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): January 28, 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
--------------------------------------------------------------------------------
(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 January 28, 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 January 28, 2004, Forrester Research, Inc. issued a press release
announcing its financial results for the quarter and fiscal year ended December
31, 2003, 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.
Integration costs - we exclude the costs related to our acquisition of
Giga Information Group, Inc., which are primarily related to orientation events
and data migration, in order to present a consistent basis for quarterly
comparisons.
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 and annual comparisons and to more
consistently present our results of operations [CONFIRM].
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: January 28, 2004
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Exhibit Index
Exhibit Description Page
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99.1 Press Release dated January 28, 2004. 5
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Exhibit 99.1
Forrester Research Announces Fourth-Quarter And Full-Year 2003 Financial Results
CAMBRIDGE, Mass.--(BUSINESS WIRE)--Jan. 28, 2004--Forrester
Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and
year-end 2003 financial results, in line with its previous financial
guidance.
Fourth-Quarter Financial Performance
-- Total revenues were $35.3 million, compared with $23.5 million
for the fourth quarter of 2002.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 31 percent, Forrester reported fourth-quarter net income of
$87,000, or $0.00 per diluted share, compared with net income
of $3.5 million, or $0.15 per diluted share, for the same
period in 2002.
-- On a pro forma basis, which excludes amortization of $2.6
million of acquisition-related intangible assets, costs of
$117,000 related to the integration of Giga Information Group,
Inc. ("Giga"), reorganization costs of $1.4 million, and
impairments to certain non-marketable securities of $1.8
million, and which reflects a pro forma effective tax rate of
35 percent, net income was $3.9 million, or $0.17 per diluted
share, for the fourth quarter of 2003. This compares with pro
forma net income of $2.8 million, or $0.12 per diluted share,
for the same period in 2002, which excludes amortization of
acquisition-related intangible assets of $82,000 and
impairments to certain non-marketable securities of $525,000.
Full-Year 2003 Financial Performance
-- Total revenues were $126.0 million, compared with $96.9
million for 2002.
-- On a GAAP-reported basis, which reflects an effective tax rate
of 31 percent, Forrester reported net income of $2.2 million,
or $0.10 per diluted share for 2003, compared with net income
of $589,000, or $0.02 per diluted share, for 2002.
-- On a pro forma basis, which excludes amortization of $8.8
million of acquisition-related intangible assets, costs of
$1.1 million related to the integration of Giga,
reorganization costs of $2.6 million, impairments to certain
non-marketable securities of $2.4 million, and which reflects
a pro forma effective tax rate of 35 percent, net income was
$11.7 million, or $0.51 per diluted share, for 2003. This
compares with pro forma net income of $11.8 million, or $0.50
per diluted share, for 2002, which excludes the amortization
of acquisition-related assets of $328,000, reorganization
charges of $12.2 million, and impairments to certain
non-marketable securities of $4.1 million.
A reconciliation of GAAP results to pro forma results may be found
in the attached financial tables.
"Forrester's fourth-quarter financial results continued to show
signs of improvement and stabilization, including increases in
deferred revenue and client retention rates," said George F. Colony,
chairman of the board and chief executive officer. "We were
particularly pleased with the progress we made during the quarter
because approximately 40 percent of our contracts were up for renewal
at the same time we began selling WholeView 2(TM), our unified
Forrester-Giga research product. The initial response to WholeView 2
has been favorable from both clients and prospects.
"Overall, 2003 was a very busy year for Forrester," continued
Colony. "After announcing and closing the acquisition of Giga early in
the year, we moved quickly to integrate the research, sales, and
operational groups. Based on significant client input, we developed
WholeView 2 during the second half of the year, and rolled it out as
technology budgets began to relax toward the end of 2003. The
integration is now complete, and we believe we are well-positioned for
2004."
