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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

infoUSA INC.

5711 South 86th Circle, Omaha, Nebraska 68127
(Address of principal executive offices)

(402) 593-4500
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.0025 par value
Series A Preferred Share Purchase Rights
9 1/2% Senior Subordinated Notes due 2008

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Act). Yes [X] No [   ]

     State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter.

Approximately $119 million as of June 30, 2002

     As of March 5, 2003 the registrant had outstanding 51,165,410 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive proxy statement for the Annual Meeting of Stockholders to be held on April 21, 2003, which will be filed within 120 days of the end of fiscal year 2002, are incorporated into Part III hereof by reference.

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PART I

     This Annual Report on Form 10-K, the documents incorporated by reference into the Company’s Annual Report to shareholders, and press releases (as well as oral statements and other written statements made or to be made by the Company) contain forward-looking statements that are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements related to potential future acquisitions and our strategy and plans for our business contained in Item 1 “Business,” Item 2 “Properties,” Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Annual Report. Such forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by our management. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include those set forth in this Annual Report under “Factors That May Affect Operating Results,” as well as those noted in the documents incorporated by reference into this Annual Report. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date on which they were made. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission, particularly the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

ITEM 1. Business

     Company Profile

     infoUSA Inc. (the “Company” or “infoUSA”) creates the finest proprietary databases of nearly 14 million businesses and 220 million consumers in the United States and Canada compiled and updated under one roof in Omaha, Nebraska. These databases are compiled from thousands of public sources. We believe our databases are the most content rich in the industry. In order to improve the quality of our databases, we make over 17 million phone calls per year to gather additional content and verify existing information. We maintain a staff of approximately 500 full-time employees in Omaha to manage the database. The data content changes by nearly 70 percent every year, which includes change of address, phone number, SIC code and other data within a record. Customers return to us to purchase updated products to continually update their databases. Recurring revenue is a major component of our revenue and accounts for approximately two-thirds of our annual sales.

     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, consumer products and on the Internet. Our information is used by businesses for sales leads, mailing lists, credit decisions, market research, competitive analysis and managing vendor relationships. Consumers use our information for travel planning, job searches, and due diligence among other things. During 2001 and 2002, the Company launched two new proprietary technologies, infoConnect^DM ONE PASS and Customer Analyzer and Prospect Builder^TM. infoConnect^DM ONE PASS is an Internet driven data hygiene and enhancement software that was developed to cleanse our customer’s house files by matching their databases against our databases online. Customer Analyzer and Prospect Builder^TM analyzes the customer base of our clients and delivers prospects that have similar characteristics. infoUSA is the industry’s dominant provider of both business and consumer information, offering databases of 220 million consumers and 14 million businesses for endless customer applications.

Business 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, especially during the slow economy.

     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 14 million businesses for finding new prospects and increasing their sales. The information provided by our databases is integral to the decision-making process for businesses. Our organization is divided into three distinct groups: Database Compilation and Update Group, Small & Medium Business Group and Large Business Customer Group. Additionally, we utilize the Internet for distribution of our proprietary content and business credit reports. We believe the Internet complements our core business and in the future will be a dominant distribution channel. This expands our marketplace by allowing small businesses and consumers worldwide to access our databases and to purchase information with more frequency.

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     The Company’s introduction of infoConnect and Customer Analyzer and Prospect Builder is targeted toward salespeople and small business owners. These Internet based technologies will help to find new prospects and grow sales at a fraction of the cost of existing prospecting methods, such as trade shows, print advertising, billboards and television and radio advertising.

     Database Compilation and Update Group

     In 2002 we focused on creating the freshest, most up-to-date information, while expanding our core coverage and adding depth to our proprietary databases. We believe that we are the premier provider of databases of both businesses and consumers compiled and updated under one roof. We use thousands of sources and hundreds of proprietary processes developed over the last thirty years to compile and enhance our databases. We employ nearly 500 people, and spend over $50 million annually to create, maintain, enhance and deliver our databases.

     Business Database. Our proprietary business database contains information on nearly 14 million businesses in the United States and Canada. The database contains a wealth of information about businesses such as: name, address, phone number, SIC codes, number of employees, business owner and key executive names, credit score and sales volume. We also provide fax and toll free numbers, website addresses, headline news, and public filings including liens, judgments and bankruptcies. Our data can be categorized in various segments such as Small Business Owners, Executives at Home, Big Businesses and their Corporate Affiliations, Growing Businesses, and Female Business Owners. Additionally, vertical industry data segments are created such as Physicians and Surgeons, Schools, Restaurants, Places of Interest, Churches, and Government Offices.

     We compile the business information from over 15,000 sources. Sources such as the yellow pages are used to identify businesses for inclusion in the database. As an innovative industry leader in database compilation, we now include utility service connects and disconnects in our database. This information allows us to provide our customers with the freshest, most accurate data available in the industry, as we are now able to identify new and out of business records much more quickly. Other sources, such as primary telephone research surveys, are used to enhance the database with key data elements like names of executives, primary SIC code, number of employees, fax numbers and Internet addresses. Additional sources, such as annual reports, SEC filings and public filings, are used to update the database with liens, judgments, bankruptcies, headline news, commercial debtor data, changes in leadership, address changes, corporate affiliation changes, and the like. In addition, we use information licensed from the United States Postal Service’s National Change of Address (NCOA) and Delivery Sequence File (DSF) to update and maintain our business database. Accuracy is the most important characteristic of any database and our database is approximately 95% accurate at any given time. This is the highest degree of accuracy in the industry.

     Consumer Database. With the acquisition of Donnelley Marketing, we gained over 85 years of consumer database compilation technology and proprietary models. We built upon this foundation to create the most comprehensive and accurate consumer database in the industry. Key elements in our database include name, address, phone number, age, income, marital status, presence of children, active bank card, religion, ethnicity, dwelling type and size, home value, length of residence, vehicle data, and dozens of self-reported behavioral and lifestyle elements.

     The foundation of the consumer database begins with the compilation of all households listed in telephone directories and other public sources such as real estate records. This core data source is compiled with the highest accuracy standards in the industry. The white page file is then enhanced with nearly 2 billion records from public sources and proprietary third parties to add individuals not listed in the telephone directories and to further enhance the records with demographic and psychographic data required to segment consumer prospects. In addition, our investment into a new, nationwide source of utility new connects and disconnects allowed us to identify new movers and homeowners as they transact with utility services and to update our core consumer file with the most recent information available. The end result is a database of 220 million consumers, 115 million households, and 55 million homeowners. In addition, we offer other specialty consumer files including: New Homeowners, New Movers, Occupant Addresses, Bankruptcies, Tax Liens and Judgments.

