-----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, RCsWQUWWnEAUKqArIwMgmBoP1cuPgkx9WfisHAS94o8y73SmzyX9SS6/SE6xGqpW elNC44oqP4iM4YUKFa4yhA== 0000950137-98-003169.txt : 19980814 0000950137-98-003169.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950137-98-003169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION RESOURCES INC CENTRAL INDEX KEY: 0000714278 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 362947987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11428 FILM NUMBER: 98685367 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 FORM 10-Q 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 June 30, 1998 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 Securities registered pursuant to Section 12(g) of the Act: Title of each class Common, $.01 par value per share Preferred Stock Purchase Rights 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 July 31, 1998 was 29,142,531. 1 2 INFORMATION RESOURCES, INC. AND SUBSIDIARIES INDEX
PAGE NUMBER PART I. FINANCIAL INFORMATION - ---------------------------------- Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 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 9 PART II. OTHER INFORMATION - ------------------------------ Item 4 - Submission of Matters to Vote of Security Holders 16 Item 6 - Exhibits and Reports on Form 8-K 16 Signatures 17
2 3 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
ASSETS JUNE 30, 1998 DECEMBER 31, 1997 ------------- ------------------ (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $16,254 $20,925 Accounts receivable, net 100,790 96,209 Prepaid expenses and other 5,182 9,563 --------- --------- Total Current Assets 122,226 126,697 --------- --------- Property and equipment, at cost 194,972 180,043 Accumulated depreciation and amortization (120,358) (111,628) --------- --------- Net property and equipment 74,614 68,415 Investments 8,664 13,061 Other assets 168,986 158,447 --------- --------- $374,490 $366,620 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of capitalized leases $2,084 $2,266 Accounts payable 38,474 49,306 Accrued compensation and benefits 18,738 20,357 Accrued property, payroll and other taxes 3,351 3,068 Accrued expenses 12,425 6,324 Deferred revenue 24,938 20,469 --------- --------- Total Current Liabilities 100,010 101,790 --------- --------- Long-term capitalized leases 70 640 Deferred income taxes, net 17,319 13,660 Other liabilities 8,629 8,988 STOCKHOLDERS' EQUITY Preferred stock-authorized, 1,000,000 shares $.01 par value - none issued Common stock - authorized 60,000,000 shares, $.01 par value; 28,995,812 and 28,713,943 shares issued and outstanding, respectively 290 287 Capital in excess of par value 201,676 198,537 Retained earnings 51,283 45,932 Cumulative translation adjustment (4,787) (3,214) --------- --------- Total Stockholders' Equity 248,462 241,542 --------- --------- $374,490 $366,620 ========= =========
The accompanying notes are an integral part of these statements. 3 4 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 --------------------- ------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues $ 129,392 $ 113,973 $ 248,582 $ 219,101 Costs and expenses: Operating expenses (112,039) (100,260) (216,408) (196,173) Selling, general and administrative expenses (11,436) (9,126) (22,971) (18,379) --------- --------- --------- --------- (123,475) (109,386) (239,379) (214,552) --------- --------- --------- --------- Operating profit 5,917 4,587 9,203 4,549 Interest expense and other, net (45) (261) (210) (504) Equity in earnings of affiliated companies 220 184 294 344 --------- --------- --------- --------- Earnings before income taxes and minority interests 6,092 4,510 9,287 4,389 Income tax expense (2,400) (2,000) (3,800) (2,047) ---------- --------- --------- --------- Earnings before minority interests 3,692 2,510 5,487 2,342 Minority interests expense (251) (381) (136) (158) ---------- --------- --------- --------- Net earnings $ 3,441 $ 2,129 $ 5,351 $ 2 ,184 ========== ========== ========= ========== Net earnings per common share - basic $ .12 $ .08 $ .19 $ .08 ========== ========== ========= ========== Net earnings per common and common equivalent share - diluted $ .12 $ .07 $ .18 $ .08 ========== ========== ========= ========= Weighted average common shares - basic 28,860 28,260 28,766 28,156 ========== ========== ========= ========= Weighted average common and common equivalent shares - diluted 29,839 28,553 29,393 28,558 ========== ========== ========= ==========
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)
