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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
or
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-22554
OPINION RESEARCH CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3118960
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23 Orchard Road, Skillman, New Jersey 08558
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 281-5100
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
Preferred Stock Purchase Rights
-------------------------------
(Titles of Classes)
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 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. [X]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes ___ No X
---
The aggregate market value of the common stock held by non-affiliates of
the Registrant, based on the closing sale price of its common stock on June 28,
2002, the last business day of the Company's second fiscal quarter, as quoted on
the Nasdaq National Market, was approximately $16,066,000.*
As of February 26, 2003, 6,042,802 shares of common stock, par value $.01
per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement, which will be filed
with the Securities and Exchange Commission in connection with the Registrant's
2003 Annual Meeting of Stockholders, are incorporated by reference into Part III
of this report.
_______________________
*Calculated by excluding all shares that may be deemed to be beneficially owned
by executive officers and directors of the Registrant, without conceding that
all such persons are "affiliates" of the Registrant for purposes of the federal
securities laws.
OPINION RESEARCH CORPORATION
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business .................................................................. 1
Item 2. Properties ................................................................ 9
Item 3. Legal Proceedings ......................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ....................... 11
Executive Officers of the Registrant ...................................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ..... 13
Item 6. Selected Financial Data ................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations ............................................................. 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................ 26
Item 8. Financial Statements and Supplementary Data ............................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .................................................. 26
PART III
Item 10. Directors and Executive Officers of the Registrant ........................ 27
Item 11. Executive Compensation .................................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and Management ............ 27
Item 13. Certain Relationships and Related Transactions ............................ 28
Item 14. Controls and Procedures ................................................... 28
PART IV
Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K ......... 29
Signatures .......................................................................... 36
Certification ....................................................................... 37
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ............. 41
Except where the context indicates otherwise, the term "Company" refers to
Opinion Research Corporation and its subsidiaries. All dollar amounts presented
in this Annual Report on Form 10-K are in thousands unless indicated otherwise.
Readers of this report should review carefully the information contained under
the headings "Risk Factors" and "Forward-looking Statements" in Part II.
PART I
Item 1. Business
General
Opinion Research Corporation (the "Company") was established in 1938
to apply the principles of general public opinion polling to marketing issues
facing America's largest companies. The Company has evolved to provide social
research, market research, information services, marketing services, and
telemarketing. The Company performs public sector primary research and provides
information technology, communications, and other consulting services, primarily
to agencies of the United States federal government and state and local
governments. The Company also assists its commercial clients in the evaluation,
monitoring and optimization of their marketing and sales efforts, addressing
issues such as customer loyalty and retention, market demand and forecasting,
and corporate image and competitive positioning. The majority of the Company's
governmental projects are in the areas of health, education, and international
aid. The Company's telemarketing services consist principally of outbound
customer acquisition services.
The Company completed its initial public offering in October 1993.
Between 1993 and 1997, as part of its globalization strategy, the Company
established its presence in the United Kingdom, Asia and Mexico through various
acquisitions. In January 1998, the Company acquired ProTel Marketing, Inc. ("ORC
ProTel" or "ProTel"), a high quality telemarketing company based in Lansing,
Illinois. In May 1999, the Company acquired Macro International Inc. ("ORC
Macro" or "Macro"), a predominately public sector research, consulting and
technology company based in the Washington, D.C. area. The Macro acquisition
substantially increased the Company's presence in the public sector. In
September 2000, the Company acquired C/J Research, Inc. ("C/J"), and in November
2000, acquired Social & Health Services, Ltd. ("SHS"). The two acquisitions in
2000 provided expansion opportunities for the Company in the areas of consumer
research, social research and information management.
The Company collects customer, market, and demographic information
through computer-assisted telephone interviews, internet based data collection
techniques, personal interviews, mail questionnaires and specialized techniques
such as business panels. Management believes that the Company's extensive
expertise with regard to certain business and social issues enables it to
provide reliable customer, market, and demographic information and advisory
services to clients. The Company also believes that its recognized name and
long-standing reputation enable it to obtain information from senior executives
who are difficult to access.
The Company's strategy for market research focuses on client projects
that require periodic updating and tracking of information, thereby creating the
potential for higher-margin
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recurring revenues. The portion of the Company's market research revenues from
such projects was approximately 61% in 2002.
The Company's Services and Products
The Company offers a variety of services and products to assist
clients with their strategic and tactical decisions as well as their plans for
marketing products and services.
Services
Advanced Analytics & Data Modeling. The Company's diagnostic and
statistical models are among the most sophisticated in market research. By
focusing on its clients' business issues and the application of the right
analytic tools, the Company can effectively transform data and analyses into
intelligence and insight.
Communications and Marketing Services. The Company provides full
service communications and marketing services to private, not-for-profit, and
government organizations. These services include strategic planning;
communication and marketing campaign development; brochure design and
production; print, radio and television advertising; web site development and
management; brand development; public relations; video development and
broadcasting; clearinghouse, warehousing and fulfillment services, and inbound,
web-enabled call center services.
These services are mainly concentrated in public health and education
arenas where the Company has won awards for their success in areas such as the
reduction of drug, tobacco and alcohol use among teens, and the prevention of
school violence.
Corporate Reputation & Branding. The Company works with clients
worldwide to manage their corporate and brand images; identify and achieve
optimal positioning in the marketplace; and strengthen equity with customers,
employees and the financial community. The strength of a client's image or
reputation is identified through interviews with constituency groups with whom
the client interacts and whose decisions influence the client's success. These
groups may include customers, potential customers, distributors, suppliers, the
media and the investment community.
Customer Loyalty & Retention. The Company assists its clients in
quantifying customer loyalty and increasing customer retention. By capturing and
analyzing the perceptions and experiences of its clients' prospects, clients,
and employees, the Company provides analysis and feedback on customer loyalty
which drives superior customer retention and business performance. The Company
provides its clients with information on the elements of products or services
which are most important to their customers; on how well these products and
services compare to the competition; and on which customers will continue to
purchase and recommend such products and services.
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Data Collection & Processing. The Company's telephone interviewing
call centers in North America, Europe and Asia combine research expertise and
advanced telecommunications technology. These facilities, staffed with
multilingual interviewers, use the Computer Assisted Telephone Interviewing
(CATI) system, which provides clients with highly efficient and cost effective
data and information collection. The Company also utilizes internet based data
collection techniques.
Demographic and Health Research. The Company manages international
research programs in developing nations for organizations such as The United
States Agency for International Development ("USAID"), the World Health
Organization ("WHO"), and UNICEF. By providing information for informed
decisions in population, health and nutrition, it supports a range of data
collection options that can be tailored to fit specific monitoring and
evaluation needs of government organizations. These include a variety of
population and facility-based surveys, secondary data analyses and other
specialized research such as qualitative, education and gender-based studies.
Employee Survey Programs. The Company provides comprehensive
employee-related research services to measure satisfaction, increase staff
retention, reduce hiring and training costs, and improve customer service. Using
proprietary computer software, exclusive multi-industry benchmarking databases
and a combination of quantitative and qualitative methodologies, the Company
works with clients to identify strengths and weaknesses. The Company implements
all stages of program management, from questionnaire design and processing
through reporting, final analysis and recommendations for action.
Information Technologies. The Company offers a variety of
technology-based services and products. These include computer security
products, such as Internet firewalls; software testing and quality assurance,
instructional product development for interactive multimedia, computer-based
instruction, decision-support systems, computer-based textbooks, and products
for individuals with special learning needs; and advanced Web services,
including a number of proprietary Web applications, database development and
management, and dynamic information retrieval.
Management Consulting. The Company offers a full spectrum of services
to address opportunities and problem areas, and to ensure that client
organizations can meet future challenges effectively. The Company's methods and
expertise produce strategies, plans and interventions that fit the values,
cultures and needs of the client organization and its managers. The Company's
focus is on sound analysis, with effective support in implementing recommended
strategies and solutions and ensuring capacity within the client organization so
that continuing outside assistance is not required.
Market Assessment. The Company works with clients worldwide to analyze
and forecast market demand for new products and services. The Company combines
sophisticated analytic techniques with global reach to provide clients with
insight regarding optimal
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product/services configuration and pricing, as well as market size information.
This work supports clients' business planning and capital generation for new
ventures.
Public Sector Research. The Company provides research and evaluation
services to local and national governments and to international organizations.
Among the services provided are communication studies; cost, cost benefit & cost
effectiveness analysis; customer satisfaction & loyalty studies; ethnography;
experimental & quasi-experimental research; needs assessments; outcome & impact
studies; performance measurement; policy research; process & implementation
studies; secondary data analysis & data mining; and survey research.