     Our e-Shareforce database is comprised of self-reported psychographic and demographic information collected via electronic surveys over the Internet. Information obtained through the Internet is timely, less expensive and the respondents have all provided the information voluntarily. Respondents to the e-survey provide information regarding purchase intention and habits, lifestyle characteristics and product usage. The e-Shareforce database consists of over 13 million households. Our marketing material has expanded our e-Shareforce brand to include many of our other business and consumer niche databases as well.

     Our Mastermatch file is the largest, most comprehensive multi-sourced consumer enhancement tool for appending consumer data to our client’s customer databases at both a household and individual level. This database allows customers to achieve the highest match rates possible for database enhancement purposes.

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     Email Marketing. In 2002, we made great strides in the collection and acquisition of opt-in business and consumer email addresses. We now offer a file of over 40 million consumer emails and 1.2 million business emails with postal addresses that are available for email marketing and email append applications. We have matched the emails to the demographic and firmographic information in our proprietary databases, to create highly targeted niches for email marketing.

     Products and Services Derived from the Database

     We create many products and services from our database to meet the needs of millions of potential customers. From our databases of 14 million businesses in the United States and Canada and 220 million consumers in the United States we produce products such as prospect lists, mailing labels, 3 x 5 cards, diskettes, printed directories, consumer products, business credit reports, and many other products and services. We also offer our information on the Internet through our various websites, such as infoUSA.com, BusinessCreditUSA.com, CityDirectory.com, Drlists.com, referenceUSA.com, newleadsUSA.com and autolistsUSA.com. Our products and data processing services are used by clients identifying and qualifying prospective customers, initiating direct mail campaigns, telemarketing, analyzing and assessing market potential, monitoring the effectiveness of marketing efforts and surveying competitive markets in order to find new customers and increase their sales at low costs. We are organized around two main customer groups: the Small & Medium Business Group and the Large Business Customers Group. Our products and services are designed for the unique needs of each group.

     Our Customers and Potential Markets

     Small & Medium Business Group

     Approximately 60% of all businesses are small companies with less than 5 employees. Small businesses are the lifeblood of our company and are often ignored by our competitors. We dedicated this division to meet the unique sales and marketing needs of small- and medium-sized businesses, including small office and home office businesses, and aspiring entrepreneurs. This market holds about 6 million potential prospects for infoUSA. Our products and services are used to find new customers, analyze current customers, research new markets and verify business information. Our database changes by nearly 70% annually. As a result, our customers have a great need for current information . Our Small & Medium Business Group offers sales leads and mailing lists in the following formats:

     Printed Prospect Lists, Mailing Labels, and Sales Lead Cards. The Company’s database can be “sliced and diced” to create customized sales lead and mailing lists for our customers. Our small business consultants work with a business to select the right criteria such as geography, type of business and size of business to generate the most revenue. The custom list can then be delivered in printed format, put on mailing labels or provided on 3 x 5 index cards.

     Diskette / CD / DVD Products. Many businesses prefer the flexibility of getting their list electronically so they can import the data into any software application. Customers have the flexibility of ordering their list on disk, DVD, CD, or downloading it from an FTP site.

     Sales Leads on the Internet. Our customers can buy all of our databases on the Internet at infoUSA.com, 24 hours a day, 7 days a week. Our site allows businesses to search our database by any number of variables, retrieve a count of the number of businesses in a particular market, or obtain a credit report on a particular company.

     Business-to-Business Sales & Marketing Directories — Printed, CD-ROM and Internet access. The Company offers a variety of titles: US Business Directory, State Business Directories, Big Business Directory, Manufacturers Directory, 575,000 Physicians and Surgeons, Households USA, and Entrepreneurs Directory. Each printed directory is bundled with a CD-ROM or DVD and allows for access to the information on the Internet, for one low price. Our customers use the directories for lead generation, telemarketing and reference purposes.

     Business Credit Directories and Reports. Our business credit directories include a printed directory bundled with a CD-ROM or DVD and access to Business Credit Reports on BusinessCreditUSA.com. The product is used by customers for making credit decisions, verifying company information, assisting in collection support, and identifying potential new customers. Customers can purchase individual business credit reports for $5 from the Internet or they may select a subscription based plan.

     Customer Analyzer and Prospect Builder. Our research and development efforts over the last two years are now bearing fruit. On infoUSA.com we offer small businesses an easy and affordable way to analyze their current customers.

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     We find the common qualities and then locate prospects that match these characteristics. The biggest challenge of most small businesses is finding the right new prospects. Our tool makes it fast and simple. Small businesses that can’t afford the luxury of high-dollar research and weeks of analysis can now go online and have a list of prospects in less than an hour.

     Polk Directories. Since 1870, The Polk City Directory® has been the trusted brand for providing residential, demographic, and business data information to small and medium businesses across the United States. Annually, over 900 versions of the directory are produced and delivered in hard cover book and CD-ROM format. Sales of these products are generated from the 200 plus field sales representatives, 20 plus telemarketing sales representatives, and on-going direct mail programs. Polk Directories’ 110,000 customers cover a wide range of industries including service, financial, and retail businesses.

	•		The Polk City Directory® consists of seven directories in one, designed to help businesses save time by planning sales calls efficiently, saving money by reducing undeliverable mail, and increasing sales by identifying prospects.
	•		InfoTYME®, our CD-ROM version of The Polk City Directory®, allows the customer to quickly search and select prospects, download prospect records into other applications for lead generation programs, and produce labels for telemarketing or direct mail campaigns.

     infoUSA acquired Polk Directories in the fourth quarter of 2001. Polk Directories provides us with another major channel for the sales and distribution of related infoUSA directory and list services products. We plan to offer Internet access and more directories in more cities to our subscribers.

     Hill-Donnelly Directories. During 2002, infoUSA acquired Hill-Donnelly, the nation’s original publisher of Cross-Reference Directories. Hill-Donnelly, founded in 1917, offers Cross-Reference Directories in over 300 metro markets totaling more than 40 million listings. Cross-Reference Directories may be searched by telephone number or by street address (e.g. cross-reference directories).

     Consumer & Small Office -Home Office Markets Products. The Company’s CD-ROM Retail division includes popular business and consumer titles such as Select Phone, PowerFinder, Directory Assistance USA, Caller ID, Yellow Pages USA, Streets USA and Business Credit Ratings USA. These products are sold at over 5,000 retail outlets in North America, including Office Depot, Staples, CompUSA, Fry’s Electronics, Electronics Boutique, Micro Center and Future Shop. Consumers and small business owners use these products to develop targeted direct mail campaigns, directory assistance, job search, travel planning, sales leads and general reference purposes. The retail products come in the form of a DVD/CD and are currently priced between $9.95 and $119.00.

     The retail channel is an excellent vehicle to build awareness and sales of infoUSA products. These retail products encourage a one-time purchase with the goal of registering the customer for an annual subscription. It is also an excellent way to cross-sell the many other InfoUSA products and services.

