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FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 0-04781
MARKET FACTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-2061602
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3040 West Salt Creek Lane, Arlington Heights, Illinois 60005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 590-7000
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES /X/ NO / /
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
8,928,301 common shares as of November 2, 1998
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
FORWARD-LOOKING STATEMENTS
Certain statements made from time to time by the Company, including
statements in the Management's Discussion and Analysis section above,
constitute "forward-looking statements" made in reliance upon the safe harbor
contained in Section 21E of the Securities Exchange Act of 1934, as amended.
Such forward-looking statements include those relating to growth through
acquisition opportunities and statements relating to the Company or its
operations that are preceded by terms such as "expects," "believes,"
"anticipates," "intends" and similar expressions. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. The Company's actual results, performance or achievements
could differ materially from the results, performance or achievements
expressed in, or implied by, these forward-looking statements as a result of
various factors, including without limitation, the following:
RELIANCE ON KEY CLIENTS. Our five largest clients accounted for approximately
26%, 26% and 25% of our revenue in 1995, 1996 and 1997. Procter & Gamble, our
largest client, accounted for approximately 12%, 10% and 11% of our revenue in
1995, 1996 and 1997. We cannot assure you that we will be able to maintain our
current level of revenue from Procter & Gamble or any other client in the
future.
We do not usually enter into long-term contracts with our clients. Clients
normally hire us on a project-by-project basis. Our clients generally have the
right to terminate their relationship with us with little or no notice. In
addition, most of our clients also use the services of other marketing research
companies. Once a project is completed, there can be no assurance that a client
will hire us to perform future services. The termination of our relationship
with any of our significant clients or a material reduction in the services
provided to such clients could adversely affect our business and future
financial results.
FLUCTUATIONS IN DEMAND FOR MARKET RESEARCH. Demand for our research services
can be affected by a number of factors outside our control, including the
following:
- changes in the management, budgets, spending patterns or
business cycles of our clients;
- competition within our industry; and
- changes in general economic conditions.
As a result of these and other factors, the amount of market research we conduct
for our clients has varied from period-to-period in the past and is likely to
continue to vary in the future. These variations may contribute to changes in
our financial results from period-to-period.
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VARIABILITY OF QUARTERLY FINANCIAL RESULTS. Our quarterly financial results
have fluctuated in the past and may continue to fluctuate in the future. Our
future quarterly financial results will depend on many factors, including the
following:
- the timing and number of new projects;
- reductions, cancellations or completions of projects;
- the number, scope, terms and degree of completion of current projects;
- our costs and any delays in connection with current projects;
- the loss of a major client;
- changes in our pricing or the pricing of our competitors;
- employee utilization rates;
- the adequacy of our provisions for losses; and
- general economic conditions.
As a result of these and other factors, we believe that period-to-period
comparisons of our financial results are not a good predictor of our future
performance. If our future financial results are below the expectations of
stock market analysts, our stock price may decline.
RISKS ASSOCIATED WITH ACQUISITIONS AND FAILURE TO INTEGRATE ACQUIRED
BUSINESSES. We have acquired four businesses over the past two years. We
intend to acquire additional businesses as part of our growth strategy.
However, we cannot assure you that we will be able to identify suitable
businesses to acquire or that we will be able to acquire such businesses on
acceptable terms. In addition, some of our competitors are also seeking to
grow through acquisitions and there is significant competition for attractive
businesses. The purchase price for such businesses may be greater than the
book value of the business. Also, we may incur debt or issue additional
shares of common stock to pay for these acquisitions. The issuance of common
stock could be dilutive to our existing stockholders.
We may have difficulty integrating acquired businesses without substantial
costs, delays or other problems. We may require the assistance of the senior
management team of an acquired business to successfully integrate the business.
However, some or all of the members of the management team may decide not to
work for us or may not work for us long enough to complete the integration.
Difficulties in integrating acquired businesses may disrupt our ongoing
business, distract our management and employees and increase our expenses. In
addition, we may not be able to manage the acquired businesses as profitably as
their prior owners.
COMPETITION. The market for our services is very competitive. We face direct
competition from many smaller organizations that serve niche markets and from
a few larger organizations who have greater resources. We believe that as our
industry consolidates we will face more competition from these organizations
for clients and for acquisition candidates. Also, we face indirect
competition from the marketing research departments of clients and potential
clients, advertising agencies and survey research departments affiliated with
universities and government agencies.
