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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
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to_____
Commission file number 0-22554
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OPINION RESEARCH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 22-3118960
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
23 Orchard Road, Skillman, New Jersey 08558
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (908) 281-5100
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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
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(Title of Class)
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 _____
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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
Company's actual results and could cause the Company's actual consolidated
results for the first quarter of 1997, and beyond, to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the
Company:
Reliance on Key Clients. The Company's success is dependent upon its
ability to maintain its existing clients and obtain new clients. 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 Company. The
Company's largest client is General Motors Corporation ("GM"). The Company's
various contracts with GM accounted for 25%, 22% and 21% of the Company's
revenues for the years ended 1996, 1995 and 1994, respectively. The Company's
focus on attracting larger projects and establishing long-term client
relationships may increase the Company's reliance on particular projects and
clients. Although the Company's ongoing projects may generally be terminated by
its clients at any time, funds for work completed are normally recoverable.
Fluctuations in Demand for Company Services. Demand for the Company's
services can be affected by a number of factors outside the Company's control,
including marketing budgets, economic conditions, consolidations and other
industry-specific trends, and changes in management or ownership of a client.
As a result, the Company's revenues and operating results may fluctuate.
Business Strategy Regarding Acquisitions and International Expansion. 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's services will be
widely accepted as it seeks to expand in 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 transfer, 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 own operations.
Dependence on Key Personnel. The Company is dependent upon the efforts and
skills of its Chairman and certain other key senior executives. The loss of the
services of one or more of these individuals could have a material adverse
effect on the Company.
Competition. 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, 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 business-to-business market research and
information services industry. For consumer market research services, the
Company regularly experiences significant competition from a large number of
competitors, including consumer market research companies, advertising agencies
and business consulting firms.
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 voting stock by non-affiliates of the
Registrant, based on the closing sale price of its common stock on February 28,
1997, a date within 60 days prior to the date of filing, as quoted on the Nasdaq
National Market, was approximately $13,468,000.*
As of February 28, 1997, 4,143,889 shares of common stock, par value $.01
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III- Portions of the Registrant's definitive Proxy Statement, which will be
filed with the Securities and Exchange Commission in connection with
the Registrant's 1997 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, directors of the Registrant, without conceding that all
such persons are "affiliates" of the Registrant for purposes of the federal
securities laws.
PART I
Item 1. Business
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GENERAL
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 provides market research
and information services, including a focus on businesses selling primarily to
other businesses. The Company assists clients in evaluating, monitoring and
optimizing the effectiveness of their marketing and sales. The Company's
services and products address issues such as customer satisfaction, advertising
effectiveness, corporate image, competitive positioning, and new product
introduction.
The Company collects customer and market information through computer
assisted telephone interviews, personal interviews, mail questionnaires and
specialized techniques such as business panels. Management believes that the
Company's substantive expertise in certain industries, including automotive,
financial services, and telecommunications enables it to provide reliable
customer and market information and advisory services to clients in those
industries. 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 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 revenues
from such projects has grown substantially over the years to approximately 56%
in 1996.
SUBSIDIARIES
During 1996 the Company created GSR/SIA, Limited to purchase the
assets of a division of an information technology company. This operating
company is a wholly owned subsidiary of ORC Holdings, Limited, a holding company
created in 1996 to hold the shares of all the Company's U.K. holdings. To that
end, the shares of Gordon Simmons Research Group were exchanged by the Company
for shares in ORC Holdings, Limited. Also during 1996, The Company purchased the
stock of a Chicago based market research company that now serves as the
Healthcare Practice for the Company.
Gordon Simmons Research Group has been a subsidiary of the Company
since its acquisition in August, 1993. Established in 1965, this market
research company conducts studies for such companies as Ford Motor Company,
Marks and Spencer, and Woolworth, plc.
As an entree to the automotive industry, the Company acquired
Strategic Research and Consulting, Inc. ("SRC") in April 1994. Parts of SRC
were integrated with the Company's
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Information Services Group in 1995. During 1996 the rest of SRC was merged with
the Company. The acquisition of SRC brought to the Company: General Motors,
Chrysler Corporation, and Harley Davidson, Inc. as first time clients.
THE COMPANY'S SERVICES AND PRODUCTS
The Company offers a variety of services and products to assist
clients with their strategies and plans for marketing and selling their products
and services to businesses and consumers.
Services
Customer Satisfaction Measurement and Tracking. The Company assists
its clients in understanding their customers' level of satisfaction with the
clients' products and services. The Company's customer satisfaction services
enable clients to establish specific customer-based goals and track their
business performance against these goals over time. These services are used by
clients to attract and retain customers and expand their customer bases. The
Company provides its clients with information on the elements of products or
services which are most important to their customers; on how these products and
services compare with the competition; and on which customers will continue to
purchase and recommend such products and services. The Company's tracking
services also enable its clients to measure and determine the impact of
improvement efforts.
Image Assessment and Competitive Positioning. The Company assists its
clients in assessing their image, reputation and positioning, and in
differentiating them within their marketplaces. 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.
Advertising Evaluation and Tracking. The Company assists its clients
in evaluating the effectiveness of their advertising by conducting interviews
with targeted audiences. These interviews measure an audience awareness of
such advertising, and its willingness to purchase and recommend the clients'
products or services. This evaluation is usually tracked over a period of time.
The results of this evaluation and tracking are used by clients to design and
modify their advertising strategies as changes are identified over time.
New Product Introduction. The Company assists its clients in
developing plans to introduce new products by identifying the market for such
products, the competitive advantages needed to penetrate the market and the
optimal methods (e.g., packaging, pricing, promotion) to deliver the products to
the marketplace. This is accomplished by interviewing potential customers
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about their needs, purchase decision processes, reactions to the product
concept, price sensitivities and distribution preferences.
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 composed 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/(R)/,"
in which questions from a number of clients are combined in a series of
interview questionnaires. The CARAVAN/(R)/ programs provide multiple clients
with high-quality, timely information at a relatively low cost.
The general public CARAVAN/(R)/ is a 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/(R)/ survey provides measurement and
evaluation of advertising and products.
-3-
Developed in 1994, CORPerceptions profiles the image of major
corporations that serve the needs of other business establishments located in 18
countries around the world. Telephone or in-person interviews are completed
annually with approximately 4,000 senior business executives selected from the
largest industrial and services companies within these countries. Industries
profiled by executives include automotive, brokerage services, computer
hardware, electronics, information technology services, and management
consulting.
CORPerceptions' sister-study, BrandPerceptions, is an international
brand equity study conducted among consumers in 16 countries throughout
Asia/Pacific, Europe and North America. BrandPerceptions was conducted for the
first time in 1996, and some of the world's leading companies benefited from the
inaugural wave by learning more about consumer awareness, preference,
satisfaction and loyalty toward their brand and competing brands in the
international marketplace.
CLIENTS AND CLIENT RELATIONSHIPS
Some of the Company's largest clients in terms of revenues generated
include Bell Atlantic, Chrysler, Coopers & Lybrand, Dean Witter, EDS Corp., GE,
General Motors, ITT Sheraton Corporation, Moody's Service, Inc., PNC Bank, and
the U.S. Postal Service. In 1996, the Company served over 670 clients. For
many clients, the Company performed multiple projects, sometimes for different
subsidiaries or business units of the same client.
In 1996, the Company was engaged by 11 divisions of GM, including GM
Corporate, covering such issues as customer satisfaction, product positioning,
buyer behavior, and corporate image. Collectively, these projects generated
approximately 25% of the Company's revenues. GM has been a client of ORC's
subsidiary, SRC, since 1985.
MARKETING
In 1996, the Company continued with a number of initiatives to further
market its services and products. These include:
International Network. The development of an international network of
affiliates increases the marketing power of the Company by utilizing local
service providers that have significant market presence. Through acquisition and
joint marketing/licensing agreements, the Company is hoping to further
strengthen the power of its international network.
Direct Marketing Program. The Company utilizes a direct
marketing program involving seminars, mailings and telemarketing in the U.S. and
the U.K to gain access to a large number of prospective clients.
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Image Building. Image building efforts speaking engagements at
prominent conferences and publishing articles authored by
professionals within the Company.
