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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): July 27, 2004
FORRESTER RESEARCH, INC.
(Exact Name of Registrant Specified in Charter)
Delaware 000-21433 04-2797789
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) 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
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(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 5
Exhibit Index appears on Page 4
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated July 27, 2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The information contained in this current report on Form 8-K is
furnished pursuant to Item 12 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 July 27, 2004, Forrester Research, Inc. issued a press release
announcing its financial results for the quarter ended June 30, 2004, 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 non-marketable securities - we have consistently
excluded both one-time gains and one-time write-offs related to our investments
in non-marketable securities from our pro forma results in order to keep quarter
over quarter comparisons consistent.
Reorganization costs - we exclude reorganization costs in order to
present a consistent basis for quarterly comparisons and to more consistently
present our results of operations.
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 Forrester's financial statements and filings with
the Securities and Exchange Commission.
2
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.
FORRESTER RESEARCH, INC.
By: /s/ WARREN HADLEY
-----------------------
Name: Warren Hadley
Title: Treasurer and Chief Financial Officer
Dated: July 27, 2004
3
Exhibit Index
Exhibit Description Page
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99.1 Press Release dated July 27, 2004. 5
4
Exhibit 99.1
Forrester Research Announces Second-Quarter 2004 Financial Results
CAMBRIDGE, Mass.--(BUSINESS WIRE)--July 27, 2004--Forrester
Research, Inc. (Nasdaq: FORR) today announced its second-quarter ended
June 30, 2004 financial results.
Second-Quarter Financial Performance
-- Total revenues were $34.9 million, compared with $34.0 million
for the second quarter of last year.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.5 percent, Forrester reported a second-quarter net loss
of $2.3 million or $0.11 per diluted share, compared with net
income of $141,000, or $0.01 per diluted share, for the same
period last year.
-- On a pro forma basis, which excludes amortization of $1.4
million of acquisition-related intangible assets,
reorganization costs of $6.8 million related primarily to
office space consolidations, and non-marketable investment
gains of $57,000 and which reflects a pro forma effective tax
rate of 35 percent, net income was $3.0 million, or $0.13 per
diluted share, for the second quarter of 2004. This compares
with pro forma net income of $2.5 million, or $0.11 per
diluted share, for the same period in 2003, which excludes
amortization of $2.6 million of acquisition-related intangible
assets, costs of $740,000 related to the integration of Giga
Information Group, Inc., and a net write-down of $272,000
related to impairments of certain non-marketable investments,
and a pro forma effective tax rate of 35 percent.
Six-Month Period Ended June 30, 2004, Financial Performance
-- Total revenues were $66.7 million, compared with $58.5 million
for the same period last year.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.5 percent, Forrester reported a net loss of $2.6
million, or $0.12 per diluted share for the six months ended
2004, compared to net income of $1.9 million or $0.08 per
diluted share for the same period last year.
-- On a pro forma basis, which excludes amortization of $3.7
million of acquisition-related intangible assets,
reorganization costs of $8.8 million related primarily to
office space consolidations, non-marketable investment gains
of $57,000 and which reflects a pro forma effective tax rate
of 35 percent, net income was $5.5 million, or $0.24 per
diluted share, for the six months ended 2004. This compares
with pro forma net income of $5.0 million, or $0.22 per
diluted share for the same period last year, which excludes
amortization of $3.5 million of acquisition-related intangible
assets, costs of $771,000 related to the integration of Giga
Information Group, Inc., and a net write-down of $572,000
related to impairments of certain non-marketable investments,
and 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 continued to improve in the
second quarter," said George F. Colony, chairman of the board and
chief executive officer. "Our client and dollar retention rates are
up, back to our target ranges. Product innovations and enhancements
are gaining traction, and technology spending is increasing at a
moderate pace. Overall, our second quarter results position us well
for the second half of 2004."
Forrester Debuts Two New Products
Also today, the company announced Forrester's Ultimate Consumer
Panel(TM) (Ultimate), an innovative, opt-in, highly secure consumer
data panel. Ultimate electronically captures online and offline
behavior from a representative group of more than 10,000 US
households. Clients including MasterCard, Wells Fargo & Company, and
Household Credit Card Services use Ultimate data and analysis to
better understand current and prospective customers, tailor marketing
strategies and messages, predict adoption for new products and
services, and gain intelligence on their market landscapes. See
separate press release at:
http://www.forrester.com/ER/Press/Release/0,1769,931,FF.html
The Forrester Oval Program(TM) (executive membership offering)
today introduced three new membership groups for marketing
professionals. The CMO Group, Database Marketing Council, and Email
Marketing Council are designed for senior marketers at
business-to-consumer (B2C) companies. Clients such as Charming
Shoppes, Panasonic, and Thrifty Rental Car have joined Forrester's
Marketing Ovals to ensure their strategies are aligned with consumer
behavior. Through these specialized marketing membership programs,
Forrester helps marketing executives thrive in a world in which
technology increasingly influences consumer behavior.
