e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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þ
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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, 2007
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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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The Nasdaq Stock Market, Inc.
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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 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. Yes þ No 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 definition of
accelerated filer, large 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
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
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,
2007 (based on the closing price as quoted by the Nasdaq
National Market as of such date) was approximately $426,000,000.
As of March 3, 2008, 23,262,752 shares of the
registrants common stock were outstanding.
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. These statements are based on our
current plans and expectations and involve risks and
uncertainties that could cause actual future activities and
results of operations to be materially different from those set
forth in the forward- looking statements. 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. conducts independent technology and
market research and provides pragmatic and forward-thinking
advice to global leaders in business and technology. We offer
products and services in four major areas: Research, Data,
Consulting, and Community. Our products and services are
targeted to specific roles, including principally senior
management, business strategists, and marketing and technology
professionals at $1 billion-plus companies who collaborate
with us to align their technology investments with their
business goals.
Research serves as the foundation for all our offerings and
consists primarily of annual memberships to our syndicated
research offering
RoleViewtm,
formerly known as
WholeView®2,
that provides comprehensive access to our core research on a
wide range of business and technology issues of interest to the
specific roles our products and services address. In addition to
RoleView, we also provide several client-focused products and
services in our Data, Consulting, and Community offerings. Each
of these allow our clients to interact directly with analysts
and explore in greater detail the issues and topics covered by
RoleView on a 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
Emerging technologies play a central role in companies and
their employees efforts 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 focus on rely on external sources of expertise that
provide independent business advice spanning a variety of areas
including technology, business strategy, and consumer behavior.
We believe there is a need for objective research that is
thematic, prescriptive, and executable, and that provides a
comprehensive perspective on the integrated use of technology in
business.
Forresters
Strategy
In 2007, Forrester introduced Roleview and accelerated execution
of a role-based strategy to focus attention on serving leaders
in multiple roles across its client base. Forresters
syndicated RoleView research provides clients with more relevant
research, easier access to the insights individual leaders need
to make them successful in their roles and new community tools
to provide a more comprehensive view of the problems they face.
We seek to maintain and enhance our position as a leading
independent technology and market research firm and to
capitalize on demand for our research 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
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impact of technology on business models and technology
infrastructure. We believe that our research methodology and our
creative culture allow us to identify and analyze rapid shifts
in the 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 and introduce innovative new
products. Our Data, Consulting, and Community offerings
complement, enhance and supplement our RoleView research
offering, and many are designed to address clients
customized needs.
Using Targeted, Global Sales Channels. We sell
our products and services directly through our global sales
force in various locations in North America, Europe, Asia and
Australia. We also sell our products and services through
independent sales representatives in select international
locations. Effective January 2007, we reorganized our business
into global client groups to more closely align with our role
based strategy client base: the IT Client Group, the
Marketing & Strategy Client Group, and the Technology
Industry Client Group.
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 2,450 client companies as of
December 31, 2007 there is opportunity to sell additional
products and services. 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, cooperation, 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.
Forresters
Solution
Our business and technology expertise enables us to offer our
clients the best available research on changing business models
and technologies, technology investments, implementation
changes, and customer trends. Our solution provides our clients
with:
A Unified Set of Services to Build Business and Technology
Strategies. We offer clients a comprehensive and
unified view of technologys impact on business. The
primary component of this view is RoleView. Clients may combine
RoleView with our Data, Consulting, and Community offerings 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.
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Anticipate technology-driven business model shifts.
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Understand how technology affects consumers and can improve
business processes.
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Educate, inform, and align strategic decision-makers in their
organizations.
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Navigate technology 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 technology 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
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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 in
the areas of Research, Data, Consulting, and Community which are
organized for and directed toward the multiple professional
roles we cover.
Research
Our primary syndicated research product, renamed RoleView in
February 2007 (formerly known as WholeView2), is a holistic,
unified offering that provides clients with comprehensive access
to our core syndicated research designed to inform their
strategic decision-making. Like WholeView2, RoleView consists of
a library of cross-linked documents that interconnects our
reports, data, product rankings, best practices, evaluation
tools, and research archives and allows clients to move
barrier-free across our research, but RoleView access is
provided through role-based websites that facilitate client
access to research and tools that are most relevant to their
professional roles. Through this access structure, RoleView
addresses the interplay of an individual clients
responsibilities and goals, business demands, and technology
capabilities. Our RoleView research includes The Forrester
Wave. 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 RoleView may choose between two
membership levels:
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RoleView Member Licenses include access to the written
research, as well as Inquiry with all analysts, one Event seat,
and access to Forrester Teleconferences.
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Inquiry. Inquiry enables clients to contact
any of 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 Inquiry Team.
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Event Seat. 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 impact of technology on business.
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Forrester Teleconferences. 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 provide access to our written
research.
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Both Member and Reader clients receive access to our Research
Help Desk, which is a call center dedicated to providing
additional information about our research, methodologies,
coverage areas, and sources. The Research Help Desk is available
to help clients navigate our website, find relevant information,
and put clients in contact with the appropriate analyst for
inquiries.
Data
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 include:
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Consumer Technographics Data &
Services. Our Technographics Data &
Services leverage our core research findings to provide an
in-depth understanding of how consumers buy, think about, and
use
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technology. Consumer Technographics delivers both primary data
and quantitative research, based on surveys of over 250,000
households in North America, Europe and Asia Pacific which is
analyzed and categorized into relevant market segments to help
organizations and their leaders capitalize on changing consumer
behavior. We combine respondent data sets from our Consumer
Technographics surveys into four offerings: North American
Consumer Technology Adoption Study, European Consumer Technology
Adoption Study, Hispanic American Technology Adoption Study, and
Asia Pacific Consumer Technology Adoption Study. 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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Business Data & Services (formerly known as
Business Technographics). Our Business Data Services 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 13,500 business and IT executives at
North American, European, and Asia Pacific large enterprises and
small and midsize businesses. Our surveys reveal these
firms technology adoption trends, budgets, business
organization, decision processes, purchase plans, and brand
preferences. Business Data and Services clients also have access
to a data specialist and input into survey design.
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Consulting
Our Consulting services leverage RoleView to deliver customized
research to assist clients in executing technology and business
strategy, assessing viable initiatives for competitive
technology gains, and making large technology investments.
Specifically, we help our clients, via custom research with:
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Market Strategy
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Effective Use of Technology
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Innovation & Organizational Design
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Supply & Demand Networks
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IT Sourcing
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We also offer Website Reviews that provide targeted,
action-oriented assessments of clients websites,
extranets, or intranets. Feedback is based on comprehensive
examination of the clients website and web strategies.
Community
Our Community offerings are designed to foster effective
connections between peers in the same or similar roles, our
analysts, and the relevant research. Our Community programs
provide exclusive networking opportunities, advice on best
practices, and targeted analysis. Community products and
services include the Forrester Leadership Boards, participation
in Workshops, and attendance at Forrester Events.
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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 CIO Group and the CMO
Group and in additional technology, marketing, and vendor
programs. In addition to a Member license to access RoleView,
members of our Forrester Leadership Boards receive access to the
following:
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analyst teams for individual research-related questions,
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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, and
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peer-to-peer networking through premier event meetings and group
audio-conferences.
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Workshops. Forrester conducts several
Workshops (formerly known as Boot Camps) over the
course of a year, each of which focuses on a specific issue or
subject matter of interest to particular technology or marketing
professionals and other executives. Workshops are an efficient
forum for clients to receive relevant and useful information and
tools to help them succeed in their roles.
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Forrester Events. We host multiple Events in
various locations in North America and Europe throughout the
year. Events build upon our research and data to bring together
executives and other participants to network with their peers,
meet with Forrester analysts, and to hear business leaders
discuss the impact of technology on business.
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Pricing
and Contract Size
We report our revenue from client contracts in two categories of
revenue: (1) research and (2) advisory services and
other. All the product and service offerings listed above are
comprised of research, advisory services and other, or some
combination of the two. Research offerings principally generate
research revenues, and Consulting offerings consist solely of
advisory services revenues. We classify revenue from our
Consumer Technographics Data & Services and Business
Data Services as research services revenue. Within Community,
revenue from memberships to the Forrester Leadership Boards is
classified as research services revenue, and revenue from
Workshops and Forrester Events is classified as other revenue in
our advisory services and other revenue classification. While
historical business practice has been to offer contracts with a
non-cancelable term, effective April 1, 2005, we began
offering clients a money-back guarantee which gives clients the
right to cancel their membership contracts prior to the end of
the contract term. For contracts that can be terminated during
the contract term, refunds would be issued for unused products
or services.
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. The average contract for annual
memberships for research only in force at December 31, 2007
was approximately $44,800, an increase of 3% from $43,500 at
December 31, 2006. The average contract for an annual
membership for research which also included advisory services in
force at December 31, 2007 was approximately $89,800, an
increase of 2% from $87,900 at December 31, 2006.
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 14% to $197.2 million at
December 31, 2007 from $172.8 million at
December 31, 2006.
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 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 Business Data Services 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.
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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 weekly research meetings. 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. At the final stage of the research
process, senior analysts meet to test the conclusions of each
research report.
Sales and
Marketing
We sell our products and services through a direct sales force
in various locations in North America, Europe, and Asia. We also
sell our products and services through independent sales
representatives and suppliers in select international locations.
We employed 308 salespersons as of December 31, 2007, an
increase of 14% from 270 as of December 31, 2006. We also
sell our research products directly online through our website.
For information on our business segments and our international
operations, see Note 14 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 emerging 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.
As of December 31, 2007, our research was delivered to more
than 2,450 client companies. No single client company accounted
for more than 2% of our 2007 revenues.
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 early focus on emerging
technologies is a significant competitive advantage.
Additionally, we believe that our role-based strategy, 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 about and relating to technology and its impact on
business. Our principal direct competitors include other
providers of similar services, such as Gartner Group, 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
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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, 2007, we employed a total of
903 persons, including 336 research staff and 308 sales
personnel.
Our culture emphasizes certain key values including
client service, quality, and creativity 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,
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:
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:
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Trends in technology spending in the marketplace and general
economic conditions.
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The timing and size of new and renewal memberships for our
research services from clients.
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The utilization of our advisory services by our clients.
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The timing of revenue-generating Events sponsored by us.
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The introduction and marketing of new products and services by
us and our competitors.
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The hiring and training of new analysts and sales personnel.
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Changes in demand for our research and advisory services.
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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, or strategic alliances by us or the
technologies services industry 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.
Our Business May be Adversely Affected by an Economic
Downturn. Our business is in part dependent on
technology spending. If current conditions in the United States
economy were to lead to an economic downturn or recession with a
resultant decrease in technology spending, this in turn could
have an adverse effect on our results of operations and
financial condition.
A Decline in Renewals for Our Membership-Based Research
Services. Our success depends in large part upon
renewals of memberships for our research products. Approximately
75%, 77%, and 78% of our client companies with memberships
expiring during the years ended December 31, 2007, 2006,
and 2005, respectively, renewed one or more memberships for our
products and services. These renewal rates are not necessarily
indicative of the rate of future retention of our revenue base.
Any future declines in renewal rates could have an adverse
effect on our results of operations.
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 addressing specific industry and business organization
sectors and by anticipating and identifying changes in client
requirements and changes in the technology industry. The process
of internally researching,
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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.
Material weaknesses in our internal control over financial
reporting could lead to errors in our financial statements and a
lack of investor confidence in us and a resulting decline in our
stock price. We had material weaknesses in our
internal control over financial reporting at December 31,
2005 and December 31, 2006 relating to the proper
accounting for non-cash stock based compensation and
additionally in 2006 the income tax accounting for goodwill
expense that resulted in restatements of our historical
financial statements. Internal controls that do not meet
applicable accounting and auditing standards could result in
errors in our financial statements and lead investors to
question the reliability and accuracy of our reported financial
information. Any such lack of confidence in the financial
information that we produce could cause investors to sell our
stock and result in a decline in our stock price.
We face risks related to the restatement of our financial
statements and the ongoing SEC investigation regarding our
historical stock-based compensation
practices. The Securities and Exchange Commission
(SEC) has commenced a formal inquiry into our
historical stock-based compensation practices. We are
cooperating with the SEC and will continue to do so as the
inquiry moves forward. At this point, we are unable to predict
what, if any, consequences the SEC investigation may have on us.
However, the investigation has resulted in considerable
expenses, has diverted managements attention from other
business concerns, and could harm our business. If the SEC were
to commence legal action, we could be required to pay
significant penalties
and/or fines
and could
9
become subject to an administrative order
and/or a
cease and desist order. Further, the resolution of the SEC
investigation could require the filing of additional
restatements of our prior financial statements,
and/or our
restated financial statements, or require that we take other
actions not presently contemplated. In addition, there can be no
assurance that the SEC will accept the Companys approach
for establishing the correct measurement dates for stock options
granted during the restatement period or that the Companys
assumptions with respect to the related tax effects will not be
challenged by the Internal Revenue Service.
Due to our current inability to sell certain of our Auction
Rate Securities, the securities may experience an
other-than-temporary decline in value, and funds associated with
the securities may be inaccessible for in excess of
12 months, which could result in a material adverse impact
to our financial condition and results of
operations. Our marketable securities portfolio,
which totaled $195.8 million at December 31, 2007,
includes Auction Rate Securities (ARS) of
$120.2 million from various issuers collateralized by
student loans and municipal debt. ARSs are securities with
long-term contractual maturities but with interest rates that
are reset every seven to thirty-five days by auctions. At the
end of each reset period, investors can sell or continue to hold
the securities at par. During February 2008, certain ARSs that
we hold experienced failed auctions that limited the liquidity
of these securities. Based on current market conditions, it is
likely that auction failures will continue and could result in
either temporary or other-than-temporary impairments of our ARS
holdings, which totaled $63.4 million (of which
$22.5 million had failed) as of February 29, 2008 (the
$56.8 million difference between the $120.2 million of
ARSs held at December 31, 2007 and the $63.4 million
held as of February 29, 2008 represents successful net
sales of these securities at par value). The Company has the
ability and intent to hold these securities until a successful
auction occurs and the ARSs are liquidated at par value. If in
the future we determine that any decline in value of the ARSs is
other-than-temporary, we would have to recognize the loss in our
statement of income, which could have a material impact on our
operating results in the period it is recognized. Further, as
the funds associated with the ARSs may not be accessible for in
excess of twelve months because of continued failed auctions or
our inability to find a buyer outside of the auction process, we
may classify these securities as long-term assets in our
consolidated balance sheet as of March 31, 2008, or
thereafter.
This list of uncertainties and risks is not exhaustive. Certain
factors that could affect our actual future activities and
results and cause actual results to differ materially from those
contained in forward-looking statements made by us include, but
are not limited to, those discussed above as well as those
discussed in other reports filed by us with the SEC.
|
|
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
125,000 square feet of office space in Cambridge,
Massachusetts, 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. We have the option to extend
this lease for an additional five-year term.
We also rent office space in Foster City, California, Amsterdam,
Dallas, Frankfurt, London and Paris. We also lease office space
on a relatively short term basis in various other locations in
the United States, 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.
In June, 2007, the SEC notified us that it had commenced a
formal inquiry into our historical stock option granting
practices. In December 2006, prior to the resignation of our
chief financial officer in connection with irregularities
involving a stock option grant awarded to him in 1999, we
advised the SEC of our voluntary internal
10
investigation. We have been cooperating fully with the SEC since
then and will continue to do so as the inquiry moves forward. We
are unable to predict what, if any, consequences the SEC
investigation may have on us or on our results of operations.
|
|
Item 4.
|
Submission
Of Matters To A Vote Of Security Holders
|
Our Annual Meeting of Stockholders was held on December 28,
2007. At this meeting, Henk W. Broeders and George R. Hornig
were re-elected as Class II Directors. Below are the votes
by which each Director was elected:
|
|
|
|
|
|
|
|
|
|
|
Total Vote for Directors
|
|
|
Total Vote Withheld from Directors
|
|
|
Henk W. Broeders
|
|
|
20,152,626
|
|
|
|
1,544,734
|
|
George R. Hornig
|
|
|
18,755,409
|
|
|
|
2,941,951
|
|
Executive
Officers
The following table sets forth information about our executive
officers as of March 3, 2008.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
George F. Colony
|
|
|
54
|
|
|
Chairman of the Board, Chief Executive Officer
|
Michael A. Doyle
|
|
|
52
|
|
|
Chief Financial Officer and Treasurer
|
Brian E. Kardon
|
|
|
50
|
|
|
Chief Strategy and Marketing Officer
|
Elizabeth Lemons
|
|
|
51
|
|
|
Chief People Officer
|
Gail S. Mann, Esq.
|
|
|
56
|
|
|
Chief Legal Officer and Secretary
|
Julie Meringer
|
|
|
39
|
|
|
Managing Director, Information Technology Client Group
|
Mark R. Nemec
|
|
|
38
|
|
|
Managing Director, Technology Industry Client Group
|
George Orlov
|
|
|
50
|
|
|
Chief Information Officer and Chief Technology Officer
|
Charles Rutstein
|
|
|
35
|
|
|
Chief Operating Officer
|
Dennis van Lingen
|
|
|
43
|
|
|
Managing Director, Marketing & Strategy Client Group; Chief
EMEA (Europe, Middle East, and Africa) Officer
|
George F. Colony, Forresters founder, has served as
Chairman of the Board of Directors and Chief Executive Officer
since the Companys inception in July 1983, and as
President since September 2001 and from
1983-2000.
Michael A. Doyle began serving as the Companys
Chief Financial Officer and Treasurer effective
September 24, 2007. Prior to joining the Company,
Mr. Doyle was Chief Financial Officer of Easylink Services
Corporation, a publicly traded telecommunications messaging
provider, since 2004. Prior to joining Easylink, Mr. Doyle
was the Chief Financial Officer for North America of
Dun & Bradstreet Corporation from 2002 to 2004, and
from 1997 to 2002, he held various senior financial and
marketing positions with Cendant Corporation.
Brian E. Kardon became Forresters Chief Strategy
and Marketing Officer in January 2003. Prior to joining
Forrester, Mr. Kardon was President of First Act, Inc., a
childrens musical instrument company. From 1999 to 2001
Mr. Kardon served as the Executive Vice President at
HomePortfolio, an online marketplace for home design and from
1995 to 1999, he was Senior Vice President and Chief Marketing
Officer of Cahners Business Information (now Reed Business
Information). We have announced that Mr. Kardon has
resigned effective April 7, 2008.