In connection with the integration of the December 2003
acquisition of certain assets of European distributor, GigaGroup,
S.A., Forrester has reduced its European headcount by 12 employees, or
approximately 2 percent of its work force. For the first quarter of
2004, Forrester expects to record a charge in the range of $1.5
million to $2.5 million related to this reduction in force and the
consolidation of European office space. On an annualized basis,
associated savings are estimated to be approximately $2.5 million to
$3.5 million.
Forrester is providing financial guidance as follows:
First-Quarter 2004 (GAAP):
-- Total revenues of approximately $29.0 million to $31.0
million.
-- Operating margin of approximately (2) percent to (6) percent.
-- Other income of approximately $650,000 to $750,000.
-- An effective tax rate of 33.5 percent.
-- Diluted earnings per share of approximately ($0.01) to
($0.05).
First-Quarter 2004 (Pro Forma):
Pro forma financial guidance for the first quarter of 2004
excludes amortization of acquisition-related intangible assets of
approximately $2.3 million, a reorganization charge of approximately
$1.5 million to $2.5 million, and any impairment charges related to
non-marketable investments.
-- Pro forma operating margin of approximately 9 percent to 11
percent.
-- Pro forma effective tax rate of 35 percent, which varies from
our actual effective tax rate of 33.5 percent because of our
tax-free interest income decreasing as a percentage of our pro
forma pre-tax income.
-- Pro forma diluted earnings per share of approximately $0.09 to
$0.11.
Full-Year 2004 (GAAP):
-- Total revenues of approximately $133.0 million to $138.0
million.
-- Operating margin of approximately 4 percent to 8 percent,
which assumes that no charges related to the San Francisco
office lease are incurred during 2004.
-- Other income of approximately $2.7 million to $2.9 million.
-- An effective tax rate of 33.5 percent.
-- Diluted earnings per share of approximately $0.24 to $0.29,
which assumes that no charges related to the San Francisco
office lease are incurred during 2004.
Full-Year 2004 (Pro Forma):
Pro forma financial guidance for full-year 2004 excludes
amortization of acquisition-related intangible assets of approximately
$6.4 million, any impairment charges related to non-marketable
investments, and a reorganization charge of approximately $1.5 million
to $2.5 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 because of 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, which assumes that no charges related to the San
Francisco office lease are incurred during 2004.
Separately, Forrester has hired Gail Mann as its new chief legal
counsel. Mann brings 25 years of legal experience to Forrester and
earned her J.D., magna cum laude, from Georgetown University Law
Center.
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. In February 2003, Forrester acquired Giga Information
Group. 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 2004,
statements about the potential success of WholeView 2 and other
product offerings, the amount of the charge and any cost savings
related to the reduction in force, 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 the reduction in force, 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
(In thousands, except per share data)
Three months ended Year ended
December 31, December 31,
2003 2002 2003 2002
(Unaudited)
Revenues:
Research services $24,120 $16,153 $92,289 $70,955
Advisory services and
other 11,211 7,356 33,710 25,981
Total revenues 35,331 23,509 125,999 96,936
Operating expenses:
Cost of services and
fulfillment 13,667 8,632 50,047 34,026
Selling and marketing 11,494 6,925 41,017 30,745
General and administrative 3,689 3,142 14,674 12,732
Depreciation and
amortization 1,204 2,077 6,256 8,078
Amortization of intangible
assets 2,638 82 8,778 328
Integration costs 117 - 1,055 -
Reorganization costs 1,364 - 2,594 12,170
Total operating expenses 34,173 20,858 124,421 98,079
Income (loss) from
operations 1,158 2,651 1,578 (1,143)
Other income, net 751 1,277 3,952 5,539
Impairments of non-
