<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT: FEBRUARY 23, 1995
(Date of earliest event reported)
ALC COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE COMMISSION FILE NO. 1-10831 38-2643582
(State of incorporation) (IRS Employer I.D. No.)
30300 TELEGRAPH ROAD, SUITE 350
BINGHAM FARMS, MI 48025
(Address of principal executive offices)
(810) 647-6920
(Registrant's telephone number, including area code)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Delaware Acquisition Corporation, a wholly owned subsidiary of the
Company, has completed its cash tender offer for all outstanding shares of
common stock, $.01 par value, of ConferTech International, Inc., a Colorado
corporation (the "Common Stock"), at a price of $8.00 per share. The tender
offer expired at 12:00, Midnight, New York City time, on Wednesday, February
22, 1995. The shares tendered constitute approximately 97% of ConferTech's
issued and outstanding shares of Common Stock. The remaining shares of Common
Stock will be acquired by the Company in a subsequent second-step merger
transaction expected to occur on or about March 15, 1995.
The total funds required to purchase the shares of Common Stock
tendered in the offer were approximately $59.3 million. The Company obtained
such funds from a loan from its affiliate, Allnet Communication Services, Inc.
("Allnet"). Allnet obtained such funds from its working capital and existing
credit facility.
ConferTech International, Inc. designs, develops and markets advanced
equipment and services for the audio teleconferencing market.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The audited consolidated balance sheets of ConferTech International,
Inc. as of December 31, 1994 and 1993, and the related audited
consolidated statements of income, shareowners' equity and cash flows
for each of the three years in the period ended December 31, 1994, are
filed herewith. See "Index to Consolidated Financial Statements."
(b) Pro Forma Financial Information
It was impracticable to provide pro forma financial information
required pursuant to Article 11 of Regulation S-X relative to an
acquired business in this Form 8-K filing. The required pro-forma
financial information will be filed with the Commission by May 1,
1995.
(c) Exhibits
(2) Agreement and Plan of Merger, dated as of January 18, 1995, is
incorporated by reference to Exhibit (c)(1) to the Company's
Schedule 14D-1 filed with the Commission on January 24, 1995.
-2-
<PAGE> 3
(99) Press release announcing the completion of the Company's tender
offer for ConferTech International, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALC COMMUNICATIONS CORPORATION
Dated: March 8, 1995 By: /s/ JOHN M. ZRNO
Its: President and Chief Executive Officer
-3-
<PAGE> 4
CONFERTECH INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 5
Consolidated Income Statements for the years ended
December 31, 1994, 1993 and 1992 6
Consolidated Balance Sheets as of December 31, 1994 and 1993 7
Consolidated Statements of Shareowners' Equity for the
years ended December 31, 1994, 1993 and 1992 8
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 9
Notes to Consolidated Financial Statements for the years
ended December 31, 1994, 1993 and 1992 10
</TABLE>
-4-
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
ConferTech International, Inc.:
We have audited the accompanying consolidated balance sheets of
ConferTech International, Inc. and its subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareowners' equity,
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
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 provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of ConferTech International, Inc.