Elizabeth Lemons became Forresters Chief People
Officer in March 2007. Ms. Lemons joined the Company in
June 2006 as Vice President, Strategic Growth for the Americas.
Previously, she was Director of Human Resources at the Joslin
Diabetes Center from 2005 to June 2006 and Vice President and
Partner at Executive Destinations Inc., an executive career
management firm, from
1997-2005.
Gail S. Mann, Esq. became Forresters Chief
Legal Officer and Secretary in February 2004. Ms. Mann
previously was of counsel to the law firm of Morse,
Barnes-Brown & Pendleton, P.C. from 2002 until
joining
11
Forrester, Vice President and Associate General Counsel of
Harcourt General, Inc., a global multimedia publishing company,
and its affiliate, The Neiman Marcus Group, a high end specialty
retailer, from
1999-2001,
and Vice President and Assistant General Counsel of Digital
Equipment Corporation from 1994 to 1998.
Julie Meringer became Managing Director of
Forresters Information Technology Client Group in January
2007. Ms. Meringer joined Forrester in 1991. From 2005
until 2007, Ms. Meringer served as Vice President of
Forresters consulting group and previously was a Vice
President for our CIO Group, one of the Forrester Leadership
Boards, from 2002 to 2004. Prior to 2002, Ms. Meringer held
various leadership roles in our London office and research
organization.
Mark R. Nemec, Ph.D. became Managing Director of
Forresters Technology Industry Client Group in January
2007. Previously, Mr. Nemec was Vice President, Forrester
Leadership Boards in 2006, and prior to that, Vice President,
Council Manager. Prior to joining Forrester in 2005,
Mr. Nemec was a senior director at the Advisory Board
Company, a research consultancy based in Washington, D.C from
2000 to 2005. Previously, Mr. Nemec was on the faculty of
Davidson College from 1999 to 2000.
George M. Orlov became Forresters Chief Information
Officer and Chief Technology Officer in December 2004. Prior to
joining Forrester, Mr. Orlov was Chief Information Officer
and Chief Technology Officer for Callisma, Inc., a professional
services firm focused on technology infrastructure that was
acquired by SBC Communications in 2003. Prior to 2003,
Mr. Orlov served as Vice President and Chief Information
Officer at Pacific Gas & Electric from 1998 to 2000,
and prior thereto, he held the same position with Commonwealth
Edison Company from 1996 to 1998.
Charles Rutstein became Forresters Chief Operating
Officer effective January 1, 2007. Mr. Rutstein joined
Forrester in 1999. In 2006, Mr. Rutstein served as
President, Forrester Americas. In 2005, he served as our Vice
President, Community and previously was our Vice President of
Consulting from 2003 to 2005. Prior to 2003, Mr. Rutstein
held various leadership positions in our research organization.
Before joining Forrester, Mr. Rutstein served as a
principal consultant with Price Waterhouse Management Consulting
Services.
Dennis van Lingen became Managing Director of our
Marketing and Strategy Client Group in January 2007.
Mr. Van Lingen also serves as Forresters Chief
Europe, Middle East, and Africa (EMEA) Officer. He was formerly
President of EMEA from May 2006 to December 2006 and Vice
President of Marketing for the Americas from January 2004 to May
2006. Mr. Van Lingen joined Forrester in 2000 as Director
of Marketing for Europe. Before joining Forrester, Mr. Van
Lingen worked as a senior manager in the marketing and public
relations divisions of Nissan Europe for 10 years.
PART II
|
|
Item 5(a).
|
Market
For Registrants Common Equity And Related Stockholder
Matters
|
Our common stock is traded on the Nasdaq Stock Market under the
symbol FORR. We did not declare or pay any dividends
during the fiscal years ended December 31, 2006 and 2007.
We anticipate that future earnings, if any, will be retained for
the development of our business, and we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.
As of March 3, 2008 there were approximately 48
stockholders of record of our common stock. On March 3,
2008 the closing price of our common stock was $26.79 per share.
The following table represents the ranges of high and low sale
prices of our common stock for the years ended December 31,
2006 and December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
23.15
|
|
|
$
|
17.76
|
|
|
$
|
29.57
|
|
|
$
|
25.00
|
|
Second Quarter
|
|
$
|
28.00
|
|
|
$
|
20.31
|
|
|
$
|
31.36
|
|
|
$
|
25.35
|
|
Third Quarter
|
|
$
|
29.55
|
|
|
$
|
23.55
|
|
|
$
|
28.07
|
|
|
$
|
21.51
|
|
Fourth Quarter
|
|
$
|
32.32
|
|
|
$
|
26.29
|
|
|
$
|
28.39
|
|
|
$
|
20.28
|
|
12
The following graph contains the cumulative stockholder return
on our common stock during the period from December 31,
2002 through December 31, 2007 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Total Return
|
|
|
|
12/31/2002
|
|
|
12/31/2003
|
|
|
12/31/2004
|
|
|
12/31/2005
|
|
|
12/31/2006
|
|
|
12/31/2007
|
Forrester Research
|
|
|
|
100
|
|
|
|
|
114.00
|
|
|
|
|
115.22
|
|
|
|
|
120.42
|
|
|
|
|
174.12
|
|
|
|
179.96
|
|
Nasdaq Stock Market (US Companies)
|
|
|
|
100
|
|
|
|
|
149.52
|
|
|
|
|
162.72
|
|
|
|
|
166.18
|
|
|
|
|
182.57
|
|
|
|
197.98
|
|
Russell 2000
|
|
|
|
100
|
|
|
|
|
145.37
|
|
|
|
|
170.08
|
|
|
|
|
175.73
|
|
|
|
|
205.61
|
|
|
|
199.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 5(c). Changes in Securities and Use of Proceeds
In February 2005, the Board of Directors authorized the
repurchase of up to an additional $50 million of our common
stock (the stock repurchase program), and in October
2007, we announced that the Board of Directors authorized an
additional $50 million for this purpose. During the quarter
ended December 31, 2007, we purchased the following shares
of our common stock under the stock repurchase program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Value that May
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Yet be Purchased
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Part of Publicly
|
|
|
Under the Stock
|
|
Period
|
|
Shares Purchased(1)
|
|
|
Paid per Share
|
|
|
Announced Programs
|
|
|
Repurchase Program
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
October 1 October 31
|
|
|
|
|
|
|
|
|
|
|
852,821
|
|
|
$
|
64,166
|
|
November 1 November 30
|
|
|
39,700
|
|
|
$
|
26.24
|
|
|
|
892,521
|
|
|
$
|
63,124
|
|
December 1 December 31
|
|
|
132,300
|
|
|
$
|
26.85
|
|
|
|
1,024,821
|
|
|
$
|
59,572
|
|
|
|
|
172,000
|
|
|
$
|
26.71
|
|
|
|
1,024,821
|
|
|
$
|
59,572
|
|
|
|
|
(1) |
|
All purchases of our common stock were made under the previously
announced stock repurchase program. |
13
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research services
|
|
$
|
92,289
|
|
|
$
|
93,750
|
|
|
$
|
96,699
|
|
|
$
|
114,876
|
|
|
$
|
131,163
|
|
Advisory services and other
|
|
|
33,710
|
|
|
|
43,874
|
|
|
|
54,700
|
|
|
|
66,597
|
|
|
|
80,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
125,999
|
|
|
|
137,624
|
|
|
|
151,399
|
|
|
|
181,473
|
|
|
|
212,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and fulfillment
|
|
|
49,006
|
|
|
|
52,456
|
|
|
|
60,461
|
|
|
|
73,268
|
|
|
|
81,608
|
|
Selling and marketing
|
|
|
40,127
|
|
|
|
46,078
|
|
|
|
51,050
|
|
|
|
59,626
|
|
|
|
71,830
|
|
General and administrative
|
|
|
14,084
|
|
|
|
16,224
|
|
|
|
18,039
|
|
|
|
22,859
|
|
|
|
30,749
|
|
Depreciation
|
|
|
6,256
|
|
|
|
3,691
|
|
|
|
3,539
|
|
|
|
3,618
|
|
|
|
3,986
|
|
Amortization of intangible assets
|
|
|
8,778
|
|
|
|
6,461
|
|
|
|
3,527
|
|
|
|
2,060
|
|
|
|
1,232
|
|
Reorganization costs
|
|
|
2,594
|
|
|
|
8,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration costs
|
|
|
1,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
121,900
|
|
|
|
133,306
|
|
|
|
136,616
|
|
|
|
161,431
|
|
|
|
189,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
4,099
|
|
|
|
4,318
|
|
|
|
14,783
|
|
|
|
20,042
|
|
|
|
22,651
|
|
Other income and realized gains on securities, net
|
|
|
1,598
|
|
|
|
4,220
|
|
|
|
4,722
|
|
|
|
6,052
|
|
|
|
7,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision
|
|
|
5,697
|
|
|
|
8,538
|
|
|
|
19,505
|
|
|
|
26,094
|
|
|
|
30,004
|
|
Income tax provision
|
|
|
1,738
|
|
|
|
2,860
|
|
|
|
7,243
|
|
|
|
10,037
|
|
|
|
11,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,959
|
|
|
|
5,678
|
|
|
|
12,262
|
|
|
|
16,057
|
|
|
|
18,943
|
|
(Loss) income from discontinued operations, net of taxes
|
|
|
|
|
|
|
(815
|
)
|
|
|
(318
|
)
|
|
|
300
|
|
|
|
|
|
Gain on sale of discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,959
|
|
|
$
|
4,863
|
|
|
$
|
11,944
|
|
|
$
|
17,756
|
|
|
$
|
18,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
$
|
0.18
|
|
|
$
|
0.25
|
|
|
$
|
0.58
|
|
|
$
|
0.72
|
|
|
$
|
0.82
|
|
Basic (loss) income per common share from discontinued operations
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
0.18
|
|
|
$
|
0.22
|
|
|
$
|
0.56
|
|
|
$
|
0.80
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from continuing operations
|
|
$
|
0.17
|
|
|
$
|
0.25
|
|
|
$
|
0.56
|
|
|
$
|
0.70
|
|
|
$
|
0.80
|
|
Diluted (loss) income per common share from discontinued
operations
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
$
|
0.17
|
|
|
$
|
0.22
|
|
|
$
|
0.55
|
|
|
$
|
0.77
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
22,555
|
|
|
|
22,024
|
|
|
|
21,413
|
|
|
|
22,195
|
|
|
|
23,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
22,891
|
|
|
|
22,464
|
|
|
|
21,876
|
|
|
|
22,973
|
|
|
|
23,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data as of December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Cash, cash equivalents, and available for sale securities
|
|
$
|
126,733
|
|
|
$
|
127,440
|
|
|
$
|
132,268
|
|
|
$
|
207,833
|
|
|
$
|
248,974
|
|
Working capital
|
|
$
|
77,331
|
|
|
$
|
82,457
|
|
|
$
|
99,005
|
|
|
$
|
166,274
|
|
|
$
|
209,527
|
|
Deferred revenue
|
|
$
|
68,630
|
|
|
$
|
72,357
|
|
|
$
|
86,663
|
|
|
$
|
99,875
|
|
|
$
|
111,418
|
|
Total assets
|
|
$
|
308,524
|
|
|
$
|
300,093
|
|
|
$
|
308,342
|
|
|
$
|
384,143
|
|
|
$
|
426,357
|
|
Total stockholders equity
|
|
$
|
196,324
|
|
|
$
|
188,641
|
|
|
$
|
189,347
|
|
|
$
|
244,905
|
|
|
$
|
275,016
|
|
|
|
Item 7.
|
Managements
Discussion and Analysis Of Financial Condition And Results Of
Operations
|
Overview
We derive revenues from memberships to our research products and
from our advisory services and events available through what we
refer to as Research, Data, Consulting, and Community offerings.
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
offered through our Data, Consulting and Community products and
services to supplement their memberships to our research.
Billings attributable to advisory services are initially
recorded as deferred revenue and are recognized as revenue when
the services are performed. Event billings are also initially
recorded as deferred revenue and are recognized as revenue upon
completion of each event. Consequently, changes in the number
and value of client contracts, both net decreases as well as net
increases, impact our revenues and other results over the terms
of the contracts.
Our primary operating expenses consist of cost of services and
fulfillment, selling and marketing expenses, general and
administrative expenses, depreciation, and amortization of
intangible assets. Cost of services and fulfillment represents
the costs associated with the production and delivery of our
products and services, and it includes compensation for research
personnel including non-cash stock-based compensation expense,
and all associated editorial, travel, and support services.
Selling and marketing expenses include salaries, bonuses,
employee benefits, non-cash stock-based compensation expense,
travel expenses, promotional costs, sales commissions, 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 strategy groups and
our other administrative functions, including salaries, bonuses,
employee benefits, and non-cash stock-based compensation
expense. Overhead costs are allocated over these categories
according to the number of employees in each group. Amortization
of intangible assets represents the cost of amortizing acquired
intangible assets such as customer relationships.
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. Deferred revenue reflects
billings in advance of revenue recognition as of the measurement
date. 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. No single client accounted for more than 2% of
agreement value at December 31, 2007. We calculate client
retention as the number of client companies who renewed with
memberships during the most recent twelve- month period as a
percentage of those that would have expired during the same
period. We calculate dollar retention as a 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.
We calculate enrichment as a percentage of the dollar value of
client membership contracts renewed during the period to the
15
dollar value of the corresponding expiring contracts. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
Year Ended December 31,
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2006
|
|
|
2007
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Deferred Revenue (in millions at year-end)
|
|
$
|
99.9
|
|
|
$
|
111.4
|
|
|
$
|
11.5
|
|
|
|
12
|
%
|
Agreement Value (in millions at year-end)
|
|
$
|
172.8
|
|
|
$
|
197.2
|
|
|
$
|
24.4
|
|
|
|
14
|
%
|
Client Retention
|
|
|
77.0
|
%
|
|
|
75.0
|
%
|
|
|
(2.0
|
)
|
|
|
(2
|
)%
|
Dollar Retention
|
|
|
86.0
|
%
|
|
|
85.0
|
%
|
|
|
(1.0
|
)
|
|
|
(1
|
)%
|
Enrichment
|
|
|
112.0
|
%
|
|
|
105.0
|
%
|
|
|
(7.0
|
)
|
|
|
(6
|
)%
|
Number of clients (at year-end)
|
|
|
2,312
|
|
|
|
2,468
|
|
|
|
156
|
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
Year Ended December 31,
|
|
|
Increase
|
|
|
Increase}
|
|
|
|
2005
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Deferred Revenue (in millions at year-end)
|
|
$
|
86.7
|
|
|
$
|
99.9
|
|
|
$
|
13.2
|
|
|
|
15
|
%
|
Agreement Value (in millions at year-end)
|
|
$
|
148.6
|
|
|
$
|
172.8
|
|
|
$
|
24.2
|
|
|
|
16
|
%
|
Client Retention
|
|
|
78.0
|
%
|
|
|
77.0
|
%
|
|
|
(1.0
|
)
|
|
|
(1
|
)%
|
Dollar Retention
|
|
|
87.0
|
%
|
|
|
86.0
|
%
|
|
|
(1.0
|
)
|
|
|
(1
|
)%
|
Enrichment
|
|
|
105.0
|
%
|
|
|
112.0
|
%
|
|
|
7.0
|
|
|
|
7
|
%
|
Number of clients (at year-end)
|
|
|
2,007
|
|
|
|
2,312
|
|
|
|
305
|
|
|
|
15
|
%
|
The increase in deferred revenue and agreement value from 2006
to 2007 is primarily due to increases in the number of clients
and in the average contract size. The average contract for
annual memberships for research only in force at
December 31, 2007 was approximately $44,800, an increase of
3% from $43,500 at December 31, 2006. The average contract
for an annual membership for research which also included
advisory services in force at December 31, 2007 was
approximately $89,800, an increase of 2% from $87,900 at
December 31, 2006. The increase in average contract size is
due to an increased demand for our products. The client
retention decrease reflects a greater proportion of new business
contracts in 2006 than previously experienced, which
historically, and in 2007, have renewed at lower rates. The
decrease in client retention as well as in enrichment also
reflects lower than historical renewal and enrichment rates in
Europe and Asia Pacific due in part to organizational
re-alignment.
The increase in deferred revenue and agreement value from 2005
to 2006 is primarily due to increases in the number of clients
and in the average contract size. The average contract for
annual memberships for research only in force at
December 31, 2006 was approximately $43,500, an increase of
7% from $40,600 at December 31, 2005. The average contract
for an annual membership for research which also included
advisory services in force at December 31, 2006 was
approximately $87,900, an increase of 2% from $85,800 at
December 31, 2005. Increases in average contract sizes and
enrichment in 2006 reflect increasing demand for our products,
reduced discounting and increased prices.
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, non-cash stock-based
compensation, allowance for doubtful accounts, non-marketable
investments, goodwill and other intangible assets and income
taxes. Management bases its estimates on historical experience
and various other 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.
16
We consider the following accounting policies to be those that
require the most subjective judgment or those most important to
the portrayal of our financial condition and results of
operations. 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 in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on
Form 10-K,
beginning on
page F-6.
|
|
|
|
|
Revenue Recognition. We generate revenues from
licensing our research, performing advisory services, hosting
events and conducting teleconferences. We execute contracts that
govern the terms and conditions of each arrangement. 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 during the
period in which the customer receives the agreed upon
deliverable. Forrester Teleconferences revenue and reimbursed
out-of-pocket expenses are recorded as advisory service
revenues. Events revenues are recognized upon completion of the
event. Annual memberships which include access to our research,
unlimited phone or email analyst inquiry, unlimited
participation in Forresters 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.
|
While historical business practice had been to offer contracts
with a non-cancelable term, effective April 1, 2005, we
began offering clients a money-back guarantee, which gives
clients the right to cancel their membership contracts prior to
the end of the contract term. For contracts that can be
terminated during the contract term, refunds would be issued for
unused products or services. Furthermore, our revenue
recognition determines the timing of commission expenses, which
are deferred and then recorded as expense as the related revenue
is recognized. We evaluate the recoverability of deferred
commissions at each balance sheet date.
|
|
|
|
|
Non-Cash Stock-Based Compensation. Effective
January 1, 2006, we adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123
(revised 2004), Share-Based Payment
(SFAS No. 123R). SFAS No. 123R
requires the recognition of the fair value of stock-based
compensation in net income. To determine the fair value of
stock-based compensation, SFAS No. 123R requires
significant judgment and the use of estimates, particularly
surrounding assumptions such as stock price volatility and
expected option lives and forfeiture rates. The Company will
record additional expense if the actual forfeitures are lower
than estimated and will record a recovery of prior expense if
the actual forfeitures are higher than estimated. The actual
expense recognized over the vesting period will only be for
those shares that vest. The development of an expected life
assumption involves projecting employee exercise behaviors
(expected period between stock option vesting date and stock
option exercise dates). The assumptions used in calculating the
fair value of share-based awards represent managements
best estimates, but 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. If our actual forfeiture
rate is materially different from our estimate, the actual
stock-based compensation expense could be significantly
different from what we have recorded in the current period.
