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United States
Securities and Exchange Commission Washington, D.C. 20549
 FORM 10-Q þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended March 31, 2005 o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Period from: ____________ to ____________ Commission file number
0-22554 OPINION RESEARCH CORPORATION 
  Delaware
    
    22-3118960(State of incorporation)
    
    (I.R.S. Employer Identification No.)600 College Road East, Suite #4100
Princeton, NJ
    
    08540(Address of principal executive offices)
    
    (Zip Code)
 609-452-5400 
  Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes þ No o Indicate by check mark whether the Registrant is an accelerated filer (as defined in
Exchange Act Rule 12b-2). Yes o No þ Indicate the number of shares outstanding of each of the issuers classes of common stock,
as of the latest practical date. Common Stock, $0.01 Par Value  6,436,388 shares as of May 2, 2005.




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INDEX Opinion Research Corporation and Subsidiaries Part I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated balance sheets  December 31, 2004 and March 31, 2005Consolidated statements of operations  Three months ended
March 31, 2004 and 2005Consolidated statements of cash flows  Three months ended March 31,
2004 and 2005Notes to consolidated financial statements  March 31, 2005Item 2. Managements Discussion and Analysis of Financial Condition and
Results of OperationsItem 3. Quantitative and Qualitative Disclosure About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignatureCERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERCERTIFICATION OF PRINCIPAL FINANCIAL OFFICERCERTIFICATION OF CEO PURSUANT TO SECTION 906CERTIFICATION OF CFO PURSUANT TO SECTION 906




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PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
  (in thousands, except share amounts)
 
 December 31,
    
    
    March 31,2004
    
    
    2005(Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    467
    
    
    $
    921Accounts receivable:Billed
    
    
    26,001
    
    
    
    25,065Unbilled services
    
    
    17,986
    
    
    
    18,82843,987
    
    
    
    43,893Less: allowance for doubtful accounts
    
    
    93
    
    
    
    6543,894
    
    
    
    43,828Prepaid and other current assets
    
    
    3,672
    
    
    
    4,550Total current assets
    
    
    48,033
    
    
    
    49,299Property and equipment, net
    
    
    10,105
    
    
    
    10,158Intangibles, net
    
    
    421
    
    
    
    361Goodwill
    
    
    32,748
    
    
    
    32,702Deferred income taxes
    
    
    3,248
    
    
    
    3,264Other assets
    
    
    3,128
    
    
    
    3,070$
    97,683
    
    
    $
    98,854Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    6,254
    
    
    $
    6,201Accrued expenses
    
    
    9,191
    
    
    
    9,215Deferred revenues
    
    
    4,344
    
    
    
    4,788Short-term borrowings
    
    
    2,000
    
    
    
    3,000Other current liabilities
    
    
    2,823
    
    
    
    4,090Total current liabilities
    
    
    24,612
    
    
    
    27,294Long-term debt
    
    
    40,286
    
    
    
    38,593Other liabilities
    
    
    1,542
    
    
    
    1,545Redeemable Equity:Preferred stock:Series B - 10 shares designated, issued and outstanding,
liquidation value of $10 per share
    
    
    
    
    
    
    Series C - 588,229 shares designated, none issued or outstanding
    
    
    
    
    
    
    Common stock, 1,176,458 shares issued and outstanding
    
    
    8,900
    
    
    
    8,900Stockholders 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, 20,000,000 shares authorized,
5,245,815 shares issued and 5,196,993 outstanding in 2004,
and 5,281,710 shares issued and 5,232,888 outstanding in 2005
    
    
    52
    
    
    
    53Additional paid-in capital
    
    
    21,426
    
    
    
    21,595Retained earnings
    
    
    422
    
    
    
    580Treasury stock, at cost, 48,822 shares in 2004 and 2005
    
    
    (261
    )
    
    
    (261
    )Accumulated other comprehensive income
    
    
    704
    
    
    
    555Total stockholders equity
    
    
    22,343
    
    
    
    22,522$
    97,683
    
    
    $
    98,854
 
 See notes to financial statements




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Statements of Operations (in thousands, except
share and per share amounts)
 
 Three Months EndedMarch 31,2004
    
    
    2005Revenues
    
    $
    47,961
    
    
    $
    48,938Cost of revenues
    
    
    33,718
    
    
    
    34,841Gross profit
    
    
    14,243
    
    
    
    14,097Selling, general and
administrative expenses
    
    
    9,898
    
    
    
    10,645Depreciation and amortization
    
    
    942
    
    
    
    969Operating income
    
    
    3,403
    
    
    
    2,483Interest expense
    
    
    1,607
    
    
    
    2,279Other non-operating (income)
expense, net
    
    
    (8
    )
    
    
    (56
    )Income before
provision for income
taxes
    
    
    1,804
    
    
    
    260Provision for income taxes
    
    
    866
    
    
    
    118Net income
    
    $
    938
    
    
    $
    142Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.02Diluted
    
    $
    0.15
    
    
    $
    0.02Weighted average common shares
outstanding:Basic
    
    
    6,148,927
    
    
    
