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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
 Washington, D.C.
20549
 FORM 10-K (Mark One) þ
    
    ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2004oro
    

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 
  Delaware
    
    22-3118960(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 600 College Road East, Suite #4100Princeton, NJ
    
    08540(Address of principal executive offices)
    
    (Zip Code)
 609-452-5400   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  
  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
þ                    No o 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.þ Indicate by check mark whether the Registrant is an accelerated filer (as defined in 12b-2 of the
Act). Yes
o                    No
þ 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 30, 2004, the last business day of the Companys
second fiscal quarter, as quoted on the NASDAQ National Market, was approximately $36,500,000.* As of March 24, 2005, 6,409,346 shares of common stock, par value $.01 per share, were
outstanding.   *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.




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OPINION RESEARCH CORPORATION INDEX PART IItem 1.
    
    Business
    
    
    1Item 2.
    
    Properties
    
    
    10Item 3.
    
    Legal Proceedings
    
    
    11Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    12Item 6.
    
    Selected Financial Data
    
    
    13Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    39Item 9A.
    
    Controls and Procedures
    
    
    39Item 9B.
    
    Other Information
    
    
    39PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    40Item 11.
    
    Executive Compensation
    
    
    45Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    50Item 13.
    
    Certain Relationships and Related Party Transactions
    
    
    55Item 14.
    
    Principal Accountant Fees and Services
    
    
    56PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    57Signatures
    
    
    62Financial StatementsFIRST MODIFICATION TO BUSINESS LOAN AND SECURITY AGREEMENTPURCHASE AGREEMENTSUBSIDIARIES OF THE REGISTRANTCONSENT OF GRANT THORTON LLPCONSENT OF ERNST & YOUNG LLPCERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906




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Except where the context indicates otherwise, the terms we or the Company refers to
Opinion Research Corporation and its subsidiaries. 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 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
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 (SAMHSA), the
United States Agency for International Development (USAID), the Centers for Disease Control and
Prevention (CDC), and the National Institutes of Health (NIH). 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 were established in 1938 to apply the principles of general public opinion polling to
marketing issues facing Americas largest companies. We completed our initial public offering in
October 1993. Between 1993 and 1997, as part of our strategy to expand internationally, we
established our presence in the United Kingdom, Asia and Mexico through various acquisitions. In
January 1998, we acquired ProTel Marketing, Inc., or ORC ProTel, a telemarketing company based in
Lansing, Illinois. In May 1999, we acquired Macro International Inc., or ORC Macro, a research,
consulting and technology company based in the Washington, D.C. area. The acquisition of ORC Macro
substantially increased our presence in the public sector. In August 2000, we acquired C/J
Research, Inc., and in October 2000, we acquired Social and Health Services, Ltd (SHS). The two
acquisitions in 2000 allowed us to expand our service offerings into the areas of consumer research
and communications services and to further expand in the area of information management. We currently have four segments for financial reporting purposes:  
    social research;
    U.K. market research;
    U.S. market research; and
    teleservices. - 1 -




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For financial information regarding each of our reportable segments, see Notes to Consolidated
Financial Statements at Note 14, Segments. Social Research In the social research segment, we perform research and provide information technology
services, public health awareness services, and other research and consulting services, primarily
to agencies of the U.S. federal government and state and local governments. The majority of our
government projects are in the areas of health, education and international aid. Our work benefits
government policy decision makers and public healthcare professionals by providing them with the
information, research and analysis they need to measure the effectiveness of existing social
programs, assess the need for new programs, and provide constituents with useful information. Our reputation for providing quality services to our clients has allowed us to develop
long-term relationships with our government agency clients. We believe that our extensive
expertise with regard to social issues, such as substance abuse and HIV-AIDS awareness, enables us
to provide reliable customer, market and demographic information and advisory services to clients. U.K. Market Research Through our U.K. market research segment, we provide market research services and data
management services to our commercial clients in the U.K. and Europe and our government clients in
the U.K. We create and host websites, utilizing the internet to gather and analyze data and
disseminate survey information for our clients. Additionally, we provide other services to our
clients such as customer satisfaction surveys, employment satisfaction surveys and market
assessment surveys, and we have the ability to maintain research archives for our clients. U.S. Market Research In the U.S. market research segment, we assist commercial clients in the evaluation,
monitoring and optimization of their marketing and sales efforts, addressing issues such as
customer loyalty and retention, customer satisfaction, market demand, market assessment, corporate
image and competitive positioning. Teleservices In the teleservices segment, we provide services for large volume clients in a variety of
industries, including the membership services, financial services,
information technology, and
entertainment industries. Presently, we provide primarily outbound telemarketing services, where
we initiate a call and our objective is to sell a product or service. In addition, we have
upgraded our call stations to enable us to provide inbound telemarketing services where we accept
incoming calls on behalf of our clients for information gathering, sales or other purposes. We
have maintained relationships with several of our largest teleservices clients for many years. - 2 -




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Services A summary of our services is set forth in the table below. Type of Service
    
    Segment
    
    Brief DescriptionDemographic and
Health Research
    
    Social Research
    
    Provides information in
areas such as
population, health,
education, and nutrition
to assist government
organizations in their
efforts to monitor and
evaluate programs and to
make funding decisions.Customer Loyalty
and Retention
    
    U.S. and U.K. Market
Research/ Social
Research
    
    Captures and analyzes
the perceptions and
experiences of our
clients customers and
provides analysis and
feedback on customer
loyalty which we believe
will help generate
superior customer
retention and business
performance.Market
Assessment
    
    U.S. and U.K. Market
Research
    
    Used to analyze and
forecast market demand,
trends and competition
for new products and
services.Corporate
Reputation and
Branding
    
    U.S. and U.K. Market
Research
    
    Assists our clients in
managing their corporate
and brand images and
identifying and
achieving optimal
positioning in the
marketplace.Employee Survey Programs
    
    Social Research/ U.K.
Market Research
    
    Provides comprehensive
employee-related
research services to
measure employee
satisfaction and assist
our clients in their
efforts to increase
staff retention, reduce
hiring and training
costs, and improve
customer service.Information Technologies
    
    Social Research/ U.S.
and U.K. Market Research
    
    Includes a variety of
technology-based
services such as
computer security
products, advanced
internet services
including a number of
proprietary internet
applications, database
development and
management, and
information retrieval.Advanced
Analytics and
Data Modeling
    
    Social Research/U.S.
and U.K. Market
Research
    
    Allows us to focus on
our clients business
issues and the
application of
appropriate analytical
tools.Communications
and Marketing Services
    
    Social Research
    
    Provides communication
and marketing campaign
development, brochure
design and production,
radio and television
advertising, website
development, video
development and
broadcasting, and
warehousing and
distribution services.Shared-Cost Programs
    
    U.S. Market Research
    
    Includes 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.
 - 3 -




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Type of Service
    
    Segment
    
    Brief DescriptionData Collection
and Processing
    
    Social Research/U.S.
and U.K. Market
Research
    
    Combines research
expertise and advanced
telecommunications
technology using
facilities staffed with
multilingual
interviewers who use a
common Computer Assisted
Telephone Interviewing
(CATI) system and
internet based data
collection techniques.Management Consulting
    
    Social Research
    
    Assists our clients in
their efforts to improve
organizational
effectiveness, develop
management of leadership
programs and address
opportunities and
problem areas.Training and
Educational
Technologies
    
    Social Research
    
    Offers training services
to help organizations
adapt to and capitalize
on changing
circumstances.Outbound and
Inbound Contact
Centers
    
    Teleservices
    
    Provides primarily
outbound telemarketing
services to solicit
individuals to purchase
our clients products or
services. Able to
accept inbound telephone
orders or collect
information for our
clients future
marketing purposes.
 Clients and Client Relationships Our largest clients in terms of revenues generated include prominent multinational
corporations and agencies of the U.S. and U.K. governments. At times, we perform multiple projects
for different subsidiaries or business units of the same client. In general, our clients have the
right to terminate our engagements at any time, with the expectation of cost recovery for work
completed by us. We may perform services for our commercial clients pursuant to verbal
understandings, project terms that are outlined in writing, purchase orders, or detailed written
contracts. Most commercial projects are completed within a few months, but we may complete some
projects in just several days or in as long as several years. Our arrangements with government
clients are in the form of detailed contracts. Most government contracts are completed over a one-
to five-year period. Our largest single client, SAMHSA, accounted for 15.6% of revenues in 2002, 16.9% of revenues
in 2003, 17.8% of revenues in 2004, and an average of 16.8% of our revenues for the last three
years. We have 25 contracts with SAMHSA, none of which constitutes more than 5.1% of our revenues.
We have contracts with each of the three component centers within SAMHSA: the Center for Mental
Health Services, the Center for Substance Abuse Prevention and the Center for Substance Abuse
Treatment. We provide a wide variety of services to SAMHSAs three centers. Our services relate
to substance abuse and mental health issues, including quantitative and qualitative research,
evaluation of program effectiveness, development and operation of public health websites, and
dissemination of public health materials and messages. Our second largest client, USAID, accounted
for 10.6% of revenues in 2002, 11.4% of revenues in 2003, and 12.3% of revenues in 2004, and an
average of 11.4% of our revenues for the last three years. We have three major contracts with
USAID. Our largest contract with USAID began in September 2003 and extends through September 2008
and is a cost-plus-award-fee contract to perform demographic and health surveys in developing
countries. We perform our second major contract with USAID as a subcontractor. This contract
began in September 2003 and extends - 4 -




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through September 2008 and is a cost-plus-fixed-fee contract to
evaluate the effectiveness of public health interventions in developing countries. Our evaluations
are used by the government of the developing country, USAID and other organizations to assist in resource allocation decisions.
The third major contract with USAID began in September 2004 and extends through September 2009 and
is a time-and-materials contract under which we provide technical assistance to non-governmental
charitable organizations in the area of childrens health programs. In addition, revenues
generated by our teleservices business segment were primarily from two key clients. See
Government Contracts below for a discussion of the types of contracts we have with the U.S.
federal government. Government Contracts During the year ended December 31, 2004, approximately 55.6% of our revenues were attributable
to contracts with various departments and agencies of the U.S. federal government. The funding of
government programs depends on Congressional appropriations. Congress generally appropriates funds
on a fiscal year basis, even though a program may be designed to continue for many years.
Consequently, programs are often only partially funded initially and additional funds are
committed only as Congress makes further appropriations. Government contracts are subject to oversight audits by government representatives.
Provisions in these contracts permit termination, in whole or in part, without prior notice, at
the governments convenience. Compensation in the event of a termination for convenience is limited
to work completed at the time of termination. In the event of a termination, the contractor will
receive an allowance for profit on the work performed. In general, all of our clients, including
the U.S. federal government, have the right to terminate their contracts with us at any time. In
addition to this general right to terminate, all contracts with the U.S. federal government contain
provisions, and/or are subject to laws and regulations, that give the government rights and
remedies not typically found in our commercial contracts, including rights that allow the
government to:  
    claim rights in and ownership of products and systems that we produce;
    adjust contract costs and fees on the basis of audits completed by its agencies;
    suspend or debar us from doing business with the U.S. federal government; and
    release information obtained from us in response to a Freedom of Information Act request. Our U.S. federal government contracts include fixed-price contracts, time-and-material
contracts and cost-reimbursement contracts, including cost-plus-fixed-fee, cost-plus-award-fee and
cost-plus-incentive-fee.  
    Fixed-price Contracts. This type of contract provides for a firm pricing
arrangement established by the parties at the time of contracting. These contracts are
not subject to adjustment by reason of costs incurred in the performance of the
contract. With this type of contract, we assume the risk that we will be able to
perform at a cost below the fixed-price, except for costs incurred because of contract
changes ordered by the client.
    Time-and-Materials Contracts. This type of contract provides for the provision of
supplies or services on the basis of (1) direct labor hours at specified hourly rates
that include direct and indirect costs, such as wages, overhead, general and
administrative expenses, and profit, and (2) materials at cost. With these contracts,
we assume the risk that we will be able to perform at the negotiated hourly rates. - 5 -




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
    Cost-reimbursement Contracts. This type of contract calls for payment to the
contractor of allowable incurred costs to the extent provided in the contract. There
are three variations of this type of contract:  
    Cost-plus-fixed-fee contracts provide for payment to us of a negotiated fee that is
fixed at the inception of the contract. This fixed fee does not vary with actual
cost of the contract, but may be adjusted as a result of changes in the work to be
performed under the contract. This contract poses less risk than a fixed price
contract, but our ability to win future contracts from the procuring agency may be
adversely affected if we fail to perform within the maximum cost set forth in the
contract.
    Cost-plus-award-fee contracts provide for a fee consisting of a base amount
(which may be zero) fixed at inception of the contract and an award amount, based
upon the governments satisfaction with our performance under the contract. With
this type of contract, we assume the risk that we may not be awarded the award fee,
or that we may be awarded only a portion of it, if we do not perform
satisfactorily.
    Cost-plus-incentive-fee contracts provide for an initially negotiated fee to be
adjusted later by a formula based on the relationship of total allowable costs to
total target costs. As is the case with all cost-reimbursement contracts, we
assume the risk that, if our costs are not allowable under the terms of the
contract or applicable regulations, we may not be able to recover the costs. We are subject to various statutes and regulations governing government contracts. These
statutes and regulations carry substantial penalty provisions, including suspension or debarment
from government contracting or subcontracting for a period of time, if we are found to have
violated any of these regulations. Among the causes for debarment are violations of various
statutes, including those related to the following:  
    procurement integrity;
    export control;
    government security regulations;
    employment practices;
    protection of the environment;
    accuracy of records; and
    recording of costs. We carefully monitor all of our contracts and contractual efforts to minimize the possibility
of any violation of these regulations. As a government contractor, we are subject at any time to government audits, inquiries and
investigations. We generally are subject to audits for up to three years following the final
payment under our U.S. federal government contracts. We have experienced minimal audit adjustments
over the past ten - 6 -




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years. The most recent indirect cost-rate audit, performed by the Department of Health and
Human Services, was through the year ended December 31, 2002 and there were no audit adjustments. Competition For business to business market research, we believe that we compete for clients based on a
variety of factors, including the following:  
    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 our experience, our typical clients are interested in the quality and utility of the
service received, as well as price. For consumer market research services, we regularly experience 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, we compete 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
which the work is being conducted and the services to be provided. Technical competence is the key
differentiator. For outbound telemarketing services, we compete with a large number of telemarketing
companies. Quality and reliability of service are the key differentiators. Many other firms provide some of the services that we provide. While bidding on a project we
may find ourselves at a competitive disadvantage. In some circumstances, a competitor has an
advantage over us because:  
    the competitor has a lower cost structure or profit objective which
enables it to offer lower prices; - 7 -




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
    the competitor is larger and better known than we are and therefore may be perceived
as being able to offer more services and handle larger contracts;
    the competitor has a larger sales force that may result in more aggressive selling
of services;
    the competitor has product offerings that may be more attractive to some clients;
and
    the competitor has what is perceived as superior technology, methodologies or
proprietary approaches that may enable it to provide services that we cannot. Any one or more of these advantages may influence the decision of one of our clients or potential
clients to obtain services from a competitor rather than from us. Segment Information Information regarding financial data by operating and geographic segments, including revenues
from external customers, is set forth in the Notes to Consolidated Financial Statements at Note 14,
Segments. Backlog As of December 31, 2003 and 2004 our backlog was as follows: Segment
    
    December 31, 2003
    
    
    December 31, 2004Social Research:Funded
    
    $
    102,780,000
    
    
    $
    101,188,000Unfunded
    
    
    184,536,000
    
    
    
    165,870,000Total Social Research
    
    
    287,316,000
    
    
    
    267,058,000U.S. Market Research
    
    
    4,228,000
    
    
    
    8,365,000U.K. Market Research
    
    
    5,856,000
    
    
    
    6,828,000Other
    
    
    545,000
    
    
    
    449,000Total
    
    $
    297,945,000
    
    
    $
    282,700,000
 We define backlog as the total contract value of our engagements that our management believes
to be firm less previously recognized revenues. Our backlog includes the amounts of our commercial
contracts, the funded and unfunded amounts of our government contracts, and options to renew or
extend government contracts that we expect our clients to exercise. Congress generally
appropriates funds for a particular program or contract on a yearly basis, even though contracts
may call for performance that is expected to take a number of years. Our funded backlog in our
social research segment consists of the amount of: (1) our U.S. federal government contracts that
have been appropriated by Congress and funded by the client agency; (2) our state and local
government contracts that have been appropriated by the applicable government entity; and (3) our
commercial contracts. Unfunded backlog includes the full value of our government contracts in our
social research segment less funded backlog applicable to those contracts. The amount of our total backlog and funded backlog may vary as a result of the execution of
new contracts or the extension of existing contracts, exercise of options, reductions from
contracts that end or are - 8 -




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completed, reductions from the early termination of contracts and
adjustments to estimates of previously included contracts. The amount of our funded backlog is
also affected by the funding of the U.S. federal government. All of the 2004 backlog in the market research business is expected to be recognized as
revenues by December 31, 2005. Revenues from social research backlog are expected to be recognized
over the next five years. Our engagements generally are terminable by the client at any time, with
the expectation of cost recovery for work performed by us. Employees At December 31, 2004, we employed a total of approximately 1,538 full-time employees and 438
full-time equivalent part-time hourly employees. The part-time employees work as telephone and
field interviewers and data processors. At December 31, 2004, of the full-time employees,
approximately 981 were professionals engaged in direct client service, 300 were telemarketing
representatives, and 257 were engaged in support, administration and executive oversight. None of our employees are subject to a collective bargaining agreement, nor have we
experienced any work stoppages. We believe that our relationship with our employees is good. Available Information We file 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 that the we file at the SECs public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our filings are also available to the public from commercial document
retrieval services and at the SECs website at www.sec.gov. We
maintain a website at www.opinionresearch.com, which contains information about us,
including links to our annual reports on Form 10-K, quarterly reports 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. Our website and the information
contained in it shall not be deemed incorporated by reference to this Form 10-K. - 9 -




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Item 2.Properties Our executive offices are located in leased space in Princeton, New Jersey. We lease
additional facilities throughout the world. The following table sets forth certain information
relating to these properties: Operating Unit
    
    Location
    
    Facility UsageU.S. Market Research
    
    Princeton, New Jersey
    
    Worldwide Headquarters, Research LocationArlington Heights, Illinois
    
    Research LocationMaumee, Ohio
    
    Research LocationTucson, Arizona
    
    Telephone Interviewing FacilityTampa, Florida
    
    Telephone Interviewing FacilityReno, Nevada
    
    Telephone Interviewing FacilityU.K. Market Research
    
    London, U.K.
    
    U.K. Market Research Headquarters,
Research
Location and Telephone Interviewing
FacilityManchester, U.K.
    
    Research LocationAsia Market Research
    
    Hong Kong
    
    Asia Market Research Headquarters,
Research
Location and Telephone Interviewing
FacilityShanghai, China
    
    Research LocationSeoul, Korea
    
    Country Headquarters, Research Location
and Telephone Interviewing FacilityTaipei, Taiwan
    
    Country Headquarters, Research Location
and Telephone Interviewing FacilityMexico Market Research
    
    Mexico City, Mexico
    
    Country Headquarters, Research LocationTeleservices
    
    Lansing, Illinois
    
    ORC ProTel Headquarters, Customer Contact FacilityTopeka, Kansas
    
    Customer Contact FacilitySt. John, Missouri
    
    Customer Contact FacilityDayton, Ohio
    
    Customer Contact FacilitySocial Research
    
    Calverton, Maryland
    
    ORC Macro Headquarters, Research LocationBurlington, Vermont
    
    Telephone Interviewing Facility and
Research LocationSt. Albans, Vermont
    
    Telephone Interviewing FacilityNew York, New York
    
    Research LocationBethesda, Maryland
    
    Research LocationPlattsburgh, New York
    
    Telephone Interviewing FacilityAtlanta, Georgia
    
    Research LocationRockville, Maryland
    
    Research Location and Multi-media
Production FacilityColumbia, Maryland
    
    Warehouse
 - 10 -




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Our U.S. telephone interviewing facilities serve both our U.S. market research and our social
research operating units. We presently have a combined total of 708 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. We believe that our properties are sufficient for our current operational needs. 
 Item 3.Legal Proceedings Except for the following lawsuit, we are not a party to any litigation that we believe could
have a material adverse effect on us. 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 our contemplated offering of common stock. We have proposed to use a portion of the
proceeds of the offering to repurchase, for an aggregate cash purchase price of $18.0 million, all
of the interests of LLR Partners, L.P. and LLR Partners Parallel, L.P. (together, the LLR
Partnerships) in us, 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 in this report as the LLR
Interests. The plaintiffs allege, among other things, that the contemplated 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 an improper use 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. - 11 -




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##### Table of Contents



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, 2004. 
 PART II 
  Item 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities Market Information Our common stock is currently quoted on the Nasdaq National Market under the symbol ORCI.
The table below sets forth the high and low prices for our common stock (the Common Stock) for
each of the four quarters of 2003 and 2004: High
    
    
    Low2003First Quarter
    
    $
    6.00
    
    
    $
    3.55Second Quarter
    
    
    6.70
    
    
    
    3.89Third Quarter
    
    
    6.64
    
    
    
    5.97Fourth Quarter
    
    
    6.59
    
    
    
    5.192004First Quarter
    
    $
    6.70
    
    
    $
    5.71Second Quarter
    
    
    8.55
    
    
    
    6.00Third Quarter
    
    
    7.09
    
    
    
    5.71Fourth Quarter
    
    
    6.75
    
    
    
    5.75
 The
closing price of the Common Stock on March 24, 2005 was $6.93 per share. Holders As
of March 24,
2005, we had 96 holders of record of the Common Stock (approximately
638
beneficial stockholders). Dividends We have not paid any dividends on our common stock during the last two fiscal years or during
the current fiscal year. Our credit facilities prohibit us from paying cash dividends to holders of
our common stock. Further, we currently intend to retain any earnings of our company for the future
operation and growth of our business. Therefore, we do not anticipate paying any cash dividends on
our common stock in the foreseeable future. However, our board of directors, at its discretion, may
decide to declare a dividend at an appropriate time in the future. A decision to pay a dividend
would depend, among other factors, upon our results of operations, financial condition and cash
requirements, the terms of our credit facility, and other financing agreements at the time a
payment of dividends is considered. - 12 -




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Item 6.Selected
Financial Data The following selected financial data should be read in conjunction with our audited financial statements
and notes which are listed herein under Item 8 and are included
on pages F-1 through F-33. (In Thousands, Except Per Share Data)For the Year Ended December 31,2000(1)
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004Operating Data:Total revenues
    
    $
    160,909
    
    
    $
    176,909
    
    
    $
    175,260
    
    
    $
    179,557
    
    
    $
    195,554Cost of revenues
    
    
    105,975
    
    
    
    121,525
    
    
    
    120,705
    
    
    
    125,890
    
    
    
    140,143Gross profit
    
    
    54,934
    
    
    
    55,384
    
    
    
    54,555
    
    
    
    53,667
    
    
    
    55,411Selling, general and administrative expenses
    
    
    36,004
    
    
    
    38,128
    
    
    
    39,736
    
    
    
    39,437
    
    
    
    39,770Depreciation and amortization
    
    
    7,278
    
    
    
    8,431
    
    
    
    4,596
    
    
    
    4,024
    
    
    
    3,979Goodwill
impairment charges
(2)
    
    
    
    
    
    
    
    
    
    
    5,938
    
    
    
    16,317
    
    
    
    Operating income (loss)
    
    
    11,652
    
    
    
    8,825
    
    
    
    4,285
    
    
    
    (6,111
    )
    
