Delaware
|
04-3099750
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(State or other jurisdiction of
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(I.R.S. Employer
|
incorporation or organization)
|
Identification Number)
|
|
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P.O. Box 10212
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06902-7700
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56 Top Gallant Road
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(Zip Code)
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Stamford, CT
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(Address of principal executive offices)
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Page
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|
|
|
|
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March 31,
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December 31,
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||||
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2016
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|
2015
|
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
403,943
|
|
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$
|
372,976
|
|
Fees receivable, net of allowances of $7,200 and $6,900, respectively
|
602,877
|
|
|
580,763
|
|
||
Deferred commissions
|
118,125
|
|
|
124,831
|
|
||
Prepaid expenses and other current assets
|
54,332
|
|
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62,427
|
|
||
Total current assets
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1,179,277
|
|
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1,140,997
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|
||
Property, equipment and leasehold improvements, net
|
108,628
|
|
|
108,733
|
|
||
Goodwill
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718,034
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|
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715,359
|
|
||
Intangible assets, net
|
90,553
|
|
|
96,544
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Other assets
|
115,017
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|
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113,053
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|
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Total Assets
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$
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2,211,509
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|
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$
|
2,174,686
|
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Liabilities and Stockholders’ Deficit
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|
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Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
$
|
247,423
|
|
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$
|
387,691
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Deferred revenues
|
986,301
|
|
|
900,801
|
|
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Current portion of long-term debt
|
57,500
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|
|
35,000
|
|
||
Total current liabilities
|
1,291,224
|
|
|
1,323,492
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|
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Long-term debt
|
832,500
|
|
|
790,000
|
|
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Other liabilities
|
200,455
|
|
|
193,594
|
|
||
Total Liabilities
|
2,324,179
|
|
|
2,307,086
|
|
||
Stockholders’ Deficit
|
|
|
|
|
|
||
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $.0005 par value, 250,000,000 shares authorized; 156,234,415 shares issued for both periods
|
78
|
|
|
78
|
|
||
Additional paid-in capital
|
832,973
|
|
|
818,546
|
|
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Accumulated other comprehensive loss, net
|
(49,430
|
)
|
|
(44,402
|
)
|
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Accumulated earnings
|
1,490,851
|
|
|
1,450,684
|
|
||
Treasury stock, at cost, 73,734,432 and 73,896,245 common shares, respectively
|
(2,387,142
|
)
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(2,357,306
|
)
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||
Total Stockholders’ Deficit
|
(112,670
|
)
|
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(132,400
|
)
|
||
Total Liabilities and Stockholders’ Deficit
|
$
|
2,211,509
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|
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$
|
2,174,686
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Three Months Ended
|
||||||
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March 31,
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||||||
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2016
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2015
|
||||
Revenues:
|
|
|
|
||||
Research
|
$
|
440,271
|
|
|
$
|
381,090
|
|
Consulting
|
84,940
|
|
|
76,792
|
|
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Events
|
32,055
|
|
|
13,304
|
|
||
Total revenues
|
557,266
|
|
|
471,186
|
|
||
Costs and expenses:
|
|
|
|
||||
Cost of services and product development
|
212,041
|
|
|
177,762
|
|
||
Selling, general and administrative
|
257,411
|
|
|
229,522
|
|
||
Depreciation
|
8,834
|
|
|
7,989
|
|
||
Amortization of intangibles
|
6,183
|
|
|
2,139
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Acquisition and integration charges
|
8,368
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|
|
5,092
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Total costs and expenses
|
492,837
|
|
|
422,504
|
