forr-10q_20150630.htm

 

 

 

FORM 10-Q

 

(MARK ONE)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED June 30, 2015

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NUMBER: 000-21433

 

FORRESTER RESEARCH, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

04-2797789

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

60 Acorn Park Drive

CAMBRIDGE, MASSACHUSETTS

 

02140

(Address of principal executive offices)

 

(Zip Code)

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

 

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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

¨

  

Accelerated filer

 

x

 

 

 

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o     No  x

As of July 31, 2015 17,920,000 shares of the registrant’s common stock were outstanding.

 

 

 

 

 


 

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q

 

 

  

PAGE

 

PART I. FINANCIAL INFORMATION

  

3

 

ITEM 1. Financial Statements (Unaudited)

  

3

 

Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

  

3

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2015 and 2014

  

4

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014

  

5

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

  

6

 

Notes to Consolidated Financial Statements

  

7

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

15

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

  

23

 

ITEM 4. Controls and Procedures

  

23

 

PART II. OTHER INFORMATION

  

24

 

ITEM 1A. Risk Factors

  

24

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

  

24

 

ITEM 6. Exhibits

  

25

  

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

50,163

 

 

$

49,650

 

Marketable investments (Note 3)

 

 

60,677

 

 

 

54,885

 

Accounts receivable, net

 

 

42,656

 

 

 

67,429

 

Deferred commissions

 

 

10,985

 

 

 

13,754

 

Prepaid expenses and other current assets

 

 

22,330

 

 

 

22,277

 

Total current assets

 

 

186,811

 

 

 

207,995

 

Property and equipment, net

 

 

29,305

 

 

 

32,174

 

Goodwill

 

 

74,525

 

 

 

76,683

 

Intangible assets, net

 

 

2,801

 

 

 

3,382

 

Other assets

 

 

13,944

 

 

 

12,473

 

Total assets

 

$

307,386

 

 

$

332,707

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

698

 

 

$

912

 

Accrued expenses and other current liabilities

 

 

29,168

 

 

 

36,217

 

Deferred revenue

 

 

136,228

 

 

 

144,568

 

Total current liabilities

 

 

166,094

 

 

 

181,697

 

Non-current liabilities

 

 

9,315

 

 

 

9,408

 

Total liabilities

 

 

175,409

 

 

 

191,105

 

 

 

 

 

 

 

 

 

 

Commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Note 7):

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 500 shares, issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

 

 

Issued - 20,983 and 20,856 as of June 30, 2015 and December 31, 2014,

   respectively

 

 

 

 

 

 

 

 

Outstanding 17,955 and 18,153 as of June 30, 2015 and December 31, 2014,

   respectively

 

 

210

 

 

 

209

 

Additional paid-in capital

 

 

129,588

 

 

 

124,942

 

Retained earnings

 

 

116,718

 

 

 

117,318

 

Treasury stock - 3,028 and 2,703 as of June 30, 2015 and December 31, 2014,

   respectively, at cost

 

 

(111,040

)

 

 

(99,254

)

Accumulated other comprehensive loss

 

 

(3,499

)

 

 

(1,613

)

Total stockholders’ equity

 

 

131,977

 

 

 

141,602

 

Total liabilities and stockholders’ equity

 

$

307,386

 

 

$

332,707

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

3


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research services

 

$

52,604

 

 

$

52,322

 

 

$

104,462

 

 

$

103,115

 

Advisory services and events

 

 

30,207

 

 

 

30,625

 

 

 

53,536

 

 

 

52,903

 

Total revenues

 

 

82,811

 

 

 

82,947

 

 

 

157,998

 

 

 

156,018

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

32,560

 

 

 

33,558

 

 

 

63,321

 

 

 

63,038

 

Selling and marketing

 

 

28,481

 

 

 

28,630

 

 

 

58,112

 

 

 

58,513

 

General and administrative

 

 

9,276

 

 

 

9,815

 

 

 

19,034

 

 

 

19,342

 

Depreciation

 

 

2,096

 

 

 

2,289

 

 

 

4,203

 

 

 

5,062

 

Amortization of intangible assets

 

 

