INFORMATION RESOURCES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

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 NO. 0-11428
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INFORMATION RESOURCES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 36-2947987
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
150 NORTH CLINTON STREET, CHICAGO, ILLINOIS 60661
(Address of Principal Executive Offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 726-1221

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

TITLE OF EACH CLASS
COMMON STOCK, $.01 PAR VALUE PER SHARE
PREFERRED STOCK PURCHASE RIGHTS

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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. X

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act.) Yes X No [ ]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of June 28, 2002 (based on the closing price as quoted by NASDAQ
as of such date) was $243,205,339.

The number of shares of the registrant's common stock, $.01 par value per
outstanding share, as of February 28, 2003 was 29,861,295.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for the annual meeting
of stockholders to be held May 15, 2003 to be filed pursuant to Regulation 14A
are incorporated by reference into Part III of this Form 10-K.

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PART I

ITEM 1. BUSINESS

INTRODUCTION

Information Resources, Inc. and its subsidiaries (collectively referred to
herein as "IRI" or the "Company") is a leading provider of universal product
code ("UPC"), scanner-based business solutions services to the consumer packaged
goods ("CPG") industry, offering services in the United States, Europe and other
international markets. The Company supplies CPG manufacturers, retailers and
brokers with information and analysis critical to their sales and marketing
operations. IRI provides services designed to deliver value through an enhanced
understanding of the consumer to a majority of the Fortune 500 companies in the
CPG industry.

The Company currently generates approximately 75% of its revenues from
sales and services provided in the U.S. These services include the Company's
flagship InfoScan(R) service, which tracks consumer purchasing of products sold
in grocery stores, drug stores, mass merchandisers, convenience stores and other
retail outlets across the United States, household-level information collected
via consumer panels and BehaviorScan(R) which is used for the testing and
evaluation of alternative marketing strategies and tactics for both new and
established products. The Company also offers modeling and other testing
services as well as custom analytic and consulting services to enable clients to
address critical business issues. Closely related to its information services,
the Company also markets various software applications to the CPG industry.

Revenues from the Company's U.S. and International Services were as follows
for the years ended December 31 (in thousands):

U.S. SERVICES

The Company's U.S. Services include retail product tracking services,
related delivery and software product sales, retail audit services, consumer
panel services, analytical and consulting services, BehaviorScan product testing
services and a variety of applications using the Company's census (i.e., all
stores within participating retail chains) scanner databases and the Company's
multi-outlet consumer panel databases.

RETAIL TRACKING SERVICES

InfoScan. The Company's principal information service marketed in the
United States and internationally is InfoScan. InfoScan is a retail tracking
service used by the CPG industry to monitor and evaluate the market performance
of products sold in retail stores. The InfoScan service provides clients with a
variety of information including the quantity of products they and their
competitors are selling, where the products are being purchased, at what price
the products are being sold and under what promotional conditions sales are
occurring. This information helps clients make fundamental strategic and
tactical decisions for their businesses in the areas of sales, marketing and
promotion. IRI currently collects this information in grocery, drug, mass
merchandiser, convenience store, club store and chain liquor outlets across the
United States and is also exploring collection in other outlets.

InfoScan utilizes data collected from UPC bar codes on CPG product
packaging. Scanners at retail checkouts read the UPC code and record product
sales electronically. On an on-going basis, the Company procures such electronic
sales data along with related promotional data from a sample of national and
local market retail stores. The Company also collects consumer purchase
information directly from individual households across the United States using
proprietary in-home scanning devices and/or consumer

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identification cards in a store. The consumer purchase information can be used
in a complementary fashion with InfoScan data. The Company processes the
information at its computer facilities and stores it in the Company's
proprietary databases. InfoScan clients access the information in the Company's
databases through a variety of means, including the use of analytical software
provided by the Company and the use of reports delivered via the Internet.

Contracts for InfoScan services with CPG manufacturers are currently a
principal source of revenue for the Company. Manufacturers obtain access to the
InfoScan databases for specified product categories. InfoScan contracts in the
United States generally have multi-year terms, usually of three years or more.

InfoScan Census. InfoScan Census applications are based on scanner data
collected from all stores within participating retail chains, as opposed to
collection from a sample of such stores. InfoScan Census offers the CPG industry
more complete and accurate data than sample services, since it has no sampling
or projection errors for census chains, and its applications can go beyond
traditional market tracking uses. Nearly all of IRI's clients' databases in the
United States use a census-based projection system.

InfoScan Census revenues also come from manufacturers purchasing key
account data, defined as sales data for a product category based on all stores
of a specific retailer. This service enables manufacturers' sales
representatives to negotiate with retail buyers based on a mutually consistent
and accurate measure of retail product movement. In addition, an evaluation of
differences in brand and product category purchasing across individual stores
within a chain can often pin-point opportunities to effectively build sales to
the benefit of both manufacturers and retailers. Other census applications
include improved management of trade promotions, validation of
"pay-for-performance" promotions, more effective sales force and broker
compensation programs and improved inventory and distribution management.

There are presently 14,800 grocery stores, 14,000 drug stores and 3,000
mass merchandisers in the Company's InfoScan Census U.S. database. In addition,
the Company's InfoScan Census database also includes census data from certain
club stores and liquor store chains.

Participating retailers typically deliver their scanner data electronically
to the Company's computer facilities in Wood Dale, Illinois. While most retail
stores in the United States have installed scanner equipment to record product
sales information, certain convenience stores and other retail outlets have not.
When scanner data are not available, field personnel visit stores and obtain
sales information via manual audits of the stores' product purchases and
inventory.

InfoScan Causal Data Collection. The InfoScan U.S. and international
databases typically contain product movement and price information and "causal"
data. Causal data consist of information which may explain changes in product
sales, such as price promotions, retailers' newspaper ads and in-store displays,
as well as other promotion and merchandising data related to the sale of CPG
products. For the Company's InfoScan causal data service, the Company
continuously collects weekly promotional information from representative retail
outlets. Included in the Company's national and local market causal data samples
in the U.S. are approximately 4,300 stores in the aggregate, including grocery
stores, drug stores, mass merchandisers and convenience stores.

IRI's causal data are collected in the United States by Mosaic InfoForce,
L.P., a joint venture company formed during 2000 by IRI and Mosaic Group, Inc.,
a Canadian outsourced marketing services agency with operations in Canada and
the United States. Employees of Mosaic InfoForce, L.P. conduct weekly on-site
visits to retail stores participating in the InfoScan service to collect causal
information such as in-store promotions and displays. Mosaic InfoForce, L.P.
provides additional related services, including custom data collection, custom
and syndicated observational audits, and other in-store activities such as light
merchandising services.

The Company often pays a fee for scanner data covering a sample or census
of retailers' stores. However, the Company also exchanges software, product
movement information and other services to obtain access to data for certain
chains or stores. Current retailer data contracts generally have initial
multi-year terms, usually of three or more years, some of which are cancelable
either during or after the initial term with 3 to 6 months notice by either
party.

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InfoScan Advantage. In August 2001, Wal-Mart Stores, Inc. discontinued
providing point-of-sale and related data for its U.S. business to all third
party data providers, including IRI and ACNielsen. In response, IRI has enhanced
its InfoScan service to provide continued insights into Wal-Mart by using IRI's
consumer panel data collected directly from Wal-Mart shoppers as a replacement
for Wal-Mart's point-of-sale data. This enhanced service, InfoScan
Advantage(TM), provides the ability to integrate the Wal-Mart panel data with
IRI's InfoScan Census retail tracking data. IRI began making InfoScan Advantage
available to clients in October 2001.

Data Processing. With respect to its operations in the United States,
United Kingdom, France, Germany, Italy, the Netherlands and Spain, the Company
receives and processes data at its production center and computer facilities
located in Wood Dale, Illinois. The Company's production center operates with
numerous platforms including mainframe, UNIX and Windows NT as well as
proprietary production software and related technology developed exclusively by
the Company to process and store very large amounts of data. Through direct
telecommunication connections with InfoScan clients in the U.S., the Company
also provides electronic on-line access to InfoScan data services. The Company
currently leases its mainframe computers from third party financial
institutions.

Data Delivery. IRI's InfoScan service entitles clients to access the
Company's databases and receive information for specific product categories.
Because large amounts of data are involved, clients in the U.S. usually either
take electronic delivery of the data or obtain electronic access to the
Company's databases through the Company's on-line service or web-based delivery
service. Clients taking on-line electronic delivery generally license software
from the Company. The Company's on-line service permits the Company to build,
maintain and store client-contracted databases which remain resident on the
Company's computers. Clients then access the databases through remote electronic
connection. Clients may also purchase software services from the Company. (See
"Software and Related Products" below for more information on Company revenues
derived from software licensing.) In addition, the Company also provides
Internet delivery options, including CPGNetwork(R), its web-based business
intelligence resource that delivers custom reports and relevant industry
information via a Company-hosted web site.

Software and Related Products. A principal source of software revenue is
the provision of on-line access services and web delivery services to InfoScan
clients who access InfoScan databases residing in the Company's data warehouses.
Other revenues are derived from consulting services the Company performs to
assist clients with the integration of data into their existing systems.

In close association with its retail tracking services, the Company markets
analytical software to the CPG industry principally for use in accessing,
managing and analyzing the Company's databases. In July 1995, the Company sold
its EXPRESS technology and certain software products to Oracle Corporation
("Oracle"), while retaining ownership of certain EXPRESS-based sales and
marketing software application products for use in the CPG industry. Many of the
Company's U.S. and International clients currently use the
Oracle(R)EXPRESS-based software application, Oracle(R) Sales Analyzer, to
access, manage and analyze the Company's databases. Oracle EXPRESS is a software
technology now owned by Oracle designed for working with large and complex
databases. Oracle Sales Analyzer is a decision support software application
built in Oracle EXPRESS and is also now owned by Oracle. The product provides
users with a range of analytical and reporting tools. Through licensing
agreements with Oracle, the Company continues to market and distribute certain
Oracle EXPRESS software products, including Oracle Sales Analyzer. The Company
also licenses its own applications, such as XLerate(TM), in conjunction with a
client's InfoScan data contract.

Oracle is entitled to receive royalties on certain types of Oracle software
sublicenses granted by the Company and its distributors; however, prior to July
2001, the Company was not required to pay royalties to Oracle on licenses
granted by the Company and its affiliates to CPG end-users for use with data
provided by the Company or its affiliates. The Company will be required to pay
royalties to Oracle for update and support services provided for sublicenses
granted by the Company prior to July 2001, but only to the extent that the
Company and the sublicensee elect to receive update and support services from
Oracle for such sublicenses after July 2001. IRI has also negotiated new royalty
rates to be paid to Oracle for any additional sublicenses of Oracle software
products granted by the Company and its distributors to CPG entities during the
two-year

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period beginning July 2001 and for any update and support services provided for
such Oracle software products during this same two-year period. Thereafter,
Oracle and the Company have agreed to negotiate new royalty rates. For a period
of three years from July 2001, the Company also has the right to license certain
Oracle software products, including Oracle Sales Analyzer and Express Server
software products, on favorable terms, for the Company's own use and the use of
the Company's clients, in connection with the Company's data operations.
Thereafter, the Company expects to negotiate new royalty rates for such use.

The Company's current web offering, CPGNetwork, enables clients to access
InfoScan and related data and other personalized content via a web browser. The
Company is also developing alternative technologies to deliver its data based on
Microsoft(R) technology. These alternative technologies are expected to increase
accessibility to the Company's InfoScan data, improve compatibility with
existing technical architectures of the Company's clients and partners, and
extend integration of additional data sources. To support the Microsoft
technology, the Company has developed a new easy-to-use data retrieval, analysis
and reporting suite called InfoPro(TM). The Company began releasing InfoPro to
clients, on a limited basis, beginning in early 2003 and continues to work on
enhancing the product. InfoPro will allow users to easily access, manipulate and
analyze data from IRI and other sources within the familiar environment of the
internet and Microsoft Office(R). InfoPro and CPGNetwork will provide customers
a complete end-to-end solution for accessing, analyzing, publishing and
integrating IRI and third party data sources.