Training & Educational Technologies. The Company offers a full
spectrum of training services to help organizations adapt to and capitalize on
changing circumstances. All courses and training services are supported by the
Company's research and management consulting services in the subject areas
offered. The Company uses adult learning methodologies, instructional system
design, electronic performance support systems and highly skilled facilitators
who provide interactive, experiential-based training. The Company is also a
leader in applying technology to educational and learning needs and in
developing and producing distance learning programs, multimedia materials and
expert systems.
Industries
Automotive. Utilizing research methodologies developed for its
automotive industry clients, the Company has extensive experience working with a
wide range of companies around the world, including vehicle manufacturers,
original-equipment-manufacturers suppliers, dealers, distributors, trucking
companies and heavy equipment manufacturers.
The Company provides sophisticated segmentation research and long-term
studies on retail sales and service; brand image and equity; product
development, design and performance; and dealer/manufacturer relations. The
Company's exclusive consumer market analysis evaluates and tracks customer needs
as they relate to new vehicle purchases, financing and leasing, buying behavior,
and brand loyalty.
Financial Services. The Company provides market and customer
intelligence to banks, securities brokerage firms, insurance companies and other
financial institutions across a number of business issues: customer loyalty and
retention, image management, market segmentation and positioning, new product
development, pricing strategy, corporate branding, and customer database
management.
By focusing its research efforts on key customer segments - such as
high net worth individuals, corporate treasurers, active investors,
policyholders, etc. - the Company can determine the specific factors that
influence the target groups' decisions, and design strategies to attract, retain
and motivate them effectively.
Health Care. The Company's services include surveys and evaluations to
determine patient satisfaction, market segmentation, customer acquisition,
competitive analysis,
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community needs assessment, and corporate positioning. For pharmaceutical
companies, HMOs, hospitals, and health care providers, the Company also conducts
loyalty and retention modeling research as part of its clients' patient and
employee satisfaction programs.
Through its innovative methodologies, such as proprietary panels, the
Company establishes ongoing dialogues with difficult-to-reach decision-makers
such as physicians, plan and hospital administrators and benefits managers.
Retail and Trade. To shape marketing strategy, the Company's areas of
specialization include understanding the determinants of store choice; customer
loyalty and satisfaction; mystery shopping; segmentation and positioning; store
location, layout, design and product positioning; merchandise performance;
development and appraisal of individual outlets and sites; and diversification
into new markets, both domestic and international.
The Company also works in partnership with manufacturers and suppliers
of consumer goods to understand the needs, behavior and attitudes of customers
at all stages in the distribution channel. The Company's aim is to enhance the
manufacturer/trade/consumer relationship.
Telecommunications and Information Technology. The Company provides
market knowledge for a range of telecommunications and information technology
companies, from wireless communications companies and telephone carriers to
Internet service providers and computer hardware and software firms. Its
services include market definition, segmentation, new product development,
customer retention, corporate branding, usage analysis, and competitive
profiling.
Among its services, the Company helps clients determine pricing and
distribution systems, track service performance, gauge the success of products
and services, design and configure new products, predict customer needs and
define competitive positions in new markets.
Products
The following products are used by the Company to deliver some of the
services listed above and are also marketed as stand-alone products:
Shared-Cost Programs. For over 30 years, the Company has conducted
shared-cost telephone survey programs, marketed under the name "CARAVAN," in
which questions from a number of clients are combined in a series of interview
questionnaires. The CARAVAN programs provide multiple clients with high-quality,
timely information at a relatively low cost.
-5-
The general public CARAVAN is a twice-weekly shared-cost national
survey combining questions of clients such as advertising agencies, public
affairs departments of large corporations and product managers. Typically, the
information collected from the CARAVAN survey provides measurement and
evaluation of advertising and products.
Customer Loyalty Plus (CL+) is the Company's system for measuring and
building customer loyalty. The three-phase approach includes Assessment, which
is designed to provide clients with a customized CL+ score that can be used over
time to evaluate change; Planning, which consists of an action plan aimed at
closing the identified gaps; and Improvement, during which the Company's
professionals design and implement a specialized program tailored to the
client's specific needs. The plan includes training, organization development
and total quality management programs.
Marketing
Marketing and Sales-Support Program. In 2002, the Company continued to
support strong business development initiatives worldwide, as well as build upon
already comprehensive internal and external communications programs. The
Company's business development efforts continued with the production of
newsletters, position papers, direct marketing, seminars, advertising, media
placements, web development, telemarketing and speaking platforms. These efforts
have assisted in allowing the Company to access a large number of prospective
clients worldwide and share its products, services, and capabilities.
Clients and Client Relationships
Some of the Company's largest clients in terms of revenues generated
include America Online, Department of Health and Human Services, Department for
Work and Pensions (U.K.), General Motors, IBM, National Institutes of Health,
National Science Foundation, Sears Roebuck & Co., USAID, and U.S. Department of
Education. In 2002, the Company served over 2,000 clients. For many clients, the
Company performed multiple projects, sometimes for different subsidiaries or
business units of the same client. In general, the Company's engagements are
terminable by the Company's clients at any time, with the expectation of cost
recovery for work completed by the Company.
The Company's largest single client, USAID, accounted for 11%, 11%,
and 13% of the Company's revenues in 2002, 2001, and 2000, respectively. All
revenues generated by the USAID relationship were for social research studies.
Competition
Many other firms provide some of the services and products provided by
the Company, typically focusing on consumer markets. However, the Company
believes that no single competitor offers a comparable combination of services
and products.
-6-
For business to business market research, the Company believes that it
competes for clients based on a variety of factors, including name recognition,
reputation, expertise in a variety of industries, ability to access executives
and other key constituencies, ability to collect accurate and representative
data, ability to enhance the value of the data collected through analysis and
consulting, technological competence, reliability, promptness and efficiency. In
the Company's experience, its typical clients are interested in the quality and
utility of the service received as well as price.
For consumer market research services, the Company regularly
experiences significant competition from a large number of competitors,
including marketing and research departments of various companies, advertising
agencies and business consulting firms. Price, reputation, and quality of
service are the dominant considerations.
For social research services, the Company competes with a large number
of firms that vary in size as well as with not-for-profit organizations. The
competition varies depending upon the agency for whom the work is being
conducted and the services to be provided. Technical competence is the key
differentiator.
For outbound telemarketing services, the Company competes with a large
number of telemarketing companies. Quality and reliability of service are the
key differentiators.
Segment Information
Information regarding financial data by operating and geographic
segments is set forth in the Notes to Consolidated Financial Statements at Note
15, "Segments."
Backlog
As of December 31, 2002, backlog in the market research business of
the Company was $13,825 as compared to $17,529 as of December 31, 2001. All of
the 2002 backlog in the market research business is expected to be recognized as
revenues by December 31, 2003. Social research backlog at December 31, 2002 was
$215,632, as compared to $199,204 at December 31, 2001. Revenue from this
backlog is expected to be recognized over the next five years. The Company's
engagements generally are terminable by the Company's clients at any time, with
the expectation of cost recovery for work completed by the Company.
Employees
As of December 31, 2002, the Company employed a total of approximately
1,500 full-time employees and 1,400 part-time hourly employees. The part-time
employees work as telephone interviewers and data processors. Of the full-time
employees, 960 are professionals engaged in direct client service, 370 are
telemarketing representatives, and 170 are engaged in support, administration
and executive oversight.
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None of the Company's employees are subject to a collective bargaining
agreement, nor has the Company experienced any work stoppages. The Company
believes that its relationship with its employees is satisfactory.
Available Information
The Company files reports and other information with the Securities
and Exchange Commission ("SEC") pursuant to the information requirements of the
Securities Exchange Act of 1934. Readers may read and copy any document the
Company files at the SEC's public reference room in Washington, D.C. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The Company's filings are also available to the public from commercial document
retrieval services and at the SEC's web site at http://www.sec.gov.
The Company maintains a website, free of charge, at
www.opinionresearch.com, which contains information about the Company, including
links to the Company's annual report on Form 10-K, quarterly report on Form
10-Q, current reports on Form 8-K, and related amendments, which are available
as soon as reasonably practicable after such reports are filed or furnished
electronically with the SEC. The Company's website and the information contained
in it shall not be deemed incorporated by reference to this Form 10-K.
