SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended DECEMBER 31, 1996
Commission file number 1-7675
AUDITS & SURVEYS WORLDWIDE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1809586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
650 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10011
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-627-9700
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
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COMMON STOCK AMERICAN STOCK EXCHANGE
PAR VALUE $.01
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 17, 1997: $17,352,207
Number of shares of Common Stock outstanding at March 17, 1997: 13,099,103
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DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of Audits & Surveys Worldwide, Inc.'s 1997 Proxy
Statement are incorporated by reference into Part III of this Annual Report on
Form 10-K.
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ITEM 1. BUSINESS
On March 24, 1995, Audits and Surveys, Inc. ("A&S") and The Triangle
Corporation ("Triangle") consummated a merger pursuant to which A&S was merged
with and into Triangle. Triangle was the surviving corporation and the separate
existence of A&S ceased. The name of the merged corporation was changed to
Audits & Surveys Worldwide, Inc. ("ASW"). Unless the context otherwise requires,
the terms "Company" or "ASW" refer to Audits and Surveys Worldwide, Inc. and its
consolidated subsidiaries.
Recent Developments
The Company made significant progress towards implementation of its
strategy to globally expand its services through the growth of its international
consumer tracking research from approximately 60 countries in 1995 to
approximately 70 countries in 1996. The Company capitalized on its leadership
position in providing U.S. data to the personal computer industry to establish a
syndicated global sales measurement program in information technology products.
Seven European countries are now being monitored by the Company and the Company
intends to commence monitoring in countries in Asia and Latin America in the
second and third quarters of 1997, respectively. The Company is also conducting
major customer satisfaction and mystery shopper programs on computer products
around the world. ASW recently opened an Asia Pacific headquarters office in
Manila to provide regional on-site supervision of its research in the area.
ASW's Media Division joined forces with IBOPE, the largest research
company in Latin America, to sell and service the region's first pan-regional
television ratings service to U.S.-based clients. The Division has also
developed the unique Primary Audience Database, a syndicated print measurement
service for publishers and advertising agencies, which measures magazine
readership and monitors household demographics, product usage and lifestyles of
U.S. magazine readers.
The Company has been expanding its presence in niche markets. In its
efforts to better serve clients selling through the rapidly expanding group of
home improvement centers, the Company recently entered a 10-year strategic
alliance with Triad Systems Corporation, an information management company, to
provide retail sales measurement and other marketing data.
Business. General. Audits and Surveys, founded in 1953, is an
international marketing research firm providing clients with a broad selection
of services to assist in the development of marketing, advertising and
investment strategies. The Company's marketing research services, conducted in
over 70 countries, are provided to major commercial, industrial, institutional
and academic organizations. The Company's most significant clients in terms of
1996 revenue include AT&T, The Coca-Cola Company, Harlequin, IBM, MasterCard,
Metropolitan Transportation Authority, Shell Oil Company, Volvo Corporation of
North America, Warner Lambert and Xerox.
ASW provides its services on a custom, continuous tracking or
syndicated basis. Custom research measures awareness, knowledge, attitudes and
behavior toward specific products, services, advertising or public policies
among consumers with particular demographics or a defined profile. Continuous
tracking allows companies to track consumer attitudes and behavior on an ongoing
basis in order to determine changes in the market toward its products or
services. Syndicated research is made available on a nonexclusive basis and
provides economies of scale to
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ASW and cost savings to client companies. Syndicated research may include audits
of product inventory and distribution and consumer survey research.
The Company's varied services include monitoring of market share
trends or measuring the impact of new product advertising or service
introductions, conducting surveys for media and advertisers who require the
measurement of the size and demographics of target audiences and providing
clients with data on customer satisfaction, mystery shopping studies at client
product or service outlets and litigation research.
The percentages of the Company's revenues by type of research service
for the last three years have been as follows:
1996 1995 1994
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Custom Research Projects 31% 36% 41%
Continuous Tracking Studies 49% 49% 39%
Syndicated Studies 20% 15% 20%
---- ---- ----
100% 100% 100%
The Company believes that it has earned an impressive reputation for
providing quality research with state-of-the-art statistical and sampling
techniques and analysis. ASW utilizes a proprietary Computer-Assisted Telephone
Interviewing system (A&S/CATI), special analytic software, multimedia software
for client presentations and a system for digitizing respondents' answers to
telephone surveys (A&S/Voice CATI(R)). The services and products offered by ASW
are supported by a large in-house computer capacity and a full staff of
programmers, statisticians, psychologists, sociologists and marketing
professionals.
ASW believes that its ability to provide both consumer and retail
data nationally and internationally yields marketing insights to its clients
which are unavailable from any other industry source. The Company also believes
that its marketing research services and technological and professional
capabilities provide significant advantages over other marketing research firms
and serve as a platform for the development of new services and products to
domestic and multinational corporations, whatever their country of origin.
Industry Overview. The marketing research industry is highly
fragmented, comprising several large firms, including ASW, and a large number of
smaller firms. Many firms specialize in specific industries, products, services
or methodologies. The bulk of the smaller firms offer limited services and
conduct their research primarily in the consumer market while larger firms
generally provide services in the retail, consumer and industrial markets.
Services of ASW. The Company offers a wide array of services to
assist clients in developing and refining the marketing, advertising and
investment strategies for their products. These services include continuous
retail sales measurement, test marketing, tests of in-store
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promotions and measurement of product distribution on a local, regional,
national and international basis. ASW complements these "audit" efforts for its
clients through surveys of consumers, retailers and industrial establishments.
The Company's client services are provided by six primary internal
organizations.
Audit Division. The Audit Division provides clients with a wide
variety of services that track retail sales, product inventory and factors
relating to distribution. Most of the Division's services are syndicated or
continuous tracking programs, with the remainder being customized research,
often to provide clients of syndicated services with marketing insights more
tailored to their needs than syndicated programs can provide.
Major continuous sales tracking services are:
SERVICE DESCRIPTION
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Global Computer Products A monthly measurement of sales of
Sales Index Personal Computers and related
products through all major retail
channels throughout the world.
National Home Improvement A monthly or bi-monthly measurement
Products Sales Index of sales of Do-It-Yourself products
through the rapidly growing Home
Center channel.
PETS A continuous tracking of the sales
of Pet Products through
Veterinarians, Pet Supply Stores and
Farm/Feed Dealers.
Small Food Store In-person audits and point-of-sale
Sales Index information to measure sales and
distribution in small food stores.
VENDtrack The only national on-site continuous
tracking service of vending machine
distribution.
Automotive Aftermarket Measurement of sales of specific
Sales Index product categories in the retail
automotive chain store market.
The Audit Division also offers continuous sales tracking for a broad
array of other products including jewelry, optical products, photographic
products and home health care.
Other principal services offered by the Audit Division are: the
National Retail Census, which measures penetration of products among a
nationally projectable sample of retail and service outlets; Custom Retail
Measurements, including test markets, controlled in-store variable tests and
interviews of store customers and management; Brand Name Store Search which
assists clients to avoid problems arising from the choice of a brand name that
may be confusingly similar to existing brand names; and Product Pickup Service
providing retrieval for product recalls, age-dating analysis, packaging
integrity examination and competitive new product introductions.
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Survey Division. The Survey Division provides custom and syndicated
research services which help clients increase market share, focus media
advertising and promotion, identify areas for enhancement of consumer goodwill
and generally assist in the development of marketing, advertising and investment
strategies for their products and services.
The Survey Division's telephone interviewing is conducted at A&S/CATI
facilities in Chicago, Philadelphia and Portland (OR). The A&S/Voice CATI(R)
system digitally captures the respondent's own voice, allowing researchers to
overcome the limitations of interviewer and coder interpretation and facilitate
the transfer of voice data to clients through a variety of digital media.
One of the Survey Division's syndicated services is TECH/TRACK, a
comprehensive syndicated study of sales, incidence and usage of personal
computers, software, peripherals, online services and other technology products
in the home. This study provides PC manufacturers with information on ownership
and product awareness, customer loyalty and computer service membership. Because
the survey includes both owner and nonowner households, Tech/Track also provides
market research on prime potential customer markets.
International Division - The International Division helps clients
identify growth opportunities and develop marketing strategies for their
products and services on six continents. The International Division offers a
broad range of services from problem definition to research analysis in new
product development testing, market share data, attitude and usage profiles,
brand and corporate imagery, and retail product availability measurement. The
International Division specializes in conducting major, continuous research
programs with quality standards that permit truly comparable results to be
obtained across and within all researched countries over time. ASW's
international research is coordinated at its corporate headquarters in New York
and is supervised regionally by offices in London, Manila and Buenos Aires.
