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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----
ACT OF 1934
For the fiscal year ended December 31, 2001
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 0-22554
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OPINION RESEARCH CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3118960
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23 Orchard Road, Skillman, New Jersey 08558
- ------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 281-5100
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
Preferred Stock Purchase Rights
-------------------------------
(Titles of Classes)
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. [_]
The aggregate market value of the common stock held by non-affiliates of
the Registrant, based on the closing sale price of its common stock on February
28, 2002, a date within 60 days prior to the date of filing, as quoted on the
Nasdaq National Market, was approximately $13,910,000.*
As of February 28, 2002, 5,898,085 shares of common stock, par value $.01
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement, which will be filed
with the Securities and Exchange Commission in connection with the Registrant's
2002 Annual Meeting of Stockholders, are incorporated by reference into Part III
of this report.
__________________
*Calculated by excluding all shares that may be deemed to be beneficially owned
by executive officers and directors of the Registrant, without conceding that
all such persons are "affiliates" of the Registrant for purposes of the federal
securities laws.
OPINION RESEARCH CORPORATION
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 9
Item 3. Legal Proceedings...................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.................................... 11
Executive Officers of the Registrant................................................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 13
Item 6. Selected Financial Data................................................................ 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................. 24
Item 8. Financial Statements and Supplementary Data............................................ 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................................... 24
PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 25
Item 11. Executive Compensation................................................................. 25
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 25
Item 13. Certain Relationships and Related Transactions......................................... 25
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K...................... 26
Signatures.......................................................................................... 32
Except where the context indicates otherwise, the term "Company" refers to
Opinion Research Corporation and its subsidiaries. All dollar amounts presented
in this Annual Report on Form 10-K are in thousands unless indicated otherwise.
Readers of this report should review carefully the information contained under
the headings "Risk Factors" and "Forward-looking Statements" in Part II.
PART I
Item 1. Business
--------
General
Opinion Research Corporation (the "Company") was established in 1938
to apply the principles of general public opinion polling to marketing issues
facing America's largest companies. The Company has evolved to provide primary
market research, social research, information services, marketing services, and
telemarketing. The Company assists its commercial clients in the evaluation,
monitoring and optimization of their marketing and sales efforts, addressing
issues such as customer loyalty and retention, market demand and forecasting,
and corporate image and competitive positioning. The Company also performs
public sector primary research and provides information technology,
communications, and other consulting services, primarily to agencies of the
United States federal government and state and local governments. The majority
of the Company's governmental projects are in the areas of health, education,
and international aid. The Company's telemarketing services consist principally
of outbound customer acquisition services.
The Company completed its initial public offering in October 1993.
Between 1993 and 1997, as part of its globalization strategy, the Company
established its presence in the U.K., Asia and Mexico through various
acquisitions. In January 1998, the Company acquired ProTel Marketing, Inc. ("ORC
ProTel" or "ProTel"), a high quality telemarketing company based in Lansing,
Illinois, which enabled the Company to combine market research expertise with
telemarketing services. In May 1999, the Company acquired Macro International
Inc. ("ORC Macro" or "Macro"), a predominately public sector research,
consulting and technology company based in the Washington, D.C. area. The Macro
acquisition substantially increased the Company's presence in the public sector.
In September 2000, the Company acquired C/J Research, Inc. ("C/J"), and in
November 2000, acquired Social and Health Services, Ltd. ("SHS"). The two
acquisitions in 2000 provided expansion opportunities for the Company in the
areas of consumer research, social research and information management.
The Company collects customer, market, and demographic information
through computer-assisted telephone interviews, internet based data collection
techniques, personal interviews, mail questionnaires and specialized techniques
such as business panels. Management believes that the Company's extensive
expertise with regard to certain business and social issues enables it to
provide reliable customer, market, and demographic information and advisory
services
-1-
to clients. The Company also believes that its recognized name and long-standing
reputation enable it to obtain information from senior executives who are
difficult to access.
The Company's strategy for market research focuses on client projects
that require periodic updating and tracking of information, thereby creating the
potential for higher-margin recurring revenues. The portion of the Company's
market research revenues from such projects was approximately 66% in 2001.
The Company's Services and Products
The Company offers a variety of services and products to assist
clients in various industries with their strategic and tactical decisions as
well as their plans for marketing and selling their products to other businesses
and consumers.
Services
Advanced Analytics & Data Modeling. The Company's diagnostic and
statistical models are among the most sophisticated in market research. By
focusing on its clients' business issues and the application of the right
analytic tools, the Company can effectively transform data and analyses into
intelligence and insight.
Communications and Marketing Services. The Company provides full
service communications and marketing services to private, not-for-profit, and
government organizations. These services include strategic planning;
communication and marketing campaign development; brochure design and
production; print, radio and television advertising; web site development and
management; brand development; public relations; video development and
broadcasting; clearinghouse, warehousing and fulfillment services, and inbound,
web-enabled call center services.
These services are mainly concentrated in public health and education
arenas where the Company has won awards for their success in areas such as the
reduction of drug, tobacco and alcohol use among teens, and the prevention of
school violence.
Corporate Reputation & Branding. The Company works with clients
worldwide to manage their corporate and brand images; identify and achieve
optimal positioning in the marketplace; and strengthen equity with customers,
employees and the financial community. The strength of a client's image or
reputation is identified through interviews with constituency groups with whom
the client interacts and whose decisions influence the client's success. These
groups may include customers, potential customers, distributors, suppliers, the
media and the investment community.
Customer Loyalty & Retention. The Company assists its clients in
quantifying customer loyalty and increasing customer retention. By capturing and
analyzing the perceptions
-2-
and experiences of its clients' prospects, clients, and employees, the Company
provides analysis and feedback on customer loyalty which drives superior
customer retention and business performance. The Company provides its clients
with information on the elements of products or services which are most
important to their customers; on how well these products and services compare to
the competition; and on which customers will continue to purchase and recommend
such products and services.
Data Collection & Processing. The Company's telephone interviewing
call centers in North America and Europe combine research expertise and advanced
telecommunications technology. These facilities, staffed with multilingual
interviewers, use the Computer Assisted Telephone Interviewing (CATI) system,
which provides clients with highly efficient and cost effective data and
information collection. The Company also utilizes internet based data collection
techniques.
Demographic and Health Research. The Company manages international
research programs in developing nations for organizations such as The United
States Agency for International Development ("USAID"), the World Health
Organization ("WHO"), and UNICEF. By providing information for informed
decisions in population, health and nutrition, it supports a range of data
collection options that can be tailored to fit specific monitoring and
evaluation needs of government organizations. These include a variety of
population and facility-based surveys, secondary data analyses and other
specialized research such as qualitative, education and gender-based studies.
Employee Survey Programs. The Company provides comprehensive
employee-related research services to measure satisfaction, increase staff
retention, reduce hiring and training costs, and improve customer service. Using
proprietary computer software, exclusive multi-industry benchmarking databases
and a combination of quantitative and qualitative methodologies, the Company
works with clients to identify strengths and weaknesses. The Company implements
all stages of program management, from questionnaire design and processing
through reporting, final analysis and recommendations for action.
Information Technologies. The Company offers a variety of
technology-based services and products. These include computer security
products, such as Internet firewalls; software testing and quality assurance,
instructional product development for interactive multimedia, computer-based
instruction, decision-support systems, computer-based textbooks, and products
for individuals with special learning needs; and advanced Web services,
including a number of proprietary Web applications, database development and
management, and dynamic information retrieval.
Management Consulting. The Company offers a full spectrum of
services to address opportunities and problem areas, and to ensure that client
organizations can meet future challenges effectively. The Company's methods and
expertise produce strategies, plans and
-3-
interventions that fit the values, cultures and needs of the client organization
and its managers. The Company's focus is on sound analysis, with effective
support in implementing recommended strategies and solutions and ensuring
capacity within the client organization so that continuing outside assistance is
not required.
Market Assessment. The Company works with clients worldwide to analyze
and forecast market demand for new products and services. The Company combines
sophisticated analytic techniques with global reach to provide clients with
insight regarding optimal product/services configuration and pricing, as well as
market size information. This work supports clients' business planning and
capital generation for new ventures.
Public Sector Research. The Company provides research and evaluation
services to local and national governments and to international organizations.
Among the services provided are communication studies; cost, cost benefit & cost
effectiveness analysis; customer satisfaction & loyalty studies; ethnography;
experimental & quasi-experimental research; needs assessments; outcome & impact
studies; performance measurement; policy research; process & implementation
studies; secondary data analysis & data mining; and survey research.
Training & Educational Technologies. The Company offers a full
spectrum of training services to help organizations adapt to and capitalize on
changing circumstances. All courses and training services are supported by the
Company's research and management consulting services in the subject areas
offered. The Company uses adult learning methodologies, instructional system
design, electronic performance support systems and highly skilled facilitators
who provide interactive, experiential-based training. The Company is also a
leader in applying technology to educational and learning needs and in
developing and producing distance learning programs, multimedia materials and
expert systems.
Industries
Automotive. Utilizing research methodologies developed for its
automotive industry clients, the Company has extensive experience working with a
wide range of companies around the world, including vehicle manufacturers,
original-equipment-manufacturers, suppliers, dealers, distributors, trucking
companies and heavy equipment manufacturers.
The Company provides sophisticated segmentation research and
long-term studies on retail sales and service; brand image and equity; product
development, design and performance; and dealer/manufacturer relations. The
Company's exclusive consumer market analysis evaluates and tracks customer needs
as they relate to new vehicle purchases, financing and leasing, buying behavior,
and brand loyalty.
Financial Services. The Company provides market and customer
intelligence to banks, securities brokerage firms, insurance companies and other
financial institutions across a number of business issues: customer loyalty and
retention, image management, market
-4-
segmentation and positioning, new product development, pricing strategy,
corporate branding, and customer database management.
By focusing its research efforts on key customer segments - such as
high net worth individuals, corporate treasurers, active investors,
policyholders, etc. - the Company can determine the specific factors that
influence the target groups' decisions, and design strategies to attract, retain
and motivate them effectively.
Health Care. The Company's services include surveys and evaluations to
determine patient satisfaction, market segmentation, customer acquisition,
competitive analysis, community needs assessment, and corporate positioning. For
pharmaceutical companies, HMOs, hospitals, and health care providers, the
Company also conducts loyalty and retention modeling research as part of its
clients' patient and employee satisfaction programs.
Through its innovative methodologies, such as proprietary panels, the
Company establishes ongoing dialogues with difficult-to-reach decision-makers
such as physicians, plan and hospital administrators and benefits managers.
Retail and Trade. To shape marketing strategy, the Company's areas
of specialization include understanding the determinants of store choice;
customer loyalty and satisfaction; mystery shopping; segmentation and
positioning; store location, layout, design and product positioning; merchandise
performance; development and appraisal of individual outlets and sites; and
diversification into new markets, both domestic and international.
The Company also works in partnership with manufacturers and suppliers
of consumer goods to understand the needs, behavior and attitudes of customers
at all stages in the distribution channel. The Company's aim is to enhance the
manufacturer/trade/consumer relationship.
Telecommunications and Information Technology. The Company provides
market knowledge for a range of telecommunications and information technology
companies, from wireless communications companies and telephone carriers to
Internet service providers and computer hardware and software firms. Its
services include market definition, segmentation, new product development,
customer retention, corporate branding, usage analysis, and competitive
profiling.
Among its services, the Company helps clients determine pricing and
distribution systems, track service performance, gauge the success of products
and services, design and configure new products, predict customer needs and
define competitive positions in new markets.
-5-
Products
The following products are used by the Company to deliver some of the
services listed above and are also marketed as stand-alone products:
Business Panels. The Company develops business panels to access
executives and professionals. Panels are comprised of executives and
professionals who have agreed in advance to participate in an on-going series of
interviews with the Company for the purpose of gathering customer and market
information.
The Company owns and operates a number of proprietary panels. The
panels range in size from several hundred to several thousand panelists. These
panels have been created with no predetermined end date.
The creation of a business panel involves considerable planning, time
and expense. Once established, however, it provides a significant amount of
reliable information that can be collected and updated from a relatively
constant source with less time and expense than would be otherwise required. As
such, the Company believes that there are strong financial incentives for
clients to continue using a panel.
Business panels produce up-to-date market intelligence that can be
used by the client for decisions ranging from marketing and sales strategies to
"micro-marketing" plans for specific market niches or segments. Typical issues
addressed by business panels include customer satisfaction, pricing and sales
strategy, market receptivity to new or potential products or services and market
share information.
Shared-Cost Programs. For over 30 years, the Company has conducted
shared-cost telephone survey programs, marketed under the name "CARAVAN," in
which questions from a number of clients are combined in a series of interview
questionnaires. The CARAVAN programs provide multiple clients with high-quality,
timely information at a relatively low cost.
The general public CARAVAN is a twice-weekly shared-cost national
survey combining questions of clients such as advertising agencies, public
affairs departments of large corporations and product managers. Typically, the
information collected from the CARAVAN survey provides measurement and
evaluation of advertising and products.
Customer Loyalty Plus (CL+) is the Company's system for measuring and
building customer loyalty. The three-phase approach includes Assessment, which
is designed to provide clients with a customized CL+ score that can be used over
time to evaluate change; Planning, which consists of an action plan aimed at
closing the identified gaps; and Improvement, during which the Company's
professionals design and implement a specialized program tailored to the
client's specific needs. The plan includes training, organization development
and total quality management programs.
-6-
Communications & Reaction Test (C&R), together with the Competitive
Environment Test, comprises the Company's procedure for testing television and
radio commercials, print advertisements and concepts. Conducted in shopping
malls across the United States, the C&R Test measures advertising comprehension
and reaction. It both evaluates the effectiveness of a print or television
commercial and diagnoses its strengths and weaknesses.
Marketing
Marketing and Sales-Support Program. In 2001, the Company continued to
support strong business development initiatives, as well as build upon the
already comprehensive internal and external communications programs. The
Company's business development efforts continued with the production of
newsletters, position papers, direct marketing, seminars, advertising, web
development, telemarketing and speaking platforms. These efforts have assisted
in allowing the Company to access a large number of prospective clients
worldwide and share its products, services, and capabilities. In 2001, as part
of a key initiative to improve the Company's global unity, the Company developed
and implemented an extensive internal communications plan bringing its worldwide
associates more closely together.
