-----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, TePVKpOoWV/PtdSbIwfyRV9Y+aV5+j0hdihJzKqE2dz+iYOZuaPKwE0R34+ksEGy KVs9GnFCIjoCUJf3lCnjhQ== 0000950137-01-501511.txt : 20010516 0000950137-01-501511.hdr.sgml : 20010516 ACCESSION NUMBER: 0000950137-01-501511 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION RESOURCES INC CENTRAL INDEX KEY: 0000714278 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 521287752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11428 FILM NUMBER: 1634446 BUSINESS ADDRESS: STREET 1: 150 N CLINTON ST CITY: CHICAGO STATE: IL ZIP: 60661-1416 BUSINESS PHONE: 3127261221 MAIL ADDRESS: STREET 1: 150 N CLINTON ST CITY: CHICAGO STATE: IL ZIP: 60661-1416 10-Q 1 c62469e10-q.txt QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934. For the quarterly period ended March 31, 2001 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission file number 0-11428 INFORMATION RESOURCES, INC. --------------------------- (Exact name of registrant as specified in its charter) Delaware 36-2947987 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 North Clinton Street, Chicago, Illinois 60661 ------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 726-1221 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] The number of shares of the registrant's common stock, $.01 par value per share outstanding, as of April 30, 2001 was 29,053,777. 2 INFORMATION RESOURCES, INC. AND SUBSIDIARIES INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 18 Signatures 19 2 3 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS MARCH 31, 2001 DECEMBER 31, 2000 -------------- ----------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $ 9,407 $ 11,914 Accounts receivable, net 86,921 80,610 Prepaid expenses and other 9,680 11,009 --------- --------- Total Current Assets 106,008 103,533 --------- --------- Property and equipment, at cost 207,788 203,509 Accumulated depreciation (134,703) (127,777) --------- --------- Net Property and Equipment 73,085 75,732 Investments 15,512 15,858 Deferred income taxes 7,543 4,031 Other assets 163,137 166,006 --------- --------- $ 365,285 $ 365,160 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of capitalized leases $ 2,388 $ 2,337 Accounts payable 58,529 53,360 Accrued compensation and benefits 17,782 22,609 Accrued property, payroll and other taxes 2,594 1,980 Accrued expenses 9,716 11,372 Accrued restructuring costs 1,744 2,570 Deferred revenue 30,438 24,487 --------- --------- Total Current Liabilities 123,191 118,715 --------- --------- Long-term debt 25,507 24,628 Other liabilities 7,691 8,686 STOCKHOLDERS' EQUITY Preferred stock - authorized, 1,000,000 shares, $.01 par value; none issued -- -- Common stock - authorized 60,000,000 shares, $.01 par value, 29,053,777 and 29,069,892 shares issued and outstanding, respectively 294 294 Additional paid-in capital 198,940 198,926 Retained earnings 21,377 23,852 Accumulated other comprehensive loss (11,715) (9,941) --------- --------- Total Stockholders' Equity 208,896 213,131 --------- --------- $ 365,285 $ 365,160 ========= =========
The accompanying notes are an integral part of these statements. 3 4 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED ---------------------- MARCH 31, ---------------------- 2001 2000 --------- --------- Information services revenues $ 136,308 $ 129,141 Costs and expenses: Information services sold (122,260) (119,605) Selling, general and administrative expenses (13,323) (12,940) Restructuring and other charges (4,097) (3,557) --------- --------- (139,680) (136,102) --------- --------- Operating loss (3,372) (6,961) Interest expense and other, net (1,407) (813) Equity in earnings (loss) of affiliated companies (56) 113 Minority interest benefit 792 1,207 --------- --------- Loss before income taxes (4,043) (6,454) Income tax benefit 1,568 2,900 --------- --------- Net loss $ (2,475) $ (3,554) ========= ========= Net loss per common share - basic $ (.09) $ (.12) ========= ========= Net loss per common and common equivalent share - diluted $ (.09) $ (.12) ========= ========= Weighted average common shares - basic 29,069 29,068 ========= ========= Weighted average common and common equivalent shares - diluted 29,069 29,068 ========= ========= The accompanying notes are an integral part of these statements. 