    
    11,662Interest and other non-operating expenses, net
    
    
    5,681
    
    
    
    5,413
    
    
    
    4,707
    
    
    
    4,996
    
    
    
    4,710Unamortized
loan fees
(3)
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    2,506Income (loss) before provision (benefit) for income
taxes and cumulative effect of accounting change
    
    
    5,971
    
    
    
    3,412
    
    
    
    (499
    )
    
    
    (11,107
    )
    
    
    4,446Provision ( benefit) for income taxes
    
    
    2,667
    
    
    
    1,796
    
    
    
    2,122
    
    
    
    (2,165
    )
    
    
    2,020Cumulative effect of accounting change,
net of tax benefit of
$0(4)
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    3,304
    
    
    $
    1,616
    
    
    $
    (2,913
    )
    
    $
    (8,942
    )
    
    $
    2,426Basic earnings (loss) per share
    
    $
    0.70
    
    
    $
    0.28
    
    
    $
    (0.49
    )
    
    $
    (1.47
    )
    
    $
    0.39Diluted earnings (loss) per share
    
    $
    0.65
    
    
    $
    0.27
    
    
    $
    (0.49
    )
    
    $
    (1.47
    )
    
    $
    0.38Weighted average number of shares outstanding:Basic
    
    
    4,692
    
    
    
    5,762
    
    
    
    5,949
    
    
    
    6,079
    
    
    
    6,255Diluted
    
    
    5,053
    
    
    
    5,992
    
    
    
    5,949
    
    
    
    6,079
    
    
    
    6,445Balance Sheet Data:Total assets
    
    $
    115,957
    
    
    $
    113,957
    
    
    $
    103,745
    
    
    $
    97,574
    
    
    $
    97,683Total debt (5)
    
    
    51,842
    
    
    
    55,462
    
    
    
    46,892
    
    
    
    45,436
    
    
    
    42,802Total liabilities
    
    
    82,097
    
    
    
    77,624
    
    
    
    68,930
    
    
    
    70,575
    
    
    
    66,440Redeemable equity
    
    
    8,900
    
    
    
    8,900
    
    
    
    8,900
    
    
    
    8,900
    
    
    
    8,900Total stockholders equity
    
    
    24,960
    
    
    
    27,433
    
    
    
    25,915
    
    
    
    18,099
    
    
    
    22,343
   (1)
    
    We acquired C/J Research, Inc. in August 2000 and SHS in October 2000: accordingly, the consolidated statement of operations
includes only four-month operating results of C/J Research, Inc. and two month operating results of SHS.(2)
    
    We recorded a non-cash impairment charge of $5.9 million in 2002 to reduce the carrying value of goodwill in our U.S. market research
segment and $16.3 million in 2003 to reduce the carrying value
of goodwill in our teleservices segment by $10.0 million, our U.S. market research segment by $6.0 million and our Korean market research subsidiary by $317,000.(3)
    
    As a result of the amendment of our credit facility in the third quarter of 2002, we experienced a $77,000 expense associated with the
write-off of unamortized loan fees. In the second quarter of 2004 we refinanced our debt and recognized an expense of $2.5 million for
the write-off of unamortized loan fees.(4)
    
    On January 1, 2002, we recorded a goodwill impairment charge in our Mexican subsidiary of $292,000 as a cumulative
effect of a change in accounting principle upon adoption of Statement No. 142, Goodwill and Other Intangible Assets.(5)
    
    Amounts include capital leases. - 13 -




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Item 7.Managements Discussion and Analysis of Financial Condition and Results of
Operations 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
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 SAMHSA, USAID, CDC, and NIH. 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 were established in 1938 to apply the principles of general public opinion polling to
marketing issues facing Americas largest companies. We completed our initial public offering in
October 1993. Between 1993 and 1997, as part of our strategy to expand internationally, we
established our presence in the United Kingdom, Asia and Mexico through various acquisitions. In
January 1998, we acquired ORC ProTel, a telemarketing company based in Lansing, Illinois. In May
1999, we acquired ORC Macro, a research, consulting and technology company based in the Washington,
D.C. area. The acquisition of ORC Macro substantially increased our presence in the public sector.
In August 2000, we acquired C/J Research, Inc., and in October 2000, we acquired SHS. The two
acquisitions in 2000 allowed us to expand our service offerings into the areas of consumer research
and communications services and to further expand in the area of information management. We currently have four segments for financial reporting purposes:  
    social research;
    U.K. market research;
    U.S. market research; and
    teleservices. While our consolidated revenues grew from 2002 to 2004, our performance has varied from
segment to segment. We have achieved strong performance in our social research segment, which has
benefited from the U.S. federal governments increased spending on health-related research and our
success in winning new projects and renewing existing projects. During this period, our U.S.
market research segment experienced a decline in revenues due to weak economic conditions in the
U.S. Our U.K. market research segment experienced stable revenues due to the strength of the
global research market. The teleservices segment experienced a decline in revenues due to weak
economic conditions in the U.S. as well as factors unique to the telemarketing industry, such as
the enactment of new laws regulating the industry and competition from call centers outside of the
U.S. - 14 -




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Our operating income grew from 2002 to 2004, reflecting the strong performance in our social
research segment. The loss of revenues over the past three years in
the U.S. market research and
teleservices segments led to the write-off of goodwill in these segments and our Korean
subsidiary, which reduced operating income by $5.9 million in 2002 and $16.3 million in 2003.
Operating income increased to $11.7 million in 2004 from a loss
of $6.1 million in 2003. The operating loss in 2003 included a
goodwill impairment charge of $16.3 million. We believe that the decline in revenues in the U.S. market research segment was due to the
slow economy and resulting reductions in our clients discretionary market research budgets. This
situation has improved recently, with revenues in 2004 increasing to $26.0 million from $25.8
million in 2003. Backlog for this segment has increased 97.8% from $4.2 million at December 31,
2003 to $8.4 million at December 31, 2004. We believe that revenues attributable to this segment
will increase if the economy continues to improve, and, because we maintained our fixed-cost
structure of research professionals through the slow years, we expect that operating income as a
percentage of revenues in this segment will improve as our revenues increase. The decrease in operating income levels from 2001 to 2003 led to difficulty in complying with
our loan agreement covenants and the resulting incurrence of
amendment fees. As a result of a default under our senior credit facility in 2003, we incurred forbearance fees and
refinancing fees. In 2004 we refinanced all of our debt to extend our debt maturities, reduce our
borrowing costs, and relax certain financial covenants. See
Liquidity and Capital Resources  Credit
Facilities
below. The following are important factors that affect our results of 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 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 impacts our 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. - 15 -




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Goodwill impairment: Our results in 2002 and 2003 were impacted by goodwill impairment
charges for our teleservices and U.S. market research segments based on the decline in revenues and
earnings for these segments. Interest expense: Our results in 2002, 2003 and 2004 were impacted by fees charged by our
lenders to renegotiate the terms of our credit agreements and by the non-cash write-off of
unamortized loan fees when we refinanced our credit agreements in 2004. Results of Operations The following table sets forth, for the periods indicated, selected operating data as a
percentage of revenue: 2002
    
    
    2003
    
    
    2004Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    31.1
    %
    
    
    29.9
    %
    
    
    28.3
    %Selling, general and administrative expenses
    
    
    22.7
    %
    
    
    22.0
    %
    
    
    20.3
    %Operating income
    
    
    2.4
    %
    
    
    (3.4
    )%
    
    
    6.0
    %Net income
    
    
    (1.7
    )%
    
    
    (5.0
    )%
    
    
    1.2
    %
 Comparison of 2003 to 2004 Revenues Consolidated
revenues increased $16.0 million, or 8.9%, from $179.6 million in 2003 to $195.6
million in 2004. Revenues increased $12.6 million, or 10.9%, in our social research business due
to increased activity on contracts for our primary customers including USAID and SAMHSA. Revenues
decreased $2.1 million, or 14.4%, in the teleservices business reflecting continued weakness in
this market segment. Revenues increased $181,000 or 0.7%, in U.S. market research, and increased
$2.5 million, or 12.0%, in U.K. market research. For U.K. market research, the decline of the U.S.
dollar relative to the U.K. pound increased revenues by $2.4 million. Except for U.K. market
research, where the increase in revenues was due to exchange rate fluctuations, the increase or
decrease in revenues in the various operating segments is primarily due to higher or lower demand
for services. Cost of Revenues Consolidated cost of revenues increased $14.3 million, or 11.3%, from $125.9 million in 2003
to $140.1 million in 2004. Gross profit as a percentage of revenues declined from 29.9% in 2003 to
28.3% in 2004 due primarily to cost increases on certain contracts in the U.S. market research
segment. In U.S. market research, cost of revenues increased 16.3% from $18.8 million in 2003 to
$21.8 million in 2004 and the gross profit percentage decreased from 27.3% in 2003 to 16.0% in 2004
reflecting reduced efficiencies and lower pricing. For U.K. market research, cost of revenues
increased 14.9% from $12.7 million in 2003 to $14.6 million in 2004 primarily due to the decline of
the U.S. dollar relative to the U.K. pound which increased cost of revenues by approximately $1.5
million. Gross profit as a percentage of revenues decreased from 38.2% in 2003 to 36.6% in
2004. For the social research business, cost of revenues increased 9.8% from $84.9 million in 2003
to $93.2 million in 2004 and gross profit as a percentage of revenues increased from 26.6% in
2003 to 27.3% in 2004. In the - 16 -




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teleservices business, cost of revenues decreased 17.9% from $7.6
million in 2003 to $6.2 million in 2004 and gross profit as a percentage of revenues increased
from 49.2% in 2003 to 51.2% in 2004. Selling, General and Administrative Expenses (SG&A) SG&A increased $333,000, or 0.8%, from $39.4 million in 2003 to $39.8 million in 2004. As a
percentage of revenues, consolidated SG&A decreased from 22.0% in 2003 to 20.3% in 2004. The decrease
in SG&A expenses as a percentage of revenues was principally due to the cost reduction efforts
implemented in U.S. market research, which included headcount reductions and cutbacks in
discretionary spending. For the social research business, SG&A increased from $17.0 million in
2003 to $20.1 million in 2004, and as a percentage of revenues, increased from 14.7% in 2003 to
15.7% in 2004. For U.K. market research, the increase in 2004 versus
2003 SG&A of $1.0 million, or
16.9%, was principally attributable to exchange rate fluctuations. Depreciation and Amortization Expense Depreciation and amortization expense remained stable at $4.0 million for both 2003 and 2004. Goodwill Impairment Charge In
October 2003, we performed our annual goodwill impairment test
in accordance with the Financial
Accounting Standards Boards (the FASB) Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets(Statement No. 142). Based upon the initial results of this
test, we determined that there was a goodwill impairment charge in our Korean subsidiary of
$317,000. In addition, we determined that the recorded book values of U.S. market research and
teleservices exceeded their fair values, as determined by a weighting of comparable company
analyses and discounted cash flow models. Upon completion of the assessments, we recorded non-cash
impairment charges of $10.0 million to reduce the carrying value of the goodwill in teleservices
and $6.0 million in U.S. market research. See Note 3 to the Consolidated Financial Statements,
Goodwill and Other Intangibles, for additional information. We believe that the decline in the fair value of our U.S. market research business can be
attributed to the following:  
    A deterioration in general economic conditions;
    An even greater decline in business to business market research activity; and
    An expectation that recovery will be prolonged. We believe that the decline in the fair value of our teleservices business can be attributed
to the following:  
    A deterioration in general economic conditions;
    An adverse impact on the outbound telemarketing industry arising from various
federal and state regulations, including do-not-call and privacy regulations; and - 17 -




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
    Client concentration risks. In October 2004, as part of our annual impairment test based on Statement No. 142, we
performed our annual goodwill impairment test. Based upon the results of this test we determined
that the estimated fair values of our business segments exceeded
their book values as determined by a
weighting of comparable company analyses and discounted cash flow models. We cannot provide assurance that an additional impairment charge will not be required in the
future if the U.S. market research and teleservices businesses do not recover as projected. Interest and Other Non-Operating Expenses, Net Interest and other non-operating expenses increased $2.2 million, or 44.4%, from $5.0 million
in 2003 to $7.2 million in 2004. The increase was principally due to a $2.5 million charge for
debt fees, principally the non-cash write-off of unamortized loan fees, related to debt that was
refinanced during the second quarter of 2004. Provision (Benefit) for Income Taxes The
(benefit) provision for income taxes for 2003 was ($2.2 million) and $2.0 million for 2004.
Excluding the effect of tax benefits of $4.8 million resulting from the goodwill impairment charges
in 2003, the provisions for these years are higher than the amounts that result from applying the
federal statutory rate to income before income taxes, due to our not recognizing tax
benefits for certain state and non-U.S. losses as well as increased state taxes from profitable
business segments. At December 31, 2003 we recorded a net valuation allowance of $2.2 million and at December 31,
2004 we recorded at net valuation allowance of $2.7 million against state deferred tax assets
related to certain subsidiaries because the realization of these future state tax benefits is not
deemed to be more likely than not. Net Income (Loss) As a result of the foregoing, we recorded a net loss for 2003 of $8.9 million and net income
for 2004 of $2.4 million. The 2003 results were negatively impacted by a goodwill
impairment charge of $11.5 million, net of tax benefits. The 2004 results were negatively impacted
by the debt fees discussed above totaling $2.5 million, or $1.6 million net of tax benefits. Comparison of 2002 to 2003 Revenues Consolidated revenues for 2003 increased $4.3 million, or 2.5%, from $175.3 million in 2002 to
$179.6 million in 2003. Revenues increased $10.1 million, or 9.6%, in the social research
business. Revenues decreased $728,000, or 4.7%, in the teleservices business. Revenues decreased
$7.2 million, or 21.9%, in U.S. market research, and increased $1.5 million, or 7.9%, in U.K.
market research. For U.K. market research, the decline of the U.S. dollar relative to the U.K.
pound increased revenues by $1.7 million. Except for U.K. market research where the increase in
revenues was due to exchange rate fluctuations, the increase or decrease in revenues in the various
operating segments was primarily due to - 18 -




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higher or lower demand for services, with approximately
$4.2 million of the decline in U.S. market research revenues arising from the reduced scope of
three client contracts and $1.3 million from the non-renewal of two client contracts. Cost of Revenues Consolidated cost of revenues increased $5.2 million, or 4.3%, from $120.7 million in 2002 to
$125.9 million in 2003. Gross profit as a percentage of revenues declined from 31.1% in 2002 to
29.9% in 2003. For the social research business, cost of revenues increased 9.6% from $77.4
million in 2002 to $84.9 million in 2003 and gross profit as a percentage of revenues was
stable at 26.6% in both 2002 and 2003. In U.S. market research, cost of revenues decreased 15.6%
from $22.2 million in 2002 to
$18.8 million in 2003 and gross profit as a percentage of revenues decreased from 32.6% in
2002 to 27.3% in 2003, reflecting reduced efficiencies and lower pricing. For U.K. market
research, cost of revenues increased 2.8% from $12.3 million in 2002 to $12.7 million in 2003 and
the decline of the U.S. dollar relative to the U.K. pound increased cost of revenues by $1.0
million. Gross profit as a percentage of revenues increased from 35.1% in 2002 to 38.2% in 2003,
reflecting improved efficiencies. In the teleservices business, cost of revenues decreased 2.6%
from $7.8 million in 2002 to $7.6 million in 2003 and gross profit as a percentage of revenues
decreased from 50.2% in 2002 to 49.2% in 2003, reflecting reduced efficiencies. Selling, General and Administrative Expenses SG&A decreased $299,000, or 0.8%, from $39.7 million in 2002 to $39.4 million in 2003. As a
percentage of revenues, consolidated SG&A decreased from 22.7% in 2002 to 22.0% in 2003. The
decrease in SG&A was principally due to the cost reduction efforts implemented in U.S. market
research, which included headcount reductions and cutbacks in discretionary spending. For the
social research business, while SG&A increased from $16.2 million in 2002 to $17.0 million in 2003,
SG&A as a percentage of revenues was generally stable at 15.4% in 2002 and 14.7% in 2003. For U.K.
market research, the increase in SG&A of $587,000, or 10.5%, was principally attributable to
exchange rate fluctuations. Depreciation and Amortization Expense Depreciation and amortization expense decreased by 572,000, or 12.4%, from $4.6 million in
2002 to $4.0 million in 2003. The decrease was due to assets which were fully depreciated or
amortized by the end of 2002. Goodwill Impairment Charge In October 2003, we performed the annual goodwill impairment test in accordance with Statement
No. 142. Based upon the initial results of this test, we determined that there was a goodwill
impairment charge in our Korean subsidiary of $317,000. In addition, we determined that the
recorded book values of U.S. market research and teleservices exceeded their fair values, as
determined by a weighting of comparable company analyses and discounted cash flow models. Upon
completion of the assessments, we recorded non-cash impairment charges of $10.0 million to reduce
the carrying value of the goodwill in teleservices and $6.0 million in U.S. market research. See
Note 3 to our Consolidated Financial Statements, Goodwill and Other Intangibles, for additional
information. - 19 -




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In October 2002, as part of our annual impairment test based on Statement No. 142, we
determined that the recorded book value of U.S. market research exceeded its fair value, as
determined by a weighting of comparable company analyses and discounted cash flow models. Upon
completion of the assessment, we recorded a non-cash impairment charge of $5.9 million to reduce
the carrying value of goodwill in U.S. market research. We believe that the decline in the fair value of our U.S. market research business can be
attributed to the following:  
    A deterioration in general economic conditions;
    An even greater decline in business to business market research activity; and
    An expectation that recovery will be prolonged. We believe that the decline in the fair value of our teleservices business can be attributed
to the following:  
    A deterioration in general economic conditions;
    An adverse impact on the outbound telemarketing industry arising from various
federal and state regulations, including do-not-call and privacy regulations; and
    Client concentration risks. Interest and Other Non-Operating Expenses Interest and other non-operating expenses increased $212,000, or 4.4%, from $4.8 million in
2002 to $5.0 million in 2003. The increase was due to an increase in interest expense of $258,000
attributable to higher borrowing costs partially offset by a decrease of $46,000 in other
non-operating expenses. Provision (Benefit) for Income Taxes The provision (benefit) for income taxes was $2.1 million for 2002 and $(2.2 million) for
2003. Excluding the effect of tax benefits of $4.8 million resulting from the goodwill impairment
charges in 2003, the provisions for these years are higher than the amounts that result from
applying the federal statutory rate to income before income taxes, due to our not providing tax
benefits for certain state and non-U.S. losses, as well as increased state taxes from profitable
business segments. Cumulative Effect of Accounting Change With the adoption of Statement No. 142 on January 1, 2002, we recorded as a cumulative effect
of a change in accounting principle, goodwill impairment related to our Mexican subsidiary of
$292,000, or $(0.05) per share. - 20 -




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Net Loss As a result of the foregoing, net loss was $2.9 million for 2002 and $8.9 million for 2003.
The 2002 results were negatively impacted by a goodwill impairment charge and the cumulative effect
of an accounting change of $6.2 million, net of tax benefits. The 2003 results were negatively
impacted by a goodwill impairment charge of $11.5 million, net of tax benefits. Liquidity and Capital Resources Cash Flows At December 31, 2004, working capital was $23.4 million. Net cash provided by operating
activities for 2003 was $7.0 million as compared to
$5.6 million for 2004. For 2003, 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 $8.1
million, an increase of $2.1 million in payables and accrued
expenses and $658,000 in deferred revenues and other
liabilities, offset by an increase in receivables of $3.7 million, and an increase in other assets
of $181,000. Growth in accounts receivable was primarily related to growth in fourth quarter 2003
revenues of $1.4 million and a decline in collections in our U. S. market research segment due to
normal fluctuations in project billing and payment cycles. For 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 $11.5 million, an increase of $742,000 in
payables, offset by an increase in receivables of $2.9 million, a decrease of $3.2 million in
accrued expenses and other liabilities and an increase in other assets of $773,000. Growth in
accounts receivable was due to the growth in fourth quarter 2004 revenues. Investing activities for 2003 included capital expenditures of $3.4 million. Investing
activities for 2004 included capital expenditures of $4.4 million. The majority of the spending on
capital items was for the ongoing maintenance and replacement of technology. In 2003, financing activities included a net reduction in borrowings totaling $2.1 million,
payment of loan fees of $1.8 million and proceeds from the sale of our common stock under our
various stock purchase plans and the exercises of stock options totaling $502,000. In 2004,
financing activities included a net reduction in borrowings totaling $2.6 million, payment of loan
fees of $1.9 million and proceeds from the sale of our common stock under our various stock
purchase plans and the exercises of stock options totaling $892,000. Credit Facilities In May 2004, we entered into a secured revolving credit facility of $35.0 million with
Citizens 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 the financial
institutions designated base rate (5.25% at December 31, 2004) plus 100 basis points or LIBOR
(3-month LIBOR was 2.56% at December 31, 2004) plus 300 basis points. As of December 31, 2004, we
had approximately $12.7 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 - 21 -




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Notes) to Allied Capital Corporation (Allied Capital). We used the proceeds of the borrowings
under the Senior Revolving Facility, the Secured Subordinated Notes and the Unsecured Subordinated
Notes to
repay all debt outstanding at May 4, 2004. At December 31, 2004, the Secured Subordinated
Notes carried an interest rate of 10.0%, required principal payments of $500,000 per quarter, and
were set to mature in November 2007. At December 31, 2004, the Unsecured Subordinated Notes
carried a fixed interest rate of 15.5%; 13.0% payable quarterly in
cash, and 2.5%, at our discretion, payable in cash
or able to be deferred and included in the outstanding principal balance until maturity in May 2009. In
exchange for consideration received in connection with this debt, we extended the term of existing
warrants held by Allied Capital 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 is valued at $616,000 and will
be accreted through interest expense over the life of the Unsecured Subordinated Notes. As
described in Recent Developments, below, effective March 15, 2005, we used the proceeds from
the Term Loan, together with proceeds from a drawdown of the Senior Revolving Facility, to pay off
the outstanding balance under the Secured Subordinated Notes and 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 December 31, 2004, we were in compliance with all of our 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. In conjunction with our May 2004 refinancing 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, commencing in the second quarter of 2004,
and we wrote off the unamortized loan fees of approximately $2.5 million as interest expense, which
included cash payments of $420,000 made in 2004. During the third quarter of 2003, it came to our attention and the attention of our lenders
that we had inadvertently failed to make a payment in the amount of $1.7 million under a provision
of our then existing senior credit facility that required us to make payments out of excess cash
flow. Pursuant to a Forbearance Agreement we entered into with our senior lenders, the senior
lenders allowed us to make the $1.7 million payment in four equal monthly installments beginning
December 31, 2003, and we agreed that we would refinance the credit facility with new lenders by
December 17, 2003. We were not able to refinance the senior credit facility by December 17, 2003.
As a result of the foregoing, our senior lenders did not approve interest payments in the amount of
$474,000 that we were required to make to our subordinated lenders. All defaults were cured with
our entry into an amended senior credit facility with our then senior lender on December 30, 2003,
and requirements concerning future payments out of excess cash flow were waived. In addition, we
paid the outstanding interest to the subordinated lenders on that date. As noted above, we
refinanced our senior credit facility in May 2004 with new lenders. Joint Venture We entered into a joint venture agreement with Ratrix Analytics LLC (the Joint Venture)
during 2001 for the purpose of developing new research-based products. As of December 31, 2004, we
had a 44.8% ownership interest in the Joint Venture and a 50% voting
interest in the Joint Venture. In 2003, we contributed $495,000 in services
and cash and, since inception, have contributed an aggregate of $1.7 million. We did not fund the
Joint - 22 -




