SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 20, 1998
-----------------
NFO Worldwide, Inc.
-------------------
(Exact name of Registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-21460 06-1327424
------- ----------
(Commission file number) (IRS Employer File Number)
2 Pickwick Plaza, Greenwich, CT 06830
-------------------------------------
(Address of Principal Executive Offices)
(203) 629-8888
--------------
(Registrant's Telephone Number, Including Area Code)
<PAGE>
NFO WORLDWIDE, INC.
INDEX
PAGE
NUMBER
Item 7 - Financial Statements and Exhibits 4
Signature 5
Independent Auditors' Reports for the years ended
September 30, 1998, 1997, and 1996 6
Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial
Statements as of September 30, 1998 7
Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial
Statements as of September 30, 1997 27
Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial
Statements as of September 30, 1996 46
Description of Pro Forma Combined Condensed Financial Information 61
Pro Forma Combined Condensed Balance Sheet as of September 30, 1998 62
Pro Forma Combined Condensed Statement of Income for the nine months
ended September 30, 1998 63
Pro Forma Combined Condensed Statement of Income for the year ended
December 31, 1997 64
Notes to Pro Forma Combined Condensed Financial Information 65
Exhibit 10.1* Stock Purchase Agreement dated as of November 10, 1998 by
and among NFO Europe (Deutschland) GmbH & Co. KG, NFO
Worldwide, Inc. (the "Company") and all of the Stockholders
(the "Sellers") of Infratest Burke Aktiengesellschaft
Holding ("Infratest").
Exhibit 10.2* Letter Agreement dated November 17, 1998 among the
Company, Infratest and the Sellers.
2
<PAGE>
Exhibit 10.3* Note Purchase Agreement dated as of November 20, 1998
between the Company and each of the purchasers signatory
thereto relating to the Company's Adjustable Rate Series A
Senior Notes due 2005 and the Company's Adjustable Rate
Series B Senior Notes due 2008.
Exhibit 10.4* Note Purchase Agreement dated as of November 20, 1998
between the Company and each of the purchasers signatory
thereto relating to the Company's 9.84% Senior Subordinated
Notes due 2008.
Exhibit 10.5* Amendment dated as of November 20, 1998 to the separate
Note Purchase Agreements dated as of March 9, 1998 between
the Company and each of the institutions signatory thereto.
Exhibit 10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit
Agreement dated as of March 9, 1998 by and among the
Company, Fleet National Bank and The Chase Manhattan Bank,
as co-agents, and the banks signatory thereto.
Exhibit 23.1 Consent of Independent Public Accountants 67
Exhibit 99.1* Press Release dated November 23, 1998 by the Company
announcing the Company's private placement.
Exhibit 99.2* Press Release dated November 23, 1998 by the Company
announcing the Infratest acquisition.
- ------------------
* Previously filed
3
<PAGE>
This Amendment No. 1 amends the Current Report on Form 8-K of NFO Worldwide,
Inc. (the "Company") dated November 20, 1998 (the "Form 8-K"). As provided in
Item 7(a) and 7(b) of Form 8-K, the Form 8-K did not include (i) audited
financial statements of Infratest Burke Aktiengesellschaft Holding
("Infratest"), the business acquired in the transaction, or (ii) pro forma
financial statements of the Company, neither of which were available at the time
the Form 8-K was filed. This Amendment No. 1 is filed to provide audited
financial statements of Infratest and to also provide the required pro forma
financial information.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired. The following financial
statements of Infratest prepared in accordance with German GAAP are
filed as part of this Current Report:
o Independent Auditors' Reports for the years ended September 30, 1998,
1997, and 1996.
o Infratest Burke Aktiengesellschaft Holding Munich Consolidated
Financial Statements as of September 30, 1998
o Infratest Burke Aktiengesellschaft Holding Munich Consolidated
Financial Statements as of September 30, 1997
o Infratest Burke Aktiengesellschaft Holding Munich Consolidated
Financial Statements as of September 30, 1996
(b) Pro Forma Financial Information. The following unaudited pro forma
financial information is filed as part of this Current Report:
o Description of Pro Forma Combined Condensed Financial Information
o Pro Forma Combined Condensed Balance Sheet as of September 30, 1998.
o Pro Forma Combined Condensed Statement of Income for the nine months
ended September 30, 1998.
o Pro Forma Combined Condensed Statement of Income for the year ended
December 31, 1997.
o Notes to Pro Forma Combined Condensed Financial Information.
(c) Exhibits:
10.1* Stock Purchase Agreement dated as of November 10, 1998 by and
among NFO Europe (Deutschland) GmbH & Co. KG, NFO Worldwide,
Inc. (the "Company") and all of the Stockholders (the
"Sellers") of Infratest Burke Aktiengesellschaft Holding
("Infratest").
10.2* Letter Agreement dated November 17, 1998 among the Company,
Infratest and the Sellers.
10.3* Note Purchase Agreement dated as of November 20, 1998 between
the Company and each of the purchasers signatory thereto
relating to the Company's Adjustable Rate Series A Senior
Notes due 2005 and the Company's Adjustable Rate Series B
Senior Notes due 2008.
10.4* Note Purchase Agreement dated as of November 20, 1998 between
the Company and each of the purchasers signatory thereto
relating to the Company's 9.84% Senior Subordinated Notes due
2008.
10.5* Amendment dated as of November 20, 1998 to the separate Note
Purchase Agreements dated as of March 9, 1998 between the
Company and each of the institutions signatory thereto.
10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit
Agreement dated as of March 9, 1998 by and among the Company,
Fleet National Bank and The Chase Manhattan Bank, as
co-agents, and the banks signatory thereto.
23.1 Consent of Independent Public Accountants.
99.1* Press Release dated November 23, 1998 by the Company
announcing the Company's private placement.
99.2* Press Release dated November 23, 1998 by the Company
announcing the Infratest acquisition.
- ------------------
* Previously filed
4
<PAGE>
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 hereunto duly authorized.
NFO Worldwide, Inc.
By: /s/ PATRICK G. HEALY
------------------------
PATRICK G. HEALY
President - AustralAsia and the
Middle East and
Chief Financial Officer
(Authorized Officer of Registrant and
Principal Financial Officer)
Dated: February 3, 1998
----------------
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors of
Infratest Burke Aktiengesellschaft Holding
We have audited the accompanying consolidated balance sheets of Infratest Burke
Aktiengesellschaft Holding and subsidiaries ("IB") as of September 30, 1998,
1997 and 1996 and the related consolidated statements of operations for each of
the years in the three year period ended September 30, 1998. These consolidated
financial statements are the responsibility of IB's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Germany which are similar to US generally accepted auditing standards in all
material respects. 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 based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of IB as of September 30, 1998, 1997 and 1996 and the results of their
operations for each of the years in the three year period ended September 30,
1998 in conformity with generally accepted accounting principles in Germany.
Further, in our opinion, the reconciliation of consolidated net income and
shareholders' equity for the years ended September 30, 1998 and 1997 presented
in Note 6 and 7 to the accompanying consolidated financial statements, presents
fairly in all material respects, the reconciliation of net income and
shareholders` equity, as shown in the consolidated financial statements, to net
income and shareholders' equity as determined in accordance with accounting
principles generally accepted in the United States of America.
Munich, Germany
January 15, 1999
Haarmann, Hemmelrath & Partner GmbH
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft
Zelger ppa. Pilenghi
Wirtschaftsprufer Wirtschaftsprufer
Attachments
6
<PAGE>
Infratest Burke Aktiengesellschaft Holding
Munich
Consolidated Financial Statements
as of September 30, 1998
7
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998
ASSETS
1998 1997
DM DM
-------------- --------------
A. FIXED ASSETS
I.Intangible assets
1. Franchise, trademarks, patents,
licences and similar rights 11,150,627.83 16,297,565.38
2. Goodwill 39,065,569.29 42,063,252.14
-------------- --------------
50,216,197.12 58,360,817.52
II.Property, plant and equipment
1. Land, leasehold rights and buildings,
including buildings on non-owned land 9,364,268.69 10,108,100.18
2. Other equipment, fixtures, fittings and
equipment 15,956,366.84 16,048,743.47
-------------- --------------
25,320,635.53 26,156,843.65
III.Financial assets
1. Shares in affiliated companies 2,843,350.76 624,468.00
2. Shares in associated companies 350,079.77 301,804.92
3. Investments 192,260.30 532,681.94
4. Loans due from other group companies 321,530.00 271,530.00
5. Securitiy investments 0.00 40,766.25
6. Other loans 363,777.43 349,693.92
-------------- --------------
4,070,998.26 2,120,945.03
-------------- --------------
79,607,830.91 86,638,606.20
-------------- --------------
B. CURRENT ASSETS
I.Inventories
1. Raw material and supplies 319,258.14 365,497.24
2. Work in process and finished goods 51,612,031.32 44,442,315.88
3. minus: advance payments received on
accounts orders -51,612,031.32 -44,442,315.88
4. Advance payments 10,380.00 120,695.00
-------------- --------------
329,638.14 486,192.24
II.Accounts receivable and other assets
1. Accounts receivable trade 59,871,699.84 51,213,594.89
2. Accounts due from affiliated companies 181,135.33 230.00
3. Accounts due from joint ventures 676,702.59 173.90
4. Accounts due from other group companies 527,865.84 524,209.16
5. Other assets 6,766,373.35 5,796,290.47
-------------- --------------
68,023,776.95 57,534,498.42
III.Marketable securities
Other marketable securities 186,764.03 205,156.18
IV.Checks, cash on hand and in Federal Bank
and in postal giro accounts and cash in
banks 12,881,001.82 15,134,051.05
-------------- --------------
81,421,180.94 73,359,897.89
-------------- --------------
C. DEFERRED TAX ASSETS 845,679.25 799,475.25
-------------- --------------
D. PREPAID EXPENSES AND DEFERRED CHARGES 4,762,617.01 2,481,096.07
-------------- --------------
166,637,308.11 163,279,075.41
============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
1998 1997
DM DM
-------------- --------------
A. SHAREHOLDERS' EQUITY
I.Capital subscribed 100,000.00 100,000.00
II.Capital surplus 29,180,000.00 29,180,000.00
III.Consolidated accumulated deficit, brought
forward -12,710,228.79 -15,726,626.48
IV.Consolidated net income/(loss) 6,902,903.42 3,630,799.65
V.Minority interest 1,435,961.32 1,025,228.16
VI.Accumulated translation difference 174,652.61 620,197.16
-------------- --------------
25,083,288.56 18,829,598.49
-------------- --------------
B. PROVISIONS AND ACCRUED LIABILITIES
1. Provisions for pensions and similar
obligations 73,114.84 112,633.95
2. Accrued taxes 4,671,729.62 4,992,685.33
3. Deferred taxes 417,932.51 0.00
4. Other provisions and accrued liabilities 40,594,752.41 31,265,849.52
-------------- --------------
45,757,529.38 36,371,168.80
-------------- --------------
C. LIABILITIES
1. Liabilities due to banks 43,830,322.94 55,203,766.17
2. Advance payments received on account of
orders 894,653.49 1,241,319.09
3. Trade accounts payable 18,007,818.41 15,884,769.80
4. Accounts due to affiliated companies 2,703,659.29 3,208,642.29
5. Accounts payable due to joint ventures 1,028,782.05 73,437.02
6. Accounts due to other group companies 1,389,280.34 575,360.64
7. Other liabilities 27,625,362.19 31,623,276.57
-------------- --------------
95,479,878.71 107,810,571.58
-------------- --------------
D. DEFERRED CHARGES 316,611.46 267,736.54
-------------- --------------
-------------- --------------
166,637,308.11 163,279,075.41
============== ==============
8
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR 1997/98
<TABLE>
<CAPTION>
1998 1997
DM DM
-------------------- --------------------
<S> <C> <C>
1. Sales 362,586,890.62 289,983,801.85
2. Increase of work in process and finished goods 7,169,715.44 5,066,942.11
3. Other operating income 5,361,415.57 7,809,006.16
4. Expenses of services received -129,870,733.28 -94,238,723.43
5. Personnel expenses
a) Wages and salaries -119,219,244.92 -92,622,345.66
b) Social security, pension and other benefit costs -23,259,376.11 -20,515,468.02
6. Depreciation expenses -16,769,891.19 -14,193,453.60
7. Other operating expenses -68,974,279.36 -69,986,307.74
8. Income from investments and associated companies 630,440.28 786,867.05
9. Other interest and similar income 492,317.31 431,865.97
10. Write-offs of financial assets and marketable securities -865,218.31 -63,163.18
11. Interest and similar expenses -4,031,523.43 -3,766,351.93
-------------------- --------------------
12. Result from ordinary operation 13,250,512.62 8,692,669.58
-------------------- --------------------
13. Taxes on income -3,765,533.74 -3,292,888.40
14. Other taxes -1,692,428.29 -1,389,626.43
-------------------- --------------------
15. Consolidated profit / (loss) before minority-interest 7,792,550.59 4,010,154.75
-------------------- --------------------
16. Minority-interest -889,647.17 -379,355.10
-------------------- --------------------
17. Consolidated profit / (loss) 6,902,903.42 3,630,799.65
==================== ====================
</TABLE>
9
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR 1997/98
1. INFORMATION ON INVESTMENT HOLDINGS
For the following notes, the ultimate participating interest of Infratest Burke
AG Holding in the capital of the individual companies has been calculated as a
percentage.