Customer Satisfaction Division - The Company pioneered the
measurement of customer satisfaction in the 1950's. Today its services go beyond
traditional customer satisfaction studies to examine the many individual
components that create customer satisfaction. The Customer Satisfaction Division
uses qualitative focus group studies, customer satisfaction studies, mystery
shopper programs, benchmarking/comparison research, employee satisfaction
studies, feedback management systems, motivational/incentive programs and
communications and training to implement the results of the research objectives.
The Media Division - has developed the first syndicated study of
media and consumer markets encompassing nineteen Latin American countries. This
study, funded by a consortium of more than 30 of the largest multinational cable
TV networks, advertising agencies, advertisers and magazines, provides a
standardized method of evaluating multinational, multimedia advertising plans in
Latin America. The Company is also the only company authorized to sell and
service the IBOPE Latin American Television Ratings Service, the first
pan-regional television ratings service in Latin America. The Media Division has
also developed the unique Primary Audience Database, a syndicated print
measurement service for publishers and advertising agencies, which measures
magazine readership and monitors household demographics, product usage and
lifestyles of U.S.
magazine readers.
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Public Affairs Division - The Public Affairs Division assists
corporations, advertising and public relations firms, universities and
foundations, associations, government agencies and law firms in understanding
the perceptions and concerns of their varied constituencies in order to develop
and deliver more effective communications. The Public Affairs Division conducts
research in all areas of public relations and public policy including corporate
image and reputation, crisis communications, publicity research, communications
audits, public affairs/public policy research, issue tracking and management,
investor relations research, media effectiveness, communications program
effectiveness, political research and government research.
Clients. The Company's 10 largest clients, based on revenue for the
year ended December 31, 1996, were AT&T, The Coca-Cola Company, Harlequin, IBM,
MasterCard, Metropolitan Transportation Authority, Shell Oil Company, Volvo
Corporation of North America, Warner Lambert and Xerox. The Coca-Cola Company
has been a client of ASW for over 30 years and represented approximately 28% of
the Company's 1996 revenues. No other client accounted for more than 6 % of
ASW's revenues during such fiscal year. Of the other nine clients listed above,
5 have been clients of the Company for 10 years or more.
The Company has conducted numerous domestic and international custom
and consumer tracking studies for The Coca-Cola Company. Its Audit Division has
also conducted an annual International Availability Study, as well as a domestic
retail sample census and numerous test market studies for this client. These
studies were commissioned by different divisions of The Coca-Cola Company,
including the Fountain Division and The Minute Maid Company.
Marketing And Sales. New business development has centered on
continuous nurturing of existing client relationships by the researchers and
professionals directly involved with the client. The Company believes excellent
provider/client relationships create the best opportunities for future business
with existing clients, and significantly assist in the generation of new
business through client referrals and recommendations.
The Company's marketing staff is responsible for the overall
monitoring of client relationships and for the development of domestic and
international opportunities in addition to those market entries generated by the
research staff. The marketing staff determines the feasibility of new market
penetration through analyses of industry trends, consumer buying patterns and
potential client needs. The Company owns several registered trademarks and
service marks, and has applied for registration of certain other trademarks and
service marks. The Company does not believe that the loss of any such mark would
have a material adverse effect on its business and operations.
Operations. The Company is headquartered in New York City and
operates regionally through offices in Chicago, Minneapolis, Philadelphia,
Portland (OR) and San Francisco. International research studies are coordinated
in New York and are conducted in Europe through the Company's 51% owned
subsidiary, Audits & Surveys Europe, Ltd., located in London. The Company
recently opened an office in Manila to provide on-site regional supervision of
research conducted in Asia Pacific. In Latin America the Company entered into a
strategic business
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relationship with the marketing research firm ASECOM, S.A. of Buenos Aires to
provide research services throughout Latin America.
The Company's offices in Chicago, Philadelphia and Portland (OR)
contain approximately 180 A&S/CATI terminals which enable the Company to conduct
telephone interviews in three time zones across the United States. The multiple
locations of A&S/CATI operations provide the Company with a competitive
advantage by increasing interviewer scheduling flexibility, expanding the number
of daily interviews that can be conducted and allowing for alternative
interviewing facilities in the event that extreme weather conditions or an
area-wide power failure temporarily incapacitates any given location.
Competition. The market research industry is highly competitive and
is characterized by a large number of competitors, ranging from relatively small
organizations to companies with substantial resources. These competitors also
include in-house marketing research departments, advertising agencies and
business consulting firms. Although the Company believes that no single
competitor offers a comparable combination of services, there can be no
assurance that other companies, some with greater financial resources, will not
attempt to offer a broader range of services than those offered by the Company.
The Company believes that it competes primarily on the basis of the quality of
the design of its market research proposals and on its ability to perform,
analyze and provide the results of its research projects on a timely basis,
consistently.
The Company believes that its ability to offer a wide variety of
statistically valid marketing services to a broad base of clients in both
domestic and international markets is critical to its competitive advantage and
believes that providing a combination of custom, continuous tracking and
syndicated research services for the consumer and industrial markets further
enhances its competitive position in the industry. The Company also believes
that its ability to design and develop research services and technologies in
response to changing clients' needs, as well as in anticipation of marketing
trends, has enabled the Company to achieve and sustain a leadership position in
the market research industry.
Employees. The Company has 562 employees, 275 of whom were part-time
hourly support employees and 287 were full-time staff. The full-time staff
includes 120 professional employees, 77 support employees and 90 individuals in
administrative and management functions. The part-time employees are primarily
engaged in A&S/CATI operations and other data gathering and processing
functions.
The Company conducts regular training sessions for professional staff
and enrolls selected staff members in the training programs sponsored by CASRO,
a marketing research industry association. In addition, the Company monitors the
performance of its staff on a regular basis and conducts special training
sessions for all its telephone interviewing staff in order to maintain high
quality standards.
Many of the Company's professional staff have advanced degrees in
fields such as marketing, economics, computer science, management, finance,
business, statistics, mathematics and psychology. None of its employees are
subject to a collective bargaining agreement, nor has
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the Company experienced any work stoppages. The Company believes that its
relations with employees are excellent.
Compliance with Environmental Laws. Based on the nature of its
marketing research operations, the Company believes that its compliance with
federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, should have no material effect
upon its capital expenditures, earnings or competitive position. (See Note 15 to
the Notes to Consolidated Financial Statements.)
Backlog. A majority of the Company's revenues are recorded utilizing
the percentage of completion method of accounting, which recognizes revenues as
services are performed. In addition, revenues are recognized on syndicated
research studies on a pro rata basis over the terms of the individual contracts.
At December 31, 1996, the Company had total unrecognized revenues of
approximately $16,300,000 compared with approximately $14,100,000, as adjusted,
at December 31, 1995. Substantially all of such unrecognized revenues at
December 31, 1996 are expected to be recognized in 1997.
ITEM 2. PROPERTIES
The Company's principal office is located in New York, New York where
it leases approximately 107,000 square feet under a lease that expires on
February 28, 2003. It currently subleases approximately 21,000 square feet at
this location to an unaffiliated party through the date on which the primary
lease expires.
The Company also leases an aggregate of approximately 26,000 square
feet of office space in San Francisco, Chicago, Philadelphia, Minneapolis,
Portland (OR), Livonia (MI), Manila and London.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation that is expected to have
a material effect on its results of operations or financial condition. (See Note
15 to the Consolidated Financial Statements for a discussion of an environmental
action involving an inactive subsidiary, Diamond Tool and Horseshoe Co., now
known as Tri-North, Inc.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Price Range of Common Stock
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The Company's common stock is traded on the American Stock Exchange
("AMEX"). The following table shows the range of closing prices for the common
stock for the calendar quarters indicated, as reported by AMEX:
1995 HIGH LOW
First Quarter $ 4 - 1/2 $ 2 - 7/8
Second Quarter 4 - 1/8 2 - 7/8
Third Quarter 3 - 11/16 2 - 3/8
Fourth Quarter 2 - 3/4 1 - 1/2
1996
First Quarter $ 2 - 3/4 $ 1 - 3/4
Second Quarter 2 - 3/4 2
Third Quarter 3 2 - 3/8
Fourth Quarter 3 2 - 1/8
(b) Approximate Number of Equity Security Holders
---------------------------------------------
The number of record holders of the Company's common stock as of
March 17, 1996 was 629.
(c) Dividends
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For the year ended December 31, 1996 the Company declared a special
cash dividend of $.05 per share which was paid on January 15, 1997 to
stockholders of record as of December 31,1996. No dividends were declared or
paid for the year ended December 31, 1995. During the year ended December 31,
1994 the Company declared and paid $2,049,000 of distributions to shareholders
which were the final distributions related to periods during which the Company
was an S Corporation for income tax purposes and distributed substantially all
its earnings in the form of S Corporation distributions.
