<PAGE>
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 Quarterly Period Ended March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period from : ____________ to ____________
Commission file number 0-22554
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OPINION RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-3118960
- ------------------------------------ --------------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
23 Orchard Road
Skillman, NJ 08558
- ------------------------------------- ---------------------------
(Address of principle executive offices) (Zip Code)
908-281-5100
(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 - 4,243,889 shares as of March 31, 1999
<PAGE>
INDEX
Opinion Research Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - March 31, 1999 and December 31, 1998
Condensed consolidated statements of income - Three months ended
March 31, 1999 and 1998
Condensed consolidated statements of cash flows - Three months ended
March 31, 1999 and 1998
Notes to condensed consolidated financial statements - March 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
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
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
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March 31, December 31,
1999 1998
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<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 181 $ 1,058
Accounts receivable:
Billed 9,018 9,457
Unbilled services 5,381 3,383
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14,399 12,840
Less: allowance for doubtful accounts 165 209
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14,234 12,631
Prepaid and other current assets 3,995 4,244
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Total current assets 18,410 17,933
Property and equipment, net 5,858 5,421
Intangibles, net 1,983 2,134
Goodwill, net 23,199 23,659
Other assets 1,007 1,463
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$ 50,457 $ 50,610
================== =================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,556 $ 1,688
Accrued expenses 2,979 4,695
Deferred revenues 2,909 2,683
Acquisition payable - 3,000
Short term borrowings 3,170 2,623
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Total current liabilities 10,614 14,689
Long term debt 19,575 15,600
Deferred income taxes 420 404
Other liabilities 2,849 3,226
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued or outstanding - -
Common stock, $.01 par value, 10,000,000 shares authorized,
4,281,747 shares issued and 4,243,889 outstanding in 1999
and 1998 42 42
Additional paid-in capital 14,216 14,216
Retained earnings 3,059 2,507
Treasury stock, at cost, 37,858 shares in 1999 and 1998 (186) (186)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (132) 112
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Total stockholders' equity 16,999 16,691
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$ 50,457 $ 50,610
================== =================
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</TABLE>
See notes to financial statements.
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
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Three Months Ended
March 31,
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1999 1998
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<S> <C> <C>
Revenues $ 17,342 $ 18,476
Cost of revenues 10,098 11,533
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Gross profit 7,244 6,943
Selling, general and administrative expenses 4,791 4,892
Depreciation and amortization 1,015 918
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Operating income 1,438 1,133
Interest expense, net 424 361
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Income before provision for income taxes 1,014 772
Provision for income taxes 462 347
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Net income $ 552 $ 425
============== ===============
Net income per common share:
Basic $ 0.13 $ 0.10
============== ===============
Diluted $ 0.13 $ 0.10
============== ===============
Weighted average common shares outstanding:
Basic 4,243,889 4,193,889
Diluted 4,320,147 4,269,508
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</TABLE>
See notes to financial statements.
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
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Three Months Ended
March 31,
-----------------------------------
1999 1998
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<S> <C> <C>
Net cash provided by (used in) operating activities (1) $ (1,378) $ 922
Cash flows from investing activities:
Payments for acquisitions (3,000) (11,434)
Proceeds from disposal of assets 106 122
Capital expenditures (1,109) (518)
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Net cash used in investing activities (4,003) (11,830)
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Cash flows from financing activities:
Borrowings under line-of-credit agreements 8,557 22,973
Repayments under line-of-credit agreements (3,400) (18,971)
Issuance of notes payable - 7,593
Repayments of notes payable (625) (386)
Repayments under capital lease arrangements (28) (38)
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Net cash provided by financing activities 4,504 11,171
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Increase (decrease) in cash and cash equivalents (877) 263
Cash and cash equivalents at beginning of period 1,058 160
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Cash and cash equivalents at end of period $ 181 $ 423
============== ==============
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</TABLE>
(1)Includes payments of $1,948 made in the first quarter of 1999 related to
the unusual charge of $2,470 recorded in the fourth quarter of 1998 in
relation to a separation agreement with the Company's former Chairman
and CEO and the buy-out of his pre-existing employment contract.
See notes to financial statements.
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1999
(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,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. 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, 1998, as amended.