WebSite. The Company has developed a "Home Page" on the
World Wide web to allow prospective clients to learn about its
products and services at a time of the prospective client's choosing.
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.
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 information, ability to enhance the value
of the data collected through analysis and consulting, technological competence,
reliability, promptness and efficiency. In the Company's experience, rather than
price, its typical clients are interested primarily in the quality and utility
of the service received.
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.
The Company considers the relationship with its clients as well as its
know-how and expertise as invaluable assets. The Company seeks to safeguard
these assets by requiring each of its senior employees to execute
confidentiality and non-solicitation agreements.
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GEOGRAPHIC SEGMENT INFORMATION
Results of Foreign Operations
--------------------------------
1996 1995 1994
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(DOLLARS IN THOUSANDS)
Revenues from foreign operations $11,963 $10,550 $11,479
% of total Company revenues 25.3% 23.9% 28.8%
Operating income (loss) from foreign operations (215) (474) 763
% of total Company operating profit (loss) N/A 35.3% 23.4%
Identifiable assets from foreign operations 10,077 6,786 7,340
% of total Company asset 30.8% 23.8% 24.0%
BACKLOG
As of December 31, 1996, revenues expected to be received by the
Company under its client contracts, which are based on budgeted amounts in those
contracts, were $12,154,000, as compared to $17,903,000 as of December 31, 1995.
This decline in backlog is due primarily to the timing associated with the
renewal of certain projects. All of the 1996 amount is expected to be received
by December 31, 1997. 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, 1996, the Company employed a total of 316 full-time
employees and maintained a pool of part-time hourly employees in the United
States and the United Kingdom of approximately 900 people. The part-time
employees work as telephone interviewers and data processors. Of the full-time
employees, 254 are professionals engaged in direct client service and 62 are
engaged in support, administration and executive oversight.
The Company conducts special training programs for all telephone
interviewing staff and regularly monitors such staff to ensure that its high-
quality standards are maintained.
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.
Item 2. Properties
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The Company's executive offices are located in approximately 40,000
square feet of leased space in Skillman (Greater Princeton), New Jersey. The
term of the lease expires in August, 2003. The Company has an option to renew
the lease for five years. The Company also leases 3,000 square feet in Chicago,
Illinois. This lease will expire in September, 1998. The Company maintains a
telephone interviewing facility in Tucson, Arizona which it opened in November,
1994. The lease on the Tucson facility is for 16,000 square feet and expires in
November, 1999 with an option to renew for an additional five years. GSR
occupies approximately 16,500 square feet of leased space in London, England.
The lease for such premises expires in May, 2002. Additional
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space is leased in Manchester and London, England by GSR/SIA Limited. The
Manchester lease is for 1,500 square feet. It expires December 1999 with a five
year renewal option. The London lease is for 4,000 square feet, expires
December, 1998 and is renewable for eight years. SRC occupies approximately
25,000 square feet in Maumee (Greater Toledo), Ohio under a lease that expires
in June, 2000 and 2,400 square feet in Detroit, Michigan that expires in May,
2000.
The Toledo, Tucson, and London centers presently have a combined total
of 298 computer assisted telephone interviewing stations which represents an 86%
increase in capacity over the last three years. All of these facilities are
equipped with state-of-the-art hardware and software. In a typical telephone
interview, the computer assisted telephone interviewing system prompts the
interviewer's sequence of questions 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.
Over the past three years the Company has installed database systems
and software to store information in its Toledo, Tucson, and London centers.
These systems and software expand the Company's reporting capabilities and
transform traditional tabular formats into graphic output, thereby improving the
utility and presentation of reports as well as the turnaround times.
The Company believes that its properties are sufficient for its
current operational needs.
Item 3. Legal Proceedings
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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, 1996.
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Item 4A Executive Officers Of The Registrant
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The current term of office of each of the Company's executive officers
expires at the first meeting of the Board of Directors of the Company following
the 1997 Annual Meeting of Shareholders, or as soon thereafter as each of their
successors is duly elected and qualified.
The following table sets forth certain information concerning the
principal executive officers of the Company as of December 31, 1996.
Name Age Position
---- --- --------
Michael R. Cooper, Ph.D. 50 Chairman, President and Chief Executive
Officer
John F. Short 52 Vice-Chairman, Chief Financial Officer,
Treasurer, and Secretary
Gregory C. Ellis 40 Group Chief Executive Officer -
ORC Princeton Group
Gilbert A. Frisbie, Ph.D. 52 Group Managing Director - ORC
SRC Automotive Group
James C. Fink, Ph.D. 52 Executive Vice President; Director
James T. Heisler, Ph.D. 50 Executive Vice President; Director
Richard I. Cornelius 35 Group Managing Director - ORC
Gordon Simmons Research Group
Jeffrey T. Resnick 40 Group Managing Director - ORC
Princeton Group
Dr. Cooper joined the Company as its Chief Executive Officer in 1989 and
continues to serve in that capacity. Dr. Cooper received a Ph.D. in Industrial
and Organizational Psychology from The Ohio State University.
Mr. Short joined the Company as its Chief Financial Officer in 1989 and
was appointed Vice Chairman in 1992.
Mr. Ellis joined the Company in October 1995 as the Chief Executive Officer
of the Princeton Group. Prior to joining ORC, Mr. Ellis was Senior Vice
President and General Manager of Testing, Analytics, and Media Services for AC
Nielsen Company. Mr. Ellis holds a M.S.I.A. degree from Carnegie-Mellon
University's Graduate School of Industrial Administration.
Dr. Frisbie joined the Company in April 1994 with the acquisition of SRC,
which he co-founded in 1985. Dr. Frisbie was formerly an Associate Professor of
Marketing on the graduate faculty at Bowling Green State University. He
received an M.B.A. from Indiana State University and a Ph.D. in Business
Administration from the University of Iowa.
Dr. Fink joined the Company in 1982. Since 1990, Dr. Fink has held
various managerial positions within the Company and is currently responsible for
the Corporate Image and Reputation Practice of the Princeton Group. Dr. Fink
received a Ph.D. in Economics from The Pennsylvania State University.
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Dr. Heisler joined the Company in 1982. Since 1990, Dr. Heisler has held
various managerial positions, and he is currently responsible for the
Telecommunications and Technology Practice of the Princeton Group. Dr. Heisler
received a Ph.D. in Social Psychology from Illinois Institute of Technology.
Mr. Cornelius joined Gordon Simmons Research Group in 1984 and directed the
Telecommuniciations Practice for GSR Group until he became the Group Managing
Director in 1996. Mr.Cornelius received a Bachelor of Science degree, with
Honors, in Sociology from Kingston University.
Mr. Resnick joined the Company in 1984. Since 1990 Mr. Resnick has directed
the Financial Services Practice for the Princeton Group. In 1996 Mr. Resnick was
appointed Group Managing Director - ORC Princeton Group. Mr. Resnick holds a
Master of Arts degree from Western Michigan University and a Bachelor of Science
degree from Pennsylvania State University.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
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Market Information
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The Company's Common Stock has been traded on NASDAQ/NMS under the
symbol "ORCI" since the Company's initial public offering on October 26, 1993.
The table below sets forth the high and low sale closing for the Company's
Common Stock for each of the four quarters of 1996 and 1995:
High Low
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Calendar Year 1996
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Fourth Quarter $4.88 $3.13
Third Quarter 7.38 4.00
Second Quarter 7.13 6.25
First Quarter 7.13 5.88
Calendar Year 1995
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Fourth Quarter $6.38 $5.50
Third Quarter 6.00 4.88
Second Quarter 6.00 4.75
First Quarter 5.88 4.31
The closing price of the Company's Common Stock on February 28, 1997
was $3.25 per share. As of February 28, 1997, the Company had 61 holders of
record of its Common Stock (approximately 1,100 beneficial shareholders).
Dividends
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The Company has not paid any dividends on its Common Stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying dividends on its Common Stock in the
foreseeable future.