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ITEM 6. SELECTED FINANCIAL DATA
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ONE MONTH YEAR ENDED
--------------------------------------------- ENDED ----------------------------
1996 1995 1994 DEC. 31, 1993 NOV. 28, 1993 NOV. 29, 1992
---- ---- ---- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Selected Income
Statement Data:
Revenue $ 60,368 $ 54,626 $ 43,917 $ 2,568 $ 40,173 $ 35,367
Income (Loss) Before
Taxes $ 4,408 $ 1,553 $ 1,868 ($ 422) $ 1,485 $ 1,703
Net Income:
Historical $ 2,589 $ 846 $ 1,016 $538 (a) $ 1,323 $ 1,534
Pro forma (b) -- -- -- -- $ 808 $ 928
Income per share:
Historical $ .20 $ .07 $ .10 $ .05 -- --
Pro forma (b) -- -- -- -- $ .08 $ .09
Weighted average shares
outstanding 13,099,103 12,499,213 10,475,804 10,475,804 10,475,804 10,475,804
SELECTED BALANCE
SHEET DATA:
Total assets $ 26,973 $ 24,887 $ 16,478 $ 13,068 $ 12,642 $ 12,279
Total debt $ 2,739 $ 4,802 $ 2,454 $ 2,543 $ 1,869 $ 2,066
Stockholders' equity $ 8,467 $ 6,627 $ 1,132 $ 1,648 $ 1,110 $ 1,063
Cash dividends per
share (c) $ .05 -- -- -- -- --
</TABLE>
(a) In connection with the termination of the Company's S Corporation tax
status as of December 1, 1993, a cumulative Federal and New York State
deferred tax asset of $759,000 was recognized with an offsetting credit to
the provision for income taxes for the one month period ended December 31,
1993.
(b) For the years ended November 28, 1993 and November 29, 1992 the Company
was an S Corporation for tax purposes and its historical results provided
limited state and local income taxes and no Federal income taxes. Pro
forma net income shown above for these two years has been adjusted to
reflect an estimate of the actual taxes that would have been paid had the
Company been a C Corporation.
(c) For the year ended December 31, 1996 the Company declared a cash dividend
of $.05 per share which was paid on January 15, 1997 to stockholders of
record as of December 31,1996. No dividends were declared or paid for the
year ended December 31, 1995. During the year ended December 31, 1994 the
Company declared and paid $2,049,000 of distributions to shareholders
which were the final distributions related to periods during which the
Company was an S Corporation for income tax purposes and distributed
substantially all its earnings in the form of S Corporation distributions.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
1996 Compared with 1995
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Revenues for 1996 increased $5.7 million (10%) to $60.4 million
compared with $54.6 million in 1995. The increase in revenues was principally
attributable to higher revenues from international consumer tracking studies and
several custom and syndicated audit research services.
Direct costs were $1.7 million (6%) higher in 1996 compared with
1995, primarily as a result of the increase in revenues. As a percentage of
revenues, direct costs were 47% in 1996 compared with 49% in 1995. The decrease
in direct costs as a percentage of revenues represented an improvement in the
profitability of the overall mix of revenues in 1996 compared with 1995. Direct
costs also include expenses related to the development of new research services
and such development expenses were lower in 1996 than in 1995.
Selling, general and administrative (SG&A) expenses increased $1
million (4%) in 1996 compared with 1995. Approximately 70% of the SG&A increase
was in payroll and related costs and resulted from the addition of personnel as
well as normal salary adjustments. The remainder of the increase in SG&A
expenses was spread over various expenses such as rent and utilities,
depreciation and computer costs.
The provision for incentive bonuses was $.6 million higher in 1996
compared with 1995 and resulted from the increase in operating income on which
the incentive bonuses are calculated.
Income taxes for 1996 have been provided at approximately 41% of
pretax income compared with 45% in 1995. See Note 7 to the Notes to Consolidated
Financial Statements for a detailed analysis of the provisions for income taxes.
1995 Compared with 1994
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Revenues for 1995 rose $10.7 million (24%) to $54.6 million compared
with $43.9 million in 1994. Approximately 85% of the increase in 1995 stemmed
from new customer satisfaction continuous tracking studies and major
international consumer products surveys. The remaining portion of the increase
in revenues came from a variety of new custom research studies.
Direct costs increased $8.9 million (50%) in 1995 compared with 1994,
principally as a result of the increased revenues. As a percentage of revenues,
direct costs were 49% in 1995 compared with 41% in 1994. The overall increase in
direct costs as a percentage of revenues was caused primarily by the survey
studies which generated a significant portion of the increased revenues having
substantially higher direct cost levels than the Company's historical mix of
survey studies. In addition, direct costs as a percentage of revenues reflected
the effect of expenses incurred in the development of various new research
services.
SG&A expenses increased $3.7 million (18%) compared with 1995.
Approximately $2.6 million of the increase resulted from higher base
compensation for several key employees upon implementation of new compensation
agreements (see incentive bonuses discussion below) and additional salaries of
new personnel related to the increased revenues previously discussed. Other SG&A
expenses increased $1.1 million, with approximately half of these increases
stemming from higher professional and consulting fees and other expenses
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incurred in connection with the Company making the transition from a private to
a publicly owned corporation and for improvements to the Company's information
system. In addition, increases in rent, utilities, telephone and associated
costs were incurred to accommodate the new personnel described above.
Incentive bonuses decreased $2.2 million in 1995 which resulted from
a decline in the operating income on which the incentive bonuses are calculated
as well as the implementation of new compensation agreements with several key
employees which increased base salaries (see SG&A above) and simultaneously
reduced incentive bonuses.
Results of operations in 1995 were adversely impacted by a charge of
$175,000 against "Other Income" resulting from the termination of a sublease
with a subtenant and the occupancy of the space by the Company to accommodate
the increased personnel referred to above.
Income before taxes in 1994 was favorably effected by $215,000 as a
result of three nonrecurring transactions. The Company sold its investment in an
Argentinean affiliate at a gain of $1,335,000. The gain was offset by costs of
$779,000 incurred in connection with stock bonuses issued to certain key
employees and $341,000 representing the settlement costs of a retirement
agreement with the estate of a former shareholder. No similar nonrecurring
transactions arose in 1995.
Financial Condition, Liquidity and Capital Resources
At December 31, 1996, the Company had working capital of $3.9 million
and a current ratio of 1.28 to 1 compared with working capital of $1.9 million
and a current ratio of 1.15 to 1 at December 31, 1995.
Cash flow from operations and borrowings under its credit facilities
with its bank are the Company's principal sources of funds. The Company's cash
flow and borrowings have historically been sufficient to provide funds for
working capital, capital expenditures and payment of indebtedness. On June 5,
1996 the Company refinanced an existing term loan and its $5 million short-term
credit facility into a new $2,610,000 term loan and a $2.5 million secured line
of credit. The new term loan is repayable in 20 quarterly installments of
$130,500 which began on June 30, 1996. The term loan and the line of credit
contain customary affirmative and negative covenants including those requiring
the Company to maintain certain financial ratios and restricting the annual
payment of cash dividends to an amount not in excess of 50% of the preceding
year's net income.
Net cash provided by operating activities was $4,980,000, consisting
primarily of net income of $2,589,000 plus non-cash expenses of $1,628,000 and
increases in customer billings in excess of revenue earned of $952,000 and
income taxes payable of $716,000 offset primarily by an increase in accounts
receivable of $930,000.
Net cash used in investing activities was $57,000 primarily from
purchases of property and equipment of $583,000 and payment of merger related
expenses of $124,000 offset by proceeds of $650,000 from the sale of a portion
of Triangle's former operating assets.
Net cash used in financing activities was $2,055,000 consisting
primarily of proceeds from bank borrowings of $1,931,000 offset by repayments of
bank borrowings and other debt of $3,993,000.
The Company believes that its revised credit arrangements with its
bank, combined with funds generated by its operations, will be adequate to fund
its planned capital expenditures, meet its debt obligations and finance its
operations for at least the next twelve months.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of the
report. (See Item 14).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required in response to this item with respect to
Directors is contained in the Company's 1997 Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days after the close of the Company's fiscal year and, accordingly, is omitted
pursuant to General Instruction G(3).
The following sets forth the names and ages of the Company's
Executive Officers, together with all positions and offices held with the
Company by such Executive Officers. Officers are appointed to serve until the
meeting of the Board of Directors following the next Annual Meeting of
Stockholders and until their successors have been elected and have qualified:
Solomon Dutka (73) has served as a director, Chairman and Chief
Executive Officer of the Company since March 1995. A founder of A&S
in 1953, he served A&S in various capacities, including as its
Chairman and President, prior to the merger with Triangle in March
1995.
H. Arthur Bellows, Jr. (59) has served as a director, President and
Chief Operating Officer of the Company since March 1995. He served as
a director and Chairman of Triangle from August 1967 until the merger
with A&S in March 1995 and as Triangle's President from October 1971
until March 1995.
Joseph Plummer (56) has served as Vice Chairman of the Company since
August 1996. From 1989 to 1996 he was with the advertising agency of
DMB&B, serving as its Vice Chairman and Worldwide Planning Director.
