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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q/A Amendment No. 1
 [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 2004 or [  ]
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from __________ to __________ Commission File Number 0-19598 infoUSA INC.   DELAWARE
    
    47-0751545(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 5711 SOUTH 86TH CIRCLE, OMAHA, NEBRASKA
    
    68127(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (402) 593-4500 N/A 
  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 at least the past 90 days. Yes
[X]    
No    [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X ]    No [  ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date. 53,437,226 shares of Common Stock at August 3, 2004




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infoUSA INC. INDEX  
 PART I  FINANCIAL INFORMATION AND MANAGEMENTS DISCUSSION AND ANALYSISItem 1. Consolidated Balance Sheets as of June 30, 2004 and
December 31, 2003Consolidated Statements of Operations for the Three Months and Six
Months Ended June 30, 2004 and 2003Consolidated Statements of Cash Flows for the Six Months
ended June 30, 2004 and 2003Notes to Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and
Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-KSignatureIndex to ExhibitsCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  The Registrant hereby amends
its report on Form 10-Q for the quarterly period ended
June 30, 2004 for the restatement of the Registrant's
consolidated balance sheet as of June 30, 2004 to correct two
amounts that had been inadvertently entered into the document being
prepared for submission. The two amounts include total current
liabilities and deferred income taxes. 2




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infoUSA INC. FORM 10-Q FOR THE QUARTER ENDED June 30, 2004 
 PART I FINANCIAL INFORMATION 3




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ITEM 1. FINANCIAL STATEMENTS infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts)
 June 30,
    
    December 31,2004
    
    2003(UNAUDITED)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,376
    
    
    $
    2,686Marketable securities
    
    
    3,628
    
    
    
    3,685Trade accounts receivable, net of allowances of $1,918 and
$2,492, respectively
    
    
    50,782
    
    
    
    40,922List brokerage trade accounts receivable
    
    
    21,230
    
    
    
    12,844Income taxes receivable
    
    
    1,633
    
    
    
    1,046Prepaid expenses
    
    
    8,586
    
    
    
    4,985Deferred marketing costs
    
    
    3,040
    
    
    
    5,457Total current assets
    
    
    98,275
    
    
    
    71,625Property and equipment, net
    
    
    47,529
    
    
    
    40,984Goodwill, net
    
    
    293,460
    
    
    
    202,386Intangible assets, net
    
    
    72,925
    
    
    
    45,223Other assets
    
    
    7,478
    
    
    
    6,128$
    519,667
    
    
    $
    366,346LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    24,792
    
    
    $
    17,280Accounts payable
    
    
    16,237
    
    
    
    16,212List brokerage trade accounts payable
    
    
    15,588
    
    
    
    9,516Accrued payroll expenses
    
    
    17,961
    
    
    
    17,793Accrued expenses
    
    
    8,001
    
    
    
    824Income taxes payable
    
    
    
    
    
    
    Deferred income taxes
    
    
    3,294
    
    
    
    3,241Deferred revenues
    
    
    42,104
    
    
    
    19,824Total current liabilities
    
    
    127,977
    
    
    
    84,690Long-term debt, net of current portion
    
    
    211,357
    
    
    
    122,485Deferred income taxes
    
    
    18,488
    
    
    
    8,553Deferred revenue
    
    
    
    
    
    
    3,000Other liabilities
    
    
    1,397
    
    
    
    1,397Stockholders equity:Common stock, $.0025 par value. Authorized
295,000,000 shares; 53,428,426 shares issued and
52,976,722 outstanding at June 30, 2004 and 52,808,835
shares issued and 52,271,323 outstanding at December 31, 2003
    
    
    134
    
    
    
    132Paid-in capital
    
    
    105,210
    
    
    
    99,447Retained earnings
    
    
    60,017
    
    
    
    51,932Treasury stock, at cost, 451,704 shares held at June 30, 2004
and 537,512 held at December 31, 2003
    
    
    (2,749
    )
    
    
    (3,247
    )Notes receivable from officers
    
    
    (328
    )
    
    
    (325
    )Accumulated other comprehensive loss
    
    
    (1,836
    )
    
    
    (1,718
    )Total stockholders equity
    
    
    160,448
    
    
    
    146,221$
    519,667
    
    
    $
    366,346
 The accompanying notes are an integral part of the
consolidated financial statements. 4




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infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 THREE MONTHS ENDED
    
    SIX MONTHS ENDEDJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003(UNAUDITED)
    
    (UNAUDITED)Net sales
    
    $
    83,794
    
    
    $
    78,831
    
    
    $
    164,605
    
    
    $
    154,911Costs and expenses:Database and production costs
    
    
    24,823
    
    
    
    22,240
    
    
    
    48,684
    
    
    
    43,140Selling, general and administrative (excluding non-cash stock option
compensation expense of $458 and $69 for the three months and
$640 and $69 for the six months ended June 30, 2004 and 2003,
respectively)
    
    
    40,021
    
    
    
    33,864
    
    
    
    80,200
    
    
    
    66,998Depreciation and amortization of operating assets
    
    
    3,560
    
    
    
    3,707
    
    
    
    6,874
    
    
    
    7,558Amortization of intangible assets
    
    
    3,616
    
    
    
    3,326
    
    
    
    7,062
    
    
    
    6,650Non-cash stock option compensation
    
    
    458
    
    
    
    69
    
    
    
    640
    
    
    
    69Restructuring charges
    
    
    1,007
    
    
    
    430
    
    
    
    1,622
    
    
    
    985Acquisition costs
    
    
    239
    
    
    
    41
    
    
    
    242
    
    
    
    54Total operating costs and expenses
    
    
    73,724
    
    
    
    63,677
    
    
    
    145,324
    
    
    
    125,454Operating income
    
    
    10,070
    
    
    
    15,154
    
    
    
    19,281
    
    
    
    29,457Other income (expense):Investment income (loss)
    
    
    (243
    )
    
    
    146
    
    
    
    (42
    )
    
    
    828Other charges
    
    
    (2,079
    )
    
    
    (3,810
    )
    
    
    (2,223
    )
    
    
    (4,145
    )Interest expense
    
    
    (1,761
    )
    
    
    (3,596
    )
    
    
    (3,975
    )
    
    
    (7,257
    )Other expense, net
    
    
    (4,083
    )
    
    
    (7,260
    )
    
    
    (6,240
    )
    
    
    (10,574
    )Income before income taxes
    
    
    5,987
    
    
    
    7,894
    
    
    
    13,041
    
    
    
    18,883Income taxes
    
    
    2,275
    
    
    
    3,169
    
    
    
    4,956
    
    
    
    7,303Net income
    
    $
    3,712
    
    
    $
    4,725
    
    
    $
    8,085
    
    
    $
    11,580Basic earnings per share:
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.23Diluted earnings per share:
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.23
 The accompanying notes are an integral part of the
consolidated financial statements. 5




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infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 SIX MONTHS ENDEDJune 30,2004
    
    2003(UNAUDITED)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    8,085
    
    
    $
    11,580Adjustments to reconcile net income
to net cash provided by operating activities:Depreciation and amortization of operating assets
    
    
    6,874
    
    
    
    7,558Amortization of intangible assets
    
    
    7,062
    
    
    
    6,650Amortization of deferred financing costs
    
    
    77
    
    
    
    458Deferred income taxes
    
    
    (2,874
    )
    
    
    3,952Tax benefit related to employee stock options
    
    
    762
    
    
    
    Non-cash stock option compensation expense
    
    
    640
    
    
    
    69Non-cash 401(k) contribution in common stock
    
    
    812
    
    
    
    680(Gain) loss on sale of assets
    
    
    79
    
    
    
    (263
    )Non-cash other charges
    
    
    796
    
    
    
    1,679Changes in assets and liabilities, net of effect of acquisitions:Trade accounts receivable
    
    
    213
    
    
    
    1,062List brokerage trade accounts receivable
    
    
    1,316
    
    
    
    4,170Prepaid expenses and other assets
    
    
    (151
    )
    
    
    (3,398
    )Deferred marketing costs
    
    
    2,417
    
    
    
    (1,082
    )Accounts payable
    
    
    (2,766
    )
    
    
    270List brokerage trade accounts payable
    
    
    (2,206
    )
    
    
    (4,053
    )Income taxes receivable and payable, net
    
    
    1,089
    
    
    
    (3,870
    )Accrued expenses and other liabilities
    
    
    3,991
    
    
    
    1,907Net cash provided by operating activities
    
    
    26,216
    
    
    
    27,369CASH FLOWS FROM INVESTING ACTIVITIES:Sale of other investments
    
    
    1,704
    
    
    
    396Purchase of other investments
    
    
    (2,929
    )
    
    
    (626
    )Purchases of property and equipment
    
    
    (2,491
    )
    
    
    (2,632
    )Acquisitions of businesses, net of cash acquired
    
    
    (109,356
    )
    
    
    (4,350
    )Software and database development costs
    
    
    (1,032
    )
    