NOTE B - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
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<S> <C> <C>
Numerator:
Net income $ 552 $ 425
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Numerator for basic and diluted earnings per share $ 552 $ 425
============ =============
Denominator:
Denominator for basic earnings per share
Weighted-average shares 4,244 4,194
Effect of dilutive stock options 76 76
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Denominator for diluted earnings per share
Adjusted weighted-average shares 4,320 4,270
============ =============
Basic and diluted earnings per share $ 0.13 $ 0.10
============ =============
</TABLE>
<PAGE>
NOTE C - CREDIT FACILITY
During July 1998, the Company entered into an agreement with a three bank
syndicate for an increased credit facility of $32,000. The credit facility
provided $12,500 of term notes and up to $19,500 of revolving credit. All debts
outstanding as of June 30, 1998 were repaid with proceeds from the new facility.
This new facility is for a three-year term and is secured by substantially all
of the assets of the Company. Availability of funds under the new facility is
based on a multiple of trailing EBITDA. As of March 31, 1999, the Company had
$3,649 of additional available credit.
NOTE D - COMPREHENSIVE INCOME
The Company's comprehensive income for the quarters ended March 31, 1999 and
1998, are set forth in the following table:
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Net income $ 552 $ 425
Other comprehensive income (loss):
Foreign currency translation adjustment (244) 289
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Comprehensive income $ 308 $ 714
============ ============
</TABLE>
NOTE E SEGMENTS
The Company's operations by business segments for the three months ended March
31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
U.S. Market U.K. Market Total
Research Research Teleservices Segments Other Consolidated
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Three months ended March 31, 1999:
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<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $ 9,361 $3,374 $3,811 $16,546 $796 $17,342
Operating income 788 42 581 1,411 27 1,438
Interest expense 424
Income before income taxes $ 1,014
Three months ended March 31, 1998:
- ----------------------------------
Revenues from external customers $10,112 $3,541 $3,824 $17,477 $999 $18,476
Operating income 802 89 224 1,115 18 1,133
Interest expense 361
Income before income taxes $ 772
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</TABLE>
<PAGE>
NOTE F SUBSEQUENT EVENT
On April 30, 1999, the Company signed a definitive agreement to acquire Macro
International, Inc. Closing is expected in the second quarter of 1999.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(dollars in thousands)
Results of Operations - First Quarter 1999 as Compared to First Quarter 1998
Revenues for the first quarter of 1999 decreased $1,134, or 6%, from $18,476 in
the first quarter of 1998 to $17,342 in the first quarter of 1999. Included in
revenues are certain costs, which are passed through to clients. The nature of
client assignments in the first quarter of 1999 resulted in a lower level of
such costs than in the first quarter of 1998. These pass-through costs were
$1,834 in the first quarter of 1999 and $3,657 in the first quarter of 1998.
Gross profit for the three months ended March 31, 1999 was $7,244, an increase
of $301, or 4%, over the same period in 1998. The gross profit increase is
consistent with the revenue increase net of pass-through costs.
Selling, general and administrative expenses decreased to $4,791 from $4,892 for
the three months ended March 31, 1999 relative to the same period in 1998. This
reflects cost reduction initiatives throughout the Company and a net cost
reduction in the Teleservices business segment ("Teleservices") resulting from
the opening of a new call center in 1999 and the closure of a call center in
1998.
Depreciation and amortization expense increased to $1,015 from $918 for the
three months ended March 31, 1999, relative to the same period in 1998. $54 of
the increase is due to additional goodwill amortization on a $3,000 acquisition
payment in Teleservices; the remainder is principally due to the depreciation of
new capital investments made in 1998 and the first quarter of 1999.
Interest expense increased to $424 from $361 for the three months ended March
31, 1999 relative to the same period in 1998, primarily due to the increased
borrowing to fund the Teleservices acquisition in January 1998 and subsequent
earn-out payments in the first quarter of 1999.
As a result of all of the above, net income for the Company increased from $425
to $552 for the three months ended March 31, 1998 and 1999, respectively.
Liquidity and Capital Resources
Net cash used by operations for the first three months of 1999 was $1,378.
Included in the current period were payments of $1,948 related to the unusual
charge of $2,470 recorded in the fourth quarter of 1998 in relation to a
separation agreement with the Company's former Chairman and CEO and the buy-out
of his pre-existing employment contract.
Investing and financing activities for the first three months of 1999 included
capital expenditures of $1,109 and payments of $3,000 to the principals of an
acquired Teleservices business based on 1998 operating performance. The Company
believes that
<PAGE>
its current sources of liquidity and capital will be sufficient to fund its
long-term obligations and working capital needs for the foreseeable future.
