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Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of The Securities
- ----- Exchange Act of 1934. [Fee Required]
For the fiscal year ended December 31, 1993
or
Transition report pursuant to Section 13 or 15(d) of The Securities
- ----- Exchange Act of 1934. [No Fee Required]
For the transition period from to
Commission file number: 0-11428
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INFORMATION RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-2947987
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 North Clinton Street, Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 726-1221
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Securities registered pursuant to Section 12(g) of the Act:
Title of each class
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Common Stock, $.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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 28, 1994 (based on the closing price as quoted by
NASDAQ as of such date) was $661,483,030.
The number of shares of the registrant's common stock, $.01 par value per share
outstanding, as of February 28, 1994 was 25,441,655.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual meeting
of stockholders to be held May 26, 1994 to be filed pursuant to Regulation 14A
are incorporated by reference into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
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INTRODUCTION
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Information Resources, Inc. (the "Company") provides a variety of information
services and business intelligence software products to its customers. The
Company is a leading provider of information services to the consumer packaged
goods industry and believes that its proprietary data bases, analytical models
and business intelligence software enable consumer packaged goods manufacturers
and retailers to make better, more cost-effective decisions in marketing and
selling their products. The Company's business intelligence software products
are also used across a wide range of industries and governmental agencies
worldwide.
The consumer packaged goods industry is comprised of numerous firms which
manufacture and market products distributed in supermarket, drug, mass
merchandiser and other outlets. Consumer packaged goods manufacturers require
information on consumer purchasing to measure market performance and to evaluate
the impact of marketing activities. The Company provides consumer purchase data
through its range of information services. Consumer packaged goods clients may
also purchase the Company's software products to help them analyze, manipulate
and interpret consumer purchase data.
The Company's software products can be used in tandem with the Company's
information services or can be used separately with other data bases.
Approximately 31% of the Company's clients currently purchasing the Company's
information services also purchase its business intelligence software and
services.
The Company's business intelligence software products are widely applicable
and are used outside of the consumer packaged goods industry by Fortune 1000
corporations and comparable companies around the world covering a variety of
businesses and industries, including pharmaceuticals, health care,
telecommunications, financial services, transportation and government agencies.
In 1993, approximately 51% of the Company's software and support services
revenue was derived from clients outside of the consumer packaged goods
industry.
The Company operates in one industry segment, business information services.
The business of the Company has evolved into primarily two categories of
services, information services and software products and services. The Company's
principal information services are InfoScan(R), InfoScan(R) Census, QScan/TM/,
BehaviorScan(R), other testing services and Towne-Oller. InfoScan Census and
QScan are national and local market tracking and evaluation services for the
consumer packaged goods industry. Using the universal product code ("UPC")
printed on products and scanners installed in supermarket, drug, mass
merchandiser and other retail stores, InfoScan tracks consumer purchasing of
products sold in a representative, national, projectable sample of stores. In
1992, the Company began development of a retailer service named QScan which
obtains scan data from all stores within a chain (i.e., a "census") rather than
just a sample. In 1994, the Company is introducing its InfoScan Census service
for manufacturers which tracks consumer purchasing in all stores within
participating retail chains rather than just stores within projectable samples.
Major costs to deliver the InfoScan services are data acquisition costs,
provision of software and hardware to participating retailers, expenses
associated with the collection of causal [i.e., promotional] data, compensation
to participating panel households, computer and personnel resources to process
the data and personnel costs for
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interpreting and analyzing data for clients. BehaviorScan is a test marketing
system that enables clients to measure the effect of different marketing
variables on consumer purchasing. It uses supermarket, drug store and mass
merchandiser scan data to measure the impact of changes in marketing variables
on consumer purchasing. Major costs to deliver the BehaviorScan service are data
costs (comprised of store equipment depreciation expense and cash payments to
retailers), compensation to participating panel households, field personnel
costs, costs to operate and maintain cable television studios, computer
resources and client service personnel costs. Towne-Oller is in the business of
tracking deliveries of health and beauty care products from retailer and
wholesaler warehouses to approximately 30,000 individual drug stores and 30,000
individual supermarkets. Towne-Oller is currently the only supplier of such data
to the U. S. consumer packaged goods industry. Major costs to deliver the Towne-
Oller service are data acquisition payments to retailers, computer and personnel
resources to process the data, and personnel costs related to client service.
"IRI Software", the Company's software business unit, provides business
intelligence software, including decision support software ("DSS") executive
information systems ("EIS") and related support services. DSS and EIS are
licensed as the EXPRESS(R) family of computer software and application
solutions. Through another division, the Company also markets retailer software
products that mainly carry the APOLLO(tm) name. Major costs to deliver these
software products are costs to develop and maintain software, personnel costs to
develop custom applications for clients and costs for computer resources.
Only a portion of the cost to deliver information services and software
support services is directly attributable to any specific product. A significant
portion of the cost elements is provided by shared resources.
The approximate revenues attributable to the Company's information and
software support services were as follows for the periods shown:
Year Ended December 31,
--------------------------------
(In thousands)
1993 1992 1991
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Information Services
- --------------------
InfoScan $180,623 $151,097 $120,590
BehaviorScan/Other Testing Services 21,938 22,741 21,323
Towne-Oller 17,546 15,543 15,006
Other 7,785 2,993 --
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Total Information Services $227,892 $192,374 $156,919
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Software Products and Support Services
- --------------------------------------
Business Intelligence Software $ 95,397 $ 75,331 $ 57,690
Retailer Services 11,255 8,657 8,080
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Total Software Services $106,652 $ 83,988 $ 65,770
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Total Company $334,544 $276,362 $222,689
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The majority of the Company's information services business is of a recurring
nature performed subject to a written contract. The Company's software business
is comprised of a mix of new client projects, sale of new application solutions
to existing clients and a growing software maintenance base. For a fee,
implementation and consulting services are also provided to client companies as
required to deliver EXPRESS-based solutions. In 1993, approximately 64% of the
Company's total revenue from information services and software products and
services was attributed to ongoing contractual arrangements. Other nonrecurring
revenues were attributed to licenses of software and from the sale of customized
analytical projects.
The Company was incorporated in Delaware in 1982. Its principal offices and
corporate headquarters are located at 150 North Clinton Street, Chicago,
Illinois 60661. Its telephone number is (312) 726-1221.
DESCRIPTION OF THE COMPANY'S BUSINESS
A. Principal Products & Services
1. Information Services
--------------------
The Company provides a variety of products and services utilizing its data
bases to assist its clients in tracking and understanding consumer purchase
behavior and the impact of promotions, advertising and price changes on that
behavior, evaluating the sales potential of new products and media advertising,
and providing clients with comparative information about their competitors.
Based upon revenues, the Company believes it is the second largest marketing
research firm providing continuous sales measurement services to the consumer
packaged goods industry worldwide.
(a) InfoScan, InfoScan Census and QScan
InfoScan, InfoScan Census and QScan are national and local market scanner
tracking services for the consumer packaged goods industry. InfoScan tracks
consumer purchasing of UPC-coded products sold in a representative, national,
projectable sample of supermarkets, drug stores, mass merchandisers, convenience
stores, and warehouse membership clubs covering major metropolitan markets,
smaller cities and individual chains. InfoScan also tracks promotional
activities which motivate consumer purchasing, such as temporary price
reductions, newspaper feature advertising, couponing and in-store displays.
During 1992, the Company began collecting scan data from all stores within
individual supermarket chains (i.e. "census" data) to be utilized in its
InfoScan and QScan services. The Company is currently collecting such data from
approximately 9,000 supermarkets. The Company's InfoScan Census service
provides manufacturers with a measurement of consumer purchasing in all stores
within participating individual retail chains rather than just stores within
projectable samples. The Company's QScan service provides retailers with
consumer purchasing information based on all stores within participating chains.
The Company expects to complete the introduction of its enhanced InfoScan Census
service for supermarkets by the third quarter of 1994, with an expansion to drug
and mass merchandisers planned for 1995 and beyond. A benefit of census
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based retail account data is that it is expected to provide more complete and
accurate information because it eliminates sampling error. In addition, the
Company believes that census based scan data will facilitate the implementation
of "pay-for-performance" promotions, more effective salesforce and broker
compensation programs, improved inventory and distribution management, and
just-in-time inventory replenishment systems.
InfoScan tracking reports are available to clients in hard copy format and/or
via electronic access through proprietary Company software or other software.
Clients may elect to receive periodic hard copy tracking reports which include
scanner-based sales data measuring volume, market share, and price, together
with information relating store sales to promotional and merchandising
conditions. Weekly InfoScan data are available before printed four-week reports
are issued and may be accessed by personal computers through proprietary
software developed by the Company using pcInfoScan(R), DataServer(TM) and The
Partners(TM) software packages specifically designed to analyze scanner data. In
addition, clients may select tracking reports that provide national data or
reports that reflect results for individual markets, groups of markets, or
custom-defined sales geographies. Further, through agreements with many retailer
chains, the Company is able to provide its manufacturer clients with "key
account" retailer reports that track consumer purchasing in specific
identifiable chains. The majority of supermarket key account reports are now
census based (i.e., reflect all stores within participating individual chains
rather than just projectable samples). The Company believes that its ability to
be a single source for both sample and census data, in conjunction with its
analytical software applications, represents a significant competitive
advantage.
Through the Company's panel data base, InfoScan provides access to individual
household purchase data collected from approximately 60,000 households in the
Company's metro-sampling pods and mini-markets. Quarterly reports which
tabulate household purchase data by four-week periods may be presented to the
client. Household panel data are also used for custom client analysis of issues
such as store and brand loyalties, trial and repeat purchasing of new products,
demographic patterns, consumer response to promotional activities, and overall
store shopping behavior. The Company's computerized software system, EZ
Prompt(TM), provides on-line access to its InfoScan panel data base through a
terminal and telephone link. Through this computer access to the data base,
which may be accomplished either by Company representatives or directly by the
client, a client is able to address numerous marketing issues for the specific
brand or category in question. Such issues are addressed using the Company's
software packages and may involve evaluation of issues such as the socioeconomic
profiles of buyers, the degree of interaction between a major national brand and
its regional competitor, the role of price features in promoting brand
switching, or numerous other marketing issues.
Under the typical InfoScan contract, the client subscribes to services on a
specified consumer product category. The Company agrees that during the term of
the contract it will maintain data collection facilities in its mini-markets, in
specified major metropolitan markets and in other geographically dispersed
areas, and that scanner sales data will be collected from a minimum of 2,380
supermarkets. In contracts for drug, mass merchandiser and warehouse membership
clubs, the Company also guarantees data collection from a minimum number of such
outlets. The Company also agrees to collect data on newspaper feature ads and
retail displays from stores that provide sample scan data and to collect
manufacturer coupon distribution data on a weekly basis. The Company also
agrees to maintain facilities for the collection of household purchase
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data (i.e., panel data) in several mini-markets and in specified major
metropolitan markets and to maintain an average sample size of 60,000 households
across these markets. Initial InfoScan contracts generally require a one-year
client commitment and increasingly include commitments for up to three years or
more. After the initial commitment, the contract generally continues
indefinitely unless cancelled by the client on six months prior notice.
(b) BehaviorScan/Other Testing Services
The Company's BehaviorScan system offers consumer packaged goods manufacturers
and other non-CPG marketers a cost-effective, accurate and technologically
advanced method for testing alternative marketing strategies. The BehaviorScan
system permits clients to measure the impact of different marketing variables on
product purchases. In a typical marketing test performed by the Company, one
group of consumer panelists is exposed to one or more test variables while
another group of panelists is used as a control group. Typical marketing
variables tested are television advertisements, newspaper ads, manufacturers'
coupons, free samples, in-store displays, shelf price, and packaging changes.
With the BehaviorScan system, the Company can target alternate advertising
messages over cable television to groups of pre-selected households, collect
household purchase data through the use of supermarket and drug store point-of-
sale scanners, and analyze the effect of client advertising by means of the
Company's computer systems and analytical software.
A feature of the BehaviorScan system is the ability to send different
television messages to selected panel households using the Company's patented
targetable television technology. Using the Company's proprietary software, a
microcomputer at the Company's television studio is able to substitute, for the
advertisement which would normally appear, a special test advertisement being
simultaneously broadcast by the Company on an unused cable channel. This
advertising substitution can be done on a household-by-household basis for the
majority of panel households and is computer-controlled. Thus, by using
targetable television, a manufacturer can expose select groups of panelists to
alternative levels of advertising or alternative advertising campaigns and use
the UPC-scanner data to obtain an accurate measure of sales response.
The Company has made arrangements with supermarkets, mass merchandiser
outlets, drug stores, newspapers, selected magazines, television stations, and
cable television operators in the BehaviorScan markets to cooperate with the
Company in controlling marketing variables. These arrangements are contractual
in nature and provide that the Company may measure, and in some cases control,
the nature and content of advertising and other marketing programs to which
consumers are exposed, for purposes of measuring the relative sales impact of
such programs.
Typical BehaviorScan tests last about one year, although many tests are of
shorter duration and a few last longer than a year. Clients receive four-week
period summaries of household purchases and store sales along with other
statistical summaries. The Company's senior research consultants work with the
client to design marketing tests, analyze test results, and interpret the
marketing implications of such tests. A detailed analysis of test results and
recommendations is provided on an interim and final basis as scheduled by the
client.
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A typical BehaviorScan contract grants the client the exclusive right to the
Company's service with respect to one specified product category and within
specified mini-markets for the term of the contract. The Company has divided
consumer packaged goods available in its market areas into approximately 450
categories. Individual clients utilizing the BehaviorScan system for more than
one category generally enter into a separate contract for each category.
Because the client can run multiple tests within a product category, some
clients with multiple brands maintain an ongoing usage of the BehaviorScan
system. Expired contracts have tended to involve tests which were one-time in
nature, such as a new product introduction. The Company may not terminate a
contract with a client for the purpose of offering a category to a third party.
In a typical BehaviorScan contract, the Company agrees to maintain the
following within each of the specified markets: (1) UPC scanners at checkouts
in at least six supermarkets representing not less than 80% of total supermarket
volume within the area; (2) consumer panels of approximately 2,500 households
for whom individual purchase records will be maintained for all UPC-coded items
purchased at participating stores; (3) apparatus for delivery of commercial
messages by cable television to separate groups of panel households within each
market, with selection capability on a household-by-household basis for
approximately 1,500 households in each market; (4) cooperation of retailers for
in-store placement by the Company of test products not generally available
except in such test markets; and (5) apparatus for in-store coding of products
not coded with the UPC. The Company also agrees to collect sales data for a
specified term on the relevant category for all scanner-equipped stores and for
all panel members on a household-by-household basis and to provide a specified
number of cable television advertising test insertions during the term of the
contract.
