UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-15512
ALPNET, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0356708
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4444 SOUTH 700 EAST, SUITE #204, SALT LAKE CITY, UTAH 84107-3075
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 265-3300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
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 12 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value (based on the average closing bid and ask
prices of the Common Stock as reported by the Nasdaq Stock Market on March 15,
1996) of the voting stock held by non-affiliates of the registrant as of March
15, 1996, was $18,509,644.
The number of shares outstanding of the registrant's Common Stock as of
March 15, 1996, was 16,200,541.
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents from which information is incorporated by
reference herein, and the Parts of this Form 10-K into which such incorporation
by reference is made:
Definitive Proxy Statement dated April 1, 1996 - Part III of this Form 10-
K.
TABLE OF CONTENTS
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
ALPNET, Inc., incorporated in the state of Utah in 1980, and the subsidiaries it
acquired in 1987, 1988 and 1995 (the "Company" or "ALPNET"), together with its
independent affiliates, form a worldwide network dedicated to providing
specialized language services for businesses engaged in international trade.
The Company has combined computer translation technology with experienced human
translators in its worldwide network to provide a full spectrum of services to
fulfill the language needs of customers in international business. The Company
believes that it is the largest publicly-traded corporation in the world,
dedicated to providing translation and related services to corporations involved
in international trade. The Company provides translation, localization,
multilingual desktop publishing, project management, and other linguistic
services, into all the world's major languages. The following table shows the
operating companies in the network as of December 31, 1995:
ALPNET, Inc. U.S.A.
Multiscript International Inc. Canada
ALPNET U.K. Ltd. U.K.
ALPNET Ireland Ltd. Ireland
ALPNET S.A. Switzerland
Interlingua S.L. Spain
Dr. W.D. Haehl GmbH Germany
INTERDOC SARL France
Interlingua Language Services Ltd. Hong Kong
ALPNET Singapore Pte Ltd Singapore
ALPNET, Inc. Korea Branch Korea
AOLI Network Technology Ltd. China
In 1987 and 1988, ALPNET organized holding companies in certain countries in
connection with the formation of its network and related acquisitions. The
Korean branch of ALPNET, Inc. was formed in 1994. ALPNET Ireland Ltd. and AOLI
Network Technology Ltd. were formed in 1995 and the Company acquired Translation
Services Bureau Ltd., a Scottish company, in late 1995. In addition, since
December 31, 1995, the Company has added an operating company in the Netherlands
and a branch office of ALPNET, Inc. in Japan.
ALPNET affiliates are independent companies in which ALPNET has no ownership
interest, but which have been selected based upon their ability to produce
quality work in accordance with ALPNET standards, and which have been trained to
utilize ALPNET technology to produce work for the Company on a regular basis.
ALPNET affiliates are located in the following cities:
Buenos Aires, Argentina Prague, Czech Republic
Sao Paulo, Brazil Budapest, Hungary
Stockholm, Sweden Moscow, Russia
Dreibergen, The Netherlands Warsaw, Poland
Milan, Italy
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT
The Company operates in one business segment: language translation and related
services.
(C) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company provides a full range of language services specifically tailored to
clients engaged in international business. ALPNET translates product
information, brochures, operating manuals, schematics, maintenance manuals,
training materials and a host of other materials for businesses engaged in
selling products and services into markets where multiple languages are
required. The Company also has specialized capabilities to help its customers
localize the actual products they sell in foreign markets. This may be as
complex as the translation of software in computer-based products, or as simple
as the translation of packaging and labels for traditional products. ALPNET
provides interpretation services for private business meetings, as well as for
business conferences, enabling delegates to meet and communicate. The Company
also provides intensive language training courses for individuals with
assignments to foreign locations. Less than 10% of the Company's revenues
derive from interpretation and language training services.
The Company has the knowledge and experience to manage a global project from a
central point, through a single contact. This eliminates the need for the client
to have to deal with several different providers in different locations in order
to receive translation and related services in multiple languages. Because of
the Company's international organization and worldwide locations, it can also
deal directly with a client's international counterparts for development of
preferred terminologies and quality reviews and ensure that the translated
product is "localized" or "customized" according to the client's standards and
preferences.
The Company has developed a set of sophisticated computer programs, collectively
called the Translation Support System ("TSS"), which it uses to differentiate
itself from other translation providers in the market. The use of TSS by
experienced translation professionals allows the Company to provide better
quality translation services at lower overall cost, by standardizing the use of
approved terminology, providing translation consistency, and preserving
formatting information for later use in desktop publishing. TSS facilitates
these functions and provides ALPNET personnel with the means to accomplish high
quality, consistent translation and desktop publishing process on an improved
schedule, thereby allowing clients to bring products to market faster.
TSS can be utilized in translation from English, French, or German, into any
Roman alphabet language, as well as Japanese, Korean, and simplified and
traditional Chinese. TSS is a proprietary asset, and the Company protects its
use with non-disclosure agreements and license agreements, along with the
protection provided by copyright and trademark law.
The Company believes that most well-managed multinational companies do not want
to devote their internal resources to the details of the translation business,
and would prefer to entrust translation to a professional organization.
Translation is ALPNET's principal business and it manages that business on
behalf of its client "partners."
Project management services provided by the Company eliminate the client's need
for a large and costly in-house staff to manage the translation process. The
Company coordinates the translation into as many languages as required, on one
schedule, under a common contract, and provides a single status reporting system
and point of contact.
Following translation, ALPNET can provide any form of production support needed
including layout and design, camera-ready copy, printing and magnetic media
production, together with packaging and distribution. The Company can produce
complete, final products to its clients' specifications.
The Company also has software development capabilities, allowing it to provide
software product localization services, and to develop interfaces tailored to
the client's information and document creation tools and systems if required.
This assures that the client's tools and the Company's translation system are
integrated and compatible.
The Company is keenly aware that the internationalization process is much more
than just translation and, accordingly, has organized its network to provide the
services and support required to affect all aspects of this process economically
and efficiently for its clients.
TRANSLATION MARKET
Recent political and economic changes have created and expanded opportunities
for significant increases in international trade. As companies increase their
operations on a global basis, they require marketing, sales and technical
information in a wide variety of languages. Traditionally, translation services
have been supplied by in-house departments, governmental units, commercial
translation agencies and individual freelance translators. While there are
thousands of individual free-lance translators and many commercial agencies, it
appears that all but a handful of operations are too small to effectively deal
with the increasingly complex translation and multilingual publication
requirements of large corporate businesses. The Company is well positioned to
serve such companies. Multinational companies are looking for a new type of
supplier to replace the "cottage labor" that has historically dominated the
translation services industry. The Company has combined its proprietary
computer translation technology with established suppliers to enable it to
obtain a growing portion of the market share in this expanding industry. The
Company believes that the available market is much larger than the combined
revenue of the current major providers and that no one provider accounts for a
significant portion of the commercial translation market.
MARKETING
The Company has developed and implemented a very structured, multi-phased sales
plan in several of its key markets to enable it to achieve its growth
objectives. The following information summarizes this plan.
Strategy:
Offer basic translation services and expand revenues by
providing value-added pre- and post-translation services.
Target key industry segments which track to the ideal client
profile.
Identification of specific prospects in targeted industries.
Telephone contact to establish client interest and need.
Personalized direct-mail introduction to ALPNET.
Consultative selling from experienced direct sales force.
Utilize an internal sales support and project management
organization to provide support to the sales force and
interface to the ALPNET network production facilities.
Targeted industries:
Computer Hardware and Software
Automotive
Chemical and Pharmaceutical
Telecommunications and Electronics
Aerospace and Defense
Banking and Finance
Ideal client profile:
Multilingual translation needs
Translation of documentation required to support international
revenue
Need is continuous or growing
Information is developed "on-line"
Has unique terminology requirements
Recognize translation as a purchased service
Require value-added services with translation
Other Value-Added Services:
Pre-translation consulting including:
Organization
Planning
Developing materials for translation
Administration
Project/facilities management
Custom development, layout, design and production
Post-translation services including:
Desktop publishing
Typesetting
Multilingual printing
Packaging
Storage
Shipping
MAJOR CUSTOMERS
Seventeen percent of the Company's 1995 revenues and fourteen percent of 1994
revenues were for services provided to a single customer in the computer
industry. Relations with this customer are good and management believes a
significant portion of 1996 revenues will also be attributable to this customer.
No other customer accounts for more than ten percent of revenues.
MANPOWER
The Company requires both sales and project management personnel to obtain and
manage major translation projects. In all network countries, sales is one of
the primary responsibilities of the country manager and the local direct sales
personnel. The Company also has project managers dedicated to specific clients.
Project managers are introduced to potential clients as a part of the sales plan
and are vital for obtaining major contracts, where the ability to demonstrate
the Company's management strengths can be as important as the quality of
translation itself.
BACKLOG
As of December 31, 1995, the Company and its subsidiaries had a backlog of
approximately $2,100,000 of translation services orders compared with a backlog
of approximately $1,900,000 as of December 31, 1994. The increase in backlog in
1995 is primarily the result of an increase in customer orders in Canada.
COMPETITION
The Company experiences competition in two primary forms: (1) large commercial
translation services companies, and (2) local translation services providers.
The Company is aware of very few large commercial translation services
companies, and the Company believes that no one company accounts for a
significant portion of the commercial translation market. Certain of the
Company's principal competitors are owned by large companies in the publishing
industry.
Local translation services providers generally service the needs of specific
customers on a very localized basis. These providers typically consist of a
small number of translators who provide translation into one or two languages,
or serve only limited market segments. Although they frequently cooperate in
loosely formed networks and alliances, these competitors do not presently offer
the broad range of languages, services and support that are available from
ALPNET.
Beginning in late 1993 and continuing throughout 1994 and 1995, the translation
industry has been extremely price-competitive. Many competitors adopted a policy
of buying market share by cutting prices and this practice has escalated
throughout the industry as other competitors have reduced prices in an effort to
maintain their revenues. This led to the loss of some orders and required the
Company to re-evaluate its pricing strategy and to reduce prices in many areas,
which had a significant affect on profitability in 1994 and 1995, even though
the effect on 1995 was minimized by an increase in sales volume.
The use of proprietary computer translation technology has allowed the Company
to compete at reduced price levels. Nevertheless, the Company does not have the
financial resources of some of its largest competitors. Management does believe
the Company is better positioned to sustain operations at these levels than many
of its smaller competitors, and this situation could ultimately be resolved by
the elimination of some current providers which may not be able to continue in
business at the current price levels. Although the Company must effectively
compete and prices have been reduced, the Company has determined that it will
not be the price leader. ALPNET will compete by offering fair prices for
superior quality service. In 1995, revenues and results have been affected by
these conditions but the effect was less than it was during 1994. 1996 results
will also be affected, the extent of which depends on how quickly the
competitive situation improves.
DEVELOPMENT AND CUSTOMER SUPPORT
During 1995, 1994 and 1993, the Company spent approximately $170,000, $124,000
and $179,000, respectively, on technology development and support activities.
These reflect the amounts spent on the further development and support of
technology for use within the Company. Management expects an increase in the
level of development-related expenses in 1996 as it expands the services
available to its clients via Europe Online and the Internet.
EMPLOYEES
As of December 31, 1995, the Company employed 247 persons. Due to the nature of
its business, the Company also retains a large number of freelance translators
on an as-needed basis.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Financial information concerning the Company's foreign and domestic operations
is presented in Note 2 to the Consolidated Financial Statements included in Item
8 of this Form 10-K and is incorporated herein by reference.
ITEM 2: PROPERTIES
<TABLE>
ALPNET's corporate headquarters are located in Salt Lake City, Utah. Sales and production facilities used by the Company as of
December 31, 1995, are listed below. All facilities are leased, except as noted.