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Venture in 2004, and we are
not obligated for any future funding of the Joint Venture. All amounts funded to date have been expensed. Capital Expenditures We currently have no material capital expenditure commitments and no acquisition-related
commitments. We have 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, the time at which our revolving
credit facility matures. Recent Developments We have proposed to effect a public offering of our common stock and have filed a registration
statement on Form S-1 and amendments thereto with the SEC regarding the public offering. We
contemplate that we will use the proceeds of the offering to repurchase the LLR Interests from the
LLR Partnerships for an aggregate cash purchase price of $18.0 million and to repay a portion of
the outstanding amount under the Senior Revolving Facility. If the public offering is consummated
and we repurchase the LLR Interests, we will incur a deduction to net income, before calculating
net income available to common shares, equal to the difference between the value received by the
LLR Partnerships for the LLR Interests and our carrying value of the LLR Interests. We believe
this difference will be approximately $8.2 million based upon an
offering price of $6.93 per
share, which was the closing price of the common stock on
March 24, 2005. 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. We used the proceeds from the Term Loan and a drawdown from the
Senior Revolving Facility 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 $360,000 in connection with this transaction in the first quarter of
2005. - 23 -




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Contractual Obligations The following table represents our contractual obligations at December 31, 2004: Payment Due by Period($ thousands)Less
    
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    
    1-3
    
    
    3-5
    
    
    thanTotal
    
    
    year
    
    
    years
    
    
    years
    
    
    5 yearsLong-term debt obligations
    
    $
    55,659
    
    
    $
    5,406
    
    
    $
    35,674
    
    
    $
    14,579
    
    
    $
    Capital lease obligations
    
    
    587
    
    
    
    225
    
    
    
    289
    
    
    
    73
    
    
    
    Operating lease obligations
    
    
    47,535
    
    
    
    10,984
    
    
    
    16,648
    
    
    
    10,394
    
    
    
    9,509Purchase obligations
    
    
    539
    
    
    
    293
    
    
    
    239
    
    
    
    7
    
    
    
    Total contractual obligations
    
    $
    104,320
    
    
    $
    16,908
    
    
    $
    52,850
    
    
    $
    25,053
    
    
    $
    9,509
 As of December 31, 2004, long-term debt obligations included expected interest payments on the
Secured Subordinated Notes, the Unsecured Subordinated Notes and the Senior Revolving Facility.
The interest on the Senior Revolving Facility is based on LIBOR plus 300 basis points, which
totaled 5.56% as of December 31, 2004, or the prime interest rate plus 100 basis points, which
totaled 6.25% as of December 31, 2004. See Recent Developments above for a discussion of our
March 2005 debt refinancing. Pursuant to the terms of a September 1, 2000 Purchase Agreement, we sold and the LLR
Partnerships purchased in a private placement (1) 1,176,458 shares of our Common Stock, (2) 10
shares of the Series B Preferred Stock, and (3) warrants to purchase 740,500 shares of our Common
Stock at an exercise price of $12.00 per share, for aggregate gross proceeds of $10 million. At
any time on or after September 1, 2005, the LLR Partnerships may exchange each share of Common
Stock for one-half of a share of our Series C Preferred Stock. After conversion, the holders of
Series C Preferred Stock are entitled to receive cumulative quarterly cash dividends at an annual
rate of $2.04 per share, or an aggregate of $1.2 million per annum. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based
upon our 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 us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. We base our estimates on historical experience and on
assumptions that we believe to be reasonable under the circumstances. Actual results may differ
from these estimates, and the estimates will change under different assumptions or conditions. We believe that the implementation of the following critical accounting policies, used in the
preparation of our consolidated financial statements, introduces the most significant levels of
judgments and estimates. - 24 -




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Revenue Recognition Service revenue is recognized when earned, generally as work is performed in accordance with
the provisions of Staff Accounting Bulletin No. 104. Services performed vary from contract to
contract and are not uniformly performed over the term of the arrangement. In our market research
and social research segments, revenues under fixed-price contracts are recognized on a proportional
performance basis. Performance is based on the ratio of costs incurred to total estimated costs
where the costs incurred represent a reasonable surrogate for output measures of contract
performance, including survey design, data collection, survey analysis and presentation of
deliverables to the client. Progress on a contract is matched against project costs and costs to
complete on a periodic basis. Provision for estimated contract losses, if any, is made in the
period such losses are determined. Customers are obligated to pay as services are performed, and
in the event that a client cancels the contract, the client is responsible for payment for services
performed through the date of cancellation. Revenues under cost-reimbursement contracts are recognized as costs are incurred. Applicable
estimated profits are included in earnings in the proportion that incurred costs bear to total
estimated costs. Incentives, award fees or penalties related to performance are also considered in
estimating revenues and profit rates based on actual and anticipated awards. See Item 1, Business
 Government Contracts for a discussion of the types of contracts we have with the U.S. federal
government. Revenues under time-and-materials contracts are recognized as costs are incurred. In our teleservices segment, revenues are recognized at the time services are performed. Goodwill and Other Intangible Assets We have significant intangible assets related to goodwill. In assessing the recoverability of
our goodwill and other identifiable intangibles, we must make assumptions regarding estimated
future cash flows and other factors, such as trading and transaction multiples, and for other
identifiable assets, valuation estimates for items such as backlog and outstanding proposals, to
determine the fair value of the respective assets. If these estimates or their related assumptions
change in the future, we may be required to record impairment charges for these assets. On January
1, 2002, we adopted Statement No. 142, which requires us to analyze our goodwill for impairment on an
annual basis. At the date of adoption, we reclassified assembled workforce intangible assets with
an unamortized balance of $865,000 to goodwill and recorded as a cumulative effect of a change in
accounting principle, goodwill impairment related to our Mexican subsidiary of $292,000, or $(0.05)
per share. During 2002 we identified other intangible assets with useful lives that could no
longer be determined. As a result, we reclassified $480,000 from other intangible assets to
goodwill in the fourth quarter of 2002. In the fourth quarter of 2002, we recorded a non-cash
impairment charge of $5.9 million to reduce the carrying value of goodwill in U.S. market research. In the fourth quarter of 2003, we recorded non-cash impairment charges to reduce the carrying
values of goodwill in the amount of $10.0 million in teleservices, $6.0 million in U.S. market
research and $317,000 in our Korean subsidiary. - 25 -




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The significant assumptions used in determining the market value of the teleservices business
were as follows:  
    0.3 times trailing twelve-month revenues for comparable publicly-traded companies;
    3.7 times trailing twelve-month earnings before interest, taxes, depreciation and
amortization for comparable publicly-traded companies;
    0.5 times trailing twelve-month revenues for comparable sales transactions;
    multiples of earnings before interest, taxes, depreciation and amortization for
comparable sales transactions were not included given the absence of profitable
comparable companies;
    for a five-year financial projection, a discount rate of 20.0%; an exit multiple of
2.5 times earnings before interest, taxes, depreciation and amortization; a compound
growth rate for revenues of 6.4% and an improvement in operating income as a percentage
of revenues from 13.3% to 15.4%; and
    in the overall evaluation, the publicly-traded comparable data was discounted 45.0%
to reflect the netting of discounts for marketability, company size and customer
concentration and a control premium. The significant assumptions used in determining the market value of the U.S. market research
business were as follows:  
    1.2 times trailing twelve-month revenues for comparable publicly-traded companies;
    9.6 times trailing twelve-month earnings before interest, taxes, depreciation and
amortization for comparable publicly-traded companies;
    0.6 times trailing twelve-month revenues for comparable sales transactions;
    6.6 times trailing earnings before interest, taxes, depreciation and amortization
for comparable sales transactions;
    for a five-year financial projection, a discount rate of 16.0%; an exit multiple of
6.0 times earnings before interest, taxes, depreciation and amortization; a compound
growth rate for revenues of 7.5% and no improvement in operating income as a percentage
of revenues; and
    in the overall evaluation, the publicly-traded comparable data was discounted 15.0%
to reflect the netting of discounts for marketability and company size and a control
premium. The valuation metric assumptions used in the goodwill impairment analyses performed on our
teleservices and U.S. market research segments differed significantly for two principal reasons.
First, because these two segments were and continue to be engaged in very different types of
business, they were and must continue to be compared to very different types of companies and
transactions. In performing this analysis of market comparables, we determined that both the
public-trading comparables and the relevant-sale transaction comparables were very different for
these two segments at the time of comparison. Second, - 26 -




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because the two segments had very different
types of operating risks at the time, we used different weighted average costs of
capital and different discount rates for lack of marketability in these analyses. One of the most
significant differences in operating risks between these two segments was the nature and mix of the
client contracts when viewed in the context of the then-current market conditions. Both of these
factors led to the use of lower valuation metric assumptions for the teleservices segment at the
time we performed the analyses. Deferred Tax and Valuation Allowance Deferred tax assets and liabilities are determined based on the temporary differences between
financial statement and tax basis of assets and liabilities and are measured using the enacted tax
rates and laws that are expected to be in effect when the temporary differences are expected to reverse.
Recognition of deferred tax assets is limited to amounts considered to be more likely than not to
be realized in future periods. At December 31, 2004 we had net deferred tax assets of $6.3 million before the application of
a valuation allowance. Of this amount, $2.7 million is made up of state deferred tax assets of
subsidiaries that have not been profitable. We recognize that it is not more likely than not that
the future tax benefits of these assets will be realized.
Accordingly, we have recorded a
$2.7 million valuation allowance against these assets. We believe that all of the deferred tax
assets for federal and non-U.S. income tax purposes will be fully realized. In order to fully
realize these tax assets, we must have pre-tax earnings in the U.S. of $10.2 million and pre-tax
earnings outside the U.S. of $497,000. Recent Accounting Pronouncements Effective January 1, 2003, we adopted FASB Statement No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, (Statement No. 146), which requires liabilities for costs
associated with exit or disposal activities to be recognized when the liabilities are incurred,
rather than when an entity commits to an exit plan. Statement No. 146 also establishes that the
liability should initially be measured and recorded at fair value. This rule changed the timing of
liability and expense recognition related to exit or disposal activities, but not the ultimate
amount of such expenses. In 2003, we reduced our workforce in the U.S. market research operating segment and, as a
result, incurred one-time termination benefits of approximately $705,000 for the termination of
certain employees. These termination benefits were recognized in accordance with Statement No. 146
and included in our results of operations for the year ended December 31, 2003. During 2004, we
paid out all previously accrued termination benefits from 2003. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51 (Interpretation No. 46).
Interpretation No. 46 requires the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a majority of the entitys expected residual
returns, or both, as a result of ownership, contractual or other financial interests in the entity.
Currently, entities are generally consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting interest in the entity. In
December 2003, the FASB issued Interpretation No. 46 (R) (Interpretation No. 46 (R)),
which clarified and amended Interpretation No. 46. Interpretation
No. 46 (R) requires existing
unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse - 27 -




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risk among the parties involved. Interpretation No. 46 (R)
also enhances the disclosure requirements related to variable interest entities. Interpretation No.
46 applied immediately to variable interest entities created after January 31, 2003 and, with
respect to variable interest entities created before February 1, 2003, Interpretation No. 46 (R)
applied for the quarter ended March 31, 2004. During 2001, we formed the Joint Venture with Ratrix Analytics LLC for the purpose of
developing new research-based products. As of December 31, 2004,
we had a 44.8% ownership interest and 50% voting interest
in the Joint Venture. In 2004, we contributed $0 in services and cash and, since inception, have
contributed an aggregate of $1.7 million. All amounts funded to date have been expensed. We are
not obligated for future funding of the Joint Venture. As the Joint Venture has a sufficient amount of equity to absorb the entitys expected loss,
the equity owners as a group are able to make decisions about the entitys activities, and the
equity owners have the obligation to absorb expected losses and the rights to receive the expected
residual returns, we believe that the Joint Venture is not a variable interest entity under the
principal criteria as set forth in Interpretations No. 46 and 46 (R) and, accordingly, we are not
required to apply the consolidation provision under Interpretations No. 46 and 46 (R). The
application of Interpretations No. 46 and 46 (R) in 2003 and 2004 had no impact on our results of
operations, financial position or cash flows. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (Statement
No. 150). Statement No. 150 requires that certain financial instruments with characteristics of
both liabilities and equity, including mandatory redeemable financial instruments, be classified as
a liability. Any amounts paid or to be paid to holders of these financial instruments in excess of
the initial measurement amount shall be reflected in interest cost. Statement No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and otherwise will be
effective at the beginning of the first interim period beginning after June 15, 2003. We adopted
Statement No. 150 on July 1, 2003. The adoption of this statement had no impact on our results of
operations, financial position or cash flows. In
December 2004, the FASB 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 Opinion 25, Accounting for Stock Issued to
Employeesand its related interpretations, and eliminates the alternative to use Opinion 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 - 28 -




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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, EPS and cash flows when Statement No. 123(R) is adopted. In December 2004, the FASB issued FSP 109-2, Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provisions within the American Jobs Creation Act of 2004 (the
Act). The Act was signed into law on October 22, 2004. The Act provides for a special one-time
tax deduction of 85% of certain foreign earnings that are repatriated (as defined by the Act) in
either an enterprises last tax year that began before the enactment date, or the first tax year
that begins during the one-year period beginning on the date of enactment. At December 31, 2004,
unremitted earnings of our foreign subsidiaries that could qualify for this special one-time tax
deduction of 85% were approximately $384,000. Because at this time it is our intention to
indefinitely reinvest these earnings, no U.S. taxes have been provided. If, upon further
evaluation of this provision, we conclude that we will repatriate these unremitted foreign
earnings, the tax expense recognized would be approximately $20,000. Inflation and Foreign Currency Exchange Inflation has not had a significant impact on our operating results to date, nor do we expect
it to have a significant impact through 2005. Foreign currency exchange fluctuations did not have
a material impact on our operating results from 2002 to 2004. As we continue to expand our
international operations, exposures to gains and losses from foreign currency fluctuations will
increase. It has not been our practice to enter into foreign exchange contracts, but such
contracts may be used in the future if we deem them to be an appropriate resource to manage our
exposure to movements in foreign currency exchange rates. - 29 -




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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, our actual operating results and could
cause our actual
consolidated results for 2005 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of us. Risks Related to Our Business General economic and industry-specific factors beyond our control may adversely affect our
business by causing demand for our services to decline. A number of factors beyond our control could decrease the demand of our existing clients for
our services and impair our ability to attract new clients. These include marketing budgets,
general economic conditions, business consolidations, government spending, and other
industry-specific trends. Changes in management or ownership of an existing client are also factors
that could affect the clients demand for our services. As a result, we may provide different
levels of services to our clients from year to year, and these differences can cause a decline in
or contribute to fluctuations in our operating results. Our business could suffer if we were to lose the business of SAMHSA, USAID or one or more of our
other large clients. SAMHSA and USAID are our largest clients. SAMHSA represented 17.8% of our revenues and 24.7%
of our backlog at December 31, 2004. USAID, our second largest client, represented 12.3% of our
revenues and 40.9% of our backlog at December 31, 2004. Services we provided to various U.S.
federal and state governmental departments and agencies, including SAMHSA and USAID, generated
approximately 60.7% of our revenues in 2004. Our clients generally may terminate the services we
provide to them at any time. If we lose one or more of our large clients, such as SAMHSA or USAID ,
or if one or more of our large clients reduces its business with us, our revenues could decline. We have incurred losses in recent years and may not be profitable in the future. These losses
may adversely affect our business and the market price of our stock. We incurred net losses of $2.9 million in 2002 and $8.9 million in 2003. We may not be able to
attain or increase profitability in the future on a quarterly or annual basis. Any future losses
may adversely affect our business and the market price of our stock. Covenants in our loan agreements could adversely affect our business by limiting our operational
and financial flexibility. Our present credit agreements contain customary financial and operating covenants. These
covenants limit or prohibit, among other things, our ability to incur additional debt, prepay
specified types of indebtedness, pay dividends, make investments, sell assets, or engage in mergers
and acquisitions. These covenants could adversely affect our business by limiting our operational
and financial flexibility. - 30 -




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We may enter into acquisitions that may be difficult to integrate, disrupt our business, dilute
stockholder value or divert management attention. We have evaluated, and expect to continue to evaluate, a wide array of possible acquisitions.
We cannot assure you that any acquisition we make in the future will provide us with the benefits
we anticipated in entering into the transaction. Acquisitions are typically accompanied by a number
of risks, including:  
    difficulties in integrating the operations and personnel of the acquired companies;
    maintenance of acceptable standards, controls, procedures and policies;
    potential disruption of ongoing business and distraction of management;
    impairment of relationships with employees and customers as a result of any
integration of new management and other personnel;
    inability to maintain relationships with customers of the acquired business;
    difficulties in incorporating acquired technology and rights into our services;
    unexpected expenses resulting from the acquisition;
    potential unknown liabilities associated with acquired businesses; and
    unanticipated expenses related to acquired technology and its integration into our
existing technology. In addition, acquisitions may result in the incurrence of debt, restructuring charges and
large one-time write-offs, such as write-offs for acquired in-process research and development
costs. Acquisitions may also result in goodwill and other intangible assets that are subject to
impairment tests, which could result in future impairment charges. Furthermore, if we finance
acquisitions by issuing convertible debt or equity securities, the holdings of our existing
stockholders may be diluted and earnings per share may decline. Fluctuations in our quarterly and annual operating results may cause unanticipated decreases in
available cash and may cause the value of our stock to decline. A number of factors, many of which are outside our control, may cause or contribute to
significant fluctuations in our quarterly and annual revenue and operating results. These
fluctuations may make financial planning and forecasting more difficult. In addition, these
fluctuations may result in unanticipated decreases in our available cash, which could negatively
impact our operations. These fluctuations also could increase the volatility of our stock price. - 31 -




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A number of factors cause our revenues, cash flow and operating results to vary from quarter
to quarter, including:  
    fluctuations in revenues earned and expenses incurred on fixed-price contracts and
contracts with a performance-based fee structure;
    commencement, completion or termination of contracts during any particular quarter;
    variable purchasing patterns under government and commercial contracts; and
    changes in policy or budgetary measures that adversely affect government and
commercial contracts in general. Changes in the number of contracts commenced, completed or terminated during any quarter may
cause significant variations in our revenues and, because a relatively large amount of our expenses
are fixed, in our operating results. In addition, payments due to us from government agencies may
be delayed due to billing cycles or as a result of delayed approvals of governmental budgets by
legislative, executive or other governmental bodies. Our operating results may suffer if there are additional significant goodwill write-offs. Goodwill related to acquisitions represents a substantial portion of our total assets. In the
fourth quarter of 2003, we wrote off impaired goodwill in the aggregate amount of $16.3 million.
At December 31, 2004, the net goodwill amount on our
consolidated balance sheet represented 33.5%
of our total assets. Goodwill is an intangible asset and represents the excess of the purchase
price that we paid for acquired businesses over the estimated fair market value of the net assets
of those businesses. If the fair value of the goodwill, determined in accordance with applicable
accounting standards, falls below the recorded value shown on the balance sheet, we will be
required to write off the excess goodwill. Any future write-off would be treated as an expense and,
although non-cash in nature, would adversely affect our operating results by reducing net income. If we lose key management or are unable to attract and retain the personnel required for our
business, our operating results could suffer. We are a service business, and as such we are dependent upon the efforts and skills of our
senior executives and other key employees. The cumulative effect of losing several of these
individuals could hurt our business. We do not currently maintain key person life insurance
policies on any of our executives other than John F. Short, our Chief Executive Officer.
Competition for senior management is intense, and in the future we may not be successful in
retaining key personnel or in attracting and retaining other personnel that we may require. Our clients spending priorities may change in a manner which could negatively affect our
revenues. A majority of our revenues result from services we provide to the U.S. federal government;
therefore, our business depends upon continued U.S. federal government expenditures. A significant
decline in government expenditures, or a shift of expenditures away from programs for which we
provide services, could adversely affect our business. In addition, it has been our experience that
our commercial - 32 -




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clients generally view their expenditures for our services as discretionary. If our
commercial clients budgets for
discretionary spending on programs for which we provide services decrease or if their
priorities for spending shift in a manner that results in a significant decline in research
expenditures, our business could be adversely affected by the loss of revenues. Our contracts with the U.S. federal government grant the government rights that are typically
not found in commercial contracts and that could adversely affect our revenues and income. We presently have approximately 450 active contracts and task orders with the U.S. federal
government which represented approximately 55.6% of our revenues for the year ended December 31,
2004. There are inherent risks in contracting with the U.S. federal government which could have an
adverse effect on our business. All contracts with the U.S. federal government contain provisions,
and/or are subject to laws and regulations, that give the government rights and remedies not
typically found in our commercial contracts, including rights that allow the government to:  
    claim rights in and ownership of products and systems that we produce;
    adjust contract costs and fees on the basis of audits completed by its agencies;
    suspend or debar us from doing business with the U.S. federal government; and
    release information obtained from us in response to a Freedom of Information Act request. The U.S. federal government has the right to terminate its contracts with us at any time and
such terminations could adversely affect our revenues and income. The U.S. federal government has the right to terminate its contracts with us at any time. If
the U.S. federal government terminates a contract, we may recover only our incurred or committed
costs, settlement expenses and profit on work completed before the termination. If the government
terminates a contract for default, we may not recover even those amounts, and instead may be liable
for excess costs incurred by the government in procuring undelivered items and services from
another source. Additionally, most of our backlog could be reduced by any modification or
termination of contracts that we have with the U.S. federal government or, in cases where we are a
subcontractor, contracts that our prime contractors have with the U.S. federal government. As a contractor to the U.S. federal government, we are subject to restrictions and compliance
requirements that could divert the attention of our management, drain our resources and/or
result in additional costs, fines or other penalties. As a contractor to the U.S. federal government, we are subject to various laws and regulations
that are more restrictive than those applicable to non-government contractors. We are required to
obtain and maintain material governmental authorizations and approvals to conduct our business as
it is currently conducted. New or more stringent laws or governmental regulations concerning
government contracts could hurt our business by limiting our flexibility and by potentially causing
us to incur additional expenses. We also must comply with and are affected by laws and regulations relating to the formation,
administration and performance of U.S. federal government contracts. These laws and regulations
affect - 33 -




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how we do business with our U.S. federal government clients and may result in added costs
for our business. For example, we are required to comply with the Federal Acquisition Regulations
and all supplements, which comprehensively regulate the formation, administration and performance
of U.S.
federal government contracts, and the Truth in Negotiations Act, which requires certification
and disclosure of cost and pricing data in connection with contract negotiations. If a government
review or investigation uncovers improper or illegal activities, we may be subject to civil and
criminal penalties and administrative sanctions, including:  
    termination of contracts;
    forfeiture of profits;
    suspension of payments;
    fines; and
    suspension or debarment from doing business with U.S. federal government agencies. Any of the sanctions could adversely affect our business, prospects, financial condition, or
operating results. We may not receive the full amount authorized under contracts that we have entered into and our
backlog may be lower than we have projected, both of which could reduce our future revenues. We define backlog as the total contract value of our engagements that our management believes
to be firm, less previously recognized revenues. Our backlog includes the amounts of our commercial
contracts, the funded and unfunded amounts of our government contracts, and options to renew or
extend government contracts that we expect our clients to exercise. However, the maximum contract
value specified under each contract that we enter into is not necessarily indicative of the
revenues that we will realize under that contract. Because we may not receive the full amount we
expect under a contract, our estimates of our backlog may not prove to be accurate since the actual
recognition of revenues on programs included in backlog may never occur or may change. Estimates of
future revenues included in backlog are not necessarily precise and the receipt and timing of any
of the revenues are subject to contingencies, many of which are beyond our control. For a
discussion of these contingencies, see Special Note Regarding Forward-Looking Statements in this
Annual Report on Form 10-K. Our competitors could challenge successfully the award of a government contract to us,
causing us to lose the contract, which could reduce our future revenues. A unique feature of U.S. federal government contracting allows a contractor that loses a prime
contract award to protest the contract award to its competitor and obtain an independent review of
the agencys decision-making process. A contractor may also protest the terms of a bid solicitation
if it believes those terms to be unfair or anticompetitive. If one or more of our competitors
challenges a contract awarded to us, the government may ultimately determine that it is necessary
for the contract to undergo a new round of evaluation and competition, and our contract with the
government may be terminated. A successful challenge by a competitor could cause us to lose a
contract that might otherwise be awarded to us and reduce our future revenues. - 34 -