Clients and Client Relationships
Some of the Company's largest clients in terms of revenues generated
include America Online, Department of Housing and Urban Development, Department
of Health and Human Services, General Motors, IBM, National Science Foundation,
Sears Roebuck & Company, Trilegiant, The United States Agency for International
Development ("USAID"), and U.S. Department of Education. In 2001, the Company
served over 2,000 clients. For many clients, the Company performed multiple
projects, sometimes for different subsidiaries or business units of the same
client.
The Company's largest single client, USAID, accounted for 11%, 13%,
and 11% of the Company's revenues in 2001, 2000, and 1999, respectively. All
revenues generated by the USAID relationship were for social research studies.
Competition
Many other firms provide some of the services and products provided by
the Company, typically focusing on consumer markets. However, the Company
believes that no single competitor offers a comparable combination of services
and products.
For business to business market research, the Company believes that it
competes for clients based on a variety of factors, including name recognition,
reputation, expertise in a variety of industries, ability to access executives
and other key constituencies, ability to collect accurate and representative
data, ability to enhance the value of the data collected through analysis and
consulting, technological competence, reliability, promptness and efficiency. In
the Company's
-7-
experience, its typical clients are interested primarily in the quality and
utility of the service received rather than price.
For consumer market research services, the Company regularly
experiences significant competition from a large number of competitors,
including marketing and research departments of various companies, advertising
agencies and business consulting firms. Price, reputation, and quality of
service are the dominant considerations.
For public sector research services, the Company competes with a large
number of firms that vary in size as well as with not-for-profit organizations.
The competition varies depending upon the agency for whom the work is being
conducted and the services to be provided. Technical competence is the key
differentiator.
For outbound telemarketing services, the Company competes with a large
number of telemarketing companies. Quality and reliability of service are the
key differentiators.
Segment Information
Information regarding financial data by operating and geographic
segments is set forth in the Notes to Consolidated Financial Statements at Note
15, "Segments."
Backlog
As of December 31, 2001, revenues expected to be generated by the
Company under its market research client contracts were $17,529 as compared to
$33,210 as of December 31, 2000. All of the 2001 amount is expected to be
recognized as revenues by December 31, 2002. Public sector backlog at December
31, 2001 was $199,204, as compared to $202,958 as of December 31, 2000. Revenue
from this backlog is expected to be recognized over the next five years. The
Company's engagements generally are terminable by the Company's clients at any
time, with the expectation of cost recovery for work completed by the Company.
Employees
As of December 31, 2001, the Company employed a total of approximately
1,650 full-time employees and 1,500 part-time hourly employees. The part-time
employees work as telephone interviewers and data processors. Of the full-time
employees, 950 are professionals engaged in direct client service, 450 are
telemarketing representatives, and 250 are engaged in support, administration
and executive oversight.
None of the Company's employees are subject to a collective bargaining
agreement, nor has the Company experienced any work stoppages. The Company
believes that its relationship with its employees is excellent.
-8-
Item 2. Properties
----------
The Company's executive offices are located in approximately 45,000
square feet of leased space in Skillman (Greater Princeton), New Jersey. The
term of the lease expires in August 2003. The Company leases additional
facilities throughout the world. The following table sets forth certain
information relating to these properties:
Operating Unit Location Facility Usage
- ------------------------------- ------------------------------ ----------------------------------------------------
U.S. Market Research Skillman, New Jersey Worldwide Headquarters, Research Location
Maumee, Ohio Research Location
Arlington Heights, Illinois Research Location and Telephone Interviewing
Facility
Chicago, Illinois Research Location
Bingham Farms, Michigan Research Location
Tucson, Arizona Telephone Interviewing Facility
Tampa, Florida Telephone Interviewing Facility
Reno, Nevada Telephone Interviewing Facility
U.K. Market Research London, U.K. U.K. Market Research Headquarters, Research
Location, and Telephone Interviewing Facility
Manchester, U.K. Research Location
Asia Market Research Hong Kong Asia Market Research Headquarters and
Research Location
Seoul, Korea Country Headquarters, Research Location
Taipei, Taiwan Country Headquarters, Research Location
Mexico Market Research Mexico City, Mexico Country Headquarters, Research Location
Teleservices Lansing, Illinois ORC ProTel Headquarters, Telemarketing
Facility
Topeka, Kansas Telemarketing Facility
St. John, Missouri Telemarketing Facility
Dayton, Ohio Telemarketing Facility
Social Research Calverton, Maryland Macro Headquarters, Research Location
Burlington, Vermont Telephone Interviewing Facility and Research
Location
St. Albans, Vermont Telephone Interviewing Facility
New York, New York Research Location
Bethesda, Maryland Research Location
Plattsburgh, New York Telephone Interviewing Facility
Atlanta, Georgia Research Location
Rockville, Maryland Research Location and Multi-media Production
Facility
Columbia, Maryland Warehouse
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The Company presently has a combined total of 780 computer assisted
telephone interviewing stations worldwide dedicated to market research and an
additional 315 telemarketing stations. All of these facilities are equipped with
state-of-the-art hardware and software. In a typical telephone interview or
sale, the CATI system prompts the interviewer's sequence of questions or
responses depending on the previous answers. All responses are recorded directly
into the computer, avoiding the need for subsequent data entry and enabling
prompt analysis of responses. The interviewees communicate with live
interviewers at all times.
The Company believes that its properties are sufficient for its
current operational needs.
-10-
Item 3. Legal Proceedings
-----------------
The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2001.
Item 4A. Executive Officers of the Registrant
------------------------------------
The following table sets forth certain information
concerning the principal executive officers of the Company as of February 28,
2002.
Name Age Position
- ---- --- --------
John F. Short 57 Chairman, President, and
Chief Executive Officer
Douglas L. Cox 56 Executive Vice President
and Chief Financial
Officer
Kevin P. Croke 43 Executive Vice President
and Director of Finance
Michael T. Errecart 52 President, Macro
International Inc.
James C. Fink 58 Vice Chairman, Chief
Executive Officer of
Worldwide Market Research
Nigel P. Maxfield 44 Senior Vice President and
Managing Director,
O.R.C. International Ltd.
Frank J. Quirk 61 Chairman and Chief
Executive Officer, Macro
International Inc.
Ruth R. Wolf 64 Chief Executive Officer,
ORC ProTel, Inc.
-11-
Mr. Short joined the Company as its Chief Financial Officer in 1989 and
was appointed Vice Chairman in 1992. In 1998, Mr. Short was appointed President
of the Company. In February 1999, Mr. Short assumed the roles of Chief Executive
Officer and Chairman of the Board.
Mr. Cox joined the Company as Executive Vice President and Chief
Financial Officer in October 1998. Prior to joining the Company, Mr. Cox spent
ten years as Senior Vice President and Chief Financial Officer of Elf Atochem
North America, Inc. Mr. Cox holds an MBA, with honors, from the Wharton School
of the University of Pennsylvania.
Mr. Croke joined the Company in 1991 as Controller. Throughout the
years Mr. Croke has served in various capacities in the Company's financial
arena. In 1995, Mr. Croke was appointed Director of Finance. Mr. Croke holds an
MBA from Case Western Reserve University.
Dr. Errecart joined the Company in 1999 with the acquisition of Macro,
where he had served as its President since 1998 and Executive Vice President
from 1994 to 1998. Dr. Errecart was appointed President of Macro in 1999. Dr.
Errecart holds a Ph.D. in Mathematical Sciences from the Johns Hopkins
University.
Dr. Fink joined the Company in 1982. Since 1990, Dr. Fink had held
various managerial positions within the Company and was a member of the Board of
Directors of the Company and Managing Director of the Company's corporate brand
equity practice when he resigned in February 1999. Between 1999 and 2001, Dr.
Fink was President of the worldwide brand research division of Enterprise IG. In
July 2001, Dr. Fink rejoined the Company as Vice Chairman and Chief Executive
Officer of Worldwide Market Research. Dr. Fink holds a Ph.D. in Economics from
the Pennsylvania State University.
Dr. Maxfield joined the Company in 1996 with the acquisition of a U.K.
division. In 1997, Dr. Maxfield was appointed Managing Director of ORC - U.K.
Dr. Maxfield holds a Ph.D. in Applied Mathematics and Computing Science from the
University of Sheffield.
Mr. Quirk joined the Company in 1999 with the acquisition of Macro,
where he served, and continues to service, as the Chief Executive Officer since
1980. In 2000, Mr. Quirk was elected as a member of the Board of Directors of
the Company. Mr. Quirk holds an MBA degree from Cornell University.
Ms. Wolf joined the Company in 1998 with the acquisition of ProTel,
which she co-founded in 1988. Ms. Wolf was appointed Chief Executive Officer of
ORC ProTel in 1998. Ms. Wolf has over 30 years of experience in telemarketing.
-12-
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
Market Information
- ------------------
The Company's Common Stock is currently quoted on the Nasdaq National
Market under the symbol "ORCI". Prior to August 2001, the Company's Common Stock
was traded on the American Stock Exchange under the symbol "OPI". The table
below sets forth the high and low prices for the Company's Common Stock (the
"Common Stock") for each of the four quarters of 2001 and 2000:
High Low
---------- ---------
2001
----
Fourth Quarter $ 6.640 $2.890
Third Quarter 6.910 5.250
Second Quarter 7.600 6.100
First Quarter 7.700 4.875
2000
----
Fourth Quarter $ 7.500 $4.750
Third Quarter 7.750 5.750
Second Quarter 8.500 6.000
First Quarter 11.625 7.875
The closing price of the Common Stock on February 28, 2002 was $5.15
per share. As of February 28, 2002, the Company had 70 holders of record of the
Common Stock (approximately 690 beneficial stockholders).
Dividends
- ---------
The Company has not paid any dividends on the Common Stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying dividends on the Common Stock in the
foreseeable future.
-13-
Item 6. Selected Financial Data
Selected Financial Data
(In Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------
For the Year Ended December 31,
-----------------------------------------------------------------------------
2001 2000 1999 1998 1997
------------- ------------ ------------ ------------- ------------
Operating Data:
Revenues $ 176,909 $ 60,909 $ 118,621 $ 73,167 $ 56,673
Operating income (1) 8,825 11,652 8,463 2,340 2,801
Extraordinary loss on debt
refinancings, net of tax of $60 and $133 (2) - - (90) (150) -
Net income (loss) $ 1,616 $ 3,304 $ 2,424 $ (170) $ 1,151
============ ========== ========== =========== ==========
Weighted average common shares
outstanding 5,762 4,692 4,244 4,202 4,144
Income before extraordinary
loss per common share $ 0.28 $ 0.70 $ 0.59 $ 0.00 $ 0.28
Extraordinary loss per common share - - (0.02) (0.04) -
------------ ---------- ---------- ----------- ----------
Net income (loss) per common share $ 0.28 $ 0.70 $ 0.57 $ (0.04) $ 0.28
============ ========== ========== =========== ==========
Adjusted weighted average common shares
and assumed conversions 5,992 5,053 4,332 4,202 4,146
Income before extraordinary
loss per diluted share $ 0.27 $ 0.65 $ 0.58 $ (0.00) $ 0.28
Extraordinary loss per diluted share - - (0.02) (0.04) -
------------ ---------- ---------- ----------- ----------
Net income (loss) per diluted share $ 0.27 $ 0.65 $ 0.56 $ (0.04) $ 0.28
============ ========== ========== =========== ==========
Balance Sheet Data:
Total assets $ 112,916 $ 115,957 $ 91,966 $ 50,610 $ 32,480
Total debt (3) 55,462 51,842 47,438 18,320 6,652
- --------------------------------------------------------------------------------
(1) In the fourth quarter of 1998, the Company took an unusual pre-tax charge
of $2,470 for expenses incurred in relation to a separation agreement with
the Company's former Chairman and CEO and the buy-out of his pre-existing
employment contract.
(2) In the second quarter of 1999 and 1998, the Company recorded extraordinary
losses of $90 and $150, net of tax benefits of $60 and $133, respectively,
due to the write-off of unamortized loan origination fees associated with
debt refinancings.
(3) Amounts presented include capital lease obligations.
-14-
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Overview
The Company was established in 1938 to apply the principles of
general public opinion polling to marketing issues facing America's largest
companies. The Company has evolved to provide primary market research, social
research, information services, marketing services, and telemarketing. The
Company assists its commercial clients in the evaluation, monitoring and
optimization of their marketing and sales efforts, addressing issues such as
customer loyalty and retention, market demand and forecasting, and corporate
image and competitive positioning. The Company performs public sector primary
research and provides information technology, communications, and other
consulting services, primarily to agencies of the United States federal
government and state and local governments. The majority of the Company's
governmental projects are in the areas of health, education, and international
aid. The Company's telemarketing services consist principally of outbound
customer acquisition services.
The Company completed its initial public offering in October 1993.
Between 1993 and 1997, as part of its globalization strategy, the Company
established its presence in the U.K., Asia and Mexico through various
acquisitions. In January 1998, the Company acquired ProTel Marketing, Inc. ("ORC
ProTel" or "ProTel"), a high quality telemarketing company based in Lansing,
Illinois, which enabled the Company to combine market research expertise with
telemarketing services. In May 1999, the Company acquired Macro International
Inc. ("ORC Macro" or "Macro"), a predominately public sector research,
consulting and technology company based in the Washington, D.C. area. The Macro
acquisition substantially increased the Company's presence in the public sector.
In September 2000, the Company acquired C/J Research, Inc. ("C/J"), and in
November 2000, acquired Social and Health Services, Ltd. ("SHS"). The two
acquisitions in 2000 provided expansion opportunities for the Company in the
areas of consumer research, social research and information management.