<CAPTION>
Location Square Feet
<S> <C>
United States
Salt Lake City, Utah 5,300
Other locations 1,100
Canada 11,600
United Kingdom
Croydon(1) 12,400
Other locations 7,100
Germany
Stuttgart 9,900
Other locations 5,000
France, Spain(2), Switzerland, Ireland,
Netherlands 2,300
Hong Kong, Singapore, Korea and China 4,600
<FN>
(1) Approximately 3,000 square feet of the Croydon facilities are subleased pursuant to a contract expiring in 1998.
(2) The Company's facility in Barcelona, Spain is owned and subject to a mortgage as described in Note 4 to the
Consolidated Financial Statements included in Item 8 of this Form 10-K.
</FN>
</TABLE>
ITEM 3: LEGAL PROCEEDINGS
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1995.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
<TABLE>
ALPNET's Common Stock trades on the Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the symbol "AILP." The following
table shows the range of high and low trading prices as reported by the Nasdaq Stock Market for the years 1994 and 1995.
<CAPTION>
1994 HIGH LOW
<S> <C> <C>
Quarter ended March 31, 1994 $ .84 $.31
Quarter ended June 30, 1994 .87 .31
Quarter ended September 30, 1994 .78 .41
Quarter ended December 31, 1994 .47 .28
<CAPTION>
1995 HIGH LOW
<S> <C> <C>
Quarter ended March 31, 1995 $ .38 $.19
Quarter ended June 30, 1995 .44 .19
Quarter ended September 30, 1995 1.47 .28
Quarter ended December 31, 1995 2.22 .84
</TABLE>
As of March 15, 1996, there were 482 shareholders of record. No dividends have
been declared on the Company's Common Stock. The Company is currently
prohibited from paying dividends under Utah corporate law.
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
The following selected financial data are derived from the Consolidated Financial Statements of the Company. The data should be
read in conjunction with the Consolidated Financial Statements, related notes and other financial information included herein.
<CAPTION>
OPERATING SUMMARY
Thousands of dollars, except per-share data
YEAR ENDED DECEMBER 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Sales of services $26,919 $20,473 $19,459 $19,747 $23,118
Net income (loss) 621 (741) 458 (613) 378
Net income (loss) per share .03 (.04) .03 (.05) .03
Cash provided by (used in)
operations 1,233 (606) 371 (130) 1,647
<CAPTION>
FINANCIAL SUMMARY
Thousands of dollars and shares
AS OF DECEMBER 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Working capital (working
capital deficiency) $ 2,245 $ 1,187 $ 125 $ (633) $ (610)
Total assets 14,449 13,223 12,743 12,233 15,520
Long-term debt and long-
term debt to affiliates,
less current portion 220 533 1,314 2,156 1,965
Shareholders' equity 9,331 7,177 6,089 5,146 6,335
Shares of Common
Stock outstanding 16,199 15,562 15,562 12,562 11,480
Shares of Convertible
Preferred Stock out-
standing:
Series B(1) 459 459 459 459 459
Series C(2) 585 585 -- -- --
Series D(2) 87 -- -- -- --
<FN>
(1) Convertible at the rate of three common shares for each preferred share.
(2) Convertible at the rate of nine common shares for each preferred share.
</FN>
<CAPTION>
A large majority of the Company's operations are in foreign countries. Accordingly, the Company is significantly affected by
foreign currency exchange rate fluctuations. The following table shows what sales and results of operations would have been for
the years presented, had foreign currency exchange rates remained at 1991 levels for all years.
PRO FORMA DATA
Thousands of dollars
YEAR ENDED DECEMBER 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Pro forma sales of services at
1991 foreign currency
exchange rates $27,660 $22,307 $21,332 $19,639 $23,118
Pro forma net income (loss) at
1991 foreign currency
exchange rates 814 (906) 626 (608) 378
</TABLE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read in conjunction
with the Consolidated Financial Statements and notes thereto.
FOREIGN OPERATIONS
The Company serves its customers from 30 offices in 14 countries. The
operations of the Company are predominantly located outside the U.S.
Accordingly, the Company is subject to the effects of foreign currency exchange
rate fluctuations among U.S. dollars, Canadian dollars, British pounds sterling,
German marks and other European and Asian currencies. For all of the Company's
foreign subsidiaries, the functional currency has been determined to be the
local currency. Accordingly, assets and liabilities are translated at year-end
exchange rates, and operating statement items are translated at average exchange
rates prevailing during the year. The resultant cumulative foreign currency
adjustments to the assets and liabilities are recorded as a separate component
of shareholders' equity. The 1995 foreign currency equity adjustment was
positive $192,000 compared to a positive adjustment of $514,000 in 1994. As of
December 31, 1995, the cumulative net effect to the Company of the equity
adjustment from movements in foreign currency exchange rates was a reduction of
$1.4 million in shareholders' equity. A significant portion of the cumulative
foreign currency adjustment relates to changes in the recorded amount of
goodwill.
Because most of the Company's operations are located outside the U.S. and its
foreign operations' financial results must be translated into U.S. dollars, the
Company's actual and reported financial results and financial condition are
susceptible to movements in foreign currency exchange rates. Furthermore, since
the Company has relatively few long-term monetary assets and liabilities
denominated in currencies other than the U.S. dollar, it does not have any
ongoing hedging programs in place to manage currency risk.
RESULTS OF OPERATIONS
The following paragraphs discuss 1995 results as compared with 1994, and 1994
results as compared with 1993, including the significant effects of fluctuating
foreign currency exchange rates.
The Company reported net income of $621,000 in 1995 compared to a net loss of
$741,000 in 1994 and net income of $458,000 in 1993. If foreign currency
exchange rates for 1995 had remained unchanged from 1994, the Company would have
recorded net income of $560,000 instead of $621,000 and therefore currency
exchange rate fluctuations had a positive effect on 1995 results. In 1994, the
Company would have recorded a net loss of $733,000 instead of $741,000 if
currency exchange rates for 1994 had remained unchanged from 1993 levels.
Sales of services were $26.9 million for 1995 compared to $20.5 million for 1994
and $19.5 million for 1993. The $6.4 million increase in reported sales for
1995 consisted of an increase in sales volume of $5.2 million and a $1.2 million
increase due to currency exchange rate variances. The $1.0 million increase in
reported sales for 1994 consisted of an increase in sales volume of $800,000 and
an increase of $200,000 due to currency exchange rate variances.
The increases in sales volume in both 1995 and 1994 are largely the result of an
increase in the need for language related services in an increasingly global
marketplace where more and more businesses are entering foreign markets and
becoming involved in worldwide trade. Management believes that international
trade agreements such as the North American Free Trade Agreement (NAFTA) and the
General Agreement on Tariffs and Trade (GATT) have also had a positive effect on
demand for the language services provided by the Company.
The Company competes on the basis of quality, service and geographical proximity
to clients and potential clients, and opened several new offices in 1995 and
1994 in order to increase its market share in what management believes has been
and will continue to be an expanding industry. Reported revenue growth from
1994 to 1995 was 31%, while reported revenue growth from 1993 to 1994 was only
5%. However, management believes the actual growth in business volume in terms
of words translated was 10% to 15% in 1994, but due to intense price competition
which the Company encountered in 1994, prices the Company could charge in the
marketplace were severely restricted.
The following table shows a comparison of sales of services in each of the
Company's significant geographic areas for 1995, 1994 and 1993, along with the
effect of foreign currency exchange rate fluctuations on the sales between
years.
<TABLE>
<CAPTION>
Thousands of dollars
Increase (Decrease) Increase (Decrease)
in Sales of Services Total in Sales of Services Total
due to 1995/1994 due to 1994/1993
Sales Currency Increase Sales Currency Increase
1995 1994 Volume Differences (Decrease) 1993 Volume Differences (Decrease)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 2,463 $ 2,360 $ 103 $ $ 103 $ 2,467 $(107) $ $ (107)
Canada 3,860 3,404 461 (5) 456 3,077 532 (205) 327
Europe 21,864 15,940 4,523 1,401 5,924 15,309 245 386 631
Asia 2,464 1,955 400 109 509 1,268 621 66 687
Eliminations (3,732) (3,186) (310) (236) (546) (2,662) (461) (63) (524)
TOTAL SALES $26,919 $20,473 $5,177 $1,269 $6,446 $19,459 $ 830 $ 184 $1,014
</TABLE>
As shown in the above table, with the exception of the U.S. in 1994, which
experienced a 4% sales decline compared to 1993, every major geographical region
reported increased sales in 1995 and 1994 over the prior year. In the U.S.,
sales can fluctuate widely from period to period due to industry conditions
which are often less predictable and stable than those found in the Company's
foreign markets. Such conditions are characterized by the inexperience of many
U.S. companies in international business and clients which may be
unsophisticated in the nuances of marketing to foreign countries and the
importance of related language issues. These factors, along with the
unpredictable timing and the nonrecurring nature of most large translation
projects for U.S. companies, contribute to a deficiency of customers who
reorder on a regular basis and also have a tendency to depress the profitability
of work performed by the Company for U.S. clients. Despite these factors, U.S.
sales have remained relatively level from 1993 to 1995, and while management is
hopeful that 1996 sales will increase over 1995, there is no assurance that this
will occur.
Canada's reported sales for 1995 represented an increase over 1994 of 13% and
1994 sales increased 11% over 1993; however, the 1994 increase would have been
17% if currency exchange rates in 1994 had remained the same as in 1993. The
increase in sales in Canada for both 1995 and 1994 was due in part to increased
international trading as well as aggressive marketing and sales efforts which
were initiated during 1993 and which continued throughout 1994 and 1995. These
increases in sales have occurred despite ongoing economic and political
challenges in Canada, which are still present and which could eventually depress
sales if the economy and the strength of the Canadian dollar do not improve or
if the political situation deteriorates in the coming year.
In 1995, sales in Europe of $21.9 million represent 81% of the Company's total
worldwide sales and grew by $5.9 million over 1994 sales levels, or by 37% year
over year. Sales increased in every European country in which the Company has
offices, but most of the increase was a result of growth in the U.K. (37% growth
rate, of which 33% was actual growth in volume and only 4% was due to the effect
of foreign currency exchange rate variances) and in Germany (45% growth rate, of
which 29% was actual growth in volume and 16% was due to the effect of foreign
currency exchange rate variances). Together, the U.K. and Germany accounted for
89% of Europe's total sales in 1995.
The high rate of growth in sales in the U.K. is due to several factors,
including a healthy local economy; the Company's growing reputation for
providing quality service; expansion of sales efforts in all offices, including
the smaller regional offices in the central and northern areas of Great Britain;
an experienced and dedicated management and production team which has been in
place for several years; and to a lesser extent, the opening of the London
sales office in early 1995 and the expansion of the Glasgow office in late 1995
when the Company acquired a local translation company to supplement the sales of
the existing office in that city. Management expects sales in the U.K. to
continue to grow, but at a lower growth rate than was experienced in 1995.
In Germany, the economy grew at a mild pace in the early part of the year, but
slowed considerably late in 1995. Despite a lukewarm economy, sales in Germany,
especially in some of the newer, smaller offices which were opened in recent
years, have increased at a high growth rate. Reasons for this include
aggressive marketing and sales efforts; a stronger and more experienced
management and production team, especially in the small to midsize offices; and
an emphasis on the Company's electronic publishing capabilities, an increasingly
important part of the language services package needed by many international
businesses operating in Germany. While management is optimistic that sales
growth will continue in 1996, the uncertain economic conditions in Germany will
undoubtedly have a dampening effect on the Company's ability to grow sales and
it is not probable that the 1995 growth rate of 45% will be duplicated in 1996.
