-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FErEnmBumHKkRTOM31GRwZZYYDU/cBgQ5mBmzkGVw3NgoFmO5WSMMS1/DQ1aeAGJ flbpY9a2x1qrRZQKVPzcgA== 0000950142-99-000057.txt : 19990204 0000950142-99-000057.hdr.sgml : 19990204 ACCESSION NUMBER: 0000950142-99-000057 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981120 ITEM INFORMATION: FILED AS OF DATE: 19990203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NFO WORLDWIDE INC CENTRAL INDEX KEY: 0000897940 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 061327424 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-13707 FILM NUMBER: 99520388 BUSINESS ADDRESS: STREET 1: 2 PICKWICK PLAZA STREET 2: STE 400 CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036298888 MAIL ADDRESS: STREET 1: TWO PICKWICK PLAZA CITY: GREENWICH STATE: CT ZIP: 06830 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 20, 1998 ----------------- NFO Worldwide, Inc. ------------------- (Exact name of Registrant as specified in its charter) Delaware -------- (State or other jurisdiction of incorporation) 0-21460 06-1327424 ------- ---------- (Commission file number) (IRS Employer File Number) 2 Pickwick Plaza, Greenwich, CT 06830 ------------------------------------- (Address of Principal Executive Offices) (203) 629-8888 -------------- (Registrant's Telephone Number, Including Area Code) NFO WORLDWIDE, INC. INDEX PAGE NUMBER Item 7 - Financial Statements and Exhibits 4 Signature 5 Independent Auditors' Reports for the years ended September 30, 1998, 1997, and 1996 6 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1998 7 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1997 27 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1996 46 Description of Pro Forma Combined Condensed Financial Information 61 Pro Forma Combined Condensed Balance Sheet as of September 30, 1998 62 Pro Forma Combined Condensed Statement of Income for the nine months ended September 30, 1998 63 Pro Forma Combined Condensed Statement of Income for the year ended December 31, 1997 64 Notes to Pro Forma Combined Condensed Financial Information 65 Exhibit 10.1* Stock Purchase Agreement dated as of November 10, 1998 by and among NFO Europe (Deutschland) GmbH & Co. KG, NFO Worldwide, Inc. (the "Company") and all of the Stockholders (the "Sellers") of Infratest Burke Aktiengesellschaft Holding ("Infratest"). Exhibit 10.2* Letter Agreement dated November 17, 1998 among the Company, Infratest and the Sellers. 2 Exhibit 10.3* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's Adjustable Rate Series A Senior Notes due 2005 and the Company's Adjustable Rate Series B Senior Notes due 2008. Exhibit 10.4* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's 9.84% Senior Subordinated Notes due 2008. Exhibit 10.5* Amendment dated as of November 20, 1998 to the separate Note Purchase Agreements dated as of March 9, 1998 between the Company and each of the institutions signatory thereto. Exhibit 10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit Agreement dated as of March 9, 1998 by and among the Company, Fleet National Bank and The Chase Manhattan Bank, as co-agents, and the banks signatory thereto. Exhibit 23.1 Consent of Independent Public Accountants 67 Exhibit 99.1* Press Release dated November 23, 1998 by the Company announcing the Company's private placement. Exhibit 99.2* Press Release dated November 23, 1998 by the Company announcing the Infratest acquisition. - ------------------ * Previously filed 3 This Amendment No. 1 amends the Current Report on Form 8-K of NFO Worldwide, Inc. (the "Company") dated November 20, 1998 (the "Form 8-K"). As provided in Item 7(a) and 7(b) of Form 8-K, the Form 8-K did not include (i) audited financial statements of Infratest Burke Aktiengesellschaft Holding ("Infratest"), the business acquired in the transaction, or (ii) pro forma financial statements of the Company, neither of which were available at the time the Form 8-K was filed. This Amendment No. 1 is filed to provide audited financial statements of Infratest and to also provide the required pro forma financial information. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. The following financial statements of Infratest prepared in accordance with German GAAP are filed as part of this Current Report: o Independent Auditors' Reports for the years ended September 30, 1998, 1997, and 1996. o Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1998 o Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1997 o Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1996 (b) Pro Forma Financial Information. The following unaudited pro forma financial information is filed as part of this Current Report: o Description of Pro Forma Combined Condensed Financial Information o Pro Forma Combined Condensed Balance Sheet as of September 30, 1998. o Pro Forma Combined Condensed Statement of Income for the nine months ended September 30, 1998. o Pro Forma Combined Condensed Statement of Income for the year ended December 31, 1997. o Notes to Pro Forma Combined Condensed Financial Information. (c) Exhibits: 10.1* Stock Purchase Agreement dated as of November 10, 1998 by and among NFO Europe (Deutschland) GmbH & Co. KG, NFO Worldwide, Inc. (the "Company") and all of the Stockholders (the "Sellers") of Infratest Burke Aktiengesellschaft Holding ("Infratest"). 10.2* Letter Agreement dated November 17, 1998 among the Company, Infratest and the Sellers. 10.3* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's Adjustable Rate Series A Senior Notes due 2005 and the Company's Adjustable Rate Series B Senior Notes due 2008. 10.4* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's 9.84% Senior Subordinated Notes due 2008. 10.5* Amendment dated as of November 20, 1998 to the separate Note Purchase Agreements dated as of March 9, 1998 between the Company and each of the institutions signatory thereto. 10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit Agreement dated as of March 9, 1998 by and among the Company, Fleet National Bank and The Chase Manhattan Bank, as co-agents, and the banks signatory thereto. 23.1 Consent of Independent Public Accountants. 99.1* Press Release dated November 23, 1998 by the Company announcing the Company's private placement. 99.2* Press Release dated November 23, 1998 by the Company announcing the Infratest acquisition. - ------------------ * Previously filed 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NFO Worldwide, Inc. By: /s/ PATRICK G. HEALY ------------------------ PATRICK G. HEALY President - AustralAsia and the Middle East and Chief Financial Officer (Authorized Officer of Registrant and Principal Financial Officer) Dated: February 3, 1998 ---------------- 5 INDEPENDENT AUDITORS' REPORT ---------------------------- To the Board of Directors of Infratest Burke Aktiengesellschaft Holding We have audited the accompanying consolidated balance sheets of Infratest Burke Aktiengesellschaft Holding and subsidiaries ("IB") as of September 30, 1998, 1997 and 1996 and the related consolidated statements of operations for each of the years in the three year period ended September 30, 1998. These consolidated financial statements are the responsibility of IB's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Germany which are similar to US generally accepted auditing standards in all material respects. 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 based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IB as of September 30, 1998, 1997 and 1996 and the results of their operations for each of the years in the three year period ended September 30, 1998 in conformity with generally accepted accounting principles in Germany. Further, in our opinion, the reconciliation of consolidated net income and shareholders' equity for the years ended September 30, 1998 and 1997 presented in Note 6 and 7 to the accompanying consolidated financial statements, presents fairly in all material respects, the reconciliation of net income and shareholders` equity, as shown in the consolidated financial statements, to net income and shareholders' equity as determined in accordance with accounting principles generally accepted in the United States of America. Munich, Germany January 15, 1999 Haarmann, Hemmelrath & Partner GmbH Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft Zelger ppa. Pilenghi Wirtschaftsprufer Wirtschaftsprufer Attachments 6 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1998 7 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 ASSETS 1998 1997 DM DM -------------- -------------- A. FIXED ASSETS I.Intangible assets 1. Franchise, trademarks, patents, licences and similar rights 11,150,627.83 16,297,565.38 2. Goodwill 39,065,569.29 42,063,252.14 -------------- -------------- 50,216,197.12 58,360,817.52 II.Property, plant and equipment 1. Land, leasehold rights and buildings, including buildings on non-owned land 9,364,268.69 10,108,100.18 2. Other equipment, fixtures, fittings and equipment 15,956,366.84 16,048,743.47 -------------- -------------- 25,320,635.53 26,156,843.65 III.Financial assets 1. Shares in affiliated companies 2,843,350.76 624,468.00 2. Shares in associated companies 350,079.77 301,804.92 3. Investments 192,260.30 532,681.94 4. Loans due from other group companies 321,530.00 271,530.00 5. Securitiy investments 0.00 40,766.25 6. Other loans 363,777.43 349,693.92 -------------- -------------- 4,070,998.26 2,120,945.03 -------------- -------------- 79,607,830.91 86,638,606.20 -------------- -------------- B. CURRENT ASSETS I.Inventories 1. Raw material and supplies 319,258.14 365,497.24 2. Work in process and finished goods 51,612,031.32 44,442,315.88 3. minus: advance payments received on accounts orders -51,612,031.32 -44,442,315.88 4. Advance payments 10,380.00 120,695.00 -------------- -------------- 329,638.14 486,192.24 II.Accounts receivable and other assets 1. Accounts receivable trade 59,871,699.84 51,213,594.89 2. Accounts due from affiliated companies 181,135.33 230.00 3. Accounts due from joint ventures 676,702.59 173.90 4. Accounts due from other group companies 527,865.84 524,209.16 5. Other assets 6,766,373.35 5,796,290.47 -------------- -------------- 68,023,776.95 57,534,498.42 III.Marketable securities Other marketable securities 186,764.03 205,156.18 IV.Checks, cash on hand and in Federal Bank and in postal giro accounts and cash in banks 12,881,001.82 15,134,051.05 -------------- -------------- 81,421,180.94 73,359,897.89 -------------- -------------- C. DEFERRED TAX ASSETS 845,679.25 799,475.25 -------------- -------------- D. PREPAID EXPENSES AND DEFERRED CHARGES 4,762,617.01 2,481,096.07 -------------- -------------- 166,637,308.11 163,279,075.41 ============== ============== LIABILITIES AND SHAREHOLDER'S EQUITY 1998 1997 DM DM -------------- -------------- A. SHAREHOLDERS' EQUITY I.Capital subscribed 100,000.00 100,000.00 II.Capital surplus 29,180,000.00 29,180,000.00 III.Consolidated accumulated deficit, brought forward -12,710,228.79 -15,726,626.48 IV.Consolidated net income/(loss) 6,902,903.42 3,630,799.65 V.Minority interest 1,435,961.32 1,025,228.16 VI.Accumulated translation difference 174,652.61 620,197.16 -------------- -------------- 25,083,288.56 18,829,598.49 -------------- -------------- B. PROVISIONS AND ACCRUED LIABILITIES 1. Provisions for pensions and similar obligations 73,114.84 112,633.95 2. Accrued taxes 4,671,729.62 4,992,685.33 3. Deferred taxes 417,932.51 0.00 4. Other provisions and accrued liabilities 40,594,752.41 31,265,849.52 -------------- -------------- 45,757,529.38 36,371,168.80 -------------- -------------- C. LIABILITIES 1. Liabilities due to banks 43,830,322.94 55,203,766.17 2. Advance payments received on account of orders 894,653.49 1,241,319.09 3. Trade accounts payable 18,007,818.41 15,884,769.80 4. Accounts due to affiliated companies 2,703,659.29 3,208,642.29 5. Accounts payable due to joint ventures 1,028,782.05 73,437.02 6. Accounts due to other group companies 1,389,280.34 575,360.64 7. Other liabilities 27,625,362.19 31,623,276.57 -------------- -------------- 95,479,878.71 107,810,571.58 -------------- -------------- D. DEFERRED CHARGES 316,611.46 267,736.54 -------------- -------------- -------------- -------------- 166,637,308.11 163,279,075.41 ============== ============== 8 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR 1997/98
1998 1997 DM DM -------------------- -------------------- 1. Sales 362,586,890.62 289,983,801.85 2. Increase of work in process and finished goods 7,169,715.44 5,066,942.11 3. Other operating income 5,361,415.57 7,809,006.16 4. Expenses of services received -129,870,733.28 -94,238,723.43 5. Personnel expenses a) Wages and salaries -119,219,244.92 -92,622,345.66 b) Social security, pension and other benefit costs -23,259,376.11 -20,515,468.02 6. Depreciation expenses -16,769,891.19 -14,193,453.60 7. Other operating expenses -68,974,279.36 -69,986,307.74 8. Income from investments and associated companies 630,440.28 786,867.05 9. Other interest and similar income 492,317.31 431,865.97 10. Write-offs of financial assets and marketable securities -865,218.31 -63,163.18 11. Interest and similar expenses -4,031,523.43 -3,766,351.93 -------------------- -------------------- 12. Result from ordinary operation 13,250,512.62 8,692,669.58 -------------------- -------------------- 13. Taxes on income -3,765,533.74 -3,292,888.40 14. Other taxes -1,692,428.29 -1,389,626.43 -------------------- -------------------- 15. Consolidated profit / (loss) before minority-interest 7,792,550.59 4,010,154.75 -------------------- -------------------- 16. Minority-interest -889,647.17 -379,355.10 -------------------- -------------------- 17. Consolidated profit / (loss) 6,902,903.42 3,630,799.65 ==================== ====================
9 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR 1997/98 1. INFORMATION ON INVESTMENT HOLDINGS For the following notes, the ultimate participating interest of Infratest Burke AG Holding in the capital of the individual companies has been calculated as a percentage. 1.1 Consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/98 1997/98 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- --------------------- Infratest Burke International GmbH Holding, Munich 100 TDM 30.000 39,840 7,461 Infratest Burke GmbH & Co, Forschung fur Entscheidungen in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 7,421 Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 4,181 Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 2,086 Infratest Burke S.p.A., Mailand, Italien 100 MioLIR 1.000 2,557 1,116 Infratest Burke S.a.r.l., Paris, France 100 TFF 270 1,027 556 Infratest Burke Group Ltd., London, UK 100 TGBP 2.000 7,136 490 PAS Group Ltd., London, UK 100 TGBP 342 2,712 427 Infratest Burke InCom GmbH & Co, Forschung und Beratung fur die Informations- und Kommunikationsmarkte, Munich 1) 100 TDM 100 100 2,087 Infratest Burke International Services Ltd., London, UK 100 TGBP 60 -122 95 Infratest dimap Gesellschaft fur Trend- und Wahlforschung mbH, Berlin 74 TDM 50 -78 49 NEXXUS Kommunikationsanlagen GmbH, Betrieb und Vermietung, Munich 100 TDM 50 37 21 Infratest Burke AB, Goteborg, Sweden 75.2 TSEK 100 262 -27 Infratest Burke Asia Pacific Ltd., London, UK 100 TGBP 50 -37 254 Infratest Burke GmbH & Co. Marketingforschung, Frankfurt am Main 100 TDM 100 100 26 Trendbox B.V., Amsterdam, Netherlands 75 THFL 250 -1,447 -436 Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 2,030 KFM Klinische Forschung GmbH, Munich 72 TDM 50 443 291 Testpanel-Marktforschungsinstitut GmbH, Wetzlar 100 TDM 60 737 440 1) The presentation of the nominal capital and net worth relates to the capital account of the limited-liability partner of the respective partnership.
