e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal
year ended December 31,
2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number
000-21433
Forrester Research,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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04-2797789
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification Number)
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400 Technology Square
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02139
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Cambridge, Massachusetts
(Address of principal
executive offices)
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(Zip Code)
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Registrants telephone number, including area code:
(617) 613-6000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 Par Value
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Nasdaq Global Select Market
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Securities
to be registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 requirement for the past
90 days. Yes þ 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
o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. 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):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the registrants common stock
held by non-affiliates of the registrant as of June 30, 2010
(based on the closing price as quoted by the Nasdaq National
Market as of such date) was approximately $441,000,000.
As of March 10, 2011, 22,646,000 shares of the
registrants common stock were outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants Proxy Statement related to its
2011 Annual Stockholders Meeting to be filed
subsequently Part III of this
Form 10-K.
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as
expects, anticipates,
intends, plans, estimates,
or similar expressions are intended to identify these
forward-looking statements. Reference is made in particular to
our statements about possible acquisitions, our plans for
international expansion and the adequacy of our cash, marketable
investments and cash flows to satisfy our working capital and
capital expenditures. These statements are based on our current
plans and expectations and involve risks and uncertainties.
Important factors that could cause actual future activities and
results of operations to be materially different from those set
forth in the forward-looking statements are discussed below
under Risk Factors. We undertake no obligation to
update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise.
PART I
General
Forrester Research, Inc. is an independent research company that
provides pragmatic and forward-thinking advice to global leaders
in business and technology. Our products and services are
targeted to 19 specific roles, including senior management in
business strategy, marketing, and information technology at
$1 billion-plus (revenue) companies who collaborate with us
to accelerate achievement of their business goals.
Research serves as the foundation for all our solutions and
consists primarily of annual memberships to our
RoleViewtm
syndicated research offerings that provide access to our core
research on a wide range of business and technology issues
critical to the success of the individuals in the roles we
serve. In addition to our RoleView offerings, we also provide a
portfolio of products and services that allow our clients to
interact directly with analysts and their peers and explore in
greater detail the issues and topics covered by RoleView
research on a role and client-specific basis.
We were incorporated in Massachusetts on July 7, 1983 and
reincorporated in Delaware on February 16, 1996.
Our Internet address is www.forrester.com. We make available
free of charge, on or through the investor information section
of our website, annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC.
Industry
Background
Enterprises and their employees struggle to remain both
competitive and cost-efficient in an increasingly complex global
business environment. Developing comprehensive and coordinated
business strategies is difficult because as the economy and
technology change, consumers and businesses adopt new methods of
buying and selling, and markets grow increasingly dynamic.
Consequently, companies and the professionals who are in the
roles we serve rely on external sources of expertise that
provide independent business advice spanning a variety of areas
including but not limited to technology, business strategy, and
customer behavior. We believe there is a need for objective
research that is thematic, prescriptive, and executable, and
that provides a comprehensive perspective on the knowledge and
skills required to succeed in todays rapidly changing
business environment.
Forresters
Strategy
In 2007, Forrester accelerated execution of a role-based
strategy to focus attention on serving leaders in key roles
across its client base. Forresters role-centric solutions
provide clients with more relevant insight, allowing them to
make better informed and justified decisions faster.
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We seek to maintain and enhance our position as a leading global
research and advisory firm and to capitalize on demand for our
offerings by:
Identifying and Defining New Business Models, Technologies,
and Markets. We seek to differentiate ourselves
from other research firms by delivering pragmatic and
forward-thinking research and analysis on the impact of
technology on business models, business practices, and
technology infrastructure. We believe that our research
methodology and our creative culture allow us to identify and
analyze rapid shifts in business and consumer use of technology
before these changes appear on the horizons of most users,
vendors, and other research firms. Our early identification of
these shifts enables us to help our clients capitalize on
emerging business models and technologies.
Leveraging our RoleView Research. Our business
model, technology platform, and research methodologies allow us
to sell existing products and to rapidly introduce new products
and services without incurring significant incremental costs. We
intend to continue to use our business model, technology
platform, and research methodologies to both increase sales of
our existing RoleView research products and introduce innovative
new products. Our other offerings complement, enhance and
supplement our RoleView research offerings, and many are
designed to address the specific needs and problems of our
clients and the professionals in the roles we serve. We also may
acquire, through acquisition or license from third parties, new
products and services that complement and support our strategy
and existing offerings. In July 2008, we acquired
JupiterResearch, LLC to enhance our offerings to marketing and
strategy professionals. In December 2009, we acquired the
business of New Strategic Oxygen, LLC whose products and
services and decision tools enhance our offerings to technology
product management & marketing professionals.
Using Targeted, Global Client-Centric Sales
Channels. Our business is organized into three
principal global client groups that support our role-based
strategy and are closely aligned with our client base: the
Information Technology Client Group, the Marketing &
Strategy Client Group, and the Technology Industry Client Group.
Effective January 2010, we appointed senior practice leaders
within our three principal client groups to better focus on
creating and delivering relevant research and related products
and services to the professional roles we serve. We sell our
products and services directly through a global sales force with
sales personnel focusing on the needs of professionals within
each of the three principal client groups. Our sales force,
managed by a chief sales officer with global sales management
responsibility to improve sales productivity within our global
client group organizational structure, operates out of various
locations in North America, Europe, Australia, and India. We
also sell our products and services through independent sales
representatives in select international locations.
Growing Our Client Base Worldwide and Increasing Sales to
Existing Clients. We believe that our products
and services can be successfully marketed and sold to new client
companies worldwide and to new roles and additional units and
divisions within our existing client companies. We believe that
within our client base of over 2,500 client companies as of
December 31, 2010 there is opportunity both to sell
additional products and services to current users as well as to
deliver our RoleView research and product portfolio to a greater
number of professionals in our targeted roles. In addition, we
intend to expand our international presence as the growing
impact of technology on business innovation creates demand for
external sources of objective research.
Developing and Retaining Outstanding Research
Professionals. The knowledge and experience of
our analysts are critical elements of our ability to provide
high-quality products and services. We employ outstanding
research professionals from varied backgrounds and a wide range
of industries. We believe that our culture, which emphasizes
quality, collaboration, and creativity, helps us to develop and
retain high-caliber research professionals. We provide a
competitive compensation structure, as well as recognition and
rewards for excellent individual and team performance.
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Forresters
Solution
Our broad range of expertise on business and the impact of
technology enables us to offer our clients the best available
and most relevant research and insights on changing business
models, best practices, technology investments, business
practices, implementation advice, and customer trends. Our
solution provides our clients with:
A Unified Set of Services to Help our Clients and to Make
their Leaders Successful in their Roles. We offer
clients a comprehensive set of products and services to obtain
access to the research, data, analysts, and peer insights they
need to be successful in their professional roles, including,
for example, to:
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Assess potential new markets, competitors, products and
services, and
go-to-market
strategies.
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Anticipate technology-driven business model shifts.
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Understand trends in consumer behavior and how to capitalize on
those trends for marketing and sales purposes.
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Educate, inform, and align strategic decision-makers in their
organizations.
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Navigate technology purchase and implementation challenges and
optimize technology investments.
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Capitalize on emerging technologies.
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Expertise on Emerging Technologies. We started
our business in 1983 and have a long history of, and extensive
experience in, identifying trends and providing research and
executable advice on the impact of technology on business. Our
research analysts have many years of industry experience, are
frequent speakers at business and technology conferences, and
are often quoted in the media. They enjoy direct access to the
leaders and decision-makers within large enterprises and
technology vendors. We provide our research analysts with
training to ensure that they have the skills to challenge
conventional viewpoints and provide prescriptive, executable
insight and research to our clients.
Products
and Services
We offer our clients a selection of engagement opportunities
that are organized for and directed toward the multiple
professional roles we cover.
RoleViewtm
Research
Our primary syndicated research product, RoleView, provides
clients with access to our core syndicated research designed to
inform their strategic decision-making. Our various RoleView
research offerings, including IT View, M&S View, TI View,
each consists of a library of cross-linked documents that
interconnect our reports, data, product rankings, best
practices, evaluation tools, and research archives. RoleView
research access is provided through role-based websites that
facilitate client access to research and tools that are most
relevant to their professional roles, including community tools
that allow interaction between and among clients and our
analysts. Through this access structure, each of our RoleView
research offerings addresses the interplay of an individual
clients responsibilities and goals, business demands, and
organizational and technology capabilities.
Our RoleView research products include The Forrester
Wavetm.
The Forrester Wave provides a detailed analysis of vendors
technologies and services based on transparent, fully accessible
criteria, and measurement of characteristics weighted by us. The
Forrester Wave includes an Excel spreadsheet that allows clients
to compare products and get in-depth data and analysis about
each one and tools to develop a custom shortlist based on the
clients unique requirements. The Forrester Wave is our
primary mechanism for evaluating enterprise technologies.
Clients subscribing to our RoleView research products may choose
between two membership levels:
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RoleView Member Licenses. RoleView Member
Licenses include access to the written research, as well as
Inquiry with analysts, one Event seat, and access to Forrester
Teleconferences. Inquiry enables clients to contact our analysts
for quick feedback on projects they may have underway, to
discuss ideas and models in the research, or for answers to
questions about unfolding industry events. Typically, Inquiry
sessions are
30-minute
phone calls, scheduled upon client request, or
e-mail
responses coordinated through our research
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specialists. Events bring together executives and other
participants for one or
multi-day
conferences to network with their peers and to hear business
leaders discuss the issues and solutions most pertinent to their
roles and responsibilities. Forrester Teleconferences are
hour-long audio conferences on selected topics of interest to
particular professional roles that typically are held several
times a week. They consist of an analyst-led presentation
followed by questions from participants. Members may access the
analyst Web presentation and participate in the subsequent forum
for questions and discussion among all attendees.
Teleconferences are also made available for member download.
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RoleView Reader Licenses. RoleView Reader
Licenses provide access to our written research.
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Both Member and Reader clients receive access to our research
specialists, who provide additional information about our
research, methodologies, coverage areas, and sources. The
research specialists are available to help clients navigate our
website, find relevant information, and put clients in contact
with the appropriate analyst for inquiries.
Forrester®
Leadership Boards
Our Forrester Leadership Boards are exclusive offerings for
executives and other key employees at large companies worldwide.
Clients may choose to participate in one or more Forrester
Leadership Boards. Memberships are available in the Chief
Information Officer (CIO) Group and the Chief Marketing Officer
(CMO) Group and in a number of additional IT, marketing, and
executive programs and councils addressing issues of interest to
the professional roles we cover. In addition to a Member license
to access the appropriate RoleView research offering, members of
our Forrester Leadership Boards receive access to the following:
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Advisors to assist members with individual research-related
questions, and topics of specific relevance to the challenges
these clients face.
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Membership-directed research which includes comprehensive
coverage of industry trends and best practices.
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Exclusive industry-specific benchmark data.
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Peer-to-peer
networking through premier event meetings and group
audio-conferences, individual member to member conversations,
and virtual community activities.
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Data
Products & Services
Our Data products and services focus on consumers and
business users attitudes about and behavior toward
technology, including ownership, future purchases, and adoption
trends. These products incorporate extensive survey research
designed and analyzed by our staff. Clients can leverage our
data products and services or choose to have us conduct data
analysis on their behalf. Our data products and services include:
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Consumer
Technographics®
Data & Services. Consumer
Technographics delivers both primary data and quantitative
research, based on surveys of over 300,000 households and
individuals in North America, Europe, Asia Pacific, and Latin
America. Marketing and strategy professionals rely on our
Consumer Technographics data for unique insights into how
technology impacts the way consumers select, purchase, use, and
communicate about products and services. We combine respondent
data sets from our Consumer Technographics surveys into four
offerings: North American Consumer Technographics, European
Consumer Technographics, Asia Pacific Consumer Technographics
and Latin America Consumer Technographics. Additionally, clients
have access to a Technographics data specialist to help them use
the data effectively to meet their specific business needs.
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Forresters
Forrsightstm
for Business Technology. Forresters
Forrsights is an ongoing quantitative research program that
provides comprehensive, in-depth assessments of what motivates
businesses to choose certain technologies and vendors over
others. We annually survey more than 30,000 business and IT
executives as well as information workers at small, medium and
large enterprises in North American, European, and other global
markets. Our surveys reveal these firms technology
adoption trends, budgets, business organization, decision
processes, purchase plans, and brand preferences.
Forresters Forrsights clients also have access to a data
specialist.
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Forresters Strategic
Oxygentm
offering is a decision support tool that measures and reports on
the current information consumption patterns of key influencers
for large technology purchases. We annually survey more than
20,000 business and IT executives in North America, Europe, Asia
Pacific, and Latin America. Technology Marketing professionals
rely on Strategic Oxygen to make a wide range of key decisions
around content, messaging, sequencing of activities, specific
media that need to work globally and locally, and
demand-generation choices. The Strategic Oxygen offering
includes access to an online decision tool and a data advisor.
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Forrester
Consulting
Our research-based advisory and project consulting services
leverage our RoleView research offerings and our data products
and services to deliver focused insights and recommendations to
assist clients in developing and executing technology and
business strategy, informing critical decisions and reducing
business risk, and making large technology investments. For
example, we help IT professionals with vendor selection, compare
best practices, analyze whether outsourcing is advisable, and
validate technology infrastructure; marketing and strategy
professionals with consumer product strategy, direct marketing
technology investments, eBusiness strategy, and interactive
marketing strategy, including Web 2.0; and technology industry
professionals with market and competitive assessments,
go-to-market
strategy, custom market research, and product development.
Our consulting services include website reviews that provide
targeted, action-oriented assessments of clients websites,
extranets, or intranets. Feedback is based on a comprehensive
examination of the clients website and web strategies as
well as reviews and comparisons with competitors websites,
other channels and industry benchmarks.
Forrester
Events
We host multiple events in various locations in North America
and Europe throughout the year. Events build upon our research
and data products and services to bring together executives and
other participants serving or interested in the particular
professional role(s) on which an event focuses. Event
participants come together to network with their peers, meet
with Forrester analysts, and to hear business leaders discuss
business and technology issues of interest or significance to
the professional roles in attendance and the impact of
technology on the professionals and their businesses.
Sales and
Marketing
Our business is organized into three principal global client
groups that support our role-based strategy and closely align
with our client base: the IT Client Group, the
Marketing & Strategy Client Group, and the Technology
Industry Client Group. In addition, our Events operations
support all three client groups. We sell our products and
services through our direct sales force in various locations in
North America, Europe, Australia, and India. We also sell our
products and services through independent sales representatives
in select international locations. We employed 378 salespersons
as of December 31, 2010, an increase of 20% from 315 as of
December 31, 2009. We also sell certain of our research
products directly online through our website.
For information on our operating segments and our international
operations, see Note 11 of the Notes to Consolidated
Financial Statements included herein.
Our marketing activities are designed to increase awareness of
the Forrester brand and further our reputation as a leader in
role-based business and technology research. We actively promote
brand awareness via our website, Forrester Events, extensive
worldwide press relations, and direct mail campaigns. We also
employ an integrated direct marketing strategy that uses
Internet, mail, and telephone channels for identifying and
attracting high-quality sales leads. We encourage our analysts
to increase our visibility by having their research ideas
selectively distributed through various Internet, print, and
television outlets. In addition, we support an active social
media strategy whereby our analysts blog regularly with respect
to the role they serve. Other activities, including Twitter,
LinkedIn, Facebook, and similar tools interconnect and
cross-promote the analysts blogs and research content.
As of December 31, 2010, our research was delivered to more
than 2,500 client companies. No single client company accounted
for more than 2% of our 2010 revenues.
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Pricing
and Contracts
We report our revenue from client contracts in two categories of
revenue: (1) research services and (2) advisory
services and other. We classify revenue from subscriptions to
our RoleView Research, Forrester Leadership Boards and Data
Products and Services as research services revenue. We classify
revenue from Forrester Consulting and Forrester Events as
advisory services and other revenue.
Contract pricing for annual memberships for research only is
principally a function of the number of licensed users at the
client. Pricing of contracts for research and advisory services
is a function of the number of licensed users, and the amount
and type of advisory services. We track the agreement value of
contracts to purchase research and advisory services as a
significant business indicator. We calculate agreement value as
the total revenues recognizable from all research and advisory
service contracts in force at a given time (but not including
advisory-only contracts), without regard to how much revenue has
already been recognized. Agreement value increased 4% to
$202.7 million at December 31, 2010 from
$194.8 million at December 31, 2009. The increase in
agreement value was partially offset by a change in the
calculation to exclude agreement value in excess of the first
year for multiple year contracts signed in 2009 and beyond,
which reduced the growth rate in 2010 by approximately 6%.
Research
Analysts and Methodology
We employ a structured methodology in our research that enables
us to identify and analyze technology trends, markets, and
audiences and ensures consistent research quality and
recommendations across all coverage areas. We seek to provide
relevant research that will contribute to the success of our
clients in their professional roles.
We ascertain the issues important to our clients and technology
users through thousands of interactions and surveys with vendors
and business, marketing, and IT professionals, and accordingly,
the majority of our research is focused on the issues our
clients face each day. We use the following primary research
inputs:
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Confidential interviews with early adopters and mainstream users
of new technologies.
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In-depth interviews with technology vendors and suppliers of
related services.
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Ongoing briefings with vendors to review current positions and
future directions.
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Continuous dialogue with our clients to identify technology
issues in the marketplace.
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Our Consumer Technographics and Forresters Forrsights
research combines our qualitative research methodology with
traditional survey research methodologies such as correlation,
frequency distribution, cross-tabulation, and multivariate
statistics to produce research reports, quantitative survey
data, and data briefs. Third-party data vendors are frequently
used for data collection and tabulation.
The Forrester Wave combines in-depth product test results and
user interviews with market and strategic analysis to score
attributes of emerging technologies. We then apply this research
and strategic analysis to determine the weighting of each
attribute and create interactive spreadsheets, databases, and
reports.
Collaboration among analysts is an integral part of our process,
leading to higher-quality research and a unified perspective.
All RoleView research begins either with a client or vendor
catalyst or with discussion sessions among analysts to generate
ideas for research. Analysts test ideas throughout the research
process at both informal and regularly scheduled research
meetings and using social media technologies. Our reports are
consistent in format, and we require our analysts to write in a
structure that combines graphics with
easy-to-read
text to deliver concise, decisive, relevant, and objective
research to our clients.
Competition
We believe that the principal competitive factors in our
industry include the following:
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Quality of research and analysis and related services.
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The ability to offer products and services that meet the
changing needs of organizations and executives for research and
analysis.
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Customer service.
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Independent analysis and opinions.
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Timely delivery of information.
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The ability to leverage new technologies.
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Price.
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We believe that we compete favorably with respect to each of
these factors. We believe that our role-based strategy,
including the diversity of roles we support and the ways in
which we support them, as well as our focus on emerging
technologies are significant competitive advantages.
Additionally, we believe that in addition to our role-based
strategy, our research methodology,
easy-to-read
formats, and portfolio of complementary product offerings
distinguish us from our competitors.
We compete principally in the market for research and advisory
services and their application for client success, with an
emphasis on the impact of technology on our clients
business models and customer markets. Our principal direct
competitors include other providers of similar services, such as
Gartner, as well as providers of peer networking services and
Internet and digital media measurement services. In addition,
our indirect competitors include the internal planning and
marketing staffs of our current and prospective clients, as well
as other information providers such as electronic and print
publishing companies, survey-based general market research
firms, and general business consulting firms. Our indirect
competitors could choose to compete directly against us in the
future. In addition, there are relatively few barriers to entry
into our market, and new competitors could readily seek to
compete against us in one or more market segments addressed by
our research. Increased competition could adversely affect our
operating results through pricing pressure and loss of market
share. There can be no assurance that we will be able to
continue to compete successfully against existing or new
competitors.