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Item 6. Selected Financial Data
SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Data)
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For the Twelve Months Ended December 31,
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1996 1995 1994 1993 1992
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Operating Statement Data:
Revenues $47,273 $44,101 $39,841 $24,537 $21,028
Income (loss) from continuing operations (1) 2,425 (1,341) 3,267 1,380 1,090
Extraordinary gain on debt
restructuring, net of tax of $90 (2) 365
Net income (loss) $808 ($1,669) $1,295 $841 $441
Weighted average shares
outstanding (3) 4,213 4,254 4,243 3,063 3,024
Income (loss) before extraordinary
gain per share $ 0.19 ($0.39) $ 0.31 $ 0.16 $ 0.15
Extraordinary gain per share 0.12
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Net income (loss) per share $ 0.19 ($0.39) $ 0.31 $ 0.28 $ 0.15
======= ======== ====== ======= =======
Weighted average fully diluted
shares outstanding (4) 4,231 4,875 3,599 3,601
Income before extraordinary
gain per fully diluted share $ 0.19 $ 0.30 $ 0.16 $ 0.12
Extraordinary gain per fully diluted
share $ 0.10
------- ------ ------- -------
Net income per fully diluted
share $ 0.19 $ 0.30 $ 0.26 $ 0.12
==== ==== ==== ====
Balance Sheet Data:
Total assets $32,772 $28,537 $30,674 $24,604 $12,924
Total debt 7,916 7,372 5,816 4,341 5,527
===============================================================================
(1) In the second quarter of 1995, the Company took an unusual pre-tax charge
of $3,489. This charge included a $1,958 write-down of capitalized
production costs; $178 for the disposal of fixed assets: $460 of
intangible assets associated with previous acquisitions; $380 in severance
costs; $414,000 provision for the abandonment of leases: and other
miscellaneous charges of $99.
(2) In June 1993, the Company realized an extraordinary pre-tax gain of $455
resulting from the cancellation of deferred interest in accordance with an
agreement with ADL.
(3) The primary earnings per share calculations have given effect to the
public offering of stock by the Company on October 26, 1993 and all
related closing transactions. Fully diluted earnings per share also takes
into account the conversion of convertible debentures.
(4) Common stock equivalents and shares attributable to the conversion of
convertible debentures are not included for 1996 as they expired on
November 30, 1996, nor in 1995 as their effect was anti-dilutive.
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Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
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OVERVIEW
Opinion Research Corporation was established in 1938 to apply the
principles of general public opinion polling to marketing issues facing
America's largest companies. The Company provides market research and
information services, including a focus on businesses selling primarily to other
businesses. The Company assist clients in evaluating, monitoring and optimizing
the effectiveness of their marketing and sales. The Company's services and
products address issues such as customer satisfaction, advertising
effectiveness, corporate image, competitive positioning, and new product
introduction. In August 1993 the Company acquired all of the stock of GSR,
substantially increasing the Company's presence in the U.K. and expanding the
international aspects of its business. In April of 1994 the Company acquired all
of the stock of SRC. The SRC acquisition gave the Company access to the U.S.
automotive industry. In August of 1995 the Company opened a branch office in
Hong Kong and has continued to expand internationally with the acquisition of
GSR/SIA Limited in the U.K. in the latter part of 1996. GSR/SIA expands the
Company's capabilities in servicing international clients and introduces the
Company to the U.K. public sector.
RESULTS OF OPERATIONS - 1996 COMPARED TO 1995
Revenues
Revenues increased by 7.2% to $47,273,000 in 1996 from $44,101,000 in
1995. $974, or 31%, of this increase in revenues resulted from the acquisition
of GSR/SIA in London effective October 1, 1996. An additional $248, or 26.7%, of
this increase can be attributed to an increase in the Company's Asian
operations. The remaining increase in revenues was due to a general improvement
in business condition.
Cost of Revenues
Cost of revenues increased 12.8% to $30,281,000 in 1996 from
$26,854,000 in 1995. As a percentage of total revenues, cost of revenues
increased to 64.0% in 1996 from 60.9% in 1995. The increase in the cost of
revenues as a percentage of total revenues was principally due to a management
decision to maintain an increased workforce despite experiencing delays in
certain contract awards.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased to
$12,214,000 in 1996 from $12,422,000 in 1995. As a percentage of revenues SG&A
decreased to 25.8% in 1996 from 28.2% in 1995. The decline in SG&A was the
result of a deliberate strategy to control SG&A costs and increase the leverage
at the SG&A line as the Company continues to expand.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased 12.1 % to $2,353,000
in 1996 from $2,677,000 in 1995. As a percentage of revenues, depreciation and
amortization expense declined to 5.0% in 1996 from 6.1% in 1995. The decline in
depreciation and amortization was the direct result of the write down of
capitalized production cost in the second quarter of 1995 which were amortized
over three years.
Unusual Charges
There were no unusual charges in 1996. During the second quarter of
1995, the Company announced a plan to restructure and consolidate operations,
concentrate resources, and better position itself to achieve its strategic
growth objectives. This plan resulted in a pre-tax charge of $3,489,000. This
charge included a $1,958,000 write-down of capitalized production costs related
to products discontinued as a result of the restructuring; $178,000 for the
disposal of obsolete fixed assets; $460,000 of intangible assets associated with
previous acquisitions; $380,000 in severance costs; $414,000 provision for the
abandonment of leases; and other miscellaneous charges of $99,000. Management
does not anticipate incurring an additional charge such as this in the
foreseeable future.
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Interest Expense
Net interest expense increased 4.3% to $777,000 in 1996 compared to
$745,000 in 1995.
Provision for Income Taxes
The provision/(benefit) for income taxes for 1996 and 1995 are
$840,000 and ($417,000), respectively. The tax benefit arising from the loss in
1995 was less than the amount which results from applying the federal statutory
rate to the loss primarily because of foreign losses for which no tax benefit
was currently available. The provision in 1996 is higher than the amount which
results from applying the federal statutory rate to income primarily because of
the non-deductibility of goodwill amortization and the effect of state taxes.
The company has recognized for financial reporting purposes deferred
tax assets which consist primarily of a tax net operating loss carryforward.
These deferred tax assets are expected to be realized upon the reversal of
existing taxable temporary differences.
Net Income (Loss)
Net income (loss) for the periods ending December 31, 1996 and 1995
were $808,000 and ($1,669,000), respectively. The Company's net income for the
period ended December 31, 1995 was materially impacted by the unusual item
discussed previously. There were no such items in 1996.
RESULTS OF OPERATIONS - 1995 COMPARED TO 1994
Revenues
Revenues increased by 10.7% to $44,101,000 in 1995 from $39,841,000 in
1994. A portion of this increase in revenues resulted from a full year of
revenues generated by SRC, which was acquired in April of 1994. Tracking
projects increased by 6.3% to $24,124,000 in 1995 from $22,697,000 in 1994.
Tracking projects decreased as a percent of total revenues to 54.7% in 1995 from
57.0% in 1994.
Cost of Revenues
Cost of revenues increased 7.7% to $26,854,000 in 1995 from
$24,932,000 in 1994. As a percentage of total revenues, cost of revenues
decreased to 60.9% in 1995 from 62.6% in 1994. The decrease in the cost of
revenues as a percentage of total revenues was due to a
-12-
management decision to focus on higher margin business and to not pursue
projects with a high proportion of sub-contracting costs.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses ("SG&A") increased to
$12,422,000 in 1995 from $9,024,000 in 1994. As a percentage of revenues, SG&A
increased to 28.2% in 1995 from 22.3% in 1994. The growth in SG&A was due, in
part, to a full year of costs being generated by SRC, which was acquired in
April 1994. Additionally, less costs were absorbed by the capitalization of
production costs in 1995.
Depreciation and Amortization Expense
Depreciation and amortization expense increased slightly to $2,677,000
in 1995 from $2,618,000 in 1994. As a percentage of revenues, depreciation and
amortization expense declined to 6.1% in 1995 from 6.6% in 1994. The decline in
the relative value of depreciation and amortization was due to the write-down of
capitalized production costs which were being amortized over a period of three
years.
Unusual Charge
During the second quarter of 1995, the Company announced a plan to
restructure and consolidate operations, concentrate resources, and better
position itself to achieve its strategic growth objectives. This plan resulted
in a pre-tax charge of $3,489,000. This charge included a $1,958,000 write-down
of capitalized production costs related to products discontinued as a result of
the restructuring; $178,000 for the disposal of obsolete fixed assets; $460,000
of intangible assets associated with previous acquisitions; $380,000 in
severance costs; $414,000 provision for the abandonment of leases; and other
miscellaneous charges of $99,000. Management does not anticipate incurring an
additional charge such as this in the foreseeable future.