10 1.2 Non-consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/98 1997/98 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- -------------------- Infratest Burke Core Company Ltd., London, England 100 TGBP 150 386 0 Infratest U.S. Inc. Wilmington (USA) 1) 100 TUSD 1 - - Infratest Burke Beteiligungs GmbH, Munich 100 TDM 50 57 3 Infratest Burke Verwaltungs-GmbH, Munich 100 TDM 50 58 3 Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 58 3 Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 15 5 Infratest Burke InCom Beteiligungs GmbH, Munich 100 TDM 50 58 3 InfraForces S.a.r.l., Paris, France 100 TFF 100 -270 -328 Infratest Gesundheitsforschung GmbH, Geretsried 80 TDM 50 58 2 Plus Remark Research for Marketing, Istanbul, Turke 2) 55 TRK 7.500 1,096 473 1) No data on the year-end closing were available by the date of preparation of the annual financial statements 2) Data as of December 31, 1997
These firms were not included in the consolidated financial statements in view of their minimal business activity during the fiscal year 1997/98 or their secondary importance with respect to the consolidated financial statements pursuant to Section 296 of the Commercial Code. Additional participating interests are held in companies that are currently inactive or are in liquidation. 11 1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/98 1997/98 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- -------------------- Burke Inc., Cincinnati, USA 50 TUSD 3.750 3,023 2,080 Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin 1) 40 TDM 70 70 2,496 Infratest Gesundheitsforschung (Suisse) GmbH, 34 TSFR 200 166 777 ZEG Zentrum fur Epidemiologie und Gesundheits- forschung GmbH, Zepernick 22 TDM 150 580 359 GPI Kommunikationsforschung Gesellschaft fur 32 TDM 50 1,343 1,247 Pharma-Informationssysteme mbH, Nurnberg I + G Infratest und GFK Medical Research 26 TUSD 100 1,136 378 International Inc., Rhode Island, USA I + G Nordic Medical Research A/S, Copenhagen 28 TDKK 500 187 57 Denmark IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich 20 TDM 100 399 188 I + G Gesundheitsforschung GmbH & Co, Nurnberg 40 TDM 50 50 2,450 1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of the respective partnership.
1.4 Associated companies in the sense of Section 311 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/98 1997/98 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- -------------------- Infratel GmbH Telefonische Datenerhebung und Datenverarbeitung, Bielefeld 1) 29 TDM 50 233 49 P & P Software und Consulting Gesellschaft mbH, Bad Homburg 1) 20 TDM 56,5 755 613 MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt 18 TDM 100 -1,693 9 GPI Gesellschaft fur Pharma-Informations- systeme mbH, Frankfurt 2) 12 TDM 100 1,687 1,537 MAP I + G S.A., Lyon, France 3) 20 TFF 350 1,106 12 1) The data pertain to the unaudited annual financial statements as of December 31, 1997 2) The data pertain to the annual financial statements as of November 30, 1997 3) The data pertain to the annual financial statements as of September 30, 1997
12 2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION 2.1 Individual annual financial statements included The provisions of the Commercial Code and the Stock Corporation Law relating to balance-sheet preparation, valuation and recognition are complied with in preparing the annual accounts included in the consolidated financial statements. In cases where tax provisions relating to balance-sheet preparation mandate the preparation of a corresponding balance-sheet as part of the annual financial statements, compliance with these tax provisions is maintained. 2.1.1 Assets Intangible and tangible fixed assets are recorded at acquisition cost less scheduled depreciation. Depreciation is calculated by the straight-line method, at the rates permitted by tax law. Low-cost economic goods are depreciated in full during the year of acquisition and are shown in the development of the assets as additions and disposals and as depreciation for the current fiscal year. The rates of depreciation are: Goodwill 6,7 - 25 % p.a. Software 25 % p.a. Vehicle fleet 20 - 25 % p.a. Other factory and office equipment 10 - 33 % p.a. 13 Fixed assets developed as follows (from 10-01 1997 to 09-30 1998):
Cost ----------------------------------------------------------------------------------------------------------- 10-01-1997 10-01-1997 at closing date Exchange at closing date rate rate rate 09-30-97 differences 09-30-98 Additions Transfers Disposals 09-30-98 DM DM DM DM DM DM DM ----------------------------------------------------------------------------------------------------------- Intangible assets - ----------------- 1. Franchises, trademarks, patents, licences and similar rights 27,621,348.56 -126,999.85 27,494,348.71 378,891.75 8,566.24 258,335.17 27,623,471.53 2. Goodwill 45,268,543.73 0.00 45,268,543.73 10,077.79 0.00 0.00 45,278,621.52 ----------------------------------------------------------------------------------------------------------- 72,889,892.29 -126,999.85 72,762,892.44 388,969.54 8,566.24 258,335.17 72,902,093.05 ----------------------------------------------------------------------------------------------------------- Property, plant and equipment - ------------------- 1. Land, leasehold rights and buildings, including buildings einschlielslich der Bauten on non-owned land 10,253,673.18 -159,571.42 10,094,101.76 38,333.83 -217,487.72 5,510.10 9,909,437.77 2. Technical equipment, plant and machinery 5,295,124.69 -212,064.60 5,083,060.09 1,507,564.80 1,088,829.92 761,629.98 6,917,824.83 3. Other equipment, fixtures, fittings and equipment 34,279,492.76 -350,912.83 33,928,579.93 6,484,380.85 -713,230.96 3,156,929.22 36,542,800.60 4. Advance payments 168,812.23 -649.63 168,162.60 366,625.04 -166,677.47 1,485.12 366,625.05 ----------------------------------------------------------------------------------------------------------- 49,997,102.86 -723,198.48 49,273,904.38 8,396,904.52 -8,566.23 3,925,554.42 53,736,688.25 ----------------------------------------------------------------------------------------------------------- Financial assets - ---------------- 1. Shares in affiliated companies 624,468.00 0.00 624,468.00 2,130,747.12 88,135.64 0.00 2,843,350.76 2. Loans due from affiliated companies 0.00 0.00 0.00 1,769,714.31 0.00 0.00 1,769,714.31 3. Shares in associated companies 1,233,244.30 0.00 1,233,244.30 74,500.00 0.00 26,225.15 1,281,519.15 4. Investments 696,554.74 0.00 696,554.74 0.00 -88,135.64 252,286.00 356,133.10 5. Loans due from other group companies 271,530.00 0.00 271,530.00 50,000.00 0.00 0.00 321,530.00 6. Security investments 40,766.25 0.00 40,766.25 0.00 0.00 40,766.25 0.00 7. Other loans 349,693.92 -1,103.77 348,590.15 76,862.17 0.00 61,674.90 363,777.42 ----------------------------------------------------------------------------------------------------------- 3,216,257.21 -1,103.77 3,215,153.44 4,101,823.60 0.00 380,952.30 6,936,024.74 ----------------------------------------------------------------------------------------------------------- 126,103,252.36 -851,302.10 125,251,950.26 12,887,697.66 0.00 4,564,841.89 133,574,806.04 =========================================================================================================== Depreciation - ------------------------------------------------------------------------------------------------------------------------------------ 10-01-1997 10-01-1997 at closing date Exchange at closing date Additions Exchange Additions rate rate rate Average rate at closing date 09-30-97 differences 09-30-98 rate differences rate Transfers Disposals 09-30-98 DM DM DM DM DM DM DM DM DM - ------------------------------------------------------------------------------------------------------------------------------------ 11,323,783.18 -107,245.31 11,216,537.87 5,417,504.37 -2,920.16 5,414,584.21 8,563.25 166,841.63 16,472,843.70 3,205,291.59 0.00 3,205,291.59 3,007,760.64 0.00 3,007,760.64 0.00 0.00 6,213,052.23 - ------------------------------------------------------------------------------------------------------------------------------------ 14,529,074.77 -107,245.31 14,421,829.46 8,425,265.01 -2,920.16 8,422,344.85 8,563.25 166,841.63 22,685,895.93 - ------------------------------------------------------------------------------------------------------------------------------------ 145,573.00 -11,652.20 133,920.80 473,749.83 -1,402.16 472,347.67 -55,589.29 5,510.10 545,169.08 2,968,746.61 -129,604.05 2,839,142.56 1,541,107.15 -71,927.30 1,469,179.85 596,635.29 753,080.41 4,151,877.29 20,725,939.60 -189,299.09 20,536,640.51 6,362,402.04 -45,265.06 6,317,136.98 -549,609.25 2,585,161.90 23,719,006.34 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 23,840,259.21 -330,555.34 23,509,703.87 8,377,259.02 -118,594.52 8,258,664.50 -8,563.25 3,343,752.41 28,416,052.71 - ------------------------------------------------------------------------------------------------------------------------------------ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,769,714.31 0.00 1,769,714.31 0.00 0.00 1,769,714.31 931,439.38 0.00 931,439.38 0.00 0.00 0.00 0.00 0.00 931,439.38 163,872.80 0.00 163,872.80 0.00 0.00 0.00 0.00 0.00 163,872.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1,095,312.18 0.00 1,095,312.18 1,769,714.31 0.00 1,769,714.31 0.00 0.00 2,865,026.49 - ------------------------------------------------------------------------------------------------------------------------------------ 39,464,646.16 -437,800.65 39,026,845.51 18,572,238.34 -121,514.68 18,450,723.66 0.00 3,510,594.04 53,966,975.13 ==================================================================================================================================== Net book value - ------------------------------------ 09-30-1998 09-30-1997 DM DM - ------------------------------------ 11,150,627.83 16,297,565.38 39,065,569.29 42,063,252.14 - ------------------------------------ 50,216,197.12 58,360,817.52 - ------------------------------------ 9,364,268.69 10,108,100.18 2,765,947.54 2,326,378.08 12,823,794.26 13,553,553.16 366,625.05 168,812.23 - ------------------------------------ 25,320,635.54 26,156,843.65 - ------------------------------------ 2,843,350.76 624,468.00 0.00 0.00 350,079.77 301,804.92 192,260.30 532,681.94 321,530.00 271,530.00 0.00 40,766.25 363,777.42 349,693.92 - ------------------------------------ 4,070,998.25 2,120,945.03 ==================================== 79,607,830.91 86,638,606.20 ==================================== The additions to depreciation include DM 32.632,82 resulting from the initial consolidation of ImePa GmbH on quota-basis (26,5%) and DM 904.496,00 resulting from the consolidation of InfraForces. A loan in the amount of TDM 1.769 to InfraForces has been partially (50 %) in fiscal year 1996/1997 reserved, which has been eliminated in the consolidation process. The remaining book value in the amount of TDM 865 has been reserved in fiscal year 1997/98 with the result that a reserve has been provided for the total amount of the loan as of September 30, 1998.