Employees
As of December 31, 2010, we employed a total of
1,078 persons, including 394 research staff and 378 sales
personnel.
Our culture emphasizes certain key values including
client service, quality, integrity, collaboration, and
courage that we believe are critical to our future
growth. We promote these values through training and frequent
recognition for achievement. We encourage teamwork and promote
and recognize individuals who foster these values. New employees
participate in a
three-day
training process that focuses on our role-based strategy, our
products and services, corporate culture, values and goals.
We are subject to risks and uncertainties that could cause our
actual future activities and results of operations to be
materially different from those set forth in forward-looking
statements made by us. These risks and uncertainties include:
A Decline in Renewals for Our Membership-Based Research
Services. Our success depends in large part upon
retaining (on both a client company and dollar basis) and
enriching existing memberships for our research products and
services. Future declines in client retention, dollar retention,
and enrichment could have an adverse effect on our results of
operations.
Our Business may be Adversely Affected by the Economic
Environment. Our business is in part dependent on
technology spending and is impacted by economic conditions. The
economic environment may materially and adversely affect demand
for our products and services. If conditions in the United
States and global economy were to lead to a decrease in
technology spending, or in demand for our research and advisory
services, this could have an adverse effect on our results of
operations and financial condition.
Our International Operations Expose Us to a Variety of
Operational Risks which Could Negatively Impact Our Results of
Operations. We have clients in over 60 countries
and approximately 28% of our revenue comes from international
sales. Our operating results are subject to the risks inherent
in international business activities, including challenges in
staffing and managing foreign operations, changes in regulatory
requirements, compliance
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with numerous foreign laws and regulations, differences between
U.S. and foreign tax rates and laws, fluctuations in
currency exchange rates and the difficulty of enforcing client
agreements, collecting accounts receivable and protecting
intellectual property rights in international jurisdictions.
Furthermore, we rely on local independent sales representatives
in some international locations. If any of these arrangements
are terminated by our representatives or us, we may not be able
to replace the arrangement on beneficial terms or on a timely
basis, or clients of the local sales representative may not want
to continue to do business with us or our new representative.
Ability to Develop and Offer New Products and
Services. Our future success will depend in part
on our ability to offer new products and services. These new
products and services must successfully gain market acceptance
by anticipating and identifying changes in client requirements
and changes in the technology industry and by addressing
specific industry and business organization sectors. The process
of internally researching, developing, launching and gaining
client acceptance of a new product or service, or assimilating
and marketing an acquired product or service, is risky and
costly. We may not be able to introduce new, or assimilate
acquired, products or services successfully. Our failure to do
so would adversely affect our ability to maintain a competitive
position in our market and continue to grow our business.
Loss of Key Management. Our future success
will depend in large part upon the continued services of a
number of our key management employees. The loss of any one of
them, in particular George F. Colony, our founder, Chairman of
the Board and Chief Executive Officer, could adversely affect
our business.
The Ability to Attract and Retain Qualified Professional
Staff. Our future success will depend in large
measure upon the continued contributions of our senior
management team, research analysts, and experienced sales and
marketing personnel. Thus, our future operating results will be
largely dependent upon our ability to retain the services of
these individuals and to attract additional professionals from a
limited pool of qualified candidates. We experience competition
in hiring and retaining professionals from developers of
Internet and emerging-technology products, other research firms,
management consulting firms, print and electronic publishing
companies and financial services companies, many of which have
substantially greater ability, either through cash or equity, to
attract and compensate professionals. If we lose professionals
or are unable to attract new talent, we will not be able to
maintain our position in the market or grow our business.
Failure to Anticipate and Respond to Market
Trends. Our success depends in part upon our
ability to anticipate rapidly changing technologies and market
trends and to adapt our research to meet the changing
information needs of our clients. The technology and commerce
sectors that we analyze undergo frequent and often dramatic
changes. The environment of rapid and continuous change presents
significant challenges to our ability to provide our clients
with current and timely analysis, strategies and advice on
issues of importance to them. Meeting these challenges requires
the commitment of substantial resources. Any failure to continue
to provide insightful and timely analysis of developments,
technologies, and trends in a manner that meets market needs
could have an adverse effect on our market position and results
of operations.
Competition. We compete in the market for
research products and services with other independent providers
of similar services. We may also face increased competition from
Internet-based research firms. Some of our competitors have
substantially greater financial, information-gathering, and
marketing resources than we do. In addition, our indirect
competitors include the internal planning and marketing staffs
of our current and prospective clients, as well as other
information providers such as electronic and print publishing
companies, survey-based general market research firms and
general business consulting firms. Our indirect competitors may
choose to compete directly against us in the future. In
addition, there are relatively few barriers to entry into our
market, and new competitors could readily seek to compete
against us in one or more market segments addressed by our
products and services. Increased competition could adversely
affect our operating results through pricing pressure and loss
of market share.
Fluctuations in Our Operating Results. Our
revenues and earnings may fluctuate from quarter to quarter
based on a variety of factors, many of which are beyond our
control, and which may affect our stock price. These factors
include, but are not limited to:
|
|
|
|
|
Trends in technology spending in the marketplace and general
economic conditions.
|
|
|
|
The timing and size of new and renewal memberships for our
research services from clients.
|
9
|
|
|
|
|
The utilization of our advisory services by our clients.
|
|
|
|
The timing of revenue-generating Events sponsored by us.
|
|
|
|
The introduction and marketing of new products and services by
us and our competitors.
|
|
|
|
The hiring and training of new analysts and sales personnel.
|
|
|
|
Changes in demand for our research and advisory services.
|
|
|
|
Fluctuations in currency exchange rates.
|
As a result, our operating results in future quarters may be
below the expectations of securities analysts and investors,
which could have an adverse effect on the market price for our
common stock. Factors such as announcements of new products,
services, offices, acquisitions or strategic alliances by us,
our competitors, or in the technologies services industry
generally may have a significant impact on the market price of
our common stock. The market price for our common stock may also
be affected by movements in prices of stocks in general.
We May Realize Losses on Our Investments or Be Unable to
Liquidate These Investments at Desired Times and in Desired
Amounts. At December 31, 2010, we had
approximately $9.1 million of long-term marketable
investments in municipal notes with an auction reset feature. In
February 2008, auctions had begun to fail for these securities
and have continued to fail, which means that the parties wishing
to sell securities in the normal auction process could not.
Based on current market conditions, it is likely that auction
failures will continue and as a result, our ability to liquidate
our investment and fully recover the carrying value of our
investment in the near term may be limited or not exist.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
We have not received written comments from the Securities and
Exchange Commission that remain unresolved.
Our headquarters are located in approximately
145,000 square feet of office space in Cambridge,
Massachusetts, substantially all of which is currently occupied
by the Company. This facility accommodates research, marketing,
sales, technology, and operations personnel. The lease term of
this facility expires in September 2011.
On September 29, 2009, we entered into a
build-to-suit
net lease (Lease) with BHX, LLC, as trustee of Acorn
Park I Realty Trust and predecessor to 200 Discovery Park, LLC
(Landlord) pursuant to which the Landlord will build
a new corporate headquarters building for the Company in an
office park in the Alewife section of Cambridge, Massachusetts.
Pursuant to the Lease, as amended, the Landlord will construct
an approximately 190,000 square foot building
(Building) and lease the Building and parcel to us
for an initial term of 15 years. During construction, we
will continue to occupy our current corporate headquarters in
Cambridge, Massachusetts under the existing lease for such
premises. Presently, we expect to commence using the facility on
or about August 15, 2011.
We also rent office space in Foster City and San Francisco,
California, New York City, Dallas, McLean Virginia, Amsterdam,
Frankfurt, London and Paris. In 2010, we entered into new leases
for, and completed the
fit-up of
and moved into, office space in London and New York. The New
York lease is for an initial term of ten years for approximately
15,200 square feet. The London lease is for a term of
eleven years for approximately 17,800 square feet. We also
entered into a new lease for approximately 15,600 feet of
office space in San Francisco, with a
63-month
term expected to commence during the first half of 2011. We also
lease office space on a relatively short-term basis in various
other locations in North America, Europe and Asia.
We believe that our existing facilities are adequate for our
current needs and that additional facilities are available for
lease to meet future needs.
|
|
Item 3.
|
Legal
Proceedings
|
We are not currently a party to any material legal proceedings.
10
PART II
|
|
Item 5.
|
Market
For Registrants Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities
|
Our common stock is listed on the Nasdaq Global Select Market
under the symbol FORR. In December 2010, we paid a
one-time special cash dividend of $3.00 per share to holders of
shares of our common stock. We did not declare or pay any
dividends during the fiscal year ended December 31, 2009.
We do not presently intend to pay cash dividends on our common
stock in the foreseeable future.
As of March 10, 2011 there were approximately
43 stockholders of record of our common stock. On
March 10, 2011 the closing price of our common stock was
$37.07 per share.
The following table represents the ranges of high and low sale
prices of our common stock for the years ended December 31,
2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
32.17
|
|
|
$
|
23.65
|
|
|
$
|
28.14
|
|
|
$
|
16.49
|
|
Second Quarter
|
|
$
|
33.21
|
|
|
$
|
29.10
|
|
|
$
|
25.44
|
|
|
$
|
19.41
|
|
Third Quarter
|
|
$
|
34.20
|
|
|
$
|
28.63
|
|
|
$
|
26.64
|
|
|
$
|
21.59
|
|
Fourth Quarter
|
|
$
|
36.31
|
|
|
$
|
31.82
|
|
|
$
|
27.66
|
|
|
$
|
24.70
|
|
Through 2010, our Board of Directors authorized an aggregate
$260 million to purchase common stock under our stock
repurchase program, including $60 million authorized in
2010 and $50 million authorized in 2009. During the quarter
ended December 31, 2010, we purchased the following shares
of our common stock under the stock repurchase program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
Value that May
|
|
|
|
|
|
|
|
|
|
Yet be Purchased
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Under the Stock
|
|
Period
|
|
Shares Purchased(1)
|
|
|
Paid per Share
|
|
|
Repurchase Program
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
October 1 October 31
|
|
|
|
|
|
$
|
|
|
|
$
|
104,799
|
|
November 1 November 30
|
|
|
162,968
|
|
|
$
|
34.66
|
|
|
$
|
99,151
|
|
December 1 December 31
|
|
|
50,911
|
|
|
$
|
34.28
|
|
|
$
|
97,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All purchases of our common stock were made under the stock
repurchase program first announced in 2002. |
11
The following graph contains the cumulative stockholder return
on our common stock during the period from December 31,
2005 through December 31, 2010 with the cumulative return
during the same period for the Nasdaq Stock Market
(U.S. Companies) and the Russell 2000, and assumes that the
dividends, if any, were reinvested.
12
|
|
Item 6.
|
Selected
Consolidated Financial Data
|
The selected financial data presented below is derived from our
consolidated financial statements and should be read in
connection with those statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Consolidated Statement of Income Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research services
|
|
$
|
168,508
|
|
|
$
|
157,726
|
|
|
$
|
155,339
|
|
|
$
|
131,163
|
|
|
$
|
114,876
|
|
Advisory services and other
|
|
|
82,218
|
|
|
|
75,626
|
|
|
|
85,536
|
|
|
|
80,893
|
|
|
|
66,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
250,726
|
|
|
|
233,352
|
|
|
|
240,875
|
|
|
|
212,056
|
|
|
|
181,473
|
|
Income from operations
|
|
|
30,750
|
|
|
|
32,420
|
|
|
|
37,964
|
|
|
|
22,651
|
|
|
|
20,042
|
|
Other income and gains (losses) on investments, net
|
|
|
3,550
|
|
|
|
1,315
|
|
|
|
6,846
|
|
|
|
7,353
|
|
|
|
6,052
|
|
Income from continuing operations
|
|
$
|
20,507
|
|
|
$
|
18,866
|
|
|
$
|
29,215
|
|
|
$
|
18,943
|
|
|
$
|
16,057
|
|
Basic income per common share from continuing operations
|
|
$
|
0.91
|
|
|
$
|
0.83
|
|
|
$
|
1.27
|
|
|
$
|
0.82
|
|
|
$
|
0.72
|
|
Diluted income per common share from continuing operations
|
|
$
|
0.89
|
|
|
$
|
0.82
|
|
|
$
|
1.24
|
|
|
$
|
0.80
|
|
|
$
|
0.70
|
|
Basic weighted average shares outstanding
|
|
|
22,478
|
|
|
|
22,645
|
|
|
|
23,062
|
|
|
|
23,074
|
|
|
|
22,195
|
|
Diluted weighted average shares outstanding
|
|
|
23,063
|
|
|
|
22,884
|
|
|
|
23,585
|
|
|
|
23,729
|
|
|
|
22,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable investments
|
|
$
|
216,034
|
|
|
$
|
259,792
|
|
|
$
|
259,929
|
|
|
$
|
248,974
|
|
|
$
|
207,833
|
|
Working capital
|
|
|
146,140
|
|
|
|
190,667
|
|
|
|
166,001
|
|
|
|
209,527
|
|
|
|
166,274
|
|
Total assets
|
|
|
450,477
|
|
|
|
470,196
|
|
|
|
454,951
|
|
|
|
426,357
|
|
|
|
384,143
|
|
Deferred revenue
|
|
|
131,521
|
|
|
|
117,888
|
|
|
|
113,844
|
|
|
|
111,418
|
|
|
|
99,875
|
|
Total liabilities
|
|
|
178,570
|
|
|
|
158,251
|
|
|
|
151,454
|
|
|
|
151,341
|
|
|
|
139,238
|
|
Cash dividends declared
|
|
|
68,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following items impact the comparability of our consolidated
data:
|
|
|
|
|
Cash dividends declared in 2010 represents a special dividend of
$3.00 per common share declared and paid in the fourth quarter
of 2010.
|
|
|
|
The 2009 operating income amount includes a $5.4 million
reorganization charge for facility consolidations and a
reduction-in-force
of approximately 50 employees. See Note 10 of the
Notes to Consolidated Financial Statements.
|
|
|
|
The results of JupiterResearch, LLC, and its parent company,
JUPR Holdings, Inc. (JupiterResearch) are included
in our consolidated results beginning July 31, 2008, the
date of acquisition. See Note 2 of the Notes to
Consolidated Financial Statements.
|
|
|
|
The 2008 other income amount includes a net foreign exchange
loss of approximately $1.6 million ($1.2 million after
tax) resulting primarily from the remeasurement of certain
intercompany payables and receivables. Of the net
$1.6 million loss, approximately $1.9 million related
to periods prior to 2008.
|
13
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
We derive revenues from memberships to our research products and
services, performing advisory services and consulting projects
and hosting events. We offer contracts for our research products
that are typically renewable annually and payable in advance.
Research revenues are recognized as revenue ratably over the
term of the contract. Accordingly, a substantial portion of our
billings are initially recorded as deferred revenue. Clients
purchase advisory services independently
and/or to
supplement their memberships to our research. Billings
attributable to advisory services and consulting projects are
initially recorded as deferred revenue. Advisory service
revenues are recognized when the customer receives the agreed
upon deliverable. Consulting project revenues, which generally
are short-term in nature and based upon fixed-fee agreements,
are recognized as the services are provided. Event billings are
also initially recorded as deferred revenue and are recognized
as revenue upon completion of each event.
Our primary operating expenses consist of cost of services and
fulfillment, selling and marketing expenses and general and
administrative expenses. Cost of services and fulfillment
represents the costs associated with the production and delivery
of our products and services, including salaries, bonuses,
employee benefits and stock-based compensation expense for
research personnel and all associated editorial, travel, and
support services. Selling and marketing expenses include
salaries, sales commissions, bonuses, employee benefits,
stock-based compensation expense, travel expenses, promotional
costs and other costs incurred in marketing and selling our
products and services. General and administrative expenses
include the costs of the technology, operations, finance, and
human resources groups and our other administrative functions,
including salaries, bonuses, employee benefits, and stock-based
compensation expense. Overhead costs such as facilities are
allocated to these categories according to the number of
employees in each group.
Deferred revenue, agreement value, client retention, dollar
retention and enrichment are metrics we believe are important to
understanding our business. We believe that the amount of
deferred revenue, along with the agreement value of contracts to
purchase research and advisory services, provide a significant
measure of our business activity. We define these metrics as
follows:
|
|
|
|
|
Deferred revenue billings in advance of
revenue recognition as of the measurement date.
|
|
|
|
Agreement value the total revenues
recognizable from all research and advisory service contracts in
force at a given time (but not including advisory-only
contracts), without regard to how much revenue has already been
recognized. Agreement value excludes amounts in excess of the
first year value for multiple year contracts signed in 2009 and
beyond. No single client accounted for more than 2% of agreement
value at December 31, 2010.
|
|
|
|
Client retention the percentage of client
companies with memberships expiring during the most recent
twelve-month period that renewed one or more of those
memberships during that same period.
|
|
|
|
Dollar retention the percentage of the dollar
value of all client membership contracts renewed during the most
recent twelve-month period to the total dollar value of all
client membership contracts that expired during the period.
|
|
|
|
Enrichment the percentage of the dollar value
of client membership contracts renewed during the period to the
dollar value of the corresponding expiring contracts.
|
14
Client retention, dollar retention, and enrichment are not
necessarily indicative of the rate of future retention of our
revenue base. A summary of our key metrics is as follows
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
Absolute
|
|
Percentage
|
|
|
December 31,
|
|
Increase
|
|
Increase
|
|
|
2010
|
|
2009
|
|
(Decrease)
|
|
(Decrease)
|
|
Deferred revenue
|
|
$
|
131.5
|
|
|
$
|
117.9
|
|
|
$
|
13.6
|
|
|
|
12
|
%
|
Agreement value
|
|
$
|
202.7
|
|
|
$
|
194.8
|
|
|
$
|
7.9
|
|
|
|
4
|
%
|
Client retention
|
|
|
80
|
%
|
|
|
74
|
%
|
|
|
6
|
|
|
|
8
|
%
|
Dollar retention
|
|
|
91
|
%
|
|
|
86
|
%
|
|
|
5
|
|
|
|
6
|
%
|
Enrichment
|
|
|
104
|
%
|
|
|
96
|
%
|
|
|
8
|
|
|
|
8
|
%
|
Number of clients
|
|
|
2,575
|
|
|
|
2,519
|
|
|
|
56
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
Absolute
|
|
Percentage
|
|
|
December 31,
|
|
Increase
|
|
Increase
|
|
|
2009
|
|
2008
|
|
(Decrease)
|
|
(Decrease)
|
|
Deferred revenue
|
|
$
|
117.9
|
|
|
$
|
113.8
|
|
|
$
|
4.1
|
|
|
|
4
|
%
|
Agreement value
|
|
$
|
194.8
|
|
|
$
|
222.5
|
|
|
$
|
(27.7
|
)
|
|
|
(12
|
)%
|
Client retention
|
|
|
74
|
%
|
|
|
73
|
%
|
|
|
1
|
|
|
|
1
|
%
|
Dollar retention
|
|
|
86
|
%
|
|
|
84
|
%
|
|
|
2
|
|
|
|
2
|
%
|
Enrichment
|
|
|
96
|
%
|
|
|
102
|
%
|
|
|
(6
|
)
|
|
|
(6
|
)%
|
Number of clients
|
|
|
2,519
|
|
|
|
2,643
|
|
|
|
(124
|
)
|
|
|
(5
|
%)
|
The increase in deferred revenue and agreement value from 2009
to 2010 is primarily due to increased demand for our products
and services due to the improvement in the economy and an
increase in the number of sales people during 2010. The increase
in agreement value was partially offset by a change in the
calculation to exclude agreement value in excess of the first
year for multiple year contracts signed in 2009 and beyond,
which reduced the growth rate in 2010 by approximately 6% .