and its subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 10, 1995
5
<PAGE> 6
CONFERTECH INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Conferencing services $ 30,521 $ 24,118 $ 17,578
Equipment sales 13,461 11,657 7,681
--------- -------- ---------
Total revenue 43,982 35,775 25,259
--------- -------- ---------
COSTS AND EXPENSES:
Cost of conferencing services 16,188 13,110 9,163
Cost of equipment sales 7,611 5,445 3,774
Marketing, general and administrative 14,868 11,984 8,643
Research and development 2,610 1,602 1,303
--------- -------- ---------
Total costs and expenses 41,277 32,141 22,883
--------- -------- ---------
OPERATING INCOME 2,705 3,634 2,376
--------- -------- ---------
OTHER INCOME (EXPENSE):
Interest income 215 223 434
Interest expense (32) (25) (202)
--------- -------- ---------
Total other income 183 198 232
--------- -------- ---------
INCOME BEFORE INCOME TAXES 2,888 3,832 2,608
PROVISION FOR INCOME TAXES 1,253 1,484 1,043
--------- -------- ---------
NET INCOME $ 1,635 $ 2,348 $ 1,565
========= ======== =========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary $ 0.21 $ .30 $ .26
========= ======== =========
Fully Diluted - - .21
========= ======== =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Primary 7,972 7,961 6,103
========= ======== =========
Fully Diluted - - 7,848
========= ======== =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
6
<PAGE> 7
CONFERTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,047 $ 2,125
Receivables (net of allowance for doubtful accounts:
1994, $210; 1993, $182)
Trade accounts 8,509 7,458
Long-term contract 744 1,030
Inventories 2,994 3,130
Prepaids and other 1,205 876
-------- ---------
Total current assets 16,499 14,619
-------- ---------
PROPERTY - AT COST 21,332 16,952
Less accumulated depreciation and amortization 8,871 5,868
-------- ---------
Net property 12,461 11,084
-------- ---------
OTHER ASSETS 147 466
-------- ---------
TOTAL $ 29,107 $ 26,169
======== =========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,621 $ 2,436
Accrued liabilities 3,157 2,769
Deferred income 520 244
Other 35 113
-------- ---------
Total current liabilities 6,333 5,562
-------- ---------
LONG-TERM LIABILITIES:
Deferred income 214 254
Deferred income tax liability 949 632
Other 33
-------- ---------
Total long-term liabilities 1,163 919
-------- ---------
SHAREOWNERS' EQUITY:
Preferred stock, $1.00 par value; 5,000 shares authorized;
no shares issued and outstanding
Common stock, $0.01 par value; 20,000 shares authorized;
shares issued and outstanding: 1994, 7,591; 1993, 7,430 76 74
Additional paid-in capital 15,719 15,329
Retained earnings 6,048 4,413
Translation adjustment (232) (128)
-------- ---------
Shareowners' equity 21,611 19,688
-------- ---------
TOTAL $ 29,107 $ 26,169
======== =========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
7
<PAGE> 8
CONFERTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Retained Translation Shareowners'
Shares Par Value Capital Earnings Adjustment Equity
------ --------- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 5,299 $ 53 $12,427 $ 500 $ 3 $12,983
Shares issued upon conversion
of convertible debentures 169 2 167 169
Shares issued upon exercise of
stock options 20 39 39
Shares issued through employee
stock purchase plan 45 181 181
Translation adjustment (72) (72)
Net income 1,565 1,565
----- ------ -------- ------- ------ -------
BALANCE, DECEMBER 31, 1992 5,533 55 12,814 2,065 (69) 14,865
Shares issued upon conversion of
convertible debentures 1,654 17 1,593 1,610
Shares issued upon exercise of
employee stock options 208 2 475 477
Shares issued through employee
stock purchase plan 25 106 106
Shares issued for the purchase
of assets 10 56 56
Tax reduction from exercise of
employee stock options 285 285
Translation adjustment (59) (59)
Net income 2,348 2,348
----- ------ -------- ------- ------ -------
BALANCE, DECEMBER 31, 1993 7,430 74 15,329 4,413 (128) 19,688
Shares issued upon exercise of
stock options and warrants 126 1 215 216
Shares issued through employee
stock purchase plan 35 1 153 154
Tax reduction from exercise of
employee stock options 22 22
Translation adjustment (104) (104)
Net income 1,635 1,635
----- ------ -------- ------- ------ -------
BALANCE, DECEMBER 31, 1994 7,591 $ 76 $ 15,719 $ 6,048 $ (232) $21,611
===== ====== ======== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
8
<PAGE> 9
CONFERTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,635 $ 2,348 $ 1,565
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,676 2,438 1,568
Deferred income tax provision 93 106 124
Net changes in assets and liabilities:
Trade accounts receivable (829) (901) (3,591)
Long-term contract receivable 286 (532) (498)
Inventories 136 (1,486) (72)
Prepaids and other assets 11 (57) (3)
Accounts payable 185 684 750
Accrued liabilities 373 1,379 354
Deferred income 236 (76) 55
-------- -------- --------
Net cash provided by operating activites 5,802 3,903 252
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property (5,236) (7,481) (3,250)
Proceeds from sale of property 201 31 173
-------- -------- --------
Net cash used in investing activities (5,035) (7,450) (3,077)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on obligations under capital lease (111) (125) (152)
Proceeds from issuance of common stock 370 583 220
-------- -------- --------
Net cash provided by financing activities 259 458 68
-------- -------- --------
EFFECT OF EXCHANGE RATE TRANSLATION ON
CASH AND CASH EQUIVALENTS (104) (59) (72)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 922 (3,148) (2,829)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,125 5,273 8,102
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,047 $ 2,125 $ 5,273
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
9
<PAGE> 10
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - The Company is engaged in the design, development, manufacturing and
marketing of advanced teleconferencing bridge equipment and services.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. Intercompany
transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers highly liquid investments and
investments with original maturities of three months or less to be cash
equivalents.