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Operating income
|
64,429
|
|
|
48,682
|
|
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Interest expense, net
|
(6,006
|
)
|
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(3,480
|
)
|
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Other income (expense), net
|
1,884
|
|
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(962
|
)
|
||
Income before income taxes
|
60,307
|
|
|
44,240
|
|
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Provision for income taxes
|
20,140
|
|
|
15,889
|
|
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Net income
|
$
|
40,167
|
|
|
$
|
28,351
|
|
|
|
|
|
||||
Net income per share:
|
|
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|
||||
Basic
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$
|
0.49
|
|
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$
|
0.33
|
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Diluted
|
$
|
0.48
|
|
|
$
|
0.32
|
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Weighted average shares outstanding:
|
|
|
|
||||
Basic
|
82,451
|
|
|
86,539
|
|
||
Diluted
|
83,464
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|
|
87,773
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|
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Three Months Ended
|
||||||
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March 31,
|
||||||
|
2016
|
|
2015
|
||||
Net income
|
$
|
40,167
|
|
|
$
|
28,351
|
|
Other comprehensive loss, net of tax:
|
|
|
|
||||
Foreign currency translation adjustments
|
2,068
|
|
|
(20,107
|
)
|
||
Interest rate hedges – net change in deferred loss
|
(7,133
|
)
|
|
(1,104
|
)
|
||
Pension – net change in deferred actuarial loss
|
37
|
|
|
53
|
|
||
Other comprehensive loss, net of tax
|
(5,028
|
)
|
|
(21,158
|
)
|
||
Comprehensive income
|
$
|
35,139
|
|
|
$
|
7,193
|
|
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Three Months Ended
|
||||||
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March 31,
|
||||||
|
2016
|
|
2015
|
||||
Operating activities:
|
|
|
|
|
|
||
Net income
|
$
|
40,167
|
|
|
$
|
28,351
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
15,017
|
|
|
10,128
|
|
||
Stock-based compensation plan expense
|
15,495
|
|
|
16,729
|
|
||
Excess tax benefits from stock-based compensation plans
|
(4,751
|
)
|
|
(7,556
|
)
|
||
Deferred taxes
|
(2,191
|
)
|
|
(3,358
|
)
|
||
Amortization of debt issue costs
|
411
|
|
|
837
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Fees receivable, net
|
(19,089
|
)
|
|
9,631
|
|
||
Deferred commissions
|
7,047
|
|
|
8,352
|
|
||
Prepaid expenses and other current assets
|
8,205
|
|
|
(22,964
|
)
|
||
Other assets
|
5,436
|
|
|
12,927
|
|
||
Deferred revenues
|
79,141
|
|
|
74,208
|
|
||
Accounts payable, accrued, and other liabilities
|
(136,308
|
)
|
|
(121,622
|
)
|
||
Cash provided by operating activities
|
8,580
|
|
|
5,663
|
|
||
Investing activities:
|
|
|
|
|
|
||
Additions to property, equipment and leasehold improvements
|
(6,560
|
)
|
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(11,632
|
)
|
||
Acquisitions - cash paid (net of cash acquired)
|
(800
|
)
|
|
—
|
|
||
Cash used in investing activities
|
(7,360
|
)
|
|
(11,632
|
)
|
||
Financing activities:
|
|
|
|
|
|
||
Proceeds from stock-based compensation plans and ESP Plan
|
2,580
|
|
|
2,076
|
|
||
Proceeds from borrowings
|
70,000
|
|
|
265,000
|
|
||
Payments on borrowings
|
(5,000
|
)
|
|
(5,000
|
)
|
||
Purchases of treasury stock
|
(45,487
|
)
|
|
(324,042
|
)
|
||
Excess tax benefits from stock-based compensation plans
|
4,751
|
|
|
7,556
|
|
||
Cash provided (used) in financing activities
|
26,844
|
|
|
(54,410
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
28,064
|
|
|
(60,379
|
)
|
||
Effects of exchange rates on cash and cash equivalents
|
2,903
|
|
|
(23,270
|
)
|
||
Cash and cash equivalents, beginning of period
|
372,976
|
|
|
365,302
|
|
||
Cash and cash equivalents, end of period
|
$
|
403,943
|
|
|
$
|
281,653
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Numerator:
|
|
|
|
|
|
||
Net income used for calculating basic and diluted earnings per common share
|
$
|
40,167
|
|
|
$
|
28,351
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
|
||
Weighted average number of common shares used in the calculation of basic earnings per share
|
82,451
|
|
|
86,539
|
|
||
Common stock equivalents associated with stock-based compensation plans (1)
|
1,013
|
|
|
1,234
|
|
||
Shares used in the calculation of diluted earnings per share
|
83,464
|
|
|
87,773
|
|
||
|
|
|
|
||||
Basic earnings per share
|
$
|
0.49
|
|
|
$
|
0.33
|
|
Diluted earnings per share
|
$
|
0.48
|
|
|
$
|
0.32
|
|
|
(1)
|
Certain common stock equivalents were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. These common share equivalents totaled less than
0.4 million
in each of the periods presented.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Award type:
|
|
2016
|
|
2015
|
||||
Stock appreciation rights
|
|
$
|
1.7
|
|
|
$
|
2.1
|
|
Common stock equivalents
|
|
0.2
|
|
|
0.2
|
|
||
Restricted stock units
|
|
13.6
|
|
|
14.4
|
|
||
Total (1)
|
|
$
|
15.5
|
|
|
$
|
16.7
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Amount recorded in:
|
|
2016
|
|
2015
|
||||
Cost of services and product development
|
|
$
|
7.6
|
|
|
$
|
6.9
|
|
Selling, general and administrative
|
|
7.9
|
|
|
9.8
|
|
||
Total (1)
|
|
$
|
15.5
|
|
|
$
|
16.7
|
|
|
(1)
|
Includes charges of
$10.3 million
and
$10.5 million
for the three months ended
March 31, 2016
and
2015
, respectively, for awards to retirement-eligible employees since these awards vest on an accelerated basis.