     Large Business Customer Group

     Our Large Business Customer Group is comprised of Donnelley Marketing, Walter Karl and the infoUSA Database Licensing Group.

     Donnelley Marketing is one of the nation’s leading direct marketing solution providers, targeting medium and large size firms where quality data and customer service count. Our mission is to help businesses find new customers, grow their sales, reduce selling costs and become more profitable. Donnelley’s reputation has been built by delivering consistent results to clients for 85 years.

     Donnelley Marketing serves a variety of industries including traditional direct marketers, packaged goods, retailers, financial institutions, telecommunications, utilities, technology, fund raising, automotive and catalog companies. Donnelley Marketing maintains over 300 marketing databases, processes over 50 billion records annually, creates 200 custom models each year and delivers personalized care to more than 2,000 customers.

     Our goal in 2002 was to increase client access to our databases and data processing services while reducing turnaround time and lowering costs. We were pleased to increase the revenue of infoConnect^TM ONE PASS, which was introduced last year. infoConnect^TM ONE PASS is an Internet driven software that performs data cleansing and enhancement services online. In the past, customers sent their tapes to us and we would match those tapes against our databases and send them back to the customers in days or weeks. Now, they can do it online, 24 hours a day, seven days

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a week. Not only does it save our customers money, but also our fulfillment costs are lower. We are in the process of transitioning our clients to a recurring revenue model through this automated system. This offering is attractive to large, medium and small organizations.

     infoConnect^DM ONE PASS provides online, real-time data enhancement and file cleansing access to the following databases:

•		220 Million National Consumer Database — the industry’s largest and most comprehensive consumer database.
•		14 Million National Business Database — the world’s finest business content.
•		15 Million National Privacy Database — provides marketers with the ability to eliminate people who will not respond to their offer.
•		All Major USPS Data Hygiene Databases — Donnelley Marketing licenses all five of the major United State Postal Service data hygiene databases.

     2002 also proved to be a highly successful year for our client marketing database unit. MarketZone Analytics, a closed loop, Internet enabled, fully relational database tool for decision support, campaign management and execution system, was introduced to provided our clients the ability to expertly manage their customer relationships. This new product is an e-CRM (customer relationship management) solution that integrates the entire suite of Donnelley Marketing products to create real-time customer content integration.

     CatalogVision^TM, a division of Donnelley Marketing, has been specializing in the catalog marketing industry for over 30 years serving both business-to-business and consumer direct marketers. CatalogVision^TM clients maximize the return on their promotion dollars through use of our information and processing services. Address integrity and merge/purge toolsets eliminate wasted mailings and optimize postal discounts. Relational marketing database systems enable multichannel contact management and personalization.

     Walter Karl, a division of Donnelley Marketing, provides list brokerage, list management services and an array of database services to a broad range of direct marketing clients. Walter Karl also specializes in email list management and brokerage services for on-line marketers. Our specialized list management services provide a strong revenue base for our customers. In addition, we have our list brokerage business, which recommends and sells specialty lists to a wide range of businesses in many industries.

     The infoUSA Database Licensing Group continued its strategy of working with customers for whom data remains the core foundation of their product or service. The strength of our customers’ products is predicated on the accuracy, timeliness, and relevance of the data that drives it. Our distribution channel of Value Added Resellers and Original Equipment Manufacturers understand that the success and profitability of their service is largely dependent on the integration of infoUSA’s best-in-breed business and consumer information.

     The Database Licensing Group has customers that use the data in a variety of verticals, all which are unique in their integration of the database. In 2002, we re-organized the team to better reflect our customers’ unique needs and to respond to their database concerns. A new layer of account representatives was added to proactively service our customers, and sales employees with specific vertical expertise were deployed in strategic geographic markets. These changes were made to reflect our customer’s distinctive needs, and to gain a better foothold in the Directory Assistance, Risk Management, and CRM marketplaces.

     In 2002 the Database Licensing Group also focused itself on maintaining and expanding its relationships with some of the most recognizable brands in the Internet, including AOL, Yahoo!, and Microsoft. Furthermore, we increased our market share in Directory Assistance, Risk Management, and Navigation spaces.

     Most significant in 2002 was the announcement of our multi-year relationship with the Microsoft Small Business Group. infoUSA has licensed its Business Database for delivery through the Microsoft bCentral online marketplace. Small business users will be able to use infoUSA data through the Microsoft bCentral solution for lead generation, prospect marketing, and sales lead management. Further integration of the infoUSA database suite will occur in the second half of 2003.

     Also of note in 2002 was the Database Licensing Group continued success in the Vehicular Navigation System market. infoUSA has relationships with the OEM providers of navigation systems for select General Motors, Lexis, Mercedes, and Acura vehicles, among others, for access to on-demand point-of-interest (POI) information. The leaders

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of this market all rely on infoUSA to provide the highest quality POI and emergency services information. When a driver of one of these vehicles search for a gas station, restaurant, or other service, infoUSA data powers the response.

     infoUSA’s databases impact every aspect of our customer’s business. From enterprise partnerships to direct consumer access, infoUSA provides a quality foundation to our partner’s database applications.

     During 2002, infoUSA acquired ClickAction. ClickAction has developed a customer acquisition and retention solution designed for direct marketers, publishers and organizations that want to grow their customer database, develop personalized relationships with these customers and execute more effective email marketing campaigns. ClickAction provides an email marketing solution that expertly combines acquisition and retention strategies along with applied educational programs to deliver high returns on investment and strong overall results.

     Distribution Channels

     We sell our products and services through direct mail, telemarketing and a large team of Account Executives. We also sell through value added resellers and various websites, such as infoUSA.com, ListBazaar.com, CityDirectory.com, ReferenceUSA.com, DirectoriesUSA.com and BusinessCreditUSA.com. Our sales channels vary widely by product line. We currently employ over 650 sales executives who work with our customers.

     Internet Strategy

     The Company views the Internet as a dominant and important distribution channel for its information in the future. As the owner of the databases, infoUSA is uniquely able to use its content to exploit this channel. We use many website addresses to sell our products and services: infoUSA.com, ListBazaar.com, CityDirectory.com, ReferenceUSA.com, DirectoriesUSA.com and BusinessCreditUSA.com to name a few.

     infoUSA.com is actively making all of its content available via internet. To date, the following databases are available: 14 million business database, 115 million households database, doctors and dentists database, monthly new business database and new home owners and new movers database.