Interest Expense
Net interest expense for 1995 remained flat at $745,000 relative to an
expense of $739,000 in 1994.
Provision for Income Taxes
The provision/(benefit) for income taxes in 1995 and 1994 was
($417,000) and $1,146,000, respectively. The tax benefit arising from the loss
in 1995 is less than the amount which results from applying the federal
statutory rate to the loss primarily because of foreign losses for which no tax
benefit was currently available. The provision in 1994 was higher than the
amount which results from applying the federal statutory rate to income
primarily because of the nondeductibility of goodwill amortization and the
effect of State Taxes.
-13-
The Company has recognized for financial reporting purposes deferred
tax assets which consist primarily of a tax net operating loss carryforward.
These deferred tax assets are expected to be realized upon the reversal of
existing taxable temporary differences.
Net Income (Loss)
Net income (loss) for the periods ending December 31, 1995 and 1994
were ($1,669,000) and $1,295,000, respectively. The Company's net income for
the period ended December 31, 1995 was materially impacted by the unusual item
discussed previously. There were no such items in 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, working capital was ($211,000), a decrease of
$6,041,000 from December 31, 1995. The decrease in working capital is due
primarily to the reclassification of $3,000,000 of subordinated debt and
$1,203,000 of deferred interest due in May, 1997 from long term liabilities to
current liabilities. The Company generated cash from operations of $5,694,000,
up from $72,000 in 1995.
Cash used in investing activities for 1996 was $5,330,000, comprised
of a $667,000 payment related to the purchase of SRC, $327,000 for the purchase
of the Healthcare practice, and $2,278,000 for the purchase of GSR/SIA Limited,
$1,647,000 in capital expenditures, and $442,000 for capitalized production
costs.
In 1996, the Company increased net borrowings from its senior lender
by $787,000. A portion of these funds were used to supplement cash generated
from operations to repurchase 102,182 of shares of the Company's common stock
($579,823), to repay principal under capital lease arrangements of $257,000, and
to finance the acquisitions noted previously.
In March of 1997, the Company executed a Letter of Intent for a
$15,000,000 senior debt facility to be used for acquisitions, capital
expenditures, debt refinancing, and working capital. The new facility is
comprised of a revolving credit line ($9,000,000) carrying an interest rate of
prime plus one half percent and a five year term note ($6,000,000) carrying a
rate of prime plus one and one quarter percent. The subordinated debt and
deferred interest payable previously mentioned will be repaid from this credit
facility. The agreement is for three years and is secured by substantially all
of the assets of the Company. 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.
-14-
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 1997. 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.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Financial Statements are set forth at Page F-1 at the end of this
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
None.
-15-
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
This information will be contained in the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, 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, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, 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, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, 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, to be
filed with the Securities and Exchange Commission within 120 days following the
end of the Company's fiscal year, and is hereby incorporated by reference
thereto.
-16-
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
1996 and 1995.
Consolidated Statements of Operations for F-3
the years ended December 31, 1996, 1995,
and 1994.
Consolidated Statements of Stockholders' F-4
Equity for the years ended December 31, 1996,
1995, and 1994.
Consolidated Statements of Cash Flows for F-5
the years ended December 31, 1996, 1995, and 1994.
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 regulations 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.
-17-
3. Exhibits
--------
Exhibit No.
- -----------
3.1 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.
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (No. 33-68428) filed with the Securities
and Exchange Commission on September 3, 1993.
9.1 Voting Trust Agreement dated June 23, 1992 between Michael R.
Cooper and the Trustees U/I/T of Michael R. Cooper dated June 18,
1992 f/b/o Carolyn and Jordan Cooper - Incorporated by reference
to Exhibit 9.1 to the Registrant's Registration Statement on Form
S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
9.2 Voting Trust Agreement dated August 23, 1993 between the
Registrant, Michael R. Cooper and certain members of the
Registrant's Senior Management - Incorporated by reference to
Exhibit 9.2 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission
on September 3, 1993.
9.3 Voting Trust Agreement by and among Michael R. Cooper and Ruth M.
Cooper, Trustee U/I/T of Michael R. Cooper dated December 23,
1994 f/b/o Carolyn and Jordan Cooper - Incorporated by reference
to Exhibit 9.3 on Registrant's Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995.
*10.1 Employment Agreement between the Registrant and Michael R.
Cooper.
*10.2 Employment Agreement between the Registrant and John F. Short
*10.3 Employment Agreement between the Registrant and James C. Fink.
Incorporated by reference to Exhibit 10.5 on Registrant's Form
10-K filed with the Securities and Exchange Commission on March
31, 1995.
*10.4 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 on Registrant's Form
10-K filed with the Securities and Exchange Commission on March
31, 1995.
-18-
*10.5 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 on Registrant's Form
10-K filed with the Securities and Exchange Commission on March
29, 1996.
*10.6 Form of Non Competition Agreement executed by the Registrant's
Senior Management - Incorporated by reference to Exhibit 10.4 to
the Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
10.7 Form of Representative's Warrants - Incorporated by reference to
Exhibit 10.23 to the Registrant's Registration Statement on Form
S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
*10.8 The Registrant's 1993 Stock Incentive Plan - Incorporated by
reference to Exhibit 10.6 to the Registrant's Registration
Statement on Form S-1(No. 33-68428) filed with the Securities and
Exchange Commission on September 3, 1993.
*10.9 The Registrant's 1994 Stock Incentive Plan - Incorporated by
reference to Exhibit 10.10 on Registrant's Form 10-K filed with
the Securities and Exchange Commission on March 31, 1995.
*10.10 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form
S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.11 Purchase Agreement dated as of August 13, 1993 between the
Registrant and Allstate Insurance Company, Allstate Life
Insurance Company, Allstate Retirement Plan and Agents Pension
Plan - Incorporated by reference to Exhibit 10.13 to the
Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
10.12 Stock Purchase Agreement dated April 29, 1994 by and between the
Registrant and William F. Lehman, William B. Jones and Gilbert A.
Frisbie, Jr. - Incorporated by reference to Exhibit 10.15 on
Registrant's Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
10.13 Credit agreement, as amended, with Meridian Bank dated October
24, 1995.
10.14 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility). Incorporated by
reference to Exhibit
-19-
10.15 on Registrant's Form 10-K filed with the Securities and
Exchange Commission on March 29, 1996.
10.15 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 Registrant's
Registration Statement on Form S-1(No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993.
10.16 Lease dated March 24, 1992 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for second floor
of GSR facility) - Incorporated by reference to Exhibit 10.18 to
the Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
10.17 Lease dated February 1, 1984 between Torin (Angel City)
Investments Limited and Davis Schottlander & Davis Limited (for
third floor of GSR facility) - Incorporated by reference to
Exhibit 10.19 to the Registrant's Registration Statement on Form
S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.18 Assignment of Lease dated December 20, 1989 between Torin (Angel
City ) Davis Schottlander & Davis Limited and GSR and Lionel
Lawrence Gordon, Esq. and Martin Simmons, Esq. (for second and
third floors of GSR facility) - Incorporated by reference to
Exhibit 10.20 to the Registrant's Registration Statement on Form
S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.19 Lease dated March 24, 1982 between Torin (Angel City) Davis
Schottlander & Davis Limited (for fourth floor of GSR facility) -
Incorporated by reference to Exhibit 10.21 to the Registrant's
Registration Statement on Form S-1(No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993.
10.20 Assignment of Lease dated October 27, 1989 between Davis
Schottlander and Davis Limited and GSR and Lionel Lawrence
Gordon, Esq. and Martin Simmons, Esq. (for fourth floor of GSR
facility) - Incorporated by reference to Exhibit 10.22 to the
Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
10.21 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by
reference to Exhibit 10.22 on Form 10-K filed with the Securities
and Exchange Commission on March 31, 1995.
-20-
*10.22 Special Incentive Program between the Registrant and Michael R.
Cooper and John F. Short.
11 Statement regarding computation of per share earnings.
21 Subsidiaries of the Registrant.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the last quarter of the
fiscal year covered by this report.