Client retention and enrichment metrics increased in 2010 which
is consistent with an improved economic environment and is also
due to increased sales performance in 2010.
The increase in deferred revenue from 2008 to 2009 is primarily
due to increased demand for our products due to the improvement
in the economy in the fourth quarter of 2009 compared to 2008 as
well as the effect of the JupiterResearch and Strategic Oxygen
acquisitions completed in July 2008 and December 2009,
respectively. See Note 2 Acquisitions of the
Notes to Consolidated Financial Statements. The decrease in
agreement value from 2008 to 2009 is reflective of the economic
downturn in the second half of 2008 through the majority of 2009
which resulted in a lower number of clients and lower enrichment
rates in 2009 compared to 2008 and also is due to the exclusion
in 2009 of agreement value in excess of the first year value for
multiple year contracts signed in 2009. Client and dollar
retention amounts were essentially flat in 2009 compared to 2008.
Critical
Accounting Policies and Estimates
Managements discussion and analysis of financial condition
and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United
States of America (GAAP). The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our
policies and estimates, including but not limited to, those
related to our revenue recognition, stock-based compensation,
non-marketable investments, goodwill and intangible assets,
income taxes and valuation and impairment of marketable
investments. Management bases its estimates on historical
experience, data available at the time the estimates are made
and various assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
15
We consider the following accounting policies to be those that
require the most subjective judgment or that involve uncertainty
that could have a material impact on our financial statements.
If actual results differ significantly from managements
estimates and projections, there could be a material effect on
our financial statements. This is not a comprehensive list of
all of our accounting policies. In many cases, the accounting
treatment of a particular transaction is specifically dictated
by GAAP, with no need for managements judgment in its
application. There are also areas in which managements
judgment in selecting any available alternative would not
produce a materially different result. For a discussion of our
other accounting policies, see Note 1 of the Notes to
Consolidated Financial Statements beginning on
page F-7.
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Revenue Recognition. We generate revenues from
licensing memberships to our research, performing advisory
services and consulting projects and hosting events. We execute
contracts that govern the terms and conditions of each
arrangement. Revenues are recognized when persuasive evidence of
an arrangement exists, the fee is fixed and determinable,
services have been provided to the customer and collectability
is reasonably assured. Revenues from contracts that contain
multiple deliverables are allocated among the separate units
based on their relative fair values; however, the amount
recognized is limited to the amount that is not contingent on
future performance conditions. Research service revenues are
recognized ratably over the term of the agreement. Advisory
service revenues are recognized when the customer receives the
agreed upon deliverable and consulting project revenues are
recognized as the services are provided. Reimbursed
out-of-pocket
expenses are recorded as advisory service revenues. Events
revenues are recognized upon completion of the event. Annual
subscriptions to our RoleView research, which include access to
all or a designated portion of our research, and depending on
the type of license, membership in one or more of our Forrester
leadership boards, unlimited phone or email analyst inquiry,
unlimited participation in Forrester Teleconferences, and the
right to attend one event, are accounted for as one unit of
accounting and recognized ratably as research services revenue
over the membership period. Annual subscriptions to our data
products include access to designated survey data products and
access to a data specialist, and are accounted for as one unit
of accounting and recognized ratably as research services
revenue over the membership period. We offer our clients a
service guarantee, which gives our clients the right to cancel
their contracts prior to the end of the contract term and
receive a refund for unused products or services. Furthermore,
our revenue recognition determines the timing of commission
expenses, as commissions are earned during the month a contract
is booked and are deferred and recognized as expense as the
related revenue is recognized. We evaluate the recoverability of
deferred commissions at each balance sheet date.
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Stock-Based Compensation. Stock-based
compensation is recognized as an expense based upon the fair
value of the award at the time of grant. The determination of
the fair value of stock-based compensation requires significant
judgment and the use of estimates, particularly surrounding
assumptions such as stock price volatility, expected option
lives and forfeiture rates. These estimates involve inherent
uncertainties and the application of management judgment. As a
result, if circumstances change and we use different
assumptions, our stock-based compensation expense could be
materially different in the future.
|
Expected volatility is based, in part, on the historical
volatility of our common stock as well as managements
expectations of future volatility over the expected term of the
awards granted. The development of an expected life assumption
involves projecting employee exercise behaviors (expected period
between stock option vesting dates and stock option exercise
dates). We are also required to estimate future forfeitures of
stock-based awards for recognition of compensation expense. We
will record additional expense if the actual forfeitures are
lower than estimated and will record a recovery of prior
recognized expense if the actual forfeitures are higher than
estimated. In addition, for our performance-vested restricted
stock units, we make estimates of the performance outcome at
each period end in order to estimate the actual number of shares
that will be earned
and/or the
vesting period of the award. The actual expense recognized over
the vesting period will only be for those awards that vest. If
our actual forfeiture rate or performance outcomes are
materially different from our estimate, the actual stock-based
compensation expense could be significantly different from what
we have recorded in the current period.
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Non-Marketable Investments. We hold minority
interests in technology-related investment funds with a book
value of $7.4 million at December 31, 2010. These
investment funds are not publicly traded, and, therefore,
because no established market for these securities exists, the
estimate of the fair value of our
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16
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investments requires significant judgment. Investments that are
accounted for using the cost method are valued at cost unless an
other-than-temporary
impairment in their value occurs. For investments that are
accounted for using the equity method, we record our share of
the investees operating results each period. We review the
fair value of our investments on a regular basis to evaluate
whether an
other-than-temporary
impairment in the investment has occurred. We record impairment
charges when we believe that an investment has experienced a
decline in value that is
other-than-temporary.
Future adverse changes in market conditions or poor operating
results of underlying investments could result in losses or an
inability to recover the carrying value of the investments that
may not be reflected in an investments current carrying
value, thereby possibly requiring an impairment charge in the
future.
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Goodwill, Intangible Assets and Other Long-Lived
Assets. As of December 31, 2010, we had
$76.4 million of goodwill and intangible assets with finite
lives recorded on our Consolidated Balance Sheets. Goodwill is
required to be measured for impairment at least annually or
whenever events indicate that there may be an impairment. In
order to determine if an impairment exists, we compare each of
our reporting units carrying value to the reporting
units fair value. Determining the reporting units
fair value requires us to make estimates of market conditions
and operational performance. Absent an event that indicates a
specific impairment may exist, we have selected November 30 as
the date to perform the annual goodwill impairment test. We
completed the annual goodwill impairment testing as of
November 30, 2010 and concluded that the fair values of
each of our reporting units substantially exceeded their
respective carrying values. Future events could cause us to
conclude that impairment indicators exist and that goodwill
associated with our acquired businesses is impaired. Any
resulting impairment loss could have a material adverse impact
on our results of operations.
|
Intangible assets with finite lives consist of acquired customer
relationships, technology, research content and trademarks and
are valued according to the future cash flows they are estimated
to produce. These assigned values are amortized on a basis which
best matches the periods in which the economic benefits are
expected to be realized. Tangible assets with finite lives
consist of property and equipment, which are depreciated and
amortized over their estimated useful lives. We continually
evaluate whether events or circumstances have occurred that
indicate that the estimated remaining useful life of our
intangible and long-lived tangible assets may warrant revision
or that the carrying value of these assets may be impaired. To
compute whether intangible assets have been impaired, the
estimated undiscounted future cash flows for the estimated
remaining useful life of the assets are compared to the carrying
value. To the extent that the future cash flows are less than
the carrying value, the assets are written down to their
estimated fair value.
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Income Taxes. We recognize deferred tax assets
and liabilities using enacted tax rates for the effect of
temporary differences between book and tax bases of assets and
liabilities as well as operating loss carryforwards (from
acquisitions). Such amounts are adjusted as appropriate to
reflect changes in the tax rates expected to be in effect when
the temporary differences reverse. We record a valuation
allowance to reduce our deferred taxes to an amount we believe
is more likely than not to be realized. We consider future
taxable income and prudent and feasible tax planning strategies
in assessing the need for a valuation allowance.
|
As a global company, we use significant judgment to calculate
and provide for income taxes in each of the tax jurisdictions in
which we operate. In the ordinary course of our business, there
are transactions and calculations undertaken whose ultimate tax
outcome cannot be certain. Some of these uncertainties arise as
a consequence of transfer pricing for transactions with our
subsidiaries and potential challenges to nexus and credit
estimates. We estimate our exposure to unfavorable outcomes
related to these uncertainties and record a liability based on
the probability for such outcomes in accordance with current
accounting guidelines.
Although we believe our estimates are reasonable, no assurance
can be given that the final tax outcome will not be different
from what is reflected in our historical income tax provisions,
returns, and accruals. Such differences, or changes in estimates
relating to potential differences, could have a material impact
on our income tax provision and operating results in the period
in which such a determination is made.
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Valuation and Impairment of Marketable
Investments. Our investment portfolio may at any
time contain investments in U.S. Treasury and
U.S. government agency securities, taxable
and/or tax
exempt municipal
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17
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notes (some of which may have an auction reset feature),
corporate notes and bonds, commercial paper and money market
funds. The assessment of the fair value of certain of the debt
securities can be difficult and subjective due in part to
limited trading activity of certain of these debt instruments.
|
We conduct periodic reviews to identify and evaluate each
investment that has an unrealized loss, in accordance with the
meaning of
other-than-temporary
impairment and its application to certain investments, as
required under current accounting standards. An unrealized loss
exists when the current fair value of an individual security is
less than its amortized cost basis. Unrealized losses on
available-for-sale
securities that are determined to be temporary, and not related
to credit loss, are recorded, net of tax, in accumulated other
comprehensive loss.
For
available-for-sale
debt securities with unrealized losses, management performs an
analysis to assess whether we intend to sell or whether we would
more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where we intend
to sell a security, or may be required to do so, the
securitys decline in fair value would be deemed to be
other-than-temporary
and the full amount of the unrealized loss would be recorded
within gains (losses) on investments, net in the Consolidated
Statements of Income. Regardless of our intent to sell a
security, we perform additional analysis on all securities with
unrealized losses to evaluate losses associated with the
creditworthiness of the security. Credit losses are identified
where we do not expect to receive cash flows sufficient to
recover the amortized cost basis of a security and would be
recorded within gains (losses) on investments, net in the
Consolidated Statements of Income.
As of December 31, 2010, we held municipal bonds with a
fair value of $9.1 million ($11.0 million at par
value) with an auction reset feature (auction rate
securities or ARS). The fair value of the ARS
was determined by utilizing a discounted cash flow approach. The
assumptions used in preparing the discounted cash flow model
include estimates, based on data available at December 31,
2010, of interest rates, timing and amount of cash flows, credit
and liquidity premiums, and expected holding periods of the ARS.
The assumptions used in valuing the ARS are volatile and subject
to change as the underlying sources of these assumptions and
market conditions change, which may lead us in the future to
recorded additional losses for these securities. We classified
these ARS as
available-for-sale
securities and determined that the losses were not considered
other-than-temporary
and were not due to credit losses. Accordingly, changes in the
market value of the ARS have been recorded in other
comprehensive loss in the Consolidated Balance Sheets during the
years ended December 31, 2010 and 2009. If the market
conditions deteriorate further, we may be required to record
unrealized losses in other comprehensive loss or impairment
charges within the Consolidated Statements of Income. We may not
be able to liquidate these investments unless the issuer calls
the security, a successful auction occurs, a buyer is found
outside of the auction process, or the security matures.
18
Results
of Operations for the years ended December 31, 2010, 2009
and 2008
The following table sets forth our Consolidated Statements of
Income as a percentage of total revenues for the years noted.
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Years Ended
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|
December 31,
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2010
|
|
2009
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research services
|
|
|
67
|
%
|
|
|
68
|
%
|
|
|
64
|
%
|
Advisory services and other
|
|
|
33
|
|
|
|
32
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Operating expenses:
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|
|
|
|
|
|
|
|
|
|
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|
Cost of services and fulfillment
|
|
|
38
|
|
|
|
38
|
|
|
|
37
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|
Selling and marketing
|
|
|
34
|
|
|
|
31
|
|
|
|
32
|
|
General and administrative
|
|
|
14
|
|
|
|
12
|
|
|
|
12
|
|
Depreciation
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Amortization of intangible assets
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Reorganization costs
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
12
|
|
|
|
14
|
|
|
|
16
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|
Other income, net
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
Gains (losses) on investments, net
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Income before income taxes
|
|
|
14
|
|
|
|
14
|
|
|
|
19
|
|
Income tax provision
|
|
|
6
|
|
|
|
6
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
8
|
%
|
|
|
8
|
%
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
compared to 2009
Revenues
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
250.7
|
|
|
$
|
233.4
|
|
|
$
|
17.3
|
|
|
|
7
|
%
|
Revenues from research services
|
|
$
|
168.5
|
|
|
$
|
157.7
|
|
|
$
|
10.8
|
|
|
|
7
|
%
|
Revenues from advisory services and other
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|
$
|
82.2
|
|
|
$
|
75.6
|
|
|
$
|
6.6
|
|
|
|
9
|
%
|
Revenues attributable to customers outside of the U.S.
|
|
$
|
70.7
|
|
|
$
|
69.3
|
|
|
$
|
1.4
|
|
|
|
2
|
%
|
Percentage of revenue attributable to customers outside of the
U.S.
|
|
|
28
|
%
|
|
|
30
|
%
|
|
|
(2
|
)
|
|
|
(7
|
)%
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Number of clients (at end of period)
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|
|
2,575
|
|
|
|
2,519
|
|
|
|
56
|
|
|
|
2
|
%
|
Number of events
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
|
|
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The increase in total revenues in 2010 is principally the result
of increased demand for our products and services and the
acquisition of Strategic Oxygen in December 2009, which
accounted for approximately 1.9% of revenue growth. The effects
of foreign exchange resulted in an approximate 1% decrease in
total revenues during 2010. Revenue growth in 2010 was driven by
a 12% increase in the technology industry client group
(approximately 6.7% due to Strategic Oxygen), a 12% increase in
the marketing and strategy client group and a 16% increase for
events. Revenue in the information technology group was
essentially flat for the year. Overall revenue growth was due in
part to the improvement in the economy and an increase in the
number of sales personnel in 2010. Revenue growth in the U.S.
outpaced the growth in Europe, due in part to a stronger economy
in the U.S. relative to Europe, resulting in a decrease of 2% in
the percentage of revenue earned outside of the U.S. Taking into
account the
19
increase in deferred revenue of approximately 12% at
December 31, 2010 compared to December 31, 2009 and
the increase in the number of sales personnel in 2010, we
anticipate that revenue growth will accelerate in 2011.
Cost
of Services and Fulfillment
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Cost of services and fulfillment (dollars in millions)
|
|
$
|
94.1
|
|
|
$
|
87.9
|
|
|
$
|
6.2
|
|
|
|
7
|
%
|
Cost of services and fulfillment as a percentage of total
revenues
|
|
|
38
|
%
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
Number of research and fulfillment employees (at end of period)
|
|
|
474
|
|
|
|
435
|
|
|
|
39
|
|
|
|
9
|
%
|
The increase in the dollar amount of cost of services and
fulfillment during 2010 is primarily the result of increased
compensation and benefit costs resulting from an increase in the
number of employees and an increase in incentive compensation,
increased travel-related costs and costs resulting from the
acquisition of Strategic Oxygen in December 2009. This increase
was partially offset by stock-based compensation expense in 2009
from the accelerated vesting of performance-based stock options.
We expect facility lease costs to increase by approximately
$5.0 million in 2011, of which approximately
$2.2 million will be recorded as cost of services and
fulfillment in 2011. The increase in facility lease costs will
primarily result from our move into our new corporate
headquarters in Cambridge, Massachusetts in the third quarter of
2011. Of the $5.0 million increase, approximately
$3.6 million represents lease costs for the period in 2011
for which we have access to our new Cambridge headquarters for
construction purposes until the time that we occupy the facility
for operations.
Selling
and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Selling and marketing expenses (dollars in millions)
|
|
$
|
84.7
|
|
|
$
|
72.5
|
|
|
$
|
12.2
|
|
|
|
17
|
%
|
Selling and marketing expenses as a percentage of total revenues
|
|
|
34
|
%
|
|
|
31
|
%
|
|
|
3
|
|
|
|
10
|
%
|
Selling and marketing employees (at end of period)
|
|
|
430
|
|
|
|
364
|
|
|
|
66
|
|
|
|
18
|
%
|
The increase in selling and marketing expenses in dollars and as
a percentage of total revenues during 2010 is primarily due to
an increase in compensation and benefit costs resulting from an
increase in the number of selling and marketing employees and an
increase in sales commissions and bonuses. The increase is also
attributable to increased travel-related costs. Subject to the
business environment for our products and services, we have an
ongoing initiative to expand our sales force by 15% to 20%
annually. Increased sales of our syndicated research services
products attributable to an expanding sales force are generally
recognized over a twelve-month period, which typically results
in an increase in selling and marketing expense as a percentage
of revenue during periods of sales force expansion. As noted
above under costs of services and fulfillment, we
expect facility lease costs to increase by approximately
$5.0 million in 2011, of which approximately
$2.0 million will be recorded as selling and marketing
expense in 2011.
General
and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
General and administrative expenses (dollars in millions)
|
|
$
|
34.0
|
|
|
$
|
28.5
|
|
|
$
|
5.5
|
|
|
|
19
|
%
|
General and administrative expenses as a percentage of total
revenues
|
|
|
14
|
%
|
|
|
12
|
%
|
|
|
2
|
|
|
|
17
|
%
|
General and administrative employees (at end of period)
|
|
|
174
|
|
|
|
148
|
|
|
|
26
|
|
|
|
18
|
%
|
20
The increase in general and administrative expenses in dollars
and as a percentage of total revenues during 2010 is primarily
due to an increase in compensation and benefits costs resulting
from an increase in the number of general and administrative
employees to support our growth plan and an increase in bonuses.
The increase is also attributable to increased investments in
customer facing technology. As noted above under costs of
services and fulfillment, we expect facility lease costs
to increase by approximately $5.0 million in 2011, of which
approximately $0.8 million will be recorded as general and
administrative expenses in 2011.
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Depreciation expense (dollars in millions)
|
|
$
|
3.6
|
|
|
$
|
4.4
|
|
|
$
|
(0.8
|
)
|
|
|
(17
|
)%
|
Depreciation expense as a percentage of total revenues
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
(1
|
)
|
|
|
(50
|
%)
|
The decrease in depreciation expense during 2010 is primarily
due to lower amortization of leasehold improvements due to
facility consolidations in 2009. We expect depreciation expense
to increase substantially in the second half of 2011 due to our
new corporate headquarters and customer facing technologies that
will be implemented during 2011.
Amortization
of Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Amortization expense (dollars in millions)
|
|
$
|
3.6
|
|
|
$
|
2.3
|
|
|
$
|
1.3
|
|
|
|
58
|
%
|
Amortization expense as a percentage of total revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
The increase in amortization expense during 2010 is primarily
due to the amortization of intangible assets from the
acquisition of Strategic Oxygen in December 2009. We expect
amortization expense to decrease by approximately
$1.8 million in 2011 as certain intangible assets relating
to Strategic Oxygen become fully amortized in the first quarter
of 2011.
Reorganization
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Reorganization costs (dollars in millions)
|
|
$
|
|
|
|
$
|
5.4
|
|
|
$
|
(5.4
|
)
|
|
|
(100
|
)%
|
Reorganization costs as a percentage of total revenues
|
|
|
|
|
|
|
2
|
%
|
|
|
(2
|
)
|
|
|
(100
|
%)
|
Reorganization costs in 2009 consist of $3.1 million
incurred in the first quarter of 2009 primarily for severance
and related benefit costs in connection with the termination of
approximately 50 positions and approximately $2.3 million
incurred in the fourth quarter of 2009 for costs related to
facility consolidations primarily in Cambridge, Massachusetts.