The Company also markets its proprietary Apollo Space Management System(TM)
software to CPG retailers, wholesalers, manufacturers and brokers worldwide to
enhance the merchandising understanding and business success of our clients
through improved performance at the shelf and throughout the total store. Apollo
software is designed to provide store specific solutions and detail to drive
improved margin performance. Apollo facilitates an integrated approach which
enables customers to drive productivity through integration of IRI data and
analytics to assist in the management of retail space, providing a range of
tools for space management including assortment planning, data integration and
management, category analysis, creation of schematics and web enabled access and
distribution.

The Company also develops and markets other analytical software
applications and technology-based consulting services for use in the CPG
industry, including tools to help clients receive, analyze, interpret and
facilitate enhanced uses of IRI's InfoScan data, consumer panel data and
analytics data.

PANEL, ANALYTICS AND TESTING

Consumer Panel. The Company also collects consumer purchase and attitudinal
information through 70,000 hand held bar-code scanners that it places in
households throughout the United States. Collection of purchase data from these
bar-code scanners enables the Company to ascertain product movement information
from a full spectrum of retail outlets, including stores that either do not have
scanners or do not provide point-of-sale data to the Company. In addition to the
Company's multi-outlet consumer panel services, the Company also maintains a
separate consumer panel of shoppers in its BehaviorScan testing markets in
connection with the Company's provision of testing and analytics services. These
additional households provide the Company's clients with the means to test and
evaluate various marketing programs and the impact of different marketing
variables on consumer behavior in a controlled environment prior to a full
launch. BehaviorScan households use the same scanner device as the multi-outlet
panelists and/or present an identification card when shopping at participating
stores, thereby allowing scanners to record specific details of their product
purchases. The Company provides a variety of syndicated and custom databases and
analytics utilizing the multi-outlet panel data to provide retailers and
manufacturers with insights into consumer purchase behavior. See "Analytical and
Consulting Services" below.

Analytical and Consulting Services. The Company emphasizes the provision of
experienced and knowledgeable client service personnel to assist clients in the
use and interpretation of InfoScan retail tracking data and consumer panel data,
as well as in the use of the Company's analytical software. The Company also
offers a variety of advanced analytical and consulting services to CPG
manufacturers, retailers and brokers to evaluate and address critical business
decisions. These services are directed at helping clients identify new marketing
opportunities, plan and evaluate new or restaged product launches, evaluate the
impact of price

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changes, evaluate opportunities for product line optimization, and evaluate and
increase the effectiveness of marketing expenditures. Advanced analytics
typically involve the application of sophisticated statistical models to IRI's
InfoScan, consumer panel, attitudinal survey and custom store audit data. These
analyses help the clients quantify the sales and profit impact of major sales
and marketing decisions. Revenues from analytical and consulting services
typically follow from the Company's InfoScan service; however, IRI is
increasingly providing analytical and consulting services to clients that do not
purchase ongoing tracking services from the Company.

Testing Services. The Company provides a number of in-market testing
services primarily for CPG manufacturers, including controlled store testing,
matched market testing and BehaviorScan. Controlled store testing involves
testing the placement of new products or changes in advertising, shelf location,
price or other in-store merchandising conditions in a limited group of test
stores. In a matched market test, IRI measures the effects of a client's
execution of new marketwide advertising or couponing programs in one or more
cities. In both types of testing services, IRI applies statistical analysis
techniques to the InfoScan data to measure test results. The Company's
BehaviorScan service, currently available in five U.S. markets, is the only
electronic test marketing system available in the United States. BehaviorScan
analyzes consumer purchasing behavior based on exposure to different television
advertising plans and allows CPG manufacturers to measure the impact of
different marketing variables on consumer purchase behavior, for both existing
and new products, including high-risk new brands and brand restages. Typical
marketing variables tested in BehaviorScan markets are television
advertisements, newspaper ads, manufacturers' coupons, free samples, in-store
displays, shelf price and packaging changes. BehaviorScan tests compare the
purchases of a group of consumers exposed to test variable(s) with the purchases
of a control group of consumers not exposed to the test variable(s). A unique
feature of the BehaviorScan system is its ability to deliver alternative
television advertising to different groups of panel households using the
Company's proprietary targetable television technology. Major costs associated
with the BehaviorScan system include payments to retailers, incentive programs
for participating panel households, field personnel costs, cable television
studio operation, computer resources and client service personnel costs.

Healthcare Solutions Services. IRI also provides consumer intelligence,
targeting and analytic services for the healthcare and pharmaceutical
industries. IRI's newly formed business group, The Healthcare Solutions Group,
was created during the fourth quarter of 2002 in response to the increasing need
to understand consumer insights and decisions related to prescription and
over-the-counter purchasing behaviors, attitudes and preferences. IRI's
Healthcare Solutions Group will offer a complete suite of retail tracking,
consumer panel and analytic-driven products and services under the RxPulse(TM)
brand to help its clients monitor, comprehend and compete within the rapidly
evolving healthcare space.

INTERNATIONAL SERVICES

Through subsidiaries and joint ventures with other leading marketing
information firms, in 1992 the Company began offering information services,
primarily using scanner-based data, in a number of countries outside of the
United States. The Company offers many of the same services internationally as
it offers within the U.S., including InfoScan retail tracking services, InfoScan
census services, related delivery and software, and analytic and consulting
services; however, specific services offered depend upon local country
competitive conditions and the prevailing retailer environments. Collection
practices for weekly product sales information in the Company's foreign markets
are largely scanner-based, although that may vary on a country-by-country basis,
depending on scanner data availability. Household panel services are available
in European markets from alliance partners of the Company. The Company's major
European subsidiaries and joint venture companies rely on the Company's data
production facilities in the United States as well as the Company's know-how and
intellectual property to provide InfoScan retail tracking services.

United Kingdom. The Company's subsidiary in the United Kingdom, IRI
InfoScan Ltd., offers scanner-based tracking services under the InfoScan name to
the British market. Organized in 1992 as a joint venture, the Company's partners
are Taylor Nelson Sofres plc of the United Kingdom ("TNS") and GfK AG of Germany
("GfK"). The Company owns substantially all of the joint venture. Pursuant to
contractual arrangements, the Company provides data production services to the
subsidiary from the Company's computer

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facilities in Wood Dale, Illinois. During 2000, the subsidiary acquired a 40%
interest in Radar Research Limited ("Radar"), a United Kingdom company that
performed testing services for key retailers. TNS owned the remaining 60% of
Radar. In the second quarter of 2002, the Company and TNS decided to cease
Radar's operations and the Company recorded a pre-tax charge of $966,000
relating to its investment and the accrual of the Company's share of Radar's
closing costs.

France. The Company's subsidiary in France, IRI-Secodip S.C.S., offers
scanner-based tracking services under the InfoScan name. IRI-Secodip S.C.S. was
organized in 1993 as a joint venture with GfK and Secodip S.A., a wholly owned
subsidiary of TNS. Since 1994, the Company has funded substantially all of the
joint venture's capital requirements and the Company now owns substantially all
of the joint venture interests. Pursuant to contractual arrangements, the
Company provides data production services to the subsidiary from the Company's
computer facilities in Wood Dale, Illinois.

Italy. In 1994, the Company began development of an information service in
Italy through the formation of a wholly-owned subsidiary, IRI InfoScan S.r.l.
("IRI Italy"). Its basic service consists of retail sales and promotion tracking
using a sample of retail grocery outlets. Supermarket sales are tracked by means
of scanning data, while sales in smaller, traditional shops are measured by
manual audit techniques. Pursuant to contractual arrangements, the Company
provides data production services to IRI Italy from the Company's computer
facilities in Wood Dale, Illinois.

Germany. The Company operates a retail tracking service joint venture in
Germany, Information Resources GfK GmbH ("IRI Germany"), which the Company
currently owns approximately 78% and GfK owns the balance. During 2001, the
Company's funding requirements per the joint venture agreement increased to 100%
although GfK continued to share in certain operating results through the second
quarter of 2002. In 2000, the Company began transitioning data production
services for IRI Germany from GfK's facilities in Nuremberg, Germany to the
Company's facilities in Wood Dale, Illinois. This transition was completed in
the first quarter of 2002 and the Company now provides data production services
to IRI Germany pursuant to contractual arrangements.

Netherlands. The Company and GfK operate a joint venture which offers a
scanner-based retail tracking service to the Netherlands market. This
scanner-based retail tracking service, Information Resources GfK B.V. ("IRI
Netherlands"), became fully-operational in 1994. The Company currently owns
approximately 80% of this company, with GfK owning the balance. In 2001, the
Company's funding requirements per the joint venture agreement increased to
100%, although GfK is entitled to 49% of any profits. Pursuant to contractual
arrangements, the Company provides data production services to IRI Netherlands
through the Company's computer facilities in Wood Dale, Illinois.

Benelux. In 1998, the Company sold a 9.9% interest in GfK Panel Services
Benelux B.V. to GfK reducing its ownership in this entity to 10%. The Company's
interest was further reduced to 7.6% during 2001 following a capital increase.
This company operates household panel services in the Netherlands and Belgium
and continues to cooperate with IRI Netherlands in the sale and delivery of
services to common customers.

Spain. IRI began a start-up venture in Spain during April 1998. In November
1998, the Company executed a joint venture agreement with Media Planning, S.A.
to create a new retail tracking business to serve the Spanish market under the
name Information Resources Espana, S.L. ("IRI Spain"). In January 1999, IRI
Spain and Dympanel, S.A., a wholly owned subsidiary of TNS, signed a cooperation
agreement which added Dympanel, S.A. as a third investor in IRI Spain. The
aforementioned agreements resulted in the Company, Media Planning, S.A., and
Dympanel, S.A. owning 65%, 33% and 2%, respectively, of the capital shares of
IRI Spain. IRI Spain began providing the InfoScan service to the Spanish market
in early 1999, using the Company's production facilities in Wood Dale, Illinois.

Greece. The Company operates a retail audit business in Greece which it
acquired in 1994. The operation includes collecting, reporting, analyzing and
interpreting national and regional sales data from retail audits.

Eastern Europe, Middle East and North Africa. In 1995, the Company entered
into a strategic alliance with Middle East Market Research Bureau ("MEMRB"), a
market research company based in Cyprus. MEMRB provides market research
throughout more than 20 countries in the Middle East, Eastern Europe,

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the Mediterranean, the Commonwealth of Independent States and North Africa.
Under the terms of the strategic alliance agreement, MEMRB has agreed to
cooperate in the adoption of multi-country technical standards developed by the
Company and co-market certain information and software products with the
Company. In 1998, IRI acquired a 19.9% ownership interest in MEMRB. The Company
holds an option to increase its ownership interest of MEMRB to 49%.

Asia and Australia. The Company had a joint venture in Japan with
Tokyo-based Mitsui & Co., Ltd. ("Mitsui") to provide information services in
Japan under the name Information Resources Japan, Ltd. The joint venture was
formed in 1995. Effective December 2002, the Company sold its 40% interest to
Mitsui and granted Mitsui the right to continue to use the trade name
"Information Resources Japan" for a period of twelve months after the date of
sale. Until September 2000, the Company also had wholly-owned software
distribution subsidiaries in Japan and Australia. The distribution of the
Company's proprietary Apollo software products has now been transferred to
Information Resources Japan, Ltd. and an unrelated company in Australia in
exchange for royalties and the businesses of these subsidiaries have been
discontinued.

Latin America. The Company has operations in certain Latin American markets
through joint ventures and subsidiaries in Venezuela, Puerto Rico, Guatemala and
Mexico. The Company owns 49% of the Venezuelan joint venture, Datos Information
Resources, which provides audit-based product tracking as well as ad hoc and
software services to the Venezuelan market. The Company's wholly-owned
subsidiary in Puerto Rico offers both audit-based product tracking and ad hoc
marketing research services. The Company owns 19.9% of a Guatemalan-based
company that provides research services in Central America. The Company also has
a wholly-owned software distribution subsidiary in Mexico to provide software
and consultancy services to both CPG and non-CPG clients in Mexico. In addition,
the Company has distributors of its proprietary Apollo software products in
Peru, Brazil, Chile and Argentina.

