16.05.2006 12:59:00
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infoUSA Sends Letter to Shareholders; Urges Shareholders to Vote FOR infoUSA Directors and AGAINST Shareholder Proposal Number 2
infoUSA's ANNUAL MEETING OF STOCKHOLDERS IS RAPIDLY APPROACHING
TAKE ACTION TO PROTECT YOUR INVESTMENT AND VOTE THE
ENCLOSED WHITE PROXY CARD TODAY!
May 16, 2006
Dear Fellow infoUSA Shareholder,
We urge you to take action to preserve and enhance the value of
your investment in infoUSA by signing, dating and returning the
enclosed WHITE PROXY CARD TODAY in support of our three highly
qualified nominees - Vinod Gupta, Dr. George Haddix and Dr. Vasant
Raval.
As you know, Dolphin Partners, a dissident stockholder, has
launched a hostile proxy contest in an attempt to elect three of its
own nominees to the infoUSA Board of Directors.
THE KEY ISSUE IS WHO SHOULD BE THE STEWARDS OF infoUSA
We strongly urge you to disregard the dissidents' materials and
the blue proxy card and vote FOR the incumbent infoUSA directors. Your
Board of Directors also urges you to vote AGAINST shareholder proposal
number 2.
infoUSA's EXISTING BOARD IS HIGHLY QUALIFIED, INDEPENDENT MINDED
AND COMMITTED TO THE PRINCIPLES OF GOOD CORPORATE GOVERNANCE
The current infoUSA Board is committed to sound corporate
governance. infoUSA has continually added highly-qualified members to
the Board, and today eight of infoUSA's nine directors are
"independent" by NASDAQ's Corporate Governance Standards and all of
the members of the Board's committees are independent.
Long before Dolphin's involvement, this Board, under the direct
oversight of Dr. Vasant Raval (Chairman of the Audit Committee and
current nominee), reviewed all related party transactions with the
Company's outside auditors and determined that such transactions were
appropriate and disclosed in the Company's SEC filings. However, given
the post-Sarbanes Oxley corporate environment, Dr. Raval recommended
the reduction or restructuring of those transactions and by the end of
2004, infoUSA had virtually eliminated all related party transactions.
Also under Dr. Raval's oversight, infoUSA has developed a strong
internal audit function that reports directly to the Audit Committee,
and the Company received a clean Section 404 report on internal
controls from its outside auditors for 2005. Despite Dolphin's
rhetoric to the contrary, this Board has done the right thing by
proactively taking actions to strengthen its corporate governance.
infoUSA's NOMINEES HAVE THE RIGHT EXPERIENCE AND KNOWLEDGE
TO ENHANCE VALUE FOR ALL SHAREHOLDERS
infoUSA's nominees, which include its founder and largest
shareholder, and the Chairmen of its independent Corporate Governance
and Nominating Committee and its independent Audit Committee, are
respected and proven business leaders. Importantly, they each have
experience at companies whose businesses are similar or complementary
to that of infoUSA and they are dedicated to enhancing shareholder
value:
Vinod Gupta
-----------
-- Founded the Company with $100 and as a result of his vision,
infoUSA has grown into a business with a market capitalization
of more than $650 million.
-- Chairman of the Board since its incorporation in 1972; CEO
since its incorporation in 1972 until September 1997 and since
August 1998.
-- Pioneered the consolidation of the direct marketing industry,
turning infoUSA into an industry leader.
-- Personally spearheaded over 26 acquisitions.
-- Led the acquisition and integration of five email companies,
purchased at a very low price, creating a highly profitable
email marketing division within infoUSA.
-- Mr. Gupta has the critical industry knowledge and personal
relationships to lead this Company forward as it implements a
business plan that we believe will create value for all
shareholders.
-- Mr. Gupta is an industry innovator, who has spearheaded the
implementation of new ideas such as our highly successful
salesgenie.com and credit.net subscription based strategy.
-- His leadership has helped infoUSA remain at the forefront of
the industry by anticipating and adapting to changing market
conditions.
-- We believe that replacing Mr. Gupta, the Company's founding
leader, would diminish the future value of the Company.
Dr. George F. Haddix
--------------------
-- Director since March 1995 and currently serves as the Chair of
the Board's Corporate Governance and Nominating Committee.
-- Dr. Haddix has significant operational and business experience
in both public and private companies that has greatly
benefited infoUSA.
-- Chairman and CEO of PKW Holdings, Inc. and PKWARE, INC.,
computer software companies headquartered in Milwaukee,
Wisconsin.
