UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
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)
(801) 265-3300
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
The number of shares outstanding of the registrant's no par value Common Stock
as of May 10, 1996, was 16,200,541.
ALPNET, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Consolidated Financial Statements (Unaudited):
Consolidated Statements of Operations--Three months ended March 31, 1996
and 1995
Consolidated Balance Sheets--March 31, 1996 and December 31, 1995
Consolidated Statements of Cash Flows--Three months ended March 31, 1996
and 1995
Notes to Consolidated Financial Statements--March 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
Thousands of dollars and shares 1996 1995
<S> <C> <C>
Sales of services $6,488 $5,906
OPERATING EXPENSES:
Cost of services sold 5,163 4,773
Selling, general and administrative expenses 1,087 910
Development costs 50 43
Amortization of goodwill 90 92
Total operating expenses 6,390 5,818
OPERATING INCOME 98 88
Interest expense, net 33 46
Income before income taxes 65 42
Income taxes 36 28
NET INCOME $ 29 $ 14
NET INCOME PER SHARE $ .001 $ .001
Weighted average shares of Common Stock
and Common Stock equivalents outstanding 25,544 22,199
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
March 31 December 31
Thousands of dollars 1996 1995
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,408 $ 1,033
Trade accounts receivable, less allowance of
$179 in 1996 and $156 in 1995 4,488 4,978
Work-in-process 340 340
Prepaid expenses and other 931 792
Total current assets 7,167 7,143
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Office facilities and leasehold improvements 141 144
Equipment 3,852 3,833
3,993 3,977
Less accumulated depreciation and
amortization 3,020 2,997
Net property, equipment and leasehold improvements 973 980
OTHER ASSETS:
Goodwill, less accumulated amortization
of $2,951 in 1996 and $2,924 in 1995 6,024 6,250
Other 80 76
Total other assets 6,104 6,326
TOTAL ASSETS $14,244 $14,449
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - continued
<CAPTION>
March 31 December 31
Thousands of dollars and shares 1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 1,233 $ 1,156
Accounts payable 1,830 1,636
Accrued payroll and related benefits 545 665
Other accrued expenses 793 813
Deferred revenue 118 254
Income taxes payable 19 18
Current portion of long-term debt 88 94
Current portion of long-term debt to affiliates 41 42
Guarantee liability (Note 3) 400 220
Total current liabilities 5,067 4,898
Long-term debt, less current portion 96 115
Long-term debt to affiliates, less current portion 91 105
Commitments (Note 3)
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, no par value;
authorized 2,000 shares; issued and outstanding
1,131 shares in 1996 and 1995 3,127 3,127
Common Stock, no par value; authorized 40,000
shares; issued and outstanding 16,201 shares
in 1996 and 16,199 shares in 1995 38,775 38,954
Accumulated deficit (31,300) (31,329)
Equity adjustment from foreign currency
translation (1,612) (1,421)
Total shareholders equity 8,990 9,331
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,244 $14,449
See accompanying notes.
</TABLE>
<TABLE>
ALPNET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
Thousands of dollars 1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 29 $ 14
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, equipment
and leasehold improvements 93 84
Amortization of goodwill 90 92
Other (36) (5)
Changes in operating assets and liabilities:
Trade accounts receivable 417 (86)
Accounts payable and accrued expenses 103 189
Other (270) (7)
Net cash provided by operating activities 426 281
INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold
improvements (104) (84)
FINANCING ACTIVITIES:
Proceeds from notes payable to banks 355 168
Principal payments on notes payable to banks (261) (272)
Principal payments on long-term debt and debt to
affiliates (35) (26)
Net cash provided by (used in) financing activities 59 (130)
Effect of exchange rate changes on cash (6) 16
NET INCREASE IN CASH AND CASH EQUIVALENTS 375 83
Cash and cash equivalents at beginning of period 1,033 344
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,408 $ 427
CASH PAID DURING THE PERIOD FOR:
Interest $ 33 $ 51
Income taxes 42 28
See accompanying notes.
</TABLE>
ALPNET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
1. BASIS OF PRESENTATION
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.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the periods presented are not necessarily
indicative of the results that may be expected for the respective complete
years. For further information, refer to the Consolidated Financial
Statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent 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.
Certain amounts for the three-month period ended March 31, 1995 have been
reclassified to conform to the 1996 presentation.
2. 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.
Fluctuations in the amount of income taxes arise primarily from the varying
combinations of taxable income and losses of the Company's subsidiaries in
the various domestic and foreign tax jurisdictions, including the
utilization of net operating loss carryforwards in many of these
jurisdictions.
3. ACQUISITION GUARANTEE LIABILITY
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 waives 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.
ITEM 2: 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 first quarter 1996 foreign currency equity
adjustment was negative $191,000 compared to a positive adjustment of $550,000
for the first quarter of 1995. When the U.S. dollar strengthens against foreign
currencies, the shareholders' equity adjustment for the Company normally is
negative since the net assets denominated in foreign currencies are translated
into a lower amount in U.S. dollars. As of March 31, 1996, the cumulative net
effect to the Company of the equity adjustment from movements in foreign
currency exchange rates was a reduction of $1.6 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 results of operations for the three months
ended March 31, 1996 as compared with the three months ended March 31, 1995,
including the significant effects of fluctuating foreign currency exchange
rates.
