##### Table of Contents



SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, D.C.
20549
 FORM 10-Q [X] Quarterly
Report pursuant to Section 13 or 15(d) of the  Securities
Exchange Act of 1934  or [  
] Transition report pursuant to Section 13 or 15(d) of the
 Securities Exchange Act of 1934  Commission File Number 0-19598 infoUSA INC. 
  DELAWARE
    
    47-0751545(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification Number)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. 53,687,084 shares of Common Stock at May 2, 2005




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infoUSA INC. INDEX PART I  FINANCIAL INFORMATIONItem 1.
Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Cash Flows for the Three Months ended March 31, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 4. Submission of matters to a vote of security holders
    
    
    22Item 6. Exhibits
    
    
    22Signature
    
    
    23Index to Exhibits
    
    
    24Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts)
 March 31,
    
    
    December 31,2005
    
    
    2004(UNAUDITED)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,295
    
    
    $
    10,404Marketable securities
    
    
    3,061
    
    
    
    3,049Trade accounts receivable, net of allowances of $1,067 and $1,394, respectively
    
    
    47,214
    
    
    
    51,707List brokerage trade accounts receivable
    
    
    19,041
    
    
    
    19,635Deferred income taxes
    
    
    1,403
    
    
    
    Prepaid expenses
    
    
    5,643
    
    
    
    6,544Deferred marketing costs
    
    
    3,679
    
    
    
    2,632Total current assets
    
    
    84,336
    
    
    
    93,971Property and equipment, net
    
    
    42,850
    
    
    
    42,537Goodwill, net
    
    
    302,642
    
    
    
    298,708Intangible assets, net
    
    
    62,167
    
    
    
    66,578Other assets
    
    
    14,650
    
    
    
    7,642$
    506,645
    
    
    $
    509,436LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    36,046
    
    
    $
    34,134Accounts payable
    
    
    16,964
    
    
    
    21,268List brokerage trade accounts payable
    
    
    15,006
    
    
    
    15,427Accrued payroll expenses
    
    
    16,263
    
    
    
    15,917Accrued expenses
    
    
    5,652
    
    
    
    7,028Income taxes payable
    
    
    3,417
    
    
    
    3,730Deferred income taxes
    
    
    
    
    
    
    170Deferred revenue
    
    
    52,604
    
    
    
    53,034Total current liabilities
    
    
    145,952
    
    
    
    150,708Long-term debt, net of current portion
    
    
    163,735
    
    
    
    162,092Deferred income taxes
    
    
    22,036
    
    
    
    23,460Other liabilities
    
    
    1,701
    
    
    
    1,701Stockholders equity:Common stock, $.0025 par value. Authorized 295,000,000 shares; 53,661,919
shares issued and 53,330,761 outstanding at March 31, 2005 and 53,555,331
shares issued and 53,177,737 outstanding at December 31, 2004
    
    
    134
    
    
    
    134Paid-in capital
    
    
    108,062
    
    
    
    106,669Retained earnings
    
    
    68,185
    
    
    
    69,770Treasury stock, at cost, 331,158 shares held at March 31, 2005 and 377,594
held at December 31, 2004
    
    
    (2,032
    )
    
    
    (2,311
    )Notes receivable from officers
    
    
    (334
    )
    
    
    (334
    )Accumulated other comprehensive loss
    
    
    (794
    )
    
    
    (2,453
    )Total stockholders equity
    
    
    173,221
    
    
    
    171,475$
    506,645
    
    
    $
    509,436
 The accompanying notes are an integral part of the  3




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infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 THREE MONTHS ENDEDMarch 31,2005
    
    
    2004(UNAUDITED)Net sales
    
    $
    95,095
    
    
    $
    80,811Costs and expenses:Database and production costs
    
    
    26,027
    
    
    
    23,861Selling, general and administrative
(excluding non-cash stock
compensation expense (benefit) of
($289) and $182 for the three months
ended March 31, 2005 and 2004,
respectively)
    
    
    44,398
    
    
    
    40,179Depreciation
    
    
    3,908
    
    
    
    3,314Amortization of intangible assets
    
    
    4,404
    
    
    
    3,446Non-cash stock compensation (benefit)
    
    
    (289
    )
    
    
    182Restructuring charges
    
    
    703
    
    
    
    615Acquisition costs
    
    
    354
    
    
    
    3Total operating costs and expenses
    
    
    79,505
    
    
    
    71,600Operating income
    
    
    15,590
    
    
    
    9,211Other income (expense):Investment income
    
    
    1,320
    
    
    
    201Other charges
    
    
    
    
    
    
    (144
    )Interest expense
    
    
    (2,740
    )
    
    
    (2,214
    )Income before income taxes
    
    
    14,170
    
    
    
    7,054Income taxes
    
    
    5,112
    
    
    
    2,681Net income
    
    $
    9,058
    
    
    $
    4,373Basic earnings per share:Net income
    
    $
    0.17
    
    
    $
    0.08Weighted average shares outstanding
    
    
    53,797
    
    
    
    52,338Diluted earnings per share:Net income
    
    $
    0.17
    
    
    $
    0.08Weighted average shares outstanding
    
    
    53,841
    
    
    
    52,955
 The accompanying notes are an integral part of the  4




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infoUSA INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 THREE MONTHS ENDEDMarch 31,2005
    
    
    2004(UNAUDITED)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    9,058
    
    
    $
    4,373Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    3,908
    
    
    
    3,314Amortization of intangible assets
    
    
    4,404
    
    
    
    3,446Amortization of deferred financing costs
    
    
    177
    
    
    
    54Deferred income taxes
    
    
    21
    
    
    
