UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[*] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 - 21460
NFO RESEARCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1327424
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO PICKWICK PLAZA, GREENWICH, CT 06830
(Address of principal executive offices, zip code)
(203) 629 - 8888
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicated 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
At November 1, 1996, Registrant had outstanding 10,249,892 shares of Common
Stock.
<PAGE>
Page 2
NFO RESEARCH, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION NUMBER
FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Condensed Consolidated Statement of
Stockholders' Equity 8
Notes to Condensed Consolidated Financial Statements 9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Part II OTHER INFORMATION
Item 4 - Submission of Matters to a
Vote of Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signature 15
<PAGE>
Page 3
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30 DECEMBER 31
1996 1995
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 3,367 $ 5,677
RECEIVABLES:
TRADE 18,843 14,155
UNBILLED 3,942 3,188
PREPAID EXPENSES AND OTHER CURRENT ASSETS 3,242 2,734
--------- ---------
TOTAL CURRENT ASSETS 29,394 25,754
PROPERTY AND EQUIPMENT, NET 10,344 8,756
CUSTOMER LIST, GOODWILL AND
OTHER INTANGIBLE ASSETS 44,423 26,501
OTHER ASSETS 6,734 5,753
--------- ---------
TOTAL ASSETS $ 90,895 $ 66,764
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-TERM DEBT $ 962 $ 643
ACCOUNTS PAYABLE 2,238 1,543
ACCRUED EXPENSES 10,212 8,700
CUSTOMER BILLINGS IN EXCESS OF REVENUES
EARNED 5,486 7,019
--------- ---------
TOTAL CURRENT LIABILITIES 18,898 17,905
LONG-TERM DEBT 4,991 1,409
OTHER LONG-TERM LIABILITIES 3,786 3,429
--------- ---------
TOTAL LIABILITIES 27,675 22,743
--------- ---------
STOCKHOLDERS' EQUITY:
COMMON STOCK, PAR VALUE $.01 PER SHARE;
65,000 SHARES AUTHORIZED, 10,250 AND
9,428 (POST-SPLIT) ISSUED AND OUTSTANDING
IN 1996 AND 1995, RESPECTIVELY 102 63
ADDITIONAL PAID-IN CAPITAL 39,966 27,222
RETAINED EARNINGS 23,821 17,405
ADDITIONAL MINIMUM LIABILITY (669) (669)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 63,220 44,021
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 90,895 $66,764
========= ========
The accompanying notes are an integral part of these statements.
<PAGE>
Page 4
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------- --------------------
1996 1995 1996 1995
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
REVENUES $ 26,838 $18,564 $ 76,588 $ 52,135
COST OF REVENUES 11,550 8,364 33,409 22,754
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 9,536 6,166 27,388 18,388
DEPRECIATION EXPENSE 429 306 1,213 913
AMORTIZATION EXPENSE 766 541 2,316 1,616
------- ------- ------- ------
OPERATING INCOME 4,557 3,187 12,262 8,464
INTEREST EXPENSE, NET 11 24 114 45
EQUITY INTEREST IN NET LOSS
OF JOINT VENTURES 75 0 345 0
------- ------- ------- ------
INCOME BEFORE INCOME TAXES 4,471 3,163 11,803 8,419
PROVISION FOR INCOME TAXES 1,996 1,381 5,387 3,624
------- ------- ------- ------
NET INCOME $ 2,475 $ 1,782 $ 6,416 $ 4,795
======= ======= ======= ======
EARNINGS PER WEIGHTED AVERAGE
SHARE OUTSTANDING(a):
PRIMARY $ .23 $ .18 $ .60 $ .50
FULLY DILUTED $ .22 $ .18 $ .58 $ .48
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING(a):
PRIMARY 10,759 9,740 10,677 9,658
FULLY DILUTED 10,894 9,821 10,820 9,772
</TABLE>
(a) For comparability, the earnings per share and share data reflect the
three-for-two stock split effected on February 5, 1996.
The accompanying notes are an integral part of these statements.