1.1 Consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/98 1997/98
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Infratest Burke International GmbH Holding, Munich 100 TDM 30.000 39,840 7,461
Infratest Burke GmbH & Co, Forschung fur Entscheidungen
in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 7,421
Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 4,181
Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 2,086
Infratest Burke S.p.A., Mailand, Italien 100 MioLIR 1.000 2,557 1,116
Infratest Burke S.a.r.l., Paris, France 100 TFF 270 1,027 556
Infratest Burke Group Ltd., London, UK 100 TGBP 2.000 7,136 490
PAS Group Ltd., London, UK 100 TGBP 342 2,712 427
Infratest Burke InCom GmbH & Co, Forschung und Beratung
fur die Informations- und Kommunikationsmarkte, Munich 1) 100 TDM 100 100 2,087
Infratest Burke International Services Ltd., London, UK 100 TGBP 60 -122 95
Infratest dimap Gesellschaft fur Trend- und Wahlforschung
mbH, Berlin 74 TDM 50 -78 49
NEXXUS Kommunikationsanlagen GmbH, Betrieb und
Vermietung, Munich 100 TDM 50 37 21
Infratest Burke AB, Goteborg, Sweden 75.2 TSEK 100 262 -27
Infratest Burke Asia Pacific Ltd., London, UK 100 TGBP 50 -37 254
Infratest Burke GmbH & Co. Marketingforschung, Frankfurt am Main 100 TDM 100 100 26
Trendbox B.V., Amsterdam, Netherlands 75 THFL 250 -1,447 -436
Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 2,030
KFM Klinische Forschung GmbH, Munich 72 TDM 50 443 291
Testpanel-Marktforschungsinstitut GmbH, Wetzlar 100 TDM 60 737 440
1) The presentation of the nominal capital and net worth relates to the capital account of the limited-liability partner of the
respective partnership.
</TABLE>
10
<PAGE>
1.2 Non-consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/98 1997/98
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Infratest Burke Core Company Ltd., London, England 100 TGBP 150 386 0
Infratest U.S. Inc. Wilmington (USA) 1) 100 TUSD 1 - -
Infratest Burke Beteiligungs GmbH, Munich 100 TDM 50 57 3
Infratest Burke Verwaltungs-GmbH, Munich 100 TDM 50 58 3
Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 58 3
Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 15 5
Infratest Burke InCom Beteiligungs GmbH, Munich 100 TDM 50 58 3
InfraForces S.a.r.l., Paris, France 100 TFF 100 -270 -328
Infratest Gesundheitsforschung GmbH, Geretsried 80 TDM 50 58 2
Plus Remark Research for Marketing, Istanbul, Turke 2) 55 TRK 7.500 1,096 473
1) No data on the year-end closing were available by the date of preparation of the annual financial statements
2) Data as of December 31, 1997
</TABLE>
These firms were not included in the consolidated financial statements in view
of their minimal business activity during the fiscal year 1997/98 or their
secondary importance with respect to the consolidated financial statements
pursuant to Section 296 of the Commercial Code.
Additional participating interests are held in companies that are currently
inactive or are in liquidation.
11
<PAGE>
1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/98 1997/98
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Burke Inc., Cincinnati, USA 50 TUSD 3.750 3,023 2,080
Infratest + GFK Gesundheitsforschung
GmbH & Co., Berlin 1) 40 TDM 70 70 2,496
Infratest Gesundheitsforschung (Suisse) GmbH, 34 TSFR 200 166 777
ZEG Zentrum fur Epidemiologie und Gesundheits-
forschung GmbH, Zepernick 22 TDM 150 580 359
GPI Kommunikationsforschung Gesellschaft fur 32 TDM 50 1,343 1,247
Pharma-Informationssysteme mbH, Nurnberg
I + G Infratest und GFK Medical Research 26 TUSD 100 1,136 378
International Inc., Rhode Island, USA
I + G Nordic Medical Research A/S, Copenhagen 28 TDKK 500 187 57
Denmark
IMePa Institut fur Medizin- und Patientenforschung
GmbH, Munich 20 TDM 100 399 188
I + G Gesundheitsforschung GmbH & Co, Nurnberg 40 TDM 50 50 2,450
1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of
the respective partnership.
</TABLE>
1.4 Associated companies in the sense of Section 311 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/98 1997/98
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Infratel GmbH Telefonische Datenerhebung
und Datenverarbeitung, Bielefeld 1) 29 TDM 50 233 49
P & P Software und Consulting Gesellschaft
mbH, Bad Homburg 1) 20 TDM 56,5 755 613
MedVantage GmbH Integriertes Datenmanagement
im Healthcare Markt, Frankfurt 18 TDM 100 -1,693 9
GPI Gesellschaft fur Pharma-Informations-
systeme mbH, Frankfurt 2) 12 TDM 100 1,687 1,537
MAP I + G S.A., Lyon, France 3) 20 TFF 350 1,106 12
1) The data pertain to the unaudited annual financial statements as of December 31, 1997
2) The data pertain to the annual financial statements as of November 30, 1997
3) The data pertain to the annual financial statements as of September 30, 1997
</TABLE>
12
<PAGE>
2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION
2.1 Individual annual financial statements included
The provisions of the Commercial Code and the Stock Corporation Law relating to
balance-sheet preparation, valuation and recognition are complied with in
preparing the annual accounts included in the consolidated financial statements.
In cases where tax provisions relating to balance-sheet preparation mandate the
preparation of a corresponding balance-sheet as part of the annual financial
statements, compliance with these tax provisions is maintained.
2.1.1 Assets
Intangible and tangible fixed assets are recorded at acquisition cost less
scheduled depreciation. Depreciation is calculated by the straight-line method,
at the rates permitted by tax law. Low-cost economic goods are depreciated in
full during the year of acquisition and are shown in the development of the
assets as additions and disposals and as depreciation for the current fiscal
year.
The rates of depreciation are:
Goodwill 6,7 - 25 % p.a.
Software 25 % p.a.
Vehicle fleet 20 - 25 % p.a.
Other factory and office equipment 10 - 33 % p.a.
13
<PAGE>
Fixed assets developed as follows (from 10-01 1997 to 09-30 1998):
<TABLE>
<CAPTION>
Cost
-----------------------------------------------------------------------------------------------------------
10-01-1997 10-01-1997
at closing date Exchange at closing date
rate rate rate
09-30-97 differences 09-30-98 Additions Transfers Disposals 09-30-98
DM DM DM DM DM DM DM
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Intangible assets
- -----------------
1. Franchises,
trademarks, patents,
licences and
similar rights 27,621,348.56 -126,999.85 27,494,348.71 378,891.75 8,566.24 258,335.17 27,623,471.53
2. Goodwill 45,268,543.73 0.00 45,268,543.73 10,077.79 0.00 0.00 45,278,621.52
-----------------------------------------------------------------------------------------------------------
72,889,892.29 -126,999.85 72,762,892.44 388,969.54 8,566.24 258,335.17 72,902,093.05
-----------------------------------------------------------------------------------------------------------
Property, plant and
equipment
- -------------------
1. Land, leasehold rights
and buildings,
including buildings
einschlielslich der
Bauten on non-owned
land 10,253,673.18 -159,571.42 10,094,101.76 38,333.83 -217,487.72 5,510.10 9,909,437.77
2. Technical equipment,
plant and machinery 5,295,124.69 -212,064.60 5,083,060.09 1,507,564.80 1,088,829.92 761,629.98 6,917,824.83
3. Other equipment,
fixtures, fittings
and equipment 34,279,492.76 -350,912.83 33,928,579.93 6,484,380.85 -713,230.96 3,156,929.22 36,542,800.60
4. Advance payments 168,812.23 -649.63 168,162.60 366,625.04 -166,677.47 1,485.12 366,625.05
-----------------------------------------------------------------------------------------------------------
49,997,102.86 -723,198.48 49,273,904.38 8,396,904.52 -8,566.23 3,925,554.42 53,736,688.25
-----------------------------------------------------------------------------------------------------------
Financial assets
- ----------------
1. Shares in affiliated
companies 624,468.00 0.00 624,468.00 2,130,747.12 88,135.64 0.00 2,843,350.76
2. Loans due from
affiliated companies 0.00 0.00 0.00 1,769,714.31 0.00 0.00 1,769,714.31
3. Shares in associated
companies 1,233,244.30 0.00 1,233,244.30 74,500.00 0.00 26,225.15 1,281,519.15
4. Investments 696,554.74 0.00 696,554.74 0.00 -88,135.64 252,286.00 356,133.10
5. Loans due from other
group companies 271,530.00 0.00 271,530.00 50,000.00 0.00 0.00 321,530.00
6. Security investments 40,766.25 0.00 40,766.25 0.00 0.00 40,766.25 0.00
7. Other loans 349,693.92 -1,103.77 348,590.15 76,862.17 0.00 61,674.90 363,777.42
-----------------------------------------------------------------------------------------------------------
3,216,257.21 -1,103.77 3,215,153.44 4,101,823.60 0.00 380,952.30 6,936,024.74
-----------------------------------------------------------------------------------------------------------
126,103,252.36 -851,302.10 125,251,950.26 12,887,697.66 0.00 4,564,841.89 133,574,806.04
===========================================================================================================
Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
10-01-1997 10-01-1997
at closing date Exchange at closing date Additions Exchange Additions
rate rate rate Average rate at closing date
09-30-97 differences 09-30-98 rate differences rate Transfers Disposals 09-30-98
DM DM DM DM DM DM DM DM DM
- ------------------------------------------------------------------------------------------------------------------------------------
11,323,783.18 -107,245.31 11,216,537.87 5,417,504.37 -2,920.16 5,414,584.21 8,563.25 166,841.63 16,472,843.70
3,205,291.59 0.00 3,205,291.59 3,007,760.64 0.00 3,007,760.64 0.00 0.00 6,213,052.23
- ------------------------------------------------------------------------------------------------------------------------------------
14,529,074.77 -107,245.31 14,421,829.46 8,425,265.01 -2,920.16 8,422,344.85 8,563.25 166,841.63 22,685,895.93
- ------------------------------------------------------------------------------------------------------------------------------------
145,573.00 -11,652.20 133,920.80 473,749.83 -1,402.16 472,347.67 -55,589.29 5,510.10 545,169.08
2,968,746.61 -129,604.05 2,839,142.56 1,541,107.15 -71,927.30 1,469,179.85 596,635.29 753,080.41 4,151,877.29
20,725,939.60 -189,299.09 20,536,640.51 6,362,402.04 -45,265.06 6,317,136.98 -549,609.25 2,585,161.90 23,719,006.34
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
23,840,259.21 -330,555.34 23,509,703.87 8,377,259.02 -118,594.52 8,258,664.50 -8,563.25 3,343,752.41 28,416,052.71
- ------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 1,769,714.31 0.00 1,769,714.31 0.00 0.00 1,769,714.31
931,439.38 0.00 931,439.38 0.00 0.00 0.00 0.00 0.00 931,439.38
163,872.80 0.00 163,872.80 0.00 0.00 0.00 0.00 0.00 163,872.80
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
1,095,312.18 0.00 1,095,312.18 1,769,714.31 0.00 1,769,714.31 0.00 0.00 2,865,026.49
- ------------------------------------------------------------------------------------------------------------------------------------
39,464,646.16 -437,800.65 39,026,845.51 18,572,238.34 -121,514.68 18,450,723.66 0.00 3,510,594.04 53,966,975.13
====================================================================================================================================
Net book value
- ------------------------------------
09-30-1998 09-30-1997
DM DM
- ------------------------------------
11,150,627.83 16,297,565.38
39,065,569.29 42,063,252.14
- ------------------------------------
50,216,197.12 58,360,817.52
- ------------------------------------
9,364,268.69 10,108,100.18
2,765,947.54 2,326,378.08
12,823,794.26 13,553,553.16
366,625.05 168,812.23
- ------------------------------------
25,320,635.54 26,156,843.65
- ------------------------------------
2,843,350.76 624,468.00
0.00 0.00
350,079.77 301,804.92
192,260.30 532,681.94
321,530.00 271,530.00
0.00 40,766.25
363,777.42 349,693.92
- ------------------------------------
4,070,998.25 2,120,945.03
====================================
79,607,830.91 86,638,606.20
====================================
The additions to depreciation include DM 32.632,82 resulting from the initial consolidation of ImePa GmbH on quota-basis (26,5%) and
DM 904.496,00 resulting from the consolidation of InfraForces.
A loan in the amount of TDM 1.769 to InfraForces has been partially (50 %) in fiscal year 1996/1997 reserved, which has been
eliminated in the consolidation process. The remaining book value in the amount of TDM 865 has been reserved in fiscal year 1997/98
with the result that a reserve has been provided for the total amount of the loan as of September 30, 1998.
</TABLE>
14
<PAGE>
2.1.2 Inventories
Work in process is valued at production cost. Completed but uninvoiced services
are recorded as finished goods under "Inventories" and are valued at net sale
price.
Production cost includes all components that must be carried as assets according
to tax law.
In case the expected total production cost of work in process exceed total
expected net sales revenues adequate inventory reserves are provided.
Furthermore provisions are established for follow-up services yet to be
performed in connection with finished or invoiced services.
Advance payments from customers are deducted from inventory as such and are
posted as liabilities to the extent they exceed inventory.