224

 

 

 

536

 

 

 

445

 

 

 

1,075

 

Reorganization costs

 

 

81

 

 

 

1,039

 

 

 

3,505

 

 

 

1,888

 

Total operating expenses

 

 

72,718

 

 

 

75,867

 

 

 

148,620

 

 

 

148,918

 

Income from operations

 

 

10,093

 

 

 

7,080

 

 

 

9,378

 

 

 

7,100

 

Other income (expense), net

 

 

(99

)

 

 

79

 

 

 

183

 

 

 

15

 

Gains (losses) on investments, net

 

 

10

 

 

 

43

 

 

 

(9

)

 

 

80

 

Income before income taxes

 

 

10,004

 

 

 

7,202

 

 

 

9,552

 

 

 

7,195

 

Income tax provision

 

 

4,254

 

 

 

2,913

 

 

 

4,026

 

 

 

2,972

 

Net income

 

$

5,750

 

 

$

4,289

 

 

$

5,526

 

 

$

4,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.32

 

 

$

0.23

 

 

$

0.31

 

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

 

$

0.31

 

 

$

0.23

 

 

$

0.30

 

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

18,007

 

 

 

18,757

 

 

 

18,033

 

 

 

19,184

 

Diluted weighted average common shares outstanding

 

 

18,268

 

 

 

19,044

 

 

 

18,314

 

 

 

19,479

 

Cash dividends declared per common share

 

$

0.17

 

 

$

0.16

 

 

$

0.34

 

 

$

0.32

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,750

 

 

$

4,289

 

 

$

5,526

 

 

$

4,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

1,067

 

 

 

(106

)

 

 

(1,933

)

 

 

(61

)

Net change in market value of investments

 

 

(51

)

 

 

25

 

 

 

47

 

 

 

36

 

Other comprehensive income (loss)

 

 

1,016

 

 

 

(81

)

 

 

(1,886

)

 

 

(25

)

Comprehensive income

 

$

6,766

 

 

$

4,208

 

 

$

3,640

 

 

$

4,198

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

5,526

 

 

$

4,223

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

4,203

 

 

 

5,062

 

Amortization of intangible assets

 

 

445

 

 

 

1,075

 

Net (gains) losses from investments

 

 

9

 

 

 

(80

)

Deferred income taxes

 

 

(1,514

)

 

 

(2,964

)

Stock-based compensation

 

 

3,661

 

 

 

3,165

 

Amortization of premium on investments

 

 

381

 

 

 

751

 

Foreign currency losses

 

 

70

 

 

 

319

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

24,353

 

 

 

36,210

 

Deferred commissions

 

 

2,769

 

 

 

1,661

 

Prepaid expenses and other current assets

 

 

(511

)

 

 

(797

)

Accounts payable

 

 

(195

)

 

 

(75

)

Accrued expenses and other liabilities

 

 

(7,268

)

 

 

(4,159

)

Deferred revenue

 

 

(7,168

)

 

 

(9,110

)

Net cash provided by operating activities

 

 

24,761

 

 

 

35,281

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,678

)

 

 

(871

)

Purchases of marketable investments

 

 

(18,575

)

 

 

(27,165

)

Proceeds from sales and maturities of marketable investments

 

 

12,478

 

 

 

26,464

 

Other investing activity

 

 

266

 

 

 

1,437

 

Net cash used in investing activities

 

 

(7,509

)

 

 

(135

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid on common stock

 

 

(6,126

)

 

 

(6,128

)

Repurchases of common stock

 

 

(11,786

)

 

 

(54,940

)

Proceeds from issuance of common stock under employee equity incentive plans

 

 

1,906

 

 

 

4,186

 

Excess tax benefits from stock-based compensation

 

 

31

 

 

 

100

 

Net cash used in financing activities

 

 

(15,975

)

 

 

(56,782

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(764

)

 

 

138

 

Net increase (decrease) in cash and cash equivalents

 

 

513

 

 

 

(21,498

)

Cash and cash equivalents, beginning of period

 

 

49,650

 

 

 

74,132

 

Cash and cash equivalents, end of period

 

$

50,163

 

 

$

52,634

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

6


 

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1 — Interim Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations, comprehensive income and cash flows as of the dates and for the periods presented have been included. The results of operations for the three and six months ended June 30, 2015 may not be indicative of the results for the year ending December 31, 2015, or any other period.