14 2.1.2 Inventories Work in process is valued at production cost. Completed but uninvoiced services are recorded as finished goods under "Inventories" and are valued at net sale price. Production cost includes all components that must be carried as assets according to tax law. In case the expected total production cost of work in process exceed total expected net sales revenues adequate inventory reserves are provided. Furthermore provisions are established for follow-up services yet to be performed in connection with finished or invoiced services. Advance payments from customers are deducted from inventory as such and are posted as liabilities to the extent they exceed inventory. 2.1.3 Receivables and other fixed assets Trade accounts receivables are recorded at nominal value. For doubtful accounts receivables and those carrying discernible risks, direct adjustments are made; uncollectable debts are written off. General interest and credit risk is covered by a lump-sum value adjustment of 2%. Other receivables and other assets are recorded at the nominal amount or at a lower value assigned at the closing date. 2.1.4 Provisions Provisions are created for as dictated by sound business judgement to cover uncertain liabilieties, anticipated losses related to incomplete contracts, and deferred maintenance. 2.1.5 Payables Payables are recorded at the amount repayable. 15 2.2 Consolidation methods 2.2.1 Capital consolidation Capital consolidation is performed by the book value method (Section 301 Para. 1 Sentence 2 No. 1 of the Commercial Code). According to this method, participating interests that must be consolidated are offset against their allotted share of the net worth of the subsidiaries. This net worth represents the book value at date of acquisition of the assets, debts, accrued and deferred items and special items to be reported on in the consolidated financial statements. Consolidation surpluses from capital consolidation at the date of acquisition of the participating interests are offset against reserves (in the year under review: TDM 614; previous year: TDM 0) - possibly after allocation to hidden reserves in the assets of the acquired undertaking - or are allocated to goodwill and amortized over the 15 years following the year of acquisition of the interest (amortization during the year under review: TDM 3.008; previous year: TDM 2.110). 2.2.2 Equity consolidation The associated companies - - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt - - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt - - P & P Software und Consulting GmbH, Bad Homburg were included in the consolidated financial statements by the equity/book value method. For reasons of materiality, the other associated companies continued to be carried at the book values recorded in the stockholder's individual financial statements. 2.2.3 Pro-rata consolidation The joint ventures IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA Infratest Gesundheitsforschung (Suisse) GmbH I + G Nordic Medical Research A/S, Copenhagen, Denmark Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme mbH, Nuremberg I + G Gesundheitsforschung GmbH & Co, Nuremberg) Burke Inc., Cincinnati, USA were included in the consolidated financial statements on a pro-rata basis, according to the percentage of the interest in the firm. 16 2.2.4 Elimination of inter-company profits Assets to be included in the consolidated financial statements and deriving wholly or in part from transactions among the companies included in the consolidated financial statements are reported on the consolidated balance sheet at acquisition or production cost of the group. 3. BASIS OF FOREIGN CURRENCY TRANSLATION 3.1 Translation of individual financial-statement items stated in foreign currency For annual financial statements containing items based on sums that are or originally were stated in foreign currency, the conversion to German marks is performed at the rate in effect at the transaction date. Balance-sheet items are valued at the exchange rate in effect on the closing date, no exchange gains being realized. 3.2 Translation of financial statements in foreign currencies The translation of financial statements recorded in foreign currencies was performed by the current rate method: balance-sheet items were translated at the rate in effect on the closing date of September 30, 1998, and income-statement items were translated at the average rate for the fiscal year 1997/98. Exchange-rate differences resulting from the translation of net worth at different current rates and differences resulting from the translation of balance-sheet items at current rates and income statement items at average rates are recognized separately as a equity item on the balance sheet. 17 4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS 4.1 Items of accrual and deferral for deferred taxes The deferred tax asset relates to a discrepancy between the goodwill reported on the individual financial statements of Infratest Burke Wirtschaftsforschung GmbH & Co, Munich, and that recorded by the Group, and to the translation of the percentage-of-completion method into the completed-contact method used within the Group for the tax consequences incurred by the joint venture Burke Inc., which is included on a pro-rata basis. 4.2 Other provisions and accrued liabilities "Other provisions and accrued liabilities" basically recognizes provisions for Profit-sharing Follow-up services Unpaid invoices Restructuring Vacations and overtime Statuary social security benefits (Italy) Year-end costs Employee anniversaries. 5. OTHER MANDATORY INFORMATION 5.1 Remaining term The remaining term on receivables is less than one year. The remaining terms on payables are shown in the following presentation of accounts payable:
Due within After Total 1 year 1-5 years 5 years DM DM DM DM -------------- -------------- --------------- -------------- Liabilities due to banks 43.830.322,94 43.426.997,04 359.043.40 44.282,50 Advance payments received on account of orders 894.653,49 894.653,49 0,00 0,00 Trade accounts payable 18.007.818,41 17.659.988,83 347.829,58 0,00 Accounts due to affiliated companies 2.703.659,29 2.703.659,29 0,00 0,00 Accounts due to joint ventures 1.028.782,05 1.028.782,05 0,00 0,00 Accounts due to other group companies 1.389.280,34 1.389.280,34 0,00 0,00 Other liabilities 27.625.362,19 27.339.115,00 131.258,44 154.988,75 ============== ============== =============== ============== 95.479.878,71 94.442.476,04 838.131,42 199.271,25 ============== ============== =============== ==============
18 5.2 Collateralization of accounts payable Payables are not collateralized. 5.3 Analysis of sales revenues Sales revenues - broken down according to country of realization - are distributed as follows: 1997/98 1996/97 TDM TDM ------------ ------------ Domestic 173,759 154,407 Foreign 188,828 135,577 ------------ ------------ 362,587 289,984 ============ ============ 5.4 Other financial obligations Other financial obligations total TDM 37.851 (previous year: TDM 42.345). 5.5 Employees The average number of employees in the Group - that is, in the fully consolidated companies - is distributed as follows (itemized by country): 1997/98 1996/97 ------------- ------------- England 174 163 Germany 418 419 Sweden 90 63 Holland 54 63 Italy 75 72 France 91 91 ------------- ------------- 902 871 ============= ============= 19 The average number of employees of companies included in the consolidated financial statements on a pro-rata basis only is distributed as follows: 1997/98 1996/97 ------------- ------------- Germany 110 123 Switzerland 12 9 U.S. 346 247 Denmark 3 3 ------------- ------------- 471 382 ============= ============= 5.6 Remuneration of officers Remuneration paid to the Board of Directors of the parent company, I.B. AG Holding, during the fiscal year 1997/98 totaled TDM 4,304 (previous year: TDM 2,750). Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year 1997/98. 6. SUMMARY OF DIFFERENCES BETWEEN GERMAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The following is a summary of the estimated adjustments to consolidated profit and to consolidated stockholders' equity that would have been required if US GAAP would have been applied instead of German GAAP. 20 6.1. Approximate effects on consolidated profit of differences between German and US generally accepted accounting principles TDM TDM ---------- ---------- Net Profit/(Loss) as reported under German GAAP 6,903 ---------- US GAAP adjustments: Amortization of goodwill 5,736 Profit recognition by application of percentage of completion method -180 Lumpsum reserve on accounts receivable trade -121 Reversal of accrual for future expenses -517 Other -25 4,893 ---------- Tax effects: Deferred taxation -3,684 Provision for tax risks -950 -4,634 ---------- ---------- Approximate Net Profit/(Loss) as adjusted for US GAAP 7,162 ========== 21 6.2. Approximate cumulative effect on shareholders' equity of differences between German and US generally accepted accounting principles TDM --------- Shareholders' equity per German GAAP 1) 23,647 --------- US GAAP adjustments: Goodwill 14,692 Profit recognition by application of percentage of completion method 21,744 Lumpsum reserve on account sreceivable trade 243 Provision for future expenses 2,026 Provision for tax risks -2,925 Deferred taxation -2,064 Effect on minorities 430 Other 53 --------- Approximate Shareholders' equity as adjusted for US GAAP 57,846 ========= 1) excluding minority interest 22 6.3. Discussion of material variations between German and US generally accepted accounting principles The material variations between German and US GAAP relate to the following items: 6.3.1. Goodwill / Amortization of goodwill Goodwill resulting from the consolidation process is amortized over a period of 30 years applying the straight line method for US GAAP purposes. The treatment in the local consolidated financial statements follows the treatment in the tax filing where the amounts of purchase prices exceeding the net equity of acquired subsidiaries is amortized over a shorter period of time (between 1 and 15 years, depending on the allocation applied). Due to the amortization opportunity for local taxation deferred taxes / tax assets have been considered (see Sect. 6.3.6 below). 6.3.2 Percentage of completion method Profit recognition relating to services rendered to customers follows the "percentage of completion"- method for US GAAP purposes whereas for local purposes the "completed contract"- method must be applied. According to the "completed contract" - method profit may not be recognized until the contractually agreed services have been accepted by the customers. Compared to the "percentage of completion"- method the application of the "completed contract" - method leads to a delay in profit recognition. 23 6.3.3. Lumpsum reserve on accounts receivable trade The difference relates to the application of varying rates for the calculation of lumpsum bond debt reserves: US GAAP 1% for German companies 0% for Non-German companies German GAAP 2% 6.3.4. Provision for future expenses Local books contain provisions for expenses which can not be related to the current or prior years but shall cover potential expenses which are related to the future. Those provisions are not allowed by US GAAP and accordingly were eliminated in consolidated shareholders' equity adjusted for US GAAP. 6.3.5 Provision for tax risks The accounting of German trade tax on income in the local consolidated financial statements followed the treatment in the tax filings. Since, however, a probable risk exists that those taxes will be payable a respective provision was established in the consolidated financial statements adjusted for US GAAP. 6.3.6 Deferred taxation Deferred taxes relate to temporary differences between the tax bases of assets or liabilities and the reported amounts according to US GAAP as well as to tax loss carryforwards. If evidence indicates that it is more likely than not that deferred tax assets relating to tax loss carryforwards will not be realized adequate allowances were provided. Deferred taxes have primarily been provided for temporary differences relating to explanations in Sect. 6.3.1, 6.3.2 and 6.3.3 and to tax loss carryforwards in Germany. The tax rate applied amounts to 35%. 6.3.7 Equity Method Joint venture companies (reference is made to Sect. 2.2.3.) were included in the consolidated financial statements under German GAAP on a pro-rata basis whereas under US GAAP the Equity method was applied. The impact on consolidated stockholders' equity and on consolidated income was not material. 24 7. CASH FLOW STATEMENT
1997/98 1996/97 TDM TDM Cash flow from operating activities: Consolidated profit (loss) of the year 7,162 6,880 Adjustments to reconcile consolidated profit (loss) to net cash: Depreciation and amortization 10,610 8,253 Change in provisions for pensions -36 109 Change in inventories -1,208 -6,827 Change in accounts receivables -6,668 -10,408 Change in deferred tax assets 3,902 3,025 Change in accounts due from group companies -1,182 2,459 Change in other operating assets and prepaid expenses -2,986 12,831 Change in deferred income taxes 3,280 3,953 Change in tax provisions -2,078 -2,329 Change in provisions 6,234 1,331 Change in advance payments received 4,761 6,105 Change in amounts owed to group companies 1,905 -1,541 Change in accounts payables -1,751 3,395 Change in other operating liabilities and deferred charges -3,386 3,330 ------------ ------------ Net cash provided from operating activities 18,559 30,566 ............ ............ Cash flow from investing activities: Net investment intangible assets -340 -16,362 Net investment tangible assets -7,022 -7,896 Net investment financial assets -2,632 -19,013 ------------ ------------ Net cash provided from investing activities -9,994 -43,271 ............ ............. Cash flow from financing activities Change in debts to banks -11,388 17,671 Change in retained earnings -614 Change in minority interest -89 297 ------------ ------------ Net cash provided from financing activities -12,091 17,968 ............ ............ Effect of Exchange Rate Differences in Equity -146 408 ............ Change in Cash and Cash Equivalents -3,672 5,671 ============ ============ Cash and Cash equivalents at the beginning of the year 14,544 8,873 ============ ============ Cash and Cash Equivalents at the end of the year 10,872 14,544 ============ ============