2.1.3 Receivables and other fixed assets
Trade accounts receivables are recorded at nominal value. For doubtful accounts
receivables and those carrying discernible risks, direct adjustments are made;
uncollectable debts are written off. General interest and credit risk is covered
by a lump-sum value adjustment of 2%.
Other receivables and other assets are recorded at the nominal amount or at a
lower value assigned at the closing date.
2.1.4 Provisions
Provisions are created for as dictated by sound business judgement to cover
uncertain liabilieties, anticipated losses related to incomplete contracts, and
deferred maintenance.
2.1.5 Payables
Payables are recorded at the amount repayable.
15
<PAGE>
2.2 Consolidation methods
2.2.1 Capital consolidation
Capital consolidation is performed by the book value method (Section 301 Para. 1
Sentence 2 No. 1 of the Commercial Code). According to this method,
participating interests that must be consolidated are offset against their
allotted share of the net worth of the subsidiaries. This net worth represents
the book value at date of acquisition of the assets, debts, accrued and deferred
items and special items to be reported on in the consolidated financial
statements.
Consolidation surpluses from capital consolidation at the date of acquisition of
the participating interests are offset against reserves (in the year under
review: TDM 614; previous year: TDM 0) - possibly after allocation to hidden
reserves in the assets of the acquired undertaking - or are allocated to
goodwill and amortized over the 15 years following the year of acquisition of
the interest (amortization during the year under review: TDM 3.008; previous
year: TDM 2.110).
2.2.2 Equity consolidation
The associated companies
- - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt
- - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt
- - P & P Software und Consulting GmbH, Bad Homburg
were included in the consolidated financial statements by the equity/book value
method.
For reasons of materiality, the other associated companies continued to be
carried at the book values recorded in the stockholder's individual financial
statements.
2.2.3 Pro-rata consolidation
The joint ventures
IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich
I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA
Infratest Gesundheitsforschung (Suisse) GmbH
I + G Nordic Medical Research A/S, Copenhagen, Denmark
Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin
ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin
GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme
mbH, Nuremberg
I + G Gesundheitsforschung GmbH & Co, Nuremberg)
Burke Inc., Cincinnati, USA
were included in the consolidated financial statements on a pro-rata basis,
according to the percentage of the interest in the firm.
16
<PAGE>
2.2.4 Elimination of inter-company profits
Assets to be included in the consolidated financial statements and deriving
wholly or in part from transactions among the companies included in the
consolidated financial statements are reported on the consolidated balance sheet
at acquisition or production cost of the group.
3. BASIS OF FOREIGN CURRENCY TRANSLATION
3.1 Translation of individual financial-statement items stated in foreign
currency
For annual financial statements containing items based on sums that are or
originally were stated in foreign currency, the conversion to German marks is
performed at the rate in effect at the transaction date. Balance-sheet items are
valued at the exchange rate in effect on the closing date, no exchange gains
being realized.
3.2 Translation of financial statements in foreign currencies
The translation of financial statements recorded in foreign currencies was
performed by the current rate method: balance-sheet items were translated at the
rate in effect on the closing date of September 30, 1998, and income-statement
items were translated at the average rate for the fiscal year 1997/98.
Exchange-rate differences resulting from the translation of net worth at
different current rates and differences resulting from the translation of
balance-sheet items at current rates and income statement items at average rates
are recognized separately as a equity item on the balance sheet.
17
<PAGE>
4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS
4.1 Items of accrual and deferral for deferred taxes
The deferred tax asset relates to a discrepancy between the goodwill reported on
the individual financial statements of Infratest Burke Wirtschaftsforschung GmbH
& Co, Munich, and that recorded by the Group, and to the translation of the
percentage-of-completion method into the completed-contact method used within
the Group for the tax consequences incurred by the joint venture Burke Inc.,
which is included on a pro-rata basis.
4.2 Other provisions and accrued liabilities
"Other provisions and accrued liabilities" basically recognizes provisions for
Profit-sharing
Follow-up services
Unpaid invoices
Restructuring
Vacations and overtime
Statuary social security benefits (Italy)
Year-end costs
Employee anniversaries.
5. OTHER MANDATORY INFORMATION
5.1 Remaining term
The remaining term on receivables is less than one year. The remaining terms on
payables are shown in the following presentation of accounts payable:
<TABLE>
<CAPTION>
Due within After
Total 1 year 1-5 years 5 years
DM DM DM DM
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Liabilities due to banks 43.830.322,94 43.426.997,04 359.043.40 44.282,50
Advance payments received on account of orders 894.653,49 894.653,49 0,00 0,00
Trade accounts payable 18.007.818,41 17.659.988,83 347.829,58 0,00
Accounts due to affiliated companies 2.703.659,29 2.703.659,29 0,00 0,00
Accounts due to joint ventures 1.028.782,05 1.028.782,05 0,00 0,00
Accounts due to other group companies 1.389.280,34 1.389.280,34 0,00 0,00
Other liabilities 27.625.362,19 27.339.115,00 131.258,44 154.988,75
============== ============== =============== ==============
95.479.878,71 94.442.476,04 838.131,42 199.271,25
============== ============== =============== ==============
</TABLE>
18
<PAGE>
5.2 Collateralization of accounts payable
Payables are not collateralized.
5.3 Analysis of sales revenues
Sales revenues - broken down according to country of realization - are
distributed as follows:
1997/98 1996/97
TDM TDM
------------ ------------
Domestic 173,759 154,407
Foreign 188,828 135,577
------------ ------------
362,587 289,984
============ ============
5.4 Other financial obligations
Other financial obligations total TDM 37.851 (previous year: TDM 42.345).
5.5 Employees
The average number of employees in the Group - that is, in the fully
consolidated companies - is distributed as follows (itemized by country):
1997/98 1996/97
------------- -------------
England 174 163
Germany 418 419
Sweden 90 63
Holland 54 63
Italy 75 72
France 91 91
------------- -------------
902 871
============= =============
19
<PAGE>
The average number of employees of companies included in the consolidated
financial statements on a pro-rata basis only is distributed as follows:
1997/98 1996/97
------------- -------------
Germany 110 123
Switzerland 12 9
U.S. 346 247
Denmark 3 3
------------- -------------
471 382
============= =============
5.6 Remuneration of officers
Remuneration paid to the Board of Directors of the parent company, I.B. AG
Holding, during the fiscal year 1997/98 totaled TDM 4,304 (previous year: TDM
2,750).
Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year
1997/98.
6. SUMMARY OF DIFFERENCES BETWEEN GERMAN AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The following is a summary of the estimated adjustments to consolidated profit
and to consolidated stockholders' equity that would have been required if US
GAAP would have been applied instead of German GAAP.
20
<PAGE>
6.1. Approximate effects on consolidated profit of differences between
German and US generally accepted accounting principles
TDM TDM
---------- ----------
Net Profit/(Loss) as reported under German GAAP 6,903
----------
US GAAP adjustments:
Amortization of goodwill 5,736
Profit recognition by application of percentage
of completion method -180
Lumpsum reserve on accounts receivable trade -121
Reversal of accrual for future expenses -517
Other -25 4,893
----------
Tax effects:
Deferred taxation -3,684
Provision for tax risks -950 -4,634
----------
----------
Approximate Net Profit/(Loss) as adjusted for US GAAP 7,162
==========
21
<PAGE>
6.2. Approximate cumulative effect on shareholders' equity of differences
between German and US generally accepted accounting principles
TDM
---------
Shareholders' equity per German GAAP 1) 23,647
---------
US GAAP adjustments:
Goodwill 14,692
Profit recognition by application of percentage
of completion method 21,744
Lumpsum reserve on account sreceivable trade 243
Provision for future expenses 2,026
Provision for tax risks -2,925
Deferred taxation -2,064
Effect on minorities 430
Other 53
---------
Approximate Shareholders' equity as adjusted for US GAAP 57,846
=========
1) excluding minority interest
22
<PAGE>
6.3. Discussion of material variations between German and US generally
accepted accounting principles
The material variations between German and US GAAP relate to the following
items:
6.3.1. Goodwill / Amortization of goodwill
Goodwill resulting from the consolidation process is amortized over a period of
30 years applying the straight line method for US GAAP purposes. The treatment
in the local consolidated financial statements follows the treatment in the tax
filing where the amounts of purchase prices exceeding the net equity of acquired
subsidiaries is amortized over a shorter period of time (between 1 and 15 years,
depending on the allocation applied). Due to the amortization opportunity for
local taxation deferred taxes / tax assets have been considered (see Sect. 6.3.6
below).
6.3.2 Percentage of completion method
Profit recognition relating to services rendered to customers follows the
"percentage of completion"- method for US GAAP purposes whereas for local
purposes the "completed contract"- method must be applied. According to the
"completed contract" - method profit may not be recognized until the
contractually agreed services have been accepted by the customers. Compared to
the "percentage of completion"- method the application of the "completed
contract" - method leads to a delay in profit recognition.
23
<PAGE>
6.3.3. Lumpsum reserve on accounts receivable trade
The difference relates to the application of varying rates for the calculation
of lumpsum bond debt reserves:
US GAAP 1% for German companies
0% for Non-German companies
German GAAP 2%
6.3.4. Provision for future expenses
Local books contain provisions for expenses which can not be related to the
current or prior years but shall cover potential expenses which are related to
the future. Those provisions are not allowed by US GAAP and accordingly were
eliminated in consolidated shareholders' equity adjusted for US GAAP.
6.3.5 Provision for tax risks
The accounting of German trade tax on income in the local consolidated financial
statements followed the treatment in the tax filings. Since, however, a probable
risk exists that those taxes will be payable a respective provision was
established in the consolidated financial statements adjusted for US GAAP.
6.3.6 Deferred taxation
Deferred taxes relate to temporary differences between the tax bases of assets
or liabilities and the reported amounts according to US GAAP as well as to tax
loss carryforwards. If evidence indicates that it is more likely than not that
deferred tax assets relating to tax loss carryforwards will not be realized
adequate allowances were provided. Deferred taxes have primarily been provided
for temporary differences relating to explanations in Sect. 6.3.1, 6.3.2 and
6.3.3 and to tax loss carryforwards in Germany.
The tax rate applied amounts to 35%.
6.3.7 Equity Method
Joint venture companies (reference is made to Sect. 2.2.3.) were included in the
consolidated financial statements under German GAAP on a pro-rata basis whereas
under US GAAP the Equity method was applied. The impact on consolidated
stockholders' equity and on consolidated income was not material.
24
<PAGE>
7. CASH FLOW STATEMENT
<TABLE>
<CAPTION>
1997/98 1996/97
TDM TDM
<S> <C> <C>
Cash flow from operating activities:
Consolidated profit (loss) of the year 7,162 6,880
Adjustments to reconcile consolidated profit (loss) to net cash:
Depreciation and amortization 10,610 8,253
Change in provisions for pensions -36 109
Change in inventories -1,208 -6,827
Change in accounts receivables -6,668 -10,408
Change in deferred tax assets 3,902 3,025
Change in accounts due from group companies -1,182 2,459
Change in other operating assets and prepaid expenses -2,986 12,831
Change in deferred income taxes 3,280 3,953
Change in tax provisions -2,078 -2,329
Change in provisions 6,234 1,331
Change in advance payments received 4,761 6,105
Change in amounts owed to group companies 1,905 -1,541
Change in accounts payables -1,751 3,395
Change in other operating liabilities and deferred charges -3,386 3,330
------------ ------------
Net cash provided from operating activities 18,559 30,566
............ ............
Cash flow from investing activities:
Net investment intangible assets -340 -16,362
Net investment tangible assets -7,022 -7,896
Net investment financial assets -2,632 -19,013
------------ ------------
Net cash provided from investing activities -9,994 -43,271
............ .............
Cash flow from financing activities
Change in debts to banks -11,388 17,671
Change in retained earnings -614
Change in minority interest -89 297
------------ ------------
Net cash provided from financing activities -12,091 17,968
............ ............
Effect of Exchange Rate Differences in Equity -146 408
............