In 1994, the U.K. and Germany contributed 87% of Europe's total reported sales.
A decrease in sales from 1993 of 5% in Germany was overshadowed by a sales
increase of 12% in the U.K. The overall increase in reported European sales of
4% in 1994 was due to currency exchange rate fluctuations as well as sales
volume increases. The decline in sales in Germany from 1993 to 1994 was
primarily attributable to lower sales to large customers, especially during the
first half of 1994, due to a general slowdown of the German economy. Sales
levels during the last half of 1994 were actually higher than average 1993
levels as the German economy improved, but were not high enough to compensate
for the low sales experienced in the first two quarters of the year. The
positive results in the U.K. were due to several factors, including enhanced
sales and marketing efforts initiated in 1993, increased core business and more
large project work, all of which was helped by an improved economic situation in
that country.
In addition to the new London office and the expansion of the Glasgow office in
1995, the Company opened offices in the Netherlands and in Ireland during the
year. These new offices, along with the investments made in human and equipment
resources in existing offices in recent years, are expected to help the Company
grow its revenues in Europe as demand for language services in this region
continues to expand.
Sales in Asia of $2.5 million in 1995 grew by 26% over 1994 levels, with the
bulk of this increase due to actual volume increases and only one fifth due to
currency exchange rate fluctuations. The Company expanded its Asian presence in
1995 by adding an office in The People's Republic of China. In 1995, the China
office functioned only as a production facility, but China is expected to begin
to sell to local companies in 1996 and contribute to the growth of sales in Asia
in coming years. While Hong Kong's sales decreased as an indirect result of the
uncertainty over the impending political changes in 1997, sales in 1995 in
Singapore and Korea increased significantly over 1994 levels.
In 1994, Asian sales increased 54% over 1993 levels as Hong Kong and Singapore
increased sales over the prior year by a combined total of 41%. In addition,
the Company's Korea office, which was opened in July 1994, contributed to the
improved sales results. Substantially all of the increase in reported Asian
sales in 1994 over 1993 was attributable to actual volume increases, with only a
small portion of the increase due to currency exchange rate fluctuations.
The Company opened an office in Tokyo in early 1996 which is not only expected
to accelerate sales growth in Asia, but also help other network offices sell to
potential clients which have needs for Japanese language services. Management
expects the increased demand for Asian language services to continue into 1996
as many Asian countries are experiencing very high economic growth rates and the
interest in Asia from the business communities in the U.S., Europe and elsewhere
is accelerating rapidly.
The Company's business can be impacted dramatically by changes in the strength
of the economies of the countries in which it has a presence and results of
operations are highly dependent on general economic trends.
Cost of services sold as a percentage of sales of services has fluctuated
primarily as a result of competition in the marketplace and the volume and
nature of direct production costs of large project sales in each year. Due to
increased competition at the end of 1993 and continuing throughout 1994 and
1995, especially with regard to pricing, the Company's gross margins
deteriorated significantly from 1993 to 1994. While the Company has largely
been able to contain the growth in cost of services sold to levels consistent
with growth in the volume of work produced and at rates at or below inflationary
increases, prices charged to clients, especially in the U.S. and Europe, have
been limited by competitive price pressures which have in turn severely
compressed margins. Management expects pressures on gross margins to continue
in 1996, but does not expect pricing pressures to intensify beyond current
levels. The Company does not expect to be able to return to early 1993 pricing
levels in the foreseeable future and is continuing its efforts to contain costs
to offset the effects of these pricing pressures. These efforts include more
effective utilization of the Company's proprietary software on smaller-sized
projects to leverage the time of translators.
Selling, general and administrative expenses were $4.4 million in 1995 and
increased over prior year levels in both 1995 (by 25%, of which 5% was due to
the effect of currency exchange rate differences) and 1994 (by 10%, of which 1%
was due to the effect of currency exchange rate differences). These increases
were due primarily to the overall growth of existing offices and the opening of
new offices in both years; increased marketing and sales efforts in all of the
Company's markets, including the hiring of a new corporate vice president of
sales and marketing in 1995; and to a lesser extent, the effect of increased
corporate overhead costs related to the Company's growth.
Development costs are related to the upgrading and expansion of the Company's
proprietary language translation software developed in the early years of the
Company's existence. In 1994, costs of $124,000 decreased somewhat from 1993
($179,000) as the need for upgrades was not high and as a result of cost
reductions put in place in 1994. In 1995, costs of $170,000 have increased to
1993 levels as the Company has enhanced certain features of its software and
made it compatible with more of the ever-increasing types and versions of
software being developed by the software industry which are being used by
clients and potential clients. Also, in 1995, the Company entered into a
partnership with Europe Online, an Internet-based online service developed and
run by Europeans, and this partnership resulted in increased development
efforts. The Company expects development costs to increase significantly in
1996 over 1995 levels, most notably because of the requirements related to
Europe Online and the Internet.
Fluctuations in the amount of goodwill amortization resulted solely from foreign
currency exchange rate fluctuations from year to year.
Interest expense was $193,000 in 1995. Interest decreased approximately $10,000
in 1995 compared to 1994 and approximately $160,000 in 1994 compared to 1993.
The decrease in 1995 was due to reduced overall debt levels, including the
conversion of $243,000 of debt to an affiliate to convertible Preferred Stock in
1995. In 1994, the decrease resulted primarily from the capital restructuring
completed in early 1994 which eliminated approximately $1.8 million of long-term
debt to affiliates, as discussed in more detail in Note 3 to the Consolidated
Financial Statements.
The U.S. parent company and each of its subsidiaries are separate legal and
taxable entities subject to the domestic or foreign taxes pertaining to
operations in their respective jurisdictions. For tax purposes, the U.S. parent
company and most of its subsidiaries have unused net operating losses from prior
years which can be utilized to reduce future years taxable income of the
respective entities. The availability of these net operating losses is governed
by applicable domestic and foreign tax rules and regulations, some of which
limit the utilization of such losses due to minimum tax requirements and other
provisions. Income tax expense as presented in the Consolidated Financial
Statements represents the combined income tax expense and income tax credits of
each of the entities of the Company.
After consideration of the effect of the utilization of net operating loss
carryforwards, income tax expense was $160,000 in 1995, $92,000 in 1994, and
$82,000 in 1993. Fluctuations in the amount of income taxes arise primarily
from the varying combinations of income and losses of the Company's subsidiaries
in the various domestic and foreign tax jurisdictions, including the utilization
in various degrees of net operating loss carryforwards in many of these
jurisdictions. In 1993, the net operating loss carryforwards of the U.S. parent
company expired for state income tax purposes.
Note 6 to the Consolidated Financial Statements, Income Taxes, contains
additional information pertaining to the computation of income taxes as well as
the Company s net operating loss carryforwards as of December 31, 1995.
LIQUIDITY AND SOURCES OF CAPITAL
In 1995, the Company had a net positive cash flow from operations of
approximately $1.2 million compared with a negative cash flow from operations in
1994 of $600,000. In 1995, as in prior years, the Company's investing
activities consisted primarily of the acquisition of equipment needed to
maintain or upgrade production capability.
The Company's 1995 financing activities included the conversion of $243,000 of
debt to an affiliate to a new series of convertible Preferred Stock of the
Company, the sale of Common Stock for $194,000, and proceeds of $44,000 from the
exercise of employee stock options. The Company's 1994 financing activities
were highlighted by a capital restructuring effective as of March 31, 1994,
whereby approximately $1.8 million of current and long-term debt to affiliates
was converted to Preferred Stock of the Company. Additionally, in 1994, the
Company increased its borrowings from affiliates by $185,000 in order to finance
a pension obligation owed to the former owner of one of its subsidiaries. In
1993, the Company's financing activities included an equity offering which
realized net proceeds of approximately $1.5 million, about half of which was
used to retire long-term debt. Financing activities for all years included
fluctuations in the amounts utilized under bank lines of credit used to finance
the Company's working capital needs.
At the end of 1995, the Company's cash and cash equivalents were approximately
$1 million, representing an increase of approximately $700,000 during 1995. At
December 31, 1995, the Company had working capital of approximately $2.2
million, compared to working capital of approximately $1.2 million at December
31, 1994. The increase in working capital during 1995 was primarily
attributable to cash provided from operations during the year.
The Company's primary working capital requirements relate to the funding of
accounts receivable. The Company funds its working capital needs with various
lines of credit with banks in Canada, the U.K., Germany and Spain. Most of the
lines of credit are secured by accounts receivable and other assets of the
respective subsidiaries. As of December 31, 1995, the Company had unused
amounts under these lines of credit of approximately $800,000 and in January
1996, the lines of credit were increased in both the U.K. and in Germany, by a
total of $220,000. The Company believes the available amounts under these lines
of credit are sufficient to fund the Company's operations at current levels as
well as enable the Company to grow at a modest level without seeking significant
new sources of working capital. Most of the Company's credit facilities are
subject to annual renewals and the Company expects them to be renewed on
substantially the same terms as those which currently exist. Some of the banks
which have loaned funds to the Company's subsidiaries under the credit
facilities noted above, have placed certain limits on the flow of cash outside
the respective countries. Such limitations have not been an undue burden to the
Company in the past, nor are they expected to be unduly burdensome in the
foreseeable future.
The Company has no present significant commitments for capital expenditures,
which generally consist almost entirely of computer equipment and related
peripheral hardware and software. Such equipment purchases in future years are
not expected to vary materially from the general levels of equipment purchases
experienced in recent years. However, the Company does plan to acquire and place
additional translation services workstations in its offices worldwide in
connection with future orders from customers, as such orders are received. The
Company expects to finance a certain portion of future equipment costs through
bank and/or leasing sources. Additionally, while there are no material current
commitments, the Company may open additional offices in strategic locations
worldwide, as customer demands dictate and opportunities arise. The costs of
opening offices in prior years have not been substantial and were almost
exclusively related to the procurement of computers and other translation-
related equipment. The costs of any additional offices are not expected to
require a significant amount of cash.
The Company believes it has the ability to issue additional equity securities if
necessary, but does not currently have any firm plans to do so. In past years,
the Company has relied on major shareholders of the Company to fund certain
obligations, but the Company does not anticipate using this source of capital in
the foreseeable future.
Management believes that current working capital and available lines of credit,
together with management s expectations of increased revenues and ongoing plans
to control expenses, will enable the Company to meet its financial obligations
during 1996. It is more difficult to assess cash flows beyond 1996 and the
ability of the Company to meet its commitments without additional sources of
capital is directly related to the Company's operations providing a positive
cash flow. Should the Company's operations fail to provide adequate funds to
enable it to meet its future financial obligations, management has the option,
because of the Company's organizational structure, to cut costs by selectively
eliminating operations which are not contributing to the Company financially.
Inflation has not been a significant factor in the Company s operations;
competition, however, has been and is expected to remain a major factor. To the
extent permitted by competition and general economic and market conditions, the
Company will pass on increased costs from inflation and operations to customers
by increasing prices.
Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. As a result, the
Company historically has not had significant income tax liabilities requiring
the expenditure of cash. Due to currently available net operating loss
carryforwards, the Company expects this general trend to continue through 1996.