    6,404,723Diluted
    
    
    6,334,952
    
    
    
    6,605,578
 See notes to financial statements




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows (in thousands)
 
 Three Months EndedMarch 31,2004
    
    
    2005Cash flows from operating activities:Net income
    
    $
    938
    
    
    $
    142Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    942
    
    
    
    969Non-cash interest expense
    
    
    455
    
    
    
    931Loss on disposal of fixed assets
    
    
    
    
    
    
    1Change in:Accounts receivable
    
    
    (1,514
    )
    
    
    (11
    )Other assets
    
    
    (687
    )
    
    
    (1,225
    )Accounts payable and accrued expenses
    
    
    (756
    )
    
    
    (18
    )Deferred revenues
    
    
    927
    
    
    
    469Other liabilities
    
    
    (151
    )
    
    
    1,341Net cash provided by operating activities
    
    
    154
    
    
    
    2,599Cash flows from investing activities:Capital expenditures
    
    
    (300
    )
    
    
    (997
    )Net cash used in investing activities
    
    
    (300
    )
    
    
    (997
    )Cash flows from financing activities:Borrowings under line-of-credit agreements
    
    
    6,158
    
    
    
    43,080Repayments under line-of-credit agreements
    
    
    (7,117
    )
    
    
    (38,758
    )Proceeds from issuance of notes payable
    
    
    
    
    
    
    15,000Repayments of notes payable
    
    
    (750
    )
    
    
    (20,577
    )Payments of loan origination and amendment fees
    
    
    (75
    )
    
    
    Repayments under capital lease arrangements
    
    
    (24
    )
    
    
    (60
    )Proceeds from the issuance of capital stock and exercise
of options
    
    
    184
    
    
    
    170Net cash used in financing activities
    
    
    (1,624
    )
    
    
    (1,145
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    66
    
    
    
    (3
    )(Decrease) increase in cash and cash equivalents
    
    
    (1,704
    )
    
    
    454Cash and cash equivalents at beginning of period
    
    
    2,766
    
    
    
    467Cash and cash equivalents at end of period
    
    $
    1,062
    
    
    $
    921Non-cash investing and financing activities:Acquisition of equipment under capital lease
    
    $
    52
    
    
    $
    
 See notes to financial statements




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
  
 NOTE A  BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the full year. For further information, reference should be made
to the consolidated financial statements and footnotes contained in our Annual Report on Form 10-K
for the year ended December 31, 2004. For purposes of this report, Opinion Research, the
Company, we, our, us or similar references means Opinion Research Corporation and its
consolidated subsidiaries unless the context requires otherwise. In the statement of cash flows for the period ended March 31, 2004, certain amounts in
unbilled services have been reclassified to deferred revenues in the net cash provided by operating
activities section to conform with the current years presentation. NOTE B  CREDIT FACILITIES In May 2004, we entered into a secured revolving credit facility of $35.0 million with
Citizens Bank of Pennsylvania and First Horizon Bank (the Senior Revolving Facility). The
Senior Revolving Facility is for a three-year term and is secured by substantially all of our
assets. The Senior Revolving Facility carries an interest rate at our discretion of either banks
designated base rate (5.75% at March 31, 2005) plus 100 basis points or LIBOR (3-month LIBOR was
3.12% at March 31, 2005) plus 300 basis points. As of March 31, 2005, there was approximately $8.4
million of additional credit available under the Senior Revolving Facility. In May 2004, we also issued $10.0 million of secured subordinated notes (the Secured
Subordinated Notes) and $12.0 million of unsecured subordinated notes (the Unsecured Subordinated
Notes) to Allied Capital Corporation. The Secured Subordinated Notes carried an interest rate of
10% and were to mature in November 2007. The Secured Subordinated Notes required principal
payments of $500,000 per quarter commencing July 1, 2004, with an unamortized balance of $3.0
million due at the end of the term. The Unsecured Subordinated Notes were to mature in May 2009
and carried a fixed interest rate of 15.5%; 13% payable quarterly in cash, and 2.5% payable in cash
or deferred and included in the outstanding principal balance until maturity. In exchange for
consideration received in connection with this debt, we extended the term of existing warrants held
by Allied Capital Corporation and Allied Investment Corporation (together, Allied) from May 2007
to the later of May 2009 or the third