Prior to SFAS No. 123R adoption, we accounted for
share-based payments under APB No. 25. APB 25 requires the
Company to determine the appropriate measurement date for
purposes of calculating non-cash stock based compensation
expense. The use of different measurement dates may have
resulted in more or less compensation expense to the Company.
|
|
|
|
Allowance for Doubtful Accounts. We maintain
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, management makes
judgments regarding the collectibility of accounts receivable by
specifically analyzing historical bad debts, customer
concentrations, current economic trends, and changes in our
customer payment terms. If the financial condition of our
customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may
|
17
|
|
|
|
|
be required and if the financial condition of our customers were
to improve, the allowances may be reduced accordingly.
|
|
|
|
|
|
Non-Marketable Investments. We hold minority
interests in technology-related companies and equity investment
funds. These investments are in companies that are not publicly
traded, and, therefore, because no established market for these
securities exists, the estimate of the fair value of our
investments requires significant judgment. We have a policy in
place to review the fair value of our investments on a regular
basis to evaluate the carrying value of the investments in these
companies, which consists primarily of reviewing the
investees revenue and earnings trends relative to
predefined milestones and overall business prospects. 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.
|
|
|
|
Goodwill and Intangible Assets and Other Long-Lived
Assets. We have goodwill and identified
intangible assets with finite lives related to our acquisitions.
SFAS No. 142, Goodwill and Other Intangible
Assets, requires that goodwill and intangible assets
with indefinite lives 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 the reporting units carrying value to the
reporting units fair value. Determining the reporting
units fair value requires us to make estimates on market
conditions and operational performance. Absent an event that
indicates a specific impairment may exist, we have selected
November 30th as the date of performing the annual
goodwill impairment test. 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 financial condition and results of operations.
|
Intangible assets with finite lives consist of acquired customer
relationships, research content and trademarks and are valued
according to the future cash flows they are estimated to
produce. These assigned values are amortized on an accelerated
basis which matches the periods in which those cash flows are
estimated to be produced. 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
identifiable 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 the
estimated fair value of the asset.
|
|
|
|
|
Income Taxes. We have deferred tax assets
related to temporary differences between the financial statement
and tax bases of assets and liabilities as well as operating
loss carryforwards (primarily from stock option exercises and
the acquisition of Giga Information Group, Inc. in 2003). In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in
which those temporary differences become deductible and before
the carryforwards expire. Although realization is not assured,
based upon the level of our historical taxable income and
projections for our 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 we will realize the benefits of these deferred tax
assets. The amount of the deferred tax asset considered
realizable, however, could be reduced if our estimates of future
taxable income during the carry-forward periods are incorrect.
In July 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No.
(FIN) 48, Accounting for Uncertainty in
Income Taxes an interpretation of
SFAS Statement No. 109,
(FIN 48) which seeks to reduce the
significant diversity in practice associated with certain
aspects of measurement and recognition in accounting for income
taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement
|
18
|
|
|
|
|
recognition and measurement of a tax position taken or expected
to be taken in a tax return, and also provides guidance on
derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. The
provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006. Upon adoption, the
cumulative effect of any changes in net assets resulting from
the application of FIN 48 was recorded as an adjustment to
retained earnings. We adopted FIN 48 in the first quarter
of 2007 and the adoption of FIN 48 did not have a material
impact on the Companys financial position or results of
operations.
|
|
|
|
|
|
Valuation and impairment of available for sale
securities. The fair value of our available for
sale securities is generally determined from quoted market
prices received from pricing services based upon market
transactions at fair value. We also have investments in auction
rate securities collateralized by student loans and municipal
debt. The Companys auction rate securities are recorded at
cost, which approximate fair market value due to their variable
interest rates, which typically reset through an auction process
every seven to thirty-five days. This auction mechanism
generally allows existing investors to roll over their holdings
and continue to own their securities or liquidate their holdings
by selling their securities at par value. Because of these short
intervals between interest reset dates, we monitor the auctions
to ensure they are successful, which provides evidence that
these investments that are carried at par value approximates
their fair value. To the extent an auction were to fail and the
securities were not liquid, we would need to seek other
alternatives to determine the fair value of these securities,
which may not be based on quoted market transactions. We did not
need to seek alternative methods of valuation for our auction
rate securities held as of December 31, 2007, as all of our
auction rate securities had successful auctions up to
December 31, 2007 as well as in January 2008.
|
Discontinued
Operations
On September 26, 2006, we completed the sale of our
Ultimate Consumer Panel (UCP) product line to
Lightspeed Online Research, Inc. for $2.5 million in cash,
of which $2.25 million was paid at the closing date subject
to a working capital adjustment, with the remainder paid nine
months after the closing date. The sale resulted in a gain on
the disposal (net of $1.0 million of income tax expense) of
$1.4 million. The sale included the transfer of certain
assets, including all UCP customer contracts, historical data,
intellectual property, six employees, and licenses as well as
certain liabilities arising in the normal course of business.
Forrester sold the product line as it was no longer a strategic
fit with its core focus on broad, global business and consumer
technology data. The UCP product line had gross revenues for the
years 2006 and 2005 of $1.8 million and $1.8 million,
respectively. Net income from the discontinued operations was
$300,000 (net of $204,000 of income tax expense) for the year
ended December 31, 2006, and net loss from the discontinued
operations was $318,000 (net of $219,000 of income tax benefit)
for the year ended December 31, 2005. The financial results
of the UCP product line are reported as a single line item of
(Loss) income from discontinued operations for all
periods presented. The gross revenue and net income numbers
noted above for UCP for 2006 only include amounts recorded
through September 26, 2006 as UCP was disposed of on that
date.
19
Results
of Operations for the years ended December 31, 2005, 2006
and 2007
The following table sets forth selected financial data as a
percentage of total revenues for the years noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Research services
|
|
|
64
|
%
|
|
|
63
|
%
|
|
|
62
|
%
|
Advisory services and other
|
|
|
36
|
|
|
|
37
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Cost of services and fulfillment
|
|
|
40
|
|
|
|
40
|
|
|
|
38
|
|
Selling and marketing
|
|
|
34
|
|
|
|
33
|
|
|
|
34
|
|
General and administrative
|
|
|
12
|
|
|
|
13
|
|
|
|
14
|
|
Depreciation
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Amortization of intangible assets
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
10
|
|
|
|
11
|
|
|
|
11
|
|
Other income, net
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
Gains on sales of available-for-sale securities, net
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Gains (impairments) from non-marketable investments
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision
|
|
|
13
|
|
|
|
14
|
|
|
|
14
|
|
Income tax provision
|
|
|
5
|
|
|
|
5
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
8
|
|
|
|
9
|
|
|
|
9
|
|
Gain on sale of discontinued operations, net of taxes
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
8
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
compared to 2006
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Increase
|
|
|
|
2006
|
|
|
2007
|
|
|
Increase
|
|
|
Percentage
|
|
|
Revenues (dollars in millions)
|
|
$
|
181.5
|
|
|
$
|
212.1
|
|
|
$
|
30.6
|
|
|
|
17
|
%
|
Revenues from research services
|
|
$
|
114.9
|
|
|
$
|
131.2
|
|
|
$
|
16.3
|
|
|
|
14
|
%
|
Revenues from advisory services and other
|
|
$
|
66.6
|
|
|
$
|
80.9
|
|
|
$
|
14.3
|
|
|
|
22
|
%
|
Revenue Attributable to customers outside of the US
|
|
$
|
53.2
|
|
|
$
|
62.3
|
|
|
$
|
9.1
|
|
|
|
17
|
%
|
Percentage of Revenue Attributable to customers outside of the US
|
|
|
29
|
%
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
Number of clients (at end of period)
|
|
|
2,312
|
|
|
|
2,468
|
|
|
|
156
|
|
|
|
7
|
%
|
Number of research employees (at end of period)
|
|
|
291
|
|
|
|
336
|
|
|
|
45
|
|
|
|
15
|
%
|
Number of events
|
|
|
9
|
|
|
|
13
|
|
|
|
4
|
|
|
|
44
|
%
|
The increase in total revenues and in research revenues is
primarily due to an increase in the number of clients in 2007 as
compared to 2006, increased demand for certain of our syndicated
research products, an increase in sales personnel, favorable
exchange rates, reduced discounting and increased prices. The
increase in advisory services and other revenues is primarily
attributable to increased demand for more customized services
and increased research personnel available to deliver advisory
services as well as to an increase in event sponsorship and
attendance created in part by the increase in number of events.
No single client company accounted for more than 2% of revenues
during 2006 or 2007. Without the effects of foreign currency
translation, total revenues would have increased from 2006 to
2007 by 15%.
20
Research services revenues as a percentage of total revenues
declined from 63% in 2006 to 62% in 2007 as customer demand
continued to shift towards advisory services, which is reflected
in the increase in advisory services and other revenues during
2007.
International revenues increased due to increased demand for our
products internationally.
Cost
of Services and Fulfillment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
|
|
Cost of services and fulfillment (dollars in millions)
|
|
$
|
73.3
|
|
|
$
|
81.6
|
|
|
$
|
8.3
|
|
|
|
11
|
%
|
|
|
|
|
Cost of services and fulfillment as a percentage of total
revenues
|
|
|
40
|
%
|
|
|
38
|
%
|
|
|
(2
|
)
|
|
|
(5
|
)%
|
|
|
|
|
Number of research and fulfillment employees (at end of period)
|
|
|
362
|
|
|
|
412
|
|
|
|
50
|
|
|
|
14
|
%
|
|
|
|
|
The increase in cost of services and fulfillment in 2007 as
compared to 2006 is primarily attributable to increased
compensation and benefit costs resulting from an increase in
average headcount and an increase in non-cash stock-based
compensation expense. The decrease in cost of services and
fulfillment as a percentage of total revenues is primarily
attributable to an increased revenue base.
Selling
and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2007
|
|
|
Increase
|
|
|
Increase
|
|
|
Selling and marketing expenses (dollars in millions)
|
|
$
|
59.6
|
|
|
$
|
71.8
|
|
|
$
|
12.2
|
|
|
|
21
|
%
|
Selling and marketing expenses as a percentage of total revenues
|
|
|
33
|
%
|
|
|
34
|
%
|
|
|
1
|
|
|
|
3
|
%
|
Selling and marketing employees (at end of period)
|
|
|
303
|
|
|
|
357
|
|
|
|
54
|
|
|
|
18
|
%
|
The increase in selling and marketing expenses, as well as the
increase in selling and marketing expenses as a percentage of
total revenues, in 2007 as compared to 2006 is primarily
attributable to increased compensation and benefit costs
resulting from an increase in new sales personnel, particularly
in the second half of the year with full productivity generally
not realized during 2007, and annual increases in compensation
costs, and to a lesser extent increase in travel costs related
to the increase in average headcount.
General
and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2007
|
|
|
Increase
|
|
|
Increase
|
|
|
General and administrative expenses (dollars in millions)
|
|
$
|
22.9
|
|
|
$
|
30.7
|
|
|
$
|
7.8
|
|
|
|
35
|
%
|
General and administrative expenses as a percentage of total
revenues
|
|
|
13
|
%
|
|
|
14
|
%
|
|
|
1
|
|
|
|
8
|
%
|
General and administrative employees (at end of period)
|
|
|
114
|
|
|
|
134
|
|
|
|
20
|
|
|
|
18
|
%
|
The increase in general and administrative expenses for 2007 as
compared to 2006, and in general and administrative expenses as
a percentage of total revenues in 2007 as compared to 2006 is
primarily attributable to increased professional costs
associated with the stock option investigation and restatement
of our financial statements. The increase in general and
administrative expenses is also due to increased compensation
expense resulting from an increase in average headcount.
21
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2007
|
|
|
Increase
|
|
|
Increase
|
|
|
Depreciation expense (dollars in millions)
|
|
$
|
3.6
|
|
|
$
|
4.0
|
|
|
$
|
0.4
|
|
|
|
11
|
%
|
Depreciation expense as a percentage of total revenues
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
The increase in depreciation expense is primarily attributable
to purchases of computer equipment and software during 2006 and
2007.
Amortization
of Intangible Assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2007
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Amortization expense (dollars in millions)
|
|
$
|
2.0
|
|
|
$
|
1.2
|
|
|
$
|
(0.8
|
)
|
|
|
(40
|
)%
|
Amortization expense as a percentage of total revenues
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
The decrease in amortization expense is primarily attributable
to the accelerated method we are using to amortize our acquired
intangible assets according to the expected cash flows to be
received from these assets.
Other Income, Net. Other income, net increased
47% to $8.4 million in 2007 from $5.7 million in 2006.
The increase is primarily due to an increase in the average cash
and investment balances available for investment in 2007 as
compared to 2006 and to higher returns on invested capital.
Gains on Sales of Available-for-Sale
Securities. In 2007, we sold approximately
20,000 shares of ComScore, Inc. received proceeds of
approximately $655,000, and recognized a gain of approximately
$603,000 related to the sale.
Gains (Impairments) from Non-Marketable
Investments. Gains on non-marketable investments
resulted from distributions from our investments and totaled
$537,000 during 2007 compared to $575,000 during 2006.
Impairments of non-marketable investments resulted in net
charges of $2.1 million during 2007 compared to $227,000
during 2006.
Gain on Sale of Discontinued Operations, Net of
Taxes. In 2006, we completed the sale of our
Ultimate Consumer Panel (UCP) product line to
Lightspeed Online Research, Inc. for $2.5 million in cash,
of which $2.25 million was paid at the closing date subject
to a working capital adjustment, with the remainder paid nine
months after the closing date. The sale resulted in a gain on
the disposal of discontinued operations of $1.4 million,
net of $1.0 million of taxes.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2006
|
|
|
2007
|
|
|
Increase
|
|
|
Increase
|
|
|
Provision for Income Taxes (dollars in millions)
|
|
$
|
10.0
|
|
|
$
|
11.1
|
|
|
$
|
1.1
|
|
|
|
11
|
%
|
During 2007, our effective tax rate was 36.9% compared to 38.5%
in 2006. The decrease in our effective tax rate for fiscal year
2007 resulted primarily from an increase in tax exempt
investment income and a decrease in the tax rate in Germany
offset by an increase in the state tax rate.
22
2006
Compared to 2005
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2005
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Revenues (dollars in millions)
|
|
$
|
151.4
|
|
|
$
|
181.5
|
|
|
$
|
30.1
|
|
|
|
20
|
%
|
Revenues from research services
|
|
$
|
96.7
|
|
|
$
|
114.9
|
|
|
$
|
18.2
|
|
|
|
19
|
%
|
Revenues from advisory services and other
|
|
$
|
54.7
|
|
|
$
|
66.6
|
|
|
$
|
11.9
|
|
|
|
22
|
%
|
Revenue Attributable to customers outside of the US
|
|
$
|
46.3
|
|
|
$
|
53.2
|
|
|
$
|
6.9
|
|
|
|
15
|
%
|
Percentage of Revenue Attributable to customers outside of the US
|
|
|
31
|
%
|
|
|
29
|
%
|
|
|
(2
|
)
|
|
|
(6
|
)%
|
Number of clients (at end of period)
|
|
|
2,007
|
|
|
|
2,312
|
|
|
|
305
|
|
|
|
15
|
%
|
Number of research employees (at end of period)
|
|
|
257
|
|
|
|
291
|
|
|
|
34
|
|
|
|
13
|
%
|
Number of events
|
|
|
8
|
|
|
|
9
|
|
|
|
1
|
|
|
|
13
|
%
|
The increase in total revenues as well as the increase in the
number of clients for 2006 as compared to 2005 is primarily
attributable to increased demand for certain of our syndicated
research products, reduced discounting and increased prices. The
increase in advisory services and other revenues is primarily
attributable to increased demand for more customized services
and increased research personnel available to deliver advisory
services as well as to an increase in event sponsorship and
attendance. No single client company accounted for more than 2%
of revenues during 2005 or 2006. The effects of foreign currency
translation on total revenues when comparing 2005 to 2006 were
negligible.
Research services revenues as a percentage of total revenues
declined from 64% in 2005 to 63% in 2006 as customer demand
continued to shift towards advisory services, which is reflected
in the increase in advisory services and other revenues during
2006.
International revenues increased due to increased demand for our
products internationally. The decrease in international revenues
as a percentage of total revenues is primarily attributable to
demand for our products and services growing at a faster rate
domestically than internationally.
Cost
of Services and Fulfillment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2005
|
|
|
2006
|
|
|
Increase
|
|
|
Increase
|
|
|
Cost of services and fulfillment (dollars in millions)
|
|
$
|
60.4
|
|
|
$
|
73.3
|
|
|
$
|
12.9
|
|
|
|
21
|
%
|
Cost of services and fulfillment as a percentage of total
revenues
|
|
|
40
|
%
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
Number of research and fulfillment employees (at end of period)
|
|
|
328
|
|
|
|
362
|
|
|
|
34
|
|
|
|
10
|
%
|
The increase in cost of services and fulfillment in 2006 as
compared to 2005 is primarily attributable to increased
compensation and benefit costs resulting from an increase in
average headcount and annual increases in compensation costs,
including an increase in non-cash stock-based compensation
expense related to the adoption of SFAS No. 123R when
compared to the non-cash stock-based compensation expense
recognized in 2005 under APB No. 25 for the March 31,
2005 performance-based grant and the mispriced options for which
measurement dates were corrected as a result of the stock option
practices investigation.