     During 2002, the Company launched a revolutionary software called Customer Analyzer and Prospect Builder^TM. This Internet based tool will help small business owners and salespeople find prospects just like their current customers. This proprietary software developed by the Company takes the guesswork out of finding new prospects. Our client sends the phone numbers of its existing customers to the Customer Analyzer and Prospect Builder^TM software. The software matches the phone numbers of the customers to infoUSA’s business database of 14 million businesses and 220 million consumers. The business customers are analyzed by modeling software that takes into account number of employees, sales volume, credit rating code, years in business etc. The consumer customers are analyzed by such factors as age, income, home value and other characteristics. At the completion of the analysis the customer can see their prospects on the Internet and choose prospective customers by any zip code, city, state or county. They can preview the names and cherry pick only the prospects they want and save the rest for later. The software also suppresses their existing customers.

     infoConnect^DM ONE PASS is a state-of-the-art, scalable, on-line, real-time system enabling clients to integrate data from multiple touch points across their enterprise. infoConnect presents an evolution in customer integration and sets a new standard in delivering speed, accuracy, and customer information management.

     We have websites for all our divisions to sell their products and the products of other divisions on the Internet. We are sending approximately 4 million e-mails per month to advertise our web sites.

     We have advanced our development as e-infomediary by using the Internet as a valuable tool for data compilation as well as distribution. We have introduced Internet opt-in consumer surveys, where consumers can volunteer lifestyle and buyer behavior that can be used to assist web marketers in targeting advertising to best meet their needs. The opt-in feature also allows us to match online and offline data to form a complete profile of consumer purchase intentions and decisions. This self-reported survey information can be obtained on the Internet with more speed, greater accuracy and at lower cost than mail-based surveys. In this way, we intend to use the Internet to increase productivity, reduce data compilation costs and obtain more relevant real-time information in the database. As with the consumer surveys, we are adding self-reported options to the infoUSA.com site in order to enhance our database with more unique and valuable information. For example, businesses will be able to update their own database information online, adding content such as names, titles and e-mail addresses of executives, as well as other demographics.

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     Computer Operations and Database Protection

     The Company currently operates four interdependent data centers located in Omaha, Nebraska; Papillion, Nebraska; Carter Lake, Iowa; and Greenwich, Connecticut. Together these sites host the core product offerings that are infoUSA. The Company contracts all mainframe data processing functions through (i)Structure, a subsidiary of Level3, headquartered in Omaha, Nebraska.

     The Company’s current initiative is the construction of an N+1 central data center in Carter Lake, Iowa resulting in the elimination of the Greenwich, Connecticut data center. This initiative is expected to consolidate select hardware and services into a protected facility providing fault tolerance and greater control over business operations and business resumption. Business continuity will be assured through our use of the enhanced Carter Lake facility and the remaining Ralston and Papillion data center locations along with our partnered mainframe processor (i)Structure.

     Given the new initiative, with minimal effort the Company will be able to reestablish administrative functions, sales and marketing operations, data delivery and limited product order fulfillment at any combination of the unaffected data center locations.

     Currently, the Omaha Data Center supports our sales order entry systems, contact management system, several Internet website systems, electronic data delivery systems, company enterprise systems (e.g. email, file/print servers) and accounting systems.

	•		Sales Order Entry and accounting systems run on an IBM AS/400 model 820 P30 Series and two SUN UNIX machines. Contact Management is loaded on a SUN E3500 system.
	•		The Internet websites reside on approximately 18 SUN E420-E250-E220 model servers and 13 DELL 2650 and 4600 servers.
	•		Electronic data delivery systems run on 5 SUN units — 3 E4500’s, 2 E3500’s and 1 SUN E6000 server.
	•		Enterprise systems are driven by DELL 6600 servers running Microsoft NT.
	•		This center is also the central node for the Local and Wide Area Network connectivity for desktop computers and application servers. Data communications have been enhanced by the installation of the Qwest Self Healing Network Service.

	•		WAN connectivity is achieved through 6 Meg of X.25 FRAME service.
	•		Data connectivity is facilitated through an ATM OC3 pipe integrated in our OC48 Self Healing Network between the Omaha — Papillion — Carter Lake facilities. Internet access is established through Tier 1 services of AT&T and Qwest at 12 Megs each.

	•		This center also houses a Nortel Option 81C PBX for telephone and ACD Sales call center services within the facility. WorldCom and Qwest provide primary long distance and local dial tone service over the Self Healing Network.
	•		The Omaha data center is protected by a chemical fire suppression system and a battery UPS backup system. Business and financial data is backed up daily and transferred to an off-site storage facility.

     Our Papillion Data Center contains the data compilation systems, enterprise support systems, and software development platforms.

	•		The business database compilation process operates on an IBM AS/400 Model 640 P40 Series 4-Way in conjunction with 5 SUN units, 3 ULTRA 60 and 2 ULTRA 5 systems to support the Davox predictive dialing program.
	•		Software development and testing is done on a mixture of three other IBM AS/400s, a Model640 P40, a Model 530 P40, and a Model S20 P10.
	•		The consumer database compilation process utilizes several DELL servers running Microsoft Windows 2000. Enterprise systems are run on large-scale servers running Microsoft NT.
	•		Network services to desktop computers and terminals and other data centers are supported in this center.
	•		Like the Omaha center, this center also contains a Nortel Option 81C PBX with dial tone services provided by WorldCom and Qwest across the Self Healing Network.
	•		A chemical fire suppression system, UPS battery backup system, and a diesel generator insure protected operations at the Papillion center. Critical data is backed up daily and stored off-site. This facility is staffed with a team of over 80 Information Technology professionals.

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     The Carter Lake Data Center is home to the business and consumer order fulfillment systems.

	•		An IBM AS/400 model 740 P50 Series 8-Way, a myriad of DELL servers running Microsoft Windows NT and SUN E3500 and 250 systems, provide order fulfillment services.

	•		Various high-end printers, CDROM, magnetic tape, and diskette devices are used to produce the customer’s product.

	•		A Nortel Option 11C PBX provides facility telephone services. All communications, data and voice ride the Self Healing Network.
	•		The Carter Lake center is protected by a chemical fire suppression system and an UPS battery backup system. Data is backed up daily and stored off-site. This facility is staffed by 20 production, operations, and shipping professionals.

     The Greenwich data center supports Donnelley Marketing for the receipt of customer files and the creation of all customer outputs. Donnelley Marketing has entered into a computer services agreement with (i)Structure to outsource all of its mainframe processing. (i)Structure provides Donnelley a secure processing environment and state-of-the-art facilities infrastructure with a dedicated mainframe, disk storage, and a combination of virtual, silo, and manual tape. (i)Structure is considered one of the premier mainframe outsourcers in the industry. They focus heavily on providing superior customer service and maintaining a high level of security. This relationship will transition to the new Carter Lake facility.

     Mainframe hardware at the Greenwich Data Center utilized for customer file processing is connected to (i)Structure via multiple high speed DS3 data circuits employing CNT channel extender technology. Heavy emphasis is placed on quick turnaround, while maintaining a high level of quality control, to ensure that customer needs are being met.

     All product and service fulfillment processes, procedures and hardware utilized at the Greenwich data center have been identified. The best of these identified elements will be brought to Carter Lake and integrated ensuring a seamless transition of products and services.