SIX MONTHS ENDED JUNE 30 ------------------------ 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 5,351 $ 2,184 Adjustments to reconcile net earnings to net cash provided by operating activities: Amortization of deferred data procurement costs 55,500 49,147 Depreciation 11,244 9,961 Amortization of capitalized software costs and intangibles 2,916 2,983 Deferred income tax expense 3,800 2,047 Equity in earnings of affiliated companies and minority interests (158) (186) Other (429) (1,927) Change in assets and liabilities: Decrease (increase) in accounts receivable (3,507) 1,877 Decrease (increase) in other current assets 108 (413) Decrease in accounts payable and accrued liabilities (3,837) (3,813) Increase in deferred revenue 8,963 6,936 Other, net (2,159) (846) -------- -------- Total adjustments 72,441 65,766 -------- -------- Net cash provided by operating activities 77,792 67,950 CASH FLOWS FROM INVESTING ACTIVITIES: Deferred data procurement costs (58,672) (55,387) Purchase of property and equipment (17,587) (10,802) Capitalized software costs (4,763) (1,843) Proceeds from disposition of assets and other 98 2,052 -------- -------- Net cash used in investing activities (80,924) (65,980) CASH FLOWS FROM FINANCING ACTIVITIES: Net bank loan repayments -- (5,500) Repayments of capitalized leases (752) (1,464) Purchases of Common Stock (5,424) -- Proceeds from exercise of stock options and other 4,794 5,356 -------- -------- Net cash used by financing activities (1,382) (1,608) EFFECT OF EXCHANGE RATE CHANGES ON CASH (157) (881) -------- -------- Net decrease in cash and cash equivalents (4,671) (519) Cash and cash equivalents at beginning of period 20,925 12,195 -------- -------- Cash and cash equivalents at end of period $16,254 $11,676 ======== ========
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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation: The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in Information Resources, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997. The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated financial statements for the periods shown. 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 within international operations, including effective February 1, 1998, IRI/GfK Retail Services B.V. (the Netherlands). The equity method of accounting is used for investments in which the Company has a 20% to 50% ownership and exercises significant influence over operating and financial policies. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassifications: Certain amounts in the 1997 condensed consolidated financial statements have been reclassified to conform to the 1998 presentation. Adoption of Recent Statement of Financial Accounting Standards: In July 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (collectively "the Standards"). The Standards are effective for fiscal years beginning after December 15, 1997. The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" in the first quarter of 1998. The Company is currently investigating the impact of Statement of Financial Accounting Standards No. 131. "Disclosures about Segments of an Enterprise and Related Information" for adoption in its December 31, 1998 consolidated financial statements. NOTE 2 - COMPREHENSIVE INCOME (LOSS) The comprehensive income (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 income (loss) for the three and six months ended June 30, 1998 and 1997 were as follows (in thousands):
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 -------------------------- ------------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Net earnings $ 3,441 $ 2,129 $ 5,351 $ 2,184 Foreign currency translation adjustment, net of tax (426) (853) (945) (2,334) ------- ------- -------- -------- Comprehensive income (loss) $ 3,015 $ 1,276 $ 4,406 $ (150) ======= ======= ======== ========
6 7 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (refunded) for interest and income taxes during the period was as follows (in thousands):
SIX MONTHS ENDED JUNE 30 ------------------------ 1998 1997 ---- ---- Interest $ 557 $ 772 Income taxes (78) 328
NOTE 4 - THE NETHERLANDS OPERATIONS The Company and GfK AG of Germany ("GfK") operate a joint venture which offers a scanner-based product tracking service to the Netherlands market operating under the InfoScan name. This scanner-based product tracking service became fully-operational in 1994. Until early 1998, this joint venture was owned 80.1% by GfK and 19.9% by the Company. In February 1998, the Company increased its ownership to 51% and assumed overall management responsibilities. The Company provides production services to the joint venture through the Company's computer facilities in Wood Dale, Illinois. The consolidation of the Netherlands did not have a material impact on the consolidated financial results or position of the Company. In 1998, the Company sold a 9.9% interest in GfK Panel Services Benelux B.V. and GfK Belgium S.A. reducing its ownership to 10%. Those companies operate household panel services in the Netherlands and Belgium and continue to cooperate with the Netherlands InfoScan operation in the sale and delivery of services to common customers. NOTE 5 - ACCOUNTS RECEIVABLE Accounts receivable were as follows (in thousands):