4 5 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, -------------------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,475) $ (3,554) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of deferred data procurement costs 30,688 30,201 Depreciation 7,321 7,329 Amortization of capitalized software costs and intangibles 1,472 1,484 Restructuring and other charges 195 1,062 Deferred income tax benefit (1,568) (2,900) Equity in earnings of affiliated companies and minority interests (736) (1,321) Other 59 68 Change in assets and liabilities: Accounts receivable, net (6,420) (8,989) Other current assets 1,329 30 Accounts payable and accrued liabilities 104 (12,229) Deferred revenue 5,951 6,426 Other, net 1,121 2,351 -------- -------- Net cash provided by operating activities 37,041 19,958 CASH FLOWS FROM INVESTING ACTIVITIES: Deferred data procurement costs (32,221) (31,074) Purchase of property, equipment and software (6,502) (3,803) Capitalized software costs (357) (783) Investment in joint ventures (917) -- Capital contributions from minority interests and other, net 134 599 -------- -------- Net cash used in investing activities (39,863) (35,061) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings 1,500 14,000 Purchases of common stock (110) -- Net repayments of capital leases (456) (387) -------- -------- Net cash provided by financing activities 934 13,613 EFFECT OF EXCHANGE RATE CHANGES ON CASH (619) 312 -------- -------- Net decrease in cash and cash equivalents (2,507) (1,178) Cash and cash equivalents at beginning of period 11,914 8,077 -------- -------- Cash and cash equivalents at end of period $ 9,407 $ 6,899 ======== ========
The accompanying notes are an integral part of these statements. 5 6 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION Principles of consolidation: The condensed consolidated financial statements include the accounts of Information Resources, Inc. and all wholly or majority owned subsidiaries and affiliates (collectively the "Company"). Minority interests reflect the non-Company owned stockholder interests in international operations. The equity method of accounting is used for investments in which the Company has a 20% to 50% ownership interest because it exercises significant influence over operating and financial policies. All significant intercompany accounts and transactions have been eliminated in consolidation. The excess of the carrying value over the net book value of investments accounted for using the equity method is amortized over ten years. Interim financial statements: The interim financial statements are unaudited, but include all adjustments necessary (consisting of normal recurring adjustments), in the opinion of management, for a fair statement of financial position and results of operations for the period presented. The preparation of interim financial statements necessarily relies on estimates, requiring the use of caution in estimating results for the full year based on interim results of operations. Reclassifications: Certain amounts in the 2000 condensed consolidated financial statements have been reclassified to conform to the 2001 presentation. Earnings (Loss) per Common and Common Equivalent Share: Net earnings (loss) per share is based upon the weighted average number of shares of common stock outstanding during each period. Net earnings (loss) per common and common equivalent share--diluted is based upon the weighted average number of shares of common stock and common stock equivalents, entirely comprised of stock options, outstanding during each period. In 2000 and 2001, common stock equivalents were excluded from the weighted average shares outstanding calculation because they were anti-dilutive. NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (received) for interest and income taxes during the period was as follows (in thousands): THREE MONTHS ENDED ------------------ MARCH 31, ------------------ 2001 2000 ------ ------ Interest $ 649 $ 499 Income taxes (5) 41 Non-cash investing and financing activities are excluded from the consolidated statement of cash flows. 6 7 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 3 - ACCOUNTS RECEIVABLE Accounts receivable were as follows (in thousands): MARCH 31, 2001 DECEMBER 31, 2000 -------------- ----------------- Billed $ 72,682 $ 69,822 Unbilled 17,728 14,706 -------- -------- 90,410 84,528 Reserve for accounts receivable (3,489) (3,918) -------- -------- $ 86,921 $ 80,610 ======== ======== NOTE 4 - INVESTMENTS AND OTHER ASSETS Investments were as follows (in thousands): MARCH 31, 2001 DECEMBER 31, 2000 -------------- ----------------- Mosaic InfoForce, L.P. at cost plus equity in undistributed earnings $ 5,775 $ 6,101 Datos Information Resources, at cost plus equity in undistributed earnings 4,469 4,439 GfK Panel Services Benelux B.V., at cost 1,315 1,315 Middle East Market Research Bureau ("MEMRB"), at cost 2,791 2,795 Other 1,162 1,208 -------- -------- $ 15,512 $ 15,858 ======== ======== 7 8 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) Other assets were as follows (in thousands): MARCH 31, 2001 DECEMBER 31, 2000 -------------- ----------------- Deferred data procurement costs - net of accumulated amortization of of $137,835 in 2001 and $132,884 in 2000 $140,369 $142,036 Intangible assets, including goodwill - net of accumulated