	•		The Greenwich Data Center houses eight midrange UNIX Servers, five midrange OpenVMS Servers, multiple high-end NT Servers, and a large PC/LAN Network.
	•		A Nortel Option 61C PBX provides telephone services for the facility. The facility also maintains direct connectivity to the Internet via UUNet and a WAN connection to all other Company computer facilities.
	•		All midrange and mainframe class computers are used to service direct marketing needs to large and mid-sized clients, many in the Fortune 500 marketplace. The mainframe is used in every aspect of direct marketing computer services while the mid-range systems are used in a client server or three tiered architecture to house relational database marketing files.
	•		The Greenwich data center is protected by a chemical fire suppression system, a UPS battery backup system and a diesel generator. Data is backed up daily and stored off-site.

     Intellectual Property and Other Proprietary Rights

     For more than 85 years, Donnelley Marketing, and over the last 30 years, infoUSA have developed a lot of processes, software, techniques and models that are unique, sophisticated and proprietary. Our databases are copyrighted, and we depend on trade secret and non-disclosure safeguards for protection of our intellectual property. We distribute our products under agreements that grant customers a license to use our products in the ordinary course of their businesses and contain terms and conditions prohibiting the unauthorized reproduction of our products. In addition, we generally enter into confidentiality agreements with our management and programming staff and limit access to and distribution of our proprietary information. There can be no assurance that the steps taken by us will be adequate to deter misappropriation of our proprietary rights or independent third party development of substantially similar products and technology. We believe, however, that legal protection of our database and software is less significant than the knowledge and experience of our management and personnel, and their ability to develop and market existing and new products and services to millions of customers.

     Competition

     The business and consumer marketing information industry is highly competitive. We believe that competition in our industry is based on the quality and comprehensiveness of the information provided, the ability to deliver the information in products and formats that the customer needs, the distribution channel and to a lesser extent, on the pricing of information products and services. We also believe that the ability to provide proprietary consumer and business

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databases along with data processing and database marketing services is a key competitive advantage. A number of competitors are active in specific aspects of our business. In business sales lead products and credit report market, we face competition primarily from D & B (e.g. Dun & Bradstreet). D & B relies upon information compiled from its credit database. In consumer sales lead products, we compete primarily with Acxiom, Experian, Equifax and Harte-Hanks Data Technologies, both directly and through reseller networks. In data processing services, we compete primarily with Acxiom, Experian and Harte-Hanks Data Technologies.

     Employees

     As of December 31, 2002, we employed a total of 2,000 people on a full-time basis. None of our employees is represented by a labor union or is the subject of a collective bargaining agreement. We have never experienced a work stoppage and believe that our employee relations are good.

     Executive Officers of the Registrant

     The current executive officers of the Company are as follows:

     Vinod Gupta is the founder of the Company and has been Chairman of the Board of the Company since its incorporation in 1972. Mr. Gupta served as Chief Executive Officer of the Company from the time of its incorporation in 1972 until September 1997 and since August 1998. Mr. Gupta holds a B.S. in Engineering from the Indian Institute of Technology, Kharagpur, India, and an M.S. in Engineering and an M.B.A. from the University of Nebraska.

     Stormy L.Dean has served as Chief Financial Officer since January 2000. He served as the Corporate Controller from September 1998 until January 2000 and as the acting Chief Financial Officer from January 1999 to August 1999. From August 1995 to September 1998, Mr. Dean served as the Company’s Tax Director. Prior to that, Mr. Dean worked in the Tax Department of Peter Kiewit Sons Inc., a construction and telecommunications company, from January 1990 until joining the Company in August 1995. Mr. Dean holds a B.S. in Accounting from the University of Nebraska at Omaha, an M.B.A from the University of Nebraska at Omaha, and a Certified Public Accountant certificate.

     Scott C. Roberts has served as Corporate Controller since joining the Company in February 2000. From August 1995 until February 2000, Mr. Roberts was the Controller for the Life Cycle Services division of Inacom Corp, a technology management services company headquartered in Omaha, Nebraska. From May 1991 until August 1995 Mr. Roberts was the Director of Internal Audit for First National of Nebraska, Inc., a multi-billion dollar bank holding company. Mr. Roberts holds a B.S. in Accounting from the University of Nebraska at Omaha and is a Certified Public Accountant (inactive registrant) in the state of Nebraska.

     Fred Vakili has served as Executive Vice President of Administration and Chief Administrative Officer since August 1998. Mr. Vakili served as Senior Vice President of Special Projects from October 1997 to August 1998, as Senior Vice President of Value Added-Resellers Group and Canada Operations from May 1987 to October 1997, and as Senior Vice President of various Company divisions from 1985 to 1987. Mr. Vakili joined the Company in 1985 as the Product Manager for the Directory Group. Mr. Vakili holds a B.S. in Industrial Engineering and Management from Iowa State University.

     Ray Butkus has served as President of Donnelley Marketing since December 2002. Mr. Butkus previously served as President and Chief Operating Officer of Naviant Marketing Solutions from early 1999 until the successful merger of the Company in late 2001. Mr. Butkus was the Vice President and General Manager for IntelliQuest’s IQ2.Net division from January 1998 through August 1999. Mr. Butkus was President and Chief Operating Officer of GEN Logistics Systems, a start-up Cyberspace venture providing information services to the transportation industry, from 1996 to 1997. Mr. Butkus worked for AT&T from 1976 to 1996, most recently as Sales Vice President, where he was responsible for a 700 person sales force and $650 million in annual revenues. Mr. Butkus holds a B.S. in Business Management from Providence College. Mr. Butkus also holds a MBA from the University of Puget Sound and is a graduate of Harvard Business School’s Advanced Management Program.

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     Allen F. Ambrosino has served as Executive Vice President of Business Development & Cross Selling Opportunities since December 2002. Mr. Ambrosino served as President of Donnelley Marketing from September 2000 to December 2002, as Executive Vice President of Donnelley Marketing from July 1999 to September 2000, and as President of Database America (DBA) from November 1991 to July 1999. The Company acquired DBA in February 1997. Mr. Ambrosino holds a B.S. in Business Administration from Fairleigh Dickinson University.

     D.  Joseph Thayer has served as President of the Small Business Group since May 1999, as Senior Vice President from October 1997 to May 1999, and as a Vice President and General Manager since joining the Company in 1993. Prior to that, Mr. Thayer worked for US West, Inc., and as a legislative aide in the U.S. House of Representatives. Mr. Thayer holds a B.A. in Political Science from the University of Nebraska, and an M.B.A. from Auburn University.

     Monica Messer has served as President of the Database and Technology Group and Chief Information Officer of the Company since February 1997, and served as a Senior Vice President of the Company from January 1996 to January 1997. Ms. Messer joined the Company in 1983 and has served as a Vice President of the Company since 1985. Ms. Messer holds a B.S. in Business Administration from Bellevue University.