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anniversary of the repayment date. These warrants were issued in 1999 to Allied and are for
the purchase of 437,029 shares of our common stock at an exercise price of $5.422 per share. The
extension of these warrants was valued at $616,000 and was accreted through interest expense over
the life of the Unsecured Subordinated Notes. We are required to maintain certain financial covenants under our credit facilities, such as
minimum earnings, debt-to-earnings, interest coverage, and other financial ratios. For the
measuring period ended March 31, 2005, we were in compliance with all of the financial covenants.
In addition, covenants under our credit facilities limit or prohibit our ability to incur
additional debt, prepay specified types of indebtedness, pay dividends, make investments, sell
assets, or engage in mergers and acquisitions. All debt outstanding as of May 4, 2004 was repaid with proceeds from the above borrowings. In
conjunction with the new credit facilities, we incurred additional costs of approximately $1.4
million which are included in other long term assets in our consolidated financial statements and
are being amortized over the remaining terms of the facilities. Due to the refinancing of the
credit facilities, we also wrote off the unamortized loan fees of approximately $2.5 million as
interest expense, which included payments of $345,000 made in 2004, related to the retired debt in
the second quarter of 2004. In March 2005, we entered into a new secured term loan of $15.0 million with Citizens Bank of
Pennsylvania and First Horizon Bank (the Term Loan). The Term Loan is for a five year term and is
secured by substantially all of our assets. The Term Loan carries an interest rate of LIBOR plus
350 basis points, requires principal payments of $750,000 per quarter and matures in 2010. The
proceeds from the Term Loan and a drawdown from the Senior Revolving Facility were used to prepay
the Secured Subordinated Notes and the Unsecured Subordinated Notes in the combined amount of $20.5
million. We wrote-off unamortized fees in the amount of $813,000 and incurred prepayment penalties
in the amount of $362,000 in connection with this transaction in the first quarter of 2005.




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NOTE C  EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three MonthsEnded March 31,($ thousands, except per share amounts)
    
    2004
    
    
    2005Numerator:Net income
    
    $
    938
    
    
    $
    142Numerator for basic and diluted earnings
per share
    
    $
    938
    
    
    $
    142Denominator:Denominator for basic earnings per shareWeighted-average shares
    
    
    6,149
    
    
    
    6,405Effect of dilutive stock options
    
    
    186
    
    
    
    201Denominator for diluted earnings per shareAdjusted weighted-average shares
    
    
    6,335
    
    
    
    6,606Net income per common share:Basic
    
    $
    0.15
    
    
    $
    0.02Diluted
    
    $
    0.15
    
    
    $
    0.02
 At March 31, 2004, there were 544,978 options and 740,500 warrants outstanding to purchase our
common shares that were not included in the computation of diluted earnings per share because their
exercise price was greater than the average market price of our common shares. At March 31, 2005, there were 266,900 options and 740,500 warrants outstanding to purchase our
common shares that were not included in the computation of diluted earnings per share because their
exercise price was greater than the average market price of our common shares. NOTE D  STOCK-BASED COMPENSATION Employee stock option plans are accounted for in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees(APB 25) and related interpretations.
We have adopted the disclosure-only provisions of Statement 123, Stock-Based Compensationand
Statement 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which was
released in December 2002 as an amendment of Statement 123. In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R),
Share-Based Payment(Statement No. 123(R)). Statement No. 123(R) requires that the costs of
employee share-based payments be measured at fair value on the awards grant date using an
option-pricing model and recognized in the financial statements over the requisite service period.
Statement No. 123(R) does not change the accounting for stock ownership plans, which is subject to
American Institute of Certified Public Accountants SOP 93-6, Employers Accounting for Employee
Stock Ownership Plans. Statement No. 123(R) supersedes APB 25, Accounting for Stock Issued to
Employeesand its related interpretations,




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and eliminates the alternative to use APB 25s intrinsic value method of accounting, which we
currently use. Statement No. 123(R) allows for two alternative transition methods. The first method is the
modified prospective application whereby compensation cost for the portion of awards for which the
requisite service has not yet been rendered that are outstanding as of the adoption date will be
recognized over the remaining service period. The compensation cost for that portion of awards will
be based on the grant-date fair value of those awards as calculated for pro forma disclosures under
Statement No. 123, as originally issued. All new awards and awards that are modified, repurchased,
or cancelled after the adoption date will be accounted for under the provisions of Statement No.
123(R). The second method is the modified retrospective application, which requires that we restate
prior period financial statements. The modified retrospective application may be applied either to
all prior periods or only to prior interim periods in the year of adoption of Statement No. 123(R).
We are currently determining which transition method we will adopt and are evaluating the impact
Statement No. 123(R) will have on our financial position, results of operations, earnings per share
and cash flows when Statement No. 123(R) is adopted. On April 14, 2005, the SEC issued Release
2005-57 which allows companies to implement Statement No. 123(R) at the beginning of their next
fiscal year, instead of the next reporting period that begins after June 15, 2005 as disclosed in
the original Statement No. 123(R) release in December 2004. The following table illustrates the effect on net income and earnings per share if the fair
value based method had been applied to all stock option awards: Three MonthsEnded March 31,($ thousands, except per share amounts)
    
    2004
    
    
    2005Net income  as reported
    
    $
    938
    
    
    $
    142Add: stock-based employee compensation
expense included in reported net income
net of related tax effects
    
    
    
    
    
    
    Deduct: total stock-based employee
compensation expense determined under
fair value method for all awards, net of
related tax effects
    
    
    (64
    )
    
    
    (64
    )Net income  pro forma
    
    $
    874
    
    
    $
    78Basic earnings per share  as reported
    
    $
    0.15
    
    
    $
    0.02Basic earnings per share  pro forma
    
    $
    0.14
    
    
    $
    0.01Diluted earnings per share  as reported
    
    $
    0.15
    
    
    $
    0.02Diluted earnings per share  pro forma
    
    $
    0.14
    
    
    $
    0.01
 The fair value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:




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2004
    
    
    2005Expected dividend
yield
    
    
    0
    %
    
    
    0
    %Expected stock price
volatility
    
    
    53.0
    %
    
    
    45.1
    %Risk-free interest
rate
    
    
    3.61
    %
    
    
    4.00
    %Expected life of
options
    
    7  years
    
    7  years
 The number of options granted during the three months ended March 31, 2004 and 2005 were
222,500 and 50,000, respectively. The weighted average fair value of options granted during the
three months ended March 31, 2004 and 2005 was $3.59 and $3.44 per share, respectively. NOTE E  GOODWILL AND OTHER INTANGIBLE ASSETS The changes in the carrying value of goodwill as of March 31, 2005 are as follows: ($ thousands)U.S.Market
    
    
    U.K. Market
    
    
    
    
    
    
    SocialResearch
    
    
    Research
    
    
    Teleservices
    
    
    Research
    
    
    Other
    
    
    ConsolidatedBalance at January 1, 2005
    
    $
    2,390
    
    
    $
    3,047
    
    
    $
    5,530
    
    
    $
    21,781
    
    
    $
    
    
    
    $
    32,748Foreign currency translation
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )Balance at March 31, 2005
    
    $
    2,390
    
    
    $
    3,001
    
    
    $
    5,530
    
    
    $
    21,781
    
    
    $
    
    
    
    $
    32,702
 The components of intangible assets are as follows: ($ thousands)December 31,
    
    
    March 31,2004
    
    
    2005Intangible assets subject to amortization:Customer lists
    
    $
    3,800
    
    
    $
    3,791Non-competition agreements
    
    
    1,627
    
    
    
    1,619Backlog
    
    
    1,350
    
    
    
    1,350Other
    
    
    555
    
    
    
    5487,332
    
    
    
    7,308Accumulated amortization
    
    
    (6,911
    )
    
    
    (6,947
    )$
    421
    
    
    $
    361
 Amortization of intangible assets for the three months ended March 31, 2004 and 2005 was
$124,000 and $55,000, respectively. The estimated aggregate amortization expense for the remainder
of 2005 and each of the five succeeding years is as follows: ($ thousands)2005
    
    $
    1172006
    
    
    192007
    
    
    192008
    
    
    192009
    
    
    19




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NOTE F  COMPREHENSIVE INCOME The components of comprehensive income (loss) for the three months ended March 31, 2004 and
2005, were: Three MonthsEnded March 31,2004
    
    
    2005( $ thousands)Net income
    
    $
    938
    
    
    $
    142Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    248
    
    
    
    (149
    )Comprehensive income (loss)
    
    $
    1,186
    
    
    $
    (7
    )
 NOTE G  SEGMENTS We identify segments based on our internal reporting to management and our board of directors
which reflects our geographic locations and industries in which we operate. We currently have four
reportable segments: U.S. market research, U.K. market research, teleservices, and social research.
We measure segment profits as operating profit, which is defined as income before interest and
other non-operating expenses and income taxes. The U.S. market research segment includes
unallocated corporate headquarters expense. Information on segments and a reconciliation to the
consolidated total, are as follows: U.S.
    
    
    U.K.Market
    
    
    Market
    
    
    
    
    
    
    Social
    
    
    Total($ thousands)
    
    Research
    
    
    Research
    
    
    Teleservices
    
    
    Research
    
    
    Segments
    
    
    Other
    
    
    ConsolidatedThree months ended March 31, 2004:Revenues from external
customers
    
    $
    6,315
    
    
    $
    5,920
    
    
    $
    3,608
    
    
    $
    30,933
    
    
    $
    46,776
    
    
    $
    1,185
    
    
    $
    47,961Operating income (loss)
    
    
    (516
    )
    
    
    213
    
    
    
    390
    
    
    
    3,339
    
    
    
    3,426
    
    
    
    (23
    )
    
    
    3,403Interest and other non-operating expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,599Income before
provision for
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,804Three months ended March 31, 2005:Revenues from external
customers
    
    $
    6,504
    
    
    $
    5,437
    
    
    $
    2,079
    
    
    $
    33,858
    
    
    $
    47,878
    
    
    $
    1,060
    
    
    $
    48,938Operating income (loss)
    
    
    (566
    )
    
    
    (28
    )
    
    
    (393
    )
    
    
    3,641
    
    
    
    2,654
    
    
    
    (171
    )
    
    
    2,483Interest and other non-operating expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223Income before
provision for
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260