<PAGE>
Page 5
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- ----------------------
1996 1995 1996 1995
----- ------ ------ -----
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME $ 2,475 $ 1,782 $ 6,416 $ 4,795
ADJUSTMENTS TO RECONCILE TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION EXPENSE 429 306 1,213 913
AMORTIZATION EXPENSE 766 541 2,316 1,616
EQUITY INTEREST IN NET LOSS FROM
JOINT VENTURES 75 -- 345 --
----- ------ ------ -----
SUBTOTAL 3,745 2,629 10,290 7,324
CHANGE IN ASSETS AND LIABILITIES THAT
PROVIDED (USED) CASH:
TRADE RECEIVABLES 245 1,040 (174) 122
UNBILLED RECEIVABLES (493) 381 (435) (828)
PREPAID EXPENSES AND OTHER
CURRENT ASSETS (459) (313) (379) (1,022)
OTHER ASSETS (462) (913) (285) (936)
ACCOUNTS PAYABLE, ACCRUED AND
OTHER LIABILITIES 1,096 1,793 643 (472)
CUSTOMER BILLINGS IN EXCESS OF
REVENUES EARNED (2,669) (3,171) (5,076) (2,703)
----- ------ ------ -----
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,003 1,446 4,584 1,485
----- ------ ------ -----
CASH FLOW FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (495) (371) (2,186) (1,235)
PAYMENT FOR ACQUISITIONS -
NET OF CASH ACQUIRED (1,040) -- (7,258) (400)
INVESTMENTS IN JOINT VENTURES (66) -- (999) --
PURCHASE OF LICENSE AGREEMENT AND
OTHER INTANGIBLES 5 -- (35) (108)
----- ------ ------ -----
NET CASH USED IN INVESTING ACTIVITIES (1,596) (371) (10,478) (1,743)
----- ------ ------ -----
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Page 6
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
(Continued)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ -----------------------
1996 1995 1996 1995
----- ---- ----- ----
<S> <C> <C> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES:
NET PROCEEDS FROM ISSUANCE OF STOCK 130 222 701 635
PAYMENTS ON LONG-TERM DEBT (2,474) (163) (6,117) (504)
COSTS ASSOCIATED WITH NEW CREDIT FACILITY ---- ---- ---- (101)
BORROWINGS ON LINE OF CREDIT 4,000 ---- 9,000 ----
----- ---- ----- ----
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,656 59 3,584 30
----- ---- ----- ----
CHANGE IN CASH 1,063 1,134 (2,310) (228)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,304 4,926 5,677 6,288
----- ----- ----- -----
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,367 $ 6,060 $ 3,367 $ 6,060
===== ==== ===== ====
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Page 7
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST $ 150 $ 49 $ 310 $ 166
INCOME TAXES $ 1,587 $ 692 $ 4,658 $ 3,618
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
In January 1996 the Company acquired Migliara/Kaplan Associates, Inc.
and Chesapeake Surveys, Inc., and in a separate transaction acquired
Plog Research, Inc., for an aggregate total of cash and shares of the
Company's Common Stock of $16.5 million (see Note 2). In August 1996
the Company acquired The Spectrem Group, Inc. for a total value of cash
and shares of the Company's Common Stock of $3.7 million (see Note 2).
In connection with these purchases, the following liabilities were
assumed.
Fair value of assets acquired $ 26,227
Less: cash paid (7,140)
Less: 729,808 (post-stock split) Company shares issued (11,559)
-------
Liabilities assumed $ 7,528
=======
The accompanying notes are an integral part of these statements.
<PAGE>
Page 8
NFO RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED, IN THOUSANDS)
ADDITIONAL ADDITIONAL
COMMON PAID-IN RETAINED MINIMUM
SHARES STOCK CAPITAL EARNINGS LIABILITY
BALANCE AT
JANUARY 1, 1996 6,285 $ 63 $27,222 $17,405 $ (669)
COMMON STOCK ISSUED IN
CONJUNCTION WITH
ACQUISITIONS 526 5 12,077
COMMON STOCK ISSUED IN
CONJUNCTION WITH THE
3 FOR 2 STOCK SPLIT 3,375 34 ( 34)
OTHER STOCK ISSUANCES 64 701
NET INCOME 6,416
------ ----- ------ ----- ------
BALANCE AT
SEPTEMBER 30, 1996 10,250 $ 102 $ 39,966 $23,821 $ (669)
The accompanying notes are an integral part of this statement.
<PAGE>
Page 9
NFO RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Financial Statements:
These condensed consolidated financial statements include the accounts of
the Company, including its subsidiaries, all of which are wholly owned.