In addition to BehaviorScan, the Company also provides other testing services
primarily for consumer packaged goods manufacturers including Controlled Retail
Testing, Matched Market analyses, and other special analyses accessing the
Company's proprietary data bases. Controlled Retail Testing involves conducting
experiments outside the BehaviorScan markets wherein the Company will arrange
for and implement special conditions in retail stores and read the results
through scanner data and/or manual audits. Typical tests involve the placement
of new products or manipulation of shelf location, price or promotional
conditions in retail outlets. The Company's existing field organization and
InfoScan data bases are customarily utilized in conjunction with Controlled
Retail Testing. Matched Market and other special analyses to evaluate the
impact of advertising and other marketing variables as they occur outside the
BehaviorScan markets typically do not involve field activities by the Company,
but simply involve custom manipulation and analysis of the Company's InfoScan
data.
(c) Towne-Oller
Towne-Oller is in the business of tracking deliveries of health and beauty
care products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and 30,000 individual supermarkets. Towne-Oller data
represents approximately 80% of total food and drug store health and beauty care
sales. Towne-Oller purchases computerized records of these shipments from
warehouses to individual supermarket and drug stores. Towne-Oller is currently
the only supplier of such data to the U.S. consumer packaged goods industry.
7
Towne-Oller clients receive periodic reports measuring store receipt volume
and market share within specific consumer product categories. Clients may elect
to receive their reports via DataServer computerized software, which provides
user-friendly access of data as well as the capability of downloading to other
software applications.
In general, the client subscribes to the store receipt service on a specified
consumer product category. Initial contracts require a one-year commitment,
continue indefinitely and are cancelable by the client on 90 days written
notice.
2. Software Support Services
(a) Decision Support Software
Primarily through its software business unit, "IRI Software", the Company
provides business intelligence software products and services to major
corporations and governmental agencies around the world to assist marketing,
sales, operations, financial and executive decision-making. These products and
services provide decision makers with access to corporate and external data,
together with tools and applications developed by the Company to analyze that
data. Business intelligence applications are made available through the use of
the Company's principal software product known as EXPRESS, which is available to
end users on a direct license or on-line basis through a variety of third party
channels. Customers utilizing EXPRESS generally also engage the Company in its
consulting capacity to help define solutions to business problems and build or
enhance applications with EXPRESS to deliver these solutions.
(i) EXPRESS
At the core of EXPRESS is a multi-dimensional data base management system.
This system differs from traditional data base management systems that organize
data on an individual transaction or record basis which is the way in which data
is collected. Instead, EXPRESS stores data in a manner that is more useful for
user analysis. The EXPRESS data base is flexible enough to accommodate the need
to handle current, historical and forecast data, internal and external data
sources, periodic updates, dynamic restructuring, data sharing, and data
organized for ease of understanding and use. The data base is accessed through
a fourth generation language integrated with a range of query, graphics,
statistical and modeling tools. In addition, the data base may be accessed
through a variety of graphical user interfaces. EXPRESS has been used to build
and support a wide range of application products for end users across numerous
functional areas.
(ii) Application Products
Using EXPRESS technology, the Company has developed a family of strategic
software application products. Most are applicable across all industries, but
some have been designed specifically for the consumer packaged goods industry.
They include:
. DataServer - DataServer is a business intelligence application that
integrates sales and marketing data from multiple internal and external
sources and provides a wide range of
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ad hoc analysis and reporting tools. The system allows users to retrieve,
view and analyze internal and external information to identify problems and
opportunities. Through a Microsoft Windows interface, users can perform
competitive analyses, track new product introductions, evaluate promotional
effectiveness, conduct market-by-market comparisons, isolate trouble spots,
and adjust marketing and sales strategies based on insight delivered by the
system. DataServer is used by companies in a wide variety of industries,
including pharmaceuticals, retail, financial services, telecommunications,
transportation and consumer packaged goods.
. Sales Management System - This application helps sales professionals
develop, manage and evaluate sales strategies and tactics. Recognizing
time constraints and performance pressures that sales professionals
encounter, Sales Management System delivers a library of sales-oriented,
pre-defined reports and graphs. This library is organized by subject area,
with each area focused on a typical business sales issue. These issues
include: quota; distribution; ranking; exceptions; trends; comparisons;
and growth. By simply choosing a report or graph, users get answers to a
wide variety of sales performance questions. Now in DOS, the Microsoft
Windows version is scheduled to be available mid year.
. The Partners(TM) - The Partners (an integration of products formerly known
as BrandPartner(R), SalesPartner(TM), and Promotion Manager(TM)) is an
interactive sales and marketing system that addresses the day-to-day
business issues of the consumer packaged goods industry. The Partners help
sales and marketing professionals understand product performance, identify
opportunities to improve performance and automate the creation of high
quality presentations to retailers and senior management. The Partners
offer a focused approach to gaining an accurate picture of how a product or
retail account is performing in any given market. By providing a connection
to multi-outlet sales, promotion, distribution, consumer franchise,
advertising and pricing data, The Partners provide users with the
information needed to develop appropriate sales and marketing strategies.
Now in DOS, the Windows version of The Partners is scheduled to be
available by mid-year.
. EXPRESS(R)/Financial Management System - The EXPRESS Financial Management
System addresses the full range of financial management problems, from
financial consolidation, management reporting and budgeting to forecasting
and planning. The system is built on a single integrated architecture
specifically designed to address the needs of finance and the enterprise as
a whole. With distributed budget preparation, EXPRESS Financial Management
System also provides the controls for central budgeting departments to
coordinate an enterprise-wide process. It delivers easy-to-use budget
preparation and exception reporting, as well as the ability to perform
comprehensive analyses. The Microsoft Windows version of EXPRESS Financial
Management System is expected to be released in May 1994.
. Financial CoverStory - Financial CoverStory is a value-added supplemental
option to EXPRESS/Financial Management System which utilizes expert system
concepts to deliver a rule-based exception reporting and analysis system
for financial analysis. Leveraging the Company's expertise in delivering
similar systems to marketing and sales
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users, Financial CoverStory brings to financial analysis an automated, in-
depth understanding of financial data and the causal relationships driving
financial performance.
. EXPRESS(R)/EIS - EXPRESS/EIS is an enterprise-wide business intelligence
system that provides an interactive environment for executives, managers
and analysts to investigate, review, annotate and communicate key business
management information. EXPRESS/EIS combines a powerful set of tools for
designing and implementing customized, enterprise-wide applications. By
delivering fast, flexible access to information to support all business
tracking and management activities, EXPRESS/EIS alerts executives to the
important news in the data, provides line managers with ad hoc query and
trend capabilities and gives analysts the ability to perform integrated
analyses. The value of EXPRESS/EIS is derived from EXPRESS, the system's
underlying architecture, which permits users to perform data-driven
analysis and reporting to find more detail, rotate dimensions to view data
from different perspectives and highlight exceptions.
(b) Retailer Products
The Company offers the APOLLO Space Management System(TM) which utilizes
proprietary software to enable manufacturers and retailers to better manage
retail shelf space. The APOLLO Space Management System provides a complete range
of tools for space management, including APOLLO VIVID(TM) for producing picture
schematics of shelf layouts, Total Store APOLLO(TM) for evaluating space
utilization within a total supermarket, APOLLO Briefcase(TM) which utilizes
Windows technology and is designed for field sales use, and the National Product
Library(TM), which provides a national data base of product dimensions and
product images for use in the APOLLO system. Other retail products include
Pricing Manager(TM) which is designed to help retailers optimize price points
for individual products and categories to remain competitive while meeting
profit objectives and Merchandising Manager(TM) which evaluates various
promotional program scenarios.
3. Efficient Consumer Response ("ECR")
Efficient Consumer Response ("ECR") is an initiative being pursued by
manufacturers, retailers and wholesalers of consumer packaged goods products
that is aimed at reducing the cost of distributing products through the
supermarket channel. Some $30 billion of excess costs in the U.S. supermarket
distribution system have been identified that could be eliminated by more
efficient procedures. Through ECR initiatives, the supply chain from
manufacturers to supermarket retailers and finally to consumers is expected to
be re-engineered and redesigned to maximize effectiveness and reduce costs.
The Company is utilizing its proprietary software and unique data bases to
offer a full line of ECR services:
(i) InfoScan Census and QScan - These services are being used to provide
manufacturers and retailers with the most accurate information on
consumer
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purchasing at the retail chain and individual store level, thereby
improving decision making regarding a variety of sales and marketing
issues.
(ii) Catalina Information Resources ("CIR") - This joint venture with
Catalina Marketing Corporation utilizes Catalina's electronic network
to efficiently and quickly retrieve daily, store-specific scan data
from a large sample of supermarkets. Coupled with the Company's
analytical application software, the data can be used by manufacturers
and retailers to more effectively monitor local marketing/sales
programs and to improve inventory management techniques, thereby
helping to reduce costs in the supply chain.
(iii) Customer Marketing Resources ("CMR") - The Company's CMR division
plans, executes and administers scanner-based product movement and
merchandising performance-based trade marketing programs. By utilizing
the Company's and CIR's census data bases, CMR helps manufacturers
issue promotional payments to retailers based upon actual consumer
purchasing, thereby helping improve the efficiency of promotional
programs for manufacturers and retailers alike.
(iv) LogiCNet - LogiCNet (an abbreviation for Logistics Communications
Network) is an integrated single source system aimed at improving the
efficiency of product replenishment across the entire grocery
distribution channel. The LogiCNet system utilizes Distribution
Resource Planning (DRP) software, training/integration support and
forecasts of consumer demand based upon the Company's and CIR's various
census data bases. LogiCNet is designed to eliminate the need for
manufacturers to have different inventory and distribution systems for
each retailer and provides accurate and consistent data flows between
retailer and manufacturer.
B. Data Collection
The Company's proprietary data bases include sales and price information for
individual product items collected by universal product code scanners in retail
outlets (scan data), together with detailed data on promotion and merchandising
activities (causal data). Scan data are currently collected from approximately
9,000 supermarkets in 75 individual markets and in a number of other communities
across the United States, and from nearly 2,000 drug stores, 250 mass
merchandiser outlets and approximately 350 warehouse membership clubs. Causal
data are available for a representative subset of these stores. Scan data
utilized in the Company's business are obtained through data purchase contracts,
usually in exchange for a payment in cash or equivalent services, independently
negotiated with supermarkets, drug stores, mass merchandisers, warehouse
membership clubs and independent outlets. Data from approximately 60,000
individual households are collected in eight small cities called "mini-markets"
(including six BehaviorScan markets) and in 22 "metro sampling pods" in 19 large
cities. Promotion and merchandising data are collected by the Company's own
employees, and include weekly audit visits to the stores.
In 1993, the Company introduced its InfoScan convenience store service, based
upon the collection of sales and causal data from convenience stores and small
grocery outlets. Forward data collection activities for certain categories
began in April 1993 for a sample of 575 stores, with sales data being obtained
through a combination of in-store scanners and manual sales audits.
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Towne-Oller is in the business of tracking deliveries of health and beauty
care products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and 30,000 individual supermarkets. Towne-Oller data
represents approximately 80% of total food and drug store health and beauty care
sales. Towne-Oller purchases computerized records of these individual food and
drug store health and beauty care receipts to produce its reports. Towne-Oller
is currently the only supplier of such data to the U.S. consumer packaged goods
industry.
1. Mini-Market Facilities
In each mini-market, the Company installs UPC scanners and on-site computers
or otherwise establishes procedures for the collection of data in supermarkets
representing substantially all of the supermarket sales in the local marketing
area. Data collection procedures have also been established in drug stores and
mass merchandisers in several of the mini-markets. The Company currently has
mini-market facilities located in Pittsfield, Massachusetts; Marion, Indiana;
Midland, Texas; Eau Claire, Wisconsin; Grand Junction, Colorado; Cedar Rapids,
Iowa; Rome, Georgia; and Visalia, California.
The Company organizes consumer panels in each of its mini-markets consisting
of approximately 2,000 to 3,000 households. Each panel member is issued an
identification card which is presented at checkout stations in participating
supermarkets and drug stores. Sales data at a total store level, not at the
panel household level, are captured in mass merchandiser outlets in several of
the mini-markets. The Company maintains incentive programs to encourage
panelists to present their identification cards on all shopping trips to any
participating store. When an identification card is presented, the cashier
enters the panelist's identification number into the on-site computer to
identify the panelist's scanner-recorded purchases with the panel household.
Through UPC scanning, the Company collects data on the purchases made by all
panelists as well as data on all coded products sold by the store. The Company
then receives each store's data (generally via telecommunication lines) at its
central computer facility, where it becomes a part of the Company's data base.
The Company employs in-market personnel to train cashiers, perform quality
control checks at the stores, and assist the retailers in maintaining efficient,
accurate scanning practices. Daily data retrieval occurs with nearly all stores
in the mini-market sample, allowing the Company to identify any problems
quickly. Technical support personnel in the Company's headquarters are
responsible for resolving hardware and software issues with respect to scanning
equipment. Since substantially all of the supermarket retailers in the
BehaviorScan market area are participating in the system, household panelists
can shop at virtually any store in the area and have their purchases monitored
by the Company.
The Company also maintains facilities in six of its mini-markets to implement
and support various marketing tests conducted under the BehaviorScan system.
The active BehaviorScan markets are located in Pittsfield, Massachusetts;
Marion, Indiana; Eau Claire, Wisconsin; Midland, Texas; Grand Junction,
Colorado; and Cedar Rapids, Iowa.
One of the key features of the BehaviorScan system is its targetable cable
television capability, which permits the Company to direct television
advertising to selected households within the consumer panel. The Company also
maintains warehouse facilities and staff in its BehaviorScan markets to support
tests run for the Company's clients, including tests of new
12
products, television and newspaper advertising, in-store displays, price,
couponing and free sample promotions.
The Company maintains facilities in cable television studios in its
BehaviorScan markets which are used to direct television advertisements as
described above. The studio equipment includes modulators and demodulators,
switching and monitoring equipment, microcomputers, and auxiliary equipment used
to originate test advertisements.
2. Metro-Sampling Pods
The Company has installed two metro-sampling pods in each of the three largest
cities in the United States (Chicago, Los Angeles, and New York) and one pod in
each of 16 other cities across the country (Atlanta, Boston, Charlotte,
Cleveland, Denver, Detroit, Houston, Kansas City, Memphis, Minneapolis,
Philadelphia, Pittsburgh, San Francisco, Seattle, St. Louis and Tampa). The
Company installs UPC scanners or otherwise establishes data collection
procedures in substantially all of the supermarkets within a selected
neighborhood or neighborhoods within the metropolitan area. In some instances,
participating retail stores have already purchased their own UPC-scanning
equipment, in which case the Company contracts to purchase the scanning data
directly from the retailer. The Company's metro-sampling contracts expire at
various dates in 1994 and thereafter. While there can be no assurance that
retailer contracts will be renewed at the end of their terms, the Company has
generally been successful in negotiating renewals of these contracts as they
expire, on essentially the same terms.
