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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1998
Commission file number 0-22554
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OPINION RESEARCH CORPORATION
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 22-3118960
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(State of incorporation) (I.R.S. Employer
Identification No.)
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<S> <C>
23 Orchard Road
Skillman, NJ 08558
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(Address of principle executive offices) (Zip Code)
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908-281-5100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports): Yes X No and; (2) has
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been subject to such filing requirements for the past 90 days:
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.01 Par Value - 4,193,889 shares as of March 31, 1998
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INDEX
Opinion Research Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1998
and December 31, 1997
Condensed consolidated statements of income - Three months ended
March 31, 1998 and 1997
Condensed consolidated statements of cash flows - Three months ended
March 31, 1998 and 1997
Notes to condensed consolidated financial statements - March 31, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
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OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
March 31, December 31,
1998 1997
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Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 423 $ 160
Accounts receivable:
Billed 10,202 7,242
Unbilled services 4,950 4,061
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15,152 11,303
Less: allowance for doubtful accounts 184 170
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14,968 11,133
Prepaid and other current assets 2,943 2,215
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Total current assets 18,334 13,508
Property and equipment, net 5,705 5,041
Capitalized production costs, net 126 145
Intangibles, net 2,397 1,316
Goodwill, net 21,317 11,063
Other assets 1,545 1,407
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$ 49,424 $ 32,480
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,891 $ 960
Accrued expenses 3,190 2,732
Deferred revenues 4,241 4,024
Revolving credit line 4,992 990
Notes payable 2,091 1,251
Current maturities of obligations under capital leases 208 217
Other current liabilities 1,706 68
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Total current liabilities 18,319 10,242
Long term debt 10,467 4,100
Long term maturities of obligations under capital leases 65 94
Deferred income taxes 395 425
Other liabilities 3,104 1,259
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued or outstanding - -
Common stock, $.01 par value, 10,000,000 shares authorized,
4,231,747 shares issued and 4,193,889 outstanding in 1998
and 1997 42 42
Additional paid-in capital 13,976 13,976
Retained earnings 3,102 2,677
Treasury stock, at cost, 37,858 shares in 1998 and 1997 (186) (186)
Accumulated other comprehensive income:
foreign currency translation adjustment 140 (149)
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Total stockholders' equity 17,074 16,360
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$ 49,424 $ 32,480
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See notes to financial statements
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OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
March 31,
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1998 1997
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<S> <C> <C>
Revenues $ 18,476 $ 12,519
Cost of revenues 11,533 7,990
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Gross profit 6,943 4,529
Selling, general and administrative expenses 4,892 3,405
Depreciation and amortization 918 657
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Operating income 1,133 467
Interest expense, net 361 176
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Income before provision for income taxes 772 291
Provision for income taxes 347 137
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Net income $ 425 $ 154
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Net income per common share:
Basic $ 0.10 $ 0.04
Diluted $ 0.10 $ 0.04
Weighted average common shares outstanding:
Basic 4,193,889 4,143,889
Diluted 4,269,508 4,143,889
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See notes to financial statements
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OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
March 31,
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1998 1997
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<S> <C> <C>
Net cash provided by operating activities $ 922 $ 729
Cash flows from investing activities:
Payment for acquisitions (11,434) (150)
Proceeds from disposal of assets 122 -
Capital expenditures (518) (210)
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Net cash used in investing activities (11,830) (360)
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Cash flows from financing activities:
Borrowings under line-of-credit agreements 22,973 1,517
Repayments under line-of-credit agreements (18,971) (2,117)
Issuance of notes payable 7,593 49
Repayments of notes payable (386) (230)
Repayments under capital lease arrangements (38) (56)
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Net cash provided by (used in) financing activities 11,171 (837)
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Increase (decrease) in cash and cash equivalents 263 (468)
Cash and cash equivalents at beginning of period 160 865
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Cash and cash equivalents at end of period $ 423 $ 397
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See notes to financial statements
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OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(Unaudited)
(in thousands, except per share data)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant Company and Subsidiaries' Annual Report on Form 10-K for the year
ended December 31, 1997.