|
|
SARs
(in millions)
|
|
Per Share
Weighted-
Average
Exercise Price
|
|
Per Share
Weighted-
Average
Grant Date
Fair Value
|
|
Weighted
Average
Remaining
Contractual
Term
|
|||||
Outstanding at December 31, 2015
|
1.3
|
|
|
$
|
56.47
|
|
|
$
|
14.92
|
|
|
4.46
|
Granted
|
0.4
|
|
|
80.06
|
|
|
16.50
|
|
|
6.86
|
||
Exercised
|
—
|
|
|
—
|
|
|
—
|
|
|
n/a
|
||
Outstanding at March 31, 2016 (1), (2)
|
1.7
|
|
|
$
|
61.31
|
|
|
$
|
15.24
|
|
|
4.63
|
Vested and exercisable at March 31, 2016 (2)
|
0.9
|
|
|
$
|
49.80
|
|
|
$
|
14.21
|
|
|
3.43
|
|
|
Three Months Ended
|
||||
|
March 31,
|
||||
|
2016
|
|
2015
|
||
Expected dividend yield (1)
|
—
|
%
|
|
—
|
%
|
Expected stock price volatility (2)
|
22
|
%
|
|
24
|
%
|
Risk-free interest rate (3)
|
1.1
|
%
|
|
1.5
|
%
|
Expected life in years (4)
|
4.4
|
|
|
4.4
|
|
|
(1)
|
The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts. Historically, the Company has not paid cash dividends on its Common Stock.
|
(2)
|
The determination of expected stock price volatility was based on both historical Common Stock prices and implied volatility from publicly traded options in the Common Stock.
|
(3)
|
The risk-free interest rate is based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award.
|
(4)
|
The expected life represents the Company’s weighted-average estimate of the period of time the SARs are expected to be outstanding (that is, period between the service inception date and the expected exercise date).
|
|
Restricted
Stock Units
(RSUs)
(in millions)
|
|
Per Share
Weighted
Average
Grant Date
Fair Value
|
|||
Outstanding at December 31, 2015
|
1.4
|
|
|
$
|
62.80
|
|
Granted (1)
|
0.6
|
|
|
80.07
|
|
|
Vested and released
|
(0.6
|
)
|
|
57.19
|
|
|
Forfeited
|
(0.1
|
)
|
|
30.67
|
|
|
Outstanding at March 31, 2016 (2), (3)
|
1.3
|
|
|
$
|
72.55
|
|
|
(1)
|
The
0.6 million
RSUs granted consisted of
0.3 million
performance-based RSUs awarded to executives and
0.3 million
service-based RSUs awarded to non-executive employees and non-management board members. The
0.3 million
performance-based RSUs represents the target amount of the grant for the year, which is tied to an increase in the Company’s total contract value for
2016
. The final number of performance-based RSUs that will ultimately be awarded for
2016
ranges from
0%
to
200%
of the target amount, with the final number dependent on the actual increase in total contract value for
2016
as measured on
December 31, 2016
. If the specified minimum level of achievement is not met, the performance-based RSUs will be forfeited in their entirety, and any compensation expense previously recorded will be reversed.
|
(2)
|
The Company expects that substantially all of the outstanding awards will vest in future periods.
|
(3)
|
The weighted-average remaining contractual term of the outstanding RSUs is approximately
1.8
years.
|
|
Common
Stock
Equivalents
(CSEs)
|
|
Per Share
Weighted
Average
Grant Date
Fair Value
|
|||
Outstanding at December 31, 2015
|
105,664
|
|
|
$
|
19.57
|
|
Granted
|
1,749
|
|
|
90.58
|
|
|
Converted to common shares upon grant
|
(1,400
|
)
|
|
90.58
|
|
|
Outstanding at March 31, 2016
|
106,013
|
|
|
$
|
19.81
|
|
|
Three Months Ended March 31, 2016
|
Research
|
|
Consulting
|
|
Events
|
|
Consolidated
|
||||||||
Revenues
|
$
|
440,271
|
|
|
$
|
84,940
|
|
|
$
|
32,055
|
|
|
$
|
557,266
|
|
Gross contribution
|
308,186
|
|
|
29,378
|
|
|
12,983
|
|
|
350,547
|
|
||||
Corporate and other expenses
|
|
|
|
|
|
|
|
|
|
(286,118
|
)
|
||||
Operating income
|
|
|
|
|
|
|
|
|
|
$
|
64,429
|
|
Three Months Ended March 31, 2015
|
Research
|
|
Consulting
|
|
Events
|
|
Consolidated
|
||||||||
Revenues
|
$
|
381,090
|
|
|
$
|
76,792
|
|
|
$
|
13,304
|
|
|
$
|
471,186
|
|
Gross contribution
|
267,065
|
|
|
26,327
|
|
|
2,442
|
|
|
295,834
|
|
||||
Corporate and other expenses
|
|
|
|
|
|
|
|
|
|
(247,152
|
)
|
||||
Operating income
|
|
|
|
|
|
|
|
|
|
$
|
48,682
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Total segment gross contribution
|
$
|
350,547
|
|
|
$
|
295,834
|
|
Costs and expenses:
|
|
|
|
||||
Cost of services and product development - unallocated (1)
|
5,322
|
|
|
2,410
|
|
||
Selling, general and administrative
|
257,411
|
|
|
229,522
|
|
||
Depreciation and amortization
|
15,017
|
|
|
10,128
|
|
||
Acquisition and integration charges
|
8,368
|
|
|
5,092
|
|
||
Operating income
|
64,429
|
|
|
48,682
|
|
||
Interest expense and other
|
4,122
|
|
|
4,442
|
|
||
Provision for income taxes
|
20,140
|
|
|
15,889
|
|
||
Net income
|
$
|
40,167
|
|
|
$
|
28,351
|
|
|
(1)
|
The unallocated amounts consist of certain bonus and related fringe costs recorded in Consolidated cost of services and product development expense that are not allocated to segment expense. The Company's policy is to only allocate bonus and related fringe charges to segments for up to
100%
of the segment employee's target bonus. Amounts above
100%
are absorbed by corporate.