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Our government contracts are subject to audits and cost adjustments by the U.S. federal
government, which could hurt our operating results. The U.S. federal government audits and reviews our performance on contracts, pricing
practices, cost structure and compliance with applicable laws, regulations and standards.
Responding to governmental audits, inquiries or investigations may involve significant expense and
divert the attention of our management. An audit of our work, including an audit of work performed
by companies we have acquired or may acquire, could result in a substantial adjustment to our
revenues because any costs determined by the government to be improperly allocated to a specific
contract will not be reimbursed, and revenues we have already recognized may need to be refunded.
If a U.S. federal government audit results in allegations of improper or illegal activities by us
or our employees and if we are unable to successfully defend against those allegations, we may be
subject to civil and criminal penalties and administrative sanctions, including termination of
contracts, forfeiture of profits, suspension of payments, fines and suspension, or debarment from
doing business with U.S. federal government agencies. In addition, we could suffer serious harm to
our reputation if allegations of impropriety were made against us regardless of the merits of any
such allegation. In addition, the U.S. federal government may conduct non-audit reviews on a
majority of our government contracts, which in turn could lead to full audit reviews by the
government. We may not accurately estimate the expenses, time and resources necessary to satisfy our
contractual obligations, which could hurt our operating results. We enter into three types of contracts with our clients: fixed-price, cost-reimbursement and
time-and-materials. For the year ended December 31, 2004, we derived approximately 39.8% of our
consolidated revenues from fixed-price contracts, 45.9% of our consolidated revenues from
cost-reimbursement contracts and 14.3% of our consolidated revenues from time-and-materials
contracts. Under fixed-price contracts, we provide specified services for a fixed price. Compared
to cost-reimbursement contracts, fixed-price contracts generally offer higher margin opportunities,
but involve greater financial risk because we bear the impact of cost overruns. Our profits could
be adversely affected if our costs under any of these contracts exceed the assumptions we used in
bidding for or negotiating the contract. Under cost-reimbursement contracts, we are reimbursed for
allowable costs and paid a fee, which may be fixed or performance-based. To the extent that the
actual costs incurred in performing a cost-reimbursement contract are within the contract ceiling
and allowable under the terms of the contract and applicable regulations, we are entitled to
reimbursement of our costs, plus a profit. However, if our costs exceed the ceiling or are not
allowable under the terms of the contract or, in the case of government contracts, by applicable
regulations, our income may be adversely affected because we may not be able to recover those
costs. Under time-and-materials contracts, we are reimbursed for labor at negotiated hourly billing
rates and for expenses. We assume financial risk on time-and-materials contracts because we assume
the risk of performing those contracts at negotiated hourly rates. If our employees engage in misconduct or other improper activities, we could be subject to
various penalties and liabilities. We are exposed to the risk that employee fraud or other misconduct could occur and would
expose us, as well as the individual employee, to various penalties and liabilities, including
those under the Federal False Claims Act. Misconduct by employees could include intentional or
unintentional failures to comply with U.S. federal government procurement regulations or failure to
disclose unauthorized or unsuccessful activities to us. It is not always possible to deter employee
misconduct, and - 35 -




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the precautions we take to prevent and detect this activity  including our
policies and procedures  may not be effective in controlling unknown or unmanaged risks or losses. Our competitors could obtain, and use to our detriment, confidential information about us
obtained through a request under the Freedom of Information Act. Our competitors may be able to obtain confidential information about us, such as our cost or
pricing policies, in a request under the Freedom of Information Act. The competitor could use this
information as the basis for a successful challenge to the award of a contract to us or to gain a
competitive business advantage that it might use to our detriment in future bid solicitations. Our international operations subject us to social, political and economic risks of doing
business in foreign countries. Approximately 14.8% of our revenues for the year ended December 31, 2004 were generated from
contracts performed outside of the U.S., and a portion of those revenues was denominated in
currencies other than the U.S. dollar. We are exposed to foreign currency risk to the extent that
the results of our foreign operations may decline in value as measured in U.S. dollars. It has not
been our practice to enter into foreign exchange contracts to protect against adverse foreign
currency fluctuations, and we cannot predict whether future exchange rate fluctuations will
significantly harm our operations or financial results. In addition to adverse fluctuations in
foreign currency exchange rates, we are exposed to further risks inherent in doing business abroad,
including limitations on asset transfers, changes in foreign regulations and political turmoil, all
of which could adversely affect our operating results. Several of our purported stockholders have filed a lawsuit against us, which could
result in significant legal costs and divert management attention from the operation of our
business. On December 2, 2004, several of our purported stockholders filed a derivative complaint
against us and our directors in the Chancery Court of the State of Delaware alleging, among other
things, that our directors breached their fiduciary duties of good faith and loyalty to us and our
stockholders. The lawsuit seeks injunctive relief, rescissory damages and costs related to the
suit. We could incur significant costs defending the lawsuit, and management attention could be
diverted from other important business concerns. An adverse determination in the lawsuit may harm
our business. For more information about this lawsuit, see Item 3. Legal Proceedings in this
Annual Report on Form 10-K. Risks Related to Our Industry The marketing research industry is vulnerable to general economic conditions, which may cause
our revenues to decline. Many of our clients treat all or a portion of their marketing research expenditures as
discretionary. If general economic conditions worsen and these companies seek to control variable
costs, research projects for which we have been engaged to collect data may be delayed or
cancelled, and new project bookings may decrease. As a result, our revenues may decline. - 36 -




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Our industry is competitive, and larger, better financed competitors may be more successful
in obtaining clients than we are. We face competition in connection with most of the services we provide. Other companies,
including some with greater financial resources than we have, may offer a range of services similar
to those offered by us, or may otherwise compete more effectively in the research and information
services industry. We regularly experience significant competition for clients seeking research
services from a large number of our competitors. These competitors include market research
companies, advertising agencies, and business consulting firms. We compete for research clients
with a large number of firms that vary in size as well as with not-for-profit organizations. For
telemarketing services clients, we compete with a large number of telemarketing companies. Our business may suffer if state and U.S. federal government do not call list regulations
are made applicable to market research phone calls. Our business may be restricted by the development of various U.S. federal and state do not
call lists and other privacy regulations that permit consumers to protect themselves from
unsolicited telemarketing telephone calls. In 2003, the Federal Trade Commission amended its rules
to establish a national do not call registry. Generally, vendors are prohibited from calling
anyone on that registry unless the consumer has initiated the contact, has given prior consent or
has an ongoing business relationship with the vendor for whom the calls have been made. Although
do not call list regulations do not currently apply to market research phone calls, new
legislation or regulation could eliminate the current market research exemption. If do not call
list regulations become applicable to market research phone calls, our results of operations may be
adversely affected by the loss of revenues. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report 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 described under the heading Risk Factors and
elsewhere in this report, 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); - 37 -




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
    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 risks described in this Annual Report on Form 10-K under the heading
Risk Factors. 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. 
 Item 7A.Quantitative and Qualitative Disclosures About Market Risk Market risks relating to our operations result primarily from changes in interest rates and
changes in foreign exchange rates. We monitor interest rate and foreign exchange rate exposures on
an ongoing basis. We have in the past entered into interest rate hedging contracts and will
continue to evaluate their appropriateness. As of December 31, 2004, we were not a party to any
interest rate hedging contract. 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 on our
revenues, cost of revenues and operating expenses when considered individually, the net impact on
our results of operations has not been significant. - 38 -




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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 December 31, 2004 by expected maturity dates. Principal Amount by Expected MaturityAverage Interest Rate($ thousands)There-
    
    
    
    
    
    
    Fair Value2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    after
    
    
    Total
    
    
    12/31/04LiabilitiesLong-term debt including current portion:Variable rate debt:LIBOR +3%, Prime +1%
    
    
    
    
    
    
    
    
    
    $
    22,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22,270
    
    
    $
    22,270Fixed rate debt  10%
    
    $
    1,500
    
    
    $
    2,000
    
    
    $
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,500
    
    
    $
    8,931Fixed rate debt  15.5%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,077
    
    
    
    
    
    
    $
    12,077
    
    
    $
    12,258
 
 Item 8.Financial Statements and Supplementary Data Our financial statements, together with the report of our independent registered public
accounting firm, are presented beginning at page F-1 at the end of this Report. 
 Item 9A.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 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 December 31, 2004 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. 
 Item 9B.Other Information None. - 39 -




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PART III 
 Item 10.Directors and Executive Officers of the Registrant We have adopted a Code of Conduct that applies to our directors, officers and employees,
including our principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions. Our Code of Conduct is located on
our website at www.opinionresearch.com. We intend to satisfy the disclosure requirements under
Item 10 of Form 8-K regarding an amendment or waiver from a provision of the Code of Conduct that
applies to our principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions and that relates to certain topics by
posting such information on our website at www.opinionresearch.com. Any shareholder may request
this information in print form from the Companys Secretary at 600 College Road East, Suite 4100,
Princeton, NJ 08540. Executive Officers and Directors of the Registrant The following table sets forth certain information concerning the executive officers and
directors of our company as of February 25, 2005. Name
    
    Age
    
    TitleJohn F. Short
    
    
    60
    
    
    Chairman of the Board and Chief Executive Officer;
DirectorFrank J. Quirk
    
    
    64
    
    
    President of Opinion Research Corporation and Chief
Executive Officer of ORC Macro; DirectorDouglas L. Cox
    
    
    59
    
    
    Executive Vice President and Chief Financial OfficerRichard I. Cornelius
    
    
    44
    
    
    Senior Vice President of Opinion Research Corporation
and Managing Director of O.R.C. International Ltd.
(U.K.)Kevin P. Croke
    
    
    46
    
    
    Executive Vice President and Director of FinanceE. Wayne Holden
    
    
    48
    
    
    Senior Vice President of Opinion Research Corporation
and President of ORC MacroRuth R. Wolf
    
    
    67
    
    
    Executive Vice President of Opinion Research
Corporation and Chief Executive Officer of ORC ProTelDale J. Florio
    
    
    50
    
    
    DirectorJohn J. Gavin
    
    
    48
    
    
    DirectorBrian J. Geiger
    
    
    61
    
    
    DirectorStephen A. Greyser,
D.B.A.
    
    
    69
    
    
    DirectorSteven F. Ladin
    
    
    58
    
    
    DirectorRobert D. LeBlanc
    
    
    55
    
    
    DirectorSeth J. Lehr
    
    
    48
    
    
    Director
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Below is a short summary of the business experience of each of our directors and executive
officers: Mr. Short has served as our Chief Executive Officer and Chairman of our board of directors
since 1999. Mr. Short joined our company and was appointed as our Chief Financial Officer in 1989.
He was elected to the board of directors in 1991. Mr. Short was later appointed Vice Chairman in
1992 and President in 1998. Prior to joining our company, Mr. Short served as the Chief Financial
Officer of Hay Systems, Inc., a management consulting company and a wholly-owned subsidiary of the
Hay Group. Mr. Quirk has served as our President since November 2003 and was elected to our board of
directors in June 2000. Mr. Quirk joined our company in 1999 with the acquisition of ORC Macro,
where he served, and continues to serve, as the Chief Executive Officer since 1980. Under his
direction, ORC Macro has grown from $3 million in annual revenues to over
$128 million in 2004. Mr. Quirk received an M.B.A. from Cornell University. Mr. Cox has served as our Executive Vice President and Chief Financial Officer since October
1998 and as our Secretary since 1999. Prior to joining us, Mr. Cox spent ten years as Senior Vice
President and Chief Financial Officer of Elf Atochem North America, Inc., a specialty chemical
company. Mr. Cox serves on the board of directors of Daou Systems, Inc., a publicly traded
information technology consulting company. Mr. Cox holds an M.B.A. from the Wharton School of the
University of Pennsylvania. Mr. Cornelius has served as Managing Director of O.R.C. International Ltd. since 2003. Mr.
Cornelius joined us in 1993 when we acquired Gordon Simmons Research Group Limited, a U.K. research
company. Mr. Cornelius was appointed Managing Director of Gordon Simmons Research in 1996, Deputy
Managing Director of our combined U.K. operations in 1998, and Managing Director of O.R.C.
International Ltd. in 2003. Mr. Croke has served as our Executive Vice President since 1998 and as our Treasurer since
1999. Mr. Croke joined us in 1991 as Controller, and he has since served in various capacities in
our finance department. Mr. Croke served as our Director of Finance from 1995 until his
appointment as Executive Vice President in 1998. Mr. Croke holds an M.B.A. from Case Western
Reserve University. Dr. Holden has served as the President of ORC Macro since 2003. He joined us in 1999 with our
acquisition of ORC Macro, in which he then held the position of Technical Director. In 2002, Dr.
Holden was appointed Senior Vice President and Managing Director of our Applied Research Division.
Dr. Holden holds a Ph.D. in Clinical/Community Psychology from the University of South Carolina. Ms. Wolf has served as the Chief Executive Officer of ORC ProTel since 1998. She joined us
in 1998 with our acquisition of ORC ProTel, which she co-founded in 1988. Ms. Wolf has over 30
years of experience in telemarketing. Mr. Florio was elected to our board of directors in July 1999. Mr. Florio is an attorney and
co-founder of the Princeton Public Affairs Group, a firm specializing in public relations, public
affairs, and government relations. Immediately prior to co-founding the Princeton Public Affairs
Group in 1987, Mr. Florio was responsible for managing Philip Morris state and local government
affairs program throughout all 50 states. Before joining Philip Morris, Mr. Florio served as a
federal public affairs representative with the National Association of Manufacturers and as an
administrative assistant to a - 41 -




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member of the New Jersey General Assembly. Mr. Florio received a law
degree from Seton Hall Law School. Mr. Gavin was elected to our board of directors by the holders of our Series B Preferred Stock
in October 2000 pursuant to the terms of the Opinion Research Corporation Designation of Series B.
Preferred Stock. Until February 2004, Mr. Gavin was President and Chief Operating Officer of Right
Management Consultants, Inc. Right Management Consultants, Inc. is the worlds largest career
management and outplacement firm with revenues in excess of $450 million. Mr. Gavin joined Right
Management Consultants, Inc. in 1996 as Executive Vice President. Prior to joining Right
Management Consultants, Inc., Mr. Gavin was a Partner with Andersen Worldwide. Mr. Gavin joined
Andersen Worldwide in 1978 and was made Partner in 1990. Mr. Gavin serves on the boards of
directors of Catholic Health East and Interline Brands, Inc., a
publicly traded direct marketing and specialty
distribution company, and is on the Advisory Board of Temple Universitys School of Business. Mr.
Gavin is a certified public accountant. Mr. Geiger was elected to our board of directors in December 2003. Mr. Geiger is a Managing
Director with the Hermes Group, a private merchant banking firm. Prior to joining the Hermes
Group, Mr. Geiger was Executive Vice President and Chief Financial Officer of Claneil Enterprises,
Inc., a privately owned, diversified holding company investing in both publicly and privately held
corporations, from November 1997 to March 2004. Prior to joining Claneil, he was Vice President,
Finance and Chief Financial Officer for The Liposome Company, Inc., a Princeton, New Jersey-based
biopharmaceutical company. Prior to joining Liposome in 1995, Mr. Geiger spent 24 years with
Johnson & Johnson, serving as Chief Financial Officer for various Johnson & Johnson companies. Mr.
Geiger currently serves on the board of directors of Immunicon Corporation, a publicly traded
medical diagnostics company, and is also a member of the board of advisors of FEI Corporation, a
womens healthcare company. Mr. Geiger received an M.B.A. from Seton Hall University and is a
certified management accountant. Professor Greyser has been a member of our board of directors since 1993. Professor Greyser
is the Richard P. Chapman Professor (Marketing/Communications) Emeritus at Harvard Business School,
where he has been on the faculty for over 35 years. Professor Greyser was associated with the
Harvard Business Review for 35 years as an editor, research director, Editorial Board Secretary and
Chairman. Since 1972, Professor Greyser has been a Trustee or member of the Executive Directors
Council of the Marketing Science Institute, a non-profit business-supported research center in
marketing; and from 1972 through 1980, he served as its Executive Director. From 1985 through
1993, Professor Greyser served on the board of directors of the Public Broadcasting Service, where
he was Vice Chairman from 1991 through 1993. In addition he has served as director or trustee on
several corporate and non-profit boards. Professor Greyser received M.B.A. and D.B.A. degrees from
Harvard University. Mr. Ladin was elected to our board of directors in December 2003. Mr. Ladin retired in 2004
as Chairman, President and Chief Executive Officer of Clinical Analysis Corporation or CAC, a
medical diagnostic products development company. Prior to joining CAC in 2002, Mr. Ladin was Vice
President and Chief Financial Officer of Sybron Chemicals, Inc., a specialty chemical company, for
three years. Prior to joining Sybron Chemicals in 1998, Mr. Ladin was Controller of DuPont Merck
Pharmaceuticals Company since its inception in 1990. Mr. Ladin joined DuPont Merck Pharmaceuticals
after 14 years with DuPont in various financial positions. Mr. Ladin has public accounting
experience with Arthur Andersen & Co. and serves on the Board of Trustees of Delaware Hospice, Inc.
Mr. Ladin is a certified public accountant. - 42 -




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Mr. LeBlanc was elected to our board of directors in December 2003. Mr. LeBlanc retired in
March 2003 as President and Chief Executive Officer of Handy & Harman, a diversified industrial
manufacturer, and as Executive Vice President and a Director of Handy & Harmans parent company,
WHX Corporation. Prior to joining Handy & Harman in 1996, Mr. LeBlanc spent 12 years with Elf
Atochem North America, Inc., a specialty chemicals company, where he was an Executive Vice President.
Mr. LeBlanc currently serves on the board of directors of Church & Dwight Co., Inc., a publicly
traded consumer goods manufacturing company. Mr. Lehr was elected to our board of directors by the holders of our Series B Preferred Stock
in October 2000 pursuant to the terms of the Opinion Research Corporation Designation of Series B
Preferred Stock. Mr. Lehr is a founding partner of LLR Equity Partners, L.P., a $620 million
private equity fund founded in 1999. Prior to forming LLR, Mr. Lehr was a Managing Director and
group head of the investment banking division of Legg Mason Wood Walker from 1992 to 1999. Mr.
Lehr currently serves on the board of directors of ICT Group, Inc., a publicly traded telemarketing
company. Mr. Lehr is involved in a number of charitable activities and has served on various
community boards. Mr. Lehr received his M.B.A. from the Wharton School of the University of
Pennsylvania. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our executive officers and directors and persons
who own more than 10% of a registered class of our equity securities (collectively, the Reporting
Persons) to file reports of ownership and changes in ownership with the Securities and Exchange
Commission (the SEC) and to furnish us with copies of these reports. Based on our review of the
reports received, we believe that all filings required to be made by the Reporting Persons for 2004
were made on a timely basis. Board of Directors Our business is managed under the direction of our board of directors, which meets regularly
during the year to review significant developments affecting our business and act on matters
requiring the board of directors approval. The board of directors met six times during the year
ended December 31, 2004, took certain actions by unanimous consent and held periodic informal
telephonic updates. Each member of the board of directors holds office until the next annual meeting of our
stockholders or until his successor has been duly elected and qualified. The board of directors
has established the six standing committees set forth below:  
    an Executive Committee;
    an Audit Committee;
    a Compensation Committee;
    a Stock Option Committee (Executive Officers);
    a Stock Option Committee (Non-Executive Officers); and
    a Nominating Committee. - 43 -




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##### Table of Contents



The Audit Committee, Compensation Committee and Nominating Committee have the responsibilities
set forth in written charters adopted by the board of directors. We make available copies of each
of these charters on our website, which is located at www.opinionresearch.com. The Audit Committee The Audit Committees purposes are to provide independent review and oversight of our
financial reporting processes and financial statements, the system of internal controls, the audit
process and results of operations and our financial condition. In doing so, the Audit Committee is
responsible for providing an open avenue of communication between the board of directors,
management and the independent auditors. In connection with its responsibilities, the Audit
Committee is directly and solely responsible for the appointment, compensation, retention,
termination, and oversight of the independent auditors. Messrs. Ladin (Chairman), Gavin and Geiger,
all of whom have been determined to be independent by our board of directors under applicable
NASDAQ National Market listing standards and SEC rules, serve as members of the Audit Committee.
The board of directors has determined that Mr. Ladin qualifies as an audit committee financial
expert, as defined in SEC rules. In addition, each of the other members of the Audit Committee
may also qualify as an audit committee financial expert. The Audit Committee met eight times during
2004. - 44 -




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##### Table of Contents



Item 11.Executive Compensation The following table sets forth, for our last three fiscal years, the cash compensation paid by
us, as well as certain other compensation paid or accrued for those years, to the following named
executive officers. Summary Compensation Table Long-TermCompensationAnnual Compensation
    
    
    AwardsOther Annual
    
    
    Shares Subject
    
    
    All OtherName and Principal Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Compensation (1)
    
    
    to Options (#)
    
    

Compensation
(2)John F. Short
    
    
    2002
    
    
    $
    443,485
    
    
    $
    262,500
    
    
    $
    3,753
    
    
    
    50,000
    
    
    $
    56,220
    (3)(4)Chairman and CEO
    
    
    2003
    
    
    
    445,495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,581
    (3)(4)2004
    
    
    
    468,524
    
    
    
    130,611
    
    
    
    9,775
    
    
    
    75,000
    
    
    
    55,581
    (3)(4)Frank J. Quirk
    
    
    2002
    
    
    
    245,726
    
    
    
    85,800
    
    
    
    
    
    
    
    
    
    
    
    12,000President - ORC
    
    
    2003
    
    
    
    281,540
    
    
    
    88,350
    
    
    
    
    
    
    
    
    
    
    
    12,000CEO - ORC Macro
    
    
    2004
    
    
    
    339,242
    
    
    
    102,000
    
    
    
    
    
    
    
    20,000
    
    
    
    12,000Douglas L. Cox
    
    
    2002
    
    
    
    224,480
    
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    
    5,764Executive Vice President
    
    
    2003
    
    
    
    245,167
    
    
    
    20,000
    
    
    
    
    
    
    
    10,000
    
    
    
    6,000and Chief Financial Officer
    
    
    2004
    
    
    
    265,647
    
    
    
    27,988
    
    
    
    
    
    
    
    10,000
    
    
    
    6,500E. Wayne Holden
    
    
    2002
    
    
    
    140,934
    
    
    
    46,500
    
    
    
    
    
    
    
    
    
    
    
    11,069Senior Vice
President - ORC
    
    
    2003
    
    
    
    162,000
    
    
    
    53,460
    
    
    
    
    
    
    
    
    
    
    
    11,465President - ORC Macro
    
    
    2004
    
    
    
    225,000
    
    
    
    67,500
    
    
    
    
    
    
    
    10,000
    
    
    
    12,000Ruth R. Wolf
    
    
    2002
    
    
    
    225,000
    
    
    
    52,890
    
    
    
    
    
    
    
    
    
    
    
    Executive
Vice President - ORC
    
    
    2003
    
    
    
    225,000
    
    
    
    56,000
    
    
    
    
    
    
    
    
    
    
    
