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Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
----- Act of 1934. [Fee Required]
For the fiscal year ended December 31, 1994
or
Transition report pursuant to Section 13 or 15(d) of The Securities
----- Exchange Act of 1934. [No Fee Required]
For the transition period from to
Commission file number: 0-11428
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INFORMATION RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-2947987
-------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 North Clinton Street, Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 726-1221
--------------
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
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 ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 28, 1995 (based on the closing price as quoted by
NASDAQ as of such date) was $405,332,032.
The number of shares of the registrant's common stock, $.01 par value per share
outstanding, as of February 28, 1995 was 26,798,812.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual meeting
of stockholders to be held May 24, 1995 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
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INTRODUCTION
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Information Resources, Inc. (the "Company" or "IRI") provides a variety of
information services and business intelligence software products to its
customers. The Company is a leading provider of information services to the
consumer packaged goods ("CPG") industry supplying proprietary data bases,
analytical models and business intelligence software that enable consumer
packaged goods manufacturers and retailers to make better, more cost-effective
decisions in marketing and selling their products. The Company also offers
services to assist manufacturers, retailers and wholesalers of consumer packaged
goods in the implementation of various Efficient Consumer Response ("ECR")
initiatives, including logistics services, "pay-for-performance" promotions and
supply chain re-engineering. "IRI Software", the Company's software business
unit, provides business intelligence software and on-line analytical processing
software, including decision support software, executive information systems and
related support services to a broad range of industries and governmental
agencies worldwide.
The Company operates in one industry segment, business information services.
The business of the Company has evolved into two primary categories of services,
information and software.
(i) Information Services
--------------------
The Company's principal information services are InfoScan(R), InfoScan(R)
Panel and InfoScan(R) Census (collectively referred to herein as "InfoScan
Services"), BehaviorScan(R) and other testing services, and the tracking of
sales of health and beauty care products by the Company's Towne-Oller division.
InfoScan, InfoScan Panel and InfoScan Census are tracking and evaluation
services for the consumer packaged goods industry. Using the scanning code
printed on products and scanners installed in retail outlets, InfoScan tracks
consumer purchasing of products sold in a representative national, projectable
sample of stores. Manually collected retail audits are used to track sales
through outlets which lack electronic point-of-sale scanning equipment.
InfoScan Panel measures the purchasing of consumer packaged goods products at
the individual household level, thereby allowing enhanced diagnostic analyses.
In 1994, the Company introduced InfoScan Census, a service for manufacturers
which tracks consumer purchasing in all stores within participating retail
chains rather than just stores within projectable samples.
BehaviorScan is a test marketing system in the United States that enables
clients to measure the effect of different marketing variables, including
television advertising, on consumer purchasing. It uses a patented electronic
system to target television advertising to individual households and electronic
scanner data to measure consumer purchase behavior in an unobtrusive manner as
part of normal television programming. BehaviorScan is the only such electronic
test marketing system in the United States.
The Company's Towne-Oller division tracks deliveries of health and beauty care
products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and 30,000 individual supermarkets. Towne-Oller is
currently the only supplier of such data to the United States CPG industry.
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In recent years, the Company has begun offering services to assist
manufacturers, retailers and wholesalers of consumer packaged goods in the
implementation of various Efficient Consumer Response initiatives. ECR is a
consumer packaged goods industry strategy to re-engineer the supermarket supply
chain (from manufacturers to retailers to consumers) to reduce total system
costs, inventories and physical assets. Through its proprietary software and
data bases, the Company now offers a full line of ECR services to its clients,
including its unique InfoScan Census data tracking services, daily store-
specific scanner data tracking services, Customer Marketing Resources "pay for
performance" promotion evaluation services and IRI Logistics software and
integration support services for consumer demand planning and forecasting. The
Company believes that its ability to be a single source for both data and
software represents a significant competitive advantage.
Since 1992, the Company has been involved in a capital-intensive expansion of
its information services capabilities in international markets. The focus of
this international expansion has primarily been in Western Europe, including
France, the United Kingdom, and more recently, Italy. The cost of this
expansion has been substantial in large part because of the need to have at
least one year of historical data available before meaningful client revenue
streams can be established. The Company believes that this expansion is
warranted because of the size of the European syndicated tracking market and the
enhanced ability of the Company to satisfy the needs of multinational
manufacturers. The Company has also made limited investments in information
businesses in Latin America and has recently entered into an alliance with
Middle East Market Research Bureau ("MEMRB"), a company that provides market
research throughout 22 countries in the Middle East, Eastern Europe, the
Mediterranean, the Commonwealth of Independent States and North Africa.
(ii) Software Products and Support Services
--------------------------------------
IRI Software operates a worldwide organization through sales and service
facilities in major markets. Software products are licensed as the EXPRESS(R)
family of computer software and application solutions. Through another
division, the Company also markets retailer software products that mainly carry
the APOLLO(TM) name and focus on the efficient utilization of retail shelf
space. Major costs to deliver these software products are costs to develop and
maintain software, personnel costs to develop custom applications for clients
and costs for computer resources.
The Company's software products can be used by clients in tandem with the
Company's information services or can be used separately with other data bases.
Approximately 30% of the Company's clients currently purchasing the Company's
information services also purchase its business intelligence software and
services. The Company's business intelligence software products are also widely
used outside of the consumer packaged goods industry by Fortune 1000
corporations and comparable companies around the world covering a variety of
businesses and industries, including pharmaceuticals, health care,
telecommunications, financial services, retail, transportation and government
agencies. In 1994, approximately 52% of the Company's software and support
services revenue was derived from clients outside of the consumer packaged goods
industry.
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The approximate revenues attributable to the Company's information services
and software products and support services were as follows for the periods
shown:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(In thousands)
1994 1993 1992
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<S> <C> <C> <C>
Information Services
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Domestic Information Businesses:
InfoScan $204,446 $180,623 $151,097
BehaviorScan/Other Testing Services 22,649 21,938 22,741
Towne-Oller 15,206 17,546 15,543
Other 1,532 -- --
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Total Domestic Information Services 243,833 220,107 189,381
International Information Businesses 13,580 7,785 2,993
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Total Information Services 257,413 227,892 192,374
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Software Products and Support Services
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Business Intelligence Software 105,416 95,397 75,331
Retailer Services 13,741 11,255 8,657
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Total Software Services 119,157 106,652 83,988
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Total Company $376,570 $334,544 $276,362
======== ======== ========
</TABLE>
A significant portion of the cost to deliver information services and software
support products and services is provided by shared resources and as such these
costs are not directly attributable to any specific product.
The majority of the Company's information services business is of a recurring
nature. The Company's software business is comprised of a mix of new client
projects, recurring sale of electronic data base access software and analytical
processing services to existing data clients utilizing IRI computer facilities,
sale of new application solutions to existing clients and a growing software
maintenance base. For a fee, implementation and consulting services are also
provided to client companies as required to deliver EXPRESS-based solutions. In
1994, approximately 66% of the Company's total revenue from information services
and software products and services were attributed to ongoing contractual
arrangements. The remaining revenues were attributed to discrete licenses of
software and from the sale of customized analytical projects.
The Company was incorporated in Delaware in 1982. Its principal offices and
corporate headquarters are located at 150 North Clinton Street, Chicago,
Illinois 60661. Its telephone number is (312) 726-1221.
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DESCRIPTION OF THE COMPANY'S BUSINESS
-------------------------------------
A. Principal Products & Services
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1. Information Services
--------------------
The Company provides a variety of products and services utilizing its data
bases to assist its clients in tracking and understanding consumer purchase
behavior and the impact of promotions, advertising and price changes on that
behavior. Based upon revenues, the Company is the second largest marketing
research firm providing continuous sales measurement services to the consumer
packaged goods industry worldwide.
(a) InfoScan, InfoScan Panel and InfoScan Census
--------------------------------------------
InfoScan and InfoScan Census are national and local market scanner tracking
services for the consumer packaged goods industry. InfoScan tracks consumer
purchasing of UPC-coded products sold in a representative, national, projectable
sample of supermarkets, drug stores, mass merchandisers, convenience stores, and
warehouse membership clubs. InfoScan also tracks promotional activities which
motivate consumer purchasing, such as temporary price reductions, newspaper
feature advertising, couponing and in-store displays. The Company began selling
its InfoScan Census service for supermarkets during the third quarter of 1994,
with expansion to other retail outlets planned for 1995 and beyond. The
InfoScan Census service provides manufacturers with a measurement of consumer
purchasing based on all stores within participating individual retail chains
(i.e., "census" data) rather than just stores within projectable samples. The
Company is currently collecting or has contracts to collect census data from
approximately 14,700 stores, primarily chain supermarket stores. Census based
retail account data represents more complete and accurate information because it
eliminates sampling error. In addition, census-based scanner data uniquely
permits store-by-store sales analysis, improved evaluation of the impact of
trade promotions, validation of "pay-for-performance" promotions, more effective
salesforce and broker compensation programs, improved inventory and distribution
management, and just-in-time inventory replenishment systems.
Sales tracking reports are available to clients in hard copy format and/or via
electronic access through proprietary Company software or other software.
Weekly sales data may be accessed by personal computers through proprietary
software developed by the Company, including DataServer Analyzer(TM) and
DataServer Partners(TM). The Company is also able to provide its manufacturer
clients with "key account" retailer reports that track consumer purchasing in
specific identifiable chains. Supermarket key account reports are now census
based. The Company believes that its ability to be a single source for both
sample and census data, in conjunction with its analytical software
applications, represents a significant competitive advantage.
Through the Company's InfoScan Panel data base, InfoScan provides access to
purchase data obtained from approximately 60,000 nationally projectable
households who show identification cards when they shop at participating
supermarkets, thereby allowing the stores' scanners to electronically record and
identify their purchases. Household panel data are used for custom client
analysis of issues such as store and brand loyalty, trial and repeat purchasing
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of new products, demographic patterns, consumer response to promotional
activities, and overall store shopping behavior. The Company's computerized
software system, EZ Prompt(TM), provides on-line access to its InfoScan panel
data base through a terminal and telephone link. The Company has also equipped
participating households with small handheld scanners, which allow a shopper to
record purchases of consumer packaged goods made in all types of outlets,
thereby expanding the applications of the Company's household panel data base.
Under the typical InfoScan Services contract, the client subscribes to
services on specified product categories. Initial contracts generally require a
multi-year client commitment up to three years or more. After the initial
commitment, the contract generally continues indefinitely unless cancelled by
the client on six months prior written notice.
Major costs to deliver the InfoScan Services are data acquisition costs,
provision of software and hardware to participating retailers, expenses
associated with the collection of causal (i.e., promotional) data, compensation
and equipment for participating panel households, computer and personnel
resources to process the data and personnel costs for interpreting and analyzing
data for clients.
(b) BehaviorScan/Other Testing Services
-----------------------------------
BehaviorScan offers consumer packaged goods manufacturers and other non-CPG
marketers a cost-effective, accurate and technologically advanced method for
testing alternative marketing strategies. In a typical marketing test one group
of consumer panelists is exposed to one or more test variables while another
group of panelists is used as a control group. A comparison of each group's
purchasing patterns (as measured by scanner data) then reveals the impact of the
test variable. A unique feature of the BehaviorScan system is the ability to
deliver alternative television advertising to different groups of panel
households using the Company's patented targetable television technology.
Typical marketing variables tested in BehaviorScan are television
advertisements, newspaper ads, manufacturers' coupons, free samples, in-store
displays, shelf price, and packaging changes. BehaviorScan is currently
available in six of the Company's mini-markets in the United States.
In addition to BehaviorScan, the Company provides other testing services
primarily for consumer packaged goods manufacturers including Controlled Retail
Testing, Matched Market Analyses, and other special analyses accessing the
Company's proprietary data bases. Controlled Retail Testing conducts
experiments outside the BehaviorScan markets wherein the Company creates and
implements special sales and marketing conditions in retail stores and reads the
results through scanner data and/or manual audits. Typical tests involve the
placement of new products or a change in shelf location, price or promotional
conditions in retail outlets. The Company's existing field organization and
InfoScan data bases are customarily utilized in conjunction with Controlled
Retail Testing. Matched Market and other special analyses to evaluate the
impact of advertising and other marketing variables as they occur outside the
BehaviorScan markets typically do not involve field activities by the Company,
but simply involve custom manipulation and analysis of the Company's InfoScan
data.
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Major costs to deliver the BehaviorScan service are data costs (comprised of
store equipment depreciation expense and cash payments to retailers),
compensation to participating panel households, field personnel costs, costs to
operate and maintain cable television studios, computer resources and client
service personnel costs.
(c) Towne-Oller
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The Company's Towne-Oller division tracks deliveries of health and beauty care
products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and 30,000 individual supermarkets in the United States.
Towne-Oller data represents approximately 80% of total food and drug store
health and beauty care sales. Towne-Oller purchases computerized records of
these shipments from warehouses to individual supermarket and drug stores.
Towne-Oller is currently the only supplier of such data to the United States
consumer packaged goods industry.
Towne-Oller clients receive periodic reports measuring store receipt volume
and market share within specific consumer product categories. Clients may elect
to receive their reports via DataServer computerized software, which provides
user-friendly access to data as well as the capability of downloading to other
software applications. In general, the client subscribes to the store receipt
service on specified consumer product categories. Initial contracts require a
multi-year client commitment, continue indefinitely and are cancelable by the
client on 90 days written notice.
Major costs to deliver the Towne-Oller service are data acquisition payments
to retailers, computer and personnel resources to process the data, and
personnel costs related to client service.
(d) NEO
---
Neo, Inc., a wholly-owned subsidiary acquired by the Company in 1994, is a
management consulting firm in the consumer packaged goods industry. Its
services focus on issues such as sales force effectiveness, retailer (customer)
marketing, information utilization and training and support for selling
organizations. Neo's customized sales force training and customer marketing
programs assist clients in organizational design, building effective sales
structures, and developing trade promotion objectives and strategies. Neo also
provides training curriculums which help manufacturers build successful sales
organizations within an information-driven retail environment.
(e) International Information Businesses
------------------------------------
In recent years, the Company has begun offering syndicated sales tracking and
analysis products, principally InfoScan and retail audit services, in numerous
countries outside of the United States. The specific products offered vary
depending upon local country conditions and the availability of scanner data.
IRI InfoScan Limited was formed in mid-1992 by the Company, Taylor Nelson
Group Limited (now known as Taylor Nelson AGB plc) of the United Kingdom and GfK
AG of Germany ("GfK") to purchase certain assets of the NMRA Retail Audit
business of BGA Audits
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Limited (formerly Audits of Great Britain), a United Kingdom market research
company then in administration (receivership). The Company's original ownership
percentage in the joint venture was 60%. However, as a result of
disproportionate capital contributions made by the joint venture partners in
1993 and 1994, the Company's ownership percentage has grown to approximately 87%
at December 31, 1994.
The operations of the acquired NMRA Retail Audit business consisted of
traditional retail audits of primarily food products in grocery stores. In early
1993, the joint venture launched the Company's InfoScan service into the United
Kingdom market based on scanner data from the leading chains in the grocery
market. Also during 1993, the joint venture started expanding its tracking
service into the health and beauty aids market. In 1994, the joint venture
continued to expand the scanner-based coverage of the retail market in general,
and entered into data acquisition agreements with two of the United Kingdom's
largest drug chains, Boots the Chemist and Superdrug, pursuant to which these
retailers elected to provide the joint venture with exclusive rights to obtain
scanner data.
In April 1993, the Company formed a joint venture, IRI-SECODIP, S.N.C., in
France with SECODIP, S.A. ("SECODIP") a subsidiary of SOFRES, S.A., and with
GfK. The IRI-SECODIP joint venture was formed to develop a scanner-based retail
tracking service in France. In connection with the formation of the joint
venture, the Company obtained certain intangible rights from SECODIP, some of
which the Company then licensed to the joint venture. The joint venture was
restructured during 1994 and February 1995 to result in the Company owning 89%
of IRI-SECODIP, S.N.C., with SECODIP owning the remaining 11% and GfK divesting
its interest. A put and call option exists relative to the remaining shares
held by SECODIP. In France, the joint venture now offers a fully operational
scanning-based tracking service with at least one year of historical data.
In July 1993, the Company and GfK completed the reorganization of the
Company's first investment in a European information services business
originally formed in 1988 which now operates exclusively in Germany. The
Company's ownership interest in the German joint venture company, GfK Panel
Services GmbH, is currently 15%. The products now offered by GfK Panel Services
GmbH include consumer household panel data, retail audit data, InfoScan scanner
data, and ad hoc studies. The InfoScan scanner data is now primarily a
diagnostic tool for promotion analysis rather than a full-fledged sales tracking
service as a result of scanner initiatives in Germany and the current refusal of
certain large retailers to provide data to any third party for retail tracking
purposes.
In July 1993, the Company formed a joint venture in the Netherlands with GfK
and SECODIP to develop a scanner-based retail tracking service in the
Netherlands. This joint venture now offers a fully operational scanning-based
tracking service with at least one year of historical data. This joint venture
was restructured during 1994 in conjunction with the Company's acquisition from
GfK of a 19.9% ownership interest in AGB Attwood Holdings B.V. (now known as GfK
Panel Services Benelux B.V.) in the Netherlands, and a 19.9% ownership interest
in GfK Belgium S.A. (GfK owns the remaining 80.1% of these entities.) The
primary operation of these entities is a household panel service.
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In mid-1993, the Company acquired 100% of a joint venture company between
Procter & Gamble and Eczacibasi (a Turkish business) in Turkey. The formal name
of this company is Panel Pazar Arastirma Ve Danismanlik A.S.; however, its trade
name is now Panel Information Resources. The Company performs market research
activities, primarily retail audits as scanner penetration in Turkey is low, in
a national sample of supermarkets, large and small grocery stores, pharmacies,
cosmetic shops and other stores. Panel Information Resources also performs
special studies and distributes IRI software products in Turkey.
See Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
See Item 1, Section C - Developments in 1994 for a discussion of the Company's
operations in Italy, Greece, Sweden and Latin America and the Company's alliance
with Cyprus-based MEMRB.
See NOTES B and D to the Consolidated Financial Statements.
2. Software Products and Support Services
--------------------------------------
IRI Software operates a worldwide organization through sales and service
facilities in major markets. Headquartered in Waltham, Massachusetts (a suburb
of Boston), IRI Software has offices throughout the United States and Canada.
European headquarters are located in Maidenhead, United Kingdom with offices in
most Western European countries. Additional offices are located in Australia,
Denmark, Hong Kong, India, Japan, Mexico, New Zealand, Scandinavia, Singapore
and The United Arab Emirates. Other worldwide coverage is accomplished
through a network of sales agents, distributors and certain information services
offices covering South America, Scandinavia, Portugal, Eastern Europe, South
Africa and the remainder of the Pacific Rim.
(a) Business Intelligence Software
------------------------------
Primarily through IRI Software, the Company provides business intelligence
software and on-line analytical processing ("OLAP") software products and
services to major corporations and governmental agencies around the world to
assist marketing, sales, operations, financial and executive decision-making.
These products and services provide decision makers and support personnel with
access to corporate and external data, together with tools and applications
developed by the Company to analyze that data. Business intelligence and OLAP
applications are made available through the use of the Company's principal
software product known as EXPRESS, which is available to end users on a direct
license from the Company and through a variety of third party channels.
Additionally, these products are made available through on-line computer access
services. Customers utilizing EXPRESS generally also engage the Company in its
consulting capacity to help define solutions to business problems and build or
enhance applications with EXPRESS to deliver these solutions. Following an
extensive conversion effort in 1994, the Company now offers its business
intelligence software products utilizing Windows technology.
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EXPRESS is an advanced, distributed, client/server technology for analyzing
complex databases. Based on a multidimensional data model, it is specifically
designed for building enterprise-wide business intelligence systems. EXPRESS is
used to build and support a wide range of application products for end users
across numerous functional areas. In addition, EXPRESS serves as the foundation
for IRI Software's OLAP applications, which include:
EXPRESS EIS
Express EIS(TM) provides an interactive environment for executives, managers and
analysts to electronically investigate, review, annotate, and communicate key
enterprise information. Its multidimensional data model supports OLAP
applications, giving users access to data from a variety of sources for
reporting, planning and forecasting.
EXPRESS FMS PLANNER
Express FMS Planner(TM) is an enterprise-wide solution for financial
consolidation, reporting, analysis, budgeting, and planning. It manages all of
a company's financial information through one central server across a
distributed environment. This centralization facilitates data accuracy and
consistency.
DATASERVER
The DataServer(TM) suite of applications for sales and marketing consists of:
. DataServer Analyzer(TM) -- DataServer Analyzer is a decision support system
designed for scanner data, factory shipments, media, promotion and other data
bases. DataServer Analyzer provides sales and marketing professionals with a
full range of analysis and reporting tools.
. DataServer Reporter(TM) -- Sales managers use DataServer Reporter to track and
analyze sales performance for more effective territory management. DataServer
Reporter helps clients manage and develop business by combining current sales
data with reporting, analysis and graphics capabilities.
. DataServer(TM) FastCast -- DataServer FastCast helps sales and marketing
managers improve the accuracy of their sales forecasts without having to
master statistical time-series forecasting techniques. DataServer FastCast
combines ease of use with flexibility.
. DataServer Targeter(TM) -- DataServer Targeter provides sales and marketing
organizations with a tool to execute comprehensive micro-marketing and sales
execution strategies utilizing sophisticated mapping technology.
. DataServer Partners(TM) -- DataServer Partners (formerly, The Partners) is an
interactive expert system that allows sales and marketing professionals to
develop profitable product strategies, and quickly create high-quality, fact-
based sales presentations.