Other
Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Other income, net (dollars in millions)
|
|
$
|
1.2
|
|
|
$
|
2.3
|
|
|
$
|
(1.1
|
)
|
|
|
(46
|
)%
|
Other income, net as a percentage of total revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
The decrease in other income, net during 2010 is primarily due
to lower interest income resulting from lower returns on
invested capital.
21
Gains
(Losses) on Investments, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Gains (losses) on investments, net (dollars in millions)
|
|
$
|
2.3
|
|
|
$
|
(1.0
|
)
|
|
$
|
3.3
|
|
|
|
334
|
%
|
Gains (losses) on investments, net as a percentage of total
revenues
|
|
|
1
|
%
|
|
|
(1
|
)%
|
|
|
2
|
|
|
|
200
|
%
|
Gains (losses) on investments primarily represent our share of
our equity method investment gains and losses from our
technology-related investment funds. The increase in gains
during 2010 is primarily due to increased valuations of certain
assets within the funds in 2010 as compared to net decreases in
valuations during 2009.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Provision for income taxes (dollars in millions)
|
|
$
|
13.8
|
|
|
$
|
14.9
|
|
|
$
|
(1.1
|
)
|
|
|
(7
|
)%
|
Effective tax rate
|
|
|
40
|
%
|
|
|
44
|
%
|
|
|
(4
|
)
|
|
|
(9
|
%)
|
The decrease in the effective tax rate during 2010 is primarily
due to a non-cash foreign exchange rate gain on the
remeasurement of a euro-denominated deferred tax liability in
2010 as compared to a loss in 2009 and to a reduction in a
valuation allowance during 2010 primarily related to the
utilization of credits. Such amounts were partially offset by a
reduction in tax exempt interest income in 2010 due primarily to
lower interest rates.
2009
compared to 2008
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
233.4
|
|
|
$
|
240.9
|
|
|
$
|
(7.5
|
)
|
|
|
(3
|
)%
|
Revenues from research services
|
|
$
|
157.7
|
|
|
$
|
155.4
|
|
|
$
|
2.3
|
|
|
|
2
|
%
|
Revenues from advisory services and other
|
|
$
|
75.6
|
|
|
$
|
85.5
|
|
|
$
|
(9.9
|
)
|
|
|
(12
|
)%
|
Revenues attributable to customers outside of the U.S.
|
|
$
|
69.3
|
|
|
$
|
67.9
|
|
|
$
|
1.4
|
|
|
|
2
|
%
|
Percentage of revenue attributable to customers outside of the
U.S.
|
|
|
30
|
%
|
|
|
28
|
%
|
|
|
2
|
|
|
|
7
|
%
|
Number of clients (at end of period)
|
|
|
2,519
|
|
|
|
2,643
|
|
|
|
(124
|
)
|
|
|
(5
|
)%
|
Number of events
|
|
|
14
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
The decrease in total revenues in 2009 compared to 2008 is
primarily attributable to lower demand for our advisory and
other services and the adverse effect of foreign exchange during
2009. The effects of foreign exchange resulted in an approximate
2% decrease in total revenues during 2009. The increase in
revenue from research services in 2009 is due in part to our
objective to drive a higher percentage of our revenue from
research services, which was accomplished in part through
greater alignment of our sales compensation plan with this
objective, as well as the acquisition of JupiterResearch in July
2008. These increases were offset in part by a decline in the
number of clients in 2009 due to the global economic slowdown.
The decrease in advisory services and other revenue is
reflective of the global economic slowdown in 2009 as well as
our objective to drive a higher percentage of revenue from
research services. No single client company accounted for more
than 2% of revenues during 2009 or 2008.
22
Cost
of Services and Fulfillment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Cost of services and fulfillment (dollars in millions)
|
|
$
|
87.9
|
|
|
$
|
90.6
|
|
|
|
(2.7
|
)
|
|
|
(3
|
)%
|
Cost of services and fulfillment as a percentage of total
revenues
|
|
|
38
|
%
|
|
|
37
|
%
|
|
|
1
|
|
|
|
3
|
%
|
Number of research and fulfillment employees (at end of period)
|
|
|
435
|
|
|
|
488
|
|
|
|
(53
|
)
|
|
|
(11
|
%)
|
The decrease in the dollar amount of cost of services and
fulfillment in 2009 compared to 2008 is largely due to lower
salary and benefit costs resulting from a lower number of
employees in 2009, a decrease in discretionary spending due to
managements focus on expense management in light of the
global economic downturn, a decrease in outsourced costs and a
general freeze in salary increases in 2009.
Selling
and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Selling and marketing expenses (dollars in millions)
|
|
$
|
72.5
|
|
|
$
|
77.2
|
|
|
|
(4.7
|
)
|
|
|
(6
|
)%
|
Selling and marketing expenses as a percentage of total revenues
|
|
|
31
|
%
|
|
|
32
|
%
|
|
|
(1
|
)
|
|
|
(3
|
)%
|
Selling and marketing employees (at end of period)
|
|
|
364
|
|
|
|
410
|
|
|
|
(46
|
)
|
|
|
(11
|
%)
|
The decrease in the dollar amount of selling and marketing
expenses in 2009 is primarily due to a decrease in compensation
resulting from lower headcount and lower sales commissions due
to lower sales volume in 2009, reduced discretionary spending
and a general salary freeze in 2009.
General
and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
General and administrative expenses (dollars in millions)
|
|
$
|
28.5
|
|
|
$
|
29.7
|
|
|
|
(1.2
|
)
|
|
|
(4
|
)%
|
General and administrative expenses as a percentage of total
revenues
|
|
|
12
|
%
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
General and administrative employees (at end of period)
|
|
|
148
|
|
|
|
150
|
|
|
|
(2
|
)
|
|
|
(1
|
%)
|
The decrease in the dollar amount of general and administrative
expenses in 2009 is primarily due to a decrease in professional
services fees as approximately $0.9 million of fees were
incurred in 2008 related to our historical stock option
investigation. The decrease in 2009 is also attributable to
lower discretionary spending, lower hiring costs and a general
salary freeze in 2009.
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Depreciation expense (dollars in millions)
|
|
$
|
4.4
|
|
|
$
|
4.0
|
|
|
$
|
0.4
|
|
|
|
9
|
%
|
Depreciation expense as a percentage of total revenues
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
The increase in depreciation expense in 2009 is primarily
attributable to leasehold improvements completed in 2009.
23
Amortization
of Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Amortization expense (dollars in millions)
|
|
$
|
2.3
|
|
|
$
|
1.4
|
|
|
$
|
0.9
|
|
|
|
60
|
%
|
Amortization expense as a percentage of total revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
The increase in amortization expense in 2009 is primarily
attributable to amortization of intangible assets from the
acquisition of JupiterResearch on July 31, 2008 and
Strategic Oxygen on December 1, 2009, partially offset by a
decrease in amortization from an acquisition in 2003 that became
fully amortized in 2008.
Reorganization
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Reorganization costs (dollars in millions)
|
|
$
|
5.4
|
|
|
$
|
|
|
|
$
|
5.4
|
|
|
|
N/A
|
|
Reorganization costs as a percentage of total revenues
|
|
|
2
|
%
|
|
|
|
|
|
|
2
|
|
|
|
N/A
|
|
Reorganization costs in 2009 consist of $3.1 million
incurred in the first quarter of 2009 primarily for severance
and related benefit costs in connection with the termination of
approximately 50 positions and approximately $2.3 million
incurred in the fourth quarter of 2009 for costs related to
facility consolidations primarily in Cambridge, Massachusetts.
Other
Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Other income, net (dollars in millions)
|
|
$
|
2.3
|
|
|
$
|
5.4
|
|
|
$
|
(3.1
|
)
|
|
|
(57
|
)%
|
Other income, net as a percentage of total revenues
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
(1
|
)
|
|
|
(50
|
%)
|
Other income, net, which consists primarily of interest income
and foreign exchange gains and losses, declined in 2009
primarily due to a decline in interest income resulting from a
significant decrease in the rates of return on our investments.
Gains
(Losses) on Investments, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Gains (losses) on investments, net (dollars in millions)
|
|
$
|
(1.0
|
)
|
|
$
|
1.5
|
|
|
$
|
(2.5
|
)
|
|
|
(167
|
)%
|
Gains (losses) on investments, net as a percentage of total
revenues
|
|
|
(1
|
)%
|
|
|
1
|
%
|
|
|
(2
|
)
|
|
|
(200
|
%)
|
In 2008 we sold the remainder of our investment in comScore,
Inc. and received proceeds of approximately $2.3 million
resulting in a gain of approximately $2.0 million. In 2009
and 2008, we recognized net losses from our non-marketable
investments of approximately $1.0 million and
$0.6 million, respectively.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Provision for income taxes (dollars in millions)
|
|
$
|
14.9
|
|
|
$
|
15.6
|
|
|
$
|
(0.7
|
)
|
|
|
(5
|
)%
|
Effective tax rate
|
|
|
44
|
%
|
|
|
35
|
%
|
|
|
9
|
|
|
|
26
|
%
|
The increase in our effective tax rate in 2009 is primarily due
to an increase in state taxes, an increase in non-deductible
expenses including stock-based compensation and a non-cash
foreign exchange loss on the
24
remeasurement of a euro-denominated deferred tax liability. In
addition, the 2008 effective tax rate was reduced by a reduction
in a valuation allowance on foreign deferred tax assets that did
not recur in 2009.
Liquidity
and Capital Resources
We have financed our operations primarily through funds
generated from operations. Memberships for research services,
which constituted approximately 67% of our revenues during 2010,
are annually renewable and are generally payable in advance. We
generated cash from operating activities of $38.7 million
during 2010 and $43.1 million during 2009. The decrease in
cash provided from operations is primarily attributable to a
lower amount of cash generated from working capital in 2010 of
$1.9 million compared to $5.4 million in 2009,
primarily due to the timing of income tax payments.
During 2010, we generated $15.6 million of cash from
investing activities, consisting primarily of $28.9 million
in proceeds from net sales and maturities of marketable
investments, which was partially offset by $13.4 million of
property and equipment purchases. Property and equipment
purchases in 2010 primarily consisted of leasehold improvements
for new facilities as well as purchases of software and computer
equipment. During 2011, we anticipate spending between
$30 million and $35 million for property and equipment
purchases, a majority of which will be utilized for the
build-out and equipping of our new headquarters in Cambridge,
Massachusetts. At December 31, 2010, we had
$15.5 million in escrow, recorded as restricted cash on the
Consolidated Balance Sheets, which will be utilized to pay for a
portion of the build-out of our new headquarters. During 2009,
we used $59.5 million of cash in investing activities,
consisting primarily of $33.5 million used for net
purchases of marketable investments and a $16.8 million
increase in restricted cash. The restricted cash was composed of
$14.8 million placed in escrow under a lease signed in 2009
for leasehold improvements for our new headquarters, as well as
$2.0 million of the purchase price placed in escrow in
connection with our acquisition of Strategic Oxygen in December
2009 and which was fully released in the first quarter of 2010.
Investing activities in 2009 also included $5.6 million for
acquisitions of businesses and $4.3 million for purchases
of property and equipment. We regularly invest excess funds in
short and intermediate-term interest-bearing obligations of
investment grade.
During 2010, we used $61.8 million of cash in financing
activities as we paid a special cash dividend in December 2010
of $68.4 million, which represented a payment of $3.00 per
share to our common stockholders. We do not currently intend to
pay cash dividends in the foreseeable future. Also in 2010, we
used $21.3 million for repurchases of our common stock and
received $27.9 from proceeds and related tax benefits from
exercises of stock options and our employee stock purchase plan.
In the fourth quarter of 2010, our board of directors increased
our stock repurchase authorization by $60.0 million. As of
December 31, 2010, we had $97.4 remaining on our stock
repurchase authorization and we plan to continue to repurchase
our common stock during 2011. During 2009, we used
$20.4 million to repurchase stock and received
approximately $4.3 million of proceeds from exercises of
stock options and our employee stock purchase plan.
As of December 31, 2010, we held $9.1 million
($11.0 million at par value) of municipal bonds with an
auction reset feature (auction rate securities or
ARS). In February 2008, auctions began to fail for
these securities and have continued to fail throughout 2010. As
a result, our ability to liquidate our investment and fully
recover the carrying value of our investment in the near term
may be limited or not exist. Based on our expected operating
cash flows and our cash resources, we do not anticipate the
current lack of liquidity on our ARS investments will affect our
ability to execute our current business plan.
As of December 31, 2010, we had cash and cash equivalents
of $86.9 million and marketable investments of
$129.1 million. We do not have a line of credit and do not
presently anticipate the need to access a line of credit in the
foreseeable future. We plan to continue to introduce new
products and services and expect to make the requisite
investments in our infrastructure during the next
12 months. We believe that our current cash balance,
marketable investments, and cash flows from operations will
satisfy working capital, financing activities, and capital
expenditure requirements for at least the next two years.
25
As of December 31, 2010, we had future contractual
obligations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
Total
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Operating leases
|
|
$
|
118,928
|
|
|
$
|
7,541
|
|
|
$
|
8,669
|
|
|
$
|
8,883
|
|
|
$
|
8,756
|
|
|
$
|
8,824
|
|
|
$
|
76,255
|
|
Other commitments(1)
|
|
|
15,300
|
|
|
|
15,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
134,228
|
|
|
$
|
22,841
|
|
|
$
|
8,669
|
|
|
$
|
8,883
|
|
|
$
|
8,756
|
|
|
$
|
8,824
|
|
|
$
|
76,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount represents a commitment to construct approximately
$15.3 million of leasehold improvements under the terms of
a
build-to-suit
lease. |
Off-Balance
Sheet Arrangements
We do not maintain any off-balance sheet financing arrangements.
Recent
Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial
Statements for a full description of recent accounting
pronouncements including the expected dates of adoption and
effects on results of operations and financial condition.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
The following discussion about our market risk disclosures
involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking
statements. We are exposed to market risk related to changes in
interest rates and foreign currency exchange rates. We have
historically not used derivative financial instruments.
The primary objective of our investment activities is to
preserve principal and maintain liquidity while at the same time
maximizing the income we receive from our investments without
significantly increasing risk. To achieve this objective, we
maintain our portfolio of cash equivalents and marketable
investments in a variety of securities, including
U.S. government agencies, municipal notes and bonds,
corporate notes and bonds, commercial paper, and money market
funds. The securities, other than money market funds, are
classified as
available-for-sale
and consequently are recorded on the Consolidated Balance Sheets
at fair value with unrealized gains or losses reported as a
component of accumulated other comprehensive loss in the
Consolidated Balance Sheets. If interest rates rise, the market
value of our investments may decline, which could result in a
realized loss if we are forced to sell an investment before its
scheduled maturity. We have the ability to hold our fixed income
investments until maturity (without giving effect to any future
acquisitions or mergers). Therefore, we would not expect our
operating results or cash flows to be affected to any
significant degree by a sudden change in market interest rates
on our securities portfolio.
At December 31, 2010, we held approximately
$9.1 million ($11.0 million at par value) of municipal
notes with an auction reset feature (auction rate
securities or ARS). In February 2008, auctions
for these securities began to fail and continued to fail
throughout 2010. These ARS may not be accessible for in excess
of twelve months because of continued failed auctions and have
been classified in the Consolidated Balance Sheets as long-term
marketable securities as of December 31, 2010. Based on
current market conditions, it is likely that auction failures
will continue and as a result, our ability to liquidate our
investment and fully recover the carrying value of our
investment in the near term may be limited or not exist. If the
issuers are unable to successfully close future auctions and
their credit ratings deteriorate, we may in the future be
required to record an impairment charge on these investments. We
valued the ARS using a discounted cash flow model. The
assumptions used in preparing the discounted cash flow model
include estimates of interest rates, timing and amount of cash
flows, credit and liquidity premiums, and expected holding
periods of the ARS, based on data available at December 31,
2010. The assumptions used in valuing these ARS are volatile and
subject to change as the underlying sources of these assumptions
and market conditions change, which could result in significant
changes to the fair value of these ARS.
26
The following table provides information about our investment
portfolio. For investment securities, the table presents
principal cash flows and related weighted-average interest rates
by maturity date. ARS are shown based upon their contractual
maturity dates between 2024 and 2034.
Principal amounts by maturity dates in U.S. dollars
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Thereafter
|
|
|
State and municipal agency obligations
|
|
$
|
43,898
|
|
|
$
|
46,668
|
|
|
$
|
17,415
|
|
|
$
|
9,117
|
|
Federal agency and corporate obligations
|
|
|
7,752
|
|
|
|
4,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
51,650
|
|
|
$
|
50,925
|
|
|
$
|
17,415
|
|
|
$
|
9,117
|
|
Weighted average interest rates
|
|
|
1.63
|
%
|
|
|
1.16
|
%
|
|
|
1.33
|
%
|
|
|
0.54
|
%
|
Foreign Currency Exchange. On a global level,
we face exposure to movements in foreign currency exchange rates
as we enter into normal business transactions that may be in
currencies other than the local currency of our subsidiaries. In
addition, transactions and account balances between our
U.S. and foreign subsidiaries expose us to currency
exchange risk. This exposure may change over time as business
practices evolve and could have a material adverse impact on our
results of operations. For the years ended December 31,
2010, 2009 and 2008, we incurred foreign currency exchange
losses of $1.4 million, $1.1 million and
$1.6 million, respectively. Historically, we have not
entered into any hedging agreements. However, we may enter into
hedging agreements in the future to attempt to mitigate the
financial effect of future fluctuations in the euro or other
foreign currencies.
27
|
|
Item 8.
|
Consolidated
Financial Statements and Supplementary Data
|
The financial statements listed in the following Index to
Financial Statements are filed as a part of this 2010 Annual
Report on
Form 10-K.
FORRESTER
RESEARCH, INC.
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Report of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm
|
|
|
F-1
|
|
Report of BDO USA, LLP, Independent Registered Public Accounting
Firm
|
|
|
F-2
|
|
Consolidated Balance Sheets
|
|
|
F-3
|
|
Consolidated Statements of Income
|
|
|
F-4
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income
|
|
|
F-5
|
|
Consolidated Statements of Cash Flows
|
|
|
F-6
|
|
Notes to Consolidated Financial Statements
|
|
|
F-7
|
|
28
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Forrester Research, Inc.:
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of income, of
stockholders equity and comprehensive income, and of cash
flows present fairly, in all material respects, the financial
position of Forrester Research, Inc. and its subsidiaries at
December 31, 2010, and the results of their operations and
their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys management is
responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on these
financial statements, and on the Companys internal control
over financial reporting based on our integrated audit. We
conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audit of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
LLP
Boston, Massachusetts
March 14, 2011
F-1
Report of
Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Forrester Research, Inc.
Cambridge, MA
We have audited the accompanying consolidated balance sheet of
Forrester Research, Inc. and subsidiaries (the
Company) as of December 31, 2009 and the
related consolidated statements of income, stockholders
equity and comprehensive income, and cash flows for each of the
two years in the period ended December 31, 2009. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Forrester Research, Inc. and subsidiaries at
December 31, 2009, and the results of their operations and
their cash flows for each of the two years in the period ended
December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.