25 Reconciliation of cash and cash equivalents - ------------------------------------------- 1997/98 1996/97 TDM TDM ----------- ----------- Cash and cash equivalents according to German GAAP as of September 30, 1998 12,881 15,134 Elimination of per quota consolidated entities -2,009 -590 ----------- ----------- 10,872 14,544 =========== =========== Munich, January 15, 1999 The Board of Directors 26 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1997 27 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 ASSETS 1997 1996 DM DM -------------- -------------- A. FIXED ASSETS I.Intangible assets 1.Franchise, trademarks, patents, licences and similar rights 16,297,565.38 19,643,319.06 2.Goodwill 42,063,252.14 12,783,680.00 -------------- -------------- 58,360,817.52 32,426,999.06 II.Property, plant and equipment 1.Land, leasehold rights and buildings, including buildings on non-owned land 10,108,100.18 8,202,729.70 2.Other equipment, fixtures, fittings and equipment including advance payments 16,048,743.47 14,826,966.22 -------------- -------------- 26,156,843.65 23,029,695.92 III.Financial assets 1.Shares in affiliated companies 624,468.00 366,592.24 2.Loans due from affiliated companies 0.00 271,530.00 3.Shares in associated companies 301,804.92 1,002,131.88 3.Investments 532,681.94 256,784.00 5.Loans due from other group companies 271,530.00 0.00 6.Securitiy investments 40,766.25 34,572.00 7.Other loans 349,693.92 496,200.85 -------------- -------------- 2,120,945.03 2,427,810.97 -------------- -------------- 86,638,606.20 57,884,505.95 -------------- -------------- B. CURRENT ASSETS I.Inventories 1.Raw material and supplies 365,497.24 415,873.38 2.Work in progress and finished goods 44,442,315.88 40,063,683.17 3.minus: advance payments received on accounts of orders -44,442,315.88 -38,375,444.81 4.Advance payments 120,695.00 600,149.62 -------------- -------------- 486,192.24 2,704,261.36 II.Accounts receivable and other assets 1.Accounts receivable trade 51,213,594.89 39,116,792.72 2.Accounts due from affiliated companies 230.00 0.00 3.Accounts due from joint ventures 173.90 671,534.13 4.Accounts due from other group companies 524,209.16 441,024.44 5.Other assets 5,796,290.47 17,511,658.39 -------------- -------------- 57,534,498.42 57,741,009.68 III.Marketable securities Other marketable securities 205,156.18 91,532.50 IV.Checks, cash on hand and in Federal Bank and in postal giro accounts and cash in banks 15,134,051.05 9,442,685.23 -------------- -------------- 73,359,897.89 69,979,488.77 -------------- -------------- C. DEFERRED TAX ASSETS 799,475.25 250,000.00 -------------- -------------- D. PREPAID EXPENSES AND DEFERRED CHARGES 2,481,096.07 2,836,401.17 -------------- -------------- 163,279,075.41 130,950,395.89 ============== ============== LIABILITIES AND SHAREHOLDER'S EQUITY 1997 1996 DM DM -------------- -------------- A. SHAREHOLDERS'S EQUITY I.Capital subscribed 100,000.00 100,000.00 II.Capital surplus 29,180,000.00 29,180,000.00 III.Consolidated accumulated deficit, brought forward -15,726,626.48 0.00 IV.Consolidated net income/(loss) 3,630,799.65 -15,726,626.48 V.Minority interest 1,025,228.16 659,035.21 VI.Exchange difference 620,197.16 276,838.26 -------------- -------------- 18,829,598.49 14,489,246.99 -------------- -------------- B. PROVISION AND ACCRUED LIABILITIES 1. Provisions for pensions and similar obligations 112,633.95 73,984.61 2. Accrued taxes 4,992,685.33 5,948,130.42 3. Other provisions and accrued liabilities 31,265,849.52 27,806,548.89 -------------- -------------- 36,371,168.80 33,828,663.92 -------------- -------------- C. LIABILITIES 1. Liabilities due to banks 55,203,766.17 37,541,445.86 2. Advance payments received on account of orders 1,241,319.09 0.00 3. Trade accounts payable 15,884,769.80 13,722,357.31 4. Notes payable 0.00 14,707.52 5. Accounts due to affiliated companies 3,208,642.29 3,046,209.72 6. Accounts payable due to joint ventures 73,437.02 0.00 7. Accounts due to other group companies 575,360.64 749,012.87 8. Other liabilities 31,623,276.57 26,018,092.56 -------------- -------------- 107,810,571.58 81,091,825.84 -------------- -------------- D. DEFERRED CHARGES 267,736.54 1,540,659.14 -------------- -------------- -------------- -------------- 163,279,075.41 130,950,395.89 ============== ============== 28 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR 1996/97
1997 1996 DM DM -------------------- -------------------- 1. Sales 289,983,801.85 241,910,735.00 2. Increase of work in process and finished goods 5,066,942.11 6,138,616.90 3. Other operating income 7,809,006.16 5,358,316.49 4. Expenses of services received -94,238,723.43 -108,394,054.70 5. Personnel expenses a) Wages and salaries -92,622,345.66 -72,690,712.91 b) Social security, pension and other benefit costs -20,515,468.02 -16,275,091.83 6. Depreciation expenses -14,193,453.60 -11,850,164.97 7. Other operating expenses -69,986,307.74 -52,960,177.30 8. Income from investments and associated companies 786,867.05 712,380.43 9. Other interest and similar income 431,865.97 989,331.80 10. Write-offs of financial assets and marketable securities -63,163.18 -56,986.67 11. Interest and similar expenses -3,766,351.93 -3,773,417.87 -------------------- -------------------- 12. Result from ordinary operation 8,692,669.58 -10,891,225.63 -------------------- -------------------- 13. Taxes on income -3,292,888.40 -2,494,655.33 14. Other taxes -1,389,626.43 -1,930,219.33 -------------------- -------------------- 15. Consolidated profit / (loss) before minority-interest 4,010,154.75 -15,316,100.29 -------------------- -------------------- 16. Minority-interest -379,355.10 -410,526.19 -------------------- -------------------- 17. Consolidated profit / (loss) 3,630,799.65 -15,726,626.48 ==================== ====================
29 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR 1996/97 1. INFORMATION ON INVESTMENT HOLDINGS For the following notes, the ultimate participating interest of Infratest Burke AG Holding in the capital of the individual companies has been calculated as a percentage. 1.1 Consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/97 1996/97 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- --------------------- Infratest Burke International GmbH Holding, Munich 100 TDM 50 32,379 2,379 Infratest Burke GmbH & Co, Forschung fur Entscheidungen in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 11,021 Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 4,524 Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 244 Infratest Burke S.r.l., Milan, Italy 100 TLIR 50000 1,765 954 Infratest Burke S.a.r.l., Paris, France 100 TFF 270 1,216 626 Infratest Burke Group Ltd., London, England 100 TGBP 2.000 7,535 1,394 Public Attitude Surveys Holding Ltd., London, England 100 TGBP 315 588 598 Infratest Burke InCom GmbH & Co, Munich 1) 100 TDM 100 100 2,763 (formerly Infratest InCom GmbH) InfraForces S.a.r.l., Paris, France 100 TFF 100 57 12 Infratest Burke International Services Ltd., London 100 TGBP 60 -214 180 (formerly Infratest Burke InCom Ltd., London, England) Infratest dimap Gesellschaft fur Trend- und Wahlforschung mbH, Berlin (formerly IBB Infratest Burke GmbH, Berlin) 74 TDM 50 -127 -231 NEXXUS GmbH, Gesellschaft fur Kommunikationstechnik, Munich 100 TDM 50 16 -23 Infratest Burke AB, Goteborg, Sweden 15.2 TSEK 100 308 -30 Infratest Burke Asia Pacific Ltd., London, England 100 TGBP 50 -283 -131 Infratest Burke GmbH & Co. Marketingforschung, Frankfurt 100 TDM 100 100 867 Trendbox B.V., Amsterdam, Netherlands 75 THFL 250 -1,013 -850 Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 1,664 KFM Klinische Forschung GmbH, Munich 72 TDM 50 152 68 Testpanel-Marktforschungsinstitut GmbH, Wetzlar 100 TDM 60 485 70 TEST S.A., Paris, France 60 TFF 300 1,398 86 1) The presentation of the nominal capital and net worth relates to the capital account of the limited-liability partner of the respective partnership.
30 1.2 Non-consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/97 1996/97 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- ---------------------- Infratest Burke Core Company Ltd., London, England 100 TGBP 300 388 - Infratest U.S. Inc. Wilmington (USA) 1) 100 TUSD 1 - - Infratest Burke Beteiligungs GmbH, Munich 100 TDM 50 55 3 Infratest Burke Verwaltungs-GmbH, Munich 100 TDM 50 53 2 Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 55 2 Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 3 7 Infratest Burke InCom Beteiligungs GmbH, Munich 100 TDM 50 53 2 Infratest Gesundheitsforschung GmbH, Geretsried 80 TDM 50 56 2 EFB Epidemiologische Forschung GmbH, Berlin 2) 40 TDM 50 -1,134 -1,078 1) No data on the year-end closing were available by the date of preparation of the annual financial statements 2) The deficit posted by EFB Epidemiologische Forschung GmbH, Berlin, was accounted for in the consolidated financial statements by appropriate provisioning for risks in the equity capital and operating results of the company's stockholder, Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich
These firms were not included in the consolidated financial statements in view of their minimal business activity during the fiscal year 1996/97 or their secondary importance with respect to the consolidated financial statements pursuant to Section 296 of the Commercial Code. Additional participating interests are held in companies that are currently inactive or are in liquidation. 31 1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/97 1996/97 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- ---------------------- Burke Inc., Cincinnati, USA 50 TUSD 3.750 6,798 770 2) Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin 1) 40 TDM 70 70 3,927 Infratest Gesundheitsforschung (Suisse) GmbH, Basel, Switzerland 34 TSFR 200 -110 777 ZEG Zentrum fur Epidemiologie und Gesundheits- forschung GmbH, Zepernick 22 TDM 150 320 122 GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme mbH, Nurnberg 32 TDM 50 1,458 1,337 I + G Infratest und GFK Medical Research International Inc., Rhode Island, USA 26 TUSD 100 825 441 I + G Nordic Medical Research A/S, Copenhagen Denmark 28 TDKK 500 129 98 IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich 20 TDM 100 251 101 Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich 1) (prospectively I+G Gesundheitsforschung) 40 TDM 50 50 3,393 1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of the respective partnership 2) For the period from April 1 to September 27, 1997
1.4 Associated companies in the sense of Section 311 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/97 1996/97 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- ---------------- ---------------- ---------------------- Infratel GmbH Telefonische Datenerhebung und Datenverarbeitung, Bielefeld 1) 29 TDM 50 184 10 P & P Software und Consulting Gesellschaft mbH, Bad Homburg 1) 20 TDM 56,5 749 798 MHIG Limited, London, England 2) 20 TGBP 2 - - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt 18 TDM 100 -1,702 -502 GPI Gesellschaft fur Pharma-Informations- systeme mbH, Frankfurt 2) 12 TDM 100 1,367 1,267 MAP I + G S.A., Lyon, France 20 TFF 350 1,106 12 1) The data pertain to the unaudited annual financial statements as of December 31,1996 2) No data on the year-end closing for September 30, 1997 were available by the date of preparation of the annual financial statements 3) The data pertain to the annual financial statements as of November 30, 1997
32 2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION 2.1 Individual annual financial statements included The provisions of the Commercial Code and the Stock Corporation Law relating to balance-sheet preparation, valuation and recognition are complied with in preparing the annual accounts included in the consolidated financial statements. In cases where tax provisions relating to balance-sheet preparation mandate the preparation of a corresponding balance-sheet as part of the annual financial statements, compliance with these tax provisions is maintained. 2.1.1 Assets Intangible and tangible fixed assets are recorded at acquisition cost less scheduled depreciation. Depreciation is calculated by the straight-line method, at the rates permitted by tax law. Low-cost economic goods are depreciated in full during the year of acquisition and are shown in the development of the assets as additions and disposals and as depreciation for the current fiscal year. The rates of depreciation are: Goodwill 6,7 - 25 % p.a. Software 25 % p.a. Vehicle fleet 20 - 25 % p.a. Other factory and office equipment 10 - 33 % p.a. 33 Fixed assets developed as follows (from 10-01 1996 to 09-30 1997):