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ------------------ Billed $ 70,592 $ 70,761 Unbilled 34,017 29,288 -------- ------- 104,609 100,049 Reserve for accounts receivable (3,819) (3,840) -------- ------- $ 100,790 $ 96,209 ======== =======
7 8 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 6 - OTHER ASSETS Other assets were as follows (in thousands):
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- Deferred data procurement costs - net of accumulated amortization of of $112,194 in 1998 and $108,491 in 1997 $ 130,753 $ 126,733 Intangible assets, including goodwill primarily related to acquisitions - net of accumulated amortization of $11,602 in 1998 and $10,233 in 1997 19,894 16,463 Capitalized software costs - net of accumulated amortization of $4,484 in 1998 and $3,578 in 1997 9,373 6,093 Other 8,966 9,158 --------- --------- $ 168,986 $ 158,447 ========= =========
NOTE 7- LONG-TERM BANK DEBT The Company currently has a $75.0 million bank revolving credit facility maturing in 2001. The facility has floating interest rate options at or below prime and commitment fees of .15% payable on the unused portion. 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 $67.7 million is currently available for such distributions under the most restrictive of these covenants. The credit agreement contains covenants which restrict the Company's ability to incur additional indebtedness. 8 9 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's consolidated net earnings were $3.4 million or $.12 per diluted share for the second quarter of 1998 compared to $2.1 million or $.07 per diluted share for the corresponding 1997 quarter. Consolidated net earnings were $5.4 million or $.18 per diluted share for the six months ended June 30, 1998 compared to $2.2 million or $.08 per diluted share for the corresponding period of 1997. Consolidated revenues for the quarter ended June 30, 1998 were $129.4 million, an increase of 14% over the corresponding quarter in 1997. Consolidated revenues were $248.6 million for the six months ended June 30, 1998, an increase of 13% over the corresponding period of 1997. This increase was the result of revenue growth in the U.S. Services business and a substantial increase in international revenues which was aided somewhat by the consolidation of IRI's majority-owned Netherlands operation effective February 1998. Consolidated operating expenses increased 12% to $112.0 million for the quarter ended June 30, 1998 compared to $100.3 million for the second quarter of 1997. The increase in 1998 was primarily due to: (a) a $5.2 million increase in compensation expense resulting primarily from higher salaries and higher headcount required for operations, client servicing and international growth; (b) a $3.2 million increase in amortization of deferred data procurement costs, principally resulting from the expansion of the information services business in Europe; and (c) $1.6 million increase in operating expenses due to the consolidation of IRI/GfK Retail Services B.V. Consolidated operating expenses increased 10% to $216.4 million for the six months ended June 30, 1998 compared to $196.2 million for the same period in 1997. The increase in 1998 was primarily due to: (a) a $10.8 million increase in compensation expense; (b) a $6.4 million increase in amortization of deferred data procurement costs; and (c) $3.0 million increase in operating expenses due to the consolidation of IRI/GfK Retail Services B.V. Consolidated selling, general and administrative expenses increased 25% to $11.4 million for the three months ended June 30, 1998. This increase was primarily attributable to higher compensation expenses worldwide and legal expenses in the U.S. Increased legal expenses related directly to the Company's antitrust lawsuit against The Dun and Bradstreet Corporation, ACNielsen Company and IMS International, Inc. In that suit, filed in 1996, the Company is seeking $1 billion in trebled damages from the defendants for violations of U.S. antitrust laws. The case is currently in the discovery phase, and the Company anticipates incurring its present level of legal expenses as the case progresses toward trial. 