SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 1, 2006
 

FORRESTER RESEARCH, INC.
(Exact Name of Registrant Specified in Charter)

Delaware		000-21433		04-2797789
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

400 Technology Square, Cambridge, Massachusetts		02139
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (617) 613-6000
 

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Page 1 of 5
Exhibit Index appears on Page 4

ITEM 2.02      RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     The information contained in this current report on Form 8-K is furnished pursuant to Item 2.02 of Form 8-K “Results of Operations and Financial Condition”. This information and the exhibits hereto are being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended. The information contained in this report shall not be incorporated by reference into any filing of Forrester Research, Inc. with the SEC, whether made before or after the date hereof, regardless of any general incorporation language in such filings.

     On February 1, 2006, Forrester Research, Inc. issued a press release announcing its financial results for the year ended December 31, 2005, the full text of which is attached hereto as Exhibit 99.1.

     Forrester believes that pro forma financial results provide investors with consistent and comparable information to aid in the understanding of Forrester’s ongoing business. Our pro forma presentation excludes the following:

     Amortization of acquisition-related intangibles — we exclude the non-cash effect of the amortization of acquisition-related intangibles from our pro forma results in order to more consistently present our ongoing results of operations.

     Impairments of and gains related to non-marketable securities and gains from sales of marketable securities — we have consistently excluded both one-time gains and one-time write-offs related to our investments in non-marketable securities and sales of marketable securities from our pro forma results in order to keep quarter over quarter and year over year comparisons consistent.

     Reorganization costs — we exclude reorganization costs in order to present a consistent basis for quarter over quarter and year over year comparisons and to more consistently present our results of operations.

     Non-cash stock-based compensation expense – we exclude the stock-based compensation impact of APB Opinion 25 and SFAS 123R from our pro forma results in order to keep quarter over quarter and year over year comparisons consistent.

     However, these measures should be considered in addition to, not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with generally accepted accounting principles as more fully discussed in our financial statements and filings with the Securities and Exchange Commission.

ITEM 9.01      Financial Statements and Exhibits

(c)

Exhibits

99.1      Press Release dated February 1, 2006

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 1, 2006

Exhibit Index

Exhibit		Description		Page
99.1		Press Release dated February 1, 2006.			5

Exhibit 99.1
 

		FOR IMMEDIATE RELEASE

Forrester Research Reports Fourth-Quarter And Full-Year 2005 Financial Results

CAMBRIDGE, Mass., February 1, 2006 . . . Forrester Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and full-year 2005 financial results.

Fourth-Quarter Financial Performance

•		Total revenues increased 9 percent to $41.2 million, compared with $38.0 million for the fourth quarter of last year.
•		On a GAAP-reported basis, which reflects an effective tax rate of 37 percent, Forrester reported net income of $3.6 million or $0.16 per diluted share, compared with net income of $3.5 million, or $0.16 per diluted share, for the same period last year.
•		On a pro forma basis, net income was $4.8 million or $0.22 per diluted share, for the fourth quarter of 2005, which excludes amortization of $782,000 of acquisition-related intangible assets, non-cash stock-based compensation expense of $537,000, and net realized losses and impairments of non-marketable investments of $326,000 and reflects a pro forma effective tax rate of 35 percent. This compares with pro forma net income of $3.9 million, or $0.18 per diluted share, for the same period in 2004, which excludes amortization of $1.3 million of acquisition-related intangible assets, a reversal of reorganization costs of $355,000, and net marketable and non-marketable investment gains of $305,000, and reflects a pro forma effective tax rate of 35 percent.

Full-Year 2005 Financial Performance

•		Total revenues increased 11 percent to $153.2 million, compared with $138.5 million for 2004.
•		On a GAAP-reported basis, which reflects an effective tax rate of 41 percent, Forrester reported net income of $11.3 million, or $0.52 per diluted share for 2005, compared to net income of $4.1 million or $0.18 per diluted share for 2004.
•		On a pro forma basis, net income was $14.8 million or $0.68 per diluted share for 2005, which excludes amortization of $3.5 million of acquisition-related intangible assets, non-cash stock-based compensation expense of $1.6 million, net marketable and non-marketable investment gains and impairments of $1.7 million, and reflects a pro forma effective tax rate of 35 percent. This compares with pro forma net income of $12.8 million, or $0.57 per diluted share for the same period last year, which excludes amortization of $6.5 million of acquisition-related intangible assets, reorganization costs of $8.4 million primarily due to office space consolidations, and net marketable and non-marketable investment gains of $1.4 million, and reflects a pro forma effective tax rate of 35 percent.

A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.

“Forrester’s financial performance made important gains in 2005,” said George F. Colony, chairman of the board and chief executive officer. “Full-year revenues grew 11 percent, marking the first organic double-digit growth rate for the company since 2000. Cash flows from operations increased 33 percent to $23.9 million for 2005. Client and dollar retention rates remained high at 78 percent and 87 percent respectively.”