23
Selling
and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
Increase
|
|
|
|
2005
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Selling and marketing expenses (dollars in millions)
|
|
$
|
51.0
|
|
|
$
|
59.6
|
|
|
$
|
8.6
|
|
|
|
17
|
%
|
Selling and marketing expenses as a percentage of total revenues
|
|
|
34
|
%
|
|
|
33
|
%
|
|
|
(1
|
)
|
|
|
(3
|
)%
|
Selling and marketing employees (at end of period)
|
|
|
263
|
|
|
|
303
|
|
|
|
40
|
|
|
|
15
|
%
|
The increase in selling and marketing expenses in 2006 is
primarily attributable to increased compensation and benefit
costs resulting from an increase in average headcount and annual
increases in compensation costs, as well as to an increase in
non-cash stock-based compensation expense related to the
adoption of SFAS No. 123R when compared to the
non-cash stock-based compensation expense recognized in 2005
under APB No. 25 for the March 31, 2005
performance-based grant and the mispriced options for which
measurement dates were corrected as a result of the stock option
practices investigation. The decrease in selling and marketing
expenses as a percentage of total revenues is primarily
attributable to an increased revenue base.
General
and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2005
|
|
|
2006
|
|
|
Increase
|
|
|
Increase
|
|
|
General and administrative expenses (dollars in millions)
|
|
$
|
18.0
|
|
|
$
|
22.9
|
|
|
$
|
4.9
|
|
|
|
27
|
%
|
General and administrative expenses as a percentage of total
revenues
|
|
|
12
|
%
|
|
|
13
|
%
|
|
|
1
|
|
|
|
8
|
%
|
General and administrative employees (at end of period)
|
|
|
103
|
|
|
|
114
|
|
|
|
11
|
|
|
|
11
|
%
|
The increase in general and administrative expenses for 2006 as
compared to 2005, and in general and administrative expenses as
a percentage of total revenues in 2006 as compared to 2005 is
primarily attributable to increased compensation expense
resulting from an increase in average headcount and annual
increases in compensation costs, as well as to an increase in
non-cash stock-based compensation expense related to the
adoption of SFAS No. 123R when compared to the
non-cash stock-based compensation expense recognized in 2005
under APB No. 25 for the March 31, 2005
performance-based grant and the mispriced options for which
measurement dates were corrected as a result of the stock option
practices investigation.
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2005
|
|
|
2006
|
|
|
Increase
|
|
|
Increase
|
|
|
Depreciation expense (dollars in millions)
|
|
$
|
3.5
|
|
|
$
|
3.6
|
|
|
$
|
.1
|
|
|
|
2
|
%
|
Depreciation expense as a percentage of total revenues
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
The increase in depreciation expense is primarily attributable
to purchases of computer equipment and leasehold improvements
during 2005 and 2006.
Amortization of Intangible Assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Percentage
|
|
|
|
2005
|
|
|
2006
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
Amortization expense (dollars in millions)
|
|
$
|
3.5
|
|
|
$
|
2.1
|
|
|
$
|
(1.4
|
)
|
|
|
(42
|
)%
|
Amortization expense as a percentage of total revenues
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
(1
|
)
|
|
|
(50
|
)%
|
The decrease in amortization expense is primarily attributable
to the accelerated method we are using to amortize our acquired
intangible assets according to the expected cash flows to be
received from these assets.
Other Income, Net. Other income, net increased
90% to $5.7 million in 2006 from $3.0 million in 2005.
The increase is primarily due to an increase in the average cash
and investment balances available for investment in 2006 as
compared to 2005 and to higher returns on invested capital.
24
Gains on Sales of Available-for-Sale
Securities. In 2005, we sold the remaining total
of approximately 89,000 shares of Greenfield Online, Inc.,
received net proceeds of approximately $1.7 million, and
recognized a gain of approximately $1.5 million related to
the sale.
Gains from Non-Marketable Investments, Net of
Impairments. Gains on non-marketable investments
resulted from distributions from our investments and totaled
$575,000 during 2006 compared to $370,000 during 2005.
Impairments of non-marketable investments resulted in net
charges of $227,000 during 2006 compared to $164,000 during 2005.
Gain on Sale of Discontinued Operations, Net of
Taxes. In 2006, we completed the sale of our
Ultimate Consumer Panel (UCP) product line to
Lightspeed Online Research, Inc. for $2.5 million in cash,
of which $2.25 million was paid at the closing date subject
to a working capital adjustment, with the remainder paid nine
months after the closing date. The sale resulted in a gain on
the disposal of discontinued operations of $1.4 million,
net of $1.0 million of taxes.
Provision
for Income Taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute
|
|
|
Absolute
|
|
|
|
2005
|
|
|
2006
|
|
|
Increase
|
|
|
Increase
|
|
|
Provision for Income Taxes (dollars in millions)
|
|
$
|
7.2
|
|
|
$
|
10.0
|
|
|
$
|
2.8
|
|
|
|
39
|
%
|
During 2006, our effective tax rate was 38.5% compared to 37.1%
during 2005. The increase in our effective tax rate for 2006
resulted primarily from an increase in deferred tax expense due
to foreign currency translation losses related to the deferred
tax liability of our German holding companies offset by an
increase in tax exempt investment income as a percentage of
total income.
Results
of Quarterly Operations
The following tables set forth a summary of our unaudited
quarterly operating results for each of our eight most recently
ended fiscal quarters. We have derived this information from our
unaudited interim consolidated financial statements, which, in
the opinion of our management, have been prepared on a basis
consistent with our financial statements contained elsewhere in
this Annual Report on
Form 10-K
and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation in accordance
with generally accepted accounting principles in the United
States when read in conjunction with our consolidated financial
statements and related notes included elsewhere in this annual
report. Historically, our total revenues, operating profit, and
net income in the fourth quarter have reflected the significant
positive contribution of revenues attributable to advisory
services performed. As a result, we have historically
experienced a decline in total revenues, operating profit, and
net income from the quarter ended December 31 to the quarter
ended March 31. Our quarterly operating results are not
necessarily indicative of future results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
|
(Amounts in thousands, except per share data)
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Research services
|
|
$
|
26,775
|
|
|
$
|
27,815
|
|
|
$
|
29,690
|
|
|
$
|
30,596
|
|
|
$
|
31,302
|
|
|
$
|
32,065
|
|
|
$
|
32,945
|
|
|
$
|
34,851
|
|
Advisory services and other
|
|
|
13,818
|
|
|
|
20,043
|
|
|
|
14,384
|
|
|
|
18,352
|
|
|
|
16,015
|
|
|
|
23,120
|
|
|
|
18,190
|
|
|
|
23,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
40,593
|
|
|
|
47,858
|
|
|
|
44,074
|
|
|
|
48,948
|
|
|
|
47,317
|
|
|
|
55,185
|
|
|
|
51,135
|
|
|
|
58,419
|
|
Cost of services and fulfillment
|
|
|
17,312
|
|
|
|
19,919
|
|
|
|
17,070
|
|
|
|
18,967
|
|
|
|
19,838
|
|
|
|
21,620
|
|
|
|
18,648
|
|
|
|
21,501
|
|
Selling and marketing
|
|
|
14,475
|
|
|
|
15,328
|
|
|
|
14,228
|
|
|
|
15,595
|
|
|
|
17,117
|
|
|
|
17,783
|
|
|
|
17,913
|
|
|
|
19,017
|
|
General and administrative
|
|
|
5,643
|
|
|
|
5,672
|
|
|
|
5,445
|
|
|
|
6,099
|
|
|
|
7,758
|
|
|
|
7,773
|
|
|
|
7,002
|
|
|
|
8,216
|
|
Depreciation
|
|
|
884
|
|
|
|
916
|
|
|
|
947
|
|
|
|
871
|
|
|
|
923
|
|
|
|
932
|
|
|
|
1,026
|
|
|
|
1,105
|
|
Amortization of intangible assets
|
|
|
652
|
|
|
|
472
|
|
|
|
474
|
|
|
|
462
|
|
|
|
392
|
|
|
|
293
|
|
|
|
293
|
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
1,627
|
|
|
|
5,551
|
|
|
|
5,910
|
|
|
|
6,954
|
|
|
|
1,289
|
|
|
|
6,784
|
|
|
|
6,253
|
|
|
|
8,326
|
|
Other income, net
|
|
|
958
|
|
|
|
1,326
|
|
|
|
1,652
|
|
|
|
1,768
|
|
|
|
1,866
|
|
|
|
2,112
|
|
|
|
2,175
|
|
|
|
2,219
|
|
Gains on sales of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
603
|
|
Gains (loss) from non-marketable investments, net of impairments
|
|
|
199
|
|
|
|
8
|
|
|
|
98
|
|
|
|
43
|
|
|
|
174
|
|
|
|
(1,962
|
)
|
|
|
98
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision
|
|
|
2,784
|
|
|
|
6,885
|
|
|
|
7,660
|
|
|
|
8,765
|
|
|
|
3,329
|
|
|
|
6,934
|
|
|
|
8,526
|
|
|
|
11,216
|
|
Income tax provision
|
|
|
1,446
|
|
|
|
3,237
|
|
|
|
2,828
|
|
|
|
2,526
|
|
|
|
1,299
|
|
|
|
2,432
|
|
|
|
1,729
|
|
|
|
5,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
|
(Amounts in thousands, except per share data)
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Income from continuing operations
|
|
$
|
1,338
|
|
|
$
|
3,648
|
|
|
$
|
4,832
|
|
|
$
|
6,239
|
|
|
$
|
2,030
|
|
|
$
|
4,502
|
|
|
$
|
6,797
|
|
|
$
|
5,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes
|
|
|
114
|
|
|
|
135
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,452
|
|
|
$
|
3,783
|
|
|
$
|
6,282
|
|
|
$
|
6,239
|
|
|
$
|
2,030
|
|
|
$
|
4,502
|
|
|
$
|
6,797
|
|
|
$
|
5,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
$
|
0.07
|
|
|
$
|
0.17
|
|
|
$
|
0.21
|
|
|
$
|
0.27
|
|
|
$
|
0.09
|
|
|
$
|
0.20
|
|
|
$
|
0.29
|
|
|
$
|
0.24
|
|
Basic income per common share from discontinued operations
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.06
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
0.08
|
|
|
$
|
0.18
|
|
|
$
|
0.27
|
|
|
$
|
0.27
|
|
|
$
|
0.09
|
|
|
$
|
0.20
|
|
|
$
|
0.29
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from continuing operations
|
|
$
|
0.06
|
|
|
$
|
0.17
|
|
|
$
|
0.21
|
|
|
$
|
0.26
|
|
|
$
|
0.09
|
|
|
$
|
0.19
|
|
|
$
|
0.29
|
|
|
$
|
0.24
|
|
Diluted income per common share from discontinued operations
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.06
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
$
|
0.07
|
|
|
$
|
0.18
|
|
|
$
|
0.27
|
|
|
$
|
0.26
|
|
|
$
|
0.09
|
|
|
$
|
0.19
|
|
|
$
|
0.29
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
|
(As a percentage of revenues)
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Research services
|
|
|
66
|
%
|
|
|
58
|
%
|
|
|
67
|
%
|
|
|
63
|
%
|
|
|
66
|
%
|
|
|
58
|
%
|
|
|
64
|
%
|
|
|
60
|
%
|
Advisory services and other
|
|
|
34
|
|
|
|
42
|
|
|
|
33
|
|
|
|
37
|
|
|
|
34
|
|
|
|
42
|
|
|
|
36
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Cost of services and fulfillment
|
|
|
43
|
|
|
|
42
|
|
|
|
39
|
|
|
|
39
|
|
|
|
42
|
|
|
|
39
|
|
|
|
36
|
|
|
|
37
|
|
Selling and marketing
|
|
|
36
|
|
|
|
32
|
|
|
|
32
|
|
|
|
32
|
|
|
|
36
|
|
|
|
32
|
|
|
|
35
|
|
|
|
32
|
|
General and administrative
|
|
|
14
|
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
|
16
|
|
|
|
14
|
|
|
|
14
|
|
|
|
14
|
|
Depreciation
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Amortization of intangible assets
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3
|
|
|
|
11
|
|
|
|
14
|
|
|
|
14
|
|
|
|
3
|
|
|
|
12
|
|
|
|
12
|
|
|
|
14
|
|
Other income, net
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
Gains on sales of available for sale investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Gains (loss) from non-marketable investments, net of impairments
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision
|
|
|
6
|
|
|
|
15
|
|
|
|
18
|
|
|
|
18
|
|
|
|
7
|
|
|
|
12
|
|
|
|
16
|
|
|
|
19
|
|
Income tax provision
|
|
|
3
|
|
|
|
7
|
|
|
|
6
|
|
|
|
5
|
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3
|
|
|
|
8
|
|
|
|
12
|
|
|
|
13
|
|
|
|
4
|
|
|
|
8
|
|
|
|
13
|
|
|
|
10
|
|
Income from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3
|
%
|
|
|
8
|
%
|
|
|
15
|
%
|
|
|
13
|
%
|
|
|
4
|
%
|
|
|
8
|
%
|
|
|
13
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources
We have financed our operations primarily through funds
generated from operations. Memberships for research services,
which constituted approximately 62% of our revenues during 2007,
are annually renewable and are generally payable in advance. We
generated cash from operating activities of $37.4 million
during 2007 and $45.8 million during 2006. The decrease in
cash provided by operating activities is primarily attributable
to a decrease in accrued expenses.
We used cash in investing activities of $25.3 million
during 2007 and $86.4 million during 2006. The decrease in
cash used in investing activities is primarily attributable to a
decrease in net purchases of available-for-sale securities. We
regularly invest excess funds in short- and intermediate-term
interest-bearing obligations of investment grade.
In June 2000, we committed to invest $20.0 million in two
technology-related private equity investment funds over an
expected period of five years. As of December 31, 2007, we
had contributed approximately $19.5 million to the funds.
The timing and amount of future contributions are entirely
within the discretion of the investment funds.
27
In July 2000, we adopted a cash bonus plan to pay bonuses, after
the return of invested capital, measured by the proceeds of a
portion of the share of net profits from these investments, if
any, to certain key employees who must remain employed with us
at the time any bonuses become payable under the plan, subject
to the terms and conditions of the plan. The principal purpose
of this cash bonus plan was to retain key employees by allowing
them to participate in a portion of the potential return from
Forresters technology-related investments if they remained
employed by the Company. The plan was established at a time when
technology and internet companies were growing significantly,
and providing incentives to retain key employees during that
time was important. To date, we have not paid any bonuses under
this plan.
In December 2003, we committed to invest an additional
$2.0 million over an expected period of two years in an
annex fund of one of the two private equity investment funds. As
of December 31, 2007, we had contributed $2.0 million
to the annex fund.
We generated $1.1 million in cash from financing activities
during 2007 and generated $30.5 million during 2006. The
decrease in cash from financing activities is primarily
attributable to a decrease in proceeds from the exercise of
employee stock options and the employee stock purchase plan.
In February 2005, our Board of Directors authorized an
additional $50.0 million to purchase common stock under the
existing stock repurchase program and in October 2007, our Board
of Directors authorized a further $50.0 million to purchase
common stock under the stock repurchase program. During 2006 and
2007, we repurchased 471,000 and 172,000 shares of common
stock at an aggregate cost of approximately $12.3 million
and $4.6 million, respectively. As of December 31,
2007, we had cumulatively repurchased approximately
5.0 million shares of common stock at an aggregate cost of
approximately $90.4 million.
In February 2008, certain Auction Rate Securities
(ARS) that we hold experienced failed auctions that
limited the liquidity of these securities. Based on current
market conditions, it is likely that auction failures will
continue that could result in either temporary or
other-than-temporary impairments of our ARS holdings, which
totalled $63.4 million (of which $22.5 million have
failed) as of February 29, 2008. The Company has the
ability and intent to hold these securities until a successful
auction occurs and the ARSs are liquidated at par value. If in
the future we determine that any decline in value of the ARSs is
other-than-temporary, we would have to recognize the loss in our
statement of operations, which could have a material impact on
our operating results in the period it is recognized. Further,
as the funds associated with the ARSs may not be accessible for
in excess of twelve months because of continued failed auctions
or our inability to find a buyer outside of the auction process,
we may classify these securities as long-term assets in our
consolidated balance sheet as of March 31, 2008, or
thereafter.
As of December 31, 2007, we had cash and cash equivalents
of $53.2 million and available-for-sale securities of
$195.8 million. We do not have a line of credit and do not
anticipate the need for one 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,
available-for-sale securities, and cash flows from operations
will satisfy working capital, financing activities, and capital
expenditure requirements for at least the next two years.
As of December 31, 2007, we had future contractual
obligations as follows for operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
Future Payments by Year
|
|
Obligations
|
|
Total
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Operating leases
|
|
$
|
28,541
|
|
|
|
8,301
|
|
|
|
7,437
|
|
|
|
7,148
|
|
|
|
3,792
|
|
|
|
567
|
|
|
|
1,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above table does not include future minimum rentals to be
received under subleases of $165,000. The above table also does
not include the remaining $500,000 of capital commitments to the
private equity funds described above due to the uncertainty and
timing of capital calls made by such funds to pay these capital
commitments.
|
Off-Balance
Sheet Arrangements
We do not maintain any off-balance sheet financing arrangements.
28
Recent
Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157
(SFAS 157), Fair Value
Measurements, which defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. SFAS 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value
by providing a fair value hierarchy used to classify the source
of the information. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. However, on
February 12, 2008, the FASB issued FSP
FAS 157-2
which delays the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). This FSP
partially defers the effective date of Statement 157 to fiscal
years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of
this FSP. Effective for 2008, we will adopt SFAS 157 except
as it applies to those nonfinancial assets and nonfinancial
liabilities as noted in FSP
FAS 157-2.
The partial adoption of SFAS 157 is not expected to have a
material impact on our consolidated financial position, results
of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159
(SFAS No. 159), The Fair Value
Option for Financial Assets and Financial Liabilities-Including
an amendment of FASB Statement No. 115. This
statement permits entities to choose to measure many financial
instruments and certain other items at fair value that are not
currently required to be measured at fair value. The FASBs
objective in this statement is to provide reporting entities
with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions.
This statement is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years. We will be required to adopt SFAS No. 159 in
the first quarter of fiscal year 2008. We are currently
evaluating the requirements of SFAS No. 159 and have
not yet determined the impact on our consolidated financial
position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business combinations
(SFAS No. 141R), which replaces
SFAS No. 141. SFAS No. 141R establishes
principles and requirements for how an acquirer in a business
combination recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and
any controlling interest; recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain
purchase; and determines what information to disclose to enable
users of the financial statements to evaluate the nature and
financial effects of the business combination.