9 10 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Consolidated selling, general and administrative expenses increased 25% to $23.0 million for the six months ended June 30, 1998. This increase was primarily attributable to higher compensation expenses worldwide and legal expenses in the U.S. For all periods presented, the Company's effective income tax rate is greater than the U.S. Federal statutory rate due to certain unbenefitted foreign losses, goodwill amortization and other nondeductible expenses. Based upon discussions with financial analysts, the Company considers the aggregation of operating profit (loss), equity earnings and minority interests ("Operating Results"), on a geographic basis to be a meaningful measure of the Company's operating performance. A comparative analysis of consolidated revenues and Operating Results for the three and six months ended June 30, 1998 and 1997 follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------- ---------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues: U.S. Services $ 99,371 $ 91,265 $ 193,943 $ 177,355 International Services 30,021 22,708 54,639 41,746 --------- --------- ---------- ---------- $ 129,392 $ 113,973 $ 248,582 $ 219,101 ========= ========= ========== ========== Operating Results: U.S. Services operating profit $ 11,536 $ 10,433 $ 21,087 $ 17,296 International Services Operating loss (3,973) (5,174) (8,961) (11,659) Equity in earnings of affiliated companies 220 184 294 344 Minority interests (251) (381) (136) (158) --------- --------- ---------- ---------- Subtotal - International (4,004) (5,371) (8,803) (11,473) Corporate and other expenses (1,646) (672) (2,923) (1,088) --------- --------- ---------- ---------- Operating Results $ 5,886 $ 4,390 $ 9,361 $ 4,735 ========= ========= ========== ==========
10 11 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. In the second quarter of 1998, revenues from the Company's U.S. Services business were $99.4 million, an increase of 9% over the corresponding 1997 quarter. U.S. revenues in the first six months of 1998 were $193.9 million also 9% higher than during the same period of 1997. These revenue increases were primarily due to the increased use of the Company's services and products by existing customers, particularly Census-based services measuring brand purchasing at individual retailers. Second quarter 1998 revenues from the Company's International businesses were $30.0 million, an increase of 32% over the corresponding 1997 quarter. For the six months ended June 30, 1998, International revenues were $54.6 million, an increase of 31% over the first half of 1997. Results in 1998 reflected the consolidation of IRI's majority-owned operations in the Netherlands, IRI/GfK Retail Services, B.V., effective February 1, 1998 and the dampening effect of the strong U.S. dollar against certain European currencies. Excluding the revenues from the Netherlands and adjusted for foreign exchange effects, European revenues increased 26% for both the second quarter of 1998 and the first six months of 1998 compared to the same periods of 1997. Consolidated Operating Results were $5.9 million in the second quarter of 1998 compared to $4.4 million for the second quarter of 1997. For the six months ended June 30, 1998, consolidated Operating Results were $9.4 million compared to $4.7 million for the corresponding period of 1997. Operating Results for the Company's U.S. businesses were $11.5 million in the second quarter of 1998 up 11% over the second quarter of 1997. Operating Results for the U.S. businesses increased 22% to $21.1 million for the six months ended June 30, 1998. The increases in U.S. Operating Results were due to the growth in revenues together with the benefit of lower expense growth resulting largely from the relatively high fixed cost structure of the Company's database operations. Operating Results for the Company's International businesses were a ($4.0) million loss in the second quarter of 1998 compared to a ($5.4) million loss in the corresponding 1997 quarter. Operating Results for the company's International businesses were an ($8.8) million loss for the six months ended June 30, 1998 compared to a ($11.5) million loss in the corresponding 1997 period. The improved International results were principally due to continuing revenue growth of the Company's major European services. Corporate and other expenses increased $1.0 million and $1.8 million for the three and six months ended June 30, 1998, respectively. The increase was primarily attributable to increased legal expenses in the U.S. 11 12 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 $16.3 million consolidated cash balance and $75.0 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 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 $67.7 million is currently available for such distributions under the most restrictive of these covenants. The credit agreement contains covenants which restrict the Company's ability to incur additional indebtedness. Cash Flow: Consolidated net cash provided by operating activities was $77.8 million for the six months ended June 30, 1998 compared to $68.0 million for the same period in 1997, primarily due to improved operating performance and offset somewhat by higher working capital investment resulting from overall business growth in 1998. Consolidated cash used in net investing activities was ($80.9) million in 1998 compared