|
|
Research
|
|
Consulting
|
|
Events
|
|
Total
|
||||||||
Balance, December 31, 2015 (1)
|
$
|
575,292
|
|
|
$
|
98,412
|
|
|
$
|
41,655
|
|
|
$
|
715,359
|
|
Additions due to acquisitions (2)
|
1,913
|
|
|
—
|
|
|
—
|
|
|
1,913
|
|
||||
Foreign currency translation adjustments
|
1,161
|
|
|
(427
|
)
|
|
28
|
|
|
762
|
|
||||
Balance, March 31, 2016
|
$
|
578,366
|
|
|
$
|
97,985
|
|
|
$
|
41,683
|
|
|
$
|
718,034
|
|
|
(1)
|
The Company does not have any accumulated goodwill impairment losses.
|
(2)
|
The additions to goodwill reflect certain measurement period working capital and other adjustments related to the acquisition of Capterra, Inc. in September 2015.
|
March 31, 2016
|
|
Trade
Name
|
|
Customer
Relationships
|
|
Content
|
|
Software
|
|
Non-Compete
|
|
Total
|
||||||||||||
Gross cost, December 31, 2015
|
|
$
|
4,144
|
|
|
$
|
62,860
|
|
|
$
|
5,450
|
|
|
$
|
16,219
|
|
|
$
|
29,330
|
|
|
$
|
118,003
|
|
Foreign currency translation impact and other
|
|
18
|
|
|
204
|
|
|
(150
|
)
|
|
(85
|
)
|
|
17
|
|
|
4
|
|
||||||
Gross cost
|
|
4,162
|
|
|
63,064
|
|
|
5,300
|
|
|
16,134
|
|
|
29,347
|
|
|
118,007
|
|
||||||
Accumulated amortization (1), (2)
|
|
(946
|
)
|
|
(11,675
|
)
|
|
(3,868
|
)
|
|
(4,926
|
)
|
|
(6,039
|
)
|
|
(27,454
|
)
|
||||||
Balance, March 31, 2016
|
|
$
|
3,216
|
|
|
$
|
51,389
|
|
|
$
|
1,432
|
|
|
$
|
11,208
|
|
|
$
|
23,308
|
|
|
$
|
90,553
|
|
December 31, 2015
|
|
Trade
Name
|
|
Customer
Relationships
|
|
Content
|
|
Software
|
|
Non-Compete
|
|
Total
|
||||||||||||
Gross cost
|
|
$
|
4,144
|
|
|
$
|
62,860
|
|
|
$
|
5,450
|
|
|
$
|
16,219
|
|
|
$
|
29,330
|
|
|
$
|
118,003
|
|
Accumulated amortization (1), (2)
|
|
(681
|
)
|
|
(9,028
|
)
|
|
(3,525
|
)
|
|
(3,699
|
)
|
|
(4,526
|
)
|
|
(21,459
|
)
|
||||||
Balance, December 31, 2015
|
|
$
|
3,463
|
|
|
$
|
53,832
|
|
|
$
|
1,925
|
|
|
$
|
12,520
|
|
|
$
|
24,804
|
|
|
$
|
96,544
|
|
2016 (remaining nine months)
|
$
|
17,938
|
|
2017
|
21,516
|
|
|
2018
|
18,855
|
|
|
2019
|
14,346
|
|
|
2020
|
12,472
|
|
|
Thereafter
|
5,426
|
|
|
|
$
|
90,553
|
|
|
|
Balance
|
|
Balance
|
||||
|
|
March 31,
|
|
December 31,
|
||||
Description:
|
|
2016
|
|
2015
|
||||
Term loans (1)
|
|
$
|
375,000
|
|
|
$
|
380,000
|
|
Revolver loans (1), (2)
|
|
510,000
|
|
|
440,000
|
|
||
Other (3)
|
|
5,000
|
|
|
5,000
|
|
||
Total (4)
|
|
$
|
890,000
|
|
|
$
|
825,000
|
|
|
(1)
|
The contractual annualized interest rates as of
March 31, 2016
on the term loan and the revolver ranged from
1.80%
to
1.90%
, which consisted of a floating eurodollar base rate ranging from
0.42%
to
0.52%
plus a margin of
1.38%
. However, the Company has outstanding interest rate swap contracts, accounted for as cash flow hedges, which effectively convert the floating eurodollar base rates to a fixed base rate on
$700.0 million
of borrowings (see below).