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NOTE H  STOCKHOLDERS DERIVATIVE LAWSUIT On December 2, 2004, several persons who purport to be stockholders of our company filed a
derivative complaint against us and our directors in the Chancery Court of the State of Delaware
regarding an offering of common stock. We proposed to use a portion of the
proceeds of a public offering of our common stock to repurchase
interests in our company held by LLR Equity Partners, L.P. and LLR
Equity Partners Parallel, L.P. (the LLR Partnerships), other
than limited registration rights and shares of our common stock with a value of $2.0 million, which
the LLR Partnerships shall retain. The interests of the LLR
Partnerships in us that we intend to repurchase are referred to
herein as the LLR Interests. The plaintiffs allege, among
other things, that the offering
is unfairly dilutive to their holdings of our common stock and that the purchase price we intend to
pay for the LLR Interests constitutes a waste of corporate assets. The complaint further alleges
that, in approving the offering and the repurchase of the LLR Interests, our directors did not act
on our behalf or on behalf of our stockholders but, rather, breached their fiduciary duties of good
faith and loyalty to us and our stockholders. Finally, the complaint alleges that Janney
Montgomery Scott LLC, an independent valuation firm, materially overvalued the LLR Interests in its
opinion to our board of directors that our repurchase of the LLR Interests is fair, from a
financial point of view, to our stockholders other than the LLR Partnerships. The plaintiffs seek
the following:  
    a declaration that our directors have violated their fiduciary duties;
    to enjoin the offering and the proposed repurchase of the LLR Interests or,
if these transactions are completed, to rescind the transactions, compel the payment
of unspecified damages or compel the issuance of new shares to plaintiffs to
compensate for their dilution;
    an accounting from the defendants, jointly and severally, to us, the
plaintiffs and our other stockholders for all monetary damages suffered by us by
reason of the alleged misconduct;




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
    the award of costs and disbursements of their actions, including reasonable
attorneys and experts fees; and
    such other and further relief as the court may determine is just and proper. We believe this suit is without merit and intend to vigorously defend against it. We have
moved to dismiss the plaintiffs complaint.




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS The following Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) includes forward-looking statements. In general, statements other than
statements of historical facts contained in this report, including statements regarding revenues,
selling, general and administrative expenses, profitability, financial position, business strategy,
and plans and objectives of management for future operations, are forward-looking statements. The
words believe, may, will, estimate, continue, anticipate, intend, expect and
similar expressions, as they relate to us, are intended to identify forward-looking statements. We
have based these forward-looking statements largely on our current expectations and projections
about future events and financial trends that we believe may affect our financial condition,
results of operations, business strategy and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including among other things:  
    fluctuations in demand for our services;
    competition;
    our 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;
    the outcome of the stockholders derivative litigation; and
    certain other risk factors under the heading Risk Factors described in our
Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 31, 2005. This list of risks is not exhaustive. We operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible for our
management to predict all risk factors, nor can we assess the impact of all factors on our
business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements. We caution you
not to place undue reliance on forward-looking statements, which speak only as of the date of
this report. We assume no obligation to update any forward-looking statements after the date
of this report as a result of new information, future events or developments, except as
required by federal securities laws. Overview We provide research services to governments and commercial clients in North America, Europe
and Asia. We collect customer, market, employee and demographic data by utilizing




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computer-assisted telephone interviews, internet-based data collection techniques, personal
interviews, mail questionnaires, and other means. After collecting the data, we analyze, develop
and present to our clients cohesive reports which provide insights regarding their programs,
operations, products, or services. Our services are designed to help our clients manage and
evaluate public policy programs and funding decisions, sell products, and improve their corporate
image and competitive position. Our government clients include some of the largest U.S federal
agencies including the Substance Abuse and Mental Health Services Administration, the United States
Agency for International Development, the Centers for Disease Control and Prevention, and the
National Institutes of Health. We have served some of these clients for over 20 years. Our
commercial clients include a diverse base of Fortune 500 corporations in the automotive, consumer
goods and services, financial services, health care, information technology, retail and trade, and
telecommunications industries. We have served the commercial research market since 1938. We also
provide telemarketing services for clients in the membership services, financial services,
information technology, and entertainment industries. We currently have four segments for financial reporting purposes:  
    social research;
    U.K. market research;
    U.S. market research; and
    teleservices. Our consolidated revenues increased in the first quarter of 2005 as compared to the first
quarter of 2004, reflecting a continuation of earlier trends: strong performance in our social
research segment, an improvement in our U.S. market research segment and poor market conditions in
our teleservices segment. Although revenues were down for U.K. market research, backlog was up in
the quarter. Our operating income declined, reflecting reduced revenues in the relatively high margin
teleservices segment and an increase in selling, general and administrative expenses, primarily in
the social research segment. The following are factors that affect our results from operations: Revenues: We generate our revenues from the hourly billings of professional labor, including
part-time labor, from call center services, and from charging our clients for the out-of-pocket
costs and subcontracted services incurred for projects. In our market research and social research
segments, revenues under fixed-price contracts are recognized on a proportional performance basis.
Revenues under time-and-materials contracts and cost-reimbursement contracts are recognized as
costs are incurred. For the teleservices segment we recognize revenues at the time the services are
performed. The level of our revenues is affected by government spending patterns, general economic
conditions, the competitiveness of our service offerings in the marketplace and general market
conditions that influence the demand for our specific services and pricing. Cost of revenues: All costs directly attributable to a project are included in cost of revenues.
These include the salary, benefits and incentive compensation expense for our professional