    CEO - ORC ProTel
    
    
    2004
    
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James C.
Fink (5)
    
    
    2002
    
    
    
    296,751
    
    
    
    
    
    
    
    
    
    
    
    Vice Chairman
    
    
    2003
    
    
    
    296,456
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    328,978
    
    
    
    14,625
    
    
    
    
    
    
    
    
    
    
    
    290,881
    (6)
   (1)
    
    Amounts in this column represent the dollar value of the difference between the price
paid by the named executive officer for shares of our common stock purchased under the Opinion
Research Corporation Stock Purchase Plan for Non-Employee Directors and Designated Employees
and Consultants (the Non-Qualified Plan) and the fair market value of such shares on the
date of purchase. The Non-Qualified Plan provides for purchases of the Common Stock at the
same percentage discount as is offered to all qualified employees under the Opinion Research
Corporation Employee Stock Purchase Plan.(2)
    
    Amounts in this column consist of contributions by us under various profit sharing and
retirement plans for each named executive officer. - 45 -




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##### Table of Contents



(3)
    
    Includes payments by us on behalf of Mr. Short of $4,313 to cover the premiums payable on a
supplemental disability policy and a matching payment under our Defined Contribution Plan of
$5,764 in 2002, and $5,125 in 2003 and 2004.(4)
    
    We have an agreement with a trust established for the benefit of the children of Mr. Short
whereby we pay certain premiums on life insurance policies on Mr. Short, to which the trust is
the beneficiary. We paid premiums on behalf of Mr. Short of $46,143 in 2002. Mr. Short
received taxable income of $46,143 in 2003 and 2004 in order to maintain the policy. We are
entitled to the repayment of the premiums paid on these insurance policies upon maturity.(5)
    
    Dr. Fink resigned from his position with us effective November 30, 2004.(6)
    
    Amount consists of $284,381 accrued base compensation payable in 2005 and a 401(k) plan
matching contribution applicable to 2004. - 46 -




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##### Table of Contents



Stock Option Grants During 2004 The following table contains information concerning the grant of stock options to the named
executive officers during 2004. We do not have any plans pursuant to which stock appreciation
rights, or SARs, may be granted. Individual Grants
    
    
    
    
    
    
    Potential Realizable ValueNumber of
    
    

    % of Total
    
    
    
    
    
    
    
    
    
    
    at Assumed Annual RatesSecurities
    
    
    Options
    
    
    
    
    
    
    
    
    
    
    of Stock PriceUnderlying
    
    
    Granted To
    
    
    Exercise or
    
    
    
    
    
    
    Appreciation for OptionOptions Granted
    
    
    Employees in
    
    
    Base Price
    
    
    Expiration
    
    
    Terms(2)Name
    
    (#)(1)
    
    
    2004
    
    
    ($/Sh)*
    
    
    Date
    
    
    5% ($)
    
    
    10% ($)John F. Short
    
    
    75,000
    
    
    
    43.5
    %
    
    
    6.23
    
    
    
    03/23/11
    
    
    
    190,218
    
    
    
    443,288Frank J. Quirk
    
    
    20,000
    
    
    
    11.6
    %
    
    
    6.23
    
    
    
    03/23/11
    
    
    
    50,725
    
    
    
    118,210Douglas L. Cox
    
    
    10,000
    
    
    
    5.8
    %
    
    
    6.23
    
    
    
    03/23/11
    
    
    
    25,362
    
    
    
    59,105E. Wayne Holden
    
    
    10,000
    
    
    
    5.8
    %
    
    
    6.23
    
    
    
    03/23/11
    
    
    
    25,362
    
    
    
    59,105Ruth R. Wolf
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James C. Fink(3)
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   *
    
    All options have an exercise price equal to or greater than the market price of the common
stock on the date of grant.(1)
    
    The options become exercisable in three equal annual installments beginning on March 23,
2005.(2)
    
    Illustrates value that might be realized upon exercise of options immediately prior to the
expiration of their term, assuming specified compounded rates of appreciation on the common
stock over the term of the options. Assumed rates of appreciation are not necessarily
indicative of future stock performance.(3)
    
    Dr. Fink resigned from his position with us effective November 30, 2004. - 47 -




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##### Table of Contents



Stock Option Exercises and Holdings During 2004 The following table sets forth information related to options exercised during 2004 by the
Named Executive Officers and the number and value of options held at December 31, 2004 by such
individuals. We do not have any plan pursuant to which SARs may be granted. Aggregated Option Exercises in 2004
and Option Values at December 31, 2004 Number of Securities
    
    
    Value ofUnderlying
    
    
    Unexercised In-the-MoneyShares
    
    
    Value
    
    
    Unexercised Options at
    
    
    Options atAcquired On
    
    
    Realized
    
    
    December 31, 2004 (#)
    
    
    December 31, 2004 ($)(1)Name
    
    Exercise (#)
    
    
    ($)
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableJohn F. Short
    
    
    60,833
    
    
    
    84,133
    
    
    
    123,333
    
    
    
    91,667
    
    
    
    52,333
    
    
    
    162,292Frank J. Quirk
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    9,200Douglas L. Cox
    
    
    
    
    
    
    
    
    
    
    68,467
    
    
    
    13,333
    
    
    
    138,221
    
    
    
    9,899E. Wayne Holden
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    10,000
    
    
    
    
    
    
    
    4,600Ruth R. Wolf
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    James C. Fink (2)
    
    
    1,167
    
    
    
    607
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   (1)
    
    The closing price of our common stock on the NASDAQ National Market on December 31, 2004 was
$6.69.(2)
    
    Dr. Fink resigned from his position with us effective November 30, 2004. Employment Agreements Mr. Short has an employment agreement with us providing for an annual salary that is subject
to annual increases during the term of the agreement, as determined by the Compensation Committee
of our board of directors. In addition, Mr. Short is eligible to receive incentive compensation as
determined by the Compensation Committee of the board of directors. The agreement provides that in
the event Mr. Shorts employment is terminated by us without cause or Mr. Short terminates the
employment for cause (as defined in the employment agreement), in addition to his compensation
through the date of such termination, he is to receive an immediate cash payment equal to two times
his annual base compensation, unless such termination occurs within 24 months after a change in
control (as defined in the employment agreement), in which case Mr. Short shall receive an
immediate cash payment equal to two and one-half times his annual base compensation. Messrs. Quirk and Cox and Ms. Wolf have employment agreements with us providing for annual
salaries that are subject to annual increases during the term of the agreement, as determined by
our Chief Executive Officer and approved by the Compensation Committee of the board of directors.
In addition, they are eligible to receive incentive compensation in accordance with short-term
and/or long-term - 48 -




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##### Table of Contents



incentive compensation programs established by us from time to time. The employment
agreements of each of Messrs. Quirk and Cox further provide that if we terminate such executive
officers employment without cause, he will be entitled to continue to receive his base
compensation and medical and life insurance benefits until 11 months after the effective date of
such termination. Compensation of Directors For 2004, each director who was not an employee of the Company (an outside director) was
entitled to receive $15,000 per annum. In addition, each outside director was paid $5,000 for
chairing a committee, $1,500 for each board meeting attended, and $1,250 for each committee meeting
attended. All directors were entitled to be reimbursed for incidental travel expenses incurred in
attending board and committee meetings. Pursuant to the 1997 Stock Incentive Plan we automatically grant to each outside director the
formula number of shares of Common Stock. The exercise price for these options is equal to the
fair market value of the underlying shares on the date of grant. The options are non-qualified
stock options. The outside directors options become exercisable on the first anniversary of the date of
grant provided the outside director is a member of the board of directors on that date. The
formula number of the stock option grants for 2004 was 5,000 for each director. In addition,
each director will be granted options to purchase an additional 5,000 shares of Common Stock for
chairing a committee. Compensation Committee Interlocks and Insider Participation The Faculty Group, Inc. which is a consulting group owned by, among others, Harvard University
faculty members, and of which Professor Greyser, one of our directors, is a principal, received
$50,000 from us in consulting fees during 2004. - 49 -




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##### Table of Contents



Item 12.Security Ownership of Certain Beneficial Owners and Management The following table provides information as of December 31, 2004 with respect to compensation
plans (including individual compensation arrangements) under which our equity securities are authorized for issuance. Equity Compensation Plan InformationNumber of
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    
    
    
    remaining available forissued upon
    
    
    
    
    
    future issuance underexercise of
    
    
    
    
    
    equity compensationoutstanding
    
    Weighted-average
    
    plans (excludingoptions, warrants
    
    exercise price of
    
    securities reflected inPlan Category
    and rights
    
    outstanding options
    
    column (a))(1)(a)
    

(b)
    
    (c)Equity compensation
plans approved by
security holders
    
    745,682
    
    

    $
    6.63
    
    
    
    1,498,237Equity compensation
plans not approved
by security holders
(2)
    
    190,000
    

    
    $
    7.06
    
    
    
    
   (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 11 and Note 12 to Consolidated
Financial Statements for additional information.(2)
    
    Amount includes 90,000 non-plan options granted to Mr. Short and 100,000 warrants issued to
investment bankers as a form of compensation. - 50 -




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##### Table of Contents



Principal Stockholders The following table sets forth certain information regarding the holdings of each stockholder
who was known to us to be the beneficial owner, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the Exchange Act), of more than 5% of the Common Stock and our Series B Preferred Stock (the Series B Preferred Stock) at the close of business on
March 24, 2005. Each of the persons named in the table below as beneficially owning the shares
has sole voting power and sole investment power with respect to such shares, unless otherwise
indicated. Common StockName and Address
    
    Amount
    
    
    Percentof Beneficial Owner
    

Beneficially Owned
    
    
    of ClassLLR Equity Partners, L.P. (1)
    
    
    1,979,196
    
    
    
    27.60The Belgravia Building
1811 Chestnut Street, Suite 210
Philadelphia, PA 19103Gruber & McBaine Capital Management, LLC (2)
    
    
    759,300
    
    
    
    11.8550 Osgood Place
San Francisco, CA 94133Cannell Capital, LLC (2)
    
    
    566,799
    
    
    
    8.84150 California Street, Fifth Floor
San Francisco, California 94111John F. Short (3)(4)(5)
    
    
    468,687
    
    
    
    7.13600 College Road East
Princeton, NJ 08540Allied Capital (6)
    
    
    437,029
    
    
    
    6.381919 Pennsylvania Avenue NW
Washington, DC 20006-3434FMR Corp. (2)
    
    
    384,441
    
    
    
    6.0082 Devonshire Street
Boston, MA 02109Dimensional Fund Advisors Inc. (2)
    
    
    319,100
    
    
    
    4.981299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
   (1)
    
    Based on Schedule 13D filed with the SEC,
the above holdings include 1,107,665 shares of
common stock and 672,274 shares of common stock underlying an exercisable warrant held by LLR
Equity Partners, L.P., and 108,393 shares of common stock and 68,226 shares of common stock
underlying an exercisable warrant held by LLR Equity Partners Parallel, L.P. Also includes
20,000 shares of common stock subject to options exercisable within
60 days of March 24,
2005 held by Mr. Lehr for the benefit of LLR Equity Partners, L.P. Also includes 2,638 shares - 51 -




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##### Table of Contents



purchased by Mr. Lehr through our Stock Purchase Plan for Non-employee Directors and Designated
Employees and Consultants.(2)
    
    Based solely on filings with the SEC on Schedule 13G.(3)
    
    Does not include 49,896 shares of common stock held in trusts for the benefit of the children
of Mr. Short. Mr. Short disclaims beneficial ownership of these shares.(4)
    
    Includes 157,500 shares of common stock held by Mr. Short as co-trustee of our Retirement Plan, over
which Mr. Short has sole voting power.(5)
    
    Includes 165,001 shares of common stock subject to options exercisable within 60 days of
March 24, 2005 beneficially owned by Mr. Short.(6)
    
    Includes 276,785 and 160,244 shares of common stock underlying exercisable warrants held by
Allied Capital Corporation and Allied Investment Corporation, respectively. - 52 -




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##### Table of Contents



Series B Preferred StockName and Address
    
    Amount
    
    
    Percentof Beneficial Owner
    
    Beneficially
    
    
    Owned of ClassLLR Equity Partners, L.P.
    
    
    9
    
    
    
    90.00The Belgravia Building1811 Chestnut Street, Suite 210Philadelphia, PA 19103LLR Equity Partners Parallel, L.P.
    
    
    1
    
    
    
    10.00The Belgravia Building1811 Chestnut Street, Suite 210Philadelphia, PA 19103
 - 53 -




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##### Table of Contents



Security Ownership of Management The following table sets forth certain information regarding the Common Stock and the Series B
Preferred Stock beneficially owned by each director of the Company, by the Companys Chief
Executive Officer, and each of the Companys four other most highly compensated executive officers
in 2004 (the Named Executive Officers), and by all directors and executive officers of the
Company as a group, at the close of business on March 24, 2005. Each of the persons named in
the table below as beneficially owning the shares set forth therein has sole voting power and sole
investment power with respect to such shares, unless otherwise indicated. Amount of
    
    
    
    
    
    
    Amount of SeriesName of
    
    Common Stock
    
    
    Percent
    
    
    B Preferred Stock
    
    
    PercentBeneficial Owner
    
    Beneficially Owned
    
    
    of Class
    
    
    Beneficially Owned
    
    
    of ClassJohn F.
Short (1) (2) (3)
    
    
    468,687
    
    
    
    7.13
    
    
    
    0
    
    
    
    *Douglas L. Cox(1)
    
    
    143,070
    
    
    
    2.21
    
    
    
    0
    
    
    
    *James C. Fink **
    
    
    125,624
    
    
    
    1.96
    
    
    
    0
    
    
    
    *Frank J. Quirk (1)
    
    
    30,530
    
    
    
    *
    
    
    
    0
    
    
    
    *E. Wayne Holden (1)
    
    
    7,819
    
    
    
    *
    
    
    
    0
    
    
    
    *Ruth R. Wolf (1)
    
    
    3,989
    
    
    
    *
    
    
    
    0
    
    
    
    *Stephen A. Greyser (1)
    
    
    111,878
    
    
    
    1.72
    
    
    
    0
    
    
    
    *Dale J. Florio (1)
    
    
    36,269
    
    
    
    *
    
    
    
    0
    
    
    
    *Brian J. Geiger (1)
    
    
    7,053
    
    
    
    *
    
    
    
    0
    
    
    
    *Steven F. Ladin (1)
    
    
    12,401
    
    
    
    *
    
    
    
    0
    
    
    
    *Robert D. LeBlanc (1)
    
    
    10,000
    
    
    
    *
    
    
    
    0
    
    
    
    *Seth J. Lehr (4)
    
    
    1,979,196
    
    
    
    27.60
    
    
    
    10
    
    
    
    100.00John J. Gavin (1)
    
    
    31,977
    
    
    
    *
    
    
    
    0
    
    
    
    *All Directors and Executive
Officers as a Group (15
persons) (5) (6)
    
    
    2,997,700
    
    
    
    39.23
    
    
    
    10
    
    
    
    100.00
   *
    
    Denotes less than one percent of applicable class.**
    
    Resigned his position with the company effective November 30, 2004  (1)
    Includes options exercisable within 60 days of
March 24, 2005 for each of the Named
Executive Officers and directors as follows: Mr. Short - 165,001; Mr. Cox - 71,800; Mr. Quirk - 6,667;
Dr. Holden - 4,333; Ms. Wolf - 1,000; Professor Greyser - 90,000; Mr. Florio - 30,000; Mr. Geiger -
5,000; Mr. Ladin - 10,000; Mr. LeBlanc - 5,000; Mr. Gavin - 20,000.(2)
    Does not include 49,896 shares of common stock held in trusts for the benefit of the children
of Mr. Short. Mr. Short disclaims beneficial ownership of these shares. - 54 -




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##### Table of Contents



(3)
    Includes 157,500 shares of common stock held by Mr. Short as co-trustee of our Retirement Plan, over which
Mr. Short has sole voting power.(4)
    Includes (a) 1,107,665 shares of common stock, 672,274 shares of common stock underlying
an exercisable warrant and 9 shares of Series B Preferred Stock held by LLR Equity Partners,
L.P., and (b) 108,393 shares of common stock, 68,226 shares of common stock underlying an exercisable
warrant and 1 share of Series B Preferred Stock held by LLR Equity Partners Parallel, L.P. Mr. Lehr
is a managing member of LLR Capital, L.L.C. which is the general partner of LLR Capital, L.P.
which, in turn, is the general partner of both LLR Equity Partners, L.P. and LLR Equity
Partners Parallel, L.P. Mr. Lehr disclaims beneficial ownership of the foregoing shares. Also includes
20,000 shares of common stock subject to options exercisable within
60 days of March 24,
2005 held by Mr. Lehr for the benefit of LLR Equity Partners, L.P.(5)
    The 98,000 shares of common stock beneficially owned by the executive officers of the Company
and held pursuant to the Companys Retirement Plan are included only once in the total.(6)
    Includes two executive officers who are not Named Executive Officers. 
 Item 13.Certain Relationships and Related Transactions Over several years, we made loans to certain of our executive officers bearing an interest
rate of 9.5%. Our current corporate policy prohibits the making of loans to all officers and
directors. Mr. Short, our Chairman and Chief Executive Officer, has an outstanding loan with us,
which has been grandfathered. Including accrued interest, the aggregate amount of indebtedness due
from Mr. Short outstanding at March 24, 2005 was $155,539 . Since January 1, 2004, the
largest amount outstanding under Mr. Shorts loan was $158,183. The Faculty Group, Inc., which is a consulting group owned by, among others, Harvard
University faculty members, and of which Professor Greyser, one of our directors, is a principal,
received $50,000 from us in consulting fees during 2004. Transaction with LLR Partnerships Pursuant to a Purchase Agreement between us and the LLR Partnerships
dated March 25, 2005
(the Purchase Agreement), we agreed to repurchase the LLR Interests for an aggregate cash purchase price of $18.0
million (the Transaction). Subject to limitations set forth in the Purchase Agreement, we also agreed to indemnify the
LLR Partnerships in connection with the transactions contemplated by the Purchase Agreement. Our
intent is to use a portion of the proceeds of a contemplated public offering of our common stock to
finance the Transaction. The closing of the transaction contemplated by the Purchase Agreement is contingent upon the
closing of an offering of our equity securities. The LLR Partnerships agreed in the Purchase
Agreement not to exercise their anti-dilution warrants as long as the Purchase Agreement was
effective. In addition, at the closing under the Purchase Agreement, the directors appointed by
the LLR Partnerships to our board of directors, Seth J. Lehr and John J. Gavin, agreed to submit to
us their resignations as members of our board of directors. The Purchase Agreement also provided
for the payment of legal fees up to $50,000 incurred by the LLR Partnerships in connection with the
transactions contemplated by the Purchase Agreement. Mr. Lehr is a managing partner of LLR
Capital, L.L.C., which is the general partner of LLR Capital, L.P., which, in turn, is the general
partner of the LLR Partnerships. - 55 -




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Audit Committee Pre-Approval Policies The Audit Committee Charter provides that the Audit Committee must pre-approve all audit and
non-audit services provided by the independent auditors. These services may include audit services,
audit-related services, tax services, and other services. The Audit Committee has delegated
pre-approval authority to the Chairman, and the Chairman must report any pre-approval decisions to
the Audit Committee at its next meeting. 
 Item 14.Principal Accountant Fees and Services The aggregate fees billed by Ernst and Young LLP, and Grant Thornton LLP for professional
services rendered to us for the fiscal years ending December 31, 2003 and December 31, 2004, were
$650,034 and $391,724 respectively. A breakdown of such fees is provided in the following table: 2003
    
    
    2004Audit Fees
    
    $
    305,995
    
    
    $
    172,780Audit-Related fees
    
    
    14,950
    
    
    
    161,650Tax Fees
    
    
    329,088
    
    
    
    57,294All Other
    
    
    
    
    
    
    Total Fees Paid
    
    $
    650,034
    
    
    $
    391,724
 Audit Fees include fees billed by Ernst & Young LLP and Grant Thornton LLP for the audit of
our annual financial statements for the fiscal year and reviewing the quarterly reports on Form
10-Q. Audit-Related Fees include fees for services such as accounting consultations and review
of other SEC filings. Tax Fees are fees billed for tax services in connection with the
preparation of our federal and state income tax returns, including extensions and quarterly
estimated payments, and customary consultation or advice regarding potential
transactions or tax planning. - 56 -




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##### Table of Contents



PART IV 
 Item 15.Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this report. Page Reference1.
    
    
    Financial StatementsReports of
Independent Registered Public Accounting Firms
    
    F-1Consolidated Balance Sheets as of December 31, 2003 and 2004
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004
    
    F-4Consolidated Statements of Stockholders Equity for the years ended December 31, 2002, 2003, and 2004
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003, and 2004
    
    F-6Notes to Consolidated Financial Statements
    
    F-72.
    
