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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended June 30, 2002
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the 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 of incorporation) (I.R.S. Employer
Identification No.)
23 Orchard Road
Skillman, NJ 08558
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
908-281-5100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No ________
--------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.01 Par Value - 5,939,128 shares as of June 30, 2002
INDEX
Opinion Research Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - June 30, 2002 and December 31, 2001
Consolidated statements of income - Three and six months ended
June 30, 2002 and 2001
Consolidated statements of cash flows - Six months ended June 30,
2002 and 2001
Notes to consolidated financial statements - June 30, 2002
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
June 30, December 31,
2002 2001
----------------- -----------------
Assets
Current Assets:
Cash and cash equivalents $ 2,542 $ 2,355
Accounts receivable:
Billed 23,282 24,729
Unbilled services 14,382 13,255
----------------- -----------------
37,664 37,984
Less: allowance for doubtful accounts 263 284
----------------- -----------------
37,401 37,700
Prepaid and other current assets 3,312 2,575
----------------- -----------------
Total current assets 43,255 42,630
Property and equipment, net 8,978 9,777
Intangibles, net 2,189 3,532
Goodwill, net 53,911 53,144
Other assets 3,557 3,833
----------------- -----------------
$ 111,890 $ 112,916
================= =================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 5,070 $ 4,232
Accrued expenses 10,155 9,897
Deferred revenues 2,661 4,397
Short-term borrowings 5,250 4,500
Other current liabilities 1,443 1,751
----------------- -----------------
Total current liabilities 24,579 24,777
Long-term debt 47,955 50,913
Other liabilities 807 893
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, 20,000,000 shares authorized,
4,811,492 shares issued and 4,762,670 outstanding in 2002,
and 10,000,000 shares authorized, 4,722,605 shares issued
and 4,673,783 outstanding in 2001 48 47
Additional paid-in capital 18,987 18,581
Retained earnings 11,325 9,851
Treasury stock, at cost, 48,822 shares in 2002 and 2001 (261) (261)
Accumulated other comprehensive loss (450) (785)
----------------- -----------------
Total stockholders' equity 29,649 27,433
----------------- -----------------
$ 111,890 $ 112,916
================= =================
See notes to financial statements
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------- ------------- ------------
Revenues $ 44,777 $ 45,159 $ 87,228 $ 90,994
Cost of revenues 30,657 31,011 59,801 61,861
----------- ----------- ------------ -----------
Gross profit 14,120 14,148 27,427 29,133
Selling, general and administrative expenses 10,218 9,982 19,876 19,542
Depreciation and amortization 1,134 2,090 2,283 4,145
----------- ----------- ------------ -----------
Operating income 2,768 2,076 5,268 5,446
Interest and other non-operating expenses, net 1,138 1,367 2,323 2,790
----------- ----------- ------------ -----------
Income before provision for income taxes and cumulative
effect of accounting change 1,630 709 2,945 2,656
Provision for income taxes 653 355 1,179 1,233
----------- ----------- ------------ -----------
Income before cumulative effect of accounting change 977 354 1,766 1,423
Cumulative effect of accounting change, net of tax benefit of $0 - - (292) -
----------- ----------- ------------ -----------
Net income $ 977 $ 354 $ 1,474 $ 1,423
=========== =========== ============ ===========
Basic earnings per share:
Income before cumulative effect of accounting change $ 0.16 $ 0.06 $ 0.30 $ 0.25
Cumulative effect of accouting change - - (0.05) -
----------- ----------- ------------ -----------
Net income $ 0.16 $ 0.06 $ 0.25 $ 0.25
=========== =========== ============ ===========
Diluted earnings per share:
Income before cumulative effect of accounting change $ 0.16 $ 0.06 $ 0.29 $ 0.24
Cumulative effect of accouting change - - (0.05) -
----------- ----------- ------------ -----------
Net income $ 0.16 $ 0.06 $ 0.24 $ 0.24
=========== =========== ============ ===========
Weighted average common shares outstanding:
Basic 5,939,128 5,741,937 5,917,776 5,705,433
Diluted 6,121,262 6,105,387 6,062,857 6,043,010
See notes to financial statements
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
June 30,
------------------------------------
2002 2001