LONG-TERM CONTRACT RECEIVABLE - The long-term contract receivable represents
costs and estimated earnings in excess of billings on a long-term contract.
The unbilled receivables are billable upon completion of contract milestones.
INVENTORIES - Inventories are stated at lower of weighted average cost or
market.
PROPERTY - The Company provides for depreciation and amortization on a
straight-line basis over the estimated useful life of thirty-one years for the
building, five years for equipment, furniture, and fixtures and three years for
software.
WARRANTY RESERVE - The Company's products are under warranty for 12 months from
the date of installation. A provision for warranty costs is established when
the related equipment sales are recognized.
REVENUE RECOGNITION - The Company recognizes conferencing services revenue when
services are rendered. Equipment sales are recognized when the product is
shipped and title transfers to the customer. Installation and training charges
related to equipment sales are deferred until services are performed.
Maintenance agreements are deferred and recognized over the life of the
agreement. The Company recognizes revenue on a long-term contract under the
percentage-of-completion method of accounting. Revenue recognized is measured
by the percentage of costs incurred to date to estimated total costs for the
contract.
EARNINGS PER SHARE - Primary earnings per share are computed using the weighted
average number of common and common stock equivalent shares outstanding during
the period. Common stock equivalents include stock options and stock purchase
warrants.
Fully diluted earnings per share for 1992 are computed using the weighted
average number of common and common stock equivalent shares outstanding during
the period, as if the convertible debentures were converted into common stock
at the beginning of the period, and give retroactive effect to the elimination
of interest expense, net of income tax effect, applicable to the convertible
debentures.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting For Income
Taxes. The standard generally requires that deferred income taxes be provided
using the liability method at currently enacted tax rates.
FOREIGN CURRENCY TRANSLATION - Foreign assets and liabilities in the
consolidated balance sheets are translated at the current rate of exchange at
the balance sheet date. Revenue and costs and expenses are translated at the
weighted average exchange rate for the year. Unrealized translation
adjustments do not affect the results of operations and are reported as a
separate component of shareowners' equity.
RECLASSIFICATIONS - Certain items in the 1992 and 1993 consolidated financial
statements have been reclassified to conform with the 1994 presentation.
10
<PAGE> 11
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Raw materials $ 1,660 $ 1,169
Work in process 558 508
Finished goods 519 876
Field service spares 257 577
-------- -------
Total inventories $ 2,994 $ 3,130
======== =======
</TABLE>
PROPERTY
Property at December 31 consists of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land $ 40 $ 40
Building 2,369 2,370
Equipment 12,113 9,160
Furniture and fixtures 2,325 2,188
Software 4,485 3,194
-------- -------
Total property - at cost $ 21,332 $16,952
======== =======
</TABLE>
BANK LINES OF CREDIT
The Company has working capital lines of credit of $3,143 bearing interest
primarily at prime plus 1/2 percent (9.0% as of December 31, 1994). As of
December 31, 1994 the Company was eligible to draw the entire amount. The
terms of the lines of credit require the Company, among other requirements, to
obtain the bank's prior written consent before paying cash dividends on common
stock. The Company did not have any outstanding balances under its bank lines
of credit as of December 31, 1994 and 1993.