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(b) Retailer Products and Services
------------------------------
The APOLLO Space Management System(TM) software enables manufacturers and
retailers to better manage retail shelf space. The APOLLO Space Management
System provides a complete range of tools for space management, including APOLLO
VIVID(TM) for producing picture schematics of shelf layouts, TotalStore
APOLLO(TM) for evaluating space utilization within a total supermarket, APOLLO
Briefcase(TM) which is designed for field sales use, and the National Product
Library(TM), which provides a national data base of product dimensions and
product images for use in the APOLLO system. All APOLLO products are available
utilizing Windows technology. Other retail products include Pricing Manager(TM)
which is designed to help retailers optimize price for individual products and
categories while meeting profit objectives, and Merchandising Manager(TM) which
evaluates various promotional program scenarios. Throughout 1994, development
work has been underway with respect to the Category Manager, an expert system
designed to facilitate strategic category planning for retailers and suppliers.
The Category Manager is expected to be released during 1995.
3. Efficient Consumer Response
---------------------------
Efficient Consumer Response is an initiative being pursued by manufacturers,
retailers and wholesalers of consumer packaged goods products that is aimed at
reducing the cost of distributing products through the supermarket channel. The
United States supermarket industry has identified an estimated $30 billion of
excess costs in the distribution system that could be eliminated by more
efficient procedures. Through ECR initiatives, the supply chain from
manufacturers to retailers and finally to consumers is expected to be re-
engineered and redesigned to maximize efficiencies and reduce costs. This re-
engineering initiative is expected to provide several opportunities for the
Company in 1995 and beyond as the Company expands beyond market research
applications into operational applications, both domestically and
internationally.
The Company is utilizing its proprietary software and unique data bases to
offer a full line of ECR services which facilitate re-engineering of a client's
operations:
(i) InfoScan Census - InfoScan Census is being used to provide
manufacturers and retailers with accurate information regarding consumer
purchasing at the retail chain and individual store level, thereby
improving decision making regarding a variety of sales, marketing and
category management issues.
(ii) CIR - The Company's CIR division (recently consolidated from the
former joint venture with Catalina Marketing Corporation) utilizes
Catalina's electronic network to obtain daily, store-specific scanner
data from a large sample of supermarkets. Coupled with the Company's
analytical application software, the data can be used by manufacturers
and retailers to more effectively monitor local marketing/sales programs
and to improve inventory management techniques, thereby helping to
reduce costs in the supply chain.
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(iii) Customer Marketing Resources(TM) ("CMR") - The Company's CMR
division helps clients plan, execute and administer scanner-based
promotions. By utilizing the Company's census data bases, CMR helps
manufacturers issue promotional payments to retailers based upon actual
consumer purchasing, thereby helping improve the efficiency of
promotional programs for manufacturers and retailers alike.
(iv) IRI Logistics - IRI Logistics (formerly LogiCNet, Inc.) helps
manufacturers and retailers improve the efficiency of product
replenishment across the entire distribution channel. The Logistics
Partner(TM) system for manufacturers utilizes demand
planning/forecasting software, order planning (DRP) software, training
and integration support and forecasts of consumer demand based upon the
Company's various census data bases, as well as the client's own
internal databases. The Logistics Partner is designed to eliminate the
need for manufacturers to have disparate inventory and distribution
systems for various retail relationships, and to provide accurate and
consistent data flows between retailer and manufacturer.
B. Data Collection
---------------
The Company's proprietary data bases include sales and price information for
individual product items collected by universal product code scanners in retail
outlets (scanner data), together with detailed data on promotion and
merchandising activities (causal data). Scanner data in the United States are
currently collected from a representative national sample of supermarkets, drug
stores, mass merchandisers, and warehouse membership stores, while manual audits
are conducted in convenience stores because of lower scanner penetration. Causal
data are available for these stores via collection of newspaper ads, in store
display data and other promotion and merchandising data by the Company's full
time and part time field personnel. The Company also currently collects census
scanner data from over 11,000 supermarkets, nearly 2,000 drug stores and nearly
500 warehouse membership club stores. Reports and information can currently be
generated from 90% of these stores. The Company also has contracts with
retailers covering an additional 1,200 stores in which the Company will commence
collection of data during 1995.
Through its QScan service, the Company obtains access to scanner data for all
stores within a chain rather than just a sample, thereby allowing enhanced
analyses and more powerful sales and marketing applications. QScan provides
retailers with consumer purchasing information through this data base. The
Company has contracts for its QScan service covering approximately 14,700
stores, primarily chain supermarket stores.
Purchase data from approximately 60,000 individual households are collected in
the United States in eight small cities called "mini-markets" (including six
BehaviorScan markets) and in 22 "metro sampling pods" in 19 large cities. These
households present an identification card when they shop at participating
supermarkets, thereby allowing the scanner to record the specific detail of
their product purchases. The Company is currently enhancing its household panel
base by equipping individual household panelists with hand-held scanner
equipment to record their product purchases made in any retail outlet.
Scanner data utilized in the Company's business is obtained through retailer
data purchase contracts, which usually require cash payments, provision of
scanner or computer equipment and/or the exchange of Company information
services and related software. Retailer contracts for collection of
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data from a representative sample are generally for one year periods, renewing
automatically unless cancelled on 90 days' prior written notice. Retailer
contracts for census data collection are generally for a three to five year
period. Retailer contracts for household panel data collection are generally
for a three to five year period. While there can be no assurance that retailer
contracts will be renewed at the end of their terms, the Company has generally
been successful in negotiating renewals of these contracts as they expire, on
essentially the same terms.
In 1993, the Company began collecting sales data from convenience stores and
small supermarket operators in the United States. The Company's convenience
store service currently collects sales data through manual audits.
The Company's Towne-Oller division tracks deliveries of health and beauty care
products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and 30,000 individual supermarkets in the United States.
Towne-Oller data represents approximately 80% of total food and drug store
health and beauty care sales. Towne-Oller is currently the only supplier of
such data to the United States consumer packaged goods industry.
The Company has an agreement with Catalina Marketing Corporation to utilize
its electronic data collection network to obtain daily, store specific scanner
data from a large sample of supermarkets. The daily data from certain of these
stores is currently utilized in the Company's CIR division. See Item 1, Section
A.3 -Efficient Consumer Response.
Data collection methodology outside of the United States differs from country
to country depending upon local country conditions and the availability of
scanner data from retailers. See Section A. 1(e) - International Information
Businesses.
C. DEVELOPMENTS IN 1994
--------------------
During 1994, the Company continued to expand its foreign information services
business. See also Item 1, Section A. 1(e) - International Information
Businesses and NOTES B and D to the Consolidated Financial Statements.
The Company's French joint venture, IRI-SECODIP, S.N.C., was restructured
during 1994 and February 1995. In September 1994, GfK withdrew from the French
joint venture and in February 1995, the Company purchased 39% of the joint
venture from SECODIP, thereby increasing the Company's ownership to a total of
89%. The Company has a call option, and SECODIP has a put option, for the
remaining interest in the joint venture held by SECODIP. As part of the
restructuring, the Company recognized all losses in excess of SECODIP's capital
contributions. As a result, the Company recorded an additional $ 2.7 million
loss in the fourth quarter of 1994.
In mid-1994, the Company's retail tracking joint venture in the Netherlands,
IRI InfoScan B.V., was restructured. The Company's interest in this venture is
to become 19.9% in conjunction with the Company's acquisition from GfK of 19.9%
interests in AGB Attwood Holdings B.V. (primarily a Dutch household consumer
panel operation) and GfK Belgium S.A. (a Belgian household consumer panel
operation).
13
<PAGE>
The Company began development of an information services business in Italy in
1994. IRI InfoScan Italy's basic service will consist of retail sales and
promotion tracking using a sample of grocery retail outlets. Supermarket sales
will be tracked via scanning data, while sales in smaller, traditional shops
will be measured via manual audits. Substantial progress has been made with key
retailer data agreements having been executed and initial client commitments
obtained. Key account census data for selected chains and other analytical
services will also be available. Revenues are expected to first be generated in
1995.
In November 1994, the Company acquired the Greek retail audit business of
Research International Hellas, a Greek subsidiary of Unilever. This business
includes collecting, reporting, analyzing and interpreting national sales data
via manual audits. In January 1995, the Company acquired a minority interest in
a newly-formed joint venture with GfK for scanner-based retail tracking services
in Sweden. This service is now operational.
In March 1995, the Company entered into an alliance with Middle East Market
Research Bureau ("MEMRB"), a market research company based in Cyprus. MEMRB
provides market research throughout 22 countries in the Middle East, Eastern
Europe, the Mediterranean, the Commonwealth of Independent States and North
Africa. Under the terms of the alliance, 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. The Company
has an option to acquire up to a 49% ownership interest in MEMRB.
The Company also began its entry into the Latin American research market
during 1994 via joint venture formations or acquisitions in Venezuela, Puerto
Rico and Guatemala. In January 1994, the Company acquired a 49% ownership
interest in a joint venture in Venezuela formed with Datos, C.A., a leading
Venezuelan market research company. The joint venture, Datos Information
Resources, provides traditional manual store audit, ad hoc and media measurement
services. In March 1994, the Company acquired Market Trends, Inc. in Puerto
Rico. Market Trends (now called IRI Puerto Rico) is the largest full-service
market research company in Puerto Rico, offering both retail tracking and ad hoc
services. In October 1994, the Company formed a joint venture with GSI, S.A., a
Guatemalan company. The Guatemalan joint venture, GSI/Information Resources,
offers retail audit, ad hoc and consulting services to the Central American
market. The Company owns 19.9% of GSI/Information Resources, with an option to
increase its ownership in specified yearly increments over a period of time to
49.9%.
During 1994, the Canadian Bureau of Competition Policy commenced formal
proceedings that may lead to the removal of existing barriers to the Company's
establishment of a retail tracking operation in Canada. The Company's entry
into the Canadian market for syndicated market tracking services has been
blocked by a series of exclusive contracts that A.C. Nielsen of Canada has
signed with leading Canadian retailers which prevent these retailers from
selling their scanner data to other research firms. Based upon the Company's
complaint regarding the effect of these contracts, during 1994 the Canadian
Bureau of Competition Policy commenced proceedings alleging that A.C. Nielsen
has engaged in a practice of anti-competitive acts contrary to the Canadian
Competition Act. In its application, the Bureau requested that A.C. Nielsen be
prohibited from enforcing the exclusivity provisions in its contracts with
retailers and provide "adequate historical scanner data available to any new
entrant into the market on fair and reasonable terms." Hearings before the
Canadian Competition Tribunal are scheduled to resume in April 1995 for a three-
week period.
14
<PAGE>
During 1994, IRI Software's geographic business expansion continued within the
Asia Pacific Region, Mexico and Latin America. Significant progress was also
made in the further development of the Company's worldwide agency and
distributor network. Within the United States marketplace, a new Government
Sector Group was created to pursue significant sales opportunities at the
federal, state and local government level.
D. Patents and Proprietary Software Protection
-------------------------------------------
The Company holds certain patents relating to the targetable television
technology utilized in its BehaviorScan service. The patents expire at various
dates between 1999 and 2005. Loss or infringement of these patents may have a
material adverse effect upon the Company's BehaviorScan revenues. The Company's
computer software bears appropriate copyright notices. The Company is the owner
of various trademarks, including BehaviorScan(R), InfoScan(R), Shoppers'
Hotline(TM), APOLLO(TM), EXPRESS(R), pcEXPRESS(R), DataServer(TM), DataServer
Partners(TM), EZPrompt(R), IRI Software(TM), QScan(TM), InfoScan(R) Census, IRI
Logistics(TM), Logistics Partner(TM), CouponScan(TM), PromotionScan(TM) and
Customer Marketing Resources(TM) as well as other major branded products and
services. The Company believes that, because of the rapid pace of technological
change in the computer industry, patent or copyright protection is of less
significance than factors such as the knowledge and experience of the Company's
personnel and their ability to develop and market new systems and services. The
Company regards its software and data bases as proprietary and, in addition to
copyright protection, relies upon trade secret laws, the limitations it imposes
on access to its computer source codes, confidentiality agreements with clients
and internal nondisclosure safeguards to protect its rights to proprietary
interests.
E. Working Capital Practices
-------------------------
Clients are invoiced in accordance with contract terms. Information services
contracts are generally billed on a quarterly basis, with the first 25% payment
due within 30 days of invoice. However, in some circumstances delayed billings
are granted. Software support services licenses are generally billed in full
upon acceptance of the software. Invoices are generally issued within 30 days
of contract date. Supplies and services are accrued for as received or
incurred. Payments to vendors are generally made in accordance with vendor
terms.
F. Customers
---------
The Company had approximately 930, 820 and 630 clients using its information
services in 1994, 1993 and 1992, respectively. Many of the Company's clients
are global manufacturers of consumer packaged goods. No client of the Company
accounted for revenues in excess of 10% of the Company's total revenues.
15
<PAGE>
G. Backlog Orders
--------------
At December 31, 1994, 1993 and 1992, the Company had committed contract
revenues for information services of approximately $161 million, $152 million
and $142 million, respectively. Initial InfoScan contracts generally require a
minimum one-year client commitment and increasingly include commitments up to
three years or more. Contracts continuing beyond the initial commitment are
generally cancelable at any time by the client on six months prior written
notice. Committed contract revenues include only the noncancelable portion of a
contract. The portion of these committed contract revenues expected to be
earned subsequent to 1995 is approximately 46%.
H. Competition
-----------
Numerous firms supply marketing and advertising research products and services
to consumer packaged goods manufacturers and retailers. However, the Company and
the A.C. Nielsen Company are the only two firms which provide national, scanner-
based syndicated sales measurement products and services in the United States to
such manufacturers and retailers. The United States market for provision of
syndicated scanner-based sales measurement is nearly evenly divided between the
Company and Nielsen. However, Nielsen is far larger than the Company in terms of
worldwide revenues. It is also a principal subsidiary of the Dun & Bradstreet
Corporation, a United States based company with 1994 revenues of $4.9 billion,
giving it access to far greater financial resources than the Company. In the
syndicated store-based trading market in Europe, Nielsen is the Company's only
competitor and also currently maintains a dominant market position in most
European countries. Principal competitive factors include innovation, the
quality, reliability and comprehensiveness of analytical services and data
provided, flexibility in tailoring services to client needs, experience, the
capability of technical and client service personnel, data processing and
decision support software, reputation, price and geographical coverage.
Competition for software support services comes primarily from specialized
products which perform some, but not all, of EXPRESS's functions. These
specialized products, including data base management systems, front-end query
tools, financial modeling languages, graphics and statistical packages, apply
competitive pressure on the Company on an application-by-application basis.
Microcomputer software also represents competition as a substitute product in
the general decision support area, although not in the Company's major
application areas.
I. Research and Development
------------------------
The Company is continuously developing new business products and services. In
this regard, the Company is actively engaged in research and development of new
software services and new data base analyses and applications. Expenditures for
research and development for the years ended December 31, 1994, 1993 and 1992
approximated $35.1 million, $31.0 million and $19.5 million, respectively.
Included in these expenditures were $11.7 million, $10.2 million and $8.8
million of software development costs that were capitalized. Expenditures not
capitalized were charged to expense as incurred.
16
<PAGE>
J. Personnel
---------
At December 31, 1994, the Company had 4,087 full-time and 2,273 part-time
employees.
The Company depends to a significant extent on its skilled technical
personnel. Its future success will depend to a large degree upon its ability to
continue to hire, train and retain its professional staff. The Company competes
with many other companies in attracting qualified personnel.
17
<PAGE>
ITEM 2. PROPERTIES
-------------------
The Company markets and provides its information services and software support
services to domestic clients from full-service sales offices in New York, New
York; San Francisco and Los Angeles, California; Cincinnati, Ohio; Darien,
Connecticut; Fairfield, New Jersey; Plano, Texas and Toronto, Canada as well as
from its headquarters in Chicago, Illinois and systems development headquarters
in Waltham, Massachusetts. The Company markets to international clients through
subsidiaries and/or offices in Australia, Belgium, Canada, Denmark, France,
Germany, Guatemala, Greece, Hong Kong, India, Italy, Japan, Mexico, Netherlands,
New Zealand, Puerto Rico, Singapore, Spain, Turkey, United Arab Emirates, United
Kingdom, Venezuela and through its various distributors.
Principal leased facilities of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
LOCATION PRINCIPAL OPERATION (SQ. FT.)
-------- ------------------------------------------ -----------
<S> <C> <C>
Chicago, IL Corporate headquarters and offices for
professional staff 387,000
Waltham, MA Professional staff and computer facilities 112,000
Wood Dale, IL Computer facilities 44,000
Regional sales and Sales, client service and analysis 240,000
client service offices
International offices Sales, client service, computer facilities
and professional staff 83,000
Data collection facilities Data collection and client test control,
cable TV studio facilities, warehouse 170,000
</TABLE>
The Company maintains $22,835,000 of business interruption insurance.
18
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
--------------------------
The Company was involved in a shareholder class action suit filed by certain
shareholders in 1989. On June 7, 1994, a federal district court jury returned a
unanimous verdict in favor of the Company and the four individual defendants.
The plaintiffs appealed such determination with the United States Court of
Appeals for the Seventh Circuit. It is anticipated that the Appeals Court will
render a decision during 1995. Although there can be no assurances regarding
the ultimate result of such appeal, the Company believes that the original
determination by the federal district court will be affirmed.
In April 1994 certain shareholders filed a class action lawsuit against the
Company. On October 25, 1994, the Company entered into an agreement to settle
this lawsuit. The settlement agreement provided class members with the
opportunity to either object to the settlement or opt out of the class and
preserve the ability to pursue the claim. By the deadline, none of the
plaintiff class members had objected to the settlement and holders of only
approximately 7,500 shares had exercised their right to opt out of the class.
On March 3, 1995, the settlement was approved by the federal district court as
"fair, just, reasonable and adequate" to the settlement class and the case was
dismissed on the merits, with prejudice. The final judgement may be appealed 30
days after its entry. Assuming no such appeal, it is anticipated that the
settlement amount will be paid in the second or third quarter of 1995. The
settlement agreement contemplates the payment of $12.5 million, of which $7.25
million will be paid by the Company's insurance carriers. The settlement
agreement provides that the Company may pay the balance in either cash or stock,
at its option.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
-------------------- --- ---------------------------------------------
Gian M. Fulgoni 47 Chairman of the Board of Directors of the Company
since February 1991; Chief Executive Officer since
January 1986; Vice Chairman from November 1988
until February 1991; Director since 1981; Director
of PLATINUM technology, inc., and U.S. Robotics
Corporation.
James G. Andress 56 President and Chief Operating Officer of the
Company since March 1994; Chief Executive Officer
since May 1990; acting Chief Financial Officer
since January 1995; Vice Chairman from July 1993
until March 1994; President from November 1989
until July 1993; Chief Operating Officer from
November 1989 until May 1990; Director since
November 1989. Director of the Liposome Co., Inc.,
NeoRx Corp., Sepracor, Inc., Genelabs Technologies,
Inc., Genetics Institute, Inc., OptionCare, Inc.,
America OnLine, Inc., Walsh International, Inc. and
Allstate Corp.
19
<PAGE>
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
-------------------- --- ---------------------------------------------
Jeffrey P. Stamen 49 Vice President of the Company since January 1986;
President - IRI Software Group (formerly known as
the Software Products Group) since February 1991;
President of the DSS Division from February 1988
until February 1991; Director of the Company since
March 1994.
Randall S. Smith 43 President of International Information Services
Group since January 1995; Vice President of the
Company since January 1986; President -
International Operations Division from December
1993 until January 1995; President of European Data
Operations Division from February 1993 until
December 1993; President of the Testing Services
Division from October 1990 to January 1993;
President of Operations Group from January 1988
until February 1989; President of the Data Base
Division from 1986 to December 1993; President of
the Administration Division from January 1987 until
September 1990.
George R. Garrick 42 Vice President of the Company and President - IRI
North America Group since November 1993; President
and Chief Operating Officer of the Nielsen
Marketing Research U.S.A. unit of A.C. Nielsen Co.
from July 1993 to October 1993; President of
European Information Services of the Company from
July 1992 until June 1993; President of the
Syndicated Information Services Division from
February 1991 to June 1992; President of the
Consumer Packaged Goods Division from February 1989
until February 1991.
Kenneth J. Giacomino 44 Division Executive Vice President and Corporate
Controller since July 1991; Chief Accounting
Officer since January 1995; Corporate Controller of
Masonite Corporation from January 1987 to July
1991.
Edward S. Berger 54 Division Executive Vice President since June 1993;
Secretary and General Counsel of the Company since
September 1988; Division Senior Vice President of
the Company from February 1991 until June 1993.
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.
20
<PAGE>
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder's Matters
--------------------------------------------------------------------------------
The Company's common stock has been traded on the Nasdaq Stock Market under
the symbol "IRIC" since March 4, 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 are as
follows:
<TABLE>
<CAPTION>
Quarters High Low
----------- ------- ---------
<S> <C> <C> <C>
1993 1st quarter $33-1/4 $27
2nd quarter 37-1/4 27-1/2
3rd quarter 44 33-5/8
4th quarter 41-3/4 34
1994 1st quarter $39-1/4 $17
2nd quarter 17 13-5/8
3rd quarter 15-1/4 11-11/16
4th quarter 17 11-1/4
</TABLE>
The last sale price on February 28, 1995 was $15-1/8 per share. As of
February 28, 1995 there were 644 record holders of the Company's common stock.