From 1979 to 1989 he was with Young & Rubicam where he served as its
Worldwide Research Director.
Carl Ravitch (55) has served as a director and Executive Vice
President of the Company since March 1995. He joined A&S in 1967 and
served as its Executive Vice President - Chief Marketing Officer from
1992 until the merger with Triangle in March 1995.
Joel S. Klein (58) has served as Executive Vice President- Operations
of the Company since January 1996 and as the Company's Secretary
since August 1996. He has been with the Company for over 35 years and
has served in various research, operational and management positions.
Alan J. Ritter (56) has served as Senior Vice President and Chief
Financial Officer of the Company since August 1996 and as Corporate
Controller from September 1995 until July 1996. He served as Vice
President - Finance of Triangle from October 1993 until the merger
with A&S in March 1995 and as Triangle's Corporate Controller from
December 1978 until September 1993.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is contained in the
Company's 1997 Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the close of the
Company's fiscal year and, accordingly, is omitted pursuant to General
Instruction G(3).
-13-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this item is contained in the
Company's 1997 Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the close of the
Company's fiscal year and, accordingly, is omitted pursuant to General
Instruction G(3).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item is contained in the
Company's 1997 Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the close of the
Company's fiscal year and, accordingly, is omitted pursuant to General
Instruction G(3).
-14-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents filed as part of this Report.
1. Financial Statements Page Number
-------------------- -----------
Independent Auditor's Report F-1
Consolidated Balance Sheets at December 31, 1996 F-2 to F-3
and December 31, 1995
Consolidated Statements of Income for the years ended F-4
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity F-5
for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years F-6 to F-7
ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements F-8 to F-19
2. Financial Statement Schedules
-----------------------------
Schedule Number Description
--------------- -----------
II Valuation and Qualifying Accounts S-1
All other financial statement schedules not listed have been omitted
since the required information is included in the consolidated
financial statements or the notes thereto, or is not applicable or
required.
-15-
<PAGE>
Exhibit
Numbers Description
- ------- -----------
2.01 Merger Agreement between The Triangle Corporation and Audits and
Surveys, Inc., dated as of August 11, 1994 (the "Merger
Agreement"). Incorporated by reference to Exhibit (2) (I) to the
Company's Report on Form 10-Q for the quarter ended September 30,
1994.
2.02 Amendment No. 1 to the Merger Agreement, dated as of October 7,
1994. Incorporated by reference to Exhibit (2) (ii) to the
Company's Report on Form 10-Q for the quarter ended September 30,
1994.
2.03 Amendment No. 2 to the Merger Agreement, dated as of January 6,
1995. Incorporated by reference to Exhibit 2 (iii) to the
Company's Report on Form 10-K for the year ended December 31,
1994.
2.04 Amendment No. 3 to the Merger Agreement, dated as of January 31,
1995. Incorporated by reference to Exhibit 2 (iv) to the
Company's Report on Form 10-K for the year ended December 31,
1994.
2.05 Amendment No. 4 to the Merger Agreement, dated as of February 8,
1995. Incorporated by reference to Exhibit 2 (v) to the Company's
Report on Form 10-K for the year ended December 31, 1994.
2.06 Stock and Asset Purchase Agreement between Cooper Industries,
Inc. and The Triangle Corporation, dated April 9, 1993 (the
"Stock and Asset Purchase Agreement"). Incorporated by reference
to Exhibit (2) to the Company's Report on Form 10-Q for the
quarter ended March 31, 1993.
2.07 Amendment No. 1 to the Stock and Asset Purchase Agreement, dated
April 30, 1993. Incorporated by reference to Exhibit (2) (ii) to
the Company's Report on Form 10-Q for the quarter ended June 30,
1993.
2.08 Amendment No. 2 to the Stock and Asset Purchase Agreement, dated
August 4, 1993. Incorporated by reference to Exhibit (2) (iii) to
the Company's Report on Form 10-Q for the quarter ended June 30,
1993.
3.01 Restated and Amended Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 4.1 to the Company's Report
on Form 10-Q/A for the quarter ended March 31, 1995.
3.02 Amended and Restated By-laws of the Company. Incorporated by
reference to Exhibit 2(b) to the Company's Registration Statement
on Form 8-A/A (Amendment No. 1) filed February 26, 1997.
4.01 Registration Rights Agreement among the Company, H. Arthur
Bellows, Jr., Carl Ravitch and the Estate of Irving I. Roshwalb,
dated March 24, 1995. Incorporated by reference to Exhibit 4.3 to
the Company's Report on Form 10-Q/A for the quarter ended March
31, 1995.
-16-
<PAGE>
Exhibit
Numbers Description
- ------- -----------
4.02 Shareholders Agreement among the Company, H. Arthur Bellows, Jr.,
Solomon Dutka, Solomon Dutka Trust for James Dutka, Solomon Dutka
Trust for Michael Dutka, Solomon Dutka Trust for Joyce Dutka,
Carl Ravitch, Anthony Timiraos, Dexter Neadle, Lawrence Karp,
George Fabian, Fred Winkel, Joel S. Klein, William Liebman,
Nagesh Gupta, Thomas Ryan, Joel Dorfman, Josh Libresco, Donald
Pace, Paul Donato, Fred Nicholson and Joel J. Klein, dated March
24, 1995. Incorporated by reference to Exhibit 4.4 to the
Company's Report on Form 10-Q/A for the quarter ended March 31,
1995.
4.03 Shareholders Agreement between The Triangle Corporation and the
Estate of Irving I. Roshwalb, dated February 9, 1995.
Incorporated by reference to Exhibit 4.5 to the Company's Report
on Form 10-Q/A for the quarter ended March 31, 1995.
10.01+ The Triangle Salaried Profit Sharing Plan. Incorporated by
reference to Exhibit (10) (vi) to the Company's Report on Form
10-K for the year ended December 31, 1992.
10.02+ The Triangle Salaried Pension Guarantee Plan. Incorporated by
reference to Exhibit (10) (vii) to the Company's Report on Form
10-K for the year ended December 31, 1992.
10.03+ The Triangle Salaried Incentive Savings Plan. Incorporated by
reference to Exhibit (10) (viii) to the Company's Report on Form
10-K for the year ended December 31, 1992.
10.04+ The Triangle Retirement Savings Plan Trust Agreement.
Incorporated by reference to Exhibit (10) (ix) to the Company's
Report on Form 10-K for the year ended December 31, 1992.
10.05+ 1994 Stock Option Plan of Audits & Surveys Worldwide, Inc.
Incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement or Form S-8 (File No. 333-22875).
10.06+ Employment agreement between the Company and Solomon Dutka, dated
March 24, 1995. Incorporated by reference to Exhibit 10.2 to the
Company's Report on Form 10-Q/A for the quarter ended March 31,
1995.
10.07+ Employment agreement between the Company and H. Arthur Bellows,
Jr., dated March 24, 1995. Incorporated by reference to Exhibit
10.3 to the Company's Report on Form 10-Q/A for the quarter ended
March 31, 1995.
10.08+ Employment agreement between the Company and Carl Ravitch, dated
March 24, 1995. Incorporated by reference to Exhibit 10.4 to the
Company's Report on Form 10-Q/A for the quarter ended March 31,
1995
10.09+ Employment agreement between the Company and Alan J. Ritter,
dated September 13, 1995. Incorporated by reference to Exhibit 10
to the Company's Report on Form 10-Q for the quarter ended
September 30, 1995.
10.10+ Employment Agreement between the Company and Joseph T. Plummer
dated August 8, 1996. Incorporated by reference to Exhibit 10.18
to the Company's report on Form 10-Q for the quarter ended
September 30, 1996.
-17-
<PAGE>
Exhibit
Numbers Description
- ------- -----------
10.11 Lease between Tobias Associates and Audits & Surveys, Inc., dated
February 13, 1987. Incorporated by reference to Exhibit 10.12 to
the Company's Report on Form 10-K for the year ending December
31, 1995.
10.12 Lease between Tobias Associates and Audits & Surveys, Inc., dated
October 26, 1990. Incorporated by reference to Exhibit 10.13 to
the Company's Report on Form 10-K for the year ending December
31, 1995.
10.13 Term Loan Agreement between Audits and Surveys Worldwide, Inc.
and Chemical Bank dated as of June 5, 1996. Incorporated by
reference to Exhibit 10.17 to the Company's report on Form 10-Q
for the quarter ended June 30, 1996.
21.01* List of subsidiaries of the Company.
23.01* Consent of Independent Auditors.
27.01* Financial Data Schedule.
- -------------------------------
* Filed herewith.
+ Management contracts for compensatory plan or arrangement required to
be noted pursuant to Item 14.(a)3 of Form 10-K.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Audits & Surveys Worldwide, Inc.