_____________________________________________________________________________
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report
-21-
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/ Michael R. Cooper
------------------------------
Michael R. Cooper, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 26, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ Michael R. Cooper Principal Executive Officer and Director
- --------------------------
Michael R. Cooper
/s/ John F. Short Principal Financial and Accounting
- --------------------------
John F. Short Officer and Director
/s/ James C. Fink Director
- --------------------------
James C. Fink
/s/ James T. Heisler Director
- --------------------------
James T. Heisler
-22-
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, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, 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, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. 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
Princeton, New Jersey
February 21, 1997 except for the third
paragraph of Note 6, as to which the
date is March 17, 1997
F-1
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
December 31,
-----------------------
1996 1995
------ ------
Assets
Current Assets:
Cash and cash equivalents $865 $340
Accounts receivable:
Billed 7,480 7,878
Unbilled services 2,867 3,696
------- -------
10,347 11,574
Less: allowance for doubtful accounts 162 129
------- -------
10,185 11,445
Prepaid and other current assets 2,655 1,495
------- -------
Total current assets 13,705 13,280
Property and equipment, net 5,511 4,885
Capitalized production costs, net 516 300
Intangible assets, net 1,427 1,343
Goodwill, net 10,971 8,194
Other assets 642 535
------- -------
$32,772 $28,537
======= =======
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,979 $1,392
Accrued expenses 1,305 1,954
Advanced billings 2,782 1,078
Revolving credit line 380 423
Notes payable 6,047 2,353
Deferred interest payable 1,203
Current maturities of obligations under capital leases 220 250
------- -------
Total current liabilities 13,916 7,450
Long term debt 993 3,857
Deferred interest payable 804
Long term maturities of obligations under capital leases 276 489
Deferred income taxes 1,103 355
Other liabilities 839 837
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
none issued or outstanding
Common Stock, $.01 par value, 10,000,000 shares authorized,
4,231,747 shares issued and 4,143,889 outstanding in 1996
and 4,231,747 shares issued and 4,197,122 outstanding in 1995 42 42
Additional paid-in capital 14,011 14,067
Retained earnings 1,526 718
Foreign currency cumulative translation adjustment 556 125
Treasury Stock, at cost, 87,858 shares in 1996, 34,625 in 1995 (490) (207)
-------- --------
Total stockholders' equity 15,645 14,745
-------- --------
$32,772 $28,537
======== ========
See notes to financial statements.
F-2
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
Year Ended December 31,
---------------------------------
1996 1995 1994
-------- -------- ---------
Revenues $ 47,273 $ 44,101 $ 39,841
Cost of revenues 30,281 26,854 24,932
------ ------ ------
Gross profit 16,992 17,247 14,909
Selling, general and administrative expenses 12,214 12,422 9,024
Depreciation and amortization 2,353 2,677 2,618
Unusual charge 3,489
------ ------ ------
Operating income (loss) 2,425 (1,341) 3,267
Interest expense, net 777 745 739
Loss on investments 87
------ ------ ------
Income (loss) before income taxes 1,648 (2,086) 2,441
Provision (benefit) for income taxes 840 (417) 1,146
------ ------ ------
Net income (loss) $808 ($1,669) $1,295
====== ====== ======
Net income (loss) per common share:
Primary $0.19 ($0.39) $0.31
====== ====== ======
Fully diluted $0.19 $0.30
====== ======
Weighted average common shares outstanding:
Primary 4,212,952 4,253,812 4,243,135
Fully diluted 4,230,511 4,874,967
See notes to financial statements.
F-3
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(in thousands)
Foreign
Additional currency Total
Common Stock paid in Retained translation Treasury Stock stockholders'
---------------- --------------
Shares Amount capital earnings adjustment Shares Amount equity
-------- ------ --------- ---------- ---------- ------- ------ --------
Balance, December 31, 1993 4,232 $42 $13,183 $1,092 ($36) $14,281
Benefit from exercising stock options 884 884
Foreign currency translation
adjustment 235 235
Net income 1,295 1,295
-------- ------ --------- ---------- ---------- ------- ------ --------
Balance, December 31, 1994 4,232 42 14,067 2,387 199 16,695
Stock repurchase 35 (207) (207)
Foreign currency translation
adjustment (74) (74)
Net loss (1,669) (1,669)
-------- ------ --------- ---------- ---------- ------- ------ --------
Balance, December 31, 1995 4,232 42 14,067 718 125 35 (207) 14,745
Stock repurchase 102 (580) (580)
Stock issuance (56) (49) 297 241
Foreign currency translation
adjustment 431 431
Net income 808 808
-------- ------ --------- ---------- ---------- ------- ------ --------
Balance, December 31, 1996 4,232 $42 $14,011 $1,526 $556 88 ($490) $15,645
======== ====== ========= ========== ========== ======= ====== ========
See notes to financial statements.
F-4
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
Cash flows from operating activities:
Net income (loss) $808 ($1,669) $1,295
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization 2,353 2,677 2,618
Loss (gain) on foreign currency 24 (12)
Loss (gain) on disposal of fixed assets (16) 179 19
Non-cash portion of unusual charge 2,420
Benefit from exercise of stock options
Provision for doubtful accounts 30 (46) 42
Change in operating assets and liabilities net of effects
from acquisitions:
Billed accounts receivable 452 (678) 267
Unbilled services 922 (383) 480
Prepaid and other assets (1,144) (685) 195
Accounts payable 444 (543) 383
Accrued expenses (749) 234 (621)
Advanced billings 1,424 (1,116) 51
Deferred interest payable 399 361 326
Deferred income taxes 745 (683) 824
Other liabilities 2 4 (73)
- - ----
Net cash provided by operating activities 5,694 72 5,794
----- -- -----
Cash flows from investing activities:
Payment for acquisitions, net of cash acquired (3,272) (891) (2,790)
Proceeds from the sale of fixed assets 31
Capitalized production costs (442) (32) (2,329)
Capital expenditures (1,647) (586) (2,696)
------- ----- -------
Net cash used in investing activities (5,330) (1,509) (7,815)
------- ------- -------
Cash flows from financing activities:
Issuance of notes payable 1,404 1,410 2,250
Repayment of notes payable (643) (100) (2,904)
Borrowings under line-of-credit agreement 21,344 11,009 3,647
Repayments under line-of-credit agreement (21,348) (11,238) (3,247)
Capital stock repurchased, net (339) (207)
Repayments under capital lease arrangements (257) (324) (275)
----- ----- -----
Net cash provided by (used in) financing activities 161 550 (529)
--- --- -----
Increase (decrease) in cash and cash equivalents 525 (887) (2,550)
Cash and cash equivalents at beginning of period 340 1,227 3,777
--- ----- -----
Cash and cash equivalents at end of period $865 $340 $1,227
---- ---- ------
Non-cash investing and financing activities:
Acquisition of equipment under capital lease $777
Capital stock issued in connection with SRC purchase $241
See notes to financial statements.
F-5
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Opinion Research Corporation and Subsidiaries (the Company, ORC), which was
founded in 1938, provides market research and business information services.
The Company offers a variety of products and services for clients in the United
States, Europe, and Asian markets. The Company offers such services as Customer
Satisfaction Measurement and Tracking, Image Assessment and Competitive
Positioning, and Advertising Evaluation and Tracking. Some products such as
business panels and shared-cost programs are marketed independently as well as
used by the Company to deliver the above listed services. The Company operates
in one industry segment.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany transactions are eliminated
upon consolidation.
REVENUE RECOGNITION
Revenues from professional services are recognized at the time services are
performed on a percentage of completion basis. Invoices to clients are
generated in accordance with the terms of the applicable contract, which are not
directly related to the performance of services. Unbilled services are
classified as a current asset. Advanced billings from clients in excess of
revenue earned are classified as a current liability. The Company grants credit
primarily to large public companies 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. As of December 31, 1996, two clients constituted 21%
of net accounts receivable. These clients accounted for 29% of the revenues for
the year ended December 31, 1996. As of December 31, 1995, one client
constituted 33% of net accounts receivable. Revenues for this client accounted
for 22% of revenues for the year ended December 31, 1995. At December 31, 1994,
two clients constituted 31% of net accounts receivable. Combined revenues for
these clients accounted for 24% of the Company's revenues for the year ended
December 31, 1994.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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-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 an original 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 (see Note 11).