The Company believes it has approximately 4,000 nonregistered stockholders
holding stock in street or nominee name with their broker.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings for use in the Company's
business. Accordingly, the Board of Directors does not anticipate that cash
dividends will be paid in the foreseeable future. In addition, the Company's
lease agreement pertaining to the Company's corporate headquarters contains
certain restrictions on the payment of cash dividends.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
---------------- ---------------- ---------------- ---------------- ----------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
Revenues from continuing operations $376,570 100.0% $334,544 100.0% $276,362 100.0% $222,689 100.0% $179,789 100.0%
Operating expenses 325,507 86.4 258,686 77.4 209,065 75.7 175,332 78.7 143,488 79.8
Selling, general and administrative
expenses 45,757 12.2 34,922 10.4 29,594 10.7 22,042 9.9 20,258 11.3
Loss on disposition and write-off
of assets -- -- 3,005 0.9 -- -- -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating profit 5,306 1.4 37,931 11.3 37,703 13.6 25,315 11.4 16,043 8.9
Other income (expense) - net (9,855) (2.6) 168 0.1 (5,071) (1.8) (897) (0.4) (1,549) (0.9)
Equity in loss of affiliated
companies (9,173) (2,050) (466) -- (312)
Income tax (expense) benefit 3,822 (15,416) (12,919) (9,032) (7,934)
Minority interest 979 1,582 -- -- --
-------- -------- -------- -------- --------
Earnings (loss) from continuing
operations (8,921) 22,215 19,247 15,386 6,248
Loss from discontinued operations -- -- -- -- (580)
Cumulative effect on prior years of
change in accounting principles(1) (6,594) 1,864 -- -- (1,369)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net earnings (loss) $(15,515) (4.1)% $ 24,079 7.2% $ 19,247 7.0% $ 15,386 6.9% $ 4,299 2.4%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Earnings (loss) per common and
common equivalent share
Continuing operations $ (.34) $ .82 $ .78 $ .66 $ .32
Discontinued operations -- -- -- -- (.03)
-------- -------- -------- -------- --------
Earnings (loss) before cumulative
effect of accounting changes (.34) .82 .78 .66 .29
Cumulative effect of accounting
changes (.26) .07 -- -- (.07)
-------- -------- -------- -------- --------
Net earnings (loss) $ (.60) $ .89 $ .78 $ .66 $ .22
======== ======== ======== ======== ========
Weighted average common and common
equivalent shares 26,056 27,160 24,817 23,398 19,579
======== ======== ======== ======== ========
</TABLE>
(1) See NOTE C to Consolidated Financial Statements.
22
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA - CONTINUED
--------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1994 1993 1992 1991 1990
-------- --------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
PRO FORMA DATA
Revenues from continuing
operations $ -- $334,601 $279,187 $213,926 $178,552
Earnings before
cumulative effect of change
in accounting principle -- 22,449 20,971 10,058 4,916
Earnings per common
and common equivalent share
before cumulative effect
of accounting change -- .83 .85 .43 .25
BALANCE SHEET DATA
Total assets $354,554 $327,515 $263,999 $202,808 $142,576
Working capital 69,574 91,970 87,941 53,155 24,253
Long-term debt 31,452 3,087 4,718 9,285 23,155
</TABLE>
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
The Company's total revenues grew 12.6% in 1994 to $376.6 million.
Total 1993 revenues were $334.5 million, reflecting 21.1% growth over 1992
revenues of $276.4 million. The Company incurred a loss of ($15.5) million in
1994, following earnings of $24.1 million and $19.2 million in 1993 and
1992, respectively. A number of factors influenced 1994 operating results,
including the substantial costs attendant to the development of the Company's
information services business in Europe and the costs incurred and delays
associated with the introduction of the Company's Window's based versions of
certain of its software products. Additional adverse impacts on 1994 results
came from a $6.6 million special charge related to a change in the accounting
method used to report revenue and $8.3 million in charges related to shareholder
litigation.
The Company's cash requirements continue to be extensive, primarily by
reason of the European expansion of its information services business. The
Company's current cash resources include its bank line of credit and internally
generated funds. However, these alone are not anticipated to be sufficient to
provide for all of the Company's proposed investment plans and working capital
needs. Accordingly, management of the Company has instituted a number of
measures to conserve cash in order that it may operate within its current cash
resources. The Company is currently seeking capital funds to continue with its
originally proposed investment plans and to further fund capital investments in
its domestic and international information and worldwide software businesses.
Management believes that, with additional financing, it will be able to complete
the Company's originally proposed investment plans. The Company obtained
compliance waivers from its banks and the landlord of its headquarters building
for financial covenant violations as of year end 1994. Although management
currently expects that it will be able to comply with its financial covenants in
1995, there can be no assurance that it will be able to do so.
RESULTS OF OPERATIONS
---------------------
REVENUES FROM CONTINUING OPERATIONS. Revenues attributable to the
Company's information services and software product and support services were as
follows:
24
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1994 1993 1992
---------- --------- ---------
(In thousands)
--------------------------------
<S> <C> <C> <C>
Information Services
Domestic Information Businesses:
InfoScan $204,446 $180,623 $151,097
BehaviorScan/Other Testing Services 22,649 21,938 22,741
Towne-Oller 15,206 17,546 15,543
Other 1,532 -- --
-------- -------- --------
Total Domestic Information Services 243,833 220,107 189,381
-------- -------- --------
International Information Businesses 13,580 7,785 2,993
-------- -------- --------
Total Information Services 257,413 227,892 192,374
-------- -------- --------
Software Products and Support Services
------------------------------------------
Business Intelligence Software 105,416 95,397 75,331
Retailer Services 13,741 11,255 8,657
-------- -------- --------
Total Software Services 119,157 106,652 83,988
-------- -------- --------
Total Company $376,570 $334,544 $276,362
======== ======== ========
</TABLE>
The Company's revenue growth was principally due to growth in InfoScan
services and increased revenues from its line of business intelligence software
products. InfoScan's revenue growth for the three year period was the result of
both increased utilization of InfoScan services by existing clients and the
attraction of new clients. During late 1993 and continuing into 1994 the
Company experienced unusual price competition from its principal competitor, the
A.C. Nielsen Company. Notwithstanding this, in 1994 the Company was able to
generate revenue growth of approximately 13% in its domestic InfoScan
business.
The Company's introduction and sale of InfoScan Census data contributed to the
increase in revenues in 1994. In both 1994 and 1993, the Company increased its
InfoScan revenues from the sales of information covering supermarket, drug,
convenience and mass merchandiser outlets. BehaviorScan/Other Testing Services
revenue remained relatively constant over the three year period.
Reflected in its international information businesses are the Company's
majority owned businesses located in the United Kingdom, Puerto Rico, Turkey and
Greece. During 1994, international information services revenue nearly doubled
from the prior year primarily due to sales increases in the United Kingdom.
International information services revenue in 1992 reflected a partial year of
sales in the United Kingdom through IRI InfoScan Limited, an 87% owned joint
venture which began operations in June 1992. Beginning in 1995, revenues
generated by the Company's businesses operating in France and Italy will be
included.
Business intelligence software products, primarily EXPRESS software products,
experienced growth in both domestic and international revenues for the three
year period. During 1994 the revenue growth in business intelligence software
products was less than prior years due to the delay in availability of, and
transition to, certain of the Company's Windows-based products.
OPERATING EXPENSES. Operating expenses increased from $209.1 million in 1992
to $258.7 million in 1993 and $325.5 million in 1994. As a percentage of
revenues, operating expenses increased from 75.7% in 1992 to 77.4% in 1993 and
increased to 86.4% in 1994. The 1994 increase over 1993 in operating expenses
reflected a $36.5 million increase in compensation
25
<PAGE>
expense, a $15.4 million increase in amortization of deferred data procurement
costs and an $8.9 million increase in depreciation and computer operation
expenses required to deliver InfoScan services and other information services
which include IRI InfoScan Limited. Approximately 20% of the increase is
attributable to the expansion of the Company's international information
business. Operating expenses also increased as a result of increases in client
service staff to support current and planned future revenue increases, and
increases in computer operations to support the Company's "OMEGA" production re-
engineering and cost reduction project. Deferred data procurement costs
increased primarily due to the Company's expansion of its data collection
capabilities into convenience store outlets in the United States and its
continuing expansion of data collection in the United Kingdom. In software
products and support services, increased staff and computer hardware and
software expansion to support current and planned revenue growth also
contributed to increases in operating expenses. Substantial costs were also
incurred in 1994 in connection with the conversion to and introduction of
Windows-based versions of certain software products. Operating expenses in 1993
increased from 1992 levels principally as a result of a $29.7 million increase
in compensation expense, an $11.7 million increase in the amortization of
deferred data procurement costs and a $4.8 million increase in travel related
expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $29.6 million in 1992 to $34.9 million in
1993 and $45.8 million in 1994. As a percentage of revenue, SG&A expenses
decreased from 10.7% in 1992 to 10.4% in 1993 and increased to 12.2% in 1994.
The increases in SG&A expenses were attributable to increased spending in
recruiting, employee development, training and professional fees associated with
the Company's domestic and international expansion along with increases in
compensation and related staffing costs. Also contributing to the increase in
SG&A expenses in 1994 was a $1.4 million charge incurred in connection with the
canceled merger with Asia-based SRG Holdings Limited. The decrease as a
percentage of revenue in 1993 from 1992 was due to control of expenses and the
spreading of fixed administrative expenses over a larger revenue base.
LOSS ON DISPOSITION AND WRITE-OFF OF ASSETS. The Company recorded a pre-tax
charge of approximately $805,000 in 1993 to expense various intangibles related
to its 1991 agreements with VideOcart, Inc. Also in 1993, the Company provided
for the expected loss of $2.2 million on the disposition of certain nonstrategic
assets.
OPERATING PROFIT. Operating margins decreased as a percentage of revenues
from 13.6% in 1992 to 11.3% in 1993 to 1.4% in 1994. The 1994 operating margin
was adversely affected by higher operating expense levels primarily associated
with the development and expansion of the Company's European information
businesses, the costs associated with the introduction of Windows-based software
products, and increased SG&A expenses. The Company expects the European
expansion will continue to have substantial, but decreasing, adverse impact to
operating profit through 1996. Despite intense price competition, the profit
contribution from the Company's domestic information businesses remained
relatively stable. During 1993, the operating margin was adversely affected by
higher operating expense levels and expenses related to the loss on disposition
and write-off of assets. The 1992 operating margin reflected increased revenues
from the Company's InfoScan product line and business intelligence software
products, the lower cost of maintaining a reduced number of BehaviorScan markets
and, in general, the impact of spreading fixed administrative and operating
expenses over a larger revenue base.
26
<PAGE>
OTHER INCOME (EXPENSE). The Company recorded $5.1 million in other expense in
1992 and other income of $168,000 in 1993. In 1994, other expense increased to
$9.9 million principally due to the nonrecurring pre-tax provision of $8.3
million related to shareholder litigation. The increase in other expense in
1994 was also due to the increase in interest expense related to bank
borrowings. The fluctuation of expense in 1992 to income in 1993 was
principally due to the reduction in interest expense from $2.5 million in 1992
to $1.0 million in 1993 due to lower borrowing levels and a non-recurring pre-
tax litigation provision of $4.4 million in 1992.
EQUITY IN LOSS OF AFFILIATED COMPANIES. Equity in loss of affiliated
companies reflected losses recognized related to equity investments. The
increase in 1994 related principally to investments in the Company's French
joint venture. In 1994 and February 1995 the Company increased its equity
ownership in the French venture and recognized a one-time pre-tax charge of $2.7
million for accumulated losses in excess of SECODIP's capital contributions.
(See NOTE D of Notes to Consolidated Financial Statements.)
INCOME TAX EXPENSE (BENEFIT). The Company's effective tax rates for 1992,
1993 and 1994 were 40.2%, 42.8% and (27.9%) respectively. The tax rates for
1993 and 1994 on operations including minority interest were 41.0% and (30.0%),
respectively. The 1994 tax rate was a result of the mix of profits and losses
and corresponding tax rates in various countries, and a significant amount of
non-deductible expenses and acquisition costs. The 1993 tax rate included the
effect of the Company increasing its domestic deferred tax liability to reflect
an increase in the Federal corporate tax rate from 34% to 35%. The 1992, 1993
and 1994 tax rates also reflect the effect of state income taxes net of the
federal benefits.
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGES IN ACCOUNTING PRINCIPLE.
Effective January 1, 1994, the Company changed its method of recognizing revenue
on InfoScan and BehaviorScan products whereby revenue is recognized over the
term of the contract on a straight-line basis.
During the three-year period, 1992 was the only year in which the change had a
significant impact on earnings. This change caused an increase of $.07 per
share which was largely a result of the impact of the Company's entry into the
drug and mass merchandiser tracking business. Clients signed multi-year
contracts for these outlets in the latter part of 1991 for contract terms
commencing 1992, and the Company recognized set-up and back data revenues in
1991 under the previous method of revenue recognition. On a straight-line basis
these revenues would have been recognized ratably over the contract terms
commencing with 1992. (See NOTE C of Notes to Consolidated Financial
Statements).
NET INCOME (LOSS). As a result of the factors described above, net earnings
(loss) were $19.2 million in 1992, $24.1 million in 1993 and ($15.5) million in
1994.
FINANCIAL CONDITION
-------------------
LIQUIDITY AND CAPITAL RESOURCES. During 1994 and 1993, the Company satisfied
its cash requirements principally through internally generated funds, bank
borrowings, and proceeds from previous equity offerings. However, working
capital declined by $22.4 million to $69.6 million at year end 1994; cash and
cash equivalents declined by $7.6 million to $11.8 million at December 31, 1994;
and bank borrowings increased by $29 million during 1994, standing at $29
27
<PAGE>
million at year end. This resulted primarily from the extensive cash
requirements needed to further the expansion of the Company's information
services business into Europe.
In order to operate within the current cash resources of the Company,
management in the first quarter of 1995 instituted a number of measures to
conserve cash. These include aggressive management of operating expenses,
accounts receivable and payable, and minimizing capital spending. While
management of the Company believes that these measures will be sufficient to
avoid defaults in loan and lease covenants without additional financing, there
can be no assurances that these measures will be sufficient. In the event that
these measures are not sufficient and the Company is unable to obtain new
financing, the Company may have to further cut back on certain other activities.
International Information Services Funding Requirements. The Company's
principal international information services business investments are in the
United Kingdom, France and Italy. Each of these is in various stages of
development and operates at a loss. Further, each will require significant
additional cash investments by the Company before reaching positive cash flow.
In 1994, the Company incurred ($23.6) million in losses from all international
information services operations on revenues of $13.6 million, compared to 1993
losses of ($4.7) million on $7.8 million of revenues. Net cash requirements for
these businesses were approximately $34 million in 1994. Management anticipates
that 1995 requirements will be approximately $41 million. The increase over 1994
is primarily due to the 1995 restructuring of its French joint venture resulting
in an increased ownership position in France. These operations will continue to
require substantial but decreasing investment through at least the end of 1996.
Management believes the investment required to establish its information
services businesses in Europe is relatively similar to that required when the
Company established its InfoScan service in the United States in the late
1980's. Current cash resources are believed to be sufficient to fund presently
planned 1995 operations in Europe, principally France, the United Kingdom and
Italy. The Company has intangible assets, the realization of which is dependent
on future international operations. In the event the Company is unable to
achieve its future financial objectives, certain intangible and other assets on
its balance sheet may have to be written off before their scheduled
amortization.
Bank Credit Facility and Financial Covenant Compliance. In late 1994, the
Company entered into a three-year $65.0 million unsecured revolving bank credit
facility with a syndicate of commercial banks, replacing its previous credit
facility. Subject to customary conditions including financial covenants, the new
facility permits borrowings up to $65.0 million through December 30, 1995, $55.0
million through December 30, 1996, and $45.0 million though October 31, 1997.
The Company obtained the facility to provide working capital principally to
support its European expansion and domestic capital spending needs.
The Company recently obtained the consent of its bank syndicate waiving
compliance with the current ratio requirement of the credit facility, since the
Company failed to meet that financial covenant at year end 1994. The Company
also obtained the consent of the lessor of its headquarters facility waiving
compliance with the lease's fixed charge coverage ratio, at December 31, 1994
and during 1995. Although management currently expects that it will be able to
comply with its financial covenants in 1995, there can be no assurance that it
will be able to do so.
28
<PAGE>
Capital Financing Initiatives. In June 1994, the Company engaged
Salomon Brothers Inc. and Hambrecht & Quist Incorporated as financial advisors
to assist the Company in identifying a strategic financial partner. The purpose
of this effort is to raise more capital for the Company by effecting a sale of
an equity interest to an investor with whom the Company could expect to develop
significant strategic synergies. To date, the Company has not entered into any
commitment of any kind with such an investor, though it continues to hold
discussions with a number of parties. To address its current cash requirements,
management recently broadened the focus of its discussions to include potential
investors not necessarily offering business synergies. Management is also
continuing to pursue a number of other more traditional alternatives to finance
the cash needs of the Company's business.
29
<PAGE>
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:
<TABLE>
<CAPTION>
(a) Financial Statements Page No.
-------------------- --------
<S> <C>
Report of Independent Certified
Public Accountants 31
Consolidated Balance Sheets at
December 31, 1994 and 1993 32
Consolidated Statements of Operations
for the years ended December 31, 1994,
1993 and 1992 34
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1994, 1993 and 1992 35
Consolidated Statements of Cash
Flows for the years ended
December 31, 1994, 1993 and 1992 36
Notes to Consolidated Financial
Statements 37
(b) Supplementary Data
------------------
Summary of Quarterly Data 59-60
</TABLE>
Financial statement schedule is included on page 67 following the signature
pages of this report (See Item 14).
30
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Information Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Information
Resources, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in NOTE C, effective January 1, 1993, the Company changed its
method of accounting for income taxes and effective January 1, 1994, changed its
method of recognizing revenue.
