forr-10q_20150930.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 September 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 November 2, 2015 17,742,000 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 September 30, 2015 and December 31, 2014

  

3

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2015 and 2014

  

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014

  

5

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 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

  

24

 

ITEM 4. Controls and Procedures

  

24

 

PART II. OTHER INFORMATION

  

25

 

ITEM 1A. Risk Factors

  

25

 

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

  

25

 

ITEM 6. Exhibits

  

26

  

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,586

 

 

$

49,650

 

Marketable investments (Note 3)

 

 

58,565

 

 

 

54,885

 

Accounts receivable, net

 

 

37,379

 

 

 

67,429

 

Deferred commissions

 

 

9,332

 

 

 

13,754

 

Prepaid expenses and other current assets

 

 

21,154

 

 

 

22,277

 

Total current assets

 

 

172,016

 

 

 

207,995

 

Property and equipment, net

 

 

27,781

 

 

 

32,174

 

Goodwill

 

 

74,772

 

 

 

76,683

 

Intangible assets, net

 

 

2,591

 

 

 

3,382

 

Other assets

 

 

15,540

 

 

 

12,473

 

Total assets

 

$

292,700

 

 

$

332,707

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

595

 

 

$

912

 

Accrued expenses and other current liabilities

 

 

29,641

 

 

 

36,217

 

Deferred revenue

 

 

124,195

 

 

 

144,568

 

Total current liabilities

 

 

154,431

 

 

 

181,697

 

Non-current liabilities

 

 

9,277

 

 

 

9,408

 

Total liabilities

 

 

163,708

 

 

 

191,105

 

 

 

 

 

 

 

 

 

 

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 - 21,046 and 20,856 as of September 30, 2015 and December 31, 2014,

   respectively

 

 

 

 

 

 

 

 

Outstanding 17,808 and 18,153 as of September 30, 2015 and December 31, 2014,

   respectively

 

 

210

 

 

 

209

 

Additional paid-in capital

 

 

132,172

 

 

 

124,942

 

Retained earnings

 

 

118,131

 

 

 

117,318

 

Treasury stock - 3,238 and 2,703 as of September 30, 2015 and December 31, 2014,

   respectively, at cost

 

 

(117,893

)

 

 

(99,254

)

Accumulated other comprehensive loss

 

 

(3,628

)

 

 

(1,613

)

Total stockholders’ equity

 

 

128,992

 

 

 

141,602

 

Total liabilities and stockholders’ equity

 

$

292,700

 

 

$

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research services

 

$

52,205

 

 

$

50,622

 

 

$

156,667

 

 

$

153,737

 

Advisory services and events

 

 

22,548

 

 

 

24,741

 

 

 

76,084

 

 

 

77,644

 

Total revenues

 

 

74,753

 

 

 

75,363

 

 

 

232,751

 

 

 

231,381

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

29,222

 

 

 

30,105

 

 

 

92,543

 

 

 

93,143

 

Selling and marketing

 

 

27,460

 

 

 

27,677

 

 

 

85,572

 

 

 

86,190

 

General and administrative

 

 

9,530

 

 

 

10,023

 

 

 

28,564

 

 

 

29,365

 

Depreciation

 

 

2,048

 

 

 

2,174

 

 

 

6,251

 

 

 

7,236

 

Amortization of intangible assets

 

 

224

 

 

 

530

 

 

 

669

 

 

 

1,605

 

Reorganization costs (credits)

 

 

928

 

 

 

(71

)

 

 

4,433

 

 

 

1,817

 

Total operating expenses

 

 

69,412

 

 

 

70,438

 

 

 

218,032

 

 

 

219,356

 

Income from operations

 

 

5,341

 

 

 

4,925

 

 

 

14,719

 

 

 

12,025

 

Other income, net

 

 

159

 

 

 

232

 

 

 

342

 

 

 

247

 

Gains (losses) on investments, net

 

 

245

 

 

 

(105

)

 

 

236

 

 

 

(25

)

Income before income taxes

 

 

5,745

 

 

 

5,052

 

 

 

15,297

 

 

 

12,247

 

Income tax provision

 

 

1,295

 

 

 