    
    Financial Statement ScheduleSchedule II -
Valuation and Qualifying Accounts
    
    S-1
 3. Exhibits Required by the Securities and Exchange Commission Regulation S-K 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 99.1 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 4.2 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 A Preferred Stock - Incorporated by
 - 57 -




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Exhibit No.reference to Exhibit 1 to the Registrants Form 8-A filed with the Securities and
Exchange Commission on September 27, 1996.4.5
    
    Opinion Research Corporation Designation of Series B Preferred Stock - Incorporated by
reference to Exhibit 4.1 to the 2000 8-K.4.6
    
    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 10.3 to the 2001 10-K.10.4
    
    Employment Agreement between the Registrant and James C. Fink dated January 28,
2002 - Incorporated by reference to Exhibit 10.4 to the Registrants Annual Report on
Form 10-K for the year ended December 31, 2002 (2002 10-K).10.5
    
    Employment Agreement between the Registrant and Kevin P. Croke dated January 23,
2002 - Incorporated by reference to Exhibit 10.5 to the 2002 10-K.10.6
    
    Employment Agreement between O.R.C. International Ltd. and Richard I. Cornelius
dated December 12, 2001 - Incorporated by reference to Exhibit 10.6 to the Registrants
Annual Report on Form 10-K for the year ended December 31, 2003 (the 2003 10-K).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 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.10.9
    
    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, 2000.10.10
    
    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, 1997.10.11
    
    Amendment to the 1997 Stock Incentive Plan - Incorporated by reference to Exhibit 10.2
 - 58 -




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Exhibit No.to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30,
2001 (the 2001 10-Q).10.12
    
    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, 2000.10.13
    
    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, 2000.10.14
    
    ORC Holdings, Ltd. Employee Share Ownership Plan - Incorporated by reference to
Exhibit 4.1 to the Registrants Registration Statement on Form S-8, filed with the
Securities and Exchange Commission on July 5, 2001.10.15
    
    Lease Agreement dated May 19, 2003 between Peregrine Investment Partners and
Opinion Research Corporation - Incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.10.16
    
    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 and 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 and Health Services, Ltd. - Incorporated by reference to Exhibit 10.16 to the 2000 10-K.10.19
    
    Business Loan and Security Agreement dated May 4, 2004 among Opinion Research
Corporation, ORC Inc., Macro International Inc., ORC Protel, Inc., 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 10.1 to the
Registrants Quarterly Report for the quarter ended June 30, 2004 (the June 30, 2004
10-Q).10.20
    
    First Modification to Business Loan and Security Agreement and Other Loan Documents dated March 15, 2004 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.*10.21
    
    Loan Agreement dated May 4, 2004 by and among Opinion Research Corporation, ORC
Inc., Macro International Inc., ORC Protel, Inc., Social and Health Services, Ltd., ORC
Holdings, Ltd., O.R.C. International Ltd and Allied Capital Corporation - Incorporated by
 - 59 -




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Exhibit No.reference to Exhibit 10.2 to the June 30, 2004 10-Q.10.22
    
    Loan Agreement dated May 4, 2004 by and among Opinion Research Corporation, ORC
Inc., Macro International Inc., ORC Protel, Inc., Social and Health Services, Ltd., ORC
Holdings, Ltd., O.R.C. International Ltd. and Allied Capital Corporation - Incorporated
by reference to Exhibit 10.3 to the June 30, 2004 10-Q.10.23
    
    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.10.24
    
    Amendment No. 2 to the Registration Rights Agreement dated September 1, 2000 among
Opinion Research Corporation, Allied Capital Corporation and Allied Investment Corporation - Incorporated by reference to Exhibit 10.11 to the 2000 8-K.10.25
    
    Amendment No. 1 to the 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.10.26
    
    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.10.27
    
    Amendment to Common Stock Purchase Warrant No. A-1 dated May 4, 2004 between
Opinion Research Corporation and Allied Capital Corporation - Incorporated by reference to Exhibit 10.4 to the June 30, 2004 10-Q.10.28
    
    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.10.29
    
    Amendment To Common Stock Purchase Warrant No. A-2 dated May 4, 2004 between
Opinion Research Corporation and Allied Capital Corporation - Incorporated by reference to Exhibit 10.5 to the June 30, 2004 10-Q.10.30
    
    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.10.31
    
    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.10.32
    
    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.10.33
    
    Common Stock Warrant Issued by Opinion Research Corporation to LLR Equity Partners
 - 60 -




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Exhibit No.Parallel, L.P. dated September 1, 2000 - Incorporated by reference to Exhibit 10.8 to the
2000 8-K.10.34

    
    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.10.35

    
    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.10.36

    
    Purchase Agreement among Opinion
Research Corporation, LLR Equity Partners L.P. and LLR Equity
Partners Parallel, L.P., dated October 21, 2004 
Incorporated by reference to Exhibit 10.34 to the
Registration Statement on Form S-1 filed October 21, 2004.10.37

    
    Purchase Agreement among Opinion
Research Corporation, LLR Equity Partners L.P. and LLR Equity Partners Parallel L.P., dated March 25, 2005.*16.1

    
    Letter from Ernst & Young LLP to Securities and Exchange Commission - Incorporated by reference to Exhibit 16 of the Registrants current report on Form 8-K filed August 13,
2004.21.1

    
    Subsidiaries of the Registrant.*23.1

    
    Consent of Grant Thornton LLP.*23.2

    
    Consent of Ernst &Young LLP.*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.*31.2

    
    Certification of Principal Financial Officer Pursuant to Rule 13a-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.*
   *
    
    Filed herewith. - 61 -




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##### Table of Contents



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 CORPORATIONBy:
    
    /s/ John F. ShortJohn F. Short, ChairmanDate:
    
    March 31, 2005
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below on March 31, 2005 by the following persons on behalf of the Registrant and in the
capacities indicated. /s/ John F. Short

John F. Short
    
    Chairman of the Board, Chief Executive Officer,
and Director (Principal Executive Officer)/s/ Douglas L. Cox

Douglas L. Cox
    
    Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)/s/ Dale J. Florio

Dale J. Florio
    
    Director/s/ John J. Gavin

John J. Gavin

    
    Director/s/ Brian J. Geiger

Brian J. Geiger
    
    Director/s/ Stephen A. Greyser

Stephen A. Greyser
    
    Director/s/ Steven F. Ladin

Steven F. Ladin
    
    Director/s/ Robert D. LeBlanc

Robert D. LeBlanc
    
    Director/s/ Seth J. Lehr

Seth J. Lehr
    
    Director/s/ Frank J. Quirk

Frank J. Quirk
    
    President and Director
 - 62 -




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Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Opinion Research Corporation We have audited the accompanying consolidated balance sheet of Opinion Research Corporation and
Subsidiaries as of December 31, 2004, and the related consolidated statements of operations,
stockholders equity, and cash flows for the year ended December 31, 2004. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (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. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Opinion Research Corporation and Subsidiaries as
of December 31, 2004, and the consolidated results of their operations and their cash flows for the
year ended December 31, 2004, in conformity with accounting principles generally accepted in the
United States of America. Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The financial schedule (Schedule II-Valuation and Qualifying
Accounts) for the year ended December 31, 2004, listed in Item 15 of the 2004 Annual Report on Form
10-K, is presented for purposes of additional analysis and is not a required part of the basic
consolidated financial statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic consolidated financial statements taken as
a whole. /s/ Grant Thornton LLP
Philadelphia, Pennsylvania
February 18, 2005, except for Note 18, as to which
     the date is March 25, 2005 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm 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, 2003, and the related consolidated statements of operations,
stockholders equity, and cash flows for the years ended December 31, 2003 and 2002. Our audits
also included the financial statement schedule for the years ended December 31, 2003 and 2002
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 the standards of the Public Company Accounting Oversight
Board (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, 2003, and the consolidated results of their operations and their cash
flows for the years ended December 31, 2003 and 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related financial statement
schedule for the years ended December 31, 2003 and 2002, 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 9, 2004 F-2




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##### Table of Contents



OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Balance Sheets
 (in thousands, except share amounts)
 December 31,2003
    
    
    2004AssetsCurrent Assets:Cash and cash equivalents
    
    $
    2,766
    
    
    $
    467Accounts receivable:Billed
    
    
    24,890
    
    
    
    26,001Unbilled services
    
    
    16,003
    
    
    
    17,98640,893
    
    
    
    43,987Less: allowance for doubtful accounts
    
    
    336
    
    
    
    9340,557
    
    
    
    43,894Prepaid and other current assets
    
    
    3,161
    
    
    
    3,672Total current assets
    
    
    46,484
    
    
    
    48,033Property and equipment, net
    
    
    9,099
    
    
    
    10,105Intangibles, net
    
    
    715
    
    
    
    421Goodwill
    
    
    32,537
    
    
    
    32,748Deferred income taxes
    
    
    4,417
    
    
    
    3,248Other assets
    
    
    4,322
    
    
    
    3,128$
    97,574
    
    
    $
    97,683Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    5,473
    
    
    $
    6,254Accrued expenses
    
    
    13,829
    
    
    
    9,191Deferred revenues
    
    
    4,046
    
    
    
    4,344Short-term borrowings
    
    
    3,000
    
    
    
    2,000Other current liabilities
    
    
    762
    
    
    
    2,823Total current liabilities
    
    
    27,110
    
    
    
    24,612Long-term debt
    
    
    41,922
    
    
    
    40,286Other liabilities
    
    
    1,543
    
    
    
    1,542Redeemable 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,
liquidation value of $17 per share
    
    
    
    
    
    
    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,
4,999,159 shares issued and 4,950,337 outstanding in 2003,
and 5,245,815 shares issued and 5,196,993 outstanding in 2004
    
    
    50
    
    
    
    52Additional paid-in capital
    
    
    19,803
    
    
    
    21,426Retained earnings (deficit)
    
    
    (2,004
    )
    
    
    422Treasury stock, at cost, 48,822 shares in 2003 and 2004
    
    
    (261
    )
    
    
    (261
    )Accumulated other comprehensive income
    
    
    511
    
    
    
    704Total stockholders equity
    
    
    18,099
    
    
    
    22,343$
    97,574
    
    
    $
    97,683
 See notes to consolidated financial statements. F-3




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Statements of Operations
 (in thousands, except share and per share amounts)
 Year Ended December 31,2002
    
    
    2003
    
    
    2004Revenues
    
    $
    175,260
    
    
    $
    179,557
    
    
    $
    195,554Cost of revenues
    
    
    120,705
    
    
    
    125,890
    
    
    
    140,143Gross profit
    
    
    54,555
    
    
    
    53,667
    
    
    
    55,411Selling, general and administrative expenses
    
    
    39,736
    
    
    
    39,437
    
    
    
    39,770Depreciation and amortization
    
    
    4,596
    
    
    
    4,024
    
    
    
    3,979Goodwill impairment charges
    
    
    5,938
    
    
    
    16,317
    
    
    
    Operating income (loss)
    
    
    4,285
    
    
    
    (6,111
    )
    
    
    11,662Interest and other non-operating expenses, net
    
    
    4,784
    
    
    
    4,996
    
    
    
    7,216Income (loss) before provision (benefit) for income taxes and
cumulative effect of accounting change
    
    
    (499
    )
    
    
    (11,107
    )
    
    
    4,446Provision (benefit) for income taxes
    
    
    2,122
    
    
    
    (2,165
    )
    
    
    2,020Income (loss) before cumulative effect of accounting change
    
    
    (2,621
    )
    
    
    (8,942
    )
    
    
    2,426Cumulative effect of accounting change, net of tax benefit of $0
    
    
    (292
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (2,913
    )
    
    $
    (8,942
    )
    
    $
    2,426Basic earnings per share:Income (loss) before cumulative effect of accounting change
    
    $
    (0.44
    )
    
    $
    (1.47
    )
    
    $
    0.39Cumulative effect of accounting change
    
    
    (0.05
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (0.49
    )
    
    $
    (1.47
    )
    
    $
    0.39Diluted earnings per share:Income (loss) before cumulative effect of accounting change
    
    $
    (0.44
    )
    
    $
    (1.47
    )
    
    $
    0.38Cumulative effect of accounting change
    
    
    (0.05
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (0.49
    )
    
    $
    (1.47
    )
    
    $
    0.38Weighted average common shares outstanding:Basic
    
    
    5,948,797
    
    
    
    6,078,535
    
    
    
    6,254,517Diluted
    
    
    5,948,797
    
    
    
    6,078,535
    
    
    
    6,445,301
 See notes to consolidated financial statements. F-4




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Statements of Stockholders Equity
 (in thousands)
 AccumulatedAdditional
    
    
    Retained
    
    
    other
    
    
    
    
    
    
    
    
    
    
    TotalCommon stock
    
    
    paid-in
    
    
    earnings
    
    
    comprehensive
    
    
    Treasury stock
    
    
    stockholdersShares
    
    
    Amount
    
    
    capital
    
    
    (deficit)
    
    
    income (loss)
    
    
    Shares
    
    
    Amount
    
    
    equityBalance, December 31, 2001
    
    
    4,723
    
    
    $
    47
    
    
    $
    18,581
    
    
    $
    9,851
    
    
    $
    (785
    )
    
    
    49
    
    
    $
    (261
    )
    
    $
    27,433Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,913
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,913
    )Other comprehensive income:Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672
    
    
    
    
    
    
    
    
    
    
    
    672Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,241
    )Exercise of stock options
    
    
    7
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Issuance of capital stock and warrants
    
    
    150
    
    
    
    2
    
    
    
    694
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    696Balance, December 31, 2002
    
    
    4,880
    
    
    $
    49
    
    
    $
    19,302
    
    
    $
    6,938
    
    
    $
    (113
    )
    
    
    49
    
    
    $
    (261
    )
    
    $
    25,915Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,942
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,942
    )Other comprehensive income:Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    624
    
    
    
    
    
    
    
    
    
    
    
    624Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,318
    )Exercise of stock options
    
    
    21
    
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117Issuance of capital stock
    
    
    98
    
    
    
    1
    
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    385Balance, December 31, 2003
    
    
    4,999
    
    
    $
    50
    
    
    $
    19,803
    
    
    $
    (2,004
    )
    
    $
    511
    
    
    
    49
    
    
    $
    (261
    )
    
    $
    18,099Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,426
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,426Other comprehensive income:Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    193Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,619Exercise of stock options
    
    
    143
    
    
    
    1
    
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    349Debt refinancing and other
    
    
    
    
    
    
    
    
    
    
    733
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    733Issuance of capital stock
    
    
    104
    
    
    
    1
    
    
    
    542
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    543Balance, December 31, 2004
    
    
    5,246
    
    
    $
    52
    
    
    $
    21,426
    
    
    $
    422
    
    
    $
    704
    
    
    
    49
    
    
    $
    (261
    )
    
    $
    22,343
 See notes to consolidated financial statements. F-5




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows
 (in thousands)
 Year Ended December 31,2002
    
    
    2003
    
    
    2004Cash flows from operating activities:Net income (loss)
    
    $
    (2,913
    )
    
    $
    (8,942
    )
    
    $
    2,426Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    4,596
    
    
    
    4,024
    
    
    
    3,979Goodwill impairment charge
    
    
    5,938
    
    
    
    16,317
    
    
    
    Cumulative effect of accounting change
    
    
    292
    
    
    
    
    
    
    
    Loss on disposal of fixed assets
    
    
    65
    
    
    
    
    
    
    
    2Provision for doubtful accounts
    
    
    211
    
    
    
    
    
    
    
    Amortization of original issue discount included in interest expense
    
    
    127
    
    
    
    147
    
    
    
    555Amortization of loan fees
    
    
    655
    
    
    
    1,015
    
    
    
    2,756Deferred income taxes
    
    
    (173
    )
    
    
    (4,416
    )
    
    
    1,820Changes in operating assets and liabilities, net of effects
from acquisitions:Billed accounts receivable
    
    
    3,076
    
    
    
    (2,595
    )
    
    
    (987
    )Unbilled services
    
    
    (373
    )
    
    
    (1,141
    )
    
    
    (1,870
    )Other assets
    
    
    (239
    )
    
    
    (181
    )
    
    
    (773
    )Accounts payable
    
    
    1,159
    
    
    
    (57
    )
    
    
    742Accrued expenses
    
    
    1,392
    
    
    
    2,122
    
    
    
    (5,267
    )Deferred revenues
    
    
    (2,129
    )
    
    
    512
    
    
    
    169Other liabilities
    
    
    (958
    )
    
    
    146
    
    
    
    2,026Net cash provided by operating activities
    
    
    10,726
    
    
    
    6,951
    
    
    
    5,578Cash flows from investing activities:Payments for acquisitions, net of cash acquired
    
    
    (46
    )
    
    
    
    
    
    
    Proceeds from the sale of fixed assets
    
    
    4
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (2,334
    )
    
    
    (3,360
    )
    
    
    (4,352
    )Net cash used in investing activities
    
    
    (2,376
    )
    
    
    (3,360
    )
    
    
    (4,352
    )Cash flows from financing activities:Borrowings under line-of-credit agreement
    
    
    28,059
    
    
    
    40,289
    
    
    
    72,957Repayments under line-of-credit agreement
    
    
    (32,233
    )
    
    
    (36,380
    )
    
    
    (67,610
    )Proceeds from the issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    22,203Repayments of notes payable
    
    
    (4,500
    )
    
    
    (6,000
    )
    
    
    (30,125
    )Payments of loan amendment and forbearance fees
    
    
    (231
    )
    
    
    (1,829
    )
    
    
    (1,850
    )Repayments under capital lease arrangements
    
    
    (27
    )
    
    
    (73
    )
    
    
    (184
    )Proceeds from issuance of capital stock, warrants, and options
    
    
    723
    
    
    
    502
    
    
    
    892Net cash (used in) financing activities
    
    
    (8,209
    )
    
    
    (3,491
    )
    
    
    (3,717
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    53
    
    
    
    117
    
    
    
    192Increase (decrease) in cash and cash equivalents
    
    
    194
    
    
    
    217
    
    
    
    (2,299
    )Cash and cash equivalents at beginning of period
    
    
    2,355
    
    
    
    2,549
    
    
    
    2,766Cash and cash equivalents at end of period
    
    $
    2,549
    
    
    $
    2,766
    
    
    $
    467Non-cash investing and financing activities:Acquisition of equipment under capital leases
    
    $
    
    
    
    $
    561
    
    
    $
    194
 See notes to consolidated financial statements. F-6




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OPINION RESEARCH CORPORATION AND SUBSIDIARIES 
 Notes to Consolidated Financial Statements
 December 31, 2004
  1.
    Summary of Significant Accounting Policies Nature of Operations and Basis of Presentation We were established in 1938 to apply the principles of general public opinion polling to
marketing issues facing Americas largest companies. We evolved to provide social research,
market research, information services, marketing services, and telemarketing. We perform public
sector primary research and provide information technology, communications, and other consulting
services, primarily to agencies of the United States federal government and state and local
governments. We also assist our 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 our governmental projects are in the areas of health, education, and international
aid. Our telemarketing services consist principally of outbound customer acquisition services. The consolidated financial statements include the accounts of our company and our wholly
owned subsidiaries. All inter-company transactions are eliminated upon consolidation. Revenue Recognition Service revenue is recognized when earned, generally as work is performed in accordance with
the provisions of Staff Accounting Bulletin No. 104. Services performed vary from contract to
contract and are not uniformly performed over the term of the arrangement. In our market
research and social research segments, revenues under fixed-price contracts are recognized on a
proportional performance basis. Performance is based on the ratio of costs incurred to total
estimated costs where the costs incurred represent a reasonable surrogate for output measures of
contract performance, including survey design, data collection, survey analysis and presentation
of deliverables to the client. Progress on a contract is matched against project costs and costs
to complete on a periodic basis. Provision for estimated contract losses, if any, is made in the
period such losses are determined. Customers are obligated to pay as services are performed, and
in the event that a client cancels the contract, the client is responsible for payment for
services performed through the date of cancellation. Revenues under cost-reimbursement contracts are recognized as costs are incurred.
Applicable estimated profits are included in earnings in the proportion that incurred costs bear
to total estimated costs. Incentives, award fees or penalties related to performance are also
considered in estimating revenues and profit rates based on actual and anticipated awards. See
Item 1, Business  Government Contracts for a discussion of the types of contracts we have with
the U.S. federal government. Revenues under time-and-materials contracts are recognized as costs are incurred. In our teleservices segment, revenues are recognized at the time services are performed. F-7




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1. Summary of Significant Accounting Policies (Continued) Invoices to clients are generated in accordance with the terms of the applicable contract,
which may not be directly related to the performance of services. Unbilled receivables are
invoiced based upon the achievement of specific events as defined by each contract including
deliverables, timetables and incurrence of certain costs. Unbilled receivables are classified as
a current asset. Advanced billings to clients in excess of revenue earned are recorded as
deferred revenues until the revenue recognition criteria are met. We grant credit primarily to
large companies and government agencies and perform periodic credit evaluations of our clients
financial condition. We do not generally require collateral. Credit losses relating to clients
generally have been within managements expectations. Reimbursements of out of pocket expenses
are included in revenues with corresponding costs incurred by us included in cost of revenues. Cash Equivalents We consider as cash equivalents all highly liquid debt instruments with a maturity of three
months or less when purchased. Property and Equipment Property and equipment are stated at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets (3-10 years). Leasehold
improvements are amortized using the straight-line method over their estimated useful lives or
the remaining life of the lease, whichever is shorter. Impairment of Long-Lived Assets We record impairment losses on long-lived assets used in operations when events and
circumstances indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability of long-lived assets is based on an estimate of undiscounted
future cash flows resulting from the use and eventual disposition of the assets. Measurement of
an impairment loss for long-lived assets that management expects to hold and use is based on the
fair value of the asset. Long-lived assets to be disposed of are reported at the lower of
carrying amount or fair value less cost to sell. Foreign Currency Translation All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using
the exchange rate in effect at the balance sheet date and revenues and expenses are translated
using an average exchange rate during the period. The resulting translation adjustments are
recorded as a component of other comprehensive income and are accumulated in stockholders
equity. Because cumulative translation adjustments are considered a component of permanently
invested unremitted earnings of subsidiaries outside of the United States, no taxes are provided
on such amounts. F -8




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1. Summary of Significant Accounting Policies (Continued) Stock-Based Compensation As permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation, (Statement No. 125) we have elected to follow Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and related
interpretations in accounting for our employee option plans. Under APB No. 25, no compensation expense is recognized at the time of the option grant if
the exercise price of the employee stock option is fixed and equals or exceeds the fair market
value of the underlying common stock on the date of grant and the number of shares to be issued pursuant to
the exercise of such options are known and fixed at the grant date. If we had elected to recognize compensation expense based on the fair value of the options
granted at grant date as prescribed by Statement No. 123, net income (loss) and related per share
amounts would have been adjusted to the pro forma amounts indicated in the table below: ($ thousands, except per share data)
    
    2002
    
    
    2003
    
    
    2004Net income (loss)  as reported
    
    $
    (2,913
    )
    
    $
    (8,942
    )
    
    $
    2,426Add: stock-based employee compensation expense
included in reported net income (loss), 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
    
    
    (582
    )
    
    
    (365
    )
    
    
    (291
    )Net income (loss)  pro forma
    
    $
    (3,495
    )
    
    $
    (9,307
    )
    
    $
    2,135Basic earnings (loss) per share  as reported
    
    $
    (.49
    )
    
    $
    (1.47
    )
    
    $
    0.39Basic earnings (loss) per share  pro forma
    
    $
    (.59
    )
    
    $
    (1.53
    )
    
    $
    0.34Diluted earnings (loss) per share  as reported
    
    $
    (.49
    )
    
    $
    (1.47
    )
    
    $
    0.38Diluted earnings (loss) per share  pro forma
    
    $
    (.59
    )
    
    $
    (1.53
    )
    
    $
    0.33
 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: 2002
    
    
    2003
    
    
    2004Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    53.4
    %
    
    
    51.7
    %
    
    
    53.0
    %Risk-free interest rate
    
    
    3.8
    %
    
    
    4.0
    %
    
    
    3.3
    %Expected life of options
    
    7 years
    
    7 years
    
    7 years
 The weighted average fair value of options granted during 2002, 2003, and 2004 was $3.32, $3.02,
and $3.57 per share, respectively. F -9




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##### Table of Contents



1. Summary of Significant Accounting Policies (Continued) Income Taxes Deferred
tax assets and liabilities are determined based on the temporary differences between
financial statement and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse.
Recognition of deferred tax assets is limited to amounts considered by management to be more
likely than not to be realized in future periods. Computer Software In accordance with Statement of Position 98-1 (SOP 98-1), Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use issued by the American Institute of
Certified Public Accountants, we have capitalized certain internal and external costs incurred to
acquire or create internal use software. Capitalized costs are amortized over five years. Comprehensive Income (Loss) Comprehensive income (loss) consists of two components, net income (loss) and other
comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses,
gains and losses that, under generally accepted accounting principles, are recorded as an element
of stockholders equity but are excluded from net income (loss). Our other comprehensive income
(loss) is comprised of foreign currency translation adjustments from those subsidiaries not using
the U.S. dollar as their functional currency. Total accumulated other comprehensive income
(loss) is displayed as a separate component of stockholders equity in the accompanying
consolidated balance sheets. Goodwill and Other Intangible Assets We adopted Statement No. 142 effective January 1, 2002. Under Statement No. 142, goodwill
and intangible assets that have indefinite useful lives are no longer amortized. Statement No.
142 requires goodwill to be tested for impairment on an annual basis, or more frequently if
certain indicators arise, using the guidance specifically provided. Furthermore, Statement No. 142 requires purchased intangible assets other than goodwill to
be amortized over their useful lives unless these lives are determined to be indefinite. We use
comparable company analyses and discounted cash flow models to determine the fair value of our
reporting units and whether any impairment of goodwill exists. See Note 3 for additional
information regarding goodwill and other intangibles. Earnings Per Share Basic and diluted earnings per share are calculated in accordance with Statement No. 128,
Earnings per Share. Basic earnings per share excludes dilution and is computed by dividing income available to
common shareholders by the weighted average common shares outstanding during the period. Diluted F -10