NOTE B - CREDIT FACILITY
During January 1998, the Company executed an agreement for an increased facility
with its senior lender. The new facility allows for $12,500 of term notes and
$9,000 of revolving credit with combined total not to exceed $21,000. As of
March 31, 1998, the Company has available under its revolving credit facility
$4,008. The agreement is for three years and is secured by substantially all of
the assets of the Company.
NOTE C - EARNINGS PER SHARE
In 1997, the Financial Accounting Standard Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
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The following table sets forth the computation of basic and diluted earnings per
share:
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Three Months
Ended March 31,
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1998 1997
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<S> <C> <C>
Numerator:
Net income $ 425 $ 154
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Numerator for basic and diluted earnings per share $ 425 $ 154
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Denominator:
Denominator for basic earnings per share
weighted-average shares 4,194 4,144
Effect of dilutive stock options 76 -
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Denominator for diluted earnings per share
adjusted weighted-average shares 4,270 4,144
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Basic and diluted earnings per share $ 0.10 $ 0.04
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NOTE D - ACQUISITION OF PRO TEL MARKETING, INC.
Pursuant to an Asset Purchase Agreement dated January 6, 1998, ORC ProTel
("ProTel"), a newly created subsidiary of the Company, purchased certain assets
(not including cash or accounts receivable) and assumed certain liabilities of
Pro Tel Marketing, Inc. The acquisition was accounted for as a purchase and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed. The purchase price was comprised of a $10,000 cash payment
and 400,000 options to purchase common shares of the Company's stock, with the
provision that such options may, at the option of the holders, be returned to
the Company for cash payment of $2,000 on the second anniversary of the closing.
The fair value of these options was $1,691 at the acquisition date. The fair
value of the assets acquired and liabilities assumed was $632 and $143,
respectively. The Company incurred $543 of costs related to the acquisition.
Identifiable intangible assets valued at $1,250 are being amortized using the
straight-line method over a period of five years. The excess consideration paid
over the estimated fair value of net assets acquired in the amount of $10,495
has been recorded as Goodwill and is being amortized using the straight-line
method over a period of fifteen years. In addition, over the next three years,
the sellers may earn up to an additional $10,000 of cash payments, contingent
upon ProTel achieving certain future targets for revenues and earnings before
interest, income taxes, depreciation, and amortization.
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The unaudited pro forma results of operations for the three months ended March
31, 1997, which assumes the consummation of the ProTel purchase as of January 1,
1997, are as follows:
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Revenues $15,919
Net income 432
Net income per share:
Basic and diluted $ 0.10
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The pro forma net income includes adjustment for amortization of goodwill and
intangible assets, adjustment of interest expense, and the related income tax
effect of such adjustments.
NOTE E - NEW ACCOUNTING PRONOUNCEMENT
The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, which establishes standards for the reporting
and disclosure of comprehensive income and its components in the financial
statements. The adoption of this Statement had no impact on the Company's net
income or shareholders' equity. The Company's comprehensive income (loss) for
the quarters ended March 31, 1998 and 1997, are set forth in the following
table:
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1998 1997
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<S> <C> <C>
Net income $ 425 $ 154
Other comprehensive income (loss):
Foreign currency translation adjustment 289 (278)
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Comprehensive income (loss) 714 (124)
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ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(in thousands)
RESULTS OF OPERATIONS - FIRST QUARTER 1998 AS COMPARED TO FIRST QUARTER 1997
Revenues for the first quarter of 1998 increased $5,957, or 48%, from $12,519 in
the first quarter of 1997 to $18,476 in the first quarter of 1998. Internal
growth accounted for an increase of $2,220, or 18%, and the acquisition of
ProTel increased revenues by $3,737, or 30%. Principally all of the internal
growth occurred in the U.S. and Hong Kong with the UK and other international
operations being flat for the first quarter of 1998 as compared to the first
quarter of 1997.