Substantially all of the Company's deferred tax assets at December 31, 1995 and
1994 were comprised of net operating loss carryforwards for which the Company
has provided allowances. The ability of the Company to utilize these loss
carryforwards in the future is dependent on profitable operations in the various
countries in which loss carryforwards exist and the specific rules and
regulations governing the utilization of such losses, including the timeframes
by which the losses must be used.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to be Disposed Of." The Company will be
required to adopt this standard in the first quarter of 1996. Management does
not currently believe the adoption of SFAS No. 121 will have a significant
impact on the Company's financial condition.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements: Page
Consolidated Financial Statements:
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the years ended December 31, 1995,
1994 and 1993
Statements of Shareholders' Equity for the years ended December
31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
December 31
Thousands of dollars 1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,033 $ 344
Trade accounts receivable, less allowance
of $156 in 1995 and $108 in 1994 4,978 4,328
Work-in-process 340 227
Income taxes receivable 51
Prepaid expenses and other 792 660
Total current assets 7,143 5,610
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Office facilities and leasehold improvements 144 141
Equipment 3,833 3,471
3,977 3,612
Less accumulated depreciation and
amortization 2,997 2,682
Net property, equipment and leasehold
improvements 980 930
OTHER ASSETS:
Goodwill, less accumulated amortization of
$2,924 in 1995 and $2,492 in 1994 6,250 6,449
Other 76 234
Total other assets 6,326 6,683
TOTAL ASSETS $14,449 $13,223
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
<CAPTION>
December 31
Thousands of dollars and shares 1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 1,156 $ 1,443
Accounts payable 1,636 1,561
Accrued payroll and related benefits 665 395
Other accrued expenses 813 822
Deferred revenue 254 78
Income taxes payable 18
Current portion of long-term debt 94 85
Current portion of long-term debt to
affiliates 42 39
Guarantee liability (Note 7) 220
Total current liabilities 4,898 4,423
Long-term debt, less current portion 115 155
Long-term debt to affiliates, less current
portion 105 378
Guarantee liability (Note 7) 1,090
Commitments (Notes 4 and 7)
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, no par value;
authorized 2,000 shares; issued and
outstanding 1,131 shares in 1995 and
1,044 shares in 1994 3,127 2,894
Common Stock, no par value; authorized
40,000 shares; issued and outstanding
16,199 shares in 1995 and 15,562
shares in 1994 38,954 37,846
Accumulated deficit (31,329) (31,950)
Equity adjustment from foreign currency
translation (1,421) (1,613)
Total shareholders' equity 9,331 7,177
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,449 $13,223
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Year Ended December 31
Thousands of dollars and shares 1995 1994 1993
<S> <C> <C> <C>
SALES OF SERVICES $26,919 $20,473 $19,459
OPERATING EXPENSES:
Cost of services sold 21,027 16,952 14,860
Selling, general and
administrative expenses 4,361 3,491 3,174
Development costs 170 124 179
Amortization of goodwill 387 351 342
Total operating expenses 25,945 20,918 18,555
OPERATING INCOME (LOSS) 974 (445) 904
Interest expense, net 193 204 364
Income (loss) before income taxes 781 (649) 540
Income taxes 160 92 82
NET INCOME (LOSS) $ 621 $ (741) $ 458
Net income (loss) per share $ .03 $ (.04) $ .03
Weighted average shares of Common
Stock and Common Stock
equivalents outstanding 23,155 17,235 14,712
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Equity
<CAPTION> Adjustment
from Foreign
Preferred Stock Common Stock Accumulated Currency
Thousands of dollars and shares Shares Amount Shares Amount Deficit Translation Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1993 459 $1,151 12,562 $37,456 $(31,667) $(1,794) $5,146
Issuance of Common Stock for cash,
net of offering costs of $45 3,000 1,488 1,488
Guarantee liability (670) (670)
Net income 458 458
Foreign currency translation adjustment (333) (333)
BALANCES AT DECEMBER 31, 1993 459 1,151 15,562 38,274 (31,209) (2,127) 6,089
Issuance of Preferred Stock in
exchange for long-term debt to
affiliates, net of costs of $25 585 1,743 1,743
Costs related to 1993 issuance of
Common Stock (8) (8)
Adjustment to guarantee liability (420) (420)
Net loss (741) (741)
Foreign currency translation adjustment 514 514
BALANCES AT DECEMBER 31, 1994 1,044 2,894 15,562 37,846 (31,950) (1,613) 7,177
Issuance of Preferred Stock in
exchange for long-term debt
to affiliate, net of offering
costs of $1 87 242 242
Issuance of Common Stock for cash,
net of offering costs of $6 582 194 194
Exercise of stock options 55 44 44
Costs related to 1994 issuance of
Preferred Stock (9) (9)
Adjustment to guarantee liability 870 870
Net income 621 621
Foreign currency translation adjustment 192 192
BALANCES AT DECEMBER 31, 1995 1,131 $3,127 16,199 $38,954 $(31,329) $(1,421) $9,331
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Year Ended December 31
Thousands of dollars 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 621 $(741) $ 458
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization of
property, equipment and leasehold
improvements 362 319 306
Amortization of goodwill 387 351 342
Other 120 (69) (37)
Changes in operating assets and
liabilities:
Trade accounts receivable (523) (690) (574)
Accounts payable and accrued
expenses (23) 426 (161)
Other 289 (202) 37
Net cash provided by (used in)
operating activities 1,233 (606) 371
INVESTING ACTIVITIES:
Purchase of property, equipment and
leasehold improvements (395) (491) (293)
FINANCING ACTIVITIES:
Proceeds from notes payable to banks 264 245 105
Principal payments on notes payable
to banks (582) (78) (308)
Proceeds from long-term debt 54 136 47
Principal payments on long-term debt (91) (40) (618)
Proceeds from long-term debt to affiliates 185
Principal payments on long-term debt
to affiliates (42) (19)
Sale of Common Stock for cash, net of
related costs 194 (8) 1,488
Proceeds from exercise of stock options 44
Net cash provided by (used in) financing
activities (159) 421 714
Effect of exchange rate changes on cash 10 8 (7)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 689 (668) 785
Cash and cash equivalents at beginning
of year 344 1,012 227
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,033 $ 344 $1,012
CASH PAID DURING THE YEAR FOR:
Interest $ 198 $ 222 $ 393
Income taxes 114 71 14
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In August 1995, the Company issued 87,339 shares of Convertible Preferred Stock in exchange for long-term debt
to affiliates.
In March 1994, the Company issued 584,257 shares of Convertible Preferred Stock in exchange for long-term debt
to affiliates.
See accompanying notes.
</TABLE>
ALPNET, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
ALPNET, Inc. and its subsidiaries (the "Company"), together with its independent
affiliates, form a worldwide network dedicated to providing specialized language
services for businesses engaged in international trade. The Company has
combined computer translation technology with experienced human translators in
its worldwide network to provide a full spectrum of services to fulfill the
language needs of customers in international business.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of ALPNET, Inc. and
its wholly-owned subsidiaries or branches located in the United States, Canada,
United Kingdom, Switzerland, Spain, Germany, France, Ireland, Hong Kong,
Singapore, Korea and China. Significant intercompany accounts and transactions
have been eliminated in consolidation.
For all of the Company's foreign subsidiaries, the functional currency has been
determined to be the local currency. Accordingly, assets and liabilities are
translated at year-end exchange rates, and operating statement items are
translated at average exchange rates prevailing during the year. The resultant
cumulative translation adjustments to the assets and liabilities are recorded as
a separate component of shareholders' equity. Exchange adjustments resulting
from foreign currency transactions are included in the determination of net
income. Such amounts are immaterial for all years presented.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's foreign subsidiaries
are calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statements of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheets.
USE OF ESTIMATES
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 periods.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to be all highly liquid investments with
a maturity of three months or less when purchased. Cash equivalents are stated
at cost, which approximates fair value.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are calculated using the straight-line method over
estimated useful lives of 3 to 25 years.
GOODWILL
Goodwill consists of the excess of the purchase price over the fair value of net
assets of purchased subsidiaries and is amortized on the straight-line method
over a 25-year period. The Company periodically reviews goodwill for impairment
by comparing undiscounted projected income over the remaining amortization
period for each acquired subsidiary to the unamortized balance of goodwill for
each subsidiary. No impairments have been recorded for any of the years
presented.
REVENUE RECOGNITION
Revenue from translation services is recognized as work is performed. Customers
are billed according to the terms of their purchase orders. Work-in-process
represents costs on incomplete and unbilled projects as well as revenues
recognized in excess of amounts billed. Deferred revenue arises when payments
are received prior to being earned under the terms of customer purchase orders.
Such revenue is subsequently recognized as the requirements specified in the
purchase orders are completed.
Collateral is not required for receivables and reserves are provided for bad
debts.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based upon the average shares of Common Stock and
Common Stock equivalents outstanding during the respective years, to the extent
they are dilutive. Common Stock equivalents include the Company s series B,
series C, and series D Preferred Stock. Other Common Stock equivalents,
consisting of warrants (in 1993 only) and employee stock options, have been
included in the calculation for 1995 only, as their effect is antidilutive or
immaterial for 1994 and 1993. Primary and fully diluted net income (loss) per
share are substantially the same for each year presented.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the 1995
presentation.
2. GEOGRAPHICAL DATA
<TABLE>
The following selected financial data summarizes the Company s domestic and foreign operations for financial reporting purposes.
Allocations of corporate and country overheads to domestic and foreign operations are based upon the Company's policies for
financial reporting consistently applied during the periods. Intercompany sales are normally billed on a profit-sharing basis.
All intercompany sales are eliminated in determining the totals.
<CAPTION>
Thousands of dollars 1995 1994 1993
<S> <C> <C> <C>
Net sales:
United States $ 2,463 $ 2,360 $ 2,467
Canada 3,860 3,404 3,077
Europe 21,864 15,940 15,309
Asia 2,464 1,955 1,268
Eliminations (3,732) (3,186) (2,662)
$26,919 $20,473 $19,459
Income (loss) before income taxes:
United States $ (195) $ (337) $ (111)
Canada 159 85 (61)
Europe 762 (408) 578
Asia 55 11 134
$ 781 $ (649) $ 540
Identifiable assets:
United States $ 1,419 $ 761 $ 1,406
Canada 1,319 1,211 937
Europe 10,272 10,493 9,821
Asia 1,439 758 579
$14,449 $13,223 $12,743
</TABLE>
Seventeen percent of the Company's 1995 revenues and fourteen percent of 1994
revenues were for services provided to a single customer in the computer
industry. No other customer accounts for more than ten percent of revenues in
any year.
3. FINANCING TRANSACTIONS
1993 TRANSACTIONS
During 1993, the Company entered into a stock purchase agreement whereby the
Company sold 3,000,000 shares of Common Stock to a Liechtenstein company. The
net proceeds of $1,488,000 were used to retire the Company's remaining
obligations to a Swiss bank and for operating purposes.
1994 TRANSACTIONS
Effective March 31, 1994, the Company completed a capital restructuring with
three shareholders. The agreements with these shareholders provided for the
following:
(1) Conversion of $1,807,000 of long-term debt due to two of the
shareholders into a new series of convertible Preferred Stock (series
C) of the Company;
(2) Deferral of the due dates for repayment of a 300,000 Swiss franc
(approximately $243,000) note payable to a third shareholder who is
also a director; and
(3) Elimination of all of the outstanding warrants held by these three
shareholders to purchase up to 8,390,000 additional shares of the
Company's Common Stock.
The conversion of $1,807,000 of debt ($1,743,000, net of related costs) to
preferred shares resulted in the issuance of 584,257 shares of series C
Preferred Stock (see Note 5).
In conjunction with this capital restructuring, the Company entered into a
"financial monitoring agreement" with its largest shareholder which requires the
Company, among other things, to obtain prior approval for major financing
transactions, significant asset purchases or sale of a major portion of the
Company's assets.
In July 1994, the Company entered into an agreement with a current shareholder
(who is also the former owner of the Company's German subsidiary) to finance a
portion of a pension obligation owed to the shareholder. In connection with
this agreement, the Company signed a 300,000 Deutsche mark (approximately
$185,000) note payable (see Note 4).