TRADEMARKS, PATENTS, LICENSES AND SOFTWARE PROTECTION

The Company is the owner of various trademarks, including Apollo(TM),
Attitudelink(TM), Attribute Drivers(TM), BehaviorScan(R), Builders(TM) Suite,
Choice Drivers(TM), Consumer Knowledge Suite(TM), Consumer Network(TM),
CouponScan(TM), CPGNetwork(R), CPGNetwork.com(R), Drivers on Demand(TM),
EZPrompt(R), InfoForce(R), InfoPro(TM), InfoScan Advantage(TM), InfoScan(R),
InfoScan Census(TM), InSite Reporting(TM), IntroCast(TM), IRI Software(TM),
Knowledge Group(TM), Mix Drivers(TM), Mix Planner(TM), Pilote(TM), Promo
Drivers(TM), PromoProphet(TM), PromotionScan(TM), QScan(R), Retail Network(TM),
ReviewNet(TM), Reviews Advantage(TM), RxPulse(TM), Sales Web(TM), ScanKey(TM),
Shoppers' Hotline(R), Shoppers Hotline Elite(R), Shoppers Hotline
EliteNet(TM)and XLerate(TM) . The Company also holds certain patents relating to
the targetable television technology utilized in its BehaviorScan service. The
patents expire at various dates through 2005. Loss or infringement of these
patents would likely not have a material adverse effect upon the Company's
revenues.

As a result of the Company's sale of its EXPRESS technology and line of
certain software products to Oracle in July 1995, the Company no longer owns a
large portion of the software that is currently used in the delivery of InfoScan
data. The Company secured a license back from Oracle providing for the continued
use of certain of the EXPRESS software products in the Company's business,
including rights to sublicense software to clients of the Company. The initial
term of the license expired in July 2001. The Company has negotiated various
rights with Oracle to continue to license, sublicense and support Oracle
software products beyond July 2001. The Company also has rights to use various
trademarks owned by Oracle, including Oracle EXPRESS and Oracle Sales Analyzer.
(See "Software and Related Products" above.)

The Company regards its databases as proprietary and, in addition to
copyright protection, relies upon trade secret laws, limitations on access to
its computer source codes, confidentiality agreements with clients and internal
nondisclosure safeguards to protect its rights to proprietary interests. The
Company's own computer software is also proprietary and bears appropriate
copyright notices.

Because of the rapid pace of technological change, trademark, patent or
copyright protection is of less significance than the knowledge and experience
of the Company's personnel and their ability to develop and market new products,
services and software applications and to leverage information delivery
technologies.

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WORKING CAPITAL PRACTICES

The Company invoices its information service clients in accordance with
agreed contract terms. Typical billing cycles are quarterly or monthly in
advance for long-term contracts and payment is typically due within 30 days of
receipt of invoice. Software licenses granted separate from data contracts
generally require payment of license fees in full upon delivery of software.
License fees for software licenses granted as part of data contracts are
generally received ratably over the term of the data contract.

The Company pays fees to some retailers in accordance with negotiated terms
for access to their scanner data for use in the InfoScan service. Payments to
other vendors are normally made in accordance with vendor terms.

CUSTOMERS

The Company had approximately 2,500, 2,600 and 2,800 clients using its
services in 2002, 2001 and 2000, respectively. The decline in customers since
2000 is primarily due to invoicing arrangements whereby clients and their
affiliates were combined for billing purposes. Most of the Company's clients are
CPG manufacturers and retailers in the United States or in other countries where
the Company offers its services. No client of the Company accounted for revenues
in excess of 10% of the Company's total revenues. The Company's top ten clients
in 2002 accounted for approximately 37% of the Company's 2002 revenues.

BACKLOG ORDERS

At December 31, 2002, 2001 and 2000, the Company had committed contract
revenues for services of approximately $440 million, $479 million and $507
million, respectively. Backlog revenue to be earned in the immediate year
following December 31, 2002, 2001 and 2000 is $264 million, $237 million and
$248 million, respectively. Variations in the backlog relate to the timing of
certain contract renewals and expirations. Contracts for retail tracking
services generally have terms of three to five years and not less than one year.
Such contracts are generally categorized into one of two classes: 1) cancelable
at the end of each year by giving six months written notice by either party, or
2) multi-year contracts either non-cancelable or cancelable only with
significant early termination fees, generally by giving six months written
notice after the initial multi-year term. Committed contract revenues include
only the non-cancelable portion of a contract.

COMPETITION

Numerous firms supply marketing and advertising research products and
services to CPG manufacturers and retailers. However, the Company and ACNielsen
are the only major firms that provide scanner-based product tracking services to
such manufacturers and retailers. In February 2001, VNU N.V. acquired the stock
of ACNielsen, resulting in a combined company that has access to greater
financial resources than the Company and is far larger than IRI in terms of
worldwide revenues. In most of the product tracking services markets in which
IRI and ACNielsen compete, ACNielsen currently maintains a larger market share.
Principal competitive factors include: price, data quality, reliability,
timeliness and comprehensiveness of analytical services and data; flexibility
and innovation in tailoring services to client needs; experience; the capability
of technical and client service personnel; and data processing and decision
support software.

The Company's market is very competitive and as a result of certain trends
and general economic conditions, the industry is facing a number of challenges.
Specifically, increasing customer consolidation among consumer packaged goods
manufacturers has caused the overall market for retail tracking services to
contract. In addition, retail tracking services offered by the Company and its
competitors, particularly in the U.S., now cover less of the total marketplace
than in prior years as a result of the decision by Wal-Mart in 2001 to
discontinue providing its point-of-sale data to third party data suppliers,
including the Company and ACNielsen, and the emergence and growth of new
channels of trade that do not release point-of-sale data for inclusion in retail
tracking services. Further, general global economic conditions in 2002 have
resulted in pricing pressure and reductions in overall customer spending on
retail tracking services. The Company expects these conditions to continue to
impact the consumer packaged goods industry and the demand for retail tracking
services for the foreseeable future.

9

Due to certain fixed costs of the Company's operations, including data
procurement and processing costs, erosion of its revenue base could have a
significant impact on profitability. From time to time competitive factors such
as quality, service and price cause clients to change their providers of retail
tracking services. Because of the lag effect between notification by a client of
its intent to switch suppliers and actual expiration of its contract, revenue
gains and losses are generally not reflected in the financial results until the
year following notification of a switch. Therefore, client gains and losses in a
given year are a key indicator, but not the only indicator of the following
year's performance. Other factors would include availability of new products as
well as market conditions for selling non-tracking products such as analytic and
store audit services.

RESEARCH AND DEVELOPMENT

The Company is continuously developing new products and services. In this
regard, the Company is actively engaged in research and development of new
database analyses and applications, software applications and services and data
delivery systems. Expenditures for research and development for the years ended
December 31, 2002, 2001 and 2000 approximated $11.2 million, $11.7 million and
$15.8 million, respectively. All research and development expenditures were
expensed as incurred.

PERSONNEL

At December 31, 2002, the Company had approximately 3,600 full-time and 750
part-time employees worldwide. The Company depends to a significant extent on
its skilled technical personnel to execute product development, delivery and
client service. Its future success will depend to a large degree upon its
ability to continue to hire, train and retain its professional staff.

WEBSITE ACCESS TO COMPANY REPORTS

The Company maintains an internet website at www.infores.com. IRI makes
available on the website annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with the
Securities and Exchange Commission.

ITEM 2. PROPERTIES

The Company markets and provides its information services and software
support services to U.S. clients from full-service sales offices in Bentonville,
Arkansas; San Francisco and Los Angeles, California; Norwalk, Connecticut;
Atlanta, Georgia; Waltham, Massachusetts; Minneapolis, Minnesota; Fairfield, New
Jersey; Winston-Salem, North Carolina; Cincinnati, Ohio; Fort Washington,
Pennsylvania as well as from its corporate headquarters in Chicago, Illinois.
The Company markets to international clients through subsidiaries, joint
ventures and/or offices in Belgium, Cyprus, France, Germany, Guatemala, Greece,
Italy, Japan, Mexico, the Netherlands, Puerto Rico, Spain, United Kingdom and
Venezuela as well as through its various distributors.

Principal leased facilities of the Company are as follows:

10

ITEM 3. LEGAL PROCEEDINGS

On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
The A.C. Nielsen Company (now owned by VNU, N.V.) and IMS International, Inc.
(collectively, the "Defendants") in the United States District Court for the
Southern District of New York entitled Information Resources, Inc. v. The Dun &
Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged that,
among other things, the Defendants violated Sections 1 and 2 of the Sherman Act,
15 U.S.C. Sections 1 and 2, by engaging in a series of anti-competitive
practices aimed at excluding the Company from various export markets for retail
tracking services and regaining monopoly power in the United States market for
such services. These practices included: i) entering into exclusionary contracts
with retailers in several countries, in order to restrict the Company's access
to sales data necessary to provide retail tracking services; ii) illegally
tying/bundling services in markets over which Defendants' had monopoly power
with services in markets in which ACNielsen competed with the Company; iii)
predatory pricing; iv) acquiring foreign market competitors with the intent of
impeding the Company's efforts at export market expansion; v) tortiously
interfering with Company contracts and relationships with clients, joint venture
partners and other market research companies; and vi) disparaging the Company to
financial analysts and clients. By the Action, the Company sought to enjoin the
Defendants' anti-competitive practices and to recover damages in excess of $350
million, prior to trebling. In procedural rulings, the District Court dismissed
IRI's claims for injury suffered from Defendants' activities in foreign markets,
where IRI operates through subsidiaries, and denied IRI leave to join such
subsidiaries as parties. IRI continues to pursue any and all appeal rights of
these procedural rulings prior to trial and to vigorously prosecute its claims
for injuries in the U.S. and other markets, which the Company believes to be
substantial.

As previously reported, in 1999 IRI filed an action against Manugistics,
Inc. in the Circuit Court of Cook County, Illinois. In this action IRI was
seeking damages for Manugistics' alleged breach of a Data Marketing and
Guaranteed Revenue Agreement and a related Non-Competition and Non-Solicitation
Agreement. In December 2001, IRI and Manugistics settled their dispute under
these agreements. Pursuant to the settlement agreement, Manugistics agreed to
pay IRI a total of $8.625 million. Of this amount, $4.75 million was paid in
cash installments. Manugistics also agreed to issue shares of its common stock
representing the remaining $3.875 million (the "Settlement Shares"). On February
26, 2002, Manugistics issued the Settlement Shares to IRI. All of the Settlement
Shares were sold by IRI for $3.875 million, net of commissions, on March 1,
2002.

In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.

11

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT

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.

13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock has traded on the NASDAQ Stock Market under the
symbol "IRIC" since 1983. The stock currently trades on the National Market
System. 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 were
as follows:

The last sale price on February 28, 2003 was $1.72 per share. As of
February 28, 2003 there were 1,539 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. There are restrictions in
IRI's bank revolving credit facility and certain lease agreements which prohibit
the payment of dividends without prior consent and limit the purchase or
redemption of Common Stock. (See Note 9 of the Notes to the Consolidated
Financial Statements.)

14

ITEM 6. SELECTED FINANCIAL DATA

- ---------------
(1) In 2002, special charges aggregated $14.9 million relating to the Company's
restructuring programs and a workforce reduction in the fourth quarter of
the year. During 2001, the Company recorded net charges aggregating $15.4
million reflecting $17.4 million of charges relating to its restructuring
programs and $2.0 million of other income resulting from the settlement of
the dispute with Manugistics. During 2000, the Company recorded charges
aggregating $14.5 million relating to its restructuring program and ($0.9)
million relating to other charges. In December 1999, the Company recorded a
$19.7 million charge

15

relating to its restructuring program and a $5.1 million charge resulting
from asset impairments, primarily goodwill at IRI Germany. (See Notes 4 and
11 of the Notes to Consolidated Financial Statements).

(2) In December 1999, the Company adopted the Information Resources, Inc.
Nonqualified Defined Contribution Plan (the "Plan"). In December 1999, the
Company made an irrevocable contribution of 877,000 shares of IRI common
stock to the Plan trust, resulting in a $7.9 million charge which represents
the fair market value of the common stock contribution.

(3) In 2002, the Company adopted Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets". As required by Statement No.
142, a goodwill impairment test was performed as of January 1, 2002 and the
Company recognized a goodwill impairment charge of $7.1 million as the
cumulative effect of a change in accounting principle in the Statement of
Operations.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The Company's market is very competitive and as a result of certain trends
and general economic conditions, the industry is facing a number of challenges.
Specifically, increasing customer consolidation among consumer packaged goods
manufacturers has caused the overall market for retail tracking services to
contract. In addition, retail tracking services offered by the Company and its
competitors, particularly in the U.S., now cover less of the total marketplace
than in prior years as a result of the decision by Wal-Mart in 2001 to
discontinue providing its point-of-sale data to third party data suppliers,
including the Company and ACNielsen, and the emergence and growth of new
channels of trade that do not release point-of-sale data for inclusion in retail
tracking services. Further, general global economic conditions in 2002 have
resulted in pricing pressure and reductions in overall customer spending on
retail tracking services. The Company expects these conditions to continue to
impact the consumer packaged goods industry and the demand for retail tracking
services for the foreseeable future. See "Business -- Competition."

The Company's revenues are affected in any given year by the net effect of
client gains and losses. The impact of client gains and losses has a somewhat
delayed effect on reported revenues in the Company's consolidated financial
statements. This lagging effect is due to the long-term nature of many contracts
and the fact that there is generally a period of transition between the date on
which a client makes a contract decision and the effective date of the
agreement. In addition, because of certain fixed costs of the Company's retail
tracking operations, including data procurement and processing costs, small
variations in revenue can have a significant impact on profitability.

With respect to the Company's U.S. retail tracking business, certain client
decisions in 2002, including the decision by one of IRI's largest clients,
Procter & Gamble ("P&G"), not to renew their retail tracking business with IRI
in the U.S. will negatively impact 2003 U.S. revenues and operating results.
However, the Company believes that, on a consolidated basis, it will be able to
mitigate the earnings impact of these U.S. revenue losses in 2003 by the
addition of new retail tracking clients that will begin generating revenue in
2003, increases in the sales of existing and new products to its current client
base and the realization of further cost efficiencies. In addition, although IRI
will stop providing retail tracking data to P&G in the second half of 2003, the
Company expects to continue to provide some services to P&G in 2003 and beyond.

The Company's Panel, Analytics and Testing business is growing through
increased spending by existing customers, the addition of new customers and the
introduction of new products and services. For example, in the U.S., the Company
has been experiencing increased demand for its panel and analytics services
resulting in an 11.2% increase in 2002 over the prior year. The Company
anticipates continued growth in these areas of its business as CPG companies
require increasingly more and advanced consumer intelligence and analysis.

The Company also continued to experience revenue growth in 2002 in most of
the Company's European markets, with the notable exception being Germany.
Although International operating losses were higher in 2002, they were primarily
driven by the Company's German operation. Losses from the German operation in
2002 increased over the prior year as a result of the Company's transition to a
new service in that country. As discussed below in Special Charges, German
production was transitioned to the U.S. in the first quarter of

16

2002. However, the German operation was also transitioning customers to a new
scan-based service during 2002 and experienced difficulty meeting client
expectations during this transition. This resulted in lower revenues due to lost
customers and credits provided to existing customers. Absent the losses
attributable to the Company's German business, the Company's International
operations would have reflected a profit in 2002. The Company believes that most
of the operational difficulties in Germany have been addressed and that results
will improve in 2003. Management continues to evaluate various options to
achieve International operating profit.

In February 2003, the Company announced the retention of an investment
banking firm to assist in its exploration of strategic options. Such options
include selling all or parts of the Company, joint ventures, restructuring and
capital infusions.

GOODWILL IMPAIRMENT

The Company performed a goodwill impairment test as required by Statement
No. 142 to determine the implied fair value of the goodwill recorded on its
books as of January 1, 2002. As the goodwill related entirely to previous
international transactions, the fair value was estimated by discounting the
estimated future cash flows of the international reporting unit. Based on this
analysis, the Company recognized a goodwill impairment charge of $7.1 million.
In accordance with Statement No. 142, the charge was reflected as the cumulative
effect of a change in accounting principle in the Statement of Operations.

SPECIAL CHARGES

Since 1999, the Company has undertaken major initiatives resulting in
significant or incremental expenditures that have been classified as Special
Charges in the Statement of Operations. In 2002, Special Charges aggregated
$14.9 million relating to the Company's restructuring programs and a workforce
reduction in the fourth quarter of the year. Special Charges are discussed in
detail below. Management reviews the operations and related costs on a
continuous basis and believes further charges are likely to be required in 2003.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
management to make estimates and assumptions. Management believes that of the
Company's significant accounting policies as disclosed in Note 1 of the Notes to
Consolidated Financial Statements, the following affect its more significant
judgments and estimates used in the preparation of the consolidated financial
statements.

Allowance for Bad Debts: IRI maintains an allowance for doubtful accounts
for estimated losses resulting from the inability of its clients to make
required payments. If the financial condition of the Company's clients were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. No client accounted for 10% or more of
consolidated revenue in 2002, 2001 or 2000.

Deferred Taxes: The Company has significant net operating loss
carryforwards that result in a deferred tax asset. The asset has been reduced by
a valuation allowance to an amount that is more likely than not to be realized.
Realization of the asset is primarily dependent on the future recognition of
substantial taxable income resulting from the reversal of existing net temporary
differences. However, in the event that IRI were to determine that the deferred
tax asset would not be realized, a material adjustment to the deferred tax asset
could be required.

Investments: The Company has equity investments in companies having
operations in areas within its strategic focus. An investment impairment charge
is required if management believes the investment has experienced a decline in
value that is other than temporary. The Company is required to review all of its
investments periodically for impairment, however, the investments are in
non-marketable equity securities for which no open market valuations are
available and the impairment analysis requires significant judgment. Future
adverse changes in market conditions or poor operating results of underlying
investments could result

17

in losses or an inability to recover the carrying value of the investments and
the Company may be required to record an impairment charge in the future.

Deferred Data Procurement Costs: IRI capitalizes data procurement
expenditures as an asset and amortizes the expenditures over a period of 28
months, which is the average number of months of back-data provided to clients.
Capitalized costs include payments to retailers for point-of-sale data and costs
related to collecting, reviewing and verifying other data (i.e., causal factors)
which are an essential part of the Company's database. The asset is reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. An estimate of the
undiscounted future cash flows produced by the asset is compared to the carrying
value to determine whether an impairment exists. If estimates of cash flows
change in the future, the Company may be required to reduce the carrying value
of the asset resulting in a material non-cash expense in the Statement of
Operations.

RESULTS OF OPERATIONS

Consolidated revenues in 2002 were slightly lower than 2001 while 2001
revenues increased 4.7% over 2000. 2002 net losses were $13.0 million compared
to losses of $3.9 million in 2001 and losses of $7.5 million in 2000.

The Company considers the aggregation of operating profit (loss), equity
earnings (losses) and minority interests ("operating results") on a geographic
basis to be a meaningful measure of the Company's operating performance. A
comparative analysis of consolidated revenues and operating results for the
years ended December 31, 2002, 2001 and 2000 follows (in thousands):

Revenues from the Company's U.S. Services business in 2002 were 2.1% lower
than in 2001, while revenues in 2001 were 5.6% higher than in 2000. The decrease
in 2002 revenue was primarily due to a 5.1% decrease in retail tracking revenue
that was partially offset by an 11.2% increase in revenue from panel and
analytics products and services. The decline in retail tracking revenue is
primarily a result of the delayed impact of customer losses in 2001 that were
not completely offset by revenues generated from new customers and increased
spending by existing customers during 2002. The increase in 2001 over 2000
revenue was primarily due to a 17.1% increase in analytic and panel revenue, a
2.8% increase in retail tracking services driven primarily by the growth of the
Company's Web access portal, CPGNetwork, and a 10.7% increase in retail audit
services.

U.S. operating results before special charges decreased by $5.0 million or
19.3% due to a 2.1% decrease in revenues that was partially offset by a 1.0%
decline in expenses. While the Company incurred additional costs associated with
the growth of its analytics business, these costs were generally offset by
savings in a number of

18

other areas as a result of the Company's ongoing cost saving efforts.
Additionally, 2002 incentive compensation was less than the prior year due to
lower operating results. U.S. operating results before special charges increased
$10.1 million or 63.5% in 2001 due to a 5.6% increase in revenues partially
offset by a 3.2% increase in expenses.

International Services revenues in 2002 increased by 5.7%, 1.0% in local
currency, over 2001. Revenues in 2001 increased by 1.9%, 6.0% in local currency,
over 2000. Operating results, before special charges, for the Company's
International businesses reflected an $8.3 million loss for 2002 compared to a
loss of $1.4 million in 2001. The higher losses in 2002 were primarily driven by
the Company's German operation. Revenue growth continued in 2002 in most of the
Company's European markets, with the notable exception being Germany. Excluding
Germany and the impact of currency, International revenues increased 4.0%.
Expense increases in 2002 of 4.0% on a local currency basis offset the favorable
impact of revenue growth. However, excluding Germany, International operating
results were positive in 2002 and 2001. International operating results, before
special charges, reflected a $1.4 million loss in 2001 compared to a $1.3
million loss in 2000. Revenue growth continued in 2001 in the Company's European
markets, primarily in the U.K., France, Italy and Spain. Expense increases in
2001 of 5.0% on a local currency basis partially offset the favorable impact of
revenue growth.

Year Ended December 31, 2002: Consolidated net losses were $13.0 million in
2002 compared to net losses of $3.9 million in 2001. The 2002 net loss increased
primarily due to lower U.S. and international contributions and a charge of $7.1
million relating to the cumulative effect of an accounting change for goodwill.
Results in 2002 reflect a net after tax charge of $9.4 million for special
charges compared to $9.7 million in 2001. (See further discussion of Special
Charges below.)

Consolidated revenues decreased slightly to $554.8 million in 2002. U.S.
revenues decreased 2.1% primarily due to a decrease in retail tracking revenue
of 5.1% that was partially offset by an 11.2% increase in revenue from panel and
analytics products and services. International revenues increased 5.7% over
2001, however, international revenue growth in local currency was 1.0%,
reflecting the strength of the European currencies versus the U.S. dollar.
Excluding Germany and the impact of currency, international revenue grew 4.0%
reflecting continued growth in the Company's European markets, primarily in the
U.K., France, Italy and Spain.

Consolidated cost of information services sold increased by $8.1 million,
or 1.6%, to $502.1 million in 2002. The increase is primarily the result of
foreign currency exchange effects. While the Company incurred additional costs
associated with the growth of its analytics business, these costs were generally
offset by savings in a number of areas as a result of the Company's ongoing cost
saving efforts and reduced incentive compensation.

Consolidated selling, general and administrative expenses decreased by $4.4
million, or 8.5%, to $47.0 million for 2002. The unfavorable impact of
strengthening European currencies during 2002 was more than offset by lower
costs as a result of ongoing cost savings efforts.

Special charges are discussed below.

Interest and other expenses were $0.3 million for 2002 compared to $3.1
million in 2001. The decrease in 2002 is due to lower interest expense resulting
from decreased bank borrowings and foreign exchange gains resulting from the
strength of the European currencies against the U.S. dollar during 2002. The
Company's 2002 income tax benefit was lower than the income tax rates computed
using the U.S. Federal statutory rate primarily due to the effects of
non-deductible expenses.

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under the
new rules, goodwill, the excess of the carrying value over the net book value of
investments accounted for using the equity method and intangible assets deemed
to have indefinite lives, are no longer amortized but are subject to annual
impairment tests. Other intangible assets continue to be amortized over their
useful lives.

19

The Company performed a goodwill impairment test as required by Statement
No. 142 to determine the implied fair value of the goodwill recorded on its
books as of January 1, 2002. Based on this analysis, the Company recognized a
goodwill impairment charge of $7.1 million and reflected the charge as the
cumulative effect of a change in accounting principle in the Statement of
Operations.

Proforma results for 2001, had the provisions of Statement No. 142 been
applied and no goodwill impairment recorded, would have been a net loss of $3.0
million or $.10 per diluted share compared to a reported net loss of $3.9
million or $.13 per diluted share.

Year Ended December 31, 2001: Consolidated net losses were $3.9 million in
2001 compared to net losses of $7.5 million in 2000. The 2001 net loss decreased
primarily due to higher revenues, which outpaced increases in operating and
special charges. Results in 2001 reflect a net after tax charge of $9.7 million
for special charges compared to $7.9 million in 2000. (See further discussion of
Special Charges below.)

Consolidated revenues increased 4.7% to $555.9 million in 2001. U.S.
revenues increased 5.6% primarily due to increases in analytic, CPGNetwork and
retail tracking services revenue. International revenues increased 1.9% over
2000, reflecting continued growth in the Company's European markets, primarily
in the U.K., France, Italy and Spain. However, international revenue growth in
local currency was 6.0%, reflecting the strength of the U.S. dollar versus
European currencies.

Consolidated cost of information services sold increased by $19.8 million,
or 4.2%, to $493.9 million in 2001. The increase is primarily attributable to
increases in compensation and benefits and market operations resulting from
increased revenues. These increases were offset by declines in office and travel
expenses. Additionally, the strength of the U.S. dollar versus European
currencies favorably impacted expenses.

Consolidated selling, general and administrative expenses decreased by $4.0
million, or 7.2%, to $51.4 million for 2001. The decrease is primarily
attributable to declines in recruiting and office expenses.

Special charges are discussed below.

Interest and other expenses were $3.1 million for 2001 compared to $3.6
million in 2000. The decrease in 2001 is due to lower interest expense resulting
from decreased bank borrowings offset by higher foreign currency losses. The
Company's 2001 income tax benefit was lower than the income tax rates computed
using the U.S. Federal statutory rate primarily due to the effects of
non-deductible expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company's current cash resources include its $9.0 million consolidated
cash balance and $26.9 million available, net of letters of credit, under the
Company's new revolving credit facility discussed below, as of December 31,
2002. The Company anticipates that it will have sufficient funds from these
sources and internally generated funds from its U.S. operations to satisfy its
cash needs for the foreseeable future. The Company's new credit agreement, which
contains covenants restricting the Company's ability to incur additional
indebtedness, expires in July 2005. The new bank revolving credit facility
includes financial and non-financial covenants as discussed below. The Company
expects to be in compliance with all of its covenants during 2003 however, if
the Company violates a covenant that the bank group is unwilling to amend or
waive, and the bank group declares a default under the credit agreement,
liquidity could be negatively impacted.

Cash Flow for the Year Ended December 31, 2002: Consolidated net cash
provided by operating activities was $154.3 million for the year ended December
31, 2002 compared to $179.7 million in 2001. This decrease was primarily
attributable to changes in accounts receivable and accounts payable resulting
from the timing of collections and payments and including a $10.9 million cash
payment the Company received in 2001 as an early termination fee on a client
contract that was to expire in 2005.

Consolidated cash used in net investing activities was $156.5 million in
2002 compared to $154.9 million in 2001. Investing activity in 2002 reflects
higher expenditures for data procurement relating to product enhancements.
Additionally, data expenditures were higher due to the impact of currency on
international data payments as well as increased international retailer
payments. These expenditures were partially offset by

20

lower expenditures for capital. 2001 investing activity also included payments
made in connection with the formation of Mosaic InfoForce, L.P.

Net cash used before financing activities was $2.2 million in 2002 compared
to net cash provided before financing activities of $24.7 million in 2001.
Consolidated cash used by net financing activities was $3.3 million in 2002
compared to $22.6 million in 2001. In 2002, the Company purchased $1.2 million
of its stock compared to $0.2 million of stock purchases in 2001. Additionally
the Company repaid $21.0 million under its revolving line of credit during 2001.

Cash Flow for the Year Ended December 31, 2001: Consolidated net cash
provided by operating activities was $179.7 million for the year ended December
31, 2001 compared to $143.9 million in 2000. In addition to improved earnings in
2001, a significant portion of this increase is attributable to a $10.9 million
cash payment received by the Company as an early termination fee on a client
contract that was to expire in 2005. Net cash provided by operating activities
was also higher due to improved working capital management in 2001.

Consolidated cash used in net investing activities was $154.9 million in
2001 compared to $148.2 million in 2000. Investing activity in 2001 reflects
higher payments for U.S. convenience and drug store data and higher retailer
payments in the U.K. and France. Additionally, 2001 investing activity reflects
reduced capital contributions from minority partners. 2001 investing activity
also includes payments of $3.7 million made in connection with the formation of
Mosaic InfoForce, L.P.

Net cash provided before financing activities was $24.7 million in 2001
compared to a net cash use before financing activities of $4.3 million in 2000.
Consolidated cash used by net financing activities was $22.6 million in 2001
compared to net cash provided by financing activities of $8.4 million in 2000.
The Company repaid $21.0 million under its revolving line of credit during 2001
and purchased $0.2 million of the Company's stock compared to borrowings of
$11.0 million and $0.9 million of stock purchases in 2000.

Financings: On July 12, 2002, the Company replaced its existing $35.0
million credit facility, which was scheduled to expire in October 2002, with a
new $40.0 million credit facility. The new facility has floating rate interest
options that range between 2.25% and 3.00% over LIBOR and commitment fees of up
to 0.50% payable on the unused portion. The weighted average interest rate at
December 31, 2002 was 4.17%. The new credit facility expires in July 2005. Under
the new credit facility, the maximum commitment of funds available for
borrowings is limited by a defined borrowing base formula related to eligible
accounts receivable, which fluctuates during the quarter. Borrowings under the
facility are secured by the Company's assets.

The financial covenants in the new credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. The new bank credit agreement contains
covenants which restrict the Company's ability to incur additional indebtedness.
As of December 31, 2002, the Company was in compliance with all covenants.

Contractual Obligations and Commercial Commitments: Following is a summary
of the Company's commitments as of December 31, 2002 (in thousands):

Common Stock Repurchase Program: During 2000, the Company began acquiring
shares of its Common Stock in connection with a stock repurchase program
announced in August 2000 that was established to acquire shares to fund the
Company's 2000 Employee Stock Purchase Plan ("ESPP"). The program, approved by
the Company's Board of Directors, authorized the periodic repurchase of up to
one million shares of its Common Stock on the open market, or in privately
negotiated transactions, depending upon market conditions and other factors.
During 2002, the Company purchased 210,000 shares of Common Stock aggregating
$1.2 million at an average cost of $5.70 per share. The Company purchased 40,000
shares of Common Stock aggregating $0.2 million during 2001 at an average cost
of $5.50 per share. During 2002, the Company sold 286,452 shares, 210,000 shares
of which were held in treasury and the remainder of which were newly issued
shares of Common Stock, for $0.7 million to employees participating in the ESPP.
During 2001, the Company sold 199,720 shares, 40,000 shares of which were held
in treasury and the remainder of which were newly issued shares of Common Stock,
for $0.8 million to employees participating in the ESPP. During 2000, the
Company sold 158,827 shares of Common Stock, which were held in treasury, for
$0.4 million to employees participating in the ESPP.

Other Deferred Costs: Consolidated deferred data procurement expenditures
were $140.9 million, $129.0 million and $124.8 million for the years ended
December 31, 2002, 2001 and 2000, respectively. These expenditures are amortized
over a period of 28 months, which is the average number of months of back-data
provided to clients, and include payments to retailers for point-of-sale data
and costs related to collecting, reviewing and verifying other data (i.e.,
causal factors) which are an essential part of the Company's database. Deferred
data procurement expenditures for the Company's U.S. services business were
$81.7 million, $76.4 million and $74.7 million for the years ended December 31,
2002, 2001 and 2000, respectively. The increase in deferred data procurement
expenditures in 2002 over the prior year is primarily due to increased causal
collection costs associated with InfoScan product enhancements. The increase in
deferred data expenditures in 2001 over the prior year was primarily due to
higher payments for convenience and drug store data. The Company's International
services business deferred data procurement expenditures were $59.2 million,
$52.6 million and $50.1 million for the years ended December 31, 2002, 2001 and
2000, respectively. International expenditures increased in 2002 due to the
impact of currency, product enhancements as well as increased retailer payments.
The increase in deferred data expenditures in 2001 over the prior year was
primarily due to increases in retailer payments in the U.K. and France.

Capital Expenditures: Consolidated capital expenditures were $14.0 million,
$20.9 million and $19.8 million for the years ended December 31, 2002, 2001 and
2000, respectively. Capital expenditures for the Company's U.S. services
business were $10.1 million, $16.5 million, and $14.0 million, while
depreciation expense was $22.8 million, $24.4 million and $25.2 million for the
years ended December 31, 2002, 2001 and 2000, respectively. Non-cash investing
and financing activities are excluded from the consolidated Statement of Cash
Flows. In 2002, the Company acquired computer and data collection equipment for
$6.5 million in exchange for capital leases. During 2001, the Company acquired
computer software licenses for $4.8 million in exchange for long-term
obligations and during 2000, the Company acquired mainframe computer equipment
in exchange for a capital lease obligation recorded at $7.4 million. The
Company's International services business capital expenditures were $3.9
million, $4.4 million and $5.8 million, while depreciation expense was $4.9
million, $4.5 million and $4.6 million for the years ended December 31, 2002,
2001 and 2000, respectively.

Consolidated capitalized software development costs, primarily in the U.S.,
were $2.2 million, $2.1 million and $1.6 million for the years ended December
31, 2002, 2001 and 2000, respectively.

22

NOL & Tax Credit Carryforwards: As of December 31, 2002, the Company had
cumulative U.S. federal taxable net operating loss ("NOL") carryforwards of
$116.8 million which expire primarily in 2009, 2011, 2020 and 2022. At December
31, 2002, the Company also had U.S. tax credit carryforwards of $7.0 million,
$5.8 million of which expire primarily between 2003 and 2012, and the remainder
of which can be carried forward indefinitely. Certain of these carryforwards
have not been examined by the Internal Revenue Service and, therefore, are
subject to potential adjustment. U.S. tax rules could limit the utilization of
these carryforwards in the event of a future change in ownership of the Company.

The Company has reduced the deferred tax liabilities in its consolidated
financial statements by the deferred tax assets related to its U.S. federal and
state NOL carryforwards and certain foreign NOL carryforwards. The Company
expects to realize these deferred tax assets primarily from future recognition
of substantial taxable income resulting from the reversal of $90.2 million of
existing net temporary differences.

Impact of Inflation: Inflation has slowed in recent years, however the
Company's results of operations are impacted by rising prices given the labor
intensive nature of the business. The Company passes increased costs on to
customers with multi-year contracts by adjusting sales prices through consumer
price index increases to the extent provided for in such contracts.

SPECIAL CHARGES

Since 1999, the Company has undertaken major initiatives as described below
resulting in significant or incremental expenditures that have been classified
as special charges in the Statement of Operations.

2002 Workforce Reduction: In the fourth quarter of 2002, the Company
eliminated approximately 5% of its total workforce in the United States and
Europe through layoffs and the elimination of open positions. A charge of $7.8
million was recorded in the fourth quarter of 2002 for severance and other costs
related to the layoffs in accordance with EITF Issue No. 94-3. The Company
expects to realize cost savings of approximately $15.0 million per year as a
result of the workforce reduction.

Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta. The objective of Project Delta was to
improve productivity and operating efficiencies to reduce the Company's ongoing
cost structure in its U.S. operations. As a result, 16% of the U.S. workforce
was eliminated. The work outlined as part of Project Delta was completed during
the third quarter of 2001. A restructuring accrual was established in 1999 to
reflect certain of the outstanding obligations related to 1999 restructuring
charges. Certain costs were not eligible for accrual in 1999 in accordance with
EITF Issue No. 94-3 and were recorded during 2000 and 2001. The Company realized
cost savings from Project Delta of $30.0 million in 2000 and an additional $10.0
million in 2001, before the impact of certain other planned cost increases.

Transition of German Production to U.S. Facility: The Company made the
decision in the fourth quarter of 1999 to transfer production services for IRI
Germany from an external vendor in Germany to the Company's U.S. headquarters
facility in order to enhance its InfoScan offering in Germany and to reduce
future production costs. The transition of German production to the U.S.
facility began in the first quarter of 2000 and was completed in the first
quarter of 2002.

Information Technology Assessment: During the fourth quarter of 2001, the
Company began a review of its information technology operations to assess
potential restructuring costs and benefits. The review included initial
assessments of database design, transition planning and cost and savings
estimates and was completed in the second quarter of 2002. This project resulted
in cost savings, process efficiencies and a plan for continuous improvement of
the technology infrastructure.

23

The following tables reflect special charges incurred during 2002, 2001 and
2000 and all cash payments made to date (in thousands):

2002 WORKFORCE REDUCTION

In the fourth quarter of 2002, the Company decided to terminate
approximately 140 full-time employees in the United States and Europe in 2002
and the beginning of 2003. The Company recorded a charge of $7.8 million in the
fourth quarter of 2002 for termination benefits when communication of such
benefits had been made to affected employees.

24

PROJECT DELTA

Termination Benefits: In the fourth quarter of 1999, the Company decided to
terminate approximately 325 full-time positions during 2000, impacting virtually
all areas of the U.S. business, including operations, client services,
technology and marketing, as well as corporate headquarters. The Company
recorded a charge of $8.4 million in 1999 for termination benefits when
communication of such benefits had been made to affected employees. Additional
provisions of $1.4 million and $3.6 million were made in 2001 and 2000,
respectively, to cover retention and relocation incentive costs that were not
eligible for accrual at December 31, 1999. As of December 31, 2001, 397
employees had been terminated under various Project Delta initiatives.

Discontinued Activities: During 2000, it was determined that certain
equipment used in the Company's U.S. operations to collect retail information
would no longer be utilized after the second quarter of 2001. Accordingly, the
Company recognized a non-cash charge of $2.0 million in 2001 and 2000 relating
to accelerated depreciation on this equipment.

During 2000, the Company ceased operations of entities in Japan (IRI Apollo
K.K.) and Australia (Information Resources Australia Pty, Ltd.) which were
responsible for distributing Apollo software. The Company entered into
agreements with its 40% owned affiliate, Information Resources Japan Ltd. and an
unrelated company in Australia to distribute its Apollo software. In connection
with the cessation of local operations, the Company incurred charges during 2000
of $0.7 million and $1.0 million relating to the Japan and Australia businesses,
respectively.

Disposition of Excess Office Space: As a result of planned headcount
reductions and space not currently utilized, office space was reduced. The
Company recorded $0.02 million and $0.6 million of charges in 2001 and 2000,
respectively, relating to accelerated depreciation on leasehold improvements and
furniture and fixtures and lease buyouts associated with these facilities.

Other Costs: Other costs in 2001 and 2000 relate primarily to consulting
fees paid to third parties for assistance in the identification of process
improvements and efficiencies within the U.S. operations.

TRANSITION OF GERMAN PRODUCTION TO U.S. FACILITY

During 2002, 2001 and 2000, charges of approximately $1.1 million, $7.8
million and $4.7 million, respectively, were recorded related to the transition
of German production to the U.S. facility. These costs consist primarily of
parallel processing and temporary workforce expenses. The transition was
completed in the first quarter of 2002.

INFORMATION TECHNOLOGY ASSESSMENT

These costs related primarily to consulting fees paid to a third party in
connection with the technology project.

FUTURE RESTRUCTURING CHARGES

Management reviews the operations and related costs on a continuous basis
and believes further charges are likely to be required in 2003.

OTHER ITEMS

Dispute Settlement: During the fourth quarter of 2001, the Company settled
a dispute with Manugistics, Inc. as further discussed in Note 11, Legal
Proceedings, of the Notes to Consolidated Financial Statements. Manugistics
agreed to pay IRI a total of $8.625 million, resulting in a gain of $2.0 million
which was reflected as other income in Special Charges.

Asset Impairments: In the fourth quarter of 1999, Special Charges included
a $0.9 million charge for a non-current receivable reserve. This reserve was
reversed during 2000 pursuant to a settlement agreement reached with the other
party.

25

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." Statement No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date that a commitment to an exit or
disposal plan is made. Examples of costs covered by the statement include lease
termination expenses and certain employee severance costs that are associated
with a restructuring, discontinuing an operation or other exit or disposal
activities. Statement No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002.

In November 2002, the FASB issued Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others." FIN No. 45 requires certain guarantees to be recorded
at fair value, and requires guarantors to make significant new disclosures, even
if the likelihood of making payments under the guarantees is remote. The initial
recognition and measurement provisions of FIN No. 45 are to be applied on a
prospective basis for guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for financial statements issued after
December 15, 2002.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 addresses accounting for variable interest
entities (VIE), defined as a separate legal structure that either 1) does not
have equity investors with voting rights, or 2) has equity investors with voting
rights that do not provide sufficient financial resources for the entity to
support its own activities. FIN No. 46 requires that a VIE be consolidated by a
company if that company is subject to a majority of the VIE's residual return,
and also requires disclosures concerning VIEs that a company is not required to
consolidate but in which it has a significant variable interest. Consolidation
requirements apply immediately to VIEs created after January 31, 2003, and to
existing VIEs in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply to financial statements
issued after January 31, 2003, regardless of when the VIE was created. The
Company and Mosaic Group, Inc. formed a joint venture company, Mosaic InfoForce,
L.P. ("MIF"), in which the Company currently has a 49% ownership interest and
Mosaic Group, Inc., through wholly-owned subsidiaries, owns the remainder. The
Company is currently in the process of a complex analysis to determine if MIF is
a VIE and if so which, if any entity, is the primary beneficiary for
consolidation purposes.

FORWARD LOOKING INFORMATION

All statements other than statements of historical fact made in this Annual
Report on Form 10-K are forward looking. In particular, statements regarding
industry prospects, our future results of operations or financial position, and
statements preceded by, followed by or that include the words "intends,"
"estimates," "believes," "expects," "anticipates," "should," "could," or similar
expressions, are forward-looking statements and reflect our current expectations
and are inherently uncertain. The Company's actual results may differ
significantly from our expectations for a number of reasons, including risks and
uncertainties relating to:

- customer renewals of service contracts

- timing of significant new customer engagements

- competitive conditions

- the Company's ability to successfully implement its cost containment
efforts

- client acceptance of new products and services

- potential loss or increased cost of ongoing supply of point-of-sale data
from cooperating retailers

- changes in client spending for the non-contractual services the Company
offers

- the success of technology alternatives currently being developed or
implemented by the Company to provide access to Company data

26

- other technology changes that may impact Company services

- material changes in partnerships and strategic alliances

- foreign currency exchange rates

- adverse impacts on liquidity

- other factors beyond the Company's control

These risks and uncertainties are described herein and in reports and other
documents filed by the Company with the Securities and Exchange Commission.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of the Company due to
adverse changes in financial rates. The Company is exposed to market risk in the
area of foreign exchange and interest rates.

Foreign Currency Exchange Rates: The Company operates and conducts business
in several foreign countries, primarily in Europe, and as a result is exposed to
movements in foreign exchange rates. Exchange rate movements upon consolidation
of the foreign subsidiaries for which the functional currency is not the U.S.
dollar could impact the Company's revenues, expenses and equity. The Company's
net earnings are also exposed to exchange rate movements relating to certain
intercompany transactions between the U.S. and foreign subsidiaries. The Company
does not use derivative financial instruments to manage changes in foreign
currency exchange rates.

Interest Rate Risk: A 1% fluctuation in interest rates would not have a
significant impact on the operating results of the Company. The Company does not
currently maintain any interest rate hedge agreements.

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:

Financial statement schedule is included on page 56 preceding the signature
page of this report (see Item 15).

27

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders Information Resources, Inc.

We have audited the accompanying consolidated balance sheets of Information
Resources, Inc. and Subsidiaries as of December 31, 2002 and 2001 and the
related consolidated statements of operations, changes in stockholders' equity
and comprehensive income and cash flows for each of the three years in the
period ended December 31, 2002. Our audits also included the financial statement
schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2002, the Company changed its method of accounting for goodwill and
other intangible assets to conform with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

ERNST & YOUNG LLP

Chicago, Illinois
February 5, 2003

28

INFORMATION RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes to consolidated financial statements are
an integral part of these statements.

29

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes to consolidated financial statements are
an integral part of these statements.

30

INFORMATION RESOURCES, INC. AND SUBSIDIARIES

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31,

The accompanying notes to consolidated financial statements are
an integral part of these statements.

31

INFORMATION RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes to consolidated financial statements are
an integral part of these statements.

32

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

1. SUMMARY OF ACCOUNTING POLICIES

BUSINESS

Information Resources, Inc. and its subsidiaries (collectively referred to
herein as "IRI" or the "Company") is a leading provider of universal product
code ("UPC"), scanner-based business solutions services to the consumer packaged
goods ("CPG") industry, offering services primarily in the U.S. and Europe. The
Company supplies CPG manufacturers, retailers and brokers with information and
analysis critical to their sales, marketing and supply chain operations. IRI
provides services designed to deliver value through an enhanced understanding of
the consumer to a majority of the Fortune 500 companies in the CPG industry.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Information
Resources, Inc. and all wholly-or majority-owned subsidiaries. Minority
interests reflect the non-Company owned stockholder interests in Information
Resources GfK GmbH ("IRI Germany"), Information Resources GfK B.V. (the
Netherlands) and Information Resources Espana, S.L. (Spain). The equity method
of accounting is used for investments in which the Company has a 20% to 50%
ownership interest because it exercises significant influence over operating and
financial policies. All significant intercompany accounts and transactions have
been eliminated in consolidation.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results may differ from estimates.

REVENUE RECOGNITION

Revenues on contracts for retail tracking services, which generally have
terms of three to five years, are recognized over the terms of the contracts.
Such contracts are generally categorized into one of two classes: 1) cancelable
at the end of each year by giving six months written notice by either party; or
2) multi-year contracts either non-cancelable or cancelable only with
significant penalties, generally by giving six months written notice after the
initial multi-year term. Revenues for special analytical services, 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 from the license of software products, subject to perpetual
license agreements, are recognized upon delivery when there is a reasonable
basis for estimating collectibility and the Company has no significant remaining
obligations. License fees for software licenses granted as part of data
contracts are recognized ratably over the term of the data contract. Related
software maintenance fees are recognized as earned over the terms of their
respective contracts.

RESEARCH AND DEVELOPMENT

The Company is continuously developing new products and services. In this
regard, the Company is actively engaged in research and development of new
database analyses and applications, software applications and services and data
delivery systems. Expenditures for research and development for the years ended

33

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

December 31, 2002, 2001 and 2000 approximated $11.2 million, $11.7 million and
$15.8 million, respectively. All research and development expenditures were
expensed as incurred.

BENEFIT PLANS

The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. The plan
allows eligible employees to contribute a portion of their pre-tax income in
accordance with specified guidelines. The Company matches a percentage of
employee contributions up to certain limits. The expense recognized for the
401(k) plan totaled approximately $2.1 million, $2.6 million and $2.8 in 2002,
2001 and 2000, respectively.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS AND CREDIT RISK

The carrying value of the Company's financial instruments, cash and cash
equivalents, investments and debt obligations represent a reasonable estimate of
their fair value. As of December 31, 2002 and 2001, the Company had no
significant concentrations of credit risk related to cash equivalents and
accounts receivable.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and is depreciated over the
estimated service lives. For financial statement purposes, depreciation is
provided by the straight-line method. The Company also capitalizes the cost of
internal-use computer software as incurred and amortizes such costs over the
respective estimated useful lives in accordance with SOP 98-1. Leasehold
improvements are amortized over the shorter of their estimated service lives or
the terms of their respective lease agreements. Estimated useful lives are as
follows:

Computer equipment and software............................. 3 to 7 years
Market testing and other operating equipment................ 3 to 7 years
Leasehold improvements...................................... 4 to 20 years
Equipment and furniture..................................... 3 to 8 years

OTHER ASSETS

Other assets include deferred data procurement costs, intangible assets and
capitalized costs of software held for sale. Data procurement costs are
amortized over a period of 28 months, which is the average number of months of
back-data provided to clients, and include payments and services to retailers
for point-of-sale data and costs related to collecting, reviewing and verifying
other data (i.e., causal factors) which are an essential part of the database.
Intangible assets include goodwill (prior to 2002) and solicitation rights which
arose from acquisitions, investments or strategic alliances. Prior to 2002,
goodwill was amortized on a straight-line basis over periods from ten to twenty
years. Solicitation rights are amortized on a straight-line basis over the
expected useful lives of six to ten years. The Company capitalizes costs
incurred for computer software to be sold in accordance with Statement of
Financial Accounting Standards No. 86. Capitalized costs of computer software
held for sale are amortized on a straight-line basis beginning upon the
software's general release date over a period not exceeding three years.