    
    (237
    )Net cash used in investing activities
    
    
    (114,104
    )
    
    
    (7,449
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of long-term debt
    
    
    (179,649
    )
    
    
    (122,105
    )Proceeds of long-term debt
    
    
    272,833
    
    
    
    100,000Deferred financing costs paid
    
    
    (2,651
    )
    
    
    (141
    )Proceeds from exercise of stock options
    
    
    4,045
    
    
    
    12Net cash used in financing activities
    
    
    94,578
    
    
    
    (22,234
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,690
    
    
    
    (2,314
    )Cash and cash equivalents, beginning of period
    
    
    2,686
    
    
    
    6,285Cash and cash equivalents, end of period
    
    $
    9,376
    
    
    $
    3,971Supplemental cash flow information:Interest paid
    
    $
    3,561
    
    
    $
    3,281Income taxes paid
    
    $
    5,792
    
    
    $
    7,374
 The accompanying notes are an integral part of the
consolidated financial statements. 6




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infoUSA INC. AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. GENERAL The accompanying unaudited consolidated financial statements have been
prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, contain all adjustments, consisting of
normal recurring adjustments, necessary to fairly present the financial
information included therein. The consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. The Company suggests that this financial data be read in conjunction with
the audited consolidated financial statements and notes thereto for the year
ended December 31, 2003 included in the Companys 2003 Annual Report on Form
10-K, filed with the Securities and Exchange Commission. Results for the
interim period presented are not necessarily indicative of results to be
expected for the entire year. 2. EARNINGS PER SHARE INFORMATION The following table shows the amounts used in computing earnings per share
and the effect on the weighted average number of shares of dilutive potential
common stock. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(In Thousands)2004
    
    2003
    
    2004
    
    2003Weighted average number of shares
used in basic EPS
    
    
    52,540
    
    
    
    51,221
    
    
    
    52,440
    
    
    
    51,183Net additional common stock
equivalent shares outstanding after
assumed exercise of stock options
    
    
    566
    
    
    
    18
    
    
    
    590
    
    
    
    5Weighted average number of shares
outstanding used in diluted EPS
    
    
    53,106
    
    
    
    51,239
    
    
    
    53,030
    
    
    
    51,188
 3. SEGMENT INFORMATION The Company currently manages existing operations utilizing financial
information accumulated and reported for two business segments. The infoUSA group (formerly known as the small business segment)
principally engages in the selling of sales lead generation and consumer DVD
products to small to medium sized companies, small office and home office
businesses and individual consumers. This segment also includes the sale of
content via the Internet. The Donnelley group (formerly known as the large business segment)
principally engages in the selling of data processing services, Web-based
business and financial information products and services, licensed databases,
database marketing solutions, e-mail marketing solutions and list brokerage and
list management services to large companies. This segment includes the
licensing of databases for Internet directory assistance services. The infoUSA
group and Donnelley group reflect actual net sales, direct order production,
and identifiable direct sales and marketing costs related to their operations.
The remaining indirect costs are presented as a reconciling item in corporate
activities. Corporate activities principally represent the information systems
technology, database compilation, database verification, and administrative
functions of the Company. Investment income (loss), interest expense, income
taxes, amortization of intangibles, and depreciation expense are only recorded
in corporate activities. The Company does not allocate these costs to the two
business segments. The infoUSA group and Donnelley group segments reflect
actual net sales, direct order production, and identifiable direct sales and
marketing-related costs related to their operations. The Company records
unusual or non-recurring items including acquisition-related and restructuring
charges and provisions for litigation settlement in corporate activities to
allow for the analysis of the sales business segments excluding such unusual or
non-recurring charges. 7




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The Company accounts for property and equipment on a consolidated basis.
The Companys property and equipment is shared by the Companys business
segments. Depreciation expense is recorded in corporate activities. The Company has no intercompany sales or intercompany expense
transactions. Accordingly, there are no adjustments necessary to eliminate
amounts between the Companys segments. The following table summarizes segment
information: For The Three Months Ended June 30, 2004infoUSA
    
    Donnelley
    
    Corporate
    
    ConsolidatedGroup
    
    Group
    
    Activities
    
    Total(In thousands)Net sales
    
    $
    38,273
    
    
    $
    45,521
    
    
    $
    
    
    
    $
    83,794Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    (458
    )
    
    
    (458
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (1,007
    )
    
    
    (1,007
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    (239
    )
    
    
    (239
    )Operating income (loss)
    
    
    13,346
    
    
    
    18,991
    
    
    
    (22,267
    )
    
    
    10,070Investment loss
    
    
    
    
    
    
    
    
    
    
    (243
    )
    
    
    (243
    )Other charges
    
    
    
    
    
    
    
    
    
    
    (2,079
    )
    
    
    (2,079
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (1,761
    )
    
    
    (1,761
    )Income (loss) before income taxes
    
    
    13,346
    
    
    
    18,991
    
    
    
    (26,350
    )
    
    
    5,987
 For The Three Months Ended June 30, 2003infoUSA
    
    Donnelley
    
    Corporate
    
    ConsolidatedGroup
    
    Group
    
    Activities
    
    Total(In thousands)Net sales
    
    $
    40,088
    
    
    $
    38,743
    
    
    $
    
    
    
    $
    78,831Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (430
    )
    
    
    (430
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (41
    )Operating income (loss)
    
    
    15,372
    
    
    
    19,247
    
    
    
    (19,465
    )
    
    
    15,154Investment income
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    146Other charges
    
    
    
    
    
    
    
    
    
    
    (3,810
    )
    
    
    (3,810
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (3,596
    )
    
    
    (3,596
    )Income (loss) before income taxes
    
    
    15,372
    
    
    
    19,247
    
    
    
    (26,725
    )
    
    
    7,894
 For The Six Months Ended June 30, 2004infoUSA
    
    Donnelley
    
    Corporate
    
    ConsolidatedGroup
    
    Group
    
    Activities
    
    Total(In thousands)Net sales
    
    $
    78,290
    
    
    $
    86,315
    
    
    $
    
    
    
    $
    164,605Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    (640
    )
    
    
    (640
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (1,622
    )
    
    
    (1,622
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    (242
    )
    
    
    (242
    )Operating income (loss)
    
    
    25,808
    
    
    
    38,018
    
    
    
    (44,545
    )
    
    
    19,281Investment loss
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    (42
    )Other charges
    
    
    
    
    
    
    
    
    
    
    (2,223
    )
    
    
    (2,223
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (3,975
    )
    
    
    (3,975
    )Income (loss) before income taxes
    
    
    25,808
    
    
    
    38,018
    
    
    
    (50,785
    )
    
    
    13,041
 For The Six Months Ended June 30, 2003infoUSA
    
    Donnelley
    
    Corporate
    
    ConsolidatedGroup
    
    Group
    
    Activities
    
    Total(In thousands)Net sales
    
    $
    79,654
    
    
    $
    75,257
    
    
    $
    
    
    
    $
    154,911Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    (985
    )
    
    
    (985
    )Acquisition costs
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    (54
    )Operating income (loss)
    
    
    30,583
    
    
    
    37,356
    
    
    
    (38,482
    )
    
    
    29,457Investment income
    
    
    
    
    
    
    
    
    
    
    828
    
    
    
    828Other charges
    
    
    
    
    
    
    
    
    
    
    (4,145
    )
    
    
    (4,145
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (7,257
    )
    
    
    (7,257
    )Income (loss) before income taxes
    
    
    30,583
    
    
    
    37,356
    
    
    
    (49,056
    )
    
    
    18,883
 8




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4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss), including the components of other
comprehensive income (loss), are as follows: For The Three
    
    For The SixMonths Ended
    
    Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003(In thousands)
    
    (In thousands)Net income
    
    $
    3,712
    
    
    $
    4,725
    
    
    $
    8,085
    
    
    $
    11,580Other comprehensive income:Unrealized gain from
investments:Unrealized gains (losses)
    
    
    89
    
    
    
    168
    
    
    
    (190
    )
    
    
    192Related tax expense
    
    
    (34
    )
    
    
    (64
    )
    
    
    72
    
    
    
    (73
    )Net
    
    
    55
    
    
    
    104
    
    
    
    (118
    )
    
    
    119Total other comprehensive income
    
    
    55
    
    
    
    104
    
    
    
    (118
    )
    
    
    119Comprehensive income
    
    $
    3,767
    
    
    $
    4,829
    
    
    $
    7,967
    
    
    $
    11,699
 The components of accumulated other comprehensive income (loss) is as
follows: Foreign
    
    
    
    
    
    AccumulatedUnrealized
    
    Currency
    
    Unrealized
    
    OtherGains/(Losses)
    
    Translation
    
    Gains / (Losses)
    
    ComprehensivePension plan
    
    Adjustments
    
    On Securities
    
    Income (Loss)(in thousands)Balance at June 30, 2004
    
    $
    (866
    )
    
    $
    (672
    )
    
    $
    (298
    )
    
    $
    (1,836
    )Balance at December 31, 2003
    
    $
    (866
    )
    