BDO USA, LLP (formerly known as BDO Seidman, LLP)
Boston, Massachusetts
March 12, 2010 (except with respect to Note 11, as to
which the date is March 11, 2011)
F-2
FORRESTER
RESEARCH, INC.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
86,927
|
|
|
$
|
97,805
|
|
Marketable investments (Note 4)
|
|
|
119,990
|
|
|
|
152,037
|
|
Accounts receivable, net (Note 12)
|
|
|
73,574
|
|
|
|
67,436
|
|
Deferred income taxes (Note 6)
|
|
|
4,089
|
|
|
|
5,276
|
|
Deferred commissions
|
|
|
12,598
|
|
|
|
9,631
|
|
Prepaid expenses and other current assets
|
|
|
16,733
|
|
|
|
8,616
|
|
Restricted cash (Note 7)
|
|
|
3,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
317,790
|
|
|
|
340,801
|
|
Long-term marketable investments (Note 4)
|
|
|
9,117
|
|
|
|
9,950
|
|
Restricted cash (Notes 2 and 7)
|
|
|
11,609
|
|
|
|
16,770
|
|
Property and equipment, net (Note 12)
|
|
|
19,838
|
|
|
|
5,823
|
|
Deferred income taxes (Note 6)
|
|
|
7,779
|
|
|
|
10,323
|
|
Goodwill (Note 3)
|
|
|
67,958
|
|
|
|
68,314
|
|
Intangible assets, net (Note 3)
|
|
|
8,487
|
|
|
|
12,108
|
|
Non-marketable investments (Note 5)
|
|
|
7,359
|
|
|
|
5,546
|
|
Other assets
|
|
|
540
|
|
|
|
561
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
450,477
|
|
|
$
|
470,196
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
3,644
|
|
|
$
|
2,078
|
|
Accrued expenses (Note 12)
|
|
|
36,485
|
|
|
|
30,168
|
|
Deferred revenue
|
|
|
131,521
|
|
|
|
117,888
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
171,650
|
|
|
|
150,134
|
|
Non-current liabilities
|
|
|
6,920
|
|
|
|
8,117
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
178,570
|
|
|
|
158,251
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS (NOTE 7)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (NOTE 8):
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value
|
|
|
|
|
|
|
|
|
Authorized 500 shares, issued and
outstanding none
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value
|
|
|
|
|
|
|
|
|
Authorized 125,000 shares
|
|
|
|
|
|
|
|
|
Issued 30,500 and 29,362 in 2010 and 2009,
respectively
|
|
|
|
|
|
|
|
|
Outstanding 22,812 and 22,334 in 2010 and 2009,
respectively
|
|
|
305
|
|
|
|
294
|
|
Additional paid-in capital
|
|
|
358,017
|
|
|
|
325,207
|
|
Retained earnings
|
|
|
81,652
|
|
|
|
129,559
|
|
Treasury stock 7,688 and 7,028 in 2010 and 2009,
respectively, at cost
|
|
|
(162,595
|
)
|
|
|
(141,250
|
)
|
Accumulated other comprehensive loss
|
|
|
(5,472
|
)
|
|
|
(1,865
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
271,907
|
|
|
|
311,945
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
450,477
|
|
|
$
|
470,196
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
FORRESTER
RESEARCH, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research services
|
|
$
|
168,508
|
|
|
$
|
157,726
|
|
|
$
|
155,339
|
|
Advisory services and other
|
|
|
82,218
|
|
|
|
75,626
|
|
|
|
85,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
250,726
|
|
|
|
233,352
|
|
|
|
240,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and fulfillment
|
|
|
94,105
|
|
|
|
87,873
|
|
|
|
90,582
|
|
Selling and marketing
|
|
|
84,663
|
|
|
|
72,487
|
|
|
|
77,164
|
|
General and administrative
|
|
|
33,960
|
|
|
|
28,461
|
|
|
|
29,723
|
|
Depreciation
|
|
|
3,628
|
|
|
|
4,380
|
|
|
|
4,007
|
|
Amortization of intangible assets
|
|
|
3,620
|
|
|
|
2,290
|
|
|
|
1,435
|
|
Reorganization costs
|
|
|
|
|
|
|
5,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
219,976
|
|
|
|
200,932
|
|
|
|
202,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
30,750
|
|
|
|
32,420
|
|
|
|
37,964
|
|
Other income, net
|
|
|
1,249
|
|
|
|
2,297
|
|
|
|
5,373
|
|
Gains (losses) on investments, net
|
|
|
2,301
|
|
|
|
(982
|
)
|
|
|
1,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
34,300
|
|
|
|
33,735
|
|
|
|
44,810
|
|
Income tax provision
|
|
|
13,793
|
|
|
|
14,869
|
|
|
|
15,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
20,507
|
|
|
$
|
18,866
|
|
|
$
|
29,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
0.91
|
|
|
$
|
0.83
|
|
|
$
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
$
|
0.89
|
|
|
$
|
0.82
|
|
|
$
|
1.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
22,478
|
|
|
|
22,645
|
|
|
|
23,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
23,063
|
|
|
|
22,884
|
|
|
|
23,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
FORRESTER
RESEARCH, INC.
COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Treasury Stock
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
Number of
|
|
|
$.01 Par
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Number of
|
|
|
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Earnings
|
|
|
Shares
|
|
|
Cost
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
28,165
|
|
|
$
|
282
|
|
|
$
|
284,431
|
|
|
$
|
81,478
|
|
|
|
5,011
|
|
|
$
|
(90,428
|
)
|
|
$
|
(747
|
)
|
|
$
|
275,016
|
|
|
|
|
|
Issuance of common stock upon exercise of options and under
stock purchase plan, including tax benefit
|
|
|
981
|
|
|
|
9
|
|
|
|
25,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,438
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
5,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,289
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,090
|
|
|
|
(30,423
|
)
|
|
|
|
|
|
|
(30,423
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,215
|
|
|
$
|
29,215
|
|
Unrealized loss on marketable investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,724
|
)
|
|
|
(1,724
|
)
|
|
|
(1,724
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
686
|
|
|
|
686
|
|
|
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
29,146
|
|
|
|
291
|
|
|
|
315,149
|
|
|
|
110,693
|
|
|
|
6,101
|
|
|
|
(120,851
|
)
|
|
|
(1,785
|
)
|
|
|
303,497
|
|
|
|
|
|
Issuance of common stock upon exercise of options and under
stock purchase plan, including tax benefit
|
|
|
216
|
|
|
|
3
|
|
|
|
4,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
6,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,045
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
927
|
|
|
|
(20,399
|
)
|
|
|
|
|
|
|
(20,399
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,866
|
|
|
$
|
18,866
|
|
Unrealized loss on marketable investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(440
|
)
|
|
|
(440
|
)
|
|
|
(440
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
360
|
|
|
|
360
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
29,362
|
|
|
|
294
|
|
|
|
325,207
|
|
|
|
129,559
|
|
|
|
7,028
|
|
|
|
(141,250
|
)
|
|
|
(1,865
|
)
|
|
|
311,945
|
|
|
|
|
|
Issuance of common stock upon exercise of options and under
stock purchase plan, including tax benefit
|
|
|
1,138
|
|
|
|
11
|
|
|
|
27,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,744
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
4,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,874
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
|
|
(21,345
|
)
|
|
|
|
|
|
|
(21,345
|
)
|
|
|
|
|
Dividend paid on common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,414
|
)
|
|
|
|
|
Capital contributed by seller of acquired business (Note 2)
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,507
|
|
|
$
|
20,507
|
|
Unrealized loss on marketable investments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(925
|
)
|
|
|
(925
|
)
|
|
|
(925
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,682
|
)
|
|
|
(2,682
|
)
|
|
|
(2,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
30,500
|
|
|
$
|
305
|
|
|
$
|
358,017
|
|
|
$
|
81,652
|
|
|
|
7,688
|
|
|
$
|
(162,595
|
)
|
|
$
|
(5,472
|
)
|
|
$
|
271,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
FORRESTER
RESEARCH, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
20,507
|
|
|
$
|
18,866
|
|
|
$
|
29,215
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and asset write-offs
|
|
|
3,671
|
|
|
|
5,278
|
|
|
|
4,007
|
|
Amortization of intangible assets
|
|
|
3,620
|
|
|
|
2,290
|
|
|
|
1,435
|
|
Net (gains) losses from investments
|
|
|
(2,301
|
)
|
|
|
982
|
|
|
|
(1,473
|
)
|
Deferred income taxes
|
|
|
2,356
|
|
|
|
1,943
|
|
|
|
1,503
|
|
Stock-based compensation
|
|
|
4,874
|
|
|
|
6,111
|
|
|
|
5,358
|
|
Amortization of premium on investments
|
|
|
2,587
|
|
|
|
1,167
|
|
|
|
870
|
|
Foreign currency losses
|
|
|
1,374
|
|
|
|
1,107
|
|
|
|
1,611
|
|
Other non-cash items
|
|
|
55
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(7,467
|
)
|
|
|
(2,090
|
)
|
|
|
7,400
|
|
Deferred commissions
|
|
|
(2,968
|
)
|
|
|
119
|
|
|
|
881
|
|
Prepaid expenses and other current assets
|
|
|
(8,220
|
)
|
|
|
7,092
|
|
|
|
(4,184
|
)
|
Accounts payable
|
|
|
1,422
|
|
|
|
(2,342
|
)
|
|
|
(893
|
)
|
Accrued expenses
|
|
|
3,975
|
|
|
|
(69
|
)
|
|
|
(2,289
|
)
|
Deferred revenue
|
|
|
15,172
|
|
|
|
2,645
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
38,657
|
|
|
|
43,099
|
|
|
|
43,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
(1,660
|
)
|
|
|
(5,592
|
)
|
|
|
(22,406
|
)
|
Purchases of property and equipment
|
|
|
(13,426
|
)
|
|
|
(4,284
|
)
|
|
|
(3,698
|
)
|
Purchases of marketable investments
|
|
|
(116,280
|
)
|
|
|
(645,312
|
)
|
|
|
(1,224,793
|
)
|
Proceeds from sales and maturities of marketable investments
|
|
|
145,195
|
|
|
|
611,859
|
|
|
|
1,288,532
|
|
Change in restricted cash
|
|
|
1,282
|
|
|
|
(16,770
|
)
|
|
|
|
|
Other investing activity
|
|
|
491
|
|
|
|
558
|
|
|
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
15,602
|
|
|
|
(59,541
|
)
|
|
|
38,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend paid on common stock
|
|
|
(68,414
|
)
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock under employee equity
incentive plans and employee stock purchase plan
|
|
|
25,971
|
|
|
|
4,282
|
|
|
|
18,577
|
|
Excess tax benefits from stock-based compensation
|
|
|
1,949
|
|
|
|
|
|
|
|
8,476
|
|
Repurchases of common stock
|
|
|
(21,345
|
)
|
|
|
(20,399
|
)
|
|
|
(30,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(61,839
|
)
|
|
|
(16,117
|
)
|
|
|
(3,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(3,298
|
)
|
|
|
886
|
|
|
|
(2,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(10,878
|
)
|
|
|
(31,673
|
)
|
|
|
76,315
|
|
Cash and cash equivalents, beginning of year
|
|
|
97,805
|
|
|
|
129,478
|
|
|
|
53,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
86,927
|
|
|
$
|
97,805
|
|
|
$
|
129,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
16,583
|
|
|
$
|
10,945
|
|
|
$
|
7,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
FORRESTER
RESEARCH, INC.
December 31,
2010
|
|
(1)
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
Principles
of Consolidation
Forrester Research, Inc. (Forrester or the
Company) is an independent research company that provides
pragmatic and forward-thinking advice to global leaders in
business and technology. Forresters products and services
are targeted to 19 specific roles, including senior management
in business strategy, marketing, and information technology at
$1 billion-plus revenue companies who collaborate with
Forrester to accelerate achievement of their business goals. The
accompanying consolidated financial statements include the
accounts of Forrester and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated in
consolidation.
Management
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Forrester considers
the more significant of these estimates to be revenue
recognition, stock-based compensation, non-marketable
investments, goodwill and intangible assets, income taxes and
valuation and impairment of marketable investments. On an
ongoing basis, management evaluates its estimates. Actual
results could differ from these estimates.
Reclassifications
The classification of certain costs within the line items
costs of services and fulfillment and selling
and marketing has changed from the prior years
consolidated financial statements to properly reflect the nature
of those costs. The change in classification resulted in an
increase to cost of services and fulfillment with a
corresponding decrease in selling and marketing expenses of
$3.6 million and $2.8 million for the years ended
December 31, 2009 and 2008, respectively, and did not have
an effect on total operating expenses or income from operations.
Fair
Value Measurements
The Company has certain financial assets recorded at fair value
which 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 carrying amounts reflected in the Consolidated Balance
Sheets for cash, cash equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair value due to
their short-term maturities.
F-7
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash,
Cash Equivalents, and Marketable Investments
Forrester considers all short-term, highly liquid investments
with original maturities at the time of purchase of 90 days
or less to be cash equivalents. The Companys investments
with an auction reset feature and for which the Company does not
have the ability to sell within one year from the balance sheet
date are classified as long-term investments.
The Companys investments are composed of securities of
U.S. government agencies, municipal notes some of which
contain an auction reset feature (auction rate
securities or ARS), corporate notes and bonds
and money market funds. Forrester accounts for all marketable
investments, except for ARS that were subject to the right
offering with UBS as discussed further in Note 4, as
available-for-sale
securities and as such are carried at fair value, with
unrealized gains and losses (not related to credit losses)
recorded in accumulated other comprehensive loss in the
Consolidated Balance Sheets. Realized gains and losses on
securities are included in earnings and are determined using the
specific identification method. The Company conducts periodic
reviews to identify and evaluate each investment that has an
unrealized loss, in accordance with the meaning of
other-than-temporary
impairment and its application to certain investments, as
required under current accounting standards. An unrealized loss
exists when the current fair value of an individual security is
less than its amortized cost basis. Unrealized losses on
available-for-sale
securities that are determined to be temporary, and not related
to credit loss, are recorded, net of tax, in accumulated other
comprehensive loss. The determination of whether a loss is
considered temporary is based in part on whether the Company
intends to sell the security or whether the Company would more
likely than not be required to sell the security before the
expected recovery of the amortized cost basis. During the years
ended December 31, 2010, 2009 and 2008, the Company did not
record any
other-than-temporary
impairment charges on its
available-for-sale
securities.
During the fourth quarter of 2008, the Company reclassified ARS
held by UBS from
available-for-sale
to trading securities. Investments that the Company designates
as trading securities are reported at fair value, with gains or
losses resulting from changes in fair value recognized in gain
(losses) on investments, net, in the Consolidated Statements of
Income. See Note 4.
Concentrations
of Credit Risk
Forrester has no significant off-balance sheet or concentration
of credit risk such as foreign exchange contracts, option
contracts, or other foreign hedging arrangements. Financial
instruments that potentially subject Forrester to concentrations
of credit risk are principally cash equivalents, marketable
investments, and accounts receivable. Forrester places its
investments in highly rated securities. No single customer
accounted for greater than 2% of revenues or accounts receivable
in any of the periods presented.
Deferred
Commissions
Commissions incurred in acquiring new or renewing existing
contracts, which are earned in the month that a contract is
booked, are deferred and expensed to operations as the related
revenue is recognized. Forrester evaluates the recoverability of
deferred commissions at each balance sheet date.
Goodwill
Goodwill is not amortized; however, it is required to be tested
for impairment annually using a fair value approach at the
reporting unit level. Furthermore, testing for impairment is
required on an interim basis if an event or circumstance
indicates that it is more likely than not an impairment loss has
been incurred. An impairment loss would be recognized to the
extent that the carrying amount of goodwill exceeds its implied
fair value. Absent an event that indicates a specific impairment
may exist, the Company has selected November 30 as the date for
performing the annual goodwill impairment test. Goodwill
impairment charges have not been required for the years ended
December 31, 2010, 2009 and 2008.
F-8
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Impairment
of Other Long-Lived Tangible and Intangible Assets
Forrester continually evaluates whether events or circumstances
have occurred that indicate that the estimated remaining useful
life of long-lived assets and intangible assets may warrant
revision or if events or circumstances indicate that the
carrying value of these assets may be impaired. To compute
whether assets have been impaired, the estimated undiscounted
future cash flows for the estimated remaining useful life of the
assets are compared to the carrying value. To the extent that
the future cash flows are less than the carrying value, the
assets are written down to the estimated fair value of the asset.
Foreign
Currency
The functional currency of the majority of Forresters
wholly-owned subsidiaries is their respective local currencies.
These subsidiary financial statements are translated to
U.S. dollars using period-end exchange rates for assets and
liabilities and average exchange rates during the corresponding
period for revenues and expenses, with translation gains and
losses accumulated as a component of accumulated other
comprehensive loss. Gains and losses related to the
remeasurement of monetary assets and liabilities denominated in
a currency other than an entitys functional currency are
included in other income, net in the Consolidated Statements of
Income. For the years ended December 31, 2010 and 2009,
Forrester recorded $1.4 million and $1.1 million of
foreign exchange losses, respectively, in other income, net.
Forrester recorded net foreign exchange losses in other income,
net related to remeasurement of intercompany transactions of
$1.6 million during the year ended December 31, 2008,
of which $1.9 million related to prior years. In addition,
Forresters German holding companies, for which the
functional currency is the United States dollar, recognized
$0.4 million, $(0.6) million and $0.6 million of
remeasurement gains (losses) on its deferred tax liability in
income tax expense for the years ended December 31, 2010,
2009 and 2008, respectively.
Accumulated
Other Comprehensive Loss
The components of accumulated other comprehensive loss as of
December 31, 2010 and 2009 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Net unrealized loss on marketable investments, net of taxes
|
|
$
|
(1,000
|
)
|
|
$
|
(75
|
)
|
Cumulative translation adjustment
|
|
|
(4,472
|
)
|
|
|
(1,790
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
$
|
(5,472
|
)
|
|
$
|
(1,865
|
)
|
|
|
|
|
|
|
|
|
|
The components of comprehensive income are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net income
|
|
$
|
20,507
|
|
|
$
|
18,866
|
|
|
$
|
29,215
|
|
Cumulative translation adjustment
|
|
|
(2,682
|
)
|
|
|
360
|
|
|
|
686
|
|
Unrealized gain (loss) on marketable investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on marketable investments, net of taxes
|
|
|
(925
|
)
|
|
|
(440
|
)
|
|
|
(4,699
|
)
|
Reclassification adjustment for realized gains in net income,
net of taxes
|
|
|
|
|
|
|
|
|
|
|
(1,095
|
)
|
Reclassification adjustment for realized loss from transfer of
ARS from
available-for-sale
securities to trading securities, net of taxes
|
|
|
|
|
|
|
|
|
|
|
4,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
16,900
|
|
|
$
|
18,786
|
|
|
$
|
28,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-9
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue
Recognition
Forrester generates revenues from licensing research, performing
advisory services and consulting projects and hosting events.
Forrester executes contracts that govern the terms and
conditions of each arrangement. Revenues are recognized when
persuasive evidence of an arrangement exists, the fee is fixed
and determinable, services have been provided to the customer
and collectability is reasonably assured. Revenues from
contracts that contain multiple deliverables are allocated among
the separate units based on their relative fair values; however,
the amount recognized is limited to the amount that is not
contingent on future performance conditions. Research service
revenues are recognized ratably over the term of the agreement.