Cost ----------------------------------------------------------------------------------------------------------- 10-01-1996 10-01-1996 at closing date Exchange at closing date rate rate rate 09-30-96 differences 09-30-97 Additions Transfers Disposals 09-30-97 DM DM DM DM DM DM DM ----------------------------------------------------------------------------------------------------------- Intangible assets - ----------------- 1. Franchises, trademarks, patents, licences and similar rights 26,312,821.99 -10,137.02 26,302,684.97 1,491,326.53 0.00 172,662.94 27,621,348.56 2. Goodwill 13,696,808.84 0.00 13,696,808.84 31,571,734.89 0.00 0.00 45,268,543.73 3. Advances paid on intangible assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------------------- 40,009,630.83 -10,137.02 39,999,493.81 33,063,061.42 0.00 172,662.94 72,889,892.29 ----------------------------------------------------------------------------------------------------------- Property, plant and equipment - ------------------- 1. Land, leasehold rights and buildings, including buildings on non-owned land 8,317,631.70 92,437.11 8,410,068.81 1,938,305.63 0.00 94,701.26 10,253,673.18 2. Technical equipment, plant and machinery 2,803,936.09 114,517.46 2,918,453.55 2,672,382.14 0.00 295,711.00 5,295,124.69 3. Other equipment, fixtures, fittings and equipment 30,579,648.07 59,257.72 30,638,905.79 6,248,327.96 0.00 2,607,740.99 34,279,492.76 4. Advance payments 739,628.83 0.00 739,628.83 167,326.86 0.00 738,143.46 168,812.23 ----------------------------------------------------------------------------------------------------------- 42,440,844.69 266,212.29 42,707,056.98 11,026,342.59 0.00 3,736,296.71 49,997,102.86 ----------------------------------------------------------------------------------------------------------- Financial assets - ---------------- 1. Shares in affiliated companies 518,686.13 0.00 518,686.13 290,001.00 -32,125.24 152,093.89 624,468.00 2. Loans due from affiliated companies 451,417.21 0.00 451,417.21 0.00 -271,530.00 179,887.21 0.00 3. Shares in associated companies 2,126,976.88 0.00 2,126,976.88 101,579.77 -185,849.00 809,463.35 1,233,244.30 4. Investments 286,784.00 0.00 286,784.00 191,796.50 217,974.24 0.00 696,554.74 5. Loans due from other group companies 0.00 0.00 0.00 0.00 271,530.00 0.00 271,530.00 6. Security investments 34,572.00 0.00 34,572.00 40,766.25 0.00 34,572.00 40,766.25 7. Other loans 522,271.67 0.00 522,271.67 349,693.92 0.00 522,271.67 349,693.92 ----------------------------------------------------------------------------------------------------------- 3,940,707.89 0.00 3,940,707.89 973,837.44 0.00 1,698,288.12 3,216,257.21 ----------------------------------------------------------------------------------------------------------- 86,391,183.41 256,075.27 86,647,258.68 45,063,241.45 0.00 5,607,247.77 126,103,252.36 =========================================================================================================== Depreciation - ------------------------------------------------------------------------------------------------------------------------------------ 10-01-1996 10-01-1996 at closing date Exchange at closing date Additions Exchange Additions rate rate rate Average rate at closing date 09-30-96 differences 09-30-97 rate differences rate Write-ups Transfers Disposals 09-30-1997 DM DM DM DM DM DM DM DM DM DM - ------------------------------------------------------------------------------------------------------------------------------------ 6,669,502.93 -5,515.36 6,663,987.57 4,824,589.68 503.87 4,825,093.55 0.00 0.00 165,297.94 11,323,783.18 913,128.84 82,616.51 995,745.35 2,209,317.49 228.75 2,209,546.24 0.00 0.00 0.00 3,205,291.59 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 7,582,631.77 77,101.15 7,659,732.92 7,033,907.17 732.62 7,034,639.79 0.00 0.00 165,297.94 14,529,074.77 114,902.00 16,846.52 131,748.52 229,245.89 8,520.71 237,766.60 0.00 -129,240.86 94,701.26 145,573.00 1,194,456.41 19,668.10 1,214,124.51 1,187,268.82 17,011.59 1,204,280.41 0.00 842,373.28 292,031.59 2,968,746.61 18,101,790.36 -6,763.99 18,095,026.37 5,743,031.72 24,096.54 5,767,128.26 0.00 -713,132.42 2,423,082.61 20,725,939.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 19,411,148.77 29,750.63 19,440,899.40 7,159,546.43 49,628.84 7,209,175.27 0.00 0.00 2,809,815.46 23,840,259.21 - ------------------------------------------------------------------------------------------------------------------------------------ 152,093.89 0.00 152,093.89 0.00 0.00 0.00 0.00 0.00 152,093.89 0.00 179,887.21 0.00 179,887.21 0.00 0.00 0.00 0.00 0.00 179,887.21 0.00 1,124,845.00 0.00 1,124,845.00 25,939.38 0.00 25,939.38 0.00 -126,649.00 92,696.00 931,439.38 30,000.00 0.00 30,000.00 37,223.80 0.00 37,223.80 0.00 126,649.00 30,000.00 163,872.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 26,070.82 0.00 26,070.82 0.00 0.00 0.00 0.00 0.00 26,070.82 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1,512,896.92 0.00 1,512,896.92 63,163.18 0.00 63,163.18 0.00 0.00 480,747.92 1,095,312.18 - ------------------------------------------------------------------------------------------------------------------------------------ 28,506,677.46 106,851.78 28,613,529.24 14,256,616.78 50,361.46 14,306,978.24 0.00 0.00 3,455,861.32 39,464,646.16 ==================================================================================================================================== Net book value - ---------------------------------- 09-30-1997 09-30-1996 DM DM - ---------------------------------- 16,297,565.38 19,643,319.06 42,063,252.14 12,783,680.00 0.00 0.00 - ---------------------------------- 58,360,817.52 32,426,999.06 - ---------------------------------- 10,108,100.18 8,202,729.70 2,326,378.08 1,609,479.68 13,553,553.16 12,477,857.71 168,812.23 739,628.83 - ---------------------------------- 26,156,843.65 23,029,695.92 - ---------------------------------- 624,468.00 366,592.24 0.00 271,530.00 301,804.92 1,002,131.88 532,681.94 256,784.00 271,530.00 0.00 40,766.25 34,572.00 349,693.92 496,200.85 - ---------------------------------- 2,120,945.03 2,427,810.97 - ---------------------------------- 86,638,606.20 57,884,505.95 ==================================
34 2.1.2 Inventories Work in process is valued at production cost. Completed but uninvoiced services are recorded as finished goods under "Inventories" and are valued at net sale price. Production cost includes all components that must be carried as assets according to tax law. In case the expected total production cost of work in process exceed total expected net sales revenues adequate inventory reserves are provided. Furthermore provisions are established for follow-up services yet to be performed in connection with finished or invoiced services. Advance payments from customers are deducted from inventory as such and are posted as liabilities to the extent they exceed inventory. 2.1.3 Receivables and other fixed assets Trade accounts receivables are recorded at nominal value. For doubtful accounts receivables and those carrying discernible risks, direct adjustments are made; uncollectable debts are written off. General interest and credit risk is covered by a lump-sum value adjustment of 2 %. Other receivables and other assets are recorded at the nominal amount or at a lower value assigned at the closing date. 2.1.4 Provisions Provisions are created for as dictated by sound business judgement to cover uncertain liabilities, anticipated losses related to incomplete contracts, and deferred maintenance. 2.1.5 Payables Payables are recorded at the amount repayable. 35 2.2 Consolidation methods 2.2.1 Capital consolidation Capital consolidation is performed by the book value method (Section 301 Para. 1 Sentence 2 No. 1 of the Commercial Code). According to this method, participating interests that must be consolidated are offset against their allotted share of the net worth of the subsidiaries. This net worth represents the book value at date of acquisition of the assets, debts, accrued and deferred items and special items to be reported on in the consolidated financial statements. Consolidation surpluses from capital consolidation at the date of acquisition of the participating interests are offset against reserves (in the year under review: TDM 0; previous year: TDM 720) - possibly after allocation to hidden reserves in the assets of the acquired undertaking - or are allocated to goodwill and amortized over the 15 years following the year of acquisition of the interest (amortization during the year under review: TDM 2.110; previous year: TDM 913). 2.2.2 Equity consolidation The associated companies - - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt - - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt - - P & P Software und Consulting GmbH, Bad Homburg were included in the consolidated financial statements by the equity/book value method. For reasons of materiality, the other associated companies continued to be carried at the book values recorded in the stockholder's individual financial statements. 2.2.3 Pro-rata consolidation The joint ventures IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA Infratest Gesundheitsforschung (Suisse) GmbH, Basel, Switzerland I + G Nordic Medical Research A/S, Copenhagen, Denmark Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme mbH, Nuremberg Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich (prospectively I+G Gesundheitsforschung GmbH & Co, Nuremberg) Burke Inc., Cincinnati, USA were included in the consolidated financial statements on a pro-rata basis, according to the percentage of the interest in the firm. 36 2.2.4 Elimination of inter-company profits Assets to be included in the consolidated financial statements and deriving wholly or in part from transactions among the companies included in the consolidated financial statements are reported on the consolidated balance sheet at acquisition or production cost of the group. 3. BASIS OF FOREIGN CURRENCY TRANSLATION 3.1 Translation of individual financial-statement items stated in foreign currency For annual financial statements containing items based on sums that are or originally were stated in foreign currency, the conversion to German marks is performed at the rate in effect at the transaction date. Balance-sheet items are valued at the exchange rate in effect on the closing date, no exchange gains being realized. 3.2 Translation of financial statements in foreign currencies The translation of financial statements recorded in foreign currencies was performed by the current rate method: balance-sheet items were translated at the rate in effect on the closing date of September 30, 1997, and income-statement items were translated at the average rate for the fiscal year 1996/97. Exchange-rate differences resulting from the translation of net worth at different current rates and differences resulting from the translation of balance-sheet items at current rates and income statement items at average rates are recognized separately as a equity item on the balance sheet. 37 4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS 4.1 Items of accrual and deferral for deferred taxes The deferred tax asset relates to a discrepancy between the goodwill reported on the individual financial statements of Infratest Burke Wirtschaftsforschung GmbH & Co, Munich, and that recorded by the Group, and to the translation of the percentage-of-completion method into the completed-contact method used within the Group for the tax consequences incurred by the joint venture Burke Inc., which is included on a pro-rata basis. 4.2 Other provisions and accrued liabilities "Other provisions and accrued liabilities" basically recognizes provisions for Profit-sharing Follow-up services Unpaid invoices Restructuring Vacations and overtime Statuary social security benefits (Italy) Year-end costs Employee anniversaries. 5. OTHER MANDATORY INFORMATION 5.1 Remaining term The remaining term on receivables is less than one year. The remaining terms on payables are shown in the following presentation of accounts payable:
Due within After Total 1 year 1-5 years 5 years DM DM DM DM --------------- --------------- --------------- -------------- Liabilities due to banks 55.203.766,17 33.732.557,33 21.426.822,34 44.386,50 Advance payments received on account of orders 1.241.319,09 1.241.319,09 0,00 0,00 Trade accounts payable 15.884.769,80 15.884.769,80 0,00 0,00 Accounts due to affiliated companies 3.208.642,29 1.858.450,29 959.592,00 390.600,00 Accounts due to joint ventures 73.437,02 73.437,02 0,00 0,00 Accounts due to other group companies 575.360,64 575.360,64 0,00 0,00 Other liabilities 31.623.276,57 23.099.883,47 8.246.291,45 277.101,65 =============== =============== =============== ============== 107.810.571,58 76.465.777,64 30.632.705,79 712.088,15 =============== =============== =============== ==============
38 5.2 Collateralization of accounts payable Payables are not collateralized. 5.3 Analysis of sales revenues Sales revenues - broken down according to country of realization - are distributed as follows: 1996/97 1995/96 TDM TDM ------------- ------------- Domestic 140,908 140,573 Foreign, Europe 122,494 92,202 Foreign, other 26,582 9,136 ------------- ------------- 289,984 241,911 ============= ============= 5.4 Other financial obligations Other financial obligations total TDM 42,345 (previous year: TDM 36,319). 5.5 Employees The average number of employees in the Group - that is, in the fully consolidated companies - is distributed as follows (itemized by country): 1996/97 1995/96 ------------- ------------- Germany 419 413 France 91 71 Sweden 63 62 England 163 61 Italy 72 60 Holland 63 47 ------------- ------------- 871 714 ============= ============= 39 The average number of employees of companies included in the consolidated financial statements on a pro-rata basis only is distributed as follows: 1996/97 1995/96 ------------- ------------- Germany 123 102 Switzerland 9 11 France 0 4 U.S. 247 4 Denmark 3 1 ------------- ------------- 382 122 ============= ============= 5.6 Remuneration of officers Remuneration paid to the Board of Directors of the parent company, I.B. AG Holding, during the fiscal year 1996/97 totaled TDM 2,750 (previous year: TDM 1,877). Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year 1996/97. 6. SUMMARY OF DIFFERENCES BETWEEN GERMAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The following is a summary of the estimated adjustments to consolidated profit and to consolidated shareholders' equity that would have been required if US GAAP would have been applied instead of German GAAP. 40 6.1. Approximate effects on consolidated profit of differences between German and US generally accepted accounting principles TDM TDM ----------- ----------- Net Profit/(Loss) as reported under German GAAP 3,631 ----------- US GAAP adjustments: Amortization of goodwill 5,299 Profit recognition by application of percentage of completion method 2,954 Lumpsum reserve on accounts receivable trade 83 Reversal of provision for future expenses -324 Other 112 8,124 ----------- Tax effects: Deferred taxation -3,517 Provision for tax risks -1,540 -5,057 ----------- Effect on minority interest 182 ----------- Approximate Net Profit/(Loss) as adjusted for US GAAP 6,880 =========== 41 6.2. Approximate cumulative effect on shareholders' equity of differences between German and US generally accepted accounting principles TDM ----------- Shareholders' equity per German GAAP 1) 17,804 ----------- US GAAP adjustments: Goodwill 9,424 Profit recognition by application of percentage of completion method 21,924 Lumpsum reserve on accounts receivable trade 364 Provision for future expenses 2,543 Provision for tax risks -1,975 Deferred taxation 1,244 Other 116 ----------- Approximate Shareholders' equity as adjusted for US GAAP 51,444 =========== 1) excluding minority interest 6.3. Discussion of material variations between German and US generally accepted accounting principles The material variations between German and US GAAP relate to the following items: 6.3.1 Goodwill / Amortization of goodwill Goodwill resulting from the consolidation process is amortized over a period of 30 years applying the straight line method for US GAAP purposes. The treatment in the local consolidated financial statements follows the treatment in the tax filing where the amounts of purchase prices exceeding the net equity of acquired subsidiaries is amortized over a shorter period of time (between 1 and 15 years, depending on the allocation applied). Due to the amortization opportunity in local taxation deferred taxes / tax assets have been considered (see Sect. 6.3.6 below). 6.3.2 Percentage of completion method Profit recognition relating to services rendered to customers follows the "percentage of completion"- method for US GAAP purposes whereas for local purposes the "completed contract"- method must be applied. According to the "completed contract" - method profit may not be recognized until the contractually agreed services have been accepted by the customers. Compared to the "percentage of completion"- method the application of the "completed contract" - method leads to a delay in profit recognition. 42 6.3.3 Lumpsum reserve on accounts receivable trade The difference relates to the application of varying rates for the calculation of lumpsum bond debt reserves: US GAAP 1% German GAAP 2% 6.4.4 Provision for future expenses Local books contain provisions for expenses which can not be related to the current or prior years but shall cover potential expenses which are related to the future. Those provisions are not allowed by US GAAP and accordingly were eliminated in consolidated stockholders' equity adjusted for US GAAP. 6.3.5 Provision for tax risks The accounting of German trade tax on income in the local consolidated financial statements followed the treatment in the tax filings. Since, however, a probable risk exists that those taxes will be payable a respective provision was established in the consolidated financial statements adjusted for US GAAP. 6.3.6 Deferred taxation Deferred taxes relate to temporary differences between the tax bases of assets or liabilities and the reported amounts according to US GAAP as well as to tax loss carryforwards. If evidence indicates that it is more likely than not that deferred tax assets relating to tax loss carryforwards will not be realized adequate allowances were provided. Deferred taxes have primarily been provided for temporary differences relating to explanations in Sect. 6.3.1, 6.3.2 and 6.3.3 and to tax loss carryforwards in Germany. The tax rate applied amounts to 35%. 6.3.7 Equity Method Joint venture companies (reference is made to Sect. 2.2.3.) were included in the consolidated financial statements under German GAAP on a pro-rata basis whereas under US GAAP the Equity method was applied. 43 7. CASH FLOW STATEMENT
1996/97 TDM CASH FLOW FROM OPERATING ACTIVITIES: Consolidated profit (loss) of the year 6,880 Adjustments to reconcile consolidated profit (loss) to net cash: Depreciation and amortization 8,253 Change in provisions for pensions 109 Change in inventories -6,827 Change in accounts receivables -10,408 Change in deferred tax assets 3,025 Change in accounts due from group companies 2,459 Change in other operating assets and prepaid expenses 12,831 Change in deferred income taxes 3,953 Change in tax provisions -2,329 Change in provisions 1,331 Change in advance payments received 6,105 Change in amounts owed to group companies -1,541 Change in accounts payables 3,395 Change in other operating liabilities and deferred charges 3,330 ------------ Net cash provided from operating activities 30,566 ............ CASH FLOW FROM INVESTING ACTIVITIES: Net investment intangible assets -16,362 Net investment tangible assets -7,896 Net investment financial assets -19,013 ------------ Net cash provided from investing activities -43,271 ............ CASH FLOW FROM FINANCING ACTIVITIES Change in debts to banks 17,671 Change in minority interest 297 ------------ Net cash provided from financing activities 17,968 ............ EFFECT OF EXCHANGE RATE DIFFERENCES IN EQUITY 408 ............ CHANGE IN CASH AND CASH EQUIVALENTS 5,671 ============ CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 8,873 ============ CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 14,544 ============
44 Reconciliation of cash and cash equivalents TDM --------------- Cash and cash equivalents according to German GAAP as of September 30, 1997 15,134 Elimination of per quota consolidated entities -590 --------------- 14,544 =============== Munich, January 15, 1998 The Board of Directors 45 Infratest Burke Aktiengesellschaft Holding Munich Consolidated Financial Statements as of September 30, 1996 46 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 ASSETS DM --------------- A. FIXED ASSETS I.Intangible assets 1. Franchise, trademarks, patents, licences and similar rights 19,643,319.06 2. Goodwill 12,783,680.00 --------------- 32,426,999.06 II.Property, plant and equipment 1. Land, leasehold rights and buildings, including buildings on non-owned land 8,202,729.70 2. Other equipment, fixtures, fittings and equipment including advance payments 14,826,966.22 --------------- 23,029,695.92 III.Financial assets 1. Shares in affiliated companies 366,592.24 2. Loans due from affiliated companies 271,530.00 3. Shares in associated companies 1,002,131.88 3. Investments 256,784.00 4. Security investments 34,572.00 5. Other loans 496,200.85 --------------- 2,427,810.97 --------------- 57,884,505.95 --------------- B. CURRENT ASSETS I.Inventories 1. Raw material and supplies 415,873.38 2. Work in progress and finished goods 40,063,683.17 3. minus: advance payments received on accounts of orders -38,375,444.81 4. Advance payments 600,149.62 --------------- 2,704,261.36 --------------- II.Accounts receivable and other assets 1. Accounts receivable trade 39,116,792.72 2. Accounts due from joint ventures 671,534.13 3. Accounts due from other group companies 441,024.44 4. Other assets 17,511,658.39 --------------- 57,741,009.68 --------------- III.Marketable securities Other marketable securities 91,532.50 IV.Checks, cash on hand and in Federal Bank and in postal giro accounts and cash in banks 9,442,685.23 --------------- 69,979,488.77 --------------- C. DEFERRED TAX ASSETS 250,000.00 --------------- D. PREPAID EXPENSES AND DEFERRED CHARGES 2,836,401.17 --------------- 130,950,395.89 =============== LIABILITIES AND SHAREHOLDER'S EQUITY DM DM --------------- --------------- A. SHAREHOLDERS'S EQUITY I.Capital subscribed 100,000.00 II.Capital surplus 1. Capital surplus 29,900,000.00 2. minus: settlement with goodwill -720,000.00 29,180,000.00 --------------- III.Consolidated net income/(loss) -15,726,626.48 IV.Minority interest 659,035.21 V.Exchange difference 276,838.26 --------------- 14,489,246.99 --------------- B. PROVISION AND ACCRUED LIABILITIES 1. Provisions for pensions and similar obligations 73,984.61 2. Accrued taxes 5,948,130.42 3. Other provisions and accrued liabilities 27,806,548.89 --------------- 33,828,663.92 --------------- C. LIABILITIES 1. Liabilities due to banks 37,541,445.86 3. Trade accounts payable 13,722,357.31 4. Notes payable 14,707.52 5. Accounts due to affiliated companies 3,046,209.72 7. Accounts due to other group companies 749,012.87 8. Other liabilities 26,018,092.56 - thereof for taxes: DM 4.748.837,80 - thereof for social security: DM 2.667.794,67 --------------- 81,091,825.84 --------------- D. DEFERRED CHARGES 1,540,659.14 --------------- 130,950,395.89 =============== 47 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR 1995/96
DM DM -------------------- -------------------- 1. Sales 241,910,735.00 2. Increase in work in process and finished goods 6,138,616.90 3. Other operating income 5,358,316.49 4. Expenses of services received -108,394,054.70 5. Personnel expenses a) Wages and salaries -72,690,712.91 b) Social security, pension and other benefit costs -16,275,091.83 -88,965,804.74 -------------------- 6. Depreciation expenses -11,850,164.97 7. Other operating expenses -52,960,177.30 8. Income from investments and associated companies 712,380.43 9. Other interest and similar income 989,331.80 10. Write-offs of financial assets and marketable securities -56,986.67 11. Interest and similar expenses -3,773,417.87 -------------------- 12. Result from ordinary operations -10,891,225.63 -------------------- 13. Taxes on income -2,494,655.33 14. Other taxes -1,930,219.33 -------------------- 15. Consolidated profit (loss) before minority-interest -15,316,100.29 -------------------- 16. Minority-interest -410,526.19 -------------------- 17. Consolidated profit (loss) -15,726,626.48 ====================
48 INFRATEST BURKE AKTIENGESELLSCHAFT HOLDING MUNICH NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR 1995/96 1. INFORMATION ON INVESTMENT HOLDINGS For the following notes, the ultimate participating interest of Infratest Burke AG Holding in the capital of the individual companies has been calculated as a percentage. 1.1 Consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/96 1995/96 Name and principal place of business as % Capital TDM TDM - ------------------------------------ ------- ------------- ------------ ------------------- Infratest Burke GmbH & Co, Forschung fur Entscheidungen in Wirtschaft und Gesellschaft, Munich 1) 100 TDM 2.000 2,000 9,439 Infratest Burke Verwaltungs-GmbH 100 TDM 50 50 3 Infratest Burke Wirtschaftsforschung GmbH & Co, Munich 1) 100 TDM 50 50 2,831 (formerly Infratest Burke Wirtschaftsforschung GmbH, Munich) Infratest Burke Wirtschaftsforschung Beteiligungs-GmbH, Munich 100 TDM 50 50 3 Infratest Burke Sozialforschung GmbH & Co, Munich 1) 100 TDM 50 50 437 (formerly Infratest Burke Sozialforschung GmbH) Infratest Burke Sozialforschung Beteiligungs-GmbH, Munich 100 TDM 50 3 3 Infratest Burke S.r.l., Milan, Italy 100 TLIR 50.000 771 509 Infratest Burke S.a.r.l., Paris, France 100 TFF 270 579 -219 Infratest Burke Group Ltd., London, England 100 TGBP 450 1,381 403 Infratest Burke InCom GmbH & Co, Munich 1) 100 TDM 100 100 3,966 (formerly Infratest InCom GmbH) Infratest Burke InCom Beteiligungs-GmbH, Munich 100 TDM 50 53 3 InfraForces S.a.r.l., Paris, France 100 TFF 100 45 45 Infratest Burke International Services Ltd., (formerly Infratest Burke InCom Ltd.), London, England 100 TGBP 60 -336 -232 IBB Infratest Burke GmbH Berlin, Berlin 100 TDM 50 119 27 NEXXUS GmbH Gesellschaft fur Kommunikations- technik, Munich 100 TDM 50 39 2 Infratest Burke AB, Goteborg, Sweden 15.2 TSEK 75 541 331 Infratest Burke Asia Pacific Ltd., (formerly: Infratest Burke Japan Ltd.), London, England 80.0 TGBP 50 -123 -117 Burke International Marktforschung GmbH, Frankfurt 75 TDM 200 322 66 Infratest Burke GmbH & Co. Marketingforschung, Frankfurt 75 TDM 100 100 -195 Trendbox B.V., Amsterdam, Netherlands 65 THFL 250 -165 -200 Infratest Gesundheitsforschung GmbH & Co., Infratest Gesundheitsforschung GmbH & Co., Munich 1) 80 TDM 20 20 1,235 Infratest Gesundheitsforschung GmbH, Geretsried 85 TDM 50 53 3 KFM Klinische Forschung GmbH, Munich 72 TDM 50 89 77 Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich 1) 40 TDM 50 50 -1,109 Infratest Epidemiologie und Gesundheitsforschung Verwaltungs-GmbH, Munich 40 TDM 50 55 5 EFB Epidemiologische Forschung GmbH, Berlin 40 TDM 50 -56 -209 1) The presentation of the nominal capital and net worth relates to the capital amount of the limited-liability partner of the respective partnership.