|
(2)
|
The Company had
$586.0 million
of available borrowing capacity on the revolver (not including the expansion feature) as of
March 31, 2016
.
|
(3)
|
Consists of a
$5.0 million
State of Connecticut economic development loan with a
3.00%
fixed rate of interest. The loan was originated in 2012 and has a
10 years
maturity. Principal payments are deferred for the first
five
years and the loan may be repaid at any point by the Company without penalty. The loan has a principal forgiveness provision in which up to
$2.5 million
of the loan may be forgiven if the Company meets certain employment targets during the first
five
years of the loan.
|
(4)
|
The average annual effective rate on the Company's total debt outstanding for the three months ended
March 31, 2016
, including the effect of the interest rate swaps discussed below, was approximately
2.75%
.
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Number of shares repurchased (1)
|
466,823
|
|
|
4,084,590
|
|
||
Cash paid for repurchased shares (in thousands) (2)
|
$
|
45,487
|
|
|
$
|
324,042
|
|
|
Interest Rate
Swaps
|
|
Defined
Benefit
Pension Plans
|
|
Foreign
Currency
Translation
Adjustments
|
|
Total
|
||||||||
December 31, 2015
|
$
|
(3,079
|
)
|
|
$
|
(4,832
|
)
|
|
$
|
(36,491
|
)
|
|
$
|
(44,402
|
)
|
Changes during the period:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in AOCL/I before reclassifications to income
|
(8,357
|
)
|
|
—
|
|
|
2,068
|
|
|
(6,289
|
)
|
||||
Reclassifications from AOCL/I to income during the period (2), (3)
|
1,224
|
|
|
37
|
|
|
—
|
|
|
1,261
|
|
||||
Other comprehensive (loss) income for the period
|
(7,133
|
)
|
|
37
|
|
|
2,068
|
|
|
(5,028
|
)
|
||||
Balance – March 31, 2016
|
$
|
(10,212
|
)
|
|
$
|
(4,795
|
)
|
|
$
|
(34,423
|
)
|
|
$
|
(49,430
|
)
|
|
Interest Rate
Swaps
|
|
Defined
Benefit
Pension Plans
|
|
Foreign
Currency
Translation
Adjustments
|
|
Total
|
||||||||
Balance – December 31, 2014
|
$
|
(1,740
|
)
|
|
$
|
(6,028
|
)
|
|
$
|
(13,402
|
)
|
|
$
|
(21,170
|
)
|
Changes during the period:
|
|
|
|
|
|
|
|
||||||||
Change in AOCL/I before reclassifications to income
|
(1,857
|
)
|
|
—
|
|
|
(20,107
|
)
|
|
(21,964
|
)
|
||||
Reclassifications from AOCL/I to income during the period (2), (3)
|
753
|
|
|
53
|
|
|
—
|
|
|
806
|
|
||||
Other comprehensive (loss) income for the period
|
(1,104
|
)
|
|
53
|
|
|
(20,107
|
)
|
|
(21,158
|
)
|
||||
Balance – March 31, 2015
|
$
|
(2,844
|
)
|
|
$
|
(5,975
|
)
|
|
$
|
(33,509
|
)
|
|
$
|
(42,328
|
)
|
(1)
|
Amounts in parentheses represent debits (deferred losses).
|
(2)
|
The reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net of tax effect. See Note 9 – Derivatives and Hedging for information regarding the hedges.
|
(3)
|
The reclassifications related to defined benefit pension plans were recorded in Selling, general and administrative expense, net of tax effect. See Note 11 – Employee Benefits for information regarding the Company’s defined benefit pension plans.
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|||||||
Derivative Contract Type
|
|
Number of
Outstanding
Contracts
|
|
Notional
Amounts
|
|
Fair Value
Asset
(Liability), Net
(3)
|
|
Balance
Sheet
Line Item
|
|
Unrealized
Loss Recorded
in OCI
|
|||||||
Interest rate swaps (1)
|
|
3
|
|
|
$
|
700,000
|
|
|
$
|
(17,021
|
)
|
|
Other liabilities
|
|
$
|
(10,212
|
)
|
Foreign currency forwards (2)
|
|
21
|
|
|
16,500
|
|
|
(126
|
)
|
|
Accrued liabilities
|
|
—
|
|
|||
Total
|
|
24
|
|
|
$
|
716,500
|
|
|
$
|
(17,147
|
)
|
|
|
|
$
|
(10,212
|
)
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|||||||
Derivative Contract Type
|
|
Number of
Outstanding
Contracts
|
|
Notional
Amounts
|
|
Fair Value
Asset
(Liability), Net
(3)
|
|
Balance
Sheet
Line Item
|
|
Unrealized
Loss Recorded
in OCI
|
|||||||
Interest rate swaps (1)
|
|
3
|
|
|
$
|
700,000
|
|
|
$
|
(5,132
|
)
|
|
Other liabilities
|
|
$
|
(3,079
|
)
|
Foreign currency forwards (2)
|
|
102
|
|
|
193,610
|
|
|
235
|
|
|
Accrued liabilities
|
|
—
|
|
|||
Total
|
|
105
|
|
|
$
|
893,610
|
|
|
$
|
(4,897
|
)
|
|
|
|
$
|
(3,079
|
)
|
|
(1)
|
The swaps have been designated and are accounted for as cash flow hedges of the forecasted interest payments on borrowings. As a result, changes in fair value of the swaps are deferred and are recorded in AOCL/I, net of tax effect (see Note 6 — Debt for additional information).