Metro-sampling pods are similar to mini-markets except that they have fewer
participating retail stores. None of the pods have the targetable cable
television capability. The Company maintains consumer panels of 1,000 to 1,500
households in each metro-sampling pod in substantially the same manner as in the
mini-markets. Also, the Company collects and generally transmits data to its
central computers in the same manner as in the mini-markets. The Company
maintains a staff in each city to record newspaper advertising by retailers, to
verify the presence of in-store displays, and to collect coupons redeemed by
panelists.
3. Retail Outlet Data Collection
(i) InfoScan Sample Stores - The Company has contracted with supermarkets,
drug, mass merchandisers, and warehouse club stores to purchase weekly
scanner sales and price data for all UPC-coded items from a
representative sample of stores. Generally, these contracts are for
one-year periods, renewing automatically unless cancelled on 90 days'
prior notice.
(ii) InfoScan Census Stores - The Company has obtained census scan data
covering approximately 11,000 stores, most of which are supermarkets.
Generally, these data are obtained in exchange for retailer use of the
Company's data management and category management software, including
computer work stations as required. These contracts are typically for
a three to five year period.
In 1993, the Company began negotiating for data collection rights with
convenience stores and small supermarket operators with the launch of the
Company's "convenience store" InfoScan service. A sample of nearly 575 stores
is now in place, with most of the retailer contracts involving cash payments for
scanner data and/or cooperation with manual audits. For
13
some retailers, the Company pays for, and helps install, scanning equipment.
Maintenance and refinement of the InfoScan sample, along with changes in
retailer merchandising practices and market shares, require that the Company
regularly drop individual stores from the sample and replace them with others
from the same or alternate retailers. For example, the entry of a new retailer
into an established InfoScan market will cause the Company to reallocate its
sample across chains to include the new retailer. Turnover may also be caused
by stores closing, ceasing to collect data via scanners or failing to provide
accurate data in a timely fashion. The Company's personnel are continually
monitoring the quality of data received from each store and work with
participating retailers to correct problems and/or identify alternate stores to
include in its sample. Changes in the sample also result from the Company's
efforts to refine and improve the set of stores selected from key chains, often
with the suggestions for changes in the composition of the stores coming from
the retailers themselves. For the reasons such as those referenced above, a
minor percentage of the stores in the sample turn over on an annual basis, with
the vast majority of these changes resulting from Company-initiated action.
Such turnover reflects the nature of sample-based data collection techniques and
the Company's procedures for addressing these changes helps ensure consistency
in the data provided to clients. One of the key benefits of census scan data is
that it eliminates the need to maintain a representative sample of stores and
eliminates sampling error.
The Company employs full-time and part-time personnel in the InfoScan markets
to collect newspaper ad, in-store display and other merchandising data. This
"causal" data is incorporated into the InfoScan service offered to clients. The
Company's field personnel also confirm the description of new items that appear
in the general marketplace.
4. Importance of Contractual Relationships With Data Sources
Scanner installations for the collection of household panel data are made
pursuant to contracts which typically provide that, in the Company's mini-market
and metro sampling pod facilities, the Company will install the equipment for
the use by the retailer. Where scanners have been installed previously by the
retail operator, the contracts typically provide for cash payments to the
retailer for the information collected. Generally, contracts for panel data
collection are for seven-year periods (subject to earlier termination in certain
circumstances), and contracts with nonsupermarket retailers are generally for
five to seven-year terms. These contracts provide that the parties will jointly
own the information collected, and provide that the retailer may not sell the
information collected to third parties. The Company's panel data collection
contracts with retailers expire at various dates between 1994 and 2000. While
there can be no assurance that retailer contracts for either BehaviorScan,
InfoScan or Towne-Oller stores will be renewed at the end of their terms, the
Company has generally been successful in negotiating renewals of these contracts
as they expire, on essentially the same terms.
C. Developments in 1993
During 1993, the Company added InfoScan coverage of convenience and wholesale
club stores. Also during 1993, the Company continued to add stores under its
QScan initiative. The Company views this expanded data base capability as a
significant competitive advantage for its InfoScan service, both in terms of
data accuracy and new applications of the information. The Company anticipates
expanding its census based services to drug and mass merchandise retailers
14
in 1994 and 1995. The Company believes that census based data will facilitate
the implementation of a variety of ECR services, including "pay-for-performance"
promotions, more effective salesforce and broker compensation programs, improved
inventory and distribution management and just-in-time replenishment systems.
In 1993, the Company began equipping participating households with small
handheld scanners, which allow a shopper to record its purchases of consumer
package goods across all types of outlets, thereby enhancing the coverage of the
Company's household panel data base. The Company expects to eventually build a
sample of approximately 20,000 households using this device.
For a discussion of business acquisitions and joint ventures by the Company in
1993, see Management's Discussion and Analysis of Financial Condition and
Results of Operations - Other Developments.
D. Patents and Proprietary Software Protection
The Company holds certain patents relating to the targetable television
technology utilized in its BehaviorScan service. The patents expire at various
dates between 1999 and 2005. Loss or infringement of these patents may have a
material adverse effect upon the Company's BehaviorScan revenues. The Company's
computer software bears appropriate copyright notices. The Company is the owner
of various trademarks, including BehaviorScan, InfoScan, Shoppers' Hotline,
APOLLO, EXPRESS, pcEXPRESS, DataServer, The Partners, SalesPartner(TM),
BrandPartner(R), EZ Prompt(R), IRI Software(TM), QScan(TM), InfoScan(R) Census,
LogiCNet(TM), CouponScan(TM), PromotionScan(TM) and Customer Marketing
Resources(TM) as well as other major branded products and services. The Company
believes that, because of the rapid pace of technological change in the computer
industry, patent or copyright protection is of less significance than factors
such as the knowledge and experience of the Company's personnel and their
ability to develop and market new systems and services. The Company regards its
software and data bases as proprietary and, in addition to copyright protection,
relies upon trade secret laws, the limitations it imposes on access to its
computer source codes, confidentiality agreements with clients and internal
nondisclosure safeguards to protect its rights to proprietary interests.
E. Working Capital Practices
Clients are invoiced in accordance with contract terms. Information services
contracts generally require payment at the time the contract is signed for 25%
to 50% of the first year contract amount. However, in some circumstances
delayed billings are granted. Generally, subsequent invoices and renewals are
prorated quarterly or monthly. Software support services licenses usually
require payment in full upon acceptance of the software. Supplies and services
are accrued for as received or incurred. Payments to vendors are generally made
in accordance with vendor terms. Company management believes these payment
practices and policies are consistent with industry practices.
15
F. Customers
The Company had approximately 820, 630 and 520 clients using its information
services in 1993, 1992 and 1991, respectively. Many of the Company's clients
are nationally recognized manufacturers of consumer packaged goods. No client
of the Company accounted for revenues in excess of 10% of the Company's total
revenues.
G. Backlog Orders
At December 31, 1993, 1992 and 1991, the Company had committed contract
revenues for information services of approximately $152 million, $142 million
and $74 million, respectively. Initial InfoScan contracts generally require a
minimum one-year client commitment and increasingly include commitments up to
three years or more. Contracts continuing beyond the initial commitment are
generally cancelable at any time by the client on six months prior notice.
Committed contract revenues include only the noncancelable portion of a
contract. The portion of these committed contract revenues expected to be
earned subsequent to 1994 is approximately 45%.
H. Competition
There are numerous other firms engaged in supplying marketing and advertising
research services to consumer packaged goods manufacturers. Some of these firms
may have financial, research and development and marketing resources equal to or
greater than the Company. Principal competitive factors include innovation, the
quality, reliability and comprehensiveness of the analytical services and data
provided, flexibility in tailoring services to client needs, experience, the
capability of technical and client service personnel, data processing and
decision support software, reputation, price and geographical coverage. The
Company has a history of successful innovation and considers itself to be the
second largest marketing research firm (based upon revenues) providing sales
measurement services to the consumer packaged goods industry worldwide.
Competition for software support services comes primarily from specialized
products which perform some, but not all, of EXPRESS's functions. These
specialized products, including data base management systems, front-end query
tools, financial modeling languages, graphics and statistical packages, apply
competitive pressure on the Company on an application-by-application basis.
Microcomputer software also represents competition as a substitute product in
the general decision support area, although not in the Company's major
application areas.
I. Research and Development
The Company is continuously developing new business products and services. In
this regard, the Company is actively engaged in research and development of new
software technologies and new data base analyses and applications. Expenditures
for research and development for the years ended December 31, 1993, 1992 and
1991 approximated $33.7 million, $19.5 million and $15.2 million, respectively.
Included in these expenditures were $10.2 million, $8.8 million and $6.5 million
of software development costs that were capitalized. Expenditures not
capitalized were charged to expense as incurred.
16
J. Personnel
At December 31, 1993, the Company had 3,600 full-time and 2,200 part-time
employees.
The Company depends to a significant extent on its skilled technical
personnel. Its future success will depend to a large degree upon its ability to
continue to hire, train and retain its professional staff. The Company competes
with many other companies in attracting qualified personnel.
K. Foreign Operations
The Company maintains offices in France, Germany, Great Britain, the
Netherlands and Turkey to market its information and software support services.
The Company also maintains offices in Australia, Belgium, Canada, Denmark, Hong
Kong, India, Italy, Japan, Singapore and United Arab Emirates to market its
software support services. The Company has also entered into distributorship
agreements in Canada, France, Germany, Holland, Japan and Sweden to market
APOLLO Space Management System software in those countries.
The Company participates in a joint venture in Great Britain with GfK AG
("GfK") of Nuremberg and Taylor Nelson Group Limited (now known as Taylor Nelson
AGB plc) of London. This joint venture operates InfoScan NMRA Limited, a retail
audit and scanner-based information business. During 1993, the Company
continued its expansion of its international information services business
through the formation of a joint venture in France with SECODIP, S.A.,
("SECODIP") of Paris, a subsidiary of SOFRES, S.A., and GfK. The joint venture,
known as IRI-SECODIP, S.N.C., operates a retail audit and scanner based
information business. In July 1993, the Company and GfK completed the
reorganization of their 1988 EuroScan joint venture, which now operates
exclusively in Germany. In July 1993, a joint venture was created in the
Netherlands by the Company, De Vin Holding Company of the Netherlands, GfK and
Secodip to launch a scanner based information business in the Netherlands. The
business of each joint venture will operate exclusively in the respective
country providing the development of the Company's scanner-based information
services through InfoScan and other information services. See NOTES B and D to
Consolidated Financial Statements.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
17
ITEM 2. PROPERTIES
The Company markets and provides its information services and software support
services to domestic clients from full-service sales offices in New York, New
York; San Francisco and Los Angeles, California; Cincinnati, Ohio; Darien,
Connecticut; Fairfield, New Jersey; Plano, Texas and Toronto, Canada as well as
from its headquarters in Chicago and systems development headquarters in
Waltham, Massachusetts. The Company markets to international clients through
subsidiaries and/or offices in Australia, Belgium, Canada, Denmark, France,
Germany, Great Britain, Hong Kong, India, Italy, Japan, Netherlands, Singapore,
Turkey and United Arab Emirates and through its various distributors.
Principal leased facilities of the Company are as follows:
APPROXIMATE
FLOOR AREA
LOCATION PRINCIPAL OPERATION (SQ. FT.)
- ---------- --------------------------------------------- -----------
Chicago, IL Corporate headquarters and offices for 345,000
professional staff
Waltham, MA Professional staff and computer facilities 112,000
Wood Dale, IL Computer facilities 44,000
Regional sales Sales, client service and analysis 182,000
and client service
offices
Data col- Data collection and client test control, cable 170,000
lection TV studio facilities, warehouse
facilities
The Company maintains $18,335,000 of business interruption insurance.
18
ITEM 3. LEGAL PROCEEDINGS
On May 8, 1989, two shareholders each filed a class action complaint against
the Company in the United States District Court for the Northern District of
Illinois. Shortly thereafter, a third shareholder filed a similar class action
complaint. All three cases have been consolidated.
In their consolidated complaint, the plaintiffs purport to represent a class
consisting generally of persons who purchased the Company's common stock between
February 6, 1989 and May 2, 1989. The plaintiffs allege Section 10(b) and Rule
10b-5 violations of the Securities Exchange Act of 1934, and common law fraud
and deceit charges, by reason of alleged omissions of the Company in setting
forth material facts in disclosures and public statements about the Company.
These alleged omissions include information relating to the Company's finances,
results of operations and prospects of achieving growth in earnings and revenues
during the referenced period when class members were acquiring shares of the
Company's stock.
The plaintiffs seek compensatory and punitive damages and attorneys' fees
against the Company, five of its former directors and one of its former
officers. The Court previously granted defendants' motion to dismiss
plaintiffs' claims of negligent misrepresentation from the case, and as a
result, the officer and certain of its directors previously named as defendants
have been voluntarily dropped from the case by the plaintiffs. The two claims
which remain pending against the defendants are for violation of Section 10(b)
and Rule 10b-5 of the Securities Exchange Act of 1934 and for common law fraud
and deceit. The plaintiffs retained an individual who testified in his
deposition that the total damages suffered by the class as a result of the
allegedly wrongful conduct of the defendants were approximately $21.7 million.
The Company retained an expert who testified in his deposition that the total
damages suffered by the plaintiffs, assuming the defendants are to be found
liable, would approximate $850,000. The Company has a directors and officers
liability insurance policy having a policy limit of $10 million. Proceeds of
the policy have been used for certain defense costs of the directors. The
remainder of the proceeds may be available to cover damages assessed against the
director defendants. The policy does not cover damages which may be assessed
against the Company itself.
Discovery with respect to the action is now completed and trial is currently
scheduled to commence in early April 1994. The Company's management believes
that the Company has valid defenses to these claims and that the ultimate
resolution of the case will not have a material impact on the Company's
consolidated financial position.
The Company has been involved in patent infringement litigation concerning
its targetable cable television technology used in its BehaviorScan mini-
markets. In December 1990, a trial court ruled that the Company had infringed
the opposing parties' patent during the period from 1979 to 1986. On December
21, 1992, a United States District Court assessed damages against the Company of
approximately $4 million plus interest and costs (The "District Court Order").
In the fourth quarter of 1992, the Company established a reserve of $4 million
for such damages and $391,000 of legal costs related to the case. On December
27, 1993, the Court of Appeals for the Federal Circuit of Washington D.C.
affirmed the award of damages against the Company. The Company has satisfied the
judgment by full payment of the amount due and, as a result, the case has been
concluded. See Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Other Income (Expense).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
19
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
------------ --- ----------------------------------------------
Gian M. Fulgoni 46 Chairman of the Board of the Company since February
1991; Chief Executive Officer since January 1986;
Vice Chairman from November 1988 until February
1991; President and Chief Operating Officer from
December 1981 until November 1989; Director since
1981; Director of PLATINUM technology, inc., and U.