amortization of $12,418 in 2001 and $12,026 in 2000 8,978 9,370 Capitalized software costs - net of accumulated amortization of $5,346 in 2001 and $4,716 in 2000 5,424 5,862 Other 8,366 8,738 -------- -------- $163,137 $166,006 ======== ======== NOTE 5 - LONG TERM DEBT Long-term debt was as follows (in thousands): MARCH 31, 2001 DECEMBER 31, 2000 -------------- ----------------- Bank borrowings $ 22,500 $ 21,000 Capitalized leases and other 5,395 5,965 -------- -------- 27,895 26,965 Less current maturities (2,388) (2,337) -------- -------- $ 25,507 $ 24,628 ======== ======== The financial covenants in the bank credit agreement, as well as in the lease agreement for the Company's Chicago headquarters, require the Company to maintain a minimum tangible net worth and to meet certain cash flow coverage and leverage ratios. The agreements also limit the Company's ability to declare dividends or make distributions to holders of capital stock, or redeem or otherwise acquire shares of the Company. Approximately $1.2 million is currently available for such distributions under the most restrictive of these covenants. The bank credit agreement contains covenants which restrict the Company's ability to incur additional indebtedness. Further, the agreement grants the bank a security interest in the Company's assets if certain financial covenants are not met. As of March 31, 2001, the Company was in compliance with all covenants. 8 9 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 6 - COMPREHENSIVE LOSS The comprehensive loss summary shown below sets forth certain items that affect stockholders' equity but are excluded from the presentation of net earnings. The components of comprehensive loss were as follows (in thousands): THREE MONTHS ENDED ------------------------- MARCH 31, ------------------------- 2001 2000 ------- ------- Net loss $(2,475) $(3,554) Foreign currency translation adjustment (1,774) (2,099) ------- ------- Comprehensive loss $(4,249) $(5,653) ======= ======= NOTE 7 - STOCK REPURCHASE The Company purchased 20,000 shares of common stock aggregating $0.1 million during the first quarter of 2001 in connection with the stock repurchase program announced in August 2000 that was established principally to acquire shares to fund the Company's 2000 Employee Stock Purchase Plan ("ESPP"). The shares are currently being held in treasury until they are sold to employees in connection with the Company's ESPP. NOTE 8 - SEGMENT INFORMATION The Company's business information services are conducted almost exclusively in the United States and Europe. The Company's operations in other markets account for approximately 1% of consolidated revenues. The executive management of the Company considers revenues from third parties and the aggregation of operating profit (loss), equity earnings (losses) and minority interests, ("Operating Results"), on a geographic basis to be the most meaningful measure of the operating performance of each respective geographic segment and of the Company as a whole. 9 10 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) The following table presents certain information regarding the operations of the Company by geographic segments (in thousands): SEGMENTED RESULTS: THREE MONTHS ENDED ---------------------- MARCH 31, ---------------------- 2001 2000 --------- --------- Revenues: U.S. Services $ 103,261 $ 98,388 International Services 33,047 30,753 --------- --------- Total $ 136,308 $ 129,141 ========= ========= Operating Results: U.S. Services $ 6,167 $ 2,808 International Services: Operating loss (2,084) (3,559) Equity in earnings of affiliated companies 153 113 Minority interest benefit 792 1,207 --------- --------- Subtotal--International Services (1,139) (2,239) Corporate and other expenses including equity in loss of affiliated companies (3,567) (2,653) Restructuring and other charges (a) (4,097) (3,557) --------- --------- Operating Results (2,636) (5,641) Interest expense and other, net (1,407) (813) --------- --------- Loss before income taxes $ (4,043) $ (6,454) ========= ========= (a) $2.1 million and $2.0 million of restructuring and other charges relate to U.S. Services and International Services, respectively, for the first quarter of 2001. $2.6 million and $1.0 million of restructuring and other charges relate to U.S. Services and International Services, respectively, for the first quarter of 2000. NOTE 9 - RESTRUCTURING AND OTHER CHARGES The Company began the Project Delta initiative in the first quarter of 2000 and continues to incur costs associated with this project. Certain restructuring and other costs were not eligible for accrual in 2000 and were recorded in the first quarter of 2001. For the quarter ended March 31, 2001 and 2000, the restructuring charges included in Restructuring and Other Charges in the Statement of Operations consist of the following (in thousands): 10 11 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) THREE MONTHS ENDED ------------------- MARCH 31, ------------------- 2001 2000 ------ ------ Termination benefits $ 21 $1,259 Disposition of excess office space 17 552 Transition of German production to U.S. facility 1,862 956 Discontinued activities 1,021 -- Other costs of project 1,176 790 ------ ------ $4,097 $3,557 ====== ====== The following table reflects restructuring and other charges accrued prior to 2001 and expenses incurred and cash payments made during the first quarter of 2001 (in thousands):