Fair Value Measurements

The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. See Note 3 – Marketable Investments for the fair value of the Company’s marketable investments.

 

 

Note 2 — Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2015

 

$

(74

)

 

$

(1,539

)

 

$

(1,613

)

Foreign currency translation

 

 

 

 

 

(1,933

)

 

 

(1,933

)

Unrealized gain on investments before

   reclassification, net of tax of $29

 

 

47

 

 

 

 

 

 

47

 

Balance at June 30, 2015

 

$

(27

)

 

$

(3,472

)

 

$

(3,499

)

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at April 1, 2015

 

$

24

 

 

$

(4,539

)

 

$

(4,515

)

Foreign currency translation

 

 

 

 

 

1,067

 

 

 

1,067

 

Unrealized loss on investments before

   reclassification, net of tax of $33

 

 

(51

)

 

 

 

 

 

(51

)

Balance at June 30, 2015

 

$

(27

)

 

$

(3,472

)

 

$

(3,499

)

 

 

7


 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2014

 

$

16

 

 

$

2,438

 

 

$

2,454

 

Foreign currency translation

 

 

 

 

 

(61

)

 

 

(61

)

Unrealized gain on investments before

   reclassification, net of tax of $27

 

 

33

 

 

 

 

 

 

33

 

Reclassification adjustment for net loss

   realized in net income, net of tax of $2

 

 

3

 

 

 

 

 

 

3

 

Balance at June 30, 2014

 

$

52

 

 

$

2,377

 

 

$

2,429

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at April 1, 2014

 

$

27

 

 

$

2,483

 

 

$

2,510

 

Foreign currency translation

 

 

 

 

 

(106

)

 

 

(106

)

Unrealized gain on investments before

   reclassification, net of tax of $27

 

 

27

 

 

 

 

 

 

27

 

Reclassification adjustment for net loss

   realized in net income, net of tax of $2

 

 

(2

)

 

 

 

 

 

(2

)

Balance at June 30, 2014

 

$

52

 

 

$

2,377

 

 

$

2,429

 

 

Reclassification adjustments for net gains (losses) are reported in gains (losses) on investments, net in the Consolidated Statements of Income.

 

 

Note 3 — Marketable Investments

The following table summarizes the Company’s marketable investments (in thousands):

 

 

 

As of June 30, 2015

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

60,720

 

 

$

17

 

 

$

(60

)

 

$

60,677

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

55,005

 

 

$

13

 

 

$

(133

)

 

$

54,885

 

 

Realized gains and losses on securities are included in earnings and are determined using the specific identification method. Realized gains or losses on the sale of the Company’s corporate obligations were not material in the three and six months ended June 30, 2015 or 2014.

The following table summarizes the maturity periods of the marketable securities in the Company’s portfolio as of June 30, 2015 (in thousands).

 

 

 

FY 2015

 

 

FY 2016

 

 

FY 2017

 

 

Thereafter

 

 

Total

 

Corporate obligations

 

$

8,478

 

 

$

25,496

 

 

$

23,706

 

 

$

2,997

 

 

$

60,677

 

 

 

8


 

The following table shows the gross unrealized losses and market value of Forrester’s available-for-sale securities with unrealized losses that are not deemed to be other-than-temporary, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

 

As of June 30, 2015

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

32,296

 

 

$

53

 

 

$

2,043

 

 

$

7

 

 

 

 

As of December 31, 2014

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

38,175

 

 

$

133

 

 

$

 

 

$

 

 

Fair Value

The Company measures certain financial assets at fair value on a recurring basis, including cash equivalents and available-for-sale securities. The fair values of these financial assets have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

As of June 30, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

852

 

 

$

 

 

$

 

 

$

852

 

Corporate obligations

 

 

 

 

 

60,677

 

 

 

 

 

 

60,677

 

Total

 

$

852

 

 

$

60,677

 

 

$

 

 

$

61,529

 

 

 

 

As of December 31, 2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

1,794

 

 

$

 

 

$

 

 

$

1,794

 

Corporate obligations

 

 

 

 

 

54,885

 

 

 

 

 

 

54,885

 

Total

 

$

1,794

 

 

$

54,885

 

 

$

 

 

$

56,679

 

 

(1)

Included in cash and cash equivalents. 