All significant intercompany amounts have been eliminated. In the
opinion of the Company, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position
of the Company as of September 30, 1996 and the results of its operations
for the three and nine month periods ended September 30, 1996 and
September 30, 1995, respectively.
These financial statements are presented in accordance with the
requirements of Form 10-Q. Accordingly, the financial statements and
related notes in the Company's Audited Financial Statements for the
fiscal year ended December 31, 1995, included in the Company's Form 10-K
filed with the SEC on March 28, 1996, should be read in conjunction with
the accompanying condensed consolidated financial statements. The
information included herein may not be indicative of the results to be
expected for a full year.
Certain reclassifications have been made to the 1995 Condensed
Consolidated Financial Statements to conform with the 1996 presentation.
Note 2. Acquisitions:
On January 3, 1996, the Company acquired Migliara/Kaplan Associates, Inc.
("M/K") and substantially all the net assets of Chesapeake Surveys, Inc.
("CSI") for approximately $15.2 million. M/K is a full-service
healthcare marketing information company with offices in Baltimore,
Maryland and Princeton, New Jersey. CSI, a sister company of M/K,
provides data collection and survey services such as focus groups and
random telephone interviews. Of the total purchase price, approximately
$11.45 million was paid at closing, approximately 31 percent in cash and
69 percent in newly issued shares of NFO Common Stock. The remaining
$3.75 million is payable over the next three years approximately 30% in
cash and 70% in newly issued shares of the Company's Common Stock subject
to adjustment, upwards or downwards, based on the combined actual
earnings of M/K and CSI during that period and will be accounted for as
an adjustment to goodwill.
On January 3, 1996, the Company acquired Plog Research, Inc. ("Plog").
Plog supplies syndicated market research products as well as marketing
and forecasting services to the travel and tourism industries. Of the
total purchase price, approximately $5.0 million was paid at closing, 50
percent in cash, and 50 percent in newly issued shares of NFO Common
Stock. The remaining purchase price of approximately $1.7 million is
payable over the next three years, 50 percent in cash and 50 percent in
NFO Common Stock, subject to adjustment, upwards or downwards, based on
Plog's actual earnings during the period and will be accounted for as an
adjustment to goodwill.
<PAGE>
Page 10
On August 15, 1996, the Company acquired The Spectrem Group, Inc.
("Spectrem"). Spectrem provides niche consulting and acquisition and
divestiture advisory services in the trust and investment products
sectors. Of the total purchase price of $3.7 million, plus the
assumption of $0.8 million in debt, $2.4 million was paid at closing, 50%
in cash and 50% in newly issued shares of NFO Common Stock. The
remaining purchase price of approximately $1.3 million will be payable
50% in cash and 50% in newly issued shares of NFO Common Stock over the
next three years, subject to annual adjustments, upwards or downwards,
based on Spectrem's actual earnings during the period and will be
accounted for as an adjustment to goodwill. The acquisition of Spectrem
is not considered material to NFO's consolidated financial statements.
All acquisitions have been accounted for as purchases and the
accompanying financial statements include the results of operations from
the effective date of the acquisitions. The purchase price allocations
are based on preliminary estimates of fair market value and are subject
to revision.
The following unaudited proforma summary presents the condensed
consolidated results of operations as if the acquisitions had occurred on
January 1, 1995 and do not purport to be indicative of what would have
occurred had the acquisitions been made at that date or of the results
which may occur in the future. The pro forma effects of Spectrem are not
material to the three and nine month periods ended September 30, 1996 and
1995, and therefore are not included in the table shown here.
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES $ 26,838 $ 23,395 $ 76,588 $ 65,521
NET INCOME 2,475 2,245 6,416 5,779
PRIMARY EARNINGS PER SHARE $ .23 $ .22 $ .60 $ .56
The Company's results of operations for 1996 include net operating losses
associated with NFO's European joint venture activities now operating in
France, Germany and the U.K. These losses amounted to $75,000, or $.01
per share, and $345,000, or $.03 per share, for the three and nine month
periods ended September 30, 1996, respectively.
Note 3. Stock Split:
On January 5, 1996 the Company's Board of Directors authorized a three
for two stock split of the Company's Common Stock that was effected on
February 5, 1996, for holders of record as of January 22, 1996. The
accompanying financial statements give effect to the stock split.