    (1,311
    )Non-cash stock compensation expense (benefit)
    
    
    (289
    )
    
    
    182Non-cash 401(k) contribution in common stock
    
    
    499
    
    
    
    384Gain on sale of assets and marketable securities
    
    
    (1,320
    )
    
    
    (191
    )Non-cash other charges
    
    
    
    
    
    
    144Changes in assets and liabilities, net of effect of acquisitions:Trade accounts receivable
    
    
    6,306
    
    
    
    6,508List brokerage trade accounts receivable
    
    
    594
    
    
    
    1,924Prepaid expenses and other assets
    
    
    (3,483
    )
    
    
    456Deferred marketing costs
    
    
    (1,048
    )
    
    
    1,624Accounts payable
    
    
    (4,458
    )
    
    
    (3,876
    )List brokerage trade accounts payable
    
    
    (422
    )
    
    
    (2,023
    )Income taxes receivable and payable, net
    
    
    (1,715
    )
    
    
    3,591Accrued expenses and other liabilities
    
    
    (1,487
    )
    
    
    (2,456
    )Net cash provided by operating activities
    
    
    10,745
    
    
    
    16,143CASH FLOWS FROM INVESTING ACTIVITIES:Sale of marketable securities
    
    
    3,633
    
    
    
    377Purchase of marketable securities
    
    
    (390
    )
    
    
    (223
    )Purchases of property and equipment
    
    
    (1,161
    )
    
    
    (1,651
    )Acquisitions of businesses, net of cash acquired
    
    
    (8,133
    )
    
    
    (6,104
    )Software and database development costs
    
    
    (795
    )
    
    
    (452
    )Net cash used in investing activities
    
    
    (6,846
    )
    
    
    (8,053
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of long-term debt
    
    
    (19,718
    )
    
    
    (105,094
    )Proceeds of long-term debt
    
    
    19,100
    
    
    
    138,814Deferred financing costs paid
    
    
    (7
    )
    
    
    (436
    )Dividends paid
    
    
    (10,646
    )
    
    
    Proceeds from exercise of stock options
    
    
    1,263
    
    
    
    834Net cash provided by (used in) financing activities
    
    
    (10,008
    )
    
    
    34,118Net increase (decrease) in cash and cash equivalents
    
    
    (6,109
    )
    
    
    42,208Cash and cash equivalents, beginning
    
    
    10,404
    
    
    
    2,686Cash and cash equivalents, ending
    
    $
    4,295
    
    
    $
    44,894Supplemental cash flow information:Interest paid
    
    $
    2,615
    
    
    $
    1,307Income taxes paid
    
    $
    6,287
    
    
    $
    75
 The accompanying notes are an integral part of the  5




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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, 2004 included
in the Companys 2004 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 common stock. Three Months EndedMarch 31,2005
    
    
    2004(In Thousands)Weighted average number of shares used in basic EPS
    
    
    53,797
    
    
    
    52,338Net additional common stock equivalent shares outstanding after
assumed exercise of stock options
    
    
    44
    
    
    
    617Weighted average number of shares outstanding used in diluted EPS
    
    
    53,841
    
    
    
    52,955
 3. SEGMENT INFORMATION The Company currently reports financial information on two business segments. The infoUSA Group (formerly known as the Small Business segment) licenses its sales leads,
mailing lists, databases, and other database marketing services to small and medium size
businesses, entrepreneurs, professionals, and sales executives. This segment also includes the sale
of our database content on the Internet. The Donnelley Group (formerly known as the Large Business segment) provides licensing of the
infoUSA database, direct marketing services, database marketing services, e-mail marketing
services, and list brokerage and list management services to large businesses, i.e. businesses with
1,000 or more employees. The infoUSA Group and Donnelley Group reflect actual net sales, order production costs,
identifiable direct sales and marketing costs. The remaining indirect costs are presented as a
consolidating item in corporate activities. The corporate activities group includes the compilation of our proprietary databases, such as
14 million businesses, 220 million consumers, 5.2 million new homeowners, 17.0 million new movers,
2.6 million new business formations and other databases. They also include the cost for database
verification, administrative functions of the company and other identified gains (losses). 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. 6




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Goodwill, net of accumulated amortization for the Donnelley Group segment increased from
$167.0 million at March 31, 2004 to $261.5 million at March 31, 2005. The increase in goodwill is
due to the acquisitions of OneSource and Edith Roman in June 2004 and @Once in January 2005. The
Company has changed the structure of its internal organization. Due
to acquisition and realignment within the Company, one division has
been moved from the Donnelley Group into the infoUSA group. In accordance with SFAS 131,
disclosures about segments of an enterprise, the Company has restated the results by segment for
the quarter ended March 31, 2004 according to the current internal structure. 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 March 31, 2005infoUSA
    
    
    Donnelley
    
    
    Corporate
    
    
    ConsolidatedGroup
    
    
    Group
    
    
    Activities
    
    
    Total(In thousands)Net sales
    
    $
    37,869
    
    
    $
    57,226
    
    
    $
    
    
    
    $
    95,095Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    (289
    )
    
    
    (289
    )Restructuring charges
    
    
    
    
    
    
    
    
    
    
    703
    
    
    
    703Acquisition costs
    
    
    
    
    
    
    
    
    
    
    354
    
    
    
    354Operating income (loss)
    
    
    12,247
    
    
    
    23,019
    
    
    
    (19,676
    )
    
    
    15,590Investment income
    
    
    
    
    
    
    
    
    
    
    1,320
    
    
    
    1,320Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,740
    )
    
    
    (2,740
    )Income (loss) before income taxes
    
    
    12,247
    
    
    