Results of Operations - 2001 compared to 2000
Revenues
Revenues for 2001 increased $16,000, or 10%, to $176,909 in 2001
from $160,909 in 2000. The acquisitions of C/J and SHS (the "Acquisitions")
accounted for $21,408, of this increase. Excluding the impact of the
acquisitions, revenues declined $4,130, or 3%, in the research business, of
which $1,176 was due to the appreciation of the U.S. dollar, and $1,278, or 6%,
in the teleservices businesses, with both segments experiencing lower demand for
services.
Cost of Revenues
Cost of revenues increased $15,550, or 15%, to $121,525 in 2001 from
$105,975 in 2000. The Acquisitions accounted for $16,855 of this increase.
Excluding the impact of the Acquisitions, cost of revenues in the research
business declined $461. Before the impact of the appreciation of the U.S. dollar
against other currencies, which reduced cost of revenues by $817,
-15-
cost of revenues in the research business increased $356 reflecting
inefficiencies at the lower level of service provided. In the teleservices
business, cost of revenues decreased $844, or 8%, reflecting the lower level of
services provided.
Gross profit as a percentage of revenues for the Company decreased
to 31% in 2001 from 34% in 2000 due to the impact of the Acquisitions, for which
the gross profit percentage for 2001 was 23%. Excluding the impact of the
Acquisitions, the gross profit percentage for the research business decreased to
31% in 2001 from 32% in 2000 and the gross profit percentage for the teleservice
business increased to 49% in 2001 from 48% in 2000.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased
$2,124, or 6%, to $38,128 in 2001 from $36,004 in 2000. The Acquisitions
resulted in an increase in SG&A of $2,635. As a percent of revenues,
consolidated SG&A decreased to 21.6% in 2001 from 22.4% in 2000.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $1,153, or 16%,
to $8,431 in 2001 from $7,278 in 2000. The Acquisitions accounted for $679 of
the increase. Earnout payments made in connection with prior acquisitions
resulted in a $473 increase in goodwill amortization. Depreciation and
amortization on a consolidated basis increased to 4.8% of revenues in 2001 from
4.5% in 2000.
Interest and Other Non-Operating Expenses
Interest and other non-operating expenses decreased $268, or 5%, to
$5,413 in 2001 from $5,681 in 2000. The decrease is due to a decrease in
interest expense of $114, resulting from lower interest rates offset in part by
additional borrowings to fund one of the Acquisitions and acquisition related
payments, and a decrease of $154 in other non-operating expenses.
Provision for Income Taxes
The provision for income taxes for 2001 and 2000 was $1,796 and
$2,667, respectively. The provisions for these years are higher than the amount
that results from applying the federal statutory rate to income primarily
because of amortization of non-deductible goodwill generated from acquisitions
throughout the years and the impact of state taxes.
Net Income
Net income for 2001 and 2000 was $1,616 and $3,304, respectively.
Results of Operations - 2000 compared to 1999
Revenues
Revenues for 2000 increased $42,288, or 36%, to $160,909 in 2000
from $118,621 in 1999. The acquisitions of Macro, C/J and SHS (the
"Acquisitions") accounted for $40,948, of this increase. Revenue increases for
the remainder of the Company were due principally to the
-16-
improvements in the Company's teleservices business, where revenue increased by
$2,837, or 17%, offset by a decrease in revenues of $1,497, or 3%, from the
Company's market research business. The appreciation of the U.S. dollar against
the U.K. pound accounted for $1,129 of the decrease in market research revenues.
Cost of Revenues
Cost of revenues increased $30,126, or 40%, to $105,975 in 2000 from
$75,849 in 1999. The Acquisitions accounted for $28,767 of this increase. Cost
of revenues for the Company's market research business decreased by $155 to
$34,701 from $34,856 in 1999, while cost of revenues for the teleservices
business increased by $1,514, or 17%, to $10,223 in 2000 from $8,709 in 1999.
Gross profit as a percentage of revenues for the Company decreased
to 34% in 2000 from 36% in 1999 due to the impact of the Acquisitions, for which
the gross profit percentage for 2000 was 29%. The gross profit percentage for
the market research business decreased to 37% in 2000 from 39% in 1999 and the
gross profit percentage for the teleservice business was 48% in both 2000 and
1999.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased
$7,502, or 26%, to $36,004 in 2000 from $28,502 in 1999. The Acquisitions
accounted for $6,870, or 92%, of the increase while non-acquisition SG&A
increased by $632, or 3%. As a percent of revenues, consolidated SG&A decreased
to 22% in 2000 from 24% in 1999.
The lower gross profit and lower SG&A percentages for the
Acquisitions are due to the nature of the businesses, as approximately 80% of
the Acquisitions' businesses are conducted with government entities.
Consequently, in accordance with the prescribed accounting procedures for
government contractors, the Acquisitions' cost of revenues reflect certain costs
attributable to contract projects which the Company classifies as general and
administrative expenses for other operating segments. Therefore, the inclusion
of the Acquisitions in the operating results of the Company has, and will
continue to have, the effect of lowering, as a percentage of revenues, the
consolidated gross profit and SG&A.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $1,471, or 25%,
to $7,278 in 2000 from $5,807 in 1999. The Acquisitions accounted for $1,136, or
77%, of the total increase. Depreciation and amortization on a consolidated
basis decreased to 4.5% of revenues in 2000 from 4.9% in 1999.
Interest and Other Non-Operating Expenses
Interest and other non-operating expenses increased $1,676, or 42%,
to $5,681 in 2000 from $4,005 in 1999. The increase in interest expense is
attributable to the additional borrowings incurred during 2000 to fund two of
the Acquisitions and to higher interest rates.
-17-
Provision for Income Taxes
The provision for income taxes for 2000 and 1999 was $2,667 and
$1,944, respectively. The provisions for these years are higher than the amount
that results from applying the federal statutory rate to income primarily
because of amortization of non-deductible goodwill generated from acquisitions
throughout the years and the impact of state taxes.
Extraordinary Loss
The Company recorded an extraordinary loss, net of tax benefits of
$90, in 1999. This non-cash charge was due to the write-off of unamortized loan
origination fees associated with a debt refinancing.
Net Income
Net income for 2000 and 1999 was $3,304 and $2,424, respectively.
Liquidity and Capital Resources
As of December 31, 2001, working capital was $17,853. Net cash
generated by operations for 2001 was $9,350 as compared to $11,003 in 2000. The
decrease is due to a decrease in current period net income combined with an
increase in working capital requirements. For 2001, the net cash provided by
operating activities was primarily generated by net income, after adjusting for
depreciation and amortization, totaling $10,047, and a decrease in accounts
receivable of $3,260, offset by decreases in payables and accrued expenses of
$2,061. For 2000, the net cash provided by operating activities was primarily
generated by net income, after adjusting for depreciation and amortization,
totaling $10,582, an increase in payables and accrued expenses of $4,959, offset
by an increase in accounts receivable of $4,292.
Investing and financing activities for 2001 included capital
expenditures of $3,934, earn-out payments of $8,726 to previous ProTel and Macro
shareholders, and payments of $2,125 to previous C/J and SHS shareholders based
on the respective asset/stock purchase agreements upon acquisition.
In May 1999, the Company entered into a credit agreement with a
financial institution for a facility which provided $30,000 of term notes and up
to $20,000 of revolving credit for a six-year term (the "Senior Facility"). The
Senior Facility carried an interest rate at the discretion of the Company of
either the financial institution's designated base rate plus 100 basis points or
LIBOR plus 250 basis points for both revolving credit and term notes.
On October 4, 2001, the Company amended its Senior Facility
increasing the amount available under the revolving credit to up to $24,000 and
to shorten the maturity for both the revolving credit and the term notes to June
1, 2004 from May 31, 2005 (the "Amendment"). Additionally, the Amendment
provides an increase in interest rate to LIBOR plus 325 basis points or the
financial institution's designated base rate plus 200 basis points. As of
December 31, 2001, the Company had approximately $6,811 of additional credit
available under the amended facility.
-18-
On September 1, 2000, the Company entered into a Purchase Agreement
("Purchase Agreement") with LLR Equity Partners, L.P. and LLR Equity Partners
Parallel, L.P. (collectively, "LLR"). Pursuant to the terms of the Purchase
Agreement, the Company sold and LLR purchased in a private placement (i)
1,176,458 shares of the Company's Common Stock, (ii) 10 shares of the Series B
Preferred Stock, and (iii) warrants to purchase 740,500 shares of the Company's
Common Stock at an exercise price of $12.00 per share, for aggregate gross
proceeds of $10 million (see Note 11 to the Consolidated Financial Statements
for additional information concerning the LLR transaction). A portion of the
proceeds received from this private placement was used to fund the C/J
acquisition (see Note 3 to the Consolidated Financial Statements for additional
information concerning the C/J acquisition).
The Company entered into a joint venture agreement during 2001 for
the purpose of developing new research-based products. Through the end of 2002,
it is expected that the Company will fund up to $1,000 in cash or services
related to the joint venture. All amounts funded will be charged to expense. The
Company expensed approximately $70 in 2001.
The Company believes that its current sources of liquidity and
capital will be sufficient to fund its long-term obligations and working capital
needs for the foreseeable future.
Critical Accounting Policies
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and on assumptions that are
believed to be reasonable under the circumstances.
The Company believes that the implementation of the following
critical accounting policies, used in the preparation of its consolidated
financial statements, introduce the most significant levels of judgments and
estimates.
Revenue Recognition
The Company recognizes revenues on the percentage of completion
method, which relies on a periodic determination of the ratio of costs incurred
to total estimated contract costs. The Company follows this method since
reasonably dependable estimates of the revenue and costs applicable to various
stages of a project can be made. Recognized revenue and profit are subject to
revisions as the project progresses to completion. Revisions in profit estimates
are reflected in income in the period in which the facts that give rise to the
revision become known. These revisions could be material to the Company's
results of operations.
-19-
Goodwill and Other Intangible Assets
The Company has significant intangible assets related to goodwill
and other identifiable intangible assets, such as non-competition agreements.
The determination of the related estimated useful lives involves significant
judgments. Changes in those useful lives could be material to the Company's
results of operations.
In assessing the recoverability of the Company's goodwill and other
identifiable intangibles, the Company must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the
future, the Company may be required to record impairment charges for these
assets. During the year ended December 31, 2001, the Company did not record any
impairment losses related to goodwill and other intangible assets in accordance
with FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. On January 1, 2002, the Company
adopted Statement No. 142, Goodwill and Other Intangible Assets, which requires
the Company to analyze its goodwill for impairment in 2002, and then on a
periodic basis thereafter. At the date of adoption, the Company reclassified
assembled workforce intangible assets with an unamortized balance of $864 to
goodwill. Based on a preliminary analysis under the requirements of Statement
142, which are different than the requirements of Statement 121, a potential
goodwill impairment loss of approximately $250 to $300 in the Company's Mexican
subsidiary may be reflected as the cumulative effect of a change in accounting
principle in the first quarter of 2002.
Inflation and Foreign Currency Exchange
Inflation has not had a significant impact on the Company's
operating results to date, nor does the Company expect it to have a significant
impact through 2002. The appreciation of the U.S. dollar versus the British
pound has negatively affected the Company's operating results in 2001. As the
Company continues to expand its international operations, exposures to gains and
losses from foreign currency fluctuations will increase. The Company may choose
to limit such exposure by the purchase of forward foreign exchange contracts.
Risk Factors
Readers of this report should be aware that the following important
factors, among others, in some cases have affected, and in the future could
affect, the actual operating results of the Company and could cause the
Company's actual consolidated results for 2002 and beyond to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company:
The Company's success depends on the Company's ability to retain its
existing clients and obtain new clients. The Company's clients generally may
terminate the services it provides to them at any time. The loss of one or more
of the Company's large clients or a significant reduction in business from such
clients could have a material adverse effect on the
-20-
Company. The existence of larger projects and long-term client relationships may
increase the Company's reliance on particular projects and clients. In 2001,
approximately 48% of the Company's revenue was generated by providing services
to various U.S. governmental departments and agencies.
The Company's business may suffer if demand for its services
declines. A number of factors that are beyond the Company's control can
adversely affect the demand of the Company's existing clients for its services
and impair its ability to attract new clients. These include marketing budgets,
general economic conditions, consolidations, government spending, and other
industry-specific trends. Changes in management or ownership of an existing
client are factors that can affect the client's demand for the Company's
services. As a result, the Company may provide different amounts of services to
its clients from year to year, and these differences can contribute to
fluctuations in the Company's operating results.
The Company's attempts to expand its operations into markets where
the Company does not currently operate may not be successful and the Company's
efforts to expand its international operations will be subject to added risks
which are inherent in doing business abroad. Part of the Company's business
strategy is to expand domestically and internationally, and to extend into
related businesses through strategic acquisitions. There can be no assurance
that the Company will be able to so expand or to identify targets for such
acquisitions on terms attractive to the Company. Further, there can be no
assurance that the Company's services will be sufficiently accepted to sustain
its efforts to expand in selected international markets. International expansion
will also subject the Company to risks inherent in doing business abroad,
including adverse fluctuations in currency exchange rates, limitations on asset
transfers, changes in foreign regulations and political turmoil. Furthermore,
there can be no assurance that the Company will be able to integrate
successfully the operations of any subsequently acquired company with its
current operations.
The Company's business may suffer if the Company is unable to retain
its key personnel. The Company is dependent upon the efforts and skills of
certain key senior executives. The loss of the services of one or more of these
individuals could have a material adverse effect on the Company. The Company
does not currently maintain key man life insurance policies on any of the
Company's executives other than John F. Short, the Company's chief executive
officer, and the Company has employment agreements only with certain executive
officers. Competition for senior management is intense, and the Company may not
be successful in retaining key personnel or in attracting and retaining other
personnel that the Company may require in the future.
The Company faces competition in its industry. The Company faces
competition in connection with most of the individual services and products it
provides. Although the Company believes that no single competitor offers a
comparable combination of services and products, there can be no assurance that
other companies, including some with greater financial resources than the
Company, will not attempt to offer a range of services and products similar to
those offered by the Company, or otherwise compete more effectively in the
market research and information services industry. The Company regularly
experiences significant competition for customers seeking
-21-
market research services from a large number of competitors. These include
market research companies, advertising agencies, and business consulting firms.