CAPITALIZED PRODUCTION COSTS
The costs of producing the Company's standardized computer models are
capitalized and amortized using the straight-line method over three years or
the estimated remaining periods for which the models provide future economic
benefits, whichever is shorter. The models are computer software which are
marketed and sold by the Company as separate products, along with research and
business information services. Capitalization of costs begins upon the
establishment of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized costs
require considerable judgment by management with respect to certain factors
including anticipated future gross revenues, estimated economic life and changes
in technology. These factors are considered on a product-by-product basis.
Total amortization expense for capitalized production costs was $226, $683, and
$926 for the years ended December 31, 1996, 1995, and 1994, respectively.
During 1995, the Company recorded a pre-tax write-down of capitalized production
costs of $1,958 (see Note 11).
FOREIGN OPERATIONS
The functional currency for the Company's UK subsidiaries, Gordon Simmons
Research Group Limited (GSR), and GSR/SIA Limited, is the British pound. The
translation into U.S. dollars is performed for assets and liabilities using the
exchange rate in effect at the balance sheet date and for revenue and expense
accounts using a monthly average exchange rate during the period. Translation
adjustments are shown as a separate
F-7
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
component of stockholder's equity. Combined revenue, assets and other financial
information for foreign operations, is as follows:
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
-------- -------- -------
Revenue $10,792 $10,227 $11,479
Net Income (loss) (255) (606) 321
DECEMBER 31,
-----------------
1996 1995
-------- --------
Assets $ 9,757 $ 6,523
Liabilities 6,824 3,583
Stockholders' equity 2,933 2,940
The results of operations and financial position of the Hong Kong branch,
established in 1995, were not significant in either 1996 or 1995.
STOCK BASED COMPENSATION
As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the Company has elected to follow Accounting Principal
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 option grant if the
exercise price of the Company's employee stock option equals the fair market
value of the underlying common stock on the date of grant.
INCOME TAXES
The Company files a consolidated federal income tax return. Separate income tax
returns are filed for foreign, state, and local income taxes.
EARNINGS PER SHARE
Earnings (loss) per share is determined by dividing net income (loss) by the
weighted average common shares outstanding. Fully diluted earnings per share
takes into account the conversion of the convertible debentures issued August
13, 1993 for 1994 only. Such convertible debentures are not included in the
calculation of fully diluted earnings per share in 1996 as they expired on
November 30, 1996, or in 1995 as their effect in 1995 was anti-dilutive (see
Note 6).
F-8
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS
On April 29, 1994 the Company purchased the stock of Strategic Research and
Consulting, Inc., (SRC), an Ohio corporation, for a price of $3,000. The
acquisition was accounted for as a purchase and accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed. The fair value of
the assets acquired and liabilities assumed was $5,004, and $4,076,
respectively. The Company incurred $69 of costs related to the acquisition.
Identifiable intangible assets, valued at $300, are being amortized using the
straight-line method over five years. The excess consideration paid over the
estimated fair value of net assets acquired in the amount of $1,841 has been
recorded as goodwill to be amortized using the straight-line method over 25
years. During 1995, cash payments totalling $891 were made to the previous
owners of SRC as part of the purchase price which was contingent upon achieving
specific performance criteria. The additional consideration is recorded as
goodwill and will be amortized over the 24 years remaining on the original
goodwill. Based on 1995 operating performance, a final payment of $667 was made
to the principals of Strategic Research and Consulting, Inc. during 1996. This
payment consisted of a cash payment of $426 and the issuance of stock valued at
$241. This payment has been recorded as goodwill and will be amortized over the
23 years remaining on the original goodwill. The 1994 financial statements
reflect SRC's operations for the period from April 29, 1994 to December 31,
1994. The acquisition was financed through Company funds and senior bank debt.
During 1996 the Company created GSR/SIA, Limited to purchase the assets of
a division of an information technology company. This operating company is a
wholly owned subsidiary of ORC Holdings, Limited, a holding company created in
1996 to hold the shares of all the Company's U.K. holdings. To that end, the
shares of Gordon Simmons Research Group were exchanged by the Company for shares
in ORC Holdings, Limited. Also during 1996, the Company purchased the stock of a
Chicago based market research company that now serves as the Healthcare Practice
for the Company.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31,
----------------
1996 1995
------- -------
Leasehold improvements $ 1,714 $ 1,343
Computer equipment and software 6,221 5,112
Furniture, fixtures, and equipment 3,501 2,886
Equipment under capital lease obligations 1,143 1,028
------- -------
12,579 10,369
Less accumulated depreciation & amortization 7,068 5,484
------- -------
Property and equipment, net $ 5,511 $ 4,885
======= =======
F-9
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT (CONTINUED)
During 1995, the Company recorded charges of $178 and $66 for the disposal of
obsolete fixed assets and the abandonment of leasehold improvements,
respectively (see Note 11).
4. INTANGIBLE ASSETS
Intangible assets are as follows:
DECEMBER 31,
--------------------
1996 1995
------- ------
Capitalized production costs $ 1,076 $ 634
less accumulated amortization 560 334
------- ------
Capitalized production costs, net $ 516 $ 300
======= ======
Intangible assets $ 3,703 $3,077
less accumulated amortization 2,276 1,734
------- ------
Intangible assets, net $ 1,427 $1,343
======= ======
Goodwill $12,165 $9,000
less accumulated amortization 1,194 806
------- ------
Goodwill, net $10,971 $8,194
======= ======
During 1995 the Company wrote down $1,958 as capitalized production costs and
$460 of impaired intangible assets (see Note 11).
5. INCOME TAXES
For financial reporting purposes, income (loss) before income taxes consists of
the following:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- -------- ------
United States $1,973 ($1,480) $1,781
Foreign (325) (606) 660
------ ------- ------
$1,648 ($2,086) $2,441
====== ======= ======
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The provisions (benefit) for income taxes consists of the following:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Current:
Federal $ 84 $ 96 $ 16
State 110 170 73
Foreign (70) 311
----- ------ ------
Total current 124 266 400
----- ------ ------
Deferred:
Federal 553 (496) 604
State 163 (187) 114
Foreign 28
----- ------ ------
Total deferred 716 (683) 746
----- ------ ------
$ 840 ($417) $1,146
===== ====== ======
The difference between tax expense and the amount computed by applying the
statutory federal income tax rate to income before income taxes is as follows:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------ ------- --------
Statutory rate applied to pre-tax income loss $ 560 ($710) $ 830
Add (deduct):
State income taxes, net of federal 73 (75) 123
benefit
Foreign operating losses for which
a tax benefit has not been recorded 42 206
Effect of non-deductible expenses 55 20 54
Effect of goodwill amortization 98 61 129
Increase in valuation allowance 35
Other 12 81 (25)
----- ----- ------
$ 840 ($417) $1,146
===== ===== ======
F-11
OPINION RESEARCH CORPORATIONAND SUBSIDIARIES
NOTES TO CONSOLIDATED FINAICIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The Company's deferred tax liabilities and assets consists of the following
temporary differences:
DECEMBER 31,
----------------
1996 1995
------- -------
Deferred tax liabilities:
Capitalized product costs $1,296 $ 623
Fixed assets 125
Tax basis adjustment of acquired 227 605
subsidiary
Other 39
------ ------
Total deferred tax liabilities 1,523 1,392
------ ------
Deferred tax assets:
Reserves for doubtful accounts 44 60
Fixed assets 134
Deferred revenue 244
Net operating loss carryforwards 199 797
Valuation allowance (64) (64)
Other 139
------ ------
Total deferred tax assets 452 1,037
------ ------
Net deferred tax liabilities $1,071 $ 355
====== ======
The recognition of $884 of the valuation allowance was credited directly to
contributed capital in 1994.
The Company has U.S. federal tax net operating loss carryforwards of
approximately $110, at December 31, 1996 which expire in 2010. At December 31,
1996 unremitted earnings of foreign subsidiaries were approximately $170. Since
it is the Company's intention to indefinitely reinvest these earnings, no U.S.
taxes have been provided. Determination of the amount of unrecognized deferred
tax liability on these unremitted earnings is not practicable.