1995 TRANSACTIONS
In August 1995, the Company converted the 300,000 Swiss franc note payable to
the shareholder and director mentioned above into 87,339 shares of series D
Preferred Stock (see Note 5).
The Company issued 581,818 shares of restricted Common Stock to a new vice
president of the Company for approximately $194,000, net of related costs. In
conjunction with this transaction, the Company granted this officer an option to
acquire 500,000 shares of restricted Common Stock (see Note 5).
4. BORROWINGS
NOTES PAYABLE TO BANKS
<TABLE>
Notes payable to banks consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1995 1994
<S> <C> <C>
Credit facility with a Canadian bank, interest at 8.5%,
collateralized by the accounts receivable of the
Canadian subsidiary, guaranteed by the Company $ 70 $ 314
Credit facility with a U.K. bank, interest at 10.0%,
collateralized by the assets of the U.K. subsidiary,
guaranteed by the Company 991 736
Credit facility with a German bank, interest at 9.5%,
collateralized by the accounts receivable of the
German subsidiary 181
Unsecured credit facility with a German bank,
interest at 10.0% 31 78
Credit facility with a Spanish bank, interest at 12.5%,
guaranteed by the Company's U.K. subsidiary 64 63
Other 71
$1,156 $1,443
</TABLE>
All of the above credit facilities have variable interest rates. The interest
percentages shown are the actual rates at December 31, 1995. Due to the short-
term nature of these notes, their carrying values at December 31, 1995 are
considered to approximate their fair values.
The credit facility with the Canadian bank has a maximum limit of Canadian
$500,000 (approximately $370,000) at December 31, 1995, and intercompany debts
have been subordinated to the bank.
The credit facility with the U.K. bank has a maximum limit of Pounds700,000
(approximately $1,090,000) at December 31, 1995. In January 1996, the limit was
increased to Pounds800,000 (approximately $1,240,000). Intercompany debts
have been subordinated to the bank. The note agreement requires the U.K.
subsidiary to maintain net equity of Pounds750,000 (approximately $1,170,000)
and a 2:1 ratio of accounts receivable to outstanding borrowings under the
facility.
The secured credit facility with the German bank has a maximum limit of DM
500,000 (approximately $350,000) and was not utilized at December 31, 1995. In
January 1996 the limit was increased to DM 600,000 (approximately $420,000).
Intercompany debts have been subordinated to the bank. The unsecured credit
facility has a maximum limit of DM 100,000 (approximately $70,000) at December
31, 1995.
The credit facility with the Spanish bank has a maximum limit of PTS 9.2 million
(approximately $80,000) at December 31, 1995.
Most of the Company's credit facilities are subject to annual renewals and the
Company expects them to be renewed on substantially the same terms as exist at
December 31, 1995. The weighted average interest rate on notes payable to banks
was 10.1% at December 31, 1995 and 9.8% at December 31, 1994.
LONG-TERM DEBT
<TABLE>
Long-term debt consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1995 1994
<S> <C> <C>
Mortgage with a bank in Spain payable in monthly
installments through March 1997, interest at 17% $ 34 $ 52
Obligations to financial institutions due at
various dates through 1999, secured by certain
equipment 175 188
209 240
Less current portion 94 85
$115 $155
</TABLE>
LONG-TERM DEBT TO AFFILIATES
<TABLE>
Long-term debt to affiliates consisted of the following at December 31:
<CAPTION>
Thousands of dollars 1995 1994
<S> <C> <C>
Secured note payable to a shareholder and director,
interest at 9%, exchanged for 87,339 shares of
series D Preferred Stock in August 1995 $ 0 $243
Unsecured note payable to a current shareholder (who
is also the former owner of the Company's German
subsidiary), due in monthly installments of
approximately $3 plus interest through June 1999,
interest at 8% 147 174
147 417
Less current portion 42 39
$105 $378
</TABLE>
Interest expense on notes payable to affiliates was approximately $28,000 in
1995, $61,000 in 1994 and $156,000 in 1993.
DEBT MATURITIES
<TABLE>
The aggregate maturities of long-term debt and long-term debt to affiliates as of December 31, 1995 were as follows:
<CAPTION>
Long-Term
Long-Term Debt to
Thousands of dollars Debt Affiliates Total
<S> <C> <C> <C>
Year Ending December 31
1996 $ 94 $ 42 $136
1997 70 42 112
1998 37 42 79
1999 8 21 29
$209 $147 $356
</TABLE>
Based on a discounted cash flow analysis, the carrying values of long-term debt
and long-term debt to affiliates at December 31, 1995 are considered to
approximate their fair values.
5. CAPITAL STOCK
CONVERTIBLE PREFERRED STOCK
The Company has 1,131,007 outstanding shares of Preferred Stock, of which
459,411 shares are designated as series B, 584,257 shares are designated as
series C and 87,339 shares are designated as series D. The series B Preferred
Stock is convertible at the option of the holder into three shares of the
Company s Common Stock, has voting rights as if the shares were already
converted, and features a 10% non-cumulative dividend subject to the discretion
of the Board of Directors. All of the outstanding shares of series B Preferred
Stock were issued in 1991.
The series C and series D Preferred Stock is convertible at the option of the
holder into nine shares of the Company's Common Stock and otherwise has the same
general terms as the series B Preferred Stock. All of the outstanding shares of
series C Preferred Stock were issued in 1994 and all of the outstanding shares
of series D Preferred Stock were issued in 1995, as described in Note 3.
COMMON STOCK
The Company issued 581,818 shares of Common Stock in 1995 and 3,000,000 shares
of Common Stock in 1993, as described in Note 3. As discussed in more detail in
Note 7, the Company has a guarantee liability related to the purchase of its
German subsidiary which could result in the issuance of additional shares of
Common Stock. The Company is currently prohibited from paying dividends under
Utah corporate law.
STOCK OPTIONS
The Company has an incentive stock option plan and a nonstatutory stock option
plan whereby 136,577 and 1,063,423 shares, respectively, of the Company s
authorized but unissued Common Stock are reserved for ultimate issuance under
the plans.
There was no activity for the incentive stock option plan for any of the years
presented and there were no outstanding options under this plan as of December
31, 1995, 1994 or 1993. The following table is a summary of activity for the
Company's nonstatutory stock option plan for the years ended December 31:
<TABLE>
<CAPTION>
Thousands of shares 1995 1994 1993
<S> <C> <C> <C>
Outstanding at beginning of year 830 888 801
Granted 154 31 325
Cancelled (608) (89) (238)
Exercised (55)
Outstanding at end of year 321 830 888
Exercisable at end of year 83 430 323
Option price range per share:
Granted $1.08 $.44 $.75 to $.94
Outstanding at end
of year $.42 to $1.13 $.42 to $1.13 $.42 to $1.13
</TABLE>
The exercise terms of the options provide that the options expire six years
after date of grant and cannot be exercised during the first year. No more than
20% of the options can be exercised in any one year; however, any unexercised
options may be accumulated and exercised in succeeding years. The exercise price
of options exercised during 1995 ranged from $.42 to $1.13 per share.
In addition to the above option grants, in 1995 the Board of Directors approved
the grant of stock options to nine members of management. In total, options to
purchase 2,950,000 shares of restricted Common Stock were granted, with the
following terms and conditions: 983,333 optioned shares vest on September 1,
1996 and are exercisable at $.50 per share; 983,333 optioned shares vest on
September 1, 1997 and are exercisable at $.75 per share; and 983,334 optioned
shares vest on September 1, 1998 and are exercisable at $1.10 per share. All
unexercised options expire on September 1, 2000 or when the employee terminates
employment with the Company, if sooner. All existing options (for the purchase
of approximately 450,000 shares of unrestricted Common Stock) previously granted
to members of management participating in the new grants, were voluntarily
forfeited.
In conjunction with the issuance of 581,818 shares of Common Stock to an officer
of the Company in 1995, an option to acquire 500,000 shares of restricted Common
Stock was granted to this officer. The exercise price for this option is
$.34375 per share and the option was exercisable at date of grant and expires on
September 1, 2000, unless the officer terminates employment with the Company
sooner.
6. INCOME TAXES
The Company files a consolidated U.S. Federal income tax return which includes
all domestic operations. Tax returns for states within the U.S. and for foreign
subsidiaries are filed in accordance with applicable laws. The following
summarizes for income tax purposes, the domestic and foreign components of
income (loss) before income taxes for the year ended December 31:
<TABLE>
<CAPTION>
Thousands of dollars 1995 1994 1993
<S> <C> <C> <C>
Domestic $1,295 $ 807 $1,118
Foreign (514) (1,456) (578)
$ 781 $ (649) $ 540
</TABLE>
Income tax expense, including the effect of net operating loss carryforwards,
consisted of the following for the year ended December 31:
<TABLE>
<CAPTION>
Thousands of dollars 1995 1994 1993
<S> <C> <C> <C>
Current income tax expense:
Domestic income taxes:
Federal $ 15 $ 5 $16
State 65 45
Foreign income taxes 50 42 66
130 92 82
Deferred foreign income tax expense 30
Total income tax expense $160 $92 $82
</TABLE>
Income tax expense varied from the expected statutory domestic federal income
tax amount as follows for the year ended December 31:
<TABLE>
<CAPTION>
Thousands of dollars 1995 1994 1993
<S> <C> <C> <C>
Tax expense (benefit) on consolidated
income (loss) computed at the domestic
statutory federal income tax rate $ 273 $(227) $ 189
Effect of foreign losses on the
computation of tax expense (benefit)
at domestic statutory rates 311 611 556
Utilization of U.S. net operating
losses from prior years (438) (277) (375)
Utilization of foreign net operating
losses from prior years (51) (60) (288)
Domestic state income taxes 65 45
Reported income tax expense $ 160 $ 92 $ 82
</TABLE>
The approximate tax effect of the temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are as follows
for the year ended December 31:
<TABLE>
<CAPTION>
Thousands of dollars 1995 1994
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $7,600 $8,700
Tax credit carryforwards 400 400
Other 100 100
Total deferred tax assets 8,100 9,200
Less valuation allowances (8,000) (9,100)
Net deferred tax assets $ 100 $ 100
Total deferred tax liabilities $ 100 $ 100
</TABLE>
Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. In 1993, the net
operating loss carryforwards of the U.S. parent company expired for state income
tax purposes. The Company has approximately $400,000 of general business tax
credit carryforwards available to offset future U.S. federal income taxes which
expire beginning in 1997 through 2001.
The following table summarizes by country the available operating loss
carryforwards and the related expiration dates.
<TABLE>
<CAPTION>
Operating Loss Expiration
Thousands of dollars Carryforwards Dates
<S> <C> <C>
United States $16,400 1999 through 2003
Canada 200 1998 through 2000
Canada 800 None
United Kingdom 1,500 None
Germany 1,600 None
Spain 1,000 1998 through 2002
France 300 1999 through 2000
Hong Kong 200 None
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Substantially all of the Company's office space and various equipment is rented
under leases which are classified as operating leases. These leases have
remaining terms of up to 19 years. Certain of the leases for office space
contain renewal options and adjustment clauses based on consumer price indices.
Total rental expense for all operating leases was approximately $1.5 million in
1995, $1.6 million in 1994 and $1.6 million in 1993.
Certain office space is subleased under an agreement pursuant to a contract
expiring in 1998 with various renewal options. Total sublease rental income was
approximately $220,000 in 1995, $250,000 in 1994 and $230,000 in 1993.
