Now that Christmas is out of the way, it's time for that other "most wonderful time of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their Q4 and full-year results. Next up is data collator infoUSA (NASDAQ:IUSA), which reports after markets close on Thursday.

What analysts say:

  • Buy, sell, or waffle? InfoUSA's sole analyst rates the stock a hold.
  • Revenues. He expects to see 8% sales growth to $107 million.
  • Profits. Profits, however, are predicted to rise 40% to $0.21 per share.

What management says:
The big news at infoUSA this quarter was its announced completion of the Opinion Research acquisition. According to management, this $134.3 million deal will be financed by "cash on hand at the time of closing and borrowings under its existing credit facility." But in fact, it's going to be almost entirely a debt-financed deal. According to infoUSA's third-quarter balance sheet, the firm had just $7.1 million in cash and equivalents at the end of last quarter, against $132.3 million in long-term debt.

What management does:
Paying down that debt, however, should pose little problem. infoUSA boasts enviable -- and rising -- margins at the gross level, and consistently achieves operating margins in the mid-double-digits.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

71.0%

71.7%

71.8%

72.4%

73.0%

73.7%

Operating

14.6%

15.6%

17.0%

16.5%

15.6%

16.3%

Net

6.8%

7.5%

8.2%

7.8%

6.8%

7.4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Of course, the really interesting thing about infoUSA has never been its debt, its profitability, or its margins -- it's been the story of a firm whose majority shareholder really, really, wants to own the whole thing, lock, stock, and barrel, but whose board of directors temporarily derailed that plan.

The more I look at what's been going on at infoUSA, though, the less I think we'll see management make another attempt to take the company private. You see, the whole trend in goings-private over the last couple of years has been for a group of savvy investors to locate a cash-generating machine, buy it out, load it with debt that its cash-generating properties can still service, then sell it back to the public for a profit.

In infoUSA's case, that story line got knocked off track a couple years ago. Since then, investors have begun to wise up to the private equity game, and started wondering aloud why the companies can't just take on lots of debt and maximize their value without first going private. What we may be seeing at infoUSA today is management trying just that: skipping the going-private step to directly load up on debt in an attempt to maximize its own value. It remains to be seen whether this new twist on an old tale works out as well for individual investors as it has for the private equity crowd.

For more on infoUSA's past attempts to go private, see:

Competitors:

  • Acxiom (NASDAQ:ACXM)
  • ChoicePoint (NYSE:CPS)
  • Dun & Bradstreet (NYSE:DNB)
  • Equifax (NYSE:EFX)

Customers:

  • Google
  • Yahoo!

Yahoo! is a Motley Fool Stock Advisor recommendation. Find out why with a 30-day free trial to the Gardner brothers' market-beating service.

Fool contributor Rich Smith does not own shares of any company named above.