S. Robotics, Inc.
James G. Andress 55 President and Chief Operating Officer of the Company
since March 1994; Chief Executive Officer since May
1990; Vice Chairman from July 1993 until March 1994;
President from November 1989 until July 1993; Chief
Operating Officer from November 1989 until May 1990;
Director since November 1989. Chairman of Smith
Kline Beecham Healthcare Products and Services from
July 1989 until November 1989; Chairman of Beecham
Pharmaceuticals from July 1988 until July 1989;
President and Chief Operating Officer of Sterling
Drug, Inc., from May 1985 until July 1988; Director
of the Liposome Co., Inc., NeoRx Corp., Sepracor,
Inc., Genelabs Technologies, Inc., Genetics
Institute, Inc., OptionCare, Inc., America Online,
Inc., Walsh International, Inc. and Allstate
Insurance Co., Inc.
Gerald Eskin, Ph.D. 59 Co-Founder of the Company; Vice Chairman since
December 1981; Professor of Marketing at the
University of Iowa since 1974 (currently adjunct
status); Director since 1977.
Magid Abraham, Ph.D. 35 Vice Chairman of the Company since March 1994;
President and Chief Operating Officer from July 1993
until March 1994; Group President -Information
Services Group from February 1991 until July 1993;
President of the Product Development Division from
December 1988 until February 1991; Vice President
since December 1988; Divisional Executive Vice
President from August 1988 until December 1988;
Employed by the Company in product development
positions since June 1985; Director since July 1993.
Thomas M. Walker 46 Executive Vice President and Chief Financial and
Administrative Officer of the Company since March
1994; President of the Finance and Administration
Group since September 1990; Chief Financial Officer
and Treasurer from September 1990 until March 1994;
Vice President of Finance and Administration, and
Chief Financial Officer of Praxis Biologics, Inc.
from 1988 until September 1990; Corporation Director
of Finance and Administration of Sterling Drug, Inc.
from 1986 until 1988; Vice President of Finance and
Planning for the Japan-Canada-Australia-Pacific,
International Group and the world-wide Chemical
Group of Sterling Drug, Inc. from 1983 until 1986;
Director of the Company since March 1994.
20
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
------------ --- ----------------------------------------------
Jeffrey P. Stamen 48 Vice President of the Company since January 1986;
President - IRI Software Group (formerly known as
the Software Products Group) since February 1991;
President of the DSS Division from February 1988
until February 1991; Employed by the Company in
senior management positions since June 1985;
Director of the Company since March 1994.
Randall S. Smith 42 Vice President of the Company since January 1986 and
President - International Operations Division since
December 1993; President of European Data Operations
Division from February 1993 until December 1993;
President of the Testing Services Division from
October 1990 to January 1993; President of
Operations Group from January 1988 until February
1989; President of the Data Base Division and Vice
President since January 1986; President of the
Administration Division from January 1987 until
September 1990.
George R. Garrick 41 Vice President of the Company and President - IRI
North America Group since November 1993; President
and Chief Operating Officer of the Nielsen Marketing
Research U.S.A. unit of A.C. Nielsen Co. from July
1993 to October 1993; President of European
Information Services from July 1992 until June 1993;
President of the Syndicated Information Services
Division from February 1991 to June 1992; President
of the Consumer Packaged Goods Division from
February 1989 until February 1991; Vice President
since May 1988; Divisional Executive Vice President
from March 1984 until January 1989.
Edward S. Berger 53 Division Executive Vice President since June 1993;
Secretary and General Counsel of the Company since
September 1988; Division Senior Vice President of
the Company from February 1991 until June 1993; Vice
President, Assistant Secretary and General Attorney
from December 1985 until September 1988.
All of the foregoing executive officers hold office until the next annual
meeting of the Board of Directors and until their successors are elected and
qualified.
21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS
- --------------------------------------------------------------------------------
The Company's common stock has been traded in the NASDAQ over-the-counter
market since March 4, 1983 and in the NASDAQ National Market System since
February 1984. Share data has been adjusted for all stock splits and stock
dividends to date.
The high and low closing sales prices for the Company's common stock are as
follows:
Quarters High Low
----------- ------- -------
1992 1st quarter $35-3/4 $23-1/2
2nd quarter 25-7/8 18-1/2
3rd quarter 27 21-1/2
4th quarter 34-3/4 25-3/4
1993 1st quarter $33-1/4 $27
2nd quarter 37-1/4 27-1/2
3rd quarter 44 33-5/8
4th quarter 41-3/4 34
The last sale price on February 28, 1994 was $26 per share. As of February
28, 1994 there were 507 record holders of the Company's common stock.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings for use in the Company's
business. Accordingly, the Board of Directors does not anticipate that cash
dividends will be paid in the foreseeable future. In addition, the Company's
lease agreement pertaining to the Company's corporate headquarters contains
certain restrictions on the payment of cash dividends.
22
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Year Ended December 31, 1993
---------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
--------------- --------------- --------------- --------------- ---------------
(In thousands, except per share data)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
OPERATING STATEMENT DATA
Revenues from continuing
operations $334,544 100.0% $276,362 100.0% $222,689 100.0% $179,789 100.0% $144,939 100.0%
Operating expenses 258,686 77.4% 209,065 75.7 175,332 78.7 143,488 79.8 119,728 82.6
Selling, general and
administrative expenses 34,922 10.4% 29,594 10.7 22,042 9.9 20,258 11.3 18,090 12.5
Loss on disposition and
write-off of assets 3,005 0.9% -- -- -- -- -- -- -- --
Restructuring costs -- -- -- -- -- -- -- -- 5,000 3.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating profit 37,931 11.3% 37,703 13.6 25,315 11.4 16,043 8.9 2,121 1.5
Other income (expense) - net 168 0.1% (680) (0.2) (897) (0.4) (1,549) (0.9) (4,325) (3.0)
Litigation settlement -- (4,391) -- -- --
Equity in loss of
affiliated companies (2,050) (466) -- (312) (225)
Income tax (expense)
benefit (15,416) (12,919) (9,032) (7,934) 279
Minority interest 1,582 -- -- -- --
Loss from discontinued
operations -- -- -- (580) (10,724)
Cumulative effect on prior
years of change in
accounting principles (1) 1,864 -- -- (1,369) 1,500
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net income (loss) $ 24,079 7.20% $ 19,247 7.0% $ 15,386 6.9% $ 4,299 2.4% $(11,374) (7.8)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Income (loss) per common
and common equivalent share
Continuing operations $ .82 $ .78 $ .66 $ .32 $ (.12)
Discontinued operations -- -- -- (.03) (.60)
-------- -------- -------- -------- --------
Income (loss) before
cumulative effect of
accounting changes .82 .78 .66 .29 (.72)
Cumulative effect of
accounting changes .07 -- -- (.07) .08
-------- -------- -------- -------- --------
Net income (loss) $ .89 $ .78 $ .66 $ .22 $ (.64)
======== ======== ======== ======== ========
Weighted average common and
common equivalent shares 27,160 24,817 23,398 19,579 17,834
======== ======== ======== ======== ========
BALANCE SHEET DATA
Total assets $327,515 $263,999 $202,808 $142,576 $141,780
Working capital 91,970 87,941 53,155 24,253 4,174
Long-term debt 3,087 4,718 9,285 23,155 29,395
(1) (See NOTE C to Consolidated Financial Statements.)
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company experienced significant growth in revenues and earnings over the
past three years. During the three year period, operating profits have
increased while operating and selling, general and administrative expenses have
also increased. The Company made a decision to dispose of certain non-strategic
assets which impacted 1993 operating results. Also in 1993, the Company made a
change in its policy for the accounting of income taxes.
RESULTS OF OPERATIONS
REVENUES FROM CONTINUING OPERATIONS. Revenues from continuing operations
increased from $222.7 million in 1991 to $276.4 million in 1992 and $334.5
million in 1993. The percentage growth rates were 23.9% in 1991, 24.1% in 1992
and 21.1% in 1993. The Company's revenue growth was principally due to strong
growth in InfoScan services and increased revenues from its line of business
intelligence software products. The growth in InfoScan's revenues was the
result of both new clients and increased utilization of InfoScan's services by
existing clients. The Company continues to generate additional revenue from its
expansion of its InfoScan's supermarket, drug and mass merchandiser services.
Business intelligence software products, primarily EXPRESS Software products,
experienced significant growth in both domestic and international revenues.
BehaviorScan/Other Testing Services remained relatively constant over the prior
years' amounts.
OPERATING EXPENSES. Operating expenses increased from $175.3 million in 1991
to $209.1 million in 1992 and $258.7 million in 1993. As a percentage of
revenues, operating expenses decreased from 78.7% to 75.7% and increased to
77.4% over the three-year period. The 1993 increase over 1992 in operating
expenses reflected a $29.7 million increase in compensation expense, an $11.5
million increase in amortization of deferred data procurement costs and a $4.8
million increase in travel related expenses. Operating expenses in 1992
increased from 1991 levels principally as a result of a $24.0 million increase
in compensation expense, an $8.0 million increase in the amortization of
deferred data procurement costs and a $1.0 million increase in computer
operation expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $22.0 million in 1991 to $29.6 million in
1992 and $34.9 million in 1993. As a percentage of revenue, SG&A expenses
increased from 9.9% in 1991 to 10.7% in 1992 and decreased to 10.4% in 1993.
The increase in 1993 expense, as in prior years, was primarily due to increases
in compensation and related staffing costs associated with the Company's growth
in both domestic and international operations, and increased recruiting and
employee development expenses. The decrease as a percentage of revenue in 1993
from 1992 was due to control of expenses and the spreading of fixed
administrative expenses over a larger revenue base.
LOSS ON DISPOSITION AND WRITE-OFF OF ASSETS. The Company recorded a pre-tax
charge of approximately $805,000 in the third quarter of 1993 to expense various
intangibles related to its 1991 agreements with VideOcart, Inc. Also in the
first quarter of 1993, the Company provided for the expected loss of $2.2
million on the disposition of certain nonstrategic assets.
24
OPERATING PROFIT. Operating margins improved as a percentage of revenues from
11.4% in 1991 to 13.6% in 1992 and decreased to 11.3% in 1993. Operating
margins were adversely affected by higher operating expense levels and expenses
related to the loss on disposition and write-off of assets. The 1992 operating
margin improvement reflected increased revenues from the Company's InfoScan
product line and business intelligence software products, the lower cost of
maintaining a reduced number of BehaviorScan markets and, in general, the impact
of spreading fixed administrative and operating expenses over a larger revenue
base.
OTHER INCOME (EXPENSE). Other expense increased from $897,000 in 1991 to $5.1
million in 1992. In 1993, the Company recorded other income of $168,000. The
fluctuation of expense to income was principally due to the reduction in
interest expense from $2.5 million in 1992 to $1.0 million in 1993. Reduced
interest expense levels reflected lower borrowing levels. The increase in other
expense in 1992 was principally due to the nonrecurring provision for patent
infringement litigation. See Legal Proceedings.
EQUITY IN LOSS OF AFFILIATED COMPANIES. Equity in loss of affiliated
companies reflected losses recognized related to equity investments. (See NOTE
D of Notes to Consolidated Financial Statements).
INCOME TAX EXPENSE. The Company's effective tax rates for 1991, 1992 and 1993
were 37.0%, 40.2% and 42.8%, respectively. The 1993 tax rate on operations
including minority interest was 41.0%. The 1993 tax rate includes the effect of
the Company increasing its domestic deferred tax liability in 1993 as a result
of legislation enacted during 1993 increasing the Federal corporate tax rate
from 34% to 35%. The 1991 tax rate reflected a tax benefit from the liquidation
of a foreign subsidiary, the disposition of an equity investment and the
utilization of net operating loss carryforwards for which tax benefits had not
previously been reflected. The 1991, 1992 and 1993 tax rates also reflect the
effect of state income taxes net of the federal benefits.
MINORITY INTEREST. Minority interest reflects non-Company owned stockholder
interest in InfoScan NMRA Limited. (See NOTE B of Notes to Consolidated
Financial Statements).
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGES IN ACCOUNTING PRINCIPLE. In 1993,
the Company adopted Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes effective January 1, 1993. The cumulative effect of
this change at January 1, 1993 was to recognize a tax benefit of $1.9 million or
$.07 per share.
NET INCOME. As a result of the factors described above, net income increased
from $15.4 million in 1991 to $19.2 million in 1992 and to $24.1 million in
1993.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES. During 1993 and 1992, the Company's cash
requirements were satisfied through internally generated funds and proceeds from
previous equity offerings. Working capital at December 31, 1993 was $92.0
million, reflecting an increase of $4.0 million over December 31, 1992. The net
increase results from the adoption of Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes, which increased working capital
by $17.1 million, net of a reduction in working capital items other than
deferred income taxes
25
of $13.1 million. In 1992, the Company replaced its $25 million credit facility
with a new facility of the same amount. The new facility expires in 1996. The
Company has received a firm commitment from its lender to increase its credit
facility to $50 million. In September 1992, the Company issued 1,380,000 shares
of its common stock for $24.00 per share, resulting in net proceeds of
approximately $31.2 million.
Working capital requirements continue to be extensive due to the Company's
expansion of its business and investment in its InfoScan data base,
international operations and its software development activities. As of
December 31, 1993, the Company had capital commitments of approximately $3.9
million, which were primarily for computer equipment and scanner equipment.
Although not yet committed, the Company expects to spend a substantially greater
amount than its initial commitments during 1994 for such capital items. For
1993 and 1992, total capital expenditures were $25.9 million and $20.0 million
respectively. The investment in the InfoScan data bases and software
development will continue to increase due to expansion of operations. The
Company also expects to expand its operations and investments internationally,
which may require significant resources. See Other Developments.
The Company believes it will have sufficient funds from its cash balances,
internally generated funds and bank credit facility to satisfy its working
capital requirements for 1994 and the foreseeable future.
OTHER DEVELOPMENTS
In April 1993, the Company acquired a 45% ownership interest in a French
market information business through the formation of a joint venture with
SECODIP, S.A. of Paris, a subsidiary of SOFRES, S.A., and GfK AG of Germany.
SECODIP and SOFRES held a 45% and 10% interest, respectively. The Company and
GfK AG contributed their investments in the former EuroScan France operations to
the joint venture company, while SECODIP, S.A. contributed certain assets
related to its retail audit business. The name of the joint venture company is
IRI-SECODIP, S.N.C. The business of the joint venture includes the development
of the Company's scanner-based information services in the French markets. In
connection with the formation of the joint venture, the Company obtained certain
intangible rights from SECODIP, S.A., some of which the Company then licensed to
the joint venture. The Company's investments in connection with the joint
venture, including its acquisition costs, approximated $13.0 million.
In July 1993, the Company and GfK AG completed the reorganization of their
1988 EuroScan joint venture. GfK AG contributed its consumer panel and retail
audit businesses to the already established scanner-based information businesses
of the EuroScan joint venture. The Company's ownership interest in the joint
venture company, GfK Panel Services GmbH, is 15%. The Company's net investment
made to the joint venture company in connection with the reorganization was $7.2
million, including transaction costs. The Company also reacquired certain
Western European rights to its InfoScan production technology for $2.0 million.