Change in Cash and Cash Equivalents -3,672 5,671
============ ============
Cash and Cash equivalents at the beginning of the year 14,544 8,873
============ ============
Cash and Cash Equivalents at the end of the year 10,872 14,544
============ ============
</TABLE>
25
<PAGE>
Reconciliation of cash and cash equivalents
- -------------------------------------------
1997/98 1996/97
TDM TDM
----------- -----------
Cash and cash equivalents according to
German GAAP as of September 30, 1998 12,881 15,134
Elimination of per quota consolidated entities -2,009 -590
----------- -----------
10,872 14,544
=========== ===========
Munich, January 15, 1999
The Board of Directors
26
<PAGE>
Infratest Burke Aktiengesellschaft Holding
Munich
Consolidated Financial Statements
as of September 30, 1997
27
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997
ASSETS
1997 1996
DM DM
-------------- --------------
A. FIXED ASSETS
I.Intangible assets
1.Franchise, trademarks, patents, licences
and similar rights 16,297,565.38 19,643,319.06
2.Goodwill 42,063,252.14 12,783,680.00
-------------- --------------
58,360,817.52 32,426,999.06
II.Property, plant and equipment
1.Land, leasehold rights and buildings,
including buildings on non-owned land 10,108,100.18 8,202,729.70
2.Other equipment, fixtures, fittings and
equipment including advance payments 16,048,743.47 14,826,966.22
-------------- --------------
26,156,843.65 23,029,695.92
III.Financial assets
1.Shares in affiliated companies 624,468.00 366,592.24
2.Loans due from affiliated companies 0.00 271,530.00
3.Shares in associated companies 301,804.92 1,002,131.88
3.Investments 532,681.94 256,784.00
5.Loans due from other group companies 271,530.00 0.00
6.Securitiy investments 40,766.25 34,572.00
7.Other loans 349,693.92 496,200.85
-------------- --------------
2,120,945.03 2,427,810.97
-------------- --------------
86,638,606.20 57,884,505.95
-------------- --------------
B. CURRENT ASSETS
I.Inventories
1.Raw material and supplies 365,497.24 415,873.38
2.Work in progress and finished goods 44,442,315.88 40,063,683.17
3.minus: advance payments received on
accounts of orders -44,442,315.88 -38,375,444.81
4.Advance payments 120,695.00 600,149.62
-------------- --------------
486,192.24 2,704,261.36
II.Accounts receivable and other assets
1.Accounts receivable trade 51,213,594.89 39,116,792.72
2.Accounts due from affiliated companies 230.00 0.00
3.Accounts due from joint ventures 173.90 671,534.13
4.Accounts due from other group companies 524,209.16 441,024.44
5.Other assets 5,796,290.47 17,511,658.39
-------------- --------------
57,534,498.42 57,741,009.68
III.Marketable securities
Other marketable securities 205,156.18 91,532.50
IV.Checks, cash on hand and in Federal Bank
and in postal giro accounts and cash in
banks 15,134,051.05 9,442,685.23
-------------- --------------
73,359,897.89 69,979,488.77
-------------- --------------
C. DEFERRED TAX ASSETS 799,475.25 250,000.00
-------------- --------------
D. PREPAID EXPENSES AND DEFERRED CHARGES 2,481,096.07 2,836,401.17
-------------- --------------
163,279,075.41 130,950,395.89
============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
1997 1996
DM DM
-------------- --------------
A. SHAREHOLDERS'S EQUITY
I.Capital subscribed 100,000.00 100,000.00
II.Capital surplus 29,180,000.00 29,180,000.00
III.Consolidated accumulated deficit,
brought forward -15,726,626.48 0.00
IV.Consolidated net income/(loss) 3,630,799.65 -15,726,626.48
V.Minority interest 1,025,228.16 659,035.21
VI.Exchange difference 620,197.16 276,838.26
-------------- --------------
18,829,598.49 14,489,246.99
-------------- --------------
B. PROVISION AND ACCRUED LIABILITIES
1. Provisions for pensions and similar
obligations 112,633.95 73,984.61
2. Accrued taxes 4,992,685.33 5,948,130.42
3. Other provisions and accrued liabilities 31,265,849.52 27,806,548.89
-------------- --------------
36,371,168.80 33,828,663.92
-------------- --------------
C. LIABILITIES
1. Liabilities due to banks 55,203,766.17 37,541,445.86
2. Advance payments received on account of
orders 1,241,319.09 0.00
3. Trade accounts payable 15,884,769.80 13,722,357.31
4. Notes payable 0.00 14,707.52
5. Accounts due to affiliated companies 3,208,642.29 3,046,209.72
6. Accounts payable due to joint ventures 73,437.02 0.00
7. Accounts due to other group companies 575,360.64 749,012.87
8. Other liabilities 31,623,276.57 26,018,092.56
-------------- --------------
107,810,571.58 81,091,825.84
-------------- --------------
D. DEFERRED CHARGES 267,736.54 1,540,659.14
-------------- --------------
-------------- --------------
163,279,075.41 130,950,395.89
============== ==============
28
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR 1996/97
<TABLE>
<CAPTION>
1997 1996
DM DM
-------------------- --------------------
<S> <C> <C>
1. Sales 289,983,801.85 241,910,735.00
2. Increase of work in process and finished goods 5,066,942.11 6,138,616.90
3. Other operating income 7,809,006.16 5,358,316.49
4. Expenses of services received -94,238,723.43 -108,394,054.70
5. Personnel expenses
a) Wages and salaries -92,622,345.66 -72,690,712.91
b) Social security, pension and other benefit costs -20,515,468.02 -16,275,091.83
6. Depreciation expenses -14,193,453.60 -11,850,164.97
7. Other operating expenses -69,986,307.74 -52,960,177.30
8. Income from investments and associated companies 786,867.05 712,380.43
9. Other interest and similar income 431,865.97 989,331.80
10. Write-offs of financial assets and marketable securities -63,163.18 -56,986.67
11. Interest and similar expenses -3,766,351.93 -3,773,417.87
-------------------- --------------------
12. Result from ordinary operation 8,692,669.58 -10,891,225.63
-------------------- --------------------
13. Taxes on income -3,292,888.40 -2,494,655.33
14. Other taxes -1,389,626.43 -1,930,219.33
-------------------- --------------------
15. Consolidated profit / (loss) before minority-interest 4,010,154.75 -15,316,100.29
-------------------- --------------------
16. Minority-interest -379,355.10 -410,526.19
-------------------- --------------------
17. Consolidated profit / (loss) 3,630,799.65 -15,726,626.48
==================== ====================
</TABLE>
29
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR 1996/97
1. INFORMATION ON INVESTMENT HOLDINGS
For the following notes, the ultimate participating interest of Infratest Burke
AG Holding in the capital of the individual companies has been calculated as a
percentage.
1.1 Consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/97 1996/97
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
Infratest Burke International GmbH Holding, Munich 100 TDM 50 32,379 2,379
Infratest Burke GmbH & Co, Forschung fur Entscheidungen
in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 11,021
Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 4,524
Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 244
Infratest Burke S.r.l., Milan, Italy 100 TLIR 50000 1,765 954
Infratest Burke S.a.r.l., Paris, France 100 TFF 270 1,216 626
Infratest Burke Group Ltd., London, England 100 TGBP 2.000 7,535 1,394
Public Attitude Surveys Holding Ltd., London, England 100 TGBP 315 588 598
Infratest Burke InCom GmbH & Co, Munich 1) 100 TDM 100 100 2,763
(formerly Infratest InCom GmbH)
InfraForces S.a.r.l., Paris, France 100 TFF 100 57 12
Infratest Burke International Services Ltd., London 100 TGBP 60 -214 180
(formerly Infratest Burke InCom Ltd., London, England)
Infratest dimap Gesellschaft fur Trend- und Wahlforschung
mbH, Berlin (formerly IBB Infratest Burke GmbH, Berlin) 74 TDM 50 -127 -231
NEXXUS GmbH, Gesellschaft fur Kommunikationstechnik,
Munich 100 TDM 50 16 -23
Infratest Burke AB, Goteborg, Sweden 15.2 TSEK 100 308 -30
Infratest Burke Asia Pacific Ltd., London, England 100 TGBP 50 -283 -131
Infratest Burke GmbH & Co. Marketingforschung, Frankfurt 100 TDM 100 100 867
Trendbox B.V., Amsterdam, Netherlands 75 THFL 250 -1,013 -850
Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 1,664
KFM Klinische Forschung GmbH, Munich 72 TDM 50 152 68
Testpanel-Marktforschungsinstitut GmbH, Wetzlar 100 TDM 60 485 70
TEST S.A., Paris, France 60 TFF 300 1,398 86
1) The presentation of the nominal capital and net worth relates to the capital account of the limited-liability partner of the
respective partnership.
</TABLE>
30
<PAGE>
1.2 Non-consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/97 1996/97
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Infratest Burke Core Company Ltd., London, England 100 TGBP 300 388 -
Infratest U.S. Inc. Wilmington (USA) 1) 100 TUSD 1 - -
Infratest Burke Beteiligungs GmbH, Munich 100 TDM 50 55 3
Infratest Burke Verwaltungs-GmbH, Munich 100 TDM 50 53 2
Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 55 2
Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 3 7
Infratest Burke InCom Beteiligungs GmbH, Munich 100 TDM 50 53 2
Infratest Gesundheitsforschung GmbH, Geretsried 80 TDM 50 56 2
EFB Epidemiologische Forschung GmbH, Berlin 2) 40 TDM 50 -1,134 -1,078
1) No data on the year-end closing were available by the date of preparation of the annual financial statements
2) The deficit posted by EFB Epidemiologische Forschung GmbH, Berlin, was accounted for in the consolidated financial statements by
appropriate provisioning for risks in the equity capital and operating results of the company's stockholder, Infratest
Epidemiologie und Gesundheitsforschung GmbH & Co., Munich
</TABLE>
These firms were not included in the consolidated financial statements in view
of their minimal business activity during the fiscal year 1996/97 or their
secondary importance with respect to the consolidated financial statements
pursuant to Section 296 of the Commercial Code.
Additional participating interests are held in companies that are currently
inactive or are in liquidation.
31
<PAGE>
1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/97 1996/97
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Burke Inc., Cincinnati, USA 50 TUSD 3.750 6,798 770 2)
Infratest + GFK Gesundheitsforschung
GmbH & Co., Berlin 1) 40 TDM 70 70 3,927
Infratest Gesundheitsforschung (Suisse) GmbH,
Basel, Switzerland 34 TSFR 200 -110 777
ZEG Zentrum fur Epidemiologie und Gesundheits-
forschung GmbH, Zepernick 22 TDM 150 320 122
GPI Kommunikationsforschung Gesellschaft fur
Pharma-Informationssysteme mbH, Nurnberg 32 TDM 50 1,458 1,337
I + G Infratest und GFK Medical Research
International Inc., Rhode Island, USA 26 TUSD 100 825 441
I + G Nordic Medical Research A/S, Copenhagen
Denmark 28 TDKK 500 129 98
IMePa Institut fur Medizin- und Patientenforschung
GmbH, Munich 20 TDM 100 251 101
Infratest Epidemiologie und Gesundheitsforschung
GmbH & Co., Munich 1)
(prospectively I+G Gesundheitsforschung) 40 TDM 50 50 3,393
1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of
the respective partnership
2) For the period from April 1 to September 27, 1997
</TABLE>
1.4 Associated companies in the sense of Section 311 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/97 1996/97
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Infratel GmbH Telefonische Datenerhebung
und Datenverarbeitung, Bielefeld 1) 29 TDM 50 184 10
P & P Software und Consulting Gesellschaft
mbH, Bad Homburg 1) 20 TDM 56,5 749 798
MHIG Limited, London, England 2) 20 TGBP 2 - -
MedVantage GmbH Integriertes Datenmanagement
im Healthcare Markt, Frankfurt 18 TDM 100 -1,702 -502
GPI Gesellschaft fur Pharma-Informations-
systeme mbH, Frankfurt 2) 12 TDM 100 1,367 1,267
MAP I + G S.A., Lyon, France 20 TFF 350 1,106 12
1) The data pertain to the unaudited annual financial statements as of December 31,1996
2) No data on the year-end closing for September 30, 1997 were available by the date of preparation of the annual financial
statements
3) The data pertain to the annual financial statements as of November 30, 1997
</TABLE>
32
<PAGE>
2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION
2.1 Individual annual financial statements included
The provisions of the Commercial Code and the Stock Corporation Law relating to
balance-sheet preparation, valuation and recognition are complied with in
preparing the annual accounts included in the consolidated financial statements.
In cases where tax provisions relating to balance-sheet preparation mandate the
preparation of a corresponding balance-sheet as part of the annual financial
statements, compliance with these tax provisions is maintained.
2.1.1 Assets
Intangible and tangible fixed assets are recorded at acquisition cost less
scheduled depreciation. Depreciation is calculated by the straight-line method,
at the rates permitted by tax law. Low-cost economic goods are depreciated in
full during the year of acquisition and are shown in the development of the
assets as additions and disposals and as depreciation for the current fiscal
year.
The rates of depreciation are:
Goodwill 6,7 - 25 % p.a.
Software 25 % p.a.
Vehicle fleet 20 - 25 % p.a.
Other factory and office equipment 10 - 33 % p.a.