|
(2)
|
The Company has foreign exchange transaction risk since it typically enters into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into short-term foreign currency forward exchange contracts to mitigate the cash flow risk associated with changes in foreign currency rates on forecasted foreign currency transactions. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other expense, net since the Company does not designate these contracts as hedges for accounting purposes. All of the contracts outstanding at
March 31, 2016
matured by the end of April 2016.
|
(3)
|
See Note 10 — Fair Value Disclosures for the determination of the fair value of these instruments.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Amount recorded in:
|
|
2016
|
|
2015
|
||||
Interest expense, net (1)
|
|
$
|
1,987
|
|
|
$
|
1,254
|
|
Other expense (income), net (2)
|
|
335
|
|
|
258
|
|
||
Total expense, net
|
|
$
|
2,322
|
|
|
$
|
1,512
|
|
|
(1)
|
Consists of interest expense from interest rate swap contracts.
|
(2)
|
Consists of realized and unrealized gains and losses on foreign currency forward contracts.
|
|
|
Fair Value
|
|
Fair Value
|
||||
Description:
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
Assets:
|
|
|
|
|
|
|
||
Values based on Level 1 inputs:
|
|
|
|
|
||||
Deferred compensation plan assets (1)
|
|
$
|
9,672
|
|
|
$
|
8,671
|
|
Total Level 1 inputs
|
|
$
|
9,672
|
|
|
$
|
8,671
|
|
Values based on Level 2 inputs:
|
|
|
|
|
||||
Deferred compensation plan assets (1)
|
|
$
|
25,467
|
|
|
$
|
25,474
|
|
Foreign currency forward contracts (2)
|
|
—
|
|
|
610
|
|
||
Total Level 2 inputs
|
|
$
|
25,467
|
|
|
$
|
26,084
|
|
Total Assets
|
|
$
|
35,139
|
|
|
$
|
34,755
|
|
Liabilities:
|
|
|
|
|
|
|
||
Values based on Level 2 inputs:
|
|
|
|
|
||||
Deferred compensation plan liabilities (1)
|
|
$
|
39,975
|
|
|
$
|
39,071
|
|
Foreign currency forward contracts (2)
|
|
126
|
|
|
375
|
|
||
Interest rate swap contracts (3)
|
|
17,021
|
|
|
5,132
|
|
||
Total Level 2 inputs
|
|
$
|
57,122
|
|
|
$
|
44,578
|
|
Total Liabilities
|
|
$
|
57,122
|
|
|
$
|
44,578
|
|
|
(1)
|
The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees. The assets consist of investments in money market and mutual funds, and company-owned life insurance contracts, all of which are valued based on Level 1 or Level 2 valuation inputs. The related deferred compensation plan
|
(2)
|
The Company enters into foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates. Valuation of the foreign currency forward contracts is based on observable foreign currency exchange rates in active markets, which the Company considers a Level 2 input.
|
(3)
|
The Company has interest rate swap contracts which hedge the risk of variability from interest payments on its borrowings (see Note 6 — Debt). The fair value of the swaps is based on mark-to-market valuations prepared by a third-party broker. The valuations are based on observable interest rates from recently executed market transactions and other observable market data, which the Company considers Level 2 inputs. The Company independently corroborates the reasonableness of the valuations prepared by the third-party broker through the use of an electronic quotation service.
|
BUSINESS SEGMENT
|
|
BUSINESS MEASUREMENTS
|
Research
|
|
Total contract value
represents the value attributable to all of our subscription-related contracts. It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract. Total contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Events tickets) for which revenue is recognized when the deliverable is utilized.
|
|
|
|
|
|
Research contract value
represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis. Contract value is calculated as the annualized value of all subscription research contracts in effect at a specific point in time, without regard to the duration of the contract.
|
|
|
|
|
|
Client retention rate
represents a measure of client satisfaction and renewed business relationships at a specific point in time. Client retention is calculated on a percentage basis by dividing our current clients, who were also clients a year ago, by all clients from a year ago. Client retention is calculated at an enterprise level, which represents a single company or customer.
|
|
|
|
|
|
Wallet retention rate
represents a measure of the amount of contract value we have retained with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the contract value of clients, who were clients one year ago, by the total contract value from a year ago, excluding the impact of foreign currency exchange. When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both. Wallet retention is calculated at an enterprise level, which represents a single company or customer.
|
|
|
|
Consulting
|
|
Consulting backlog
represents future revenue to be derived from in-process consulting, measurement and strategic advisory services engagements.