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staff and the hourly wages and benefits of our part-time staff engaged in project work. The cost
of our professional staff is relatively fixed over the short-term, and fluctuations in our gross
margin may occur due to changes in project margins, the mix of project work that we perform, the
level of part-time labor and other variable costs, and the utilization rates of our staff. In
addition we include project related telephone expense and out of pocket expenses, including travel,
and subcontracted services incurred for project work, in cost of revenues, and the level of these
expenditures will impact gross margin. Selling, general and administrative expenses: These include expenses that are not directly related
to project performance, including salaries, benefits and incentive compensation for executive
management and support services including marketing, information technology, finance and human
resources. Also included are external expenses including insurance, legal, marketing and audit,
office space and support service expenses, travel and training costs, directors fees and other
non-project related expenses. Interest expense: Our results in the first three months of 2005 were impacted by the non-cash
write-off of an original issue discount and unamortized loan fees of approximately $547,000 and
$266,000, respectively, and by prepayment penalties of approximately $362,000 incurred when we
refinanced our debt in March, 2005. Results of Operations The following table sets forth, for the periods indicated, selected operating data as a
percentage of revenue: Three MonthsEnded March 31,2004
    
    
    2005Revenue
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    29.7
    %
    
    
    28.8
    %Selling, general and administrative expenses
    
    
    20.6
    %
    
    
    21.8
    %Operating income
    
    
    7.1
    %
    
    
    5.1
    %Net income
    
    
    2.0
    %
    
    
    0.3
    %
 First Quarter 2004 Compared to First Quarter 2005 Consolidated revenues increased $977,000, or 2.0% from $48.0 million in the first quarter of
2004 to $48.9 million in first quarter of 2005. Revenues increased $2.9 million, or 9.5%, in our
social research business. Revenues decreased $1.5 million, or 42.4%, in the teleservices business
reflecting continued weakness in this market segment. Revenues increased $189,000 or 3.0%, in U.S.
market research, and decreased $483,000, or 8.2%, 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. Consolidated cost of revenues increased $1.1 million, or 3.3%, from $33.7 million in 2004 to
$34.8 million in 2005. Gross profit as a percentage of revenues declined from 29.7% in 2004 to
28.8% in 2005. This decline reflects the reduced contribution from the relatively high margin teleservices segment. In U.S. market research, cost of revenues increased 1.1% from $4.5 million in 2004
to $4.6 million in 2005 and the gross profit percentage increased from 28.3%




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in 2004 to 29.6% in 2005. For U.K. market research, cost of revenues decreased 9.0% from $3.7
million in 2004 to $3.4 million in 2005. Gross profit as a percentage of revenues increased from
37.3% in 2004 to 37.9% in 2005. For social research, cost of revenues increased 9.5% from $22.8
million in 2004 to $24.9 million in 2005 and the gross profit percentage remained constant at 26.3%
in 2004 and 2005. In the teleservices business, cost of revenues decreased 42.7% from $1.8 million
in 2004 to $1.0 million in 2005 and the gross profit percentage increased from 50.9% in 2004 to
51.1% in 2005. Selling, general and administrative (SG&A) expenses increased $747,000, or
7.6%, from $9.9 million in 2004 to $10.6 million in 2005. As a percent of revenues, consolidated
SG&A expenses increased from 20.6% in 2004 to 21.8% in 2005. For the social research business,
SG&A expenses increased from $4.4 million in 2004 to $4.9 million in 2005, and as a percentage of
revenue, increased from 14.1% in 2004 to 14.4% in 2005. Depreciation and amortization expense remained constant at approximately $1.0 million for both
2004 and 2005. Interest expense increased $672,000 or 41.8% from $1.6 million in the first quarter of 2004 to
$2.3 million in the first quarter of 2005 primarily due to the write-off of original issue discount
and loan fees totaling $813,000 and an incurred prepayment penalty of $362,000 associated with the
early pay-off of our old debt facilities in March, 2005, offset in part by lower overall debt
balances outstanding in 2005 as compared to 2004. Other non-operating (income) expense, net, increased $48,000 from $(8,000) in the first
quarter of 2004 to $(56,000) in the first quarter of 2005. The increase was mainly due to a
settlement awarded to our Korean operations. The provision for income taxes for the first quarter of 2004 and the first quarter of 2005 was
$866,000 and $118,000 respectively. The income tax provision in both periods is higher than
statutory rates due to the fact that we are not deriving tax benefits from non-U.S. and state
losses. As a result of the foregoing, net income decreased to $142,000 in the first quarter of 2005
from $938,000 in the first quarter of 2004 mainly due to the aforementioned write-off of original
issue discount, loan fees, and an incurred prepayment penalty associated with the early pay-off of
our old debt facilities totaling $1.2 million, or $776,000 net of tax benefits. Liquidity and Capital Resources Cash Flows At March 31, 2005, working capital was $22.0 million. Net cash provided by operating
activities for the first three months of 2005 was $2.6 million as compared to $154,000 for the same
period in 2004. For the first quarter of 2004, 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 $2.3 million and an increase of $927,000 in deferred revenues, offset by
increases in accounts receivable of $1.5 million and other assets of $687,000, and decreases in
accounts payable and accrued expenses of $756,000 and other liabilities of $151,000. For the first
quarter of 2005, the increase was mainly attributable to