"Both of these new offerings - Ultimate and the Marketing Ovals --
are a natural progression for Forrester," said Colony. "For years, we
have researched technology's impact on consumer behavior and advised
marketing executives at our client companies. We are pleased that key
$1 billion-plus companies have already become clients of Ultimate and
the Marketing Ovals."
Forrester is providing third-quarter and full-year 2004 guidance
as follows:
Third-Quarter 2004 (GAAP):
-- Total revenues of approximately $32.0 million to $34.0
million.
-- Operating margin of approximately 8 percent to 10 percent.
-- Interest income of approximately $650,000.
-- An effective tax rate of 33.5 percent.
-- Diluted earnings per share of approximately $0.09 to $0.12.
Third-Quarter 2004 (Pro Forma):
Pro forma financial guidance for the third quarter of 2004
excludes amortization of acquisition-related intangible assets of
approximately $1.4 million, as well as all gains and impairment
charges related to non-marketable securities.
-- Pro forma operating margin of approximately 12 percent to 14
percent.
-- Pro forma effective tax rate of 35 percent, which varies from
our actual effective tax rate of 33.5 percent due to our
tax-free interest income decreasing as a percentage of our pro
forma pre-tax income.
-- Pro forma diluted earnings per share of approximately $0.13 to
$0.15.
Full-Year 2004 (GAAP):
-- Total revenues of approximately $133.0 million to $138.0
million.
-- Operating margin of approximately 0 percent to 2 percent.
-- Interest income of approximately $2.7 million to $2.8 million.
-- An effective tax rate of 33.5 percent.
-- Diluted earnings per share of approximately $0.10 to $0.14.
Full-Year 2004 (Pro Forma):
Pro forma financial guidance for full-year 2004 excludes
amortization of acquisition-related intangible assets of approximately
$6.5 million, all gains and impairment charges related to
non-marketable securities, and reorganization and integration charges
of approximately $8.8 million.
-- Pro forma operating margin of approximately 11 percent to 13
percent.
-- Pro forma effective tax rate of 35 percent, which varies from
our actual effective tax rate of 33.5 percent due to our
tax-free interest income decreasing as a percentage of our pro
forma pre-tax income.
-- Pro forma diluted earnings per share of approximately $0.52 to
$0.57.
Forrester is an independent technology research company that
provides pragmatic and forward-thinking advice about technology's
impact on business. Business, marketing, and IT professionals
worldwide collaborate with Forrester to align their technology
investments with their business goals. Forrester offers products and
services in four major areas: Research, Data, Consulting, and
Community. Established in 1983, Forrester is headquartered in
Cambridge, Mass. For additional 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 second quarter of and full-year 2004,
statements about the potential success of product offerings, the
ability to achieve all of the anticipated benefits from the
acquisition of Giga Information Group, the amount of the charge and
any cost savings related to reductions in force and associated
actions, and the ability of Forrester to achieve success as the
economy improves. 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, market trends,
competition, 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, the actual amount of the charge and any cost savings related
to reductions in force and associated actions, 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.
(C) 2004, Forrester Research, Inc. All rights reserved. Forrester,
WholeView 2, Forrester Oval Program, and Ultimate Consumer Panel are
trademarks of Forrester Research, Inc.
Forrester Research, Inc.
Consolidated Statements of Income
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(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
-------------------- --------------------
(Unaudited) (Unaudited)
Revenues
Research services $23,046 $25,865 $46,035 $44,371
Advisory services and
other 11,875 8,113 20,615 14,089
----------- -------- ----------- --------
Total revenues 34,921 33,978 66,650 58,460
Operating expenses
Cost of services and
fulfillment 14,377 14,330 27,516 23,855
Selling and marketing 11,605 11,022 22,665 18,774
General and
administrative 3,985 3,781 7,396 7,058
Depreciation and
amortization 1,026 1,839 2,057 3,532
Amortization of
intangible assets 1,384 2,608 3,728 3,532
Reorganization costs 6,794 - 8,751 -
Integration costs - 740 - 771
----------- -------- ----------- --------
Total operating expenses 39,171 34,320 72,113 57,522
(Loss) income from
operations (4,250) (342) (5,463) 938
Other income, net 662 819 1,488 2,414
Non-marketable investment
gains (impairments) 57 (272) 57 (572)
----------- -------- ----------- --------
(Loss) income before
income taxes (3,531) 205 (3,918) 2,780
Income tax (benefit)
provision (1,183) 64 (1,313) 862
----------- -------- ----------- --------
Net (loss) income $(2,348) $141 $(2,605) $1,918
=========== ======== =========== ========
Diluted (loss) earnings
per share $(0.11) $0.01 $(0.12) $0.08
=========== ======== =========== ========
Diluted weighted average
shares outstanding 22,074 22,718 22,165 22,819
=========== ======== =========== ========
Basic (loss) earnings
per share $(0.11) $0.01 $(0.12) $0.08
=========== ======== =========== ========
Basic weighted average
shares outstanding 22,074 22,515 22,165 22,627
=========== ======== =========== ========
Pro forma data (1):
(Loss) income from
operations $(4,250) $(342) $(5,463) $938
Amortization of
intangible assets 1,384 2,608 3,728 3,532
Reorganization costs 6,794 - 8,751 -
Integration costs - 740 - 771
----------- -------- ----------- --------
Pro forma income from
operations 3,928 3,006 7,016 5,241
Other income, net 662 819 1,488 2,414
----------- -------- ----------- --------
Pro forma income before
income taxes 4,590 3,825 8,504 7,655
Pro forma income tax
provision 1,607 1,339 2,977 2,679
----------- -------- ----------- --------
Pro forma net income $2,983 $2,486 $5,527 $4,976
=========== ======== =========== ========
Pro forma diluted
earnings per share $0.13 $0.11 $0.24 $0.22
=========== ======== =========== ========
Diluted weighted average
shares outstanding 22,614 22,718 22,693 22,819
=========== ======== =========== ========
(1) The pro forma data excludes amortization of intangibles and other
integration costs related to acquisitions, reorganization costs
and gains and impairments related to non-marketable investments,
as well as their related tax effects. This does not purport to be
prepared in accordance with Generally Accepted Accounting
Principles.