-- Founder and former president of publicly-held CSG Systems
International, Inc., a $600 million software and services
company that has successfully built a customer subscription
business
-- His operational experience at CSG is highly relevant and makes
him an invaluable resource to infoUSA as we continue to build
our subscription business.
-- Formerly CEO of U.S. West Network Systems Inc. and served as
chairman and CEO of Applied Communications, Inc.
Dr. Vasant H. Raval
-------------------
-- Director of the Company and Chair of the Audit Committee since
October 2002.
-- Professor of accounting and a highly qualified audit committee
chair.
-- Under his oversight, and in many cases hands-on involvement,
the Company's financial reporting and internal controls have
been markedly strengthened during his tenure on the Board.
-- Dr. Raval invested numerous hours in overseeing the Company's
successful efforts to achieve compliance with the Sarbanes
Oxley Act of 2002, build a highly professional internal audit
function and upgrade its financial reporting processes.
-- Dr. Raval has been Professor and Chair of the Department of
Accounting at Creighton University since July 2001. He joined
the Creighton University faculty in 1981 and has served as
Professor of Accounting and Associate Dean and Director of
Graduate Programs at the College of Business Administration.
-- Dr. Raval is also a director and chairman of the audit
committee of Syntel Inc., an electronic business solutions
provider based in Troy, Michigan.
OUR NOMINEES ARE MORE THAN DIRECTORS, THEY ARE
SIGNIFICANT infoUSA SHAREHOLDERS
Mr. Gupta, the founder of infoUSA is the Company's largest
shareholder, and Dr. Haddix and Dr. Raval have each made personal
significant financial investments in the Company as well. The full
Board together with the senior management team beneficially own
approximately 43% of the Company -- their financial interests are
clearly aligned with enhancing shareholder value. Dolphin's nominees
have no financial stake in the success of infoUSA and therefore we
don't believe that interests are aligned with yours.
WE ARE EXECUTING A STRATEGIC PLAN THAT WILL ENHANCE VALUE
FOR ALL infoUSA STOCKHOLDERS
Our nominees have the skills, experience, judgment and
institutional knowledge necessary to successfully steer this Company
as it moves forward with the implementation of its STRATEGIC business
plan. Through the successful acquisition and integration of more than
twenty companies, infoUSA believes it has put in place a platform for
sustained organic revenue growth going forward. Our acquisitions have
enhanced content, opened new distribution channels and provided entry
into new vertical segments. In addition, we believe we will see
revenue growth from our compelling cross-selling opportunities across
infoUSA businesses and suites of products and services. We also have
an outstanding track-record of integrating and reducing costs in these
acquired companies, which we believe offers significant potential for
margin expansion.
The success of infoUSA's strategy is clearly evident in the
Company's performance:
-- infoUSA's return on equity was 16% in 2005.
-- Total return to our stockholders over the past four years has
been 57.5% - or an average annual return of approximately
11.5%.
-- This compares to a return of only 14.8% from the Nasdaq over
the same four-year period - or an average annual return of
approximately 3.7%.
-- infoUSA has paid a cash dividend in each of the past two years
- returning more than $12 million to infoUSA stockholders in
2006 alone.
infoUSA had a great first quarter in 2006 and has revised revenue
guidance to the upper end of the range for the year, while keeping the
same guidance for profitability. infoUSA reported 4.3% organic growth
in the first quarter.
OUR STRATEGIC PLAN HAS RESULTED IN STRONG CASH FLOW, ALLOWING
infoUSA TO SIGNIFICANTLY REDUCE ITS DEBT
The Company's strong free cash flow has enabled it to delever its
balance sheet significantly over the last five years. infoUSA reduced
its outstanding net debt by approximately $48 million in 2005 and by
approximately $5 million in the first quarter of 2006. Since 2000, we
have dramatically improved the Company's leverage ratio (total
debt/EBITA) from 5.33 to 1.61.(1)
WHO ARE DOLPHIN'S NOMINEES?
DOES DOLPHIN REALLY KNOW?
In its proxy soliciting materials, Dolphin asserts that its
nominees have the "experience and energy that shareholders can trust."
But even a cursory examination of the public record by Dolphin would
have revealed serious questions about its nominees' experience.
For instance, Mr. Trevisani's biography in Dolphin's proxy
materials states that from "1996 to 2000, Mr. Trevisani was a director
of Home Port Bancorp (NASDAQ:HPBC)." This is untrue.