    $
    (672
    )
    
    $
    (180
    )
    
    $
    (1,718
    )
 5. ACQUISITIONS On February 2, 2004, the Company acquired all the issued and outstanding
common stock of Triplex Direct Marketing Corp. (Triplex), a provider of data
processing services to nonprofit and catalog customers. The total purchase
price was $7.9 million including acquisition costs of $0.3 million, of which,
$6.1 million was payable in cash at closing and the remaining $1.5 million will
be payable on February 2, 2005 if Triplex satisfies all its representations,
warranties, covenants and agreements. The purchase price for the acquisition
has been preliminarily allocated to current assets of $2.4 million, property
and equipment of $0.7 million, current liabilities of $2.4 million, and
goodwill of $5.7 million. The acquisition has been accounted for under the
purchase method of accounting, and accordingly, the operating results of
Triplex have been included in the Companys financial statements since the date
of acquisition. On June 4, 2004, the Company acquired all the issued and outstanding
common stock of Edith Roman Associates, Inc., Database Direct, Inc. and E-Post
Direct, Inc. (collectively Edith Roman), a provider of list brokerage and
list management services, data processing services and email acquisition and
retention solutions. The total purchase price was $13.4 million including
acquisition costs of $0.2 million, of which, $6.6 million was payable in cash
at closing and the remaining $6.6 million represented as a note payable in the
accompanying consolidated balance sheet will be payable on June 4, 2005. The
transaction is subject to purchase price adjustment represented by an
adjustment for finalized working capital, net sales and other contingent items
specified within the purchase agreement. The purchase price for the
acquisition has been preliminarily allocated to current assets of $11.5
million, property and equipment of $0.5 million, current liabilities of $9.6
million, other liabilities of $0.5 million and goodwill of $11.5 million. The
acquisition has been accounted for under the purchase method of accounting, and
accordingly, the operating results of Edith Roman have been included in the
Companys financial statements since the date of acquisition. On June 9, 2004, the Company acquired all the issued and outstanding
common stock of OneSource Information Services, Inc. (OneSource). OneSource
provides primarily Web-based business and financial information products to
professionals who need quick access to timely and reliable company, industry,
and market intelligence. OneSources primary products, the OneSource® Business
BrowserSM products, are password-protected, subscription-based products that
provide sales, marketing, finance, and management professionals and consultants
with industry and company profiles, research reports, media accounts, executive
listings and biographies, and financial information on over 1.7 million public
and private companies. OneSource customers access this information over the
Internet using standard Web browsers. 9




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The total purchase price was $109.0 million, comprised of cash paid for
the outstanding common stock of OneSource of $104.6 million, a merger agreement
termination fee associated with the acquisition of $3.0 million and
acquisition-related costs of $1.4 million. Additionally, the Company paid $2.3
million for bank financing fees associated with the transaction recorded as
deferred financing costs. The purchase price for the acquisition has been
preliminarily allocated to current assets of $28.2 million, property and
equipment of $5.6 million, other assets of $1.5 million, current liabilities of
$20.8 million (including $13.7 million of deferred revenue), other liabilities
of $11.6 million and goodwill and other intangibles of $106.1 million.
Goodwill and other identified intangibles include: developed technology of $9.0
million (life of 5 years), Corptech database of $2.6 million (life of 3 years),
customer lists of $16.6 million (life of 6 years), tradenames and trademarks of
$4.4 million (life of 20 years) and goodwill of $73.5 million. The acquisition
has been accounted for under the purchase method of accounting, and
accordingly, the operating results of OneSource have been included in the
Companys financial statements since the date of acquisition. In connection with the preliminary purchase price allocation for
OneSource, the Company recorded deferred revenue of $13.7 million, which is
less than the carrying value recorded by OneSource at the time of the
acquisition. In accordance with EITF Issue 01-03 Accounting in a Purchase
Business Combination for Deferred Revenue of an Acquiree, the Company recorded
deferred revenue at the fair value of the assumed liability for fulfillment of
customer obligations plus a normal profit margin. Assuming Triplex, OneSource and Edith Roman had been acquired on January
1, 2003 and included in the accompanying consolidated statements of operations,
unaudited pro forma consolidated net sales, net income and net income per share
would have been as follows: For the three months ended
    
    For the six months endedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003(In thousands, except per share amounts)(unaudited)Net sales
    
    $
    95,938
    
    
    $
    96,009
    
    
    $
    195,423
    
    
    $
    189,363Net income
    
    $
    (771
    )
    
    $
    1,704
    
    
    $
    1,760
    
    
    $
    5,590Basic earnings per share
    
    $
    (0.01
    )
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.11Diluted earnings per share
    
    $
    (0.01
    )
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.11
 The pro forma information provided above does not purport to be indicative
of the results of operations that would actually have resulted if the
acquisitions were made as of those dates or of results that may occur in the
future. Pro forma net income includes adjustments for interest expense,
amortization of intangible assets, income taxes and valuation of deferred
revenue and deferred commission costs for OneSource. 6. CREDIT FACILITY On March 25, 2004, the Company financed a new Senior Secured Credit
Facility administered by Wells Fargo Bank, N.A. The new credit facility
provides for a $120.0 million Term A loan with a maturity date of March 2009
and a $50.0 million revolving line of credit with a maturity date of March
2007. On June 4, 2004, the Company negotiated an amended and restated Senior
Secured Credit Facility (the Credit Facility) administered by Wells Fargo
Bank, N.A. in conjunction with the acquisition of OneSource. The Credit
Facility provides for a new $80.0 million Term B loan with a maturity date of
June 2010. The Credit Facility provides for grid-based interest pricing based upon
the Companys consolidated total leverage ratio and ranges from base rate plus
1.00% to 1.75% for base rate loans and LIBOR plus 2.00% to 2.75% for use of the
revolving credit facility. The term loans interest rates range from base rate
plus 1.50% to 2.00% or LIBOR plus 2.50% to 3.00%. Substantially all of the
assets of the Company are pledged as security under the terms of the Credit
Facility. At June 30, 2004, the Term A loan had a balance of $115.0 million
bearing an interest rate of 3.64%, the Term B loan had a balance of $80.0
million bearing an interest rate of 4.01% and $29.6 million was available under
the revolving line of credit. The Company is subject to certain financial covenants in the Credit
Facility, including minimum consolidated fixed charge coverage ratio, maximum
consolidated total leverage ratio and minimum consolidated net worth.
Management believes the Company is in compliance with all restrictive covenants
in the Credit Facility. 10




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7. NON-CASH STOCK COMPENSATION EXPENSE At June 30, 2004, the Company has a nonqualified stock option plan. The
Company applies the intrinsic value-based method of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for its stock option plan. No stock-based
employee compensation cost is reflected in net income, as all options granted
under the plan had an exercise price equal to the market value of the
underlying common stock on the date of grant. The Companys pro forma net
income and earnings per share would have been as indicated below had the fair
value of all option grants been charged to salaries, wages, and benefits in
accordance with SFAS No. 123, Accounting for Stock-Based Compensation: Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003(in thousands, except
    
    (in thousands, exceptper share amounts)
    
    per share amounts)Net income, as reported
    
    $
    3,712
    
    
    $
    4,725
    
    
    $
    8,085
    
    
    $
    11,580Less: Total stock-based employee compensation
expense determined under fair value based
method, net of taxes
    
    
    620
    
    
    
    653
    
    
    
    1,285
    
    
    
    1,220Net income, pro forma
    
    $
    3,092
    
    
    $
    4,072
    
    
    $
    6,800
    
    
    $
    10,360Earnings per share:Basic  as reported
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.23Basic  pro forma
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.20Diluted  as reported
    
    $
    007
    
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.23Diluted  pro forma
    
    $
    0.06
    
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.20
 The above pro forma results are not likely to be representative of the
effects on reported net income for future years since options vest over several
years and additional awards generally are made each year. The fair value of the weighted average of option grants is estimated as of
the date of grant using the Black-Scholes option-pricing model with the
following assumptions used for grants in 2004: volatility of 73.95%, risk free
interest rate of 3.29% based on the U.S. Treasury strip yield at the date of
grant and expected lives of 5 years. Compensation cost for stock options and warrants granted to non-employees
and vendors is measured based upon the fair value of the stock option or
warrant granted. When the performance commitment of the non-employee or vendor
is not complete as of the grant date, the Company estimates the total
compensation cost using a fair value method at the end of each period.
Generally, the final measurement of compensation cost occurs when the
non-employee or vendors related performance commitment is complete. Changes,
either increases or decreases, in the estimated fair value of the options
between the date of the grant and the final vesting of the options result in a
change in the measure of compensation cost for the stock options or warrants.
Compensation cost is recognized as expense over the periods in which the
benefit is received. The Company previously granted non-qualified stock options to non-employee
consultants of the Company in connection with consulting agreements executed by
the Company. The options vest evenly over four years and have a five-year life.
The fair value of the options were estimated, as of the grant date, using the
Black-Scholes option pricing model and are updated at each balance sheet date.
As such, the Company has recorded a non-cash charge of $458 thousand, related
to stock options granted to the consultants during the three months ended June
30, 2004. The charges were recorded as an addition to paid-in-capital. One consulting agreement commits the Company to make cash payments of $675
thousand, $775 thousand and $200 thousand in 2003, 2004 and 2005 to the
consultant for services rendered. Expense of $175 thousand for this consulting
agreement was recorded during the three months ended June 30, 2004 and 2003,
respectively. 8. RESTRUCTURING CHARGES During the quarter ended June 30, 2004, the Company recorded restructuring
charges due to workforce reductions of $1.0 million. The charges included
involuntary employee separation costs (severance) for 191 employees in
administration, information technology, order production and sales. During
the six months ended June 30, 2004, the Company recorded restructuring charges
totaling $1.6 million for 287 employees. As of June 30, 2004, an accrual of
$1.8 million was included in the accompanying consolidated balance sheet for
severance costs remaining to be paid. During the three months ended June 30,
2004, the Company recorded $1.0 million of 11