GRANT THORNTON LLP
Chicago, Illinois
March 24, 1995
31
<PAGE>
Information Resources, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,792 $ 19,368
Accounts receivable
Customers 117,479 113,495
Related parties 4,651 4,241
Other 647 1,151
-------- --------
122,777 118,887
Allowance for doubtful receivables (2,926) (2,250)
-------- --------
119,851 116,637
Deferred income taxes (NOTE H) 4,471 9,205
Prepaid expenses and other current assets 7,075 4,230
-------- --------
Total current assets 143,189 149,440
-------- --------
PROPERTY AND EQUIPMENT
Computer equipment 70,572 58,206
Market advertising and testing equipment 20,485 19,631
Store operating equipment 4,746 6,344
Leasehold improvements 15,310 12,572
Equipment and furniture 34,424 27,432
-------- --------
145,537 124,185
Accumulated depreciation and
amortization (85,244) (71,013)
-------- --------
60,293 53,172
INVESTMENTS (NOTE D) 20,995 11,764
OTHER ASSETS (NOTE E) 130,077 113,139
-------- --------
$354,554 $327,515
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
32
<PAGE>
Information Resources, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
LIABILITIES 1994 1993
-------- --------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt (NOTE G) $ 1,998 $ 1,691
Accounts payable 19,665 14,512
Accrued expenses (NOTE F) 28,012 22,919
Deferred revenue 17,733 13,844
Other (NOTE M) 6,207 4,504
-------- --------
Total current liabilities 73,615 57,470
-------- --------
LONG-TERM DEBT (NOTE G) 31,452 3,087
DEFERRED INCOME TAXES (NOTE H) 16,122 31,040
DEFERRED GAIN (NOTE M) 4,463 4,878
OTHER LIABILITIES 1,701 1,176
MINORITY INTEREST -- 1,202
COMMITMENTS & CONTINGENCIES (NOTE M) -- --
STOCKHOLDERS' EQUITY (NOTE K)
Preferred stock--authorized 1,000,000 shares,
$.01 par value, none issued -- --
Common stock--authorized 60,000,000 shares,
$.01 par value, issued 26,493,277 shares
in 1994 and 25,416,502 shares in 1993 265 254
Capital in excess of par value 169,703 157,972
Retained earnings 57,506 72,333
Cumulative translation adjustment (273) (1,897)
-------- --------
Total stockholders' equity 227,201 228,662
-------- --------
$354,554 $327,515
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
33
<PAGE>
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Revenues
$ 376,570 $ 334,544 $ 276,362
--------- --------- ---------
Costs and expenses
Operating expenses 325,507 258,686 209,065
Selling, general and administrative expenses 45,757 34,922 29,594
Loss on disposition and write-off of assets -- 3,005 --
--------- --------- ---------
371,264 296,613 238,659
---------- -------- ---------
Operating profit 5,306 37,931 37,703
Other income (expense)
Interest income 492 1,257 1,631
Interest expense (2,379) (1,049) (2,542)
Litigation provision (8,275) (432) (4,391)
Other - net 307 392 231
--------- --------- ---------
(9,855) 168 (5,071)
--------- --------- ---------
Equity in loss of affiliated companies (9,173) (2,050) (466)
--------- --------- ---------
Earnings (loss) before income taxes, minority
interest and cumulative effect of
change in accounting principle (13,722) 36,049 32,166
Income tax (expense) benefit 3,822 (15,416) (12,919)
--------- --------- ---------
Earnings (loss) before minority interest and
cumulative effect of change
in accounting principle (9,900) 20,633 19,247
Minority interest 979 1,582 --
--------- --------- ---------
Earnings (loss) before cumulative effect of
change in accounting principle (8,921) 22,215 19,247
Cumulative effect on prior years of
change in accounting principle (6,594) 1,864 --
--------- --------- ---------
Net earnings (loss) $ (15,515) $ 24,079 $ 19,247
========= ========= =========
Earnings (loss) per common and common equivalent share:
Before cumulative effect of
accounting change $ (.34) $ .82 $ .78
Cumulative effect of accounting change (.26) .07 --
--------- --------- ---------
Net earnings (loss) $ (.60) $ .89 $ .78
========= ========= =========
Weighted average common and common equivalent shares 26,056 27,160 24,817
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
34
<PAGE>
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Years Ended December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
Capital in Cumulative Treasury
Preferred Common Excess of Retained Translation Common
Stock Stock Par Value Earnings Adjustment Stock Total
--------- ------ ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $ -- $229 $ 93,711 $ 29,007 $ 1,150 $ (766) $123,331
--------- ---- -------- -------- ------- ------ --------
Exercise of stock options -- 1 5,494 -- -- 766 6,261
Income tax benefit from the
exercise of stock options -- -- 5,890 -- -- -- 5,890
Issuance of 160,000 shares -- 1 3,172 -- -- -- 3,173
Compensation for issuance of
stock options at less than
fair market value -- -- 124 -- -- -- 124
Issuance of 1,380,000 shares -- 14 31,146 -- -- -- 31,160
Foreign currency translation -- -- -- -- (2,298) -- (2,298)
Net earnings for the year -- -- -- 19,247 -- -- 19,247
--------- ---- -------- -------- ------- ------ --------
Balance at December 31, 1992 -- 245 139,537 48,254 (1,148) -- 186,888
--------- ---- -------- -------- ------- ------ --------
Exercise of stock options -- 9 11,169 -- -- -- 11,178
Income tax benefit from the
exercise of stock options -- -- 6,846 -- -- -- 6,846
Compensation for issuance of
stock options at less than
fair market value -- -- 420 -- -- -- 420
Foreign currency translation -- -- -- -- (749) -- (749)
Net earnings for the year -- -- -- 24,079 -- -- 24,079
--------- ---- -------- -------- ------- ------ --------
Balance at December 31, 1993 -- 254 157,972 72,333 (1,897) -- 228,662
--------- ---- -------- -------- ------- ------ --------
Exercise of stock options -- 1 1,248 -- -- -- 1,249
Income tax benefit from the
exercise of stock options -- -- 448 -- -- -- 448
Compensation for issuance of
stock options at less than
fair market value -- 1 230 -- -- -- 231
Issuance of 53,000 shares
for compensation -- 1 753 -- -- 754
Issuance of 411,000 shares
for joint ventures -- 4 7,299 -- -- -- 7,303
Business acquisitions -- 4 1,753 688 -- -- 2,445
Foreign currency translation -- -- -- -- 1,624 1,624
Net loss for the year -- -- -- (15,515) -- -- (15,515)
--------- ---- -------- -------- ------- ------ --------
Balance at December 31, 1994 $ -- $265 $169,703 $ 57,506 $ (273) $ -- $227,201
========= ==== ======== ======== ======= ====== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements
35
<PAGE>
Information Resources, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993 1992
--------- --------- --------
<S> <C> <C> <C>
Net earnings (loss): $ (15,515) $ 24,079 $ 19,247
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 20,315 16,463 14,217
Amortization of capitalized software costs 8,839 4,966 4,293
Amortization of deferred data procurement costs 65,819 50,464 38,742
Deferred income taxes (6,270) 6,559 5,537
Equity in loss of affiliated companies 9,173 2,050 466
Minority interest (979) (1,582) --
Cumulative effect of change in revenue recognition 6,594 -- --
Cumulative effect of adoption of FAS 109 -- (1,864) --
Stock option and other compensation expense 985 420 124
Provision for losses on accounts receivable 2,584 542 594
Other 341 (494) (1,122)
Change in assets and liabilities:
Increase in accounts receivable (22,586) (34,728) (6,678)
(Increase)/Decrease in other current assets (1,555) (458) 275
Increase in other assets (3,223) (700) (2,538)
Increase in accounts payable 4,334 1,344 2,226
Increase in other current liabilities 5,508 3,956 5,986
Increase in income taxes 901 4,922 5,734
Increase in deferred revenue 2,319 4,296 1,161
Increase in other liabilities 525 192 349
--------- --------- --------
Total adjustments 93,624 56,348 69,366
--------- --------- --------
Net cash provided by operating activities 78,109 80,427 88,613
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 210 168 56
Purchase of property and equipment (22,768) (25,906) (19,993)
Software costs (11,681) (10,202) (8,808)
Deferred data procurement costs (79,162) (67,991) (51,881)
Net assets acquired in business acquisitions -- (1,252) (2,921)
Investments relating to joint ventures (1,832) (20,287) (425)
--------- --------- --------
Net cash used by investing activities (115,233) (125,470) (83,972)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreements 29,000 -- --
Net repayments of capitalized leases (1,620) (1,500) (20,216)
Proceeds from exercise of stock options 1,249 11,178 6,261
Proceeds from issuance of common stock, net
of expenses -- -- 34,333
Capital contributions from minority interest -- 1,486 1,173
--------- --------- --------
Net cash provided by financing activities 28,629 11,164 21,551
EFFECT OF EXCHANGE RATE CHANGES ON CASH 919 (346) (1,093)
--------- --------- --------
NET INCREASE (DECREASE) IN CASH (7,576) (34,225) 25,099
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 19,368 53,593 28,494
--------- --------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 11,792 $ 19,368 $ 53,593
========= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
36
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of significant accounting policies applied in the preparation of the
accompanying consolidated financial statements follows:
1. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Information
Resources, Inc. ("IRI" or the "Company") and all wholly or majority owned
subsidiaries. The minority interest separately disclosed herein reflects the
non-Company owned stockholder interest in IRI InfoScan Limited. The equity
method of accounting is used for investments in which the Company has a 50% or
less ownership and exercises significant influence over operating and financial
policies. All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. Revenue Recognition
-------------------
Effective January 1, 1994, the Company changed its method of recognizing revenue
on InfoScan and BehaviorScan products whereby revenue is recognized over the
term of the contract on a straight-line basis. Previously, the Company
recognized a portion of the initial contract revenue in the period between
client commitment and either the start of forward data or the test commencement
with the remaining revenue recognized ratably over the initial contract term.
(See Note C - Change in Accounting Principle).
InfoScan products generally have contract terms of a period not less than one
year. Contracts are generally categorized into one of two classes: 1)
cancelable at the end of each year with six months written notice by either
party, or 2) multi-year contracts either non-cancelable or cancelable only with
significant penalties generally cancelable with six months written notice after
the initial term. The base contract revenue from the first commitment period is
recognized ratably over the initial contract term. Revenues from remaining
years of multi-year contracts, extensions and renewals are recognized ratably
over their extension periods. After the initial commitment, the contract
generally continues indefinitely, unless cancelled by the client on six months
prior notice. Revenue for special analytical services is recognized as services
are performed. Initial BehaviorScan contracts typically commence within three
months after execution and provide clients with historical data covering the
six-month to one-year period prior to a contract's commencement date and with
data, testing services and analyses for the twelve-month period covering the
minimum term of the contract. The base contract revenue is recognized ratably
over the initial contract term. Revenues from contract extensions are
recognized ratably over their extension periods, typically year-to-year.
37
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Revenues from the sale of EXPRESS, APOLLO and other software application
products, under licensing agreements, are recognized upon delivery where there
is a reasonable basis for estimating collectibility and the Company has no
significant remaining obligations. If there are significant other obligations,
revenues are recognized on the basis of estimated cost. Related software
maintenance fees are recognized as earned over the terms of their respective
contracts.
Revenues from market research and consulting projects are recognized as services
are performed. Certain of these projects are fixed-price in nature and use the
percentage-of-completion method for the recognition of revenue. Revenues for
projects that include a timesharing aspect are allocated over the timesharing
period based on the costs incurred to provide the service.
Billings to customers in advance of revenue recognition are reflected in the
consolidated financial statements as deferred revenue. Unbilled charges of
$59,806,000 and $55,592,000 for 1994 and 1993, respectively are included as a
part of accounts receivable and represent accrued revenues and fees on contracts
and other services incurred to date.
3. Property and Equipment
----------------------
Property and equipment is recorded at cost and depreciated over the estimated
service lives. For financial statement purposes, depreciation is provided by
the straight-line method. For income tax purposes, accelerated methods are
used. Leasehold improvements are amortized over the shorter of their estimated
service lives or the terms of their respective lease agreements for financial
statement purposes. For income tax purposes, leasehold improvements are
amortized over the service lives of the buildings.
Estimated useful lives for property and equipment are as follows:
Computer equipment 3 to 5 years
Market advertising and testing equipment 4 to 7 years
Store operating equipment 3 to 7 years
Leasehold improvements 5 to 13 years
Equipment and furniture 3 to 8 years
The Company reduced store operating equipment and related accumulated
depreciation by $2.5 million and $13.0 million in 1994 and 1993, respectively,
for equipment which was no longer used, obsolete or reverted to store owners.
4. Other Assets
------------
Other assets include deferred data procurement costs, goodwill, capitalized
software costs, solicitation rights and non-compete agreements. Data
procurement costs are capitalized as incurred and amortized over periods not
exceeding twenty-eight months. Goodwill represents the unamortized cost in
excess of fair value of the
38
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
identifiable net assets acquired. Goodwill is amortized on a straight-line
basis over periods from ten to twenty years. Capitalized costs of computer
software to be sold are amortized on a straight-line basis beginning upon
general release date and not exceeding three years. Solicitation rights are
amortized on a straight line basis over the expected useful lives of six to ten
years. Non-compete agreements are being amortized over periods from five to
seven years. On an ongoing basis, management reviews the valuation and
amortization of intangibles to determine possible impairment by comparing the
carrying value to the undiscounted future cash flows of the related assets.
5. Stock Options
-------------
For options granted at fair market value, the proceeds are credited to the
capital accounts upon exercise. For options granted at less than fair market
value, the difference between the exercise price and fair market value at date
of grant is recognized as compensation expense over the vesting period. With
respect to nonqualified options, the Company recognizes a tax benefit upon
exercise of these options on the difference between the option price and the
fair market value of the common stock. With respect to incentive stock options,
tax benefits arising from disqualifying dispositions are recognized at the time
of disposition. Tax benefits related to stock options are credited to capital
in excess of par value.
6. Earnings (loss) per Common and Common Equivalent Share
------------------------------------------------------
Earnings (loss) per common and common equivalent share is based on the weighted
average number of shares of common stock and common stock equivalents (if
dilutive) outstanding during each year.
The effect of dilution from the exercise of stock options is considered in the
computation of earnings (loss) per common and common equivalent share. The
modified treasury stock method was used to compute earnings (loss) per common
and common equivalent share for all quarters in 1994 and 1993 since options
outstanding exceeded 20% of the shares of common stock outstanding. In applying
the modified treasury stock method for all periods in 1994, stock options were
not included as they were anti-dilutive. The treasury stock method was used to
calculate earnings per common and common equivalent share in 1992.
7. Income Taxes
------------
The Company adopted Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes (FAS 109) effective January 1, 1993. FAS 109
requires an asset and liability approach in accounting for income taxes. Under
this method, deferred income taxes are recognized, at enacted rates, to reflect
the future effects of tax carryforwards and temporary differences arising
between the tax bases of assets and liabilities and their financial reporting
amounts at each year end. (See NOTE C.) Prior to January 1, 1993, the Company
followed the provisions of Financial Accounting Standards No. 96 - Accounting
for Income Taxes. Among other things, its provisions include providing deferred
taxes based upon enacted tax rates which would apply during the period in which
taxes become payable (receivable) and the adjustment of cumulative deferred
taxes for any changes in the tax rates.
39
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Deferred U.S. income taxes are not provided on the undistributed earnings of
foreign subsidiaries since such earnings are considered to be permanently
invested in those operations. Cumulative undistributed earnings of foreign
subsidiaries are not significant.
8. Reclassifications
-----------------
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 1994 presentation.
9. Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and funds held in money market accounts with a maturity of three months or
less. The carrying amount approximates fair value.
10. Supplemental Cash Flow Information
----------------------------------
Cash paid for interest and income taxes during the years ended December 31, was
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Interest $2,087 $1,055 $2,866
Income taxes $1,547 $3,935 $1,648
</TABLE>
Excluded from the consolidated statements of cash flows was the effect of
certain non-cash investing and financing activities:
The Company had capital lease obligations for new equipment. These totaled
$1,185,000 and $1,053,000 for 1994 and 1992, respectively. In 1993, there were
no obligations for new equipment.
The Company had income tax benefits realized from the exercise of nonqualified
stock options. These totaled $448,000, $6,846,000 and $5,890,000 for 1994, 1993
and 1992, respectively.
In 1994 and 1992, the Company issued shares of its common stock to acquire
certain businesses and to invest in joint ventures as described in Note B.
In 1994, receivables of $7,391,000 were reclassified to investment in joint
ventures. In 1993, receivables of $1,800,000 were transferred to investments in
satisfaction of cash contributions that otherwise would have been made to
various joint ventures.
40
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
11. Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments is a reasonable
approximation of their fair values.
12. Concentrations of Credit Risk
------------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade receivables. The
Company's cash equivalents are placed in high quality securities and diverse
investment funds. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
Company's customer base, and their dispersion across different businesses and
geographic areas. As of December 31, 1994 and 1993, the Company had no
significant concentrations of credit risk.
NOTE B - ACQUISITIONS
In September 1994, the Company acquired 19.9% of AGB Attwood Holdings B.V.
("Attwood") of the Netherlands from GfK AG of Germany for approximately
$1,900,000. Attwood operates a household consumer panel service. Of the total
consideration, approximately $500,000 was paid via offset of excess capital
contributions which the Company was otherwise to have been refunded as part of
the restructuring of the Company's interest in its existing Holland joint
venture. The remainder of the purchase price was settled by the issuance of
109,000 shares of the Company's common stock having a market value of
approximately $1,400,000. Coincident with this acquisition, GfK AG acquired the
remainder of Attwood and now owns 80.1%. Attwood has been renamed GfK Panel
Services Benelux B.V.
In September 1994, the Company issued a promissory note for approximately
$570,000 for the acquisition from GfK AG of a 19.9% ownership interest in GfK
Belgium S.A. GfK Belgium S.A. operates a household consumer panel service in
Belgium. The Company issued shares of its common stock in settlement of the
promissory note in January 1995. GfK Belgium S.A. has been subsequently
combined with the investment in GfK Panel Services Benelux B.V.
In January 1994, the Company formed a joint venture, Datos Information
Resources, with Datos C.A. of Venezuela. Datos C.A. contributed net assets of
its existing retail audit, ad hoc and media services businesses to the joint
venture. The purpose of the joint venture is to offer market research services
and to promote the licensing of the Company's software and related services in
Venezuela. The Company acquired a 49% interest in the joint venture for 287,000
shares of the Company's common stock having a market value of approximately
$5,750,000 at the time of acquisition.
41
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE B - ACQUISITIONS - Continued
In July 1993, the Company and GfK AG completed the reorganization of their 1988
EuroScan joint venture. GfK AG contributed its consumer panel and retail audit
businesses to the already established scanner-based information businesses of
the EuroScan joint venture. The Company's ownership interest in the joint
venture company, GfK Panel Services GmbH, is 15%. The Company's net investment
made to the joint venture company in connection with the reorganization was
$7,200,000, including transaction costs. The Company also reacquired certain
Western European rights to its InfoScan production technology for $2,000,000.
In April 1993, the Company acquired a 45% ownership interest in a French market
information business through the formation of a joint venture with certain
European market research companies. SECODIP, S.A. ("SECODIP") of France, a
subsidiary of SOFRES, S.A., initially held a 45% interest in the joint venture
company, and GfK AG of Germany initially held a 10% interest. The Company and
GfK AG contributed their investments in the former EuroScan France operations to
the joint venture company, while SECODIP contributed certain assets related to
its retail audit business. The name of the joint venture company is IRI -
SECODIP, S.N.C. The purpose of the joint venture is to develop the Company's
scanner-based information services in the French markets. In connection with
the formation of the joint venture, the Company obtained certain intangible
rights from SECODIP, some of which the Company then licensed to the joint
venture. The Company's investments in connection with the joint venture,
including its acquisition costs, approximated $13,000,000. In September 1994,
GfK's interest was acquired by the other joint venture partners. This joint
venture was restructured in February 1995 (See Note D - INVESTMENT).
In December 1992, the Company organized LogiCNet, Inc. (renamed IRI Logistics,
Inc.) as a joint venture company along with other parties to pursue development
of a distribution resource planning system incorporating inventory management
and product reordering systems. In November 1994, the Company increased its
ownership interest to 100% through the issuance of 100,000 shares of the
Company's common stock having a market value of approximately $1,300,000.
In June 1992, the Company formed a joint venture, IRI InfoScan Limited (formerly
known as InfoScan NMRA Limited), with GfK AG of Nuremberg, Germany and Taylor
Nelson Group Limited (now known as Taylor Nelson AGB plc) of London to purchase
certain assets of the NMRA Retail Audit business of BGA Audits Limited (formerly
Audits of Great Britain), a United Kingdom market research company in
administration. The Company purchased 60% of the joint venture for $2,900,000
including direct costs of acquisition. During 1993 and 1994, as a result of
disproportionate capital contributions made by the joint venture partners, the
Company's ownership interest increased to approximately 75% at December 31, 1993
and approximately 87% at December 31, 1994. The other partners may reestablish
their ownership interest percentages to all or part of their original levels
within a specified period of time. The accounts of the joint venture have been
included in the accompanying consolidated financial statements.
42
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE B - ACQUISITIONS - Continued
In May 1992, the Company acquired Towne-Oller & Associates ("Towne-Oller"). The
transaction was effected through the exchange of approximately 690,000 shares of
the Company's common stock for all of the issued and outstanding shares of
Towne-Oller. The acquisition has been accounted for as a pooling-of-interests
and accordingly, the accompanying consolidated financial statements have been
restated to reflect the acquisition.
NOTE C - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company changed its method of recognizing revenue
on InfoScan and BehaviorScan products whereby revenue is recognized over the
term of the contract on a straight-line basis. Previously, the Company
recognized a portion of the initial contract revenue in the period between
client commitment and either the start of forward data or the test commencement
with the remaining revenue recognized ratably over the initial contract term.
The Company believes this change is preferable because the new accounting policy
is consistent with the Company's change in business strategies to emphasize
value added service to existing clients. Other factors also having a bearing on
this decision include:
(a) Set-up and backdata activities associated with new customers as a percentage
of total IRI's business have decreased and are expected to decrease further
in the future as customers continue to renew and extend their existing
contracts.
(b) The Company is expanding its business internationally through acquisitions
and has found that contract revenues for information services have been
accounted for on a straight-line basis by many of the acquired companies.
As a result, the implementation of the Company's accounting policies is
difficult because the accounting systems of many foreign companies often do
not routinely provide adequate cost information.
The cumulative effect of this change for periods prior to January 1, 1994 of
$6,594,000 (after reduction for the income tax effect of $4,440,000) is shown
separately in the condensed consolidated statement of operations. The effect of
the change on the quarter ended March 31, 1994 was to reduce the loss, before
the cumulative effect, by approximately $455,000 after tax ($.02 per share).
43
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
NOTE C - CHANGE IN ACCOUNTING PRINCIPLE - Continued
The pro forma amounts summarized below have been adjusted for the effect of
retroactive application on revenues and the change in minority interest and
related income taxes that would have been made had the new method been in
effect. The actual amounts for each year are being reported for comparative
purposes.
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
(In Thousands, except per share data)
1993 1992
-------- --------
<S> <C> <C>
Revenues
- Actual $334,544 $276,362
======== ========
- Pro forma $334,601 $279,187
======== ========
Earnings before
cumulative effect of
accounting change
- Actual $ 22,215 $ 19,247
======== ========
- Pro forma $ 22,449 $ 20,971
======== ========
Earnings per
common and common
equivalent share before
cumulative effect of
accounting change
- Actual $ .82 $ .78
======== ========
- Pro forma $ .83 $ .85
======== ========
</TABLE>
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes (FAS 109). The effect of the
adoption was to record a $1,864,000 favorable cumulative effect adjustment as of
January 1, 1993 in the statement of income for the year ended December 31, 1993.
The adjustment primarily represents the impact of recognizing tax benefits for
future taxable losses that could not be recorded under FAS 96.
44
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE D - INVESTMENTS
Investments at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
(In Thousands)
<S> <C> <C>
GfK Panel Services GmbH, at cost $ 7,118 $ 7,155
Datos Information Resources, at cost
plus equity in undistributed earnings 6,137 13
IRI-SECODIP, S.N.C., at cost less
equity in net losses 4,664 4,012
GfK Panel Services Benelux, B.V. at cost 2,707 256
Other, at cost and at cost plus equity in
undistributed earnings 369 328
------- -------
$20,995 $11,764
======= =======
</TABLE>
At December 31, 1994, the Company owned 50% of IRI-SECODIP, S.N.C. ("IRI-
SECODIP"). (See NOTE B - ACQUISITIONS.) In February 1995, the Company
purchased 39% of the joint venture from SECODIP increasing the Company's
ownership in the joint venture to 89%. The Company has a call option, and the
joint venture partner has a put option, for the remaining interest in the joint
venture. The Company's call option is exercisable any time through March 15,
1996 for 750,000 French Francs (which at December 31, 1994 would approximate
$140,000). The put option is exercisable between February 16, 1996 and March
15, 1996 at the same price. As part of the restructuring the Company recognized
all losses in excess of SECODIP's capital contributions. As a result, the
Company recorded an additional $2.7 million loss in the fourth quarter. As the
Company's purchase of the additional 39% of the joint venture did not occur
until after December 31, 1994, the investment is accounted for on the equity
basis in the accompanying financial statements.