The Company competes for public sector research services with a large number of
firms that vary in size as well as with not-for-profit organizations. For
outbound telemarketing services, the Company competes with a large number of
telemarketing companies.
The Company does not currently pay dividends on its common stock and
the Company does not expect to do so for the foreseeable future. The Company
expects to retain its future earnings, if any, for the operation and expansion
of its business, and to pay no cash dividends for the foreseeable future. The
terms of the Company's current financing agreements prohibit the payment of
dividends, and future agreements may also contain terms that limit the amount of
dividends the Company may pay or prohibit any payment of dividends.
Anti-takeover provisions and the Company's right to issue preferred
stock could make a third-party acquisition of the Company difficult. The
Company's certificate of incorporation provides that the board of directors may
issue preferred stock without stockholder approval. In addition, the Company's
by-laws provide for a classified board, with each board member serving a
three-year term. The board of directors has also adopted a stockholder rights
plan, commonly referred to as a "poison pill." The issuance of preferred stock,
the existence of a classified board, and the stockholder rights plan could make
it more difficult for a third party to acquire the Company without board
approval. These provisions could also limit the price that certain investors
might be willing to pay in the future for the Company's common stock.
Trading Volume in the Company's Common Stock has historically been
limited. There is a limited market for the Company's common stock. Selling the
Company's shares may be difficult because smaller quantities of shares are
bought and sold and security analysts' and the news media's coverage about the
Company is limited. These factors could result in lower prices and larger
spreads in the bid and ask prices for the Company's shares.
Forward-looking Statements
Certain statements contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations, and elsewhere in this Annual
Report on Form 10-K, are forward-looking statements. The Company has based these
forward-looking statements on its current expectations about future events.
These forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
intentions, financial condition, results of operations, future performance and
business, including:
. statements relating to the Company's business strategy;
. the Company's current and future plans; and
. statements that include the words "may," "could," "should," "would,"
"believe," "expect," "anticipate," "estimate," "intend," "plan" or
similar expressions.
-22-
These forward-looking statements are subject to risks,
uncertainties, and assumptions about the Company and its operations that are
subject to change based on various important factors, some of which are beyond
the Company's control. The following factors, among others, could cause the
Company's financial performance to differ materially from the goals, plans,
objectives, intentions and expectations expressed in its forward-looking
statements:
. fluctuations in demand for the Company's services;
. competition;
. the Company's dependence on key personnel;
. government funding of social research projects;
. leverage and debt service (including sensitivity to fluctuations in
interest rates);
. domestic and global economic, credit and capital market conditions;
. foreign exchange fluctuations;
. changes in federal or state tax laws or the administration of these
laws;
. regulatory or judicial proceedings; and
. certain other risks described in this Annual Report on Form 10-K.
If one or more of the assumptions underlying these forward-looking
statements proves incorrect, the Company's actual results, performance or
achievements in future periods could differ materially from those expressed in,
or implied by, the forward-looking statements contained in this Annual Report on
Form 10-K. Therefore, the Company cautions the readers not to place undue
reliance on its forward-looking statements.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether written or oral, whether as a result of
new information, changed assumptions, the occurrence of unanticipated events,
changes in future operating results over time or otherwise. All forward-looking
statements attributable to the Company are expressly qualified by these
cautionary statements.
-23-
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Market risks relating to the Company's operations result primarily
from changes in interest rates and changes in foreign exchange rates. The
Company monitors its interest rate and foreign exchange rate exposures on an
ongoing basis. Historically, the Company has entered into interest rate hedging
contracts and will continue to evaluate their appropriateness. As of December
31, 2001, the Company was not a party to any interest rate hedging contracts.
It has not been the Company's practice to enter into foreign
exchange contracts, but such contracts may be used in the future if the Company
deems them to be an appropriate resource to manage the Company's exposure to
movements in foreign currency exchange rates. The Company does not consider its
current foreign exchange exposure, which is primarily related to changes between
the U.S. dollar and the U.K. pound, to be material. Although the impact of
changes in foreign exchange rates may be significant on the Company's revenues,
cost of revenues and operating expenses when considered individually, the net
impact on the Company's results of operations has not been significant.
The following table provides information about the financial
instruments of the Company that are sensitive to changes in interest rates. For
debt obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates.
- -------------------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
There- Fair Value
2002 2003 2004 2005 2006 After Total 12/31/01
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
Long-term debt including current portion:
Variable rate debt $4,500 $6,000 $30,689 - - - $41,189 $41,189
Average interest rate -
LIBOR+3.25%
Fixed rate debt - 12% $3,750 $7,500 $3,750 $15,000 $12,633
- --------------------------------------------------------------------------------------------------------------------------------
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The Company's financial statements, together with the report of the
Company's independent public accountants, are set forth beginning at page F-1 at
the end of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
-24-
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Except as set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K, this information will
be contained in the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders for 2002, to be filed with the
Securities and Exchange Commission within 120 days following the end of the
Company's fiscal year ended December 31, 2001, and is hereby incorporated by
reference thereto.
Item 11. Executive Compensation
----------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders for 2002,
to be filed with the Securities and Exchange Commission within 120 days
following the end of the Company's fiscal year ended December 31, 2001, and is
hereby incorporated by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders for 2002,
to be filed with the Securities and Exchange Commission within 120 days
following the end of the Company's fiscal year ended December 31, 2001, and is
hereby incorporated by reference thereto.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders for 2002,
to be filed with the Securities and Exchange Commission within 120 days
following the end of the Company's fiscal year ended December 31, 2001, and is
hereby incorporated by reference thereto.
-25-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a) The following documents are filed as part of this report.
1. Financial Statements Page Reference
-------------------- --------------
Report of Independent Auditors F-1
Consolidated Balance Sheets as of December 31, F-2
2001 and 2000
Consolidated Statements of Income for F-3
the years ended December 31, 2001, 2000,
and 1999
Consolidated Statements of Stockholders' F-4
Equity for the years ended December 31, 2001
2000, and 1999
Consolidated Statements of Cash Flows for F-5
the years ended December 31, 2001, 2000, and 1999
Notes to Consolidated Financial Statements F-6
2. Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable or the required information
is given in the Financial Statements or Notes thereto, and therefore have been
omitted.
(b) Reports on Form 8-K
None.
-26-
(c) Exhibits
--------
Exhibit No.
- ----------
3.1 Amended and Restated Certificate of Incorporation of the Registrant
- Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993 (the "Form
S-1").
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Form S-1.
4.1 Rights Agreement, dated September 13, 1996, between the Registrant
and StockTrans, Inc. - Incorporated by reference to Exhibit 1 to
the Registrant's Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on September 27, 1996.
4.2 Amendment to Rights Agreement dated August 8, 1998 - Incorporated
by reference to Exhibit 4.1 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998 (the "1998 10-K").
4.3 Amendment No. 2 to Rights Agreement dated September 1, 2000 -
Incorporated by reference to Exhibit 10.11 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 15, 2000 (the "2000 8-K").
4.4 Opinion Research Corporation Designation of Series B Preferred
Stock - Incorporated by reference to Exhibit 4.1 to the 2000 8-K.
4.5 Opinion Research Corporation Designation of Series C Preferred
Stock - Incorporated by reference to Exhibit 4.2 to the 2000 8-K.
*10.1 Employment Agreement between the Registrant and John F. Short -
Incorporated by reference to Exhibit 10.12 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
(the "1999 10-Q").
*10.2 Employment Agreement between the Registrant and Douglas L. Cox
dated January 23, 2002.
*10.3 Employment Agreement between the Registrant and Frank J. Quirk
dated January 25, 2002.
-27-
*10.4 Employment Agreement among Opinion Research Corporation, ORC ProTel
Inc., and Ruth R. Wolf dated January 1, 1998 - Incorporated by
reference to Exhibit 10.7 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1999 (the "1999 10-K").
*10.5 Employment Agreement between Macro International Inc. and Michael
T. Errecart dated May 20, 1999 - Incorporated by reference to
Exhibit 10.2 to the 1999 8-K.
*10.6 Employment Agreement among Opinion Research Corporation, ORC
Consumer, Inc. and Terence W. Cotter dated August 31, 2000 -
Incorporated by reference to Exhibit 10.1 to the 2000 8-K.
*10.7 Employment Agreement among Opinion Research Corporation, ORC
Consumer, Inc. and Gary M. Cotter dated August 31, 2000 -
Incorporated by reference to Exhibit 10.2 to the 2000 8-K.
*10.8 Employment Agreement between Macro International Inc. and Lewis D.
Eigen dated October 31, 2000 - Incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
*10.9 1997 Stock Incentive Plan - Incorporated by reference to Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
*10.10 Amendment to the 1997 Stock Incentive Plan - Incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001 (the "2001
10-Q").
*10.11 Opinion Research Corporation Employee Stock Purchase Plan -
Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-8, filed with the Securities and
Exchange Commission on September 8, 2000.
*10.12 Opinion Research Corporation Stock Purchase Plan for Non-employee
Directors and Designated Employees and Consultants - Incorporated
by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-8, filed with the Securities and Exchange
Commission on September 25, 2000.
10.13 Lease Agreement dated May 24, 1993 between the Registrant and
Computer Associates International, Inc. (for Princeton facility) -
Incorporated by reference to Exhibit 10.16 to the Form S-1.
-28-
10.14 Lease dated August 27, 1993 between Carrollton Enterprises
Associates Limited Partnership and Macro International, Inc. -
Incorporated by reference to Exhibit 10.14 to the 1999 10-K.
10.15 Lease and Lease Addendum dated February 24, 1995 between North
Bethesda Associates Limited Partnership and Social and Health
Services, Ltd. - Incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 2000 (the "2000 10-K").
10.16 First Amendment to Lease dated January 1, 1999 and Second Amendment
to Lease dated September 15, 1999, between Bethesda Properties,
L.L.C. and Social and Health Services, Ltd. - Incorporated by
reference to Exhibit 10.16 to the 2000 10-K.
10.17 Asset Purchase Agreement between the Registrant and Pro Tel
Marketing, Inc. - Incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 20, 1998.
10.18 Stock Purchase Agreement dated April 30, 1999 among the Registrant
and the Stockholders of Macro International Inc. - Incorporated by
reference to Exhibit 2.1 to the 1999 8-K.
10.19 Asset Purchase Agreement dated August 31, 2000 among the
Registrant, ORC Consumer Inc., C/J Research, Inc. and the
Stockholders of C/J Research, Inc. - Incorporated by reference to
Exhibit 2.1 to the 2000 8-K.
10.20 Stock Purchase Agreement dated October 31, 2000 among Macro
International Inc., Opinion Research Corporation, and Lewis D.
Eigen and Ramona E.F. Arnett - Incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
10.21 Waiver and Fifth Amendment to Credit Agreement dated October 4,
2001 among Opinion Research Corporation, ORC Inc., and Heller
Financial, Inc. - Incorporated by reference to Exhibit 10.1 to the
2001 10-Q.
10.22 Credit Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated by
reference to Exhibit 10.1 to the 1999 10-Q.
-29-
10.23 Security Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated by
reference to Exhibit 10.2 to the 1999 10-Q.
10.24 Investment Agreement dated May 26, 1999 among Opinion Research
Corporation, Allied Investment Corporation, and Allied Capital
Corporation. - Incorporated by reference to Exhibit 10.5 to the
1999 10-Q.
10.25 Subordinated Debenture for $9.5 million dated May 26, 1999 issued
by Opinion Research Corporation to Allied Capital Corporation. -
Incorporated by reference to Exhibit 10.7 to the 1999 10-Q.
10.26 Subordinated Debenture for $5.5 million dated May 26, 1999 issued
by Opinion Research Corporation to Allied Investment Corporation. -
Incorporated by reference to Exhibit 10.8 to the 1999 10-Q.
10.27 Registration Rights Agreement dated May 26, 1999 among Opinion
Research Corporation, Allied Capital Corporation and Allied
Investment Corporation. - Incorporated by reference to Exhibit 10.9
to the 1999 10-Q.
10.28 Amendment No.1 to Registration Rights Agreement dated September 1,
2000 among Opinion Research Corporation, Allied Capital Corporation
and Allied Investment Corporation - Incorporated by reference to
Exhibit 10.12 to the 2000 8-K.
10.29 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Capital Corporation dated May 26, 1999 - Incorporated by
reference to Exhibit 10.10 to the 1999 10-Q.
10.30 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Investment Corporation dated May 26, 1999 - Incorporated by
reference to Exhibit 10.11 to the 1999 10-Q.
10.31 Purchase Agreement dated September 1, 2000 among Opinion Research
Corporation, LLR Equity Partners, L.P. and LLR Equity Partners
Parallel, L.P. - Incorporated by reference to Exhibit 10.5 to the
2000 8-K.
10.32 Registration Rights Agreement dated September 1, 2000 among Opinion
Research Corporation, LLR Equity Partners, L.P. and LLR Equity
Partners Parallel, L.P. - Incorporated by reference to Exhibit 10.6
to the 2000 8-K.
-30-
10.33 Common Stock Warrant Issued by Opinion Research Corporation to LLR
Equity Partners, L.P. dated September 1, 2000 - Incorporated by
reference to Exhibit 10.7 to the 2000 8-K.
10.34 Common Stock Warrant Issued by Opinion Research Corporation to LLR
Equity Partners Parallel, L.P. dated September 1, 2000 -
Incorporated by reference to Exhibit 10.8 to the 2000 8-K.
10.35 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners, L.P. dated September 1, 2000 -
Incorporated by reference to Exhibit 10.9 to the 2000 8-K.
10.36 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners Parallel, L.P. dated September
1, 2000 - Incorporated by reference to Exhibit 10.10 to the 2000
8-K.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
________________________________________________________________________________
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report
-31-
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.