“During the past year, Forrester made progress on its goal to stabilize and increase sales of its core research product, WholeView 2^™,” said Colony. “In addition, we posted healthy growth in other products including consulting, data, and Forrester Leadership Boards, formerly known as the Forrester Oval Program. In 2006, we will maintain our primary focus to drive sales of syndicated products, particularly WholeView 2.”

Forrester is providing first-quarter 2006 financial guidance as follows:

First-Quarter 2006 (GAAP):
GAAP financial guidance includes an estimate of $2.0 million to $3.0 million in non-cash stock-based compensation expense related to the adoption of SFAS 123R, Share-Based Payment, and its related estimated impact on the effective tax rate.

•		Total revenues of approximately $38.0 million to $40.0 million.
•		Operating margin of approximately 1 percent to 3 percent.
•		Other income of approximately $800,000.
•		An effective tax rate of 44 percent.
•		Diluted earnings per share of approximately $0.02 to $0.06.

Forrester Fourth-Quarter Fiscal 2005 Results / Page 2

 

First-Quarter 2006 (Pro Forma):
Pro forma financial guidance for the first quarter of 2006 excludes amortization of acquisition-related intangible assets of approximately $700,000, non-cash stock-based compensation expense of approximately $2.0 million to $3.0 million, and does not include any estimate of gains or impairment charges related to non-marketable investments.

•		Pro forma operating margin of approximately 9 percent to 10 percent.
•		Pro forma effective tax rate of 37 percent.
•		Pro forma diluted earnings per share of approximately $0.12 to $0.14.

Forrester is providing full-year 2006 guidance as follows:

Full-Year 2006 (GAAP):
GAAP financial guidance includes an estimate of $8.0 million to $10.0 million in non-cash stock-based compensation expense related to the adoption of SFAS 123R, Share-Based Payment, and its related estimated impact on the effective tax rate. The Company continues to review the impact of SFAS 123R and intends to update guidance when more precise data is available.

•		Total revenues of approximately $175.0 million to $180.0 million.
•		Operating margin of approximately 7 percent to 9 percent.
•		Other income of approximately $3.2 million.
•		An effective tax rate of 44 percent.
•		Diluted earnings per share of approximately $0.46 to $0.54.

Full-Year 2006(Pro Forma):
Pro forma financial guidance for full-year 2006 excludes amortization of acquisition-related intangible assets of approximately $2.1 million, non-cash stock-based compensation expense of approximately $8.0 million to $10.0 million, and does not include any estimate of gains or impairment charges related to non-marketable investments.

•		Pro forma operating margin of approximately 14 percent to 15 percent.
•		Pro forma diluted earnings per share of approximately $0.80 to $0.86.
•		An effective tax rate of 37 percent.

Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology’s impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, Forrester’s financial and operating targets for the first quarter of and full-year 2006. These statements are based on Forrester’s current plans and expectations and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and results to differ include, among others, Forrester’s ability to anticipate business and economic conditions, technology spending, market trends, competition, industry consolidation, the ability to attract and retain professional staff, possible variations in Forrester’s quarterly operating results, risks associated with Forrester’s ability to offer new products and services, and Forrester’s dependence on renewals of its membership-based research services and on key personnel. Forrester undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information, please refer to Forrester’s reports and filings with the Securities and Exchange Commission.

The consolidated statements of income, consolidated balance sheets, and consolidated statements of cash flows are attached.

Kimberly Maxwell		Karyl Levinson
Director, Investor Relations		Director, Corporate Communications
Forrester Research, Inc.		Forrester Research, Inc.
+1 617/613-6234		+1 617/613-6262
kmaxwell@forrester.com		press@forrester.com

^© 2006, Forrester Research, Inc. All rights reserved. Forrester and Forrester Oval Program are trademarks of Forrester Research, Inc.

Forrester Fourth-Quarter Fiscal 2005 Results / Page 4  

Forrester Research, Inc.

Consolidated Statements of Income

(In thousands, except per share data)