CONVERTIBLE DEBENTURES
Convertible debentures totaling $2,000 were issued in 1989 at an interest rate
of 9% per annum. The debentures were payable in twenty quarterly installments
commencing December 1992 and were subordinated to the bank lines of credit.
Debentures of $169 and $178 were converted into common stock in 1992 and 1991,
respectively, and the remaining debentures were converted in January 1993. The
debentures were converted into one share of common stock for each $1 of
debenture principal.
SHAREOWNERS' EQUITY
EMPLOYEE STOCK PURCHASE PLAN - The Company adopted a stock purchase plan in
1991 and reserved 200 shares for issuance under the terms of the plan. In
1994, the Company increased the shares reserved under the stock purchase plan
to 300. The Company grants to each participant an option to purchase the
number of full shares his or her accumulated payroll deductions will pay for
based on the purchase price. The purchase price is 85% of the lesser of the
fair market value of the common stock on the first business day or the last
business day of the purchase period. Each employee having at least six months
of employment service prior to the beginning of a semi-annual offering is
eligible to participate. Outstanding options to purchase common stock as of
December 31, 1994 will be converted into 18 shares of common stock in 1995 at a
purchase price of $3.83 per share.
11
<PAGE> 12
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
STOCK OPTION PLANS - The Company adopted stock option plans for employees and
directors. The Company has reserved 1,800 shares of its common stock for
issuance under the plans. The plans provide that options must be granted
within 10 years after the effective date of the plan and must not have more
than a 10-year term. The exercise price of options granted must be at least
equal to the fair market value of the related common stock on the date of the
grant. Under the terms of the option plans, the Board of Directors has the
authority to grant options utilizing different vesting provisions, but
generally options granted to employees vest 25% each year following one year of
service, and options granted to non-employee directors vest 50% upon grant and
50% after one year. Changes in options outstanding under the plans are as
follows:
<TABLE>
<CAPTION>
Exercise
Number of Options Outstanding Price
------------------------------------------------- -----
Nonstatutory Statutory Total
------------ --------- -----
<S> <C> <C> <C> <C>
December 31, 1991 83 915 998 $1.50-5.75
Granted 45 99 144 4.50-5.38
Expired (27) (27) 1.63-5.38
Exercised (20) (20) 1.63-3.13
---- ----- ----- ---------
December 31, 1992 128 967 1,095 1.50-5.75
Granted 47 399 446 4.75-7.25
Expired (126) (126) 1.63-6.25
Exercised (25) (175) (200) 1.50-5.38
---- ----- ----- ---------
December 31, 1993 150 1,065 1,215 1.50-7.25
Granted 55 215 270 3.75-8.25
Expired (59) (59) 5.38-8.25
Exercised (15) (15) 1.63-4.50
---- ----- ----- ----------
December 31, 1994 205 1,206 1,411 $1.50-8.25
==== ===== ===== ==========
Options vested
December 31, 1994 148 876 1,024 $1.50-8.25
==== ===== ===== ==========
</TABLE>
NONQUALIFIED STOCK OPTIONS - Prior to 1990, the Company had issued nonqualified
stock options to its outside directors. Changes in nonqualified options
outstanding are as follows:
<TABLE>
<CAPTION>
Number of
Options Exercise
Outstanding Price
----------- -----
<S> <C> <C>
December 31, 1991 67 $ 1.75-6.00
Expired (15) 4.14-4.65
--- -----------
December 31, 1992 52 1.75-6.00
Expired (25) 6.00
Exercised (8) 1.75
--- -----------
December 31, 1993 19 1.75
Exercised (19) 1.75
--- -----------
December 31, 1994 - $ -
=== ===========
</TABLE>
12
<PAGE> 13
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
STOCK PURCHASE WARRANTS - The Company has granted warrants in connection with a
public offering, debt agreements and refinancings and for various other
purposes. Each warrant outstanding entitles the holder to purchase one share
of common stock. All outstanding warrants expire on December 31, 1994.