     Edward C. Mallin has served as President of Walter Karl since June 1998, as Executive Vice President of the National Accounts Division from January 1997 to June 1998 and as President of Compilers Plus from January 1990 to May 1998. Prior to that, Mr. Mallin was Executive Vice President of Compilers Plus which the Company acquired in January 1990. Mr. Mallin holds a B.A. in History from the University of Bridgeport and an M.A. in Business Administration from New York University.

     Website Information

     The Company has a website at www.infousa.com. Contents of the website are not part of, or incorporated by this reference, into this Annual Report.

     Since November 15, 2002, the Company has made available on its website all annual and quarterly reports, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company has filed such material with, or furnished it to, the SEC.

ITEM 2. Properties

     Our headquarters are located in a 148,000 square foot facility in Omaha, Nebraska, where we perform sales and administrative activities. Order fulfillment and shipping is conducted at our 30,000 square foot Carter Lake, Iowa facility, which is located 15 miles from our headquarters. Administration and management are also located in a 24,000 square foot facility in Omaha, Nebraska, which is adjacent to our sales and administration facility. Data compilation, telephone verification, data and product development, and information technology services are conducted at our 130,000 square foot Papillion, Nebraska facility which is located about 5 miles from our headquarters. Donnelley Marketing catalog sales operations are performed in a 40,000 square foot location in Marshfield, Wisconsin. We own these facilities, as well as adjacent land at certain locations for possible future expansion.

     In addition, we lease a 69,000 square foot facility in Greenwich, Connecticut which lease expires in October 2003. The Greenwich, Connecticut facility houses various Donnelley Marketing sales and operations functions, and serves as one of our data centers. Donnelley Marketing also leases a 60,000 square foot facility in Ames, Iowa, which houses consumer database and client services operations. Donnelley Marketing is currently headquartered in Omaha, Nebraska. We also lease sales office space at approximately 45 different locations in the United States, Canada and the United Kingdom, the aggregate rental obligations of which are not significant.

ITEM 3. Legal Proceedings

     During 2002, the Company settled legal issues totaling $0.4 million in connection with the settlement of two contractual disputes. There are no material pending legal or governmental proceedings involving the Company, other than ordinary routine litigation, incidental to the business of the Company.

ITEM 4. Submission of Matters to a Vote of Securityholders

     No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this 2002 Annual Report on Form 10-K.

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PART II

ITEM 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

     Our Common Stock, $0.0025 par value, is traded on the NASDAQ National Market System under the symbol “IUSA:.

     The following table sets forth the high and low closing sales prices for our Common Stock during each quarter of 2002 and 2001.

COMMON STOCK

     As of March 5, 2003, there were 144 stockholders of record of the Common Stock, and an estimated additional 3,500 stockholders who held beneficial interests in shares of common stock registered in nominee names of banks and brokerage houses.

     We have not declared or paid any cash dividends on our capital stock. We intend to retain future earnings to fund the development and growth of our business and, therefore, do not anticipate paying cash dividends within the foreseeable future. Any future payment of dividends will be determined by our Board of Directors and will depend on our financial condition, results of operations and other factors deemed relevant by our Board of Directors. Existing credit agreements generally prohibit the payment of dividends or other distributions with respect to our common stock.

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ITEM 6. Selected Consolidated Financial Data

     The following selected consolidated financial data as of the end of, and for each of the years in the five-year period ended December 31, 2002 are derived from the Company’s audited Consolidated Financial Statements and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes included elsewhere in this Form 10-K. The Company has made several acquisitions since 1998 that would affect the comparability of historical data. See Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Consolidated Financial Statements as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002, are included elsewhere in this Form 10-K.

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		Intangible Assets.” As required by SFAS 142, goodwill amortization was not recorded on new acquisitions after July 1, 2001 for fiscal year 2001 and no goodwill amortization was recorded during 2002.
(2)		During 2000, the Company recorded an impairment loss of $2.1 million for certain capitalized software development costs, fixed assets related to the abandoned infoPIX business photograph project, as well as a cost for a proposed public offering and leasehold improvement costs of infoUSA.com, a subsidiary of the Company.
		During 1999, the Company recorded an impairment loss of $3.9 million on the Company’s existing consumer database due to the acquisition of Donnelley Marketing and an impairment loss of $1.7 million on leasehold improvements and in-process construction projects due to the move of the Company’s data processing operations from Montvale, NY to Greenwich, CT.
(3)		Includes the following acquisition costs: 1) $0.2 million related to various acquisitions made during 2002, 2) $0.5 million in 2001 for the acquisition of Polk City Directories from Equifax, Inc., 3) $1.8 million in 2000 for the attempted acquisition of the consumer database division of R.L. Polk and $0.5 million related to the acquisitions of idEXEC, American Church Lists and Getko Direct Response, 4) $4.2 million in 1999 associated with the acquisition and integration of Donnelley Marketing, and 5) $3.0 million in 1998 of costs associated with the Company’s bid to acquire Metromail Corporation and $0.6 million associated with the Company’s offering to sell Common Stock which was not completed. These costs are not direct costs of acquisition and therefore can not be capitalized as part of the purchase price. Rather, these are general and administrative costs incurred in connection with the integration of these businesses.
(4)		During 2002, the Company recorded restructuring charges for severance costs of $2.5 million for 230 employees terminated during the year. During 2001, the Company recorded the following restructuring charges: 1) $2.1 million of severance costs for the termination of 265 employees, and 2) estimated lease termination costs of $2.8 million associated with the infoUSA.com Foster City, California location. During 2000, the Company recorded the following restructuring charges: 1) $2.1 million of severance costs for 350 employees terminated during December 2000, and 2) estimated lease termination costs of $3.7 million associated with the infoUSA.com Foster City, California location. During 1998, the Company recorded the following restructuring charges: 1) $1.4 million related to the Company’s compilation and sales activities for new businesses, and 2) $1.2 million related to certain cost reduction measures enacted by the Company.
(5)		During 2002 and 2001, the Company settled legal issues totaling $0.4 million and $1.1 million, respectively, in connection with the settlement of various contractual disputes. During 1998, the Company incurred $4.5 million in damages awarded to Experian Information Solutions, Inc. in connection with arbitration of a contractual dispute.
(6)		During 1998, the Company incurred charges of $3.8 million for purchased in-process research and development costs associated with the acquisition of Walter Karl, Inc.
(7)		During 2000 and 1999, infoUSA.com, completed its first and second rounds of venture capital financing. As a result of the issuance of common stock of this subsidiary, the Company recorded gains of $14.6 million and $8.9 million, respectively.
(8)		During 2002, the Company recorded other charges totaling $2.7 million for: 1) a loss of $1.1 million for an other-than-temporary decline in the value of a nonmarketable equity investment, 2) a charge of $1.2 million for the reclassification of an interest rate swap agreement due to the refinancing of the Company’s senior debt credit facility during the year, and 3) the Company repurchased $9.0 million of its Senior Subordinated Notes. As part of the repurchases, the Company recorded charges totaling $0.4 million for net unamortized debt issue costs related to the Senior Subordinated Notes and for amounts paid in excess of carrying value. During 1998, the Company recorded a charge of $2.0 million for an other-than-temporary decline in the value of a nonmarketable investment.
(9)		During December 2000, the Company discontinued the operations of its VideoYellowPages.com Internet unit and recorded a loss of $4.2 million, net of tax. The loss is comprised of two components: 1) the loss of its results of operations of $3.4 million, net of tax for the full fiscal year, and 2) charges totaling $0.8 million, net of tax, for asset impairments. The loss from this discontinued operation for 1999 was $1.5 million, net of tax.