Note 4. Newly Authorized Common Stock
The Company held a Special Meeting of Stockholders on September 19, 1996
who voted to approve increasing the authorized number of shares of the
Company's Common Stock from 15 million to 60 million.
<PAGE>
Page 11
NFO RESEARCH, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included
in this Quarterly Report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
statement data for the Company, expressed as a percentage of revenues, and
the percentage change in such items compared to amounts for the prior year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
-------------------------------- ------------------------------
PERCENTAGE OF PERCENTAGE PERCENTAGE OF PERCENTAGE
REVENUES CHANGE FROM REVENUES CHANGE FROM
1996 1995 PRIOR YEAR 1996 1995 PRIOR YEAR
------- ------- ---------- ----- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES 100.0% 100.0% 44.6% 100.0% 100.0% 46.9%
COST OF REVENUES 43.0 45.1 38.1 43.6 43.6 46.8
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 35.5 33.2 54.7 35.8 35.3 48.9
DEPRECIATION EXPENSE 1.6 1.6 40.2 1.6 1.8 32.9
AMORTIZATION EXPENSE 2.9 2.9 41.6 3.0 3.1 43.3
---- ---- ---- ----
OPERATING INCOME 17.0 17.2 43.0 16.0 16.2 44.9
INTEREST EXPENSE, NET 0.1 0.2 (54.2) 0.2 0.1 153.3
EQUITY INTEREST IN NET
LOSS OF JOINT VENTURES 0.3 0.0 ---- 0.4 0.0 ----
--- ----- ---- ----
INCOME BEFORE INCOME TAXES 16.6 17.0 41.4 15.4 16.1 40.2
PROVISION FOR INCOME TAXES 7.4 7.4 44.5 7.0 6.9 48.6
--- ----- ---- ----
NET INCOME 9.2% 9.6% 38.9% 8.4% 9.2 % 33.8%
==== ===== ===== ==== ==== ====
</TABLE>
<PAGE>
Page 12
NFO RESEARCH, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS
The Company's revenues for the three months ended September 30, 1996
increased 45% to $26.8 million from $18.6 million for the same period last
year. For the nine month period ended September 30, 1996 revenues
increased 47% to $76.6 million from $52.1 million a year ago. The
acquisitions of Migliara/Kaplan Associates, Chesapeake Surveys and Plog
Research, which occurred on January 3, 1996, and The Spectrem Group,
acquired in August, contributed $7.6 million to the $8.3 million increase
for the quarter, and $18.8 million of the $24.5 million increase for the
nine month period just ended. Revenues, not including those of the
acquired companies, increased 11% for the first nine months of 1996, led by
strong showings in NFO's core packaged goods and financial services
business units.
Cost of revenues increased 38% in the third quarter to $11.6 million from
$8.4 million a year ago. This increase is primarily due to the first time
inclusion of M/K, CSI, Plog and Spectrem ($3.4 million), somewhat offset by
a favorable shift in product mix. For the nine months ended September 30,
1996 cost of revenues increased 47% to $33.4 million from $22.8 million
last year. The percentage increase is equal to the percentage increase in
revenues for the same period and is primarily due to the 1996 acquisitions
($8.2 million).
Selling, general and administrative expenses increased 55% in the third
quarter to $9.5 million from $6.2 million a year ago. The increase is
primarily due to the inclusion of the 1996 acquisitions ($2.5 million),
expenses related to the development of the Company's new on-line
interactive research activities, expenses related to the increased activity
in Payment Systems, Inc.'s London operation which began in the second
quarter of 1995, and inflationary increases. For the nine months ended
September 30, 1996 selling, general and administrative expenses increased
49% to $27.4 million from $18.4 million last year. The principal
contributing factors to the increase were the inclusion of the 1996
acquisitions ($6.3 million), increased staffing caused by increased
activity in both the U.S. and Europe, development of on-line interactive
research services and inflationary increases.
As a result of the items above operating income for the quarter ended
September 30, 1996 increased 43% to $4.6 million from $3.2 million, and for
the first nine months of 1996 increased 45% to $12.3 million from $8.5
million, compared to the same periods a year ago.
Included this year for the first time are net operating losses associated
with NFO's European joint venture activities now operating in France,
Germany and the U.K., of $.1 million and $.3 million for the three and nine
month periods ended September 30, 1996, respectively.