Changes in warrants outstanding are as follows:
<TABLE>
<CAPTION>
Number of
Warrants Exercise
Outstanding Price
----------- -----
<S> <C> <C>
December 31, 1991 92 $ 1.50-1.80
--- -----------
December 31, 1992 92 1.50-1.80
--- -----------
December 31, 1993 92 1.50-1.80
Exercised (92) 1.50-1.80
--- -----------
December 31, 1994 - $ -
=== ===========
</TABLE>
INCOME TAXES
The domestic and foreign components of income before income taxes for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic $ 1,793 $ 2,953 $ 2,036
Foreign 1,095 879 572
------- ------- --------
Total $ 2,888 $ 3,832 $ 2,608
======= ======= ========
</TABLE>
The provision for income taxes for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current $ 1,160 $ 1,378 $ 919
Deferred 93 106 124
------- ------- --------
Total $ 1,253 $ 1,484 $ 1,043
======= ======= ========
</TABLE>
The Federal, state and foreign components of the provision for income taxes for
the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal $ 846 $ 1,004 $ 687
State 149 215 153
Foreign 258 265 203
------- ------- --------
Total $ 1,253 $ 1,484 $ 1,043
======= ======= ========
</TABLE>
13
<PAGE> 14
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
A reconciliation of the differences between income taxes computed at the
Federal statutory rate and the provision for income taxes for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed income tax at the
Federal statutory rate $ 982 $ 1,303 $ 887
State income tax, net of
Federal benefit 98 136 97
Foreign income tax differentials 64 63 69
Alternative minimum income tax (125)
Other 109 (18) 115
------- ------- --------
Provision for income tax expense $ 1,253 $ 1,484 $ 1,043
======= ======= ========
</TABLE>
The net current and non-current components of deferred income taxes recognized
in the consolidated balance sheets at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net current deferred tax assets $ 528 $ 402
Net non-current deferred tax liabilities 851 632
------- -------
Net deferred tax liability $ 323 $ 230
======= =======
</TABLE>
The tax effects of the significant temporary differences which comprise
deferred tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
Nondeductible accruals for
employee benefits $ 216 $ 171
Nondeductible accruals for
inventory valuation 148 138
Other nondeductible accruals 118 127
Foreign book over tax depreciation 97 70
Deferred income 75 65
Other 6 6
------- -------
Total deferred tax assets $ 660 $ 577
------- -------
Deferred tax liabilties:
Tax over book depreciation $ 950 $ 754
Other 33 53
------- -------
Total deferred tax liabilities 983 807
------- -------
Net deferred tax liabilities $ 323 $ 230
======= =======
</TABLE>
14
<PAGE> 15
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
RESEARCH AND DEVELOPMENT
Research and development costs, other than capitalized software development
costs, are charged to operations when incurred. The following schedule sets
forth the amounts spent for the years ended December 31 on research and
development activities:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Research and development expense $ 2,610 $ 1,602 $ 1,303
Capitalized software development costs 992 1,389 218
------- ------- --------
Total $ 3,602 $ 2,991 $ 1,521
======= ======= ========
</TABLE>
The net book value of capitalized software development costs included in
property at December 31, 1994 and 1993 is $1,623 and $1,412, respectively.
Amortization expense for the years ended December 31, 1994, 1993 and 1992 was
$808, $296 and $180, respectively.
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Compensation payable $ 1,693 $ 1,711
Accrued employee benefits 271 230
Income taxes payable 124 52
Other taxes payable 470 343
Other accrued expenses 599 433
------- -------
Total accrued liabilities $ 3,157 $ 2,769
======= =======
</TABLE>
COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS - The Company leases office space, vehicles and equipment
under operating leases. Rental expense for 1994, 1993 and 1992 was $879, $861
and $697, respectively.