In February 1994, the Company signed an agreement in principle with privately
held Asia-based SRG Holdings Limited ("SRG") to acquire SRG in an exchange of
stock valued at approximately $76.0 million. SRG is Asia's largest market
research firm, operating in 12 countries in the Asia Pacific Region. SRG had
worldwide sales in excess of $70.0 million in 1993. See NOTE P to Consolidated
Financial Statements.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed below are the financial statements and supplementary data included in
this part of the Annual Report on Form 10-K:
(a) Financial Statements Page No.
-------------------- --------
Report of Independent Certified
Public Accountants 28
Consolidated Balance Sheets at
December 31, 1993 and 1992 29-30
Consolidated Statements of Income
for the years ended December 31, 1993,
1992 and 1991 31
Consolidated Statements of Stockholders'
Equity for the years ended December
31, 1993, 1992 and 1991 32
Consolidated Statements of Cash
Flows for the years ended
December 31, 1993, 1992 and 1991 33
Notes to Consolidated Financial
Statements 34-53
(b) Supplementary Data
------------------
Summary of Quarterly Data 54-55
Financial statement schedules are included on pages 62 to 64 following the
signature pages of this report (See Item 14).
27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Information Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Information
Resources, Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in NOTE C, effective January 1, 1993, the Company changed its
method of accounting for income taxes.
GRANT THORNTON
Chicago, Illinois
February 10, 1994
28
Information Resources, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
ASSETS 1993 1992
-------- --------
CURRENT ASSETS
Cash and cash equivalents $ 19,368 $ 53,593
Accounts receivable
Customers 113,495 82,060
Related parties 4,257 2,384
Other 1,135 1,842
-------- --------
118,887 86,286
Allowance for doubtful receivables (2,250) (2,051)
-------- --------
116,637 84,235
Deferred income taxes (NOTE I) 9,205 --
Prepaid expenses and other current assets 4,230 3,698
-------- --------
Total current assets 149,440 141,526
-------- --------
PROPERTY AND EQUIPMENT
Computer equipment 58,206 47,553
Market advertising and testing equipment 19,631 13,119
Store operating equipment 6,309 19,014
Leasehold improvements 12,572 10,804
Equipment and furniture 27,467 21,546
-------- --------
124,185 112,036
Accumulated depreciation and
amortization (71,013) (71,271)
------- --------
53,172 40,765
INVESTMENTS (NOTE D) 11,764 1,598
OTHER ASSETS (NOTE E) 113,139 80,110
-------- --------
$327,515 $263,999
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
29
Information Resources, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
LIABILITIES 1993 1992
-------- --------
CURRENT LIABILITIES
Current maturities of long-term debt (NOTE H) $ 1,691 $ 1,676
Accounts payable 14,512 13,034
Accrued expenses (NOTE G) 21,521 17,279
Deferred income taxes (NOTE I) -- 7,926
Deferred revenue 13,844 9,548
Other (NOTES L & M) 5,902 4,122
-------- --------
Total current liabilities 57,470 53,585
-------- --------
LONG-TERM DEBT (NOTE H) 3,087 4,718
DEFERRED INCOME TAXES (NOTE I) 31,040 11,403
DEFERRED GAIN 4,878 5,294
OTHER LIABILITIES 1,176 938
MINORITY INTEREST 1,202 1,173
COMMITMENTS & CONTINGENCIES (NOTE M) -- --
STOCKHOLDERS' EQUITY (NOTE K)
Preferred stock - authorized 1,000,000 shares,
$.01 par value, none issued -- --
Common stock - authorized 60,000,000 shares,
$.01 par value, issued 25,416,502 shares
in 1993 and 24,546,345 shares in 1992 254 245
Capital in excess of par value 157,972 139,537
Retained earnings 72,333 48,254
Cumulative translation adjustment (1,897) (1,148)
-------- --------
Total stockholders' equity 228,662 186,888
-------- --------
$327,515 $263,999
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
30
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
(Dollars in thousands, except per share data)
1993 1992 1991
-------- -------- --------
Revenues $334,544 $276,362 $222,689
-------- -------- --------
Costs and expenses
Operating expenses 258,686 209,065 175,332
Selling, general and administrative expenses 34,922 29,594 22,042
Loss on disposition and write-off of assets 3,005 -- --
-------- -------- --------
296,613 238,659 197,374
-------- -------- --------
Operating profit 37,931 37,703 25,315
Other income (expense)
Interest income 1,257 1,631 1,772
Interest expense (1,049) (2,542) (2,636)
Litigation provision (432) (4,391) --
Other - net 392 231 (33)
-------- -------- --------
168 (5,071) (897)
-------- -------- --------
Equity in loss of affiliated companies (2,050) (466) --
-------- -------- --------
Income before income taxes, minority
interest and cumulative effect of
change in accounting principle 36,049 32,166 24,418
Income tax expense 15,416 12,919 9,032
-------- -------- --------
Income before minority interest and
cumulative effect of change
in accounting principle 20,633 19,247 15,386
Minority interest 1,582 -- --
-------- -------- --------
Income before cumulative effect of
change in accounting principle 22,215 19,247 15,386
Cumulative effect on prior years of
change in accounting principle (NOTE C) 1,864 -- --
-------- -------- --------
Net income $ 24,079 $ 19,247 $ 15,386
======== ======== ========
Income per common and common equivalent share:
Before cumulative effect of
accounting change $ .82 $ .78 $ .66
Cumulative effect of accounting change .07 -- --
-------- -------- --------
Net income $ .89 $ .78 $ .66
======== ======== ========
Weighted average common and common equivalent shares 27,160 24,817 23,398
======== ======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
31
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Years Ended December 31,
(Dollars in thousands)
Capital in Cumulative Treasury
Preferred Common Excess of Retained Translation Common
Stock Stock Par Value Earnings Adjustment Stock Total
--------- ----- ----------- ---------- ----------- ------------ ---------
Balance at January 1, 1991 $ -- $207 $ 51,433 $14,600 $ 757 $(1,613) $ 65,384
Exercise of stock options -- -- 5,408 -- -- 847 6,255
Income tax benefit from the
exercise of stock options -- -- 3,313 -- -- -- 3,313
Compensation for issuance of
stock options at less than
fair market value -- -- 248 -- -- -- 248
Issuance of 2,270,000 shares -- 22 45,809 -- -- -- 45,831
Purchase of Citicorp warrants -- -- (12,500) -- -- -- (12,500)
Retirement of treasury stock -- -- -- (979) -- -- (979)
Foreign currency translation -- -- -- -- 393 -- 393
Net income for the year -- -- -- 15,386 -- -- 15,386
--------- ---- -------- ------- ------- ------- --------
Balance at December 31, 1991 -- 229 93,711 29,007 1,150 (766) 123,331
--------- ---- -------- ------- ------- ------- --------
Exercise of stock options -- 1 5,494 -- -- 766 6,261
Income tax benefit from the
exercise of stock options -- -- 5,890 -- -- -- 5,890
Issuance of 160,000 shares -- 1 3,172 -- -- -- 3,173
Compensation for issuance of
stock options at less than
fair market value -- -- 124 -- -- -- 124
Issuance of 1,380,000 shares -- 14 31,146 -- -- -- 31,160
Foreign currency translation -- -- -- -- (2,298) -- (2,298)
Net income for the year -- -- -- 19,247 -- -- 19,247
--------- ---- -------- ------- ------- ------- --------
Balance at December 31, 1992 -- 245 139,537 48,254 (1,148) -- 186,888
--------- ---- -------- ------- ------- ------- --------
Exercise of stock options -- 9 11,169 -- -- -- 11,178
Income tax benefit from the
exercise of stock options -- -- 6,846 -- -- -- 6,846
Compensation for issuance of
stock options at less than
fair market value -- -- 420 -- -- -- 420
Foreign currency translation -- -- -- -- (749) -- (749)
Net income for the year -- -- -- 24,079 -- -- 24,079
--------- ---- -------- ------- ------- ------- --------
Balance at December 31, 1993 $ -- $254 $157,972 $72,333 $(1,897) $ -- $228,662
========= ==== ======== ======= ======= ======= ========
The accompanying notes to consolidated financial statements are an integral part
of these statements
32
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: 1993 1992 1991
--------- -------- --------
Net income: $ 24,079 $ 19,247 $ 15,386
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,429 18,510 16,016
Amortization of deferred data procurement costs 50,464 38,742 30,709
Deferred income taxes 6,559 5,537 3,283
Equity in loss of affiliated companies 2,050 466 --
Minority interest (1,582) -- --
Cumulative effect of adoption of FAS 109 (1,864) -- --
Loss on disposition and write-off of assets 3,005 -- --
Other 48 (528) 730
Change in assets and liabilities:
Increase in accounts receivable (34,728) (6,678) (26,467)
(Increase)/Decrease in other current assets (458) 275 (355)
Increase in other assets (1,505) (2,538) (2,872)
Increase/(Decrease) in accounts payable 1,344 2,226 (1,771)
Increase/(Decrease) in other current
liabilities 1,756 5,986 (3,245)
Increase in income taxes 4,922 5,734 2,877
Increase in deferred revenue 4,296 1,161 3,813
Increase in other liabilities 192 349 128
--------- -------- --------
Total adjustments 55,928 69,242 22,846
--------- -------- --------
Net cash provided by operating activities 80,007 88,489 38,232
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 168 56 426
Purchase of property and equipment (25,906) (19,993) (12,228)
Software costs (10,202) (8,808) (6,458)
Deferred data procurement costs (67,991) (51,881) (36,752)
Net assets acquired in business acquisitions (1,252) (2,921) --
Investments relating to joint ventures (20,287) (425) --
--------- -------- --------
Net cash used by investing activities (125,470) (83,972) (55,012)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line-of-credit agreements -- -- (16,415)
Net repayments of long-term debt (1,500) (20,216) (2,035)
Proceeds from exercise of stock options 11,598 6,385 6,503
Proceeds from issuance of common stock, net
of expenses -- 34,333 45,831
Capital contributions from minority interest 1,486 1,173 --
Purchase of treasury stock by subsidiary acquired
in pooling transaction -- -- (979)
--------- -------- --------
Net cash provided by financing activities 11,584 21,675 32,905
EFFECT OF EXCHANGE RATE CHANGES ON CASH (346) (1,093) 37
--------- -------- --------
NET INCREASE (DECREASE) IN CASH (34,225) 25,099 16,162
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 53,593 28,494 12,332
--------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 19,368 $ 53,593 $ 28,494
========= ======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
33
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992, and 1991
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of significant accounting policies applied in the preparation of the
accompanying consolidated financial statements follows:
1. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Information
Resources, Inc. ("IRI" or the "Company") and all wholly or majority owned
subsidiaries. The minority interest separately disclosed herein reflects the
non-Company owned stockholder interest in InfoScan NMRA Limited. The equity
method of accounting is used for investments in which the Company has a 50% or
less ownership and exercises significant influence over operating and financial
policies. All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. Revenue Recognition
-------------------
InfoScan and PromotionScan products generally have contract terms of a period
not less than one year. Contracts are generally categorized into one of two
classes: 1) cancelable at the end of each year with six months written notice by
either party, or 2) multi-year contracts either non-cancelable or cancelable
only with significant penalties generally cancelable with six months notice
after the initial term. A portion of the base contract revenue, approximately
15% of a calculated first year price, is recognized in the period between client
commitment and the delivery of forward data to match revenue with costs to
customize and set up client reports. An additional 25% is recognized in the
period between commitment and the delivery of forward data to match revenue with
the costs allocated to the period for which historical data, usually one to two
years, is furnished. The remaining revenue from the first commitment period is
recognized ratably over the initial contract term. Revenues from remaining
years of multi-year contracts, extensions and renewals are recognized ratably
over their extension periods. After the initial commitment, the contract
generally continues indefinitely, unless cancelled by the client on six months
prior notice. Revenue for special analytical services is recognized as services
are performed. Initial BehaviorScan contracts typically commence within three
months after execution and provide clients with historical data covering the
six-month to one-year period prior to a contract's commencement date and with
data, testing services and analyses for the twelve-month period covering the
minimum term of the contract. A portion of the revenue from the contract,
approximately 25% of the first year minimum, is recognized in the period between
the client's commitment and the test commencement. This revenue is recognized
to match revenue with cost allocated to the period for which historical data is
furnished. The remaining revenue from the minimum period is recognized ratably
over the initial contract term. Revenues from contract extensions are
recognized ratably over their extension periods, typically year-to-year.
34
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992, and 1991
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Revenues from the sale of EXPRESS, APOLLO and other software application
products, under licensing agreements, are recognized upon delivery where there
is a reasonable basis for estimating collectibility and the Company has no
significant remaining obligations. If there are significant other obligations,
revenues are recognized on the basis of estimated cost. Related software
maintenance fees are recognized as earned over the terms of their respective
contracts.
Revenues from market research and consulting projects are recognized as services
are performed. Certain of these projects are fixed-price in nature and use the
percentage-of-completion method for the recognition of revenue. Revenues for
projects that include a timesharing aspect are allocated over the timesharing
period based on the costs incurred to provide the service.
Billings to customers in advance of revenue recognition are reflected in the
consolidated financial statements as deferred revenue. Unbilled charges are
included as a part of accounts receivable and represent accrued revenues and
fees on contracts and other services incurred to date.
3. Property and Equipment
----------------------
Property and equipment is recorded at cost and depreciated over the estimated
service lives. For financial statement purposes, depreciation is provided by
the straight-line method. For income tax purposes, accelerated methods are
used.
Leasehold improvements are amortized over the shorter of their estimated service
lives or the terms of their respective lease agreements for financial statement
purposes. For income tax purposes, leasehold improvements are amortized over
the service lives of the buildings.
During 1993, the Company reduced store operating equipment and related
accumulated depreciation by $13.0 million for equipment which was no longer
used, obsolete or reverted to store owners.
4. Other Assets
------------
Other assets include deferred data procurement costs, goodwill, capitalized
software, data and solicitation rights and non-compete agreements. Data
procurement costs are capitalized as incurred and amortized over periods not
exceeding twenty-eight months. Goodwill represents the unamortized cost in
excess of fair value of the net assets of acquired subsidiaries and the excess
of cost over the allocation to data and solicitation rights. Goodwill is
amortized on a straight-line basis over periods from ten to twenty years.
Capitalized costs of computer software to be sold are amortized on a straight-
line basis beginning upon general release date and not exceeding three years.
Solicitation rights are amortized on a straight line basis over the expected
useful lives of six to ten years. Non-compete agreements are being amortized
over periods from two to seven years.
35
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992, and 1991
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
5. Stock Options
-------------
For options granted at fair market value, the proceeds are credited to the
capital accounts upon exercise. For options granted at less than fair market
value, the difference between the exercise price and fair market value at date
of grant is recognized as compensation expense over the vesting period. With
respect to nonqualified options, the Company recognizes a tax benefit upon
exercise of these options in an amount equal to the difference between the
option price and the fair market value of the common stock. With respect to
incentive stock options, tax benefits arising from disqualifying dispositions
are recognized at the time of disposition. Tax benefits related to stock
options are credited to capital in excess of par value.