45
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE D - INVESTMENTS - Continued
Summarized financial data for all equity investments including IRI-SECODIP is as
follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
Current assets $ 8,425 $ 7,181
Non-current assets 12,247 4,150
------- -------
$20,672 $11,331
======= =======
Current liabilities $18,746 $10,393
Non-current liabilities 6,913 245
Stockholders' equity (deficit) (4,987) 693
------- -------
$20,672 $11,331
======= =======
Revenues $18,378 $10,814
Operating loss $(9,076) $(1,495)
Net loss $(9,139) $(1,412)
</TABLE>
At December 31, 1994 and 1993, the investments in companies accounted for by the
equity method include goodwill and other intangibles (relating primarily to IRI-
SECODIP) in the amount of $15,810,000 and $11,937,000, respectively, which is
being amortized over periods not exceeding 15 years. This amortization is
included in the equity in loss of affiliated companies.
At December 31, 1994 and 1993, included in accounts receivable-related parties
are receivables of $2.6 million and $2.5 million, respectively, from affiliates.
46
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE E - OTHER ASSETS
Other assets at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Deferred data procurement costs - net of accumulated
amortization of $78,408 in 1994 and $62,333 in 1993 $ 87,799 $ 71,131
Capitalized software costs - net of accumulated amortization
of $14,255 in 1994 and $10,081 in 1993 23,357 21,481
Goodwill - net of accumulated amortization of $1,436 in
1994 and $1,439 in 1993 4,450 3,931
Solicitation rights - net of accumulated
amortization of $4,532 in 1994 and $3,112 in 1993 6,395 7,815
Non-compete agreements - net of accumulated amortization
of $3,292 in 1994 and $2,272 in 1993 3,058 4,328
Other 5,018 4,453
-------- --------
$130,077 $113,139
======== ========
</TABLE>
Costs which became fully amortized and are excluded from the accumulated
amortization amounts above are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Deferred data procurement costs $ 49,744 $ 32,867
Capitalized software costs $ 4,665 $ 6,712
Goodwill $ 653 $ --
Non-compete agreements $ 250 $ --
</TABLE>
NOTE F - ACCRUED EXPENSES
Accrued expenses at December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Accrued payroll $ 11,982 $ 8,866
Accrued property, payroll and other taxes 5,132 4,701
Other 10,898 9,352
-------- --------
$ 28,012 $ 22,919
======== ========
</TABLE>
47
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE G - LONG-TERM DEBT
Long-term debt at December 31, is as follows:
<TABLE>
<CAPTION>
1994 1993
------- ------
(In thousands)
<S> <C> <C>
Bank borrowings /(1)/ $29,000 $ --
Capitalized leases /(2)/ 4,362 4,778
Other 88 --
------- ------
33,450 4,778
Less current maturities 1,998 1,691
------- ------
$31,452 $3,087
======= ======
</TABLE>
Maturities of capitalized leases and other long-term debt during each of the
years 1995 through 1998 are $1,998,000, $1,282,000, $994,000 and $176,000,
respectively.
/(1)/ On November 3, 1994, the Company established a three-year unsecured
revolving bank credit facility of $65,000,000 replacing its previous
credit facility of $50,000,000 dated May 13, 1994. The credit facility
allows borrowings of $65,000,000 through December 30, 1995 and is
scheduled to decrease to $55,000,000 on December 31, 1995 and to
$45,000,000 on December 31, 1996. Borrowings under the facility are
subject to interest at either the bank's prime rate or LIBOR (London
Interbank Offer Rate). At December 31, 1994 the interest rates ranged
from 7.6% to 8.1%.
The credit facility contains certain financial covenants including:
restrictions on additional indebtedness and liens, limitations on
acquisitions and investments, and maintenance of minimum levels of
tangible net worth, and current, leverage and cash flow coverage ratios.
At December 31, 1994 the Company was not in compliance with its current
ratio requirement. Noncompliance with the current ratio requirement was
waived at December 31, 1994. Although it is possible that long-term debt
covenants may not be met for the remaining quarters of 1995 the Company
has classified its debt between long-term and short-term according to its
terms.
/(2)/ The amount consists primarily of leases for telephone and computer
equipment expiring through 1998. Total interest in the amount of
$405,000 to be paid over the period of the lease is not included in
the lease commitment.
48
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
NOTE H - INCOME TAXES
The components of earnings (loss) before income taxes, minority interest and
cumulative effect of change in accounting principle are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Domestic $ 3,414 $ 38,426 $ 28,860
Foreign (17,136) (2,377) 3,306
-------- -------- --------
$(13,722) $ 36,049 $ 32,166
======== ======== ========
</TABLE>
Income tax expense (benefit) relating to earnings (loss) before minority
interest and cumulative effect of change in accounting principle for the three
years ended December 31 consists of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Current income tax expense
Federal $ 385 $ 6,048 $ 4,572
Foreign 976 989 966
State and local 1,087 1,820 1,844
-------- -------- --------
2,448 8,857 7,382
-------- -------- --------
Deferred income tax expense (benefit)
Federal (3,577) 5,148 4,877
Foreign (920) -- --
State and local (1,773) 1,411 660
-------- -------- --------
(6,270) 6,559 5,537
-------- -------- --------
$ (3,822) $ 15,416 $ 12,919
======== ======== ========
</TABLE>
49
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE H - INCOME TAXES - Continued
Temporary differences and carryforwards, which give rise to deferred income tax
assets and liabilities at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
(In thousands)
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Capitalized software costs $ -- $ 9,057 -- 7,999
Property and equipment -- 4,276 -- 1,963
Deferred data procurement costs -- 33,463 -- 26,594
Tax credit carryforwards 4,216 -- 4,100 --
Tax loss carryforwards 11,808 -- 896 --
Litigation accrual 2,495 -- 1,810 --
Deferred gain 1,795 -- 1,962 --
Revenue recognition change 8,091 -- 913 --
Capitalized leases 1,675 -- 834 --
Nonqualified stock options 628 -- 169 --
Foreign tax loss carryforwards 1,069 -- -- --
Loss in equity investment 982 -- 795 --
Accrued lease obligations 742 -- 523 --
Allowance for doubtful receivables 715 -- 500 --
Other 2,177 370 2,275 56
------- ------- ------- -------
Total deferred taxes $36,393 $47,166 $14,777 $36,612
======= ======= ======= =======
</TABLE>
50
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE H - INCOME TAXES - Continued
In 1992, deferred income tax expense included taxes resulting from timing
differences in the recognition of revenue and expense for income tax and
financial statement purposes. The sources of these differences and their net
tax effects for the year ended December 31 are as follows:
<TABLE>
<CAPTION>
1992
--------------
(In thousands)
<S> <C>
Deferred tax expense
Excess tax (book) depreciation $ (501)
Capitalized software costs,
net of amortization 1,861
Deferred data procurement costs,
net of amortization 3,574
Reversal due to general business
tax credit utilization 2,112
Capitalized leases 290
Accruals not currently deductible
for tax 224
Litigation provision not currently
deductible for tax (1,619)
Other (404)
-------
$ 5,537
=======
</TABLE>
Income tax expense differs from the statutory U.S. Federal income tax rate of
35% for 1994 and 1993 and 34% for 1992 applied to earnings before income taxes,
minority interest and cumulative effect of change in accounting principle as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Income tax expense
at statutory Federal tax rate $(4,803) $12,617 $10,936
State income taxes, net of
Federal income tax benefit (643) 1,974 1,603
Change in tax rates -- 443 --
Nondeductible meals and entertainment 372 141 114
Nondeductible acquisition/organization costs 231 345 460
Effect of foreign tax rates 171 (6) (157)
Other 850 (98) (37)
------- ------- -------
Actual income tax expense $(3,822) $15,416 $12,919
======= ======= =======
Effective income tax rate (27.9%) 42.8% 40.2%
======= ======= =======
</TABLE>
51
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE H - INCOME TAXES - Continued
At December 31, 1994, the Company had general business tax credit carryforwards
of approximately $2,900,000 available to reduce future Federal income tax
liabilities which will expire between 1996 and 2003 if not utilized. At
December 31, 1994, the Company had federal tax loss carryforwards of $25,475,000
which will expire between 1998 and 2009 if not utilized. The full realization
of the tax benefits associated with the carryforwards depends predominantly upon
the recognition of ordinary income, and to a lesser extent, capital gain income
during the carryforward period. The Company believes it is more likely than not
that such benefits will be realized. For financial reporting purposes, the
Company has recognized the tax effects of the tax loss and tax credit
carryforwards as reductions of deferred Federal income taxes. The Tax Reform
Act of 1986 enacted an alternative minimum tax system for corporations,
generally effective for taxable years beginning after December 31, 1986. The
alternative minimum tax is imposed at a 20% rate on the corporation's
alternative minimum taxable income which is determined by making a statutory
adjustment to the corporation's regular taxable income. The Company is subject
to the alternative minimum tax for financial reporting purposes resulting in an
alternative minimum tax carryforward of $1,316,000 as of December 31, 1994.
This amount will be allowed as a credit carryover against regular tax in the
future in the event the regular tax expense exceeds the alternative minimum tax
expense.
The Company increased its U.S. deferred tax liability in 1993 as a result of
legislation enacted during 1993 increasing the corporate tax rate from 34% to
35% effective January 1, 1993.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries which the Company intends to
continue to reinvest. It is not practicable to estimate the amount of
additional tax that might be payable on the foreign earnings if they were
remitted as dividends or lent to the Company, or if the Company should sell its
stock in the subsidiaries or ventures. However, the Company believes that U.S.
foreign tax credits would substantially eliminate any additional tax effects.
The tax effect related to the cumulative effect on prior years of the 1994
change in accounting principle is included in deferred taxes and approximates
the statutory U.S. tax rate plus state tax rate (net of Federal benefit).
NOTE I - STOCK OPTIONS
The 1982 Incentive Stock Option Plan, a qualified plan within the meaning of
relevant sections of the Internal Revenue Code, authorizing the granting of
incentive stock options, expired on November 3, 1992. All remaining outstanding
stock options must be exercised within ten years of their respective grant
dates.
The 1984 Non-Qualified Stock Option Plan expired on January 1, 1994. All
outstanding stock options remaining under the 1984 Non-Qualified Stock Option
Plan must be exercised within ten years of their respective grant dates.
In 1993, the 1994 Non-Qualified Stock Option Plan was adopted and approved by
the Executive Committee of the Company's Board of Directors. During 1993, the
Company reserved for issuance
52
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE I - STOCK OPTIONS - Continued
up to 3,000,000 shares of Common Stock to be issued upon the exercise of options
to be granted pursuant to the plan. During 1994, the Board of Directors
approved an increase in the number of shares authorized under the plan of
5,000,000, bringing the total maximum shares available for grant to 8,000,000.
The Company's 1994 Non-Qualified Plan is administered by the Executive Committee
of the Company's Board of Directors.
On May 27, 1992, the stockholders of the Company adopted the Company's 1992
Executive Stock Option Plan and 1992 Incentive Stock Option Plan. Only the
Company's executive officers and directors are eligible to participate in the
1992 Executive Stock Option Plan. The 1992 Executive Stock Option Plan is
administered by a Stock Option Committee of at least two directors who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act.
The Company has reserved for issuance up to 2,000,000 shares of Common Stock to
be issued upon the exercise of options granted or to be granted pursuant to the
1992 Executive Stock Option Plan. In 1994, the Stock Option Committee and the
Company's Board of Directors approved, subject to shareholder approval, an
increase in the number of shares authorized under the 1992 Executive Stock
Option Plan of 500,000 shares, bringing the total maximum shares available for
grant to 2,500,000. The Company's 1992 Incentive Stock Option Plan is
administered by the Executive Committee of the Company's Board of Directors.
The Company's executive officers and directors are not eligible to participate
in the 1992 Incentive Stock Option Plan. The Company has reserved for issuance
up to 2,000,000 shares of its common stock to be issued upon exercise of options
to be granted pursuant to the 1992 Incentive Stock Option Plan. It is intended
that options issued under these plans and designated by the respective
Committees will or may qualify as incentive stock options under relevant
sections of the Internal Revenue Code. As of December 31, 1994, no options had
been granted pursuant to the Company's 1992 Incentive Stock Option Plan.
On April 15, 1994, the Board of Directors cancelled most of the outstanding
stock options with exercise prices exceeding $14.25 that existed under all of
the Company's stock option plans (with the exception of the 1992 Executive Stock
Option Plan) and replaced those options with new stock options from the
Company's 1994 Nonqualified Stock Option Plan if the employee agreed to an
extension in vesting. In addition, employees with 2,000 or more outstanding
stock options on the offer date were required to sign the Company's standard
non-compete agreement. Executive officers and directors were not eligible to
participate in this program.
Future deferred compensation expense with respect to options granted at less
than fair market value at grant date is approximately $1,838,000 ($3,009,000 was
recognized in 1994 and $420,000 in 1993) and will be recognized over the
remaining vesting period. Upon exercise of these options, the Company is
obligated to pay the difference between the market value at date of exercise and
the market value at the date of grant. The Company has accrued $1.6 million for
this market value difference at December 31, 1994.
53
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1993, 1992, and 1991
NOTE I - STOCK OPTIONS - Continued
A summary of transactions in the above described plans during the three years
ended December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
1982 Incentive Stock Option Plan
-------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning
of year 295 6,989 15,672
Granted -- -- --
Exercised -- (6,694) (8,683)
Cancelled -- -- --
---------- --------- ---------
Options outstanding at end of year 295 295 6,989
========== ========= =========
Available for grant -- -- --
========== ========= =========
Options exercisable at end of year 295 295 6,989
========== ========= =========
1984 Nonqualified Stock Option Plan
-------------------------------------
Options outstanding at beginning
of year 6,029,856 4,592,596 3,872,491
Granted -- 2,402,323 2,055,419
Exercised (103,060) (825,581) (706,215)
Cancelled (3,840,284) (139,482) (629,099)
---------- --------- ---------
Options outstanding at end of year 2,086,512 6,029,856 4,592,596
========== ========= =========
Available for grant -- -- 1,892,547
========== ========= =========
Options exercisable at end of year 1,866,132 2,705,550 2,240,518
========== ========= =========
1992 Executive Stock Option Plan
-------------------------------------
Options outstanding at beginning
of year 1,265,175 177,447 --
Granted 939,523 1,136,869 178,587
Exercised (55,000) (37,882) (1,140)
Cancelled (88,087) (11,259) --
---------- --------- ---------
Options outstanding at end of year 2,061,611 1,265,175 177,447
========== ========= =========
Available for grant 344,367 695,803 1,821,413
========== ========= =========
Options exercisable at end of year 482,209 104,409 55,590
========== ========= =========
</TABLE>
54
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
NOTE I - STOCK OPTIONS - Continued
1994 1993 1992
--------------- -------------- ---------------
<S> <C> <C> <C>
1992 Incentive Stock Option Plan
-------------------------------------
Available for grant 2,000,000 2,000,000 2,000,000
============== ============== ===============
1994 Nonqualified Stock Option Plan
-------------------------------------
Options outstanding at beginning
of year -- -- --
Granted 5,785,020 -- --
Exercised (11,866) -- --
Cancelled (213,525) -- --
-------------- -------------- ---------------
Options outstanding at end of year 5,559,629 -- --
============== ============== ===============
Available for grant 2,428,505 3,000,000 --
============== ============== ===============
Options exercisable at end of year 850,439 -- --
============== ============== ===============
Price Range of Options: 1994 1993 1992
-------------- -------------- ---------------
Granted $9.93 - $25.50 $0.01 - $42.75 $18.50 - $33.25
Exercised $0.01 - $33.63 $6.86 - $34.25 $ 0.01 - $22.50
Cancelled $8.13 - $42.75 $8.13 - $34.25 $ 8.13 - $23.50
Outstanding $0.01 - $34.00 $0.01 - $42.75 $ 6.86 - $33.25
</TABLE>
NOTE J - SAVINGS PLAN
The Company has an employee savings plan that qualifies as a deferred salary
arrangement under Section 401(k) of the Internal Revenue Code. The plan allows
participating employees to contribute a portion of their pretax income in
accordance with specified guidelines. The Company matches a percentage of
employee contributions up to certain limits. These contributions were
$1,269,000, $971,000 and $687,000 in 1994, 1993 and 1992, respectively.
NOTE K - CAPITAL STOCK
IRI is authorized to issue 60,000,000 shares of common stock and 1,000,000
shares of preferred stock.
Preferred stock may be issued in series with the rights and limitations of each
series being determined by the Board of Directors.
55
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE L - LOSS ON DISPOSITION AND WRITE-OFF OF ASSETS
The Company recorded a pre-tax charge of approximately $805,000 in 1993 to
expense various intangibles related to its 1991 agreements with VideOcart, Inc.
Also in 1993, the Company provided for the expected loss of $2.2 million on the
disposition of certain non-strategic assets.
NOTE M - COMMITMENTS AND CONTINGENCIES
1. Lease Agreements
----------------
The Company leases its Chicago, Illinois headquarters facilities. Under the
terms of the lease agreement, the Company leased the facility under a long-term
operating lease having a minimum term of 15 years (expiring in 2005) and rental
rates subject to increases in cost of living expenses. The original
sale/leaseback agreement resulted in a $6.2 million deferred gain which is
recognized over the lease term. The lease agreement contains financial and
other covenants including restrictions on the payment of dividends. At December
31, 1994 the Company was not in compliance with its fixed charge coverage ratio.
Noncompliance with the fixed charge coverage ratio was waived through 1995, and
the lease term was extended through 2010. The Company and subsidiaries also
lease certain property and equipment under operating leases expiring at various
dates through 2008.
At December 31, 1994, obligations to make future minimum payments under these
leases for the five years ending in 1999 are $28,802,000, $23,169,000,
$17,927,000, $11,831,000 and $10,268,000, respectively.
Minimum rental commitments for the above leases in the aggregate are
$130,723,000.
Rent expense under such operating leases for the three years ended December 31
was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Gross rent $29,805 $26,288 $23,730
Sublease rental income -- -- (266)
------- ------- -------
$29,805 $26,288 $23,464
======= ======= =======
</TABLE>
2. Licensing Agreements
--------------------
The Company has entered into licensing agreements with certain cable television
companies expiring at various dates through 1999. At December 31, 1994,
obligations to make minimum license payments under these agreements for the five
years ending in 1999 are $726,000, $643,000, $385,000, $328,000 and $54,000,
respectively.
Licensing expense under these agreements was approximately $911,000, $892,000
and $889,000 in 1994, 1993, and 1992, respectively.
56
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE M - COMMITMENTS AND CONTINGENCIES - Continued
3. Litigation
----------
The Company was involved in a shareholder class action suit filed by certain
shareholders in 1989. On June 7, 1994, a federal district court jury returned a
unanimous verdict in favor of the Company and the four individual defendants.
The plaintiffs appealed such determination with the United States Court of
Appeals for the Seventh Circuit. It is anticipated that the Appeals Court will
render a decision during 1995. Although there can be no assurances regarding
the ultimate result of such appeal, the Company believes that the original
determination by the federal district court will be affirmed.
In April 1994 certain shareholders filed a class action lawsuit against the
Company. On October 25, 1994, the Company entered into an agreement to settle
this lawsuit. The settlement agreement provided class members with the
opportunity to either object to the settlement or opt out of the class and
preserve the ability to pursue the claim. By the deadline, none of the
plaintiff class members had objected to the settlement and holders of only
approximately 7,500 shares had exercised their right to opt out of the class.
On March 3, 1995, the settlement was approved by the federal district court as
"fair, just, reasonable and adequate" to the settlement class and the case was
dismissed on the merits, with prejudice. The final judgement may be appealed 30
days after its entry. Assuming no such appeal, it is anticipated that the
settlement amount will be paid in the second or third quarter of 1995. The
settlement agreement contemplates the payment of $12,500,000, of which
$7,250,000 will be paid by the Company's insurance carriers. The settlement
agreement provides that the Company may pay the balance in either cash or stock,
at its option.
NOTE N - RESEARCH AND DEVELOPMENT
Expenditures for research and development for the years ended December 31, 1994,
1993, and 1992 approximated $35,138,000, $30,993,000 and $19,479,000,
respectively. Included in these expenditures were $11,681,000, $10,202,000 and
$8,808,000 of software development cost that were capitalized. Expenditures not
capitalized were charged to expense as incurred.
57
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE O - GEOGRAPHIC AREAS INFORMATION
The Company develops and maintains computer-based proprietary data bases,
decision support software, and mathematical models, primarily for the analysis
of detailed information on purchasing of consumer goods, all within one industry
segment - business information services. The following table presents
information about the Company by geographic areas.
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------- ----------
<S> <C> <C> <C>
(In thousands)
Operating revenues:
To unaffiliated customers:
United States $318,106 $284,808 $241,607
International 58,464 49,736 34,755
Transfers between geographic areas:
United States 8,802 8,695 6,102
International 1,938 1,943 1,677
Eliminations (10,740) (10,638) (7,779)
-------- -------- --------
Total operating revenues $376,570 $334,544 $276,362
======== ======== ========
Operating profit (loss):
United States 23,483 $ 40,684 $ 35,014
International (18,177) (2,753) 2,689
-------- -------- --------
Operating profit $ 5,306 $ 37,931 $ 37,703
======== ======== ========
Identifiable assets:
United States $347,570 $309,996 $248,857
International 65,820 45,567 27,980
Eliminations (58,836) (28,048) (12,838)
-------- -------- --------
Total identifiable assets $354,554 $327,515 $263,999
======== ======== ========
</TABLE>
Included in United States revenue for the years ended December 31, 1994, 1993
and 1992, are $1,952,000, $2,534,000 and $1,187,000, respectively, of export
sales to unaffiliated customers. Total international revenues, including export
sales, were $60,416,000, $52,270,000 and $35,942,000 for 1994, 1993 and 1992,
respectively.