2,009

 

 

 

5,321

 

 

 

4,981

 

Net income

 

$

4,450

 

 

$

3,043

 

 

$

9,976

 

 

$

7,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.25

 

 

$

0.17

 

 

$

0.55

 

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

 

$

0.25

 

 

$

0.16

 

 

$

0.55

 

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

17,892

 

 

 

18,287

 

 

 

17,986

 

 

 

18,886

 

Diluted weighted average common shares outstanding

 

 

18,065

 

 

 

18,549

 

 

 

18,231

 

 

 

19,169

 

Cash dividends declared per common share

 

$

0.17

 

 

$

0.16

 

 

$

0.51

 

 

$

0.48

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

4,450

 

 

$

3,043

 

 

$

9,976

 

 

$

7,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

(129

)

 

 

(2,333

)

 

 

(2,062

)

 

 

(2,394

)

Net change in market value of investments

 

 

 

 

 

(59

)

 

 

47

 

 

 

(23

)

Other comprehensive loss

 

 

(129

)

 

 

(2,392

)

 

 

(2,015

)

 

 

(2,417

)

Comprehensive income

 

$

4,321

 

 

$

651

 

 

$

7,961

 

 

$

4,849

 

 

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

 

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

9,976

 

 

$

7,266

 

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

 

 

 

 

 

 

 

 

Depreciation and asset write-offs

 

 

6,408

 

 

 

7,236

 

Amortization of intangible assets

 

 

669

 

 

 

1,605

 

Net (gains) losses from investments

 

 

(236

)

 

 

25

 

Deferred income taxes

 

 

(2,463

)

 

 

(5,406

)

Stock-based compensation

 

 

5,885

 

 

 

5,148

 

Amortization of premium on investments

 

 

556

 

 

 

1,048

 

Foreign currency losses

 

 

64

 

 

 

234

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

29,511

 

 

 

37,921

 

Deferred commissions

 

 

4,422

 

 

 

3,230

 

Prepaid expenses and other current assets

 

 

(148

)

 

 

(255

)

Accounts payable

 

 

(284

)

 

 

18

 

Accrued expenses and other liabilities

 

 

(7,115

)

 

 

(7,924

)

Deferred revenue

 

 

(19,027

)

 

 

(22,295

)

Net cash provided by operating activities

 

 

28,218

 

 

 

27,851

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,316

)

 

 

(1,110

)

Purchases of marketable investments

 

 

(20,587

)

 

 

(27,165

)

Proceeds from sales and maturities of marketable investments

 

 

16,428

 

 

 

51,610

 

Other investing activity

 

 

275

 

 

 

1,471

 

Net cash provided by (used in) investing activities

 

 

(6,200

)

 

 

24,806

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid on common stock

 

 

(9,163

)

 

 

(9,053

)

Repurchases of common stock

 

 

(18,639

)

 

 

(66,557

)

Proceeds from issuance of common stock under employee equity incentive plans

 

 

2,899

 

 

 

6,781

 

Excess tax benefits from stock-based compensation

 

 

32

 

 

 

157

 

Net cash used in financing activities

 

 

(24,871

)

 

 

(68,672

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,211

)

 

 

(1,185

)

Net decrease in cash and cash equivalents

 

 

(4,064

)

 

 

(17,200

)

Cash and cash equivalents, beginning of period

 

 

49,650

 

 

 

74,132

 

Cash and cash equivalents, end of period

 

$

45,586

 

 

$

56,932

 

 

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 nine months ended September 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

 

 

 

 

 

(2,062

)

 

 

(2,062

)

Unrealized gain on investments, net of tax of $29

 

 

47

 

 

 

 

 

 

47

 

Balance at September 30, 2015

 

$

(27

)

 

$

(3,601

)

 

$

(3,628

)

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at July 1, 2015

 

$

(27

)

 

$

(3,472

)

 

$

(3,499

)

Foreign currency translation

 

 

 

 

 

(129

)

 

 

(129

)

Balance at September 30, 2015

 

$

(27

)

 

$

(3,601

)

 

$

(3,628

)

 

 

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

 

 

 

 

 

(2,394

)

 

 