Home Port's proxy statements for its 1996, 1997, and 1998 annual
meetings do not list Mr. Trevisani as a director. Home Port's proxy
statement for its May 17, 1999 annual meeting of stockholders states
that Mr. Trevisani became a director of that company on February 3,
1999, not in 1996, to replace a resigning director. Mr. Tevisani made
a filing with the Securities and Exchange Commission, a Form 3 which
must be filed within ten days of becoming a director of a public
company that confirms that date. Unless several public filings made
with the SEC are wrong, Mr. Trevisani did not serve as a director of
the publicly-held Home Port in 1996, 1997 or 1998 as claimed. It also
appears from public documents that prior to and during his relatively
short term as a director, Mr. Trevisani and his law firm served as
Home Port's outside counsel. In fact, publicly available documents
confirm that after he joined its board, Mr. Trevisani personally
served as the attorney that handled the sale of the Home Port to
Seacoast Financial Services Corp. in December 2000. The public record
confirms that Mr. Trevisani's tenure as a Home Port director and his
experience as a public company director is substantially shorter than
Dolphin would like you to believe.
Given their long professional relationship, Mr. Meyer must
certainly know when Mr. Trevisani served on Home Port's board of
directors. Mr. Meyer's biography in Dolphin's proxy solicitation
materials states that he was chairman of the board of Home Port from
1992 to 2000. The professional relationship between Mr. Trevisani and
Mr. Meyer has continued. Mr. Trevisani and Mr. Meyer were both
nominated to serve on the board of Computer Horizons by a shareholder
that was attempting to take control of that company.
Mr. Meyer's biography in Dolphin's solicitation materials ends
with the statement that "in April 2005, Mr. Meyer was nominated to the
board of directors of OfficeMax (NYSE:OMX) by its then third largest
shareholder." This statement is incomplete and misleading. Again, a
simple check of the public filings of OfficeMax reveals that Mr.
Meyer's nomination was later withdrawn by that shareholder.
Dolphin's most recent communications to infoUSA shareholders no
longer make reference to Mr. Aslin's current service as a director of
ACT Teleconferencing, Inc. Public filings indicate that since Mr.
Aslin became a member of that company's board of directors and audit
committee in 2004, its auditors have repeatedly found that its
disclosure controls and procedures are not effective, it has failed to
file its reports with the SEC on time and it has been delisted from
NASDAQ.
In short, it appears that Dolphin has made little effort to
confirm or disclose the background and experience of the nominees that
it is asking you to make the stewards of the future of infoUSA.
DOLPHIN'S MISLEADING STATEMENTS ABOUT OUR FINANCIAL PERFORMANCE
We urge you to be cautious about relying on the financial analysis
offered by Dolphin. In its recently filed investor presentation,
Dolphin includes several charts purporting to depict infoUSA's
financial performance. These charts and the underlying data are
inaccurate and misleading.
One chart is a comparison of infoUSA's P/E ratio to its peer
group. Dolphin evidently has used an earnings per share number other
than the earnings per share reported in infoUSA's SEC filings. As a
result, Dolphin's comparison substantially understates the Company's
P/E ratio for each of the periods covered. For example, in 2001, the
Company's publicly reported earnings per share divided by average
trading price for the period results in a P/E ratio of 48.2, not 20.1
as reported by Dolphin. We have been unable to ascertain the basis of
Dolphin's P/E calculations, but can find no defensible reason for
using numbers other than those publicly reported by the Company.
The other charts presented by Dolphin are based on EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization) data.
When infoUSA presents EBITDA information, it provides a reconciliation
of that information to its GAAP financial statements. Dolphin does not
include such a reconciliation or otherwise explain how it calculates
EBITDA. This is significant, because the EBITDA figures used by
Dolphin are different than the EBITDA figures publicly disclosed by
infoUSA, and the calculation selected by Dolphin causes infoUSA's
performance to look less favorable in comparison to the peer group.
OUR ACQUISITION STRATEGY HAS CREATED SIGNIFICANT VALUE
While Dolphin says otherwise, our acquisition strategy has created
significant value. Since 1996, we have made over 20 acquisitions,
financed primarily through debt. The operating cash flows from these
acquisitions have contributed significantly to the financial
performance of the Company. Over this period of time, the Company's
EBITDA has increased from approximately $14 million to approximately
$92 million, without any additional equity investment from
shareholders.