|
|
|
|
|
|
Utilization rate
represents a measure of productivity of our consultants. Utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill.
|
|
|
|
|
|
Billing Rate
represents earned billable revenue divided by total billable hours.
|
|
|
|
|
|
Average annualized revenue per billable headcount
represents a measure of the revenue generating ability of an average billable consultant and is calculated periodically by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year.
|
|
|
|
Events
|
|
Number of events
represents the total number of hosted events completed during the period.
|
|
|
|
|
|
Number of attendees
represents the total number of people who attend events.
|
|
|
|
•
|
Research revenues are mainly derived from subscription contracts for research products. The related revenues are deferred and recognized ratably over the applicable contract term. Fees derived from assisting organizations in selecting the right business software for their needs is recognized when the leads are provided to vendors.
|
•
|
Consulting revenues are principally generated from fixed fee and time and material engagements. Revenues from fixed fee contracts are recognized on a proportional performance basis. Revenues from time and materials engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization contracts are contingent in nature and are only recognized upon satisfaction of all conditions related to their payment.
|
•
|
Events revenues are deferred and then recognized upon the completion of the related symposium, conference or exhibition.
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
Total fees receivable
|
$
|
610,077
|
|
|
$
|
587,663
|
|
Allowance for losses
|
(7,200
|
)
|
|
(6,900
|
)
|
||
Fees receivable, net
|
$
|
602,877
|
|
|
$
|
580,763
|
|
|
Three Months Ended March 31, 2016
|
|
Three Months Ended March 31, 2015
|
|
Income
Increase
(Decrease)
$
|
|
Increase
(Decrease)
%
|
|||||||
Total revenues
|
$
|
557,266
|
|
|
$
|
471,186
|
|
|
$
|
86,080
|
|
|
18
|
%
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Cost of services and product development
|
212,041
|
|
|
177,762
|
|
|
(34,279
|
)
|
|
(19
|
)
|
|||
Selling, general and administrative
|
257,411
|
|
|
229,522
|
|
|
(27,889
|
)
|
|
(12
|
)
|
|||
Depreciation
|
8,834
|
|
|
7,989
|
|
|
(845
|
)
|
|
(11
|
)
|
|||
Amortization of intangibles
|
6,183
|
|
|
2,139
|
|
|
(4,044
|
)
|
|
>(100)
|
|
|||
Acquisition and integration charges
|
8,368
|
|
|
5,092
|
|
|
(3,276
|
)
|
|
(64
|
)
|
|||
Operating income
|
64,429
|
|
|
48,682
|
|
|
15,747
|
|
|
32
|
|
|||
Interest expense, net
|
(6,006
|
)
|
|
(3,480
|
)
|
|
(2,526
|
)
|
|
73
|
|
|||
Other income (expense), net
|
1,884
|
|
|
(962
|
)
|
|
2,846
|
|
|
>100
|
|
|||
Provision for income taxes
|
(20,140
|
)
|
|
(15,889
|
)
|
|
(4,251
|
)
|
|
(27
|
)
|
|||
Net income
|
$
|
40,167
|
|
|
$
|
28,351
|
|
|
$
|
11,816
|
|
|
42
|
%
|
|
As Of And For The Three Months Ended March 31, 2016
|
|
As Of And For The Three Months Ended March 31, 2015
|
|
Increase
(Decrease)
|
|
Percentage
Increase
(Decrease)
|
|||||||
Financial Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenues (1)
|
$
|
440,271
|
|
|
$
|
381,090
|
|
|
$
|
59,181
|
|
|
16
|
%
|
Gross contribution (1)
|
$
|
308,186
|
|
|
$
|
267,065
|
|
|
$
|
41,121
|
|
|
15
|
%
|
Gross contribution margin
|
70
|
%
|
|
70
|
%
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Business Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total contract value (1), (2)
|
$
|
1,721,000
|
|
|
$
|
1,576,000
|
|
|
$
|
145,000
|
|
|
9
|
%
|
Research contract value (1), (3)
|
$
|
1,704,000
|
|
|
$
|
1,562,000
|
|
|
$
|
142,000
|
|
|
9
|
%
|
Client retention
|
84
|
%
|
|
85
|
%
|
|
(1) point
|
|
|
—
|
|
|||
Wallet retention
|
105
|
%
|
|
106
|
%
|
|
(1) point
|
|
|
—
|
|
|
(1)
|
In thousands.
|
(2)
|
Total contract value represents the value attributable to all of our subscription-related contracts. It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract. Total contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Events tickets) for which revenue is recognized when the deliverable is utilized.
|
(3)
|
Research contract value represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis. Contract value is calculated as the annualized value of all subscription research contracts in effect at a specific point in time, without regard to the duration of the contract.