The Company's effective tax rate for the three and nine month periods ended
September 30, 1996 were 44.6 and 45.6%, respectively. For the three and
nine month periods ended September 30, 1995 were 43.7% and 43.0%,
respectively. The increases over the previous year were primarily the
result of increased non-deductible amortization of intangible assets
associated with the Company's 1996 acquisitions.
<PAGE>
Page 13
Net income for the third quarter of 1996 increased 39% to $2.5 million
from $1.8 million in the same period last year. Primary earnings per
share for the quarter increased 28% to $.23 from $.18 last year. Net
income for the nine month period ended September 30, 1996 increased 34%
to $6.4 million from $4.8 million for the same period in the prior year.
Primary earnings per share for the nine month period increased 20% to
$.60 from $.50. The increases in primary earnings per share for the
quarter and nine month period were primarily due to higher net income
and occurred in spite of a greater number of outstanding shares caused
primarily by the issuance of additional shares in connection with the
recent acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of September 30, 1996 was $10.5 million compared to
$7.8 million at December 31, 1995. The increase in working capital was
primarily the net effect of the results of operations for the first nine
months of 1996, partially offset by the cash portion of the purchase
price relating to the Company's acquisitions net of borrowings ($4.4
million), capital expenditures and investments in European joint venture
activities.
At September 30, 1996 the Company had $4.0 million outstanding on its
$50.0 million credit facility with three major U.S. banks.
Capital expenditures for the quarter ended September 30, 1996 were $.5
million compared to $.4 million for the same period a year ago. For the
nine months ended September 30, 1996 capital expenditures were $2.2
million compared to $1.2 million in the prior year. It is anticpiated
that capital expenditures for 1996 will not exceed $3.3 million.
The Company anticipates that existing cash, together with internally
generated funds and its credit availabilities will provide the Company
with the resources needed to satisfy potential acquisitions and the
Company's growing working capital requirements. The timing and
magnitude of future acquisitions will be the single most important
factor in determining the Company's long term capital needs.
<PAGE>
Page 14
FORWARD LOOKING STATEMENTS
Statements in this Form 10-Q relating to matters that are not historical
facts are forward-looking statements. Such forward-looking statements
are based on the Company's current forecasts and actual results may
differ materially. To understand the risks which may affect the
Company's future performance, please refer to Part 1 of NFO's 1995
Annual Report on Form 10-K.
PART II OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote of Security Holders.
The Company held a Special Meeting of Stockholders on September
19, 1996. One matter was submitted to a vote of the Company's
stockholders at the Special Meeting. The stockholders, by a vote
of 5,918,919 for and 1,459,168 against, with 11,524 abstentions
and no broker non-votes, approved a proposal to amend the NFO
Research, Inc. Restated Certificate of Incorporation to increase
the authorized number of shares of Common Stock of the Company
from 15,000,000 to 60,000,000.
ITEM 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
3. Restated Certificate of Incorporation, as Amended
11. Computations of Net Income per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the quarter for which this report is filed.
<PAGE>
Page 15
NFO RESEARCH, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NFO RESEARCH, INC.
(Registrant)
Dated: November 13, 1996
/s/ Patrick G. Healy
Patrick G. Healy,
Executive Vice President
and Chief Financial Officer
(Authorized Officer of
Registrant and
Principal Financial Officer)
<PAGE>
NFO RESEARCH, INC.
INDEX TO EXHIBITS
EXHIBITS
3. Restated Certificate of Incorporation, as Amended
11. Computations of Net Income Per Common Share
27. Financial Data Schedule
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NFO RESEARCH, INC.
(Under Section 242 of the Delaware General Corporation Law)
NFO Research, Inc., a corporation organized and existing under
the Delaware General Corporation Law (the "Corporation"), DOES HEREBY
CERTIFY:
FIRST: The name of the Corporation is NFO Research, Inc.
SECOND: Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended by deleting the first
paragraph thereof and substituting in lieu thereof the following
paragraph:
"The total number of shares which the Corporation
shall have authority to issue is sixty-five million
(65,000,000), consisting of sixty million
(60,000,000) shares of Common Stock, par value $.01
per share (the "Common Stock") and five million
(5,000,000) shares of Preferred Stock, par value $.01
per share (the "Preferred Stock")."