------------- -------------
Net cash provided by operating activities
Net income $ 1,474 $ 1,423
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,283 4,145
Cumulative effect of accounting change 292 -
Non-cash interest expense 349 268
Change in:
Accounts receivable 577 1,915
Other assets (693) (677)
Accounts payable and accrued expenses 884 (1,941)
Deferred revenues (1,771) (1,573)
Other liabilities (393) (1,265)
------------- -------------
Net cash provided by operating activities 3,002 2,295
------------- -------------
Cash flows from investing activities:
Payments for acquisitions (46) (5,351)
Capital expenditures (934) (2,473)
------------- -------------
Net cash used in investing activities (980) (7,824)
------------- -------------
Cash flows from financing activities:
Borrowings under line-of-credit agreements 12,931 18,136
Repayments under line-of-credit agreements (12,950) (14,350)
Repayments of notes payable (2,250) (1,500)
Repayments under capital lease arrangements (14) (7)
Proceeds from the issuance of capital stock, warrants and options 407 472
------------- -------------
Net cash provided by (used in) financing activities (1,876) 2,751
------------- -------------
Effect of exchange rate changes on cash and cash equivalents 41 (39)
------------- -------------
Increase (decrease) in cash and cash equivalents 187 (2,817)
Cash and cash equivalents at beginning of period 2,355 3,235
------------- -------------
Cash and cash equivalents at end of period $ 2,542 $ 418
============= =============
See notes to financial statements
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2002
(Unaudited)
(in thousands, except per share data)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended June 30, 2002
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Registrant Company
and Subsidiaries' Annual Report on Form 10-K for the year ended December 31,
2001.
In the statement of cash flows for the period ended June 30, 2001, certain
amounts in accrued expenses have been reclassified to payments for acquisitions
as noted in the liquidity and capital resources section in Item 2 of this
report.
NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS
In addition to the adoptions reported in Note G herein, effective January 1,
2002, the Company adopted Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes 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 adoption of
Statement 144 did not have an impact on the Company's results of operations,
financial position or cash flows.
NOTE C - CREDIT FACILITY
The Company maintains a credit agreement with a financial institution which
provides, among other things, a revolving credit facility of up to $24,000. As
of June 30, 2002, the Company had $6,830 of additional credit available under
this facility.
NOTE D - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- --------- ---------
2002 2001 2002 2001
--------- --------- --------- ---------
Numerator:
Income before cumulative effect of
accounting change $ 977 $ 354 $ 1,766 $ 1,423
--------- --------- --------- ---------
Numerator for basic and diluted earnings
per share $ 977 $ 354 $ 1,766 $ 1,423
========= ========= ========= =========
Denominator:
Denominator for basic earnings per share,
Weighted-average shares 5,939 5,742 5,918 5,705
Effect of dilutive stock options 182 363 145 338
--------- --------- --------- ---------
Denominator for diluted earnings per share
Adjusted weighted-average shares 6,121 6,105 6,063 6,043
========= ========= ========= =========
Income before cumulative effect of accounting
change per common share:
Basic earnings per share $ 0.16 $ 0.06 $ 0.30 $ 0.25
========= ========= ========= =========
Diluted earnings per share $ 0.16 $ 0.06 $ 0.29 $ 0.24
========= ========= ========= =========
NOTE E - COMPREHENSIVE INCOME
The Company's comprehensive income for the three and six months ended June 30,
2002 and 2001, are set forth in the following table:
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Net income $ 977 $ 354 $ 1,474 $ 1,423
Other comprehensive gain (loss):
Foreign currency translation adjustment 439 51 335 (269)
--------- --------- --------- ---------
Comprehensive income $ 1,416 $ 405 $ 1,809 $ 1,154
========= ========= ========= =========
NOTE F - SUBSEQUENT EVENT
On August 1, 2002, the Company amended its Certificate of Incorporation to
increase the number of shares of its common stock authorized for issuance from
10,000 to 20,000. The amendment was approved by the Company's stockholders at
the Annual Meeting of Stockholders of the Company on May 14, 2002.