At December 31, 1995, future minimum payments under noncancelable operating
leases with initial terms of one year or more and future sublease income under
noncancelable subleases with initial terms of one year or more, are as follows:
<TABLE>
<CAPTION>
Lease Sublease
Thousands of dollars Payments Income
<S> <C> <C>
Year ending December 31
1996 $ 969 $ 65
1997 998 47
1998 966 47
1999 916
2000 920
Thereafter 1,650
Total minimum lease payments $6,419 $159
</TABLE>
EMPLOYEE BENEFIT PLANS
ALPNET, Inc. has a contributory profit sharing plan ("Plan") which is designed
to meet the requirements for qualification under Section 401(k) of the U.S.
Internal Revenue Code. Under this provision, contributions by U.S. employees are
excluded from their taxable income. The Plan provides retirement benefits for
U.S. employees meeting certain eligibility requirements. Employer contributions
are discretionary and become fully vested after two years. Employer
contributions of $3,900 and $1,700 were made in 1995 and 1994, respectively, but
no employer contributions were made to the Plan in 1993. Total employer and
employee contributions may not exceed specified limits.
The Company's U.K. subsidiary has two defined contribution plans which cover
substantially all of its employees. Contributions are based upon percentages of
participating employees' compensation. The cost of these plans was
approximately $89,000 in 1995, $81,000 in 1994, and $61,000 in 1993.
ACQUISITION GUARANTEE
In 1988, the Company acquired its German subsidiary for a combination of cash
and shares of the Company's Common Stock. The acquisition agreement required
the Company to give additional consideration if the value of the shares of
Common Stock did not reach an agreed-upon level within a specified period
following the acquisition, and remain at that level until the former owner was
able to sell the shares of the Company's Common Stock for an amount equal to the
purchase price stipulated in the acquisition agreement. As a result of this
requirement, the Company issued additional shares to the former owner in 1990.
In 1993, the Company and the former owner entered into an agreement which
amended the original acquisition agreement. This agreement waived the
requirement to pay any additional consideration if the value of all shares of
Common Stock previously issued reached the stipulated purchase price on or
before September 30, 1994 (which date was subsequently extended to September 30,
1996). If the stock value does not reach such amount, the Company is required
to pay interest on the stock value deficiency beginning on September 30, 1996.
Alternatively, the Company could settle such deficiency by making additional
payments (in cash or stock) to the former owner.
As a result of this waiver agreement, the Company recorded a guarantee liability
for the stock value deficiency, calculated based on the trading value per share
of the Company's Common Stock as compared to the guaranteed value at the balance
sheet dates. An adjustment to shareholders' equity has also been recorded for
the same amounts. Due to the nature of this guarantee liability, there exists a
high probability that the amount of the liability could change significantly in
the near term.
8. RELATED PARTY TRANSACTIONS
Related party transactions not previously disclosed are as follows.
The Company incurred legal costs of approximately $53,000 in 1994 and $57,000 in
1993 for services performed by a law firm whose Chairman of the Board was a
director and also the secretary of the Company during those years.
Approximately $25,000 in 1994 and $36,000 in 1993 of these legal fees related to
financing transactions discussed in Note 3.
As of December 31, 1995, the Company has a $67,200 unsecured promissory note
receivable, bearing interest at prime plus 3%, from an officer and director of
the Company. The note balance was $76,100 at December 31, 1994 and $84,300 at
December 31, 1993.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
ALPNET, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of ALPNET, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of Multiscript International Inc., a
subsidiary of ALPNET, Inc., which statements reflect total assets constituting
9% as of December 31, 1995 and 1994, and total revenues constituting 14% in
1995, 17% in 1994 and 14% in 1993 of the related consolidated totals. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to data included for Multiscript
International Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of ALPNET, Inc. and subsidiaries at December
31, 1995 and 1994, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
\s\ERNST & YOUNG LLP
Salt Lake City, Utah
March 15, 1996
</AUDIT-REPORT>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors required by Item 10 of Form 10-K is
presented in the section titled "Information About Directors" in the Company's
definitive Proxy Statement dated April 1, 1996 and is incorporated herein by
reference. The information with respect to Executive Officers is presented in
the section titled "Information About Directors" and in paragraph 8 of the
section titled "Certain Significant Employees" in the Company's definitive Proxy
Statement dated April 1, 1996 and is incorporated herein by reference. The
information with respect to other significant employees is presented in the
section titled "Certain Significant Employees" in the Company's definitive Proxy
Statement dated April 1, 1996 and is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by Item 11 of Form 10-K is presented in the sections titled
"Compensation of Directors," "Executive Compensation" and "Compensation Pursuant
to Plans" in the Company's definitive Proxy Statement dated April 1, 1996 and is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 of Form 10-K is presented in the sections titled
"Principal Shareholders" and "Information About Directors" in the Company's
definitive Proxy Statement dated April 1, 1996 and is incorporated herein by
reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 of Form 10-K is presented in the section titled
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement dated April 1, 1996 and is incorporated herein by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS:
The financial statements are included in Item 8, Financial Statements and
Supplementary Data, as listed in the Index to Consolidated Financial
Statements at the beginning of Item 8.
(2) FINANCIAL STATEMENT SCHEDULES:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions and therefore have been omitted, or are not
presented because the information required is included in the financial
statements or notes thereto.
(3) LISTING OF EXHIBITS:
<TABLE>
<CAPTION>
Exhibit Filing
No. Description Status
<S> <C> <C>
3.1 Restated Articles of Incorporation, as Amended (iv)
3.2 By-Laws (i)
4.1 Specimen Series B Preferred Stock Certificate (iv)
4.2 Specimen Series C Preferred Stock Certificate (iv)
4.3 Specimen Series D Preferred Stock Certificate (iv)
10.1 Stock Purchase Agreement between ALPNET, Inc. and Benitex A.G.
dated 1 July 1993, with Exhibits (ii)
10.2 Debt Conversion Agreement dated 31 March 1994 between ALPNET, Inc.
and H.F. Boeckmann, II (iii)
10.3 Debt Conversion Agreement dated 31 March 1994 between ALPNET, Inc.
and NFT Ventures, Inc. (iii)
10.4 Debt Conversion Agreement dated 17 August 1995 between
Michael F. Eichner and ALPNET, Inc. (iv)
10.5 Stock Purchase and Sale Agreement dated 20 October 1995 between
ALPNET, Inc. and Jaap van der Meer (iv)
10.6 Financial Monitoring Agreement dated 31 March 1994 between
H.F. Boeckmann, II and ALPNET, Inc. (v)
10.7 First Amendment to Financial Monitoring Agreement dated
15 September 1995 between H.F. Boeckmann II and ALPNET, Inc. (v)
10.8 Specimen Executive Stock Option Agreement dated 17 August 1995 (v)
11 Statement Re: Computation of Per Share Earnings (v)
20 Opinion of Friedman & Friedman, Independent Auditors for Multiscript
International Inc. (v)
21 Subsidiaries of Registrant (v)
23.1 Consent of Ernst & Young LLP, Independent Auditors (v)
23.2 Consent of Friedman & Friedman, Independent Auditors for Multiscript
International Inc. (v)
27 Financial Data Schedule (v)
<FN>
(i ) Previously filed on April 16, 1990 with the Securities and Exchange Commission as an Exhibit to Form 10-K for the
year ended December 31, 1989, and incorporated herein by reference.
(ii) Previously filed on March 30, 1994 as an Exhibit to Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference.
(iii) Previously filed on March 29, 1995 as an Exhibit to Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
(iv) Previously filed on November 13, 1995 as an Exhibit to Form 10-Q for the quarterly period ended September 30,
1995, and incorporated herein by reference.
(v) Filed herewith.
</FN>
</TABLE>
(B) REPORTS ON 8-K:
The following reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1995, which are incorporated herein by
reference:
Financial
Date of Statements
Report Item Reported Filed
11/01/95 ALPNET Announces Record Third
Quarter Results N/A
(C) EXHIBITS:
The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(3) above.
(D) FINANCIAL STATEMENT SCHEDULES:
The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ALPNET, INC.
By: \s\ Thomas F. Seal
Thomas F. Seal, President
Date: 25 March 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
\s\ Thomas F. Seal President, Chief Executive Officer 25 March 1996
Thomas F. Seal and Director
\s\ John W. Wittwer Executive Vice President and Director 25 March 1996
John W. Wittwer
\s\ D. Kerry Stubbs Chief Financial and Accounting Officer 25 March 1996
D. Kerry Stubbs
\s\ Michael F. Eichner Chairman of the Board of Directors 25 March 1996
Michael F. Eichner
EXHIBIT 10.6
FINANCIAL MONITORING AGREEMENT DATED 31 MARCH 1994
BETWEEN H.F. BOECKMANN, II AND ALPNET, INC.
FINANCIAL MONITORING AGREEMENT
This Financial Monitoring Agreement (the "AGREEMENT") is made effective as
of 31 March 1994 by and between H. F. Boeckmann II ("BOECKMANN") and ALPNET,
Inc., a Utah corporation ("ALPNET" or the "COMPANY").
R E C I T A L S :
A. Boeckmann is the largest single shareholder of ALPNET. Prior to the
transactions that are described in the recitals below, Boeckmann was the
beneficial owner of 6,507,891 shares of the Company's common stock and common
stock equivalents, which represent approximately 31.60% of the Company's common
stock, assuming that Boeckmann exercised all of his available warrants to
acquire common stock and converted all of his preferred stock to common stock
and assuming that no other shareholder made the same type of exercise or
conversion. Prior to the transactions that are described in the recitals below,
ALPNET had approximately 16,940,456 issued and outstanding common shares and
common share equivalents.
B. ALPNET and Boeckmann have heretofore entered into certain financing
transactions whereby Boeckmann has provided ALPNET with substantial debt and
equity financing, including the Company issuing in favor of Boeckmann a
promissory note in the principal amount of $2,157,544, dated April 16, 1990 (the
"NOTE").
C. In conjunction with the issuance of the Note, ALPNET, as borrower, and
Boeckmann, as lender, entered into that certain Loan and Security Agreement
dated 16 April 1990 (the "LOAN AGREEMENT").
D. Contemporaneously herewith and pursuant to a "Debt Conversion
Agreement" (the "DEBT CONVERSION AGREEMENT"), Boeckmann is (1) converting all of
the principal balance of the debt evidenced by the Note, in the amount of
$1,632,544.90, into ALPNET $3.09 convertible, voting, non-cumulative 10%
preferred stock, series C, without par value; and (2) surrendering warrants to
purchase 4,416,171 additional shares of ALPNET common, voting, no par value
stock ("ALPNET COMMON STOCK"), all on the terms and conditions as herein set
forth.
E. In the Loan Agreement, ALPNET made certain debt covenants running to
Boeckmann. As a result of the debt-to-equity conversion described in Recital D
above, the debt covenants contained in the Loan Agreement will be terminated.
F. After the debt-to-equity conversion described above, Boeckmann will be
the beneficial owner of 6,840,939 shares of ALPNET Common Stock and Common
Stock equivalents, which represent approximately 32.69% of ALPNET Common Stock,
assuming that no other ALPNET shareholder has exercised or surrendered warrants
or converted preferred stock into ALPNET Common Stock. After completion of
certain debt conversion transactions taking place contemporaneously herewith,
ALPNET will have approximately 22,198,769 issued and outstanding ALPNET Common
Stock and Common Stock equivalents.
NOW, THEREFORE, for and in consideration of the mutual promises and other
consideration herein set forth, it is agreed by the parties as follows:
1. APPROVAL RIGHTS. During the term of this Agreement, ALPNET shall not,
without the prior written consent of Boeckmann (which consent shall not be
unreasonably withheld), issue securities, borrow money or purchase or dispose of
assets if the aggregated amount of any such transaction exceeds ten percent
(10%) of the then current assets of the Company and its subsidiaries determined
on a consolidated basis. ALPNET agrees to defend, indemnify and hold Boeckmann
harmless from and against any and all liabilities, claims, demands, damages,
losses (including, without limitation, reasonable attorneys' fees), actions and
causes of action, or suits at law or in equity of whatsoever kind or nature,
arising from actions taken, or actions that allegedly should have been taken, by
Boeckmann pursuant to or under this Agreement.