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(10)		During 2002, the Company refinanced its senior debt credit facility resulting in a charge of $1.8 million, net of tax, for the net unamortized debt issue costs related to the extinguishment of the senior debt credit facility. During 1999, the Company repurchased $9.0 million of its Senior Subordinated Notes. As part of the repurchase, the Company recorded a net gain of $0.1 million.
(11)		During 2000, the Company changed its revenue recognition method for data licensing revenue. Effective January 1, 2000, the Company began to recognize revenue on data license arrangements on a straight-line basis. This change in method was made because a growing proportion of such license revenue is from long-term and continuous access agreements. The Company believes the newly adopted method of accounting better reflects the service commitment inherent in its various license agreements. The cumulative effect of the change in method of $10.3 million is net of income tax benefit of $3.5 million. Assuming the above described revenue recognition policy had been implemented on January 1, 1998, pro forma consolidated net sales, net income from continuing operations and net income from continuing operations per share would have been as follows:

(12)		“EBITDA, as adjusted,” is defined as operating income (loss) adjusted to exclude depreciation and amortization, impairment of assets, non-cash stock compensation expense and in-process research and development charges. EBITDA is presented because it is a widely accepted indicator of a company’s ability to incur and service debt and of the Company’s cash flows from operations excluding any non-cash items. However, EBITDA, as adjusted, 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, as adjusted, may not be comparable to similar measures reported by other companies.
		The following provides a reconciliation of operating income (loss) to EBITDA, as adjusted:

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Overview

     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 nearly 14 million businesses and 220 million consumers in the United States and Canada. 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.

     EBITDA, as adjusted, margins were down from 31% in 2001 to 27% in 2002 as the Company continued to experience softer customer demand and the loss of higher margin license contracts with Internet companies that went out of business. The Company offset the lost Internet license revenue with the complete integration of Polk City Directories and six acquisitions completed during 2002. The higher cost structure of the acquired companies contributed in large part to the lower margins.

     During 2001 and 2002, the Large Business Customer Group continued to experience softer customer demand due to the macroeconomic downturn that began in the fourth quarter of 2000. As a result, some of its Fortune 1000 customers were impacted by budgetary constraints, forced to postpone capital spending decisions, reduced spending on direct marketing, and in certain cases, the customers brought much of the direct marketing function in-house. The Database Licensing Group was also impacted by the slow economy and by many of the Internet companies which licensed data but subsequently went out of business. Accordingly, the large business segment reduced its operating cost structure and is well positioned to continue to focus on expense control and profitable revenue growth through the development and introduction of innovative new products. These include the recently introduced info Connect ONE PASS that provides for automated data enhancement and file cleansing services, and MarketZone DS, a premier e-CRM solution that integrates the entire suite of Donnelley products to create a real-time customer content integration and decision support tool. Recent additions to the Donnelley Marketing management team will bring a fresh approach to selling a complete package of data and data processing services to its customers, creating a value model that positions Donnelley Marketing for profitable revenue growth.

     The Company has supplemented its internal growth through strategic acquisitions. The Company has completed 20 acquisitions since mid 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 it offerings for e-mail and business marketing information. During 2002, the Company completed the integration of Polk City Directories and enhanced its presence in e-mail marketing services with the acquisition of DoubleClick’s email deployment business and Clickaction. The Company also continued to consolidate the printed and online directory industry with its acquisition of Hill-Donnelly and City Publishing directory companies.

     Since 1996, 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.

     Critical Accounting Policies

     Our significant accounting policies are described in Note 2 to the audited Consolidated Financial Statements. Of those policies, we have identified the following to be the most critical because they are the most important to our portrayal of our results of operations and financial condition and they require subjective or complex management judgments:

	•		Revenue recognition and related estimates of valuation allowances for doubtful accounts, sales returns and other allowances;
	•		Database acquisition, development and maintenance expenses; and
	•		Valuation of long-lived and intangible assets and goodwill.

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     Revenue recognition. 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. With the expansion of our Consumer Products Division, and the acquisition of Pro CD and Digital Directory Assistance, revenue from consumer CD-Rom products increased substantially between 1993 and 1997. Retail sales of consumer products generate leads for our subscription sales department, which is highly profitable. Walter Karl was acquired in 1998 and combined with JAMI Marketing Services to form what is now know as Walter Karl, our list brokerage business. Finally, 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. We estimate that no customer represented greater than approximately 4% of net sales in 2002. As described below, significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period.

     Revenue from the sale of prospect lists, mailing labels, published directories, other sales lead products and DVD and CD information products are recognized upon shipment. These product sales are typically evidenced by a written purchase order or by credit card authorization. Terms and conditions for the sales of DVD and CD information products include rights of return. Accordingly, we estimate and record an allowance for product returns and reduce the amount of recognized revenue by anticipated product returns. The estimate of the product returns is made by giving consideration to the historical trends in sales and product returns, estimates of product inventory currently in the channel of distribution, and the timing and release of new product versions.

     Data processing revenues are billed on a time and materials basis, with the recognition of revenue occurring as the services are rendered to the customer.

     Revenue from the licensing of our data to third parties is recognized on a straight-line basis over the life of the agreement, when we commit to provide the customer either continuous data access (i.e., “24/7” access via the Internet) or updates of data files over a period of time. Licenses are typically evidenced by written contracts. We adopted this policy in 2000 because we believe this method better reflects the service commitment inherent in the licensing agreements in light of a growing proportion of such long-term and continuous access agreements. We also license data to customers with no such commitments. In those cases, we recognize revenue when the data is shipped to the customer, provided all the revenue recognition criteria have been met.

     We assess collectibility of revenues and our allowance for doubtful accounts based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. We do not request collateral from our customers. An allowance for doubtful accounts is established to record our trade accounts receivable at estimated net realizable value. If we determine that collection of revenues are not reasonably assured at or prior to the delivery of our products, we recognize revenue upon the receipt of cash. Cash-basis revenue recognition periodically occurs in those cases where we sell or license our information products to a poorly capitalized company, such as an Internet startup company. However, sales recognized on this basis are not a significant portion of our total revenues.