6. Income per Common and Common Equivalent Share
---------------------------------------------
Income per common and common equivalent share is based on the weighted average
number of shares of common stock and common stock equivalents (if dilutive)
outstanding during each year.
The effect of dilution from the exercise of stock options is considered in the
computation of income per common and common equivalent share. The modified
treasury stock method was used to compute income per common and common
equivalent share for the quarters ended June 30 and September 30, 1992 and for
all quarters in 1993 since options and warrants outstanding exceeded 20% of the
shares of common stock outstanding. The treasury stock method was used to
calculate income per common and common equivalent share for other periods.
7. Income Taxes
------------
The Company adopted Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes (FAS 109) effective January 1, 1993. FAS 109
requires an asset and liability approach in accounting for income taxes. Under
this method, deferred income taxes are recognized, at enacted rates, to reflect
the future effects of tax carryforwards and temporary differences arising
between the tax bases of assets and liabilities and their financial reporting
amounts at each year end. (See NOTE C). Prior to January 1, 1993, the Company
followed the provisions of Financial Accounting Standards No. 96 - Accounting
for Income Taxes. Among other things, its provisions include providing deferred
taxes based upon enacted tax rates which would apply during the period in which
taxes become payable (receivable) and the adjustment of cumulative deferred
taxes for any changes in the tax rates.
Deferred U.S. income taxes are not provided on the undistributed earnings of
foreign subsidiaries since such earnings are considered to be permanently
invested in those operations. Cumulative undistributed earnings of foreign
subsidiaries were not significant at December 31, 1993.
36
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
8. Reclassifications
-----------------
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 1993 presentation.
9. Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and funds held in money market accounts with a maturity of three months or
less. The carrying amount approximates fair value.
10. Supplemental Cash Flow Information
----------------------------------
Cash paid for interest and income taxes during the years ended December 31, was
as follows:
1993 1992 1991
------ ------ ------
(In thousands)
Interest $1,055 $2,866 $2,949
Income taxes $3,935 $1,648 $2,872
The Company had noncash financing transactions relating to capital lease
obligations for new equipment. These totaled $1,053,000 and $6,881,000 for 1992
and 1991, respectively.
The Company had noncash investing transactions resulting from the
reclassification of receivables due from some of the Company's joint ventures
and joint venture partners in satisfaction of cash contributions the Company
otherwise would have made to various joint ventures. The amounts totaled
$1,800,000 in 1993.
The Company had noncash financing transactions relating to income tax benefits
realized from the exercise of nonqualified stock options. These totaled
$6,846,000, $5,890,000 and $3,313,000 for 1993, 1992 and 1991, respectively.
In 1991 the Company purchased all of the outstanding warrants held by Citicorp
Credit Services, Inc. (Citicorp) in exchange for a promissory note in the
principal amount of $12.5 million. In 1992, this promissory note was repaid in
full.
11. Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments is a reasonable
approximation of their fair values.
37
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
12. Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade receivables.
The Company's cash equivalents are placed in high quality securities and diverse
investment funds. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different businesses and
geographic areas.
As of December 31, 1993 and 1992, the Company had no significant concentrations
of credit risk.
NOTE B - ACQUISITIONS
In July 1993, the Company and GfK AG completed the reorganization of their 1988
EuroScan joint venture. GfK AG contributed its consumer panel and retail audit
businesses to the already established scanner-based information businesses of
the EuroScan joint venture. The Company's ownership interest in the joint
venture company, GfK Panel Services GmbH, is 15%. The Company's net investment
made to the joint venture company in connection with the reorganization was $7.2
million, including transaction costs. The Company also reacquired certain
Western European rights to its InfoScan production technology for $2.0 million.
In April 1993, the Company acquired a 45% ownership interest in a French market
information business through the formation of a joint venture with certain
European market research companies. SECODIP, S.A. of Paris, a subsidiary of
SOFRES, S.A., holds a 45% interest in the joint venture company, and GfK AG of
Germany has a 10% interest. The Company and GfK AG contributed their
investments in the former EuroScan France operations to the joint venture
company, while SECODIP, S.A. contributed certain assets related to its retail
audit business. The name of the joint venture company is IRI - SECODIP, S.N.C.
The purpose of the joint venture includes the development of the Company's
scanner-based information services in the French markets. In connection with
the formation of the joint venture, the Company obtained certain intangible
rights from SECODIP, S.A., some of which the Company then licensed to the joint
venture. The Company's investments in connection with the joint venture,
including its acquisition costs, approximated $13.0 million.
In December 1992, the Company organized LogiCNet, Inc. as a joint venture
company along with other parties to pursue development of a distribution
resource planning system incorporating inventory management and product
reordering systems. The Company intends to underwrite development costs, for
which it may be reimbursed by others, and has the option to acquire up to a 65%
ownership interest in the venture.
In November 1992, Catalina Marketing Corporation and the Company formed a joint
venture company, Catalina Information Resources, Inc., to develop products and
services designed to enhance decision-making capabilities involving quick
response product reordering and day-after sales performance tracking. The
Company initially contributed $425,000 in cash and licensed certain software
capabilities in return for a 50% ownership interest. During 1993, the Company
contributed $350,000 in cash to the joint venture.
38
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE B - ACQUISITIONS - Continued
In June 1992, the Company formed a joint venture, InfoScan NMRA Limited, with
GfK AG of Nuremberg, Germany and Taylor Nelson Group Limited (now known as
Taylor Nelson AGB plc) of London to purchase certain assets of the NMRA Retail
Audit business of BGA Audits Limited (formerly Audits of Great Britain), a
United Kingdom market research company in administration. The Company purchased
60% of the joint venture for $2.9 million including direct costs of acquisition.
During 1993, as a result of disproportionate capital contributions made by the
joint venture partners, the Company's ownership interest increased to
approximately 75% at December 31, 1993. The other partners may reestablish
their ownership interest percentages to their original levels within a specified
period of time. The accounts of the joint venture have been included in the
accompanying consolidated financial statements.
In May 1992, the Company acquired Towne-Oller & Associates ("Towne-Oller"). The
transaction was effected through the exchange of approximately 690,000 shares of
the Company's common stock for all of the issued and outstanding shares of
Towne-Oller. The acquisition has been accounted for as a pooling-of-interests
and accordingly, the accompanying consolidated financial statements have been
restated to reflect the acquisition.
NOTE C - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 -Accounting for Income Taxes (FAS 109). The effect of the
adoption was to record a $1,864,000 favorable cumulative effect adjustment as of
January 1, 1993 in the statement of income for the year ended December 31, 1993.
The adjustment primarily represents the impact of recognizing tax benefits for
future taxable losses that could not be recorded under FAS 96.
39
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE D - INVESTMENTS
Investments at December 31 are as follows:
1993 1992
------- ------
(In Thousands)
GfK Panel Services GmbH, at cost $ 7,155 $ 591
IRI-SECODIP, S.N.C., at cost plus
equity in undistributed earnings 4,012 558
Other, at cost plus equity in
undistributed earnings 597 449
------- ------
$11,764 $1,598
======= ======
At December 31, 1993 and 1992, the amount of investments in companies accounted
for by the equity method included goodwill in the amount of $3,246,000 and
$559,000 which is being amortized into income over periods not exceeding 15
years. This amortization is included in the equity in loss of affiliated
companies.
At December 31, 1993, the Company had outstanding receivables of $2.5 million
due from affiliates.
40
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE E - OTHER ASSETS
Other assets at December 31 are as follows:
1993 1992
-------- --------
(In thousands)
Deferred data procurement costs - net of accumulated
amortization of $62,333 in 1993 and $44,736 in 1992 $ 71,131 $53,416
Goodwill - net of accumulated amortization of $1,439
in 1993 and $888 in 1992 3,931 3,355
Capitalized software costs - net of accumulated
amortization of $10,081 in 1993 and $11,827 in 1992 21,481 15,245
Solicitation rights - net of accumulated
amortization of $3,112 in 1993 and $1,843 in 1992 7,815 3,067
Non-compete agreements - net of accumulated amortization
of $2,272 in 1993 and $1,127 in 1992 4,328 1,473
Other 4,453 3,554
-------- -------
$113,139 $80,110
======== =======
In 1993 and 1992, deferred data procurement costs of $32,867,000 and $30,594,000
respectively, became fully amortized. Such fully amortized costs are excluded
from the amounts shown above.
In 1993 and 1992, capitalized software costs of $6,712,000 and $8,283,000
respectively became fully amortized. Such fully amortized costs are excluded
from the amounts shown above.
41
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE F - NOTE PAYABLE
On November 25, 1991, the Company purchased the outstanding warrants held by
Citicorp in exchange for a promissory note in the principal amount of $12.5
million. The note bore an interest rate of 1% over the Citicorp base rate with
interest payable monthly. The note was due December 31, 1992 and the
outstanding principal and related interest were paid in full.
NOTE G - ACCRUED EXPENSES
Accrued expenses at December 31 are as follows:
1993 1992
------- -------
(In thousands)
Accrued payroll $ 8,446 $ 7,361
Accrued property, payroll and other taxes 4,701 3,370
Other 8,374 6,548
------- -------
$21,521 $17,279
======= =======
NOTE H- LONG-TERM DEBT
Long-term debt at December 31, is as follows:
1993 1992
------- -------
(In thousands)
Capitalized leases $ 4,778 $ 6,394
Less current maturities 1,691 1,676
------- -------
$ 3,087 $ 4,718
======= =======
Maturities of long-term debt during each of the years 1994 through 1997 are
$1,691,000, $1,523,000, $912,000 and $652,000, respectively.
The amount consists primarily of leases for telephone and computer equipment
expiring in 1997. Total interest in the amount of $605,000 to be paid over the
period of the lease is not included in the lease commitment.
On December 22, 1992, the Company entered into a new bank credit facility
replacing its previous facility dated October 30, 1990. The credit facility
allows borrowings up to $25 million due April 30, 1996 at an interest rate at or
below prime. Interest is payable quarterly. The credit facility contains
certain financial covenants including: limitations on acquisitions,
restrictions on additional indebtedness and liens and maintenance of minimum
levels of tangible net worth, current and cash flow coverage ratios. There were
no amounts outstanding under the credit facility at December 31, 1993 and
December 31, 1992.
42
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE I - INCOME TAXES
The components of income before income taxes are as follows:
1993 1992 1991
------- ------- -------
(In thousands)
Domestic $38,426 $28,860 $23,159
Foreign (2,377) 3,306 1,259
------- ------- -------
$36,049 $32,166 $24,418
======= ======= =======
Income tax expense for the three years ended December 31 consists of the
following components:
1993 1992 1991
-------- ------- ------
(In thousands)
Current income tax expense
Federal $ 6,048 $ 4,572 $4,431
Foreign 989 966 499
State and local 1,820 1,844 819
------- ------- ------
8,857 7,382 5,749
------- ------- ------
Deferred income tax expense
Federal 5,148 4,877 2,760
State and local 1,411 660 523
------- ------- ------
6,559 5,537 3,283
------- ------- ------
$15,416 $12,919 $9,032
======= ======= ======
43
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE I - INCOME TAXES - Continued
Temporary differences and carryforwards, which give rise to deferred income tax
assets and liabilities at December 31, 1993 are as follows:
Deferred Deferred
Tax Tax
Assets Liabilities
-------- -----------
(In thousands)
Capitalized software costs, net of amortization $ -- $ 7,999
Property and equipment -- 1,963
Deferred data procurement costs, net of amortization -- 26,594
Tax credit carryforwards 4,100 --
Tax loss carryforwards 896 --
Litigation provision 1,810 --
Deferred gain 1,962 --
Other 6,009 56
------- -------
Total deferred taxes $14,777 $36,612
======= =======
In 1992 and 1991, deferred income tax expense included taxes resulting from
timing differences in the recognition of revenue and expense for income tax and
financial statement purposes. The sources of these differences and their net
tax effects for the two years ended December 31 are as follows:
1992 1991
------- -------
(In thousands)
Deferred tax expense
Excess tax (book) depreciation $ (501) $ 1,080
Capitalized software costs,
net of amortization 1,861 996
Deferred data procurement costs,
net of amortization 3,574 2,463
Reversal due to general business
tax credit utilization 2,112 362
Capitalized leases 290 (1,021)
Accruals not currently deductible
for tax 224 (913)
Litigation provision not currently
deductible for tax (1,619) --
Other (404) 316
------- -------
$ 5,537 $ 3,283
======= =======
44
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE I - INCOME TAXES - Continued
Income tax expense differs from the statutory U.S. Federal income tax rate of
35% for 1993 and 34% for 1992 and 1991 applied to income before income taxes as
follows:
1993 1992 1991
------- ------- ------
(In thousands)
Income tax expense
at statutory Federal tax rate $12,617 $10,936 $8,302
State income taxes, net of
Federal income tax benefit 1,974 1,603 1,325
Change in tax rates 443 -- --
Loss on liquidation of subsidiary -- -- (814)
Nondeductible acquisition/organization costs 345 460 --
Other 37 (80) 219
------- ------ ------
Actual income tax expense $15,416 $12,919 $9,032
======= ======= ======
"Effective" income tax rate 42.8% 40.2% 37.0%
======= ======= ======
At December 31, 1993, the Company had general business tax credit carryforwards
of approximately $2,500,000 available to reduce future Federal income tax
liabilities which will expire between 1995 and 2000 if not utilized. At
December 31, 1993, the Company had tax loss carryforwards of $2,200,000 which
will expire between 1998 and 2008 if not utilized. The full realization of the
tax benefits associated with the carryforwards depends predominantly upon the
recognition of ordinary income, and to a lesser extent, capital gain income
during the carryforward period. The Company believes it is more likely than not
that such benefits will be realized. For financial reporting purposes, the
Company has recognized the tax effects of the tax loss and tax credit
carryforwards as reductions of deferred Federal income taxes. The Tax Reform
Act of 1986 enacted an alternative minimum tax system for corporations,
generally effective for taxable years beginning after December 31, 1986. The
alternative minimum tax is imposed at a 20% rate on the corporation's
alternative minimum taxable income which is determined by making a statutory
adjustment to the corporation's regular taxable income. The Company is subject
to the alternative minimum tax for financial reporting purposes resulting in an
alternative minimum tax carryforward of $1,600,000 as of December 31, 1993.
This amount will be allowed as a credit carryover against regular tax in the
future in the event the regular tax expense exceeds the alternative minimum tax
expense.
The Company increased its U.S. deferred tax liability in 1993 as a result of
legislation enacted during 1993 increasing the corporate tax rate from 34% to
35% effective January 1, 1993.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries which the Company intends to
continue to reinvest. It is not practicable to estimate the amount of
additional tax that might be payable on the foreign earnings if they were
remitted as dividends, were lent to the Company, or if the Company should sell
its stock in the subsidiaries or ventures. However, the Company believes that
U.S. foreign tax credits would substantially eliminate any additional tax
effects.