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We believe the principal methods of competition include the following:
- quality and speed of research results;
- the ability to provide customized data collection, analysis and
interpretation;
- geographic coverage;
- the ability to guide clients through the entire marketing research
process;
- the ability to provide creative recommendations to clients; and
- the ability to attractively price services.
If we fail to compete successfully based on these or other factors, we may lose
clients to our competitors or fail to recruit new clients and our business and
future financial results could be materially and adversely affected.
ABILITY TO CONTINUE GROWTH; MANAGEMENT OF GROWTH. For the three year period
ended December 31, 1997, our revenue and net income increased at a compound
annual growth rate of 22% and 60%, respectively. We cannot assure you that we
will be able to sustain this rate of growth. In addition, this growth in our
business has placed increased demands on our management, operating systems and
internal controls. Our operational, financial and information systems and
controls may not be adequate to support the continued growth of our business.
Consequently, we may need to hire new employees, acquire new office space,
invest in new equipment and update our systems, procedures and controls. Our
business and future financial results will be materially and adversely affected
if we are unable to effectively manage our expanding operations.
RISKS OF INTERNATIONAL EXPANSION; ABILITY TO SERVICE CLIENTS GLOBALLY. An
important part of our business strategy is to be able to provide market
research services to our clients globally. We intend to seek acquisitions,
joint ventures and strategic alliances globally, but there is no assurance
that we will be able to establish global operations that will meet the
specific international needs of our clients. Further, as we expand
internationally, we will be subject to increased risks which may include the
following:
- our ability to maintain an international data collection
network which meets our quality standards;
- currency exchange or price control laws;
- currency translation adjustments;
- political and economic instability;
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- longer accounts receivable collection cycles; and
- potentially adverse tax consequences.
Also, we may have difficulty enforcing agreements and collecting accounts
receivable through a foreign country's legal system.
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VOLATILITY OF STOCK PRICE. Our common stock has experienced wide price
fluctuations in the past, and such fluctuations may continue in the future. In
addition, the stock market has been extremely volatile in recent years. These
broad market fluctuations may adversely affect the market price of our common
stock. In addition, the following factors may have a significant effect on the
market price of our common stock:
- fluctuations in our financial results;
- the introduction of new services or products by us or our competitors;
- announcements of acquisitions, strategic alliances or joint
ventures by us, our clients or our competitors;
- changes in analysts' recommendations regarding our common stock;
- general conditions in the market research industry; and
- general economic conditions.
There can be no assurance that the price of our common stock will increase in
the future or be maintained at its recent levels.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. We consider most of our software,
database management methods, modeling techniques and other database information
strategies to be proprietary technology. We believe our success and ability to
compete depends in part on this proprietary technology. We rely on a combination
of trade secret, trademark, copyright and other intellectual property laws, as
well as contractual agreements, to protect this proprietary technology. However,
we may have difficulty monitoring the unauthorized use of our proprietary
technology and the steps we have taken to protect it may not be adequate. Also,
we cannot be sure the courts will enforce the contracts we have entered into to
protect our proprietary technology. Any misappropriation of our intellectual
property could have a material adverse effect on our business or future
financial results.
RISK OF DECLINING RESPONSE RATES. We must be able to collect high quality
data in order to service our clients. We collect data using our Consumer Mail
Panel-SM-, random telephone interviewing, and other sources. Response rates
to data collection efforts in our industry have generally declined in recent
years. Lower response rates could lower the quality of data we collect and
increase our project costs. If we are unable to recruit and maintain
appropriate members for our Consumer Mail Panel-SM-, or if consumers are not
as receptive to our attempts at data collection, or if we cannot rely on the
integrity of the data received, our ability to market and sell our research
products would be materially and adversely affected.
RELIANCE ON KEY PERSONNEL. Our success depends significantly on our key
personnel who have expertise in custom market research and have established
relationships with our clients. Although we manage client relationships at many
levels, the loss of a key employee could have an adverse effect on our
relationship with the clients served by that employee. Our success also depends
on our ability to hire, train and retain skilled personnel in all areas of our
business. Competition for qualified personnel in our industry is substantial.
There can be no assurance that we will be able to recruit, retain and motivate a
sufficient number of qualified employees to compete successfully.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Market Facts, Inc.
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(Registrant)
Date: February 1, 1999 Timothy J. Sullivan
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Timothy J. Sullivan
Chief Financial Officer, Senior Vice
President, Treasurer, Assistant
Secretary and Director
(Principal Financial Officer)
Date: February 1, 1999 Anthony J. Solarz
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Anthony J. Solarz
Vice President and Controller
(Principal Accounting Officer)
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