49 1.2 Non-consolidated subsidiaries
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/96 1995/96 Name and principal place of business as % Capital TDM TDM - ------------------------------------ ------- ------------- ------------ ------------------- Infratest Burke Core Company Ltd., (formerly Infratest Burke European Consultance Centre Ltd.), London, England 100 TGBP 300 340 0 Infratest Burke S.L., Madrid, Spain 1) 50 TPTA 5.000 22 -1 Infratest U.S. Inc., Wilmington (USA) 100 TUSD 1 1) The data pertain to the unaudited annual financial statements as of December 31, 1995
These firms were not included in the consolidated financial statements in view of their minimal business activity during the fiscal year 1995/96 or their secondary importance with respect to the consolidated financial statements pursuant to Section 296 of the Commercial Code. Additional participating interests are held in companies that are currently inactive or are in liquidation. 50 1.3 Joint Ventures in the sense of Section 310 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/96 1995/96 Name and principal place of business as % Capital TDM TDM - ------------------------------------ --------- -------------- ---------------- -------------------- Vector GmbH Automobilmarktforschung, Munich 50 TDM 50 1,096 1,018 Infratest + GFK Gesundheitsforschung GmbH & Co., Berlin 1) 40 TDM 70 70 3,263 Infratest + GFK Gesundheitsforschung Verwaltungs- GmbH, Berlin 40 TDM 50 60 2 I + G Gesundheits- und Pharmamarkt-Forschung GmbH & Co., Nurnberg 1) 40 TDM 50 50 3,530 I + G Pharmamarkt-Forschung Verwaltungs-GmbH, Nurnberg 40 TDM 50 59 3 I + G France Health and Pharmaceutical Market Research, Rueil Malmaison, France 2) 40 TFF 100 - - Infratest Gesundheitsforschung GmbH, Basel, Suisse 34 TSFR 200 -918 81 ZEG Zentrum fur Epidemiologie und Gesundheits- forschung GmbH, Zepernick 20 TDM 150 377 377 GPI Kommunikationsforschung Gesellschaft fur Pharma-Informationssysteme mbH, Nurnberg 32 TDM 50 1,365 1,286 I + G Infratest und GFK Medical Research International Inc., Rhode Island, USA 26.0 TUSD 100 1,088 255 I + G Nordic Medical Research A/S, Kopenhagen Denmark 28 TDKK 500 -108 100 IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich 19.6 TDM 100 310 160 Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich 1) 40.0 TDM 50 50 -1,109 Infratest Epidemiologie und Gesundheitsforschung Verwaltungs-GmbH, Munich 40.0 TDM 50 55 5 EFB Epidemiologische Forschung GmbH, Berlin 40.0 TDM 50 -55 -209 1) The presentation of the nominal capital and net worth relates to the capital accounts of the limited and unlimited partner of the respective partnership 2) The company is in liquidation
51 1.4 Associated companies in the sense of Section 311 of the Commercial Code
Partici- Net Operating result pating Worth for the fiscal year Interest Nominal 09/30/96 1995/96 Name and principal place of business as % Capital TDM TDM ------- ---------- ------------- ------------------- Infratel GmbH Telefonische Datenerhebung fur die empirische Wirtschafts- und Sozial- forschung, Bielefeld 1) 29 TDM 50 187 -6 GENESIS Institut fur strategische Innovations- studien - Unabhangige Forschungsgesell- schaft mbH, Dortmund 2) 27 TDM 100 - - L + H AutomobilConsult GmbH, Nurnberg 3) 25.2 TDM 50 - - L + H MarketingServices GmbH, Nurnberg 3) 25.1 TDM 100 - - T.E.S.T. S.A., Paris 6) 25 TFF 300 1,397 113 Anders & Partner Gesellschaft fur Manage- mentdienste mbH, Nurnberg 24 TDM 100 - - P & P Software und Consulting Gesellschaft mbH, Bad Homburg 1) 20 TDM 56,5 731 820 MHIG Limited, London, England 5) 15 TGBP 2 -404 -390 MedVantage GmbH Integriertes Daten- management im Healthcare Markt, Frankfurt 18 TDM 100 -1,683 -477 GPI Gesellschaft fur Pharma-Informations- systeme mbH, Frankfurt 4) 12 TDM 100 328 1,403 BBI Mark. Serv. Inc., Delaware, USA 1.5 - - - Proteus - - - - MAP I + G S.A., Lyon, France 3) 20 - - - 1) The data pertain to the unaudited annual financial statements as of December 31, 1995 2) No data on the year-end closing for June 30, 1996 were available by the date of preparation of the annual financial statements. 3) No data on the year-end closing for September 30, 1996 were available by the date of preparation of the annual financial statements. 4) The data pertain to the annual financial statements as of November 30, 1996 5) The data pertain to the annual financial statements as of October 30, 1996 6) The data pertain to the audited annual financial statements as of December 31, 1995
52 2. BASIC PRINCIPLES OF PREPARATION OF BALANCE SHEET AND VALUATION 2.1 Individual annual financial statements included The provisions of the Commercial Code and the Stock Corporation Law relating to balance-sheet preparation, valuation and recognition are complied with in preparing the annual accounts included in the consolidated financial statements. In cases where tax provisions relating to balance-sheet preparation mandate the preparation of a corresponding balance-sheet as part of the annual financial statements, compliance with these tax provisions is maintained. 2.1.1 Assets Intangible and tangible fixed assets are recorded at acquisition cost less scheduled depreciation. Depreciation is calculated by the straight-line method, at the rates permitted by tax law. Low-cost economic goods are depreciated in full during the year of acquisition and are shown in the development of the assets as additions and disposals and as depreciation for the current fiscal year. The rates of depreciation are: Goodwill 10 - 25 % p.a. Software 25 % p.a. Vehicle fleet 20 - 25 % p.a. Other factory and office equipment 10 - 33 % p.a. 53 Fixed assets developed as follows (from 10-01 1995 to 09-30 1996):
Cost ----------------------------------------------------------------------------------------------------------- 10-01-1995 10-01-1995 at closing date Exchange at closing date rate rate rate 09-30-95 differences 09-30-96 Additions Transfers Disposals 09-30-96 DM DM DM DM DM DM DM ----------------------------------------------------------------------------------------------------------- Intangible assets - ----------------- 1. Franchises, trademarks, patents, licences and similar rights 2,295,017.01 50,119.80 2,345,136.81 24,208,611.32 0.00 240,926.14 26,312,821.99 2. Goodwill 0.00 0.00 0.00 13,696,808.84 0.00 0.00 13,696,808.84 3. Advances paid on intangible assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ----------------------------------------------------------------------------------------------------------- 2,295,017.01 50,119.80 2,345,136.81 37,905,420.16 0.00 240,926.14 40,009,630.83 ----------------------------------------------------------------------------------------------------------- Property, plant and equipment - ------------------- 1. Land, leasehold rights and buildings, including buildings on non-owned land 0.00 0.00 0.00 8,317,631.70 0.00 0.00 8,317,631.70 2. Technical equipment, plant and machinery 0.00 0.00 0.00 2,803,936.09 0.00 0.00 2,803,936.09 3. Other equipment, fixtures, fittings and equipment 28,794,551.08 -524,988.48 28,269,562.60 6,079,917.97 0.00 3,769,832.50 30,579,648.07 4. Advance payments 0.00 0.00 0.00 739,628.83 0.00 0.00 739,628.83 ----------------------------------------------------------------------------------------------------------- 28,794,551.08 -524,988.48 28,269,562.60 17,941,114.59 0.00 3,769,832.50 42,440,844.69 ----------------------------------------------------------------------------------------------------------- Financial assets - ---------------- 1. Shares in affiliated companies 641,680.53 0.00 641,680.53 1,526.74 0.00 124,521.14 518,686.13 2. Loans due from affiliated companies 451,417.21 0.00 451,417.21 0.00 0.00 0.00 451,417.21 3. Shares in associated companies 2,101,037.50 0.00 2,101,037.50 25,939.38 0.00 0.00 2,126,976.88 4. Investments 286,245.00 539.00 286,784.00 0.00 0.00 0.00 286,784.00 5. Security investments 0.00 0.00 0.00 34,572.00 0.00 0.00 34,572.00 6. Other loans 543,726.16 17,346.49 561,072.65 147,617.54 0.00 186,418.52 522,271.67 ----------------------------------------------------------------------------------------------------------- 4,024,106.40 17,885.49 4,041,991.89 209,655.66 0.00 310,939.66 3,940,707.89 ----------------------------------------------------------------------------------------------------------- 35,113,674.49 -456,983.19 34,656,691.30 56,056,190.41 0.00 4,321,698.30 86,391,183.41 =========================================================================================================== Depreciation - ------------------------------------------------------------------------------------------------------------------------------------ 10-01-1996 10-01-1996 at closing date Exchange at closing date Additions Exchange Additions rate rate rate Average rate at closing date 09-30-96 differences 09-30-97 rate differences rate Write-ups Transfers Disposals 09-30-1997 DM DM DM DM DM DM DM DM DM DM - ------------------------------------------------------------------------------------------------------------------------------------ 1,571,908.07 25,891.94 1,597,800.01 5,247,938.32 4,375.40 5,252,313.72 0.00 325.00 180,935.80 6,669,502.93 0.00 0.00 0.00 913,128.84 0.00 913,128.84 0.00 0.00 0.00 913,128.84 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1,571,908.07 25,891.94 1,597,800.01 6,161,067.16 4,375.40 6,165,442.56 0.00 325.00 180,935.80 7,582,631.77 - ------------------------------------------------------------------------------------------------------------------------------------ 0.00 0.00 0.00 114,902.00 0.00 114,902.00 0.00 0.00 0.00 114,902.00 0.00 0.00 0.00 1,159,278.66 35,177.75 1,194,456.41 0.00 0.00 0.00 1,194,456.41 16,720,812.80 0.00 16,720,812.80 4,414,917.15 0.00 4,414,917.15 0.00 -1,337.25 3,032,602.34 18,101,790.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - ------------------------------------------------------------------------------------------------------------------------------------ 16,720,812.80 0.00 16,720,812.80 5,689,097.81 35,177.75 5,724,275.56 0.00 -1,337.25 3,032,602.34 19,411,148.77 - ------------------------------------------------------------------------------------------------------------------------------------ 127,653.04 0.00 127,653.04 24,440.85 0.00 24,440.85 0.00 0.00 0.00 152,093.89 173,412.21 0.00 173,412.21 6,475.00 0.00 6,475.00 0.00 0.00 0.00 179,887.21 1,124,845.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,124,845.00 30,000.00 0.00 30,000.00 0.00 0.00 0.00 0.00 0.00 0.00 30,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 26,070.82 0.00 26,070.82 0.00 0.00 0.00 26,070.82 - ------------------------------------------------------------------------------------------------------------------------------------ 1,455,910.25 0.00 331,065.25 56,986.67 0.00 56,986.67 0.00 0.00 0.00 1,512,896.92 - ------------------------------------------------------------------------------------------------------------------------------------ 19,748,631.12 25,891.94 18,649,678.06 11,907,151.64 39,553.15 11,946,704.79 0.00 -1,012.25 3,213,538.14 28,506,677.46 ==================================================================================================================================== Net book value - --------------------------------- 09-30-1996 09-30-1995 DM DM - --------------------------------- 19,643,319.06 723,108.94 12,783,680.00 0.00 0.00 0.00 - --------------------------------- 32,426,999.06 723,108.95 8,202,729.70 0.00 1,609,479.68 0.00 12,477,857.71 12,073,738.29 739,628.83 0.00 - --------------------------------- 23,029,695.92 12,073,738.29 - --------------------------------- 366,592.24 514,027.49 271,530.00 278,005.00 1,002,131.88 976,192.50 256,784.00 256,245.00 34,572.00 0.00 496,200.85 543,726.16 - --------------------------------- 2,427,810.97 2,568,196.15 - --------------------------------- 57,884,505.95 15,365,043.39 =================================
54 2.1.2 Inventories Work in process is valued at production cost. Completed but uninvoiced services are recorded as finished goods under "Inventories" and are valued at net sale price. Production cost includes all components that must be carried as assets according to tax law. In case the expected total production cost of work in process exceed total expected net sales revenues adequate provisions for anticipated losses are established. Furthermore provisions are established for follow-up services yet to be performed in connection with finished or invoiced services. Advance payments from customers are deducted from inventory as such and are posted as liabilities to the extent they exceed inventory. 2.1.3 Receivables and other fixed assets Trade accounts receivables are recorded at nominal value. For doubtful accounts receivables and those carrying discernible risks, direct adjustments are made; uncollectable debts are written off. General interest and credit risk is covered by a lump-sum value adjustment of 2 %. Other receivables and other assets are recorded at the nominal amount or at a lower value assigned at the closing date. 2.1.4 Provisions Provisions are created for as dictated by sound business judgement to cover uncertain liabilities anticipated losses related to incomplete contracts, and deferred maintenance. 2.1.5 Payables Payables are recorded at the amount repayable. 2.2 Consolidation methods 2.2.1 Capital consolidation Capital consolidation is performed by the book value method (Section 301 Para. 1 Sentence 2 No. 1 of the Commercial Code). According to this method, participating interests that must be consolidated are offset against their allotted share of the net worth of the subsidiaries. This net worth represents the book value at date of acquisition of the assets, debts, accrued and deferred items and special items to be reported on in the consolidated financial statements. 55 Consolidation surpluses from capital consolidation at the date of acquisition of the participating interests are offset against reserves (in the year under review: TDM 720; previous year: TDM 1.540) - possibly after allocation to hidden reserves in the assets of the acquired undertaking - or are allocated to goodwill and amortized over the 15 years following the year of acquisition of the interest (amortization during the year under review: TDM 913; previous year: TDM 68). 2.2.2 Equity consolidation The associated companies - - MedVantage GmbH Integriertes Datenmanagement im Healthcare Markt, Frankfurt - - GPI Gesellschaft fur Pharma-Informationssysteme mbH, Frankfurt - - P & P Software und Consulting GmbH, Bad Homburg - - L + H Marketing Services GmbH, Nurnberg were included in the consolidated financial statements by the equity/book value method. For reasons of materiality, the other associated companies continued to be carried at the book values recorded in the stockholder's individual financial statements. 