At December 31, 1994 minimum annual operating lease commitments are as follows:
<TABLE>
<CAPTION>
Operating
Leases
------
<S> <C>
1995 $ 533
1996 466
1997 383
1998 319
1999 92
Thereafter 116
-------
Total lease payments $ 1,909
=======
</TABLE>
GUARANTEES - The Company has guaranteed approximately $630 of obligations of
third parties in connection with equipment sales. The Company holds title to
the related equipment as collateral.
15
<PAGE> 16
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
EMPLOYEE SAVINGS PLAN - The Company has adopted a 401(k) Employee Profit
Savings Plan. The Plan is a defined contribution profit savings plan for all
employees of the Company who have attained at least 21 years of age and have
completed at least one year of service.
Participants may elect to make contributions up to 12% of their annual
compensation, subject to limitations based on provisions of the tax law. The
Company matches 50% of individual participant contributions up to 3% of the
participant's annual compensation. The Company's contribution vests at a rate
of 25% per year. For the years ended December 31, 1994, 1993, and 1992, the
Company incurred costs of $201, $142, and $112, respectively, under the plan.
SIGNIFICANT CUSTOMERS
The Company recognized revenues from a significant customer of $4,167 and
$3,993 in 1993 and 1992, respectively.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION - The Company paid approximately $999,
$1,380 and $876 in income taxes in 1994, 1993, and 1992 and $32, $25 and $202
for interest on debt in 1994, 1993 and 1992, respectively.
NONCASH INVESTING AND FINANCING ACTIVITIES: In 1994 and 1993, employee stock
options exercised reduced current income taxes payable by $22 and $285,
respectively, and were recorded as an increase in additional paid in capital.
In January 1993, convertible debentures outstanding of $1,654, less unamortized
offering costs of $44, were converted into one share of common stock for each
$1 of debenture principal. Debentures of $169 were converted into common stock
in 1992.
In 1993, the Company issued 10 shares of common stock valued at $56 in
connection with the purchase of assets.
16
<PAGE> 17
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
FOREIGN OPERATIONS
The Company acquired ConferTech Canada, Inc., a Canadian conferencing service,
in 1988 and organized a wholly owned United Kingdom subsidiary, ConferTech
(UK), Ltd., in 1993. The Canadian subsidiary purchases bridges from the parent
company and resells the bridges in addition to selling other products and
conferencing services within Canada. The Company sells bridges to its Canadian
subsidiary at prices similar to that available for a distributor. Operations
related to the ConferTech (UK), Ltd. subsidiary were nominal in 1994 and 1993.
In 1994, the Company disposed of the ConferTech (UK), Ltd. subsidiary. The
Company's domestic and foreign operations for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue from unaffiliated
customers:
Domestic $ 36,586 $ 29,352 $ 21,265
Foreign 7,396 6,423 3,994
-------- --------- --------
Total $ 43,982 $ 35,775 $ 25,259
======== ========= ========
Revenue from intercompany sales:
(eliminated in consolidation)
Domestic $ 810 $ 1,257 $ 298
Foreign 21 15 37
-------- --------- --------
Total $ 831 $ 1,272 $ 335
======== ========= ========
Net income:
Domestic $ 798 $ 1,734 $ 1,196
Foreign 837 614 369
-------- --------- --------
Total $ 1,635 $ 2,348 $ 1,565
======== ========= ========
Identifiable assets:
Domestic $ 25,742 $ 23,312 $ 18,681
Foreign 3,365 2,857 2,234
-------- --------- --------
Total $ 29,107 $ 26,169 $ 20,915
======== ========= ========
</TABLE>
17
<PAGE> 18
CONFERTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
Earnings Per
Common and Common
Total Equivalent Share
1994: Total Costs and Net ----------------------
Revenue Expenses Income Primary Fully Diluted