58
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE P - SUMMARY OF QUARTERLY DATA (UNAUDITED)
Summaries of consolidated 1994 and 1993 results on a quarterly basis are as
follows:
<TABLE>
<CAPTION>
1994
------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- -------- ---------- ---------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues $87,678 $92,183 $92,915 $103,794
Operating & selling, general and
administrative expenses 83,152 90,042 94,222 103,848
------- ------- ------- --------
Operating profit (loss) 4,526 2,141 (1,307) (54)
Other income (expense) - net 55 (311) (437) (887)
Litigation provision (5,000) -- (3,000) (275)
Equity in loss of affiliated companies (2,258) (2,071) (683) (4,161)
------- ------- ------- --------
Loss before income taxes,
minority interest & cumulative
effect of change in accounting principle (2,677) (241) (5,427) (5,377)
Income tax (expense) benefit 895 ( 9) 2,130 806
------- ------- ------- --------
Loss before minority interest &
cumulative effect of change in
accounting principle (1,782) (250) (3,297) (4,571)
Minority interest 494 262 193 30
------- ------- ------- --------
Earnings (loss) before cumulative
effect of change in accounting principle (1,288) 12 (3,104) (4,541)
Cumulative effect on prior years of change
in accounting principle (6,594) -- -- --
------- ------- ------- --------
Net earnings (loss) $(7,882) $ 12 $(3,104) $ (4,541)
======= ======= ======= ========
Loss per common and common
equivalent share:
Before cumulative
effect of accounting change $ (.05) $ -- $(.12) $(.17)
Cumulative effect of accounting change (.26) -- -- --
------- ------- ------- --------
Net loss $ (.31) $ -- $(.12) $(.17)
======= ======= ======= ========
Weighted average common and common
equivalent shares 25,579 26,091 26,174 26,380
======= ======= ======= ========
</TABLE>
59
<PAGE>
Information Resources, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993, and 1992
NOTE P - SUMMARY OF QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1993
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- --------- --------- --------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Revenues $75,650 $82,110 $87,784 $89,000
Operating & selling, general and
administrative expenses 67,020 71,544 74,121 80,923
Loss on disposition & write-off of assets 2,200 -- 805 --
------- ------- ------- -------
Operating profit 6,430 10,566 12,858 8,077
Other income (expense) - net 182 32 248 (294)
Equity in loss of affiliated companies (312) (284) (811) (643)
------- ------- ------- -------
Earnings before income taxes, minority
interest & cumulative effect of change
in accounting principle 6,300 10,314 12,295 7,140
Income tax expense (2,670) (4,334) (5,350) (3,062)
------- ------- ------- -------
Earnings before minority interest &
cumulative effect of change in
accounting principle 3,630 5,980 6,945 4,078
Minority interest 297 479 413 393
------- ------- ------- -------
Earnings before cumulative effect of change
in accounting principle 3,927 6,459 7,358 4,471
Cumulative effect on prior years of change
in accounting principle 1,864 -- -- --
------- ------- ------- -------
Net earnings $ 5,791 $ 6,459 $ 7,358 $ 4,471
======= ======= ======= =======
Earnings per common and common
equivalent share:
Before cumulative
effect of accounting change $ .15 $.24 $.27 $.16
Cumulative effect of accounting change .07 -- -- --
------- ------- ------- -------
Net earnings $ .22 $.24 $.27 $.16
======= ======= ======= =======
Weighted average common and common
equivalent shares 26,157 26,738 27,253 27,494
======= ======= ======= =======
</TABLE>
60
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
--------------------------------------------------------------
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The sections entitled "Election of Directors" and "Ownership of Securities"
are incorporated by reference from the definitive proxy statement to be filed
with the Securities and Exchange Commission in connection with the Company's
1995 annual meeting of stockholders scheduled for May 24, 1995. 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 1995 annual meeting of
stockholders scheduled for May 24, 1995.
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 1995 annual meeting of stockholders
scheduled for May 24, 1995.
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 1995 annual meeting of stockholders
scheduled for May 24, 1995.
61
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) Documents filed as a part of this Report:
1. Financial Statements
--------------------
The consolidated financial statements of the Company are included in
Part II, Item 8 of this Report.
2. Financial Statement Schedules Page No.
----------------------------- --------
(I) Information Resources, Inc. and Subsidiaries
Report of Independent Certified
Public Accountants on Schedules 66
Schedule II - Valuation and Qualifying Accounts;
Allowance for Doubtful Receivables 67
(II) IRI - SECODIP, S.N.C.
Balance Sheet 69
Statement of Operations 71
Statement of Stockholders' Deficit 72
Statement of Cash Flows 73
Notes to Financial Statements 74
Report of Independent Certified Public Accountants 68
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
3. Exhibits
--------
(I) See Exhibit Index (Immediately Following the Financial Statement
Schedules attached hereto)
62
<PAGE>
(II) Executive Compensation Plans and Arrangements. The following Executive
Compensation Plans and Arrangements are listed as exhibits to this
Form 10-K:
Employment Agreement dated November 27, 1978 between the Company and Gerald
Eskin.
Employment agreement dated March 15, 1985 between the Company and Jeffrey
Stamen.
Employment agreements dated March 15, 1985 between the Company and
Leonard Lodish.
Noncompetition Agreement dated March 15, 1985 between the Company and John
D.C. Little, Glen Urban, and Leonard Lodish, respectively.
Letter agreement dated January 17, 1989 between the Company and Glen Urban.
Form of letter agreement between the Company and John D.C. Little.
Agreement effective January 1, 1989 between the Company and Edwin Epstein,
amending the Consulting and Non-competition Agreement dated January 16,
1987, which Consulting and Noncompetition Agreement is referred to above.
Letter agreement dated August 7, 1989 between the Company and Leonard
Lodish.
Employment Agreement dated November 16, 1989 between the Company and
James G. Andress.
Amended and Restated Employment Agreement dated March 16, 1994 between the
Company and Thomas M. Walker.
1992 Executive Stock Option Plan.
1992 Employee Incentive Stock Option Plan.
Employment Agreement dated November 4, 1993 between the Company and
George Garrick.
1994 Employee Nonqualified Stock Option Plan.
Form of Information Resources, Inc. Directorship/Officership Agreement
between the Company and its directors, its executive officers and certain
other officers.
63
<PAGE>
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 31, 1995
INFORMATION RESOURCES, INC.
By: /s/ Gian M. Fulgoni
--------------------------
Gian M. Fulgoni, Chairman,
Chief Executive Officer and
Director
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 31, 1995.
By: /s/ Gian M. Fulgoni
-------------------------------------------
Gian M. Fulgoni, Chairman, and Chief
Executive Officer and Director
[Principal executive officer]
/s/ James G. Andress
-------------------------------------------
James G. Andress, Chief Executive
Officer, President, Chief Operating
Officer, Acting Chief Financial Officer,
and Director [Principal financial officer]
/s/ Kenneth J. Giacomino
-------------------------------------------
Executive Vice President and
Corporate Controller
[Principal accounting officer]
*/s/ Jeffrey P. Stamen
------------------------------------------
Jeffrey P. Stamen, President,
IRI Software and Director
64
<PAGE>
*/s/ Gerald J. Eskin
----------------------------------------
Gerald J. Eskin, Director
*/s/ Edwin E. Epstein
----------------------------------------
Edwin E. Epstein, Director
*/s/ John D. C. Little
----------------------------------------
John D.C. Little, Director
*/s/ Leonard M. Lodish
----------------------------------------
Leonard M. Lodish, Director
*/s/ Edward E. Lucente
----------------------------------------
Edward E. Lucente, Director
*/s/ Edith W. Martin
----------------------------------------
Edith W. Martin, Director
*/s/ George G. Montgomery, Jr.
----------------------------------------
George G. Montgomery, Jr.,
Director
*/s/ Glen L. Urban
----------------------------------------
Glen L. Urban, Director
*/s/ Thomas W. Wilson, Jr.
----------------------------------------
Thomas W. Wilson, Jr., Director
*/s/ Gian M. Fulgoni
---------------------------------
By Gian M. Fulgoni
pursuant to a power of attorney
65
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Information Resources, Inc.
In connection with our audit of the consolidated financial statements of
Information Resources, Inc. and Subsidiaries referred to in our report dated
March 24, 1995 which is included in Part II of this form, we have also audited
Schedule II for each of the three years in the period ended December 31, 1994.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Chicago, Illinois
March 24, 1995
66
<PAGE>
SCHEDULE II
Information Resources, Inc. and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL RECEIVABLES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance at
Beginning of Charged to (Net Writeoffs/ End of
Description Period Costs & Expenses Recoveries) Period
----------- ------------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1992 $1,475 $ 704 $ (128) $2,051
Year ended December 31, 1993 $2,051 $ 627 $ (428) $2,250
Year ended December 31, 1994 $2,250 $2,565 $(1,889) $2,926
</TABLE>
67
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
IRI - SECODIP, S.N.C.
We have audited the accompanying balance sheet of IRI - SECODIP, S.N.C. as
of December 31, 1994, and the related statements of operations, stockholders'
deficit and cash flows for the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IRI-SECODIP, S.N.C. at
December 31, 1994, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 24, 1995
68
<PAGE>
IRI - SECODIP, S.N.C.
BALANCE SHEET
December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Accounts receivable
Customers $ 4,923
Related parties 43
Other 703
-------
5,669
Prepaid expenses and other current assets 422
-------
Total current assets 6,091
-------
PROPERTY AND EQUIPMENT
Computer equipment 2,758
Equipment and furniture 952
-------
3,710
Accumulated depreciation and amortization (1,075)
-------
2,635
OTHER ASSETS (NOTE C) 6,814
-------
$15,540
=======
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
69
<PAGE>
IRI - SECODIP, S.N.C.
BALANCE SHEET
December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES
CURRENT LIABILITIES
Bank borrowings (NOTE D) $ 4,812
Accounts payable 4,922
Current portion of payables to related parties (NOTE E) 2,099
Accrued expenses (NOTE F) 1,899
Deferred revenue 129
-------
Total current liabilities 13,861
-------
LONG-TERM PAYABLES TO RELATED PARTIES (NOTE E) 6,470
OTHER LONG-TERM LIABILITIES 163
STOCKHOLDERS' DEFICIT
Capital stock - authorized, issued and
outstanding 4,126,792 shares,
4 French Francs par value 2,954
Accumulated deficit (7,651)
Cumulative translation adjustment (257)
--------
Total stockholders' deficit (4,954)
--------
$ 15,540
========
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
70
<PAGE>
IRI - SECODIP, S.N.C.
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenues $ 12,414
--------
Costs and expenses
Operating expenses 18,358
Selling, general and administrative expenses 2,283
--------
20,641
--------
Operating loss (8,227)
Other income (expense)
Interest expense (154)
Other - net 182
--------
28
--------
Loss before income taxes (8,199)
Income tax expense (11)
--------
Net loss $ (8,210)
========
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
71
<PAGE>
IRI - SECODIP, S.N.C.
STATEMENT OF STOCKHOLDERS' DEFICIT
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Capital Accumulated Translation
Stock Deficit Adjustment Total
--------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 $ 778 $ 559 $ (51) $ 1,286
Issuance of 2,875,001 shares 2,176 -- -- 2,176
Foreign currency translation -- -- (206) (206)
Net loss for the year -- (8,210) -- (8,210)
------ ------- ----- -------
Balance at December 31, 1994 $2,954 $(7,651) $(257) $(4,954)
====== ======= ===== =======
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
72
<PAGE>
IRI - SECODIP, S.N.C.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $(8,210)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 880
Amortization of deferred data procurement costs 2,324
Gain on disposal of assets (3)
Change in assets and liabilities:
Decrease in accounts receivable 326
Increase in other current assets (410)
Increase in accounts payable and accrued expenses 1,410
Increase in payables to related parties 4,141
Increase in deferred revenue 124
-------
Total adjustments 8,792
-------
Net cash provided by operating activities 582
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 25
Purchase of property and equipment (1,247)
Software costs (1,032)
Deferred data procurement costs (5,802)
-------
Net cash used by investing activities (8,056)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings 4,671
Proceeds from issuance of common stock 2,176
-------
Net cash provided by financing activities 6,847
-------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (90)
-------
NET DECREASE IN CASH (717)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 717
-------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ --
=======
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
73
<PAGE>
IRI - SECODIP, S.N.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A - NATURE OF BUSINESS
IRI-SECODIP, S.N.C. (IRI-SECODIP) was established April 1, 1993 by Information
Resources, Inc. ("IRI"), SECODIP S.A. ("SECODIP") and GfK AG. In connection
with the formation of IRI-SECODIP, IRI (via IRI French Holdings, Inc.) acquired
certain intangible rights from SECODIP some of which IRI then licensed to IRI-
SECODIP. The primary purposes of IRI-SECODIP are to: (i) develop a scanner-
based information business in France, (ii) participate in the offering of Pan-
European products with affiliates of the shareholders, and (iii) offer retail
audit business products.
IRI-SECODIP will require significant working capital as it continues to develop
its business. Operating losses are expected for at least two more years as a
result of the continuing costs to collect and maintain data while at the same
time building its customer business base. Based upon current expectations, IRI
is committed to funding the business development of IRI-SECODIP. A substantial
portion of the Company's assets consists of intangible as well as other assets
whose ultimate realization depends upon the achievement of forecasted business
plans.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of significant accounting policies applied in the preparation of the
accompanying financial statements in accordance with U.S. generally accepted
accounting principles follows:
1. Revenue Recognition
-------------------
IRI-SECODIP recognizes subscription revenues for InfoScan and non-scanner retail
tracking products over the term of the contract on a straight-line basis.
Revenues from market research and consulting projects are recognized as services
are performed.
2. Property and Equipment
----------------------
Property and equipment is recorded at cost and depreciated over the estimated
service lives on a straight-line basis. Estimated useful lives for property and
equipment are as follows:
Computer equipment 1 to 4 years
Equipment and furniture 5 to 10 years
74
<PAGE>
IRI - SECODIP, S.N.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
3. Other Assets
------------
Other assets include deferred data procurement costs, capitalized software and
other intangible assets.
Data procurement costs are capitalized as incurred and amortized over twenty-
eight months. Software acquired and to be licensed to customers is amortized
on a straight-line basis over three years.
4. Income Taxes
------------
IRI-SECODIP has elected to be taxed as a corporation. Net losses for tax
purposes can carry forward for five years.
IRI-SECODIP accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 -- Accounting for Income Taxes ("FAS 109"). FAS
109 requires an asset and liability approach in accounting for income taxes.
Under this method deferred taxes are recognized at enacted rates, to reflect the
future effects of tax carryforwards and temporary differences arising between
the tax bases of assets and liabilities and their financial reporting amounts at
year end. Due to the losses incurred by IRI-SECODIP, pursuant to French tax
regulations only a minimal amount of tax provision has been recorded in the
accompanying financial statements.
5. Translation of Financial Statements
-----------------------------------
The accompanying financial statements and footnotes have been translated from
French Francs, IRI-SECODIP's functional currency, to U.S. dollars. In
accordance with Statement of Financial Accounting Standards No. 52, the assets
and liabilities have been translated at the current exchange rate at December
31, 1994, and the shareholders' deficit section of the balance sheet has been
translated at historical exchange rates. The cumulative translation adjustment
balance represents the difference between the current and historical translation
methods. Operating results are translated at average exchange rates during the
year.
6. Supplemental Cash Flow Information
----------------------------------
Cash paid for interest and income taxes during the year ended December 31, 1994
was $71,000 and $7,000, respectively.
75
<PAGE>
IRI - SECODIP, S.N.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE C - OTHER ASSETS
Other assets at December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred data procurement costs -- net of
accumulated amortization of $2,757 $ 5,743
Capitalized software costs -- net of
accumulated amortization of $352 703
Other 368
-------
$ 6,814
=======
</TABLE>
NOTE D - BANK BORROWINGS
In April 1994, IRI-SECODIP reached agreement with two French banks (Credit
Lyonnais and Credit Industriel et Commercial de Paris) to obtain a 30.0 million
French Francs (approximately $5.6 million) line of credit. IRI-SECODIP assigned
all trade receivables as security for the line of credit. The shareholders of
IRI-SECODIP are jointly and severally liable for the bank credit line. As of
December 31, 1994, IRI-SECODIP had drawn a total of 25,694,000 French Francs
(approximately $4,812,000) on the line of credit. At December 31, 1994, the
interest rate is 7.25%. IRI-SECODIP repaid the entire outstanding balance of
its line of credit with the French banks in February 1995. Near term future
financing of IRI-SECODIP is dependent upon either capital contributions or loans
from IRI.
NOTE E - PAYABLES TO RELATED PARTIES
IRI, SECODIP and their affiliates have provided processing, production and
administrative services since inception. In addition, IRI-SECODIP is obligated
to a wholly-owned subsidiary of IRI for an annual license fee of $640,000 for a
period of ten years. The license fees accrued from April 1, 1993 through
December 31, 1994 (as well as the 1995 license fee) are not payable until
January 1, 1996; thereafter, the license fee is due on July 1 of each year.
As of December 31, 1994 IRI had loaned IRI-SECODIP approximately $1,623,000
pursuant to the terms of a revolving loan agreement signed at the time of the
formation of the joint venture in 1993. The loan is unsecured and non-interest
bearing through the maturity date of December 31, 1995. If the revolving loan
is not paid as of the maturity date, then interest shall begin to accrue at an
annual rate of interest equal to the U.S. Prime Rate plus two percent. At IRI's
sole discretion, IRI may request a prepayment of the loan by IRI-SECODIP. In
such case, IRI shall arrange for there to be substituted for the loan a bank
loan made directly to IRI-SECODIP by IRI's bank. IRI does not intend to call
the revolving loan prior to January 1, 1996; therefore it is classified as long-
term.
76
<PAGE>
IRI - SECODIP, S.N.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE E - PAYABLES TO RELATED PARTIES - Continued
The following is a summary of amounts owed at December 31, 1994 to specific
related parties for transactions incurred:
<TABLE>
<CAPTION>
Current Long Term
------- ---------
(In thousands)
<S> <C> <C>
IRI $ -- $5,161
IRI's affiliates 1,336 1,121
SECODIP and affiliates 763 188
------ ------
$2,099 $6,470
====== ======
</TABLE>
NOTE F - ACCRUED EXPENSES
Accrued expenses at December 31 are as follows: (In thousands)
Accrued payroll and related taxes $1,302
Other 597
------
$1,899
NOTE G - CAPITAL STOCK
In 1994, IRI-SECODIP issued 2,875,001 shares for 11,500,004 French Francs or
approximately $2,176,000.
NOTE H - LEASE COMMITMENTS
IRI-SECODIP leases its office space in Chambourcy, France, from an affiliate of
SECODIP. Under the terms of the lease agreement, office space, together with
related services (e.g., janitorial services, utilities, etc.) and a specified
amount of parking spaces are provided for an annual charge of approximately
2,612,000 French Francs (approximately $489,000) subject to periodic cost of
living increases. The lease agreement expires in 2002 and is accounted for as a
long-term operating lease.
IRI-SECODIP also leases certain property and equipment under operating leases
expiring at various dates through the year 2002. At December 31, 1994,
obligations to make future minimum payments under these leases (including the
aforementioned office space and parking space lease) for the five years ending
in 1999 are: $594,000; $578,000; $540,000; $538,000; and $538,000.
Minimum rental commitments for the above leases in the aggregate are $4,042,000.
Rent expense under such operating leases for 1994 was $506,000.
77
<PAGE>
IRI - SECODIP, S.N.C.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE I - RESEARCH AND DEVELOPMENT
Expenditures for research and development for the year ended December 31, 1994
approximated $2,800,000. Included in these expenditures was $1,032,000 of
software development costs that were capitalized. Expenditures not capitalized
were charged to expense as incurred.
NOTE J - SUBSEQUENT EVENT
In February 1995, IRI French Holdings, Inc. purchased 39% of IRI-SECODIP from
SECODIP (with a put and call option for the remaining 11% owned by SECODIP) and
transferred additional capital of approximately $6,100,000 (32,500,000 French
Francs) to IRI-SECODIP. The majority of such funds was immediately used to
repay the then outstanding balance of IRI-SECODIP's bank line of credit.
78
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The page number, if any, listed
opposite an exhibit indicates the page number in the sequential numbering system
in the manually signed original of this Report where such exhibit can be found.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
------- ----------------------- ---------------
<C> <S> <C>
3(a) Copy of the certificate of incorporation of the
Company dated May 27, 1982, as amended.
(Incorporated by reference. Previously filed
as Exhibit 3(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988). IBRF
(b) Copy of the bylaws of the Company, as amended.
(Incorporated by reference. Previously filed
as Exhibit 3(b) to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988). IBRF
(c) Copy of amendments to the Certificate of
Incorporation approved by the stockholders
on May 16, 1989 (Incorporated by reference.
Previously as Exhibit 3(c) to the Company's
Annual Report 10-K for the fiscal year ended
December 31, 1989). IBRF
(d) Copy of amendments to the bylaws of the Company
as approved by the Board of Directors bringing
the bylaws into conformity with the amendments
to the Certificate of Incorporation approved by
the stockholders May 16, 1989 (Incorporated by
reference. Previously filed as Exhibit 3(d) to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989). IBRF
(e) Certificate of Designations of Series A
Participating Preferred Stock, as adopted by the
Board of Directors of the Company on March 2, 1989
and duly filed with the Secretary of State of the
State of Delaware March 15, 1989 (Incorporated by
reference. Previously filed as Exhibit 3(e) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989). IBRF
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
------- ----------------------- ---------------
<C> <S> <C>
10 MATERIAL CONTRACTS
(a) 1982 Incentive Stock Option Plan adopted November 3,
1982, as amended. (Incorporated by reference.
