<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, 2000
[ ] 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
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(Exact name of registrant as specified in its charter)
Delaware 22-3118960
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(State of incorporation) (I.R.S. Employer
Identification No.)
23 Orchard Road
Skillman, NJ 08558
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(Address of principle executive offices) (Zip Code)
(Registrant's telephone number, including area code)
908-281-5100
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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 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 - 4,270,749 shares as of March 31, 2000
<PAGE>
INDEX
Opinion Research Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets - March 31, 2000 and December 31, 1999
Condensed consolidated statements of income - Three months ended
March 31, 2000 and 1999
Condensed consolidated statements of cash flows - Three months ended
March 31, 2000 and 1999
Notes to condensed consolidated financial statements - March 31, 2000
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
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<TABLE>
<CAPTION>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
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March 31, December 31,
2000 1999
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Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,239 $ 2,808
Accounts receivable:
Billed 21,331 21,107
Unbilled services 11,826 11,853
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33,157 32,960
Less: allowance for doubtful accounts 258 259
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32,899 32,701
Prepaid and other current assets 1,736 2,034
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Total current assets 35,874 37,543
Property and equipment, net 9,248 8,815
Intangibles, net 3,953 4,217
Goodwill, net 37,010 37,588
Other assets 3,782 3,803
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$89,867 $91,966
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 5,075 $ 3,629
Accrued expenses 8,283 8,329
Deferred revenues 2,643 3,450
Acquisition payable - 2,897
Short term borrowings 2,013 2,027
Other current liabilities 1,405 1,838
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Total current liabilities 19,419 22,170
Long term debt 47,307 45,311
Deferred income taxes 1,163 1,232
Other liabilities 1,051 3,060
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,
4,308,607 shares issued and 4,270,749 outstanding in 2000
and 4,292,641 shares issued and 4,254,783 outstanding in 1999 43 43
Additional paid-in capital 15,571 15,475
Retained earnings 5,715 4,931
Treasury stock, at cost, 37,858 shares in 2000 and 1999 (186) (186)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment (216) (70)
---------- ----------
Total stockholders' equity 20,927 20,193
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$89,867 $91,966
========== ==========
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</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
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Revenues $ 38,911 $ 17,342
Cost of revenues 25,596 10,098
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Gross profit 13,315 7,244
Selling, general and administrative expenses 8,831 4,791
Depreciation and amortization 1,708 1,015
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Operating income 2,776 1,438
Interest expense, net 1,357 424
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Income before provision for income taxes 1,419 1,014
Provision for income taxes 635 462
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Net income $ 784 $ 552
=========== ===========
Net income per common share:
Basic $ 0.18 $ 0.13
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Diluted $ 0.16 $ 0.13
=========== ===========
Weighted average common shares outstanding:
Basic 4,260,052 4,243,889
Diluted 4,912,160 4,320,147
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</TABLE>
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<TABLE>
<CAPTION>
<S><C> <C><C> <C><C>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended
March 31,
-------- --------
2000 1999
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Net cash provided by (used in) operating activities (1) $ 2,640 $ (1,378)
Cash flows from investing activities:
Payments for acquisitions (2,914) (3,000)
Proceeds from disposal of assets - 106
Capital expenditures (1,346) (1,109)
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Net cash used in investing activities (4,260) (4,003)
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Cash flows from financing activities:
Borrowings under line-of-credit agreements 6,700 8,557
Repayments under line-of-credit agreements (4,198) (3,400)
Issuance of notes payable - -
Repayments of notes payable (541) (625)
Redemption of acquisition stock options (2,000) -
Exercise of employee stock options 96 -
Repayments under capital lease arrangements (6) (28)
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Net cash provided by financing activities 51 4,504
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Decrease in cash and cash equivalents (1,569) (877)
Cash and cash equivalents at beginning of period 2,808 1,058
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Cash and cash equivalents at end of period $ 1,239 $ 181
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(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.
</TABLE>
<PAGE>
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(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,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. 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, 1999.
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,
-----------------------------
2000 1999
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<S> <C> <C>
Numerator:
Net income $ 784 $ 552
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Numerator for basic and diluted earnings per share $ 784 $ 552
============ =============
Denominator:
Denominator for basic earnings per share
Weighted-average shares 4,260 4,244
Effect of dilutive stock options 652 76
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Denominator for diluted earnings per share
Adjusted weighted-average shares 4,912 4,320
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Net income per common share:
Basic earnings per share $ 0.18 $ 0.13
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Diluted earnings per share $ 0.16 $ 0.13
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</TABLE>
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NOTE C - ACQUISITION
The Company acquired all of the outstanding shares of stock of Macro
International Inc. ("Macro") pursuant to a Stock Purchase Agreement dated April
30, 1999. The purchase price was comprised of a $22,300 cash payment and
approximately $1,010 of additional costs related to the acquisition. The fair
value of the net assets acquired was $8,742. Identifiable intangible assets
valued at $2,960 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 and identifiable intangible assets of $11,608 has
been recorded as goodwill and is being amortized using the straight-line method
over a period of twenty years.