SFAS No. 141R is to be applied prospectively to
business combinations for which the acquisition date is on or
after an entitys fiscal year that begins after
December 15, 2008. We have not completed our evaluation of
the potential impact, if any, of the adoption of
SFAS No. 141R on our consolidated financial position,
results of operations and cash flows. Adoption is prospective
and early adoption is not permitted. Adoption of
SFAS No. 141R will not impact our accounting for
business combinations closed prior to its adoption, but given
the nature of the changes noted above, we expect our accounting
for business combinations occurring subsequent to adoption will
be significantly different than that applied following current
accounting literature.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS No. 160). SFAS No. 160
amends ARB 51 to establish accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary by requiring all noncontrolling
interests in subsidiaries be reported in the same way in the
consolidated financial statements and eliminates the diversity
in accounting for transactions between an entity and
noncontrolling interests by requiring they be treated as equity
transactions. SFAS No. 160 is effective prospectively
for fiscal years beginning after December 15, 2008 and may
not be applied before that date. We are currently evaluating the
impact, if any, that the adoption of SFAS No. 160 will
have on our consolidated 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 do not
use derivative financial instruments.
29
The primary objective of our investment activities is to
preserve principal 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 short-term investments in a variety of
securities, including U.S. government agencies, municipal
notes which may have an auction reset feature, corporate notes
and bonds, commercial paper, and money market funds. These
securities are classified as available for sale and consequently
are recorded on the balance sheet at fair value with unrealized
gains or losses reported as a separate component of accumulated
other comprehensive income (loss). All investments mature within
approximately one year from the date of purchase. 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.
Our available for sale securities portfolio, which totalled
$195.8 million at December 31, 2007, includes Auction
Rate Securities (ARS) of $120.2 million from
various issuers collateralized by student loans and municipal
debt. ARSs are securities with long-term contractual maturities
but with interest rates that are reset every seven to
thirty-five days by auctions. At the end of each reset period,
investors can sell or continue to hold the securities at par.
During February 2008, certain ARSs that we hold experienced
failed auctions that limited the liquidity of these securities.
Based on current market conditions, it is likely that auction
failures will continue and could result in either temporary or
other-than-temporary impairments of our ARS holdings, which
totalled $63.4 million (of which $22.5 million had
failed) as of February 29, 2008. (The $56.8 million
difference between the $120.2 million of ARSs held at
December 31, 2007 and the $63.4 million held as of
February 29, 2008, represents successful net sales of these
securities at par value.) The Company has the ability and intent
to hold these securities until a successful auction occurs and
the ARSs are liquidated at par value. If in the future we
determine that any decline in value of the ARSs is
other-than-temporary, we would have to recognize the loss in our
statement of income, which could have a material impact on our
operating results in the period it is recognized. Further, as
the funds associated with the ARSs may not be accessible for in
excess of twelve months because of continued failed auctions or
our inability to find a buyer outside of the auction process, we
may classify these securities as long-term assets in our
consolidated balance sheet as of March 31, 2008, or
thereafter.
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 expected maturity dates.
Principal amounts by expected maturity in US dollars (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
Year Ending
|
|
|
Year Ending
|
|
|
Year Ending
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Cash equivalents
|
|
$
|
17,501
|
|
|
$
|
17,501
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate
|
|
|
4.60
|
%
|
|
|
4.60
|
%
|
|
|
|
|
|
|
|
|
Investments
|
|
$
|
192,352
|
|
|
$
|
145,673
|
|
|
$
|
36,620
|
|
|
$
|
10,059
|
|
Weighted average interest rate
|
|
|
4.28
|
%
|
|
|
4.48
|
%
|
|
|
3.65
|
%
|
|
|
3.62
|
%
|
Total portfolio
|
|
$
|
209,853
|
|
|
$
|
163,174
|
|
|
$
|
36,620
|
|
|
$
|
10,059
|
|
Weighted average interest rate
|
|
|
4.31
|
%
|
|
|
4.49
|
%
|
|
|
3.65
|
%
|
|
|
3.62
|
%
|
Foreign Currency Exchange. On a global level,
we face exposure to movements in foreign currency exchange
rates. This exposure may change over time as business practices
evolve and could have a material adverse impact on our results
of operations. To date, the effect of changes in currency
exchange rates has not had a significant impact on our financial
position or our results of operations. Accordingly, we have not
entered into any hedging agreements. However, we are prepared to
hedge against fluctuations that the Euro, or other foreign
currencies, will have on foreign exchange exposure if this
exposure becomes material. As of December 31, 2007, the
total assets, excluding goodwill and intangible assets, related
to
non-U.S. dollar
denominated currencies were approximately $37.8 million.
30
|
|
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 2007 Annual
Report on
Form 10-K.
FORRESTER
RESEARCH, INC.
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
F-1
|
|
Consolidated Balance Sheets
|
|
|
F-2
|
|
Consolidated Statements of Income
|
|
|
F-3
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income
|
|
|
F-4
|
|
Consolidated Statements of Cash Flows
|
|
|
F-5
|
|
Notes to Consolidated Financial Statements
|
|
|
F-6
|
|
31
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Forrester Research, Inc.
Cambridge, MA
We have audited the accompanying consolidated balance sheets of
Forrester Research, Inc. and subsidiaries (the
Company) as of December 31, 2007 and 2006 and
the related consolidated statements of income,
stockholders equity and comprehensive income and cash
flows for each of the three years in the period ended
December 31, 2007. 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 auditing 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 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, 2007 and 2006, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2007 in conformity with
accounting principles generally accepted in the United States of
America.
As described in Note 1 to the accompanying consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standard No. 123R, Share Based
Payment, effective January 1, 2006.
As discussed in Note 8 to the consolidated financial
statements, effective January 1, 2007, the Company adopted
FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an Interpretation of
FASB Statement No. 109.
We have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the
Companys internal control over financial reporting as of
December 31, 2007, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria) and our report dated
March 14, 2008 expressed an unqualified opinion thereon.
Boston, Massachusetts
March 14, 2008
F-1
FORRESTER
RESEARCH, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
39,157
|
|
|
$
|
53,163
|
|
Available-for-sale
securities (Note 6)
|
|
|
168,676
|
|
|
|
195,811
|
|
Accounts receivable, net of allowance for doubtful accounts of
$717 and $727 in 2006 and 2007, respectively (Note 15)
|
|
|
59,727
|
|
|
|
69,865
|
|
Deferred income tax assets (Note 8)
|
|
|
13,592
|
|
|
|
13,236
|
|
Deferred commissions
|
|
|
10,117
|
|
|
|
10,631
|
|
Prepaid expenses and other current assets
|
|
|
7,610
|
|
|
|
11,304
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
298,879
|
|
|
|
354,010
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS:
|
|
|
|
|
|
|
|
|
Property and equipment, net (Note 15)
|
|
|
5,611
|
|
|
|
6,834
|
|
Goodwill, net (Note 4)
|
|
|
53,171
|
|
|
|
53,677
|
|
Deferred income taxes, net (Note 8)
|
|
|
11,335
|
|
|
|
2,274
|
|
Intangible assets, net (Note 4)
|
|
|
1,517
|
|
|
|
309
|
|
Non-marketable investments (Note 7)
|
|
|
13,015
|
|
|
|
8,414
|
|
Other assets
|
|
|
615
|
|
|
|
839
|
|
|
|
|
|
|
|
|
|
|
Total long-term assets
|
|
|
85,264
|
|
|
|
72,347
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
384,143
|
|
|
$
|
426,357
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,878
|
|
|
$
|
4,174
|
|
Accrued expenses (Note 15)
|
|
|
29,852
|
|
|
|
28,891
|
|
Deferred revenue
|
|
|
99,875
|
|
|
|
111,418
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
132,605
|
|
|
|
144,483
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
6,633
|
|
|
|
6,858
|
|
COMMITMENTS (NOTES 9 and 12)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (NOTE 10):
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value
|
|
|
|
|
|
|
|
|
Authorized 500 shares
|
|
|
|
|
|
|
|
|
Issued and outstanding none
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value
|
|
|
|
|
|
|
|
|
Authorized 125,000 shares
|
|
|
|
|
|
|
|
|
Issued 27,884 and 28,165 shares in 2006 and
2007, respectively
|
|
|
|
|
|
|
|
|
Outstanding 23,045 and 23,153 shares in 2006
and 2007, respectively
|
|
|
279
|
|
|
|
282
|
|
Additional paid-in capital
|
|
|
270,306
|
|
|
|
284,431
|
|
Retained earnings
|
|
|
62,766
|
|
|
|
81,478
|
|
Treasury stock 4,839 and 5,011 shares in 2006
and 2007, respectively, at cost
|
|
|
(85,834
|
)
|
|
|
(90,428
|
)
|
Accumulated other comprehensive loss
|
|
|
(2,612
|
)
|
|
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
244,905
|
|
|
|
275,016
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
384,143
|
|
|
$
|
426,357
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
FORRESTER
RESEARCH, INC.
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research services
|
|
$
|
96,699
|
|
|
$
|
114,876
|
|
|
$
|
131,163
|
|
Advisory services and other
|
|
|
54,700
|
|
|
|
66,597
|
|
|
|
80,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
151,399
|
|
|
|
181,473
|
|
|
|
212,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and fulfillment
|
|
|
60,461
|
|
|
|
73,268
|
|
|
|
81,608
|
|
Selling and marketing
|
|
|
51,050
|
|
|
|
59,626
|
|
|
|
71,830
|
|
General and administrative
|
|
|
18,039
|
|
|
|
22,859
|
|
|
|
30,749
|
|
Depreciation
|
|
|
3,539
|
|
|
|
3,618
|
|
|
|
3,986
|
|
Amortization of intangible assets (Note 4)
|
|
|
3,527
|
|
|
|
2,060
|
|
|
|
1,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
136,616
|
|
|
|
161,431
|
|
|
|
189,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
14,783
|
|
|
|
20,042
|
|
|
|
22,651
|
|
Other income, net
|
|
|
3,027
|
|
|
|
5,704
|
|
|
|
8,372
|
|
Gains on sales of
available-for-sale
securities (Note 6)
|
|
|
1,489
|
|
|
|
|
|
|
|
603
|
|
Gains (impairments) from non-marketable investments, net
(Note 7)
|
|
|
206
|
|
|
|
348
|
|
|
|
(1,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision
|
|
|
19,505
|
|
|
|
26,094
|
|
|
|
30,004
|
|
Income tax provision (Note 8)
|
|
|
7,243
|
|
|
|
10,037
|
|
|
|
11,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
12,262
|
|
|
|
16,057
|
|
|
|
18,943
|
|
(Loss) income from discontinued operations, net of taxes
(Note 3)
|
|
|
(318
|
)
|
|
|
300
|
|
|
|
|
|
Gain on sale of discontinued operations, net of taxes
(Note 3)
|
|
|
|
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,944
|
|
|
$
|
17,756
|
|
|
$
|
18,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share from continuing operations
|
|
$
|
0.58
|
|
|
$
|
0.72
|
|
|
$
|
0.82
|
|
Basic (loss) income per common share from discontinued
operations
|
|
|
(0.02
|
)
|
|
|
0.08
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
0.56
|
|
|
$
|
0.80
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share from continuing operations
|
|
$
|
0.56
|
|
|
$
|
0.70
|
|
|
$
|
0.80
|
|
Diluted (loss) income per common share from discontinued
operations
|
|
|
(0.01
|
)
|
|
|
0.07
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
$
|
0.55
|
|
|
$
|
0.77
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
21,413
|
|
|
|
22,195
|
|
|
|
23,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
21,876
|
|
|
|
22,973
|
|
|
|
23,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
FORRESTER
RESEARCH, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY AND
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, 2004
|
|
|
24,729
|
|
|
$
|
247
|
|
|
$
|
207,115
|
|
|
$
|
33,066
|
|
|
|
3,045
|
|
|
$
|
(50,056
|
)
|
|
$
|
(1,732
|
)
|
|
$
|
188,640
|
|
|
|
|
|
Issuance of common stock under stock option plans, including tax
benefit
|
|
|
579
|
|
|
|
6
|
|
|
|
9,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,791
|
|
|
|
|
|
Issuance of common stock under employee stock purchase plan,
including tax benefit
|
|
|
83
|
|
|
|
1
|
|
|
|
1,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,316
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
2,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,002
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,323
|
|
|
|
(23,474
|
)
|
|
|
|
|
|
|
(23,474
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,944
|
|
|
$
|
11,944
|
|
Unrealized loss on
available-for-sale
securities, net of tax provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,578
|
)
|
|
|
(1,578
|
)
|
|
|
(1,578
|
)
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706
|
|
|
|
706
|
|
|
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
25,391
|
|
|
|
254
|
|
|
|
220,217
|
|
|
|
45,010
|
|
|
|
4,368
|
|
|
|
(73,530
|
)
|
|
|
(2,604
|
)
|
|
|
189,347
|
|
|
|
|
|
Issuance of common stock under stock option plans, including tax
benefit
|
|
|
2,409
|
|
|
|
24
|
|
|
|
41,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,342
|
|
|
|
|
|
Issuance of common stock under employee stock purchase plan,
including tax benefit
|
|
|
84
|
|
|
|
1
|
|
|
|
1,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,562
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
7,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,210
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
471
|
|
|
|
(12,304
|
)
|
|
|
|
|
|
|
(12,304
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,756
|
|
|
$
|
17,756
|
|
Unrealized gain on
available-for-sale
securities, net of tax provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271
|
|
|
|
271
|
|
|
|
271
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(279
|
)
|
|
|
(279
|
)
|
|
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
27,884
|
|
|
|
279
|
|
|
|
270,306
|
|
|
|
62,766
|
|
|
|
4,839
|
|
|
|
(85,834
|
)
|
|
|
(2,612
|
)
|
|
|
244,905
|
|
|
|
|
|
Cumulative effect of adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(231
|
)
|
|
|
|
|
Issuance of common stock under stock option plans, including tax
benefit
|
|
|
281
|
|
|
|
3
|
|
|
|
5,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,803
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
8,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,325
|
|
|
|
|
|
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172
|
|
|
|
(4,594
|
)
|
|
|
|
|
|
|
(4,594
|
)
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,943
|
|
|
|
18,943
|
|
Unrealized gain on
available-for-sale
securities, net of tax provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,196
|
|
|
|
2,196
|
|
|
|
2,196
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(331
|
)
|
|
|
(331
|
)
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
28,165
|
|
|
$
|
282
|
|
|
$
|
284,431
|
|
|
$
|
81,478
|
|
|
|
5,011
|
|
|
$
|
(90,428
|
)
|
|
$
|
(747
|
)
|
|
$
|
275,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
FORRESTER
RESEARCH, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,944
|
|
|
$
|
17,756
|
|
|
$
|
18,943
|
|
Loss (Income) from discontinued operations, net
|
|
|
318
|
|
|
|
(300
|
)
|
|
|
|
|
Gain on disposal of discontinued operations, net
|
|
|
|
|
|
|
(1,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
12,262
|
|
|
|
16,057
|
|
|
|
18,943
|
|
Adjustments to reconcile net income to net cash provided by
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,539
|
|
|
|
3,551
|
|
|
|
3,903
|
|
Amortization of intangible assets
|
|
|
3,527
|
|
|
|
2,060
|
|
|
|
1,232
|
|
Impairments (Gains) from non-marketable investments
|
|
|
(206
|
)
|
|
|
(348
|
)
|
|
|
1,622
|
|
Realized gains on sales of
available-for-sale
securities
|
|
|
(1,489
|
)
|
|
|
|
|
|
|
(603
|
)
|
Tax benefit from exercises of employee stock options
|
|
|
2,243
|
|
|
|
75
|
|
|
|
101
|
|
Deferred income taxes
|
|
|
4,973
|
|
|
|
9,636
|
|
|
|
6,878
|
|
Non-cash stock-based compensation expense
|
|
|
2,002
|
|
|
|
7,210
|
|
|
|
8,326
|
|
Increase in provision for doubtful accounts
|
|
|
100
|
|
|
|
358
|
|
|
|
480
|
|
Loss on disposal of fixed assets
|
|
|
|
|
|
|
67
|
|
|
|
83
|
|
Amortization of premium on
available-for-sale
securities
|
|
|
1,080
|
|
|
|
852
|
|
|
|
607
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(14,307
|
)
|
|
|
(7,765
|
)
|
|
|
(9,966
|
)
|
Deferred commissions
|
|
|
(2,084
|
)
|
|
|
(1,267
|
)
|
|
|
(514
|
)
|
Prepaid expenses and other current assets
|
|
|
(545
|
)
|
|
|
(1,906
|
)
|
|
|
(3,552
|
)
|
Accounts payable
|
|
|
(2,063
|
)
|
|
|
1,171
|
|
|
|
1,171
|
|
Accrued expenses
|
|
|
(2,022
|
)
|
|
|
2,935
|
|
|
|
(1,122
|
)
|
Deferred revenue
|
|
|
16,508
|
|
|
|
12,751
|
|
|
|
9,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operations
|
|
|
23,518
|
|
|
|
45,437
|
|
|
|
37,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
|
414
|
|
|
|
325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
23,932
|
|
|
|
45,762
|
|
|
|
37,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,012
|
)
|
|
|
(3,334
|
)
|
|
|
(5,106
|
)
|
Purchases of non-marketable investments
|
|
|
(700
|
)
|
|
|
(300
|
)
|
|
|
|
|
Proceeds from non-marketable investments
|
|
|
741
|
|
|
|
555
|
|
|
|
2,640
|
|
Proceeds from sale of discontinued operations
|
|
|
|
|
|
|
1,642
|
|
|
|
250
|
|
Decrease in other assets
|
|
|
995
|
|
|
|
391
|
|
|
|
146
|
|
Purchases of
available-for-sale
securities
|
|
|
(260,362
|
)
|
|
|
(565,495
|
)
|
|
|
(1,240,584
|
)
|
Proceeds from sales and maturities of
available-for-sale
securities
|
|
|
264,626
|
|
|
|
480,166
|
|
|
|
1,217,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
2,288
|
|
|
|
(86,375
|
)
|
|
|
(25,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock under stock option plans
and employee stock purchase plan
|
|
|
8,963
|
|
|
|
42,526
|
|
|
|
4,896
|
|
Tax benefits related to stock options
|
|
|
|
|
|
|
308
|
|
|
|
807
|
|
Repurchase of common stock
|
|
|
(23,474
|
)
|
|
|
(12,304
|
)
|
|
|
(4,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(14,511
|
)
|
|
|
30,530
|
|
|
|
1,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(499
|
)
|
|
|
702
|
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
11,210
|
|
|
|
(9,381
|
)
|
|
|
14,006
|
|
Cash and cash equivalents, beginning of year
|
|
|
37,328
|
|
|
|
48,538
|
|
|
|
39,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
48,538
|
|
|
$
|
39,157
|
|
|
$
|
53,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
288
|
|
|
$
|
2,186
|
|
|
$
|
3,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2007
|
|
(1)
|
Operations
and Significant Accounting Policies
|
Business
Forrester Research, Inc. (Forrester or the
Company) conducts independent technology research and
provides pragmatic and forward-thinking advice to global leaders
in business and technology. Forresters products and
services are targeted to specific roles, including principally
senior management, business strategists, and marketing and
technology professionals at $1 billion-plus companies who
collaborate with Forrester to align their technology investments
with their business goals.