33
<PAGE>
Fixed assets developed as follows (from 10-01 1996 to 09-30 1997):
<TABLE>
<CAPTION>
Cost
-----------------------------------------------------------------------------------------------------------
10-01-1996 10-01-1996
at closing date Exchange at closing date
rate rate rate
09-30-96 differences 09-30-97 Additions Transfers Disposals 09-30-97
DM DM DM DM DM DM DM
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Intangible assets
- -----------------
1. Franchises,
trademarks, patents,
licences and
similar rights 26,312,821.99 -10,137.02 26,302,684.97 1,491,326.53 0.00 172,662.94 27,621,348.56
2. Goodwill 13,696,808.84 0.00 13,696,808.84 31,571,734.89 0.00 0.00 45,268,543.73
3. Advances paid on
intangible assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------
40,009,630.83 -10,137.02 39,999,493.81 33,063,061.42 0.00 172,662.94 72,889,892.29
-----------------------------------------------------------------------------------------------------------
Property, plant and
equipment
- -------------------
1. Land, leasehold rights
and buildings,
including buildings
on non-owned land 8,317,631.70 92,437.11 8,410,068.81 1,938,305.63 0.00 94,701.26 10,253,673.18
2. Technical equipment,
plant and machinery 2,803,936.09 114,517.46 2,918,453.55 2,672,382.14 0.00 295,711.00 5,295,124.69
3. Other equipment,
fixtures, fittings
and equipment 30,579,648.07 59,257.72 30,638,905.79 6,248,327.96 0.00 2,607,740.99 34,279,492.76
4. Advance payments 739,628.83 0.00 739,628.83 167,326.86 0.00 738,143.46 168,812.23
-----------------------------------------------------------------------------------------------------------
42,440,844.69 266,212.29 42,707,056.98 11,026,342.59 0.00 3,736,296.71 49,997,102.86
-----------------------------------------------------------------------------------------------------------
Financial assets
- ----------------
1. Shares in affiliated
companies 518,686.13 0.00 518,686.13 290,001.00 -32,125.24 152,093.89 624,468.00
2. Loans due from
affiliated companies 451,417.21 0.00 451,417.21 0.00 -271,530.00 179,887.21 0.00
3. Shares in associated
companies 2,126,976.88 0.00 2,126,976.88 101,579.77 -185,849.00 809,463.35 1,233,244.30
4. Investments 286,784.00 0.00 286,784.00 191,796.50 217,974.24 0.00 696,554.74
5. Loans due from other
group companies 0.00 0.00 0.00 0.00 271,530.00 0.00 271,530.00
6. Security investments 34,572.00 0.00 34,572.00 40,766.25 0.00 34,572.00 40,766.25
7. Other loans 522,271.67 0.00 522,271.67 349,693.92 0.00 522,271.67 349,693.92
-----------------------------------------------------------------------------------------------------------
3,940,707.89 0.00 3,940,707.89 973,837.44 0.00 1,698,288.12 3,216,257.21
-----------------------------------------------------------------------------------------------------------
86,391,183.41 256,075.27 86,647,258.68 45,063,241.45 0.00 5,607,247.77 126,103,252.36
===========================================================================================================
Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
10-01-1996 10-01-1996
at closing date Exchange at closing date Additions Exchange Additions
rate rate rate Average rate at closing date
09-30-96 differences 09-30-97 rate differences rate Write-ups Transfers Disposals 09-30-1997
DM DM DM DM DM DM DM DM DM DM
- ------------------------------------------------------------------------------------------------------------------------------------
6,669,502.93 -5,515.36 6,663,987.57 4,824,589.68 503.87 4,825,093.55 0.00 0.00 165,297.94 11,323,783.18
913,128.84 82,616.51 995,745.35 2,209,317.49 228.75 2,209,546.24 0.00 0.00 0.00 3,205,291.59
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
7,582,631.77 77,101.15 7,659,732.92 7,033,907.17 732.62 7,034,639.79 0.00 0.00 165,297.94 14,529,074.77
114,902.00 16,846.52 131,748.52 229,245.89 8,520.71 237,766.60 0.00 -129,240.86 94,701.26 145,573.00
1,194,456.41 19,668.10 1,214,124.51 1,187,268.82 17,011.59 1,204,280.41 0.00 842,373.28 292,031.59 2,968,746.61
18,101,790.36 -6,763.99 18,095,026.37 5,743,031.72 24,096.54 5,767,128.26 0.00 -713,132.42 2,423,082.61 20,725,939.60
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
19,411,148.77 29,750.63 19,440,899.40 7,159,546.43 49,628.84 7,209,175.27 0.00 0.00 2,809,815.46 23,840,259.21
- ------------------------------------------------------------------------------------------------------------------------------------
152,093.89 0.00 152,093.89 0.00 0.00 0.00 0.00 0.00 152,093.89 0.00
179,887.21 0.00 179,887.21 0.00 0.00 0.00 0.00 0.00 179,887.21 0.00
1,124,845.00 0.00 1,124,845.00 25,939.38 0.00 25,939.38 0.00 -126,649.00 92,696.00 931,439.38
30,000.00 0.00 30,000.00 37,223.80 0.00 37,223.80 0.00 126,649.00 30,000.00 163,872.80
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
26,070.82 0.00 26,070.82 0.00 0.00 0.00 0.00 0.00 26,070.82 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
1,512,896.92 0.00 1,512,896.92 63,163.18 0.00 63,163.18 0.00 0.00 480,747.92 1,095,312.18
- ------------------------------------------------------------------------------------------------------------------------------------
28,506,677.46 106,851.78 28,613,529.24 14,256,616.78 50,361.46 14,306,978.24 0.00 0.00 3,455,861.32 39,464,646.16
====================================================================================================================================
Net book value
- ----------------------------------
09-30-1997 09-30-1996
DM DM
- ----------------------------------
16,297,565.38 19,643,319.06
42,063,252.14 12,783,680.00
0.00 0.00
- ----------------------------------
58,360,817.52 32,426,999.06
- ----------------------------------
10,108,100.18 8,202,729.70
2,326,378.08 1,609,479.68
13,553,553.16 12,477,857.71
168,812.23 739,628.83
- ----------------------------------
26,156,843.65 23,029,695.92
- ----------------------------------
624,468.00 366,592.24
0.00 271,530.00
301,804.92 1,002,131.88
532,681.94 256,784.00
271,530.00 0.00
40,766.25 34,572.00
349,693.92 496,200.85
- ----------------------------------
2,120,945.03 2,427,810.97
- ----------------------------------
86,638,606.20 57,884,505.95
==================================
</TABLE>
34
<PAGE>
2.1.2 Inventories
Work in process is valued at production cost. Completed but uninvoiced services
are recorded as finished goods under "Inventories" and are valued at net sale
price.
Production cost includes all components that must be carried as assets according
to tax law.
In case the expected total production cost of work in process exceed total
expected net sales revenues adequate inventory reserves are provided.
Furthermore provisions are established for follow-up services yet to be
performed in connection with finished or invoiced services.
Advance payments from customers are deducted from inventory as such and are
posted as liabilities to the extent they exceed inventory.
2.1.3 Receivables and other fixed assets
Trade accounts receivables are recorded at nominal value. For doubtful accounts
receivables and those carrying discernible risks, direct adjustments are made;
uncollectable debts are written off. General interest and credit risk is covered
by a lump-sum value adjustment of 2 %.
Other receivables and other assets are recorded at the nominal amount or at a
lower value assigned at the closing date.
2.1.4 Provisions
Provisions are created for as dictated by sound business judgement to cover
uncertain liabilities, anticipated losses related to incomplete contracts, and
deferred maintenance.
2.1.5 Payables
Payables are recorded at the amount repayable.
35
<PAGE>
2.2 Consolidation methods
2.2.1 Capital consolidation
Capital consolidation is performed by the book value method (Section 301 Para. 1
Sentence 2 No. 1 of the Commercial Code). According to this method,
participating interests that must be consolidated are offset against their
allotted share of the net worth of the subsidiaries. This net worth represents
the book value at date of acquisition of the assets, debts, accrued and deferred
items and special items to be reported on in the consolidated financial
statements.
Consolidation surpluses from capital consolidation at the date of acquisition of
the participating interests are offset against reserves (in the year under
review: TDM 0; previous year: TDM 720) - possibly after allocation to hidden
reserves in the assets of the acquired undertaking - or are allocated to
goodwill and amortized over the 15 years following the year of acquisition of
the interest (amortization during the year under review: TDM 2.110; previous
year: TDM 913).
2.2.2 Equity consolidation
The associated companies
- - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt
- - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt
- - P & P Software und Consulting GmbH, Bad Homburg
were included in the consolidated financial statements by the equity/book value
method.
For reasons of materiality, the other associated companies continued to be
carried at the book values recorded in the stockholder's individual financial
statements.
2.2.3 Pro-rata consolidation
The joint ventures
IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich
I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA
Infratest Gesundheitsforschung (Suisse) GmbH, Basel, Switzerland
I + G Nordic Medical Research A/S, Copenhagen, Denmark
Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin
ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin
GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme mbH,
Nuremberg
Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich
(prospectively I+G Gesundheitsforschung GmbH & Co, Nuremberg)
Burke Inc., Cincinnati, USA
were included in the consolidated financial statements on a pro-rata basis,
according to the percentage of the interest in the firm.
36
<PAGE>
2.2.4 Elimination of inter-company profits
Assets to be included in the consolidated financial statements and deriving
wholly or in part from transactions among the companies included in the
consolidated financial statements are reported on the consolidated balance sheet
at acquisition or production cost of the group.
3. BASIS OF FOREIGN CURRENCY TRANSLATION
3.1 Translation of individual financial-statement items stated in foreign
currency
For annual financial statements containing items based on sums that are or
originally were stated in foreign currency, the conversion to German marks is
performed at the rate in effect at the transaction date. Balance-sheet items are
valued at the exchange rate in effect on the closing date, no exchange gains
being realized.
3.2 Translation of financial statements in foreign currencies
The translation of financial statements recorded in foreign currencies was
performed by the current rate method: balance-sheet items were translated at the
rate in effect on the closing date of September 30, 1997, and income-statement
items were translated at the average rate for the fiscal year 1996/97.
Exchange-rate differences resulting from the translation of net worth at
different current rates and differences resulting from the translation of
balance-sheet items at current rates and income statement items at average rates
are recognized separately as a equity item on the balance sheet.
37
<PAGE>
4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS
4.1 Items of accrual and deferral for deferred taxes
The deferred tax asset relates to a discrepancy between the goodwill reported on
the individual financial statements of Infratest Burke Wirtschaftsforschung GmbH
& Co, Munich, and that recorded by the Group, and to the translation of the
percentage-of-completion method into the completed-contact method used within
the Group for the tax consequences incurred by the joint venture Burke Inc.,
which is included on a pro-rata basis.
4.2 Other provisions and accrued liabilities
"Other provisions and accrued liabilities" basically recognizes provisions for
Profit-sharing
Follow-up services
Unpaid invoices
Restructuring
Vacations and overtime
Statuary social security benefits (Italy)
Year-end costs
Employee anniversaries.
5. OTHER MANDATORY INFORMATION
5.1 Remaining term
The remaining term on receivables is less than one year. The remaining terms on
payables are shown in the following presentation of accounts payable:
<TABLE>
<CAPTION>
Due within After
Total 1 year 1-5 years 5 years
DM DM DM DM
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Liabilities due to banks 55.203.766,17 33.732.557,33 21.426.822,34 44.386,50
Advance payments received on account of orders 1.241.319,09 1.241.319,09 0,00 0,00
Trade accounts payable 15.884.769,80 15.884.769,80 0,00 0,00
Accounts due to affiliated companies 3.208.642,29 1.858.450,29 959.592,00 390.600,00
Accounts due to joint ventures 73.437,02 73.437,02 0,00 0,00
Accounts due to other group companies 575.360,64 575.360,64 0,00 0,00
Other liabilities 31.623.276,57 23.099.883,47 8.246.291,45 277.101,65
=============== =============== =============== ==============
107.810.571,58 76.465.777,64 30.632.705,79 712.088,15
=============== =============== =============== ==============
</TABLE>
38
<PAGE>
5.2 Collateralization of accounts payable
Payables are not collateralized.
5.3 Analysis of sales revenues
Sales revenues - broken down according to country of realization - are
distributed as follows:
1996/97 1995/96
TDM TDM
------------- -------------
Domestic 140,908 140,573
Foreign, Europe 122,494 92,202
Foreign, other 26,582 9,136
------------- -------------
289,984 241,911
============= =============
5.4 Other financial obligations
Other financial obligations total TDM 42,345 (previous year: TDM 36,319).
5.5 Employees
The average number of employees in the Group - that is, in the fully
consolidated companies - is distributed as follows (itemized by country):
1996/97 1995/96
------------- -------------
Germany 419 413
France 91 71
Sweden 63 62
England 163 61
Italy 72 60
Holland 63 47
------------- -------------
871 714
============= =============
39
<PAGE>
The average number of employees of companies included in the consolidated
financial statements on a pro-rata basis only is distributed as follows:
1996/97 1995/96
------------- -------------
Germany 123 102
Switzerland 9 11
France 0 4
U.S. 247 4
Denmark 3 1
------------- -------------
382 122
============= =============
5.6 Remuneration of officers
Remuneration paid to the Board of Directors of the parent company, I.B. AG
Holding, during the fiscal year 1996/97 totaled TDM 2,750 (previous year: TDM
1,877).
Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year
1996/97.
6. SUMMARY OF DIFFERENCES BETWEEN GERMAN AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The following is a summary of the estimated adjustments to consolidated profit
and to consolidated shareholders' equity that would have been required if US
GAAP would have been applied instead of German GAAP.