-8-
Item 2. Properties
The Company's executive offices are located in approximately 45,000
square feet of leased space in Skillman (Greater Princeton), New Jersey. The
term of the lease expires in August 2003. The Company leases additional
facilities throughout the world. The following table sets forth certain
information relating to these properties:
Operating Unit Location Facility Usage
- ------------------------------ ------------------------------ ----------------------------------------------------
U.S. Market Research Skillman, New Jersey Worldwide Headquarters, Research Location
Maumee, Ohio Research Location
Arlington Heights, Illinois Research Location and Telephone Interviewing
Facility
Tucson, Arizona Telephone Interviewing Facility
Tampa, Florida Telephone Interviewing Facility
Reno, Nevada Telephone Interviewing Facility
U.K. Market Research London, U.K. U.K. Market Research Headquarters, Research
Location, and Telephone Interviewing Facility
Manchester, U.K. Research Location
Asia Market Research Hong Kong Asia Market Research Headquarters, Research
Location and Telephone Interviewing Facility
Seoul, Korea Country Headquarters, Research Location, and
Telephone Interviewing Facility
Taipei, Taiwan Country Headquarters, Research Location, and
Telephone Interviewing Facility
Mexico Market Research Mexico City, Mexico Country Headquarters, Research Location
Teleservices Lansing, Illinois ORC ProTel Headquarters, Telemarketing
Facility
Topeka, Kansas Telemarketing Facility
St. John, Missouri Telemarketing Facility (currently idle)
Dayton, Ohio Telemarketing Facility
Social Research Calverton, Maryland Macro Headquarters, Research Location
Burlington, Vermont Telephone Interviewing Facility and Research
Location
St. Albans, Vermont Telephone Interviewing Facility
New York, New York Research Location
Bethesda, Maryland Research Location
Plattsburgh, New York Telephone Interviewing Facility
Atlanta, Georgia Research Location
Rockville, Maryland Research Location and Multi-media Production
Facility
Columbia, Maryland Warehouse
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The Company presently has a combined total of 735 computer assisted
telephone interviewing stations worldwide dedicated to market research and an
additional 345 telemarketing stations. All of these facilities are equipped with
state-of-the-art hardware and software. In a typical telephone interview or
sale, the CATI system prompts the interviewer's sequence of questions or
responses depending on the previous answers. All responses are recorded directly
into the computer, avoiding the need for subsequent data entry and enabling
prompt analysis of responses. The interviewees communicate with live
interviewers at all times.
The Company believes that its properties are sufficient for its
current operational needs. The Company is currently reviewing its options for
the expiring lease in Skillman, New Jersey.
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Item 3. Legal Proceedings
The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2002.
Item 4A. Executive Officers of the Registrant
The following table sets forth certain information concerning the
principal executive officers of the Company as of February 26, 2003.
Name Age Position
- ---- --- --------
John F. Short 58 Chairman, President, and
Chief Executive Officer
Douglas L. Cox 57 Executive Vice President and
Chief Financial Officer
Kevin P. Croke 44 Executive Vice President and
Director of Finance
Michael T. Errecart 53 President, Macro International Inc.
James C. Fink 59 Vice Chairman; Chief Executive Officer
of Worldwide Market Research
Nigel P. Maxfield 45 Senior Vice President and
Managing Director,
O.R.C. International Ltd.
Frank J. Quirk 62 Chairman and Chief Executive Officer,
Macro International Inc.
Ruth R. Wolf 65 Chief Executive Officer,
ORC ProTel, Inc.
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Mr. Short joined the Company as its Chief Financial Officer in 1989 and was
appointed Vice Chairman in 1992. In 1998, Mr. Short was appointed President of
the Company. In February 1999, Mr. Short assumed the roles of Chief Executive
Officer and Chairman of the Board.
Mr. Cox joined the Company as Executive Vice President and Chief Financial
Officer in October 1998. Prior to joining the Company, Mr. Cox spent ten years
as Senior Vice President and Chief Financial Officer of Elf Atochem North
America, Inc. Mr. Cox holds an MBA, with honors, from the Wharton School of the
University of Pennsylvania.
Mr. Croke joined the Company in 1991 as Controller. Throughout the years
Mr. Croke has served in various capacities in the Company's financial arena. In
1995, Mr. Croke was appointed Director of Finance. Mr. Croke holds an MBA from
Case Western Reserve University.
Dr. Errecart joined the Company in 1999 with the acquisition of Macro,
where he had served as its President since 1998 and Executive Vice President
from 1994 to 1998. Dr. Errecart was appointed President of Macro in 1999. Dr.
Errecart holds a Ph.D. in Mathematical Sciences from the Johns Hopkins
University.
Dr. Fink joined the Company in 1982. Since 1990, Dr. Fink had held various
managerial positions within the Company and was a member of the Board of
Directors of the Company and Managing Director of the Company's corporate brand
equity practice when he resigned in February 1999. Between 1999 and 2001, Dr.
Fink was President of the worldwide brand research division of Enterprise IG. In
July 2001, Dr. Fink rejoined the Company as Vice Chairman and Chief Executive
Officer of Worldwide Market Research. Dr. Fink holds a Ph.D. in Economics from
the Pennsylvania State University.
Dr. Maxfield joined the Company in 1996 with the acquisition of a U.K.
division. In 1997, Dr. Maxfield was appointed Managing Director of O.R.C.
International Ltd. Dr. Maxfield holds a Ph.D. in Applied Mathematics and
Computing Science from the University of Sheffield.
Mr. Quirk joined the Company in 1999 with the acquisition of Macro, where
he served, and continues to serve, as the Chief Executive Officer since 1980. In
2000, Mr. Quirk was elected as a member of the Board of Directors of the
Company. Mr. Quirk holds an MBA degree from Cornell University.
Ms. Wolf joined the Company in 1998 with the acquisition of ProTel, which
she co-founded in 1988. Ms. Wolf was appointed Chief Executive Officer of ORC
ProTel in 1998. Ms. Wolf has over 30 years of experience in telemarketing.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Information
The Company's Common Stock is currently quoted on the Nasdaq National
Market under the symbol "ORCI". Prior to August 2001, the Company's Common Stock
was traded on the American Stock Exchange under the symbol "OPI". The table
below sets forth the high and low prices for the Company's Common Stock (the
"Common Stock") for each of the four quarters of 2002 and 2001:
High Low
---------- ----------
2002
----
Fourth Quarter $6.150 $4.660
Third Quarter 6.000 4.700
Second Quarter 6.550 5.470
First Quarter 6.800 5.000
2001
----
Fourth Quarter $6.640 $2.890
Third Quarter 6.910 5.250
Second Quarter 7.600 6.100
First Quarter 7.700 4.875
The closing price of the Common Stock on February 26, 2003 was $5.04
per share. As of February 26, 2003, the Company had 86 holders of record of the
Common Stock (approximately 694 beneficial stockholders).
Dividends
The Company has not paid any dividends on the Common Stock. The
Company currently intends to retain its earnings to finance future growth and
therefore does not anticipate paying dividends on the Common Stock in the
foreseeable future.
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Item 6. Selected Financial Data
The following selected financial data should be read in conjunction
with the Company's audited financial statements and notes which are listed
herein under Item 15 and are included on pages F-1 through F-29.
- ----------------------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
For the Year Ended December 31,
--------------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
Operating Data:
Revenues $ 175,260 $ 176,909 $ 160,909 $ 118,621 $ 73,167
Operating income (1) $ 4,285 $ 8,825 $ 11,652 $ 8,463 $ 2,340
Income (loss) before provision for income taxes,
cumulative effect of accounting change and
extraordinary loss $ (499) $ 3,412 $ 5,971 $ 4,458 $ 469
Income (loss) before cumulative effect of accounting
change and extraordinary loss $ (2,621) $ 1,616 $ 3,304 $ 2,514 $ (20)
Cumulative effect of accounting change,
net of tax benefit of $0 (2) (292) - - - -
Extraordinary loss on debt
refinancings, net of tax of $60 and $133 (3) - - - (90) (150)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (2,913) $ 1,616 $ 3,304 $ 2,424 $ (170)
========== ========== ========== ========== ==========
Weighted average common shares
outstanding 5,949 5,762 4,692 4,244 4,202
Income (loss) before cumulative effect of accounting
change and extraordinary loss per common share $ (0.44) $ 0.28 $ 0.70 $ 0.59 $ 0.00
Cumulative effect of accounting change per share (0.05) - - - -
Extraordinary loss per common share - - - (0.02) (0.04)
---------- ---------- ---------- ---------- ----------
Net income (loss) per common share $ (0.49) $ 0.28 $ 0.70 $ 0.57 $ (0.04)
========== ========== ========== ========== ==========
Adjusted weighted average common shares
and assumed conversions 5,949 5,992 5,053 4,332 4,202
Income (loss) before cumulative effect of accounting
change and extraordinary loss per diluted share $ (0.44) $ 0.27 $ 0.65 $ 0.58 $ (0.00)
Cumulative effect of accounting change per share (0.05) - - - -
Extraordinary loss per diluted share - - - (0.02) (0.04)
---------- ---------- ---------- ---------- ----------
Net income (loss) per diluted share $ (0.49) $ 0.27 $ 0.65 $ 0.56 $ (0.04)
========== ========== ========== ========== ==========
Balance Sheet Data:
Total assets $ 102,436 $ 112,916 $ 115,957 $ 91,966 $ 50,610
Total debt (4) $ 46,892 $ 55,462 $ 51,842 $ 47,438 $ 18,320
Redeemable equity $ 8,900 $ 8,900 $ 8,900 $ - $ -
- ----------------------------------------------------------------------------------------------------------------------------------
(1) In the fourth quarter of 2002, the Company recorded a non-cash impairment
charge of $5,938 to reduce the carrying value of goodwill in the U.S.