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earnings per share takes into account the potential dilution that could occur if securities or
other contracts to issue common stock were exercised and converted into common stock. Use of Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include
those related to revenue recognition, valuation allowances, and goodwill impairment. Actual results could
differ from those estimates. Fair Value of Financial Instruments Our carrying value of financial instruments approximates fair value because of the nature
and characteristic of our financial instruments. We do not have any off-balance sheet financial
instruments. We do not have derivative procedure in place to manage risks related to foreign
currency fluctuations for our foreign operations or for interest rate changes. Reclassification In
the consolidated balance sheet as of December 31, 2003 certain
amounts in unbilled services have been reclassified to deferred
revenues and the consolidated statements of cash flows for the years
ended December 31, 2002 and 2003 have been adjusted accordingly. In the consolidated statements of cash flows for the year ended December 31, 2002, certain
amounts in other assets have been reclassified to payments of loan amendment fees in the cash
flows from financing activities. 2. Recent Accounting Pronouncements Effective January 1, 2003, we adopted FASB Statement No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, (Statement No. 146), which requires liabilities for costs
associated with exit or disposal activities to be recognized when the liabilities are incurred,
rather than when an entity commits to an exit plan. Statement No. 146 also establishes that the
liability should initially be measured and recorded at fair value. This rule changed the timing of
liability and expense recognition related to exit or disposal activities, but not the ultimate
amount of such expenses. In 2003, we reduced our workforce in the U.S. market research operating segment and, as a
result, incurred one-time termination benefits of approximately $705,000 for the termination of
certain employees. These termination benefits were recognized in accordance with Statement No. 146
and included in our results of operations for the year ended December 31, 2003. During 2004, we
paid out all previously accrued termination benefits from 2003. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51 (Interpretation No. 46).
Interpretation No. 46 requires the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a majority of the entitys expected residual
returns, or both, as a result of ownership, contractual or other financial interests in the entity.
Currently, entities are generally consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting interest in the entity. F -11




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2. Recent Accounting Pronouncements (Continued) In December 2003, the FASB issued Interpretation No. 46 (R) (Interpretation No. 46 (R)),
which clarified and amended Interpretation No. 46. Interpretation No. 46 (R) requires existing
unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the entities do not
effectively disperse risk among the parties involved. Interpretation No. 46 (R) also enhances the
disclosure requirements related to variable interest entities. Interpretation No. 46 applied
immediately to variable interest entities created after January 31, 2003 and, with respect to
variable interest entities created before February 1, 2003, Interpretation No. 46 (R) applied for
the quarter ended March 31, 2004. During 2001, we formed the Joint Venture with Ratrix Analytics LLC for the purpose of
developing new research-based products. We have a 44.8% ownership interest and 50% voting interest
in the Joint Venture. In 2004, we contributed $0 in services and cash and, since inception, have
contributed an aggregate of $1.7 million. All amounts funded to date have been expensed. We are
not obligated for future funding of the Joint Venture. As the Joint Venture has a sufficient amount of equity to absorb the entitys expected loss,
the equity owners as a group are able to make decisions about the entitys activities, and the
equity owners have the obligation to absorb expected losses and the rights to receive the expected
residual returns, we believe that the Joint Venture is not a variable interest entity under the
principal criteria as set forth in Interpretations No. 46 and 46 (R) and, accordingly, we are not
required to apply the consolidation provision under Interpretations No. 46 and 46 (R). The
application of Interpretations No. 46 and 46 (R) in 2003 and 2004 had no impact on our results of
operations, financial position or cash flows. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting
for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (Statement
No. 150). Statement No. 150 requires that certain financial instruments with characteristics of
both liabilities and equity, including mandatory redeemable financial instruments, be classified as
a liability. Any amounts paid or to be paid to holders of these financial instruments in excess of
the initial measurement amount shall be reflected in interest cost. Statement No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and otherwise will be
effective at the beginning of the first interim period beginning after June 15, 2003. We adopted
Statement No. 150 on July 1, 2003. The adoption of this statement had no impact on our results of
operations, financial position or cash flows. 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 are subject
to American Institute of Certified Public Accountants SOP 93-6, Employers Accounting for Employee
Stock Ownership Plans. Statement No. 123(R) supersedes Opinion 25, Accounting for Stock Issued to
Employeesand its related interpretations, and eliminates the alternative to use Opinion 25s
intrinsic value method of accounting, which we are currently using. 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 F -12




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2. Recent Accounting Pronouncements (Continued) 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, EPS and
cash flows when Statement No. 123(R) is adopted. In December 2004, the FASB issued FSP 109-2, Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provisions within the American Jobs Creation Act of 2004 (the
Act). The Act was signed into law on October 22, 2004. The Act provides for a special one-time
tax deduction of 85% of certain foreign earnings that are repatriated (as defined by the Act) in
either an enterprises last tax year that began before the enactment date, or the first tax year
that begins during the one-year period beginning on the date of enactment. At December 31, 2004,
unremitted earnings of foreign subsidiaries that could qualify for this special one-time tax
deduction of 85% were approximately $384,000. Because at this time it is our intention to
indefinitely reinvest these earnings, no U.S. taxes have been provided. If, upon further
evaluation of this provision, we conclude that we will repatriate these unremitted foreign
earnings, the tax expense recognized would be approximately $20,000. F -13




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3. Goodwill and Other Intangibles As discussed in Note 1 to the Consolidated Financial Statements, we adopted SFAS No. 142,
Goodwill and Other Intangible Assets on January 1, 2002. Under Statement No. 142, goodwill and
intangible assets that have indefinite useful lives are no longer amortized. Instead, Statement
No. 142
requires such assets be reviewed for impairment annually, or more frequently if certain
indicators arise, using the guidance specifically provided. At the date of adoption, we
reclassified assembled workforce intangible assets with an unamortized balance of $865,000 and
recorded as a cumulative effect of a change in accounting principle, goodwill impairment related
to our Mexican subsidiary of $292,000, or $(0.05) per share. During 2002, we identified other
intangible assets for which useful life can no longer be determined. As a result, we
reclassified $480,000 from other intangible assets to goodwill in the fourth quarter of 2002. In
the fourth quarter of 2002, we recorded a non-cash impairment charge of $5.9 million to reduce
the carrying value of goodwill in our U.S. market research segment. In the fourth quarter of 2003, we recorded non-cash impairment charges to reduce the
carrying values of goodwill in the amount of $10.0 million in teleservices, $6.0 million in U.S.
market research and $317,000 in our Korean subsidiary. The significant assumptions in 2003 used in determining the market value of the teleservices
business were as follows:  
    0.3 times trailing twelve-month revenues for comparable publicly-traded
companies;
    3.7 times trailing twelve-month earnings before interest, taxes,
depreciation and amortization for comparable publicly-traded companies;
    0.5 times trailing twelve-month revenues for comparable sales
transactions;
    multiples of earnings before interest, taxes, depreciation and
amortization for comparable sales transactions were not included given the absence of
profitable comparable companies; and
    for a five-year financial projection, a discount rate of 20.0%; an exit
multiple of 2.5 times earnings before interest, taxes, depreciation and amortization; a
compound growth rate for revenues of 6.4% and an improvement in operating income as a
percentage of revenues from 13.3% to 15.4%. The significant assumptions used in determining the market value of the U.S. market
research business were as follows:  
    1.2 times trailing twelve-month revenues for comparable publicly-traded
companies; F -14




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##### Table of Contents



3. Goodwill and Other Intangibles (Continued)  
    9.6 times trailing twelve-month earnings before interest, taxes,
depreciation and amortization for comparable publicly-traded companies;
    0.6 times trailing twelve-month revenues for comparable sales
transactions;
    6.6 times trailing earnings before interest, taxes, depreciation and
amortization for comparable sales transactions;
    for a five-year financial projection, a discount rate of 16.0%; an exit
multiple of 6.0 times earnings before interest, taxes, depreciation and amortization; a
compound growth rate for revenues of 7.5% and no improvement in operating income as a
percentage of revenues; and
    in the overall evaluation, the publicly-traded comparable data was
discounted 15.0% to reflect the netting of discounts for marketability and company size
and a control premium. The valuation metric assumptions used in the goodwill impairment analyses performed on our
teleservices and U.S. market research segments differed significantly for two principal reasons.
First, because these two segments were and continue to be engaged in very different types of
business, they were and must continue to be compared to very different types of companies and
transactions. In performing this analysis of market comparables, we determined that both the
public-trading comparables and the relevant-sale transaction comparables were very different for
these two segments at the time of comparison. Second, because the two segments had very
different types of operating risks at the time, we used different weighted average costs of
capital and different discount rates for lack of marketability in these analyses. One of the most significant differences in operating risks between these two
segments was the nature and mix of the client contracts when viewed in the context of the
then-current market conditions. Both of these factors led to the use of lower valuation metric
assumptions for the teleservices segment at the time we performed the analyses. In October 2004, as part of our annual impairment test based on Statement No. 142, we
performed our annual goodwill impairment test. Based upon the results of such test we determined
that the estimated fair values of our business segments exceeded
their book values as determined by a
weighting of comparable company analyses and discounted cash flow models. Management cannot provide assurance that additional impairment charges will not be required
in the future if the U.S. market research and teleservices businesses do not recover as
projected. F -15




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##### Table of Contents



3. Goodwill and Other Intangibles (Continued) The changes in the carrying value of goodwill are as follows: ($ thousands)U.S.
    
    
    U.K.Market
    
    
    Market
    
    
    
    
    
    
    SocialResearch
    
    
    Research
    
    
    Teleservices
    
    
    Research
    
    
    Other
    
    
    ConsolidatedBalance at December 31, 2002
    
    $
    8,983
    
    
    $
    2,556
    
    
    $
    15,530
    
    
    $
    21,188
    
    
    $
    320
    
    
    $
    48,577Reclassification between
reporting entities
    
    
    (593
    )
    
    
    
    
    
    
    
    
    
    
    593
    
    
    
    
    
    
    
    Impairment Charges
    
    
    (6,000
    )
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (317
    )
    
    
    (16,317
    )Foreign currency translation
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    277Balance at December 31, 2003
    
    $
    2,390
    
    
    $
    2,836
    
    
    $
    5,530
    
    
    $
    21,781
    
    
    
    
    
    
    $
    32,537Foreign currency translation
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211Balance at December 31, 2004
    
    $
    2,390
    
    
    $
    3,047
    
    
    $
    5,530
    
    
    $
    21,781
    
    
    
    
    
    
    $
    32,748
  Our intangible assets consist of the following: December 31,2003
    
    
    2004($ thousands)Intangible assets subject to amortization:Customer lists
    
    $
    3,750
    
    
    $
    3,800Non-competition agreements
    
    
    1,587
    
    
    
    1,627Backlog
    
    
    1,350
    
    
    
    1,350Other
    
    
    521
    
    
    
    555$
    7,208
    
    
    $
    7,332Accumulated amortization
    
    
    (6,493
    )
    
    
    (6,911
    )$
    715
    
    
    $
    421
 Amortization expense for other intangibles for the years ended December 31, 2002, 2003, and
2004 was $986,000, $538,000 and $312,000 respectively. The estimated aggregate amortization
expense for each of the five succeeding years is as follows: ($ thousands)2005
    
    $
    1722006
    
    
    202007
    
    
    202008
    
    
    202009
    
    
    20
 F-16




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4. Accounts Receivable Accounts receivable consists of the following: December 31,2003
    
    
    2004($ thousands)Billed Receivables:U.S. government departments and agencies
    
    $
    10,711
    
    
    $
    12,961Commercial clients & other
    
    
    14,179
    
    
    
    13,04024,890
    
    
    
    26,001Unbilled Receivables:U.S. government departments and agencies
    
    $
    10,591
    
    
    $
    11,853Commercial clients & other
    
    
    5,412
    
    
    
    6,13316,003
    
    
    
    17,986Accounts receivable, gross
    
    $
    40,893
    
    
    $
    43,987Less: allowance for doubtful accounts
    
    
    336
    
    
    
    93Accounts receivable, net
    
    $
    40,557
    
    
    $
    43,894
 The unbilled receivables at December 31, 2003 and 2004 included $802,000 and $1.1 million
respectively, of
retainage under terms of the contracts which can only be invoiced upon completion of federal
government indirect cost audits. We do not anticipate the collection of any of the retainage
recorded at December 31, 2004 during 2005, but such amounts are classified as current assets in
accordance with industry standards. No single client constituted more than 10% of net billed
receivables at December 31, 2003. One client in our social research business constituted 14% of
net billed receivables for the year ended December 31, 2004. 5. Property and Equipment Property and equipment consists of the following: December 31,2003
    
    
    2004($ thousands)Leasehold improvements
    
    $
    4,661
    
    
    $
    5,713Computer equipment and software
    
    
    15,034
    
    
    
    17,375Furniture, fixtures, and equipment
    
    
    6,291
    
    
    
    6,753Equipment under capital lease obligations

    
    
    732
    
    
    
    893$
    26,718
    
    
    $
    30,734Less accumulated depreciation and amortization
    
    
    17,619
    
    
    
    20,629Property and equipment, net
    
    $
    9,099
    
    
    $
    10,105
 F-17




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##### Table of Contents



5. Property and Equipment (Continued) Depreciation expense for the years ended December 31, 2002, 2003, and 2004 was $3.5 million,
$3.6 million and $3.7 million, respectively. 6. Income Taxes For financial reporting purposes, income (loss) before income taxes and cumulative effect
of accounting change consists of the following: Year Ended December 31,2002
    
    
    2003
    
    
    2004($ thousands)United
States
    
    $
    (978
    )
    
    $
    (11,240
    )
    
    $
    3,511Foreign
    
    
    479
    
    
    
    133
    
    
    
    935$
    (499
    )
    
    $
    (11,107
    )
    
    $
    4,446
 The provision (benefit) for income taxes, excluding amounts related to cumulative effect of
accounting change, consists of the following: Year Ended December 31,2002
    
    
    2003
    
    
    2004($ thousands)Current:Federal
    
    $
    1,256
    
    
    $
    781
    
    
    $
    (965
    )State
    
    
    821
    
    
    
    1,126
    
    
    
    897Foreign
    
    
    218
    
    
    
    344
    
    
    
    268Total current
    
    $
    2,295
    
    
    $
    2,251
    
    
    $
    200Deferred:Federal
    
    $
    (238
    )
    
    $
    (5,170
    )
    
    $
    1,744State
    
    
    23
    
    
    
    837
    
    
    
    40Foreign
    
    
    42
    
    
    
    (83
    )
    
    
    36Total deferred
    
    $
    (173
    )
    
    $
    (4,416
    )
    
    $
    1,820$
    2,122
    
    
    $
    (2,165
    )
    
    $
    2,020
 F-18




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##### Table of Contents



6. Income Taxes (Continued) The difference between tax expense and the amount computed by applying the statutory federal
income tax rate (34%) to income before income taxes and cumulative effect of accounting change is
as follows: Year Ended December 31,2002
    
    
    2003
    
    
    2004($ thousands)Statutory rate applied to pre-tax income (loss)
    
    $
    (170
    )
    
    $
    (3,776
    )
    
    $
    1,512Add (deduct):State income taxes, net of federal benefit
    
    
    254
    
    
    
    1,296
    
    
    
    605Foreign rate differential
    
    
    93
    
    
    
    135
    
    
    
    (36
    )Foreign operating losses for which a benefit
has not been recorded
    
    
    34
    
    
    
    80
    
    
    
    22Effect of impairment and non-deductible
goodwill amortization
    
    
    2,019
    
    
    
    126
    
    
    
    Effect of other non-deductible expenses
    
    
    73
    
    
    
    50
    
    
    
    139Tax credits
    
    
    (165
    )
    
    
    (122
    )
    
    
    (86
    )Other
    
    
    (16
    )
    
    
    46
    
    
    
    (136
    )$
    2,122
    
    
    $
    (2,165
    )
    
    $
    2,020
 F-19




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##### Table of Contents



6. Income Taxes (Continued) Our deferred tax liabilities and assets consist of the following temporary differences: December 31,2003
    
    
    2004($ thousands)Deferred tax liabilities:Fixed assets
    
    $
    (260
    )
    
    $
    (910
    )Other
    
    
    (387
    )
    
    
    (856
    )Total deferred tax liabilities
    
    
    (647
    )
    
    
    (1,766
    )Deferred tax assets:Reserve for doubtful accounts
    
    
    98
    
    
    
    19Intangibles
    
    
    5,132
    
    
    
    4,344Compensation
    
    
    1,155
    
    
    
    1,079Accrued expenses
    
    
    324
    
    
    
    377Valuation allowance
    
    
    (2,178
    )
    
    
    (2,726
    )Other
    
    
    1,464
    
    
    
    2,201Total deferred tax assets
    
    
    5,995
    
    
    
    5,294Net deferred tax assets
    
    $
    5,348
    
    
    $
    3,528
 At December 31, 2003 and 2004, we have net current deferred tax assets in the amount of
$931,000 and $280,000, respectively, which are reported in the balance sheet in prepaid and other
current assets. Income taxes paid in the U.S. in 2002, 2003, and 2004 are $1.8 million, $1.1
million, and $1.9 million, respectively. Income taxes paid in the U.K. in 2002, 2003, and 2004
are $417,000, $198,000, and $217,000, respectively. At December 31, 2003 and 2004 we recorded a net valuation allowance of $2.2 million and $2.7
million respectively against state deferred tax assets related to certain subsidiaries since the
realization of these future state tax benefits is not deemed to be more likely than not. The American Jobs Creation Act of 2004 (the Act) was signed into law on October 22, 2004.
The Act provides for a special one time tax deduction of 85 percent of certain foreign earnings
that are repatriated (as defined by the Act) in either an enterprises last tax year that began
before the enactment date, or the first tax year that begins during the one-year period beginning
on the date of enactment. At December 31, 2004, unremitted earnings of foreign subsidiaries that
could qualify for this special one time tax deduction of 85 percent were approximately $384,000.
Since at this time it is our intention to indefinitely reinvest these earnings, no U.S. taxes have
been provided. If, upon further evaluation of this provision, we
conclude that we will repatriate
these unremitted foreign earnings, the deferred tax expense recognized would be approximately
$20,000. At December 31, 2004, the company had approximately $34 million of state net operating losses
available to offset the future taxable income of certain subsidiaries. If not used, these net
operating losses will expire in varying amounts beginning in 2005 through 2024. F-20




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##### Table of Contents



7. Debt Debt consists of the following: December 31,2003
    
    
    2004($ thousands)Working capital facilities
    
    $
    16,924
    
    
    $
    22,270Notes payable  senior notes
    
    
    13,500
    
    
    
    8,500Note payable  subordinated debentures
    
    
    14,498
    
    
    
    11,516Total debt
    
    
    44,922
    
    
    
    42,286Less current maturities
    
    
    3,000
    
    
    
    2,000Long-term portion
    
    $
    41,922
    
    
    $
    40,286
 In February 2003, we completed an amendment to our then existing senior credit facility (the
Senior Facility), which reduced the amount available under the revolving credit from $19.0
million to $16.5 million and amended certain future covenants to be less restrictive (the
February 2003 Amendment). Additionally, the February 2003 Amendment provided 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. We incurred an
amendment fee of $180,000 for the February 2003 Amendment. We were required to maintain certain financial covenants under the Senior Facility, such as
minimum earnings, debt-to-earnings, interest coverage and other financial ratios. For the
measuring period ended June 30, 2003, we were not in compliance with two of the existing
covenants; such non-compliance was waived by the lenders in July 2003. In conjunction with the
waiver, we also amended certain covenants for the measuring period ended September 30, 2003 to be
less restrictive (the July 2003 Amendment). We were in compliance with all covenant
requirements for the measuring period ended September 30, 2003. Total costs incurred for the July 2003 Amendment were $495,000 and were
being amortized over the remaining term of the facility. During the third quarter of 2003, it came to our attention and our lenders that we had failed
to make a payment under an excess cash flow provision of our Senior Facility in the amount of $1.7
million. We entered into a Forbearance Agreement with our lenders pursuant to which the lenders
agreed to allow us to make such payment in four equal monthly installments beginning December 31,
2003, and we agreed to an increase of 2% in the interest rate applicable to our senior credit
facility and a forbearance fee of $79,000. We also agreed to meet certain deadlines relating to
the expected refinancing of our credit facilities which included the requirement to deliver a
written commitment from a new senior credit facility lender no later than December 17, 2003. We
were not able to deliver such written commitment on the specified date. As a result of the
non-delivery of the written commitment, the senior lenders did not approve and we did not make an
interest payment to our subordinated lenders in the amount of $474,000 which was originally due on
December 1, 2003. On December 30, 2003, we completed another amendment to our Senior Facility (the December
2003 Amendment) in which Heller Financial Inc., a wholly owned subsidiary of General Electric
Capital Corporation, purchased the remaining interests from other participating lenders and
assumed the entire Senior Facility. The December 2003 Amendment provided for the increase in the
amount available under F-21




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##### Table of Contents



7. Debt (Continued) the revolving credit from $16.5 million to $19.5 million and extended the maturity for both the
revolving credit and the term notes to March 31, 2005. Additionally, the December 2003 Amendment
provided for an increase in the interest rate to LIBOR plus 700 basis points or the financial institutions
designated base rate plus 500 basis points for the revolving credit and 9% for the term notes for
which the outstanding balance as of December 31, 2003 was $13.5 million. The December 2003
Amendment also permitted the payment of interest in the amount of $474,000 due to our subordinated
lenders and waived the existing defaults and required excess cash flow payments discussed in the
previous paragraphs. We made such interest payment to our subordinated lenders upon completion
of the December 2003 Amendment. In conjunction with the December 2003 Amendment, we incurred an amendment fee of $1.0 million
which was recorded in other long-term assets in our consolidated balance sheet and, together with
the previously unamortized loan fees of $520,000 was being amortized over the remaining term of
the facility. In March 2004, we further amended a future financial covenant under our Senior Facility and
subordinated debentures to be less restrictive. We incurred an amendment fee of $75,000. In May 2004, we entered into a secured revolving credit facility of $35.0 million with
Citizens 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 the financial
institutions designated base rate (5.25% at December 31, 2004) plus 100 basis points or LIBOR
(3-month LIBOR was 2.56% at December 31, 2004) plus 300 basis points. As of December 31, 2004, we
had approximately $12.7 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 (Allied Capital). We used the proceeds of the borrowings
under the Senior Revolving Facility, the Secured Subordinated Notes and the Unsecured Subordinated
Notes to repay all debt outstanding at May 4, 2004. At December 31, 2004, the Secured
Subordinated Notes carried an interest rate of 10.0%, required principal payments of $500,000 per
quarter, and were set to mature in November 2007. At December 31, 2004, the Unsecured Subordinated
Notes carried a fixed interest rate of 15.5%; 13.0% payable quarterly in cash, and 2.5%, payable,
in cash or deferred and included in the outstanding principal balance until maturity in May 2009.
In exchange for consideration received in connection with this debt, we extended the term of
existing warrants held by Allied Capital 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 is valued at
$616,000 and will be accreted through interest expense over the life of the Unsecured Subordinated
Notes. Effective March 15, 2005, we used the
proceeds from the Term Loan, together with proceeds from a drawdown of the Senior Revolving
Facility, to pay off the outstanding balance under the Secured Subordinated Notes and the Unsecured
Subordinated Notes. F-22




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##### Table of Contents



7. Debt (Continued) We are required to maintain certain financial covenants under our
credit facilities. At December 31, 2004, we were in compliance with all of our financial
covenants. We expect to be in compliance with all of our financial
covenants throughout 2005. 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
amortized over the remaining terms of the facilities, commencing in the second quarter of 2004.
Due to the refinancing described herein, we also wrote off the unamortized loan fees of
approximately $2.5 million as interest expense, which included payments of $420,000 made in 2004,
related to the retired debt in the second quarter of 2004. Aggregate maturities of debt for the years ending December 31 are as follows: ($ thousands)2005
    
    $
    1,5002006
    
    
    2,0002007
    
    
    27,2702008
    
    
    2009
    
    
    12,077Thereafter
    
    
    