(2,394

)

Unrealized loss on investments before

   reclassification, net of tax of $6

 

 

(18

)

 

 

 

 

 

(18

)

Reclassification adjustment for net gains

   realized in net income, net of tax of $7

 

 

(5

)

 

 

 

 

 

(5

)

Balance at September 30, 2014

 

$

(7

)

 

$

44

 

 

$

37

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at July 1, 2014

 

$

52

 

 

$

2,377

 

 

$

2,429

 

Foreign currency translation

 

 

 

 

 

(2,333

)

 

 

(2,333

)

Unrealized loss on investments before

   reclassification, net of tax of $33

 

 

(51

)

 

 

 

 

 

(51

)

Reclassification adjustment for net gains

   realized in net income, net of tax of $5

 

 

(8

)

 

 

 

 

 

(8

)

Balance at September 30, 2014

 

$

(7

)

 

$

44

 

 

$

37

 

 

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  September 30, 2015

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

58,608

 

 

$

15

 

 

$

(58

)

 

$

58,565

 

 

 

 

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 nine months ended September 30, 2015 or 2014.

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

 

 

 

FY 2015

 

 

FY 2016

 

 

FY 2017

 

 

Thereafter

 

 

Total

 

Corporate obligations

 

$

4,501

 

 

$

25,434

 

 

$

23,632

 

 

$

4,998

 

 

$

58,565

 

 

 

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  September 30, 2015

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate obligations

 

$

24,065

 

 

$

52

 

 

$

2,035

 

 

$

6

 

 

 

 

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 (in thousands):

 

 

 

As of  September 30, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

3,181

 

 

$

 

 

$

 

 

$

3,181

 

Corporate obligations

 

 

 

 

 

58,565

 

 

 

 

 

 

58,565

 

Total

 

$

3,181

 

 

$

58,565

 

 

$

 

 

$

61,746

 

 

 

 

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.

 

 

 

9


 

Note 4 — Non-Marketable Investments

At September 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 $3.9 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 September 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 nine months ended September 30, 2015 and 2014, and are included in gains (losses) on investments, net in the Consolidated Statements of Income. During the nine months ended September 30, 2015 and 2014, gross distributions of $0.1 million and $1.5 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 approximately 1% at the end of 2015 compared to 2014 levels. The Company recorded $3.2 million of severance and related costs for this action during the nine months ended September 30, 2015.  In addition, the Company incurred $0.3 million during the nine months ended September 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.

In the third quarter of 2015 the Company incurred $0.7 million of severance and related benefits for the reorganization of its Products Group, consisting of the termination of the chief product officer and related administrative staff, and the termination of a senior product leader with the intent to relocate this position to the U.S.  The responsibilities of the former chief product officer have been assumed by the Company’s chief research officer.  In addition, as a result of the change in leadership in the Products Group, the Company incurred $0.2 million of expense to write off a software development project that was no longer deemed probable to be completed.  

Approximately $0.5 million of the severance and related benefit costs incurred during 2015 are expected to be paid in 2016 and the remainder will be paid in 2015.

During the nine months ended September 30, 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.

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

 

 

 

Workforce

 

 

Subsidiary

 

 

Products Group

 

 

 

 

 

 

 

Reduction

 

 

Liquidation

 

 

Reorganization

 

 

Total

 

Accrual at December 31, 2014

 

$

118

 

 

$

 

 

$

 

 

$

118

 

Additions

 

 

3,173

 

 

 

334

 

 

 

926

 

 

 

4,433

 

Cash payments

 

 

(3,134

)

 

 

 

 

 

 

 

 

(3,134

)

Non-cash charge

 

 

 

 

 

(318

)

 

 

(157

)

 

 

(475

)

Accrual at September 30, 2015

 

$

157

 

 

$

16

 

 

$

769

 

 

$

942

 

 

 

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.

 

10


 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

17,892

 

 

 

18,287

 

 

 

17,986

 

 

 

18,886

 

Weighted average common equivalent shares

 

 

173

 

 

 

262

 

 

 

245

 

 

 

283

 

Diluted weighted average common shares outstanding

 

 

18,065

 

 

 

18,549