market research reporting unit.
(2) On January 1, 2002, the Company recorded a goodwill impairment loss in its
Mexican subsidiary of $292 as a cumulative effect of a change in accounting
principle upon adoption of Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets.
(3) In the second quarter of 1999 and 1998, the Company recorded extraordinary
losses of $90 and $150, net of tax benefits of $60 and $133, respectively,
due to the write-off of unamortized loan origination fees associated with
debt refinancings.
(4) Amounts presented include capital lease obligations.
-14-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company was established in 1938 to apply the principles of general
public opinion polling to marketing issues facing America's largest companies.
The Company has evolved to provide social research, market research, information
services, marketing services, and telemarketing. The Company performs public
sector primary research and provides information technology, communications, and
other consulting services, primarily to agencies of the United States federal
government and state and local governments. The Company also assists its
commercial clients in the evaluation, monitoring and optimization of their
marketing and sales efforts, addressing issues such as customer loyalty and
retention, market demand and forecasting, and corporate image and competitive
positioning. The majority of the Company's governmental projects are in the
areas of health, education, and international aid. The Company's telemarketing
services consist principally of outbound customer acquisition services.
Results of Operations - 2002 compared to 2001
Revenues
Consolidated revenues for 2002 decreased $1,649, or 1%, to $175,260
from $176,909 in 2001. Revenues increased $10,162, or 11%, in the Company's
social research business. Revenues decreased $2,870, or 16%, in the teleservices
business. Revenues declined $8,263, or 20%, in U.S. market research, and
increased $619, or 3%, in U.K. market research. In all cases, the increase or
decrease in revenues in the various operating segments is primarily due to
higher or lower demand for services, with approximately $4,300 of the decline in
U.S. market research revenues arising from the non-renewal of two client
contracts and $3,700 from the reduced scope of three client contracts.
The Company expects that social research revenues will continue to
expand as evidenced by increased backlog. Any improvements in U.S. market
research and teleservices revenues over 2002 are dependent upon a better
economic and business climate.
Cost of Revenues
Consolidated cost of revenues decreased $820, or 1%, to $120,705 in
2002 from $121,525 in 2001. Gross profit as a percentage of revenues was stable
at 31% in both 2002 and 2001. For the social research business, cost of revenues
increased 11% from $69,816 in 2001 to $77,394 in 2002 and the gross profit
percentage was stable at 27% in both 2002 and 2001. Consistent with the decline
in revenues, cost of revenues decreased 20% from $27,832 in 2001 to $22,231 in
2002 in U.S. market research and the gross profit percentage was stable at 33%
in both 2002 and 2001. For U.K. market research, cost of revenues increased 6%
from $11,644 in 2001 to $12,316 in 2002 and the gross profit percentage declined
from 37% in 2001 to 35% in 2002, primarily as the result of higher
subcontracting costs. In the teleservices business, cost of revenues decreased
17% from $9,379 in 2001 to $7,761 in 2002, reflecting the lower volume of client
services. The gross profit percentage improved slightly from 49% in 2001 to 50%
in 2002.
-15-
The Company does not expect a significant improvement in the gross
profit percentage unless the economic and business climate results in improved
U.S. market research and teleservices revenues.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased
$1,608, or 4%, to $39,736 in 2002 from $38,128 in 2001. The increase is mainly
attributable to higher compensation and occupancy expenses. As a percent of
revenues, SG&A increased to 23% from 22%.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased by $3,835 to $4,596,
or 5%, in 2002 from $8,431 in 2001. The adoption of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets ("Statement 142") at the
beginning of 2002 which eliminated the amortization of goodwill, accounted for
$3,738 of this decrease.
Goodwill Impairment Charge
In October 2002, as part of its annual impairment test based on
Statement 142, the Company engaged an independent valuation firm to determine if
there had been an impairment of the goodwill associated with the Company's U.S.
market research business. The analysis performed by the independent valuation
firm indicated that the recorded book value of the U.S. market research
reporting unit exceeded its fair value, as determined by a weighting of
comparable company analyses and discounted cash flow models. Upon completion of
such assessment, the Company recorded a non-cash impairment charge of $5,938 to
reduce the carrying value of goodwill in the U.S. market research reporting
unit. See Note 3 to Consolidated Financial Statements "Goodwill and other
intangibles" for additional information.
Interest and Other Non-Operating Expenses
Interest and other non-operating expenses decreased $629, or 12%, to
$4,784 in 2002 from $5,413 in 2001. The decrease is due to a decrease in
interest expense of $797, resulting from lower interest rates and reduced
borrowings, partially offset by an increase of $168 in other non-operating
expenses resulting from unfavorable foreign currency fluctuations.
Provision for Income Taxes
The provision for income taxes for 2002 and 2001 was $2,122 and
$1,796, respectively. The provisions for these years are higher than the amounts
that result from applying the federal statutory rate to income before income
taxes, reflecting the absence of any tax benefits associated with the goodwill
impairment charge in 2002, the non-deductibility of goodwill amortization in
2001, and for both years, the impact of state taxes.
Cumulative Effect of Accounting Change
With the adoption of Statement 142 on January 1, 2002, the Company
recorded as a cumulative effect of a change in accounting principle, goodwill
impairment related to the Company's Mexican subsidiary of $292, or $(0.05) per
share.
-16-
Net Income (Loss)
Net income (loss) for 2002 and 2001 was $(2,913) and $1,616,
respectively.
Results of Operations - 2001 compared to 2000
Revenues
Revenues for 2001 increased $16,000, or 10%, to $176,909 in 2001 from
$160,909 in 2000. The acquisitions of C/J and SHS (the "Acquisitions") accounted
for $21,408, of this increase. Excluding the impact of the acquisitions,
revenues declined $4,130, or 3%, in the research business, of which $1,176 was
due to the appreciation of the U.S. dollar, and $1,278, or 6%, in the
teleservices businesses, with both segments experiencing lower demand for
services.
Cost of Revenues
Cost of revenues increased $15,550, or 15%, to $121,525 in 2001 from
$105,975 in 2000. The Acquisitions accounted for $16,855 of this increase.
Excluding the impact of the Acquisitions, cost of revenues in the research
business declined $461. Before the impact of the appreciation of the U.S. dollar
against other currencies, which reduced cost of revenues by $817, cost of
revenues in the research business increased $356 reflecting inefficiencies at
the lower level of service provided. In the teleservices business, cost of
revenues decreased $844, or 8%, reflecting the lower level of services provided.
Gross profit as a percentage of revenues for the Company decreased to
31% in 2001 from 34% in 2000 due to the impact of the Acquisitions, for which
the gross profit percentage for 2001 was 23%. Excluding the impact of the
Acquisitions, the gross profit percentage for the research business decreased to
31% in 2001 from 32% in 2000 and the gross profit percentage for the
teleservices business increased to 49% in 2001 from 48% in 2000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased
$2,124, or 6%, to $38,128 in 2001 from $36,004 in 2000. The Acquisitions
resulted in an increase in SG&A of $2,635. As a percent of revenues,
consolidated SG&A decreased to 21.6% in 2001 from 22.4% in 2000.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by $1,153, or 16%, to
$8,431 in 2001 from $7,278 in 2000. The Acquisitions accounted for $679 of the
increase. Earnout payments made in connection with prior acquisitions resulted
in a $473 increase in goodwill amortization. Depreciation and amortization on a
consolidated basis increased to 4.8% of revenues in 2001 from 4.5% in 2000.
