InfoGroup Filings Reveal Direct Media Acquisition Price

InfoGroup, formerly infoUSA, paid $17.4 million for Direct Media Inc., according to recent financial documents. That price does not include $4.9 million in cash acquired, but does include $400,000 in acquisition related costs.

Late last week, the company filed overdue quarterly and annual financial documents with the Securities and Exchange Commission. The filings had been in abeyance pending two investigations, one conducted by the company’s own Special Litigation Committee, and the other an informal inquiry by the SEC.

The Direct Media purchase price included $13.1 million in “goodwill and other identified intangibles”. These intangibles encapsulate customer relationships valued at $5.2 million (during a life of 10 years); trade names valued at $900,000 (with a life of 8 years) and goodwill of $7 million.

The Direct Media acquisition helped push infoGroup’s “list brokerage trade accounts payable” to $80.5 million by the end of the first quarter, up from $63.8 million as of the end of fourth-quarter 2007, according to the SEC filings.

The filings also give details of several acquisitions infoGroup made during 2007. In several cases, the purchase prices had not previously been made public. These acquisitions include:

* SECO Financial, a financial services marketing firm acquired in October 2007 for $1.1 million;

* Northwest Research Group, a marketing research company bought in October 2007 for $1.6 million;

* Guideline Inc., a custom business and market research and analysis firm picked up in August 2007 for $39.1 million;

* NWC Research, an Asia Pacific Research company based in Australia, acquired for $7.5 million in July 2007; and

* Expresscopy.com, a printing and mailing services provider purchased for $8 million in June 2007.

During infoGroup’s 2008 first quarter, the company generated $191.1 million in net sales, up from $157.9 million in first quarter 2007. The current results include revenue from the firm’s acquisitions.

InfoGroup realized a gain in its profits, as well: For the quarter, it racked up $6.6 million in net income, compared with $6.3 million a year earlier. The company’s total goodwill rose from $415.1 million in first-quarter 2007 to $422.3 million, while its net intangible assets ticked up from $118.2 million to $119.7 million.

During first-quarter 2008, the company paid $800,000 in restructuring charges related to laying off “approximately 67 employees,” according to SEC filings. A year earlier, the company had laid off around 220 employees and incurred $700,000 million in charges, along with an additional $1.4 million in operations restructuring fees.

Within its operating units, the Data Group’s sales increased from $78.3 million in first quarter 2007 to $83.4 million in the quarter just ended. The increase was primarily due to growth in the company’s national accounts, Salesgenie.com and License division operations. But cost of goods and services rose from 24% of net sales a year ago to 27% during the quarter just ended.

The Services Group racked up $40.4 million in net sales, up from $31.4 million a year ago. Much of this was related to infoGroup’s Direct Media acquisition, as well as growth within its Yesmail e-mail operations. Cost of goods and services within this unit amounted to 24% of net sales, compared with 25% a year ago.

The Marketing Services Group generated $67.3 million in sales, a jump from the $48.1 million it realized in first quarter 2007. Much of this was due to the research company acquisitions during the year, as well as an increase in international clients. Costs of goods and services within this division were 68% of sales, down from 72% a year ago.

According to infoGroup, expenses associated with the two investigations that preempted its filing its financial papers before now amounted to $12.7 million -- $3 million of which was incurred in 2007, with the remainder generated during the first six months of 2008.

The company also announced that, effective July 1, it would no longer be providing business data to First Data Resources. First Data had maintained this contract, which had an annual value of $2.5 million, since June 1999. In December 2007, First Data terminated another contract that had an annual value of $12 million.

InfoGroup also filed its full-year financial results for 2007. During that year, the company generated $688.8 million in net sales, up from $434.9 million a year earlier. The company’s net income jumped from $33.3 million to $40.9 million. The year ended Dec. 31.

In 2007, the company’s cost of goods and services amounted to 40% of its net sales, up from 27% in 2006. But its selling, general and administrative expenses fell from 52% in 2006 to 41% in 2007. The increase in goods and services was attributed to growth expenses within the Yesmail operations.

Within its units, the Data Group generated $330.5 million, up from $299.4 million. But that amount included a $9.9 million payment from the final settlement of a lawsuit, as well as results from the expresscopy.com and SECO Financial operations. Both of these companies were acquired during 2007.

The Services Group’s sales rose from $120.9 million in 2006 to $136.8 million, primarily due to the company’s Digital Connexxions and Rubin Response Services acquisitions, both of which were completed in late 2006. The unit also saw growth within its Yesmail operations.

The Marketing Research Group generated $221.5 million, a multifold increase from $14.6 million in 2006, as 2007 included a full year’s worth of results from its 2006 Opinion Research acquisition, as well as its mid-year Guideline, NWC Research and Northwest Research Group purchases.

As a result of infoGroup’s internal Special Litigation Committee’s investigation, the company has arranged for greater scrutiny of executive spending and corporate expenditures. As part of the agreement, Vinod Gupta stepped down as the company’s chairman, although he has retained his CEO position.