The Company reported net income of $29,000 for the three months ended March 31,
1996 compared to net income of $14,000 for the first three months of 1995. If
foreign currency exchange rates for 1996 had remained unchanged from 1995, the
Company would have recorded net income of $39,000 instead of $29,000 and
therefore currency exchange rate fluctuations had an immaterial effect on 1996
results.
Sales of services were $6.5 million for the three months ended March 31, 1996
compared to $5.9 million for the three months ended March 31, 1995. The
$580,000 increase in reported sales for 1996 consisted of an increase in sales
volume of approximately $650,000 and a $70,000 decrease due to currency exchange
rate variances. The increase in sales volume in the first quarter of 1996 over
the first quarter of 1995 is primarily attributable to significant increases in
the Company's UK offices, as well as in Canada and Asia, with smaller increases
in most of the other countries in which the Company operates. Revenues in
Germany decreased by approximately 11% in 1996 as compared to 1995 due primarily
to sluggishness in the German economy.
The increase in sales volume is also a result of expanding needs 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 has opened several new offices in recent
years--including a new office in Tokyo in 1996--in order to increase its market
share in what management believes has been and will continue to be an expanding
industry. The intense price competition which the Company encountered
throughout 1994 and 1995 continues to limit the prices the Company can charge in
the marketplace, and the industry pricing situation appears to have improved
only marginally in 1996 compared to early 1995.
The following table shows a comparison of sales of services in each of the
Company's significant geographic areas for the three months ended March 31, 1996
and 1995, along with the effect of foreign currency exchange rate fluctuations
on the sales between periods. Intercompany sales are normally billed on a
margin-sharing basis. All intercompany sales are eliminated in determining the
totals.
<TABLE>
<CAPTION>
Thousands of dollars
Increase (Decrease) in
Three Months Sales of Services due to Total
Ended March 31 Sales Currency Increase
1996 1995 Volume Fluctuations (Decrease)
<S> <C> <C> <C> <C> <C>
United States $ 669 $ 635 $ 34 $ $ 34
Canada 962 817 121 24 145
Europe 5,389 4,864 616 (91) 525
Asia 575 477 90 8 98
Eliminations (1,107) (887) (209) (11) (220)
Total Sales $6,488 $5,906 $ 652 $(70) $582
</TABLE>
As shown in the above table, every major geographical region reported increased
sales in 1996 over 1995, although as previously noted, sales declined in
Germany, which is the Company's second largest source of revenues after the U.K.
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 many 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 increased from 1995 to 1996, and due primarily to increased investment in
sales and marketing, the backlog of uncompleted orders is higher as of March 31,
1996 than it was as of March 31, 1995.
Canada's reported sales for 1996 represented an increase of 18% over 1995,
substantially all of which is due to actual volume increases. The increase in
sales in Canada was due in part to increased international trading as well as
ongoing aggressive marketing and sales efforts. 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 decline or if the political situation
deteriorates in the future.
In 1996, sales in Europe of $5.4 million represented approximately 70% of the
Company's total worldwide sales and grew by $525,000 over 1995 sales levels, or
by 11% year over year. Sales increased in every European country in which the
Company has offices, except Germany and Spain, but most of the increase was a
result of growth in the U.K. (30% growth rate, which would have been 35% absent
the effect of foreign currency exchange rate variances). Together, the U.K. and
Germany accounted for approximately 87% of Europe's total sales in both 1996 and
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; the growing revenues of the London sales office which
was opened 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 in 1996, although the rate of growth will depend on many
factors which are subject to constant change.
In Germany, the overall economy grew at a mild pace during most of 1995, but
slowed considerably late in 1995. The slowdown continued into 1996. The first
quarter of 1996 was particularly poor in terms of economic strength, evidenced
by the unemployment rate which increased to post WWII highs as many companies
and industries have reduced employment. Due to the effects of the overall
economic slowdown, the Company's sales in Germany decreased from levels reported
in the first quarter of 1995. The uncertain economic conditions in Germany will
undoubtedly have some effect on the Company's ability to grow sales in the
foreseeable future. However, it is not unusual for Germany's sales levels to
begin the year at a low level and increase in subsequent quarters of the year,
and management is optimistic that sales growth will commence in the second
quarter of 1996, based on the backlog of orders at the end of March 1996.
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 in late 1995.
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 $575,000 in 1996 grew by 21% over 1995 levels, with the bulk of
this increase due to actual volume increases and only 2% 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 and early 1996, the
China office functioned only as a production facility, but China is expected to
begin to sell to local companies later in 1996 and contribute to the growth of
sales in Asia in coming years. While Hong Kong's sales decreased substantially
as an indirect result of the uncertainty over the impending political changes in
1997, sales in 1996 in Singapore and Korea increased significantly over 1995
levels.