Advisory service revenues are recognized when the customer
receives the agreed upon deliverable and consulting project
revenues, which are short-term in nature and based upon
fixed-fee agreements, are recognized as the services are
provided. Losses on consulting project contracts, if any, would
be recognized in the period in which the loss first becomes
probable and reasonably estimable. Reimbursed
out-of-pocket
expenses are recorded as advisory service revenues. Events
revenues are recognized upon completion of the event. Annual
subscriptions to our RoleView research, which include access to
all or a designated portion of our research, and depending on
the type of license, membership in one or more of our Forrester
leadership boards, unlimited phone or email analyst inquiry,
unlimited participation in Forrester Teleconferences, and the
right to attend one event, are accounted for as one unit of
accounting and recognized ratably as research services revenue
over the membership period. Annual subscriptions to our data
products include access to designated survey data products and
access to a data specialist, and are accounted for as one unit
of accounting and recognized ratably as research services
revenue over the membership period. Clients are offered a
service guarantee, which gives them the right to cancel their
contracts prior to the end of the contract term and receive a
refund for unused products or services.
Stock-Based
Compensation
Forrester recognizes the fair value of stock-based compensation
expense over the requisite service period of the individual
grantee, which generally equals the vesting period. Cash flows
resulting from the tax benefits of tax deductions in excess of
the compensation expense recognized for stock-based awards are
classified as financing cash flows. The Company is required to
estimate future forfeitures of stock-based awards for
recognition of compensation expense. The Company will record
additional expense if the actual forfeitures are lower than
estimated and will record a recovery of prior recognized expense
if the actual forfeitures are higher than estimated. The actual
expense recognized over the vesting period will only be for
those awards that vest. Stock-based compensation expense was
recorded in the following expense categories (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of services and fulfillment
|
|
$
|
2,094
|
|
|
$
|
2,961
|
|
|
$
|
2,776
|
|
Selling and marketing
|
|
|
943
|
|
|
|
1,123
|
|
|
|
988
|
|
General and administrative
|
|
|
1,837
|
|
|
|
2,027
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,874
|
|
|
$
|
6,111
|
|
|
$
|
5,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-10
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The options granted under the equity incentive plans and shares
subject to the employee stock purchase plan were valued
utilizing the Black Scholes model using the following
assumptions and had the following fair values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Equity Incentive
|
|
|
Employee Stock
|
|
|
Equity Incentive
|
|
|
Employee Stock
|
|
|
Equity Incentive
|
|
|
Employee Stock
|
|
|
|
Plans
|
|
|
Purchase Plan
|
|
|
Plans
|
|
|
Purchase Plan
|
|
|
Plans
|
|
|
Purchase Plan
|
|
|
Average risk-free interest rate
|
|
|
1.93
|
%
|
|
|
0.17
|
%
|
|
|
1.85
|
%
|
|
|
0.29
|
%
|
|
|
2.59
|
%
|
|
|
2.41
|
%
|
Expected dividend yield
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Expected life
|
|
|
3.6 Years
|
|
|
|
0.5 Years
|
|
|
|
3.5 Years
|
|
|
|
0.5 Years
|
|
|
|
3.5 Years
|
|
|
|
0.5 Years
|
|
Expected volatility
|
|
|
40
|
%
|
|
|
25
|
%
|
|
|
44
|
%
|
|
|
44
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
Weighted average fair value
|
|
$
|
9.67
|
|
|
$
|
6.38
|
|
|
$
|
8.38
|
|
|
$
|
6.81
|
|
|
$
|
8.00
|
|
|
$
|
7.27
|
|
The dividend yield of zero is based on the fact that Forrester
had never paid cash dividends until the board of directors
approved a special dividend of $3.00 per common share in the
fourth quarter of 2010. The Company has no present intention to
pay cash dividends in the foreseeable future. Expected
volatility is based, in part, on the historical volatility of
Forresters common stock as well as managements
expectations of future volatility over the expected term of the
awards granted. The risk-free interest rate used is based on the
U.S. Treasury Constant Maturity rate with an equivalent
remaining term. Where the expected term of a stock-based award
does not correspond with a term for which the interest rates are
quoted, Forrester uses the rate with the maturity closest to the
awards expected term. The expected term calculation is
based upon Forresters historical experience of exercise
patterns. The unamortized fair value of stock-based awards as of
December 31, 2010 was $5.6 million, with a weighted
average remaining recognition period of 1.7 years.
Allowance
for Doubtful Accounts
Forrester maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of our customers
to make contractually obligated payments. When evaluating the
adequacy of the allowance for doubtful accounts, the Company
makes judgments regarding the collectability of accounts
receivable by specifically analyzing historical bad debts,
customer concentrations, current economic trends, and changes in
the customer payment terms. If the financial condition of the
Companys customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required and if the financial condition of the
Companys customers were to improve, the allowances may be
reduced accordingly.
Depreciation
and Amortization
Forrester provides for depreciation and amortization of property
and equipment, computed using the straight-line method, over
estimated useful lives of assets as follows:
|
|
|
|
|
Estimated
|
|
|
Useful Life
|
|
Computers and equipment
|
|
2 to 5 Years
|
Computer software
|
|
3 Years
|
Furniture and fixtures
|
|
7 Years
|
Leasehold improvements
|
|
Shorter of asset life or lease term
|
F-11
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Forrester provides for amortization of intangible assets,
computed using an accelerated method according to the expected
cash flows to be received from the underlying assets, over the
respective lives as follows:
|
|
|
|
|
Estimated
|
|
|
Useful Life
|
|
Customer relationships
|
|
5 to 11 Years
|
Research content
|
|
1 to 2 Years
|
Registered trademarks
|
|
1 Year
|
Technology
|
|
7 Years
|
Income
Taxes
Forrester recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the financial statements and tax basis of assets and
liabilities as well as operating loss carryforwards.
Forresters provision for income taxes is composed of a
current and a deferred provision for federal, state and foreign
jurisdictions. The current provision is calculated as the
estimated taxes payable or refundable on tax returns for the
current year. The deferred income tax provision is calculated as
the net change during the year in deferred tax assets and
liabilities. Valuation allowances are provided if based on the
weight of available evidence, it is more likely than not that
some or all of the deferred tax asset will not be realized.
Forrester accounts for uncertain tax positions using a
more-likely-than-not threshold for recognizing and
resolving uncertain tax positions. The evaluation of uncertain
tax positions is based on factors including, but not limited to,
changes in tax law, the measurement of tax positions taken or
expected to be taken in tax returns, the effective settlement of
matters subject to audit, new audit activity, and changes in
facts or circumstances related to a tax position. The Company
evaluates these tax positions on a quarterly basis. The Company
also accrues for potential interest and penalties related to
unrecognized tax benefits in income tax expense.
Net
Income Per Common Share
Basic 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 stock
equivalents consist of common stock issuable upon the exercise
of outstanding stock options and restricted stock units.
Basic and diluted weighted average common shares are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Basic weighted average common shares outstanding
|
|
|
22,478
|
|
|
|
22,645
|
|
|
|
23,062
|
|
Weighted average common equivalent shares
|
|
|
585
|
|
|
|
239
|
|
|
|
523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
23,063
|
|
|
|
22,884
|
|
|
|
23,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2010, 2009 and 2008,
options to purchase approximately 0.4 million,
2.0 million and 1.5 million shares, respectively, were
outstanding but not included in the diluted weighted average
common share calculation as the effect would have been
anti-dilutive.
F-12
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
New
Accounting Pronouncements
In September 2009, the FASB issued Update
No. 2009-13,
Multiple-Deliverable Revenue Arrangements a
consensus of the FASB Emerging Issues Task Force (ASU
2009-13). It
updates the existing multiple-element revenue arrangements
guidance currently included under
ASC 605-25,
which originated primarily from the guidance in EITF Issue
No. 00-21,
Revenue Arrangements with Multiple
Deliverables. The revised guidance primarily provides
two significant changes: 1) eliminates the need for
objective and reliable evidence of the fair value for the
undelivered element in order for a delivered item to be treated
as a separate unit of accounting, and 2) eliminates the
residual method to allocate the arrangement consideration. In
addition, the guidance also expands the disclosure requirements
for revenue recognition. ASU
2009-13 will
be effective for the first annual reporting period beginning on
or after June 15, 2010, with early adoption permitted
provided that the revised guidance is retroactively applied to
the beginning of the year of adoption. The Company will adopt
the new standard effective January 1, 2011 for contracts
entered into or materially modified after that date. The
adoption of this standard is not expected to have a significant
effect on the Companys financial position, results of
operations or cash flows.
Effective January 1, 2010 the Company adopted ASU
No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements.
According to the guidance, a reporting entity should provide
additional disclosures about the different classes of assets and
liabilities measured at fair value, the valuation techniques and
inputs used in Level 3 fair value measurements, and the
transfers between Levels 1, 2, and 3 fair value
measurements. The adoption of the additional disclosures for
Level 1 and Level 2 fair value measurements did not
have an impact on the Companys financial position, results
of operations or cash flows. The disclosures regarding
Level 3 fair value measurements do not become effective
until January 1, 2011 and will not have an impact on the
Companys financial position, results of operations or cash
flows.
Effective January 1, 2010, the Company adopted ASU
No. 2009-17,
Consolidations (Topic 810): Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities. The amendments in this update replace the
quantitative-based risks and rewards calculation for determining
which reporting entity, if any, has a controlling financial
interest in a variable interest entity with an approach focused
on identifying which reporting entity has the power to direct
the activities of a variable interest entity that most
significantly impacts the entitys economic performance and
(1) the obligation to absorb losses of the entity or
(2) the right to receive benefits from the entity. An
approach that is expected to be primarily qualitative will be
more effective for identifying which reporting entity has a
controlling financial interest in a variable interest entity.
The amendments in this update also require additional
disclosures about a reporting entitys involvement in
variable interest entities, which will enhance the information
provided to users of financial statements. The adoption of this
standard did not have an impact on the Companys financial
position, results of operations or cash flows.
Strategic
Oxygen
On December 1, 2009, Forrester acquired the Strategic
Oxygen business to further support Forresters syndicated
business model and the Companys role-based strategy. The
total purchase price was approximately $7.3 million, of
which approximately $4.6 million was paid on the
acquisition date, $0.5 million was paid in February 2010
and $0.4 million is payable in June 2011, subject to
reduction for indemnification claims. The remaining purchase
price of $1.8 million represented contingent purchase price
valued as of December 1, 2009, which was subject to
adjustment based on the achievement of certain financial metrics
related to the acquired business. Of the $1.8 million
contingent purchase price, $0.2 million was paid in
December 2009 and $1.2 million was paid in February 2010 as
full consideration. At December 31, 2009, the Company
maintained approximately $2.0 million in an escrow account
classified as restricted cash in the Consolidated Balance Sheets
related to the contingent purchase price. The balance of the
escrow was fully released in the first quarter of 2010. The
Company recorded a credit of approximately $0.5 million
within general and administrative expense during 2010 as a
result of
F-13
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
a reduction in the estimated amount of contingent purchase price
from December 31, 2009 to the final calculation date. The
results of Strategic Oxygen, which were not material to the
consolidated financial statements, have been included in
Forresters consolidated financial statements since
December 1, 2009 in the Technology Industry Client Group
segment. Pro forma financial information has not been provided
as it is not material to the consolidated results of operations.
An agreement existed between an employee of Strategic Oxygen,
who became an employee of Forrester upon the closing of the
acquisition, and the seller of Strategic Oxygen that provided
for an allocation of a portion of the contingent consideration
from the seller to the employee. The contingent consideration
was earned by the seller based upon the financial performance of
Strategic Oxygen for a short period of time subsequent to the
acquisition. Forrester was not a party to this agreement;
however, this payment in the amount of $0.2 million paid to
Forresters employee by the seller is considered to have
resulted in services that benefited Forrester, and therefore the
payment was required to be recorded as a non-cash compensation
expense, within general and administrative expense, by Forrester
and as a capital contribution to Forrester by the seller in 2010.
Forrester
Middle East FZ-LLC
On January 22, 2009, Forrester acquired all of the
outstanding share capital of Forrester Middle East FZ-LLC (FME),
a Dubai, UAE based reseller of Forresters products that
also offered consulting services to local customers, to expand
the Companys direct geographical presence in the area. The
total purchase price was approximately $1.1 million of
which approximately $0.6 million was paid on the
acquisition date, $0.2 million was paid in 2009 and
$0.3 million was contingent upon the acquired company
meeting certain financial metrics, which were not met and
accordingly the final $0.3 million was not required to be
paid by Forrester. The results of FMEs operations, which
were not material to the consolidated financial statements, have
been included in Forresters consolidated financial
statements since January 22, 2009, with the revenue
included within the client group segment to which it relates.
Pro forma financial information has not been provided as it is
not material to the consolidated results of operations.
A summary of the purchase price allocation for Strategic Oxygen
and FME is as follows (in thousands):
|
|
|
|
|
Assets:
|
|
|
|
|
Accounts receivable
|
|
$
|
1,972
|
|
Prepaid expenses
|
|
|
33
|
|
Property and equipment
|
|
|
26
|
|
Goodwill
|
|
|
1,409
|
|
Intangible assets
|
|
|
7,261
|
|
|
|
|
|
|
Total assets
|
|
|
10,701
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts payable
|
|
|
387
|
|
Accrued expenses
|
|
|
1,471
|
|
Deferred revenue
|
|
|
450
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,308
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
8,393
|
|
|
|
|
|
|
Approximately $0.9 million of the goodwill is deductible
for tax purposes. The Company believes the goodwill reflects its
expectations of synergistic revenue opportunities from the
acquisitions.
F-14
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets are amortized according to the expected cash
flows to be received. The following are the identifiable
intangible assets acquired and their respective weighted average
lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful
|
|
|
|
Assigned
|
|
|
Life
|
|
|
|
Value
|
|
|
(in years)
|
|
|
Customer relationships
|
|
$
|
2,958
|
|
|
|
10
|
|
Technology
|
|
|
1,507
|
|
|
|
7
|
|
Research content
|
|
|
2,500
|
|
|
|
1
|
|
Trademarks and other
|
|
|
296
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 31, 2008, Forrester acquired all of the outstanding
capital stock of JUPR Holdings, Inc. (Holdings), the
parent company of JupiterResearch, LLC
(JupiterResearch). JupiterResearch provided business
professionals with syndicated research, analysis, and advice
backed by proprietary data. The acquisition supported the
Companys role-based strategy and added greater depth and
breadth to the marketing and strategy syndicated product
offering, increased the number of client companies and was
expected to reduce operating expenses of the combined entity
through economies of scale. The total consideration was
$22.0 million, which consisted of initial cash
consideration of $23.0 million less a working capital
adjustment of $1.0 million which was received in the fourth
quarter of 2008. The aggregate purchase price of
$22.6 million consisted of $22.0 million for the
acquisition of all outstanding shares of Holdings common stock,
$0.4 million of direct acquisition costs and
$0.2 million for severance related to 14 employees of
JupiterResearch terminated as a result of the acquisition. The
results of JupiterResearchs operations have been included
in Forresters consolidated financial statements since
July 31, 2008 in the Marketing and Strategy Client Group
segment.
A summary of the purchase price allocation for JupiterResearch
is as follows (in thousands):
|
|
|
|
|
Assets:
|
|
|
|
|
Accounts receivable
|
|
$
|
2,636
|
|
Prepaid expenses and other current assets
|
|
|
500
|
|
Property and equipment, net
|
|
|
398
|
|
Deferred tax asset, net
|
|
|
1,738
|
|
Goodwill
|
|
|
14,807
|
|
Intangible assets
|
|
|
8,267
|
|
|
|
|
|
|
Total assets
|
|
|
28,346
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts payable
|
|
|
419
|
|
Accrued expenses
|
|
|
996
|
|
Deferred revenue
|
|
|
4,378
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,793
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
22,553
|
|
|
|
|
|
|
Approximately $4.1 million of the goodwill is deductible
for tax purposes. The Company believes the goodwill reflects its
expectations of synergistic revenue opportunities from the
acquisition.
F-15
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(3)
|
Goodwill
and Other Intangible Assets
|
A summary of the goodwill by segment and the changes in the
carrying amount of goodwill for the Information Technology
Client Group (IT), Technology Industry Client Group
(TI), Marketing and Strategy Client Group
(M&S) and Events segments is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT
|
|
|
TI
|
|
|
M&S
|
|
|
Events
|
|
|
Total
|
|
|
Balance, December 31, 2008
|
|
$
|
22,291
|
|
|
$
|
23,360
|
|
|
$
|
19,860
|
|
|
$
|
1,913
|
|
|
$
|
67,424
|
|
Acquisitions
|
|
|
7
|
|
|
|
1,395
|
|
|
|
6
|
|
|
|
1
|
|
|
|
1,409
|
|
Purchase accounting adjustments(1)
|
|
|
|
|
|
|
|
|
|
|
(597
|
)
|
|
|
|
|
|
|
(597
|
)
|
Translation adjustments
|
|
|
26
|
|
|
|
27
|
|
|
|
23
|
|
|
|
2
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
22,324
|
|
|
|
24,782
|
|
|
|
19,292
|
|
|
|
1,916
|
|
|
|
68,314
|
|
Translation adjustments
|
|
|
(116
|
)
|
|
|
(129
|
)
|
|
|
(101
|
)
|
|
|
(10
|
)
|
|
|
(356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
$
|
22,208
|
|
|
$
|
24,653
|
|
|
$
|
19,191
|
|
|
$
|
1,906
|
|
|
$
|
67,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Adjustments relate to the finalization of the JupiterResearch
acquisition, primarily relating to tax attributes that were
finalized in the first quarter of 2009. |
As of December 31, 2010, the Company had no accumulated
goodwill impairment losses.
A summary of Forresters intangible assets is as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
30,478
|
|
|
$
|
23,670
|
|
|
$
|
6,808
|
|
Research content
|
|
|
6,060
|
|
|
|
5,727
|
|
|
|
333
|
|
Technology
|
|
|
1,507
|
|
|
|
229
|
|
|
|
1,278
|
|
Trademarks
|
|
|
876
|
|
|
|
876
|
|
|
|
|
|
Other
|
|
|
223
|
|
|
|
155
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,144
|
|
|
$
|
30,657
|
|
|
$
|
8,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
30,478
|
|
|
$
|
22,398
|
|
|
$
|
8,080
|
|
Research content
|
|
|
6,060
|
|
|
|
3,727
|
|
|
|
2,333
|
|
Technology
|
|
|
1,507
|
|
|
|
16
|
|
|
|
1,491
|
|
Trademarks
|
|
|
876
|
|
|
|
808
|
|
|
|
68
|
|
Other
|
|
|
223
|
|
|
|
87
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
39,144
|
|
|
$
|
27,036
|
|
|
$
|
12,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amortization expense related to intangible assets was
approximately $3.6 million, $2.3 million and
$1.4 million during the years ended December 31, 2010,
2009 and 2008, respectively. Estimated amortization expense
related to intangible assets that will continue to be amortized
is as follows (in thousands):
|
|
|
|
|
Year ending December 31, 2011
|
|
$
|
1,773
|
|
Year ending December 31, 2012
|
|
|
1,241
|
|
Year ending December 31, 2013
|
|
|
1,128
|
|
Year ending December 31, 2014
|
|
|
1,034
|
|
Year ending December 31, 2015
|
|
|
954
|
|
Thereafter
|
|
|
2,357
|
|
|
|
|
|
|
Total
|
|
$
|
8,487
|
|
|
|
|
|
|
|
|
(4)
|
Marketable
Investments
|
The following table summarizes the Companys marketable
investments (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Market
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations
|
|
$
|
12,011
|
|
|
$
|
23
|
|
|
$
|
(25
|
)
|
|
$
|
12,009
|
|
Federal agency and corporate obligations
|
|
|
107,669
|
|
|
|
483
|
|
|
|
(171
|
)
|
|
|
107,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term
available-for-sale
securities
|
|
|
119,680
|
|
|
|
506
|
|
|
|
(196
|
)
|
|
|
119,990
|
|
ARS, long-term
|
|
|
11,000
|
|
|
|
|
|
|
|
(1,883
|
)
|
|
|
9,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
130,680
|
|
|
$
|
506
|
|
|
$
|
(2,079
|
)
|
|
$
|
129,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Market
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal obligations
|
|
$
|
45,392
|
|
|
$
|
482
|
|
|
$
|
(2
|
)
|
|
|
45,872
|
|
Federal agency and corporate obligations
|
|
|
73,992
|
|
|
|
498
|
|
|
|
|
|
|
|
74,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term
available-for-sale
securities
|
|
|
119,384
|
|
|
|
980
|
|
|
|
(2
|
)
|
|
|
120,362
|
|
Non-UBS ARS, long-term
|
|
|
11,000
|
|
|
|
|
|
|
|
(1,050
|
)
|
|
|
9,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
|
130,384
|
|
|
|
980
|
|
|
|
(1,052
|
)
|
|
|
130,312
|
|
Trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBS ARS
|
|
|
31,675
|
|
|
|
|
|
|
|
(2,100
|
)
|
|
|
29,575
|
|
UBS Right
|
|
|
|
|
|
|
2,100
|
|
|
|
|
|
|
|
2,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
|
|
$
|
162,059
|
|
|
$
|
3,080
|
|
|
$
|
(3,152
|
)
|
|
$
|
161,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the maturity periods of the
marketable securities in the Companys portfolio as of
December 31, 2010. In February 2008, certain ARS that
Forrester held experienced failed auctions that limited the
liquidity of these securities. These auction failures have
continued throughout 2010 and based on current market
F-17
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
conditions, it is likely that auction failures will continue.