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##### Table of Contents



severance liabilities in conjunction with the acquisition of OneSource and
Edith Roman in June 2004 that was included in the determination of purchase
price for each of these acquisitions. During the quarter ended June 30, 2003, the Company recorded restructuring
charges due to workforce reductions of $430 thousand. The charges included
involuntary employee separation costs for 59 employees in administration, sales
support and marketing functions. During the six months ended June 30, 2003,
the Company recorded restructuring charges totaling $1.0 million for 115
employees. The following table summarizes activity related to the restructuring
charges recorded by the Company during the six months ended June 30, 2004,
including the liability accrual balances: Amounts recordedDecember 31,
    
    Amounts
    
    as part of
    
    Amounts
    
    June 30,2003
    
    expensed
    
    acquisitions
    
    paid
    
    2004(In thousands)Restructuring
accrual
    
    $
    247
    
    
    
    1,622
    
    
    
    1,008
    
    
    
    1,041
    
    
    $
    1,836
 9. ACQUISITION COSTS The Company recorded costs of $239 thousand and $41 thousand during the
quarter ended March 31, 2004 and 2003, respectively, and costs of $242 thousand
and $54 thousand during the six months ended June 30, 2004 and 2003,
respectively, for general and administrative expenses incurred in connection
with the integration of acquired companies and for costs associated with
potential acquisition efforts. These costs are not direct costs of acquisition
and therefore cannot be capitalized as part of the purchase price. 10. OTHER CHARGES During the quarter ended March 31, 2004, the Company wrote-off deferred
financing costs of $0.1 million related to the prior credit facility as a
result of the financing on March 25, 2004 of the Credit Facility described in
Note 6. On April 26, 2004, the Company redeemed the remainder of its outstanding
91/2% Senior Subordinated Notes of $30.0 million at a premium of 4.75% to
face amount. The premium paid on the redemption was $1.5 million, representing
amounts paid in excess of the carrying value of the debt. As part of the
redemption, the Company recorded charges of $0.6 million for net unamortized
debt issue costs related to the Senior Subordinated Notes. During the six months ended June 30, 2003, the Company purchased $36.2
million of its 91/2% Senior Subordinated Notes of which $11.5 million were
from the Chief Executive Officer. All purchases of 91/2% Senior
Subordinated Notes occurred at the same price and under the same terms. As
part of these purchases, the Company recorded charges of $0.9 million for
related net unamortized debt issue costs and $1.7 million for amounts paid in
excess of the carrying value of the debt. During the six months ended June 30, 2003, the Company expensed $0.8
million for net unamortized debt issue costs and $0.7 million in bank fees
associated with the refinancing of the credit facility. 12




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11. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets consist of the following: June 30,
    
    December 31,2004
    
    2003(In thousands)Goodwill
    
    $
    352,472
    
    
    $
    261,398Less accumulated amortization
    
    
    59,012
    
    
    
    59,012$
    293,460
    
    
    $
    202,386Other intangible assets:Non-compete agreements
    
    
    13,534
    
    
    
    13,534Core technology
    
    
    13,753
    
    
    
    4,800Customer base
    
    
    24,899
    
    
    
    8,372Trade names
    
    
    20,241
    
    
    
    15,815Purchased data processing software
    
    
    73,478
    
    
    
    73,478Acquired database costs
    
    
    21,591
    
    
    
    19,000Perpetual software license agreement, net
    
    
    2,533
    
    
    
    2,933Software development costs, net
    
    
    2,122
    
    
    
    2,128Database development costs, net
    
    
    540
    
    
    
    149Deferred financing costs
    
    
    10,871
    
    
    
    8,216183,562
    
    
    
    148,425Less accumulated amortization
    
    
    110,637
    
    
    
    103,202$
    72,925
    
    
    $
    45,223
 12. CONTINGENCIES The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. Management believes
that any resulting liability should not materially affect the Companys
financial position, results of operations, or cash flows. 13




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##### Table of Contents



ITEM 2. infoUSA INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS This discussion and analysis contains forward-looking statements,
including without limitation statements in the discussion of comparative
results of operations, accounting standards and liquidity and capital
resources, within the meaning of Section 21E of the Securities Exchange Act
of 1934 and Section 27A of the Securities Act of 1933, which are subject to
the safe harbor created by those sections. The Companys actual future
results could differ materially from those projected in the forward-looking
statements. Some factors which could cause future actual results to differ
materially from the Companys recent results or those projected in the
forward-looking statements are described in Factors that May Affect
Operating Results below. The Company assumes no obligation to update the
forward-looking statements or such factors. GENERAL Overview Products and Services infoUSA is a leading provider of business and consumer information, data
processing, and database marketing services. The Companys key assets include
proprietary databases of 14 million businesses in the United States and Canada
and 200 million individuals and 110 million households in the United States.
We believe our proprietary content is the most comprehensive and accurate data
available. We leverage these key assets by selling through multiple
distribution channels to over 4 million customers that include small and
medium-sized businesses, Fortune 1000 companies, consumers, and Internet users. Sales Overview Our revenue has historically been derived predominantly through the sale
of customized sales lead generation products. We have successfully capitalized
on new markets and applications for our proprietary databases, as our Company
expanded product and service offerings. We began to recognize significant
revenue from data processing services in 1997, following the acquisition of
Database America and continued expanding our data processing revenue with the
acquisition of Donnelley Marketing in July of 1999. The acquisition of
Donnelley Marketing enhanced our proprietary consumer database and database
marketing services. The merger made us the only company in our industry to
offer proprietary business and consumer data, data processing, and database
marketing services and gave us the ability to offer complete solutions and
fulfill substantially all the database, data processing, and database marketing
needs of our Fortune 1000 customers. Walter Karl and JAMI Marketing were
acquired in 1998 providing the Companys direct entry into the complimentary
sales list brokerage and list management industries. The Company has
recognized strong Internet license revenue and Internet content sales since
1999 and believes there is significant opportunity to expand the market for our
products and services over the Internet. The Company acquired Polk City
Directories in 2001 and Hill-Donnelly and City Publishing in 2002, expanding
the Companys presence in the published directories markets, specifically the
criss-cross reference directory market. Finally, the Companys acquisitions of
ClickAction, Yesmail and Markado during 2002 and 2003 provided the entrance to
yet another complimentary sales market offering e-mail customer acquisition and
customer retention solutions. The Companys acquisitions of Triplex, Edith
Roman and OneSource during 2004 significantly increase the Companys customer
bases in data processing, list brokerage and management and Web-based business
and financial information solutions. We estimate that no customer represented
greater than approximately 5% of our net sales in 2003. During late 2003, the Company began to focus on migrating customer within
its infoUSA group, which principally serves small business customers, from
one-time sales leads products to subscription-based products. These products
include directory products, vertical databases, online sales leads, and custom
sales leads and products for sales people and small office / home office
markets. Conversions from one-time sales to this subscription format will
cause this group to experience short-term reductions in reported revenue due to
the deferred revenue recognition practices associated with the sale of these
types of products. Sales of subscription-based products require the Company to
recognize revenues over the subscription period instead of at the time of sale. 14