to ($66.0) million for the same period in 1997. Investing activity in the first six months of 1998 reflects higher expenditures in the U.S. business for purchases of property and equipment, data procurement costs and software development costs, compared to the same period of 1997. Higher capital expenditures in the first six months of 1998 were primarily due to investment in equipment required to expand the Company's household panel services. Net cash provided (used) before financing activities was ($3.1) million for the six months ended June 30, 1998 and $2.0 million for the same period of 1997 due to the higher investing activities in 1998. Consolidated cash used by net financing activities was ($1.4) million for the six months ended June 30, 1998 compared to ($1.6) million for the same period in 1997. The six months ended June 30, 1998 reflected $5.4 million of purchases of the Company's Common Stock under its stock purchase plan. Common Stock Purchase Plan: In November 1997, the Company's Board of Directors approved a plan to purchase up to two million shares of the Company's Common Stock from time to time in the open market. Purchases under the plan are subject to a number of considerations including the market price of the Company's Common Stock and general market conditions. Through June 30, 1998, the Company had purchased a cumulative total of 575,300 shares of its Common Stock at an average price of $14.60 per share. Pursuant to the plan, purchases of Common Stock during the six months ended June 30, 1998 aggregated 156,100 shares at an average price of $15.71 per share. 12 13 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Other Deferred Costs and Capital Expenditures: Consolidated deferred data procurement expenditures were $58.7 million for the six months ended June 30, 1998 and $55.4 million for the same period in 1997. These expenditures are amortized over a period of 28 months and include payments and services to retailers for point-of-sale data and other costs related to collecting, reviewing and verifying other data which are an essential part of the Company's data base. Such expenditures were $37.8 million and $35.4 million for the periods ended June 30, 1998 and 1997, respectively, for the Company's U.S. services business and $20.9 million and $20.0 million, respectively, for the Company's International services business. Management expects to continue the development of its businesses in Europe, and accordingly, the Company's European operations will continue to require substantial investment in data procurement costs. Based upon currently projected Operating Results and cash flows, the Company's assessment is that the realizability of its International assets is not impaired. Should actual Operating Results and cash flows be materially lower than current projections, the Company may be required to write down a portion of these assets in future periods. Consolidated capital expenditures were $17.6 million and $10.8 million for the six months ended June 30, 1998 and 1997, respectively. Capital expenditures for the Company's U.S. services business were $15.0 million and $8.6 million, while depreciation expense was $8.9 million and $8.0 million for the six months ended June 30, 1998 and 1997, respectively. The Company's International services business capital expenditures were $2.6 million and $2.2 million while depreciation expense was $2.3 million and $2.0 million, for the six months ended June 30, 1998 and 1997, respectively. Consolidated capitalized software development costs were $4.8 million and $1.8 million for the six months ended June 30, 1998 and 1997, respectively. NOL Carryforwards: As of December 31, 1997, the Company had cumulative U.S. Federal net operating loss ("NOL") carryforwards of approximately $70.8 million that expire primarily in 2009 and 2011. At December 31, 1997, the Company had general business tax credit carryforwards of approximately $9.5 million which expire primarily between 1999 and 2012, and are available to reduce future Federal income tax liabilities. Certain of these carryforwards have not been examined by the Internal Revenue Service and, therefore, are subject to adjustment. In addition, at December 31, 1997, various foreign subsidiaries of IRI had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $8.9 million which are subject to various income tax provisions of each respective country. Approximately $3.3 million of these foreign NOL's may be carried forward indefinitely, while the remaining $5.6 million expire in 2000 and 2002. 13 14 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Impact of Inflation: Inflation is currently not an important determinant of the Company's results of operations. 