<PAGE>
Page 2
THIRD: The aforesaid amendment has been duly adopted in
accordance with Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this certificate
to be signed by its duly authorized officer, this 20th day of September,
1996.
NFO RESEARCH, INC.
By:/S/WILLIAM E. LIPNER
Name:William E. Lipner
Title: Chairman of the Board and
Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
NFO RESEARCH, INC.
Adopted in accordance with the
provisions of Section 242 of the General
Corporation Law of the State of Delaware
We, William E. Lipner, President, and Steven J. Gilbert,
Secretary, of NFO RESEARCH, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, as amended (the "Corporation"), DO HEREBY CERTIFY under the
seal of the Corporation as follows:
FIRST: Article FIFTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended by deleting in its
entirety and substituting in lieu thereof the following new ARTICLE
FIFTH:
FIFTH: At all meetings of stockholders, each stockholder
shall be entitled to vote, in person or by proxy, the shares of
voting stock owned by such stockholder of record on the record date
for the meeting. Except as otherwise provided by statute or by the
Restated Certificate of Incorporation, at any meeting of
stockholders (at which a quorum was present to organize the
meeting), any election of directors shall be decided by a plurality
of the votes cast at such meeting by the holders of shares present
in person or represented by proxy and entitled to vote in the
election and all other matters shall be decided by a majority of the
votes cast at such meeting by the holders of
<PAGE>
Page 2
shares present in person or represented by proxy and entitled to vote
thereon, in each case whether or not a quorum is present when the vote
is taken.
SECOND: The foregoing amendment was duly adopted in accordance
with Section 242 of the General Corporation Law of the State of Delaware
by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Corporation, being the only class entitled
to vote at a duly held meeting of stockholders.
IN WITNESS WHEREOF, we have signed this Certificate of
Amendment and caused the corporate seal of said NFO RESEARCH, INC., to be
hereunto affixed this 5th day of May, 1995.
/S/ WILLIAM E. LIPNER
William E. Lipner
President
[SEAL]
ATTEST:
/S/ STEVEN J. GILBERT
Steven J. Gilbert
Secretary
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
NFO RESEARCH, INC.
The undersigned, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, as
amended (the "Corporation"), DOES HEREBY CERTIFY as follows:
1. The Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on
September 17, 1991 and amended and restated on September 27, 1991 and
further amended on October 21, 1991.
2. On December 21, 1992, the Corporation filed a Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
3. On February 23, 1993, and March 15, 1993, in the manner
prescribed by Sections 242 and 245 of the General Corporation Law of the
State of Delaware, as amended, resolutions were duly adopted by the Board
of Directors and the stockholders of the Corporation, respectively, duly
adopting this Restated Certificate of Incorporation and amending the
Certificate of Incorporation of the Corporation as herein provided.
4. Pursuant to the provisions of Section 103(d) of the
General Corporation Law of the State of Delaware, as amended, this
Restated Certificate of Incorporation is not to become effective until
9:00 a.m. New York time on April 15, 1993 (the "Effective Date").
5. The text of the certificate of incorporation of the
Corporation as amended and restated herein, shall, at the effective time
of this Restated Certificate of Incorporation, read as follows:
FIRST: The name of the Corporation is NFO Research, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at
that address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware, as amended (the "GCL").
FOURTH: The total number of shares which the Corporation shall
have the authority to issue is twenty million (20,000,000), consisting of
fifteen million (15,000,000) shares of Common Stock, par value $.01 per
share (the "Common
<PAGE>
Page 2
Stock") and five million (5,000,000) shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock").
B. PREFERRED STOCK. The Board of Directors is authorized,
subject to limitations prescribed by law and the provisions of this
Article FOURTH, to fix by resolution or resolutions providing for the
issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to Section 151 of the General Corporation Law of the
State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The Board of Directors may from time to time increase the
number of shares of any series of Preferred Stock already created by
providing that any unissued shares of Preferred Stock shall constitute
part of such series, or decrease (but not below the number of shares
thereof then outstanding) the number of shares of any series of Preferred
Stock already created by providing that any unissued shares previously
assigned to such series shall no longer constitute part thereof. The
Board of Directors is hereby empowered to classify any unissued Preferred
Stock by fixing or altering the terms thereof in respect of the above-
mentioned particulars and by assigning the same to any existing or newly
created series from time to time before the issuance of such Preferred
Stock.