2. LEGAL EXISTENCE AND LAWS; INSURANCE COVERAGE. During the term of this
Agreement, ALPNET shall guarantee and annually certify to Boeckmann (i) its
material compliance with all applicable laws, and with all material contracts
and corporate agreements to which it is a party, and (ii) that it is keeping and
maintaining insurance to such extent and against such risks as is customary for
companies of comparable size in the same or similar business and property in the
same general area.
3. IAB DELEGATE. During the term of this Agreement, Boeckmann shall have
the right to have a delegate of his choice participate in ALPNET's International
Advisory Board meetings, once per quarter, at ALPNET's expense.
4. TERM OF AGREEMENT. This Agreement shall automatically terminate upon
the fulfillment of whichever of the following conditions shall first occur:
4.1. Ten (10) years after the date of this Agreement set forth
above; or
4.2. The market value of ALPNET Common Stock, determined by
taking the average of the bid and ask price as reported on the NASDAQ system,
exceeds $4.00 per share for a period of ninety (90) consecutive calendar days;
or
4.3. Boeckmann's actual holdings of ALPNET Common Stock and
Common Stock equivalents constitutes less than twenty percent (20%) of the
issued and outstanding shares of ALPNET Common Stock and Common Stock
equivalents.
5. MISCELLANEOUS PROVISIONS.
5.1. NOTICES. Notice required by this Agreement shall be given
in writing sent by certified U.S. Mail, Federal Express (or equivalent courier
service) or facsimile telecopy addressed as follows (or to such other address or
facsimile number subsequently provided in writing by such party):
Boeckmann: 15505 Roscoe Boulevard
Sepulveda, CA 94313
Fax No. (818) 892-7367
ALPNET: 4444 South 700 East, #204
Salt Lake City, UT 84107-3075
Fax No. (801) 265-3310
Any notice sent pursuant to this paragraph shall be deemed effective: (i) if by
certified U.S. mail or Federal Express, on the date of the first attempted
delivery (excluding Saturdays, Sundays and holidays); and (ii) if by facsimile
transmission, immediately upon confirmed transmission.
5.2. ASSIGNMENT. This Agreement may not be assigned by either
party without the written consent of the other party first had and obtained.
5.3. ENTIRE AGREEMENT. The parties acknowledge that this
Agreement and the instruments referred to herein contain their entire
understanding with respect to the specific matters referred to herein and
supersede all prior understandings, correspondence, memoranda, representations,
negotiations, letters of intent or other prior agreements with respect thereto
and that this Agreement may not be amended or modified except by a written
instrument signed by all parties affected thereby.
5.4. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Utah.
5.5. APPROVALS. Unless otherwise provided in this Agreement,
whenever approval or consent is required by any party hereto, such approval or
consent shall not be unreasonably withheld or delayed. If any party hereto
disapproves of some matter hereunder, then the reasons therefor shall be stated.
5.6. WAIVER. No waiver of any breach or default by any party to
this Agreement shall be considered to be a waiver of any other breach or
default.
5.7. SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as to
be valid under applicable law; however, if any provision of any of the foregoing
is invalid or prohibited under applicable law, then such provision shall be
ineffective to the extent of such invalidity or prohibition without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
5.8. COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in counterparts, each of which shall be deemed to be
an original, but all of which taken together shall constitute one and the same
instrument. The counterparts are in all respects identical, and each of the
counterparts shall be deemed to be complete in itself so that any one may be
introduced in evidence or used for any other purpose without the production of
the other counterparts. This Agreement shall be effective when one or more of
such counterparts has been executed by each party and delivered. If a party
receives a facsimile transmission of this Agreement from another party, which
transmission bears the signature of the other party, then it shall be deemed
that (i) the Agreement that is sent by facsimile transmission conforms to the
original, (ii) the original Agreement bears a genuine signature of the other
party and (iii) the Agreement has been delivered by the other party. In such
event, the other party shall send an original of the Agreement to the receiving
party by regular mail.
5.9. AUTHORIZATION. Each individual executing this Agreement
does thereby represent and warrant to any other individual so signing (and to
each other entity for which another individual is signing) that the individual
has been duly authorized to deliver this Agreement in the capacity and for the
entity that is set forth where he signs.
5.10. COSTS AND ATTORNEYS' FEES. In the event that either party
shall be required to engage legal counsel to enforce the provisions of this
Agreement, the prevailing party shall be entitled to recover all cost and
expenses, including reasonable attorneys' fees, whether suit be instituted or
not, and whether at trial or on appeal.
5.11. NEGATION OF THIRD PARTY RIGHTS. This Agreement is not
intended, nor shall it be construed, to create any third party beneficiary
rights in any person or entity unless expressly otherwise provided.
IN WITNESS WHEREOF, the parties have signed this Agreement effective as of
the day and year first set forth above.
\s\ H. F. BOECKMANN
H. F. BOECKMANN, II
ALPNET, INC., a Utah Corporation
By: \s\ Thomas F. Seal
THOMAS F. SEAL
President
ATTEST:
\s\ Leo A. Jardine
LEO A. JARDINE
Secretary
EXHIBIT 10.7
FIRST AMENDMENT TO FINANCIAL MONITORING AGREEMENT
DATED 15 SEPTEMBER 1995
BETWEEN H.F. BOECKMMANN, II AND ALPNET, INC.
FIRST AMENDMENT TO
FINANCIAL MONITORING AGREEMENT
This First Amendment to Financial Monitoring Agreement (the "AMENDMENT") is
made effective as of 15 September 1995 by and between H. F. Boeckmann II
("BOECKMANN") and ALPNET, Inc., a Utah corporation ("ALPNET" or the "COMPANY").
R E C I T A L S :
WHEREAS, effective 31 March 1994, Boeckmann and ALPNET entered into a
"Financial Monitoring Agreement" (the "ORIGINAL AGREEMENT"); and
WHEREAS, pursuant to the terms of Paragraph 5.3 of the Original Agreement,
the Original Agreement may not be amended or modified except by a written
instrument signed by all parties affected thereby; and
WHEREAS, each of the parties desire to amend the Original Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises and other
consideration herein set forth, the parties amend the Original Agreement as
follows:
A M E N D M E N T:
A. AMENDMENT TO PARAGRAPH 1. The parties hereby expressly revoke and
delete in its entirety Paragraph 1 of the Original Agreement, entitled "APPROVAL
RIGHTS" and hereby insert the following in lieu thereof:
1. APPROVAL RIGHTS. During the term of this Agreement, ALPNET
shall not, without the prior written consent of Boeckmann (which consent
shall not be unreasonably withheld), issue securities, borrow money or
purchase or dispose of assets if the aggregated amount of any such
transaction exceeds five percent (5%) of the then current assets of the
Company and its subsidiaries determined on a consolidated basis; provided,
however, that for equity transactions only, the five percent (5%) test
shall be applied on a prospective basis taking into account all equity
transactions which have not been approved by the Board of Directors of
ALPNET in meetings held on or before 15 September 1995. ALPNET agrees to
defend, indemnify and hold Boeckmann harmless from and against any and all
liabilities, claims, demands, damages, losses (including, without
limitation, reasonable attorneys' fees), actions and causes of action, or
suits at law or in equity of whatsoever kind or nature, arising from
actions taken, or actions that allegedly should have been taken, by
Boeckmann pursuant to or under this Agreement.
B. AMENDMENT TO PARAGRAPH 4.3. The parties hereby expressly revoke and
delete in its entirety Paragraph 4.3 of the Original Agreement and hereby insert
the following in lieu thereof:
4.3. Boeckmann's actual holdings of ALPNET Common Stock and
Common Stock equivalents constitutes less than fifteen percent (15%) of
the issued and outstanding shares of ALPNET Common Stock and Common Stock
equivalents.
C. NO OTHER MODIFICATIONS. Except as expressly and specifically modified
herein, all of the other terms and conditions of the Original Agreement shall
remain absolutely unchanged and in full force and effect; provided, however,
that no provision of the Original Agreement shall be interpreted in such a
manner as to be inconsistent with this Amendment.
IN WITNESS WHEREOF, the parties have signed this Amendment effective as of
the day and year first set forth above.
\s\ H. F. Boeckmann, II
H. F. BOECKMANN, II
ALPNET, INC., a Utah Corporation
By: \s\ John W. Wittwer
JOHN W. WITTWER
Executive Vice President
ATTEST:
\s\ D. Kerry Stubbs
D. KERRY STUBBS
Secretary
E X H I B I T 1 0.8
SPECIMEN EXECUTIVE STOCK OPTION AGREEMENT
DATED 17 AUGUST 1995
ALPNET EXECUTIVE STOCK OPTION
THIS EXECUTIVE STOCK OPTION (the "OPTION") is granted effective as of 17
August 1995, by ALPNET, INC., a Utah corporation having its principal place of
business in Salt Lake City, Utah ("ALPNET"), to ,
who currently resides in Salt Lake City, Utah (" ").
R E C I T A L S:
A. ALPNET, and its subsidiaries and affiliates, form a world wide network
engaged in the business of providing specialized language services for
businesses engaged in international trade.
B. The Board of Directors of ALPNET (the "BOARD") have approved the
granting of a limited number of stock options to certain executive officers of
ALPNET as an incentive to those certain executive officers to improve the
performance and profitability of ALPNET and its subsidiaries.
C. is the and
of ALPNET, and the Board has approved the granting of a
stock option to in his capacity as executive officer of
ALPNET.
A G R E E M E N T:
NOW, THEREFORE, in conjunction with the employment of by
ALPNET, and as a part of ALPNET's executive officer incentive program, ALPNET
hereby grants to the option (the "OPTION") to purchase
up to shares of ALPNET's unissued but authorized restricted common
stock, no par value (the "SHARES"), on the terms and conditions that are set
forth in this Agreement.
1. VESTING OF OPTION. The Option shall vest and become exercisable as
follows:
1.1. The first Shares shall vest and become
exercisable on 1 September 1996, at an exercise price of $0.50 per share;
1.2. The second Shares shall vest and become
exercisable on 1 September 1997, at an exercise price of $0.75 per share; and
1.3. The final Shares shall vest and become exercisable
on 1 September 1998, at an exercise price of $1.10 per share.
2. ACCELERATION UPON CHANGE IN CONTROL. All unvested and/or
unexercisable portions of the Option shall accelerate and become immediately
vested and exercisable if employment is
involuntarily terminated (with or without cause) within one (1) year after a
"change in control" of ALPNET. As used herein, a "change in control" shall mean
the acquisition by a person or group of the beneficial ownership of (i) thirty-
five percent (35%) or more of the outstanding common stock or common stock
equivalents of ALPNET or (ii) fifty percent (50%) or more of ALPNET's assets.
3. RIGHT TO EXERCISE; EXPIRATION OF OPTION. has the
right to exercise the Option only while is an
employee, officer or director of ALPNET. Any portion of the Option which has
not been exercised by will expire on 1 September 2000,
unless sooner terminated by the terms of this Agreement.
4. METHOD OF EXERCISE. The Option shall be exercisable by a written
notice to ALPNET which shall:
4.1. State the election to exercise the Option, the number of shares
in respect of which it is being exercised, and current
address and Social Security Number (if applicable);
4.2. Contain such representations and agreements as to
investment intent with respect to such shares as may be satisfactory to
ALPNET's counsel; and
4.3. Be signed by .
5. PAYMENT OF EXERCISE PRICE. Payment of the exercise price of any shares
with respect to which the Option is being exercised shall be paid in full in
United States dollars or by certified funds and shall be delivered with the
notice of exercise; provided, however, that at the discretion of
, the exercise price may be paid in full or in part with stock of
ALPNET valued at fair market value as of the date of exercise of the Option.
