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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): October 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 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 October 27, 2004, Forrester Research, Inc. issued a press release
announcing its financial results for the quarter ended September 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 the Forrester's financial statements and filings with
the Securities and Exchange Commission.
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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: October 27, 2004
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Exhibit Index
Exhibit Description Page
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99.1 Press Release dated October 27, 2004. 5
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EXHIBIT 99.1
Forrester Research Announces Third-Quarter 2004 Financial Results
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Oct. 27, 2004--Forrester
Research, Inc. (Nasdaq: FORR) today announced its third-quarter ended
September 30, 2004 financial results.
Third-Quarter Financial Performance
-- Total revenues were $33.9 million, compared with $32.2 million
for the third quarter of last year.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.5 percent, Forrester reported third-quarter net income
of $3.2 million or $0.14 per diluted share, compared with net
income of $186,000, 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, gains
resulting from sales of marketable securities and
non-marketable investments totaling $1.0 million, and which
reflects a pro forma effective tax rate of 35 percent, net
income was $3.4 million, or $0.15 per diluted share, for the
third quarter of 2004. This compares with pro forma net income
of $2.8 million, or $0.12 per diluted share, for the same
period in 2003, which excluded amortization of $2.6 million of
acquisition-related intangible assets, reorganization costs of
$1.2 million, costs of $167,000 related to the integration of
Giga Information Group, Inc., and a pro forma effective tax
rate of 35 percent.
Nine-Month Period Ended September 30, 2004, Financial Performance
-- Total revenues were $100.5 million, compared with $90.7
million for the same period last year.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 33.5 percent, Forrester reported net income of $606,000, or
$0.03 per diluted share for the nine months ended 2004,
compared to net income of $2.1 million or $0.09 per diluted
share for the same period last year.
-- On a pro forma basis, which excludes amortization of $5.1
million of acquisition-related intangible assets,
reorganization costs of $8.8 million related primarily to
office space consolidations, gains resulting from sales of
marketable securities and non-marketable investments totaling
$1.0 million, and which reflects a pro forma effective tax
rate of 35 percent, net income was $8.9 million, or $0.40 per
diluted share, for the nine months ended 2004. This compares
with pro forma net income of $7.4 million, or $0.33 per
diluted share for the same period last year, which excludes
amortization of $6.1 million of acquisition-related intangible
assets, reorganization costs of $1.2 million, costs of
$938,000 related to the integration of Giga Information Group,
Inc., a net loss of $63,000 resulting from sales of marketable
securities and 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.
"The second half of the year got off to a good start in the third
quarter," said George F. Colony, chairman of the board and chief
executive officer. "Dollar retention significantly improved to 86
percent, up from 73 percent a year ago. Forrester's key financial
metrics were positive during the third quarter: renewals and
enrichment were strong, cross-sell opportunities increased, and client
company retention continued on the upswing. In the fourth quarter, we
will remain focused on our busiest season for renewals while
attracting more new business before the end of the year."
Forrester is providing fourth-quarter and reaffirming full-year
2004 guidance as follows:
Fourth-Quarter 2004 (GAAP):
-- Total revenues of approximately $35.0 million to $37.0
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 $0.10 to $0.12.
Fourth-Quarter 2004 (Pro Forma):
Pro forma financial guidance for the fourth quarter of 2004
excludes amortization of acquisition-related intangible assets of
approximately $1.3 million, as well as all gains and impairment
charges related to marketable securities and non-marketable
investments.
-- Pro forma operating margin of approximately 13 percent to 15
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 $0.15 to
$0.17.