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##### Table of Contents



Financial Performance Operating income for the six months ended June 30, 2004 was $19.3 million,
or 12% of net sales, down from $29.5 million, or 19% of net sales, for the same
period in 2003, as the Company continued to make extensive investments in
increased sales staff, advertising and marketing to grow revenue internally.
Additionally, companies acquired during 2004 including Triplex, Edith Roman and
OneSource historically had higher operating cost structures at the time of
acquisition, expressed as a percentage of net sales, than the Companys
existing businesses. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization),
as adjusted, margins were down from 28% of net sales for the six months ended
June 30, 2003 to 21% of net sales for the same period in 2004 due to the same
reasons described above for the decrease in operating income. Company
management utilizes the non-GAAP financial disclosure of EBITDA, as adjusted,
as a key financial measure in the analysis of its financial performance, as it
does with similar GAAP financial measures including operating income and cash
flows from operations. The Companys Facility provides for financial covenants
that are based on EBITDA, as adjusted. Additionally, the Company has
historically had a significant amount of recorded goodwill and purchased
intangibles resulting from the acquisition of other companies, and the amount
of non-cash amortization expense associated with these acquisitions has varied
significantly between reporting periods. The Companys calculation of EBITDA is
defined by footnote in the accompanying financial data table. Mergers and Acquisitions The Company has historically supplemented its internal growth through
strategic acquisitions. The Company has completed over 20 acquisitions since
1996. The Company has increased its presence in the consumer marketing
information industry, greatly increased its ability to provide data processing
solutions, increased its presence in list management and list brokerage
services and broadened its offerings for e-mail and business marketing
information. During 2002 and 2003, the Company enhanced its presence in e-mail
marketing services and solutions with the acquisition of DoubleClicks email
deployment business, ClickAction, Yesmail and Markado. The Company also
continued to consolidate the printed and online directory industry with its
acquisition of Polk City Directories in 2001 and the Hill-Donnelly and City
Publishing directory companies during 2002. As described in the notes to the
accompanying financial statements, the Company acquired Triplex during February
2004 expanding its data processing solutions in the non-profit and catalog
markets, Edith Roman during June 2004 increasing its customer base related to
list brokerage, list management and email acquisition and retention solutions,
and finally, OneSource in June 2004 adding Web-based business and financial
information products for professionals who need quick access to timely and
reliable company, industry, and market intelligence. The Company has systematically integrated the operations of the acquired
companies into existing operations of the Company. In most cases, the results
of operations for these acquired activities are no longer separately accounted
for from existing activities. The Company cannot report the results of the
operations of acquired companies upon completion of the integration as the
results are commingled with existing results. Additionally, upon integration
of the acquired operations, the Company frequently combines acquired products
or features with existing products, and experiences significant cross selling
of products between business units, including sales of acquired products by
existing business units and sales by acquired business units of existing
products. Due to recent and potential future acquisitions, future results of
operations will not be comparable to historical data. 15




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##### Table of Contents



RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected
financial information and other data. The amounts and related percentages may
not be fully comparable due to acquisitions. THREE MONTHS
    
    THREE MONTHS
    
    SIX MONTHS
    
    SIX MONTHSENDED
    
    ENDED
    
    ENDED
    
    ENDEDJune 30, 2004
    
    June 30, 2003
    
    June 30, 2004
    
    June 30, 2003CONSOLIDATED STATEMENT OF OPERATIONS
DATA:Net sales
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Costs and expenses:Database and production costs
    
    
    30
    
    
    
    28
    
    
    
    30
    
    
    
    28Selling, general and administrative
    
    
    48
    
    
    
    43
    
    
    
    49
    
    
    
    43Depreciation
    
    
    4
    
    
    
    5
    
    
    
    4
    
    
    
    5Amortization
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4Non-cash stock compensation expense
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Restructuring charges
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Acquisition costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    88
    
    
    
    81
    
    
    
    88
    
    
    
    81Operating income
    
    
    12
    
    
    
    19
    
    
    
    12
    
    
    
    19Other expense, net
    
    
    (5
    )
    
    
    (9
    )
    
    
    (4
    )
    
    
    (7
    )Income before income taxes
    
    
    7
    
    
    
    10
    
    
    
    8
    
    
    
    12Income taxes
    
    
    3
    
    
    
    4
    
    
    
    3
    
    
    
    5Net income
    
    
    4
    %
    
    
    6
    %
    
    
    5
    %
    
    
    7
    %OTHER DATA:(in thousands)
    
    (in thousands)SALES BY SEGMENT:infoUSA Group
    
    $
    38,273
    
    
    $
    40,088
    
    
    $
    78,290
    
    
    $
    79,654Donnelley Group
    
    
    45,521
    
    
    
    38,743
    
    
    
    86,315
    
    
    
    75,257Total
    
    $
    83,794
    
    
    $
    78,831
    
    
    $
    164,605
    
    
    $
    154,911SALES BY SEGMENT AS A PERCENTAGE OF NET SALES:infoUSA Group
    
    
    46
    %
    
    
    51
    %
    
    
    48
    %
    
    
    52
    %Donnelley Group
    
    
    54
    
    
    
    49
    
    
    
    52
    
    
    
    48Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %(in thousands)
    
    (in thousands)Amortization expense of intangible assets (1)
    
    $
    3,616
    
    
    $
    3,326
    
    
    $
    7,062
    
    
    $
    6,650Earnings before, interest, taxes, depreciation and
amortization, (EBITDA), as adjusted (2)
    
    $
    17,704
    
    
    $
    22,256
    
    
    $
    33,857
    
    
    $
    43,734EBITDA, as adjusted, as a percentage of net sales
    
    
    21
    %
    
    
    28
    %
    
    
    21
    %
    
    
    28
    %(in thousands)Cash Flow Data:Net cash from operating activities
    
    
    
    
    
    
    
    
    
    $
    26,216
    
    
    $
    27,369Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    $
    (114,104
    )
    
    $
    (7,449
    )Net cash from (used) in financing activities
    
    
    
    
    
    
    
    
    
    $
    94,578
    
    
    $
    (22,234
    )
 (1) This represents amortization expense recorded by the Company on amortizable
intangible assets recorded as part of the acquisition of other companies, and
excludes amortization related to deferred financing costs, software development
costs and other intangible assets not recorded as part of an acquisition of
another company. (2) EBITDA, as adjusted, is defined as net income adjusted to exclude
depreciation and amortization, non-operating other charges, income taxes,
interest expense, investment income and non-cash stock compensation expenses.
EBITDA is presented because it is a widely accepted measure of performance that
eliminates the effects of a variety of methods used for deprecation and
amortization that have changed over time. However, EBITDA, does not purport to
represent cash provided by operating activities as reflected in the Companys
consolidated statements of cash flows, is not a measure of financial
performance under generally accepted accounting principles (GAAP) and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. Also, the measure of EBITDA, may not be
comparable to similar measures reported by other companies. 16




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The following provides a reconciliation of net income to EBITDA, as
adjusted: Three months ended
    
    Six months endedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    3,712
    
    
    $
    4,725
    
    
    $
    8,085
    
    
    $
    11,580Other charges
    
    
    2,079
    
    
    
    3,810
    
    
    
    2,223
    
    
    
    4,145Investment income
    
    
    243
    
    
    
    (146
    )
    
    
    42
    
    
    
    (828
    )Interest expense
    
    
    1,761
    
    
    
    3,596
    
    
    
    3,975
    
    
    
    7,257Income taxes
    
    
    2,275
    
    
    
    3,169
    
    
    
    4,956
    
    
    
    7,303Depreciation
    
    
    3,560
    
    
    
    3,707
    
    
    
    6,874
    
    
    
    7,558Amortization
    
    
    3,616
    
    
    
    3,326
    
    
    
    7,062
    
    
    
    6,650Non-cash stock compensation
    
    
    458
    
    
    
    69
    
    
    
    640
    
    
    
    69EBITDA, as adjusted
    
    $
    17,704
    
    
    $
    22,256
    
    
    $
    33,857
    
    
    $
    43,734
 Net sales Net sales for the quarter ended June 30, 2004 were $83.8 million, an
increase of 6% from $78.8 million for the same period in 2003. Net sales for
the six months ended June 30, 2004 were $164.6 million, an increase of 6% from
$154.9 million for the same period in 2003. Net sales of the infoUSA Group segment for the quarter ended June 30, 2004
were $38.3 million, a 5% decrease from $40.1 million for the same period in
2003. Net sales of the infoUSA Group segment for the six months ended June 30,
2004 were $78.3 million, a 2% decrease from $79.7 million for the same period
in 2003. The decrease in net sales is principally due to a decline in net
sales for the Polk City Directories division. The infoUSA Group segment
principally engages in the selling of sales lead generation and consumer DVD
products to small to medium sized companies, small office and home office
businesses and individual consumers. This segment also includes the sale of
content via the Internet. Net sales of the Donnelley Group segment for the quarter ended June 30,
2004 were $45.5 million, a 17% increase from $38.7 million for the same period
in 2003. Net sales of the Donnelley Group segment for the six months ended
June 30, 2004 were $86.3 million, a 15% increase from $75.3 million for the
same period in 2003. The increase was principally due to the acquisition of
Triplex in February 2004 and Edith Roman and OneSource in June 2004. The
Donnelley Group segment principally engages in the selling of data processing
services, Web-based business and financial information products and services,
licensed databases, database marketing solutions, e-mail marketing solutions
and list brokerage and list management services to large companies. This
segment includes the licensing of databases for Internet directory assistance
services. Database and production costs Database and production costs for the quarter ended June 30, 2004 were
$24.8 million, or 30% of net sales, compared to $22.2 million, or 28% of net
sales for the same period in 2003. Database and production costs for the six
months ended June 30, 2004 were $48.7 million, or 30% of net sales, compared to
$43.1 million, or 28% of net sales for the same period in 2003. The increase
in database and production costs principally relates to the acquisition of
Triplex in February 2004 and OneSource in June 2004. These acquired companies
historically had higher database and production costs structures, expressed as
a percentage of net sales, than the Companys existing businesses. Selling, general and administrative expenses Selling, general and administrative expenses for the quarter ended June
30, 2004 were $40.0 million, or 48% of net sales, compared to $33.9 million, or
43% of net sales for the same period in 2003. Selling, general and
administrative expenses for the six months ended June 30, 2004 were $80.2
million, or 49% of net sales, compared to $67.0 million, or 43% of net sales
for the same period in 2003. The increase in selling, general and
administrative expenses principally relates to the Companys planned increase
in direct marketing costs and the addition of approximately 200 sales staff
beginning during the second half of 2003. Additionally, the increase is due to
the acquisition of companies during the first six months of 2004 including
Triplex, Edith Roman and OneSource. These acquired companies historically had
higher selling, general and administrative cost structures, expressed as a
percentage of net sales, than the Companys existing businesses. 17




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Depreciation expense Depreciation expense for the quarter ended June 30, 2004 was $3.6 million,
or 4% of net sales, compared to $3.7 million, or 5% of net sales for the same
period in 2003. Depreciation expense for the six months ended June 30, 2004
was $6.9 million, or 4% of net sales, compared to $7.6 million, or 5% of net
sales for the same period in 2003. Amortization expense Amortization expense for the quarter ended June 30, 2004 was $3.6 million,
or 4% of net sales, compared to $3.3 million, or 4% of net sales for the same
period in 2003. Amortization expense for the six months ended June 30, 2004
was $7.1 million, or 4% of net sales, compared to $6.7 million, or 4% of net
sales, for the same period in 2003. Amortization expense is expected to
increase as a percentage of net sales as identified intangible assets recorded
as part of the acquisition of OneSource totaling $32.6 million will be
amortized. The Company adopted SFAS No. 142, Goodwill and Other Intangible
Assets, as of January 1, 2002. SFAS No. 142 requires the Company to complete an
annual impairment test on goodwill and other intangible assets with an
indefinite life rather than record amortization expense on those assets. The
Company last completed impairment tests as of October 31, 2003, as required by
SFAS 142, and established that no impairment exists. Non-cash stock compensation expense During the quarter ended June 30, 2004, the Company recorded non-cash
charges of $458 thousand, compared to $69 thousand for the same period in 2003.
During the six months ended June 30, 2004, the Company recorded non-cash
charges of $640 thousand, compared to $69 thousand for the same period in 2003.
These charges represent non-cash stock compensation expense related to
non-employee consulting agreements. The Company will incur additional non-cash
compensation expense for these consultants options during the vesting period
of those options. The amount of compensation expense will be affected by
changes in the fair value of the Companys common stock and interest rates. Restructuring costs The Company recorded restructuring charges (severance) during the quarters
ended June 30, 2004 and 2003 of $1.0 million and $0.4 million, respectively,
related to workforce reductions as a part of the Companys continuing strategy
to reduce unnecessary costs and focus on core operations. Restructuring
charges recorded during the six months ended June 30, 2004 and 2003 were $1.6
million and $1.0 million, respectively. The workforce reduction charges
included involuntary employee separation costs during 2004 and 2003 for
approximately 287 and 115 employees, respectively. Acquisition costs The Company recorded integration-related costs during the quarters ended
June 30, 2004 and 2003 of $239 thousand and $41 thousand, respectively.
Acquisition costs recorded during the six months ended June 30, 2004 and 2003
were $242 thousand and $54 thousand, respectively. Acquisition costs include
costs related to unsuccessful acquisition efforts and integration-related costs
including general and administrative costs, information system conversion costs
and other direct integration-related charges. These costs were not directly
related to the recent acquisitions of various companies, and therefore could
not be capitalized. Operating income Including the factors previously described, the Company had operating
income of $10.0 million, or 12% of net sales during the quarter ended June 30,
2004, compared to operating income of $15.2 million, or 19% of net sales for
the same period in 2003. The Company had operating income of $19.3 million, or
12% of net sales during the six months ended June 30, 2004, compared to
operating income of $29.5 million, or 19% for the same period in 2003. The
decrease in operating income as a percentage of net sales is a result of the
following items: 1) the Companys planned increase in direct marketing costs
and the addition of sales staff, beginning during the second half of 2003, 2) a
decline in net sales for Polk City Directories, and 3) increased operating
expenses represented as percentage of net sales associated with companies
acquired in 2004 including Triplex, Edith Roman and OneSource. Operating income for the infoUSA Group segment for the quarter ended June
30, 2004 was $13.3 million, or 35% of net sales, as compared to $15.4 million,
or 42% of net sales for the same period in 2003. Operating income for the
infoUSA Group segment for the six months ended June 30, 2004 was $25.8 million,
or 33% of net sales, as compared to $30.6 million, or 38% of net sales for the
same period in 2003. The decrease in operating income as a percentage of nets
sales is principally due to items 1) and 2) described in 18




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the preceding paragraph. Operating income for the Donnelley Group segment for the quarter ended
June 30, 2004 was $19.0 million, or 42% of net sales, as compared to $19.2
million, or 50% of net sales for the same period in 2003. Operating income for
the Donnelley Group segment for the six months ended June 30, 2004 was $38.0
million, or 44% of net sales, as compared to $37.4 million, or 50% of net sales
for the same period in 2003. The decrease in operating income as a percentage
net sales is principally due to increased operating expenses represented as
percentage of net sales associated with companies acquired during 2004
including Triplex, Edith Roman and OneSource. Other income (expense), net Other expense, net was $(4.1) million, or 5% of net sales, and $(7.3)
million, or 9% of net sales, for the quarters ended June 30, 2004 and 2003,
respectively. Other expense, net was $(6.2) million, or 4% of net sales, and
$(10.6) million, or 7% of net sales, for the six months ended June 30, 2004 and
2003, respectively. Other income or (expense), net is comprised of interest
expense, investment income and other income or expense items, which do not
represent components of operating income and operating expense of the Company. Interest expense was $1.8 million and $3.6 million for the quarters ended
June 30, 2004 and 2003, respectively. Interest expense was $4.0 million and
$7.3 million for the six months ended June 30, 2004 and 2003, respectively.
The decrease is principally due to lower interest rates on the Companys former
credit facility refinanced in May 2003, the reduction in the amount of 9 1/2 %
Senior Subordinated Notes outstanding and favorable interest rates. Investment
income (loss) was $(243) thousand and $146 thousand, for the quarters ended
June 30, 2004 and 2003, respectively and $(42) thousand and $828 thousand for
the six months ended June 30, 2004 and 2003, respectively. During the quarter ended March 31, 2004, the Company wrote-off deferred
financing costs of $0.1 million related to the prior credit facility as a
result of the financing on March 25, 2004 of the Credit Facility described in
Note 6. On April 26, 2004, the Company redeemed the remainder of its outstanding
91/2% Senior Subordinated Notes of $30.0 million at a premium of 4.75% to
face amount. The premium paid on the redemption was $1.5 million, representing
amounts paid in excess of the carrying value of the debt. As part of the
redemption, the Company recorded charges of $0.6 million for net unamortized
debt issue costs related to the Senior Subordinated Notes. During the six months ended June 30, 2003, the Company purchased $36.2
million of its 91/2% Senior Subordinated Notes of which $11.5 million were
from the Chief Executive Officer. All purchases of 91/2% Senior Subordinated
Notes occurred at the same price and under the same terms. As part of these
purchases, the Company recorded charges of $0.9 million for related net
unamortized debt issue costs and $1.7 million for amounts paid in excess of the
carrying value of the debt. During the six months ended June 30, 2003, the Company expensed $0.8
million for net unamortized debt issue costs and $0.7 million in bank fees
associated with the refinancing of the credit facility. Income taxes A provision for income taxes of $2.3 million and $3.2 million was recorded
during the quarters ended June 30, 2004 and 2003, respectively and $5.0 million
and $7.3 million for the six months ended June 30, 2004 and 2003, reflecting an
effective income tax rate of approximately 38%. EBITDA, as adjusted The Companys EBITDA, as adjusted, was $17.7 million, or 21% of net sales
during the quarter ended June 30, 2004, compared to $22.3 million, or 28% of
net sales for the same period in 2003. The Companys EBITDA, as adjusted, was
$33.9 million, or 21% of net sales during the six months ended June 30, 2004,
compared to $43.7 million, or 28% of net sales for the same period in 2003.
The decrease in EBITDA, as adjusted, represented as a percentage of net sales
principally relates to the Companys planned increase in direct marketing costs
and the addition of approximately 200 sales staff during the latter half of
2003. 19




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Liquidity and Capital Resources Overview Our principal sources of liquidity are cash flow provided by our operating
activities, our revolving credit facilities, and cash and cash equivalents on
hand. Our ability to generate cash from our operations is one of our
fundamental financial strengths. We use cash flows from operations, along with
borrowings, to fund capital expenditures, pursue growth initiatives, make
acquisitions and retire outstanding indebtedness. General Information- Debt Instruments, Financial Covenants and Sources and
Uses of Cash On March 25, 2004, the Company financed a new Senior Secured Credit
Facility administered by Wells Fargo Bank, N.A. The new credit facility
provides for a $120.0 million Term A loan with a maturity date of March 2009
and a $50.0 million revolving line of credit with a maturity date of March
2007. On June 4, 2004, the Company negotiated an amended and restated Senior
Secured Credit Facility (the Credit Facility) administered by Wells Fargo
Bank, N.A. in conjunction with the acquisition of OneSource. The Credit
Facility provides for a new $80.0 million Term B loan with a maturity date of
June 2010. The Credit Facility provides for grid-based interest pricing based upon
the Companys consolidated total leverage ratio and ranges from base rate plus
1.00% to 1.75% for base rate loans and LIBOR plus 2.00% to 2.75% for use of the
revolving credit facility. The term loans interest rates range from base rate
plus 1.50% to 2.00% or LIBOR plus 2.50% to 3.00%. Substantially all of the
assets of the Company are pledged as security under the terms of the Credit
Facility. At June 30, 2004, the Term A loan had a balance of $115.0 million
bearing an interest rate of 3.64%, the Term B loan had a balance of $80.0
million bearing an interest rate of 4.01% and $29.6 million was available under
the revolving credit facility. The Company is subject to certain financial covenants in the Credit
Facility, including minimum consolidated fixed charge coverage ratio, maximum
consolidated total leverage ratio and minimum consolidated net worth.
Management believes the Company is in compliance with all restrictive covenants
of the Credit Facility. The Company believes that its existing sources of liquidity and cash
generated from operations will satisfy the Companys projected working capital,
debt repayments and other cash requirements for at least the next 12 months.
Acquisitions of other technologies, products or companies, or internal product
development efforts may require the Company to obtain additional equity or debt
financing, which may not be available or may be dilutive. Selected Consolidated Statements of Cash Flows Information As of June 30, 2004, the Companys principal sources of liquidity included
$29.6 million available under the Senior Secured Credit Facility. As of June
30, 2004, the Company had a working capital deficit of $29.7 million. Net cash provided by operating activities during the six months ended June
30, 2004 totaled $26.2 million compared to $27.4 million for the same period in
2003. During the six months ended June 30, 2004, the Company spent $2.5 million
for additions of property and equipment and $1.0 million related to software
and database development costs, compared to $2.6 million and $0.2 million,
respectively during the same period in 2003. During the six months ended June 30, 2004, the Company spent a total of
$109.4 million for acquisitions of businesses, net of cash acquired of $19.3
million. The Company paid $6.2 million for Triplex (net of cash acquired of
$0.2 million) including capitalized acquisition costs of $0.3 million. The
Company paid $12.2 million for Edith Roman (net of cash acquired of $1.2
million) including capitalized acquisition costs of $0.2 million. The Company
paid $91.1 million for OneSource (net of cash acquired of $17.9 million)
including capitalized acquisition costs of $1.4 million. During the six months ended June 30, 2004, the Company borrowed a total of
$272.8 million in debt while making repayments on 20




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debt totaling $179.6 million during the same period. These amounts
reflect activity for the financing of the acquisitions of Triplex, Edith Roman
and OneSource during 2004, the refinancing of the Companys Senior Secured
Credit Facility in March 2004 and the redemption of the Companys 91/2%
Senior Subordinated Notes in April 2004. Selected Consolidated Balance Sheet Information Trade accounts receivable increased to $50.8 million at June 30, 2004 from
$40.9 million at December 31, 2003. The increase is principally due to the
acquisition of OneSource in June 2004. The days sales outstanding (DSO)
ratio, excluding OneSource, for the six months ended June 30, 2004 was 45 days
compared to 45 days for the same period in 2003. List brokerage trade accounts receivable increased to $21.2 million at
June 30, 2004 from $12.8 million at December 31, 2003. The increase is due to
the acquisition of Edith Roman in June 2004, which provides list brokerage
sales operations. Deferred marketing costs decreased to $3.0 million at June 30, 2004 from
$5.5 million at December 31, 2003. The decrease is the direct result of the
Companys decreased spending during the six months ended June 30, 2004 from the
level of spending incurred during the latter half of 2003 on direct marketing
costs that are subject to deferral and amortization. List brokerage trade accounts payable increased to $15.6 million at June
30, 2004 from $9.5 million at December 31, 2003. The increase is due to the
acquisition of Edith Roman in June 2004, which provides list brokerage sales
operations. Deferred revenue increased to $42.1 million at June 30, 2004 from $19.8
million at December 31, 2003. The increase is principally due to the
acquisition of OneSource in June 2004. Long-term debt, net of current portion increased to $211.4 million at June
30, 2004 from $122.5 million at December 31, 2003. The net increase is due to
the financed acquisitions of Triplex, Edith Roman and OneSource during 2004. Selected other balance sheet accounts including prepaid expenses, accounts
payable, accrued expenses and accrued payroll expenses increased (decreased)
moderately from their respective account balances at June 30, 2004 from their
respective account balances at December 31, 2003. The increase (decrease) in
these account balances is due to the acquisition of certain companies during
2004 and payment timing differences related to various general operating
expenses. Other than facility leasing arrangements, the Company does not engage in
off-balance sheet financing activities. Accounting Standards In January 2003, the FASB issued FASB Interpretation No. 46 (Revised),
Consolidation of Variable Interest Entities.FIN
No. 46 (Revised) addresses
consolidation by business enterprises of certain variable interest entities.
The effective date for this Interpretation for the Company, as amended, was
March 31, 2004. The adoption of this Interpretation did not have an impact on
the financial statements of the Company. The Financial Accounting Standards Board (FASB) issued an exposure draft
on March 31, 2004 addressing accounting for share-based payments. The objective
of this proposed statement is to make one accounting standard available for
share-based payments that would require a company to recognize in its financial
statements the cost of employee services received in exchange for valuable
equity instruments issued, and liabilities incurred, to employees in
share-based payment transactions (e.g., stock options). For public entities,
the proposed statement would be applied prospectively for awards that are
granted, modified, or settled in fiscal years beginning after December 15,
2004. Additionally, public entities would apply the provisions of the proposed
statement in recognizing compensation cost for any portion of awards granted or
modified after December 15, 1994, that is not yet vested at the date the
standard is adopted. If the final statement is issued as proposed, management
anticipates that adopting the new statement will not have a material impact
upon the Companys operating results for financial condition. Inflation We do not believe that the rate of inflation has had a material effect on
our operating results. However, inflation could adversely affect our future
operating results if it were to result in a substantial weakening economic
condition. 21




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##### Table of Contents



Factors That May Affect Operating Results Our Internet strategy is subject to review and revision. Our Internet strategy is to leverage our proprietary content into multiple
vertical market applications and provide marketing solutions for electronic
commerce applications. The strategy of developing more efficient and profitable
applications of our content through the Internet is evolving. We cannot
guarantee that our customers will choose to have our products and services
delivered to them over the Internet. If we are successful in developing
Internet applications, we may face strong competition from current and
potential competitors, including other Internet companies and other providers
of business and consumer databases. We will review our Internet strategy from
time to time and may continue to revise it. Our markets are highly competitive and many of our competitors have
greater resources than we do. The business and consumer marketing information industry in which we
operate is highly competitive. Intense competition could harm us by causing,
among other things, price reductions, reduced gross margins, and loss of market
share. Our competition includes:  In consumer sales lead generation products, Acxiom, Experian (a
subsidiary of Great Universal Stores, P.L.C. (GUS)), and Equifax, both
directly and through reseller networks.  In data processing services, Acxiom, Experian, Direct Marketing
Technologies (a subsidiary of GUS) and Harte-Hanks Communications, Inc.  In business sales lead generation products, Experian and Duns Marketing
Services (DMS), a division of Dun & Bradstreet. DMS, which relies upon
information compiled from Dun & Bradstreets credit database, tends to focus on
marketing to large companies.  In business directory publishing, we compete with Regional Bell
Operating Companies and many smaller, regional directory publishers.  In consumer products, certain smaller producers of CD-Rom products.  Technologies which companies may install and implement in-house as part
of their internal information systems functions, instead of purchasing or
outsourcing such functions. In addition, we may face competition from new entrants to the business and
consumer marketing information industry as a result of the rapid expansion of
the Internet, which creates a substantial new channel for distributing business
information to the market. Many of our competitors have longer operating
histories, better name recognition and greater financial resources than we do,
which may enable them to implement their business strategies more readily than
we can. We are leveraged. If we are unable to service our debt as it becomes due,
our business would be harmed. As of June 30, 2004, we had total indebtedness of $236.1 million.
Substantially all of our assets are pledged as security under the terms of the
Credit Facility. Our ability to pay principal and interest on the indebtedness under the
Credit Facility and our ability to satisfy our other debt obligations will
depend upon our future operating performance. Our performance will be affected
by prevailing economic conditions and financial, business and other factors.
Certain of these factors are beyond our control. The future availability of
revolving credit under the Credit Facility will depend on, among other things,
our ability to meet certain specified financial ratios and maintenance tests.
We expect that our operating cash flow should be sufficient to meet our
operating expenses, to make necessary capital expenditures and to service our
debt requirements as they become due. If we are unable to service our
indebtedness, however, we will be forced to take actions such as reducing or
delaying acquisitions and/or capital expenditures, selling assets,
restructuring or refinancing our indebtedness (including the Credit Facility)
or seeking additional equity capital. We may not be able to implement any such
measures or obtain additional financing or terms that are favorable or
satisfactory to us, if at all. 22




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The terms of our current indebtedness may restrict our ability to take
certain actions that fit our business strategy. Our existing Credit Facility contain certain covenants that restricts our
ability to:  Incur additional indebtedness;  Pay dividends and make certain other similar payments;  Guarantee indebtedness of others;  Enter into certain transactions with affiliates;  Consummate certain asset sales, certain mergers and consolidations,
sales or other dispositions of all or substantially all of our assets  Acquire other companies; and  Obtain dividends or certain other payments from our subsidiaries. These restrictions may impair our ability to take certain actions that fit
our business strategy. A breach of any of these covenants could result in an
event of default under the terms of our existing Credit Facility. Upon the
occurrence of an event of default, the lenders could elect to declare all
amounts outstanding, together with accrued interest, to be immediately due and
payable. If the payment of any such indebtedness is accelerated, our assets may
not be sufficient to repay in full the indebtedness under our credit facilities
and our other indebtedness. Moreover, if we were unable to repay amounts owed
to the lenders under our Credit Facility, the lenders could foreclose on our
assets that secure the indebtedness. Fluctuations in our operating results may result in decreases in the
market price of our common stock. Our operating results may fluctuate on a quarterly and annual basis. Our
expense levels are relatively fixed and are based, in part, on our expectations
as to future revenues. As a result, unexpected changes in revenue levels may
have a disproportionate effect on operating performance in any given period. In
some period or periods our operating results may be below the expectations of
public market analysts and investors. Our failure to meet analyst or investor
expectations could result in a decrease in the market price of our common
stock. If we do not adapt our products and services to respond to changes in
technology, they could become obsolete. We provide marketing information and services to our customers in a
variety of formats, including printed formats, electronic formats such as
CD-Rom and DVD, and over the Internet. Advances in information technology may
result in changing customer preferences for products and product delivery
formats. If we do not successfully adapt our products and services to take
advantage of changes in technology and customer preferences, our business,
financial condition and results of operations would be adversely affected. We have adopted an Internet strategy because we believe that the Internet
represents an important and rapidly evolving market for marketing information
products and services. Our business, financial condition and results of
operations would be adversely affected if we:  
    
    Fail to develop products and services that are well suited to the
Internet market;
    
    Experience difficulties that delay or prevent the successful
development, introduction and marketing of these products and services;
or
    
    Fail to achieve sufficient traffic to our Internet sites to generate
significant revenues, or to successfully implement electronic commerce
operations. 23




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Our ability to increase our revenues will depend to some extent upon
introducing new products and services, and if the marketplace does not accept
these new products and services, our revenues may decline. To increase our revenues, we must enhance and improve existing products
and continue to introduce new products and new versions of existing products
that keep pace with technological developments, satisfy increasingly
sophisticated customer requirements, and achieve market acceptance. We believe
much of our future growth prospects will rest on our ability to continue to
expand into newer products and services. Products and services that we plan to
market in the future are in various stages of development. We cannot assure you
that the marketplace will accept these products. If our current or potential
customers are not willing to switch to or adopt our new products and services,
our ability to increase revenues will be impaired. Changes in laws and regulations relating to data privacy could adversely
affect our business. We engage in direct marketing, as do many of our customers. Certain data
and services provided by us are subject to regulation by federal, state and
local authorities in the United States as well as those in Canada and the
United Kingdom. For instance, some of the data and services that we provide are
subject to regulation under the Fair Credit Reporting Act, which regulates the
use of consumer credit information, and to a lesser extent, the
Gramm-Leach-Bliley Act, which regulates the use of non-public personal
information. We are also subject to the United Kingdoms Data Protection Act
of 1998, which became fully effective on October 24, 2001 and regulates the
manner in which we can use third-party data, and recent regulatory limitations
relating to use of the Electoral Roll, one of our key data sources in the
United Kingdom. In addition, growing concerns about individual privacy and the
collection, distribution and use of information about individuals have led to
self-regulation of such practices by the direct marketing industry through
guidelines suggested by the Direct Marketing Association and to increased
federal and state regulation. There is increasing awareness and concern among
the general public regarding marketing and privacy concerns, particularly as it
relates to the Internet. This concern is likely to result in new laws and
regulations. Compliance with existing federal, state and local laws and
regulations and industry self-regulation has not to date seriously affected our
business, financial condition or results of operations. Nonetheless, federal,
state and local laws and regulations designed to protect the public from the
misuse of personal information in the marketplace and adverse publicity or
potential litigation concerning the collection, management or commercial use of
such information may increasingly affect our operations. This could result in
substantial regulatory compliance or litigation expense or a loss of revenue. Our business would be harmed if we do not successfully integrate future
acquisitions. Our business strategy includes continued growth through acquisitions of
complementary products, technologies or businesses. We have made over 20
acquisitions since 1996 and completed the integration of these acquisitions
into our existing business by the end of 2003, with the exception of those
companies recently acquired during 2004. We continue to evaluate strategic
opportunities available to us and intend to pursue opportunities that we
believe fit our business strategy. Acquisitions of companies, products or
technologies may result in the diversion of managements time and attention
from day-to-day operations of our business and may entail numerous other risks,
including difficulties in assimilating and integrating acquired operations,
databases, products, corporate cultures and personnel, potential loss of key
employees of acquired businesses, difficulties in applying our internal
controls to acquired businesses, and particular problems, liabilities or
contingencies related to the businesses being acquired. To the extent our
efforts to integrate future acquisitions fail, our business, financial
condition and results of operations would be adversely affected. 24




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##### Table of Contents



ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to material future earnings or cash flow exposures
from changes in interest rates as nearly all of the Companys debt is not at
fixed rates. At June 30, 2004, the fair value of the Companys long-term debt
is based on quoted market prices at the reporting date or is estimated by
discounting the future cash flows of each instrument at rates currently offered
to the Company for similar debt instruments of comparable maturities. At June
30, 2004, the Company had long-term debt with a carrying value of $236.1
million and estimated fair value of the same. The Company has no significant
operations subject to risks of foreign currency fluctuations. 
 ITEM 4.
CONTROLS AND PROCEDURES As of June 30, 2004, the Company carried out an evaluation, under the
supervision and with the participation of the Companys management, including
the Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls
and procedures, as defined in Exchange Act Rule 15d-15(e) and Rule 13a-15(e).
Based upon that evaluation, the Companys Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures were effective as of June 30, 2004 in enabling the Company to
record, process, summarize and report information required to be included in
the Companys periodic SEC filings within the required time period. There have
been no changes in internal controls over financial reporting that has
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting, subsequent to the date the
Chief Executive Officer and Chief Financial Officer completed their evaluation. 25




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##### Table of Contents



infoUSA INC.
FORM 10-Q FOR THE QUARTER ENDED June 30, 2004 
 PART II OTHER INFORMATION 
 ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.32.1*
    
    
    
    Certification of Chief Executive Officer pursuant to
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.32.2*
    
    
    
    Certification of Chief Financial Officer pursuant to
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
 * Filed herewith (b) Reports on Form 8-K The Company filed a Form 8-K under Item 7 and 9 on April 14, 2004
announcing its first quarter 2004 financial results; a Form 8-K under Item 7
and 9 on April 16, 2004 announcing supplemental first quarter 2004 operating
results; a Form 8-K under Item 7 and 11 on April 19, 2004 announcing the end of
a blackout on trading of the Companys common stock related to the change in
plan administrators of the Companys 401 (k) Plan; a Form 8-K under Item 5 and
7 announcing the proposed acquisition of OneSource Information Services, Inc.
and Subsidiaries on April 29, 2004; and a Form 8-K under Item 2 and 7
announcing the pending acquisition of OneSource Information Services, Inc. and
Subsidiaries on June 3, 2004. 26




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. infoUSA INC.Date:
August 10, 2004
    
    /s/ Michael SchultzMichael Schultz, Controller(principal accounting officer)Date:
August 10, 2004
    
    /s/ Raj DasRaj Das, Chief Financial Officer
 27




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##### Table of Contents



INDEX TO EXHIBITS 31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.32.1*
    
    
    
    Certification of Chief Executive Officer pursuant to
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.32.2*
    
    
    
    Certification of Chief Financial Officer pursuant to
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
 * Filed herewith