By: /S/ H. ARTHUR BELLOWS, JR. March 27, 1997
-------------------------- --------------
H. Arthur Bellows, Jr. Date
President, Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on its behalf by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /S/ SOLOMON DUTKA March 27, 1997
-------------------------- --------------
Solomon Dutka Date
Chairman, Chief Executive Officer and Director
By: /S/ H. ARTHUR BELLOWS, JR. March 27, 1997
-------------------------- --------------
H. Arthur Bellows, Jr. Date
President and Chief Operating Officer and Director
By: /S/ JOSEPH T. PLUMMER March 27, 1997
-------------------------- --------------
Joseph T. Plummer Date
Vice Chairman and Director
By: /S/ CARL RAVITCH March 27, 1997
-------------------------- --------------
Carl Ravitch Date
Executive Vice President and Director
By: /S/ ALAN J. RITTER March 27, 1997
-------------------------- --------------
Alan J. Ritter Date
Senior Vice President
(Principal Financial and Accounting Officer)
<PAGE>
By: /S/ CHARLES E. BRADLEY March 27, 1997
-------------------------- --------------
Charles E. Bradley Date
Director
By: /S/ BRIAN G. DYSON March 27, 1997
-------------------------- --------------
Brian G. Dyson Date
Director
By: /S/ MATTHEW GOLDSTEIN March 27, 1997
-------------------------- --------------
Matthew Goldstein Date
Director
By: /S/ ROBERT C. MILLER March 27, 1997
-------------------------- --------------
Robert C. Miller Date
Director
By: /S/ WILLIAM NEWMAN March 27, 1997
-------------------------- --------------
William Newman Date
Director
By: /S/ SOL YOUNG March 27, 1997
-------------------------- --------------
Sol Young Date
Director
By: /S/ WILLIAM A. ZEBEDEE March 27, 1997
-------------------------- --------------
William A. Zebedee Date
Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Audits & Surveys Worldwide, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Audits & Surveys
Worldwide, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years ended December 31, 1996, 1995 and 1994. Our audits also included
the financial statement schedule listed in the Index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Audits & Surveys Worldwide, Inc.
and Subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for the years ended December 31, 1996, 1995 and
1994 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects, the information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 3, 1997
F-1
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
<S> <C> <C>
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 3,827 $ 936
------- -------
Accounts receivable:
Billed (net of allowance for doubtful accounts of $30 and $150) 9,161 8,687
Unbilled 2,714 2,366
Refundable income taxes 299
Prepaid expenses and inventories 1,259 1,320
Deferred income taxes 346 168
Other current assets 183 139
Net assets held for sale 300 983
------- -------
Total current assets 17,790 14,898
PROPERTY AND EQUIPMENT - Net 2,962 3,127
RECEIVABLE FROM SALE OF ASSETS 500 500
PREPAID PENSION COSTS 1,090 943
DEFERRED INCOME TAXES 2,906 3,398
OTHER ASSETS 1,725 2,021
------- -------
TOTAL ASSETS $26,973 $24,887
======= =======
</TABLE>
(Continued)
F-2
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
CURRENT LIABILITIES:
Notes payable bank $ -- $ 1,200
Accounts payable and accrued expenses 4,483 4,877
Accrued payroll and bonuses 2,505 1,917
Dividends payable 655 --
Customer billings in excess of revenues earned 5,234 4,282
Income taxes payable 417 --
Current portion of long-term debt 555 658
Current portion of capital lease obligations 88 75
-------- --------
Total current liabilities 13,937 13,009
LONG-TERM DEBT - Net of current portion 1,943 2,647
CAPITAL LEASE OBLIGATIONS - Net of current portion 153 222
DEFERRED INCOME TAX LIABILITIES 464 405
OTHER LIABILITIES 2,009 1,977
-------- --------
Total liabilities 18,506 18,260
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 1,000,000 shares authorized and
unissued -- --
Common stock, $.01 par value, 30,000,000 shares authorized;
13,099,103 shares and 13,094,755 shares issued at
December 31, 1996 and 1995, respectively 131 131
Additional paid-in capital 4,369 4,486
Retained earnings 3,948 2,014
Cumulative foreign currency translation adjustment 19 (4)
-------- --------
Total stockholders' equity 8,467 6,627
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,973 $ 24,887
======== ========
</TABLE>
See notes to consolidated financial statements. (Concluded)
F-3
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands Except for Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
REVENUES $ 60,368 $ 54,626 $ 43,917
------------ ------------ ------------
COSTS AND EXPENSES:
Direct costs 28,431 26,732 17,815
Selling, general and administrative expenses 25,396 24,410 20,696
Incentive bonuses 2,394 1,765 3,947
Stock bonuses -- -- 779
Provision in connection with retirement agreement -- -- 341
Interest expense 328 435 206
Gain on sale of investment in affiliate -- -- (1,335)
Other (income) - net (589) (269) (400)
------------ ------------ ------------
Total costs and expenses 55,960 53,073 42,049
------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,408 1,553 1,868
PROVISION FOR INCOME TAXES 1,819 707 852
------------ ------------ ------------
NET INCOME $ 2,589 $ 846 $ 1,016
============ ============ ============
NET INCOME PER SHARE $ .20 $ .07 $ .10
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 13,099,103 12,499,213 10,475,804
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
- ----------------------------------------------------------------------------------------- ----------------------------------------
(PART 1 OF 2)
COMMON STOCK COMMON STOCK ADDITIONAL CURRENCY
$.01 PAR VALUE NO PAR VALUE PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS
---------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 -- $ -- 10,000 $ 14 $ 15 $ 2,201 $ (54)
Net income -- -- -- -- -- 1,016 --
Foreign currency adjustment -- -- -- -- -- -- 50
Stock bonuses -- -- -- -- 319 -- --
Distributions to stockholders -- -- -- -- -- (2,049) --
---------- ---------- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 -- -- 10,000 14 334 1,168 (4)
Net income -- -- -- -- -- 846 --
Recapitalization and merger 13,094,755 131 (10,000) (14) 4,152 -- --
---------- ---------- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 13,094,755 131 -- -- 4,486 2,014 (4)
Net income -- -- -- -- -- 2,589 --
Foreign currency adjustment -- -- -- -- -- -- 23
Revaluation of assets acquired
in merger -- -- -- -- (124) -- --
Stock bonuses 4,348 -- -- -- 7 -- --
Dividends -- -- -- -- -- (655) --
---------- ---------- --------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 13,099,103 $ 131 -- $ -- $ 4,369 $ 3,948 $ 19
========== ========== ========= ========== ========== ========== ==========
</TABLE>
(PART 2 OF 2))
CUMULATIVE
FOREIGN
TREASURY
STOCK
SHARES AMOUNT TOTAL
---------- ---------- ----------
BALANCE, DECEMBER 31, 1993 3,556 $ (528) $ 1,648
Net income -- -- 1,016
Foreign currency adjustment -- -- 50
Stock bonuses (998) 148 467
Distributions to stockholders -- -- (2,049)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 2,558 (380) 1,132
Net income -- -- 846
Recapitalization and merger (2,558) 380 4,649
---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 -- -- 6,627
Net income -- -- 2,589
Foreign currency adjustment -- -- 23
Revaluation of assets acquired
in merger -- -- (124)
Stock bonuses -- -- 7
Dividends -- -- (655)
---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 -- $ -- $ 8,467
========== ========== ==========
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
- --------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,589 $ 846 $ 1,016
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 748 581 531
Provision for bad debts 108 92 152
Deferred income taxes 373 240 13
Deferred compensation 34 31 30
Amortization of deferred charges 329 285 24
Increase in cash surrender value of officers' life insurance (22) 50 (24)
Accrued rent 58 160 (244)
Income from investment accounted for on the equity method -- -- (72)
Gain on sale of affiliate -- -- (1,335)
Stock bonuses to officers -- -- 467
Minority interest -- (54) 49
Changes in operating assets and liabilities:
Accounts receivable (930) (1,709) (3,205)
Prepaid expenses and inventories 61 296 (63)
Net assets held for sale 33 (102) --
Other current assets (45) 202 (61)
Prepaid pension costs (147) (64) --
Other assets (12) (1,227) (18)
Accounts payable and accrued expenses (394) 638 1,553
Accrued payroll and bonuses 589 (1,516) 362
Customer billings in excess of revenues earned 952 (331) 1,881
Deferred compensation -- -- (69)
Income taxes payable 716 (894) 837
Other liabilities (60) 530 --
Other -- 71 104
------- ------- -------
Net cash provided by (used in) operating activities 4,980 (1,875) 1,928
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to officers/stockholders -- -- (111)
Repayment of officer/stockholders' loans -- -- 171
Purchases of property and equipment (583) (588) (253)
Proceeds from sale of assets 650 -- --
Cash received from Triangle merger -- 1,090 --
Proceeds from sale of affiliate -- -- 1,500
Payment of merger costs (124) (210) (1,113)
------- ------- -------
Net cash (used in) provided by investing activities (57) 292 194
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt 1,931 -- --
Proceeds from notes payable to officers/stockholders -- -- 1,500
Principal payments on notes payable to officers/stockholders -- (1,500) (391)
Principal payments on long-term debt (2,737) (334) (407)
Proceeds from short-term bank debt -- 3,700 750
Repayment of short-term bank debt (1,200) -- (1,500)
Principal payments on capital lease obligations (56) (101) (41)
Distributions to stockholders -- -- (2,049)
Issuance of common stock 7 -- --
------- ------- -------
Net cash (used in) provided by financing activities (2,055) 1,765 (2,138)
------- ------- -------
(Continued)
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31,
------------------------
1996 1995 1994
<S> <C> <C> <C>
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 23 -- 50
------ ------ ------
NET INCREASE IN CASH 2,891 182 34
CASH, BEGINNING OF YEAR 936 754 720
------ ------ ------
CASH, END OF YEAR $3,827 $ 936 $ 754
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 430 $ 334 $ 161
====== ====== ======
Income taxes $ 784 $1,335 $ 1
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Employee stock bonuses $ 7 $ 319
====== ======
Capital lease obligation incurred for purchase of equipment $ 250
======
Financing of capital improvements $ 333
======
The Company issued common stock in order to effect the merger with Triangle
Such stock aggregated (net of $1,323 of related merger costs). In $4,488
conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired (includes $1,090 of cash acquired) $5,267
Value of common stock issued (net of $1,323 of related merger costs) 4,488
------
Liabilities assumed $ 779
======
See notes to consolidated financial statements. (Concluded)
</TABLE>
F-7
<PAGE>
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION - The consolidated financial
statements include the accounts of Audits & Surveys Worldwide, Inc. (the
"Company"), and its majority owned subsidiary, Audits & Surveys Europe
Ltd. ("A&SE"). All significant intercompany transactions and balances
have been eliminated.