OPINION RESEARCH CORPORATION
By: /s/ John F. Short
-----------------------------------------
John F. Short, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 26, 2002 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ John F. Short Chairman of the Board, Chief Executive Officer,
- -----------------------------
John F. Short President and Director
(Principal Executive Officer)
/s/ Douglas L. Cox Executive Vice President and Chief Financial Officer
- -----------------------------
Douglas L. Cox (Principal Financial and Accounting Officer)
/s/ James A. Bulvanoski Director
- -----------------------------
James A. Bulvanoski
/s/ Dale J. Florio Director
- -----------------------------
Dale J. Florio
/s/ John J. Gavin Director
- -----------------------------
John J. Gavin
/s/ Stephen A. Greyser Director
- -----------------------------
Stephen A. Greyser
/s/ Seth J. Lehr Director
- -----------------------------
Seth J. Lehr
/s/ Frank J. Quirk Executive Vice President and Director
- -----------------------------
Frank J. Quirk
/s/ Lenard B. Tessler Director
- -----------------------------
Lenard B. Tessler
-32-
Report of Independent Auditors
The Board of Directors and Stockholders
Opinion Research Corporation
We have audited the accompanying consolidated balance sheets of Opinion Research
Corporation and Subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted
in the United States. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Opinion
Research Corporation and Subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 7, 2002
F-1
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
December 31,
-----------------------
2001 2000
---------- ----------
Assets
Current Assets:
Cash and cash equivalents $ 2,355 $ 3,235
Accounts receivable:
Billed 24,729 27,162
Unbilled services 13,255 14,185
--------- ---------
37,984 41,347
Less: allowance for doubtful accounts 284 246
--------- ---------
37,700 41,101
Prepaid and other current assets 2,575 2,319
--------- ---------
Total current assets 42,630 46,655
Property and equipment, net 9,777 9,610
Intangibles, net 3,532 4,924
Goodwill, net 53,144 51,108
Other assets 3,833 3,660
--------- ---------
$ 112,916 $ 115,957
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 4,232 $ 4,737
Accrued expenses 9,897 13,683
Deferred revenues 4,397 4,834
Acquisition payable -- 3,226
Short-term borrowings 4,500 3,002
Other current liabilities 1,751 2,340
--------- ---------
Total current liabilities 24,777 31,822
Long-term debt 50,913 48,776
Deferred income taxes -- 548
Other liabilities 893 951
Redeemable Equity:
Preferred stock:
Series B - 10 shares designated, issued and outstanding,
liquidation value of $10 per share -- --
Series C - 588,229 shares designated, none issued or outstanding -- --
Common stock, 1,176,458 shares issued and outstanding 8,900 8,900
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized:
Series A - 10,000 shares designated, none issued or outstanding -- --
Common stock, $.01 par value, 10,000,000 shares authorized,
4,722,605 shares issued and 4,673,783 outstanding in 2001,
and 4,474,412 shares issued and 4,436,554 outstanding in 2000 47 45
Additional paid-in capital 18,581 17,473
Retained earnings 9,851 8,235
Treasury stock, at cost, 48,822 shares in 2001, 37,858 in 2000 (261) (186)
Accumulated other comprehensive loss (785) (607)
--------- ---------
Total stockholders' equity 27,433 24,960
--------- ---------
$ 112,916 $ 115,957
========= =========
See notes to consolidated financial statements.
F-2
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except share and per share amounts)
Year Ended December 31,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
Revenues $ 176,909 $ 160,909 $ 118,621
Cost of revenues 121,525 105,975 75,849
----------- ----------- -----------
Gross profit 55,384 54,934 42,772
Selling, general and administrative expenses 38,128 36,004 28,502
Depreciation and amortization 8,431 7,278 5,807
----------- ----------- -----------
Operating income 8,825 11,652 8,463
Interest and other non-operating expenses, net 5,413 5,681 4,005
----------- ----------- -----------
Income before income taxes and extraordinary loss 3,412 5,971 4,458
Provision for income taxes 1,796 2,667 1,944
----------- ----------- -----------
Income before extraordinary loss 1,616 3,304 2,514
Extraordinary loss on debt refinancing,
net of tax benefit of $60 in 1999 -- -- (90)
----------- ----------- -----------
Net income $ 1,616 $ 3,304 $ 2,424
=========== =========== ===========
Income before extraordinary loss per common share:
Basic $ 0.28 $ 0.70 $ 0.59
=========== =========== ===========
Diluted $ 0.27 $ 0.65 $ 0.58
=========== =========== ===========
Extraordinary loss on debt refinancing per common share:
Basic $ -- $ -- $ (0.02)
=========== =========== ===========
Diluted $ -- $ -- $ (0.02)
=========== =========== ===========
Net income per common share:
Basic $ 0.28 $ 0.70 $ 0.57
=========== =========== ===========
Diluted $ 0.27 $ 0.65 $ 0.56
=========== =========== ===========
Weighted average common shares outstanding:
Basic 5,762,383 4,691,859 4,244,026
Diluted 5,991,566 5,053,217 4,331,700
See notes to consolidated financial statements.
F-3
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(in thousands)
Common stock Additional
------------------------ paid-in Retained
Shares Amount capital earnings
--------- ---------- ------------ -----------
Balance, December 31, 1998 4,282 $ 42 $ 14,216 $ 2,507
Comprehensive income:
Net income - - - 2,424
Other comprehensive income:
Foreign currency translation
adjustments - - - -
Comprehensive income
Exercise of stock options 148 1 912 -
Common stock redeemed for the
exercise of stock options (137) - (936) -
Compensation expense recognized
for warrants issued - - 100 -
Warrants issued in association with
debt refinancing - - 1,183 -
--------- ---------- ------------ -----------
Balance, December 31, 1999 4,293 43 15,475 4,931
Comprehensive income:
Net income - - - 3,304
Other comprehensive income:
Foreign currency translation
adjustments - - - -
Comprehensive income
Exercise of stock options 37 - 168 -
Issuance of capital stock and warrants 145 2 1,830 -
--------- ---------- ------------ -----------
Balance, December 31, 2000 4,475 45 17,473 8,235
Comprehensive income:
Net income - - - 1,616
Other comprehensive income:
Foreign currency translation
adjustments - - - -
Comprehensive income
Exercise of stock options 13 - 29 -
Issuance of capital stock and warrants 235 2 1,079
Treasury shares purchased - - - -
--------- ---------- ------------ -----------
Balance, December 31, 2001 4,723 $ 47 $ 18,581 $ 9,851
========= ========== ============ ===========
Accumulated
other Treasury stock Total
comprehensive ------------------------ stockholders'
income (loss) Shares Amount equity
------------------ --------- ---------- ------------------
Balance, December 31, 1998 $ 112 38 $ (186) $ 16,691
Comprehensive income:
Net income - - - 2,424
Other comprehensive income:
Foreign currency translation
adjustments (182) - - (182)
-----------------
Comprehensive income 2,242
Exercise of stock options - - - 913
Common stock redeemed for the
exercise of stock options - - - (936)
Compensation expense recognized
for warrants issued - - - 100
Warrants issued in association with
debt refinancing - - - 1,183
------------------ --------- ---------- -----------------
Balance, December 31, 1999 (70) 38 (186) 20,193
Comprehensive income:
Net income - - - 3,304
Other comprehensive income:
Foreign currency translation
adjustments (537) - - (537)
-----------------
Comprehensive income 2,767
Exercise of stock options - - - 168
Issuance of capital stock and warrants - - - 1,832
------------------ --------- ---------- -----------------
Balance, December 31, 2000 (607) 38 (186) 24,960
Comprehensive income:
Net income - - - 1,616
Other comprehensive income:
Foreign currency translation
adjustments (178) - - (178)
-----------------
Comprehensive income 1,438
Exercise of stock options - - - 29
Issuance of capital stock and warrants 1,081
Treasury shares purchased - 11 (75) (75)
------------------ --------- ---------- -----------------
Balance, December 31, 2001 $ (785) 49 $ (261) $ 27,433
================== ========= ========== =================
See notes to consolidated financial statements.
F-4
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
--------------------------------------------------
2001 2000 1999
-------------- ------------- -------------
Cash flows from operating activities:
Net income $ 1,616 $ 3,304 $ 2,424
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 8,431 7,278 5,807
Loss (gain) on disposal of fixed assets (3) 63 9
Extraordinary loss - - 150
Provision for doubtful accounts 38 - 135
Amortization of original issue discount included in interest expense 109 95 260
Amortization of loan fees 385 315 169
Compensation expense recognized for issuance of warrants - - 100
Deferred income taxes (688) (964) (835)
Changes in operating assets and liabilities, net of effects
from acquisitions,
Billed accounts receivable 2,372 (2,710) 3,269
Unbilled services 888 (1,582) (6,509)
Other assets (692) (58) 709
Accounts payable (494) (21) (84)
Accrued expenses (1,567) 4,980 (282)
Deferred revenues (414) 1,244 777
Other liabilities (631) (941) 772
-------------- ------------- -------------
Net cash provided by operating activities 9,350 11,003 6,871
-------------- ------------- -------------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired (10,851) (19,344) (26,383)
Proceeds from the sale of fixed assets 30 - 107
Capital expenditures (3,934) (4,440) (3,563)
-------------- ------------- -------------
Net cash used in investing activities (14,755) (23,784) (29,839)
-------------- ------------- -------------
Cash flows from financing activities:
Borrowings under line-of-credit agreement 31,514 31,233 23,769
Repayments under line-of-credit agreement (24,975) (24,836) (31,735)
Issuance of notes payable - - 43,970
Repayments of notes payable (3,000) (2,051) (12,355)
Repayments under capital lease arrangements (21) (22) (101)
Redemption of acquisition stock options - (2,000) -
Proceeds from issuance of capital stock, warrants, and options 1,035 10,900 1,161
-------------- ------------- -------------
Net cash provided by financing activities 4,553 13,224 24,709
-------------- ------------- -------------
Effect of exchange rate changes on cash and cash equivalents (28) (16) 9
-------------- ------------- -------------
Increase (decrease) in cash and cash equivalents (880) 427 1,750
Cash and cash equivalents at beginning of period 3,235 2,808 1,058
-------------- ------------- -------------
Cash and cash equivalents at end of period $ 2,355 $ 3,235 $ 2,808
============== ============= =============
Non-cash investing and financing activities:
Acquisition of equipment under capital lease $ - $ - $ 107
============== ============= =============
See notes to consolidated financial statements.
F-5
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
(in thousands, except share and per share amounts)
1. Summary of significant accounting policies
Nature of operations and basis of presentation
Opinion Research Corporation (the "Company" or "ORC") was established in 1938 to
apply the principles of general public opinion polling to marketing issues
facing America's largest companies. The Company has evolved to provide primary
market research, social research, information services, marketing services, and
telemarketing. The Company assists its commercial clients in the evaluation,
monitoring and optimization of their marketing and sales efforts, addressing
issues such as customer loyalty and retention, market demand and forecasting,
and corporate image and competitive positioning. The Company also performs
public sector primary research and provides information technology,
communications, and other consulting services, primarily to agencies of the
United States federal government and state and local governments. The majority
of the Company's governmental projects are in the areas of health, education,
and international aid. The Company's telemarketing services consist principally
of outbound customer acquisition services. The Company operates in three
industry and three geographic segments.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All intercompany transactions are eliminated
upon consolidation.
Revenue recognition
The Company recognizes revenues on the percentage of completion method, which
relies on a periodic determination of the ratio of costs incurred to total
estimated contract costs. The Company follows this method since reasonably
dependable estimates of the revenue and costs applicable to various stages of a
project can be made. Recognized revenue and profit are subject to revisions as
the project progresses to completion. Revisions in profit estimates are
reflected in operations in the period in which the facts that give rise to the
revision become known. These revisions could be material to the Company's
results of operations.
Invoices to clients are generated in accordance with the terms of the applicable
contract, which may not be directly related to the performance of services.
Unbilled receivables are billed based upon the achievement of specific events as
defined by each contract including deliverables, timetables and incurrence of
certain costs. Billing milestones vary by contract. Unbilled receivables are
classified as a current asset. Advanced billings to clients in excess of
revenue earned are recorded as deferred revenues and are classified as a current
liability. The Company grants credit primarily to large companies and
government agencies and performs periodic credit evaluations of its clients'
financial condition. The Company does not generally require collateral. Credit
losses relating to clients consistently have been within management's
expectations.
F-6
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of significant accounting policies (continued)
Cash equivalents
The Company considers as cash equivalents all highly liquid debt instruments
with a maturity of three months or less when purchased.
Property and equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets (3-10
years). Leasehold improvements are amortized using the straight-line method
over their estimated useful lives or the remaining life of the lease, whichever
is shorter.
Impairment of long-lived assets
The Company records impairment losses on long-lived assets used in operations or
expected to be disposed when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets. If impairment
is indicated, the carrying value of long-lived assets would be reduced to fair
value.
Foreign currency translation
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars using the exchange rate in effect at the balance sheet date and revenues
and expenses are translated using an average exchange rate during the period.
The resulting translation adjustments are recorded as a component of other
comprehensive income and are accumulated in stockholders' equity. Because
cumulative translation adjustments are considered a component of permanently
invested unremitted earnings of subsidiaries outside of the United States, no
taxes are provided on such amounts.
Stock-based compensation
As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation,
the Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related interpretations
in accounting for its employee option plans. Under APB 25, no compensation
expense is recognized at the time of the option grant if the exercise price of
the employee stock option is fixed and equals or exceeds the fair market value
of the underlying common stock on the date of grant and the number of shares to
be issued pursuant to the exercise of such options is known and fixed at the
grant date.
F-7
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of significant accounting policies (continued)
Income taxes
The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Recognition of deferred
tax assets is limited to amounts considered by management to be more likely than
not to be realized in future periods.
Earnings per share
Basic and diluted earnings per share are calculated in accordance with FASB
Statement No. 128, Earnings per Share.
Comprehensive income
Comprehensive income consists of two components, net income and other
comprehensive income. Other comprehensive income refers to revenue, expenses,
gains and losses that, under generally accepted accounting principles, are
recorded as an element of stockholders' equity but are excluded from net income.
The Company's other comprehensive income is comprised of foreign currency
translation adjustments from those subsidiaries not using the U.S. dollar as
their functional currency. Total accumulated other comprehensive income (loss)
is displayed as a separate component of stockholders' equity in the accompanying
consolidated balance sheets.
