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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 September 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
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(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 ________
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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 - 5,971,379 shares as of September 30, 2002
INDEX
Opinion Research Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - September 30, 2002 and December 31, 2001
Consolidated statements of income - Three and nine months ended
September 30, 2002 and 2001
Consolidated statements of cash flows - Nine months ended September 30,
2002 and 2001
Notes to consolidated financial statements - September 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
Item 4. Controls and Procedures
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
Certification
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
September 30, December 31,
2002 2001
------------- ------------
Assets
Current Assets:
Cash and cash equivalents $ 1,840 $ 2,355
Accounts receivable:
Billed 21,847 24,729
Unbilled services 14,725 13,255
--------- ---------
36,572 37,984
Less: allowance for doubtful accounts 223 284
--------- ---------
36,349 37,700
Prepaid and other current assets 3,055 2,575
--------- ---------
Total current assets 41,244 42,630
Property and equipment, net 8,626 9,777
Intangibles, net 1,948 3,532
Goodwill, net 53,947 53,144
Other assets 3,349 3,833
--------- ---------
$ 109,114 $ 112,916
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 4,124 $ 4,232
Accrued expenses 10,631 9,897
Deferred revenues 2,240 4,397
Short-term borrowings 5,625 4,500
Other current liabilities 1,262 1,751
--------- ---------
Total current liabilities 23,882 24,777
Long-term debt 44,753 50,913
Other liabilities 787 893
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,
4,843,743 shares issued and 4,794,921 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 19,147 18,581
Retained earnings 12,216 9,851
Treasury stock, at cost, 48,822 shares in 2002 and 2001 (261) (261)
Accumulated other comprehensive loss (358) (785)
--------- ---------
Total stockholders' equity 30,792 27,433
--------- ---------
$ 109,114 $ 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 Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2002 2001 2002 2001
------ ------ ------ ------
Revenues $ 43,341 $ 41,943 $ 130,569 $ 132,937
Cost of revenues 29,947 28,901 89,748 90,762
----------- ----------- ----------- -----------
Gross profit 13,394 13,042 40,821 42,175
Selling, general and administrative expenses 9,716 9,327 29,592 28,869
Depreciation and amortization 1,152 2,160 3,435 6,305
----------- ----------- ----------- -----------
Operating income 2,526 1,555 7,794 7,001
Interest and other non-operating expenses, net 1,253 1,357 3,576 4,147
----------- ----------- ----------- -----------
Income before provision for income taxes and cumulative
effect of accounting change 1,273 198 4,218 2,854
Provision for income taxes 382 193 1,561 1,426
----------- ----------- ----------- -----------
Income before cumulative effect of accounting change 891 5 2,657 1,428
Cumulative effect of accounting change, net of tax benefit of $0 - - (292) -
----------- ----------- ----------- -----------
Net income $ 891 $ 5 $ 2,365 $ 1,428
=========== =========== =========== ===========
Basic earnings per share:
Income before cumulative effect of accounting change $ 0.15 $ 0.00 $ 0.45 $ 0.25
Cumulative effect of accouting change - - (0.05) -
----------- ----------- ----------- -----------
Net income $ 0.15 $ 0.00 $ 0.40 $ 0.25
=========== =========== =========== ===========
Diluted earnings per share:
Income before cumulative effect of accounting change $ 0.15 $ 0.00 $ 0.44 $ 0.24
Cumulative effect of accouting change - - (0.05) -
----------- ----------- ----------- -----------
Net income $ 0.15 $ 0.00 $ 0.39 $ 0.24
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic 5,971,379 5,794,859 5,935,840 5,735,569
Diluted 6,018,670 5,977,348 6,048,324 6,021,450
See notes to financial statements