C. COMMON STOCK. A statement of the designations, powers,
preferences, rights, qualifications, limitations and restriction in
respect of the shares of Common Stock is as follows:
(1) DIVIDENDS. The Board of Directors of the Corporation may
cause dividends to be paid to the holders of shares of Common Stock out
of funds legally available for the payment of dividends by declaring an
amount per share as a dividend. When and as dividends are declared,
whether payable in cash, in property or in shares of stock or other
securities of the Corporation, the holders of Common Stock shall be
entitled to share ratably, according to the number of shares of Common
Stock held by them, in such dividends.
(2) LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to share,
ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Corporation available for distribution to
its stockholders.
(3) VOTING RIGHTS. Except as otherwise provided in this
Certificate of Incorporation or by applicable law, the holders of Common
Stock shall be entitled to vote on each matter on which the stockholders
of the Corporation shall be entitled
<PAGE>
Page 3
to vote, and each holder of Common Stock shall be entitled to one vote for
each share of such stock held by him.
D. CONVERSION. (1) On the Effective Date, by virtue of the
effectiveness of this Restated Certificate of Incorporation, and without
any action on the holders of such shares, each share of Class A Common
Stock and each share of Class B Common Stock of the Corporation
outstanding prior to the effectiveness of this Restated Certificate of
Incorporation shall be extinguished and cease to exist and shall be
converted from 33.82700 shares of Common Stock and 22.57127 shares of
Common Stock, respectively, which shares of Common Stock shall be fully
paid and nonassessable shares of the Corporation.
(2) No fractional shares of Common Stock shall be issued upon
the aforementioned conversion, but instead such fractional shares, which
would have been issuable but for the prohibition in this paragraph, shall
evidence the right to receive cash equal to the number of fractional
shares multiplied by the initial public offering price of the shares of
Common Stock offered to the public pursuant to the Company's Registration
Statement on Form S-1 (File No 33-58748) filed with the Securities and
Exchange Commission.
(3) On the Effective Date or as soon as practicable
thereafter, each holder of the Class A Common Stock and Class B Common
Stock shall surrender its shares to the Secretary of the Company in
exchange for (i) the number of shares of Common Stock as determined in
subparagraph (C)(1) above and (ii) the amount, if applicable to such
holder, referred to in subparagraph (C)(2) above payable by check, to
which such holder is entitled. No holder shall be entitled to any
interest on the cash in lieu of fractional shares to which it is
entitled.
FIFTH: At all meetings of stockholders, each stockholder shall
be entitled to vote, in person or by proxy, the shares of voting stock
owned by such stockholders of record on the record date for the meeting.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the voting power of all of the shares of stock
of the Corporation outstanding and entitled to vote on any matter,
question or proposal brought before such meeting shall decide such
question, unless the question is one upon which, by express provision of
law, this Certificate of Incorporation or the By-Laws, a different vote
is required, in which case such express provision shall govern and
control the decision of such question.
SIXTH: The number of directors of the Corporation shall be
fixed from time to time by the vote of a majority of the entire Board of
Directors, but such number shall in no case be less than three nor more
than twelve. Any such determination made by the Board of Directors shall
continue in effect unless and until changed by the Board of Directors,
but no such changes shall affect the term of any directors then in
office.
<PAGE>
Page 4
A director shall hold office until the annual meeting for the
year in which his or her term expires and until his or her successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
Advance notice of nominations for the election of directors,
other than nominations by the Board of Directors or a committee thereof,
shall be given to the Corporation in the manner provided in the By-Laws.
SEVENTH: For the management of the business and for the
conduct of the affairs of the Corporation, and in further definition,
limitation and regulation of the powers of the Corporation and of its
directors and of its stockholders or any class thereof, as the case may
be, it is further provided:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the By-Laws
of the Corporation.
(3) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been
adopted.
EIGHTH: (1) Meetings of stockholders may be held within or
without the State of Delaware as the By-Laws may provide. The books of
the Corporation may be kept (subject to any provision contained in the
GCL) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws
of the Corporation.
(2) Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual
or special meeting of such holders and may not be effected by a consent
in writing by any such holders.