BUSINESS ACTIVITY - The Company is an international marketing research
firm providing its clients with a broad selection of services and
information used to assist in the development of marketing, advertising
and investment strategies for their products and services. These
services are provided to a wide variety of commercial, industrial and
academic organizations on a custom, continuous tracking or syndicated
basis.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENTS IN AFFILIATES - The equity method of accounting was used by
the Company in connection with investments in its Canadian and Pacific
joint ventures. These ventures were sold during 1995. Under the equity
method, original investments are recorded at cost and adjusted for the
Company's share of earnings or losses and distributions.
INVENTORIES - Inventories, which consist primarily of components and
finished goods, are stated at the lower of cost (principally on a
first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of furniture and
fixtures and equipment is provided using accelerated methods over five
to ten years. Amortization of leasehold improvements and assets held
under capital leases is provided using the straight-line method over the
lease term.
LONG-LIVED ASSETS - In March 1995, the Financial Accounting Standards
Board issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." This
statement is effective for fiscal years beginning after December 15,
1995. There was no impact to the Company from adopting this statement.
FAIR VALUE OF FINANCIAL INSTRUMENTS - For financial instruments
including cash, accounts receivable, accounts payable and accrued
expenses, it was assumed that the carrying amount approximated fair
value because of their short maturities. The carrying amount of
long-term debt, including capitalized lease obligations, approximates
fair value because such debt is subject to floating interest rates or,
with respect to capitalized leases, contain current market rates.
F-8
<PAGE>
REVENUE RECOGNITION - The accompanying financial statements have been
prepared using the percentage-of-completion method of accounting for
certain contracts and, therefore, take into account the revenue, cost
and estimated earnings on contracts not yet completed. Income is
recognized on the excess of contract price over direct costs in the
percentage that actual costs to date relate to total estimated costs to
be incurred. At the time a loss on a contract becomes known, the entire
amount of the estimated loss is recognized in the financial statements.
In some instances, billing arrangements allow for amounts billed to
exceed the revenue recognized, thus resulting in a liability. In those
cases where revenue recognized exceeds billings to customers, an
unbilled receivable is recorded.
Revenues for the distribution of certain marketing research information
is recognized pro rata over the life of the contract.
INCOME TAXES - Deferred income taxes are recognized for the tax
consequences of differences between the bases of assets and liabilities
for income tax and financial statement reporting, based on enacted tax
laws. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
STOCK OPTIONS AND WARRANTS - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 123," Accounting for Stock-Based Compensation," which became
effective for the Company beginning January 1, 1996. SFAS No. 123
requires expanded disclosures of stock-based compensation arrangements
with employees and encourages (but does not require) compensation cost
to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No.
25, which recognized compensation cost based on the intrinsic value of
the equity instrument awarded. The Company has elected to follow the
provisions of APB Opinion No. 25 for stock based compensation to
employees.
TRANSLATION OF FOREIGN CURRENCIES - Financial statements of the Company
are reported in U.S. dollars based on the determination that the U.S.
dollar is the Company's functional currency. A&SE, using the pound as
its functional currency, translates its financial statements into U.S.
dollars. Assets and liabilities are translated at the rates of exchange
in effect at year end; common stock and additional paid-in capital are
translated using historical rates and revenue and expense accounts are
translated at the average rates of exchange in effect during the period.
Translation adjustments are reflected as a separate component of
stockholders' equity.
NET INCOME PER SHARE - The number of shares used in the determination of
net income per share represents the weighted average number of common
and common equivalent shares outstanding during the periods presented.
Common stock equivalents include shares issuable under the Company's
stock option plan when dilutive. Shares outstanding have been
retroactively adjusted for the number of equivalent shares received in
the Merger.
2. MERGER
On March 24, 1995, Audits and Surveys, Inc. (A&S) and The Triangle
Corporation ("Triangle") consummated a merger pursuant to which A&S was
merged with and into Triangle. Triangle was the surviving corporation
and the separate existence of A&S ceased. The name of the merged
corporation was changed to "Audits & Surveys Worldwide, Inc." Each share
of Triangle's common stock outstanding prior to the consummation of the
Merger remained outstanding. Each share of A&S' common stock outstanding
prior to the Merger was exchanged for 1,407.565 shares of Triangle's
common stock. Upon consummation of the Merger, the holders of Triangle's
common stock immediately prior to the Merger owned 20% of the Company's
common stock and the holders of A&S' common stock immediately prior to
the Merger owned 80% of the Company's common stock.
F-9
<PAGE>
For accounting and financial reporting purposes, the Merger has been
treated as a reverse acquisition. Accordingly, A&S was deemed to have
acquired Triangle's net assets in return for a 20% equity interest in
the Company. Inasmuch as Triangle's operations were limited, the
purchase price was recorded at the fair value of Triangle's net assets
acquired plus approximately $1,323,000 of merger related expenses. Any
excess purchase price has been charged to paid-in capital. No goodwill
has been recorded in connection with this transaction.
At the date of Merger, Triangle had net operating loss carry forwards of
approximately $7,600,000. No deferred tax assets were initially
recognized by the Company due to the limitations in the tax laws
relating to the change in Triangle's stock ownership and the planned
disposition of Triangle's only two operating entities subsequent to the
Merger. In the fourth quarter of 1995, management reevaluated its tax
planning alternatives with respect to the disposition of one of
Triangle's operating entities, thereby permitting the limited
utilization of Triangle's operating loss carryforwards. Accordingly, in
December 1995, the Company recognized approximately $2,600,000 of
deferred tax assets with a corresponding increase in paid-in capital.
The accompanying consolidated financial statements include the accounts
of Triangle subsequent to the Merger. Triangle's operations for the
period March 24, 1995 to March 31, 1995 were not significant. For
convenience, the acquisition has been recorded as of March 31, 1995 for
accounting purposes.
The following unaudited pro forma condensed consolidated operating
information is presented to illustrate the effects of certain
adjustments to the historical statements of operations of the Company
that would result from the merger and is presented as if the merger
occurred on January 1, 1994.
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
(UNAUDITED)
($000 EXCEPT PER SHARE DATA)
Revenues $ 54,766 $ 44,771
=========== ===========
Net income $ 753 $ 321
=========== ===========
Net income per share $ .06 $ .10
=========== ===========
Weighted average shares outstanding 13,094,755 13,094,755
=========== ===========
F-10
<PAGE>
3. PROPERTY AND EQUIPMENT
DECEMBER 31,
-------------------
1996 1995
($000)
Furniture and fixtures $ 437 $ 413
Equipment 1,936 1,873
Leasehold improvements 3,263 3,183
Assets held under capital leases (Note 6) 386 386
------ ------
Total 6,022 5,855
Less accumulated depreciation and
amortization 3,060 2,728
------ ------
Property and equipment - net $2,962 $3,127
====== ======
Depreciation and amortization expense for the years ended December
31, 1996, 1995 and 1994 were $748,000, $581,000 and $531,000,
respectively.