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
------------------------
2002 2001
------ ------
Net cash provided by operating activities
Net income $ 2,365 $ 1,428
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,435 6,305
Cumulative effect of accounting change 292 -
Non-cash interest expense 510 327
Other non-cash adjustments 63 (4)
Change in:
Accounts receivable 1,722 2,135
Other assets (367) (312)
Accounts payable and accrued expenses 408 (2,327)
Deferred revenues (2,235) (2,257)
Other liabilities (586) (1,213)
-------- --------
Net cash provided by operating activities 5,607 4,082
-------- --------
Cash flows from investing activities:
Payments for acquisitions (46) (5,851)
Capital expenditures (1,532) (3,011)
-------- --------
Net cash used in investing activities (1,578) (8,862)
-------- --------
Cash flows from financing activities:
Borrowings under line-of-credit agreements 20,980 22,612
Repayments under line-of-credit agreements (22,732) (17,225)
Repayments of notes payable (3,375) (2,250)
Repayments under capital lease arrangements (20) (20)
Proceeds from the issuance of capital stock and options 568 726
-------- --------
Net cash provided by (used in) financing activities (4,579) 3,843
-------- --------
Effect of exchange rate changes on cash and cash equivalents 35 (24)
-------- --------
Increase (decrease) in cash and cash equivalents (515) (961)
Cash and cash equivalents at beginning of period 2,355 3,235
-------- --------
Cash and cash equivalents at end of period $ 1,840 $ 2,274
======== ========
See notes to financial statements
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
(in thousands, except shares and 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 nine-month period ended September 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 September 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
On September 29, 2002, the Company completed an amendment to its credit
facilities which, among other things, reduced the amount available under the
revolving credit from $24,000 to $19,000 and amended certain financial
covenants. As of September 30, 2002, the Company had approximately $3,564 of
additional credit available under the amended facilities.
NOTE D - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------------- ----------------------
2002 2001 2002 2001
------- -------- --------- ---------
Numerator:
Income before cumulative effect of
accounting change $ 891 $ 5 $ 2,657 $ 1,428
------- -------- --------- ---------
Numerator for basic and diluted earnings
per share $ 891 $ 5 $ 2,657 $ 1,428
======= ======== ========= =========
Denominator:
Denominator for basic earnings per share,
Weighted-average shares 5,971 5,795 5,936 5,736
Effect of dilutive stock options 48 182 112 285
------- -------- --------- ---------
Denominator for diluted earnings per share
Adjusted weighted-average shares 6,019 5,977 6,048 6,021
======= ======== ========= =========
Income before cumulative effect of accounting
change per common share:
Basic earnings per share $ 0.15 $ 0.00 $ 0.45 $ 0.25
======= ======== ========= =========
Diluted earnings per share $ 0.15 $ 0.00 $ 0.44 $ 0.24
======= ======== ========= =========
NOTE E - COMPREHENSIVE INCOME
The Company's comprehensive income for the three and nine months ended September
30, 2002 and 2001, are set forth in the following table:
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
------------ --------- ----------- ---------
Net income $ 891 $ 5 $ 2,365 $ 1,428
Other comprehensive gain (loss):
Foreign currency translation adjustment 92 184 427 (85)
------------ --------- ----------- ---------
Comprehensive income $ 983 $ 189 $ 2,792 $ 1,343
============ ========= =========== =========
NOTE F - STOCKHOLDERS' EQUITY
As of September 30, 2002, the Company has issued, in its current fiscal year,
114,047 shares of common stock with the aggregate amount of $545 under the
Company's various stock purchase plans.
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. In October 2002, the Company engaged an independent valuation
firm to determine if there has been an impairment of the goodwill associated
with the Company's U.S. market research business.