-17-
Interest and Other Non-Operating Expenses
Interest and other non-operating expenses decreased $268, or 5%, to
$5,413 in 2001 from $5,681 in 2000. The decrease is due to a decrease in
interest expense of $114, resulting from lower interest rates offset in part by
additional borrowings to fund one of the Acquisitions and acquisition related
payments, and a decrease of $154 in other non-operating expenses.
Provision for Income Taxes
The provision for income taxes for 2001 and 2000 was $1,796 and
$2,667, respectively. The provisions for these years are higher than the amount
that results from applying the federal statutory rate to income primarily
because of amortization of non-deductible goodwill generated from acquisitions
throughout the years and the impact of state taxes.
Net Income
Net income for 2001 and 2000 was $1,616 and $3,304, respectively.
Liquidity and Capital Resources
As of December 31, 2002, working capital was $14,733. Net cash
generated by operations for 2002 was $10,495 as compared to $9,350 in 2001. For
2002, the net cash provided by operating activities was primarily generated by a
net loss, after adjusting for depreciation and amortization, goodwill impairment
charge and other non-cash items, totaling $8,493, a net decrease in receivables
of $3,125, and an increase of $2,551 in payables and accrued expenses, offset by
an increase in other assets of $319 and decreases in deferred revenues of $2,397
and other liabilities of $958. For 2001, the net cash provided by operating
activities was primarily generated by net income, after adjusting for
depreciation and amortization and other non-cash items, totaling $9,888, and a
decrease in receivables of $3,260, offset by decreases in payables and accrued
expenses of $2,061.
Investing activities for 2002 included capital expenditures of $2,334
and acquisition related payments of $46. Investing activities for 2001 included
capital expenditures of $3,934, earn-out payments of $8,726 to previous ProTel
and Macro shareholders, and payments of $2,125 to previous shareholders of C/J
and SHS based on their respective purchase agreements.
In 2002, financing activities included a net reduction in borrowings
totaling $8,674 and proceeds from the sale of the Company's common stock under
the Company's stock purchase plans and the exercises of stock options totaling
$723. This compares to net borrowings of $3,539 and proceeds of $1,035 from the
sale of common stock and the exercises of stock options in 2001.
On October 4, 2001, the Company amended its senior credit facility
increasing the amount available under the revolving credit to up to $24,000 and
shortening the maturity for both the revolving credit and the term notes to June
1, 2004 from May 31, 2005 (the "October 2001 Amendment"). Additionally, the
October 2001 Amendment provided for an increase in the interest
-18-
rate to LIBOR plus 325 basis points or the financial institution's designated
base rate plus 200 basis points.
On September 29, 2002, the Company further amended its credit
facilities which, among other things, reduced the amount available under the
revolving credit from $24,000 to $19,000 and amended certain near-term financial
covenants to less restrictive amounts. As of December 31, 2002, the Company had
approximately $5,985 of additional credit available under the amended
facilities.
In February 2003, the Company completed another amendment to its
senior credit facility (the "February 2003 Amendment") which further reduced the
amount available under the revolving credit from $19,000 to $16,500 and amended
certain future covenants to be less restrictive. Additionally, the February 2003
Amendment provides for an increase in the interest rate by 50 basis points to
LIBOR plus 375 basis points or the financial institution's designated base rate
plus 250 basis points. Upon signing the February 2003 Amendment, the Company had
approximately $4,100 of additional credit available under the newly amended
facilities.
In conjunction with the February 2003 Amendment, the Company also
amended its subordinated debenture to increase the coupon rate from 12% to 12.5%
and amended certain future covenants to be less restrictive.
The Company's senior credit facility will mature on June 1, 2004 and
as is customary, may be accelerated if the Company is unable to meet various
financial covenants. The Company expects to renegotiate its credit facilities
during 2003, extending their maturities, and expects to meet the financial
covenant requirements.
The Company entered into a joint venture agreement during 2001 for the
purpose of developing new research-based products. In 2002, the Company
contributed $1,085 in services and cash and, since inception, has contributed an
aggregate of $1,155. All amounts funded to date have been expensed except for an
investment of $79 in the joint venture which is included in other current assets
in the Company's consolidated balance sheet.
There are no material capital expenditure commitments and no
acquisition related commitments. The Company has no off-balance sheet financing
arrangements. 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.
-19-
The following table represents the Company's contractual obligations
as of December 31, 2002:
Payment Due by Period
Less than After
Contractual Obligations Total 1 year 2 -3 years 4-5 years 5 years
- -------------------------------- ----------- ------------- ------------ ------------- -------------
Accounts payable and
accrued expenses $ 16,991 $ 16,991 $ - $ - $ -
Short-term borrowings 6,000 6,000 - - -
Long-term debt 41,515 - 30,265 11,250 -
Capital leases 27 27 - - -
Operating leases 31,805 8,707 13,387 6,982 2,729
----------- ------------- ------------ ------------- -------------
Total contractual obligations $ 96,338 $ 31,725 $ 43,652 $ 18,232 $ 2,729
=========== ============= ============ ============= =============
Critical Accounting Policies
The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and on assumptions that are
believed to be reasonable under the circumstances.
The Company believes that the implementation of the following critical
accounting policies, used in the preparation of its consolidated financial
statements, introduce the most significant levels of judgments and estimates.
Revenue Recognition
The Company recognizes revenues on the percentage of completion method
for its social research and market research segments, which relies on a periodic
determination of the ratio of costs incurred to total estimated contract costs.
The Company follows this method since reasonably dependable estimates of the
revenue and costs applicable to various stages of a project can be made.
Recognized revenue and profit are subject to revisions as the project progresses
to completion. Revisions in profit estimates are reflected in income in the
period in which the facts that give rise to the revision become known. These
revisions could be material to the Company's results of operations. For the
Company's teleservices business, revenues are recognized at the time services
are performed.
-20-
Goodwill and Other Intangible Assets
The Company has significant intangible assets related to goodwill and
other identifiable intangible assets, such as non-competition agreements. The
determination of the related estimated useful lives involves significant
judgments. Changes in those useful lives could be material to the Company's
results of operations.
In assessing the recoverability of the Company's goodwill and other
identifiable intangibles, the Company must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the
future, the Company may be required to record impairment charges for these
assets. On January 1, 2002, the Company adopted Statement No. 142, Goodwill and
Other Intangible Assets, which requires the Company to analyze its goodwill for
impairment in 2002, and then on an annual basis thereafter. At the date of
adoption, the Company reclassified assembled workforce intangible assets with an
unamortized balance of $865 to goodwill and recorded as a cumulative effect of a
change in accounting principle, goodwill impairment related to the Company's
Mexican subsidiary of $292, or $(0.05) per share. During the year the Company
identified other intangible assets with useful life that can no longer be
determined. As a result, the Company reclassified $480 from other intangible
assets to goodwill in the fourth quarter of 2002. In the fourth quarter of 2002,
the Company recorded a non-cash impairment charge of $5,938 to reduce the
carrying value of goodwill in the U.S. market research reporting unit. See Note
3 to Consolidated Financial Statements "Goodwill and other intangibles" for
additional information.
Recent Accounting Pronouncements
In August 2001, the FASB issued Statement No. 143, Accounting for
Asset Retirement Obligations. That standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. The Company has adopted Statement 143 on January 1, 2003 and the
adoption of Statement 143 will not have any material impact on the Company's
results of operations, financial position or cash flows.
Effective January 1, 2002, the Company adopted Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and provides a single accounting model for
long-lived assets to be disposed of. Although retaining many of the fundamental
recognition and measurement provisions of Statement 121, the new rules
significantly change the criteria that would have to be met to classify an asset
as held-for-sale. The adoption of Statement 144 did not have an impact on the
Company's results of operations, financial position or cash flows.
In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure. Statement 148 amends
Statement 123, Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures
-21-
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The disclosure provisions of this Statement are effective for
fiscal years ending after December 15, 2002 and have been incorporated into Note
1 to the consolidated financial statements "Summary of Significant Accounting
Policies".
Inflation and Foreign Currency Exchange
Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact
through 2003. The foreign currency exchange fluctuations did not have a material
impact on the Company's operating results in 2002. In 2001 and 2000, the
appreciation of the U.S. dollar versus the British pound had negatively affected
the Company's operating results in both years. As the Company continues to
expand its international operations, exposures to gains and losses from foreign
currency fluctuations will increase. It has not been the Company's practice to
enter into foreign exchange contracts, but such contracts may be used in the
future if the Company deems them to be an appropriate resource to manage the
Company's exposure to movements in foreign currency exchange rates.