4. OTHER ASSETS
Other assets consist of the following:
DECEMBER 31,
-----------------
1996 1995
($000)
Cash surrender value of officers' life insurance $ 265 $ 243
Deferred charges 1,296 1,649
Security deposits 164 129
------ ------
$1,725 $2,021
====== ======
Deferred charges at December 31, 1996 and 1995 principally include
approximately $986,000 and $1,286,000, respectively, representing the
unamortized portion of costs related to an agreement with a supplier
for retail sales data (see Note 15).
Deferred charges also include commission payments made in connection
with the sublease of portions of the Company's premises. Such amounts
have been deferred and are being amortized over the lease terms of
the related subleases.
F-11
<PAGE>
5. DEBT
DECEMBER 31,
--------------------
NOTES PAYABLE BANK 1996 1995
($000)
Notes payable bank pursuant to a $2,500,000 credit
facility; interest is payable at the bank's prime
rate (8.25% at December 31, 1996) or LIBOR plus
250 basis points. The line of credit matures in
June 1997 and is collateralized by accounts
receivable (a). $ - $ 1,200
========= =========
LONG-TERM DEBT
Term loan payable to a bank with interest at 1/2% over
the bank's prime rate or LIBOR plus 300 basis
points. The loan is repayable in twenty quarterly
installments of $130,500 which began in June 1996
and is collateralized by accounts receivable (a). $ 2,218 $ 2,500
Note payable to a bank with interest at 1% above
the prime rate (a). - 500
Note payable to subtenant for leasehold improvements,
due in quarterly installments of $15,000,
including interest at the rate of 11.02% through
January 2003. 280 303
Other - 2
--------- ---------
Total 2,498 3,305
Less current portion 555 658
--------- ---------
Long-term portion $ 1,943 $ 2,647
========= =========
(a) On June 5, 1996 the Company refinanced its existing term loan and
$5,000,000 credit facility into a $2,610,000 term loan and a
$2,500,000 secured line of credit. The term loan and line of credit
contain customary affirmative and negative covenants including those
requiring the Company to maintain certain financial ratios and
restricting the annual payment of dividends to an amount not in
excess of 50% of the previous year's net income.. The weighted
average interest rate in effect for the year ended December 31, 1996
under the short-term credit facility was 8.26%.
F-12
<PAGE>
Debt matures in each of the years subsequent to December 31, 1996, as
follows:
YEAR ENDED
DECEMBER 31, ($000)
- ------------
1997 $ 555
1998 559
1999 563
2000 568
2001 182
Thereafter 71
------
$2,498
======
6. CAPITAL LEASE OBLIGATIONS
The Company has entered into lease agreements for computer and office
equipment that have been accounted for as capital leases due to the
provisions of the lease agreements. The equipment has been recorded
in the accompanying consolidated financial statements at the present
value of the future minimum lease payments.
At December 31, 1996, future minimum lease payments are as follows:
YEAR ENDED
DECEMBER 31, ($000)
- ------------
1997 $ 91
1998 72
1999 59
2000 59
2001 20
------
Total future minimum lease payments 301
Less amounts representing interest 60
------
Present value of future minimum lease
payments (including $88,000 payable
currently) $ 241
======
Accumulated depreciation related to assets held under capital leases
at December 31, 1996 was $188,000.
F-13
<PAGE>
7. INCOME TAXES
The components of the provision for income taxes are as follows:
Year Ended December 31,
------------------------
1996 1995 1994
($000)
Federal $1,185 $ 237 $ 672
State and local 579 200 166
Foreign 6 30 1
Deferred 49 240 13
------ ------ ------
$1,819 $ 707 $ 852
====== ====== ======
The following reconciles Federal taxes at the statutory rate to the
tax expense recorded in the financial statements:
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
($000)
Federal taxes at statutory rate $ 1,499 $ 528 $ 635
State taxes, net of federal benefit 382 132 110
Other (62) 47 107
------- ------- -------
$ 1,819 $ 707 $ 852
======= ======= =======
The tax effects of temporary differences which give rise to deferred
tax assets and liabilities are as follows:
DECEMBER 31,
------------------
1996 1995
($000)
Current deferred income tax assets:
Net operating loss carryforwards $ 236 $ --
Accrued vacation pay 97 101
Other 13 67
------- -------
$ 346 $ 168
======= =======
Noncurrent deferred income tax assets:
Net operating loss carryforwards $ 1,905 $ 2,468
Accrued rent 507 539
Basis of leasehold improvements 330 252
Deferred compensation 164 139
------- -------
$ 2,906 $ 3,398
======= =======
Deferred income tax liability:
Prepaid pension costs $ (464) $ (405)
======= =======
F-14
<PAGE>
8. DEFERRED COMPENSATION
The Company is a party to deferred compensation agreements with
certain key employees. Amounts due under such agreements amounted to
$358,000 and $324,000 at December 31, 1996 and 1995, respectively,
and are included in "Other Liabilities." The costs related to these
agreements for the years ended December 31, 1996, 1995 and 1994 were
$34,000, $31,000, and $30,000, respectively.
9. ACCRUED RENT
The Company has entered into various lease agreements which provide
for scheduled rent increases and free rent periods. In accordance
with generally accepted accounting principles, rent expense has been
recorded on the straight-line basis over the life of the leases. At
December 31, 1996 and 1995, accrued rent of $1,181,000 and
$1,124,000, respectively, represents that portion of rent expense
(net of sublease income) which has not yet been paid. Such amounts
are included in "Other Liabilities."
10. STOCKHOLDERS' EQUITY
On July 21, 1994, the Company issued 998 shares of common stock to
certain key employees, some of whom were already shareholders of the
Company. In connection with this transaction, the Company charged
$779,000 to operations representing the estimated fair value of the
stock of $467,000 plus the estimated tax cost to the recipients of
$312,000. Upon the effectiveness of the merger (Note 2), all existing
redemption agreements terminated and stockholders' agreements became
effective which among other things, preclude the sale of the
Company's stock by the parties to the agreements for a period of two
years, subject to certain limited exceptions.
For the year ended December 31, 1996 the Company declared a dividend
of $.05 per share ($655,000) which was paid on January 15, 1997 to
stockholders of record as of December 31, 1996. No dividends were
declared or paid for the year ended December 31, 1995. During the
year ended December 31, 1994 the Company declared and paid $2,049,000
of distributions to shareholders which were the final distributions
related to periods during which the Company was a Subchapter S
Corporation for income tax purposes.
11. STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "Plan") covers 650,000
shares of common stock which are available for future grants. The
Plan, adopted in 1994 and expiring in 2004, is administered by a
committee designated by the board of directors. Options granted to
eligible employees are generally exercisable over three years.
Prior to 1996, there were no options granted under the Plan. A
summary of the status of the Plan as of December 31, 1996 is
presented below:
SHARES EXERCISE PRICE
------ --------------
Outstanding at the beginning of year 0
Granted 637,550 $2.00 - $2.75
Exercised 0
Forfeited 46,500 $2.00 - $2.75
---------
Outstanding at end of year 591,050 $2.00 - $2.75
=========
Options exercisable at year end 0
=========
F-15
<PAGE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock options. Accordingly, no compensation cost
has been recognized for the options granted to employees. Had
compensation cost for the employee options been determined using the
Black-Scholes option-pricing model described in SFAS No. 123, the
Company would have recorded aggregate compensation of approximately
$695,000 which would be expensed over the options' vesting periods.
The assumptions used in the option pricing model include risk-free
interest rates of 5.8% to 6.5%, expected lives of 3 to 5 years and
expected volatility of 50.8% to 57.3%. The pro forma impact for the
year ended December 31, 1996 of following the provisions of SFAS No.
123 for employee options on the Company's net income and earnings per
share would be as follows:
Net income - As Reported $2,589,000
==========
- Pro Forma $2,434,000
==========
Net Income per share - As Reported $.20
====
- Pro Forma $.19
====
12. RELATED PARTY TRANSACTIONS
On November 28, 1994, effective December 6, 1994, the Company sold
its 20% investment in IPSA, an Argentinean affiliate, for an
aggregate of $1,500,000, thereby realizing a net gain of $1,335,000.
On January 31, 1994, the Company entered into an agreement with one
of its shareholders who owned approximately 9% of the Company's
outstanding stock ("Retirement Agreement"), which provided for, among
other things, the payment of salary, incentive bonuses and special
bonuses and the repurchase of the shareholder's stock on November 30,
1995 at a price equal to two times the book value of those shares
determined as of the redemption date. On August 19, 1994 the
shareholder died. On February 9, 1995 the Company entered into a
revised agreement with the estate of the deceased shareholder which
amended the Company's obligations under the Retirement Agreement and
provided for aggregate payments of $341,000 through August 1995 in
full settlement of all obligations to the estate. Additionally, the
estate will not be required to redeem the shares of common stock held
by it.