40
<PAGE>
6.1. Approximate effects on consolidated profit of differences between
German and US generally accepted accounting principles
TDM TDM
----------- -----------
Net Profit/(Loss) as reported under German GAAP 3,631
-----------
US GAAP adjustments:
Amortization of goodwill 5,299
Profit recognition by application of percentage
of completion method 2,954
Lumpsum reserve on accounts receivable trade 83
Reversal of provision for future expenses -324
Other 112 8,124
-----------
Tax effects:
Deferred taxation -3,517
Provision for tax risks -1,540 -5,057
-----------
Effect on minority interest 182
-----------
Approximate Net Profit/(Loss) as adjusted for US GAAP 6,880
===========
41
<PAGE>
6.2. Approximate cumulative effect on shareholders' equity of differences
between German and US generally accepted accounting principles
TDM
-----------
Shareholders' equity per German GAAP 1) 17,804
-----------
US GAAP adjustments:
Goodwill 9,424
Profit recognition by application of percentage
of completion method 21,924
Lumpsum reserve on accounts receivable trade 364
Provision for future expenses 2,543
Provision for tax risks -1,975
Deferred taxation 1,244
Other 116
-----------
Approximate Shareholders' equity as adjusted for US GAAP 51,444
===========
1) excluding minority interest
6.3. Discussion of material variations between German and US generally
accepted accounting principles
The material variations between German and US GAAP relate to the following
items:
6.3.1 Goodwill / Amortization of goodwill
Goodwill resulting from the consolidation process is amortized over a period of
30 years applying the straight line method for US GAAP purposes. The treatment
in the local consolidated financial statements follows the treatment in the tax
filing where the amounts of purchase prices exceeding the net equity of acquired
subsidiaries is amortized over a shorter period of time (between 1 and 15 years,
depending on the allocation applied). Due to the amortization opportunity in
local taxation deferred taxes / tax assets have been considered (see Sect. 6.3.6
below).
6.3.2 Percentage of completion method
Profit recognition relating to services rendered to customers follows the
"percentage of completion"- method for US GAAP purposes whereas for local
purposes the "completed contract"- method must be applied. According to the
"completed contract" - method profit may not be recognized until the
contractually agreed services have been accepted by the customers. Compared to
the "percentage of completion"- method the application of the "completed
contract" - method leads to a delay in profit recognition.
42
<PAGE>
6.3.3 Lumpsum reserve on accounts receivable trade
The difference relates to the application of varying rates for the calculation
of lumpsum bond debt reserves:
US GAAP 1%
German GAAP 2%
6.4.4 Provision for future expenses
Local books contain provisions for expenses which can not be related to the
current or prior years but shall cover potential expenses which are related to
the future. Those provisions are not allowed by US GAAP and accordingly were
eliminated in consolidated stockholders' equity adjusted for US GAAP.
6.3.5 Provision for tax risks
The accounting of German trade tax on income in the local consolidated financial
statements followed the treatment in the tax filings. Since, however, a probable
risk exists that those taxes will be payable a respective provision was
established in the consolidated financial statements adjusted for US GAAP.
6.3.6 Deferred taxation
Deferred taxes relate to temporary differences between the tax bases of assets
or liabilities and the reported amounts according to US GAAP as well as to tax
loss carryforwards. If evidence indicates that it is more likely than not that
deferred tax assets relating to tax loss carryforwards will not be realized
adequate allowances were provided. Deferred taxes have primarily been provided
for temporary differences relating to explanations in Sect. 6.3.1, 6.3.2 and
6.3.3 and to tax loss carryforwards in Germany.
The tax rate applied amounts to 35%.
6.3.7 Equity Method
Joint venture companies (reference is made to Sect. 2.2.3.) were included in the
consolidated financial statements under German GAAP on a pro-rata basis whereas
under US GAAP the Equity method was applied.
43
<PAGE>
7. CASH FLOW STATEMENT
<TABLE>
<CAPTION>
1996/97
TDM
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Consolidated profit (loss) of the year 6,880
Adjustments to reconcile consolidated profit (loss) to net cash:
Depreciation and amortization 8,253
Change in provisions for pensions 109
Change in inventories -6,827
Change in accounts receivables -10,408
Change in deferred tax assets 3,025
Change in accounts due from group companies 2,459
Change in other operating assets and prepaid expenses 12,831
Change in deferred income taxes 3,953
Change in tax provisions -2,329
Change in provisions 1,331
Change in advance payments received 6,105
Change in amounts owed to group companies -1,541
Change in accounts payables 3,395
Change in other operating liabilities and deferred charges 3,330
------------
Net cash provided from operating activities 30,566
............
CASH FLOW FROM INVESTING ACTIVITIES:
Net investment intangible assets -16,362
Net investment tangible assets -7,896
Net investment financial assets -19,013
------------
Net cash provided from investing activities -43,271
............
CASH FLOW FROM FINANCING ACTIVITIES
Change in debts to banks 17,671
Change in minority interest 297
------------
Net cash provided from financing activities 17,968
............
EFFECT OF EXCHANGE RATE DIFFERENCES IN EQUITY 408
............
CHANGE IN CASH AND CASH EQUIVALENTS 5,671
============
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 8,873
============
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 14,544
============
</TABLE>
44
<PAGE>
Reconciliation of cash and cash equivalents
TDM
---------------
Cash and cash equivalents according to
German GAAP as of September 30, 1997 15,134
Elimination of per quota consolidated entities -590
---------------
14,544
===============
Munich, January 15, 1998
The Board of Directors
45
<PAGE>
Infratest Burke Aktiengesellschaft Holding
Munich
Consolidated Financial Statements
as of September 30, 1996
46
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
ASSETS
DM
---------------
A. FIXED ASSETS
I.Intangible assets
1. Franchise, trademarks, patents, licences
and similar rights 19,643,319.06
2. Goodwill 12,783,680.00
---------------
32,426,999.06
II.Property, plant and equipment
1. Land, leasehold rights and buildings, including
buildings on non-owned land 8,202,729.70
2. Other equipment, fixtures, fittings and equipment
including advance payments 14,826,966.22
---------------
23,029,695.92
III.Financial assets
1. Shares in affiliated companies 366,592.24
2. Loans due from affiliated companies 271,530.00
3. Shares in associated companies 1,002,131.88
3. Investments 256,784.00
4. Security investments 34,572.00
5. Other loans 496,200.85
---------------
2,427,810.97
---------------
57,884,505.95
---------------
B. CURRENT ASSETS
I.Inventories
1. Raw material and supplies 415,873.38
2. Work in progress and finished goods 40,063,683.17
3. minus: advance payments received on accounts
of orders -38,375,444.81
4. Advance payments 600,149.62
---------------
2,704,261.36
---------------
II.Accounts receivable and other assets
1. Accounts receivable trade 39,116,792.72
2. Accounts due from joint ventures 671,534.13
3. Accounts due from other group companies 441,024.44
4. Other assets 17,511,658.39
---------------
57,741,009.68
---------------
III.Marketable securities
Other marketable securities 91,532.50
IV.Checks, cash on hand and in Federal Bank
and in postal giro accounts and cash in banks 9,442,685.23
---------------
69,979,488.77
---------------
C. DEFERRED TAX ASSETS 250,000.00
---------------
D. PREPAID EXPENSES AND DEFERRED CHARGES 2,836,401.17
---------------
130,950,395.89
===============
LIABILITIES AND SHAREHOLDER'S EQUITY
DM DM
--------------- ---------------
A. SHAREHOLDERS'S EQUITY
I.Capital subscribed 100,000.00
II.Capital surplus
1. Capital surplus 29,900,000.00
2. minus: settlement with goodwill -720,000.00 29,180,000.00
---------------
III.Consolidated net income/(loss) -15,726,626.48
IV.Minority interest 659,035.21
V.Exchange difference 276,838.26
---------------
14,489,246.99
---------------
B. PROVISION AND ACCRUED LIABILITIES
1. Provisions for pensions and similar obligations 73,984.61
2. Accrued taxes 5,948,130.42
3. Other provisions and accrued liabilities 27,806,548.89
---------------
33,828,663.92
---------------
C. LIABILITIES
1. Liabilities due to banks 37,541,445.86
3. Trade accounts payable 13,722,357.31
4. Notes payable 14,707.52
5. Accounts due to affiliated companies 3,046,209.72
7. Accounts due to other group companies 749,012.87
8. Other liabilities 26,018,092.56
- thereof for taxes: DM 4.748.837,80
- thereof for social security: DM 2.667.794,67
---------------
81,091,825.84
---------------
D. DEFERRED CHARGES 1,540,659.14
---------------
130,950,395.89
===============
47
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR 1995/96
<TABLE>
<CAPTION>
DM DM
-------------------- --------------------
<S> <C> <C>
1. Sales 241,910,735.00
2. Increase in work in process and finished goods 6,138,616.90
3. Other operating income 5,358,316.49
4. Expenses of services received -108,394,054.70
5. Personnel expenses
a) Wages and salaries -72,690,712.91
b) Social security, pension and other benefit costs -16,275,091.83 -88,965,804.74
--------------------
6. Depreciation expenses -11,850,164.97
7. Other operating expenses -52,960,177.30
8. Income from investments and associated companies 712,380.43
9. Other interest and similar income 989,331.80
10. Write-offs of financial assets and marketable securities -56,986.67
11. Interest and similar expenses -3,773,417.87
--------------------
12. Result from ordinary operations -10,891,225.63
--------------------
13. Taxes on income -2,494,655.33
14. Other taxes -1,930,219.33
--------------------
15. Consolidated profit (loss) before minority-interest -15,316,100.29
--------------------
16. Minority-interest -410,526.19
--------------------
17. Consolidated profit (loss) -15,726,626.48
====================
</TABLE>
48
<PAGE>
INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING
MUNICH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR 1995/96
1. INFORMATION ON INVESTMENT HOLDINGS
For the following notes, the ultimate participating interest of Infratest Burke
AG Holding in the capital of the individual companies has been calculated as a
percentage.
1.1 Consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/96 1995/96
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ ------- ------------- ------------ -------------------
<S> <C> <C> <C> <C>
Infratest Burke GmbH & Co, Forschung fur Entscheidungen
in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 9,439
Infratest Burke Verwaltungs-GmbH 100 TDM 50 50 3
Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 2,831
(formerly Infratest Burke Wirtschaftsforschung GmbH, Munich)
Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 50 3
Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 437
(formerly Infratest Burke Sozialforschung GmbH)
Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 3 3
Infratest Burke S.r.l., Milan, Italy 100 TLIR 50.000 771 509
Infratest Burke S.a.r.l., Paris, France 100 TFF 270 579 -219
Infratest Burke Group Ltd., London, England 100 TGBP 450 1,381 403
Infratest Burke InCom GmbH & Co, Munich 1) 100 TDM 100 100 3,966
(formerly Infratest InCom GmbH)
Infratest Burke InCom Beteiligungs-GmbH, Munich 100 TDM 50 53 3
InfraForces S.a.r.l., Paris, France 100 TFF 100 45 45
Infratest Burke International Services Ltd.,
(formerly Infratest Burke InCom Ltd.), London, England 100 TGBP 60 -336 -232
IBB Infratest Burke GmbH Berlin, Berlin 100 TDM 50 119 27
NEXXUS GmbH Gesellschaft fur Kommunikations-
technik, Munich 100 TDM 50 39 2
Infratest Burke AB, Goteborg, Sweden 15.2 TSEK 75 541 331
Infratest Burke Asia Pacific Ltd., (formerly: Infratest Burke
Japan Ltd.), London, England 80.0 TGBP 50 -123 -117
Burke International Marktforschung GmbH, Frankfurt 75 TDM 200 322 66
Infratest Burke GmbH & Co. Marketingforschung, Frankfurt 75 TDM 100 100 -195
Trendbox B.V., Amsterdam, Netherlands 65 THFL 250 -165 -200
Infratest Gesundheitsforschung GmbH & Co.,
Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 1,235
Infratest Gesundheitsforschung GmbH, Geretsried 85 TDM 50 53 3
KFM Klinische Forschung GmbH, Munich 72 TDM 50 89 77
Infratest Epidemiologie und Gesundheitsforschung
GmbH & Co., Munich 1) 40 TDM 50 50 -1,109
Infratest Epidemiologie und Gesundheitsforschung
Verwaltungs-GmbH, Munich 40 TDM 50 55 5
EFB Epidemiologische Forschung GmbH, Berlin 40 TDM 50 -56 -209
1) The presentation of the nominal capital and net worth relates to the capital amount of the limited-liability partner of the
respective partnership.
</TABLE>
49
<PAGE>
1.2 Non-consolidated subsidiaries
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/96 1995/96
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ ------- ------------- ------------ -------------------
<S> <C> <C> <C> <C>
Infratest Burke Core Company Ltd., (formerly Infratest Burke
European Consultance Centre Ltd.), London, England 100 TGBP 300 340 0
Infratest Burke S.L., Madrid, Spain 1) 50 TPTA 5.000 22 -1
Infratest U.S. Inc., Wilmington (USA) 100 TUSD 1
1) The data pertain to the unaudited annual financial statements as of December 31, 1995
</TABLE>
These firms were not included in the consolidated financial statements in view
of their minimal business activity during the fiscal year 1995/96 or their
secondary importance with respect to the consolidated financial statements
pursuant to Section 296 of the Commercial Code.
Additional participating interests are held in companies that are currently
inactive or are in liquidation.