Risk Factors
Readers of this report should be aware that the following important
factors, among others, in some cases have affected, and in the future could
affect, the actual operating results of the Company and could cause the
Company's actual consolidated results for 2003 and beyond to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company:
The Company's success depends on its ability to retain its existing
clients and obtain new clients. The Company's clients generally may terminate
the services it provides to them at any time. The loss of one or more of the
Company's large clients or a significant reduction in business from such clients
could have a material adverse effect on the Company. The existence of larger
projects and long-term client relationships may increase the Company's reliance
on particular projects and clients. In 2002, approximately 53% of the Company's
revenue was generated by providing services to various U.S. governmental
departments and agencies.
The Company's business may suffer if demand for its services declines.
A number of factors that are beyond the Company's control can adversely affect
the demand of the Company's existing clients for its services and impair its
ability to attract new clients. These include marketing budgets, general
economic conditions, consolidations, government spending, and other
industry-specific trends. Changes in management or ownership of an existing
client are factors that can affect the client's demand for the Company's
services. As a result, the Company may provide different amounts of services to
its clients from year to year, and these differences can contribute to
fluctuations in the Company's operating results.
The Company's attempts to expand its operations into markets where the
Company does not currently operate may not be successful and the Company's
efforts to expand its
-22-
international operations will be subject to added risks which are inherent in
doing business abroad. Part of the Company's business strategy is to expand
domestically and internationally, and to extend into related businesses through
strategic acquisitions. There can be no assurance that the Company will be able
to so expand or to identify targets for such acquisitions on terms attractive to
the Company. Further, there can be no assurance that the Company's services will
be sufficiently accepted to sustain its efforts to expand in selected
international markets. International expansion will also subject the Company to
risks inherent in doing business abroad, including adverse fluctuations in
currency exchange rates, limitations on asset transfers, changes in foreign
regulations and political turmoil. Furthermore, there can be no assurance that
the Company will be able to integrate successfully the operations of any
subsequently acquired company with its current operations.
The Company's business may suffer if the Company is unable to retain
its key personnel. The Company is dependent upon the efforts and skills of
certain key senior executives. The loss of the services of one or more of these
individuals could have a material adverse effect on the Company. The Company
does not currently maintain key man life insurance policies on any of the
Company's executives other than John F. Short, the Company's chief executive
officer, and the Company has employment agreements only with certain executive
officers. Competition for senior management is intense, and the Company may not
be successful in retaining key personnel or in attracting and retaining other
personnel that the Company may require in the future.
The Company faces competition in its industry. The Company faces
competition in connection with most of the individual services and products it
provides. Although the Company believes that no single competitor offers a
comparable combination of services and products, there can be no assurance that
other companies, including some with greater financial resources than the
Company, will not attempt to offer a range of services and products similar to
those offered by the Company, or otherwise compete more effectively in the
market research and information services industry. The Company regularly
experiences significant competition for customers seeking market research
services from a large number of competitors. These include market research
companies, advertising agencies, and business consulting firms. The Company
competes for public sector research services with a large number of firms that
vary in size as well as with not-for-profit organizations. For outbound
telemarketing services, the Company competes with a large number of
telemarketing companies.
The Company does not currently pay dividends on its common stock and
the Company does not expect to do so for the foreseeable future. The Company
expects to retain its future earnings, if any, for the operation and expansion
of its business, and to pay no cash dividends for the foreseeable future. The
terms of the Company's current financing agreements prohibit the payment of
dividends, and future agreements may also contain terms that limit the amount of
dividends the Company may pay or prohibit any payment of dividends.
Anti-takeover provisions and the Company's right to issue preferred
stock could make a third-party acquisition of the Company difficult. The
Company's certificate of incorporation provides that the board of directors may
issue preferred stock without stockholder approval. In addition, the Company's
by-laws provide for a classified board, with each board
-23-
member serving a three-year term. The board of directors has also adopted a
stockholder rights plan, commonly referred to as a "poison pill." The issuance
of preferred stock, the existence of a classified board, and the stockholder
rights plan could make it more difficult for a third party to acquire the
Company without board approval. These provisions could also limit the price that
certain investors might be willing to pay in the future for the Company's common
stock.
Trading Volume in the Company's Common Stock has historically been
limited. There is a limited market for the Company's common stock. Selling the
Company's shares may be difficult because smaller quantities of shares are
bought and sold and security analysts' and the news media's coverage about the
Company is limited. These factors could result in lower prices and larger
spreads in the bid and ask prices for the Company's shares.
Forward-looking Statements
Certain statements contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations, and elsewhere in this Annual
Report on Form 10-K, are forward-looking statements. The Company has based these
forward-looking statements on its current expectations about future events.
These forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
intentions, financial condition, results of operations, future performance and
business, and include the following:
. statements relating to the Company's business strategy;
. the Company's current and future plans; and
. statements that include the words "may," "could," "should," "would,"
"believe," "expect," "anticipate," "estimate," "intend," "plan" or
similar expressions.
These forward-looking statements are subject to risks, uncertainties,
and assumptions about the Company and its operations that are subject to change
based on various important factors, some of which are beyond the Company's
control. The following factors, among others, could cause the Company's
financial performance to differ materially from the goals, plans, objectives,
intentions and expectations expressed in its forward-looking statements:
. fluctuations in demand for the Company's services;
. competition;
. the Company's dependence on key personnel;
. government funding of social research projects;
. leverage and debt service (including sensitivity to fluctuations in
interest rates);
. domestic and global economic, credit and capital market conditions;
. foreign exchange fluctuations;
. changes in federal or state tax laws or the administration of these
laws;
. regulatory or judicial proceedings; and
. certain other risks described in this Annual Report on Form 10-K,
including the risks presented under the heading "Risk Factors."
-24-
If one or more of the assumptions underlying these forward-looking
statements proves incorrect, the Company's actual results, performance or
achievements in future periods could differ materially from those expressed in,
or implied by, the forward-looking statements contained in this Annual Report on
Form 10-K. Therefore, the Company cautions the readers not to place undue
reliance on its forward-looking statements.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether written or oral, whether as a result of new
information, changed assumptions, the occurrence of unanticipated events,
changes in future operating results over time or otherwise. All forward-looking
statements attributable to the Company are expressly qualified by these
cautionary statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risks relating to the Company's operations result primarily
from changes in interest rates and changes in foreign exchange rates. The
Company monitors its interest rate and foreign exchange rate exposures on an
ongoing basis. Historically, the Company has entered into interest rate hedging
contracts and will continue to evaluate their appropriateness. As of December
31, 2002, the Company was not a party to any interest rate hedging contracts.
It has not been the Company's practice to enter into foreign exchange
contracts, but such contracts may be used in the future if the Company deems
them to be an appropriate resource to manage the Company's exposure to movements
in foreign currency exchange rates. The Company does not consider its current
foreign exchange exposure, which is primarily related to changes between the
U.S. dollar and the U.K. pound, to be material. Although the impact of changes
in foreign exchange rates may be significant on the Company's revenues, cost of
revenues and operating expenses when considered individually, the net impact on
the Company's results of operations has not been significant.
The following table provides information about the financial
instruments of the Company that are sensitive to changes in interest rates. For
debt obligations, the table presents principal cash flows and related weighted
average interest rates as of February 26, 2003 by expected maturity dates.
- ----------------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
There- Fair Value
2003 2004 2005 2006 2007 After Total 12/31/02
- ----------------------------------------------------------------------------------------------------------------------
Liabilities
Long-term debt including current
portion:
Variable rate debt $6,000 $26,515 - - - - $32,515 $32,515
Average interest rate -
LIBOR+3.75%
Fixed rate debt - 12.5% $3,750 $7,500 $3,750 - $15,000 $13,346
- ----------------------------------------------------------------------------------------------------------------------
Item 8. Financial Statements and Supplementary Data
The Company's financial statements, together with the report of the
Company's independent auditors, are set forth beginning at page F-1 at the end
of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
-26-
PART III
Item 10. Directors and Executive Officers of the Registrant
Except as set forth under the caption "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K, this information will
be contained in the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders for 2003 ("2003 Proxy Statement"), to
be filed with SEC within 120 days following the end of the Company's fiscal year
ended December 31, 2002, and is hereby incorporated by reference thereto.