|
|
As Of And For The Three Months Ended March 31, 2016
|
|
As Of And For The Three Months Ended March 31, 2015
|
|
Increase
(Decrease)
|
|
Percentage
Increase
(Decrease)
|
|||||||
Financial Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenues (1)
|
$
|
84,940
|
|
|
$
|
76,792
|
|
|
$
|
8,148
|
|
|
11
|
%
|
Gross contribution (1)
|
$
|
29,378
|
|
|
$
|
26,327
|
|
|
$
|
3,051
|
|
|
12
|
%
|
Gross contribution margin
|
35
|
%
|
|
34
|
%
|
|
1 point
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Business Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Backlog (1)
|
$
|
114,100
|
|
|
$
|
101,400
|
|
|
$
|
12,700
|
|
|
13
|
%
|
Billable headcount
|
618
|
|
|
547
|
|
|
71
|
|
|
13
|
%
|
|||
Consultant utilization
|
67
|
%
|
|
67
|
%
|
|
—
|
|
|
—
|
|
|||
Average annualized revenue per billable headcount (1)
|
$
|
386
|
|
|
$
|
395
|
|
|
$
|
(9
|
)
|
|
(2
|
)%
|
|
(1)
|
Dollars in thousands.
|
|
As Of And For The Three Months Ended March 31, 2016
|
|
As Of And For The Three Months Ended March 31, 2015
|
|
Increase
(Decrease)
|
|
Percentage
Increase
(Decrease)
|
|||||||
Financial Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenues (1)
|
$
|
32,055
|
|
|
$
|
13,304
|
|
|
$
|
18,751
|
|
|
141
|
%
|
Gross contribution (1)
|
$
|
12,983
|
|
|
$
|
2,442
|
|
|
$
|
10,541
|
|
|
432
|
%
|
Gross contribution margin
|
41
|
%
|
|
18
|
%
|
|
23 points
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Business Measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Number of events
|
12
|
|
|
9
|
|
|
3
|
|
|
33
|
%
|
|||
Number of attendees
|
7,640
|
|
|
4,065
|
|
|
3,575
|
|
|
88
|
%
|
|
(1)
|
Dollars in thousands.
|
|
Three Months Ended
March 31, 2016 |
|
Three Months Ended
March 31, 2015 |
|
Cash
Increase
(Decrease)
|
||||||
Cash provided by operating activities
|
$
|
8,580
|
|
|
$
|
5,663
|
|
|
$
|
2,917
|
|
Cash used in investing activities
|
(7,360
|
)
|
|
(11,632
|
)
|
|
4,272
|
|
|||
Cash provided (used) in financing activities
|
26,844
|
|
|
(54,410
|
)
|
|
81,254
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
28,064
|
|
|
(60,379
|
)
|
|
88,443
|
|
|||
Effects of exchange rates
|
2,903
|
|
|
(23,270
|
)
|
|
26,173
|
|
|||
Beginning cash and cash equivalents
|
372,976
|
|
|
365,302
|
|
|
7,674
|
|
|||
Ending cash and cash equivalents
|
$
|
403,943
|
|
|
$
|
281,653
|
|
|
$
|
122,290
|
|
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Approximate
Dollar Value of Shares
that may yet be purchased
Under our Share Repurchase Program
(in billions) (1)
|
|||||
2016
|
|
|
|
|
|
|
|
|
|
||
January
|
|
36,554
|
|
|
$
|
82.00
|
|
|
|
|
|
February
|
|
299,211
|
|
|
81.14
|
|
|
|
|
||
March
|
|
131,058
|
|
|
84.02
|
|
|
|
|
||
Total for quarter
|
|
466,823
|
|
|
$
|
82.02
|
|
|
$
|
1.11
|
|
EXHIBIT
NUMBER
|
|
DESCRIPTION OF DOCUMENT
|
10.1
|
|
Amended and Restated Employment Agreement between Eugene A. Hall and Gartner, Inc. dated as of March 19, 2016.
|
|
|
|
31.1
|
|
Certification of chief executive officer under Rule 13a — 14(a)/15d — 14(a).
|
|
|
|
31.2
|
|
Certification of chief financial officer under Rule 13a — 14(a)/15d — 14(a).
|
|
|
|
32
|
|
Certification under 18 U.S.C. 1350.
|
|
|
|
101
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets at March 31, 2016 and December 31, 2015, (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015, and (v) the Notes to Condensed Consolidated Financial Statements.
|
|
|
Gartner, Inc.
|
|
|
|
Date:
|
May 5, 2016
|
/s/ Craig W. Safian
|
|
|
Craig W. Safian
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
(1)
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended
March 31, 2016
, of Gartner, Inc.;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 5, 2016
|
|
/s/ Eugene A. Hall
|
Eugene A. Hall
|
Chief Executive Officer
|
(1)
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended
March 31, 2016
, of Gartner, Inc.;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 5, 2016
|
|
/s/ Craig W. Safian
|
Craig W. Safian
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Eugene A. Hall
|
|
Name: Eugene A. Hall
|
|
Title: Chief Executive Officer
|
|
Date: May 5, 2016
|
|
|
|
/s/ Craig W. Safian
|
|
Name: Craig W. Safian
|
|
Title: Chief Financial Officer
|
|
Date: May 5, 2016
|
|