Level 2 assets consist of the Company’s entire portfolio of corporate bonds. Level 2 assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation methods, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

 

 

 

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Note 4 — Non-Marketable Investments

At June 30, 2015 and December 31, 2014, the carrying value of the Company’s non-marketable investments, which were composed primarily of interests in technology-related private equity funds, was $3.7 million and $3.8 million, respectively, and is included in other assets in the Consolidated Balance Sheets.

One of the Company’s investments, with a book value of $0.6 million and $0.7 million at June 30, 2015 and December 31, 2014, respectively, is being accounted for using the cost method and, accordingly, is valued at cost unless an other-than-temporary impairment in its value occurs. The other investments are being accounted for using the equity method as the investments are limited partnerships and the Company has an ownership interest in excess of 5% and, accordingly, the Company records its share of the investee’s operating results each period. Gains and losses from non-marketable investments were insignificant during the three and six months ended June 30, 2015 and 2014, and are included in gains (losses) on investments, net in the Consolidated Statements of Income. During the six months ended June 30, 2015 and 2014, gross distributions of $0.1 million and $1.4 million, respectively, were received from the funds.

 

 

Note 5 — Reorganization

In the first quarter of 2015, the Company implemented a reduction in its workforce of approximately 4% of its employees across various geographies and functions, in order to reallocate investment in 2015 to planned sales expansion and to delivery areas seeing the greatest client demand. Overall the Company expects to increase its headcount by 5% to 7% at the end of 2015 compared to 2014 levels. The Company recorded $(0.2) million and $3.2 million of severance and related costs for this action during the three and six months ended June 30, 2015.  In addition, the Company incurred $0.3 million during the three months ended June 30, 2015 primarily for a non-cash charge for the liquidation of a small non-U.S. subsidiary. The costs under this plan are expected to be substantially paid by the end of 2015.

During 2014 the Company incurred $1.8 million of severance and related costs for the termination of approximately 1% of its employees across various geographies and functions primarily to realign resources due to the Company’s new organizational structure put in place in late 2013. Approximately $0.8 million of the costs were recognized in the three months ended March 31, 2014 and approximately $1.0 million were recognized in the three months ended June 30, 2014.

The following table rolls forward the activity in the reorganization accrual for the six months ended June 30, 2015 (in thousands):

 

 

 

Workforce

 

 

Subsidiary

 

 

 

 

 

 

 

Reduction

 

 

Liquidation

 

 

Total

 

Accrual at December 31, 2014

 

$

118

 

 

$

 

 

$

118

 

Additions

 

 

3,173

 

 

 

332

 

 

 

3,505

 

Cash payments

 

 

(2,768

)

 

 

 

 

 

(2,768

)

Non-cash charge

 

 

 

 

 

(318

)

 

 

(318

)

Accrual at June 30, 2015

 

$

523

 

 

$

14

 

 

$

537

 

 

 

Note 6 — Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding options and vesting of restricted stock units when dilutive.

 

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Basic and diluted weighted average common shares are as follows (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

18,007

 

 

 

18,757

 

 

 

18,033

 

 

 

19,184

 

Weighted average common equivalent shares

 

 

261

 

 

 

287

 

 

 

281

 

 

 

295

 

Diluted weighted average common shares outstanding

 

 

18,268

 

 

 

19,044

 

 

 

18,314

 

 

 

19,479

 

Options excluded from diluted weighted average share

   calculation as effect would have been anti-dilutive

 

 

1,012

 

 

 

602

 

 

 

852

 

 

 

582

 

 

 

Note 7 — Stockholders’ Equity

Equity Plans

Stock option activity for the six months ended June 30, 2015 is presented below (in thousands, except per share data):

 

 

 

 

 

 

 

Weighted -