The Shares shall be issued upon payment in full therefor. Until the issuance of
the stock certificates, no rights as a shareholder shall exist with respect to
shares subject to the Option notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other rights for which the record date
is prior to the date the stock certificate is issued.
6. RESTRICTIONS ON EXERCISE AND SHARES. As a condition to his exercise of
the Option, ALPNET may require to make such
representations and warranties to ALPNET as may be required by applicable law or
regulation. acknowledges and understands that the Shares
issued pursuant to the exercise of the Option will be "restricted" or "legend"
securities and will be so marked and identified. understands and
acknowledges that "restricted" or "legend" securities means that said securities
cannot be resold without registration under the United States Securities Act of
1933 or pursuant to an exemption from such registration.
7. NON-TRANSFERABILITY OF OPTION. The Option may not be transferred by
and may be exercised during the lifetime of
only by him and only while he is an employee, officer, director
or independent contractor of ALPNET, except that if his employment or position
terminates by reason of his death, to the extent that shares subject to the
Option have vested and remain unexercised on the date of
death, such vested Option may be exercised within six (6) months after
the death of , but in no event later than 1
September 2000, by, and only by, the person or persons to whom his rights under
the Option shall have passed by Will or by the laws of descent and distribution.
8. INVESTMENT PURPOSES. covenants and warrants that
any and all securities of ALPNET obtained upon exercise of all or any part of
the Option are being acquired for personal account
and not on behalf of any others or with a view to their distribution.
9. EFFECT OF OPTION ON EMPLOYMENT. The grant of the Option does not give
any right to continued employment with ALPNET
or its subsidiaries or affiliates for any period, and does not give ALPNET or
its subsidiaries or affiliates any right to the continued services of
for any period.
10. VOLUNTARY RELINQUISHMENT OF NSO PLAN. hereby
voluntarily relinquishes and forfeits any and all right, title and interest he
currently has in options, whether vested or non-vested, which have been granted
to him by ALPNET under ALPNET's nonstatutory stock option plan.
11. NO ISSUANCE OF STOCK IN VIOLATION OF LAWS.
right to receive stock of ALPNET upon exercise of the Option is subject to
ALPNET's obligation to comply with all applicable state and federal securities
laws, as well as the requirements of any stock exchange on which the shares of
ALPNET are listed and that notwithstanding anything contained herein to the
contrary, this Agreement shall not require ALPNET to issue shares to
if such issuance would be a violation of applicable laws or
agreements with stock exchanges.
12. GENERAL PROVISIONS. The following provisions are also an integral
part of this Agreement.
12.1. BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the respective
parties hereto.
12.2. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties and supersedes all prior
agreements, representations or understandings between the parties relating to
the subject matter hereof. All preceding agreements relating to the subject
matter hereof, whether written or oral, are hereby merged into this Agreement.
12.3. CAPTIONS. The headings used in this Agreement are inserted for
reference purposes only and shall not be deemed to define, limit, extend,
describe or affect in any way the meaning, scope or interpretation of any of the
terms or provisions of this Agreement or the intent hereof.
12.4. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures upon any counterpart were
upon the same instrument. All signed counterparts shall be deemed to be one
original.
12.5. SEVERABILITY. The provisions of this Agreement are severable;
and should any provision hereof be void, voidable, unenforceable or invalid,
such void, voidable, unenforceable or invalid provision shall not affect the
other provisions of this Agreement.
12.6. WAIVER OF BREACH. Any waiver by either party of any breach of
any kind or character whatsoever by the other, whether such be direct or
implied, shall not be construed as a continuing waiver of or consent to any
subsequent breach of this Agreement.
12.7. ATTORNEYS' FEES. In the event any action or proceeding is
brought by either party to enforce the provisions of this Agreement, the
prevailing party shall be entitled to recover its costs and reasonable
attorneys' fees, whether such sums are expended with or without suit, at trial
or on appeal.
12.8. CUMULATIVE REMEDIES. The rights and remedies of the parties
hereto shall be construed cumulatively, and none of such rights and remedies
shall be exclusive of, or in lieu or limitation of any other right, remedy or
priority allowed by law.
12.9. AMENDMENT. This Agreement may not be modified except by an
instrument in writing signed by the parties hereto.
12.10. TIME OF ESSENCE. Time is the essence of this Agreement.
12.11. INTERPRETATION. This Agreement shall be interpreted,
construed and enforced according to the substantive laws of the State of Utah
and the United States securities laws.
12.12. GOVERNING LAW AND JURISDICTION. This Agreement shall be
construed under and governed by the laws of the State of Utah, United States of
America, in force at the time of execution. Each of the parties hereby
irrevocably consents and agrees that any legal action, suit or proceeding
arising out of or in any way in connection with this Agreement, including an
appeal therefrom, may be instituted or brought in the Federal District Court for
the District of Utah, and each of the parties hereby irrevocably consents and
submits to, for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of such Court, and to all proceedings in such
Court. Further, each of the parties irrevocably consents to actual receipt of
any summons and/or legal process at their respective addresses as set forth in
this Agreement as constituting in every respect sufficient and effective service
of process in any such legal action or proceeding. The parties further agree
that final judgment in any such legal action, suit or proceeding shall be
conclusive and may be enforced in any other jurisdiction, whether within or
outside the United States of America, by suit under judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact and the
amount of the liability.
12.13. NOTICE. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given when such
notice shall have been either (i) duly mailed by registered or certified, first-
class mail, return receipt requested, postage prepaid, or (ii) transmitted by
hand-delivery, telegram, telex, telecopier or facsimile transmission, to the
party entitled to receive the same at the address indicated below, or at such
other address as such party shall have specified by written notice to the other
party hereto given in accordance herewith:
If to ALPNET, at the following address:
ALPNET, Inc.
c/o D. Kerry Stubbs
4444 South 700 East, Suite 204
Salt Lake City, UT 84107-3075 USA
If to , at the following address:
DATED effective the day, month and year first above written.
ALPNET, INC., A UTAH CORPORATION
By:____________________________
JAMES R. MORGAN
Chairman of the Board
ACCEPTANCE OF GRANT
The undersigned hereby acknowledges the granting, and his acceptance, of
the Option on the terms and conditions set forth above.
_______________________________
E X H I B I T 1 1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Thousands of dollars and shares 1995 1994 1993
<S> <C> <C> <C>
Net income (loss) $621 $(741) $458
Weighted average shares of
Common Stock outstanding 15,783 15,562 13,334
Shares of Common Stock issuable
upon conversion of convertible
Preferred Stock (2) 6,929 1,673 1,378
Shares of Common Stock issuable
upon exercise of employee
stock options 443
Total shares of Common Stock and
Common Stock equivalents 23,155 17,235 14,712
Net income (loss) per share $.03 $(.04) $.03
<FN>
(1) Primary and fully diluted per share earnings (loss) are substantially the same for each year presented.
(2) Common Stock issuable upon conversion of Preferred Stock was anti-dilutive for certain quarters in 1994.
</FN>
</TABLE>
E X H I B I T 2 0
OPINION OF FRIEDMAN & FRIEDMAN,
INDEPENDENT AUDITORS FOR MULTISCRIPT INTERNATIONAL INC.
To the Shareholder of
Multiscript Inc.
We have audited the balance sheets of Multiscript Inc. as at December 31, 1995
and 1994 and the statements of earnings, deficit and changes in financial
position for each of the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1995 and 1994
and the results of its operations and the changes in its financial position for
each of the years in the three year period ended December 31, 1995 in accordance
with generally accepted accounting principles.
\s\FRIEDMAN & FRIEDMAN
Chartered Accountants
Montreal, Quebec
February 7, 1996
E X H I B I T 2 1
LIST OF ALL SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
All subsidiaries are wholly-owned.
Date of
Place of Incorporation
Name Incorporation or Acquisition
<S> <C> <C>
ALPNET, S.A. Switzerland June 21, 1984
Automated Language Processing Systems, Ltd. Canada November 17, 1986
a.l.p. Services, Inc. Utah, USA November 25, 1987
A.L.P. SERVICES SARL France November 30, 1987
INTERDOC SARL France November 30, 1987
Automated Language Processing Services, Ltd. England December 2, 1987
ALPNET GmbH Germany January 11, 1988
Multiscript International Inc. Canada January 15, 1988
Dr. W.D. Haehl GmbH Germany January 29, 1988
Interlingua Group Ltd. England March 31, 1988
ALPNET U.K. Ltd. England March 31, 1988
Interlingua S.L. Spain March 31, 1988
Interlingua Language Services Ltd. Hong Kong March 31, 1988
ALPNET Singapore Pte. Ltd. Singapore March 31, 1988
ALPNET Ireland Ltd. Ireland August 18, 1995
Translation Services Bureau Ltd. Scotland October 31, 1995
AOLI Network Technology Ltd. China December 12, 1995
ALPNET Netherlands BV The Netherlands February 12, 1996
</TABLE>
E X H I B I T 2 3.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1981 Incentive Stock Option Plan and The 1983
Non-Statutory Stock Option Plan of ALPNET, Inc. and subsidiaries of our report
dated March 15, 1996, with respect to the consolidated financial statements of
ALPNET, Inc. and subsidiaries included in the Annual Report (Form 10-K) for the
year ended December 31, 1995.
\s\ ERNST & YOUNG LLP
Salt Lake City, Utah
March 22, 1996
E X H I B I T 2 3.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1981 Incentive Stock Option Plan and the 1983
Non-Statutory Stock Option Plan of ALPNET, Inc. and subsidiaries; of our
Auditors' Report dated February 7, 1996 with respect to the balance sheets of
Multiscript Inc. as at December 31, 1995 and 1994 and the statements of
earnings, deficit and changes in financial position for each of the years ended
December 31, 1995, 1994 and 1993, which we have been advised is included in this
Annual Report (Form 10-K) of ALPNET, Inc. for the year ended December 31, 1995.
\s\FRIEDMAN & FRIEDMAN
Chartered Accountants
Montreal, Quebec
March 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994
AND 1993, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1995 DEC-31-1994 DEC-31-1993
<CASH> 1,033 344 1,012
<SECURITIES> 0 0 0
<RECEIVABLES> 5,134 4,436 3,580
<ALLOWANCES> 156 108 165
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 7,143 5,610 5,465
<PP&E> 3,977 3,612 3,309
<DEPRECIATION> 2,997 2,682 2,575
<TOTAL-ASSETS> 14,449 13,223 12,743
<CURRENT-LIABILITIES> 4,898 4,423 5,340
<BONDS> 220 1,623 1,314
0 0 0
3,127 2,894 1,151
<COMMON> 38,954 37,846 38,274
<OTHER-SE> (32,750) (33,563) (33,336)
<TOTAL-LIABILITY-AND-EQUITY> 14,449 13,223 12,743
<SALES> 26,919 20,473 19,459
<TOTAL-REVENUES> 26,919 20,473 19,459
<CGS> 21,027 16,952 14,860
<TOTAL-COSTS> 21,027 16,952 14,860
<OTHER-EXPENSES> 4,918 3,966 3,695
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 193 204 364
<INCOME-PRETAX> 781 (649) 540
<INCOME-TAX> 160 92 82
<INCOME-CONTINUING> 621 (741) 458
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 621 (741) 458
<EPS-PRIMARY> .03 (.04) .03
<EPS-DILUTED> .03 (.04) .03
</TABLE>