Item 11. Executive Compensation
This information will be contained in the Company's 2003 Proxy
Statement, to be filed with SEC within 120 days following the end of the
Company's fiscal year ended December 31, 2002, and is hereby incorporated by
reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 403 of Regulation S-K will be
contained in the Company's 2003 Proxy Statement, to be filed with SEC within 120
days following the end of the Company's fiscal year ended December 31, 2002, and
is hereby incorporated by reference thereto.
The following table provides information as of December 31, 2002 with
respect to compensation plans (including individual compensation arrangements)
under which the Company's equity securities are authorized for issuance.
Equity Compensation Plan Information
- ---------------------------------------------------------------------------------------------------------------------
Number of securities
Number of securities remaining available for
to be issued upon future issuance under
exercise of Weighted-average equity compensation plans
outstanding options, exercise price of (excluding securities
Plan Category warrants and rights outstanding options reflected in column (a))(1)
- ------------------------------- ---------------------- ----------------------- -----------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders
899,972 $6.51 967,217
Equity compensation plans not
approved by security holders
(2) 465,000 $5.93 -
(1) Amount includes shares reserved for issuance under 1997 Stock Incentive
Plan, Opinion Research Corporation Employee Stock Purchase Plan, Opinion
Research Corporation Stock Purchase Plan for Non-employee Directors and
Designated Employees and Consultants, and the ORC Holdings, Ltd. Employee
Share Ownership Plan. See Note 12 and Note 13 to Consolidated Financial
Statements for additional information.
(2) Amount includes 200,000 non-plan options granted to two senior executives
and 265,000 warrants issued to various investment advisors as a form of
compensation.
Item 13. Certain Relationships and Related Transactions
-27-
This information will be contained in the Company's 2003 Proxy
Statement, to be filed with SEC within 120 days following the end of the
Company's fiscal year ended December 31, 2002, and is hereby incorporated by
reference thereto.
Item 14. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in SEC's
rules and forms. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the foregoing evaluation.
-28-
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page Reference
-------------------- --------------
Report of Independent Auditors F-1
Consolidated Balance Sheets as of December 31, F-2
2002 and 2001
Consolidated Statements of Operations for F-3
the years ended December 31, 2002, 2001,
and 2000
Consolidated Statements of Stockholders' Equity F-4
for the years ended December 31, 2002, 2001, and 2000
Consolidated Statements of Cash Flows for F-5
the years ended December 31, 2002, 2001, and 2000
Notes to Consolidated Financial Statements F-6
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable or the required information
is given in the Financial Statements or Notes thereto, and therefore have been
omitted.
(b) Reports on Form 8-K
None.
-29-
(c) Exhibits
Exhibit No.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant - Incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1 (No. 33-68428)
filed with the Securities and Exchange Commission on September
3, 1993 (the "Form S-1").
3.2 Amended and Restated By-Laws of the Registrant - Incorporated by
reference to Exhibit 3.2 to the Form S-1.
4.1 Rights Agreement, dated September 13, 1996, between the
Registrant and StockTrans, Inc. - Incorporated by reference to
Exhibit 1 to the Registrant's Registration Statement on Form
8-A, filed with the Securities and Exchange Commission on
September 27, 1996.
4.2 Amendment to Rights Agreement dated August 8, 1998 -
Incorporated by reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998
(the "1998 10-K").
4.3 Amendment No. 2 to Rights Agreement dated September 1, 2001 -
Incorporated by reference to Exhibit 10.11 to the Registrant's
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 15, 2000 (the "2000 8-K").
4.4 Opinion Research Corporation Designation of Series B Preferred
Stock - Incorporated by reference to Exhibit 4.1 to the 2000
8-K.
4.5 Opinion Research Corporation Designation of Series C Preferred
Stock - Incorporated by reference to Exhibit 4.2 to the 2000
8-K.
*10.1 Employment Agreement between the Registrant and John F. Short -
Incorporated by reference to Exhibit 10.12 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 (the "1999 10-Q").
*10.2 Employment Agreement between the Registrant and Douglas L. Cox
dated January 23, 2002 - Incorporated by reference to Exhibit
10.2 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2001 (the "2001 10-K").
*10.3 Employment Agreement between the Registrant and Frank J. Quirk
dated January 25, 2002 - Incorporated by reference to Exhibit
10.2 to the 2001 10-K.
-30-
*10.4 Employment Agreement between the Registrant and James C. Fink
dated January 28, 2002.
*10.5 Employment Agreement between the Registrant and Kevin P. Croke
dated January 23, 2002.
*10.6 Employment Agreement between ORC International Ltd. and Nigel M.
Maxfield dated January 25, 2002.
*10.7 Employment Agreement among Opinion Research Corporation, ORC
ProTel Inc., and Ruth R. Wolf dated January 1, 1998 -
Incorporated by reference to Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1999
(the "1999 10-K").
*10.8 Employment Agreement between Macro International Inc. and
Michael T. Errecart dated May 20, 1999 - Incorporated by
reference to Exhibit 10.2 to the Registrant's Current Report on
Form 8-K filed with the Securities and Exchange Commission on
June 9, 1999.
*10.9 Employment Agreement among Opinion Research Corporation, ORC
Consumer, Inc. and Terence W. Cotter dated August 31, 2000 -
Incorporated by reference to Exhibit 10.1 to the 2000 8-K.
*10.10 Employment Agreement between Macro International Inc. and Lewis
D. Eigen dated October 31, 2001 - Incorporated by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000.
*10.11 1997 Stock Incentive Plan - Incorporated by reference to Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
*10.12 Amendment to the 1997 Stock Incentive Plan - Incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2001 (the "2001
10-Q").
*10.13 Opinion Research Corporation Employee Stock Purchase Plan -
Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-8, filed with the Securities
and Exchange Commission on September 8, 2000.
*10.14 Opinion Research Corporation Stock Purchase Plan for
Non-employee Directors and Designated Employees and Consultants
- Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-8, filed with the Securities
and Exchange Commission on September 25, 2000.
-31-
10.15 Lease Agreement dated May 24, 1993 between the Registrant and
Computer Associates International, Inc. (for Princeton facility)
- Incorporated by reference to Exhibit 10.16 to the Form S-1.
10.16 Lease dated August 27, 1993 between Carrollton Enterprises
Associates Limited Partnership and Macro International, Inc. -
Incorporated by reference to Exhibit 10.14 to the 1999 10-K.
10.17 Lease and Lease Addendum dated February 24, 1995 between North
Bethesda Associates Limited Partnership and Social & Health
Services, Ltd. - Incorporated by reference to Exhibit 10.15 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000 (the "2000 10-K").
10.18 First Amendment to Lease dated January 1, 1999 and Second
Amendment to Lease dated September 15, 1999, between Bethesda
Properties, L.L.C. and Social & Health Services, Ltd. -
Incorporated by reference to Exhibit 10.16 to the 2000 10-K.
10.19 Asset Purchase Agreement dated August 31, 2000 among the
Registrant, ORC Consumer Inc., C/J Research, Inc. and the
Stockholders of C/J Research, Inc. - Incorporated by reference
to Exhibit 2.1 to the 2000 8-K.
10.20 Stock Purchase Agreement dated October 31, 2000 among Macro
International Inc., Opinion Research Corporation, and Lewis D.
Eigen and Ramona E.F. Arnett - Incorporated by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000.
10.21 Consent and Ninth Amendment to Credit Agreement dated February
10, 2003 among Opinion Research Corporation, ORC Inc., and
Heller Financial, Inc.
10.22 Eighth Amendment to Credit Agreement dated September 29, 2002
among Opinion Research Corporation, ORC Inc., and Heller
Financial, Inc. - Incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002 ("2002 10-Q")
10.23 Seventh Amendment to Credit Agreement dated March 19, 2002 among
Opinion Research Corporation, ORC Inc., and Heller Financial,
Inc.
10.24 Sixth Amendment to Credit Agreement and Amendment to Security
Documents dated November 30, 2001 between Opinion Research
Corporation and ORC Inc., and Heller Financial, Inc.
-32-
10.25 Waiver and Fifth Amendment to Credit Agreement dated October 4,
2001 among Opinion Research Corporation, ORC Inc., and Heller
Financial, Inc. - Incorporated by reference to Exhibit 10.1 to
the 2001 10-Q.
10.26 Fourth Amendment to Credit Agreement dated October 1, 2001 among
Opinion Research Corporation, ORC Inc., and Heller Financial,
Inc.