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 third 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, 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
and WholeView 2 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 Nine months ended
September 30, September 30,
2004 2003 2004 2003
------------------ -------------------
(Unaudited) (Unaudited)
Revenues
Research services $ 23,544 $ 23,798 $ 69,579 $ 68,169
Advisory services and
other 10,335 8,410 30,950 22,499
-------- -------- --------- --------
Total revenues 33,879 32,208 100,529 90,668
Operating expenses
Cost of services and
fulfillment 13,266 12,525 40,782 36,380
Selling and marketing 11,036 10,749 33,701 29,523
General and administrative 4,291 3,927 11,687 10,985
Depreciation and
amortization 744 1,520 2,801 5,052
Amortization of intangible
assets 1,384 2,608 5,112 6,140
Reorganization costs - 1,230 8,751 1,230
Integration costs - 167 - 938
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Total operating expenses 30,721 32,726 102,834 90,248
Income (loss) from
operations 3,158 (518) (2,305) 420
Other income, net 680 787 2,168 2,692
Gains on sales of
marketable securities 678 - 678 509
Non-marketable investment
gains (impairments) 313 - 370 (572)
-------- -------- --------- --------
Income before income taxes 4,829 269 911 3,049
Income tax provision 1,618 83 305 945
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Net income $ 3,211 $ 186 $ 606 $ 2,104
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Diluted earnings per share $ 0.14 $ 0.01 $ 0.03 $ 0.09
======== ======== ========= ========
Diluted weighted average
shares outstanding 22,345 22,741 22,577 22,793
======== ======== ========= ========
Basic earnings per share $ 0.15 $ 0.01 $ 0.03 $ 0.09
======== ======== ========= ========
Basic weighted average
shares outstanding 21,952 22,462 22,094 22,572
======== ======== ========= ========
Pro forma data (1):
Income (loss) from
operations $ 3,158 $ (518) $ (2,305) $ 420
Amortization of intangible
assets 1,384 2,608 5,112 6,140
Reorganization costs - 1,230 8,751 1,230
Integration costs - 167 - 938
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Pro forma income from
operations 4,542 3,487 11,558 8,728
Other income, net 680 787 2,168 2,692
-------- -------- --------- --------
Pro forma income before
income taxes 5,222 4,274 13,726 11,420
Pro forma income tax
provision 1,828 1,496 4,804 3,997
-------- -------- --------- --------
Pro forma net income $ 3,394 $ 2,778 $ 8,922 $ 7,423
======== ======== ========= ========
Pro forma diluted earnings
per share $ 0.15 $ 0.12 $ 0.40 $ 0.33
======== ======== ========= ========
Diluted weighted average
shares outstanding 22,345 22,741 22,577 22,793
======== ======== ========= ========
(1) The pro forma data excludes amortization of intangibles and other
integration costs related to acquisitions, reorganization costs
and gains and impairments related to marketable and 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)
September 30, December 31,
2004 2003
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(Unaudited)
Assets:
Cash and cash equivalents $ 36,621 $ 22,385
Marketable securities 91,779 104,348
Accounts receivable, net 25,113 40,013
Deferred commissions 5,150 5,999
Prepaid expenses and other current assets 7,325 7,079
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Total current assets 165,988 179,824
Property and equipment, net 6,025 8,266
Goodwill, net 56,894 57,006
Intangible assets, net 8,345 13,456
Deferred income taxes 39,709 40,159
Non-marketable investments and other assets 13,822 12,264
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Total assets $ 290,783 $ 310,975
========== =========
Liabilities and stockholders' equity:
Accounts payable $ 2,570 $ 2,566
Accrued expenses 27,363 31,457
Deferred revenue 60,769 68,630
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Total liabilities 90,702 102,653
Preferred stock - -
Common stock 246 243
Additional paid-in capital 177,793 172,523
Retained earnings 67,551 66,945
Treasury stock, at cost (44,923) (30,300)
Accumulated other comprehensive loss (586) (1,089)
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Total stockholders' equity 200,081 208,322
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Total liabilities and stockholders' equity $ 290,783 $ 310,975
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Forrester Research, Inc.
Consolidated Statements Cash Flows
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(In thousands)
Nine months ended
September 30,
2004 2003
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(Unaudited)
Cash flows from operations:
Net income $ 606 $ 2,104
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 2,801 5,052
Amortization of intangible assets 5,112 6,140
Non-marketable investments (gains) impairments (370) 572
Realized gains on sales of marketable
securities (678) (509)
Tax benefit from stock options 256 239
Deferred income taxes (2) 747
Non-cash reorganization costs 1,844 -
Increase in provision for doubtful accounts 224 -
Accretion of premiums on marketable securities 635 618
Changes in assets and liabilities, net of
acquisition -
Accounts receivable 15,541 9,088
Deferred commissions 849 (434)
Prepaid expenses and other current assets (296) 2,401
Accounts payable (116) (1,395)
Accrued expenses (4,025) (4,714)
Deferred revenue (8,770) (16,914)
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Net cash provided by operating activities 13,611 2,995
Cash flows from investing activities:
Acquisition of Giga Information Group, Inc.,
net of cash acquired - (57,027)
Purchases of property and equipment (2,423) (1,122)
Purchase of non-marketable investments (2,263) (3,150)
Decrease (increase) in other assets 842 (1,439)
Purchase of marketable securities (107,478) (164,338)
Proceeds from sales and maturities of
marketable securities 121,623 230,641
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Net cash provided by investing activities 10,301 3,565
Cash flows from financing activities:
Proceeds from issuance of common stock under
employee stock option plans and employee stock
purchase plan 2,959 2,070
Acquisition of treasury shares (12,623) (6,796)
Structured stock repurchase 54 (1,793)
--------- ---------
Net cash used in financing activities (9,610) (6,519)
Effect of exchange rate changes on cash and cash
equivalents (66) (178)
--------- ---------
Net increase (decrease) in cash and
cash equivalents 14,236 (137)
Cash and cash equivalents, beginning of period 22,385 11,479
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Cash and cash equivalents, end of period $ 36,621 $ 11,342
========= =========
CONTACT: Forrester Research, Inc.
Kimberly Maxwell, 617-613-6234
Director, Investor Relations
kmaxwell@forrester.com
or
Karyl Levinson, 617-613-6262
Director, Corporate Communications
press@forrester.com