45
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE J - STOCK OPTIONS
The 1982 Incentive Stock Option Plan, a qualified plan within the meaning of
relevant sections of the Internal Revenue Code, authorizing the granting of
incentive stock options, expired on November 3, 1992. All remaining outstanding
stock options must be exercised within ten years of their respective grant
dates.
In 1991, the Board of Directors approved an increase in the number of shares
authorized under the Company's 1984 Nonqualified Stock Option Plan of 2,000,000
shares, bringing the total maximum shares available for grant to 6,000,000. In
1992, an additional 2,000,000 shares were authorized increasing the total to
8,000,000. In 1993, an additional 2,000,000 shares were authorized increasing
the total to 10,000,000. Options are granted pursuant to terms and conditions
set forth by the Executive Committee of the Company's Board of Directors. The
1984 Non-Qualified Stock Option Plan expired on January 1, 1994 and was replaced
by the 1994 Non-Qualified Stock Option Plan which was adopted and approved by
the Executive Committee of the Company's Board of Directors. The Company has
reserved for issuance up to 3,000,000 shares of Common Stock to be issued upon
the exercise of options to be granted pursuant to the plan. The Company's 1994
Non-Qualified Plan is administered by the Executive Committee of the Company's
Board of Directors. All outstanding stock options remaining under the 1984 Non-
Qualified Stock Option Plan must be exercised within ten years of their
respective grant dates.
On May 27, 1992, the stockholders of the Company adopted the Company's 1992
Executive Stock Option Plan and 1992 Incentive Stock Option Plan. Only the
Company's executive officers and directors are eligible to participate in the
1992 Executive Stock Option Plan. The 1992 Executive Stock Option Plan is
administered by a Stock Option Committee of at least two directors who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act.
The Company has reserved for issuance up to 2,000,000 shares of Common Stock to
be issued upon the exercise of options granted or to be granted pursuant to the
1992 Executive Stock Option Plan. The Company's 1992 Incentive Stock Option
Plan is administered by the Executive Committee of the Company's Board of
Directors. The Company's executive officers and directors are not eligible to
participate in the 1992 Incentive Stock Option Plan. The Company has reserved
for issuance up to 2,000,000 shares of its common stock to be issued upon
exercise of options to be granted pursuant to the 1992 Incentive Stock Option
Plan. It is intended that options issued under these plans and designated by
the respective Committees will or may qualify as incentive stock options under
relevant sections of the Internal Revenue Code. As of December 31, 1993, no
options had been granted pursuant to the Company's 1992 Incentive Stock Option
Plan.
Future deferred compensation expense with respect to options granted at less
than fair market value at grant date was approximately $4,847,000 (net of
approximately $420,000 expense in 1993) and will be recognized over the
remaining vesting period.
46
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE J - STOCK OPTIONS - Continued
A summary of transactions in the above described plans during the three years
ended December 31 is as follows:
1993 1992 1991
---------- ---------- ----------
1982 Incentive Stock Option Plan
- --------------------------------
Options outstanding at beginning
of year 6,989 15,672 81,280
Granted -- -- --
Exercised (6,694) (8,683) (60,565)
Cancelled -- -- (5,043)
--------- --------- ---------
Options outstanding at end of year 295 6,989 15,672
========= ========= =========
Available for grant -- -- 1,431,372
========= ========= =========
Options exercisable at end of year 295 6,989 15,672
========= ========= =========
1984 Nonqualified Stock Option Plan
- -----------------------------------
Options outstanding at beginning
of year 4,592,596 3,872,491 3,518,029
Granted 2,402,323 2,055,419 1,096,376
Exercised (825,581) (706,215) (642,010)
Cancelled (139,482) (629,099) (99,904)
--------- --------- ---------
Options outstanding at end of year 6,029,856 4,592,596 3,872,491
========= ========= =========
Available for grant -- 1,892,547 1,318,938
========= ========= =========
Options exercisable at end of year 2,705,550 2,240,518 2,087,670
========= ========= =========
47
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE J - STOCK OPTIONS - CONTINUED
1993 1992 1991
---------- ---------- ----
1992 Executive Stock Option Plan
- --------------------------------
Options outstanding at beginning
of year 177,447 -- --
Granted 1,136,869 178,587 --
Exercised (37,882) (1,140) --
Cancelled (11,259) -- --
--------- --------- ----
Options outstanding at end of year 1,265,175 177,447 --
========= ========= ====
Available for grant 695,803 1,821,413 --
========= ========= ====
Options exercisable at end of year 104,409 55,590 --
========= ========= ====
1992 Incentive Stock Option Plan
- --------------------------------
Available for grant 2,000,000 2,000,000 --
========= ========= ====
1994 Nonqualified Stock Option Plan
- -----------------------------------
Available for grant (effective
January 1, 1994) 3,000,000 -- --
========= ========= ====
Price Range of Options: 1993 1992 1991
-------------- --------------- --------------
Granted $0.01 - $42.75 $18.50 - $33.25 $9.50 - $26.00
Exercised $6.86 - $34.25 $ 0.01 - $22.50 $1.41 - $15.75
Cancelled $8.13 - $34.25 $ 8.13 - $23.50 $6.86 - $22.00
Outstanding $0.01 - $42.75 $ 6.86 - $33.25 $0.01 - $26.00
48
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE K - CAPITAL STOCK
IRI is authorized to issue 60,000,000 shares (increased from 30,000,000 in May
1992) of common stock and 1,000,000 shares of preferred stock.
Preferred stock may be issued in series with the rights and limitations of each
series being determined by the Board of Directors.
In September 1992, the Company issued 1,380,000 shares of common stock at a
price of $24.00 per share. The proceeds, net of expenses, were $31.2 million.
Issuance costs are included as a reduction of capital in excess of par value.
In May 1992, the Company acquired, in a pooling-of-interests transaction, all
the outstanding capital stock of privately-held Towne-Oller in return for
approximately 690,000 shares of Company Common Stock.
In November 1991, the Company purchased the outstanding warrants held by
Citicorp in exchange for a promissory note in the principal amount of $12.5
million, payable December 31, 1992. The warrants represented Citicorp's right
to purchase approximately 2.4 million shares of the Company's Common Stock. The
warrants, bearing an exercise price of $16.00 per share, were originally
acquired by Citicorp in 1990 as part of a transaction wherein Citicorp also
acquired 900,000 shares. These shares are not affected by the warrant purchase
transaction.
In May 1991, the Company issued 2,270,000 shares of common stock at a price of
$21.50 per share. The proceeds, net of expenses, were $45.8 million. Issuance
costs are included as a reduction of capital in excess of par value.
NOTE L - LOSS ON DISPOSITION AND WRITE-OFF OF ASSETS
The Company recorded a pre-tax charge of approximately $805,000 in the third
quarter of 1993 to expense various intangibles related to its 1991 agreements
with VideOcart, Inc. Also in the first quarter of 1993, the Company provided
for the expected loss of $2.2 million on the disposition of certain non-
strategic assets.
49
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE M - COMMITMENTS AND CONTINGENCIES
1. Lease Agreements
----------------
The Company leases its Chicago, Illinois headquarters facilities. Under the
terms of the lease agreement, the Company leased the facility under a long-term
operating lease having a minimum term of 15 years and rental rates subject to
increases in cost of living expenses. The lease agreement contains financial
and other covenants including restrictions on the payment of dividends.
The Company and subsidiaries lease certain property and equipment under
operating leases expiring at various dates through 2013. At December 31, 1993,
obligations to make future minimum payments under these leases for the five
years ending in 1998 are $26,232,000, $21,183,000, $16,654,000, $11,633,000 and
$8,399,000, respectively.
Minimum rental commitments for the above leases in the aggregate are
$125,169,000.
Rent expense under such operating leases for the three years ended December 31
was as follows:
1993 1992 1991
--------- ---------- ---------
(In thousands)
Gross rent $26,288 $23,730 $22,445
Sublease rental income -- (266) (680)
------- ------- --------
$26,288 $23,464 $21,765
======= ======= ========
2. Licensing Agreements
--------------------
The Company has entered into licensing agreements with certain cable television
companies expiring at various dates through 1998. At December 31, 1993,
obligations to make minimum license payments under these agreements for the five
years ending in 1998 are $811,000, $408,000, $351,000, $169,000 and $112,000,
respectively.
Licensing expense under these agreements was approximately $892,000, $889,000
and $871,000 in 1993, 1992, and 1991, respectively.
50
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE M - COMMITMENTS AND CONTINGENCIES - Continued
3. Litigation
----------
On May 8, 1989, two shareholders each filed a class action complaint against the
Company in the United States District Court for the Northern District of
Illinois. Shortly thereafter, a third shareholder filed a similar class action
complaint. All three cases have been consolidated.
In their consolidated complaint, the plaintiffs purport to represent a class
consisting generally of persons who purchased the Company's common stock between
February 6, 1989 and May 2, 1989. The plaintiffs allege Section 10(b) and Rule
10b-5 violations of the Securities Exchange Act of 1934, and common law fraud
and deceit charges, by reason of alleged omissions of the Company in setting
forth material facts in disclosures and public statements about the Company.
These alleged omissions include information relating to the Company's finances,
results of operations and prospects of achieving growth in earnings and revenues
during the referenced period when class members were acquiring shares of the
Company's stock.
The plaintiffs seek compensatory and punitive damages and attorneys' fees
against the Company, five of its former directors and one of its former
officers. The Court previously granted defendants' motion to dismiss
plaintiffs' claims of negligent misrepresentation from the case, and as a
result, the officer and certain of its directors previously named as defendants
have been voluntarily dropped from the case by the plaintiffs. The two claims
which remain pending against the defendants are for violation of Section 10(b)
and Rule 10b-5 of the Securities Exchange Act of 1934 and for common law fraud
and deceit. The plaintiffs retained an individual who testified in his
deposition that the total damages suffered by the class as a result of the
allegedly wrongful conduct of the defendants were approximately $21.7 million.
The Company retained an expert who testified in his deposition that the total
damages suffered by the plaintiffs, assuming the defendants are to be found
liable, would approximate $850,000. The Company has a directors and officers
liability insurance policy having a policy limit of $10 million. Proceeds of
the policy have been used for certain defense costs of the directors. The
remainder of the proceeds may be available to cover damages assessed against the
director defendants. The policy does not cover damages which may be assessed
against the Company itself.
Discovery with respect to the action is now completed and trial is currently
scheduled to commence in early April 1994. The Company's management believes
that the Company has valid defenses to these claims and that the ultimate
resolution of the case will not have a material impact on the Company's
consolidated financial position.
51
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE M - COMMITMENTS AND CONTINGENCIES - Continued
The Company had been involved in patent infringement litigation concerning its
targetable cable television technology used in its BehaviorScan mini-markets. A
judgment was entered against the Company for approximately $4.0 million plus
interest and costs. The Company has satisfied the judgment in January 1994 by
full payment of the amount due.
NOTE N - RESEARCH AND DEVELOPMENT
Expenditures for research and development for the years ended December 31, 1993,
1992, and 1991 approximated $33,717,000, $19,479,000 and $15,255,000,
respectively. Included in these expenditures were $10,202,000, $8,808,000 and
$6,458,000 of software development cost that were capitalized. Expenditures not
capitalized were charged to expense as incurred.
52
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE O - GEOGRAPHIC AREAS INFORMATION
The Company develops and maintains computer-based proprietary data bases,
decision support software, and mathematical models, primarily for the analysis
of detailed information on purchasing of consumer goods, all within one industry
segment - business information services. The following table presents
information about the Company by geographic areas.
1993 1992 1991
-------- -------- --------
(In thousands)
Operating revenues:
To unaffiliated customers:
United States $284,338 $241,205 $198,587
International 50,206 35,157 24,102
Transfers between geographic areas:
United States 8,695 6,102 4,540
International 1,943 1,677 1,161
Eliminations (10,638) (7,779) (5,701)
-------- -------- --------
Total operating revenues $334,544 $276,362 $222,689
======== ======== ========
Operating profit (loss):
United States $ 40,213 $ 34,612 $ 23,747
International (2,282) 3,091 1,568
-------- -------- --------
Operating profit $ 37,931 $ 37,703 $ 25,315
======== ======== ========
Identifiable assets:
United States $309,996 $248,857 $191,808
International 45,567 27,980 18,780
Eliminations (28,048) (12,838) (7,780)
-------- -------- --------
Total identifiable assets $327,515 $263,999 $202,808
======== ======== ========
Included in United States revenue for the years ended December 31, 1993, 1992
and 1991, are $2,064,000, $1,187,000 and $811,000 respectively, of export sales
to unaffiliated customers. Total international revenues, including export
sales, were $52,270,000, $36,344,000 and $24,913,000 for 1993, 1992 and 1991,
respectively.
NOTE P - SUBSEQUENT DEVELOPMENTS
In February 1994, the Company signed an agreement in principle with privately
held Asia-based SRG Holdings Limited ("SRG") to acquire SRG in an exchange of
stock valued at approximately $76.0 million.
53
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE Q - SUMMARY OF QUARTERLY DATA (UNAUDITED)
Summaries of consolidated 1993 and 1992 results on a quarterly basis are as
follows:
1993
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands except per share data)
Revenues $75,650 $82,110 $87,784 $89,000
Operating & selling, general and
administrative expenses 67,020 71,544 74,121 80,923
Loss on disposition & write-off of assets 2,200 -- 805 --
------- ------- ------- -------
Operating profit 6,430 10,566 12,858 8,077
Other income (expense) - net 182 32 248 (294)
Equity in loss of affiliated companies (312) (284) (811) (643)
------- ------- ------- -------
Income before income taxes, minority interest &
cumulative effect of accounting principle 6,300 10,314 12,295 7,140
Income tax expense 2,670 4,334 5,350 3,062
------- ------- ------- -------
Income before minority interest &
cumulative effect of accounting principle 3,630 5,980 6,945 4,078
Minority interest 297 479 413 393
------- ------- ------- -------
Income before cumulative effect of change
in accounting principle 3,927 6,459 7,358 4,471
Cumulative effect on prior years of change
in accounting principle 1,864 -- -- --
------- ------- ------- -------
Net income $ 5,791 $ 6,459 $ 7,358 $ 4,471
======= ======= ======= =======
Net income per common and common
equivalent share:
Before cumulative
effect of accounting change $ .15 $ .24 $ .27 $ .16
Cumulative effect of accounting change .07 -- -- --
------- ------- ------- -------
Net income $ .22 $ .24 $ .27 $ .16
======= ======= ======= =======
Weighted average common and common
equivalent shares 26,157 26,738 27,253 27,494
======= ======= ======= =======
54
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE Q - SUMMARY OF QUARTERLY DATA (UNAUDITED) (Cont'd.)