    23,019
    
    
    
    (21,096
    )
    
    
    14,170Goodwill, net of amortization
    
    
    41,180
    
    
    
    261,462
    
    
    
    
    
    
    
    302,642
 For The Three Months Ended March 31, 2004infoUSA
    
    
    Donnelley
    
    
    Corporate
    
    
    ConsolidatedGroup
    
    
    Group
    
    
    Activities
    
    
    Total(In thousands)Net sales
    
    $
    40,891
    
    
    $
    39,920
    
    
    $
    
    
    
    $
    80,811Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    182Restructuring charges
    
    
    
    
    
    
    
    
    
    
    615
    
    
    
    615Acquisition costs
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3Operating income (loss)
    
    
    12,624
    
    
    
    20,430
    
    
    
    (23,843
    )
    
    
    9,211Investment income
    
    
    
    
    
    
    
    
    
    
    201
    
    
    
    201Other charges
    
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    (144
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (2,214
    )
    
    
    (2,214
    )Income (loss) before income taxes
    
    
    12,624
    
    
    
    20,430
    
    
    
    (26,000
    )
    
    
    7,054Goodwill, net of amortization
    
    
    41,238
    
    
    
    166,992
    
    
    
    
    
    
    
    208,230
 4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss), including the components of other comprehensive income (loss),
are as follows: For The ThreeMonths EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands)Net income
    
    $
    9,058
    
    
    $
    4,373Other comprehensive income:Unrealized gain from investments:Unrealized gains (losses)
    
    
    1,934
    
    
    
    (278
    )Related tax benefit (expense)
    
    
    (696
    )
    
    
    104Net
    
    
    1,238
    
    
    
    (174
    )Foreign currency translation adjustments:Unrealized gains
    
    
    658
    
    
    
    Related tax expense
    
    
    (237
    )
    
    
    Net
    
    
    421
    
    
    
    
 7




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For The ThreeMonths EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands)Total other comprehensive income (loss)
    
    
    1,659
    
    
    
    (174
    )Comprehensive income
    
    $
    10,717
    
    
    $
    4,199
 The components of accumulated other comprehensive income (loss) is as follows: Foreign
    
    
    
    
    AccumulatedUnrealized
    
    
    Currency
    
    
    Unrealized
    
    
    OtherLosses on
    
    
    Translation
    
    
    Gains / (Losses)
    
    
    ComprehensivePension Plan
    
    
    Adjustments
    
    
    On Securities
    
    
    Loss(in thousands)Balance at March 31, 2005
    
    $
    (1,055
    )
    
    $
    (464
    )
    
    $
    725
    
    
    $
    (794
    )Balance at December 31, 2004
    
    $
    (1,055
    )
    
    $
    (885
    )
    
    $
    (513
    )
    
    $
    (2,453
    )
 5. ACQUISITIONS On January 31, 2005, the Company acquired @Once Company, a retention based email technology
company. The total purchase price was $8.1 million, of which $7 million was paid at closing and
$1.1 million was paid on March 29, 2005 after final calculation for working capital. The purchase
price for the acquisition has been primarily allocated to current assets of $1.5 million, property
and equipment of $.7 million, current liabilities of $.5 million, and goodwill of $6.4 million.
The acquisition has been accounted for under the purchase method of accounting, and accordingly,
the operating results of @Once 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 offers a global database of over 1.7 million of
the largest businesses worldwide. This database is deep in content. It also includes financial
information and other public information. 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. The total purchase price was $109.4 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 $1.8 million. Additionally, the
Company paid $2.2 million for bank financing fees associated with the transaction recorded as
deferred financing costs. The purchase price for the acquisition has been allocated to current
assets of $28.2 million, property and equipment of $5.6 million, other assets of $1.5 million,
current liabilities of $17.7 million (including $13.7 million of deferred revenue), other
liabilities of $15.8 million and goodwill and other intangibles of $105.9 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 $16.3 million (life of 6
years), tradenames and trademarks of $3.5 million (life of 20 years) and goodwill of $74.5 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. 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
marketing services. The total purchase price was $13.5 million including acquisition costs of $0.3
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 $11.3 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. 8




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On February 2, 2004, the Company acquired all the issued and outstanding common stock of
Triplex Direct Marketing Corp. (Triplex), a provider of direct marketing and database marketing
services to nonprofit and catalog customers. The total purchase price was $7.6 million including
acquisition costs of $0.3 million, of which, $6.1 million was payable in cash at closing and the
remaining $1.2 million was paid on February 2, 2005. The purchase price for the acquisition has
been primarily allocated to current assets of $2.4 million, property and equipment of $0.7 million,
current liabilities of $1.0 million, and goodwill of $5.2 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. Assuming Triplex, OneSource, Edith Roman and @Once had been acquired on January 1, 2004 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 endedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands, except per share amounts)(unaudited)Net sales
    
    $
    95,671
    
    
    $
    101,046Net income
    
    $
    8,771
    
    
    $
    2,179Basic earnings per share
    
    $
    0.16
    
    
    $
    0.04Diluted earnings per share
    
    $
    0.16
    
    
    $
    0.04
 6. NON-CASH STOCK COMPENSATION EXPENSE At March 31, 2005, 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 endedMarch 31,2005
    
    
    2004(in thousands, exceptper share amounts)Net income, as reported
    
    $
    9,058
    
    
    $
    4,373Less: Total stock-based employee compensation
expense determined under fair value based
method, net of taxes
    
    
    169
    
    
    
    665Net income, pro forma
    
    $
    8,889
    
    
    $
    3,708Earnings per share:Basic  as reported
    
    $
    0.17
    
    
    $
    0.08Basic  pro forma
    
    $
    0.17
    
    
    $
    0.07Diluted  as reported
    
    $
    0.17
    
    
    $
    0.08Diluted  pro forma
    
    $
    0.17
    
    
    $
    0.07
 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
2005: expected volatility of 53.64%, risk free interest rate of 4.42% 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s or vendors
related performance commitment is complete. 9




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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. During 2002, the Company granted non-qualified stock options to non-employee consultants of
the Company in connection with a consulting agreements executed by the Company. The options vest
evenly over four years and have a five-year life. The fair value of the option was estimated, as of
the grant date, using the Black-Scholes option pricing model and is updated at each balance sheet
date. As such, the Company has recorded a non-cash benefit of ($289) thousand, during the three
months ended March 31, 2005 related to stock options granted to the consultant. The benefit was
recorded as a reduction to paid-in-capital. The consulting agreement with one of the consultants
commits the Company to make cash payments of $775 thousand and $200 thousand in 2004 and 2005 to
the consultant for services rendered. Expense of $175 thousand for this consulting agreement was
recorded during the three months ended March 31, 2005 and 2004, respectively. 7. RESTRUCTURING CHARGES During the three months ended March 31, 2005, the Company recorded restructuring charges of
$703 thousand. The charges included $371 thousand for involuntary employee separation costs
(severance) due to workforce reductions for 45 employees in administration, order production and
sales. In addition $332 thousand was recorded for the restructuring of the Hill-Donnelly printing
facilities, which includes costs for office space, equipment leases and raw material inventory. As
of March 31, 2005, an accrual of $711 thousand was included in the accompanying consolidated
balance sheet for severance costs remaining to be paid and an accrual of $331 thousand was included
for the restructuring of the Hill-Donnelly printing facilities. During the three months ended March 31, 2004, the Company recorded restructuring charges due
to workforce reductions of $615 thousand. The charges included involuntary employee separation
costs for 96 employees in administration, order production and sales. The following table summarizes activity related to the restructuring charges recorded by the
Company, including the liability accrual balances: Beginning
    
    
    Amounts
    
    
    Amounts From
    
    
    Amounts
    
    
    EndingPeriod Ended
    
    Accrual
    
    
    Expensed
    
    
    Acquisition
    
    
    Paid
    
    
    Accrual(In thousands)March 31, 2005
    
    $
    629
    
    
    $
    703
    
    
    $
    122
    
    
    $
    412
    
    
    $
    1,042
 8. ACQUISITION COSTS The Company recorded costs of $354 thousand and $3 thousand during the three months ended
March 31, 2005 and 2004, respectively, for general and administrative expenses incurred in
connection with the integration of acquired companies. These costs are not direct costs of
acquisition and therefore cannot be capitalized as part of the purchase price. 10




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9. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets consist of the following: March 31,
    
    
    December 31,2005
    
    
    2004(In thousands)Goodwill
    
    $
    361,654
    
    
    $
    357,720Less accumulated amortization
    
    
    59,012
    
    
    
    59,012$
    302,642
    
    
    $
    298,708Other intangible assets:Non-compete agreements
    
    
    13,534
    
    
    
    13,534Core technology
    
    
    13,753
    
    
    
    13,753Customer base
    
    
    24,663
    
    
    
    24,663Trade names
    
    
    19,259
    
    
    
    19,259Purchased data processing software
    
    
    73,478
    
    
    
    73,478Acquired database costs
    
    
    21,591
    
    
    
    21,591Perpetual software license agreement, net
    
    
    1,933
    
    
    
    2,133Software development costs, net
    
    
    5,974
    
    
    
    5,983Database development costs, net
    
    
    635
    
    
    
    461Deferred financing costs
    
    
    11,130
    
    
    
    11,123185,950
    
    
    
    185,978Less accumulated amortization
    
    
    123,783
    
    
    
    119,400$
    62,167
    
    
    $
    66,578
 10. PROPERTY AND EQUIPMENT Property and equipment consist of the following: March 31,
    
    
    December 31,2005
    
    
    2004(In thousands)Property and equipment
    
    $
    139,238
    
    
    $
    135,789Less accumulated depreciation and amortization
    
    
    96,388
    
    
    
    93,252$
    42,850
    
    
    $
    42,537
 11. 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. 12. RELATED PARTY TRANSACTIONS In February 2005, the Company purchased from NetJets fractional ownership interest in one
airplane at a total cost of $2.6 million. The fractional ownership interest in the airplane was
previously owned by Mr. Gupta, who sold it to NetJets at the same time the Company made the
purchase of the aircraft. During
the 1st quarter of 2005, the Company paid
$178 thousand to Annapurna Corporation primarily for the
business use of the aircraft before it was sold to the Company.
Annapurna is 100% owned by Mr. Gupta, the Companys
Chairman and Chief Executive Officer. 11




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ITEM 2. infoUSA INC. AND SUBSIDIARIES   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 Company Profile infoUSA Inc. (the Company or infoUSA) is the leading provider of sales leads and databases
to millions of businesses in order for them to find new prospects and grow their sales. infoUSA
compiles and updates over 15 databases under one roof in Omaha, Nebraska. Our customers include
salespeople, small office/home office (SOHO) entrepreneurs, small and medium businesses, and
Fortune 2000 corporations. Our database is also part of major directory assistance search firms
like Yahoo!, Google, AOL, and in-car navigation companies. Most cars with GPS devices today use infoUSA
databases because of the high accuracy of our business database. Databases compiled and continually
updated are as follows: Business Databases
    
    Consumer Databases 14 Million U.S. and Canadian Businesses
    
     180 Million Consumers 11.5 Million Executives and Professionals
    
     112 Million Households 5 Million Small Business Owners
    
     65 Million Homeowners 5 Million Business Addresses with Color Photos
    
     15 Million New Movers Per Year 2.6 Million Brand New Businesses
    
     3.1 Million New Homeowners Per Year 3.6 Million Yellow page Advertisers 1.7 Million Bankruptcy Filers 900,000 Global Businesses and 2 Million Executives 600,000 Manufacturers 410,000 Big Businesses
 We employ over 600 full time people to compile and update the databases from thousands of
public sources such as yellow pages, white pages, newspapers, incorporation records, real estate
deed transfers, and various other sources. For the business database, we make over 20 million phone
calls a year to verify the name of the owner or key executive, their address, number of employees,
number of PCs, fax numbers, e-mail addresses, and other information. The databases change by roughly 65% per year. We spend over $50 million a year to update these
databases and related database management systems. We believe that we have the finest and most
accurate databases in the industry. We believe there is no other company that compiles and updates
so many databases all under one roof. We have also developed proprietary software for direct marketing applications, database
marketing applications, e-mail marketing applications, telemarketing applications, and other
sophisticated modeling applications. Our proprietary software enhances the value of our databases
to the customer. 12




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##### Table of Contents



New initiatives in 2004 and 2005 include:  
    Yellow Page Advertising Expense Report  The report will include all spending by small
businesses for Yellow Page advertising. Yellow Page publishers and web advertising firms
will be able to sort this information by many selects, including by individual business as
well as by SIC code and any geographic region.  
    Business Address Photographs- The company introduced the industrys first pictures of
storefronts with corresponding longitude and latitude coordinates to its Business Database.
Important applications for this data include business credit reports/applications, directory
assistance, wireless navigation devices and insurance appraisals/underwriting.  
    Sales Genie  
    Credit.Net Sales & Marketing Strategy infoUSA has served over 4 million customers who have used our sales leads and mailing lists.
They use our databases to find new customers and grow their sales. That is why the logo of infoUSA
bears the mark Sales Solutions. For our large clients, we distribute our databases and services through the Donnelley Group.
Donnelley Marketing, the flagship Company within the Donnelley Group, was acquired by infoUSA in
1999, and has been a leader in this space since 1917. The Donnelley Group has a sales force of over
200 account executives that call on Fortune 2000 companies. These clients have a sophisticated need
for databases, database marketing, and now e-mail marketing. Under the Donnelley Group, we have
nine different companies that specialize in their own respective markets. These companies are
Donnelley Marketing, Walter Karl, Edith Roman, Catalog Vision, Triplex, Yesmail, @Once, Value Added
Reseller Group and OneSource. OneSource is the only company which has a true global database of 1.2
million businesses and 11.5 million executives by title. This database is used by multinational
companies for market research, prospect development, and other modeling and research applications. infoUSA has an extensive sales channel into medium and small businesses, SOHO markets, and
salespeople. We sell directly to these markets. We employ several distribution channels such as
direct mail, telemarketing, e-mail marketing, and our own sales force. We have over 700 account
executives that have developed relationships with these clients. More than 4 million customers have used our information in the form of sales leads, prospect
lists, mailing labels, printed directories, 3 x 5 cards, computer diskettes, business credit
reports, DVDs, and on the Internet. Our information is used by businesses for sales leads, mailing
lists, credit decisions, market research, competitive analysis, and management of vendor
relationships. Sales people and small business owners use our information for new prospects, due
diligence, and other day-to-day information purposes. Sales Genie, Credit.Net, SalesLeadsUSA . . . Subscription Model In the past, infoUSA sold sales leads and mailing lists on an as needed basis. We realized
that our customers need this information every day. We developed an Internet based service called
Sales Genie for the small business & SOHO market. This is an Internet based database delivery
service. All of our databases can be accessed on a unlimited basis for a flat price of $250 per
month. Sales Genie has a built-in contact management software and
mapping ability. Currently, a small business
can get all the sales leads and mailing lists for only $250 per month per user. For additional
users the charge is $100 per user. This subscription product is designed for approximately 3.5
million small businesses. We have also developed SalesLeadsUSA for single-owner businesses, contractors, and sales
executives. There are 10 million plus prospects in this group.
Currently, this service offers 4 databases with
limited search criteria but still offers customers unlimited sales leads and mailing lists for
$75 per month per user, i.e., $900 per year. This service also has contact management software. The Company also launched an unlimited business credit report service called Credit.Net in the
first quarter of 2004. Currently, a customer can obtain unlimited business credit reports for only $75 per
month. Two
of our directory divisions, Polk City Directories &
Hill-Donnelly Directories, currently offer
bundled subscription packages for under $100 per month per user. These bundled packages include
printed directory on a customers immediate region, DVD on the entire state, and Internet access
for all of the U.S. 13




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##### Table of Contents



This migration from one-time sales to subscription-based sales is enabling us to have a better
relationship with our customers, more predictable revenue, and the ability to offer more services
to our customers in the arena of sales solutions. Our Growth Strategy There are approximately 14 million businesses in the United States and Canada. All of these
businesses are looking for cost effective solutions to find new customers and increase their sales.
Our databases and applications enable these businesses to prospect for new customers and increase
their sales. Our goal is to be the leader in proprietary databases of businesses and consumers in the
United States and Canada, and to produce innovative products and services that meet the needs of
these businesses for finding new prospects and increasing their sales. The information provided by
our databases is integral to the new customer acquisition and retention processes for businesses.
Our organization is divided into three distinct groups: Database Compilation and Update Group, The
infoUSA Group (formerly known as Small & Medium Business Group), and The Donnelley Group (formerly
known as The Large Business Customer Group). Delivery of information via the Internet is the preferred method by our customers. We are
investing in Internet technology to develop subscription-based new customer development services
for businesses. The Internet has opened up brand new markets for our database products that are
increasingly used by our customers for multiple applications. We estimate that our total market
potential for our services exceeds $20 billion per year. We have grown through more than 20 strategic acquisitions in the last ten years. These
acquisitions have enabled us to acquire the requisite critical mass to compete over the long term
in the direct marketing industry. During 2004, we acquired three companies that opened up brand new
distribution channels for our products and applications. Triplex increased our presence in the
non-profit sector by providing data processing services and our proprietary content to their fast
growing customer base. Edith Roman gave us the premier access to the publishing industry for their
list brokerage and list management needs. OneSource brought a compelling application to our
business that is increasingly embedded in customer relationship management systems of Global 2000
corporations. These corporations use the OneSource application to access deep information on
executives of worlds 1.2 million largest companies. As we have consolidated our position in the fastest growing segments of our industry, our goal
now is to accelerate our momentum in the market for business intelligence information. Our
subscription products, accessed 24/7 over the web by our customers, will be the critical impetus
needed to achieve our desired organic revenue growth over the longer term. 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 MONTHSENDED
    
    
    ENDEDMarch 31, 2005
    
    
    March 31, 2004CONSOLIDATED STATEMENT OF OPERATIONS DATA:Net sales
    
    
    100
    %
    
    
    100
    %Costs and expenses:Database and production costs
    
    
    27
    
    
    
    30Selling, general and administrative
    
    
    47
    
    
    
    50Depreciation
    
    
    4
    
    
    
    4Amortization of intangible assets
    
    
    5
    
    
    
    4Non-cash stock compensation expense
    
    
    
    
    
    
    Restructuring charges
    
    
    1
    
    
    
    1Acquisition costs
    
    
    
    
    
    
    Total costs and expenses
    
    
    84
    
    
    
    89Operating income
    
    
    16
    
    
    
    11Other expense, net
    
    
    (1
    )
    
    
    (3
    )Income before income taxes
    
    
    15
    
    
    
    8Income taxes
    
    
    5
    
    
    
    3Net income
    
    
    10
    %
    
    
    5
    %
 14




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##### Table of Contents



THREE MONTHS
    
    
    THREE MONTHSENDED
    
    
    ENDEDMarch 31, 2005
    
    
    March 31, 2004(in thousands)OTHER DATA:SALES BY SEGMENT:infoUSA Group
    
    $
    37,869
    
    
    $
    40,891Donnelley Group
    
    
    57,226
    
    
    
    39,920Total
    
    $
    95,095
    
    
    $
    80,811SALES BY SEGMENT AS A PERCENTAGE OF NET SALES:infoUSA Group
    
    
    40
    %
    
    
    51
    %Donnelley Group
    
    
    60
    
    
    
    49Total
    
    
    100
    %
    
    
    100
    %
 Net sales Net sales for the quarter ended March 31, 2005 were $95.1 million, an increase of 18% from
$80.8 million for the same period in 2004. Net sales of the infoUSA Group segment for the quarter
ended March 31, 2005 were $37.9 million, a 7% decrease from $40.9 million for the same period in
2004. The decrease in net sales is principally due to the deferral of revenue totaling $1.8 million
during the quarter ended March 31, 2005, which were related to the sale of subscription products.
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 March 31, 2005 were $57.2
million, a 43% increase from $39.9 million for the same period in 2004. The increase was
principally due to the acquisition of Edith Roman and OneSource in June 2004. The Donnelley Group
segment principally engages in the selling of data processing 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 March 31, 2005 were $26.0 million, or 27%
of net sales, compared to $23.9 million, or 30% of net sales for the same period in 2004. The
increase in database and production costs principally relates to the acquisitions of Edith Roman,
and OneSource in June 2004. The reduction of the cost as a percentage of revenue is due to
successful integration of the previously mentioned acquisitions into the Company. Selling, general and administrative expenses Selling, general and administrative expenses for the quarter ended March 31, 2005 were $44.4
million, or 47% of net sales, compared to $40.2 million, or 50% of net sales for the same period in
2004. The increase in selling, general and administrative expenses principally relates to the
acquisitions of Edith Roman, OneSource, and @Once. Depreciation expense Depreciation expense for the quarter ended March 31, 2005 totaled $3.9 million, or 4% of net
sales, compared to $3.3 million, or 4% of net sales for the same period in 2004. Amortization expense Amortization expense for the quarter ended March 31, 2005 totaled $4.4 million, or 5% of net
sales, compared to $3.4 million, or 4% of net sales for the same period in 2004. 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
completed impairment tests as of October 31, 2004, as required by SFAS 142, and established that no
impairment exists. Non-cash stock compensation expense 15




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During the quarter ended March 31, 2005, the Company recorded a non-cash benefit of $289
thousand, compared to a charge of $182 thousand for the same period in 2004. The Company recorded
non-cash stock compensation expense related to a non-employee consulting agreements executed in
previous years. The Company will incur additional non-cash compensation expense for the consultant
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. Restructuring costs The Company recorded restructuring charges during the quarters ended March 31, 2005 and 2004
of $0.7 million and $0.6 million, respectively, related to workforce reductions as a part of the
Companys continuing strategy to reduce unnecessary costs and focus on core operations and the
restructuring of the Hill-Donnelly print operations. The workforce reduction charges included
involuntary employee separation costs during 2005 and 2004 for approximately 45 and 96 employees,
respectively. Acquisition costs The Company recorded integration-related costs during the quarters ended March 31, 2005 and
2004 of $354 thousand and $3 thousand, respectively. The 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 acquisition of various companies and therefore could
not be capitalized. Operating income Including the factors previously described, the Company had operating income of $15.6 million,
or 16% of net sales during the quarter ended March 31, 2005, compared to operating income of $9.2
million, or 11% of net sales for the same period in 2004. The increase in operating income as a
percentage of net sales is a result of the following items: 1) the Companys diligent approach to
being more efficient in its operations and 2) the successful integration of Triplex, Edith Roman,
OneSource and @Once into the Companys structure. These were companies that operated historically
at a higher operating margin than the Company. Operating income for the infoUSA Group segment for the quarter ended March 31, 2005 was $12.2
million, or 32% of net sales, as compared to $12.6 million, or 31% of net sales for the same period
in 2004. The increase in operating income as a percentage of nets sales is principally due to item
1) described in the preceding paragraph. Operating income for the Donnelley Group segment for the quarter ended March 31, 2005 was
$23.0 million, or 40% of net sales, as compared to $20.4 million, or 51% of net sales for the same
period in 2004. The decrease in operating income as a percentage of net sales is principally due to
decreased operating expenses represented as percentage of net sales associated with companies
acquired during 2004 and 2005 including Edith Roman, OneSource and @Once. Other income (expense), net Other expense, net was $(1.4) million, or 1% of net sales, and $(2.2) million, or 3% of net
sales, for the quarters ended March 31, 2005 and 2004, 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 expense of the Company. Interest expense was $2.7 million and $2.2 million for the quarters ended March 31, 2005 and
2004, respectively. The increase is principally due to an additional term loan financed in June
2004 which was principally related to the acquisition of OneSource. Investment income was $1.3
million and $0.2 million, for the quarters ended March 31, 2005 and 2004, respectively. Income taxes A provision for income taxes of $5.1 million and $2.7 million was recorded during the quarters
ended March 31, 2005 and 2004, respectively. The effective income tax rate decreased from 38% to
36% due to the following factors: state income tax planning, Section 199 related to manufacturing
deduction and dividends paid to the ESOP plans. Liquidity and Capital Resources 16




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Overview On March 25, 2004, the Company entered into 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 March
31, 2005, the Term A loan had a balance of $100.0 million, bearing an interest rate of 5.06%, the
Term B loan had a balance of $69.4 million, bearing an interest rate of 5.25%, and $44.5 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. The fixed charge coverage ratio and leverage ratio financial
covenants are based on EBITDA (Earnings before interest expense, income taxes, depreciation and
amortization), as adjusted, providing for adjustments to EBITDA for certain agreed upon items
including investment income (loss), other charges (gains), asset impairments, non-cash stock
compensation expense and other items defined within the Credit Facility. The Company was in
compliance with all restrictive covenants of the Credit Facility as of March 31, 2005. 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 March 31, 2005, the Companys principal sources of liquidity included $44.5 million
available under the Credit Facility. As of March 31, 2005, the Company had a working capital
deficit of $61.6 million. Net cash provided by operating activities during the quarter ended March 31, 2005 totaled
$10.8 million compared to $16.1 million for the same period in 2004. During the quarter ended March 31, 2005, the Company spent $1.2 million for additions of
property and equipment and $.8 million related to software and database development costs. During the quarter ended March 31, 2005, the Company spent $8.1 million for its acquisition of
@Once. On
January 25, 2005, the Companys Board of Directors declared a cash dividend of $0.20 per
common share. This represents the first ever dividend paid by the Company. The dividend was paid
on March 1, 2005, to shareholders of record on February 8, 2005. The shares outstanding on
February 8, 2005, were 53.2 million shares. The total dividend payment was $10.6 million. Selected Consolidated Balance Sheet Information Trade accounts receivable decreased to $47.2 million at March 31, 2005 from $51.7 million at
December 31, 2004. The days sales outstanding (DSO) ratio for the quarter ended March 31, 2005
was 52 days compared to 44 days for the same period in 2004. Deferred marketing costs increased to $3.7 million at March 31, 2005 from $2.6 million at
December 31, 2004. The increase is the direct result of the Companys increased spending during the
quarter ended March 31, 2005 from the level of spending incurred during the latter half of 2004 on
direct marketing costs that are subject to deferral and amortization. 17




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Selected other balance sheet accounts, including list brokerage trade accounts receivable,
prepaid expenses, list brokerage trade accounts payable, accounts payable, accrued expenses and
accrued payroll expenses, increased (decreased) moderately at March 31, 2005 from their respective
account balances at December 31, 2004. The increases, (decreases) in these account balances is due
to the acquisition of certain companies during 2004 and 2005 and payment timing differences related
to various general operating expenses. Deferred revenue decreased to $52.6 million at March 31, 2005 from $53.0 million at December
31, 2004. The current portion of long-term debt increased to $36.1 million at March 31, 2005 from $34.1
million at December 31, 2004. The increase is due to the increase in the scheduled payments on the
Wells Fargo Term A loan. The Companys long-term debt, net of current portion increased to $163.7 million at March 31,
2005 from $162.1 million at December 31, 2004 Off-Balance Sheet Arrangements Other than rents associated with facility leasing arrangements, the Company does not engage in
off-balance sheet financing activities. Accounting Standards In December 2004, the FASB revised SFAS No. 123 (revised 2004), Share-Based Payments. SFAS
123(R) eliminates the alternative to use APB Opinion 25s intrinsic value method of accounting
(generally resulting in recognition of no compensation cost) and instead requires 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). The cost will be based on the grant-date fair value of the
award and will be recognized over the period for which an employee is required to provide service
in exchange for the award. In April 2005, the Securities and Exchange Commission (SEC) adopted a
rule amending the compliance dates SFAS No. 123(R). Under the new SEC rule, the provisions of the
revised statement are to be applied prospectively by the company for awards that are granted,
modified, or settled in the first fiscal year beginning after
June 15, 2005. Additionally, public
entities would recognize 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, based on the
grant-date fair value of those awards calculated under SFAS 123 (as originally issued) for either
recognition or pro forma disclosures. When the Company adopts the standard on January 1, 2006, it
will be required to report in its financial statements the share-based compensation expense for
reporting periods in 2006. As of March 31, 2005, management believes that adopting the new
statement will have a negative impact of approximately one cent per share for the year ending
December 31, 2006, representing the expense to be recognized for the unvested portion of awards
which were granted prior to March 31, 2005, and cannot predict the earnings impact of awards that
may be granted after that date. In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 153, Exchanges
of Nonmonetary Assets. This Statement amends the guidance in APB Opinion No. 29, Accounting for
Nonmonetary Transactions. APB Opinion No. 29 provided an exception to the basic measurement
principle (fair value) for exchanges of similar assets, requiring that some nonmonetary exchanges
be recorded on a carryover basis. SFAS No. 153 eliminates the exception to fair value for
exchanges of similar productive assets and replaces it with a general exception for exchange
transactions that do not have commercial substance, that is, transactions that are not expected to
result in significant changes in the cash flows of the reporting entity. The provisions of SFAS
No. 153 are effective for exchanges of nonmonetary assets occurring in fiscal periods beginning
after June 15, 2005. As of March 31, 2005, management believes that SFAS No. 153 will have no
significant effect on the financial position, results of operations, and cash flows of the Company. 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. Factors That May Affect Operating Results Our markets are highly competitive and many of our competitors have greater resources than we
do. 18




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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: Acxiom, Experian (a
subsidiary of Great Universal Stores, P.L.C. (GUS)), Equifax, Harte-Hanks Communications, Inc.
and Dun & Bradstreet(C). 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 March 31, 2005, we had total indebtedness of approximately $199.8 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. 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. 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. 19




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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 2004, with the
exception of the company recently acquired during 2005. 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. 
 ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has identified interest rate risk as the Companys primary market risk exposure.
The Company is exposed to significant future earnings and cash flow exposures from significant
changes in interest rates as nearly all of the Companys debt is at variable rates. If necessary,
the Company could refinance the Companys debt to fixed rates or utilize interest rate protection
agreements to manage interest rate risk. For example, a 100 basis point increase (decrease) in the
interest rate would cause an annual increase (decrease) in interest expense of $2.2 million. At
March 31, 2005, 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 March
31, 2005, the Company had long-term debt with a carrying value of $199.8 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 (a) Evaluation of disclosure controls and procedures 20




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The Companys management, with the participation of the Companys Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
Act of 1934, as amended (the Exchange Act)) as of the end of the fiscal quarter ended March 31,
2005. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that as of March 31, 2005 there were material weaknesses in the Companys disclosure
controls and procedures related to lack of specialized accounting personnel and accounting for
impairments in investments. As discussed in the Companys Form 10-K filing for the fiscal year
ended December 31, 2004, our management, with the oversight of the Audit Committee, has devoted
considerable effort to remediate the material weaknesses identified, and has made improvements in
our internal controls over financial reporting to address these weaknesses. The Company is taking
the following steps to remediate these weaknesses:  
    The Company is implementing a formal review process of cost method investments.
    The Company has hired a Corporate Controller with a high level of accounting expertise.
    The Company has hired a Director of Income Tax and has implemented improved processes
and controls within the Income Tax department.
    The Company is providing continuing training to accounting
staff on non-routine technical accounting matters.
    The Company is assessing the existing accounting personnel to ensure the correct
individuals with the necessary expertise have been placed in the appropriate positions. Based upon the remediation plans, we feel confident that by the end of the 3rd quarter 2005, we
will have addressed our material weaknesses related to disclosure controls and procedures. (b) Changes in internal controls over financial reporting During
the quarter ended March 31, 2005, there were no changes in the
Companys internal control over financial reporting that have
materially affected or are reasonably likely to materially affect the
Companys internal control over financial reporting, other than
the steps take by the Company to remediate the weaknesses described
above. 21




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PART II
OTHER INFORMATION 
 ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the 2005 Annual Meeting of Stockholders of the Company held on April 29, 2005, the
stockholders voted on and approved the following items: 1. Elected the following directors to the Board of Directors for a term of three years. Martin F. Kahn
    
    FOR:
    
    
    49,142,046
    
    
    WITHHELD:
    
    
    2,269,714Charles W. Stryker
    
    FOR:
    
    
    49,132,365
    
    
    WITHHELD:
    
    
    2,279,395Dennis P. Walker
    
    FOR:
    
    
    48,213,656
    
    
    WITHHELD:
    
    
    3,198,104
 2. Approved an amendment to the Companys 1997 Stock Option Plan increasing the number of shares
available for issuance under the plan by 3,000,000. FOR:
    
    
    28,198,473
    
    
    AGAINST:
    
    
    19,993,056
    
    
    ABSTAIN:
    
    
    62,015
 
 ITEM 6.
EXHIBITS 31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
    22




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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: May 10, 2005
    /s/ Stormy DeanStormy Dean, Chief Accounting Officer(principal accounting officer) 23




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INDEX TO EXHIBITS 31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
    24