In addition, over the next two years, the sellers may earn up to an additional
$8,700 of cash payments, contingent upon Macro achieving certain future targets
for revenues and earnings before interest, income taxes, depreciation and
amortization. The pro forma amounts presented below do not give effect to any
such contingent payments.
The unaudited pro forma results of operations for the three months ended March
31, 1999, which assumes the consummation of the Macro purchase as of the
beginning of the period, is as follows:
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<S> <C>
Revenues $33,168
Net income 260
Net income per share:
Basic $ 0.06
Diluted $ 0.06
</TABLE>
The pro forma net income include adjustments for amortization of goodwill and
intangible assets, interest expense, and the related income tax effects of such
adjustments. Also included in the 1999 period are expenses of $660 incurred by
Macro prior to the acquisition for losses on the closure of certain subsidiaries
and merger related costs.
NOTE D - CREDIT FACILITY
In May 1999, in connection with the Macro acquisition the Company entered into a
credit agreement with a financial institution for a new facility of $50,000 (the
"Senior Facility"). This financial institution later syndicated the facility to
include four additional financial institutions. The Senior Facility provides
$30,000 of term notes and up to $20,000 of revolving credit for a six-year term
and is secured by substantially all of the assets of the Company. The Senior
Facility carries an interest rate at the discretion of the Company of either the
financial institution's designated base rate (9.00% at March 31, 2000) plus 125
basis points or LIBOR (3-month LIBOR was 6.26% at March 31, 2000) plus 250
basis points for both revolving credit and term notes. Principal payments on
the term notes are due in escalating quarterly installments commencing September
30, 1999. As of March 31, 2000, the Company had approximately $13,246 of
additional credit available under the Senior Facility. Given that the interest
rates on the revolving credit facility and the notes are based on current market
rates, the carrying value of the amounts due under the credit facility
approximates their fair value at March 31, 2000.
In May 1999, the Company also issued $15,000 of subordinated debentures to a
financial institution. In exchange for consideration received in connection
with this debt, the Company also
<PAGE>
issued warrants to purchase a maximum of 437,029 shares of the Company's common
stock at an exercise price of $5.422 per share. The warrants are exercisable
from the date of issuance and expire in 2007. The subordinated financing has an
eight-year term and a coupon rate of 12%.
NOTE E - COMPREHENSIVE INCOME
The Company's comprehensive income for the three months ended March 31, 2000 and
1999, are set forth in the following table:
<TABLE>
2000 1999
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<S> <C> <C>
Net income $ 784 $ 552
Other comprehensive income (loss):
Foreign currency translation adjustment (146) (244)
Comprehensive income $ 638 $ 308
============ ============
</TABLE>
NOTE F - SEGMENTS
The Company's operations by business segments for the three months ended March
31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
U.S. Market U.K. Market Social Total
Research Research Teleservices Research Segments Other Consolidated
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Three months ended March 31, 2000:
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<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from external customers $9,139 $4,276 $5,143 $19,346 $37,904 $1,007 $38,911
Operating income 673 188 538 1,388 2,787 (11) 2,776
Interest expense 1,357
Income before income taxes $ 1,419
Three months ended March 31, 1999:
- ----------------------------------
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
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</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(dollars in thousands)
Results of Operations - First Quarter 2000 as compared to First Quarter 1999
Revenues increased $21,569, or 124%, to $38,911 in the first quarter of 2000
from $17,342 in the first quarter of 1999. This increase is principally due to
$19,346 in revenues generated by ORC Macro, the Company's social research
business acquired in the second quarter of 1999 (the "Macro Acquisition").
Revenue increases for the remainder of the Company were due to the growth in the
Company's teleservices business, where revenue increased by $1,332, or 35%, and
an increase in revenues of $891, or 7%, in the Company's market research
business.
Cost of revenues increased $15,498, or 153%, to $25,596 in the first quarter of
2000 from $10,098 in the first quarter of 1999. This increase is principally
due to the Macro Acquisition, for which cost of revenues was $13,800 or 89% of
the increase. Cost of revenues for the Company's market research business
increased by $768, or 9%, and cost of revenues for the teleservices business
increased by $930, or 50%, due to the opening of new call centers and resulting
volume increases.
Gross profit as a percentage of revenues for the Company decreased to 34% in the
first quarter of 2000 from 42% in the first quarter of 1999 due primarily to the
impact of the Macro Acquisition, for which the gross profit percentage was 29%.
The gross profit percentage for the market research business decreased to 38%
from 39% and the gross profit percentage for the teleservices business decreased
to 46% from 51%, due to the opening of new call centers.
Selling, general and administrative expenses ("SG&A") increased $4,040, or 84%,
to $8,831 in the first quarter of 2000 from $4,791 in the first quarter of 1999.
The Macro Acquisition accounted for $3,577 or 89% of the increase, while SG&A
for the remainder of the Company increased by $463, or 11%. As a percentage of
revenues, consolidated SG&A decreased to 23% from 28%.