Previously filed as Exhibit 10(a) to the Company's
Registration Statement on Form S-8 filed with the SEC
on December 31, 1988). IBRF
(b) Information Resources, Inc., Nonqualified Stock Option
Plan effective January 1, 1984, as amended. Previously
filed as Exhibit 10(b) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1988). IBRF
(c) Employment Agreement dated November 27, 1978 between
the Company and Gerald Eskin. (Incorporated by
reference. Previously filed as Exhibit 10(e) to
Registration Statement No. 2-81544). IBRF
(d) Consulting and Noncompetition Agreement dated January
16, 1987 between the Company and Edwin Epstein.
(Incorporated by reference. Previously filed as
Exhibit 10(e) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1987). IBRF
(e) Employment agreement dated March 15, 1985 between the
Company and Jeffrey Stamen. (Incorporated by
reference. Previously filed as Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985, as amended on Form 8
dated April 29, 1986 and August 25, 1986). IBRF
(f) Employment agreements dated March 15, 1985 between the
Company and Leonard Lodish. (Incorporated by reference.
Previously filed as Exhibit 10.14 to Registration
Statement No. 2-96940). IBRF
(g) Noncompetition Agreement dated March 15, 1985 between
the Company and John Little, Glen Urban, and Leonard
Lodish, respectively. (Incorporated by reference.
Previously filed as Exhibit 10.15 to Registration
Statement No. 2-96490). IBRF
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
------- ----------------------- ---------------
<C> <S> <C>
(h) Letter agreement dated January 17, 1989 between the
Company and Glen Urban (Incorporated by reference.
Previously filed as Exhibit 10(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989). IBRF
(i) Form of letter agreement between the Company and
John D.C. Little (Incorporated by reference.
Previously filed as Exhibit 10(m) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989). IBRF
(j) Form of Rights Plan Agreement between the Company and
Harris Trust and Savings Bank. (Incorporated by
reference. Previously filed on Form 8-A Registration
Statement filed with the SEC on March 15, 1989). IBRF
(k) Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and
Noncompetition Agreement dated January 16, 1987, which
Consulting and Noncompetition Agreement is referred to
in Exhibit 10(d) hereof. (Incorporated by reference.
Previously filed as Exhibit 19(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989). IBRF
(l) Letter agreement dated August 7, 1989 between the
Company and Leonard Lodish (Incorporated by reference.
Previously filed as Exhibit 3(q) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989). IBRF
(m) Employment Agreement dated November 16, 1989 between
the Company and James G. Andress (Incorporated by
reference. Previously filed as Exhibit 3(r) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989). IBRF
(n) Form of 401(k) Retirement Savings Plan and Trust
adopted by the Company effective August 1, 1989.
(Incorporated by reference. Previously filed as
Exhibit 3(v) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989). IBRF
(o) Amended and Restated Employment Agreement dated
March 16, 1994 between the Company and Thomas M.
Walker. (Incorporated by reference. Previously filed
as Exhibit 10(s) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993). IBRF
(p) Lease Agreement dated September 27, 1990 between
Randolph/Clinton Limited Partnership and the Company
(Incorporated by reference. Previously filed as
Exhibit 2.1 to the Company's Current Report on Form
8-K dated September 27, 1990). IBRF
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
------- ----------------------- ---------------
<C> <S> <C>
(q) Reorganization Agreement and Plan of Distribution
dated as of October 19, 1990 between the Company
and VideOcart, Inc. (Incorporated by reference.
Previously filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated October 31, 1990). IBRF
(r) 1992 Executive Stock Option Plan (Incorporated by
reference. Previously filed as Exhibit 10 (w) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992). IBRF
(s) 1992 Employee Incentive Stock Option Plan
(Incorporated by reference. Previously filed as
Exhibit 10 (x) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992). IBRF
(t) 1994 Employee Nonqualified Stock Option Plan. IBRF
(Incorporated by reference. Previously filed as
Exhibit 10(y) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993).
(u) Employment Agreement dated November 4, 1993 between
the Company and George Garrick. (Incorporated by IBRF
reference. Previously filed as Exhibit 10(z) to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993).
(v) Credit Agreement dated May 13, 1994, between the Company
and Harris Trust and Savings Bank. Superseded by Credit
Agreement dated November 3, 1994 filed at Exhibit 10(w).
(Incorporated by reference. Previously filed as Exhibit
10 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994). IBRF
(w) Credit Agreement dated November 3, 1994, between the
Company and Harris Trust and Savings Bank. (Incorporated
by reference. Previously filed as Exhibit 10 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994). IBRF
(x) Form of Information Resources, Inc. Directorship/
Officership Agreement between the Company and each of
its directors, executive officers and certain other
officers (filed herewith). EF
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT DOCUMENT FILING
------- ----------------------- ---------------
<C> <S> <C>
11 Statement of computation of per share income (filed
herewith). EF
21 Subsidiaries of the Registrant (filed herewith). EF
23 Consent of Independent Certified Public Accountants
(filed herewith). EF
24 Powers of Attorney (filed herewith). EF
27 Financial Data Schedule (filed herewith). EF
</TABLE>
E-5
<PAGE>
EXHIBIT 10(X)
INFORMATION RESOURCES, INC.
DIRECTORSHIP AGREEMENT
This Agreement is made as of __________, 1994, by and between Information
Resources, Inc., a Delaware corporation (the "Corporation"), and the individual
whose name and signature appears on the last page hereof under the heading
"Director," a director of the Corporation (the "Director").
WHEREAS, it is essential to the Corporation that it attract and retain as
directors the most capable persons available and persons who have significant
experience in business, corporate and financial matters; and
WHEREAS, the Corporation has identified the Director as a person possessing
the background and abilities desired by the Corporation and desires the Director
to serve as a member of the Corporation's Board of Directors; and
WHEREAS, the substantial increase in corporate litigation may, from time to
time, subject directors to burdensome litigation, the risks of which frequently
far outweigh the advantages of serving in such capacity; and
WHEREAS, in recent times, the costs of directors' and officers' liability
insurance has increased and the availability of such insurance has been severely
limited; and
WHEREAS, the Corporation and the Director recognize that serving as a
director of a corporation at times calls for subjective evaluations and
judgments upon which reasonable men may differ and that, in that context, it is
anticipated and expected that directors of corporations will and do from time to
time commit actual or alleged errors or omissions in the good faith exercise of
their duties and responsibilities; and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its directors to the fullest extent permitted by law;
and
WHEREAS, the Corporation and the Director desire to articulate clearly in
contractual form, their respective rights and obligations with regard to the
Director's service on behalf of the Corporation and with regard to claims for
loss, liability, expense or damage which, directly or indirectly, may arise out
of or relate to such service,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency thereof being hereby acknowledged,
the Corporation and the Officer agree as follows:
<PAGE>
1. AGREEMENT TO SERVE
The Director shall serve as a director of the Corporation for as long as
the Director is duly elected or appointed or until said Director tenders a
resignation in writing.
2. DEFINITIONS
As used in this Agreement:
(a) The term "Proceeding" includes, without limitation, any threatened,
pending or completed action, suit or proceeding, whether brought in the right of
the Corporation or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which the Director may be or may have been involved as
a party, witness or otherwise, by reason of the fact that the Director is or was
a director of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether or not serving in
such capacity at the time any liability or expense is incurred for which
exculpation, indemnification or reimbursement can be provided under this
Agreement.
(b) The term "Expenses" includes, without limitation thereto, expenses of
investigations, judicial or administrative proceedings of appeals, attorney,
accountant and other professional fees and disbursements and any expenses of
establishing a right to indemnification under Section 12 of this Agreement, but
shall not include amounts paid in settlement by the Director or the amount of
judgments or fines against the Director.
(c) References to "other enterprise" include, without limitation, employee
benefit plans; references to "fines" include, without limitation, any excise tax
assessed with respect to any employee benefit plan; references to "serving at
the request of the Corporation" include, without limitation, any service as a
director, officer, employee or agent which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants, or its beneficiaries; and a person who
acted in good faith and in a manner reasonably believed to be in the interest of
an employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the Corporation" as referred to in this Agreement.
3. LIMITATION OF LIABILITY
(a) To the fullest extent permitted by law, the Director shall have no
monetary liability of any kind or nature with respect to the Director's conduct
in serving the Corporation or any of its subsidiaries, their respective
stockholders or any other enterprise at the request of the Corporation, except
that this Section 3(a) shall not affect liability of the Director for:
(i) any breach of the Director's duty of loyalty to the Corporation, such
subsidiaries, stockholders or enterprises;
2
<PAGE>
(ii) any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law;
(iii) any transaction from which the Director derived an improper personal
benefit; or
(iv) any unlawful payment of dividends.
(b) Without limiting the generality of (a) above and to the fullest extent
permitted by law, the Director shall have no personal liability to the
Corporation or any of its subsidiaries, their respective stockholders or any
other person claiming derivatively through the Corporation or the Corporation,
regardless of the theory or principle under which such liability may be
asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any multiple of damages
actually and directly proved to have been sustained;
(iii) fees of attorneys, accountants, expert witnesses or professional
consultants; or
(iv) civil fines or penalties of any kind or nature whatsoever.
4. INDEMNITY IN THIRD PARTY PROCEEDINGS
The Corporation shall indemnify the Director in accordance with the
provisions of this Section 4, if the Director is made a party to any Proceeding
(other than a Proceeding by or in the right of the Corporation to procure a
judgment in its favor), against all Expenses, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by the Director in connection
with such Proceeding if the conduct of the Director was in good faith and the
Director reasonably believed that the Director's conduct was in the best
interests, and, in the case of a criminal proceeding, the Director, in addition,
had no reasonable cause to believe that the Director's conduct was unlawful.
However, the Director shall not be entitled to indemnification under this
Section 4 in connection with any Proceeding charging improper personal benefit
to the Director in which the Director was adjudged liable on the basis that
personal benefit was improperly received by the Director unless and only to the
extent that the court conducting such Proceeding or any other court of competent
jurisdiction determines, upon application, that despite the adjudication of
liability, the Director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances.
5. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION
3
<PAGE>
The Corporation shall indemnify the Director in accordance with the
provisions of this Section 5, if the Director is made a party to any Proceeding
by or in the right of the Corporation to procure a judgment in its favor,
against all Expenses actually and reasonably incurred by the Director in
connection with such Proceeding if the conduct of the Director was in good faith
and the Director reasonably believed that the Director's conduct was in the best
interests of the Corporation, or at least, not opposed to its best interests.
However, the Director shall not be entitled to indemnification under this
Section 5 in connection with any Proceeding in which the Director has been
adjudged liable to the Corporation unless and only to the extent that the court
conducting such Proceeding or any other court of competent jurisdiction
determines upon application, that, despite the adjudication of liability, the
Director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY
Notwithstanding any other provisions of this Agreement, to the extent that
the Director has been successful, on the merits or otherwise, in defense of any
Proceeding or in defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, the Corporation shall indemnify the
Director against all Expenses incurred in connection therewith.
7. ADDITIONAL INDEMNIFICATION
(a) Notwithstanding any limitation in Sections 4, 5 or 6, the Corporation
shall indemnify the Director to the fullest extent permitted by law, with
respect to any Proceeding (including a Proceeding by or in the right of the
Corporation to procure a judgment in its favor), against all Expenses, judgment,
fines and amounts paid in settlement, actually and reasonably incurred by the
Director in connection with such Proceeding, except that the Director shall not
be entitled to indemnification under this Section 7(a) on account of liability
for:
(i) any breach of the Director's duty of loyalty to the Corporation or any
of its subsidiaries, their respective stockholders, or any other
enterprise that the Director was serving at the request of the
Corporation at the time of such breach;
(ii) any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law; or
(iii) any transaction from which the Director derived an improper personal
benefit.
(b) Notwithstanding any limitation in Sections 4, 5, 6 or 7(a), the
Corporation shall indemnify the Director to the fullest extent permitted by law
with respect to any Proceeding (including a Proceeding by or in the right of the
Corporation to procure a judgment in its favor) against all Expenses, judgment,
fines and amounts paid in settlement, actually and reasonably incurred by the
Director in connection with such Proceeding.
4
<PAGE>
8. EXCLUSIONS
Notwithstanding any provision in this Agreement, the Corporation shall not
be obligated under this Agreement to make any indemnification in connection with
any claim made against the Director:
(a) for which payment is made to or on behalf of the Director under any
insurance policy, except with respect to any excess amount to which the Director
is entitled under this Agreement beyond the amount of payment under such
insurance policy;
(b) if a court having jurisdiction in the matter finally determines that
such indemnification is not lawful under any applicable statute or public policy
(and, in this respect, both the Corporation and the Director have been advised
that in the opinion of the Securities and Exchange Commission indemnification
for liabilities arising under the Securities Act of 1933 is against public
policy and is, therefore, unenforceable and that claims for such indemnification
should be submitted to appropriate courts for adjudication unless, in the
opinion of counsel, the matter has been settled by controlling precedent); or
(c) in connection with any Proceeding (or part of any Proceeding) initiated
by the Director, or any Proceeding by the Director against the Corporation or
its directors, officers, employees or other persons entitled to be indemnified
by the Corporation, unless (i) the Corporation is expressly required by law to
make the indemnification, (ii) the Proceeding was authorized by the Board of
Directors of the Corporation, or (iii) the Director initiated the Proceeding
pursuant to Section 12 of this Agreement and the Director is successful in whole
or in part in the Proceeding.
9. ADVANCES OF EXPENSES
The Corporation shall pay the Expenses incurred by the Director in any
Proceeding in advance of the final disposition of the Proceeding at the written
request of the Director, if the Director:
(a) furnishes the Corporation a written affirmation of the Director's good
faith belief that the Director is entitled to be indemnified under this
Agreement; and
(b) furnishes the Corporation a written undertaking to repay the advance to
the extent that it is ultimately determined that the Director is not entitled to
be indemnified by the Corporation. Such undertaking shall be an unlimited
general obligation of the Director but need not be secured.
Advances pursuant to this Section 9 shall be made no later than ten days
after receipt by the Corporation of the affirmation and undertaking described in
Sections 9(a) and 9(b) above, and shall be made without regard to the Director's
ability to repay the amount advanced and without regard to the Director's
ultimate entitlement to indemnification under this Agreement. The
5
<PAGE>
Corporation may establish a trust, escrow account or other secured funding
source for the payment of advances made and to be made pursuant to this Section
9 or of other liability incurred by the Director in connection with any
Proceeding.
10. NONEXCLUSIVITY AND CONTINUITY OF RIGHTS
The indemnification, advancement of Expenses and exculpation from liability
provided by this Agreement shall not be deemed exclusive of any other rights to
which the Director may be entitled under any other agreement, any articles of
incorporation, bylaws or vote of shareholders or directors, or otherwise, both
as to action in the Director's official capacity and as to action in another
capacity while holding such office. The indemnification under this Agreement
shall cover the Director's service as a director and all of his acts in such
capacity, whether prior to or on or after the date of this Agreement, and such
indemnification shall continue as to the Director even though the Director may
have ceased to be director of the Corporation or a director, officer, employee
or agent of an enterprise related to the Corporation and shall inure to the
benefit of the heirs, executors, administrators and personal representatives of
the Director.
11. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION
Any indemnification under Sections 4, 5, 6 or 7 shall be made no later than
45 days after receipt of the written request of the said Director, unless a
determination is made within such 45 day period by (a) the Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to the
applicable Proceeding, (b) independent legal counsel in a written opinion (which
counsel shall be appointed if such a quorum is not obtainable) that the said
Director is not entitled to indemnification under this Agreement, or (c) a
majority vote of the shareholders.
12. ENFORCEMENT
The Director may enforce any right to indemnification or advances provided
by this Agreement in any court of competent jurisdiction if (a) the Corporation
denies the claim for indemnification or advances, in whole or in part, or (b)
the Corporation does not dispose of such claim within the time period required
by this Agreement. It shall be a defense to any such enforcement action (other
than an action brought to enforce a claim for advancement of Expenses pursuant
to, and in compliance with, Section 9 of this Agreement) that the Director is
not entitled to indemnification under this Agreement. However, except as
provided in Section 13 of this Agreement, the Corporation shall have no defense
to an action brought to enforce a claim for advancement of Expenses pursuant to
Section 9 of this Agreement if the Director has tendered to the Corporation the
affirmation and undertaking required thereunder. The burden of proving by clear
and convincing evidence that indemnification is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification or advancement of expenses
is proper in the circumstances because
6
<PAGE>
the Director has met the applicable standard of conduct nor an actual
determination by the Corporation (including its Board of Directors or
independent legal counsel) that indemnification is improper because the said
Director has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Director is not entitled to
indemnification under this Agreement or otherwise. The Director's expenses
incurred in connection with successfully establishing the Director's right to
indemnification, advances or exculpation, in whole or in part, in any Proceeding
shall also be indemnified by the Corporation.
The termination of any Proceeding by judgment, order of court, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that (a) the Director is not entitled to
indemnification under Sections 4, 5 or 7 of this Agreement, or (b) the Director
is not entitled to exculpation under Section 3 of this Agreement.
13. NOTIFICATION AND DEFENSE OF CLAIM
Not later than 90 days after receipt by the Director of notice of the
commencement of any Proceeding, the Director shall, if a claim in respect of the
Proceeding is to be made against the Corporation under this Agreement, notify
the Corporation of the commencement of the Proceeding. The omission to notify
the Corporation will not relieve the Corporation from any liability which it may
have to the Director otherwise than under this Agreement. With respect to any
Proceeding as to which the Director notifies the Corporation of the
commencement:
(a) The Corporation shall be entitled to participate in the Proceeding at
its own expense.
(b) Except as otherwise provided below, the Corporation may, at its option
and jointly with any other indemnifying party similarly notified and electing to
assume such defense, assume the defense of the Proceeding, with legal counsel
reasonably satisfactory to the Director. The Director shall have the right to
use separate legal counsel in the Proceeding, but the Corporation shall not be
liable to the Director under this Agreement, including Section 9 above, for the
fees and expenses of separate legal counsel incurred after notice from the
Corporation of its assumption of the defense, unless (i) the Director reasonably
concludes that there may be a conflict of interest between the Corporation and
the Director in the conduct of the defense of the Proceeding, or (ii) the
Corporation does not use legal counsel to assume the defense of such Proceeding.
The Corporation shall not be entitled to assume the defense of any Proceeding
brought by or on behalf of the Corporation or as to which the Director has made
the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from the
Corporation, including the Director, as parties to any Proceeding, the
Corporation may require the Director to use the same legal counsel as the other
parties. The Director shall have the right to use separate legal counsel in the
Proceeding, but the Corporation shall not be liable to the Director under this
Agreement, including Section 9 above, for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of the requirement to
use the same legal
7
<PAGE>
counsel as the other parties, unless the Director reasonably concludes that
there may be a conflict of interest between the Director and any of the other
parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Director under
this Agreement for any amounts paid in settlement of any Proceeding effected
without its written consent, which shall not be unreasonably withheld. The
Director shall permit the Corporation to settle any Proceeding that the
Corporation assumes the defense of, except that the Corporation shall not settle
any action or claim in any manner that would impose any penalty or limitation on
the Director without the Director's written consent, which may be given or
withheld in the said Director's sole discretion.
14. PARTIAL INDEMNIFICATION
If the Director is entitled under any provisions of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement, actually and reasonably incurred
by the Director in connection with such Proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify the Director
for the portion of such Expenses, judgments, fines or amounts paid in settlement
to which the Director is entitled.
15. SEVERABILITY
If this Agreement or any portion thereof shall be invalidated on any ground
by any court of competent jurisdiction, then the remainder of this Agreement
shall continue to be valid and the Corporation shall nevertheless indemnify the
Director as to Expenses, judgments, fines and amounts paid in settlement, with
respect to any Proceeding, to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated or by any other
applicable law.
16. SUBROGATION
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Director. The Director shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Corporation
effectively to bring suit to enforce such rights.
17. NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
upon delivery by hand to the party to whom the notice or other communication
shall have been directed, or (b) on the third business
8
<PAGE>
day after the date on which it is mailed by certified or registered mail with
postage prepaid, addressed as follows:
(i) If to the Director, to the address indicated on the signature page of
this Agreement, below said Director's signature.
(ii) If to the Corporation, to:
Information Resources, Inc.
150 North Clinton Street
Chicago, Illinois 60675
Attention: General Counsel
or to any other address as either party may designate to the other in writing.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall constitute the original.
19. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without regard to the principles of
conflict of laws.
20. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon the Corporation and its successors and
assigns.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed and signed as of the day and year first above written.
CORPORATION:
INFORMATION RESOURCES, INC.
a Delaware corporation
Attest:_________________________ By:_____________________________
Secretary President
DIRECTOR:
_______________________________
Address:
________________________________
________________________________
________________________________
10
<PAGE>
INFORMATION RESOURCES, INC.
OFFICERSHIP AGREEMENT
This Agreement is made as of __________, 1994, by and between
Information Resources, Inc., a Delaware corporation (the "Corporation"), and the
individual whose name and signature appears on the last page hereof under the
heading "Officer," an officer of the Corporation (the "Officer").
