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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 2, 2005
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 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 2, 2005, Forrester Research, Inc. issued a press release
announcing its financial results for the year ended December 31, 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 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
equity 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 the 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: February 2, 2005
- 3 -
Exhibit Index
Exhibit Description Page
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99.1 Press Release dated February 2, 2005. 5
- 4 -
EXHIBIT 99.1
Forrester Research Announces Fourth-Quarter And
Full-Year 2004 Financial Results
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 2, 2005--Forrester
Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and
full-year 2004 financial results.
Fourth-Quarter Financial Performance
-- Total revenues were $38.0 million, compared with $35.3 million
for the fourth quarter of 2003.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.7 percent, Forrester reported fourth-quarter net income
of $3.5 million or $0.16 per diluted share, compared with net
income of 87,000, or $0.00 per diluted share, for the same
period in 2003.
-- On a pro forma basis, which excludes amortization of $1.3
million of acquisition-related intangible assets, a
reorganization cost revision of $355,000, and net gains
resulting from sales of equity securities and non-marketable
investments totaling $305,000, and which reflects a pro forma
effective tax rate of 35 percent, net income was $3.9 million,
or $0.18 per diluted share, for the fourth quarter of 2004.
This compares with pro forma net income of $3.9 million, or
$0.17 per diluted share, for the same period in 2003, which
excluded non-marketable investment impairments of $1.8
million, amortization of $2.6 million of acquisition-related
intangible assets, reorganization costs of $1.4 million, costs
of $117,000 related to the integration of Giga Information
Group, Inc., and a pro forma effective tax rate of 35 percent.
Full-Year 2004 Financial Performance
-- Total revenues were $138.5 million, compared with $126.0
million for 2003.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.7 percent, Forrester reported net income of $4.1
million, or $0.18 per diluted share for 2004, compared with
net income of $2.2 million, or $0.10 per diluted share, for
2003.
-- On a pro forma basis, which excludes amortization of $6.5
million of acquisition-related intangible assets,
reorganization costs of $8.4 million related primarily to
office space consolidations, and gains resulting from sales of
equity securities and non-marketable investments totaling $1.4
million, and which reflects a pro forma effective tax rate of
35 percent, net income was $12.8 million, or $0.57 per diluted
share, for 2004. This compares with pro forma net income of
$11.7 million, or $0.51 per diluted share for 2003, which
excludes amortization of $8.8 million of acquisition-related
intangible assets, reorganization costs of $2.6 million, costs
of $1.1 million related to the integration of Giga Information
Group, Inc., non-marketable investment impairments of $2.4
million, 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 in 2004 was solid, with key
indicators moving in the right direction," said George F. Colony,
chairman of the board and chief executive officer. "Revenues for the
year came in above the high end of our guidance, and we generated $18
million in cash flows from operations. Forrester also accomplished
several initiatives aimed at expanding its portfolio of products.
Early in 2004, we completed the rollout of WholeView 2(TM), our
enhanced research product. Forrester also launched new Data and
Forrester Oval Program(TM) offerings, creating additional cross-sell
and new business opportunities. In 2005, Forrester remains committed
to growing its business."
Forrester's research forecasts a 7 percent increase in technology
spending in 2005. "An improved technology spending environment usually
bodes well for Forrester," said Colony. "In addition, our expanded
product portfolio enables us to target new clients and new budgets,
particularly in the marketing departments of $1 billion-plus
companies. We continue to leverage our core research business, which
serves as the foundation for everything we offer our clients."
Forrester also announced today that its board of directors has
authorized the repurchase of up to $50 million of its common stock.
The shares may be purchased from time to time in open market or
privately negotiated transactions. The shares repurchased will be
used, among other things, for Forrester's employee stock option and
stock purchase plans. As of December 31, 2004, Forrester had
approximately 21,620,000 shares of common stock outstanding.
Forrester is providing first-quarter and full-year 2005 guidance
as follows:
First-Quarter 2005 (GAAP):
-- Total revenues of approximately $32.0 million to $34.0
million.
-- Operating margin of approximately 4 percent to 7 percent.
-- Interest income of approximately $700,000.
-- An effective tax rate of 35 percent to 36 percent.
-- Diluted earnings per share of approximately $0.05 to $0.12.
First-Quarter 2005 (Pro Forma):
Pro forma financial guidance for the first quarter of 2005
excludes amortization of acquisition-related intangible assets of
approximately $1.1 million, as well as all gains and impairment
charges related to marketable securities and non-marketable
investments.
-- Pro forma operating margin of approximately 8 percent to 10
percent.
-- Pro forma diluted earnings per share of approximately $0.10 to
$0.12.
The following full-year 2005 guidance does not include an estimate
for the costs of expensing options in the second half of the year.
Full-Year 2005 (GAAP):
-- Total revenues of approximately $148.0 million to $153.0
million.
-- Operating margin of approximately 10 percent to 12 percent.
-- Interest income of approximately $2.6 million to $3.0 million.
-- An effective tax rate of 35 percent to 36 percent.
-- Diluted earnings per share of approximately $0.52 to $0.62.
Full-Year 2005 (Pro Forma):
Pro forma financial guidance for full-year 2005 excludes
amortization of acquisition-related intangible assets of approximately
$3.5 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 diluted earnings per share of approximately $0.62 to
$0.67.
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 first quarter of and full-year 2005,
statements about the potential success of product offerings, 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,
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, 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) 2005, Forrester Research, Inc. All rights reserved. Forrester,
WholeView 2, and Forrester Oval Program are trademarks of Forrester
Research, Inc.