2001 ACTIVITY --------------------------------- LIABILITY AT LIABILITY AT DECEMBER 31, 2000 PROVISION CASH NON-CASH MARCH 31, 2001 ----------------- --------- ------ -------- -------------- Termination benefits $ 2,029 $ 21 $(1,157) $ -- $ 893 Disposition of excess office space -- 17 (17) -- -- Transition of German production to U.S. facility -- 1,862 (1,513) -- 349 Discontinued activities 541 1,021 (39) (1,021) 502 Other costs of project -- 1,176 (1,176) -- -- ------- ------- ------- ------- ------- $ 2,570 $ 4,097 $(3,902) $(1,021) $ 1,744 ======= ======= ======= ======= =======
Termination Benefits: As of March 31, 2001, 351 employees have been terminated under various Project Delta initiatives. The accrual balance remaining as of March 31, 2001 represents the unpaid severance costs associated with employees terminated through the first quarter of 2001. Disposition of Excess Office Space: The Company recorded $.02 million of charges relating to lease buyouts in the first quarter of 2001 relating to office space not currently utilized. 11 12 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) Transition of German Production to U.S. Facility: The Company made a decision in the fourth quarter of 1999 to transfer production services for IRI/GfK Retail Services GmbH from an external vendor in Germany to the Company's U.S. headquarter facility in order to enhance its InfoScan offering in Germany and to reduce future production costs. In the first quarter of 2001, charges of approximately $1.9 million were recorded related to this transition. Discontinued Activities: During 2000, it was determined that certain equipment used in the Company's U.S. operations to collect retail information would no longer be utilized after the second quarter of 2001. Accordingly, the Company recognized a non-cash charge of $1.0 million in the first quarter of 2001 relating to accelerated depreciation on this equipment. Other Restructuring Costs: Other restructuring costs in the first quarter of 2001 relate primarily to the fees paid to a third party for assistance in the identification of process improvements and efficiencies within the U.S. operations. 12 13 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following narrative discusses the results of operations, liquidity and capital resources for the Company on a consolidated basis. This section should be read in conjunction with IRI's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. RESULTS OF OPERATIONS Operations: The Company's consolidated net loss was $2.5 million or ($.09) per diluted share for the first quarter of 2001 compared to a consolidated net loss of $3.6 million or $(.12) per diluted share for the corresponding 2000 quarter. Results in the first quarter of 2001 reflect an after tax charge of $2.5 million for restructuring and other charges compared to $2.1 million for the corresponding 2000 quarter. Excluding restructuring and other charges, the Company recorded consolidated net income of $.04 million in the first quarter of 2001 compared to a net loss of $1.5 million or ($.05) per diluted share for the corresponding 2000 quarter. Consolidated revenues for the first quarter of 2001 were $136.3 million, an increase of 6% over the corresponding quarter in 2000. U.S. revenues were $103.3 million, an increase of 5% compared to the prior year due to increased revenues generated by new modeling products and better account penetration. International revenues increased 7% to $33.0 million. Excluding foreign exchange effects, international revenues increased 14% over the prior year reflecting continued strong revenue growth in most of the European businesses. Consolidated costs of information services sold increased 2% to $122.3 million for the three months ended March 31, 2001 compared to $119.6 million for the first quarter of 2000. This increase is the result of costs associated with incremental services provided to U.S. clients and the continued growth of the international business. Consolidated selling, general and administrative expenses increased 3% to $13.3 million for the three months ended March 31, 2001 compared to $12.9 million for the first quarter of 2000. Earnings before interest and taxes, excluding restructuring and other charges of $4.1 million, was $1.5 million for the first quarter of 2001 compared to a loss of $2.1 million in the prior year. This improvement is the result of the continued strengthening of the international operations and increased U.S. revenues which outpaced U.S. expenses. Restructuring and other charges are discussed below. Equity in earnings (losses) of affiliated companies were $(.1) million for the first quarter of 2001, a decrease of $.2 million from the prior year due the Company's recognition of its share of the Mosaic InfoForce, L.P. losses. Interest and other expenses were $1.4 million for the first quarter of 2001 compared to $.8 million in the prior year due to higher interest charges on bank debt and increased foreign exchange losses resulting from the continued strength of the U.S. dollar against European currencies during 2001. 13 14 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. LIQUIDITY AND CAPITAL RESOURCES The Company's current cash resources include its $9.4 million consolidated cash balance and $33.8 million available under the Company's bank revolving credit facility. The Company anticipates that it will have sufficient funds from these sources and internally generated funds from its U.S. operations to satisfy its cash needs for the foreseeable future. The Company's bank credit agreement contains covenants which restrict the Company's ability to incur additional indebtedness. Cash Flow: Consolidated net cash provided by operating activities was $37.0 million for the three months ended March 31, 2001 compared to $20.0 million for the same period in 2000. This increase was primarily attributable to improved accounts receivable management in 2001 combined with the fact that 2000 operating cash flow included the funding of restructuring charges accrued at the end of 1999. Consolidated cash flow used in net investing activities was ($39.9) million in the first quarter of 2001 compared to ($35.1) million for the same period in 2000. Investing activity in the first quarter of 2001 reflects higher expenditures for data procurement and capital, and payments made in connection with the formation of Mosaic InfoForce, L.P. Net cash used before financing activities was ($2.8) million for the three months ended March 31, 2001 compared to ($15.1) for the same period in 2000. Consolidated cash flow provided by net financing activities was $0.9 million for the three months ended March 31, 2001 compared to $13.6 million for the same period in 2000. The Company borrowed an additional $1.5 million under its revolving line of credit in the first quarter of 2001 compared to $14.0 million in the prior year. Other Deferred Costs and Capital Expenditures: Consolidated deferred data procurement expenditures were $32.2 million for the three months ended March 31, 2001 and $31.1 million for the same period in 2000. These expenditures are amortized over a period of 28 months and include payments to retailers for point-of-sale data and other costs related to collecting, reviewing and verifying other data (i.e., causal factors) which are an essential part of the Company's database. Such expenditures were $19.2 million and $17.7 million for the three month periods ended March 31, 2001 and 2000, respectively, for the Company's U.S. services business and $13.0 million and $13.4 million, respectively, for the Company's International services business. Consolidated capital expenditures were $6.5 million and $3.8 million for the three months ended March 31, 2001 and 2000, respectively. Capital expenditures for the Company's U.S. services business were $5.0 million and $2.7 million, while depreciation expense was unchanged at $6.2 million for the three months ended March 31, 2001 and 2000, respectively. The Company's International services capital expenditures were $1.5 million and $1.1 million while depreciation expense was unchanged at $1.1 million for the three months ended March 31, 2001 and 2000, respectively. Consolidated capitalized software development costs, primarily in the U.S., were $0.4 million and $0.8 million for the three months ended March 31, 2001 and 2000, respectively. 