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net income, after adjusting for depreciation and amortization, and other non-cash items,
totaling $2.0 million, an increase in deferred revenues and other liabilities of $1.8 million
offset by an increase in other assets of $1.2 million. Investing activities for the first three months of 2005 consisted of capital expenditures
totaling $997,000 as compared to $300,000 for the same period in 2004. The majority of the
spending on capital items was for the ongoing maintenance and replacement of technology. Financing activities for the first three months of 2004 included a net decrease in borrowings
totaling $1.7 million, offset in part by the proceeds from the sale of the our common stock under
our various stock purchase plans and the exercises of stock options totaling $184,000. Financing
activities for the first three months of 2005 included a net decrease in borrowings of $1.3
million, offset in part by the proceeds from the sale of our common stock under our various stock
purchase plans and the exercises of stock options totaling $170,000. Credit Facilities In May 2004, we entered into a new secured revolving credit facility of $35.0 million with
Citizens Bank of Pennsylvania and First Horizon Bank (the Senior Revolving Facility). The
Senior Revolving Facility is for a three-year term and is secured by substantially all of our
assets. The Senior Revolving Facility carries an interest rate at our discretion of either banks
designated base rate (5.75% at March 31, 2005) plus 100 basis points or LIBOR (3-month LIBOR was
3.12% at March 31, 2005) plus 300 basis points. As of March 31, 2005, there was approximately $8.4
million of additional credit available under the Senior Revolving Facility. In May 2004, we also issued $10.0 million of secured subordinated notes (the Secured
Subordinated Notes) and $12.0 million of unsecured subordinated notes (the Unsecured Subordinated
Notes) to Allied Capital Corporation. The Secured Subordinated Notes carried an interest rate of
10% and were to mature in November 2007. The Secured Subordinated Notes required principal
payments of $500,000 per quarter commencing July 1, 2004, with an unamortized balance of $3.0
million due at the end of the term. The Unsecured Subordinated Notes were to mature in May 2009
and carried a fixed interest rate of 15.5%; 13% payable quarterly in cash, and 2.5% payable in cash
or deferred and included in the outstanding principal balance until maturity. In exchange for
consideration received in connection with this debt, we extended the term of existing warrants held
by Allied Capital Corporation and Allied Investment Corporation (together, Allied) from May 2007
to the later of May 2009 or the third anniversary of the repayment date. These warrants were
issued in 1999 to Allied and are for the purchase of 437,029 shares of our common stock at an
exercise price of $5.422 per share. The extension of these warrants was valued at $616,000 and was
accreted through interest expense over the life of the Unsecured Subordinated Notes. We are required to maintain certain financial covenants under our credit facilities, such as
minimum earnings, debt-to-earnings, interest coverage, and other financial ratios. For the
measuring period ended March 31, 2005, we were in compliance with all of the financial covenants.
In addition, covenants under our credit facilities limit or prohibit our ability to incur
additional debt, prepay specified types of indebtedness, pay dividends, make investments, sell
assets, or engage in mergers and acquisitions.




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All debt outstanding as of May 4, 2004 was repaid with proceeds from the above borrowings. In
conjunction with the new credit facilities, we incurred additional costs of approximately $1.4
million which are included in other long term assets in our consolidated financial statements and
are amortized over the remaining terms of the facilities. Due to the refinancing of the credit
facilities, we also wrote off the unamortized loan fees of approximately $2.5 million as interest
expense, which included payments of $345,000 made in 2004, related to the retired debt in the
second quarter of 2004. In March 2005, we entered into a new secured term loan of $15.0 million with Citizens Bank of
Pennsylvania and First Horizon Bank (the Term Loan). The Term Loan is for a five year term and is
secured by substantially all of our assets. The Term Loan carries an interest rate of LIBOR plus
350 basis points, requires principal payments of $750,000 per quarter and matures in 2010. The
proceeds from the Term Loan and a drawdown from the Senior Revolving Facility were used to prepay
the Secured Subordinated Notes and the Unsecured Subordinated Notes in the combined amount of $20.5
million. We wrote-off unamortized fees in the amount of $813,000 and incurred prepayment penalties
in the amount of $362,000 in connection with this transaction in the first quarter of 2005. Capital Expenditures We currently have no material capital expenditure commitments, no acquisition related
commitments and no off-balance sheet financing arrangements. We believe that our current sources of liquidity and capital will be sufficient to fund our
long-term obligations and working capital needs until May 2007, at which time our Senior Revolving
Facility matures.