The following table reflects the ARS at their contractual
maturity dates of between 2024 and 2034 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2011
|
|
|
FY 2012
|
|
|
FY2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
Federal agency and corporate obligations
|
|
$
|
7,752
|
|
|
$
|
4,257
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,009
|
|
State and municipal obligations
|
|
|
43,898
|
|
|
|
46,668
|
|
|
|
17,415
|
|
|
|
|
|
|
|
107,981
|
|
ARS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,117
|
|
|
|
9,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short and long-term
|
|
$
|
51,650
|
|
|
$
|
50,925
|
|
|
$
|
17,415
|
|
|
$
|
9,117
|
|
|
$
|
129,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the gross unrealized losses and market
value of Forresters
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 December 31, 2010
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
|
Market
|
|
|
Unrealized
|
|
|
Market
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
State and municipal bonds
|
|
$
|
3,258
|
|
|
$
|
25
|
|
|
$
|
|
|
|
$
|
|
|
Federal agency and corporate obligations
|
|
|
45,928
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
ARS
|
|
|
|
|
|
|
|
|
|
|
9,117
|
|
|
|
1,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
49,186
|
|
|
$
|
196
|
|
|
$
|
9,117
|
|
|
$
|
1,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
|
Market
|
|
|
Unrealized
|
|
|
Market
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
State and municipal bonds
|
|
$
|
1,148
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
ARS
|
|
|
9,950
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,098
|
|
|
$
|
1,052
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2008, the Company accepted an offer (the
Right) from UBS AG (UBS), one of its
investment advisors, entitling the Company to sell at par value
auction-rate securities originally purchased from UBS
($29.6 million fair value and $31.7 million par value
at December 31, 2009) at any time during a two-year
period from June 30, 2010 through July 2, 2012
(UBS ARS). In accepting the Right, the Company also
granted UBS the authority to sell or auction the UBS ARS at par
at any time up until the expiration date of the offer and
released UBS from any claims relating to the marketing and sale
of the UBS ARS. As the Company intended to exercise the Right
during 2010, it classified the UBS ARS in current assets in the
Consolidated Balance Sheets at December 31, 2009. During
2010, UBS repurchased all of the UBS ARS outstanding at par
value.
The enforceability of the Right resulted in a put option that
was recognized as a separate freestanding asset and was
accounted for separately from the ARS investment. As of
December 31, 2009, the fair value of the Right was
approximately $2.1 million, which is classified as a
marketable investment in current assets in the Consolidated
Balance Sheets. The Company made an election to measure the
Right at fair value in order to match the changes in the fair
value of the ARS. The Company valued the Right using a
discounted cash flow approach including estimates of interest
rates and timing and amount of cash flow, based on data
available as of December 31, 2009 and adjusted for any
bearer risk associated with UBSs financial ability to
repurchase the UBS ARS beginning June 30, 2010.
Prior to accepting the UBS offer, the Company classified its ARS
as
available-for-sale
securities, and therefore recorded resulting unrealized gains or
losses, net of tax, in accumulated other comprehensive loss on
the
F-18
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidated Balance Sheets. In connection with the acceptance
of the UBS offer in November 2008, the Company reclassified its
ARS subject to the Right from
available-for-sale
to trading securities. The transfer to trading securities
reflected the Companys intent to exercise its put option
during the period June 30, 2010 to July 3, 2012. Prior
to its agreement with UBS, the Companys intent was to hold
the UBS ARS until the earlier of an anticipated recovery in
market value or maturity. Upon transfer to trading securities,
the Company recognized an unrealized loss of approximately
$6.9 million, included in gains (losses) on investments,
net for the year ended December 31, 2008, for the amount of
the unrealized loss not previously recognized in earnings. This
amount offset a $6.9 million gain recognized for the
initial value of the Right for the year ended December 31,
2008.
The Company holds additional ARS ($9.1 million fair value
and $11.0 million par value at December 31,
2010) with another investment advisor who has not made an
offer similar to UBS. These ARS will continue to be held as
available-for-sale
and are classified as a long-term asset in the Consolidated
Balance Sheets. The Company intends to retain its investment in
these ARS until the earlier of an anticipated recovery in market
value or maturity and as a result has not recorded an
other-than-temporary
loss on these ARS.
Realized gains or losses on sales of the Companys federal
obligations, state and municipal bonds and corporate bonds were
not significant for the years ended December 31, 2010, 2009
or 2008.
The following table represents the Companys fair value
hierarchy for its financial assets (cash equivalents and
marketable investments) measured at fair value on a recurring
basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Money market funds(1)
|
|
$
|
25,222
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,222
|
|
Federal agency and corporate obligations
|
|
|
|
|
|
|
107,981
|
|
|
|
|
|
|
|
107,981
|
|
State and municipal obligations
|
|
|
|
|
|
|
12,009
|
|
|
|
9,117
|
|
|
|
21,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,222
|
|
|
$
|
119,990
|
|
|
$
|
9,117
|
|
|
$
|
154,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Money market funds(1)
|
|
$
|
50,472
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
50,472
|
|
Federal agency and corporate obligations
|
|
|
|
|
|
|
74,490
|
|
|
|
|
|
|
|
74,490
|
|
State and municipal obligations
|
|
|
|
|
|
|
45,872
|
|
|
|
39,525
|
|
|
|
85,397
|
|
UBS Right
|
|
|
|
|
|
|
|
|
|
|
2,100
|
|
|
|
2,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
50,472
|
|
|
$
|
120,362
|
|
|
$
|
41,625
|
|
|
$
|
212,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included in cash and cash equivalents. |
Level 2 assets consist of the Companys entire
portfolio of federal, municipal and corporate bonds, excluding
those municipal bonds described below with an auction reset
feature. 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 models, 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.
Level 3 assets at December 31, 2010 consist entirely
of municipal bonds with an auction reset feature and at
December 31, 2009 also include the UBS Right. Prior to
2008, the fair value of the ARS investments approximated par
value due to the frequent resets through the auction process.
While the Company continues to earn interest on its ARS at the
contractual rate, these securities trade infrequently and
therefore do not have a readily determinable
F-19
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
market value. Accordingly, the estimated fair value of the ARS
no longer approximates par value. At December 31, 2010, the
Company held ARS with one investment advisor that provided a
valuation of the ARS at par value, which Forrester considered to
be a Level 3 input based on the limited market activity. In
addition to the valuation provided by the investment advisor,
Forrester completed a valuation of the securities using a
discounted cash flow model that included estimates of interest
rates, timing and amount of cash flows, credit and liquidity
premiums and expected holding periods of the securities.
Forrester relied most heavily on its own valuation, based
primarily on the lack of market activity in these securities,
which resulted in an unrealized loss recorded in other
comprehensive loss in the Consolidated Balance Sheets of
$1.9 million and $1.1 million at December 31,
2010 and 2009, respectively. The Company believes that the loss
is temporary due to the strong underlying credit rating of the
securities and the fact that the Company does not intend to sell
the securities and is not likely to be required to sell the
securities. The assumptions used in valuing the ARS are volatile
and subject to change as the underlying sources of these
assumptions and market conditions change.
Through July 1, 2010, the Company also held ARS with UBS.
Historically, UBS provided a valuation utilizing Level 3
inputs for the ARS investments. UBS utilized a discounted cash
flow approach to arrive at its valuation, which was corroborated
by a separate and comparable discounted cash flow analysis
prepared by the Company. The assumptions used in preparing the
discounted cash flow model included estimates, based on data
available at each balance sheet date, of interest rates, timing
and amount of cash flows, credit and liquidity premiums, and
expected holding periods of the ARS. The Company valued the UBS
Right as an asset using a discounted cash flow approach
including estimates of interest rates, timing and amount of cash
flows, adjusted for any bearer risk associated with UBSs
financial ability to repurchase the ARS beginning June 30,
2010, based on data available at each balance sheet date. The
combined fair value of the Right and the UBS ARS historically
equaled the par value of the UBS ARS. The remaining
$5.4 million of par value UBS ARS at June 30, 2010
were sold to UBS at par under the Right on July 1, 2010.
The following table provides a summary of changes in fair value
of the Companys Level 3 financial assets for the
years ended December 31, 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
UBS
|
|
|
|
|
|
|
Right
|
|
|
ARS
|
|
|
Balance at December 31, 2008
|
|
$
|
6,887
|
|
|
$
|
39,613
|
|
Sales/Maturities
|
|
|
|
|
|
|
(3,825
|
)
|
Total gains (losses):
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
(1,050
|
)
|
Included in earnings
|
|
|
(4,787
|
)
|
|
|
4,787
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
2,100
|
|
|
|
39,525
|
|
Sales/Maturities
|
|
|
|
|
|
|
(31,675
|
)
|
Total gains (losses):
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
(833
|
)
|
Included in earnings
|
|
|
(2,100
|
)
|
|
|
2,100
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
|
|
|
$
|
9,117
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Non-Marketable
Investments
|
At December 31, 2010 and 2009, the carrying value of the
Companys non-marketable investments, which were composed
primarily of interests in technology-related private equity
funds, were $7.4 million and $5.5 million,
respectively.
One of the Companys investments, with a book value of
$1.7 million and $1.9 million at December 31,
2010 and 2009, respectively, is being accounted for using the
cost method and, accordingly, is valued at cost unless an
F-20
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 Forrester has an ownership interest in
excess of 5% and, accordingly, Forrester records its share of
the investees operating results each period. During the
years ended December 31, 2010, 2009 and 2008, the Company
recorded gains (losses) from its non-marketable investments of
approximately $2.3 million, $(1.0) million and
$(0.6) million, respectively, which are included in gains
(losses) on investments, net in the Consolidated Statements of
Income. During the years ended December 31, 2010, 2009 and
2008, gross distributions of $0.5 million,
$0.1 million and $0.6 million, respectively, were
received from the funds.
In June 2010, the Company extended the expiration date of a cash
bonus plan, originally adopted in 2000, that would pay a bonus,
after the return of invested capital from certain of the
Companys non-marketable investments, to certain key
employees. To date, no bonuses have been paid under the plan and
no amounts are accrued as of December 31, 2010 as payments
under the plan were not considered probable. The plan will now
automatically expire on June 30, 2013, subject to earlier
expiration as provided in the plan in the event that prior to
such date there are less than 10 participants in the plan or all
of the Companys invested capital (as defined in the plan)
has been returned to the Company.
Income from continuing operations before income tax provision
for the years ended December 31, 2010, 2009 and 2008
consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Domestic
|
|
$
|
33,964
|
|
|
$
|
33,094
|
|
|
$
|
40,076
|
|
Foreign
|
|
|
336
|
|
|
|
641
|
|
|
|
4,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,300
|
|
|
$
|
33,735
|
|
|
$
|
44,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the income tax provision for the years ended
December 31, 2010, 2009 and 2008 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
8,722
|
|
|
$
|
8,853
|
|
|
$
|
9,238
|
|
State
|
|
|
1,571
|
|
|
|
3,488
|
|
|
|
3,325
|
|
Foreign
|
|
|
1,144
|
|
|
|
585
|
|
|
|
1,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,437
|
|
|
|
12,926
|
|
|
|
14,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
2,301
|
|
|
|
1,774
|
|
|
|
2,059
|
|
State
|
|
|
1,025
|
|
|
|
(346
|
)
|
|
|
(43
|
)
|
Foreign
|
|
|
(970
|
)
|
|
|
515
|
|
|
|
(499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,356
|
|
|
|
1,943
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
13,793
|
|
|
$
|
14,869
|
|
|
$
|
15,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the federal statutory rate to
Forresters effective tax rate for the years ended
December 31, 2010, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income tax provision at federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase (decrease) in tax resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State tax provision, net of federal benefit
|
|
|
5.0
|
|
|
|
6.1
|
|
|
|
4.7
|
|
Non-deductible expenses
|
|
|
2.2
|
|
|
|
0.7
|
|
|
|
0.4
|
|
Tax-exempt interest income
|
|
|
(1.3
|
)
|
|
|
(3.0
|
)
|
|
|
(3.8
|
)
|
Stock option compensation deduction
|
|
|
0.2
|
|
|
|
1.1
|
|
|
|
(0.3
|
)
|
Other, net
|
|
|
3.6
|
|
|
|
3.0
|
|
|
|
1.6
|
|
Exchange rate (gain) loss
|
|
|
(1.1
|
)
|
|
|
1.8
|
|
|
|
(1.7
|
)
|
Change in valuation allowance
|
|
|
(3.4
|
)
|
|
|
(0.6
|
)
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
40.2
|
%
|
|
|
44.1
|
%
|
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of deferred income taxes as of December 31,
2010 and 2009 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Non-deductible reserves and accruals
|
|
$
|
5,087
|
|
|
$
|
4,469
|
|
Stock compensation
|
|
|
5,106
|
|
|
|
5,542
|
|
Depreciation and amortization
|
|
|
376
|
|
|
|
1,727
|
|
Net operating loss and other carryforwards
|
|
|
8,962
|
|
|
|
19,445
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax asset
|
|
|
19,531
|
|
|
|
31,183
|
|
Less valuation allowance
|
|
|
(2,676
|
)
|
|
|
(11,672
|
)
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
16,855
|
|
|
|
19,511
|
|
Goodwill amortization
|
|
|
(5,528
|
)
|
|
|
(6,930
|
)
|
Deferred commissions
|
|
|
(4,987
|
)
|
|
|
(3,912
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
6,340
|
|
|
$
|
8,669
|
|
|
|
|
|
|
|
|
|
|
The Company considers all available evidence, both positive and
negative, to determine whether, based on the weight of that
evidence, a valuation allowance is needed for some portion or
all of a net deferred income tax asset. Judgment is required in
considering the relative impact of negative and positive
evidence. In arriving at these judgments, the weight given to
the potential effect of negative and positive evidence is
commensurate with the extent to which it can be objectively
verified. Although realization is not assured, based upon the
Companys historical taxable income and projections of the
Companys future taxable income over the periods during
which the deferred tax assets are deductible and the
carryforwards expire, management believes it is more likely than
not that the Company will realize the benefits of these
deductible differences, net of the existing valuation
allowances, as discussed below.
As of December 31, 2010 and 2009, the Company maintained a
valuation allowance of approximately $2.7 million and
$11.7 million, respectively, primarily relating to foreign
net operating loss carryforwards from an acquisition, foreign
tax credit carryforwards and U.S. capital losses.
As of December 31, 2010, the Company had federal net
operating loss carryforwards of approximately $17.1 million
obtained from acquired businesses. These carryforwards are
limited pursuant to section 382 of the Internal Revenue
Code due to changes in ownership as a result of the
acquisitions. If unused, these carryforwards would expire on
various dates from 2019 through 2028.
F-22
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company also has foreign net operating loss carryforwards of
approximately $32.8 million, which can be carried forward
indefinitely. Approximately $5.6 million of the foreign net
operating loss carryforwards relate to a prior acquisition, the
utilization of which is subject to limitation under the tax law
of the United Kingdom. The Company has a German net operating
loss against which it had provided a full valuation allowance in
prior years. During 2010 the Company reconsidered its position
and determined that the ability of the Company to benefit from
the net operating loss did not meet the more likely than not
standard. Accordingly, the deferred tax asset and corresponding
valuation allowance for the German net operating loss have been
removed from the components of deferred taxes with no effect to
the Companys overall tax provision.
As of December 31, 2010, the Company had U.S. federal
and state capital loss carryforwards of $2.2 million, of
which $1.0 million expires in 2012 and $1.2 million
expires in 2014.
The following table provides a summary of the changes in the
deferred tax valuation allowance for the years ended
December 31, 2010, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax valuation allowance at January 1
|
|
$
|
11,672
|
|
|
$
|
10,922
|
|
|
$
|
12,794
|
|
Additions
|
|
|
440
|
|
|
|
1,532
|
|
|
|
51
|
|
Deductions
|
|
|
(9,405
|
)
|
|
|
(1,261
|
)
|
|
|
(948
|
)
|
Translation adjustments
|
|
|
(31
|
)
|
|
|
479
|
|
|
|
(975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax valuation allowance at December 31
|
|
$
|
2,676
|
|
|
$
|
11,672
|
|
|
$
|
10,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2010 and 2008, the
Company recognized approximately $5.9 million and
$8.5 million, respectively, of tax benefits from excess tax
deductions resulting from employee stock option exercises. The
tax benefit was recorded as an increase to additional
paid-in-capital.
Excess tax benefits from share-based payments are recognized in
the year that the deduction reduces the amount of cash payable
for taxes. No such tax benefits were recognized in the year
ended December 31, 2009.
Undistributed earnings of the Companys foreign
subsidiaries amounted to approximately $0.8 million as of
December 31, 2010. The Company has not provided any
additional federal or state income taxes or foreign withholding
taxes on the undistributed earnings as such earnings have been
indefinitely reinvested in the business. Due to the various
methods by which such earnings could be repatriated in the
future, the amount of taxes attributable to the undistributed
earnings is not practicably determinable.
The Company utilizes a two step process for the measurement of
uncertain tax positions that have been taken or are expected to
be taken on a tax return. The first step is a determination of
whether the tax position should be recognized in the financial
statements. The second step determines the measurement of the
tax position. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is summarized as follows for
the years ended December 31, 2010, 2009 and 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Unrecognized tax benefits at January 1
|
|
$
|
919
|
|
|
$
|
1,222
|
|
|
$
|
1,409
|
|
Additions for tax positions of prior years
|
|
|
410
|
|
|
|
|
|
|
|
398
|
|
Reductions for tax positions of prior years
|
|
|
|
|
|
|
(19
|
)
|
|
|
(12
|
)
|
Additions for tax positions of current year
|
|
|
77
|
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
|
(320
|
)
|
Lapse of statute of limitations
|
|
|
(184
|
)
|
|
|
(284
|
)
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at December 31
|
|
$
|
1,222
|
|
|
$
|
919
|
|
|
$
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2010, the total amount of unrecognized
tax benefits totaled approximately $1.2 million, all of
which if recognized, would decrease our effective tax rate in a
future period. The Company expects that the changes in the
unrecognized benefits within the next twelve months will be
immaterial.