Gross profit for the three months ended March 31, 1998 was $6,943, an increase
of $2,414, or 53%, over the same period in 1997. As a percent of revenues,
gross profit increased to 38% for the first three months of 1998 compared to 36%
in 1997. Internal growth in gross profit amounted to $718, or 16%. As a
percent of revenues, non-acquisition gross profit remained relatively stable at
36%. The acquisition of ProTel added $1,696 of gross profit. As a percent of
revenues, gross profit for ProTel was 45% for the first quarter of 1998.
Selling, general and administrative expenses increased to $4,892 from $3,405 for
the three months ended March 31, 1998 relative to the same period in 1997. Non-
acquisition SG&A increased $654, or 19%. As a percent of revenues, non-
acquisition SG&A increased slightly from 27% to 28%. The ProTel acquisition
accounted for an additional $833 of SG&A. As a percent of revenues, combined
SG&A has decreased to 26% for the three months ended March 31, 1998 from 27% for
the comparable period in 1997.
Depreciation and amortization expense increased to $918 from $657 for the three
months ended March 31, 1998, relative to the same period in 1997. Non-
acquisition depreciation and amortization decreased from $657 to $627, or 5%,
from the first quarter of 1997 to the first quarter of 1998. The acquisition of
ProTel has increased depreciation and amortization by $291, or 44%. As a
percent of revenues, the combined depreciation and amortization expense remained
constant at 5% for the three months ended March 31, 1998 and 1997.
As a result of all of the above, net income for the Company increased from $154
to $425 for the three months ended March 31, 1997 and 1998, respectively. Non-
acquisition net income increased $105, or 68%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations for the first three months of 1998 was $922.
Investing and financing activities for the first three months of 1998 included
capital expenditures of $518 and payments of $11,434 for the ProTel acquisition.
Net of the $11,434 borrowed to purchase ProTel, the Company reduced its
borrowings by $225 in the three months ended March 31, 1998. The Company
believes that its current sources of
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liquidity and capital will be sufficient to fund its long-term obligations and
working capital needs for the foreseeable future.
During January 1998, the Company executed an agreement for an increased facility
with its senior lender. The new facility allows for $12,500 of term notes and
$9,000 of revolving credit with combined total not to exceed $21,000. As of
March 31, 1998, the Company has available under its revolving credit facility
$4,008. The agreement is for three years and is secured by substantially all of
the assets of the Company.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) None.
b) Reports on Form 8-K
One report filed January 20, 1998, describing the acquisition
of Pro Tel Marketing, Inc. (see Note D). An amendment to
Form 8-K filed March 23, 1998 including audited 1997 and 1996
financial statements of Pro Tel Marketing, Inc. and unaudited
pro forma consolidated financial statements of the Registrant
for the year ended December 31, 1997.
<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 thereunto duly authorized.
Opinion Research Corporation
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(Registrant)
Date: May 14, 1998 /s/ John F. Short
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John F. Short, Vice Chairman & CFO
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND THE RELATED CONSOLIDATED
STATEMENTS OF INCOME AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 423
<SECURITIES> 0
<RECEIVABLES> 15,152
<ALLOWANCES> 184
<INVENTORY> 0
<CURRENT-ASSETS> 18,334
<PP&E> 5,705
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,424
<CURRENT-LIABILITIES> 18,319
<BONDS> 10,532
0
0
<COMMON> 42
<OTHER-SE> 17,032
<TOTAL-LIABILITY-AND-EQUITY> 49,424
<SALES> 0
<TOTAL-REVENUES> 18,476
<CGS> 0
<TOTAL-COSTS> 11,533
<OTHER-EXPENSES> 5,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> 772
<INCOME-TAX> 347
<INCOME-CONTINUING> 425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 425
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