Income taxes of $383 and $132 were paid in the U.K. in 1995 and 1994
respectively. No income taxes were paid in the U.K. in 1996.
Income taxes paid in the U.S. for 1996, 1995, and 1994 were $677, $109, and $35,
respectively.
F-12
OPINION RESEARCH CORPORATIONAND SUBSIDIARIES
NOTES TO CONSOLIDATED FINAICIAL STATEMENTS (CONTINUED)
6. DEBT
Debt consists of the following:
DECEMBER 31,
--------------
1996 1995
------ ------
Working capital facilities $2,509 $2,133
Notes payable to bank 1,911 1,500
Notes payable (convertible 12/31/95) 3,000 3,000
------ ------
Total debt 7,420 6,633
Less current maturities 6,427 2,776
------ ------
Long-term portion $ 993 $3,857
====== ======
At December 31, 1996, the Company had credit facilities with a U.S. bank
totalling $10,000. The facilities allowed for $4,000 of acquisition financing
and $1,000 for equipment financing, and $5,000 as a working capital facility.
All borrowings for acquisitions or equipment financing had a four-year term.
As of December 31, 1996, the Company had outstanding $1,911 on the acquisition
financing facility and $2,509 on the working capital facility, including $380
drawn on a UK overdraft facility that is secured by a letter of credit. The
interest rate on the acquisition financing is the bank's designated prime rate
plus 1/2% (8 3/4% at December 31, 1996). Interest was deferred for the first
six months, but is now payable monthly. Interest on the revolving credit
facility is the bank's designated prime rate (8 1/4% at December 31, 1996),
payable monthly. The interest rates on the credit facility are based on current
market rates. Consequently, the carrying value of the credit facility
approximates its fair value.
During March of 1997 the Company executed a letter of intent for an increased
borrowing facility with its senior lender. The new facility is for $15 million;
$9 million of revolving credit at prime plus one half percent and $6 million of
a 5 year term note carrying an interest rate of prime plus one and one quarter
percent. The agreement is for 3 years and is secured by substantially all assets
of the Company.
On August 13, 1993, the Company issued a subordinated 10% convertible note for
$3,000 which is due May 31, 1997. The note and accrued interest through
November 30, 1994 were convertible until November 30, 1996 into common stock of
the Company at $5.20 per share. The note was not converted. The $3,000 in
principal and $1,203 of deferred interest is payable May 31, 1997. These
amounts will be repaid from the above mentioned credit facility.
F-13
OPINION RESEARCH CORPORATIONAND SUBSIDIARIES
NOTES TO CONSOLIDATED FINAICIAL STATEMENTS (CONTINUED)
6. DEBT (CONTINUED)
Aggregate maturities of debt for the years ending December 31 are as follows:
1997................................................... $6,427
1998................................................... 491
1999................................................... 275
2000................................................... 227
The Company paid interest of $379, $445, and $475 during the years ended
December 31, 1996, 1995, and 1994, respectively.
7. PENSION
The Company maintains a defined contribution pension and profit sharing plan
covering substantially all employees. Employees may contribute from 1% to 15%
of their annual salary, up to the maximum allowable under the Internal Revenue
Code. The Board of Directors may elect to match employees' contributions or
contribute to the profit sharing plan. Plan assets include 317,563 and 351,750
shares of common stock of the Company at December 31, 1996 and 1995,
respectively. The Company contributed $75 to the plan in 1996 and $65 to the
plan in 1995. No Company contribution was elected for the year ended December
31, 1994.
8. 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
------- ---------
1997................................ $243 $1,742
1998................................ 219 1,555
1999................................ 62 1,543
2000................................ 2 1,540
2001................................ 1,307
Thereafter.......................... 2,247
---- ------
Total minimum lease payments........ 526 $9,934
======
Less amounts representing interest.. 30
----
Capitalized lease obligations....... 496
Less current portion................ 220
----
Long term portion................... $276
====
F-14
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LEASES (CONTINUED)
Rent expense under operating leases was $1,480, $1,641, and $1,215 for the years
ended December 31, 1996, 1995 and 1994, 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.
9. STOCKHOLDERS' EQUITY
On May 8, 1995, the Board of Directors authorized the Company to buy back up to
500,000 shares of the Company's common stock. During 1996 the Company
repurchased 102,182 shares at a cost of $580. Also, during 1996, 48,949 shares
valued at $241 were issued to the three senior principals of SRC (see Note 2).
During the fourth quarter of 1995, the Company repurchased 34,625 shares at a
cost of $207.
10. STOCK OPTIONS
The 1994 Stock Incentive Plan provides for the grant of up to 350,000 options to
purchase common stock to directors and key employees of the Company. No
employee can be granted options to acquire more than 100,000 shares of Company
common stock in any one calendar year. The exercise price of options granted
under the 1994 plan is equal to the fair market value of the stock on the grant
date and are exercisable for seven years. Options granted under this plan vest
equally over a period of three years. The plan terminates on April 25, 2004.
The 1993 Stock Incentive Plan provides for the grant of up to 375,000 options to
purchase common stock to directors and key employees of the Company. The
exercise price of options granted to employees under this plan is equal to the
fair market value of the stock on the date of grant. These options vest equally
over a three year period. The plan terminates in August 2003. As amended in
1996, each Non-employee Director on the date of the Annual Meeting of
Stockholders is automatically granted options to acquire the "formula number" of
shares of common stock. The option exercise price for these options will be
equal to the fair market value of the underlying shares on the date of the
grant. The options will be non-qualified stock options. The Non-employee
Directors' options will 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 "formula number" for 1996 was 15,000 shares for
those Non-employee Directors who have served as a member of the Board of
Directors for a period of three full years or more, and 5,000 shares for all
other Non-employee Directors.
Non-employee Directors' options terminate seven years from the date of grant or
90 days 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
F-15
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK OPTIONS (CONTINUED)
Board of Directors will terminate as of the termination of the Non-employee
Director's service on the Board of Directors.
Stock option transactions for the 1993 and 1994 Stock Incentive Plans were as
follows:
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ---------------
Outstanding balance at December 31, 1993 272,375 $6.03
1994
----
Granted 146,000 $6.98
Canceled (46,417) $6.45
-------
Outstanding Balance at December 31, 1994 371,958 $6.35
1995
----
Granted 246,750 $5.11
Canceled (53,332) $6.16
-------
Outstanding Balance at December 31, 1995 565,376 $5.82
1996
----
Granted 174,000 $6.50
Canceled (49,084) $5.55
-------
Outstanding Balance at December 31, 1996 690,292 $6.01
Available for Grant at December 31, 1996 34,708
=======
Options exercisable at December 31, 1996, 1995 and 1994 were 386,709, 305,536
and 181,674, respectively. Exercise prices for options outstanding as of
December 31, 1996 for the plans ranged from $4.63 to $8.38 per share. The
weighted average remaining term of the outstanding options is 4.85 years.
During 1995 the Board of Directors voted to reduce the exercise price of the
options granted prior to 1994 from $8.00 per share to $5.875 per share.
In accordance with the provisions of SFAS No. 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 SFAS No. 123, net income (loss) and
F-16
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK OPTIONS (CONTINUED)
earnings (loss) per share would have been reduced to the pro forma amounts
indicated in the table below:
1996 1995
---- -------
Net income (loss) - as reported......... $808 $(1,669)
Net income (loss) - pro forma........... $ 65 $(1,913)
Earnings (loss) per share - as reported. $.19 $ (.39)
Earnings (loss) per share - pro forma... $.02 $ (.45)
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:
1996 1995
-------- --------
Expected dividend yield.......... 0% 0%
Expected stock price volatility.. 34.9% 34.9%
Risk-free interest rate.......... 5.7% 7.6%
Expected life of options......... 7 years 7 years
The weighted average fair value of options granted during 1996 and 1995 were
$3.17 and $2.52 per share, respectively.
Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
11. UNUSUAL CHARGE
During the second quarter of 1995, the Company announced a plan to restructure
and consolidate operations, concentrate resources, and better position itself to
achieve its strategic growth objectives. This plan resulted in a pre-tax charge
of $3,489 in 1995. This charge included a $1,958 write-down of capitalized
production costs; $178 for the disposal of obsolete fixed assets; $460 of
impaired intangible assets associated with previous acquisitions; $380 in
severance costs; $414 provision for the abandonment of leases; and other
miscellaneous charges of $99.