WE BELIEVE THAT DOLPHIN'S NOMINEES OFFER "NO NEW IDEAS" FOR
IMPROVING OPERATIONS OR ENHANCING VALUE
We believe that, unlike your directors, Dolphin's nominees do not
have the industry knowledge, experience or commercial relationships
that will help to ensure that your investment in infoUSA will be
maximized. In contrast to your Board and management, the dissident
group offers no ideas for improving operations or growing the Company.
We believe that election of their slate could interrupt the
implementation of our strategic plan and negatively impact shareholder
value.
In stark contrast to our current Board, we believe that Dolphin's
nominees have:
-- NO working knowledge of infoUSA, its business or the industry
-- NO business plan or strategy for infoUSA
-- NO relevant industry experience
WITH YOUR SUPPORT, infoUSA's BOARD AND MANAGEMENT CAN
CONTINUE TO BUILD VALUE FOR ALL SHAREHOLDERS
Your Board asks that you support the current infoUSA Board and
management team by voting FOR infoUSA's incumbent directors and
AGAINST proposal number 2 on the enclosed WHITE proxy card today. Your
vote is extremely important, no matter how many or how few shares you
own. If you have any questions or need any assistance in voting your
shares, please do not hesitate to contact MacKenzie Partners, the firm
assisting us in the solicitation of proxies, toll free at (800)
322-2885.
PRESERVE AND ENHANCE THE VALUE OF YOUR infoUSA INVESTMENT
VOTE FOR YOUR BOARD'S NOMINEES AND AGAINST PROPOSAL NUMBER 2
ON THE WHITE PROXY CARD TODAY
Thank you very much for your continued support.
Sincerely,
Vinod Gupta
Chairman & Chief Executive Officer
infoUSA Inc.
(1) Total leverage is calculated by dividing total debt, as
reported in the Company's financial statements filed with the
Company's Annual Report on Form 10-K for each of the indicated
periods, by EBITDA. EBITDA is a non-GAAP financial measure.
The following table sets forth the Company's total debt and
reconciles EBITDA with Net Income, the most directly
comparable financial measure calculated and presented in
accordance with GAAP, as reported in the Company's financial
statements filed with the Company's Annual Report on Form 10-K
for each of the indicated periods. The Company noted that its
2002 and 2003 results reflect the effect of September 9, 2001.
Year Ended December 31
------------------------------------------------------
2000 2001 2002 2003 2004 2005
------------------------------------------------------
( In Thousands )
Net Income $(31,633) $4,964 $20,436 $19,695 $17,838 $31,507
Income Tax 1,320 11,371 12,713 12,072 10,934 17,659
Interest Expense 26,651 25,285 16,059 11,547 9,210 11,841
Amortization 32,190 30,254 13,310 13,276 15,875 18,098
Depreciation 20,005 17,873 14,773 14,573 14,062 12,818
------------------------------------------------------
EBITDA $48,533 $89,747 $77,291 $71,163 $67,919 $91,923
----------------
Total Debt at
Year End $258,652 $225,670 $148,797 $181,396 $196,226 $148,006
EBITDA Turns
(Total
Debt/EBITDA) 5.33 2.51 1.93 2.55 2.89 1.61
About infoUSA
infoUSA ( www.infoUSA.com ), founded in 1972, is the leadingprovider of business and consumer information products, databasemarketing services, data processing services and sales and marketingsolutions. Content is the essential ingredient in every marketingprogram, and infoUSA has the most comprehensive data in the industry,and is the only company to own a proprietary database of 250 millionconsumers and 14 million businesses under one roof. The infoUSAdatabase powers the directory services of the top Internettraffic-generating sites. Nearly 3 million customers use infoUSA'sproducts and services to find new customers, grow their sales, and forother direct marketing, telemarketing, customer analysis and creditreference purposes. infoUSA headquarters are located at 5711 S. 86thCircle, Omaha, NE 68127 and can be contacted at (402) 593-4500. Toknow more about Sales Leads, click www.infousa.com . To get a 7-dayfree trial and 100 free sales leads, click www.salesgenie.com .
Statements in this announcement other than historical data andinformation constitute forward looking statements that involve risksand uncertainties that could cause actual results to differ materiallyfrom those stated or implied by such forward-looking statements. Thepotential risks and uncertainties include, but are not limited to,recent changes in senior management, the successful integration ofrecent and future acquisitions, fluctuations in operating results,failure to successfully carry out our Internet strategy or to grow ourInternet revenue, effects of leverage, changes in technology andincreased competition. More information about potential factors thatcould affect the company's business and financial results is includedin the company's filings with the Securities and Exchange Commission.
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