WHEREAS, it is essential to the Corporation that it attract and retain
as officers the most capable persons available and persons who have significant
experience in business, corporate and financial matters; and
WHEREAS, the Corporation has identified the Officer as a person
possessing the background and abilities desired by the Corporation and desires
the Officer to serve as an employee of the Corporation; and
WHEREAS, the substantial increase in corporate litigation may, from
time to time, subject officers to burdensome litigation, the risks of which
frequently far outweigh the advantages of serving in such capacity; and
WHEREAS, in recent times, the costs of directors' and officers'
liability insurance has increased and the availability of such insurance has
been severely limited; and
WHEREAS, the Corporation and the Officer recognize that serving as a
officer of a corporation at times calls for subjective evaluations and judgments
upon which reasonable men may differ and that, in that context, it is
anticipated and expected that officers of corporations will and do from time to
time commit actual or alleged errors or omissions in the good faith exercise of
their duties and responsibilities; and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its officers to the fullest extent permitted by law;
and
WHEREAS, the Corporation and the Officer desire to articulate clearly
in contractual form, their respective rights and obligations with regard to the
Officer's service on behalf of the Corporation and with regard to claims for
loss, liability, expense or damage which, directly or indirectly, may arise out
of or relate to such service,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the receipt and sufficiency thereof being hereby
acknowledged, the Corporation and the Officer agree as follows:
<PAGE>
1. AGREEMENT TO SERVE
The Officer shall serve as a officer of the Corporation for as long as
the Officer is duly elected or appointed or until said Officer tenders a
resignation in writing.
2. DEFINITIONS
As used in this Agreement:
(a) The term "Proceeding" includes, without limitation, any
threatened, pending or completed action, suit or proceeding, whether brought in
the right of the Corporation or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which the Officer may be or may have
been involved as a party, witness or otherwise, by reason of the fact that the
Officer is or was a officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, whether or
not serving in such capacity at the time any liability or expense is incurred
for which exculpation, indemnification or reimbursement can be provided under
this Agreement.
(b) The term "Expenses" includes, without limitation thereto, expenses
of investigations, judicial or administrative proceedings of appeals, attorney,
accountant and other professional fees and disbursements and any expenses of
establishing a right to indemnification under Section 12 of this Agreement, but
shall not include amounts paid in settlement by the Officer or the amount of
judgments or fines against the Officer.
(c) References to "other enterprise" include, without limitation,
employee benefit plans; references to "fines" include, without limitation, any
excise tax assessed with respect to any employee benefit plan; references to
"serving at the request of the Corporation" include, without limitation, any
service as a director, officer, employee or agent which imposes duties on, or
involves services by such director, officer, employee or agent with respect to
an employee benefit plan, its participants, or its beneficiaries; and a person
who acted in good faith and in a manner reasonably believed to be in the
interest of an employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the Corporation" as referred to in this
Agreement.
3. LIMITATION OF LIABILITY
(a) To the fullest extent permitted by law, the Officer shall have no
monetary liability of any kind or nature with respect to the Officer's conduct
in serving the Corporation or any of its subsidiaries, their respective
stockholders or any other enterprise at the request of the Corporation, except
that this Section 3(a) shall not affect liability of the Officer for:
(i) any breach of the Officer's duty of loyalty to the Corporation,
such subsidiaries, stockholders or enterprises;
2
<PAGE>
(ii) any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law;
(iii) any transaction from which the Officer derived an improper
personal benefit; or
(iv) any unlawful payment of dividends.
(b) Without limiting the generality of (a) above and to the fullest
extent permitted by law, the Officer shall have no personal liability to the
Corporation or any of its subsidiaries, their respective stockholders or any
other person claiming derivatively through the Corporation or the Corporation,
regardless of the theory or principle under which such liability may be
asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any multiple of
damages actually and directly proved to have been sustained;
(iii) fees of attorneys, accountants, expert witnesses or
professional consultants; or
(iv) civil fines or penalties of any kind or nature whatsoever.
4. INDEMNITY IN THIRD PARTY PROCEEDINGS
The Corporation shall indemnify the Officer in accordance with the
provisions of this Section 4, if the Officer is made a party to any Proceeding
(other than a Proceeding by or in the right of the Corporation to procure a
judgment in its favor), against all Expenses, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by the Officer in connection
with such Proceeding if the conduct of the Officer was in good faith and the
Officer reasonably believed that the Officer's conduct was in the best
interests, and, in the case of a criminal proceeding, the Officer, in addition,
had no reasonable cause to believe that the Officer's conduct was unlawful.
However, the Officer shall not be entitled to indemnification under this Section
4 in connection with any Proceeding charging improper personal benefit to the
Officer in which the Officer was adjudged liable on the basis that personal
benefit was improperly received by the Officer unless and only to the extent
that the court conducting such Proceeding or any other court of competent
jurisdiction determines, upon application, that despite the adjudication of
liability, the Officer is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances.
5. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION
The Corporation shall indemnify the Officer in accordance with the
provisions of this Section 5, if the Officer is made a party to any Proceeding
by or in the right of the Corporation to procure a judgment in its favor,
against all Expenses actually and reasonably incurred by the Officer in
connection with such Proceeding if the conduct of the Officer was in good faith
and the Officer
3
<PAGE>
reasonably believed that the Officer's conduct was in the best interests of the
Corporation, or at least, not opposed to its best interests. However, the
Officer shall not be entitled to indemnification under this Section 5 in
connection with any Proceeding in which the Officer has been adjudged liable to
the Corporation unless and only to the extent that the court conducting such
Proceeding or any other court of competent jurisdiction determines upon
application, that, despite the adjudication of liability, the Officer is fairly
and reasonably entitled to indemnification in view of all the relevant
circumstances.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY
Notwithstanding any other provisions of this Agreement, to the extent
that the Officer has been successful, on the merits or otherwise, in defense of
any Proceeding or in defense of any claim, issue or matter therein, including
the dismissal of an action without prejudice, the Corporation shall indemnify
the Officer against all Expenses incurred in connection therewith.
7. ADDITIONAL INDEMNIFICATION
(a) Notwithstanding any limitation in Sections 4, 5 or 6, the
Corporation shall indemnify the Officer to the fullest extent permitted by law
with respect to any Proceeding (including a Proceeding by or in the right of the
Corporation to procure a judgment in its favor), against all Expenses, judgment,
fines and amounts paid in settlement, actually and reasonably incurred by the
Officer in connection with such Proceeding, except that the Officer shall not be
entitled to indemnification under this Section 7(a) on account of liability for:
(i) any breach of the Officer's duty of loyalty to the Corporation
or any of its subsidiaries, their respective stockholders, or
any other enterprise that the Officer was serving at the
request of the Corporation at the time of such breach;
(ii) any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law; or
(iii) any transaction from which the Officer derived an improper
personal benefit.
(b) Notwithstanding any limitation in Sections 4, 5, 6 or 7(a), the
Corporation shall indemnify the Officer to the fullest extent permitted by law
with respect to any Proceeding (including a Proceeding by or in the right of the
Corporation to procure a judgment in its favor) against all Expenses, judgment,
fines and amounts paid in settlement, actually and reasonably incurred by the
Officer in connection with such Proceeding.
8. EXCLUSIONS
4
<PAGE>
Notwithstanding any provision in this Agreement, the Corporation shall
not be obligated under this Agreement to make any indemnification in connection
with any claim made against the Officer:
(a) for which payment is made to or on behalf of the Officer under any
insurance policy, except with respect to any excess amount to which the Officer
is entitled under this Agreement beyond the amount of payment under such
insurance policy;
(b) if a court having jurisdiction in the matter finally determines
that such indemnification is not lawful under any applicable statute or public
policy (and, in this respect, both the Corporation and the Officer have been
advised that in the opinion of the Securities and Exchange Commission
indemnification for liabilities arising under the Securities Act of 1933 is
against public policy and is, therefore, unenforceable and that claims for such
indemnification should be submitted to appropriate courts for adjudication
unless, in the opinion of counsel, the matter has been settled by controlling
precedent); or
(c) in connection with any Proceeding (or part of any Proceeding)
initiated by the Officer, or any Proceeding by the Officer against the
Corporation or its officers, officers, employees or other persons entitled to be
indemnified by the Corporation, unless (i) the Corporation is expressly required
by law to make the indemnification, (ii) the Proceeding was authorized by the
Board of Directors of the Corporation, or (iii) the Officer initiated the
Proceeding pursuant to Section 12 of this Agreement and the Officer is
successful in whole or in part in the Proceeding.
9. ADVANCES OF EXPENSES
The Corporation shall pay the Expenses incurred by the Officer in any
Proceeding in advance of the final disposition of the Proceeding at the written
request of the Officer, if the Officer:
(a) furnishes the Corporation a written affirmation of the Officer's
good faith belief that the Officer is entitled to be indemnified under this
Agreement; and
(b) furnishes the Corporation a written undertaking to repay the
advance to the extent that it is ultimately determined that the Officer is not
entitled to be indemnified by the Corporation. Such undertaking shall be an
unlimited general obligation of the Officer but need not be secured.
Advances pursuant to this Section 9 shall be made no later than ten
days after receipt by the Corporation of the affirmation and undertaking
described in Sections 9(a) and 9(b) above, and shall be made without regard to
the Officer's ability to repay the amount advanced and without regard to the
Officer's ultimate entitlement to indemnification under this Agreement. The
Corporation may establish a trust, escrow account or other secured funding
source for the payment of advances made and to be made pursuant to this Section
9 or of other liability incurred by the Officer in connection with any
Proceeding.
5
<PAGE>
10. NONEXCLUSIVITY AND CONTINUITY OF RIGHTS
The indemnification, advancement of Expenses and exculpation from
liability provided by this Agreement shall not be deemed exclusive of any other
rights to which the Officer may be entitled under any other agreement, any
articles of incorporation, bylaws or vote of shareholders or officers, or
otherwise, both as to action in the Officer's official capacity and as to action
in another capacity while holding such office. The indemnification under this
Agreement shall cover the Officer's service as a officer and all of his acts in
such capacity, whether prior to or on or after the date of this Agreement, and
such indemnification shall continue as to the Officer even though the Officer
may have ceased to be officer of the Corporation or a director, officer,
employee or agent of an enterprise related to the Corporation and shall inure to
the benefit of the heirs, executors, administrators and personal representatives
of the Officer.
11. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION
Any indemnification under Sections 4, 5, 6 or 7 shall be made no later
than 45 days after receipt of the written request of the said Officer, unless a
determination is made within such 45 day period by (a) the Board of Directors by
a majority vote of a quorum consisting of officers who were not parties to the
applicable Proceeding, (b) independent legal counsel in a written opinion (which
counsel shall be appointed if such a quorum is not obtainable) that the said
Officer is not entitled to indemnification under this Agreement, or (c) a
majority vote of the shareholders.
12. ENFORCEMENT
The Officer may enforce any right to indemnification or advances
provided by this Agreement in any court of competent jurisdiction if (a) the
Corporation denies the claim for indemnification or advances, in whole or in
part, or (b) the Corporation does not dispose of such claim within the time
period required by this Agreement. It shall be a defense to any such
enforcement action (other than an action brought to enforce a claim for
advancement of Expenses pursuant to, and in compliance with, Section 9 of this
Agreement) that the Officer is not entitled to indemnification under this
Agreement. However, except as provided in Section 13 of this Agreement, the
Corporation shall have no defense to an action brought to enforce a claim for
advancement of Expenses pursuant to Section 9 of this Agreement if the Officer
has tendered to the Corporation the affirmation and undertaking required
thereunder. The burden of proving by clear and convincing evidence that
indemnification is not appropriate shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors or independent
legal counsel) to have made a determination prior to the commencement of such
action that indemnification or advancement of expenses is proper in the
circumstances because the Officer has met the applicable standard of conduct nor
an actual determination by the Corporation (including its Board of Directors or
independent legal counsel) that indemnification is improper because the said
Officer has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the Officer is not entitled to
indemnification under this Agreement or otherwise. The Officer's expenses
incurred in connection
6
<PAGE>
with successfully establishing the Officer's right to indemnification, advances
or exculpation, in whole or in part, in any Proceeding shall also be indemnified
by the Corporation.
The termination of any Proceeding by judgment, order of court,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that (a) the Officer is not entitled
to indemnification under Sections 4, 5 or 7 of this Agreement, or (b) the
Officer is not entitled to exculpation under Section 3 of this Agreement.
13. NOTIFICATION AND DEFENSE OF CLAIM
Not later than 90 days after receipt by the Officer of notice of the
commencement of any Proceeding, the Officer shall, if a claim in respect of the
Proceeding is to be made against the Corporation under this Agreement, notify
the Corporation of the commencement of the Proceeding. The omission to notify
the Corporation will not relieve the Corporation from any liability which it may
have to the Officer otherwise than under this Agreement. With respect to any
Proceeding as to which the Officer notifies the Corporation of the commencement:
(a) The Corporation shall be entitled to participate in the
Proceeding at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense of the Proceeding, with
legal counsel reasonably satisfactory to the Officer. The Officer shall have
the right to use separate legal counsel in the Proceeding, but the Corporation
shall not be liable to the Officer under this Agreement, including Section 9
above, for the fees and expenses of separate legal counsel incurred after notice
from the Corporation of its assumption of the defense, unless (i) the Officer
reasonably concludes that there may be a conflict of interest between the
Corporation and the Officer in the conduct of the defense of the Proceeding, or
(ii) the Corporation does not use legal counsel to assume the defense of such
Proceeding. The Corporation shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Corporation or as to which the Officer
has made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from
the Corporation, including the Officer, as parties to any Proceeding, the
Corporation may require the Officer to use the same legal counsel as the other
parties. The Officer shall have the right to use separate legal counsel in the
Proceeding, but the Corporation shall not be liable to the Officer under this
Agreement, including Section 9 above, for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of the requirement to
use the same legal counsel as the other parties, unless the Officer reasonably
concludes that there may be a conflict of interest between the Officer and any
of the other parties required by the Corporation to be represented by the same
legal counsel.
(d) The Corporation shall not be liable to indemnify the Officer under
this Agreement for any amounts paid in settlement of any Proceeding effected
without its written consent, which shall not be unreasonably withheld. The
Officer shall permit the Corporation to settle any Proceeding that
7
<PAGE>
the Corporation assumes the defense of, except that the Corporation shall not
settle any action or claim in any manner that would impose any penalty or
limitation on the Officer without the Officer's written consent, which may be
given or withheld in the said Officer's sole discretion.
14. PARTIAL INDEMNIFICATION
If the Officer is entitled under any provisions of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement, actually and reasonably incurred
by the Officer in connection with such Proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify the Officer
for the portion of such Expenses, judgments, fines or amounts paid in settlement
to which the Officer is entitled.
15. SEVERABILITY
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the remainder of this
Agreement shall continue to be valid and the Corporation shall nevertheless
indemnify the Officer as to Expenses, judgments, fines and amounts paid in
settlement, with respect to any Proceeding, to the fullest extent permitted by
any applicable portion of this Agreement that shall not have been invalidated or
by any other applicable law.
16. SUBROGATION
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Officer. The Officer shall execute all documents required and shall do all acts
that may be necessary to secure such rights and to enable the Corporation
effectively to bring suit to enforce such rights.
17. NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
upon delivery by hand to the party to whom the notice or other communication
shall have been directed, or (b) on the third business day after the date on
which it is mailed by certified or registered mail with postage prepaid,
addressed as follows:
(i) If to the Officer, to the address indicated on the signature
page of this Agreement, below said Officer's signature.
(ii) If to the Corporation, to:
Information Resources, Inc.
150 North Clinton Street
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<PAGE>
Chicago, Illinois 60675
Attention: General Counsel
or to any other address as either party may designate to the other in writing.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
19. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware without regard to the principles of
conflict of laws.
20. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon the Corporation and its
successors and assigns.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed and signed as of the day and year first above written.
CORPORATION:
INFORMATION RESOURCES, INC.
a Delaware corporation
Attest:_____________________ By:_____________________________
Secretary President
OFFICER:
_______________________________
Address:
________________________________
________________________________
________________________________
10
<PAGE>
EXHIBIT 11
Information Resources, Inc. and Subsidiaries
COMPUTATION OF INCOME PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ----------------- -----------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
Net earnings (loss) for the period:
Earnings (loss) before cumulative
effect of change in accounting principle $ (8,921) $ (8,921) $22,215 $22,215 $19,247 $19,247
Cumulative effect of change in accounting
principle (6,594) (6,594) 1,864 1,864 -- --
-------- -------- ------- ------- ------- -------
Net earnings (loss) (15,515) (15,515) 24,079 24,079 19,247 19,247
-------- -------- ------- ------- ------- -------
Adjustment of net income for the
period for assumed interest reduction,
net of tax effect, pursuant to
modified treasury stock method (1) -- -- 68 39 -- --
-------- -------- ------- ------- ------- -------
Adjusted net earnings (loss) (A) $(15,515) $(15,515) $24,147 $24,118 $19,247 $19,247
======== ======== ======= ======= ======= =======
Weighted common shares outstanding: 26,056 26,056 24,991 24,991 23,120 23,120
Net additional shares in excess of 20%
of outstanding issuable pursuant to
modified treasury stock method (1) -- -- 1,848 2,169 618 --
Dilutive effect of options outstanding
during the period (2) -- -- -- -- 768 1,697
-------- -------- ------- ------- ------- -------
Total common and common
equivalent shares (B) 26,056 26,056 26,839 27,160 24,506 24,817
======== ======== ======= ======= ======= =======
Earnings (loss) per common and common
equivalent shares (A) / (B):
Before cumulative effect of
accounting change $ (0.34) $ (0.34) $ 0.83 $ 0.82 $ 0.79 $ 0.78
Cumulative effect of accounting change (0.26) (0.26) 0.07 0.07 -- --
-------- -------- ------- ------- ------- -------
Net earnings (loss) $ (0.60) $ (0.60) $ 0.90 $ 0.89 $ 0.79 $ 0.78
======== ======== ======= ======= ======= =======
</TABLE>
(1) The modified treasury stock method was used to compute earnings (loss) per
common and common equivalent share for all quarters in 1994 and 1993 and for the
quarters ended June 30 and September 30, 1992 since options and warrants
outstanding exceeded 20% of shares of common stock outstanding. In applying the
modified treasury stock method for all periods in 1994, stock options were not
included as they were anti-dilutive. The treasury stock method was used to
calculate earnings (loss) per common and common equivalent share for the
quarters ending March 30 and December 31, 1992.
(2) Since the fourth quarter incremental shares were greater than the average
of the four quarters in 1993 and 1992, the fourth quarter incremental shares
were used in the year-to-date fully diluted calculation.
<PAGE>
Exhibit 21
INFORMATION RESOURCES, INC.
SUBSIDIARIES
DOMESTIC SUBSIDIARIES
---------------------
Subsidiary State of Incorporation
---------- ----------------------
564 Randolph Co. #2 Delaware
IRI French Holdings, Inc. Delaware
IRI Puerto Rico, Inc. Puerto Rico
NEO, Inc. Connecticut
IRI Venezuela Holdings, Inc. Delaware
IRI Guatemala Holdings, Inc. Delaware
IRI Greek Holdings, Inc. Delaware
IRI Italy Holdings, Inc. Delaware
InfoScan Italy Holdings, Inc. Delaware
IRI Logistics, Inc. (formerly LogiCNet, Inc.) Delaware
<PAGE>
EXHIBIT 23
INFORMATION RESOURCES, INC. & SUBSIDIARIES
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We have issued our reports dated March 24, 1995 accompanying the consolidated
financial statements and schedules included in the Annual Report of Information
Resources, Inc. & Subsidiaries on Form 10-K for the year ended December 31,
1994. We hereby consent to the incorporation by reference of said reports in
the Registration Statements of Information Resources, Inc. on Forms S-8 (File
Nos. 33-48289, 33-48290, 33-48291, 33-52719 and 33-52721).
GRANT THORNTON LLP
Chicago, Illinois
March 24, 1995
<PAGE>
EXHIBIT 24
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Gian M. Fulgoni, James G. Andress, and Edward S. Berger, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and re-substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Annual Report on Form 10-K for the year ended December
31, 1994 of Information Resources, Inc., together with any and all amendments to
such Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agent of either of them, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: March 28, 1995
/s/ Gerald J. Eskin
-----------------------------------
Gerald J. Eskin, Director
/s/ Edwin E. Epstein
----------------------------------
Edwin E. Epstein, Director
/s/ John D.C. Little
----------------------------------
John D.C. Little, Director
/s/ Leonard M. Lodish
----------------------------------
Leonard M. Lodish, Director
/s/ Edward E. Lucente
----------------------------------
Edward E. Lucente, Director
/s/ Edith W. Martin
----------------------------------
Edith W. Martin, Director
/s/ George G. Montgomery, Jr.
----------------------------------
George G. Montgomery, Jr., Director
/s/ Jeffrey P. Stamen
-----------------------------------
Jeffrey P. Stamen, President,
IRI Software and Director
/s/ Glen L. Urban
-----------------------------------
Glen L. Urban, Director
/s/ Thomas W. Wilson, Jr.
-----------------------------------
Thomas W. Wilson, Jr., Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 11,792
<SECURITIES> 0
<RECEIVABLES> 122,777
<ALLOWANCES> 2,926
<INVENTORY> 0
<CURRENT-ASSETS> 143,189
<PP&E> 145,537
<DEPRECIATION> 85,244
<TOTAL-ASSETS> 354,554
<CURRENT-LIABILITIES> 73,615
<BONDS> 31,452
<COMMON> 265
0
0
<OTHER-SE> 226,936
<TOTAL-LIABILITY-AND-EQUITY> 354,554
<SALES> 376,570
<TOTAL-REVENUES> 376,570
<CGS> 0
<TOTAL-COSTS> 325,507
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,379
<INCOME-PRETAX> (13,722)
<INCOME-TAX> 3,822
<INCOME-CONTINUING> (8,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (6,594)
<NET-INCOME> (15,515)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