The lower gross profit and lower SG&A percentages for the Macro Acquisition are
due to the nature of its business, as approximately 70% of the Macro
Acquisition's business is conducted with government entities. Consequently, in
accordance with the prescribed accounting procedures for government contractors,
the Macro Acquisition's cost of revenues reflect certain costs attributable to
its contract projects which the Company classifies as general and administrative
expenses for its other operating segments. Therefore, the inclusion of the
Macro Acquisition in the operating results of the Company has, and will continue
to have, the effect of lowering, as a percentage of revenues, the consolidated
gross profit and SG&A.
Depreciation and amortization expense increased by $693, or 68%, to $1,708 in
the first quarter of 2000 from $1,015 in the first quarter of 1999. The Macro
Acquisition accounted for $581 or 84% of the total increase. As a percentage of
revenue, depreciation and amortization on a consolidated basis decreased to 4%
from 6%.
Interest expense increased to $1,357 from $424 for the first quarter of 2000
relative to the same period in 1999, primarily due to the increased borrowings
to fund the Macro Acquisition.
The provision for income taxes increased to $635 from $462 for the first quarter
of 2000 relative to the same period in 1999, due to the higher level of pre-tax
earnings. The provisions
<PAGE>
for these periods are higher than the amount that results from applying the
federal statutory rate to income primarily because of the amortization of non-
tax deductible goodwill generated from acquisitions and the impact of state
income taxes.
As a result of all of the above, net income for the Company increased from $552
to $784 for the three months ended March 31, 1999 and 2000, respectively.
Liquidity and Capital Resources
Net cash provided by operations for the first three months of 2000 was $2,640.
Investing and financing activities for the first three months of 2000 included
capital expenditures of $1,346 and payments of $2,914 with respect to earn-out
payments for previous acquisitions. Additionally, in January 2000 the Company
paid $2,000 to the previous owners of ORC ProTel for options granted at the time
of acquisition. These options were recorded as a long-term liability. Net of
borrowings for earn-out related payments and the payment for the acquisition
options, the Company decreased its borrowings by $2,953 in the first quarter of
2000. The Company believes that its current sources of liquidity and capital
will be sufficient to fund its long-term obligations and working capital needs
for the foreseeable future.
In May 1999, in connection with the Macro Acquisition, the Company entered into
a credit agreement with a financial institution for a new facility of $50,000
(the "Senior Facility"). This financial institution later syndicated the
facility to include four additional financial institutions. The Senior Facility
provides $30,000 of term notes and up to $20,000 of revolving credit for a six-
year term and is secured by substantially all of the assets of the Company. The
Senior Facility carries an interest rate at the discretion of the Company of
either the financial institution's designated base rate (9.00% at March 31,
2000) plus 125 basis points or LIBOR (3-month LIBOR was 6.26% at March 31, 2000)
plus 250 basis points for both revolving credit and term notes. Principal
payments on the term notes are due in escalating quarterly installments
commencing September 30, 1999. As of March 31, 2000, the Company had
approximately $13,246 of additional credit available under the Senior Facility.
Given that the interest rates on the revolving credit facility and the notes are
based on current market rates, the carrying value of the amounts due under the
credit facility approximates their fair value at March 31, 2000.
In May 1999, the Company also issued $15,000 of subordinated debentures to a
financial institution. In exchange for consideration received in connection
with this debt, the Company also issued warrants to purchase a maximum of
437,029 shares of the Company's common stock at an exercise price of $5.422 per
share. The warrants are exercisable from the date of issuance and expire in
2007. The subordinated financing has an eight-year term and a coupon rate of
12%.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no significant changes in market risk since December 31, 1999
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, 1999.
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
None.
<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
------------------------------------------
(Registrant)
Date: May 12, 2000 ---------------------------------------------
------------ Douglas L. Cox, Chief Financial Officer
<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
------------------------------------------
(Registrant)
Date: May 12, 2000 /s/Douglas L. Cox
------------ ---------------------------------------------
Douglas L. Cox, Chief Financial Officer
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of March 31, 2000 and the related Consolidated
Statements of Income and Cash Flows for the three Months Ended March 31, 2000
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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,239
<SECURITIES> 0
<RECEIVABLES> 33,157
<ALLOWANCES> 258
<INVENTORY> 0
<CURRENT-ASSETS> 35,874
<PP&E> 9,248
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,867
<CURRENT-LIABILITIES> 19,419
<BONDS> 19,575
0
0
<COMMON> 43
<OTHER-SE> 20,884
<TOTAL-LIABILITY-AND-EQUITY> 89,867
<SALES> 0
<TOTAL-REVENUES> 38,911
<CGS> 0
<TOTAL-COSTS> 25,596
<OTHER-EXPENSES> 10,539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,357
<INCOME-PRETAX> 1,419
<INCOME-TAX> 462
<INCOME-CONTINUING> 784
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 784
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.16
</TABLE>