Principles
of Consolidation
The accompanying consolidated financial statements include the
accounts of Forrester and its wholly-owned subsidiaries. All
intercompany 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, non-cash stock-based compensation, allowance for
doubtful accounts, non-marketable investments, goodwill and
intangible assets, and taxes. On an ongoing basis, management
evaluates its estimates. Actual results could differ from these
estimates.
Financial
Instruments
Forresters financial instruments consist of cash
equivalents, available for sale securities, accounts receivable
and accounts payable. The estimated fair values of these
financial instruments approximate their carrying values. The
fair market value of marketable securities is based on market
quotes. Forresters cash equivalents and marketable
securities are generally investment-grade corporate bonds and
obligations of the federal government or municipal issuers.
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
are comprised of securities of U.S. government agencies,
municipal notes which mature on auction reset feature (Auction
Rate Securities or ARSs), corporate notes and bonds, commercial
paper and money market funds meeting certain criteria. Forrester
accounts for investments in marketable securities as
available-for-sale
securities in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities
(SFAS No. 115). Under
SFAS No. 115, securities purchased to be held for
indefinite periods of time and not intended at the time of
purchase to be held until maturity are classified as
available-for-sale
securities and are carried at fair value. Auction rate
securities are securities that are structured with short-term
interest rate reset dates of generally less than ninety days but
with contractual maturities that can be well in excess of ten
years. At the end of each reset period, which generally occurs
every seven to thirty-five days, investors can sell or continue
to hold the securities at par.
The fair value of our investments
and/or
marketable securities is generally determined from quoted market
prices received from pricing services based upon market
transactions at fair value. We also have investments in auction
rate securities collateralized by student loans and municipal
debt. The Companys auction rate securities are recorded at
cost, which approximates fair market value due to their variable
interest rates, which typically reset
F-6
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
through an auction process every seven to thirty-five days. This
auction mechanism generally allows existing investors to roll
over their holdings and continue to own their securities or
liquidate their holdings by selling their securities at par
value. Because of these short intervals between interest reset
dates, we monitor the auctions to ensure they are successful,
which provides evidence that these investments that are carried
at par value approximate their fair value. To the extent an
auction were to fail and the securities were not liquid, we
would need to seek other alternatives to determine the fair
value of these securities which may not be based on quoted
market transactions. We did not need to seek alternative methods
of valuation for our auction rate securities held as of
December 31, 2007 as all of our auction rate securities had
successful auctions up to December 31, 2007 as well as in
January 2008.
Forrester continually evaluates whether any marketable
investments have been impaired and, if so, whether such
impairment is temporary or other than temporary. No impairment
charges were recorded on any investments during the years ended
December 31, 2007, 2006 and 2005.
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,
available-for-sale
securities, 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 are deferred and expensed to operations as the related
revenue is recognized. Forrester evaluates the recoverability of
deferred commissions at each balance sheet date.
Intangible
Assets and Impairment of Long-Lived Assets Subject to
Amortization
Forrester continually evaluates whether events or circumstances
have occurred that indicate that the estimated remaining useful
life of long-lived assets and certain identifiable 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 currencies of Forresters wholly-owned
subsidiaries, with the exception of the German holding companies
where the functional currency is the U.S. dollar, are their
respective local currencies. The financial statements of the
subsidiaries other than the German holding companies are
translated to United States dollars using period-end exchange
rates for assets and liabilities and average exchange rates
during the corresponding period for revenues and expenses.
Translation gains and losses are accumulated as a component of
accumulated other comprehensive loss. Net gains and losses
resulting from foreign exchange transactions are included in
other income in the consolidated statements of income and were
not significant during the periods presented. For the German
holding companies, the foreign translation and transaction gains
and losses are recognized in the related current period income
statement. For the three years ended December 31, 2007, the
only material translation gains and losses arising from the
German holding companies were related to deferred tax
liabilities and therefore are recorded as components of income
tax expense and represented a loss of $871,000 in 2005 and a
gain of $671,000 and $767,000 in 2006 and 2007, respectively.
F-7
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accumulated
Other Comprehensive Loss
The components of accumulated other comprehensive loss as of
December 31, 2006 and 2007 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
Unrealized (loss) gain on
available-for-sale
securities, net of taxes
|
|
$
|
(108
|
)
|
|
$
|
2,088
|
|
Cumulative translation adjustment
|
|
|
(2,504
|
)
|
|
|
(2,835
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
$
|
(2,612
|
)
|
|
$
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
Revenue
Recognition
Forrester generates revenues from licensing research, performing
advisory services, hosting events and conducting
teleconferences. Forrester executes contracts that govern the
terms and conditions of each arrangement. 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 during the period in
which the customer receives the agreed upon deliverable.
Forresters Teleconferences revenue and reimbursed
out-of-pocket
expenses are recorded as advisory service revenues. Event
revenues are recognized upon completion of the event. Annual
memberships which include access to our research, unlimited
phone or email analyst inquiry, unlimited participation in
Forresters 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.
While historical business practice had been to offer contracts
with a non-cancelable term, effective April 1, 2005,
Forrester began offering clients a money-back guarantee, which
gives clients the right to cancel their membership contracts
prior to the end of the contract term. For contracts that are
terminated during the contract term, refunds would be issued for
unused products or services. Furthermore, revenue recognition
determines the timing of commission expenses that are deferred
and recorded as expense as the related revenue is recognized.
The recoverability of deferred commissions is evaluated at each
balance sheet date.
Stock-Based
Compensation
Effective January 1, 2006, Forrester adopted the provisions
of SFAS No. 123 (revised 2004), Share-Based
Payment (SFAS No. 123R). All of
Forresters stock-based compensation is accounted for as
equity instruments and Forrester has five equity plans required
to be evaluated under SFAS No. 123R: two equity
incentive plans, two directors stock option plans and an
employee stock purchase plan. Under the provisions of
SFAS No. 123R, Forrester recognizes the fair value of
stock-based compensation in net income over the requisite
service period of the individual grantee, which generally equals
the vesting period. Prior to January 1, 2006, Forrester
followed Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees (APB No. 25), and related
interpretations in accounting for its stock-based compensation.
See Note 11 for further discussion of Forresters
historical accounting under APB No. 25.
Forrester has elected the modified prospective transition method
for adopting SFAS No. 123R. Under this method, the
provisions of SFAS No. 123R apply to all awards
granted or modified after the date of adoption. The unrecognized
expense of awards not yet vested at the date of adoption is
recognized in net income in the periods after the date of
adoption using the same valuation method and assumptions
determined under the original provisions of
SFAS No. 123, Accounting for Stock-Based
Compensation, (SFAS No. 123) as
disclosed in previous filings. Periods prior to January 1,
2006 will not include compensation costs calculated under the
fair value method. Under the provisions of
SFAS No. 123R, Forrester recorded approximately
$7.2 million and $8.3 million of stock-based
compensation (including the expense in 2007 associated with the
tolled options discussed in Note 11) in
F-8
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the accompanying consolidated statement of income for the years
ended December 31, 2006 and 2007, respectively, included in
the following expense categories (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
Cost of services and fulfillment
|
|
$
|
3,185
|
|
|
$
|
4,245
|
|
Selling and marketing
|
|
|
1,885
|
|
|
|
1,730
|
|
General and administrative
|
|
|
2,140
|
|
|
|
2,351
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,210
|
|
|
$
|
8,326
|
|
|
|
|
|
|
|
|
|
|
The assumptions underlying this computation and additional
information with respect to periods prior to January 1,
2006 are included in Note 11 to these consolidated
financial statements.
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 collectibility 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 Life of the Asset or Life of Lease
|
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 Years
|
|
Research content
|
|
|
1 Year
|
|
Registered trademarks
|
|
|
1 Year
|
|
Income
Taxes
Forrester accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income
Taxes (SFAS No. 109).
SFAS No. 109 requires the recognition of 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.
F-9
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Forresters provision for income taxes is comprised of a
current and a deferred provision. 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 for the estimated future tax effects attributable
to temporary differences and carryforwards using expected
enacted tax rates in effect in the years during which the
differences are expected to reverse. 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.
Net
Income Per Common Share
Basic net 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.
Basic and diluted weighted average common shares are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Basic weighted average common shares outstanding
|
|
|
21,413
|
|
|
|
22,195
|
|
|
|
23,074
|
|
Weighted average common equivalent shares
|
|
|
463
|
|
|
|
778
|
|
|
|
655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
21,876
|
|
|
|
22,973
|
|
|
|
23,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005, 2006 and 2007, options to purchase
approximately 2,417,000, 1,095,000, and 1,282,408 shares,
respectively, were outstanding but not included in the diluted
weighted average common share calculation as the effect would
have been anti-dilutive.
Recent
Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No.
(FIN) 48, Accounting for Uncertainty in
Income Taxes an interpretation of
SFAS Statement No. 109,
(FIN 48) which seeks to reduce the
significant diversity in practice associated with certain
aspects of measurement and recognition in accounting for income
taxes. FIN 48 prescribes a recognition threshold and
measurement attribute for financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return, and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The provisions of
FIN 48 are effective for fiscal years beginning after
December 15, 2006. Upon adoption, the cumulative effect of
any changes in net assets resulting from the application of
FIN 48 was recorded as an adjustment to retained earnings.
We adopted FIN 48 in the first quarter of 2007 and the
adoption of FIN 48 did not have a material impact on the
Companys financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157
(SFAS 157), Fair Value
Measurements, which defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. SFAS 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value
by providing a fair value hierarchy used to classify the source
of the information. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. However, on
February 12, 2008, the FASB issued FSP
FAS 157-2
which delays the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). This FSP
partially defers the effective date of Statement 157 to fiscal
years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of
this FSP. Effective for 2008, we will adopt SFAS 157 except
as it applies to those nonfinancial assets
F-10
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and nonfinancial liabilities as noted in FSP
FAS 157-2.
The partial adoption of SFAS 157 is not expected to have a
material impact on our consolidated financial position, results
of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159
(SFAS No. 159), The Fair Value
Option for Financial Assets and Financial Liabilities-Including
an amendment of FASB Statement No. 115. This
statement permits entities to choose to measure many financial
instruments and certain other items at fair value that are not
currently required to be measured at fair value. The FASBs
objective in this statement is to provide reporting entities
with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions.
This statement is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years. We will be required to adopt SFAS No. 159 in
the first quarter of fiscal year 2008. We are currently
evaluating the requirements of SFAS No. 159 and have
not yet determined the impact on our consolidated financial
position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business combinations
(SFAS No. 141R), which replaces
SFAS No. 141. SFAS No. 141R establishes
principles and requirements for how an acquirer in a business
combination recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and
any controlling interest; recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain
purchase; and determines what information to disclose to enable
users of the financial statements to evaluate the nature and
financial effects of the business combination.
SFAS No. 141R is to be applied prospectively to
business combinations for which the acquisition date is on or
after an entitys fiscal year that begins after
December 15, 2008. Forrester has not completed its
evaluation of the potential impact, if any, of the adoption of
SFAS No. 141R on its consolidated financial position,
results of operations and cash flows. Adoption is prospective
and early adoption is not permitted. Adoption of
SFAS No. 141R will not impact our accounting for
business combinations closed prior to its adoption, but given
the nature of the changes noted above, we expect our accounting
for business combinations occurring subsequent to adoption will
be significantly different than that applied following current
accounting literature.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements
(SFAS No. 160). SFAS No. 160
amends ARB 51 to establish accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary by requiring all noncontrolling
interests in subsidiaries be reported in the same way in the
consolidated financial statements and eliminates the diversity
in accounting for transactions between an entity and
noncontrolling interests by requiring they be treated as equity
transactions. SFAS No. 160 is effective prospectively
for fiscal years beginning after December 15, 2008 and may
not be applied before that date. We are currently evaluating the
impact, if any, that the adoption of SFAS No. 160 will
have on the Companys consolidated results of operations
and financial condition.
|
|
(2)
|
Stock
Option Investigation; Restatement of Historical Financial
Statements
|
In its Annual Report on
Form 10-K
for the year ended December 31, 2006 (2006
10-K),
the Company restated its Consolidated Balance Sheet as of
December 31, 2005, and the related Consolidated Statements
of Income, Stockholders Equity and Comprehensive Income,
and Cash Flows for each of the years ended December 31,
2005 and 2004 as well as the unaudited quarterly financial
information for interim periods of 2006 and 2005. The
restatement covered three separate matters: (1) the results
of the inquiry into the Companys historical stock option
granting practices (2) failure to properly account for the
difference in the book and tax basis of goodwill related to a
German acquisition in 2000 primarily due to a write-down of
goodwill for tax purposes in 2002 and (3) failure to
appropriately update managements estimate of the
applicable pre-vesting forfeiture rate, which resulted in the
recognition of excess stock-based compensation expense under
SFAS No. 123R during 2006 interim periods. 2005 and
2006 financial information included in this Annual Report of
Form 10-K
for the year ended December 31, 2007 reflects the
aforementioned restatements.
As a result of the stock option investigation, the Company
determined that the vesting
and/or
exercise of certain stock options that were granted on a
discounted basis (exercise price is less than the fair market
value of the
F-11
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stock on the date of grant) could be subject to Internal Revenue
Code section 409A. In February 2007, the Company filed a
notice of participation in the voluntary program described in
Internal Revenue Service (IRS) Announcement
2007-18,
called the Compliance Resolution Program for Employees other
than Corporate Insiders for Additional 2006 Taxes Arising under
Section 409A due to the Exercise of Stock Rights. The
Company also participated in the similar program prescribed by
the California Franchise Tax Board. Under these programs,
employers elected to pay the requisite additional tax and
associated interest and penalties on behalf of employees (and
former employees) who exercised discounted stock options in 2006.
During 2007, Forrester paid a total of $362,000 to the Internal
Revenue Service and the California Franchise Tax Board under
these programs. Also, during 2007, the Board of Directors
approved a tender offer to amend or replace certain previously
granted stock options that had exercises prices less than the
market value of Forrester stock on the correct measurement date
and therefore would have been subject to tax under Internal
Revenue Code Section 409A. In the tender offer, the Company
adjusted the exercise prices of the affected options to the same
prices used to calculate compensation expense in the
consolidated financial statements. The Company agreed to
compensate the employees who elected to participate in the
tender offer by paying to each such person in January 2008 an
amount equal to 105% of the difference between the original
exercise price and the corrected exercise price for each
affected option. As of December 31, 2007, the Company had
$434,000 related to the tender offer included in accrued
expenses, which was paid in 2008.
During 2007, the Company incurred approximately
$3.8 million of costs (primarily professional fees) related
to the stock option investigation, the SEC inquiry and the
restatement of the Companys historical financial
statements, which have been recorded in the consolidated
statement of income for the year ended December 31, 2007
under the caption General and Administrative Expense.
|
|
(3)
|
Discontinued
Operations
|
On September 26, 2006, Forrester completed the sale of its
Ultimate Consumer Panel (UCP) product line to
Lightspeed Online Research, Inc. for $2.5 million in cash
of which $2.25 million was paid at the closing date subject
to a working capital adjustment, with the remainder paid in June
2007. The sale resulted in a gain on the disposal of
discontinued operations of $1.4 million net of
$1.0 million of taxes. The sale included the transfer of
certain assets, including all UCP customer contracts, historical
data, intellectual property, six employees, and licenses as well
as certain liabilities arising in the normal course of business.
Forrester sold the product line as it was no longer a strategic
fit with its core focus on broad, global business and consumer
technology data.
The UCP product line had gross revenues for the years 2006 and
2005, of $1.8 million and $1.8 million, respectively.
Net income from the discontinued operations was $300,000 (net of
$204,000 of income tax expense) for the year ended
December 31, 2006. Net loss from the discontinued
operations was $318,000 (net of $219,000 of income tax benefit)
for the year ended December 31, 2005. The financial results
of the UCP product line are reported as a single line item of
(Loss) income from discontinued operations for all
periods presented. The gross revenue and net income numbers
noted above for UCP for 2006 only include amounts recorded
through September 26, 2006 as UCP was disposed of on that
date.
Net assets and net liabilities of the UCP product line were
$447,000 and $974,000, respectively at September 26, 2006.
Net assets consisted primarily of accounts receivable and net
liabilities consisted primarily of deferred revenue. The
operating results of the UCP product line previously would have
been included in the marketing and strategy operating segment.
|
|
(4)
|
Goodwill
and Other Intangible Assets
|
SFAS No. 142 requires that goodwill and intangible
assets with indefinite lives no longer be amortized but instead
be measured for impairment at least annually or whenever events
indicate that there may be an impairment. Forrester has selected
November 30th as its date for performing the annual
goodwill impairment test. Forrester
F-12
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
compared each reporting units carrying value to its
estimated fair value as of November 30, 2007 and determined
that no impairment of its goodwill had occurred.
In January 2007, Forrester reorganized its business in a manner
that changed its previous reporting segments. See Note 14
for further information on Forresters Operating Segment
and Enterprise Wide Reporting.