1992
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands except per share data)
Revenues $61,465 $66,196 $71,653 $77,048
Operating & selling, general and
administrative expenses 54,567 58,010 61,463 64,619
------- ------- ------- -------
Operating profit 6,898 8,186 10,190 12,429
Other expense - net (246) (148) (205) (81)
Equity in loss of affiliated companies -- -- -- (466)
Litigation provision -- -- -- (4,391)
------- ------- ------- -------
Income from operations before
income taxes 6,652 8,038 9,985 7,491
Income tax expense 2,591 3,265 4,164 2,899
------- ------- ------- -------
Net income $ 4,061 $ 4,773 $ 5,821 $ 4,592
======= ======= ======= =======
Net income per common and common
equivalent shares $ .17 $ .20 $ .24 $ .18
======= ======= ======= =======
Weighted average common and common
equivalent shares 23,955 23,934 24,481 26,055
======= ======= ======= =======
55
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
- --------------------------------------------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The sections entitled "Election of Directors" and "Ownership of Securities"
are incorporated by reference from the definitive proxy statement to be filed
with the Securities and Exchange Commission in connection with the Company's
1994 annual meeting of stockholders scheduled for May 26, 1994. Information
about the Company's executive officers is set forth in Item 4(a) in Part I of
this Report.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The section entitled "Executive Compensation" [excluding the Board
Compensation Committee Report and the stock price performance graph] is
incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission in connection with the Company's 1994
annual meeting of stockholders scheduled for May 26, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The section entitled "Ownership of Securities" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1994 annual meeting of stockholders
scheduled for May 26, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The section entitled "Certain Transactions" is incorporated by reference from
the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1994 annual meeting of stockholders
scheduled for May 26, 1994.
56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) Documents filed as a part of this Report:
1. Financial Statements
--------------------
The consolidated financial statements of the Company are included in
Part II, Item 8 of this Report.
2. Financial Statement Schedules Page No.
----------------------------- --------
Report of Independent Certified
Public Accountants on Schedules 61
Schedule II - Amounts Receivable from Related
Parties and Underwriters, Promoters and Employees
Other than Related Parties 62
Schedule VIII - Valuation and Qualifying Accounts;
Allowance for Doubtful Receivables 63
Schedule X - Supplementary Income Statement Information 64
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
3. Exhibits
--------
(i) See Exhibit Index (Immediately Following the Financial Statement
Schedules attached hereto)
(ii) Executive Compensation Plans and Arrangements. The following
Executive Compensation Plans and Arrangements are listed as exhibits
to this Form 10-K:
Employment Agreement dated November 27, 1978 between the
Company and Gerald Eskin.
Employment agreement dated March 15, 1985 between the
Company and Jeffrey Stamen.
Employment agreements dated March 15, 1985 between the
Company and Leonard Lodish.
57
Noncompetition Agreement dated March 15, 1985 between
the Company and John D.C. Little, Glen Urban, and Leonard
Lodish, respectively.
Letter agreement dated January 17, 1989 between the
Company and Glen Urban.
Form of letter agreement between the Company and
John D.C. Little.
Employment Agreement effective June 1, 1985 between
the Company and Magid Abraham.
Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and Non-
competition Agreement dated January 16, 1987, which
Consulting and Noncompetition Agreement is referred to
above.
Letter agreement dated August 7, 1989 between the
Company and Leonard Lodish.
Employment Agreement dated November 16, 1989 between
the Company and James G. Andress.
Nonqualified Stock Option Agreement dated June 29, 1989
between the Company and Magid Abraham.
Amended and Restated Employment Agreement dated March 16,
1994 between the Company and Thomas M. Walker.
1992 Executive Stock Option Plan.
1992 Employee Incentive Stock Option Plan.
Employment Agreement dated November 4, 1993 between
the Company and George Garrick.
1994 Employee Nonqualified Stock Option Plan.
58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: March 29, 1994
INFORMATION RESOURCES, INC.
By: /s/ Gian M. Fulgoni
-----------------------------
Gian M. Fulgoni, Chairman and
Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 29, 1994.
By: /s/ Gian M. Fulgoni
------------------------------------------
Gian M. Fulgoni, Chairman and Chief
Executive Officer and Director
[Principal executive officer]
/s/ James G. Andress
------------------------------------------
James G. Andress, Chief Executive Officer,
President, Chief Operating Officer and
Director
*/s/ Gerald J. Eskin
------------------------------------------
Gerald J. Eskin, Vice Chairman and
Director
/s/ Thomas W. Walker
------------------------------------------
Thomas M. Walker, Executive Vice
President, Chief Financial and
Administrative Officer and Director
[Principal financial and accounting
officer]
/s/ Magid Abraham
------------------------------------------
Magid Abraham, Vice Chairman and
Director
/s/ Jeffrey P. Stamen
------------------------------------------
Jeffrey P. Stamen, President,
IRI Software and Director
59
-------------------------------------------
Edwin E. Epstein, Director
*/s/ John D. C. Little
-------------------------------------------
John D.C. Little, Director
*/s/ Leonard M. Lodish
-------------------------------------------
Leonard M. Lodish, Director
*/s/ Edward E. Lucente
-------------------------------------------
Edward E. Lucente, Director
*/s/ Edith W. Martin
-------------------------------------------
Edith W. Martin, Director
*/s/ George G. Montgomery, Jr.
-------------------------------------------
George G. Montgomery, Jr.,
Director
*/s/ Glen L. Urban
-------------------------------------------
Glen L. Urban, Director
*/s/ Thomas W. Wilson, Jr.
-------------------------------------------
Thomas W. Wilson, Jr., Director
*/s/ Gian M. Fulgoni
- ------------------------------------
By Gian M. Fulgoni
pursuant to a power of attorney
60
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULES
Board of Directors
Information Resources, Inc.
In connection with our audit of the consolidated financial statements of
Information Resources, Inc. and Subsidiaries referred to in our report dated
February 10, 1994 which is included in Part II of this form, we have also
audited Schedules II, VIII, and X for each of the three years in the period
ended December 31, 1993. In our opinion, these schedules present fairly, in all
material respects, the information required to be set forth therein.
GRANT THORNTON
Chicago, Illinois
February 10, 1994
61
SCHEDULE II
INFORMATION RESOURCES, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
(Dollars in thousands)
Deductions Balance at End
Balance at ---------------------- of Period
Beginning Amounts Amounts -------------------
Name of Debtor of Period Additions Collected Written Off Current Noncurrent
- ------------------- ---------- -------------- --------- ----------- ------- ----------
Year Ended
December 31, 1991
Mr. T. Walker $ 340 $ -- $ 340 $ -- $ -- $ --
Year Ended
December 31, 1992
Mr. J. Sullivan $ -- $ 120 $ -- $ -- $ 120 $ --
Mr. A. Martin $ -- $ 150 $ -- $ -- $ 150 $ --
Year Ended
December 31, 1993
Mr. G. Garrick $ -- $1,200 $ -- $ -- $1,200 $ --
Mr. A. Martin $ 150 $ -- $ -- $ -- $ 150 $ --
Mr. J. Sullivan $ 120 $ -- $ 120 $ -- $ -- $ --
Mr. D. Windish $ -- $ 108 $ -- $ -- $ 108 $ --
All receivables outstanding as of December 31, 1993 bear no interest and are due
on or before December 31, 1994.
62
SCHEDULE VIII
Information Resources, Inc. and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL RECEIVABLES
(Dollars in thousands)
Balance at Additions Deductions Balance at
Beginning of Charged to (Net Writeoffs/ End of
Description Period Costs & Expenses Recoveries) Period
- ------------------------------ ------------ ---------------- --------------- ----------
Year ended December 31, 1991 $ 923 $ 518 $ 34 $1,475
Year ended December 31, 1992 $1,475 $ 704 $ (128) $2,051
Year ended December 31, 1993 $2,051 $ 627 $ (428) $2,250
63
SCHEDULE X
Information Resources, Inc. and Subsidiaries
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Amount Charged to Costs and Expenses
--------------------------------------
Year Ended December 31
----------------------
(In thousands)
Item 1993 1992 1991
- ----------------------------------- -------- -------- --------
Maintenance and repairs $ 5,040 $ 4,103 $ 3,817
======= ======= =======
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals
Deferred data procurement costs $50,464 $38,742 $30,709
Capitalized software costs 4,966 4,293 4,373
Other/(1)/ 4,138 2,396 2,232
------- ------- -------
$59,568 $45,431 $37,314
======= ======= =======
Advertising and promotion costs $ 3,905 $ 3,407 $ 2,379
======= ======= =======
Taxes, other than payroll and
income taxes/(2)/
Royalties/(2)/
/(1)/ Includes amounts for investee companies reflected in equity in loss of
affiliated companies.
/(2)/ Less than 1% of consolidated revenues.
64
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The page number, if any, listed
opposite an exhibit indicates the page number in the sequential numbering system
in the manually signed original of this Report where such exhibit can be found.
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
- ------- ----------------------- ---------------
3(a) Copy of the certificate of incorporation of the
Company dated May 27, 1982, as amended.
(Incorporated by reference. Previously filed
as Exhibit 3(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988). IBRF
(b) Copy of the bylaws of the Company, as amended.
(Incorporated by reference. Previously filed
as Exhibit 3(b) to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988). IBRF
(c) Copy of amendments to the Certificate of
Incorporation approved by the stockholders
on May 16, 1989 (Incorporated by reference.
Previously as Exhibit 3(c) to the Company's
Annual Report 10-K for the fiscal year ended
December 31, 1989). IBRF
(d) Copy of amendments to the bylaws of the Company
as approved by the Board of Directors bringing
the bylaws into conformity with the amendments
to the Certificate of Incorporation approved by
the stockholders May 16, 1989 (Incorporated by
reference. Previously filed as Exhibit 3(d) to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989). IBRF
(e) Certificate of Designations of Series A Participating
Preferred Stock, as adopted by the Board of Directors
of the Company on March 2, 1989 and duly filed with
the Secretary of State of the State of Delaware
March 15, 1989 (Incorporated by reference. Previously
filed as Exhibit 3(e) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1989). IBRF
65
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
- ------- ------------------------------------------------------------------- ---------------
10 MATERIAL CONTRACTS
(a) 1982 Incentive Stock Option Plan adopted November 3, 1982, as
amended. (Incorporated by reference. Previously filed as
Exhibit 10(a) to the Company's Registration Statement on
Form S-8 filed with the SEC on December 31, 1988). IBRF
(b) Information Resources, Inc., Nonqualified Stock Option
Plan effective January 1, 1984, as amended. (Incorporated
by reference. Previously filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988). IBRF
(c) Employment Agreement dated November 27, 1978 between the
Company and Gerald Eskin. (Incorporated by reference.
Previously filed as Exhibit 10(e) to Registration
Statement No. 2-81544). IBRF
(d) Consulting and Noncompetition Agreement dated January 16,
1987 between the Company and Edwin Epstein. (Incorporated
by reference. Previously filed as Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987). IBRF
(e) OPEN
(f) Employment agreement dated March 15, 1985 between the
Company and Jeffrey Stamen. (Incorporated by reference.
Previously filed as Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1985, as amended on Form 8 dated April 29, 1986 and August
25, 1986). IBRF
(g) Employment agreements dated March 15, 1985 between the
Company and Leonard Lodish. (Incorporated by reference.
Previously filed as Exhibit 10.14 to Registration Statement No.
2-96940). IBRF
66
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
- ------- ------------------------------------------------------------------- ---------------
(h) Noncompetition Agreement dated March 15, 1985 between
the Company and John Little, Glen Urban, and Leonard
Lodish, respectively. (Incorporated by reference.
Previously filed as Exhibit 10.15 to Registration
Statement No. 2-96490). IBRF
(i) Letter agreement dated January 17, 1989 between the
Company and Glen Urban (Incorporated by reference.
Previously filed as Exhibit 10(1) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989). IBRF
(j) Form of letter agreement between the Company and
John D.C. Little (Incorporated by reference.
Previously filed as Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989). IBRF
(k) Employment Agreement effective June 1, 1985 between
the Company and Magid Abraham (Incorporated by
reference. Previously filed as Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989). IBRF
(l) Form of Rights Plan Agreement between the Company and
Harris Trust and Savings Bank. (Incorporated by
reference. Previously filed on Form 8-A Registration
Statement filed with the SEC on March 15, 1989). IBRF
(m) Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and
Noncompetition Agreement dated January 16, 1987. IBRF
(n) Letter agreement dated August 7, 1989 between the
Company and Leonard Lodish (Incorporated by reference.
Previously filed as Exhibit 3(q) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989). IBRF
67
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
- ------- ----------------------- ---------------
(o) Employment Agreement dated November 16, 1989 between
the Company and James G. Andress (Incorporated by
reference. Previously filed as Exhibit 3(r) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989). IBRF
(p) Nonqualified Stock Option Agreement dated June 29,
1989 between the Company and Magid Abraham
(Incorporated by reference. Previously filed as
Exhibit 3(s) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989). IBRF
(q) Form of 401(k) Retirement Savings Plan and Trust
adopted by the Company effective August 1, 1989.
(Incorporated by reference. Previously filed as
Exhibit 3(v) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989). IBRF
(r) Consulting and Non-Competition Agreement dated
October 31, 1990 between the Company and John Malec.
(Incorporated by reference. Previously filed as
Exhibit 3(r) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1990). IBRF
(s) Amended and Restated Employment Agreement dated March
16, 1994 between the Company and Thomas M. Walker
(filed herewith). EF
(t) Credit Agreement dated as of December 31, 1992 among
the Company, Harris Trust and Savings Bank,
individually and as agent, and certain other banks
signatory thereto. (Incorporated by reference.
Previously filed as Exhibit 10(t) to Annual Report on
Form 10-K for fiscal year ended December 31, 1992). IBRF
(u) Lease Agreement dated September 27, 1990 between
Randolph/Clinton Limited Partnership and the Company
(Incorporated by reference. Previously filed as
Exhibit 2.1 to the Company's Current Report on Form
8-K dated September 27, 1990). IBRF
68
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
- ------- ----------------------- ---------------
(v) Reorganization Agreement and Plan of Distribution
dated as of October 19, 1990 between the Company and
VideOcart, Inc. (Incorporated by reference.
Previously filed as Exhibit 2.1 to the Company's
Current Report or Form 8-K dated October 31, 1990). IBRF
(w) 1992 Executive Stock Option Plan (Incorporated by
reference. Previously filed as Exhibit 10 (w) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992). IBRF
(x) 1992 Employee Incentive Stock Option Plan
(Incorporated by reference. Previously filed as
Exhibit 10 (x) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992). IBRF
(y) 1994 Employee Nonqualified Stock Option Plan (filed
herewith). EF
(z) Employment Agreement dated November 4, 1993 between
the Company and George Garrick (filed herewith). EF
11 Statement of computation of per share income (filed
herewith). EF
21 Subsidiaries of the Registrant (filed herewith). EF
23 Consent of Independent Certified Public Accountants
(filed herewith). EF
24 Powers of Attorney (filed herewith). EF
69