Forrester Research, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
Three months ended Year ended
December 31, December 31,
2004 2003 2004 2003
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(Unaudited)
Revenues:
Research services $24,768 $24,120 $94,347 $92,289
Advisory services and other 13,182 11,211 44,132 33,710
----------- -------- -------- --------
Total revenues 37,950 35,331 138,479 125,999
Operating expenses:
Cost of services and
fulfillment 13,905 13,667 54,687 50,047
Selling and marketing 13,166 11,494 46,867 41,017
General and administrative 4,677 3,689 16,364 14,674
Depreciation and
amortization 890 1,204 3,691 6,256
Amortization of intangible
assets 1,349 2,638 6,461 8,778
Reorganization costs (355) 1,364 8,396 2,594
Integration costs - 117 - 1,055
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Total operating expenses 33,632 34,173 136,466 124,421
Income from operations 4,318 1,158 2,013 1,578
Other income, net 699 751 2,867 3,443
Gains on sales of equity
and debt 394 - 1,072 509
Non-marketable investment
(impairments) gains (89) (1,782) 281 (2,354)
----------- -------- -------- --------
Income before income tax
provision 5,322 127 6,233 3,176
Income tax provision 1,796 40 2,101 985
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Net income $3,526 $87 $4,132 $2,191
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Diluted earnings per share $0.16 $0.00 $0.18 $0.10
=========== ======== ======== ========
Diluted weighted average
shares outstanding 22,040 22,970 22,442 22,837
=========== ======== ======== ========
Basic earnings per share $0.16 $0.00 $0.19 $0.10
=========== ======== ======== ========
Basic weighted average shares
outstanding 21,814 22,505 22,024 22,555
=========== ======== ======== ========
Pro forma data (1):
Income from operations 4,318 1,158 2,013 1,578
Amortization of intangible
assets 1,349 2,638 6,461 8,778
Reorganization costs (355) 1,364 8,396 2,594
Integration costs - 117 - 1,055
----------- -------- -------- --------
Pro forma income from
operations 5,312 5,277 16,870 14,005
Other income, net 699 751 2,867 3,952
----------- -------- -------- --------
Pro forma income before
income taxes 6,011 6,028 19,737 17,957
Pro forma income tax
provision 2,104 2,110 6,908 6,285
----------- -------- -------- --------
Pro forma net income $3,907 $3,918 $12,829 $11,672
=========== ======== ======== ========
Pro forma diluted earnings
per share $0.18 $0.17 $0.57 $0.51
=========== ======== ======== ========
Diluted weighted average
shares outstanding 22,040 22,970 22,442 22,837
=========== ======== ======== ========
(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 amortization of intangibles and other
integration costs related to acquisitions, reorganization costs,
impairments of non-marketable investments, and gains on sales of
equity securities 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
(In thousands)
December 31,
-------------------
2004 2003
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Assets:
Cash and cash equivalents $37,328 $22,385
Marketable securities 90,112 104,348
Accounts receivable, net 39,210 40,013
Deferred commissions 6,834 5,999
Prepaid expenses and other current assets 5,509 7,079
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Total current assets 178,993 179,824
Property and equipment, net 6,410 8,266
Goodwill, net 52,875 57,006
Intangibles assets, net 6,992 13,456
Deferred income taxes 42,860 40,159
Non-marketable investments and other assets 14,742 12,264
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Total assets $302,872 $310,975
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Liabilities and stockholders' equity:
Accounts payable $3,741 $2,566
Accrued expenses 26,928 31,457
Deferred revenue 72,357 68,630
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Total liabilities 103,026 102,653
Preferred stock - -
Common stock 247 243
Additional paid-in capital 180,310 172,523
Retained earnings 71,077 66,945
Treasury stock, at cost (50,056) (30,300)
Accumulated other comprehensive loss (1,732) (1,089)
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Total stockholders' equity 199,846 208,322
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Total liabilities and stockholders' equity $302,872 $310,975
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Forrester Research, Inc.
Consolidated Statements Cash Flows
(In thousands)
Year ended
December 31,
2004 2003
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Cash flows from operations:
Net income $4,132 $2,191
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 3,691 6,256
Amortization of intangible assets 6,461 8,778
(Gains) impairments of non-marketable
investments (281) 2,354
Realized gain on sales of marketable
securities (1,072) (509)
Tax benefit from issuances of common stock 411 527
Deferred income taxes (158) (128)
Non-cash reorganization costs 1,844 -
Provision for doubtful accounts 309 -
Amortization of premiums on marketable
securities 924 832
Changes in assets and liabilities, net of
acquisitions --
Accounts receivable 1,283 (11,044)
Deferred commissions (835) (2,426)
Prepaid expenses and other current
assets 1,763 559
Accounts payable 1,152 (530)
Accrued expenses (3,850) (1,741)
Deferred revenue 2,232 (1,004)
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Net cash provided by operating activities 18,006 4,115
Cash flows from investing activities:
Acquisition of Giga Information Group, Inc.,
net of cash acquired - (57,027)
Acquisition of GigaGroup, S.A., net of cash
acquired - (2,937)
Purchases of property and equipment (3,664) (1,441)
Purchases of non-marketable investments (3,613) (3,250)
Net decrease (increase) in other assets 1,081 (1,315)
Purchases of equity and debt securities (161,344) (184,151)
Proceeds from sales and maturities of
marketable securities 176,509 263,093
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Net cash provided by investing activities 8,969 12,972
Cash flows from financing activities:
Proceeds from issuance of common stock 5,279 3,772
Acquisition of treasury stock (17,756) (8,215)
Structured stock repurchases 54 (1,708)
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Net cash used in financing activities (12,423) (6,151)
Effect of exchange rate changes on cash and
cash equivalents 391 (30)
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Net increase in cash and cash equivalents 14,943 10,906
Cash and cash equivalents, beginning of year $22,385 $11,479
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Cash and cash equivalents, end of year $37,328 $22,385
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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