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 Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net income, as reported $ 891 $ 5 $ 2,365 $ 1,428
Cumulative effect of accounting change - - 292 -
Amortization of goodwill, net of tax - 683 - 1,946
Amortization of workforce, net of tax - 52 - 156
--------- ---------- --------- --------
Net income, as adjusted 891 $ 740 $ 2,657 $ 3,530
========= ========== ========= ========
Basic earnings per share, as reported $ 0.15 $ 0.00 $ 0.40 $ 0.25
Cumulative effect of accounting change - - 0.05 -
Amortization of goodwill, net of tax - 0.12 - 0.34
Amortization of workforce, net of tax - 0.01 - 0.03
--------- ---------- --------- --------
Basic earnings per share, as adjusted $ 0.15 $ 0.13 $ 0.45 $ 0.62
========= ========== ========= ========
Diluted earnings per share, as reported $ 0.15 $ 0.00 $ 0.39 $ 0.24
Cumulative effect of accounting change - - 0.05 -
Amortization of goodwill, net of tax - 0.11 - 0.32
Amortization of workforce, net of tax - 0.01 - 0.03
--------- ---------- --------- --------
Diluted earnings per share, as adjusted $ 0.15 $ 0.12 $ 0.44 $ 0.59
========= ========== ========= ========
The changes in the carrying value of goodwill as of September 30, 2002 are as
follows:
U.S.
Market U.K. 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 - 166 - - 18 184
Balance at September 30, 2002 $14,441 $2,479 $15,530 $21,188 $309 $53,947
- ----------------------------------------------------------------------------------------------------------------
The Company's intangible assets consist of the following:
September 30, December 31,
2002 2001
----------------- ----------------
Intangible assets subject to amortization:
Customer lists $ 4,589 $ 4,554
Non-competition agreements 1,518 1,484
Backlog 1,350 1,350
Assembled workforce/(1)/ - 1,917
Other 485 458
-------- ----------
7,941 9,762
Accumulated amortization (5,993) (6,230)
-------- ----------
$ 1,948 $ 3,532
======== ==========
/(1)/ Balance has been reclassified to Goodwill on January 1, 2002 based on
Statement 142.
Amortization of intangible assets was $741 for the nine months ended September
30, 2002 and $1,037 for the nine months ended September 30, 2001, respectively.
The prior year period includes approximately $260 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 nine months
ended September 30, 2002 and 2001, are as follows:
U.S.
Market U.K. Market Social Total
Research Research Teleservices Research Segments Other Consolidated
- -------------------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2002:
- -------------------------------------
Revenues from external
customers $ 7,878 $ 4,462 $ 3,800 $26,272 $ 42,412 $ 929 $ 43,341
Operating income (loss) (760) (105) 602 2,772 2,509 17 2,526
Interest and other
non-operating
expenses, net 1,253
Income before income
taxes and cumulative
effect of accounting
change $ 1,273
Three months ended September 30, 2001:
- -------------------------------------
Revenues from external
customers $10,000 $ 4,585 $ 3,159 $23,326 $ 41,070 $ 873 $ 41,943
Operating income (loss) (762) 458 22 1,971 1,689 (134) 1,555
Add back:
Amortization of goodwill
and workforce/(1)/ 188 36 353 373 950 11 961
Operating income (loss),
as adjusted (574) 494 375 2,344 2,639 (123) 2,516
Interest and other
non-operating
expenses, net 1,357
Income before income taxes,
as adjusted $ 1,159
Nine months ended September 30, 2002:
- ------------------------------------
Revenues from external
customers $24,769 $13,762 $12,398 $77,104 $128,033 $2,536 $130,569
Operating income (loss) (2,345) 279 1,952 7,903 7,789 5 7,794
Interest and other
non-operating
expenses, net 3,576
Income before income
taxes and cumulative
effect of accounting change $ 4,218
Nine months ended September 30, 2001:
- ------------------------------------
Revenues from external
customers $33,160 $13,411 $13,168 $70,801 $130,540 $2,397 $132,937
Operating income (loss) 22 1,178 1,264 5,123 7,587 (586) 7,001
Add back:
Amortization of goodwill
and workforce/(1)/ 564 108 1,059 1,016 2,747 31 2,778
Operating income (loss),
as adjusted 586 1,286 2,323 6,139 10,334 (555) 9,779
Interest and other
non-operating
expenses, net 4,147
Income before income taxes,
as adjusted $ 5,632
________________________________________________________________________________
/(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 - Third Quarter 2002 as Compared to Third Quarter 2001
Revenues for the third quarter of 2002 increased $1,398, or 3.3%, to $43,341
from $41,943 in 2001. Revenues increased $2,946, or 13%, in the Company's social
research business, and $641, or 20%, in the teleservices business. Revenues
declined $2,122, or 21%, in U.S. market research, and $123, or 3%, in U.K.