During July 1998, the Company entered into an agreement with a three bank
syndicate for an increased credit facility of $32,000. The credit facility
provided $12,500 of term notes and up to $19,500 of revolving credit. All debts
outstanding as of June 30, 1998 were repaid with proceeds from the new facility.
This new facility is for a three-year term and is secured by substantially all
of the assets of the Company. Availability of funds under the new facility is
based on a multiple of trailing EBITDA. As of March 31, 1999, the Company had
$3,649 of additional available credit.
On April 30, 1999, the Company signed a definitive agreement to acquire Macro
International, Inc. Closing is expected in the second quarter of 1999.
Readiness for Year 2000
The Year 2000 issue concerns the inability of some computer hardware and
software to distinguish between the year 1900 and the year 2000. If not
corrected, the potential exists for computer system failures or miscalculations.
The Company uses computer systems in many aspects of its business, and Year 2000
problems in such systems, if not corrected, could disrupt operations and have an
adverse impact on the Company's operating results. The Company is also exposed
to the risk that one or more of its vendors or service providers could
experience Year 2000 problems that impact the ability of such vendor or service
provider to provide goods and services. To date, the Company is not aware of
any vendor or service provider Year 2000 issue that would have a material
adverse impact on the Company's operations.
The implementation of Year 2000 compliance procedures at the Company has
consisted of: compiling information as to the information technology (IT) and
non-IT systems that are sensitive to the Year 2000 problem; coordinating with
clients, vendors, service providers, and other third parties who are affected
by, or may affect, the Company's plans to address the Year 2000 issue.
Additionally, analysis of critical systems to determine which systems are not
Year 2000 compliant and evaluating the costs to repair or replace those systems
have been undertaken by the Company. As potential problems are identified,
affected programs have been modified, or are in the process of being modified by
the Company's system support group to ensure future compliance.
The Company intends to complete the testing of Year 2000 compliance of its
critical systems by the end of May 1999, and of the non-critical systems by July
31, 1999. Incremental out-of-pocket costs incurred through March 31, 1999 have
not been significant. The Company estimates that no more than $250 will be
needed to modify or replace its existing software and hardware in order to be
Year 2000 compliant. All maintenance and modification costs are expensed as
incurred, while the costs of new systems are being capitalized according to
generally accepted accounting principles.
<PAGE>
Based upon its analysis to date, management believes that the Company will be
able to continue operations in the year 2000 and beyond without a material
adverse effect caused by the Year 2000 problems. However, the Company may
identify unidentified problems during its Year 2000 readiness assessment that
could result in such an effect. A worst case scenario resulting from one or
more of the Company's systems being non-compliant might be an inability to
service one or more of our clients until such problem was corrected. The
Company believes that such Year 2000 difficulties experienced by the Company
would be isolated in nature and will not have a material adverse effect on the
Company's operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no significant changes in market risk since December 31, 1998
that would have a material effect on the Company's risk exposure as previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as amended.
<PAGE>
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) Financial Data Schedule (EDGAR only).
b) Reports on Form 8-K
Report filed February 16, 1999, covering Items 5, 6, and 7 of
Form 8-K.
<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
------------------------------------
(Registratant)
Date: May 10, 1999 /s/Douglas L. Cox
------------ ---------------------------------------
Douglas L. Cox, Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of March 31, 1999 and the related Consolidated
Statements of Income and Cash Flows for the three Months Ended March 31, 1999
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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 181
<SECURITIES> 0
<RECEIVABLES> 14,399
<ALLOWANCES> 165
<INVENTORY> 0
<CURRENT-ASSETS> 18,410
<PP&E> 5,858
<DEPRECIATION> 0
<TOTAL-ASSETS> 50,457
<CURRENT-LIABILITIES> 10,614
<BONDS> 19,575
0
0
<COMMON> 42
<OTHER-SE> 16,957
<TOTAL-LIABILITY-AND-EQUITY> 50,457
<SALES> 0
<TOTAL-REVENUES> 17,342
<CGS> 0
<TOTAL-COSTS> 10,098
<OTHER-EXPENSES> 5,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424
<INCOME-PRETAX> 1,014
<INCOME-TAX> 462
<INCOME-CONTINUING> 552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 552
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