NINTH: (1) The Corporation shall, to the fullest extent
permitted by Section 145 of the GCL, as the same may be amended and
supplemented, indemnify any and all directors and officers whom it shall
have power to indemnify under said Section and may, upon the act of the
Board of Directors, indemnify all other persons whom it shall have power
to indemnify under said Section, from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
<PAGE>
Page 5
Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office. The rights to
indemnification hereunder shall continue as to a director or officer who
has ceased to be a director or officer, shall inure to the benefit of the
heirs, executors and administrators of the director or officer, and may,
upon such act of the Board of Directors, continue as to such other
persons and inure to the benefit of the heirs, executors and
administrators of such other persons. The rights to indemnification
conferred in this ARTICLE NINTH shall also include the right to be paid
by the Corporation the expenses incurred in connection with any such
proceeding in advance of its final disposition to the fullest extent
authorized by Delaware law.
(2) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this ARTICLE
NINTH by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the
time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
(3) Neither the amendment, change, alteration nor repeal of
this ARTICLE NINTH, nor the adoption of any provision of this Certificate
of Incorporation or the By-Laws of the Corporation nor any modification
of law, shall eliminate or reduce the effect of this ARTICLE NINTH or the
rights or any protections afforded under this ARTICLE NINTH in respect of
any acts or omissions occurring prior to such amendment, change,
alteration, repeal, adoption or modification.
TENTH: The Corporation reserves the right to repeal, alter or
amend this Certificate of Incorporation in the manner now or hereafter
prescribed by statute. No repeal, alteration or amendment of this
Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors of the Corporation pursuant to a
resolution adopted by the directors then in office in accordance with the
By-Laws and applicable law and thereafter approved by the stockholders.
ELEVENTH: The Corporation has elected to be governed by
Section 203 of the GCL.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its President and attested
to by its Secretary.
NFO RESEARCH, INC.
(Corporate Seal) By: /S/ WILLIAM E. LIPNER
William E. Lipner
President
ATTEST:
/S/ STEVEN J. GILBERT
Steven J. Gilbert
Secretary
NFO RESEARCH, INC.
EXHIBIT 11
COMPUTATIONS OF NET INCOME PER COMMON SHARE
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY:
NET INCOME $ 2,475 $ 1,782 $ 6,416 $ 4,795
====== ====== ====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING 10,213 9,419 10,159 9,375
DILUTIVE STOCK OPTIONS 513 288 485 250
OTHER COMMON SHARES EQUIVALENTS 33 33 33 33
------ ------ ------ ------
10,759 9,740 10,677 9,658
====== ====== ====== ======
PRIMARY EARNINGS PER SHARE $ .23 $ .18 $ .60 $ .50
====== ====== ====== ======
FULLY DILUTED:
NET INCOME $ 2,427 $ 1,759 $ 6,271 $ 4,727
====== ====== ====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING 10,213 9,419 10,159 9,375
DILUTIVE STOCK OPTIONS 513 340 493 335
OTHER COMMON SHARES EQUIVALENTS 33 33 33 33
CONTINGENT SHARES 135 29 135 29
------ ------ ------ ------
10,894 9,821 10,820 9,772
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE $ .22 $ .18 $ .58 $ .48
====== ====== ====== ======
</TABLE>
The earnings per share and share data reflect the three-for-two stock split
effected on February 5, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in NFO Research, Inc.'s report on Form 10-Q
for the quarter ended June 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,367
<SECURITIES> 0
<RECEIVABLES> 22,923
<ALLOWANCES> 138
<INVENTORY> 0
<CURRENT-ASSETS> 29,394
<PP&E> 15,771
<DEPRECIATION> 5,427
<TOTAL-ASSETS> 90,895
<CURRENT-LIABILITIES> 18,898
<BONDS> 4,991
<COMMON> 102
0
0
<OTHER-SE> 63,118
<TOTAL-LIABILITY-AND-EQUITY> 90,895
<SALES> 76,588
<TOTAL-REVENUES> 76,588
<CGS> 33,409
<TOTAL-COSTS> 64,326
<OTHER-EXPENSES> 138
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 321
<INCOME-PRETAX> 11,803
<INCOME-TAX> 5,387
<INCOME-CONTINUING> 6,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,416
<EPS-PRIMARY> .60
<EPS-DILUTED> .58
</TABLE>