Computer Software
In accordance with Statement of Position 98-1 ("SOP 98-1"), Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use issued by the
American Institute of Certified Public Accountants, the Company has capitalized
certain internal and external costs incurred to acquire or create internal use
software. Capitalized costs are amortized over five years.
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of significant accounting policies (continued)
Reclassification
Certain amounts in prior years have been reclassified to conform to the 2001
presentation.
2. Recent accounting pronouncements
In June 2001, the Financial Accounting Standards Board issued Statement No. 141,
Business Combinations, and Statement No. 142, Goodwill and Other Intangible
Assets, effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are reviewed at least annually for impairment. Other
intangible assets will continue to be amortized over their useful lives. The
amortization provision of Statement 142 applies to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and intangible
assets acquired prior to July 1, 2001, the Company is required to adopt
Statement 142 effective January 1, 2002. Had the Company applied the non-
amortization provisions of Statement 142 for goodwill in 2001, the operating
income for 2001 would have increased by approximately $3,400. Changes in the
estimated useful lives of intangible assets are not expected to result in a
material effect on net income in 2002. At the date of adoption, the Company
will reclassify assembled workforce intangible assets with an unamortized
balance of $864 to goodwill. The Company will test goodwill for impairment
using the two-step process prescribed in Statement 142. Based on a preliminary
analysis under the requirements of Statement 142, a potential goodwill
impairment loss of approximately $250 to $300 in the Company's Mexican
subsidiary may be reflected as the cumulative effect of a change in accounting
principle in the first quarter of 2002.
In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. That standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred and changes the requirements for classification of discontinued
operations. In October 2001, the FASB issued Statement No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which supersedes FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and provides a single accounting model for long-lived
assets to be disposed of. Although retaining many of the fundamental recognition
and measurement provisions of Statement 121, the new rules significantly change
the criteria that would have to be met to classify an asset as held-for-sale.
The Company will adopt Statement 143 on January 1, 2003 and Statement 144 on
January 1, 2002 with transition provisions for certain matters. The Company is
currently evaluating the effects, if any, of these standards on the Company's
financial position and results of operations.
F-9
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Acquisitions
In January 1998, ORC ProTel, Inc. ("ProTel"), a newly created subsidiary of the
Company, purchased certain assets (not including cash or accounts receivable)
and assumed certain liabilities of Pro Tel Marketing, Inc. The acquisition was
accounted for as a purchase and accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed. The purchase price was comprised
of a $10,000 cash payment and 400,000 options to purchase common shares of the
Company's stock, with the provision that such options may, at the option of the
holders, be returned to the Company for cash payment of $2,000 on the second
anniversary of the closing. The fair value of these options was $1,691 at the
acquisition date and $2,000 at December 31, 1999. In January 2000, these
options were returned to the Company for a payment of $2,000. The fair value of
the net assets acquired was $489. The Company incurred $543 of costs related to
the acquisition. Identifiable intangible assets valued at $1,250 are being
amortized using the straight-line method over a period of five years. The
excess of the initial consideration paid over the estimated fair value of net
assets and identifiable intangible assets acquired in the amount of $10,495, has
been recorded as goodwill and was amortized using the straight-line method over
a period of fifteen years prior to the adoption of Statement 142.
In addition, over the years 1998 through 2000, the sellers were eligible to earn
up to an additional $10,000 of cash payments, contingent upon ProTel achieving
certain targets for revenues and earnings before interest, income taxes,
depreciation, and amortization. Based on 2000 and 1999 operating results,
additional payments totaling $3,226 and $2,897 were made to the principals and
broker in March 2001 and 2000, respectively. The additional consideration has
been recorded as goodwill and was amortized over the remaining life of the
original goodwill prior to the adoption of Statement 142.
On April 30, 1999, the Company completed the purchase of all outstanding shares
of stock of Macro International Inc. ("Macro"). The purchase price was
comprised of a $22,300 cash payment and approximately $1,010 of additional costs
related to the acquisition. The fair value of the net assets acquired was
$8,742. Identifiable intangible assets valued at $2,960 are being amortized
using the straight-line method over a period of five years. The excess of the
initial consideration paid over the estimated fair value of net assets and
identifiable intangible assets acquired in the amount of $11,608, has been
recorded as goodwill and was amortized using the straight-line method over a
period of twenty years prior to the adoption of Statement 142.
Based upon Macro's operating results for period ended April 30, 2000, an
additional payment of $3,200 was made to the sellers in July 2000. In 2001, an
additional payment of $5,500 was due to the sellers based on Macro's operating
results for the 12-month period ended April 30, 2001. In July 2001, the Company
paid $500 in cash and issued a promissory note to the previous Macro
shareholders which deferred the remaining payment from July 31, 2001 to November
1, 2001. The principal amount of the note was $5,000, with interest at a rate
of 10% per annum. Both the principal amount and the accrued interest were paid
in October 2001.
F-10
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Acquisitions (continued)
On August 31, 2000, the Company acquired substantially all of the assets of C/J
Research, Inc. ("C/J"). The purchase price was comprised of a $9,225 cash
payment and approximately $325 of additional costs related to the acquisition.
The fair value of the net assets acquired was $637. Identifiable intangible
assets valued at $1,300 are being amortized using the straight-line method over
a period of five years. The excess consideration paid over the estimated fair
value of net assets and identifiable intangible assets acquired in the amount of
$7,613, has been recorded as goodwill and was amortized using the straight-line
method over a period of twenty years prior to the adoption of Statement 142.
Pursuant to a Stock Purchase Agreement dated October 31, 2000, the Company,
through its wholly owned subsidiary Macro, acquired all of the outstanding
shares of stock of Social & Health Services, Ltd. ("SHS"), a communications and
information management company based in Rockville, Maryland. The purchase price
was comprised of $3,750 in cash, 144,990 shares of the Company's common stock
valued at $1,000, and approximately $180 of other acquisition related costs.
The fair value of the net assets acquired was $2,340. Identifiable intangible
assets valued at $594 are being amortized using the straight-line method over a
period of five years. The excess consideration paid over the estimated fair
value of net assets and identifiable intangible assets acquired in the amount of
$1,996, has been recorded as goodwill and was amortized using the straight-line
method over a period of twenty years prior to the adoption of Statement 142.
The unaudited pro forma results of operations for the years ended December 31,
2000 and 1999, which assumes the consummation of Macro, C/J, and SHS purchases
as of January 1, 1999, are as follows:
2000 1999
---------- ----------
Revenues $180,173 $165,340
Income before extraordinary loss $ 4,276 $ 2,895
Net income $ 4,276 $ 2,805
Income before extraordinary loss
per share:
Basic $ 0.76 $ 0.52
Diluted $ 0.72 $ 0.51
Net income per share:
Basic $ 0.76 $ 0.50
Diluted $ 0.72 $ 0.50
F-11
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Acquisitions (continued)
The pro forma net income includes adjustments for amortization of goodwill and
identifiable intangible assets, interest expense, and the related income tax
effects of such adjustments.
4. Accounts Receivable
Accounts receivable consists of the following:
December 31,
---------------------------
2001 2000
--------- --------
Billed receivables:
U.S. governmental departments and agencies $ 11,160 $ 11,276
Commercial clients & other 13,569 15,886
--------- --------
24,729 27,162
--------- --------
Unbilled receivables:
U.S. governmental departments and agencies 8,743 6,748
Commercial clients & other 4,512 7,437
--------- --------
13,255 14,185
--------- --------
Accounts receivable, gross 37,984 41,347
Less: allowance for doubtful accounts 284 246
--------- --------
Accounts receivable, net $ 37,700 $ 41,101
========= ========
No single client constituted more than 10% of net accounts receivable at
December 31, 2001. One client in the Company's social research business
constituted 12% of net accounts receivable at December 31, 2000. In 2001,
approximately 48% of the Company's revenue was generated by providing services
to various U.S. government departments and agencies.
5. Property and equipment
Property and equipment consists of the following:
December 31,
---------------------------
2001 2000
--------- --------
Leasehold improvements $ 3,863 $ 3,393
Computer equipment and software 16,881 15,132
Furniture, fixtures, and equipment 6,693 6,105
Equipment under capital lease obligations 139 162
--------- --------
27,576 24,792
Less accumulated depreciation and amortization 17,799 15,182
--------- --------
Property and equipment, net $ 9,777 $ 9,610
========= ========
F-12
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Property and equipment (continued)
Depreciation expense for the years ended December 31, 2001, 2000, and 1999 was
$3,671, $3,626, and $3,053, respectively.
6. Intangible assets
Intangible assets are as follows:
December 31,
--------------------
2001 2000
-------- --------
Intangible assets $ 9,763 $ 9,777
Less accumulated amortization 6,231 4,853
------- -------
Intangible assets, net $ 3,532 $ 4,924
======= =======
Goodwill $63,663 $58,239
Less accumulated amortization 10,519 7,131
------- -------
Goodwill, net $53,144 $51,108
======= =======
Amortization expense for the years ended December 31, 2001, 2000, and 1999 was
$4,760, $3,652, and $2,754, respectively.
7. Income taxes
For financial reporting purposes, income before income taxes and extraordinary
loss consists of the following:
Year Ended December 31,
---------------------------------
2001 2000 1999
------- ------- -------
United States $ 3,497 $ 6,044 $ 4,373
Foreign (85) (73) 85
------- ------- -------
$ 3,412 $ 5,971 $ 4,458
======= ======= =======
The provision (benefit) for income taxes, excluding amounts related to
extraordinary loss, consists of the following:
F-13
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Income taxes (continued)
Year Ended December 31,
-------------------------------
2001 2000 1999
------- ------- -------
Current:
Federal $ 1,662 $ 2,898 $ 1,010
State 610 593 274
Foreign 212 140 86
------- ------- -------
Total current 2,484 3,631 1,370
------- ------- -------
Deferred:
Federal (308) (732) 379
State (380) (212) 167
Foreign -- (20) 28
------- ------- -------
Total deferred (688) (964) 574
------- ------- -------
$ 1,796 $ 2,667 $ 1,944
======= ======= =======
The difference between tax expense and the amount computed by applying the
statutory federal income tax rate (34%) to income before income taxes and
extraordinary loss is as follows:
Year Ended December 31,
-----------------------------
2001 2000 1999
------- ------- -------
Statutory rate applied to pre-tax income $ 1,160 $ 2,030 $ 1,516
Add (deduct):
State income taxes, net of federal benefit 403 391 291
Foreign operating losses for which a tax
benefit has not been recorded 42 70 85
Effect of non-deductible goodwill amortization 449 362 251
Effect of other non-deductible expenses 58 44 36
Tax credits (160) (165) (100)
Other (156) (65) (135)
------- ------- -------
$ 1,796 $ 2,667 $ 1,944
======= ======= =======
F-14
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Income taxes (continued)
The Company's deferred tax liabilities and assets consist of the following
temporary differences:
December 31,
-------------------
2001 2000
-------- --------
Deferred tax liabilities:
Intangibles $ (641) $ (811)
Other assets (598) (712)
------- -------
Total deferred tax liabilities (1,239) (1,523)
------- -------
Deferred tax assets:
Reserves for doubtful accounts 87 76
Fixed assets 98 147
Intangibles 472 312
Compensation 624 519
Accrued expenses 253 318
Valuation allowance -- (95)
Other 313 76
------- -------
Total deferred tax assets 1,847 1,353
------- -------
Net deferred tax assets (liabilities) $ 608 $ (170)
======= =======
At December 31, 2001 and 2000, the Company has net current deferred tax assets
in the amount of $439 and $378, respectively, which are reported in the balance
sheet in prepaid and other current assets. At December 31, 2001, the Company
has net long-term deferred tax assets in the amount of $169, which are included
in the balance sheet in other non-current assets. Income taxes paid in the U.S.
in 2001, 2000, and 1999 were $3,205, $3,166, and $968, respectively. Income
taxes paid in the U.K. in 2001, 2000, and 1999 were $114, $0, and $39,
respectively.
8. Debt
Debt consists of the following:
December 31,
-----------------
2001 2000
------- -------
Working capital facilities $17,189 $10,650
Notes payable 38,224 41,128
------- -------
Total debt 55,413 51,778
Less current maturities 4,500 3,002
------- -------
Long-term portion $50,913 $48,776
======= =======
F-15
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Debt (continued)
In May 1999, the Company entered into a credit agreement with a financial
institution for a facility which provided $30,000 of term notes and up to
$20,000 of revolving credit for a six-year term (the "Senior Facility"). The
Senior Facility carried an interest rate at the discretion of the Company of
either the financial institution's designated base rate plus 100 basis points or
LIBOR plus 250 basis points for both revolving credit and term notes.
On October 4, 2001, the Company amended its Senior Facility increasing the
amount available under the revolving credit to up to $24,000 and to shorten the
maturity for both the revolving credit and the term notes to June 1, 2004 from
May 31, 2005 (the "Amendment"). Additionally, the Amendment provides an increase
in interest rate to LIBOR plus 325 basis points or the financial institution's
designated base rate plus 200 basis points. As of December 31, 2001, the Company
had approximately $6,811 of additional credit available under the amended
facility.
In conjunction with the Amendment, the Company incurred additional costs of
$458, which has been recorded as other long-term assets in the Company's
consolidated financial statements and, together with the previously unamortized
loan fees of $611, are being amortized over the remaining term of the facility
under the new Amendment.
In May 1999, the Company also issued $15,000 of subordinated debentures to a
financial institution. In exchange for consideration received in connection with
this debt, the Company also issued warrants to purchase a maximum of 437,029
shares of the Company's common stock at an exercise price of $5.422 per share.
The warrants are exercisable from the date of issuance and expire in 2007. The
Company incurred costs of $988 which are recorded as other long-term assets in
the Company's consolidated financial statements and are being amortized over the
term of the facility. The subordinated financing has an eight-year term and a
coupon rate of 12%. The carrying value of such debt, $14,224 at December 31,
2001, is included in notes payable in the previously presented debt table.