2.2.3 Pro-rata consolidation The joint ventures Vector GmbH Automobilmarktforschung, Munich IMePa Institut fur Medizin- und Patientenforschung GmbH, Munich I + G Infratest and GFK Medical Research International Inc., Rhode Island, USA Infratest Gesundheitsforschung (Suisse) GmbH, Basel, Suisse I + G Nordic Medical Research A/S, Kopenhagen, Danmark I + G France Health and Pharmaceutical Market Research, Rueil Malmaison, France I + G Gesundheits- und Pharmamarkt-Forschung GmbH & CoKG, Nurnberg I + G Pharmamarkt-Forschung Verwaltungs-GmbH, Berlin Infratest + GFK Gesundheitsforschung GmbH & CoKG, Berlin Infratest + GFK Gesundheitsforschung Verwaltungs-GmbH, Berlin ZEG Zentrum fur Epidemiologie und Gesundheitsforschung GmbH, Berlin GPI Kommunikationsforschung Gesellschaft fur Pharma- Informationssysteme mbH, Nurnberg Infratest Epidemiologie und Gesundheitsforschung GmbH & Co., Munich Infratest Epidemiologie und Gesundheitsforschung Verwaltungs-GmbH, Munich EFB Epidemiologische Forschung GmbH, Berlin were included in the consolidated financial statements on a pro-rata basis, according to the percentage of the interest in the firm. 56 2.2.4 Elimination of inter-company profits Assets to be included in the consolidated financial statements and deriving wholly or in part from transactions among the companies included in the consolidated financial statements are reported on the consolidated balance sheet at acquisition or production cost of the group. 3. BASIS OF FOREIGN CURRENCY TRANSLATION 3.1 Translation of individual financial-statement items stated in foreign currency For annual financial statements containing items based on sums that are or originally were stated in foreign currency, the conversion to German marks is performed at the rate in effect at the transaction date. Balance-sheet items are valued at the exchange rate in effect on the closing date, no exchange gains being realized. 3.2 Translation of financial statements in foreign currencies The translation of financial statements recorded in foreign currencies was performed by the current rate method: balance-sheet items were translated at the rate in effect on the closing date of September 30, 1996, and income-statement items were translated at the average rate for the fiscal year 1995/96. Exchange-rate differences resulting from the translation of net worth at different current rates and differences resulting from the translation of balance-sheet items at current rates and income statement items at average rates are recognized separately as a equity item on the balance sheet. 57 4. NOTES TO CONSOLIDATED BALANCE SHEET ITEMS 4.1 Items of accrual and deferral for deferred taxes The deferred tax asset relates to a provision that was established on consolidation level for potential risks of the Italian subsidiary. 4.2 Other provisions and accrued liabilities "Other provisions and accrued liabilities" basically recognizes provisions for Profit-sharing Follow-up services Unpaid invoices Restructuring Vacations and overtime Statuary social security benefits (Italy) Year-end costs Employee anniversaries. 5. OTHER MANDATORY INFORMATION 5.1 Remaining term The remaining term on receivables is less than one year. The remaining terms on payables is less than one year for TDM 75,252 and between one and five years for TDM 5,840 (other liabilities). 58 5.2 Collateralization of accounts payable Payables are not collateralized. 5.3 Analysis of sales revenues Sales revenues - broken down according to country of realization - are distributed as follows: 1995/96 TDM ------------- Domestic 140,573 Foreign, Europe 92,202 Foreign, other 9,136 ------------- 241,911 ============= 5.4 Other financial obligations Other financial obligations total TDM 36,319. 5.5 Employees The average number of employees in the Group - that is, in the fully consolidated companies - is distributed as follows (itemized by country): 1995/96 ------------- Germany 413 France 71 Sweden 62 England 61 Italy 60 Holland 47 ------------- 714 ============= 59 The average number of employees of companies included in the consolidated financial statements on a pro-rata basis only is distributed as follows: 1995/96 ------------- Germany 102 Switzerland 11 France 4 U.S. 4 Denmark 1 ------------- 122 ============= 5.6 Remuneration of officers Remuneration paid to the Board of Directors of the parent company, I.B. AG Holding, during the fiscal year 1995/96 totaled TDM 1,877. Total remuneration for the Supervisory Board totaled TDM 75 for the fiscal year 1995/96. Munich, January 1997 The Board of Directors 60 DESCRIPTION OF PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The following unaudited pro forma combined condensed balance sheet as of September 30, 1998, is based on the historical financial statements of the Company and Infratest as of September 30, 1998 (the end of their fiscal year), after giving effect to the acquisition as if such transaction had occurred on September 30, 1998. The following unaudited pro forma combined condensed income statement for the nine months ended September 30, 1998, is based on the historical financial statements of the Company for the nine months ended September 30, 1998, and of Infratest for the nine months ended June 30, 1998, after giving effect to the acquisition as if such transaction had occurred on January 1, 1997. The following unaudited pro forma combined condensed income statement for the year ended December 31, 1997, is based on the historical financial statements of the Company for the year ended December 31, 1997, and of Infratest for the year ended September 30, 1997 (the end of their fiscal year), after giving effect to the acquisition as if such transaction had occurred on January 1, 1997. The pro forma combined condensed financial information may not be indicative of the results that actually would have been attained if the acquisition had been in effect on the dates indicated or which may be attained in the future. The pro forma adjustments are described in the accompanying notes to the pro forma combined condensed financial information. The pro forma combined condensed financial information should be read in conjunction with the notes thereto and the consolidated financial statements of the Company included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, and the consolidated financial statements of Infratest presented elsewhere in this Current Report on Form 8-K/A. The pro forma combined condensed balance sheet reflects preliminary estimates of the allocation of the purchase price and is subject to final determination. The pro forma adjustments represent management's preliminary determination of purchase accounting adjustments and are based upon available information. Consequently, the amounts reflected in the pro forma financial statements are subject to change. 61 NFO Worldwide, Inc. Pro Forma Combined Condensed Balance Sheet As of September 30, 1998 (in thousands)
Proforma Adjustments NFO IB ---------------------- Proforma Including 09/30/98 09/30/98 Amount Note Infratest Burke -------------- -------------------------------------------------------- Assets Current Assets Cash and cash equivalents $6,485 $6,503 $12,988 Accounts receivable: Trade 52,487 30,838 83,325 Unbilled 12,659 36,467 49,126 Prepaid expenses and other 10,765 8,004 18,769 -------------- ---------------------------- ------------------ Total current assets 82,396 81,812 164,208 Property and equipment, net 29,171 13,922 43,093 Customer list, goodwill and other intangible assets 93,991 29,863 $90,870 A 214,724 Other assets 5,873 15,917 21,790 -------------- ---------------------------- ------------------ Total assets $211,431 $141,514 $90,870 $443,815 ============== ============================ ================== Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term debt $310 $310 Accounts payable 8,436 $12,223 20,659 Accrued expenses 18,178 23,873 42,051 Customer billings in excess of revenues earned 11,712 27,742 39,454 -------------- ---------------------------- ------------------ Total current liabilities 38,636 63,838 102,474 Long-term debt 49,869 26,207 $122,800 A 198,876 Other long-term liabilities 4,023 16,082 2,670 A 22,775 -------------- ---------------------------- ------------------ Total liabilities 92,528 106,127 125,470 324,125 Minority interests 2,709 787 3,496 Stockholders' Equity Common stock 213 60 (60) 213 Additional paid in capital 62,744 17,884 (17,884) 62,744 Retained earnings 55,453 16,216 (16,216) 55,453 Accumulated other comprehensive income (2,216) 440 (440) (2,216) -------------- ---------------------------- ------------------ Total stockholders' equity 116,194 34,600 (34,600) 116,194 -------------- ---------------------------- ------------------ Total Liabilities and stockholders' equity $211,431 $141,514 $90,870 $443,815 ============== ============================ ==================
See notes to pro forma combined condensed financial information. 62 NFO Worldwide, Inc. Pro Forma Combined Condensed Statement of Income As of September 30, 1998 (in thousands, except per share data)
Proforma Adjustments NFO IB US GAAP ---------------------- Proforma Including Thru 9/30/98 Thru 6/30/98 Amount Note Infratest Burke -------------- -------------------------------------------------------- Revenues $180,732 $101,769 $282,501 Cost of revenes 82,393 62,016 144,409 SG&A 73,107 31,328 104,435 Amortization 3,318 800 $2,434 B 6,552 Depreciation 3,011 2,487 5,498 -------------- ---------------------------- ------------------ Operating income - US GAAP 18,903 5,138 (2,434) 21,607 Interest expense 1,788 1,245 7,538 C 10,571 Equity interest in affiliates and other 394 (1,002) (608) -------------- ---------------------------- ------------------ Pre-tax profit 16,721 4,895 (9,972) 11,644 Provision for income taxes 6,885 2,268 (3,702) D 5,451 -------------- ---------------------------- ------------------ Net income before minority interest 9,836 2,627 (6,270) 6,193 Minority interest 428 212 640 -------------- ---------------------------- ------------------ Net income $9,408 $2,415 ($6,270) $5,553 ============== ============================ ================== Pro Forma Earnings per Share: Basic $0.45 $0.26 ============== ================== Diluted $0.44 $0.26 ============== ================== Pro Forma Weighted Average Number of Shares Outstanding: Basic 21,093 21,093 ============== ================== Diluted 21,621 21,621 ============== ==================
See notes to pro forma combined condensed financial information. 63 NFO Worldwide, Inc. Pro Forma Combined Condensed Statement of Income As of December 31, 1997 (in thousands, except per share data)
Proforma Adjustments NFO IB US GAAP ---------------------- Proforma Including Thru 12/31/97 Thru 9/30/97 Amount Note Infratest Burke -------------- -------------------------------------------------------- Revenues $190,229 $159,848 $350,077 Cost of revenes 83,357 96,400 179,757 SG&A 76,705 49,907 126,612 Amortization 4,094 1,067 $3,245 B 8,406 Depreciation 2,798 3,512 6,310 -------------- ---------------------------- ------------------ Operating income - US GAAP 23,275 8,962 (3,245) 28,992 Interest expense 669 2,013 10,051 C 12,733 Other expense/(income) Equity interest in affiliates 200 (1,752) (1,552) -------------- ---------------------------- ------------------ Pre-tax profit 22,406 8,701 (13,296) 17,811 Provision for income taxes 8,895 4,483 (4,936) D 8,442 -------------- ---------------------------- ------------------ Net income before minority interest 13,511 4,218 (8,360) 9,369 Minority interest 1,006 117 1,123 -------------- ---------------------------- ------------------ Net income $12,505 $4,101 ($8,360) $8,246 ============== ============================ ================== Pro Forma Earnings per Share: Basic $0.62 $0.41 ============== ================== Diluted $0.60 $0.40 ============== ================== Pro Forma Weighted Average Number of Shares Outstanding: Basic 20,265 20,265 ============== ================== Diluted 20,832 20,832 ============== ==================
See notes to pro forma combined condensed financial information. 64 NFO Worldwide, Inc. Notes to Pro Forma Combined Condensed Financial Information (in thousands) Notes: (A) To record inital purchase accounting as follows: Initial consideration paid Cash to sellers (Debt Incurred By NFO) 120,000 Capitalized Acquisition Costs (Estimated) 2,800 Payable to Sellers at a Future Date 2,670 -------------- Total Consideration 125,470 Less: Net Book Value of stock/assets acquired 34,600 -------------- Remainder - goodwill $ 90,870 ============== (B) To record additional amortization expense relating to newly acquired assets (28 year estimated useful life 12/31/97 Income Statement $ 3,245 9/30/98 Income Statement $ 2,434 (C) To record additional interest expense to reflect cash paid to sellers: 12/31/97 Income Statement $ 10,051 9/30/98 Income Statement $ 7,538 (D) To reflect tax benefit on goodwill amortization and acquisition related interest expense 12/31/97 Income Statement $ (4,936) 9/30/98 Income Statement $ (3,702) 65 EXHIBIT INDEX NFO WORLDWIDE, INC. CURRENT REPORT ON FORM 8-K/A DATED NOVEMBER 20, 1998 Exhibit No. Description Page No. - ----------- ----------- -------- 10.1* Stock Purchase Agreement dated as of November 10, 1998 by and among NFO Europe (Deutschland) GmbH & Co. KG, NFO Worldwide, Inc. (the "Company") and all of the Stockholders (the "Sellers") of Infratest Burke Aktiengesellschaft Holding ("Infratest"). 10.2* Letter Agreement dated November 17, 1998 among the Company, Infratest and the Sellers. 10.3* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's Adjustable Rate Series A Senior Notes due 2005 and the Company's Adjustable Rate Series B Senior Notes due 2008. 10.4* Note Purchase Agreement dated as of November 20, 1998 between the Company and each of the purchasers signatory thereto relating to the Company's 9.84% Senior Subordinated Notes due 2008. 10.5* Amendment dated as of November 20, 1998 to the separate Note Purchase Agreements dated as of March 9, 1998 between the Company and each of the institutions signatory thereto. 10.6* Amendment No. 1 dated as of November 20, 1998 to the Credit Agreement dated as of March 9, 1998 by and among the Company, Fleet National Bank and The Chase Manhattan Bank, as co-agents, and the banks signatory thereto. 23.1 Consent of Independent Public Accountants. 67 99.1* Press Release dated November 23, 1998 by the Company announcing the Company's private placement. 99.2* Press Release dated November 23, 1998 by the Company announcing the Infratest acquisition. - ------------------ * Previously filed 66 EX-23.1 2 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 15, 1999, on the consolidated financial statements of Infratest Burke Aktiengesellschaft Holding, Munich, and subsidiaries as of September 30, 1998, 1997 and 1996, and for each of the years in the three year period ended September 30, 1998, included in NFO Worldwide, Inc.'s current report on Form 8-K/A dated February 3, 1999, into NFO Worldwide, Inc.'s previously filed Registration Statements, File Nos. 33-73516, 33-83002, 33-91936, 333-24297, 333-24299, 333-38497, 333-51929, and 333-58067. Munich, Germany February 1, 1999 Haarmann, Hemmelrath & Partner GmbH Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft Zelger ppa. Pilenghi Wirtschaftsprufer Wirtschaftsprufer 67 -----END PRIVACY-ENHANCED MESSAGE-----