50
<PAGE>
1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/96 1995/96
Name and principal place of business as % Capital TDM TDM
- ------------------------------------ --------- -------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Vector GmbH Automobilmarktforschung, Munich 50 TDM 50 1,096 1,018
Infratest + GFK Gesundheitsforschung
GmbH & Co., Berlin 1) 40 TDM 70 70 3,263
Infratest + GFK Gesundheitsforschung Verwaltungs-
GmbH, Berlin 40 TDM 50 60 2
I + G Gesundheits- und Pharmamarkt-Forschung
GmbH & Co., Nurnberg 1) 40 TDM 50 50 3,530
I + G Pharmamarkt-Forschung Verwaltungs-GmbH,
Nurnberg 40 TDM 50 59 3
I + G France Health and Pharmaceutical Market
Research, Rueil Malmaison, France 2) 40 TFF 100 - -
Infratest Gesundheitsforschung GmbH,
Basel, Suisse 34 TSFR 200 -918 81
ZEG Zentrum fur Epidemiologie und Gesundheits-
forschung GmbH, Zepernick 20 TDM 150 377 377
GPI Kommunikationsforschung Gesellschaft fur
Pharma-Informationssysteme mbH, Nurnberg 32 TDM 50 1,365 1,286
I + G Infratest und GFK Medical Research
International Inc., Rhode Island, USA 26.0 TUSD 100 1,088 255
I + G Nordic Medical Research A/S, Kopenhagen
Denmark 28 TDKK 500 -108 100
IMePa Institut fur Medizin- und Patientenforschung
GmbH, Munich 19.6 TDM 100 310 160
Infratest Epidemiologie und Gesundheitsforschung
GmbH & Co., Munich 1) 40.0 TDM 50 50 -1,109
Infratest Epidemiologie und Gesundheitsforschung
Verwaltungs-GmbH, Munich 40.0 TDM 50 55 5
EFB Epidemiologische Forschung GmbH, Berlin 40.0 TDM 50 -55 -209
1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of
the respective partnership
2) The company is in liquidation
</TABLE>
51
<PAGE>
1.4 Associated companies in the sense of Section 311 of the Commercial Code
<TABLE>
<CAPTION>
Partici- Net Operating result
pating Worth for the fiscal year
Interest Nominal 09/30/96 1995/96
Name and principal place of business as % Capital TDM TDM
------- ---------- ------------- -------------------
<S> <C> <C> <C> <C>
Infratel GmbH Telefonische Datenerhebung
fur die empirische Wirtschafts- und Sozial-
forschung, Bielefeld 1) 29 TDM 50 187 -6
GENESIS Institut fur strategische Innovations-
studien - Unabhangige Forschungsgesell-
schaft mbH, Dortmund 2) 27 TDM 100 - -
L + H AutomobilConsult GmbH, Nurnberg 3) 25.2 TDM 50 - -
L + H MarketingServices GmbH, Nurnberg 3) 25.1 TDM 100 - -
T.E.S.T. S.A., Paris 6) 25 TFF 300 1,397 113
Anders & Partner Gesellschaft fur Manage-
mentdienste mbH, Nurnberg 24 TDM 100 - -
P & P Software und Consulting Gesellschaft
mbH, Bad Homburg 1) 20 TDM 56,5 731 820
MHIG Limited, London, England 5) 15 TGBP 2 -404 -390
MedVantage GmbH Integriertes Daten-
management im Healthcare Markt,
Frankfurt 18 TDM 100 -1,683 -477
GPI Gesellschaft fur Pharma-Informations-
systeme mbH, Frankfurt 4) 12 TDM 100 328 1,403
BBI Mark. Serv. Inc., Delaware, USA 1.5 - - -
Proteus - - - -
MAP I + G S.A., Lyon, France 3) 20 - - -
1) The data pertain to the unaudited annual financial statements as of December 31, 1995
2) No data on the year-end closing for June 30, 1996 were available by the date of preparation of the annual financial statements.
3) No data on the year-end closing for September 30, 1996 were available by the date of preparation of the annual financial
statements.
4) The data pertain to the annual financial statements as of November 30, 1996
5) The data pertain to the annual financial statements as of October 30, 1996
6) The data pertain to the audited annual financial statements as of December 31, 1995
</TABLE>
52
<PAGE>
2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION
2.1 Individual annual financial statements included
The provisions of the Commercial Code and the Stock Corporation Law relating to
balance-sheet preparation, valuation and recognition are complied with in
preparing the annual accounts included in the consolidated financial statements.
In cases where tax provisions relating to balance-sheet preparation mandate the
preparation of a corresponding balance-sheet as part of the annual financial
statements, compliance with these tax provisions is maintained.
2.1.1 Assets
Intangible and tangible fixed assets are recorded at acquisition cost less
scheduled depreciation. Depreciation is calculated by the straight-line method,
at the rates permitted by tax law. Low-cost economic goods are depreciated in
full during the year of acquisition and are shown in the development of the
assets as additions and disposals and as depreciation for the current fiscal
year.
The rates of depreciation are:
Goodwill 10 - 25 % p.a.
Software 25 % p.a.
Vehicle fleet 20 - 25 % p.a.
Other factory and office equipment 10 - 33 % p.a.
53
<PAGE>
Fixed assets developed as follows (from 10-01 1995 to 09-30 1996):
<TABLE>
<CAPTION>
Cost
-----------------------------------------------------------------------------------------------------------
10-01-1995 10-01-1995
at closing date Exchange at closing date
rate rate rate
09-30-95 differences 09-30-96 Additions Transfers Disposals 09-30-96
DM DM DM DM DM DM DM
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Intangible assets
- -----------------
1. Franchises,
trademarks, patents,
licences and
similar rights 2,295,017.01 50,119.80 2,345,136.81 24,208,611.32 0.00 240,926.14 26,312,821.99
2. Goodwill 0.00 0.00 0.00 13,696,808.84 0.00 0.00 13,696,808.84
3. Advances paid on
intangible assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------
2,295,017.01 50,119.80 2,345,136.81 37,905,420.16 0.00 240,926.14 40,009,630.83
-----------------------------------------------------------------------------------------------------------
Property, plant and
equipment
- -------------------
1. Land, leasehold rights
and buildings,
including buildings
on non-owned land 0.00 0.00 0.00 8,317,631.70 0.00 0.00 8,317,631.70
2. Technical equipment,
plant and machinery 0.00 0.00 0.00 2,803,936.09 0.00 0.00 2,803,936.09
3. Other equipment,
fixtures, fittings
and equipment 28,794,551.08 -524,988.48 28,269,562.60 6,079,917.97 0.00 3,769,832.50 30,579,648.07
4. Advance payments 0.00 0.00 0.00 739,628.83 0.00 0.00 739,628.83
-----------------------------------------------------------------------------------------------------------
28,794,551.08 -524,988.48 28,269,562.60 17,941,114.59 0.00 3,769,832.50 42,440,844.69
-----------------------------------------------------------------------------------------------------------
Financial assets
- ----------------
1. Shares in affiliated
companies 641,680.53 0.00 641,680.53 1,526.74 0.00 124,521.14 518,686.13
2. Loans due from
affiliated companies 451,417.21 0.00 451,417.21 0.00 0.00 0.00 451,417.21
3. Shares in associated
companies 2,101,037.50 0.00 2,101,037.50 25,939.38 0.00 0.00 2,126,976.88
4. Investments 286,245.00 539.00 286,784.00 0.00 0.00 0.00 286,784.00
5. Security investments 0.00 0.00 0.00 34,572.00 0.00 0.00 34,572.00
6. Other loans 543,726.16 17,346.49 561,072.65 147,617.54 0.00 186,418.52 522,271.67
-----------------------------------------------------------------------------------------------------------
4,024,106.40 17,885.49 4,041,991.89 209,655.66 0.00 310,939.66 3,940,707.89
-----------------------------------------------------------------------------------------------------------
35,113,674.49 -456,983.19 34,656,691.30 56,056,190.41 0.00 4,321,698.30 86,391,183.41
===========================================================================================================
Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
10-01-1996 10-01-1996
at closing date Exchange at closing date Additions Exchange Additions
rate rate rate Average rate at closing date
09-30-96 differences 09-30-97 rate differences rate Write-ups Transfers Disposals 09-30-1997
DM DM DM DM DM DM DM DM DM DM
- ------------------------------------------------------------------------------------------------------------------------------------
1,571,908.07 25,891.94 1,597,800.01 5,247,938.32 4,375.40 5,252,313.72 0.00 325.00 180,935.80 6,669,502.93
0.00 0.00 0.00 913,128.84 0.00 913,128.84 0.00 0.00 0.00 913,128.84
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
1,571,908.07 25,891.94 1,597,800.01 6,161,067.16 4,375.40 6,165,442.56 0.00 325.00 180,935.80 7,582,631.77
- ------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 114,902.00 0.00 114,902.00 0.00 0.00 0.00 114,902.00
0.00 0.00 0.00 1,159,278.66 35,177.75 1,194,456.41 0.00 0.00 0.00 1,194,456.41
16,720,812.80 0.00 16,720,812.80 4,414,917.15 0.00 4,414,917.15 0.00 -1,337.25 3,032,602.34 18,101,790.36
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
16,720,812.80 0.00 16,720,812.80 5,689,097.81 35,177.75 5,724,275.56 0.00 -1,337.25 3,032,602.34 19,411,148.77
- ------------------------------------------------------------------------------------------------------------------------------------
127,653.04 0.00 127,653.04 24,440.85 0.00 24,440.85 0.00 0.00 0.00 152,093.89
173,412.21 0.00 173,412.21 6,475.00 0.00 6,475.00 0.00 0.00 0.00 179,887.21
1,124,845.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,124,845.00
30,000.00 0.00 30,000.00 0.00 0.00 0.00 0.00 0.00 0.00 30,000.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 26,070.82 0.00 26,070.82 0.00 0.00 0.00 26,070.82
- ------------------------------------------------------------------------------------------------------------------------------------
1,455,910.25 0.00 331,065.25 56,986.67 0.00 56,986.67 0.00 0.00 0.00 1,512,896.92
- ------------------------------------------------------------------------------------------------------------------------------------
19,748,631.12 25,891.94 18,649,678.06 11,907,151.64 39,553.15 11,946,704.79 0.00 -1,012.25 3,213,538.14 28,506,677.46
====================================================================================================================================
Net book value
- ---------------------------------
09-30-1996 09-30-1995
DM DM
- ---------------------------------
19,643,319.06 723,108.94
12,783,680.00 0.00
0.00 0.00
- ---------------------------------
32,426,999.06 723,108.95
8,202,729.70 0.00
1,609,479.68 0.00
12,477,857.71 12,073,738.29
739,628.83 0.00
- ---------------------------------
23,029,695.92 12,073,738.29
- ---------------------------------
366,592.24 514,027.49
271,530.00 278,005.00
1,002,131.88 976,192.50
256,784.00 256,245.00
34,572.00 0.00
496,200.85 543,726.16
- ---------------------------------
2,427,810.97 2,568,196.15
- ---------------------------------
57,884,505.95 15,365,043.39
=================================
</TABLE>
54
<PAGE>
2.1.2 Inventories
Work in process is valued at production cost. Completed but uninvoiced services
are recorded as finished goods under "Inventories" and are valued at net sale
price.
Production cost includes all components that must be carried as assets according
to tax law.
In case the expected total production cost of work in process exceed total
expected net sales revenues adequate provisions for anticipated losses are
established. Furthermore provisions are established for follow-up services yet
to be performed in connection with finished or invoiced services.
Advance payments from customers are deducted from inventory as such and are
posted as liabilities to the extent they exceed inventory.
2.1.3 Receivables and other fixed assets
Trade accounts receivables are recorded at nominal value. For doubtful accounts
receivables and those carrying discernible risks, direct adjustments are made;
uncollectable debts are written off. General interest and credit risk is covered
by a lump-sum value adjustment of 2 %.
Other receivables and other assets are recorded at the nominal amount or at a
lower value assigned at the closing date.
2.1.4 Provisions
Provisions are created for as dictated by sound business judgement to cover
uncertain liabilities anticipated losses related to incomplete contracts, and
deferred maintenance.
2.1.5 Payables
Payables are recorded at the amount repayable.
2.2 Consolidation methods
2.2.1 Capital consolidation
Capital consolidation is performed by the book value method (Section 301 Para. 1
Sentence 2 No. 1 of the Commercial Code). According to this method,
participating interests that must be consolidated are offset against their
allotted share of the net worth of the subsidiaries. This net worth represents
the book value at date of acquisition of the assets, debts, accrued and deferred
items and special items to be reported on in the consolidated financial
statements.
55
<PAGE>
Consolidation surpluses from capital consolidation at the date of acquisition of
the participating interests are offset against reserves (in the year under
review: TDM 720; previous year: TDM 1.540) - possibly after allocation to hidden
reserves in the assets of the acquired undertaking - or are allocated to
goodwill and amortized over the 15 years following the year of acquisition of
the interest (amortization during the year under review:
TDM 913; previous year: TDM 68).
2.2.2 Equity consolidation
The associated companies
- - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt
- - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt
- - P & P Software und Consulting GmbH, Bad Homburg
- - L + H Marketing Services GmbH, Nurnberg
were included in the consolidated financial statements by the equity/book value
method.
For reasons of materiality, the other associated companies continued to be
carried at the book values recorded in the stockholder's individual financial
statements.
2.2.3 Pro-rata consolidation
The joint ventures
Vector GmbH Automobilmarktforschung, Munich
IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich
I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA
Infratest Gesundheitsforschung (Suisse) GmbH, Basel, Suisse
I + G Nordic Medical Research A/S, Kopenhagen, Danmark
I + G France Health and Pharmaceutical Market Research, Rueil Malmaison,
France
I + G Gesundheits- und Pharmamarkt-Forschung GmbH & CoKG, Nurnberg
I + G Pharmamarkt-Forschung Verwaltungs-GmbH, Berlin
Infratest + GFK Gesundheitsforschung GmbH & CoKG, Berlin
Infratest + GFK Gesundheitsforschung Verwaltungs-GmbH, Berlin
ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin
GPI Kommunikationsforschung Gesellschaft fur Pharma- Informationssysteme mbH,
Nurnberg
Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich
Infratest Epidemiologie und Gesundheitsforschung Verwaltungs-GmbH, Munich
EFB Epidemiologische Forschung GmbH, Berlin
were included in the consolidated financial statements on a pro-rata basis,
according to the percentage of the interest in the firm.