NOTE G - GOODWILL AND OTHER INTANGIBLE ASSETS
The Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, effective January 1, 2002. Under Statement
142, goodwill and intangible assets that have indefinite useful lives are no
longer amortized. However, the Statement requires such assets be reviewed for
impairment annually, or more frequently if certain indicators arise, using the
guidance specifically provided in the Statement. The Company used expected
future discounted cash flows and earnings multiples to determine the fair value
of its reporting units and whether any impairment of goodwill existed as of the
adoption date. As a result of this evaluation, the Company recorded as a
cumulative effect of a change in accounting principle, goodwill impairment
related to the Company's Mexican subsidiary of $292, or $(0.05) per share, as of
January 1, 2002.
Additionally, the Company reclassified the net $865 unamortized balance of its
assembled workforce intangible asset to goodwill as of the adoption date, as the
Statement provides that such assets are not recorded separately from goodwill.
The following table reflects the Company's comparative net income before the
cumulative effect of the accounting change and amortization of goodwill and
workforce under Statement 142:
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net income, as reported $ 977 $ 354 $ 1,474 $ 1,423
Cumulative effect of accounting change - - 292 -
Amortization of goodwill, net of tax - 655 - 1,264
Amortization of workforce, net of tax - 52 - 104
-------- -------- -------- --------
Net income, as adjusted 977 $ 1,061 $ 1,766 $ 2,791
======== ======== ======== ========
Basic earnings per share, as reported $ 0.16 $ 0.06 $ 0.25 $ 0.25
Cumulative effect of accounting change - - 0.05 -
Amortization of goodwill, net of tax - 0.11 - 0.22
Amortization of workforce, net of tax - 0.01 - 0.02
-------- -------- -------- --------
Basic earnings per share, as adjusted $ 0.16 $ 0.18 $ 0.30 $ 0.49
======== ======== ======== ========
Diluted earnings per share, as reported $ 0.16 $ 0.06 $ 0.24 $ 0.24
Cumulative effect of accounting change - - 0.05 -
Amortization of goodwill, net of tax - 0.10 - 0.21
Amortization of workforce, net of tax - 0.01 - 0.01
-------- -------- -------- --------
Diluted earnings per share, as adjusted $ 0.16 $ 0.17 $ 0.29 $ 0.46
======== ======== ======== ========
The changes in the carrying value of goodwill as of June 30, 2002 are as
follows:
U.S. U.K.
Market Market Social
Research Research Teleservices Research Other Consolidated
- -------------------------------------------------------------------------------------------------------
Balance at January 1, 2002 $ 14,441 $ 2,200 $ 15,530 $ 20,436 $ 537 $ 53,144
Assembled workforce - 113 - 752 - 865
Earn-out payments - - - - 46 46
Impairment loss - - - - (292) (292)
Foreign currency translation - 122 - - 26 148
Balance at June 30, 2002 $ 14,441 $ 2,435 $ 15,530 $ 21,188 $ 317 $ 53,911
- -------------------------------------------------------------------------------------------------------
The Company's intangible assets consist of the following:
June 30, December 31,
2002 2001
------------------- --------------------
Intangible assets subject to amortization:
Customer lists $ 4,581 $ 4,554
Non-competition agreements 1,509 1,484
Backlog 1,350 1,350
Assembled workforce /(1)/ - 1,917
Other 476 458
------------------- --------------------
7,916 9,762
Accumulated amortization (5,727) (6,230)
------------------- --------------------
$ 2,189 $ 3,532
=================== ====================
/(1)/ Balance has been reclassified to Goodwill on January 1, 2002 based on
Statement 142.