13. ECONOMIC DEPENDENCY AND CONCENTRATION OF CREDIT RISK
Approximately 28%, 23% and 21% of the Company's revenues for the
years ended December 31, 1996, 1995 and 1994, respectively, were
derived from one client. No other client accounted for more than 10%
of the Company's revenues.
14. EMPLOYEE BENEFIT PLANS
DEFINED CONTRIBUTION PLAN - The Company sponsors a defined
contribution plan covering substantially all of its employees.
Contributions to the plan amounted to $151,000, $173,000 and $192,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
The Company's contributions are determined annually by management.
F-16
<PAGE>
DEFINED BENEFIT PLAN - The Company maintains a retirement plan
covering the former employees of Triangle (the "Triangle Salaried
Pension Guarantee Plan"). Pension costs are based on the provisions
of Statement of Financial Accounting Standards No. 87. The net
periodic pension credits for the year ended December 31, 1996 and the
period from March 31, 1995 (the date of the merger) to December 31,
1995 included the following components:
YEAR ENDED MARCH 31, 1995 TO
DECEMBER 31,1996 DECEMBER 31,1995
---------------- ----------------
$000)
Service-cost benefits $ 14 $ 24
Interest cost on projected benefit obligation 353 273
Return on plan assets (514) (361)
----- -----
Net periodic pension credit $(147) $ (64)
===== =====
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.0% for 1996 and
7.5% for 1995. The rate of increase in future compensation levels was 4%
and the weighted average long-term rate of return on assets was 8.5% for
1996 and 1995.
The following table indicates the funded status of the plan and the amount
recognized as prepaid pension costs in the consolidated balance sheet at
December 31, 1996 and 1995:
DECEMBER 31,
-------------------
1996 1995
------- -------
($000)
Actuarial present value of benefit obligations:
Accumulated benefits obligation, including vested
benefits of $5,073,000 and $5,202,000, respectively $(5,073) $(5,216)
======= =======
Projected benefit obligation $(5,073) $(5,268)
Plan assets at fair value, primarily listed stocks 6,657 6,269
and corporate obligations ------- -------
Plan assets in excess of projected benefit obligation 1,584 1,001
Unrecognized net gain (494) (58)
------- -------
Prepaid pension costs $ 1,090 $ 943
======= =======
F-17
<PAGE>
Effective January 1, 1997, the Triangle Salaried Pension Guarantee
Plan was amended to, among other things, (i) change the name of the
plan to the Audits & Surveys Worldwide, Inc. Account Balance
Retirement Plan, (ii) include all employees of the Company completing
one year of service and (iii) establish participant accounts which
shall be credited each year with an amount equal to one and one half
percent of the participant's plan compensation ( as defined) and
interest on the account balance at the rate applicable to 30 year
U.S. Treasury securities.
15. COMMITMENTS AND CONTINGENCIES
INCENTIVE AGREEMENTS - The Company is obligated under various
incentive compensation agreements with certain key employees. Such
agreements provide for incentive bonuses based on the financial
performance of their respective divisions. Total incentive bonuses
amounted to approximately $2,394,000, $1,765,000 and $3,947,000 in
the years ended December 31, 1996, 1995 and 1994, respectively.
OPERATING LEASES - The Company is obligated under lease agreements
for office space which expire at various dates through February 28,
2003. Under the terms of the leases the Company is obligated to pay
its portion of operating costs and real estate tax increases. Rent
expense for the years ended December 31, 1996, 1995 and 1994 was
approximately $1,624,000, $1,676,000, and $1,601,000, respectively.
Sublease rental income for the years ended December 31, 1996, 1995
and 1994 was approximately $748,000, $667,000 and $937,000,
respectively.
Future minimum lease commitments and sublease income at December 31,
1996 are as follows:
YEAR ENDED LEASE SUBLEASE
DECEMBER 31, COMMITMENT INCOME
---------- ------
($ 000)
1997 $ 1,610 $ 575
1998 1,769 525
1999 1,719 525
2000 1,669 525
2001 1,653 525
Thereafter 1,929 613
------- -------
$10,349 $ 3,288
======= =======
The Company is obligated under employment compensation agreements
with five key executives which require annual aggregate minimum base
compensation payments of $1,345,000. These agreements expire at
various dates through March 24, 2002. All of theses agreements
provide for discretionary and or performance based bonuses in
addition to the base compensation.
On February 6, 1995, the Company entered into a five-year agreement
with a supplier whereby the Company will pay $1,500,000 for retail
sales data and other rights as specified in the agreement. In the
event of termination, the amounts owed to the supplier would be
prorated based on the proportion of sales data received during the
period prior to termination. As of December 31, 1996, the Company has
paid the supplier $1,100,000. The balance of $400,000 is payable over
a four-year period.
F-18
<PAGE>
Triangle's inactive subsidiary, Diamond Tool and Horseshoe Co., now
known as Tri-North, Inc., is one of a large number of third-party
defendants in an action brought by the U.S. Environmental Protection
Agency. In prior years, Triangle expensed $100,000, excluding legal
costs, relating to this action. Any further liability with respect to
this action would constitute an Assumed Liability (as defined) under
the terms of an agreement with Cooper Industries, Inc. ("Cooper")
dated August 4, 1993 pursuant to which Triangle sold substantially
all of the assets constituting its mechanics hand tool, horseshoe and
farrier tool business. Cooper is obligated to indemnify the Company
against any such liability (including the cost of obtaining a
settlement or consent order releasing the Company from further
liability). However, the final conditional payment due from Cooper of
$500,000 (plus interest thereon) is due when and if the Company
obtains a satisfactory settlement or consent order releasing it from
further liability with respect to this action. The Company believes
that the cleanup of the site has been completed and that it will
collect substantially all of the $500,000 final conditional payment
from Cooper.
16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited summary results of operations for 1996 and 1995 (in
thousands, except for per share data) were as follows:
<TABLE>
<CAPTION>
1996 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 14,403 $ 15,897 $ 14,697 $ 15,371
Income before taxes 1,116 1,241 1,113 938
Net income 609 683 612 685
Net income per share 0.05 0.05 0.05 0.05
1995
Revenues 13,313 14,519 $ 12,783 $ 14,011
Income (loss) before taxes 929 619 (925) 930
Net income (loss) 567 291 (490) 478
Net income (loss) per share 0.05 0.02 (0.04) 0.04
</TABLE>
******
F-19
<PAGE>
ITEM 14. FINANCIAL STATEMENT SCHEDULE
AUDITS & SURVEYS WORLDWIDE, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (000's)
- --------------------------------------------------------------------------------
Additions Deductions
-----------------------
Balance at Charged
Beginning to Profit Balance at
Description of Period and Loss (A) End of Period
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended December 31, 1994 $ 0 $129 $ 0 $129
Year ended December 31, 1995 $129 $ 92 $ 71 $150
Year ended December 31, 1996 $150 $108 $228 $ 30
(A) Represents write-offs of uncollectible accounts receivable
S-1
EXHIBIT 21.01
Subsidiaries of the Company
Audits & Surveys Europe Ltd. (UK)
A&S Spooner Realty Co. (Delaware)
Inactive subsidiaries:
The Triangle Tool Group, Inc. (Delaware)
Tri-South, Inc. (Delaware)
Tri-North, Inc. (Delaware)
Triangle International, Inc. (Delaware)
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
We consent to the incorporation by reference in Registration Statement No.
333-22875 of Audits & Surveys Worldwide, Inc. and Subsidiaries on Form S-8 of
our report dated March 3, 1997, appearing in this Annual Report on Form 10-K of
Audits & Surveys Worldwide, Inc. for the year ended December 31, 1996.
/s/Deloitte & Touche LLP
New York, New York
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
CONSOLIDATED FINANCIAL STATEMENTS OF AUDITS & SURVEYS WORLDWIDE, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000099703
<NAME> AUDITS & SURVEYS WORLDWIDE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,827
<SECURITIES> 0
<RECEIVABLES> 11,875
<ALLOWANCES> (30)
<INVENTORY> 1,259
<CURRENT-ASSETS> 17,790
<PP&E> 6,022
<DEPRECIATION> (3,060)
<TOTAL-ASSETS> 26,973
<CURRENT-LIABILITIES> 13,937
<BONDS> 2,096
0
0
<COMMON> 131
<OTHER-SE> 8,336
<TOTAL-LIABILITY-AND-EQUITY> 26,973
<SALES> 0
<TOTAL-REVENUES> 60,368
<CGS> 0
<TOTAL-COSTS> 28,431
<OTHER-EXPENSES> 27,790
<LOSS-PROVISION> 108
<INTEREST-EXPENSE> 328
<INCOME-PRETAX> 4,408
<INCOME-TAX> 1,819
<INCOME-CONTINUING> 2,589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,589
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