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 $1,580 of the decline in U.S. market research revenues arising
from the non-renewal of a client contract.
Cost of revenues increased $1,046, or 3.6%, from $28,901 in 2001 to $29,947 in
2002. Gross profit as a percentage of revenues was stable at 31% in both 2002
and 2001. For the social research business, cost of revenues increased 13% from
$16,912 in 2001 to $19,171 in 2002 and the gross profit percentage was stable at
27% in both 2002 and 2001. In U.S. market research, cost of revenues decreased
23% from $6,945 in 2001 to $5,354 in 2002 and the gross profit percentage
increased from 31% in 2001 to 32% in 2002, reflecting improved efficiencies. For
U.K. market research, cost of revenues increased 6% from $2,812 in 2001 to
$2,968 in 2002 and the gross profit percentage declined from 39% in 2001 to 33%
in 2002, primarily as the result of higher contracting and compensation costs.
In the teleservices business, cost of revenues increased 20% from $1,551 in 2001
to $1,858 in 2002 and the gross profit percentage was stable at 51% in both 2002
and 2001.
Selling, general and administrative expenses ("SG&A") increased $389, or 4%, to
$9,716 in the third quarter of 2002 from $9,327 in the third quarter of 2001. As
a percentage of revenues, consolidated SG&A was stable at 22% in both 2002 and
2001.
Depreciation and amortization expense decreased by $1,008 to $1,152 in the third
quarter of 2002 from $2,160 in the third quarter of 2001. The adoption of
Statement 142 at the beginning of 2002 accounted for $961 of this decrease.
Interest and other non-operating expenses decreased by $104 to $1,253 in the
third quarter of 2002 from $1,357 in the third 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 third quarter of 2002 and the third
quarter of 2001 was $382 and $193, 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 third quarter of 2001, the amortization of non-deductible goodwill generated
from acquisitions.
As a result of all of the above, net income increased to $891 in the third
quarter of 2002 from $5 in the third quarter of 2001.
Results of Operations - Nine Months Year-to-Date 2002 as Compared to Nine Months
Year-to-Date 2001
Revenues for the first nine months of 2002 decreased $2,368, or 2%, to $130,569
from $132,937 in 2001. Revenues increased $6,303, or 9%, in the Company's social
research business and $351, or 3%, in U.K. market research. Revenues declined
$8,391, or 25%, in U.S. market research and $770, or 6%, 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
$3,540 of the decline in U.S. market research revenues arising from the
non-renewal of a client contract.
Cost of revenues decreased $1,014, or 1%, to $89,748 in the first nine months of
2002 from $90,762 in the first nine 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 8% from $52,175 in 2001 to $56,260 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
$21,710 in 2001 to $16,560 in 2002 and the gross profit percentage decreased
from 34% in 2001 to 33% in 2002, principally reflecting reduced efficiencies at
the lower level of service provided in the first half of 2002. For U.K. market
research, cost of revenues increased 10% from $8,143 in 2001 to $8,919 in 2002
and the gross profit percentage declined from 39% in 2001 to 35% in 2002,
primarily as the result of higher contracting and compensation costs. In the
teleservices business, cost of revenues decreased 7% from $6,769 in 2001 to
$6,314 in 2002 and the gross profit percentage was stable at 49% in both 2002
and 2001.
Selling, general and administrative expenses ("SG&A") increased $723, or 3%, to
$29,592 in the first nine months of 2002 from $28,869 in the first nine months
of 2001. As a percent of revenues, SG&A increased to 23% from 22%.