F-17
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SPLIT-DOLLAR LIFE INSURANCE
During 1995, the Company entered into certain agreements with trusts established
in the names of two officers of the Company. Under these agreements, the
Company pays certain premiums on life insurance policies on the officers, to
which the trusts are the beneficiaries. The Company has been assigned certain
rights to the assets of the trusts as collateral for the premiums paid on these
life insurance policies. The amounts paid by the Company for the premiums on
these policies, an aggregate of $178 and $59 at December 31, 1996 and 1995,
respectively, are included in other assets in the accompanying consolidated
balance sheets. In the event the policies are terminated, the officers have
guaranteed the repayment of the amounts due from their respective trusts, and
have pledged certain of their personal assets to the Company to collateralize
such guarantees.
F-18
Schedule II - Valuation and Qualifying Accounts
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
(in Thousands of Dollars)
- --------------------------------------------------------------------------------
Rule 12-09. Valuation and Qualifying Accounts
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at Additions
--------------------------------------
Description beginning Charged to costs Charged to other Deductions - describe Balance at
of Period and expenses accounts - describe End of Period
====================================================================================================================================
Year ended December 31, 1996:
Deducted from asset account:
Allowance for Doubtful Accounts $ 129 $ 105 $ 72(1) $ 162
Accumulated Amortization:
Capitalized Production Costs 334 226 560
Goodwill 806 388 1,194
Intangible Assets 1,734 542 2,276
----- --- ------ ----- -----
Totals $ 3,003 $ 1,261 0 $ 72 $ 4,192
===== ===== ====== ===== =====
Year ended December 31, 1995:
Deducted from asset account:
Allowance for Doubtful Accounts $ 166 $ 26 $ 63(1) $ 129
Accumulated Amortization:
Capitalized Production Costs 1,604 683 1,953(2) 334
Goodwill 638 297 129(2) 806
Intangible Assets 1,208 526 1,734
----- --- ------ ----- -----
Totals $ 3,616 $ 1,532 0 $ 2,145 $ 3,003
===== ===== ====== ===== =====
Year ended December 31, 1994:
Deducted from asset account:
Allowance for Doubtful Accounts $ 128 $ 42 $ 4(1) $ 166
Accumulated Amortization:
Capitalized Production Costs 678 926 1,604
Goodwill 339 299 638
Intangible Assets 695 513 1,208
--- --- ------ ----- -----
Totals $ 1,840 $ 1,780 0 $ 4 $ 3,616
===== ===== ====== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Uncollectible accounts written-off
(2) Write-off as unusual charge in second quarter
S-1
OPINION RESEARCH CORPORATION
Annual Report on Form 10-K
EXHIBIT INDEX
Exhibit No.
- -----------
3.1 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.
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement on
Form S-1 (No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
9.1 Voting Trust Agreement dated June 23, 1992 between Michael R. Cooper
and the Trustees U/I/T of Michael R. Cooper dated June 18, 1992 f/b/o
Carolyn and Jordan Cooper - Incorporated by reference to Exhibit 9.1
to the Registrant's Registration Statement on Form S-1(No. 33-68428)
filed with the Securities and Exchange Commission on September 3,
1993.
9.2 Voting Trust Agreement dated August 23, 1993 between the Registrant,
Michael R. Cooper and certain members of the Registrant's Senior
Management - Incorporated by reference to Exhibit 9.2 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
9.3 Voting Trust Agreement by and among Michael R. Cooper and Ruth M.
Cooper, Trustee U/I/T of Michael R. Cooper dated December 23, 1994
f/b/o Carolyn and Jordan Cooper - Incorporated by reference to Exhibit
9.3 on Registrant's Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
*10.1 Employment Agreement between the Registrant and Michael R. Cooper.
*10.2 Employment Agreement between the Registrant and John F. Short.
*10.3 Employment Agreement between the Registrant and James C. Fink.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
*10.4 Employment Agreement between the Registrant and James T. Heisler.
Incorporated by reference to Exhibit 10.6 on Regisrant's Form 10-K
filed with the Securities and Exchange Commission on March 31, 1995.
*10.5 Employment Agreement between the Registrant and Gregory C. Ellis.
Incorporated by reference to Exhibit 10.5 on Registrant's Form 10-K
filed with the Securities and Exchange Commission on March 29, 1996.
*10.6 Form of Non Competition Agreement executed by the Registrant's Senior
Management - Incorporated by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.7 Form of Representative's Warrants - Incorporated by reference to
Exhibit 10.23 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission on
September 3, 1993.
*10.8 The Registrant's 1993 Stock Incentive Plan - Incorporated by reference
to Exhibit 10.6 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission on
September 3, 1993.
*10.9 The Registrant's 1994 Stock Incentive Plan - Incorporated by reference
to Exhibit 10.10 on Registrant's Form-K filed with the Securities and
Exchange Commission on March 31, 1995.
*10.10 The Registrant's Retirement Plan - Incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-
1(No. 33-68428) filed with the Securities and Exchange Commission on
September 3, 1993.
10.11 Purchase Agreement dated as of August 13, 1993 between the Registrant
and Allstate Insurance Company, Allstate Life Insurance Company,
Allstate Retirement Plan and Agents Pension Plan - Incorporated by
reference to Exhibit 10.13 to the Registrant's Registration Statement
on Form S-1(No. 33-68428) filed with the Securities and Exchange
Commission on September 3, 1993.
10.12 SRC Stock Purchase Agreement dated April 29, 1994 by and between the
Registrant and William F. Lehman, William B. Jones, and Gilbert A.
Frisbie, Jr. -Incorporated by
reference to Exhibit 10.15 on Registrant's Form 10-K filed with the
Securities and Exchange Commission on March 31, 1995.
10.13 Credit agreement, as amended, with Meridian Bank dated October 24,
1995.
10.14 Lease Agreement dated May 15, 1995 between the Registrant and the
Maumee Woodlands IV Company (Maumee Facility). Incorporated by
reference to Exhibit 10.15 on Registrant's Form 10-K filed with the
Securities and Exchange Commission on March 29, 1996.
10.15 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 Registrant's Registration
Statement on Form S-1(No. 33-68428) filed with the Securities and
Exchange Commission on September 3, 1993.
10.16 Lease dated March 24, 1992 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for second floor of
GSR facility) - Incorporated by reference to Exhibit 10.18 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.17 Lease dated February 1, 1984 between Torin (Angel City) Investments
Limited and Davis Schottlander & Davis Limited (for third floor of GSR
facility) - Incorporated by reference to Exhibit 10.19 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.18 Assignment of Lease dated December 20, 1989 between Torin (Angel City
) Davis Schottlander & Davis Limited and GSR and Lionel Lawrence
Gordon, Esq. and Martin Simmons, Esq. (for second and third floors of
GSR facility) - Incorporated by reference to Exhibit 10.20 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.19 Lease dated March 24, 1982 between Torin (Angel City) Davis
Schottlander & Davis Limited (for fourth floor of GSR facility) -
Incorporated by reference to Exhibit 10.21 to the Registrant's
Registration Statement on Form S-1(No. 33-68428) filed with the
Securities and Exchange Commission on September 3, 1993.
10.20 Assignment of Lease dated October 27, 1989 between Davis Schottlander
and Davis Limited and GSR and Lionel Lawrence Gordon, Esq. and Martin
Simmons, Esq. (for fourth floor of GSR facility) - Incorporated by
reference to Exhibit 10.22 to the
Registrant's Registration Statement on Form S-1(No. 33-68428) filed
with the Securities and Exchange Commission on September 3, 1993.
10.21 Lease dated August 25, 1994 between the Registrant and H.C.
Properties, USA, Inc. (Tucson Facility) - Incorporated by reference to
Exhibit 10.22 on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995.
*10.22 Special Incentive Program between the Registrant and Michael R. Cooper
and John F. Short.
11 Statement regarding computation of per share earnings.
21 Subsidiaries of the Registrant.
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* Constitutes a Compensatory plan or arrangement required to be filled as an
exhibit to this report.