34

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

On an ongoing basis, management reviews the valuation and amortization of
these assets to determine possible impairment by comparing the carrying value to
the undiscounted future cash flows of the related assets.

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." Under the
new rules, goodwill, the excess of the carrying value over the net book value of
investments accounted for using the equity method and intangible assets deemed
to have indefinite lives, are no longer amortized but are subject to annual
impairment tests. Other intangible assets continue to be amortized over their
useful lives.

The Company performed a goodwill impairment test as required by Statement
No. 142 to determine the implied fair value of the goodwill recorded on its
books as of January 1, 2002. As the goodwill related entirely to previous
international transactions, the fair value was estimated by discounting the
estimated future cash flows of the international reporting unit. Based on this
analysis, the Company recognized a goodwill impairment charge of $7.1 million.
In accordance with Statement No. 142, the charge was reflected as the cumulative
effect of a change in accounting principle in the Statement of Operations.

INCOME TAXES

Deferred income taxes are recognized at statutory 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. Deferred income taxes may also arise in business combinations
accounted for as purchases as a result of differences between the fair value of
assets acquired and their tax bases.

FOREIGN CURRENCY TRANSLATION

The financial position and results of operations of the Company's foreign
operations are measured using local currency as the functional currency.
Accordingly, assets and liabilities have been translated into U.S. dollars at
the rates of exchange at the balance sheet date and revenues and expenses have
been translated at average exchange rates prevailing during the period.
Translation gains and losses are deferred as a separate component of
stockholders' equity while foreign currency transaction gains and losses are
included in determining net earnings.

EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

Net earnings (loss) per share is based upon the weighted average number of
shares of common stock outstanding during each year. Net earnings (loss) per
common and common equivalent share -- diluted is based upon the weighted average
number of shares of common stock and common stock equivalents, entirely
comprised of stock options, outstanding during each year. For the years ended
December 31, 2002, 2001 and 2000, all stock options, aggregating 8,913,012
shares, 9,013,672 shares and 8,704,117 shares, respectively, were excluded from
the weighted average shares outstanding calculation because they were
anti-dilutive.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," as amended by Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation -- Transition and
Disclosure," encourages, but does not require, companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company has
chosen to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
expense for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock

35

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

at the date of the grant over the amount an employee must pay to acquire the
stock. The Company grants options at fair market value and therefore recognizes
no compensation expense.

The following table illustrates the effect on the net loss and net loss per
share for the years ended December 31, 2002, 2001 and 2000 if the Company had
applied the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," to
stock-based employee compensation (in thousands, except per share data):

The above table is based upon the valuation of option grants using the
Black-Scholes pricing model for traded options with assumed risk-free interest
rates of 3.82%, 4.55% and 6.15% for 2002, 2001 and 2000, respectively; stock
price volatility factor of 86.3%, 71.9% and 69.0% for 2002, 2001 and 2000,
respectively; and an expected life of the options of five years. Using the
foregoing assumptions, the calculated weighted-average fair value of options
granted in 2002, 2001 and 2000 was $5.34, $3.30 and $3.19, respectively. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the input
assumptions can materially affect the fair value estimate, in management's
opinion, the model does not necessarily provide a reliable single measure of the
fair value of its employee stock options.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." Statement No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date that a commitment to an exit or
disposal plan is made. Examples of costs covered by the statement include lease
termination expenses and certain employee severance costs that are associated
with a restructuring, discontinuing an operation or other exit or disposal
activities. Statement No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002.

In November 2002, the FASB issued Interpretation (FIN) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others." FIN No. 45 requires certain guarantees to be recorded
at fair value, and requires guarantors to make significant new disclosures, even
if the likelihood of making payments under the guarantees is remote. The initial
recognition and measurement provisions of FIN No. 45 are to be applied on a
prospective basis for guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for financial statements issued after
December 15, 2002.

36

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 addresses accounting for variable interest
entities (VIE), defined as a separate legal structure that either 1) does not
have equity investors with voting rights, or 2) has equity investors with voting
rights that do not provide sufficient financial resources for the entity to
support its own activities. FIN No. 46 requires that a VIE be consolidated by a
company if that company is subject to a majority of the VIE's residual return,
and also requires disclosures concerning VIEs that a company is not required to
consolidate but in which it has a significant variable interest. Consolidation
requirements apply immediately to VIEs created after January 31, 2003, and to
existing VIEs in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply to financial statements
issued after January 31, 2003, regardless of when the VIE was created. The
Company and Mosaic Group, Inc. formed a joint venture company, Mosaic InfoForce,
L.P. ("MIF"), in which the Company currently has a 49% ownership interest and
Mosaic Group, Inc., through wholly-owned subsidiaries, owns the remainder. The
Company is currently in the process of a complex analysis to determine if MIF is
a VIE and if so which, if any entity, is the primary beneficiary for
consolidation purposes.

2. SUPPLEMENTAL CASH FLOW INFORMATION

Interest expense paid and income taxes paid (refund received) during the
years ended December 31 were as follows (in thousands):

Non-cash investing and financing activities are excluded from the
consolidated Statements of Cash Flows. In 2002, the Company acquired computer
and data collection equipment for $6.5 million in exchange for capital leases.
During 2001, the Company acquired computer software licenses for $4.8 million in
exchange for long-term obligations. During 2000, the Company acquired mainframe
computer equipment in exchange for capital lease obligations recorded at $7.4
million. Additionally in 2000, the Company also capitalized $3.7 million as an
investment relating to the formation of the Mosaic InfoForce, L.P. joint venture
in exchange for an obligation due in 2001.

3. JOINT VENTURES

During 2000, the Company and Mosaic Group, Inc. formed a joint venture
company, Mosaic InfoForce, L.P. ("MIF"), in which the Company currently has a
49% ownership interest and Mosaic Group, Inc., through wholly-owned
subsidiaries, owns the remainder. The Company's domestic causal and custom audit
data collection and merchandising services are provided by MIF pursuant to an
agreement that expires in 2010. The Company capitalized $7.4 million in
connection with the formation of MIF, which is being accounted for using the
equity method of accounting. During 2002 and 2001, the Company expended $35.8
million and $32.9 million relating to MIF services. At December 31, 2002, IRI
had a receivable from MIF of $1.8 million and at December 31, 2001, IRI owed MIF
$3.0 million. As of December 31, 2002, IRI has guaranteed $1.5 million of MIF
equipment capital leases that the Company would be obligated to pay in the event
MIF can not make the payments required under the leases. The capital leases have
varying expiration dates through 2004.

4. SPECIAL CHARGES

Since 1999, the Company has undertaken major initiatives as described below
resulting in significant or incremental expenditures that have been classified
as special charges in the Statement of Operations.

37

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

2002 Workforce Reduction: In the fourth quarter of 2002, the Company
eliminated approximately 5% of its total workforce in the United States and
Europe through layoffs and the elimination of open positions. A charge of $7.8
million was recorded in the fourth quarter of 2002 for severance and other costs
related to the layoffs.

Project Delta: In the third quarter of 1999, the Company initiated a
comprehensive program named Project Delta. The objective of Project Delta was to
improve productivity and operating efficiencies to reduce the Company's ongoing
cost structure in its U.S. operations. The work outlined as part of Project
Delta was completed during the third quarter of 2001. A restructuring accrual
was established in 1999 to reflect certain of the outstanding obligations
related to 1999 restructuring charges. Certain costs were not eligible for
accrual in 1999 and were recorded during 2000 and 2001.

Transition of German Production to U.S. Facility: The Company made the
decision in the fourth quarter of 1999 to transfer production services for IRI
Germany from an external vendor in Germany to the Company's U.S. headquarters
facility in order to enhance its InfoScan offering in Germany and to reduce
future production costs. The transition of German production to the U.S.
facility began in the first quarter of 2000 and was completed in the first
quarter of 2002.

Information Technology Assessment: During the fourth quarter of 2001, the
Company began a review of its information technology operations to assess
potential restructuring costs and benefits. The review included initial
assessments of database design, transition planning and cost and savings
estimates and was completed in the second quarter of 2002. This project resulted
in cost savings, process efficiencies and a plan for continuous improvement of
the technology infrastructure.

The following tables reflect special charges incurred during 2002, 2001 and
2000 and all cash payments made to date (in thousands):

38

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):

Except to the extent that a valuation allowance has been established, the
Company expects to realize the deferred tax assets related to its U.S. federal
and state NOL carryforwards and certain foreign NOL carryforwards, primarily
from the future recognition of substantial taxable income resulting from the
reversal of $90.2 million of existing net temporary differences.

41

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

The income tax benefit differs from the statutory U.S. Federal income tax
rate of 35% applied to losses before income taxes for the years ended December
31, 2002, 2001 and 2000 as follows (in thousands):

6. ACCOUNTS RECEIVABLE

Accounts receivable at December 31 were as follows (in thousands):

Payments received in advance of revenue recognition are reflected in the
consolidated financial statements as deferred revenue. Unbilled accounts
receivable represent revenues and fees on contracts and other services earned to
date for which customers were not invoiced as of the balance sheet date.

7. PROPERTY AND EQUIPMENT

Property and equipment at December 31 were as follows (in thousands):

The net book value of computer and data collection equipment under capital
leases aggregated $7.5 million and $3.9 million for the years ended December 31,
2002 and 2001, respectively, and is included in the above amounts. Amortization
of assets under capital leases is included in depreciation expense in the
accompanying financial statements.

42

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

8. INVESTMENTS AND OTHER ASSETS

Investments at December 31 were as follows (in thousands):

In June 2002, the Company and its partner in Radar Retail Research
("Radar"), Taylor Nelson Sofres, decided to cease Radar's operations.
Accordingly, operating expenses for 2002 include a charge of $966,000 relating
to the write-off of the Company's 40% investment and the accrual of the
Company's share of Radar's closing costs.

Other assets at December 31 were as follows (in thousands):

Commercial software development costs of $2.2 million, $2.1 million and
$1.6 million were capitalized for the years ended December 31, 2002, 2001 and
2000.

As described in Note 1, on January 1, 2002, the Company adopted Statement
No. 142, and accordingly no longer amortizes goodwill and the excess of the
carrying value over the net book value of investments accounted for using the
equity method. Proforma results are summarized below, assuming the provisions of

43

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

Statement 142 had been adopted effective January 1, 2000 and assuming no
goodwill impairment was required in 2000, 2001 or 2002 (in thousands, except per
share data):

9. LONG-TERM DEBT

Long-term debt at December 31 was as follows (in thousands):

On July 12, 2002, the Company replaced its existing $35.0 million credit
facility, which was scheduled to expire in October 2002, with a new $40.0
million credit facility. The new facility has floating rate interest options
that range between 2.25% and 3.00% over LIBOR and commitment fees of up to 0.50%
payable on the unused portion. The weighted average interest rates at December
31, 2002 and 2001 under the new and previous credit agreements were 4.17% and
6.58%, respectively. The new credit facility expires in July 2005. Under the new
credit facility, the maximum commitment of funds available for borrowings is
limited by a defined borrowing base formula related to eligible accounts
receivable, which fluctuates during the quarter. Borrowings under the facility
are secured by the Company's assets. As of December 31, 2002, the Company had
$26.9 million of borrowing availability, net of letters of credit, under the new
revolving credit facility.

The financial covenants in the new credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. The new bank credit agreement contains
covenants which restrict the Company's ability to incur additional indebtedness.
As of December 31, 2002, the Company was in compliance with all covenants.