 We paid interest of $4.0 million, $4.5 million and $5.0 million for the years ended December
31, 2002, 2003, and 2004, respectively. Interest expense for 2004 included the write-off of
unamortized loan fees of approximately $2.5 million due to the refinancing of the credit
facilities. See note 18 regarding our new secured term loan. F-23




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##### Table of Contents



8. Leases Future minimum payments required under capital and operating leases that have non-cancelable
lease terms in excess of one year are as follows: Capital
    
    
    OperatingLeases
    
    
    Leases($ thousands)2005
    
    $
    225
    
    
    $
    11,0662006
    
    
    154
    
    
    
    10,1922007
    
    
    135
    
    
    
    6,5392008
    
    
    73
    
    
    
    5,9672009
    
    
    
    
    
    
    4,451Thereafter
    
    
    
    
    
    
    9,509Total minimum lease payments
    
    
    587
    
    
    $
    47,724Less amounts representing interest
    
    
    65Capitalized lease payments
    
    $
    522
 At December 31, 2004,
the current and long-term capital lease obligations of $194,000 and
$328,000 were recorded in the balance sheet in other current and long-term liabilities,
respectively. Rent expense under operating leases was $8.4 million, $8.7 million and $9.6 million
for the years ended December 31, 2002, 2003 and 2004, respectively. Real estate
taxes, insurance and maintenance expenses generally are obligations of our company and,
accordingly, are not included as part of rental payments. It is expected that, in the normal
course of business, leases that expire will be renewed or replaced by leases on similar
properties. 9. Redeemable Equity On July 19, 2001, guidance was issued in EITF Topic No. D-98, Classification and Measurement
of Redeemable Securities, which requires securities with redemption features, including those
that become exercisable only upon a change-in-control, be classified outside of permanent equity.
As described in the paragraphs below, certain of our equity instruments purchased by LLR Equity
Partners, L.P. and LLR Partners Parallel, L.P. (together, the LLR Partnerships) on September 1,
2000 contain such change-in-control redemption rights. Pursuant to the terms of a September 1, 2000 Purchase Agreement, we sold and the LLR
Partnerships purchased in a private placement (1) 1,176,458 shares of the our Common Stock, (2) 10
shares of the Series B Preferred Stock, and (3) warrants to purchase 740,500 shares of our Common
Stock at an exercise price of $12.00 per share, for aggregate gross proceeds of $10.0 million.
The warrants are exercisable from the date of issuance and expire in 2010. If we sell shares of
Common Stock in the future at a per share price below $8.50, the exercise price of the warrants
would be proportionately reduced and certain contingent warrants issued to the LLR Partnerships at
an exercise price of $.01 per share become exercisable. F-24




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##### Table of Contents



9. Redeemable Equity (Continued) The holders of Series B Preferred Stock are entitled to nominate and elect two directors to
our board of directors. The holders of the Series B Preferred Stock are not entitled to receive
dividends. In the event of liquidation, each share of the Series B Preferred Stock is entitled to
a liquidation preference of $10.00 per share. We may redeem the outstanding shares of Series B
Preferred Stock at any time the LLR Partnerships shareholdings fall below 10% of our outstanding
common shares, at a per share amount equal to the greater of the fair market value or the
liquidation preference. At any time after the fifth anniversary of the closing, the LLR Partnerships may exchange
each share of Common Stock for one-half of a share of our Series C Preferred Stock. After
conversion, the holders of Series C Preferred Stock are entitled to receive cumulative quarterly
cash dividends at an annual rate of $2.04 per share. In the event of liquidation, each share of
the Series C Preferred Stock is entitled to a liquidation preference of $17.00 per share plus all
accrued and unpaid dividends. Each share of Series C Preferred Stock is convertible at all times
into two shares of Common Stock. The holders of Series C Preferred Stock are entitled to vote on
all matters before the common holders, as a single class with the Common Stock, on an as if
converted basis. Additionally, holders of Series C Preferred Stock as a class, may also nominate
and elect two additional directors to our board of directors, subject to the maintenance by the
LLR Partnerships of certain specified ownership percentages. In the event of (i) the sale of substantially all of the assets of the Company, (ii) any
consolidation or merger of the Company into another corporation or entity in which the
stockholders of the Company immediately prior to such transaction hold less than 50% of the
Companys voting power immediately after such transaction, or (iii) any transactions in which in
excess of 50% of the Companys voting power is transferred to one or more affiliated persons, the
holders of the Series B Preferred Stock and the Series C Preferred Stock may require us to redeem
such securities at their liquidation preferences of $10.00


and $17.00 per share, respectively. Because such redemption features are not solely within
the control of the Company, the Series B Preferred Stock and the 1,176,458 shares of Common Stock
held by LLR (which may be exchanged into shares of Series C Preferred Stock), have been presented
outside of stockholders equity in our consolidated balance sheets. The 1,176,458 shares of
Common Stock held by the LLR Partnerships are carried at their aggregate fair value at issuance of
$8.9 million, and no changes will be made to such carrying value until a change-in-control of the
Company is probable. Finally, because the rights to exchange shares of Common Stock into shares
of Series C Preferred Stock may not be transferred by the LLR Partnerships to any parties other
than affiliates of the LLR Partnerships, these rights will terminate upon any resale or transfer
of the 1,176,458 shares of Common Stock held by LLR to an unaffiliated entity. Accordingly, upon
the occurrence of any such resale or transfer, we will reclassify a pro-rata portion of the
carrying value of such Common Stock into stockholders equity. We may call, solely at our discretion, the outstanding shares of Series C Preferred Stock at
any time at a per share amount equal to the greater of the fair market value or the liquidation
preference multiplied by 25% per annum, compounded annually from
September 1, 2000, plus any
accrued but unpaid dividends per share. F-25




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##### Table of Contents



10. Benefit Plans We maintain a defined contribution pension and profit sharing plan covering substantially all
domestic employees (the ORC Plan) except for ORC Macro and SHS which maintained separate profit
sharing and 401(k) plans (the ORC Macro Plans and the SHS Plans). As of December 31, 2004,
employees may contribute up to 50% of their annual salary but not to exceed the maximum allowable
under the Internal Revenue Code. The respective board of directors may elect to match employees
contributions or contribute to the profit sharing plan. The ORC Plan assets included 159,625 and
157,500 shares of our common stock as of December 31, 2003 and 2004, respectively. We
contributed $421,000, $399,000, and $325,000 to the ORC Plan in 2002, 2003, and 2004,
respectively. Under the ORC Macro Plans, we contributed $1.9 million, $1.9 million, and $2.1
million in 2002, 2003 and 2004, respectively. Under the SHS Plans, we contributed $377,000,
$446,000, and $460,000 in 2002, 2003 and 2004, respectively. 11. Stock Options We maintain the 1997 Stock Incentive Plan, which provides for the grant of up to 1,625,000
options to purchase common stock to our directors and key employees. The exercise price of
options granted to employees under this plan is at least equal to the fair market value of the
stock on the date of grant; stock options are exercisable for seven years. Options granted under
this plan are vested equally over a three-year period. Under the 1997 Stock Incentive Plan as amended, each Non-employee Director is granted options
to acquire the formula number of shares of common stock on January 2nd of each year. The option
exercise price for these options is equal to the fair market value of the underlying shares on the
date of the grant. These options become exercisable on the first anniversary of the date of grant provided the
Non-employee Director is a member of the board of directors on that date. The options granted
under this provision are non-qualified stock options. For 2002, 2003 and 2004, all outside directors were granted the formula number of 5,000
shares. In addition, each director who chaired a committee was granted options to purchase an
additional 5,000 shares of our common stock. Non-employee Directors options terminate seven years from the date of grant or the first
anniversary after the optionee ceases to serve as a member of the board of directors for any
reason. Any options of a Non-employee Director that are not exercisable when he or she ceases to
serve as a member of the board of directors will terminate as of the termination of the
Non-employee Directors service on the board of directors. F-26




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##### Table of Contents



11. Stock Options (Continued) Stock option transactions were as follows: WeightedNumber
    
    
    Averageof Shares
    
    
    Exercise PriceOutstanding Balance at December 31, 2001
    
    
    1,081,909
    
    
    $
    6.432002Granted
    
    
    140,578
    
    
    $
    5.70Canceled
    
    
    (106,015
    )
    
    
    5.77Exercised
    
    
    (16,500
    )
    
    
    5.38Outstanding Balance at December 31, 2002
    
    
    1,099,972
    
    
    
    6.542003Granted
    
    
    110,000
    
    
    $
    5.29Canceled
    
    
    (234,791
    )
    
    
    6.31Exercised
    
    
    (21,000
    )
    
    
    5.58Outstanding Balance at December 31, 2003
    
    
    954,181
    
    
    
    6.632004Granted
    
    
    222,500
    
    
    $
    6.24Canceled
    
    
    (154,665
    )
    
    
    6.40Exercised
    
    
    (186,334
    )
    
    
    6.41Outstanding Balance at December 31, 2004
    
    
    835,682
    
    
    
    6.63
 The following table presents the dollar ranges of stock option exercise prices relating to
outstanding and exercisable stock options at December 31, 2004: Outstanding Options
    
    
    Exercisable OptionsRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of exercise prices
    
    Shares
    
    
    Life (Years)
    
    
    Average Price
    
    
    Shares
    
    
    Average Price$0.00 - $5.00
    
    
    90,000
    
    
    
    1.46
    
    
    $
    4.71
    
    
    
    90,000
    
    
    $
    4.71$5.01 - $6.00
    
    
    220,702
    
    
    
    3.47
    
    
    
    5.43
    
    
    
    160,702
    
    
    
    5.49$6.01 - $7.00
    
    
    258,079
    
    
    
    5.80
    
    
    
    6.24
    
    
    
    42,053
    
    
    
    6.22$7.01 - $8.00
    
    
    46,901
    
    
    
    2.75
    
    
    
    7.56
    
    
    
    46,901
    
    
    
    7.56$8.01 - $9.00
    
    
    220,000
    
    
    
    2.01
    
    
    
    8.88
    
    
    
    220,000
    
    
    
    8.88835,682
    
    
    
    3.55
    
    
    $
    6.63
    
    
    
    559,656
    
    
    $
    6.92
 F-27




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##### Table of Contents



11. Stock Options (Continued) In January 2000, 90,000 non-plan options were issued, with an exercise price equal to the
market value of the stock at the date of grant, to a senior executive and were outstanding as of
December 31, 2004. All such non-plan options have a vesting period of three years and a life of
seven years. All non-plan options are included in the previously presented option table. Options exercisable at December 31, 2002, 2003, and 2004 were 837,560, 780,273, and 559,656
respectively. Exercise prices for options outstanding as of December 31, 2004 for the plan ranged
from $3.63 to $8.88 per share. The weighted average remaining term of the outstanding options is
3.6 years. As of December 31, 2004, there were 490,101 shares available for grant under the 1997
Stock Incentive Plan. We have 1,402,529 and 1,277,529 warrants issued and outstanding with a weighted average
exercise price of $8.80 and $9.23 as of December 31, 2003 and 2004. These warrants are
immediately exercisable. At
December 31, 2004, we have reserved an aggregate of
3,611,448 shares of common stock for
issuance upon the exercise or conversion of all outstanding securities and the purchase of common
stock under various stock purchase plans (see Note 12). 12. Stock Purchase Plans In May 2001, our stockholders approved the adoption of the Opinion Research Corporation
Employee Stock Purchase Plan (the Qualified Plan), the Opinion Research Corporation Stock
Purchase Plan for Non-employee Directors and Designated Employees and Consultants (the
Non-Qualified Plan), and the ORC Holdings, Ltd. Employee Share Ownership Plan (the U.K. Plan).
We have reserved, under the Qualified Plan, Non-Qualified Plan and the U.K. Plan, 1,000,000,
400,000 and 200,000 shares, respectively, of our common stock for future issuance. These plans
allow eligible employees, non-employee directors, and consultants who meet certain qualifications
to purchase our common stock at 85% of the lower of the fair market value at the beginning or end
of each offering period. The following table summarizes the number of shares issued under the
various plans for the years ended December 31, 2003 and 2004, respectively: December 31,2003
    
    
    2004Qualified Plan
    
    
    77,230
    
    
    
    66,294Non-Qualified Plan
    
    
    1,048
    
    
    
    34,642U.K. Plan
    
    
    3,513
    
    
    
    8,047
 As of December 31, 2004, approximately 574,340, 264,365, and 169,431 shares remained available for
future issuance under the Qualified Plan, Non-Qualified Plan, and the U.K. Plan, respectively. F-28




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##### Table of Contents



13. Split-dollar Life Insurance and Officer Loan We have entered into an agreement with a trust established in the name of an officer of the
Company. Under the agreement, we pay certain premiums on the life insurance policy on the
officer, to which the trust is the beneficiary. We have been assigned certain rights to the
assets of the trust as collateral for the premium paid on this life insurance policy. The amount
paid by us for the premiums on this policy was $46,000 for years ended December 31, 2002 and 2003.
The cumulative premiums paid prior to 2004, which totaled $370,000 are recorded in other assets
in the accompanying consolidated balance sheets. In the event the policy is terminated, the
officer has guaranteed the repayment of the amount due from his trust, and has pledged certain of
his personal assets to us to collateralize such guarantee. The amount paid in 2004 of $46,000 was
treated as compensation expense by us and as income to the officer. Over several years, we made loans to certain executive officers bearing an interest rate of
9.5%. The current corporate policy prohibits the making of loans to any officers or directors.
We currently have an outstanding loan made to our Chief Executive Officer, which has been
grandfathered. Including accrued interest, the aggregate amount of indebtedness outstanding at
December 31, 2003 and 2004 was $156,000. This amount was
recorded in other current assets in our
consolidated financial statements. F-29




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##### Table of Contents



14. 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. Information on segments and a
reconciliation to the consolidated total, are as follows: U.S.
    
    
    U.K.Market
    
    
    Market
    
    
    Tele-
    
    
    Social
    
    
    Total($ thousands)
    
    Research
    
    
    Research
    
    
    services
    
    
    Research
    
    
    Segments
    
    
    Other
    
    
    ConsolidatedYear Ended December 31, 2002:Revenues from external
customers
    
    $
    33,008
    
    
    $
    18,988
    
    
    $
    15,596
    
    
    $
    105,464
    
    
    $
    173,056
    
    
    $
    2,204
    
    
    $
    175,260Depreciation and amortization
    
    
    1,612
    
    
    
    480
    
    
    
    806
    
    
    
    1,568
    
    
    
    4,466
    
    
    
    130
    
    
    
    4,596Goodwill impairment charge
    
    
    5,938
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,938
    
    
    
    
    
    
    
    5,938Operating income (loss)
    
    
    (9,059
    )
    
    
    604
    
    
    
    2,408
    
    
    
    10,266
    
    
    
    4,219
    
    
    
    66
    
    
    
    4,285Interest and other
non-operating
expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,784Loss before income taxes and
cumulative effect of
accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (499
    )Total assets
    
    $
    19,272
    
    
    $
    9,801
    
    
    $
    19,427
    
    
    $
    52,365
    
    
    $
    100,865
    
    
    $
    2,880
    
    
    $
    103,745Capital expenditures
    
    $
    773
    
    
    $
    220
    
    
    $
    381
    
    
    $
    885
    
    
    $
    2,259
    
    
    $
    75
    
    
    $
    2,334Year Ended December 31, 2003:Revenues from external
customers
    
    $
    25,788
    
    
    $
    20,487
    
    
    $
    14,868
    
    
    $
    115,591
    
    
    $
    176,734
    
    
    $
    2,823
    
    
    $
    179,557Depreciation and amortization
    
    
    1,120
    
    
    
    485
    
    
    
    683
    
    
    
    1,606
    
    
    
    3,894
    
    
    
    130
    
    
    
    4,024Goodwill impairment charge
    
    
    6,000
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    16,000
    
    
    
    317
    
    
    
    16,317Operating income (loss)
    
    
    (10,757
    )
    
    
    1,167
    
    
    
    (7,973
    )
    
    
    12,158
    
    
    
    (5,405
    )
    
    
    (706
    )
    
    
    (6,111
    )Interest and other
non-operating
expenses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,996Loss before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,107
    )Total assets
    
    $
    20,479
    
    
    $
    11,641
    
    
    $
    10,169
    
    
    $
    53,582
    
    
    $
    95,871
    
    
    $
    1,703
    
    
    $
    97,574Capital expenditures
    
    $
    212
    
    
    $
    370
    
    
    $
    1,151
    
    
    $
    1,555
    
    
    $
    3,288
    
    
    $
    72
    
    
    $
    3,360Year Ended December 31, 2004:Revenues from external
customers
    
    $
    25,969
    
    
    $
    22,945
    
    
    $
    12,726
    
    
    $
    128,238
    
    
    $
    189,878
    
    
    $
    5,676
    
    
    $
    195,554Depreciation and amortization
    
    
    876
    
    
    
    586
    
    
    
    841
    
    
    
    1,564
    
    
    
    3,867
    
    
    
    112
    
    
    
    3,979Operating income (loss)
    
    
    (3,544
    )
    
    
    588
    
    
    
    1,097
    
    
    
    13,433
    
    
    
    11,574
    
    
    
    88
    
    
    
    11,662Interest and other
non-operating
expenses, net
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,216Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,446Total assets
    
    $
    16,065
    
    
    $
    12,046
    
    
    $
    8,966
    
    
    $
    57,954
    
    
    $
    95,031
    
    
    $
    2,652
    
    
    $
    97,683Capital expenditures
    
    $
    261
    
    
    $
    990
    
    
    $
    1,203
    
    
    $
    1,831
    
    
    $
    4,285
    
    
    $
    67
    
    
    $
    4,352
 International long-lived assets were $4.9 million in 2002 and 2003 and $5.8 million in
2004. In 2002, 2003 and 2004, revenues from one customer of the social research segment represented
$18.7 million, $20.4 million and $24.1 million of our total revenues, respectively. Revenues from
the U.S. federal government represented $82.9 million, $95.3 million and $108.8 million of our
total revenues in 2002, 2003 and 2004, respectively. Revenues in the Other category were
generated from our Asia and Mexico operations. As these segments are not significant, results
are not presented separately. F-30




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##### Table of Contents



15. Net Income (Loss) Per Share The following table sets forth the computation of basic and diluted net income (loss) per
share: Year Ended December 31,2002
    
    
    2003
    
    
    2004($ thousands, except per share amounts)Income (loss) before cumulative effect of
accounting change
    
    $
    (2,621
    )
    
    $
    (8,942
    )
    
    $
    2,426Cumulative effect of accounting change
    
    
    (292
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (2,913
    )
    
    $
    (8,942
    )
    
    $
    2,426Weighted average shares outstanding:Basic
    
    
    5,949
    
    
    
    6,079
    
    
    
    6,254Effect of dilutive potential common shares
    
    
    
    
    
    
    
    
    
    
    191Diluted
    
    
    5,949
    
    
    
    6,079
    
    
    
    6,445Net income (loss) per common share  basic:Income (loss) before cumulative effect of
accounting change
    
    $
    (.44
    )
    
    $
    (1.47
    )
    
    $
    0.39Cumulative effect of accounting change
    
    
    (.05
    )
    
    
    
    
    
    
    Net income (loss) per common share  basic
    
    $
    (.49
    )
    
    $
    (1.47
    )
    
    $
    0.39Net income (loss) per common share -diluted:Income (loss) before cumulative effect of
accounting change
    
    $
    (.44
    )
    
    $
    (1.47
    )
    
    $
    0.38Cumulative effect of accounting change
    
    
    (.05
    )
    
    
    
    
    
    
    Net income (loss) per common share -diluted
    
    $
    (.49
    )
    
    $
    (1.47
    )
    
    $
    0.38
 Options and warrants to purchase 94,328 and 127,867 shares of common stock have not been
included in the computation of diluted net income (loss) per share for the years ended December
31, 2002 and 2003, respectively, as their effect would have been anti-dilutive. F-31




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16. Selected Quarterly Financial Information (Unaudited) First
    
    
    Second
    
    
    Third
    
    
    Fourth($ thousands, except per share data)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2003Revenues
    
    $
    43,164
    
    
    $
    45,481
    
    
    $
    44,867
    
    
    $
    46,045Gross profit
    
    $
    13,358
    
    
    $
    13,535
    
    
    $
    13,306
    
    
    $
    13,468Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (16,317
    )Net income (loss)
    
    $
    733
    
    
    $
    920
    
    
    $
    711
    
    
    $
    (11,306
    )Net income (loss) per common share:Basic
    
    $
    0.12
    
    
    $
    0.15
    
    
    $
    0.12
    
    
    $
    (1.85
    )Diluted
    
    $
    0.12
    
    
    $
    0.15
    
    
    $
    0.11
    
    
    $
    (1.85
    )Weighted average shares outstanding:Basic
    
    
    6,043
    
    
    
    6,071
    
    
    
    6,090
    
    
    
    6,109Diluted
    
    
    6,068
    
    
    
    6,144
    
    
    
    6,324
    
    
    
    6,1092004Revenues
    
    $
    47,961
    
    
    $
    49,400
    
    
    $
    48,894
    
    
    $
    49,299Gross profit
    
    $
    14,243
    
    
    $
    14,355
    
    
    $
    14,202
    
    
    $
    12,611Net income (loss)
    
    $
    938
    
    
    $
    (237
    )
    
    $
    1,001
    
    
    $
    724Net income (loss) per common share:Basic
    
    $
    0.15
    
    
    $
    (0.04
    )
    
    $
    0.16
    
    
    $
    0.11Diluted
    
    $
    0.15
    
    
    $
    (0.04
    )
    
    $
    0.15
    
    
    $
    0.11Weighted average shares outstanding:Basic
    
    
    6,149
    
    
    
    6,242
    
    
    
    6,289
    
    
    
    6,337Diluted
    
    
    6,335
    
    
    
    6,242
    
    
    
    6,484
    
    
    
    6,480
 F-32




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17. 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 our contemplated offering of common stock. We have proposed to use a portion of the proceeds of
a public offering of our common stock to repurchase all of the interests of the LLR Partnerships in us, 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 contemplated 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. 18. Subsequent Events 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 $360,000 in connection with this transaction in the first quarter of
2005. On
March 25, 2005, we entered into an agreement to repurchase the
LLR Interests. Consummation of the agreement is contingent upon
completion of a proposed public offering of our common stock. This
agreement is on substantially the same terms as an earlier agreement
that expired on January 31, 2005. The new agreement is attached
as Exhibit 10.37 to our annual report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2005. F-33




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##### Table of Contents



Schedule II - Valuation and Qualifying Account
OPINION RESEARCH CORPORATION AND SUBSIDIARIES(in thousands)  Rule 12-09. Valuation and Qualifying Accounts AdditionsBalance
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balancebeginning
    
    
    costs
    
    
    other accounts-
    
    
    Deductions -
    
    
    at endDescription
    
    of period
    
    
    and expenses
    
    
    describe
    
    
    describe
    
    
    of periodYear ended December 31, 2002:Reserves and allowance deducted
from asset account:Allowance for Doubtful Accounts
    
    $
    284
    
    
    $
    211
    
    
    $
    
    
    
    $
    147

(1)
    
    $
    348Year ended December 31, 2003:Reserves and allowance deducted
from asset account:Allowance for Doubtful Accounts
    
    $
    348
    
    
    $
    
    
    
    $
    
    
    
    $
    12
    (1)
    
    $
    336Year ended December 31, 2004:Reserves and allowance deducted
from asset account:Allowance for Doubtful Accounts
    
    $
    336
    
    
    $
    
    
    
    $
    
    
    
    $
    243
    (2)
    
    $
    93   (1)
    
    Uncollectible accounts written-off.(2)
    
    Reserve revaluation. S-1