10.27 Third Amendment to Credit Agreement dated December 18, 2000
between Opinion Research Corporation and ORC Inc., and Heller
Financial, Inc.
10.28 Credit Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated
by reference to Exhibit 10.1 to the 1999 10-Q.
10.29 Security Agreement dated May 26, 1999 among Opinion Research
Corporation, ORC Inc., and Heller Financial, Inc. - Incorporated
by reference to Exhibit 10.2 to the 1999 10-Q.
10.30 Fourth Amendment to Investment Agreement dated February 12, 2003
between Opinion Research Corporation and Allied Capital
Corporation and Allied Investment Corporation.
10.31 Third Amendment to Investment Agreement dated September 29, 2002
between Opinion Research Corporation and Allied Capital
Corporation and Allied Investment Corporation. - Incorporated by
reference to Exhibit 10.5 to the 1999 10-Q.
10.32 Second Amendment to Investment Agreement dated March 19, 2002
between Opinion Research Corporation and Allied Capital
Corporation and Allied Investment Corporation.
10.33 Investment Agreement dated May 26, 1999 among Opinion Research
Corporation, Allied Investment Corporation, and Allied Capital
Corporation. - Incorporated by reference to Exhibit 10.5 to the
1999 10-Q.
10.34 Allonge to Debenture for $9.5 million dated February 11, 2003
issued by Opinion Research Corporation to Allied Capital
Corporation.
10.35 Allonge to Debenture for $5.5 million dated February 11, 2003
issued by Opinion Research Corporation to Allied Investment
Corporation.
-33-
10.36 Subordinated Debenture for $9.5 million dated May 26, 1999
issued by Opinion Research Corporation to Allied Capital
Corporation - Incorporated by reference to Exhibit 10.7 to the
1999 10-Q.
10.37 Subordinated Debenture for $5.5 million dated May 26, 1999
issued by Opinion Research Corporation to Allied Investment
Corporation - Incorporated by reference to Exhibit 10.8 to the
1999 10-Q.
10.38 Registration Rights Agreement dated May 26, 1999 among Opinion
Research Corporation, Allied Capital Corporation and Allied
Investment Corporation - Incorporated by reference to Exhibit
10.9 to the 1999 10-Q.
10.39 Amendment No. 1 to Registration Rights Agreement dated September
1, 2000 among Opinion Research Corporation, Allied Capital
Corporation and Allied Investment Corporation - Incorporated by
reference to Exhibit 10.12 to the 2000 8-K.
10.40 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Capital Corporation dated May 26, 1999 - Incorporated by
reference to Exhibit 10.10 to the 1999 10-Q.
10.41 Common Stock Warrant Issued by Opinion Research Corporation to
Allied Investment Corporation dated May 26, 1999 - Incorporated
by reference to Exhibit 10.11 to the 1999 10-Q.
10.42 Purchase Agreement dated September 1, 2000 among Opinion
Research Corporation, LLR Equity Partners, L.P. and LLR Equity
Partners Parallel, L.P. - Incorporated by reference to Exhibit
10.5 to the 2000 8-K.
10.43 Registration Rights Agreement dated September 1, 2000 among
Opinion Research Corporation, LLR Equity Partners, L.P. and LLR
Equity Partners Parallel, L.P. - Incorporated by reference to
Exhibit 10.6 to the 2000 8-K.
10.44 Common Stock Warrant Issued by Opinion Research Corporation to
LLR Equity Partners, L.P. dated September 1, 2000 - Incorporated
by reference to Exhibit 10.7 to the 2000 8-K.
10.45 Common Stock Warrant Issued by Opinion Research Corporation to
LLR Equity Partners Parallel, L.P. dated September 1, 2000 -
Incorporated by reference to Exhibit 10.8 to the 2000 8-K.
10.46 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners, L.P. dated September 1, 2000
- Incorporated by reference to Exhibit 10.9 to the 2000 8-K.
-34-
10.47 Anti-Dilution Common Stock Warrant Issued by Opinion Research
Corporation to LLR Equity Partners Parallel, L.P. dated
September 1, 2000 - Incorporated by reference to Exhibit 10.10
to the 2000 8-K.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
- --------------------------------------------------------------------------------
* Constitutes a compensatory plan or arrangement required to be filed as an
exhibit to this report
-35-
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.
OPINION RESEARCH CORPORATION
By: /s/ John F. Short
------------------------------------
John F. Short, Chairman
Dated: March 21, 2003
------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 21, 2003 by the following persons on
behalf of the Registrant and in the capacities indicated.
/s/ John F. Short Chairman of the Board, Chief Executive Officer,
- -------------------------
John F. Short President and Director
(Principal Executive Officer)
/s/ Douglas L. Cox Executive Vice President and Chief Financial Officer
- -------------------------
Douglas L. Cox (Principal Financial and Accounting Officer)
/s/ Dale J. Florio Director
- -------------------------
Dale J. Florio
/s/ John J. Gavin Director
- -------------------------
John J. Gavin
/s/ Stephen A. Greyser Director
- -------------------------
Stephen A. Greyser
/s/ Seth J. Lehr Director
- -------------------------
Seth J. Lehr
/s/ Frank J. Quirk Executive Vice President and Director
- -------------------------
Frank J. Quirk
/s/ Lenard B. Tessler Director
- -------------------------
Lenard B. Tessler
-36-
CERTIFICATION
I, John F. Short, Chairman, CEO and President of Opinion Research Corporation,
certify that:
1. I have reviewed this annual report on Form 10-K of Opinion Research
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
-37-
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 21, 2003 Signed: /s/ John F. Short
-------------------- ----------------------------------
Name: John F. Short
Title: Chairman, CEO and President
-38-
CERTIFICATION
I, Douglas L. Cox, Executive Vice President and Chief Financial Officer of
Opinion Research Corporation, certify that:
1. I have reviewed this annual report on Form 10-K of Opinion Research
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
-39-
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 21, 2003 Signed: /s/ Douglas L. Cox
-------------------- ----------------------------------
Name: Douglas L. Cox
Title: Executive Vice President and
Chief Financial Officer
-40-
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Opinion Research Corporation (the
"Company") on Form 10-K for the fiscal year ending December 31, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, John F. Short, Chairman, CEO and President of the Company, certify, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: March 21, 2003 Signed: /s/ John F. Short
-------------------- ----------------------------------
Name: John F. Short
Title: Chairman, CEO and President
-41-
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Opinion Research Corporation (the
"Company") on Form 10-K for the fiscal year ending December 31, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Douglas L. Cox, Executive Vice President and Chief Financial Officer of the
Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: March 21, 2003 Signed: /s/ Douglas L. Cox
-------------------- ----------------------------------
Name: Douglas L. Cox
Title: Executive Vice President and
Chief Financial Officer
-42-
Report of Independent Auditors
The Board of Directors and Stockholders
Opinion Research Corporation
We have audited the accompanying consolidated balance sheets of Opinion Research
Corporation and Subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2002. Our audits also
included the financial statement schedule listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Opinion
Research Corporation and Subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Notes 1 and 3 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, effective January 1, 2002.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 11, 2003
F-1
OPINION RESEARCH CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
December 31,
----------------------------------
2002 2001
---------------- ---------------
Assets
Current Assets:
Cash and cash equivalents $ 2,549 $ 2,355
Accounts receivable:
Billed 21,936 24,729
Unbilled services 13,480 13,255
---------------- ---------------
35,416 37,984
Less: allowance for doubtful accounts 348 284
---------------- ---------------
35,068 37,700
Prepaid and other current assets 3,151 2,575
---------------- ---------------
Total current assets 40,768 42,630
Property and equipment, net 8,549 9,777
Intangibles, net 1,230 3,532
Goodwill 48,577 53,144
Other assets 3,312 3,833
---------------- ---------------
$ 102,436 $ 112,916
================ ===============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 5,501 $ 4,232
Accrued expenses 11,490 9,897
Deferred revenues 2,090 4,397
Short-term borrowings 6,000 4,500
Other current liabilities 954 1,751
---------------- ---------------
Total current liabilities 26,035 24,777
Long-term debt 40,866 50,913
Other liabilities 720 893
Redeemable Equity:
Preferred stock:
Series B - 10 shares designated, issued and outstanding,
aggregate liquidation value of $100 - -
Series C - 588,229 shares designated, none issued or outstanding - -
Common stock, 1,176,458 shares issued and outstanding 8,900 8,900
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized:
Series A - 10,000 shares designated, none issued or outstanding - -
Common stock, $.01 par value, 20,000,0