As required by SFAS No. 142, the goodwill was
reassigned to the new reporting units by using a relative fair
value approach. The goodwill was assigned to the four reporting
units as a result of this approach as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
Information
|
|
|
Industry
|
|
|
Marketing
|
|
|
|
|
|
|
|
|
|
Technology Client
|
|
|
Client
|
|
|
and Strategy
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
Group
|
|
|
Client Group
|
|
|
Events
|
|
|
Total
|
|
|
Balance January 1, 2007
|
|
$
|
22,784
|
|
|
$
|
23,877
|
|
|
$
|
4,555
|
|
|
$
|
1,955
|
|
|
$
|
53,171
|
|
Other
|
|
|
217
|
|
|
|
227
|
|
|
|
43
|
|
|
|
19
|
|
|
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
$
|
23,001
|
|
|
$
|
24,104
|
|
|
$
|
4,598
|
|
|
$
|
1,974
|
|
|
$
|
53,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of Forresters intangible assets as of
December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
20,170
|
|
|
$
|
18,653
|
|
|
$
|
1,517
|
|
Research content
|
|
|
2,444
|
|
|
|
2,444
|
|
|
|
|
|
Trademarks
|
|
|
570
|
|
|
|
570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,184
|
|
|
$
|
21,667
|
|
|
$
|
1,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
20,424
|
|
|
$
|
20,115
|
|
|
$
|
309
|
|
Research content
|
|
|
2,444
|
|
|
|
2,444
|
|
|
|
|
|
Trademarks
|
|
|
570
|
|
|
|
570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,438
|
|
|
$
|
23,129
|
|
|
$
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to identifiable intangible assets
was approximately $3.5 million, $2.1 million and
$1.2 million during the years ended December 31, 2005,
2006 and 2007, respectively. The remaining carrying amount will
be fully amortized during 2008.
January 28, 2004 Reorganization
On January 28, 2004, Forrester announced a reduction of its
workforce by approximately 15 positions in connection with the
integration of GigaGroups operations, which were acquired
in November 2003. As a result, Forrester recorded a
reorganization charge of approximately $9.1 million in the
year ended December 31, 2004. Approximately 53% of the
terminated employees had been members of the sales force, while
27% and 20% had
F-13
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
held administrative and research roles, respectively. The charge
consisted primarily of severance and related benefits costs,
office consolidation costs, such as contractual lease
commitments for space that was vacated, the write-off of related
leasehold improvements and furniture and fixtures, and other
payments for professional services incurred in connection with
the reorganization.
The activity related to the January 28, 2004 reorganization
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued As of
|
|
|
2005
|
|
|
Accrued As of
|
|
|
|
December 31,
|
|
|
Cash
|
|
|
December 31,
|
|
|
|
2004
|
|
|
Payments
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Workforce reduction
|
|
$
|
442
|
|
|
$
|
364
|
|
|
$
|
78
|
|
Facility consolidation and other related costs
|
|
|
4,218
|
|
|
|
1,268
|
|
|
|
2,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,660
|
|
|
$
|
1,632
|
|
|
$
|
3,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued As of
|
|
|
2006
|
|
|
Accrued As of
|
|
|
|
December 31,
|
|
|
Cash
|
|
|
December 31,
|
|
|
|
2005
|
|
|
Payments
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Workforce reduction
|
|
$
|
78
|
|
|
$
|
|
|
|
$
|
78
|
|
Facility consolidation and other related costs
|
|
|
2,950
|
|
|
|
1,889
|
|
|
|
1,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,028
|
|
|
$
|
1,889
|
|
|
$
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accrued costs at December 31, 2006 related to the
January 28, 2004 reorganization were paid in 2007 and
accordingly there was no accrual remaining at December 31,
2007.
|
|
(6)
|
Available-for-sale
Securities
|
Forresters
available-for-sale
securities at December 31, 2006 and 2007 consist of
$168.7 million and $192.3 million of investments in
debt securities, respectively, comprised of federal obligations,
state and municipal bonds, some which contain auction reset
features(Auction Rate Securities or ARSs), corporate bonds and
approximately $60,000 and $3.5 million in equity
securities, respectively. All investments are recorded at fair
market value, with any unrealized gains and losses reported as a
separate component of accumulated other comprehensive loss.
The aggregate market value, amortized cost, unrealized gains and
unrealized losses of the investments in federal obligations,
state and municipal bonds and corporate bonds, are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
|
Market
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Federal agency obligations
|
|
$
|
3,976
|
|
|
$
|
4,000
|
|
|
$
|
|
|
|
$
|
24
|
|
State and municipal bonds
|
|
|
147,494
|
|
|
|
147,565
|
|
|
|
10
|
|
|
|
81
|
|
Corporate bonds
|
|
|
17,146
|
|
|
|
17,218
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
168,616
|
|
|
$
|
168,783
|
|
|
$
|
10
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
Market
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
State and municipal bonds
|
|
$
|
192,352
|
|
|
$
|
192,052
|
|
|
$
|
340
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the maturity periods of the state
and municipal bonds in the Companys portfolio as of
December 31, 2007. As discussed in footnote, we classify
ARSs as short term investments. The total amount of securities
containing auction reset features as of December 31, 2007
was $120.2 million. The actual contractual maturities of
these investments were they not to reset would occur at various
dates between 2009 and 2041.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
Total
|
|
|
State and municipal bonds
|
|
$
|
145,673
|
|
|
$
|
36,620
|
|
|
$
|
10,059
|
|
|
$
|
192,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the gross unrealized losses and market
value of Forresters investments with unrealized losses
that are not deemed to be
other-than-temporarily
impaired, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized
position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
|
Market
|
|
|
Unrealized
|
|
|
Market
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
State and municipal bonds
|
|
$
|
1,584
|
|
|
$
|
1
|
|
|
$
|
2,301
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses in all investment types were caused by
increasing market interest rates. The contractual terms of these
investments do not permit the issuer to settle the securities at
a price less than the amortized cost of the investment. Because
Forrester has the ability and the intent to hold these
investments until a recovery of market value, Forrester does not
consider these investments to be
other-than-temporarily
impaired at December 31, 2007.
In February 2008, certain ARSs that we hold experienced failed
auctions that limited the liquidity of these securities. Based
on current market conditions, it is likely that auction failures
will continue that could result in either temporary or
other-than-temporary
impairments of our ARS holdings, which totaled
$63.4 million (of which $22.5 million have failed) as
of February 29, 2008 (the $56.8 million difference
between $120.2 million of ARSs held at December 31,
2007 and the $63.4 million held as of February 29,
2008, represents successful net sales of these securities at par
value). The Company has the ability and intent to hold these
securities until a successful auction occurs and the ARSs are
liquidated at par value. If in the future we determine that any
decline in values of the ARSs is
other-than-temporary,
we would have to recognize the loss in our statement of
operations, which could have a material impact on our operating
results in the period it is recognized. Further, as the funds
associated with the ARSs may not be accessible for in excess of
twelve months because of continued failed auctions or our
inability to find a buyer outside of the auction process, we may
classify these securities as long-term assets in our
consolidated balance sheet as of March 31, 2008, or
thereafter.
There were no gross realized gains or losses on sales of the
federal obligations, state and municipal bonds and corporate
bonds for the years ended December 31, 2005, 2006 or 2007.
Forrester owns common stock in comScore, Inc.
(comScore), a provider of infrastructure services
which utilizes proprietary technology to accumulate
comprehensive information on consumer buying behavior. In June
2007, comScore completed an initial public offering of its
common stock. In December 2007, Forrester sold approximately
20,000 shares and received net proceeds of approximately
$655,000, and recognized a gain of approximately $603,000
related to the sale. As of December 31, 2007, the
investment of approximately $3.5 million, which is included
in
available-for-sale
securities in the accompanying consolidated balance sheet, is
stated at fair market value with any unrealized gains and losses
reported as a component of accumulated other comprehensive
income. As of December 31, 2007, approximately
$3.2 million of unrealized gain was recorded as a component
of other comprehensive income.
As of January 1, 2004, Forrester owned an approximately
1.1% ownership in a holding company that was a majority
shareholder of Greenfield Online, Inc. (Greenfield),
an Internet-based market research firm. In July 2004, Greenfield
(NASDAQ: SRVY) completed an initial public offering in which
Forresters ownership interest
F-15
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
was converted into stock. In March 2005, Forrester sold the
remainder of its holdings, approximately 89,000 shares of
common stock, received net proceeds of approximately
$1.7 million and recognized a gain of approximately
$1.5 million related to the sale of these shares.
|
|
(7)
|
Non-Marketable
Investments
|
At December 31, 2006 and 2007, the carrying value of
non-marketable investments is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
Private equity funds
|
|
$
|
12,584
|
|
|
$
|
8,328
|
|
Doculabs, Inc.
|
|
|
108
|
|
|
|
86
|
|
comScore Networks, Inc.
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,015
|
|
|
$
|
8,414
|
|
|
|
|
|
|
|
|
|
|
In June 2000, Forrester committed to invest $20.0 million
in two technology-related private equity investment funds with
capital contributions required to be funded over an expected
period of five years. During the years ended December 31,
2005, 2006 and 2007, Forrester contributed approximately
$863,000, $625,000, and $138,000 respectively, to these
investment funds, resulting in total cumulative contributions of
approximately $19.5 million to date. One of these
investments is being accounted for using the cost method and,
accordingly, is valued at cost unless an other than temporary
impairment in its value occurs or the investment is liquidated.
The other investment is being accounted for using the equity
method as the investment is a limited partnership and Forrester
has an ownership interest in the limited partnership in excess
of 5% and, accordingly, Forrester records its share of the
investees operating results each period. During the years
ended December 31, 2005, 2006 and 2007, gross distributions
of $1.1 million, $861,000 and $1.6 million,
respectively, were recorded and resulted in gains of $370,000,
$575,000 and $537,000, respectively in the consolidated
statements of income. During 2007, the Company recorded
impairments of approximately $2.0 million which is included
in the consolidated statements of income. There were no
impairments recorded in 2005 and 2006. During each of the years
ended December 31, 2005, 2006 and 2007, fund management
charges of approximately $338,000 were included in other income,
net in the consolidated statements of income. Fund management
charges are recorded as a reduction of the investments
carrying value.
Forrester has adopted a cash bonus plan to pay bonuses, after
the return of invested capital, measured by the proceeds of a
portion of its share of net profits from these investments, if
any, to certain key employees, subject to the terms and
conditions of the plan. The payment of such bonuses would result
in compensation expense with respect to the amounts so paid. To
date, no bonuses have been paid under this plan. The principal
purpose of this cash bonus plan was to retain key employees by
allowing them to participate in a portion of the potential
return from Forresters technology-related investments if
they remained employed by the Company. The plan was established
at a time when technology and internet companies were growing
significantly, and providing incentives to retain key employees
during that time was important. The purpose of this cash bonus
plan is the retention of key employees.
In December 2003, Forrester committed to invest an additional
$2.0 million over an expected capital contribution period
of 2 years in an annex fund of one of the two private
equity investment funds. The annex fund investment is outside of
the scope of the previously mentioned bonus plan. During the
year ended December 31, 2005 there was no impairment
recorded. In 2006 and 2007, Forrester determined that its
investment had been impaired. As a result, Forrester recorded
write-downs of approximately $227,000 and $123,000,
respectively, which is included in the consolidated statements
of income for the years ended December 31, 2006 and 2007,
respectively, in gains from non-marketable investments, net of
impairments. As of December 31, 2007, Forrester had
received a return on investment of approximately $344,000 which
was recorded as a reduction of the investments carrying
value. No gain or loss was recorded. This investment is being
accounted for using the equity method as the
F-16
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investment is a limited partnership and Forrester has an
ownership interest in the limited partnership in excess of 5%
and, accordingly, Forrester records its share of the
investees operating results each period.
The timing of the recognition of future gains or losses from
these investment funds is beyond Forresters control. As a
result, it is not possible to predict when Forrester will
recognize such gains or losses, if Forrester will award cash
bonuses based on the net profit from such investments, or when
Forrester will incur compensation expense in connection with the
payment of such bonuses. If the investment funds realize large
gains or losses on their investments, Forrester could experience
significant variations in its quarterly results unrelated to its
business operations. These variations could be due to
significant gains or losses or to significant compensation
expenses. While gains may offset compensation expenses in a
particular quarter, there can be no assurance that related gains
and compensation expenses will occur in the same quarters.
During the years ended December 31, 2005 and 2006,
Forrester recognized revenues of approximately $229,000, and
$200,000, respectively, related to a core research and advisory
services contract purchased by one of the private equity
investment firms.
In March 2000, Forrester invested $1.0 million in the
common stock of Doculabs, Inc. (Doculabs), an
independent technology research firm and in March 2001,
Forrester invested an additional $2.0 million. Forrester
currently has an approximately 13.5% ownership interest in
Doculabs. This investment is being accounted for using the cost
method and, accordingly, is being valued at cost unless an
impairment in its value that is other than temporary occurs or
the investment is liquidated. In 2005, Forrester determined that
its investment had been impaired. As a result, Forrester
recorded write-downs of approximately $164,000, which are
included in the consolidated statement of income for the year
ended December 31, 2005 in gains from non-marketable
investments, net of impairments. As of December 31, 2006
and 2007, Forrester determined that no further impairment had
occurred. In 2006 and 2007, Forrester received dividends of
$67,000 and $22,000, respectively which were recorded as a
reduction of the investments carrying value.
In July 2000, Forrester invested $1.6 million to purchase
preferred shares of comScore Networks, Inc.
(comScore), a provider of infrastructure services
which utilizes proprietary technology to accumulate
comprehensive information on consumer buying behavior, resulting
at the time in approximately a 1.2% ownership interest. This
investment was being accounted for using the cost method and,
accordingly, was valued at cost unless a permanent impairment in
its value occurs or the investment is liquidated. No impairments
were recorded for 2005 and 2006. In June 2007, comScore (NASDAQ:
SCOR) completed an initial public offering in which
Forresters ownership interest was converted to
approximately 126,000 shares. In December 2007, Forrester
sold approximately 20,000 shares and the remaining
investment of approximately $3.5 million was included in
available-for-sale
securities in the accompanying consolidated balance sheet.
Forrester accounts for income taxes in accordance with
SFAS No. 109. SFAS No. 109 requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the financial statement and tax basis of assets and
liabilities as well as operating loss carryforwards. Forrester
measures deferred taxes based on enacted tax rates assumed to be
in effect when these differences reverse.
Income from continuing operations before income tax provision
for the years ended December 31, 2005, 2006 and 2007
consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Domestic
|
|
$
|
17,720
|
|
|
$
|
23,622
|
|
|
$
|
25,886
|
|
Foreign
|
|
|
1,785
|
|
|
|
2,472
|
|
|
|
4,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,505
|
|
|
$
|
26,094
|
|
|
$
|
30,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of the income tax provision (benefit) for the
years ended December 31, 2005, 2006 and 2007 are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
413
|
|
|
$
|
375
|
|
|
$
|
334
|
|
State
|
|
|
(7
|
)
|
|
|
855
|
|
|
|
2,238
|
|
Foreign
|
|
|
364
|
|
|
|
720
|
|
|
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
770
|
|
|
|
1,950
|
|
|
|
4,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
5,950
|
|
|
|
7,180
|
|
|
|
7,513
|
|
State
|
|
|
1,102
|
|
|
|
220
|
|
|
|
151
|
|
Foreign
|
|
|
(579
|
)
|
|
|
687
|
|
|
|
(786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,473
|
|
|
|
8,087
|
|
|
|
6,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
7,243
|
|
|
$
|
10,037
|
|
|
$
|
11,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the federal statutory rate to
Forresters effective tax rate for the years ended
December 31, 2005, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
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
|
|
|
3.5
|
|
|
|
2.7
|
|
|
|
6.2
|
|
Non-deductible expenses
|
|
|
2.5
|
|
|
|
0.9
|
|
|
|
1.5
|
|
Tax-exempt interest income
|
|
|
(2.9
|
)
|
|
|
(5.0
|
)
|
|
|
(8.1
|
)
|
Stock compensation deduction including APB No. 25 expense
|
|
|
2.1
|
|
|
|
3.0
|
|
|
|
2.7
|
|
Other, net
|
|
|
1.0
|
|
|
|
|
|
|
|
2.2
|
|
Change in tax rate
|
|
|
|
|
|
|
|
|
|
|
(5.8
|
)
|
Change in valuation allowance
|
|
|
(4.1
|
)
|
|
|
1.9
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
37.1
|
%
|
|
|
38.5
|
%
|
|
|
36.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of deferred income taxes as of December 31,
2006 and 2007 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
Non-deductible reserves and accruals
|
|
$
|
4,245
|
|
|
$
|
2,192
|
|
Stock compensation
|
|
|
1,441
|
|
|
|
3,347
|
|
Other depreciation and amortization
|
|
|
1,365
|
|
|
|
1,910
|
|
Net operating loss and other carryforwards
|
|
|
35,620
|
|
|
|
25,135
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax asset
|
|
$
|
42,671
|
|
|
$
|
32,584
|
|
Less Valuation allowance
|
|
|
(13,651
|
)
|
|
|
(12,794
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
29,020
|
|
|
$
|
19,790
|
|
|
|
|
|
|
|
|
|
|
German Goodwill Amortization
|
|
|
(6,633
|
)
|
|
|
(5,848
|
)
|
Deferred commissions
|
|
|
(4,093
|
)
|
|
|
(4,331
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
18,294
|
|
|
$
|
9,611
|
|
|
|
|
|
|
|
|
|
|
F-18
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The deferred tax liability associated with German goodwill
amortization of $5,848 and $6,633 for the years ended
December 31, 2007 and 2006, respectively are classified as
a non current liability in Forresters balance sheet.
Forrester has aggregate net U.S. operating loss
carryforwards for federal tax purposes of approximately
$46.2 million which will expire between the years 2013 and
2023. The net operating loss carryforwards for the year ended
December 31, 2007 include approximately $13.4 million
resulting from excess tax deductions from stock options
exercised in 2006 and 2007. Pursuant to SFAS No. 123R,
the deferred tax asset relating to excess tax benefits from
these exercises was not recognized for financial statement
purposes. The net operating losses relating to the excess tax
benefits generated from exercises of stock options prior to 2006
were recorded as a benefit to additional paid-in capital within
stockholders equity. The use of these net operating loss
carryforwards may be limited pursuant to Internal Revenue Code
Section 382 as a result of future ownership changes. The
Company has alternative minimum tax (AMT) credit carryforwards
for income tax purposes of approximately $1.8 million at
December 31, 2007. The Company also has foreign net
operating loss carryforwards of approximately
$38.9 million, which can be carried forward indefinitely.