Aggregate maturities of debt for the years ending December 31 are as follows:
2002........................................... $ 4,500
2003........................................... 6,000
2004........................................... 30,689
2005........................................... 3,750
2006........................................... 7,500
Thereafter..................................... 3,750
The Company paid interest of $4,960, $5,500, and $2,123 for the years ended
December 31, 2001, 2000, and 1999, respectively.
F-16
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Leases
Future minimum payments required under capital and operating leases that have
noncancelable lease terms in excess of one year are as follows:
Capital Operating
Leases Leases
--------- -------------
2002.......................................... $ 29 $ 8,928
2003.......................................... 25 8,225
2004.......................................... - 7,168
2005.......................................... - 5,089
2006.......................................... - 4,498
Thereafter.................................... - 4,115
--------- -------------
Total minimum lease payments.................. $ 54 $ 38,023
=============
Less amounts representing interest............ 5
---------
Capitalized lease obligations................. $ 49
=========
At December 31, 2001, the current and non-current portions of capital lease
obligations of $21 and $28, respectively, were recorded in the balance sheet in
other current and other non-current liabilities, respectively. Rent expense
under operating leases was $7,935, $6,006, and $4,768, for the years ended
December 31, 2001, 2000 and 1999, respectively. Real estate taxes, insurance and
maintenance expenses generally are obligations of the Company and, accordingly,
are not included as part of rental payments. It is expected that, in the normal
course of business, leases that expire will be renewed or replaced by leases on
similar properties.
10. Benefit plans
The Company maintains a defined contribution pension and profit sharing plan
covering substantially all domestic employees ("the ORC Plan") except for Macro
and SHS, which maintained separate profit sharing and 401(k) plans (the "Macro
Plans" and the "SHS Plans"). As of December 31, 2001, under both the ORC and the
Macro Plans, employees may contribute up to 15% of their annual salary but not
to exceed the maximum allowable under the Internal Revenue Code. Effective
January 1, 2002, the salary deferral percentage is increased to 25%. The
respective Board of Directors may elect to match employees' contributions or
contribute to the profit sharing plan. The ORC Plan assets included 161,625 and
206,625 shares of common stock of the Company as of December 31, 2001 and 2000,
respectively. The Company contributed $341, $200, and $250 to the ORC Plan in
2001, 2000, and 1999, respectively. Under the Macro Plans, the Company
contributed $1,300, $1,593 and $765 in 2001, 2000 and 1999, respectively. In
2001, the Company contributed $365 to the SHS Plans.
F-17
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Redeemable equity
On July 19, 2001, guidance was issued in EITF Topic No. D-98, Classification and
Measurement of Redeemable Securities, which requires securities with redemption
features, including those that become exercisable only upon a change-in-control,
be classified outside of permanent equity. As described in the paragraphs below,
certain of the Company's equity instruments purchased by LLR on September 1,
2000 contain such change-in-control redemption rights. Accordingly, the Company
reclassified its consolidated balance sheet as of December 31, 2000 in its
quarterly financial statements to report redeemable equity and reduce
stockholders' equity in the amount of $8,900.
Pursuant to the terms of a September 1, 2000 Purchase Agreement, the Company
sold and LLR purchased in a private placement (i) 1,176,458 shares of the
Company's Common Stock, (ii) 10 shares of the Series B Preferred Stock, and
(iii) warrants to purchase 740,500 shares of the Company's Common Stock at an
exercise price of $12.00 per share, for aggregate gross proceeds of $10 million.
The warrants are exercisable from the date of issuance and expire in 2010. If
the Company sells shares of Common Stock in the future at a per share price
below $8.50, the exercise price of the warrants would be proportionately reduced
and certain contingent warrants issued to LLR at an exercise price of $.01 per
share become exercisable.
The holders of Series B Preferred Stock are entitled to nominate and elect two
directors to the Company's Board of Directors. The holders of the Series B
Preferred Stock are not entitled to receive dividends. In the event of
liquidation, each share of the Series B Preferred Stock is entitled to a
liquidation preference of $10.00 per share. The Company may redeem the
outstanding shares of Series B Preferred Stock at any time LLR's shareholdings
fall below 10% of the Company's outstanding common shares, at a per share amount
equal to the greater of the fair market value or the liquidation preference.
At any time after the fifth anniversary of the closing, LLR may exchange each
share of Common Stock for one-half of a share of the Company's Series C
Preferred Stock. After conversion, the holders of Series C Preferred Stock are
entitled to receive cumulative quarterly cash dividends at an annual rate of
$2.04 per share. In the event of liquidation, each share of the Series C
Preferred Stock is entitled to a liquidation preference of $17.00 per share plus
all accrued and unpaid dividends. Each share of Series C Preferred Stock is
convertible at all times into two shares of Common Stock.
The holders of Series C Preferred Stock are entitled to vote on all matters
before the common holders, as a single class with the Common Stock, on an as if
converted basis. Additionally, holders of Series C Preferred Stock as a class,
may also nominate and elect two additional directors to the Company's Board of
Directors, subject to LLR maintaining certain specified ownership percentages.
F-18
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Redeemable equity (continued)
In the event of (i) the sale of substantially all of the assets of the Company,
(ii) any consolidation or merger of the Company into another corporation or
entity in which the stockholders of the Company immediately prior to such
transaction hold less than 50% of the Company's voting power immediately after
such transaction, or (iii) any transactions in which in excess of 50% of the
Company's voting power is transferred to one or more affiliated persons, the
holders of the Series B Preferred Stock and the Series C Preferred Stock may
require the Company to redeem such securities at their liquidation preferences
of $10.00 and $17.00 per share, respectively. Because such redemption features
are not solely within the control of the Company, the Series B Preferred Stock
and the 1,176,458 shares of Common Stock held by LLR (which may be exchanged
into shares of Series C Preferred Stock), have been presented outside of
stockholders' equity in the Company's consolidated balance sheets.
The 1,176,458 shares of Common Stock held by LLR are carried at their aggregate
fair value at issuance of $8.9 million, and no changes will be made to such
carrying value until a change-in-control of the Company is probable. Finally,
because the rights to exchange shares of Common Stock into shares of Series C
Preferred Stock may not be transferred by LLR to any parties other than
affiliates of LLR, these rights will terminate upon any resale or transfer of
the 1,176,458 LLR common shares to an unaffiliated entity. Accordingly, upon the
occurrence of any such resale or transfer, the Company will reclassify a pro-
rata portion of the carrying value of the LLR Common Stock into stockholders'
equity.
The Company may call, solely at its discretion, the outstanding shares of Series
C Preferred Stock at any time at a per share amount equal to the greater of the
fair market value or the liquidation preference multiplied by 25% per annum,
compounded annually from September 30, 2000, plus any accrued but unpaid
dividends per share.
12. Stock options
The Company maintains a 1997 Stock Incentive Plan that provides for the grant
of up to 1,625,000 options to purchase common stock to directors and key
employees of the Company. In May 2001, the 1997 Stock Incentive Plan was amended
to increase the number of shares available for grant from 1,125,000 to
1,625,000. The exercise price of options granted to employees under this plan is
at least equal to the fair market value of the stock on the date of grant and is
exercisable for seven years. Options granted under this plan vest equally over a
three-year period.
Under the 1997 Stock Incentive Plan as amended, each Non-employee Director is
granted options to acquire the "formula number" of shares of common stock on
January 2nd of each year. The option exercise price for these options is equal
to the fair market value of the underlying shares on the date of the grant.
F-19
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Stock options (continued)
These options become exercisable on the first anniversary of the date of grant
provided the Non-employee Director is a member of the Board of Directors on that
date. The options granted under this provision are non-qualified stock options.
For 2001, 2000 and 1999, all outside directors were granted the "formula number"
of 5,000 shares. In addition, each director who chaired a committee was granted
options to purchase an additional 5,000 shares of the Company's common stock.
Non-employee Directors' options terminate seven years from the date of grant or
the first anniversary after the optionee ceases to serve as a member of the
Board of Directors for any reason. Any options of a Non-employee Director that
are not exercisable when he or she ceases to serve as a member of the Board of
Directors will terminate as of the termination of the Non-employee Director's
service on the Board of Directors.
Stock option transactions were as follows:
Weighted
Number Average
of Shares Exercise Price
-------------- --------------
Outstanding Balance at December 31, 1998 1,169,706 $ 5.64
1999
----
Granted 50,000 $ 5.35
Canceled (117,332) $ 5.56
Exercised (147,582) $ 6.18
--------------
Outstanding Balance at December 31, 1999 954,792 $ 5.55
2000
----
Granted 264,000 $ 8.75
Canceled (76,859) $ 6.18
Exercised (118,300) $ 5.01
--------------
Outstanding Balance at December 31, 2000 1,023,633 $ 6.39
2001
----
Granted 124,000 $ 6.49
Canceled (26,224) $ 7.01
Exercised (39,500) $ 5.06
--------------
Outstanding Balance at December 31, 2001 1,081,909 $ 6.43
==============
F-20
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Stock options (continued)
In December 1997, 200,000 non-plan options were granted to three senior
executives. These non-plan options were issued with an exercise price equal to
the market value of the stock at the date of grant. As of December 31, 2001,
110,000 of the December 1997 non-plan options were issued and outstanding. In
January 2000, an additional 90,000 non-plan options were granted to a senior
executive and were outstanding as of December 31, 2001. All such non-plan
options have a vesting period of three years and a life of seven years. All non-
plan options are included in the previously presented option table.
Options exercisable at December 31, 2001, 2000, and 1999 were 785,410, 705,399
and 736,960, respectively. Exercise prices for options outstanding as of
December 31, 2001 for the plan ranged from $3.63 to $8.875 per share. The
weighted average remaining term of the outstanding options is 3.81 years. As of
December 31, 2001, there were 467,709 shares available for grant under the 1997
Stock Incentive Plan.
In accordance with the provisions of statement 123, the Company applies APB 25
and related interpretations in accounting for its stock option plans and,
accordingly, does not recognize compensation expense. If the Company had elected
to recognize compensation expense based on the fair value of the options granted
at grant date as prescribed by statement 123, net income and earnings per share
would have been adjusted to the pro forma amounts indicated in the table below:
2001 2000 1999
--------- --------- ---------
Net income - as reported................... $ 1,616 $ 3,304 $ 2,424
Net income - pro forma..................... $ 1,193 $ 2,836 $ 2,239
Basic earnings per share - as reported..... $ .28 $ .70 $ .57
Basic earnings per share - pro forma....... $ .21 $ .60 $ .53
Diluted earnings per share - as reported... $ .27 $ .65 $ .56
Diluted earnings per share - pro forma..... $ .20 $ .56 $ .52
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
2001 2000 1999
--------- --------- ---------
Expected dividend yield .............. 0% 0% 0%
Expected stock price volatility....... 62.9% 66.8% 63.1%
Risk-free interest rate .............. 5.1% 6.3% 5.4%
Expected life of options ............. 7 years 7 years 7 years
F-21
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Stock options (continued)
The weighted average fair value of options granted during 2001, 2000, and 1999
was $4.34, $6.12 and $3.56 per share, respectively.
The Company has 1,442,529 and 1,432,529 warrants issued and outstanding with a
weighted average exercise price of $8.79 as of December 31, 2001 and 2000,
respectively. These warrants are immediately exercisable.
At December 31, 2001, the Company has reserved an aggregate of 3,967,529 shares
of common stock for issuance upon the exercise or conversion of all outstanding
securities and the purchase of common stock under various stock purchase plans
(see Note 13).
13. Stock purchase plans
In May 2001, the Company's stockholders approved the adoption of the Opinion
Research Corporation Employee Stock Purchase Plan (the "Qualified Plan"), the
Opinion Research Corporation Stock Purchase Plan for Non-employee Directors and
Designated Employees and Consultants (the "Non-Qualified Plan"), and the ORC
Holdings, Ltd. Employee Share Ownership Plan (the "U.K. Plan"). The Company has
reserved, under the Qualified Plan, Non-Qualified Plan and the U.K. Plan,
500,000, 200,000 and 200,000 shares, respectively, of the Company's common stock
for future issuance. These plans allow eligible employees and non-employee
directors, and consultants who meet certain qualifications to purchase the
Company's common stock at 85% of the lower of the fair market value at the
beginning or end of each offering period. For the year ended December 31, 2001,
there were 142,767, 63,664, and 8,380 shares purchased under the Qualified Plan,
Non-Qualified Plan, and the U.K. Plan, respectively.
14. Interest rate instruments
At December 31, 2000, the Company had an interest rate cap agreement outstanding
for a notional amount of $3,000. This agreement expired in January 2001. The
Company does not currently utilize any interest rate derivative financial
instruments.
15. Segments
The Company identifies its segments based on the Company's geographic locations
and industries in which the Company operates. The Company currently has four
reportable segments: U.S. Market Research, U.K. Market Research, Teleservices,
and Social Research. There were no significant inter-segment events which
materially affected the consolidated financial statements. The Company measures
segment profits as operating profit, which is defined as income before interest
and other non-operating expenses and income taxes.