Amortization of intangible assets was $493 for the six months ended June 30,
2002 and $692 for the six months ended June 30, 2001, respectively. The prior
year period includes approximately $173 of amortization related to assembled
workforce that are no longer subject to amortization as discussed above. The
estimated aggregate amortization expense for 2002 and each of the five
succeeding years is as follows:
2002 ......................................... $983
2003 ......................................... 713
2004 ......................................... 491
2005 ......................................... 287
2006 ......................................... 15
2007 ......................................... 15
NOTE H - SEGMENTS
The Company's operations by business segments for the three and six months ended
June 30, 2002 and 2001, are as follows:
U.S. U.K. Market Social Total
Market Research Teleservices Research Segments Other Consolidated
Research
- -------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, 2002:
- ---------------------------------
Revenues from external
customers $ 8,451 $4,530 $4,502 $26,825 $44,308 $ 469 $44,777
Operating income (loss) (872) 149 850 2,660 2,787 (19) 2,768
Interest and other non-
operating expenses, net 1,138
Income before income taxes
and cumulative effect of
accounting change $1,630
Three months ended June 30, 2001:
- ---------------------------------
Revenues from external
customers $ 11,402 $4,420 $4,318 $24,220 $44,360 $799 $45,159
Operating income (loss) 124 371 348 1,545 2,388 (312) 2,076
Add back:
Amortization of goodwill
and workforce/(1)/ 188 36 357 346 927 10 937
Operating income (loss), as
adjusted 312 407 705 1,891 3,315 (302) 3,013
Interest and other non-
operating expenses, net 1,367
Income before income taxes,
as adjusted $1,646
Six months ended June 30, 2002:
- -------------------------------
Revenues from external
customers $ 16,891 $9,300 $8,598 $50,832 $85,621 $1,607 $87,228
Operating income (loss) (1,585) 384 1,350 5,131 5,280 (12) 5,268
Interest and other non-
operating expenses, net 2,323
Income before income taxes
and cumulative effect of $2,945
accounting change
Six months ended June 30, 2001:
- -------------------------------
Revenues from external
customers $23,160 $8,826 $10,009 $47,475 $89,470 $1,524 $90,994
Operating income (loss) 784 720 1,242 3,152 5,898 (452) 5,446
Add back:
Amortization of goodwill
and workforce/(1)/ 376 72 706 643 1,797 20 1,817
Operating income (loss), as
adjusted 1,160 792 1,948 3,795 7,695 (432) 7,263
Interest and other non-
operating expenses, net 2,790
Income before income taxes,
as adjusted $ 4,473
- -------------------------------------------------------------------------------------------------------------------------
/(1)/ Included to provide pro forma quarterly results on a comparable basis
assuming the adoption of Statement 142 on January 1, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(dollars in thousands)
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with the Company's
interim financial statements and notes thereto, which appear elsewhere in this
Quarterly Report on Form 10-Q, and the Company's audited financial statements
and the MD&A contained in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 27, 2002 (the "Form 10-K"). The
following discussion contains forward-looking statements that involve risks and
uncertainties. The words "may," "could," "believe," "expect," "anticipate," or
"intend" and similar expressions and phrases are intended to identify
forward-looking statements. As a result of many factors, including the factors
set forth under the caption "Forward-Looking Statements" in the Form 10-K, the
Company's actual results may differ materially from those anticipated in these
forward-looking statements.
Results of Operations - Second Quarter 2002 as Compared to Second Quarter 2001
Revenues for the second quarter of 2002 decreased $382, or 1%, to $44,777 from
$45,159 in 2001. Revenues increased $2,605, or 11%, in the Company's social
research business, $110, or 2%, in U.K. market research, $184, or 4%, in the
teleservices business and declined $2,951, or 26%, in U.S. market research. In
all cases, the increase or decrease in revenues in the various operating
segments is primarily due to higher or lower demand for services, with $1,300 of
the decline in U.S. market research revenues arising out of the non-renewal of
three contracts.
Cost of revenues decreased $354, or 1%, from $31,011 in 2001 to $30,657 in 2002.