56
<PAGE>
2.2.4 Elimination of inter-company profits
Assets to be included in the consolidated financial statements and deriving
wholly or in part from transactions among the companies included in the
consolidated financial statements are reported on the consolidated balance sheet
at acquisition or production cost of the group.
3. BASIS OF FOREIGN CURRENCY TRANSLATION
3.1 Translation of individual financial-statement items stated in foreign
currency
For annual financial statements containing items based on sums that are or
originally were stated in foreign currency, the conversion to German marks is
performed at the rate in effect at the transaction date. Balance-sheet items are
valued at the exchange rate in effect on the closing date, no exchange gains
being realized.
3.2 Translation of financial statements in foreign currencies
The translation of financial statements recorded in foreign currencies was
performed by the current rate method: balance-sheet items were translated at the
rate in effect on the closing date of September 30, 1996, and income-statement
items were translated at the average rate for the fiscal year 1995/96.
Exchange-rate differences resulting from the translation of net worth at
different current rates and differences resulting from the translation of
balance-sheet items at current rates and income statement items at average rates
are recognized separately as a equity item on the balance sheet.
57
<PAGE>
4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS
4.1 Items of accrual and deferral for deferred taxes
The deferred tax asset relates to a provision that was established on
consolidation level for potential risks of the Italian subsidiary.
4.2 Other provisions and accrued liabilities
"Other provisions and accrued liabilities" basically recognizes provisions for
Profit-sharing
Follow-up services
Unpaid invoices
Restructuring
Vacations and overtime
Statuary social security benefits (Italy)
Year-end costs
Employee anniversaries.
5. OTHER MANDATORY INFORMATION
5.1 Remaining term
The remaining term on receivables is less than one year. The remaining terms on
payables is less than one year for TDM 75,252 and between one and five years for
TDM 5,840 (other liabilities).
58
<PAGE>
5.2 Collateralization of accounts payable
Payables are not collateralized.
5.3 Analysis of sales revenues
Sales revenues - broken down according to country of realization - are
distributed as follows:
1995/96
TDM
-------------
Domestic 140,573
Foreign, Europe 92,202
Foreign, other 9,136
-------------
241,911
=============
5.4 Other financial obligations
Other financial obligations total TDM 36,319.
5.5 Employees
The average number of employees in the Group - that is, in the fully
consolidated companies - is distributed as follows (itemized by country):
1995/96
-------------
Germany 413
France 71
Sweden 62
England 61
Italy 60
Holland 47
-------------
714
=============
59
<PAGE>
The average number of employees of companies included in the consolidated
financial statements on a pro-rata basis only is distributed as follows:
1995/96
-------------
Germany 102
Switzerland 11
France 4
U.S. 4
Denmark 1
-------------
122
=============
5.6 Remuneration of officers
Remuneration paid to the Board of Directors of the parent company, I.B. AG
Holding, during the fiscal year 1995/96 totaled TDM 1,877.
Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year
1995/96.
Munich, January 1997
The Board of Directors
60
<PAGE>
DESCRIPTION OF PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed balance sheet as
of September 30, 1998, is based on the historical financial statements of the
Company and Infratest as of September 30, 1998 (the end of their fiscal year),
after giving effect to the acquisition as if such transaction had occurred on
September 30, 1998.
The following unaudited pro forma combined condensed income statement
for the nine months ended September 30, 1998, is based on the historical
financial statements of the Company for the nine months ended September 30,
1998, and of Infratest for the nine months ended June 30, 1998, after giving
effect to the acquisition as if such transaction had occurred on January 1,
1997. The following unaudited pro forma combined condensed income statement for
the year ended December 31, 1997, is based on the historical financial
statements of the Company for the year ended December 31, 1997, and of Infratest
for the year ended September 30, 1997 (the end of their fiscal year), after
giving effect to the acquisition as if such transaction had occurred on January
1, 1997.
The pro forma combined condensed financial information may not be
indicative of the results that actually would have been attained if the
acquisition had been in effect on the dates indicated or which may be attained
in the future.
The pro forma adjustments are described in the accompanying notes to
the pro forma combined condensed financial information. The pro forma combined
condensed financial information should be read in conjunction with the notes
thereto and the consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, and
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998, and the consolidated financial statements of Infratest
presented elsewhere in this Current Report on Form 8-K/A. The pro forma combined
condensed balance sheet reflects preliminary estimates of the allocation of the
purchase price and is subject to final determination. The pro forma adjustments
represent management's preliminary determination of purchase accounting
adjustments and are based upon available information. Consequently, the amounts
reflected in the pro forma financial statements are subject to change.
61
<PAGE>
NFO Worldwide, Inc.
Pro Forma Combined Condensed Balance Sheet
As of September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Proforma Adjustments
NFO IB ---------------------- Proforma Including
09/30/98 09/30/98 Amount Note Infratest Burke
-------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $6,485 $6,503 $12,988
Accounts receivable:
Trade 52,487 30,838 83,325
Unbilled 12,659 36,467 49,126
Prepaid expenses and other 10,765 8,004 18,769
-------------- ---------------------------- ------------------
Total current assets 82,396 81,812 164,208
Property and equipment, net 29,171 13,922 43,093
Customer list, goodwill and other intangible assets 93,991 29,863 $90,870 A 214,724
Other assets 5,873 15,917 21,790
-------------- ---------------------------- ------------------
Total assets $211,431 $141,514 $90,870 $443,815
============== ============================ ==================
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt $310 $310
Accounts payable 8,436 $12,223 20,659
Accrued expenses 18,178 23,873 42,051
Customer billings in excess of revenues earned 11,712 27,742 39,454
-------------- ---------------------------- ------------------
Total current liabilities 38,636 63,838 102,474
Long-term debt 49,869 26,207 $122,800 A 198,876
Other long-term liabilities 4,023 16,082 2,670 A 22,775
-------------- ---------------------------- ------------------
Total liabilities 92,528 106,127 125,470 324,125
Minority interests 2,709 787 3,496
Stockholders' Equity
Common stock 213 60 (60) 213
Additional paid in capital 62,744 17,884 (17,884) 62,744
Retained earnings 55,453 16,216 (16,216) 55,453
Accumulated other comprehensive income (2,216) 440 (440) (2,216)
-------------- ---------------------------- ------------------
Total stockholders' equity 116,194 34,600 (34,600) 116,194
-------------- ---------------------------- ------------------
Total Liabilities and stockholders' equity $211,431 $141,514 $90,870 $443,815
============== ============================ ==================
</TABLE>
See notes to pro forma combined condensed financial information.
62
<PAGE>
NFO Worldwide, Inc.
Pro Forma Combined Condensed Statement of Income
As of September 30, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Proforma Adjustments
NFO IB US GAAP ---------------------- Proforma Including
Thru 9/30/98 Thru 6/30/98 Amount Note Infratest Burke
-------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $180,732 $101,769 $282,501
Cost of revenes 82,393 62,016 144,409
SG&A 73,107 31,328 104,435
Amortization 3,318 800 $2,434 B 6,552
Depreciation 3,011 2,487 5,498
-------------- ---------------------------- ------------------
Operating income - US GAAP 18,903 5,138 (2,434) 21,607
Interest expense 1,788 1,245 7,538 C 10,571
Equity interest in affiliates and other 394 (1,002) (608)
-------------- ---------------------------- ------------------
Pre-tax profit 16,721 4,895 (9,972) 11,644
Provision for income taxes 6,885 2,268 (3,702) D 5,451
-------------- ---------------------------- ------------------
Net income before minority interest 9,836 2,627 (6,270) 6,193
Minority interest 428 212 640
-------------- ---------------------------- ------------------
Net income $9,408 $2,415 ($6,270) $5,553
============== ============================ ==================
Pro Forma Earnings per Share:
Basic $0.45 $0.26
============== ==================
Diluted $0.44 $0.26
============== ==================
Pro Forma Weighted Average
Number of Shares Outstanding:
Basic 21,093 21,093
============== ==================
Diluted 21,621 21,621
============== ==================
</TABLE>
See notes to pro forma combined condensed financial information.
63
<PAGE>
NFO Worldwide, Inc.
Pro Forma Combined Condensed Statement of Income
As of December 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Proforma Adjustments
NFO IB US GAAP ---------------------- Proforma Including
Thru 12/31/97 Thru 9/30/97 Amount Note Infratest Burke
-------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $190,229 $159,848 $350,077
Cost of revenes 83,357 96,400 179,757
SG&A 76,705 49,907 126,612
Amortization 4,094 1,067 $3,245 B 8,406
Depreciation 2,798 3,512 6,310
-------------- ---------------------------- ------------------
Operating income - US GAAP 23,275 8,962 (3,245) 28,992
Interest expense 669 2,013 10,051 C 12,733
Other expense/(income)
Equity interest in affiliates 200 (1,752) (1,552)
-------------- ---------------------------- ------------------
Pre-tax profit 22,406 8,701 (13,296) 17,811
Provision for income taxes 8,895 4,483 (4,936) D 8,442
-------------- ---------------------------- ------------------
Net income before minority interest 13,511 4,218 (8,360) 9,369
Minority interest 1,006 117 1,123
-------------- ---------------------------- ------------------
Net income $12,505 $4,101 ($8,360) $8,246
============== ============================ ==================
Pro Forma Earnings per Share:
Basic $0.62 $0.41
============== ==================
Diluted $0.60 $0.40
============== ==================
Pro Forma Weighted Average
Number of Shares Outstanding:
Basic 20,265 20,265
============== ==================
Diluted 20,832 20,832
============== ==================
</TABLE>
See notes to pro forma combined condensed financial information.
64
<PAGE>
NFO Worldwide, Inc.
Notes to Pro Forma Combined Condensed Financial Information
(in thousands)
Notes:
(A) To record inital purchase accounting as follows:
Initial consideration paid
Cash to sellers (Debt Incurred By NFO) 120,000
Capitalized Acquisition Costs
(Estimated) 2,800
Payable to Sellers at a Future Date 2,670
--------------
Total Consideration 125,470
Less: Net Book Value of stock/assets acquired 34,600
--------------
Remainder - goodwill $ 90,870
==============
(B) To record additional amortization expense
relating to newly acquired assets (28 year
estimated useful life
12/31/97 Income Statement $ 3,245
9/30/98 Income Statement $ 2,434
(C) To record additional interest expense to reflect
cash paid to sellers:
12/31/97 Income Statement $ 10,051
9/30/98 Income Statement $ 7,538
(D) To reflect tax benefit on goodwill amortization
and acquisition related interest expense
12/31/97 Income Statement $ (4,936)
9/30/98 Income Statement $ (3,702)
65
<PAGE>
EXHIBIT INDEX
NFO WORLDWIDE, INC.
CURRENT REPORT ON FORM 8-K/A
DATED NOVEMBER 20, 1998
Exhibit No. Description Page No.
- ----------- ----------- --------
10.1* Stock Purchase Agreement dated as of November 10, 1998 by
and among NFO Europe (Deutschland) GmbH & Co. KG, NFO
Worldwide, Inc. (the "Company") and all of the Stockholders
(the "Sellers") of Infratest Burke Aktiengesellschaft
Holding ("Infratest").
10.2* Letter Agreement dated November 17, 1998 among the Company,
Infratest and the Sellers.
10.3* Note Purchase Agreement dated as of November 20, 1998 between
the Company and each of the purchasers signatory thereto
relating to the Company's Adjustable Rate Series A Senior
Notes due 2005 and the Company's Adjustable Rate Series B
Senior Notes due 2008.
10.4* Note Purchase Agreement dated as of November 20, 1998 between
the Company and each of the purchasers signatory thereto
relating to the Company's 9.84% Senior Subordinated Notes due
2008.
10.5* Amendment dated as of November 20, 1998 to the separate Note
Purchase Agreements dated as of March 9, 1998 between the
Company and each of the institutions signatory thereto.
10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit
Agreement dated as of March 9, 1998 by and among the Company,
Fleet National Bank and The Chase Manhattan Bank, as
co-agents, and the banks signatory thereto.
23.1 Consent of Independent Public Accountants. 67
99.1* Press Release dated November 23, 1998 by the Company
announcing the Company's private placement.
99.2* Press Release dated November 23, 1998 by the Company
announcing the Infratest acquisition.
- ------------------
* Previously filed
66
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated January 15, 1999, on the consolidated financial
statements of Infratest Burke Aktiengesellschaft Holding, Munich, and
subsidiaries as of September 30, 1998, 1997 and 1996, and for each of the years
in the three year period ended September 30, 1998, included in NFO Worldwide,
Inc.'s current report on Form 8-K/A dated February 3, 1999, into NFO Worldwide,
Inc.'s previously filed Registration Statements, File Nos. 33-73516, 33-83002,
33-91936, 333-24297, 333-24299, 333-38497, 333-51929, and 333-58067.
Munich, Germany
February 1, 1999
Haarmann, Hemmelrath & Partner GmbH
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft
Zelger ppa. Pilenghi
Wirtschaftsprufer Wirtschaftsprufer
67