Forrester Research, Inc.
Consolidated Balance Sheets
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(In thousands)
June 30, Dec. 31,
2004 2003
----------- ---------
(Unaudited)
Assets:
Cash and cash equivalents $46,068 $22,385
Marketable securities 79,025 104,348
Accounts receivable, net 26,059 40,013
Deferred commissions 5,451 5,999
Prepaid expenses and other current assets 8,206 7,079
----------- ---------
Total current assets 164,809 179,824
Property and equipment, net 5,618 8,266
Goodwill, net 56,894 57,006
Intangible assets, net 9,731 13,456
Deferred income taxes 40,590 40,159
Non-marketable investments and other assets 13,989 12,264
----------- ---------
Total assets $291,631 $310,975
=========== =========
Liabilities and stockholders' equity:
Accounts payable $2,950 $2,566
Accrued expenses 25,976 31,457
Deferred revenue 63,891 68,630
----------- ---------
Total liabilities 92,817 102,653
Preferred stock - -
Common stock 245 243
Additional paid-in capital 177,688 172,523
Retained earnings 64,340 66,945
Treasury stock, at cost (41,478) (30,300)
Accumulated other comprehensive loss (1,981) (1,089)
----------- ---------
Total stockholders' equity 198,814 208,322
----------- ---------
Total liabilities and stockholders' equity $291,631 $310,975
=========== =========
Forrester Research, Inc.
Consolidated Statements Cash Flows
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(In thousands)
Six months
ended June 30,
2004 2003
---------------------
(Unaudited)
Cash flows from operations:
Net (loss) income $(2,605) $1,918
Adjustments to reconcile net (loss) income to
net cash provided by operating activities -
Depreciation 2,057 3,532
Amortization of intangible assets 3,728 3,532
Non-marketable investments (gains)
impairments (57) 572
Loss on disposal of property and equipment - -
Realized gain on sale of securities - (509)
Tax benefit from stock options 238 155
Deferred income taxes (2) 793
Non-cash reorganization costs 1,844 -
Increase in provision for doubtful
accounts - -
Accretion of premiums on marketable
securities 404 413
Changes in assets and liabilities, net of
acquisition -
Accounts receivable 14,785 10,534
Deferred commissions 548 (1,260)
Prepaid expenses and other current
assets (717) 1,758
Accounts payable 279 (207)
Accrued expenses (5,359) (7,649)
Deferred revenue (5,481) (8,710)
----------- ---------
Net cash provided by operating activities 9,662 4,872
Cash flows from investing activities:
Acquisition of Giga Information Group, Inc.,
net of cash acquired - (56,066)
Purchases of property and equipment (1,279) (1,017)
Purchase of non-marketable investments (2,163) (2,150)
Decrease in other assets 529 75
Purchase of marketable securities (67,735) (126,158)
Proceeds from sales and maturities of
marketable securities 91,549 188,766
----------- ---------
Net cash provided by investing activities 20,901 3,450
Cash flows from financing activities:
Proceeds from issuance of common stock under
employee stock option plans and employee
stock purchase plan 2,350 1,457
Acquisition of treasury shares (9,178) (5,295)
Structured stock repurchase 54 (1,892)
----------- ---------
Net cash used in financing activities (6,774) (5,730)
Effect of exchange rate changes on cash and cash
equivalents (106) (190)
----------- ---------
Net increase in cash and cash equivalents 23,683 2,402
Cash and cash equivalents, beginning of period 22,385 11,479
----------- ---------
Cash and cash equivalents, end of period $46,068 $13,881
=========== =========
CONTACT: Forrester Research, Inc.
Kimberly Maxwell, 617-613-6234
Director, Investor Relations
kmaxwell@forrester.com
or
Forrester Research, Inc.
Karyl Levinson, 617-613-6262
Director, Corporate Communications
press@forrester.com