Gross profit as a percentage of revenues increased from 31% in 2001 to 32% in
2002. For the social research business, cost of revenues increased 10% from
$18,004 in 2001 to $19,850 in 2002 and the gross profit percentage was stable at
26% in both 2001 and 2002. In U.S. market research, cost of revenues decreased
26% from $7,349 in 2001 to $5,410 in 2002 and the gross profit percentage was
stable at 36% in both 2001 and 2002. For U.K. market research, cost of revenues
increased 7% from $2,670 in 2001 to $2,864 in 2002 and the gross profit
percentage declined from 40% in 2001 to 37% in 2002, primarily as the result of
higher contracting and compensation costs. In the teleservices business, cost of
revenues increased 2% from $2,242 in 2001 to $2,288 in 2002 and the gross profit
percentage increased from 48% in 2001 to 49% in 2002, reflecting improved
productivity.
Selling, general and administrative expenses ("SG&A") increased $236, or 2%, to
$10,218 in the second quarter of 2002 from $9,982 in the second quarter of 2001.
As a percentage of revenues, consolidated SG&A increased to 23% from 22%.
Depreciation and amortization expense decreased by $956 to $1,134 in the second
quarter of 2002 from $2,090 in the second quarter of 2001. The adoption of
Statement 142 at the beginning of 2002 accounted for $937 of this decrease.
Interest and other non-operating expenses decreased by $229 to $1,138 in the
second quarter of 2002 from $1,367 in the second quarter of 2001. The decline is
principally due to the decrease in interest expense, which is attributable to
lower interest rates and lower debt levels.
The provision for income taxes for the second quarter of 2002 and the second
quarter of 2001 was $653 and $355, respectively. The provisions for these
periods are higher than the amount that results from applying the federal
statutory rate to income primarily because of the impact of state taxes and, for
the second quarter of 2001, the amortization of non-deductible goodwill
generated from acquisitions.
As a result of all of the above, net income increased to $977 in the second
quarter of 2002 from $354 in the second quarter of 2001.
Results of Operations - Six Months Year-to-Date 2002 as Compared to Six Months
Year-to-Date 2001
Revenues for the first six months of 2002 decreased $3,766, or 4%, to $87,228
from $90,994 in 2001. Revenues increased $3,357, or 7%, in the Company's social
research business and $474, or 5%, in U.K. market research. Revenues declined
$6,269, or 27%, in U.S. market research and $1,411, or 14%, in the teleservices
business. In all cases, the increase or decrease in revenues in the various
operating segments is primarily due to higher or lower demand for services, with
$2,800 of the decline in U.S. market research revenues arising out of the
non-renewal of three contracts.
Cost of revenues decreased $2,060, or 3%, to $59,801 in the first six months of
2002 from $61,861 in the first six months of 2001. Gross profit as a percentage
of revenues decreased from 32% in 2001 to 31% in 2002. For the social research
business, cost of revenues increased 5% from $35,263 in 2001 to $37,089 in 2002
and the gross profit percentage increased from 26% in 2001 to 27% in 2002. This
improvement reflects increased margins on fixed price contracts and increased
productivity. In U.S. market research, cost of revenues decreased 24% from
$14,765 in 2001 to $11,206 in 2002 and the gross profit percentage decreased
from 36% in 2001 to 34% in 2002, reflecting reduced efficiencies at the lower
level of service provided. For U.K. market research, cost of revenues increased
12% from $5,331 in 2001 to $5,951 in 2002 and the gross profit percentage
declined from 40% in 2001 to 36% in 2002, primarily as the result of higher
contracting and compensation costs. In the teleservices business, cost of
revenues decreased 15% from $5,218 in 2001 to $4,456 in 2002 and the gross
profit percentage was stable at 48% in both 2001 and 2002.
Selling, general and administrative expenses ("SG&A") increased $334, or 2%, to
$19,876 in the first six months of 2002 from $19,542 in the first six months of
2001. As a percent of revenues, SG&A increased to 23% from 21%.
Depreciation and amortization expense decreased by $1,862 to $2,283 in the first
six months of 2002 from $4,145 in the first six months of 2001. The adoption of
Statement 142 in the first six months of 2002 accounted for $1,817 of this
decrease.