Depreciation and amortization expense decreased by $2,870 to $3,435 in the first
nine months of 2002 from $6,305 in the first nine months of 2001. The adoption
of Statement 142 in the first nine months of 2002 accounted for $2,778 of this
decrease.
Interest and other non-operating expenses decreased by $571 to $3,576 in the
first nine months of 2002 from $4,147 in the first nine months 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 first nine months of 2002 and the first
nine months of 2001 was $1,561 and $1,426, 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 $2,365 in the first
nine months of 2002 from $1,428 in the first nine months of 2001.
Liquidity and Capital Resources
Net cash provided by operating activities for the first nine months of 2002 was
$5,607 as compared to $4,082 in the first nine months of 2001. For the nine
months ended September 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 $1,722, and an increase of
$408 in payables and accrued expenses, offset by an increase in other assets of
$367 and decreases in deferred revenues of $2,235 and other liabilities of $586.
For the nine months ended September 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 $2,135,
offset by decreases in payables and accrued expenses of $2,327, deferred
revenues of $2,257, and other liabilities of $1,213.
Investing activities for the first nine months of 2002 included capital
expenditures of $1,532 and acquisition related payments of $46. Investing
activities for the first nine months of 2001 included capital expenditures of
$3,011, earn-out payments of $3,726 to previous ORC ProTel, Inc. and Macro
International 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
nine months of 2002 totaling $5,147 and proceeds from the sale of the Company's
common stock under the Company's stock purchase plans and the exercises of stock
options totaling $568. This compares to net borrowings of $3,117 and proceeds of
$726 from the sale of common stock and the exercises of stock options in the
first nine months of 2001.
The Company entered into a joint venture agreement during 2001 for the purpose
of developing new research-based products. In the first nine months of 2002, the
Company has contributed $957 in services and cash and, since inception, has
contributed an aggregate of $1,027. All amounts funded to date have been
expensed.
On September 29, 2002, the Company completed an amendment to its credit
facilities which, among other things, reduced the amount available under the
revolving credit from $24,000 to $19,000 and amended certain financial
covenants. As of September 30, 2002, the Company had approximately $3,564 of
additional credit available under the amended facilities. 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.
ITEM 4. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of the
foregoing evaluation.
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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.1 Eighth Amendment to Credit Agreement dated September 29, 2002 among
Opinion Research Corporation, ORC Inc., and Heller Financial, Inc.
10.2 Third Amendment to Investment Agreement dated September 29, 2002
between Opinion Research Corporation and Allied Capital Corporation
and Allied Investment Corporation.
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: November 12, 2002 /s/ Douglas L. Cox
------------------ ----------------------------------------------------
Douglas L. Cox
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION
I, John F. Short, Chairman, CEO and President of Opinion Research Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Opinion Research
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 12, 2002 Signed: /s/ John F. Short
------------------------- -------------------------------
Name: John F. Short
Title: Chairman, CEO and President
CERTIFICATION
I, Douglas L. Cox, Executive Vice President and Chief Financial Officer of
Opinion Research Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Opinion Research
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 12, 2002 Signed: /s/ Douglas L. Cox
------------------------- -------------------------------
Name: Douglas L. Cox
Title: Executive Vice President
and Chief Financial Officer
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Opinion Research Corporation
(the "Company") on Form 10-Q for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, John F. Short, Chairman, CEO and President of the Company, certify, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: November 12, 2002 Signed: /s/ John F. Short
------------------------- --------------------------
Name: John F. Short
Title: Chairman, CEO and President
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Opinion Research Corporation
(the "Company") on Form 10-Q for the period ending September 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Douglas L. Cox, Executive Vice President and Chief Financial Officer of the
Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: November 12, 2002 Signed: /s/ Douglas L. Cox
------------------------- -------------------------------
Name: Douglas L. Cox
Title: Executive Vice President
and Chief Financial Officer