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Except for the completion of refinancing as disclosed in the Liquidity and Capital Resources
section, there have been no significant changes in market risk since December 31, 2004 that would
have a material effect on the Companys risk exposure as previously disclosed in the Companys
Annual Report on Form 10-K for the year ended December 31, 2004. It has not been our practice to enter into foreign exchange contracts, but we may use such
contracts in the future if we deem them to be an appropriate resource to manage our exposure to
movements in foreign currency exchange rates. We do not consider our 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 to our
revenues, cost of revenues and operating expenses when considered individually, the net impact on
our results of operations has not been significant. The following table provides information about the financial instruments 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 March 31, 2005 by expected maturity dates. ($ thousands)Interest Rate SensitivityPrincipal Amount by Expected Maturity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    There-
    
    
    
    
    
    
    Fair ValueAverage Interest Rate
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    After
    
    
    Total
    
    
    3/31/05LiabilitiesLong-term debt including
current portion:Variable rate debt:LIBOR + 3.0%, Prime + 1%
    
    
    
    
    
    
    
    
    
    $
    26,593
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,593
    
    
    $
    26,593LIBOR + 3.5%
    
    $
    2,250
    
    
    $
    3,000
    
    
    $
    3,000
    
    
    $
    3,000
    
    
    $
    3,000
    
    
    $
    750
    
    
    $
    15,000
    
    
    $
    15,000
 
 ITEM 4. CONTROLS AND PROCEDURES Our chief executive officer and chief financial officer, with the assistance of management,
evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended ( the Exchange Act)) as of
the end of the period covered by this report ( the Evaluation Date). Based on that evaluation,
our chief executive officer and chief financial officer concluded that, as of the Evaluation date,
our disclosure controls and procedures were effective to ensure that information required to be
disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported
within the time periods




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specified in the Securities and Exchange Commissions rules and forms, and that such information is
accumulated and communicated to management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required disclosures. There has not been any change in our internal control over financial reporting during our
quarter ended March 31, 2005 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. 
 PART II: OTHER INFORMATION 
 Item 1. Legal Proceedings On December 2, 2004, several persons who purport to be stockholders of our company filed a
derivative complaint against us and our directors in the Chancery Court of the State of Delaware
regarding an offering of common stock. We proposed to use a portion of the
proceeds of a public offering of our common stock to repurchase interests in our company held by LLR
Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. (the LLR Partnerships), other
than limited registration rights and shares of our common stock with a value of $2.0 million, which
the LLR Partnerships shall retain. The interests of the LLR Partnerships in us that are being
repurchased are referred to herein as the LLR Interests. The plaintiffs allege, among other
things, that the offering is unfairly dilutive to their holdings of our common stock and that the
purchase price we intend to pay for the LLR Interests constitutes a waste of corporate assets. The
complaint further alleges that, in approving the offering and the repurchase of the LLR Interests,
our directors did not act on our behalf or on behalf of our stockholders but, rather, breached
their fiduciary duties of good faith and loyalty to us and our stockholders. Finally, the
complaint alleges that Janney Montgomery Scott LLC, an independent valuation firm, materially
overvalued the LLR Interests in its opinion to our board of directors that our repurchase of the
LLR Interests is fair, from a financial point of view, to our stockholders other than the LLR
Partnerships. The plaintiffs seek the following:  
    a declaration that our directors have violated their fiduciary duties;
    to enjoin the offering and the proposed repurchase of the LLR Interests or,
if these transactions are completed, to rescind the transactions, compel the payment
of unspecified damages or compel the issuance of new shares to plaintiffs to
compensate for their dilution;
    an accounting from the defendants, jointly and severally, to us, the
plaintiffs and our other stockholders for all monetary damages suffered by us by
reason of the alleged misconduct;
    the award of costs and disbursements of their actions, including reasonable
attorneys and experts fees; and
    such other and further relief as the court may determine is just and proper. We believe this suit is without merit and intend to vigorously defend against it. We have
moved to dismiss the plaintiffs complaint.




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. 
 Item 3. Defaults upon Senior Securities None. 
 Item 4. Submission of Matters to a Vote of Security Holders None. 
 Item 5. Other Information None. 
 Item 6. Exhibits 10.1
    
    First Modification to Business Loan and Security Agreement and Other Loan Documents dated
March 15, 2005 by and among Opinion Research Corporation, Macro International Inc., ORC
Protel, LLC, Social and Health Services, Ltd., ORC Holdings, Ltd., O.R.C. International Ltd.
and Citizens Bank of Pennsylvania and First Horizon Bank  Incorporated by reference to
Exhibit 10.20 to the Registrants Annual Report on Form 10-K for the year ended December 31,
2004.10.2
    
    Purchase Agreement dated March 25, 2005 by and among Opinion Research Corporation, LLR Equity
Partners L.P. and LLR Equity Partners Parallel, L.P.  Incorporated by reference to Exhibit
10.37 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2004.10.3
    
    First Amendment to Purchase Agreement dated May 6, 2005 by and among Opinion Research
Corporation, LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P.  Incorporated
by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 6, 2005.31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.




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31.2
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-15(e) or 15d-15(e) of the
Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Opinion Research Corporation(Registrant)Date:
May 16, 2005
    
    /s/ Douglas L. CoxDouglas L. CoxExecutive Vice President and Chief Financial
Officer(Principal Financial and Accounting Officer)