14 15 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Impact of Inflation: Inflation has slowed in recent years, however the Company's results of operations are impacted by rising prices given the labor intensive nature of the business. To the extent permitted by competitive conditions, the Company passes increased costs on to customers by adjusting sales prices and, in the case of multi-year contracts, through consumer price index provisions in such agreements. RESTRUCTURING AND OTHER CHARGES The Company began the Project Delta initiative in the first quarter of 2000 and continues to incur costs associated with this project. Certain restructuring and other costs were not eligible for accrual in 2000 and were recorded in the first quarter of 2001. For the quarter ended March 31, 2001 and 2000, the restructuring charges included in Restructuring and Other Charges in the Statement of Operations consist of the following (in thousands): THREE MONTHS ENDED ------------------ MARCH 31, ------------------ 2001 2000 ------ ------ Termination benefits $ 21 $1,259 Disposition of excess office space 17 552 Transition of German production to U.S. facility 1,862 956 Discontinued activities 1,021 -- Other costs of project 1,176 790 ------ ------ $4,097 $3,557 ====== ====== The following table reflects restructuring and other charges accrued prior to 2001 and expenses incurred and cash payments made during the first quarter of 2001 (in thousands):
2001 ACTIVITY --------------------------------- LIABILITY AT LIABILITY AT DECEMBER 31, 2000 PROVISION CASH NON-CASH MARCH 31, 2001 ----------------- --------- ---- ------- -------------- Termination benefits $ 2,029 $ 21 $(1,157) $ -- $ 893 Disposition of excess office space -- 17 (17) -- -- Transition of German production to U.S. facility -- 1,862 (1,513) -- 349 Discontinued activities 541 1,021 (39) (1,021) 502 Other costs of project -- 1,176 (1,176) -- -- ------- ------- ------- ------- ------- $ 2,570 $ 4,097 $(3,902) $(1,021) $ 1,744 ======= ======= ======= ======= =======
15 16 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Termination Benefits: As of March 31, 2001, 351 employees have been terminated under various Project Delta initiatives. The accrual balance remaining as of March 31, 2001 represents the unpaid severance costs associated with employees terminated through the first quarter of 2001. Disposition of Excess Office Space: The Company recorded $.02 million of charges relating to lease buyouts in the first quarter of 2001 relating to office space not currently utilized. Transition of German Production to U.S. Facility: The Company made a decision in the fourth quarter of 1999 to transfer production services for IRI/GfK Retail Services GmbH from an external vendor in Germany to the Company's U.S. headquarter facility in order to enhance its InfoScan offering in Germany and to reduce future production costs. In the first quarter of 2001, charges of approximately $1.9 million were recorded related to this transition. Discontinued Activities: During 2000, it was determined that certain equipment used in the Company's U.S. operations to collect retail information would no longer be utilized after the second quarter of 2001. Accordingly, the Company recognized a non-cash charge of $1.0 million in the first quarter of 2001 relating to accelerated depreciation on this equipment. Other Restructuring Costs: Other restructuring costs in the first quarter of 2001 relate primarily to the fees paid to a third party for assistance in the identification of process improvements and efficiencies within the U.S. operations. Future Restructuring Charges: The Company's U.S. Project Delta cost reduction program is nearing completion. However, the Company expects to incur additional costs in 2001 (primarily in the second quarter of 2001) of $6.0 million to $8.0 million relating to the Company's U.S. Project Delta initiative which could not be accrued as of March 31, 2001. Further, International Project Delta initiatives will be undertaken during 2001 at a significantly lower cost than the U.S. Project Delta program. Additionally, the Company has begun an initial review of its information technology operations to assess potential restructuring costs and benefits. The Company cannot yet estimate the costs for these future restructuring programs. EUROPEAN CURRENCY CONVERSION ISSUES In accordance with the 1992 treaty of the European Union, on January 1, 1999, a new single European currency, the Euro, became legal tender. The Euro will replace the sovereign currencies ("legacy currencies") of eleven initial members of the European Union ("participating countries"). On this date, fixed conversion rates between the Euro and the legacy currencies in those particular countries were established. 16 17 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. As the Company has operations in several of the participating countries, it will be affected by issues relating to the introduction of and transition to the Euro. The Company's European Executive Committee is charged with formulating and executing all aspects of the Company's plan concerning the conversion to the Euro. The Company does not expect the cost of any system modifications to be material or result in any material increase in transaction costs. The Company will continue to evaluate the impact of the Euro, however, based on currently available information, management does not believe the introduction of the Euro will have a material adverse impact on the Company's financial condition or overall trends in results of operations. FORWARD LOOKING INFORMATION Certain matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in reports and other documents filed by the Company with the Securities and Exchange Commission including the Company's Annual Report on Form 10-K for the year 2000. 