marketable investments, net (1,782) (525) (2,354) (4,118)
Income before income tax
provision (benefit) 127 3,403 3,176 278
Income tax provision
(benefit) 40 (61) 985 (311)
Net income $87 $3,464 $2,191 $589
Diluted earnings per share $0.00 $0.15 $0.10 $0.02
Diluted weighted average
shares outstanding 22,970 23,202 22,837 23,653
Basic earnings per share $0.00 $0.15 $0.10 $0.03
Basic weighted average
shares outstanding 22,505 22,992 22,555 23,189
Pro forma data (1):
Income (loss) from
operations 1,158 2,651 1,578 (1,143)
Amortization of intangible
assets 2,638 82 8,778 328
Integration costs 117 - 1,055 -
Reorganization costs 1,364 - 2,594 12,170
Pro forma income from
operations 5,277 2,733 14,005 11,355
Other income, net 751 1,277 3,952 5,539
Pro forma income before
income taxes 6,028 4,010 17,957 16,894
Pro forma income tax
provision 2,110 1,203 6,285 5,068
Pro forma net income $3,918 $2,807 $11,672 $11,826
Pro forma diluted earnings
per share $0.17 $0.12 $0.51 $0.50
Diluted weighted average
shares outstanding 22,970 23,202 22,837 23,653
(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,
and impairments of 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
(In thousands)
December 31,
2003 2002
Assets:
Cash and cash equivalents $22,385 $11,479
Marketable securities 104,348 183,152
Accounts receivable, net 40,013 17,791
Deferred commissions 5,999 3,524
Prepaid expenses and other current assets 7,079 5,902
Total current assets 179,824 221,848
Property and equipment, net 8,266 10,674
Goodwill, net 57,006 13,244
Intangibles assets, net 13,456 760
Deferred income taxes 40,159 21,630
Non-marketable investments and other assets 12,264 10,117
Total assets $310,975 $278,273
Liabilities and stockholders' equity:
Accounts payable $2,566 $1,601
Accrued expenses 31,457 20,681
Deferred revenue 68,630 42,123
Total liabilities 102,653 64,405
Preferred stock - -
Common stock 243 240
Additional paid-in capital 172,523 167,935
Retained earnings 66,945 64,754
Treasury stock, at cost (30,300) (20,085)
Accumulated other comprehensive (loss)
income (1,089) 1,024
Total stockholders' equity 208,322 213,868
Total liabilities and stockholders' equity $310,975 $278,273
Forrester Research, Inc.
Consolidated Statements Of Cash Flows
(In thousands)
Year ended December 31,
2003 2002
Cash flows from operations:
Net income 2,191 589
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 6,256 8,078
Amortization of intangible assets 8,778 328
Impairments of non-marketable
investments 2,354 4,118
Realized gain on sales of marketable
securities (509) -
Tax benefit from exercises of employee
stock options 527 2,618
Deferred income taxes (128) (2,243)
Non-cash reorganization costs - 3,629
Increase in provision for doubtful
accounts - 246
Loss on disposals of property and
equipment - 92
Amortization of premiums on marketable
securities 832 1,053
Changes in assets and liabilities, net
of acquisitions -
Accounts receivable (11,044) 6,608
Deferred commissions (2,426) 920
Prepaid expenses and other
current assets 559 (70)
Accounts payable (530) (1,194)
Accrued expenses (1,741) (1,476)
Deferred revenue (1,004) (17,735)
Net cash provided by operating activities 4,115 5,561
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 (1,441) (1,031)
Purchases of non-marketable investments (3,250) (4,775)
Net (increase) decrease in other assets (1,315) 61
Purchases of marketable securities (184,151) (261,530)
Proceeds from sales and maturities of
marketable securities 263,093 266,324
Net cash provided by (used in) investing
activities 12,972 (951)
Cash flows from financing activities:
Proceeds from issuance of common stock 3,772 11,284
Acquisition of treasury stock (8,215) (20,085)
Structured stock repurchases (1,708) (2,000)
Net cash used in financing activities (6,151) (10,801)
Effect of exchange rate changes on cash and
cash equivalents (30) (77)
Net increase (decrease) in cash and cash
equivalents 10,906 (6,268)
Cash and cash equivalents, beginning of year 11,479 17,747
Cash and cash equivalents, end of year 22,385 11,479
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