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 and
accelerate during 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 remains high.
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. While
some relief from severe price competition has been observed recently, management
expects competitive pricing pressures to continue during 1996. Based on current
trends, pricing pressures are not expected to intensify significantly beyond
current levels. The Company 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 medium- to
smaller-sized projects to improve the productivity of translators.
Selling, general and administrative expenses were approximately $1,090,000 in
1996 compared to $910,000 in 1995 for an increase of 20%. The increase was due
primarily to the overall growth of existing offices and the opening of new
offices; 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
late 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 as well as efforts related to the development and expansion
of the Company's online language service product offering. In 1996, costs of
$50,000 increased somewhat from 1995 ($43,000) 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 late
1995, the Company entered into a partnership with Europe Online, an Internet-
based online service developed and run by Europeans, and this partnership has
resulted in increased development efforts. The Company expects development
costs to continue to increase during 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 $33,000 in 1996, which was $13,000 less than in 1995. The
decrease was due to reduced overall debt levels, including the conversion of
$243,000 of debt to an affiliate to convertible Preferred Stock in August 1995.
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 $36,000 in 1996, compared to $28,000 in
1995. 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 of net
operating loss carryforwards in many of these jurisdictions.
LIQUIDITY AND SOURCES OF CAPITAL
In the first quarter of 1996, the Company had a net positive cash flow from
operations of approximately $430,000 compared with a positive cash flow from
operations in the first quarter of 1995 of $280,000. In 1996 and 1995, the
Company's investing activities consisted primarily of the acquisition of
equipment needed to maintain or upgrade production capability. Financing
activities for both periods consisted primarily of fluctuations in the amounts
utilized under bank lines of credit used to finance the Company's working
capital needs.
As of March 31, 1996, the Company's cash and cash equivalents were approximately
$1.4 million, representing an increase of approximately $380,000 during the
first quarter of 1996. At March 31, 1996, the Company had working capital of
approximately $2.1 million, compared to working capital of approximately $2.2
million at December 31, 1995.
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 March 31, 1996, the Company had unused amounts
under these lines of credit of approximately $900,000. The Company believes
that 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 periods
are expected to vary according to the overall growth of the Company. In
addition, the Company plans 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 recent years
have not been substantial and were almost exclusively related to the procurement
of computers and other translation-related equipment and, in certain instances,
the procurement of office premises. 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
and beyond. Substantially all of the Company's deferred tax assets at March 31,
1996 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 dates 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 was
required to adopt this standard in the first quarter of 1996, which adoption did
not have a material impact on the Company's financial condition.
CAUTIONARY STATEMENT
The statements in this Management's Discussion and Analysis that are forward
looking, including for example, information about estimates of sales growth in
various countries in future periods, are based on current expectations and
actual results may differ materially. Forward looking statements contained in
this Management's Discussion and Analysis involve numerous risks and
uncertainties that could cause actual results to be materially different from
estimated results. Such risks and uncertainties include, among many others,
fluctuating foreign currency exchange rates, changing levels of demand for the
Company's services, the effect of changing general economic and political
conditions in all of the various countries in which the Company has operations,
and the impact of competitive services and pricing. As a result, no assurance
can be given as to future results.
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
(11) Statement Re: Computation of Per Share Earnings
(27) Financial Data Schedule
(b) The Company filed the following report on Form 8-K during the three
months ended March 31, 1996.
Date of
Report Item Reported
02/06/96 ALPNET Announces Preliminary 1995 Results
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALPNET, Inc.
Registrant
Date: May 10, 1996 \s\ Thomas F. Seal
Thomas F. Seal
President and Chief Executive Officer
Date: May 10, 1996 \s\ D. Kerry Stubbs
D. Kerry Stubbs
Chief Financial Officer
E X H I B I T 1 1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31
Thousands of dollars and shares 1996 1995
<S> <C> <C>
Net income $29 $14
Weighted average shares of Common Stock
outstanding 16,200 15,562
Shares of Common Stock issuable upon conversion
of Convertible Preferred Stock 7,423 6,637
Shares of Common Stock issuable upon exercise
of employee stock options 1,921
Total shares of Common Stock and Common Stock
equivalents 25,544 22,199
Net income per share $.001 $.001
<FN>
(1) Primary and fully diluted per share earnings are substantially the same for each period presented.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1408
<SECURITIES> 0
<RECEIVABLES> 4667
<ALLOWANCES> 179
<INVENTORY> 0
<CURRENT-ASSETS> 7167
<PP&E> 3993
<DEPRECIATION> 3020
<TOTAL-ASSETS> 14244
<CURRENT-LIABILITIES> 5067
<BONDS> 187
0
3127
<COMMON> 38775
<OTHER-SE> (32912)
<TOTAL-LIABILITY-AND-EQUITY> 14244
<SALES> 6488
<TOTAL-REVENUES> 6488
<CGS> 5163
<TOTAL-COSTS> 5163
<OTHER-EXPENSES> 140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> 65
<INCOME-TAX> 36
<INCOME-CONTINUING> 29
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