F-22
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Segments (continued)
Information on segments and a reconciliation to the consolidated total, are as
follows:
U.S. Market U.K. Market Social Total
Research Research Teleservices Research Segments Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2001:
- ----------------------------
Revenues from external customers $ 41,271 $ 18,369 $ 18,466 $ 95,302 $173,408 $ 3,501 $176,909
Depreciation and amortization 2,427 721 2,164 2,954 8,266 165 8,431
Operating income (loss) (1,214) 935 2,401 7,357 9,479 (654) 8,825
Interest and other non-operating
expenses, net 5,413 5,413
Income before income taxes $ 3,412
Total assets $ 30,348 $ 9,597 $ 20,220 $ 49,692 $109,857 $ 3,059 $112,916
Capital expenditures $ 1,515 $ 297 $ 461 $ 1,474 $ 3,747 $ 187 $ 3,934
Year Ended December 31, 2000:
- ----------------------------
Revenues from external customers $ 37,807 $ 16,956 $ 19,744 $ 83,011 $157,518 $ 3,391 $160,909
Depreciation and amortization 2,047 736 1,873 2,469 7,125 153 7,278
Operating income (loss) 1,500 727 2,851 6,664 11,742 (90) 11,652
Interest and other non-operating
expenses, net 5,681 5,681
Income before income taxes $ 5,971
Total assets $ 33,565 $ 9,369 $ 22,564 $ 48,010 $113,508 $ 2,449 $115,957
Capital expenditures $ 1,573 $ 297 $ 651 $ 1,744 $ 4,265 $ 175 $ 4,440
Year Ended December 31, 1999:
- -----------------------------
Revenues from external customers $ 36,915 $ 15,411 $ 16,907 $ 44,961 $114,194 $ 4,427 $118,621
Depreciation and amortization 1,906 750 1,442 1,568 5,666 141 5,807
Operating income 3,227 174 1,965 2,815 8,181 282 8,463
Interest and other non-operating
expenses, net 4,005 4,005
Income before income taxes and
extraordinary loss $ 4,458
Total assets $ 22,163 $ 9,829 $ 20,072 $ 37,559 $ 89,623 $ 2,343 $ 91,966
Capital expenditures $ 632 $ 1,414 $ 1,094 $ 438 $ 3,578 $ 92 $ 3,670
- --------------------------------------------------------------------------------
International long-lived assets are $5,264, $5,746 and $6,444 in 2001, 2000, and
1999, respectively. In 2001, 2000 and 1999, revenues from one customer of the
Company's Social Research segment represented $18,980, $21,623 and $12,592 of
the Company's total revenues, respectively. Revenues in the "Other" category
were generated from the Company's Asia and Mexico operations. As these segments
are not significant, results are not presented separately.
F-23
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Earnings per share
The following table sets forth the computation of basic and diluted earnings per
share:
Years Ended December 31,
---------------------------------------------
2001 2000 1999
------------- ------------ ------------
Numerator:
Income before extraordinary loss $ 1,616 $ 3,304 $ 2,514
------------- ------------ ------------
Numerator for basic and diluted earnings per share $ 1,616 $ 3,304 $ 2,514
============= ============ ============
Denominator:
Denominator for basic earnings per share,
Weighted-average shares 5,762 4,692 4,244
Effect of dilutive stock options 230 361 88
------------- ------------ ------------
Denominator for diluted earnings per share
Adjusted weighted-average shares 5,992 5,053 4,332
============= ============ ============
Basic earnings per share $ .28 $ .70 $ .59
============= ============ ============
Diluted earnings per share $ .27 $ .65 $ .58
============= ============ ============
17. Selected quarterly financial information (unaudited)
Fourth Third Second First
Quarter Quarter Quarter Quarter
----------- ------------- ------------ ------------
2001
- ----
Revenues $ 43,972 $ 41,943 $ 45,159 $ 45,835
Gross profit $ 13,209 $ 13,042 $ 14,148 $ 14,985
Net income $ 188 $ 5 $ 354 $ 1,069
Earnings per common share:
Basic $ 0.03 $ 0.00 $ 0.06 $ 0.19
Diluted $ 0.03 $ 0.00 $ 0.06 $ 0.18
2000
- ----
Revenues $ 43,678 $ 37,661 $ 40,659 $ 38,911
Gross profit $ 15,042 $ 13,085 $ 13,492 $ 13,315
Net income $ 909 $ 777 $ 834 $ 784
Earnings per common share:
Basic $ 0.16 $ 0.17 $ 0.19 $ 0.18
Diluted $ 0.16 $ 0.16 $ 0.18 $ 0.16
F-24
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(continued)
18. Split-dollar life insurance
The Company has entered into an agreement with a trust established in the name
of an officer of the Company. Under the agreement, the Company pays certain
premiums on the life insurance policy on the officer, to which the trust is the
beneficiary. The Company has been assigned certain rights to the assets of the
trust as collateral for the premium paid on this life insurance policy. The
amount paid by the Company for the premiums on this policy was $46 for both
years ended December 31, 2001 and 2000.
The cumulative premiums paid are recorded in other assets in the accompanying
consolidated balance sheets. In the event the policy is terminated, the officer
has guaranteed the repayment of the amount due from the trust, and has pledged
certain personal assets to the Company to collateralize such guarantee.
19. Extraordinary loss
The Company recorded an extraordinary loss, net of tax benefits, of $90 in 1999.
This non-cash charge was a result of the write-off of unamortized loan
origination fees in connection with debt refinancing in 1999.
20. Joint Ventures
The Company entered into a joint venture agreement during 2001 for the purpose
of developing new research-based products. Through the end of 2002, it is
expected that the Company will fund up to $1,000 in cash or services related to
the joint venture. All amounts funded will be charged to expense. The Company
expensed approximately $70 in 2001.
F-25
Schedule II - Valuation and Qualifying Accounts
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
(in Thousands of Dollars)
- --------------------------------------------------------------------------------
Rule 12-09. Valuation and Qualifying Accounts
- ------------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Balance at Charged to Charged to Balance
beginning costs other accounts Deductions - at end
Description of period and expenses - describe describe of period
- ------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2001:
Deducted from asset account:
Allowance for Doubtful Accounts $ 246 $ 148 $ 110 (1) $ 284
Accumulated Amortization:
Goodwill 7,131 3,388 10,519
Intangible Assets 4,853 1,378 6,231
------- -------- ------- --------
Totals $12,230 $ 4,914 $ 110 $ 17,034
======= ======== ======= ========
Year ended December 31, 2000:
Deducted from asset account:
Allowance for Doubtful Accounts $ 259 $ - $ 13 (1) $ 246
Accumulated Amortization:
Capitalized Production Costs 1,076 - 1,076 (2) -
Goodwill 4,657 2,604 130 (3) 7,131
Intangible Assets 3,805 1,048 4,853
------- -------- ------- --------
Totals $ 9,797 $ 3,652 $ 1,219 $ 12,230
======= ======== ======= ========
Year ended December 31, 1999:
Deducted from asset account:
Allowance for Doubtful Accounts $ 209 $ 151 $ 101 (1) $ 259
Accumulated Amortization:
Capitalized Production Costs 1,009 67 1,076
Goodwill 2,848 1,809 4,657
Intangible Assets 3,004 801 3,805
------- -------- ------- --------
Totals $ 7,070 $ 2,828 $ 101 $ 9,797
======= ======== ======= ========
- --------------------------------------------------------------------------------
(1) Uncollectible accounts written-off
(2) Fully amortized asset written-off
(3) Adjustment of original goodwill amount for certain acquisitions
S-1
OPINION RESEARCH CORPORATION
Annual Report on Form 10-K
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 Amended and Restated Certificate of Incorporation of the Registrant
- Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993 (the "Form
S-1").
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Form S-1.
4.1 Rights Agreement, dated September 13, 1996, between the Registrant
and StockTrans, Inc. - Incorporated by reference to Exhibit 1 to
the Registrant's Registration Statement on Form 8-A, filed with the
Securities and Exchange Commission on September 27, 1996.
4.2 Amendment to Rights Agreement dated August 8, 1998 - Incorporated
by reference to Exhibit 4.1 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998 (the "1998 10-K").
4.3 Amendment No. 2 to Rights Agreement dated September 1, 2000 -
Incorporated by reference to Exhibit 10.11 to the Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 15, 2000 (the "2000 8-K").
4.4 Opinion Research Corporation Designation of Series B Preferred
Stock - Incorporated by reference to Exhibit 4.1 to the 2000 8-K.
4.5 Opinion Research Corporation Designation of Series C Preferred
Stock - Incorporated by reference to Exhibit 4.2 to the 2000 8-K.
*10.1 Employment Agreement between the Registrant and John F. Short -
Incorporated by reference to Exhibit 10.12 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
(the "1999 10-Q").
*10.2 Employment Agreement between the Registrant and Douglas L. Cox
dated January 23, 2002.
*10.3 Employment Agreement between the Registrant and Frank J. Quirk
dated January 25, 2002.
*10.4 Employment Agreement among Opinion Research Corporation, ORC ProTel
Inc., and Ruth R. Wolf dated January 1, 1998 - Incorporated by
reference to Exhibit 10.7 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1999 (the "1999 10-K").
*10.5 Employment Agreement between Macro International Inc. and Michael
T. Errecart dated May 20, 1999 - Incorporated by reference to
Exhibit 10.2 to the 1999 8-K.
*10.6 Employment Agreement among Opinion Research Corporation, ORC
Consumer, Inc. and Terence W. Cotter dated August 31, 2000 -
Incorporated by reference to Exhibit 10.1 to the 2000 8-K.
*10.7 Employment Agreement among Opinion Research Corporation, ORC
Consumer, Inc. and Gary M. Cotter dated August 31, 2000 -
Incorporated by reference to Exhibit 10.2 to the 2000 8-K.
*10.8 Employment Agreement between Macro International Inc. and Lewis D.
Eigen dated October 31, 2000 - Incorporated by reference to Exhibit
10.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
*10.9 1997 Stock Incentive Plan - Incorporated by reference to Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
*10.10 Amendment to the 1997 Stock Incentive Plan - Incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001 (the "2001
10-Q").
*10.11 Opinion Research Corporation Employee Stock Purchase Plan -
Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-8, filed with the Securities and
Exchange Commission on September 8, 2000.
*10.12 Opinion Research Corporation Stock Purchase Plan for Non-employee
Directors and Designated Employees and Consultants - Incorporated
by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-8, filed with the Securities and Exchange
Commission on September 25, 2000.
10.13 Lease Agreement dated May 24, 1993 between the Registrant and
Computer Associates International, Inc. (for Princeton facility) -
Incorporated by reference to Exhibit 10.16 to the Form S-1.
10.14 Lease dated August 27, 1993 between Carrollton Enterprises
Associates Limited Partnership and Macro International, Inc. -
Incorporated by reference to Exhibit 10.14 to the 1999 10-K.
10.15 Lease and Lease Addendum dated February 24, 1995 between North
Bethesda Associates Limited Partnership and Social and Health
Services, Ltd. - Incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 2000 (the "2000 10-K").
10.16 First Amendment to Lease dated January 1, 1999 and Second Amendment
to Lease dated September 15, 1999, between Bethesda Properties,
L.L.C. and Social and Health Services, Ltd. - Incorporated by
reference to Exhibit 10.16 to the 2000 10-K.
10.17 Asset Purchase Agreement between the Registrant and Pro Tel
Marketing, Inc. - Incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 20, 1998.
10.18 Stock Purchase Agreement dated April 30, 1999 among the Registrant
and the Stockholders of Macro International Inc. - Incorporated by
reference to Exhibit 2.1 to the 1999 8-K.
10.19 Asset Purchase Agreement dated August 31, 2000 among the
Registrant, ORC Consumer Inc., C/J Research, Inc. and the
Stockholders of C/J Research, Inc. - Incorporated by reference to
Exhibit 2.1 to the 2000 8-K.
10.20 Stock Purchase Agreement dated October 31, 2000 among Macro
International Inc., Opinion Research Corporation, and Lewis D.
Eigen and Ramona E.F. Arnett - Incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
10.21 Waiver and Fifth Amendment to Credit Agreement dated October 4,
2001 among Opinion Research Corporation, ORC Inc., and Heller
Financial, Inc. - Incorporated by reference to Exhibit 10.1 to the
2001 10-Q.
10.22 Credit Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated by
reference to Exhibit 10.1 to the 1999 10-Q.
10.23 Security Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated by
reference to Exhibit 10.2 to the 1999 10-Q.
10.24 Investment Agreement dated May 26, 1999 among Opinion Research
Corporation, Allied Investment Corporation, and Allied Capital
Corporation. - Incorporated by reference to Exhibit 10.5 to the
1999 10-Q.
10.25 Subordinated Debenture for $9.5 million dated May 26, 1999 issued
by Opinion Research Corporation to Allied Capital Corporation. -
Incorporated by reference to Exhibit 10.7 to the 1999 10-Q.
10.26 Subordinated Debenture for $5.5 million dated May 26, 1999 issued
by Opinion Research Corporation to Allied Investment Corporation. -
Incorporated by reference to Exhibit 10.8 to the 1999 10-Q.
10.27 Registration Rights Agreement dated May 26, 1999 among Opinion
Research Corporation, Allied Capital Corporation and Allied
Investment Corporation. - Incorporated by reference to Exhibit 10.9
to the 1999 10-Q.
10.28 Amendment No.1 to Registration Rights Agreement dated September 1,
2000 among Opinion Research Corporation, Allied Capital Corporation
and Allied Investment Corporation - Incorporated by reference to
Exhibit 10.12 to the 2000 8-K.
10.29 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Capital Corporation dated May 26, 1999 - Incorporated by
reference to Exhibit 10.10 to the 1999 10-Q.
10.30 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Investment Corporation dated May 26, 1999 - Incorporated by
reference to Exhibit 10.11 to the 1999 10-Q.
10.31 Purchase Agreement dated September 1, 2000 among Opinion Research
Corporation, LLR Equity Partners, L.P. and LLR Equity Partners
Parallel, L.P. - Incorporated by reference to Exhibit 10.5 to the
2000 8-K.
10.32 Registration Rights Agreement dated September 1, 2000 among Opinion
Research Corporation, LLR Equity Partners, L.P. and LLR Equity
Partners Parallel, L.P. - Incorporated by reference to Exhibit 10.6
to the 2000 8-K.
10.33 Common Stock Warrant Issued by Opinion Research Corporation to LLR
Equity Partners, L.P. dated September 1, 2000 - Incorporated by
reference to Exhibit 10.7 to the 2000 8-K.
10.34 Common Stock Warrant Issued by Opinion Research Corporation to LLR
Equity Partners Parallel, L.P. dated September 1, 2000 -
Incorporated by reference to Exhibit 10.8 to the 2000 8-K.
10.35 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners, L.P. dated September 1, 2000 -
Incorporated by reference to Exhibit 10.9 to the 2000 8-K.
10.36 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners Parallel, L.P. dated September
1, 2000 - Incorporated by reference to Exhibit 10.10 to the 2000
8-K.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
________________________________________________________________________________
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report