Interest and other non-operating expenses decreased by $467 to $2,323 in the
first six months of 2002 from $2,790 in the first six months of 2001. The
decline is principally due to the decrease in interest expense, which is
attributable to lower interest rates.
The provision for income taxes for the first six months of 2002 and the first
six months of 2001 was $1,179 and $1,233, respectively. The provisions for these
periods are higher than the amount that results from applying the federal
statutory rate to income primarily because of the impact of state taxes and, for
the first six months of 2001, the amortization of non-deductible goodwill
generated from acquisitions.
With the adoption of Statement 142 on January 1, 2002, the Company recorded as a
cumulative effect of a change in accounting principle, goodwill impairment
related to the Company's Mexican subsidiary of $292, or $(0.05) per share, in
the first quarter of 2002.
As a result of all of the above, net income increased to $1,474 in the first six
months of 2002 from $1,423 in the first six months of 2001.
Liquidity and Capital Resources
Net cash provided by operating activities for the first six months of 2002 was
$3,002 as compared to $2,295 in the first six months of 2001. For the six months
ended June 30, 2002, the net cash provided by operating activities was primarily
generated by net income, after adjusting for depreciation and amortization, a
decrease in accounts receivable of $577, and an increase of $884 in payables and
accrued expenses, offset by an increase in other assets of $693 and decreases in
deferred revenues of $1,771 and other liabilities of $393. For the six months
ended June 30, 2001, the net cash provided by operating activities was primarily
generated by net income, after adjusting for depreciation and amortization, and
a decrease in accounts receivable of $1,915, offset by decreases in payables and
accrued expenses of $1,941, deferred revenues of $1,573, and other liabilities
of $1,265.
Investing activities for the first six months of 2002 included capital
expenditures of $934 and acquisition related payments of $46. Investing
activities for the first six months of 2001 included capital expenditures of
$2,473, earn-out payments of $3,226 to previous ORC ProTel, Inc. shareholders,
and payments of $2,125 to previous shareholders of C/J Research, Inc. and Social
& Health Services, Ltd. based on the respective acquisition agreements.
Financing activities included a net reduction in borrowings during the first six
months of 2002 totaling $2,283 and proceeds from the sale of the Company's
common stock to employees and non-employee directors' stock purchase plans and
the exercises of stock options totaling $407. This compares to net borrowings of
$2,279 and proceeds of $472 from the sale of common stock and the exercises of
stock options in the first six months of 2001.
The Company entered into a joint venture agreement during 2001 for the purpose
of developing new research-based products. Since entering the agreement and
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. In the first six months of
2002, the Company has contributed $666 in services and cash and, since
inception, has contributed an aggregate of $736. All amounts funded to date have
been expensed.
As of June 30, 2002, the Company had approximately $6,830 of additional credit
available under its existing credit facility. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no significant changes in market risk since December 31, 2001
that would have a material effect on the Company's risk exposure as previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on May
14, 2002 at the Company's headquarters for the following
purposes:
1. To elect two Directors to serve until the 2005 Annual
Meeting of Stockholders of the Company and until their
respective successors have been duly elected and qualified.
The nominees were approved by the following votes:
John F. Short
Votes For Votes Withheld
------------------ ----------------------
5,223,996 626,018
Stephen A. Greyser
Votes For Votes Withheld
------------------ ----------------------
5,292,696 557,318
2. To approve an amendment to the Company's Restated
Certificate of Incorporation increasing the number of
authorized shares of Common Stock from 10,000,000 to
20,000,000. The amendment was approved by the following
votes:
Votes Votes Abstentions and
For Against Broker Non-Votes
--------------- --------------- ----------------
5,186,436 662,078 1,500
3. To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the 2002 fiscal year. The
matter was approved by the following votes:
Votes Votes Abstentions and
For Against Broker Non-Votes
--------------- --------------- ----------------
5,823,233 26,281 500
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Opinion Research Corporation
---------------------------------------
(Registrant)
Date: August 12, 2002 /s/ Douglas L. Cox
--------------- ---------------------------------------
Douglas L. Cox
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)