44

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

Capitalized leases and other primarily consist of leases for computer and
data collection equipment expiring through 2005. Minimum payments under capital
lease obligations are as follows (in thousands):

10. CAPITAL STOCK

PREFERRED STOCK PURCHASE RIGHTS

In 1989, IRI adopted a shareholder rights plan which attached preferred
stock rights ("Rights") to each share of its Common Stock. Each Right entitles
the holder to purchase one one-hundredth share of Preferred Stock at an exercise
price of $60. The Rights become exercisable upon the acquisition of 15% of IRI
Common Stock or a tender offer or exchange offer for IRI Common Stock by a
person or group. IRI may redeem the Rights at $.01 per Right at any time prior
to a public announcement that a person or group has acquired 15% of IRI's Common
Stock. The Rights will expire on October 27, 2007. IRI has authority to issue
one million shares of $.01 par value Preferred Stock.

COMMON STOCK

At December 31, 2002, 2001 and 2000, 29,808,550, 29,397,373 and 29,069,892
shares of Common Stock, respectively, were issued and outstanding. In connection
with the IRI Directors' Plan (see below), 7,043 shares were reserved for future
issuance at December 31, 2002. In connection with all IRI employee stock option
plans, 9.9 million shares were reserved for issuance at December 31, 2002. These
reserved shares were reduced by 8.9 million stock options outstanding at
December 31, 2002, resulting in 1.0 million stock options available for grant
under the Amended and Restated 1992 Executive Stock Option Plan, the Amended and
Restated 1994 Employee Nonqualified Stock Option Plan and the Amended and
Restated 1992 Stock Option Plan.

In May 2000, the Company established the 2000 Employee Stock Purchase Plan
("ESPP") providing employees the opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. The plan qualifies as an
Employee Stock Purchase Plan under Section 423 of the Internal Revenue Code of
1986, as amended. Employees are eligible to purchase Common Stock at the end of
an accumulation period at an amount equal to 85% of the fair market value of a
share of Common Stock on the first or last day of an accumulation period,
whichever is lower. Employees are restricted from trading stock purchased under
the ESPP for six months from the date of purchase. During 2002, the Company sold
286,452 shares, 210,000 shares of which were held in treasury and the remainder
of which were newly issued shares of Common Stock, for $0.7 million to employees
participating in the ESPP. During 2001, the Company sold 199,720 shares, 40,000
shares of which were held in treasury and the remainder of which were newly
issued shares of Common Stock, for $0.8 million to employees participating in
the ESPP. During 2000, the Company sold 158,827 shares of Common Stock, which
were held in treasury, for $0.4 million to employees participating in the ESPP.

During 2000, the Company began acquiring shares of its Common Stock in
connection with a stock repurchase program announced in August 2000 that was
established to acquire shares to fund the Company's

45

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

ESPP. The program, approved by the Company's Board of Directors, authorizes the
periodic repurchase of up to one million shares of its Common Stock on the open
market, or in privately negotiated transactions, depending upon market
conditions and other factors. During 2002, the Company purchased 210,000 shares
of Common Stock, at an average cost of $5.70 per share, aggregating $1.2
million. The Company purchased 40,000 shares of Common Stock, at an average cost
of $5.50 per share, aggregating $0.2 million during 2001. During 2000, the
Company purchased 158,700 shares of Common Stock, at an average cost of $5.88
per share, aggregating $0.9 million.

In May 1996, the Company's shareholders approved a stock plan for
non-employee directors (the "IRI Directors' Plan"), authorizing the issuance of
up to 100,000 shares of Common Stock. Under the IRI Directors' Plan, an eligible
director is paid annually in shares of Common Stock in lieu of 75% of the cash
retainer otherwise payable for services on the Board. The number of shares
issued is based upon the fair market value of the Company's Common Stock. The
Company issued 17,850, 12,075 and 13,098 shares in 2002, 2001 and 2000 at an
average price of $5.07, $6.51 and $5.41 per share, respectively, under the IRI
Directors' Plan.

There are restrictions in IRI's bank revolving credit facility and lease
agreements which prohibit the payment of dividends without prior consent and
limit the purchases or redemption of Common Stock. (See Note 9).

STOCK OPTIONS

The Company has several stock option plans. The Amended and Restated 1994
Employee Nonqualified Stock Option Plan and the Amended and Restated 1992 Stock
Option Plan cover most employees other than executive officers and directors.
All options under these plans have been granted at fair market value or higher.
Most option grants are exercisable in equal annual increments of 25% beginning
on the first anniversary of the grant date and expire ten years after the date
of grant. IRI also has an Amended and Restated 1992 Executive Stock Option Plan
covering executive officers and directors which at inception authorized up to
2.5 million stock options. Most options under this plan were granted at fair
market value and are exercisable in equal annual increments of 25% beginning on
the first anniversary of the grant date and expire ten years after the date of
grant.

46

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

Transactions involving stock options for the Executive and Employee Stock
Option Plans are summarized as follows:

Stock options outstanding at December 31, 2002 are as follows:

47

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

11. COMMITMENTS, CONTINGENCIES AND LITIGATION

LEASE AGREEMENTS AND OTHER COMMITMENTS

Future minimum lease payments under all operating leases as of December 31,
2002 are as follows (in thousands):

Total rental expense for the years ended December 31, 2002, 2001 and 2000
was $26.5 million, $22.3 million and $24.9 million, respectively.

LEGAL PROCEEDINGS

On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
The A.C. Nielsen Company (now owned by VNU, N.V.) and IMS International, Inc.
(collectively, the "Defendants") in the United States District Court for the
Southern District of New York entitled Information Resources, Inc. v. The Dun &
Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged that,
among other things, the Defendants violated Sections 1 and 2 of the Sherman Act,
15 U.S.C. Sections 1 and 2, by engaging in a series of anti-competitive
practices aimed at excluding the Company from various export markets for retail
tracking services and regaining monopoly power in the United States market for
such services. These practices included: i) entering into exclusionary contracts
with retailers in several countries, in order to restrict the Company's access
to sales data necessary to provide retail tracking services; ii) illegally
tying/bundling services in markets over which Defendants' had monopoly power
with services in markets in which ACNielsen competed with the Company; iii)
predatory pricing; iv) acquiring foreign market competitors with the intent of
impeding the Company's efforts at export market expansion; v) tortiously
interfering with Company contracts and relationships with clients, joint venture
partners and other market research companies; and vi) disparaging the Company to
financial analysts and clients. By the Action, the Company sought to enjoin the
Defendants' anti-competitive practices and to recover damages in excess of $350
million, prior to trebling. In procedural rulings, the District Court dismissed
IRI's claims for injury suffered from Defendants' activities in foreign markets,
where IRI operates through subsidiaries, and denied IRI leave to join such
subsidiaries as parties. IRI continues to pursue any and all appeal rights of
these procedural rulings prior to trial and to vigorously prosecute its claims
for injuries in the U.S. and other markets, which the Company believes to be
substantial.

As previously reported, in 1999 IRI filed an action against Manugistics,
Inc. in the Circuit Court of Cook County, Illinois. In this action IRI was
seeking damages for Manugistics' alleged breach of a Data Marketing and
Guaranteed Revenue Agreement and a related Non-Competition and Non-Solicitation
Agreement. In December 2001, IRI and Manugistics settled their dispute under
these agreements. Pursuant to the settlement agreement, Manugistics agreed to
pay IRI a total of $8.625 million. Of this amount, $4.75 million was paid in
cash installments and Manugistics agreed to issue shares of its common stock
representing the remaining $3.875 million (the "Settlement Shares"). In February
2002, Manugistics issued the Settlement Shares to IRI which were sold by the
Company for $3.875 million, net of commissions, in March 2002.

48

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.

12. SEGMENT INFORMATION

The Company develops and maintains databases, 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 Company's business information services are conducted
almost exclusively in the United States and Europe. The Company's operations in
other markets account for less than 1% of consolidated revenues. Management of
the Company routinely evaluates the performance of its operations against
short-term and long-term objectives.

The Company's segment disclosure by geographic areas is consistent with the
management structure of the Company. The Company considers revenues from third
parties and the aggregation of operating profit (loss), equity earnings (losses)
and minority interests, ("Operating Results"), on a geographic basis to be the
most meaningful measure of the operating performance of each respective
geographic segment and of the Company as a whole.

The following tables and discussion present certain information regarding
the operations of the Company by geographic segment as of December 31, 2002,
2001 and 2000 (in thousands):

SEGMENTED RESULTS:

49

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

IDENTIFIABLE ASSETS:

- ---------------
(a) Special charges, net (in millions):

(b) Identifiable corporate assets represent investments. (See Note 8).

OTHER CASH FLOW INFORMATION:

50

INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2002

SUMMARY OF QUARTERLY DATA (UNAUDITED)

Summaries of consolidated results on a quarterly basis are as follows (in
thousands, except per share data):

As described in Note 1, during the first quarter of 2002, the Company
recognized a goodwill impairment charge of $7.1 million.

51

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 "Section 16(a) Beneficial
Ownership Reporting Compliance" are incorporated by reference from the
definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 2003 annual meeting of stockholders
scheduled for May 15, 2003. 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 2003
annual meeting of stockholders scheduled for May 15, 2003.

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 2003 annual meeting of stockholders
scheduled for May 15, 2003.

The following information relates to the Company's equity compensation
plans and individual compensation arrangements as of December 31, 2002. (See
Note 10 of the Notes to the Consolidated Financial Statements.)

- ---------------
(1) Includes 355,001 shares authorized for issuance under the Company's 2000
Employee Stock Purchase Plan ("ESPP"). The Company may either issue such
shares or may acquire such shares on the open market or in privately
negotiated transactions, depending upon market conditions and other factors.

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 2003 annual meeting of stockholders
scheduled for May 15, 2003.

ITEM 14. CONTROLS AND PROCEDURES

As of December 31, 2002, an evaluation was performed under the supervision
and with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that

52

evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of December 31, 2002. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to December 31, 2002.

53

PART IV

ITEM 15. 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.

54

Amended and Restated 1994 Employee Nonqualified Stock Option
Plan, as amended effective June 29, 2000.

Employment letter agreement dated May 19, 2000 between the
Company and Mary K. Sinclair.

Form of Employment and Change in Control Agreement between
the Company and certain executive officers.

Information Resources, Inc. Directors Deferred Compensation
Plan effective May 1, 2000.

Information Resources, Inc. 2000 Employee Stock Purchase
Plan effective as of May 19, 2000.

Amendment One to Employment Agreement dated April 30, 1999
between the Company and Joseph P. Durrett.

Information Resources, Inc. Amended and Restated 401(k)
Retirement Savings Plan, as amended effective as of August
17, 2000.

First Amendment to Information Resources, Inc. Amended and
Restated 401(k) Retirement Savings Plan, effective as of
November 13, 2002.

Second Amendment to Information Resources, Inc. Amended and
Restated 401(k) Retirement Savings Plan, effective as of
November 13, 2002.

(b) Reports on 8-K

During the last quarter of 2002, the Company filed a Current Report on
Form 8-K on December 19, 2002, covering Item 5 (Other Events) and Item
7 (Exhibits), which contained the press release commenting on Procter &
Gamble's decision not to renew its U.S. market measurement business
with the Company.

During the first quarter of 2003, the Company filed a Current Report on
Form 8-K on March 4, 2003, covering Item 5 (Other Events) and Item 7
(Exhibits), which contained the press release announcing that the
Company has engaged the investment banking firm of William Blair &
Company, L.L.C. to assist the Company in its exploration of strategic
options.

(c) Exhibits

See Exhibit Index (immediately following the CFO certification)

55

SCHEDULE II

INFORMATION RESOURCES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR ACCOUNTS RECEIVABLE
(IN THOUSANDS)

56

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 27, 2003

INFORMATION RESOURCES, INC.

By: /s/ JOSEPH P. DURRETT
----------------------------------
Joseph P. Durrett
President 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 27, 2003.

58

CERTIFICATIONS

I, Joseph P. Durrett, certify that:

1. I have reviewed this annual report on Form 10-K of Information
Resources, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

/s/ JOSEPH P. DURRETT
- --------------------------------------
Joseph P. Durrett
Chief Executive Officer

March 27, 2003

59

CERTIFICATIONS

I, Andrew G. Balbirer, certify that:

1. I have reviewed this annual report on Form 10-K of Information
Resources, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

/s/ ANDREW G. BALBIRER
- --------------------------------------
Andrew G. Balbirer
Chief Financial Officer

March 27, 2003

60

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.