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. Year 2000: The Company has been assessing whether the information technology systems, specifically hardware and software, and other non-information technology systems, such as facilities and equipment, used in its businesses will function properly in connection with the transition of dates from 1999 to 2000. The Company expects to complete the assessment phase in the early fall of 1998 and make any required systems adjustments prior to June 30, 1999. Based on its evaluation to date, management believes that most of the systems used in the Company's businesses are either now Year 2000 compliant or will become so prior to midyear 1999 through regular product upgrades and replacements. Therefore, management currently anticipates that, in connection with bringing its own systems into compliance, the Company will not incur material expenditures which would cause the Company's reported consolidated financial information not to be indicative of future consolidated operating results or financial condition. The Company potentially faces Year 2000 compliance issues with certain of its data vendors and tracking service clients. The Company is currently developing a plan to ensure that all such hardware and software interfacing with the Company complies with Year 2000 requirements. The Company believes that its plans to address Year 2000 concerns are adequate and does not currently anticipate significant problems with data suppliers and clients on which the Company's systems rely. If the Company's data suppliers do not become Year 2000 compliant on a timely basis, delays in the Company's data delivery to clients may occur. If clients do not become Year 2000 compliant, their ability to utilize the Company's data and services may be negatively affected. A significant disruption of service, if it were to occur, could negatively impact the Company's financial performance. The Company believes that its assessment plan of both information technology and non-information technology systems is adequate to identify all material risks to the operations of the Company and therefore the Company does not anticipate the need to establish a contingency plan at this time. The Company will continue to evaluate the need for a contingency plan through the completion of both the assessment phase and during the systems adjustments phase in order to provide reasonable assurance that the consequences of the Year 2000 do not result in a material affect on the Company's business, results of operations or financial condition. 14 15 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Forward Looking Information: Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including customer renewals of service contracts, the timing of significant new customer engagements, competitive conditions in Europe, foreign currency exchange fluctuations, Year 2000 issues and other factors beyond the Company's control. These risks and uncertainties are described in reports and other documents filed by the Company with the Securities and Exchange Commission. 15 16 INFORMATION RESOURCES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders. a. The annual meeting of Stockholders of the Company was held May 21, 1998. b. Without solicitation in opposition, the nominees listed in the proxy statement soliciting proxies were elected as directors to serve for a three-year term ending in 2001 as follows:
Name Votes For Votes Withheld ---- --------- -------------- Gian M. Fulgoni 22,789,985 1,402,899 Leonard M. Lodish, Ph.D. 22,784,853 1,408,031 Edith W. Martin, Ph.D. 22,789,935 1,408,949 Thomas W. Wilson, Jr. 22,789,923 1,408,961
Following is the name of each other director whose term of office as a director continued after the meeting for terms ending in either 1999 or 2000: James G. Andress, Edwin E. Epstein, Edward E. Lucente, Jeffrey P. Stamen, Gerald J. Eskin, Ph.D., John D.C. Little, Ph.D., and Glen L. Urban, Ph.D. Item 6. Exhibits and Reports on Form 8-K a. Exhibits
Exhibit No. Description of Exhibit Page ----------- ---------------------- ---- 27 Financial Data Schedule (filed herewith). EF
b. Reports on Form 8-K. The registrant has not filed any reports on Form 8-K during the quarter for which this report is filed. 16 17 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 RESOURCES, INC. ----------------------------- (Registrant) /s/ Gary M. Hill ----------------------------- Gary M. Hill Executive Vice President and Chief Financial Officer (Authorized officer of Registrant and principal financial officer) /s/ John P. McNicholas, Jr. ----------------------------- John P. McNicholas, Jr. Senior Vice President and Controller (Principal accounting officer) August 13, 1997 17 EX-27 2 FDS
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 16,254 0 104,609 (3,819) 0 122,226 194,972 (120,358) 374,490 100,010 70 290 0 0 248,172 374,490 0 248,582 0 216,408 0 0 557 9,287 3,800 5,351 0 0 0 5,351 .19 .18
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