------- -------- ------ ----------------------
<S> <C> <C> <C> <C>
First quarter $ 10,476 $ 9,666 $ 527 $ .07
Second quarter 10,067 10,021 41 .01
Third quarter 11,151 10,146 599 .08
Fourth quarter 12,288 11,444 468 .05
</TABLE>
<TABLE>
<CAPTION>
Earnings Per
Common and Common
Total Equivalent Share
1993: Total Costs and Net ----------------------
Revenue Expenses Income Primary Fully Diluted
------- -------- ------ ----------------------
<S> <C> <C> <C> <C>
First quarter $ 8,285 $ 7,501 $ 526 $ .07
Second quarter 8,646 7,675 621 .08
Third quarter 9,434 8,284 710 .09
Fourth quarter 9,410 8,682 491 .06
</TABLE>
<TABLE>
<CAPTION>
Earnings Per
Common and Common
Total Equivalent Share
1992: Total Costs and Net ----------------------
Revenue Expenses Income Primary Fully Diluted
------- -------- ------ ----------------------
<S> <C> <C> <C> <C> <C>
First quarter $ 5,627 $ 5,131 $ 330 $ .05 $ .05
Second quarter 5,925 5,302 412 .07 .06
Third quarter 5,692 5,225 330 .05 .05
Fourth quarter 8,015 7,225 493 .09 .07
</TABLE>
SUBSEQUENT EVENT
On January 18, 1995 the Company entered into a merger agreement with Delaware
Acquisition Corporation, a wholly owned subsidiary of ALC Communications
Corporation. Delaware Acquisition Corporation offered to purchase all
outstanding shares of common stock of the Company at a price of $8.00 per
share. The offer to purchase is being made subject to an Agreement and Plan of
Merger dated January 18, 1995. The offer is conditioned upon, among other
things, there having been validly tendered two-thirds of the shares outstanding
on a fully diluted basis.
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
99 Press release announcing the completion of the
Company's tender offer for ConferTech International, Inc.
</TABLE>
<PAGE> 1
[ALC COMMUNICATIONS CORPORATION LETTERHEAD]
Exhibit 99
FOR IMMEDIATE RELEASE Contact: David J. Thomas
February 23, 1995 Vice President & Treasurer
(810) 433-4935
ALC COMMUNICATIONS CORPORATION COMPLETES
TENDER OFFER FOR CONFERTECH INTERNATIONAL, INC.
Bingham Farms, Michigan - ALC Communications Corporation
(AMEX:ALC) announced today that Delaware Acquisition Corporation, a
wholly owned subsidiary of ALC (registered), has completed its cash
tender offer for all outstanding shares of common stock of ConferTech
International, Inc. (NASDAQ/NMS:CFER) at a price of $8.00 per share.
ALC stated that, based upon a preliminary count, a total of
approximately 7,409,000 ConferTech (registered) shares had been
tendered pursuant to the offer, which expired at midnight, New York
City time, on Wednesday, February 22, 1995, and that all such shares
had been or will be purchased in accordance with the terms of the
offer.
The shares tendered constitute approximately 97% of
ConferTech's presently outstanding shares. There remain approximately
202,000 shares not tendered or beneficially owned by ALC.
Pursuant to the terms of the Agreement and Plan of Merger,
dated as of January 18, 1995, by and among ALC, Delaware Acquisition
Corporation and ConferTech, except for two ConferTech designees who
will remain on the Board (Robert Gill and Brian P. Johnson), all of the
directors of ConferTech resigned and were replaced by ALC designees
(John M. Zrno, Marvin C. Moses, and William H. Oberlin).
<PAGE> 2
As previously announced, all ConferTech common shares not
tendered and purchased pursuant to the offer will be acquired in a
subsequent second-step merger transaction at the same $8.00 per share
price. The merger is currently expected to occur on or about March
15,1995.
ALC Communications Corporation common stock is traded on the
American Stock Exchange under the symbol ALC. Allnet Communication
Services, Inc., the wholly owned operating subsidiary of ALC, provides
long distance products and services to customers nationwide. The
Company is headquartered in Bingham Farms, Michigan.
***