17 18 INFORMATION RESOURCES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit No. Description of Exhibit ----------- ---------------------- 10.1 Amendment One to Employment Agreement dated April 30, 1999 between the Company and Joseph P. Durrett b. Reports on Form 8-K. None. 18 19 INFORMATION RESOURCES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INFORMATION RESOURCE, INC. ------------------------------------- (Registrant) May 11, 2001 /s/ ANDREW G. BALBIRER ------------------------------------- Andrew G. Balbirer Executive Vice President and Chief Financial Officer (Authorized officer of Registrant and Principal Financial Officer) /s/ MARY K. SINCLAIR ------------------------------------- Mary K. Sinclair Controller (Principal Accounting Officer) 19 EX-10.1 2 c62469ex10-1.txt AMENDMENT #1 TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.1 AMENDMENT ONE TO EMPLOYMENT AGREEMENT THIS AMENDMENT ONE TO EMPLOYMENT AGREEMENT ("Amendment") is made as of the 30th day of January, 2001 by and between Information Resources, Inc., a Delaware corporation (the "Company"), and Joseph P. Durrett ("Executive"). W I T N E S S E T H: WHEREAS, the Company and Executive have entered into an Employment Agreement, dated as of April 30, 1999 (the "Employment Agreement"), pursuant to which the Company employs the Executive as President and Chief Executive Officer of the Company; WHEREAS, as part of the Employment Agreement, Executive was entitled to receive 300,000 options under the terms of the 1992 Executive Stock Option Plan (the "Executive Option Plan") to purchase shares of the Company's common stock at an exercise price of $12.00 per share during 2000 on or before May 20, 2000; WHEREAS, because the Company determined that it did not have an adequate number of stock options available under the Executive Option Plan during 2000 to provide Executive with the full grant of 300,000 stock options in accordance with the terms of the Employment Agreement, Executive agreed to accept only 225,000 stock options in 2000 with an exercise price of $12.00; WHEREAS, in consideration for Executive's agreement to accept only 225,000 stock options in 2000, the Compensation Committee of the Board of Directors of the Company determined that the balance of 75,000 stock options should be granted to Executive on January 30, 2001 at an exercise price of $4.2813, the fair market value of the Company's stock on that date. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the parties agree as follows: 1.0 Effective as of January 30, 2001, Section 4(a)(iii) of the Employment Agreement shall be deleted in its entirety and the following shall be inserted in its place: "(iii) In the event that Executive is employed by the Company on the first anniversary of the Effective Date, and subject to stockholder approval of additional Stock Options available for issuance under the Option Plan, if necessary, then, on any business day selected by the Company during calendar year 2000 up to and including May 20, 2000, the Company shall grant to Executive 225,000 Stock Options, at the exercise price of $12.00 per share, which, subject to the 2 provisions of subsections (b), (c) and (d) of this Section 4.0, shall vest and become exercisable in three equal annual installments of 75,000 shares on each of May 20, 2001, May 20, 2002 and May 20, 2003. (iv) In the event that Executive is employed by the Company on the first anniversary of the Effective Date, and subject to stockholder approval of additional Stock Options available for issuance under the Option Plan, if necessary, then, on January 30, 2001, the Company shall grant to Executive 75,000 Stock Options, at the exercise price of $4.2813 per share, which, subject to the provisions of subsections (b), (c) and (d) of this Section 4.0, shall vest and become exercisable in two equal annual installments of 37,500 shares on each of January 30, 2002 and January 30, 2003." 2.0 Except as expressly modified herein, the terms and conditions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company and Executive have caused this Amendment One to Employment Agreement to be duly executed as of the date first written above. INFORMATION RESOURCES, INC. ATTEST: By: /s/ Andrew G. Balbirer ------------------------ Andrew G. Balbirer /s/ Monica M. Weed Chief Financial Officer - ------------------------ Monica M. Weed Secretary /s/ Joseph P. Durrett --------------------------- Joseph P. Durrett 2 -----END PRIVACY-ENHANCED MESSAGE-----