The Company recognizes interest and penalties related to
uncertain tax positions in income tax expense and such amounts
were not material in the years ended December 31, 2010,
2009 and 2008. As of December 31, 2010 and 2009, the
Company had approximately $0.2 million and
$0.2 million, respectively, of accrued interest and
penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. and in
foreign jurisdictions. Generally, the Company is no longer
subject to U.S. state, local and foreign income tax
examinations by tax authorities in its major jurisdictions for
years before 2005, except to the extent of net operating loss
and tax credit carryforwards from those years. Major taxing
jurisdictions include the U.S., the Netherlands and the United
Kingdom.
As of December 31, 2010, Forrester had future contractual
obligations as follows for operating leases (in thousands):
|
|
|
|
|
2011
|
|
$
|
7,541
|
|
2012
|
|
|
8,669
|
|
2013
|
|
|
8,883
|
|
2014
|
|
|
8,756
|
|
2015
|
|
|
8,824
|
|
Thereafter
|
|
|
76,255
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
118,928
|
|
|
|
|
|
|
On September 29, 2009, the Company entered into a
build-to-suit
net lease (Lease) pursuant to which the landlord
will build a new corporate headquarters building for the Company
in Cambridge, Massachusetts. Pursuant to the Lease, as amended,
the landlord will construct an approximately 190,000 square
foot building (Building) and lease the Building and
parcel to the Company for an initial term of 15 years.
During construction, the Company will continue to occupy its
current corporate headquarters in Cambridge, Massachusetts under
the existing lease for such premises. In accordance with the
Lease, the Company is required to place funds in escrow for
leasehold improvements for the Building. At December 31,
2010, the Company had $15.5 million in escrow for leasehold
improvements, of which $11.6 million is classified as
long-term restricted cash and $3.9 million is classified
within current assets on the Consolidated Balance Sheets.
Aggregate rent expenses, net of sublease income, were
approximately $10.6 million, $10.0 million and
$9.4 million for the years ended December 31, 2010,
2009, and 2008, respectively.
Preferred
Stock
Forrester has authorized 500,000 shares of $.01 par
value preferred stock. The Board of Directors has full authority
to issue this stock and to fix the voting powers, preferences,
rights, qualifications, limitations, or restrictions thereof,
including dividend rights, conversion rights, redemption
privileges and liquidation preferences and the number of shares
constituting any series or designation of such series.
F-24
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Treasury
Stock
Forresters Board of Directors has authorized an aggregate
$260 million, including an additional $60 million
approved in October 2010, to purchase common stock under the
stock repurchase program. The shares repurchased may be used,
among other things, in connection with Forresters equity
incentive and purchase plans. As of December 31, 2010,
Forrester had repurchased approximately 7.7 million shares
of common stock at an aggregate cost of $162.6 million.
Dividends
The Company paid a special cash dividend in December 2010 of
$68.4 million, which represented a payment of $3.00 per
share to common stockholders.
Equity
Plans
Forrester maintains the following four equity incentive plans:
the 2006 Equity Incentive Plan (the 2006 Plan),
the Amended and Restated 1996 Equity Incentive Plan (the
1996 Plan), the 2006 Stock Option Plan for
Directors (the 2006 Directors Plan)
and the 1996 Stock Option Plan for Non-Employee Directors (the
1996 Directors Plan). Upon approval of
the 2006 Plan and the 2006 Directors Plan by stockholders,
no future awards under the 1996 Plan and 1996 Directors
Plan could be granted or issued.
In May 2006, the 2006 Plan was approved by the stockholders of
the Company. The 2006 Plan provides for the issuance of
stock-based awards, including incentive stock options
(ISOs), non-qualified stock options
(NSOs), and restricted stock units
(RSUs) to purchase up to 4,350,000 shares
authorized in the 2006 Plan plus up to 2,500,000 shares
returned from the 1996 Plan. Under the terms of the 2006 Plan,
ISOs may not be granted at less than fair market value on the
date of grant (and in no event less than par value). Options
generally vest annually over two to four years and expire after
10 years and RSUs generally vest over three to four years,
in each case sometimes subject to performance conditions in
addition to the passage of time. Options and RSUs granted under
the 2006 Plan immediately vest upon certain events, as described
in the 2006 Plan. As of December 31, 2010, approximately
3.0 million shares were available for future grant of
awards under the 2006 Plan.
The 1996 Plan provided for the issuance of stock-based awards,
including ISOs and NSOs, to purchase up to
13,500,000 shares of common stock. Under the terms of the
1996 Plan, ISOs were not granted at less than fair market value
on the date of grant (and in no event less than par value). ISO
grants to holders of 10% of the combined voting power of all
classes of Forrester stock were required to be granted at an
exercise price not less than 110% of the fair market value at
the date of grant. Options generally vested ratably over two to
four years and will expire after 10 years and were
sometimes subject to performance conditions in addition to the
passage of time. At December 31, 2010, approximately
0.4 million options remain outstanding and are fully vested
under the 1996 Plan.
In May 2006, the 2006 Directors Plan was approved by
the stockholders of the Company. The 2006 Directors
Plan provides for the issuance of options to purchase up to
450,000 shares of common stock. Under the
2006 Directors Plan, each non-employee director shall
be awarded an option to purchase 6,000 shares of common
stock, at an exercise price equal to the fair market value of
the common stock upon his or her election as a director. These
options vest in four equal annual installments, with the first
installment vested on the date of grant. In addition, prior to
the 2010 annual stockholder meeting, each non-employee director
was entitled to receive an option to purchase 12,500 shares
of common stock, at an exercise price equal to the fair market
value of the common stock on the grant date, each year
immediately following Forresters annual stockholders
meeting, and commencing with the 2010 annual stockholders
meeting, non-employee directors are now entitled to receive an
option to purchase 12,000 shares immediately following the
meeting. These options vest in four equal installments on the
first, second, third, and fourth anniversaries of the date of
grant. Options granted under the 2006 Directors Plan
immediately vest upon certain events, as described in the
2006 Directors Plan. As of December 31, 2010,
approximately 140,000 shares were available for future
grant of awards under the 2006 Directors Plan.
F-25
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Options issued under the 1996 Directors Plan were
granted at an exercise price equal to the fair market value of
the common stock at the time of grant, each year immediately
following Forresters annual stockholders meeting.
These options vested in four equal installments on the first,
second, third, and fourth anniversaries of the date of grant. At
December 31, 2010, approximately 0.1 million options
remain outstanding and are fully vested under the
1996 Directors Plan.
Stock
Options
Stock option activity for the year ended December 31, 2010
is presented below (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted -
|
|
|
Weighted -
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Price Per
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Share
|
|
|
Term (In Years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2009
|
|
|
3,090
|
|
|
$
|
25.18
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
364
|
|
|
|
30.41
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,050
|
)
|
|
|
22.41
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(189
|
)
|
|
|
42.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
2,215
|
|
|
$
|
26.00
|
|
|
|
6.63
|
|
|
$
|
20,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2010
|
|
|
1,350
|
|
|
$
|
24.91
|
|
|
|
5.53
|
|
|
$
|
14,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2010
|
|
|
2,102
|
|
|
$
|
25.87
|
|
|
|
6.52
|
|
|
$
|
19,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during 2010, 2009
and 2008 was $11.6 million, $0.7 million and
$10.4 million, respectively.
On April 3, 2006, Forrester issued to its employees options
to purchase 587,500 shares of common stock. These options
were subject to performance criteria and would vest only if
certain operating margin targets related to full year 2006
performance were achieved. The vesting of these options was over
24 or 36 months, or the options could be forfeited,
depending on the actual operating margin achieved for 2006.
During 2006, operating performance was expected to result in the
options vesting over 36 months and expense was recognized
assuming that vesting period. The actual operating margin for
2006 resulted in accelerated vesting of the options over
24 months and the compensation expense associated with the
accelerated vesting was recognized on a prospective basis
through the remainder of the vesting period. The expense related
to these options was recognized on a graded basis.
On April 2, 2007, Forrester issued to its employees options
to purchase 293,600 shares of common stock. These options
were subject to performance criteria and would vest only if
certain operating margin targets related to full year 2007
performance were achieved. The vesting of these options was over
24 or 36 months, or the options could be forfeited,
depending on the actual operating margin achieved for 2007.
During 2007, operating performance was expected to result in the
options vesting over 36 months and expense was recognized
assuming that vesting period. The actual operating margin for
2007 resulted in the options vesting over 36 months and the
expense related to these options was recognized on a graded
basis.
On April 1, 2008, Forrester issued to its employees options
to purchase 370,000 shares of common stock. These options
were subject to performance criteria and would vest only if
certain operating profit targets related to full year 2008
performance were achieved. The vesting of these options was over
24, 36 or 48 months, or the options could be forfeited,
depending on the actual operating profit achieved for 2008.
During 2008, operating performance was expected to result in the
options vesting over 48 months and expense was recognized
assuming that vesting period. The actual operating profit
targets for 2008 resulted in accelerated vesting of the options
over 24 months and
F-26
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the compensation expense associated with the accelerated vesting
was recognized on a prospective basis through the remainder of
the vesting period. The expense related to these options was
recognized on a graded basis.
Restricted
Stock Units
Restricted stock units (RSUs) represent the right to
receive one share of Forrester common stock when the
restrictions lapse and the vesting conditions are met, and are
valued on the date of grant based upon the value of the
Companys stock on the date of grant.
In 2009, Forrester issued to its employees 95,496
performance-based RSUs. The vesting of the RSUs is subject to
performance criteria and will vest at 100% or 40% on
April 1, 2012, or the RSUs could be forfeited, depending on
whether specified revenue growth and certain operating margin
targets related to full year 2011 performance are achieved.
Compensation expense in 2010 and 2009 was recognized based on
the assumption of 100% vesting of the RSUs.
In 2010, Forrester issued to its employees approximately 63,000
performance-based RSUs. The vesting of the RSUs is subject to
performance criteria and will vest at 100% or 40% on
April 1, 2013, or the RSUs could be forfeited, depending on
whether specified revenue growth and certain operating margin
targets related to full year 2012 performance are achieved.
Compensation expense in 2010 was recognized based on the
assumption of 100% vesting of the RSUs. In addition, Forrester
issued approximately 42, 000 RSUs during 2010 that generally
vest equally over a four-year period.
RSU activity for the year ended December 31, 2010 is
presented below (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2009
|
|
|
94
|
|
|
$
|
25.21
|
|
Granted
|
|
|
105
|
|
|
|
29.77
|
|
Vested or settled
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(7
|
)
|
|
|
26.57
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2010
|
|
|
192
|
|
|
$
|
27.64
|
|
|
|
|
|
|
|
|
|
|
Employee
Stock Purchase Plan
In September 1996, Forrester adopted the 1996 Employee Stock
Purchase Plan (the Stock Purchase Plan). The Stock
Purchase Plan, as amended and restated in 2009, provides for the
issuance of up to 1.5 million shares of common stock and as
of December 31, 2010 approximately 0.5 million shares
remain available for issuance. With certain limited exceptions,
all employees of Forrester who have completed six months or more
of continuous service in the employ of Forrester and whose
customary employment is more than 20 hours per week,
including officers and directors who are employees, are eligible
to participate in the Stock Purchase Plan. Purchase periods
under the Stock Purchase Plan are generally six months in length
and commence on each successive January 1 and July 1.
During each purchase period the maximum number of shares of
common stock that may be purchased by an employee is limited to
the number of shares equal to $12,500 divided by the fair market
value of a share of common stock on the first day of the
purchase period. An employee may elect to have up to 10%
deducted from his or her compensation for the purpose of
purchasing shares under the Stock Purchase Plan. The price at
which the employees shares are purchased is the lower of:
a) 85% of the closing price of the common stock on the day
that the purchase period commences, or b) 85% of the
closing price of the common stock on the day that the purchase
period
F-27
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
terminates. Shares purchased by employees under the Stock
Purchase Plan are as follows (in thousands, except per share
data):
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Purchase
|
|
Purchase Period Ended
|
|
Purchased
|
|
|
Price
|
|
|
June 30, 2010
|
|
|
45
|
|
|
$
|
22.67
|
|
December 31, 2010
|
|
|
44
|
|
|
$
|
26.44
|
|
June 30, 2009
|
|
|
43
|
|
|
$
|
20.87
|
|
December 31, 2009
|
|
|
38
|
|
|
$
|
21.46
|
|
June 30, 2008
|
|
|
32
|
|
|
$
|
23.38
|
|
December 31, 2008
|
|
|
36
|
|
|
$
|
23.98
|
|
|
|
(9)
|
Employee
Pension Plans
|
Forrester sponsors several defined contribution plans for
eligible employees. Generally, the defined contribution plans
have funding provisions which, in certain situations, require
contributions based upon formulas relating to employee wages or
the level of elective participant contributions, as well as
allow for additional discretionary contributions. Further,
certain plans contain vesting provisions. Forresters
contributions to these plans totaled approximately
$2.8 million, $2.0 million and $2.0 million for
the years ended December 31, 2010, 2009 and 2008,
respectively.
During the first quarter of 2009, Forrester announced a
reduction of its workforce by approximately 50 positions in
response to conditions and demands of the market and a slower
economy. Additionally, Forrester identified certain leased
office space that was no longer required to support the ongoing
business. As a result, Forrester recorded a reorganization
charge of approximately $3.1 million in the three months
ended March 31, 2009. Approximately 44% of the terminated
employees were members of the sales force, while 38% and 18%
held research and administrative roles, respectively. In
addition, during the fourth quarter of 2009, Forrester incurred
additional reorganization costs of $2.3 million related to
facility consolidations primarily in Cambridge, Massachusetts.
Of the $2.3 million fourth quarter 2009 charge,
approximately $1.4 million relates to future lease payments
through September 2011 and $0.9 million relates to the
write-off of leasehold improvements.
The activity related to the reorganization during the years
ended December 31, 2010 and 2009 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce
|
|
|
Facility
|
|
|
|
|
|
|
Reduction
|
|
|
Consolidation
|
|
|
Total
|
|
|
Total charge
|
|
$
|
2,872
|
|
|
$
|
2,569
|
|
|
$
|
5,441
|
|
Cash payments
|
|
|
(2,774
|
)
|
|
|
(84
|
)
|
|
|
(2,858
|
)
|
Non-cash portion of charge
|
|
|
|
|
|
|
(898
|
)
|
|
|
(898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual at December 31, 2009
|
|
|
98
|
|
|
|
1,587
|
|
|
|
1,685
|
|
Cash payments
|
|
|
(98
|
)
|
|
|
(1,141
|
)
|
|
|
(1,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual at December 31, 2010
|
|
$
|
|
|
|
$
|
446
|
|
|
$
|
446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The remainder of the costs accrued at December 31, 2010,
classified as accrued expenses on the Consolidated Balance
Sheets, are expected to be paid during 2011.
F-28
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(11)
|
Operating
Segment and Enterprise Wide Reporting
|
Forrester is organized into three client groups with each client
group responsible for writing relevant research for the roles
within the client organizations on a worldwide basis. The three
client groups are: Information Technology (IT),
Technology Industry (TI), and Marketing and Strategy
(M&S). All of the client groups generate
revenues through sales of research and advisory and other
service offerings targeted at specific roles within their
targeted clients. Each of the client groups consists of research
personnel focused primarily on issues relevant to particular
roles and to the
day-to-day
responsibilities of persons within the roles. Amounts included
in the Events segment relate to the operations of
the events production department. Revenue reported in the Events
segment consists primarily of sponsorships and event tickets to
Forrester events.
Forrester evaluates reportable segment performance and allocates
resources based on direct margin. Direct margin, as presented
below, is defined as operating income excluding sales expenses,
certain marketing and fulfillment expenses, stock-based
compensation expense, general and administrative expenses,
depreciation expense, amortization of intangible assets and
reorganization costs. In the first quarter of 2010, the Company
modified its calculation of segment direct margin to exclude all
sales expenses. Accordingly, the 2009 and 2008 amounts have been
reclassified to conform to the current presentation. The
accounting policies used by the reportable segments are the same
as those used in the consolidated financial statements.
Forrester does not identify or allocate assets, including
capital expenditures, by operating segment. Accordingly, assets
are not being reported by segment because the information is not
available by segment and is not reviewed in the evaluation of
performance or making decisions in the allocation of resources.
The following tables present information about reportable
segments (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT
|
|
|
TI
|
|
|
M&S
|
|
|
Events
|
|
|
Consolidated
|
|
|
Year ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
93,414
|
|
|
$
|
74,799
|
|
|
$
|
71,313
|
|
|
$
|
11,200
|
|
|
$
|
250,726
|
|
Direct margin
|
|
|
64,854
|
|
|
|
54,859
|
|
|
|
43,264
|
|
|
|
4,753
|
|
|
|
167,730
|
|
Selling, marketing, administrative and other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133,360
|
)
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
92,950
|
|
|
$
|
66,848
|
|
|
$
|
63,910
|
|
|
$
|
9,644
|
|
|
$
|
233,352
|
|
Direct margin
|
|
|
65,073
|
|
|
|
49,163
|
|
|
|
36,089
|
|
|
|
3,183
|
|
|
|
153,508
|
|
Selling, marketing, administrative and other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(113,357
|
)
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,290
|
)
|
Reorganization costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
99,869
|
|
|
$
|
69,621
|
|
|
$
|
58,773
|
|
|
$
|
12,612
|
|
|
$
|
240,875
|
|
Direct margin
|
|
|
69,299
|
|
|
|
53,226
|
|
|
|
30,841
|
|
|
|
5,397
|
|
|
|
158,763
|
|
Selling, marketing, administrative and other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119,364
|
)
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Net long-lived tangible assets by location as of
December 31, 2010 and 2009 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
United States
|
|
$
|
15,903
|
|
|
$
|
4,793
|
|
United Kingdom
|
|
|
3,423
|
|
|
|
258
|
|
Europe (excluding United Kingdom)
|
|
|
506
|
|
|
|
765
|
|
Other
|
|
|
6
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,838
|
|
|
$
|
5,823
|
|
|
|
|
|
|
|
|
|
|
Net revenues by geographic destination and as a percentage of
total revenues for the years ended December 31, 2010, 2009,
and 2008 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
180,065
|
|
|
$
|
164,031
|
|
|
$
|
172,973
|
|
Europe (excluding United Kingdom)
|
|
|
31,188
|
|
|
|
31,011
|
|
|
|
31,179
|
|
United Kingdom
|
|
|
15,285
|
|
|
|
15,200
|
|
|
|
14,294
|
|
Canada
|
|
|
13,724
|
|
|
|
13,706
|
|
|
|
13,267
|
|
Other
|
|
|
10,464
|
|
|
|
9,404
|
|
|
|
9,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
250,726
|
|
|
$
|
233,352
|
|
|
$
|
240,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
|
72
|
%
|
|
|
70
|
%
|
|
|
72
|
%
|
Europe (excluding United Kingdom)
|
|
|
12
|
%
|
|
|
13
|
%
|
|
|
13
|
%
|
United Kingdom
|
|
|
6
|
%
|
|
|
7
|
%
|
|
|
6
|
%
|
Canada
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
Other
|
|
|
4
|
%
|
|
|
4
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
Certain
Balance Sheet Accounts
|
Property
and Equipment:
Property and equipment as of December 31, 2010 and 2009
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Computers and equipment
|
|
$
|
10,815
|
|
|
$
|
10,758
|
|
Computer software
|
|
|
13,433
|
|
|
|
10,828
|
|
Furniture and fixtures
|
|
|
4,763
|
|
|
|
4,653
|
|
Leasehold improvements
|
|
|
16,650
|
|
|
|
6,043
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
45,661
|
|
|
|
32,282
|
|
Less accumulated depreciation and amortization
|
|
|
25,823
|
|
|
|
26,459
|
|
|
|
|
|
&nb |