Approximately $10.7 million of the foreign net operating
loss carryforwards were acquired from Giga Information Group,
Inc. (Giga), the utilization of which is subject to
limitation under the tax law of the United Kingdom.
During the year ended December 31, 2007, Forresters
valuation allowance decreased by approximately $857,000. In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in
which those temporary differences become deductible and the
carryforwards expire. Although realization is not assured, based
upon the level of historical taxable income of Forrester and
projections for Forresters 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 Forrester will realize the benefits of these
deductible differences, net of the existing valuation
allowances. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if
estimates of future taxable income during the carry-forward
period are reduced. As of December 31, 2007, approximately
$3.2 million of the valuation allowance for deferred tax
assets relate to the acquisition of Giga, the tax benefit of
which, if recognized, will be allocated to first reduce goodwill
to zero, second to reduce to zero other noncurrent intangible
assets related to the acquisition, and lastly to reduce the
income tax expense.
Upon adoption of
SFAS 141-R,
Business Combinations, the reduction of a valuation allowance
that pertains to the acquired companies is generally recorded to
reduce our income tax expense.
A portion of the deferred tax liabilities are created by
goodwill as a result of an acquisition in Germany in 2000. These
deferred tax liabilities are not allowed as an offset to
deferred tax assets for purposes of determining the amount of
valuation allowance required. As a result, a deferred tax
provision is required to increase the Companys valuation
allowance. The resulting deferred tax liability as of
December 31, 2006 and 2007 was $6.6 million and
$5.8 million, respectively.
No amount for U.S. income tax has been provided on
undistributed earnings of Forresters foreign subsidiaries
because Forrester considers such earnings to be permanently
reinvested. The amount of such earnings included in consolidated
retained earnings at December 31, 2007 was approximately
$10.7 million. In the event of distribution of those
earnings in the form of dividends or otherwise, the Company
would be subject to both U.S. income taxes, subject to
adjustments, if any, for foreign tax credits and amounts
previously included in U.S. income under IRC
Section 956, and foreign withholding taxes payable to
certain foreign tax authorities. Determination of the amount of
U.S. income tax liability that would be incurred is not
practicable because of the complexities associated with the
hypothetical calculation.
F-19
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of the beginning and ending amount of net
unrecognized tax benefits is as follows:
|
|
|
|
|
Unrecognized tax benefits balance at January 1, 2007
|
|
$
|
1,110
|
|
Gross increases for tax positions of prior years
|
|
|
320
|
|
Gross decreases for tax positions of prior years
|
|
|
|
|
Settlements
|
|
|
|
|
Lapse of statute of limitation
|
|
|
(21
|
)
|
|
|
|
|
|
Unrecognized tax benefits balance at December 31, 2007
|
|
$
|
1,409
|
|
|
|
|
|
|
The Companys major taxing jurisdictions include the U.S.,
the Netherlands, the United Kingdom and Germany. In the United
Kingdom, the 2003 and 2004 tax years are currently under audit
and all subsequent years remain open. The Company does not
anticipate the resolution of the 2003 and 2004 tax years or open
subsequent years will significantly impact the Companys
consolidated financial statements.
We recognize interest and penalties related to uncertain tax
positions in income tax expense. As of January 1, 2007 and
December 31, 2007, we had approximately $114,000 and
$283,000 of accrued interest and penalties related to uncertain
tax positions, respectively.
Total amount of unrecognized tax benefits that would affect our
effective tax rate if recognized is $392,000 as of
January 1, 2007 and $676,000 as of December 31, 2007.
Due to the expected settlements as well as expiration of certain
statutes of limitation, it is reasonably possible that the
Companys total liability for unrecognized tax benefits may
decrease within the next twelve months by a range of zero to
$320,000.
As of December 31, 2007, Forrester had future contractual
obligations as follows for operating leases (in thousands):
|
|
|
|
|
2008
|
|
|
8,301
|
|
2009
|
|
|
7,437
|
|
2010
|
|
|
7,148
|
|
2011
|
|
|
3,792
|
|
2012
|
|
|
567
|
|
Thereafter
|
|
|
1,296
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
28,541
|
|
|
|
|
|
|
The above table does not include future minimum rentals to be
received under subleases of $165,000. The above table also does
not include the remaining $500,000 of capital commitments to the
private equity funds described in Note 7 due to the
uncertainty as to the timing of capital calls made by such funds.
Sublease income was approximately $1,181,000 in 2005, $721,000
in 2006, and $330,000 in 2007.
Aggregate rent expenses, net of sublease income, were
approximately $6.7 million, $7.7 million and
$9.4 million for the years ended December 31, 2005,
2006, and 2007, respectively.
|
|
(10)
|
Stockholders
Equity
|
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
F-20
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Treasury
Stock
Through 2005, Forresters Board of Directors authorized an
aggregate $100 million to purchase common stock under the
stock repurchase program. The shares repurchased were used,
among other things, in connection with Forresters employee
stock option and purchase plans. In October 2007,
Forresters Board of Directors authorized an additional
$50 million to purchase common stock under the stock
repurchase plans. As of December 31, 2007, Forrester had
repurchased approximately 5.0 million shares of common
stock at an aggregate cost of $90.4 million, including
commissions paid for the acquisition of the common stock.
In February 1996, Forrester adopted the Forrester Research, Inc.
1996 Equity Incentive Plan, which was amended and restated and
approved by the stockholders in September 1996 (the 1996
Plan). The 1996 Plan provided for the issuance of
incentive stock options (ISOs) and non-qualified
stock options (NSOs) to purchase up to
13,500,000 shares of common stock. Under the terms of the
1996 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). ISO grants to holders of 10% of the combined voting
power of all classes of Forrester stock must be granted at an
exercise price not less than 110% of the fair market value at
the date of grant. Options generally vest ratably over two to
four years and expire after 10 years. Options granted under
the 1996 Plan immediately vest upon certain events, as described
in the 1996 Plan. Upon adoption of the 2006 Equity Incentive
Plan described below, the 1996 Plan was terminated.
In May 2006, the Forrester Research, Inc. 2006 Equity Incentive
Plan (the 2006 Plan) was approved by the
stockholders of the Company. The 2006 Plan provides for the
issuance of stock-based awards, including ISOs and NSOs, to
purchase up to 4,350,000 shares authorized in the 2006 Plan
plus up to 2,500,000 returned 1996 Plan shares. 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. Options granted under the 2006
Plan immediately vest upon certain events, as described in the
2006 Plan.
In September 1996, Forrester adopted the 1996 Stock Option Plan
for Non-Employee Directors (the 1996 Directors
Plan), which provided for the issuance of options to
purchase up to 600,000 shares of common stock. The
1996 Directors Plan provided that 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, the 1996 Directors Plan provided
that each non-employee director will also 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 at time
of grant, each year immediately following Forresters
annual stockholders 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
1996 Directors Plan immediately vest upon certain
events, as described in the 1996 Directors Plan. Upon
adoption of the 2006 Directors Plan described below,
the 1996 Directors Plan terminated.
In May 2006, the Forrester Research, Inc. 2006 Stock Option Plan
for Directors (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, each non-employee director will also 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. These
options vest in
F-21
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Stock option activity from December 31, 2004 to
December 31, 2007 was as follows (in thousands, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Price Per
|
|
|
Price Per
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Share
|
|
|
Share
|
|
|
Value
|
|
|
Outstanding at December 31, 2004
|
|
|
5,109
|
|
|
$
|
2.75-70.84
|
|
|
$
|
18.98
|
|
|
|
|
|
Granted
|
|
|
1,146
|
|
|
|
14.04-21.01
|
|
|
|
14.59
|
|
|
|
|
|
Exercised
|
|
|
(579
|
)
|
|
|
2.75-20.53
|
|
|
|
13.34
|
|
|
|
3,631
|
|
Forfeited
|
|
|
(440
|
)
|
|
|
11.69-45.41
|
|
|
|
19.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2005
|
|
|
5,236
|
|
|
|
9.57- 70.84
|
|
|
|
18.57
|
|
|
|
|
|
Granted
|
|
|
1,146
|
|
|
|
18.75-31.54
|
|
|
|
24.92
|
|
|
|
|
|
Exercised
|
|
|
(2,409
|
)
|
|
|
9.57-28.47
|
|
|
|
17.01
|
|
|
|
22,283
|
|
Forfeited
|
|
|
(653
|
)
|
|
|
13.94-70.84
|
|
|
|
20.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
|
3,320
|
|
|
|
9.57-67.97
|
|
|
|
21.52
|
|
|
|
|
|
Granted
|
|
|
641
|
|
|
|
23.11-28.62
|
|
|
|
27.70
|
|
|
|
|
|
Exercised
|
|
|
(281
|
)
|
|
|
9.57-25.16
|
|
|
|
17.45
|
|
|
|
2,458
|
|
Forfeited
|
|
|
(216
|
)
|
|
|
11.69-67.97
|
|
|
|
21.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
3,464
|
|
|
$
|
11.69-$65.59
|
|
|
$
|
23.15
|
|
|
$
|
21,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
|
2,000
|
|
|
$
|
11.69-$65.59
|
|
|
$
|
21.57
|
|
|
$
|
16,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2006
|
|
|
1,310
|
|
|
$
|
9.57-$67.97
|
|
|
$
|
22.52
|
|
|
$
|
9,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2005
|
|
|
2,769
|
|
|
$
|
9.57-$70.84
|
|
|
$
|
20.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options
outstanding and exercisable at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Options
|
|
|
Weighted
|
|
|
|
Options
|
|
|
Average
|
|
|
Average
|
|
|
Exercisable
|
|
|
Average
|
|
|
|
Outstanding
|
|
|
Exercise
|
|
|
Remaining
|
|
|
At
|
|
|
Exercise
|
|
|
|
At December 31,
|
|
|
Price of
|
|
|
Contractual
|
|
|
December 31,
|
|
|
Price of
|
|
|
|
2007
|
|
|
Options
|
|
|
Life
|
|
|
2007
|
|
|
Options
|
|
Range of Exercise Prices
|
|
(In thousands)
|
|
|
Outstanding
|
|
|
(in years)
|
|
|
(In thousands)
|
|
|
Exercisable
|
|
|
$11.69-$14.06
|
|
|
354
|
|
|
$
|
13.83
|
|
|
|
6.61
|
|
|
|
352
|
|
|
$
|
13.83
|
|
14.12-16.01
|
|
|
355
|
|
|
|
15.28
|
|
|
|
5.74
|
|
|
|
305
|
|
|
|
15.24
|
|
16.03-18.42
|
|
|
557
|
|
|
|
17.87
|
|
|
|
5.84
|
|
|
|
377
|
|
|
|
17.76
|
|
18.47-21.87
|
|
|
306
|
|
|
|
20.04
|
|
|
|
4.59
|
|
|
|
230
|
|
|
|
19.85
|
|
22.19-22.19
|
|
|
415
|
|
|
|
22.19
|
|
|
|
8.25
|
|
|
|
195
|
|
|
|
22.19
|
|
22.22-26.30
|
|
|
371
|
|
|
|
24.99
|
|
|
|
5.09
|
|
|
|
255
|
|
|
|
25.13
|
|
26.40-28.47
|
|
|
354
|
|
|
|
27.22
|
|
|
|
8.77
|
|
|
|
45
|
|
|
|
27.29
|
|
28.52-31.39
|
|
|
350
|
|
|
|
28.74
|
|
|
|
8.83
|
|
|
|
23
|
|
|
|
30.30
|
|
31.42-56.41
|
|
|
362
|
|
|
|
35.91
|
|
|
|
7.38
|
|
|
|
177
|
|
|
|
40.62
|
|
60.63-65.59
|
|
|
40
|
|
|
|
62.31
|
|
|
|
2.64
|
|
|
|
41
|
|
|
|
62.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,464
|
|
|
$
|
23.15
|
|
|
|
6.74
|
|
|
|
2,000
|
|
|
$
|
21.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average remaining contractual life of options
exercisable as of December 31, 2007 was 5.42 years. As
of December 31, 2007, shares available for future grant of
awards under the 2006 Plan and the 2006 Directors
Plan were approximately 3,999,105 and 325,000, respectively.
As described in Note 1, effective January 1, 2006,
Forrester adopted the provisions of SFAS No. 123R.
Under the provisions of SFAS No. 123R, Forrester
recorded approximately $7.2 million and $8.3 million
of stock-based compensation expense in the accompanying
consolidated statements of income for the years ended
December 31, 2006 and 2007, respectively. Forrester
utilized the Black-Scholes valuation model for estimating the
fair value of the stock-based compensation granted after the
adoption of SFAS No. 123R. Prior to the adoption of
SFAS No. 123R, the Company recorded stock-based
compensation expense based on the provisions contained in APB
No. 25. The impact of the change in accounting principle
from APB No. 25 to SFAS No. 123R was an increase
in non-cash stock-based compensation expense of
$4.9 million, or $0.22 and $0.21 per basic and diluted
income per common share, respectively, which is included in the
accompanying consolidated statement of income for the year ended
December 31, 2006.
The option period under the employee stock purchase plan that
would have resulted in the purchase of shares at the end of June
2007 was terminated and no option period was authorized for the
remainder of the year. As a result no compensation expense was
recognized related to the employee stock purchase plan for the
year ended December 31, 2007. (See Note 13 for further
discussion of the Employee Stock Purchase Plan). The options
granted under the stock option 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:
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Year Ended
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Year Ended
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December 31,
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December 31,
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Year Ended
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2006
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2006
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December 31,
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Stock Option
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Employee Stock
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2007
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Plans
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Purchase Plan
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Stock Option Plan
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Average risk-free interest rate
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4.69
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%
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5.27
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%
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4.5
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%
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Expected dividend yield
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None
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None
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None
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Expected life
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6.25 Years
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0.5 Years
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3.24 Years
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Expected volatility
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35
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%
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26
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%
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35
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%
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Weighted average fair value
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$
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9.18
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$
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5.12
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$
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8.28
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The dividend yield of zero is based on the fact that Forrester
has never paid cash dividends and has no present intention to
pay cash dividends. 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. With the
exception of the options granted on April 3, 2006 and
April 2, 2007 referenced below, the expected term
assumption is calculated using the simplified method outlined in
SEC Staff Accounting Bulletin No. 107.
Based on Forresters historical experience for grants with
varying vesting terms, an estimated forfeiture rate of 10% had
been used to determine current period expense. Forrester
analyzed various employee groups to determine if the utilization
of different forfeiture rates was required to arrive at a more
accurate expense number. The Company concluded that the
forfeiture experience was not materially different amongst the
employee groups and determined that one forfeiture rate was
appropriate. Forrester will record additional expense if the
actual forfeiture rate is lower than estimated, and will record
recovery of prior expense if the actual forfeiture rate is
higher than estimated. The actual expense recognized over the
vesting period will only be for those shares that vest.
On April 3, 2006, Forrester issued to its employees options
to purchase 587,500 shares of common stock (the
April 3, 2006 grant). These options were subject to
performance criteria and would vest only if certain pro forma
operating margin targets related to full year 2006 performance
were achieved. The vesting of these options was over
F-23
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
24 or 36 months, or the options could be forfeited,
depending on the actual pro forma 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 for the interim
reporting periods of 2006. Based on historical exercise patterns
for options with similar vesting and the expected vesting period
at the time of grant, Forrester used an expected option term of
2 years for the year one vest, 3 years for the year
two vest and 4 years for the year three vest to value these
options. The expense related to these options was recognized on
a graded basis, with the Company recognizing in 2006
100 percent of the expense related to the first tranche
that was expected to vest in year one, 50 percent of the
expense related to the portion of the options that was expected
to vest in year two, and 33 percent of the expense related
to the portion of the options that was expected to vest in year
three. The actual pro forma operating margin for 2006 resulted
in accelerated vesting of the options over 24 months. The
remaining compensation expense associated with this accelerated
vesting will be recognized on a prospective basis in accordance
with SFAS No. 123R.
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 will vest only if
certain pro forma operating margin targets related to full year
2007 performance are achieved. The vesting of these options is
over 24 or 36 months, or the options could be forfeited,
depending on the actual pro forma operating margin achieved for
2007. The expense related to these options was recognized on a
graded basis, with the Company recognizing in 2007
100 percent of the expense related to the first tranche
that was expected to vest in year one, 50 percent of the
expense related to the portion of the options that was expected
to vest in year two, and 33 percent of the expense related
to the portion of the options that was expected to vest in year
three. As of December 31, 2007, operating performance
resulted in the options vesting over 36 months consistent
with the Companys estimates used during the interim
periods.
As of December 31, 2006 and 2007, there remained
approximately $12.4 million and $6.6 million,
respectively, of unrecognized compensation costs related to
non-vested stock options that is expected to be recognized as
expense over a weighted average period of approximately one year.
The Company elected to adopt the alternative transition method
for calculating the tax effects of employee stock-based
compensation awards outstanding upon the adoption of
SFAS No. 123R, as provided under the Financial
Accounting Standards Board Staff Position
No. FAS 123(R)-3, Transition Related to Accounting
for Tax Effects of Share-Based Payment Award. The
alternative transition method provides simplified methods to
calculate the tax effects of such outstanding stock-based
compensation awards on the beginning balance of the additional
paid-in capital pool (APIC pool) and to determine
the subsequent effect of such tax effects on the APIC pool and
the statements of cash flows.
Terminated employees have three months from date of termination
to exercise their vested options. During 2007, following the
Companys conclusion that its financial statements could no
longer be relied upon, the registration statement covering the
offer and sale of stock upon the exercise of options was not
available. As a result, no option holders were able to exercise
their options and terminated employees faced the prospect of
having their options expire before being able to exercise them.
Because the suspension of the registration statement was not
anticipated, the Company modified vested options held by
terminated employees to extend their expiration dates to
30 days after the date the suspension is lifted, but no
later than December 31, 2007 (i.e., tolled stock options).
Options for terminated employees that were tolled before
March 14, 2007 were accounted for as liability awards
because the option holders were no longer employees at the time
of the modification and because of the Companys inability
to provide shares upon exercise. When the Companys
registration statement covering the offer and sale of stock
became available, these awards were reclassified as equity
awards. Options that were tolled after March 14, 2007 were
accounted for as equity awards because their options were tolled
in conjunction with their termination. A summary of the options
tolled during 2007 is as follows:
F-24
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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Total
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Number of
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Number of
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Expense
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Individuals
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