		Three months ended								Year ended
		December 31,								December 31,
		2005				2004				2005				2004
		(Unaudited)
Revenues
Research services		$	26,095			$	24,768			$	98,298			$	94,347
Advisory services and other			15,081				13,182				54,931				44,132
Total revenues			41,176				37,950				153,229				138,479
Operating expenses
Cost of services and fulfillment			15,950				13,905				61,598				54,687
Selling and marketing			13,350				13,166				50,814				46,867
General and administrative			4,417				4,677				17,539				16,364
Depreciation			925				890				3,539				3,691
Amortization of intangible assets			782				1,349				3,527				6,461
Non-cash stock-based compensation expense			537				—				1,556				—
Reorganization costs			—				(355	)			—				8,396
Total operating expenses			35,961				33,632				138,573				136,466
Income from operations			5,215				4,318				14,656				2,013
Other income, net			799				699				3,027				2,867
Realized (losses) gains on sales of securities and non-marketable investments			(162	)			305				1,859				1,353
Impairments of non-marketable investments			(164	)			—				(164	)			—
Income before income taxes			5,688				5,322				19,378				6,233
Income tax provision			2,094				1,796				8,030				2,101
Net income		$	3,594			$	3,526			$	11,348			$	4,132
Diluted income per share		$	0.16			$	0.16			$	0.52			$	0.18
Diluted weighted average shares outstanding			21,912				22,040				21,883				22,442
Basic income per share		$	0.17			$	0.16			$	0.53			$	0.19
Basic weighted average shares outstanding			21,246				21,814				21,413				22,024
Pro forma data (1):
Income from operations		$	5,215			$	4,318			$	14,656			$	2,013
Amortization of intangible assets			782				1,349				3,527				6,461
Non-cash stock-based compensation			537				—				1,556				—
Reorganization costs			—				(355	)			—				8,396
Pro forma income from operations			6,534				5,312				19,739				16,870
Other income, net			799				699				3,027				2,867
Pro forma income before income taxes			7,333				6,011				22,766				19,737
Pro forma income tax provision			2,567				2,104				7,968				6,908
Pro forma net income		$	4,766			$	3,907			$	14,798			$	12,829
Pro forma diluted earnings per share		$	0.22			$	0.18			$	0.68			$	0.57
Diluted weighted average shares outstanding			21,912				22,040				21,883				22,442

Forrester believes that pro forma financial results provide investors with consistent and comparable information to aid in the understanding of Forrester’s ongoing business. Our pro forma presentation excludes amortization of intangibles, non-cash stock-based compensation, reorganization costs, and impairments of non-marketable securities and gains from sales of marketable securities as well as their related tax effects. This does not purport to be prepared in accordance with Generally Accepted Accounting Principles

Forrester Fourth-Quarter Fiscal 2005 Results / Page 5  

Forrester Research, Inc.

Consolidated Balance Sheets

(In thousands)

		December 31,				December 31,
		2005				2004
Assets:
Cash and cash equivalents		$	48,538			$	37,328
Marketable securities			83,730				90,112
Accounts receivable, net			52,177				39,210
Deferred commissions			8,940				6,834
Prepaid expenses and other current assets			5,126				5,509
Total current assets			198,511				178,993
Property and equipment, net			5,771				6,410
Goodwill, net			53,034				52,875
Intangible assets, net			3,530				6,992
Deferred income taxes			36,941				42,860
Non-marketable investments and other assets			13,915				14,742
Total assets		$	311,702			$	302,872
Liabilities and stockholders’ equity:
Accounts payable		$	1,716			$	3,741
Accrued expenses			24,569				26,928
Deferred revenue			86,663				72,357
Total liabilities			112,948				103,026
Preferred stock			—				—
Common stock			254				247
Additional paid-in capital			192,206				180,310
Retained earnings			82,425				71,077
Treasury stock, at cost			(73,527	)			(50,056	)
Accumulated other comprehensive loss			(2,604	)			(1,732	)
Total stockholders’ equity			198,754				199,846
Total liabilities and stockholders’ equity		$	311,702			$	302,872

Forrester Fourth-Quarter Fiscal 2005 Results / Page 6  

Forrester Research, Inc.

Consolidated Statements of Cash Flows

(In thousands)

		Year ended December 31,
		2005				2004
Cash flows from operations:
Net income		$	11,348			$	4,132
Adjustments to reconcile net income to net cash provided by operating activities –
Depreciation			3,539				3,691
Amortization of intangible assets			3,527				6,461
(Gains) impairments of non-marketable investments			(206	)			(281	)
Realized gain on sale of securities			(1,489	)			(1,072	)
Tax benefit from stock options			1,375				411
Deferred income taxes			5,261				(158	)
Non-cash stock-based compensation expense			1,556				—
Non-cash reorganization costs			—				1,844
Increase in provision for doubtful accounts			100				309
Accretion of premiums on marketable securities			1,080				924
Changes in assets and liabilities, net of acquisition –
Accounts receivable			(14,444	)			1,283
Deferred commissions			(2,108	)			(835	)
Prepaid expenses and other current assets			117				1,763
Accounts payable			(2,057	)			1,152
Accrued expenses			(400	)			(3,850	)
Deferred revenue			16,733				2,232
Net cash provided by operating activities			23,932				18,006
Cash flows from investing activities:
Purchases of property and equipment			(3,012	)			(3,664	)
Purchase of non-marketable investments			(700	)			(3,613	)
Proceeds from non-marketable investments			741				—
Decrease in other assets			995				1,081
Purchase of marketable securities			(260,362	)			(161,344	)
Proceeds from sales and maturities of marketable securities			264,626				176,509
Net cash provided by investing activities			2,288				8,969
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock option plans and employee stock purchase plan			8,963				5,279
Acquisition of treasury shares			(23,474	)			(17,756	)
Structured stock repurchase			—				54
Net cash used in financing activities			(14,511	)			(12,423	)
Effect of exchange rate changes on cash and cash equivalents			(499	)			391
Net increase in cash and cash equivalents			11,210				14,943
Cash and cash equivalents, beginning of period			37,328				22,385
Cash and cash equivalents, end of period		$	48,538			$	37,328

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