     Database Costs. The Company’s database and production costs are generally charged to expense as incurred and relate principally to maintaining, verifying and updating its databases, fulfilling customer orders and the production of DVD/CD titles. Costs to develop new databases are capitalized by the Company and amortized upon the successful completion of the databases, over a period ranging from one to five years. Our cost of maintaining the Company’s consumer and business databases does not necessarily vary directly with revenues since a significant portion of the cost is the maintenance and verification of our existing data. Consequently, operating income may vary significantly with changes in revenue from period-to-period, as our ability to adjust certain elements of our cost structure is limited in the short-run.

     At December 31, 2002, the Company had no capitalized database costs (net of accumulated amortization). Because we expense the costs of maintaining and verifying the Company’s existing database, our balance sheet does not include an asset for the value of our database. We believe that our databases of consumer and business information are valuable intellectual property assets. Our success in marketing our products and services depends, in large part, on our ability to maintain an accurate and reliable database of business and consumer information.

     Related party transactions. As discussed in Note 12 to the audited Consolidated Financial Statements included elsewhere in this Form 10-K, the Company paid $2.2 million during 2002 to Annapurna Corporation, which is 100%

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owned by Mr. Gupta, who is Chairman and Chief Executive Officer of the Company, for use of NetJets aircraft for infoUSA management and employee travel expenses. The expenses are authorized by the Company’s management and board of directors to support Mr. Gupta’s and other executives’ responsibilities related to customer relationship, business development, new acquisitions and other strategic initiatives. Arrangements between the Company and Annapurna Corporation are subject to periodic review by the Company’s management and board of directors.

     Valuation of long-lived and intangible assets and goodwill. Prior to the adoption of SFAS No. 142, the Company assessed the impairment of identifiable intangibles, long-lived assets and related goodwill and enterprise level goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considered important which could trigger an impairment review included the following:

	•		Significant underperformance relative to expected historical or projected future operating results,
	•		Significant changes in the manner or use of the acquired assets or the strategy for our overall business,
	•		Significant negative industry or economic trends,
	•		Significant decline in our stock price, and
	•		Our market capitalization relative to net book value.

     When we determine that the carrying value of intangibles, long-lived assets and related goodwill and enterprise level goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure impairment based on estimated fair value of the assets. Net intangible assets, long-lived assets, and goodwill amounted to $273.2 million as of December 31, 2002.

     The Company adopted the provisions of SFAS No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets” effective January 1, 2002. Therefore, the Company ceased to recognize annual amortization of approximately $16.5 million of goodwill effective January 1, 2002, that was amortized during 2001. In accordance with SFAS No. 142, the Company performed an initial impairment test of goodwill and concluded no impairment existed at January 1, 2002. In addition, the Company completed an impairment test as of October 31, 2002 and determined that no impairment existed.

     Income Taxes. Accounting for income taxes requires significant judgments in the development of estimates used in income tax calculations. Such judgments include, but would not be limited to, the likelihood the Company would realize the benefits of net operating loss carryforwards, the adequacy of valuation allowances, and the rates used to measure transactions with foreign subsidiaries. As part of the process of preparing the Company’s financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which the Company operates. The judgments and estimates used are subject to challenge by domestic and foreign taxing authorities. It is possible that either domestic or foreign taxing authorities could challenge those judgments and estimates and draw conclusions that would cause the Company to incur tax liabilities in excess of those currently recorded. Changes in the geographical mix or estimated amount of annual pretax income could impact the Company’s overall effective tax rate.

     To the extent recovery of deferred tax assets is not likely based on estimation of future taxable income in each jurisdiction, the Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Although the Company has considered future taxable income along with prudent and feasible tax planning strategies in assessing the need for the valuation allowance, if the Company should determine that it would not be able to realize all or part of its deferred tax assets in the future, and adjustment to deferred tax assets would be charged to income in the period any such determination was made. Likewise, in the event the Company was able to realize its deferred tax assets in the future in excess of the net recorded amount, an adjustment to deferred tax assets would increase income in the period any such determination was made.

     Investments. The Company records a non-cash charge to earnings when it determines that an investment has experienced an “other than temporary” decline in market value. To make this determination, the Company reviews the carrying value of its marketable equity security investments at the end of each reporting period for impairment. Other-than-temporary impairments are generally recognized if the market value of the investment is below its current carrying value for an extended period, which the Company generally defines as six to nine months, or if the issuer has experienced significant financial declines or difficulties in raising capital to continue operations, among other factors. Future adverse changes in market conditions or poor operating results of underlying investments could result in an inability to recover the carrying value of the recorded marketable securities, thereby possibly requiring additional impairment charges in the future.

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     The Company has supplemented its internal growth through strategic acquisitions. The Company has completed numerous acquisitions since mid-1996. Through these acquisitions, the Company has increased its presence in the consumer marketing information industry, greatly increased its ability to provide data processing solutions, added two consumer CD-ROM product lines, increased its presence in list management and list brokerage services and broadened its offerings of business and consumer marketing information. The following table summarizes the more significant acquisitions:

     As part of these strategic acquisitions, the Company has incurred various acquisition-related charges to integrate operations, consisting of: 1) $0.2 million in 2002 in connection with several acquisitions, 2) $0.5 million in 2001 in connection with the acquisition of Polk City Directories, 3) $2.3 million in 2000 for the attempted acquisition of the consumer database division of R.L. Polk and the acquisitions of idEXEC, American Church Lists and Getko Direct Response, 4) $9.8 million in 1999 in connection with the acquisition of Donnelley Marketing, 5) $10.1 million in 1998 in connection with the acquisitions of Walter Karl and JAMI Marketing and for certain internal restructuring charges, and 6) $56.1 million in 1997 in connection with the acquisitions of DBA and Pro CD.

     While there are currently no binding commitments with respect to any particular future acquisitions, the Company frequently evaluates the strategic opportunities available and intends to pursue strategic acquisitions of complementary products, technologies or businesses that it believes fit its business strategy. In connection with future acquisitions, the Company expects that it will be required to incur additional acquisition-related charges to operations.

     Associated with the acquisitions previously described, the Company recorded amortization expense on goodwill and other purchased intangibles as summarized in the following table (amounts in thousands):

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Results of Operations

     The following table sets forth, for the periods indicated, certain items from the Company’s statement of operations data expressed as a percentage of net sales. The amounts and related percentages may not be fully comparable due to the minority interest in infoUSA.com during 2000 and 2001 and the acquisition of American Church Lists in March 2000, idEXEC and Getko Direct Response in May 2000, Polk City Directories in October 2001, the e-mail business from DoubleClick in March 2002, Hill Donnelly in June 2002, City Publishing in September 2002 and ClickAction in December 2002: