FORRESTER RESEARCH, INC.
10-Ks and 10-Qs
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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-K
| (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 | |
| For the fiscal year ended December 31, 2009 | ||
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or
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|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission File Number
000-21433
Forrester Research,
Inc.
(Exact name of registrant as
specified in its charter)
|
Delaware
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04-2797789 | |
|
(State or other jurisdiction
of
incorporation or organization) |
(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) |
(Zip Code) |
Registrant’s telephone number, including area code:
(617) 613-6000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 Par Value
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Nasdaq Global Select Market |
Securities
to be registered pursuant to Section 12(g) of the Act:
None
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
o
No
þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirement for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files.) Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s
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.
þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
|
Large accelerated
filer
o
|
Accelerated filer þ |
Non-accelerated
filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
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 registrant’s common stock
held by non-affiliates of the registrant as of June 30,
2009 (based on the closing price as quoted by the Nasdaq
National Market as of such date) was approximately $360,000,000.
As of March 10, 2010, 22,449,868 shares of the
registrant’s common stock were outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement related to its
2010 Annual Stockholders’ Meeting to be filed
subsequently — Part III of this
Form 10-K.
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as
“expects,” “anticipates,”
“intends,” “plans,” “estimates,”
or similar expressions are intended to identify these
forward-looking statements. Reference is made in particular to
our statements about possible acquisitions, our plans for
international expansion and the adequacy of our cash, marketable
investments and cash flows to satisfy our working capital and
capital expenditures. These statements are based on our current
plans and expectations and involve risks and uncertainties.
Important factors that could cause actual future activities and
results of operations to be materially different from those set
forth in the forward-looking statements are discussed below
under “Risk Factors.” We undertake no obligation to
update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise.
General
Forrester Research, Inc. is an independent research company that
provides pragmatic and forward-thinking advice to global leaders
in business and technology. Our products and services are
targeted to 19 specific roles, including senior management in
business strategy, marketing and information technology at
$1 billion-plus (revenue) companies who collaborate with us
to accelerate achievement of their business goals.
Research serves as the foundation for all our solutions and
consists primarily of annual memberships to our
RoleView
tm
syndicated research offerings that provide access to our core
research on a wide range of business and technology issues
critical to the success of the individuals in the roles we
serve. In addition to our RoleView offerings, we also provide a
portfolio of products and services that allow our clients to
interact directly with analysts and their peers and explore in
greater detail the issues and topics covered by RoleView
research on a role and client-specific basis.
We were incorporated in Massachusetts on July 7, 1983 and
reincorporated in Delaware on February 16, 1996.
Our Internet address is www.forrester.com. We make available
free of charge, on or through the investor information section
of our website, annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
and current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC.
Industry
Background
Technology plays 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 serve rely on external sources of expertise that
provide independent business advice spanning a variety of areas
including but not limited to technology, business strategy, and
customer behavior. We believe there is a need for objective
research that is thematic, prescriptive, and executable, and
that provides a comprehensive perspective on the knowledge and
skills required to succeed in today’s rapidly changing
business environment.
Forrester’s
Strategy
In 2007, Forrester accelerated execution of a role-based
strategy to focus attention on serving leaders in key roles
across its client base. Forrester’s role-centric solutions
provide clients with more relevant insight, allowing them to
make better informed and justified decisions faster.
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We seek to maintain and enhance our position as a leading
independent technology and market research firm and to
capitalize on demand for our offerings by:
Identifying and Defining New Business Models, Technologies,
and Markets.
We seek to differentiate ourselves
from other research firms by delivering pragmatic and
forward-thinking research and analysis on the impact of
technology on business models, business practices, and
technology infrastructure. We believe that our research
methodology and our creative culture allow us to identify and
analyze rapid shifts in business and consumer use of technology
before these changes appear on the horizons of most users,
vendors, and other research firms. Our early identification of
these shifts enables us to help our clients capitalize on
emerging business models and technologies.
Leveraging our RoleView Research.
Our business
model, technology platform, and research methodologies allow us
to sell existing products and to rapidly introduce new products
and services without incurring significant incremental costs. We
intend to continue to use our business model, technology
platform, and research methodologies to both increase sales of
our existing RoleView research products and introduce innovative
new products. Our other offerings complement, enhance and
supplement our RoleView research offerings, and many are
designed to address the specific needs and problems of our
clients and the professionals in the roles we serve. We also may
acquire, through acquisition or license from third parties, new
products and services that complement and support our strategy
and existing offerings. In July 2008, we acquired
JupiterResearch, LLC to enhance our offerings to marketing and
strategy professionals. In December 2009 we acquired the
business of New Strategic Oxygen, LLC whose products and
services and decision tools enhance our offerings to technology
product management & marketing professionals.
Using Targeted, Global Client-Centric Sales
Channels.
Our business is organized into three
principal global client groups that support our role-based
strategy and are closely aligned with our client base: the
Information Technology Client Group, the Marketing &
Strategy Client Group, and the Technology Industry Client Group.
Effective January 2010, we appointed senior role managers within
our three principal client groups to better focus on creating
and delivering relevant research and related products and
services to the professional roles we serve. We sell our
products and services directly through a global sales force with
sales personnel focusing on the needs of professionals within
each of the three principal client groups. Our sales force
operates out of various locations in North America, Europe, and
Australia. We also sell our products and services through
independent sales representatives in select international
locations.
Growing Our Client Base Worldwide and Increasing Sales to
Existing Clients.
We believe that our products
and services can be successfully marketed and sold to new client
companies worldwide and to new roles and additional units and
divisions within our existing client companies. We believe that
within our client base of over 2,500 client companies as of
December 31, 2009 there is opportunity both to sell
additional products and services to current users as well as to
deliver our RoleView research and product portfolio to a greater
number of professionals in our targeted roles. In addition, we
intend to expand our international presence as the growing
impact of technology on business innovation creates demand for
external sources of objective research.
Developing and Retaining Outstanding Research
Professionals.
The knowledge and experience of
our analysts are critical elements of our ability to provide
high-quality products and services. We employ outstanding
research professionals from varied backgrounds and a wide range
of industries. We believe that our culture, which emphasizes
quality, 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.
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Forrester’s
Solution
Our broad range of expertise on business and the impact of
technology enables us to offer our clients the best available
and most relevant research on changing business models, best
practices, technology investments, implementation advice, and
customer trends. Our solution provides our clients with:
A Unified Set of Services to Help our Clients and to Make
their Leaders Successful in their Roles
. We offer
clients a comprehensive set of products and services to obtain
access to the research, data, analysts, and peer insights they
need to be successful in their professional roles, including,
for example, to:
| • | Assess potential new markets, competitors, products, and services, and go-to-market strategies. | |
| • | Anticipate technology-driven business model shifts. | |
| • | Understand trends in consumer behavior and how to capitalize on those trends for marketing and sales purposes. | |
| • | Educate, inform, and align strategic decision-makers in their organizations. | |
| • | Navigate technology purchase and implementation challenges and optimize technology investments. | |
| • | Capitalize on emerging technologies. |
Expertise on Emerging Technologies.
We started
our business in 1983 and have a long history of, and extensive
experience in, identifying trends and providing research and
executable advice on the impact of technology on business. Our
research analysts have many years of industry experience, are
frequent speakers at business and technology conferences, and
are often quoted in the media. They enjoy direct access to the
leaders and decision-makers within large enterprises and
technology vendors. We provide our research analysts with
training to ensure that they have the skills to challenge
conventional viewpoints and provide prescriptive, executable
insight and research to our clients.
Products
and Services
We offer our clients a selection of engagement opportunities
that are organized for and directed toward the multiple
professional roles we cover.
Roleview
tm
Research
Our primary syndicated research product, RoleView, provides
clients with access to our core syndicated research designed to
inform their strategic decision-making. Our various RoleView
research offerings, including IT View, M&S View, TI View,
each consists of a library of cross-linked documents that
interconnect our reports, data, product rankings, best
practices, evaluation tools, and research archives. RoleView
research access is provided through role-based websites that
facilitate client access to research and tools that are most
relevant to their professional roles, including community tools
that allow interaction between and among clients and our
analysts. Through this access structure, each of our RoleView
research offerings addresses the interplay of an individual
client’s responsibilities and goals, business demands, and
organizational and technology capabilities.
Our RoleView research products include The Forrester
Wave
tm
.
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
client’s unique requirements. The Forrester Wave is our
primary mechanism for evaluating enterprise technologies.
Clients subscribing to our RoleView research products may choose
between two membership levels:
| • | RoleView Member Licenses. RoleView Member Licenses include access to the written research, as well as Inquiry with analysts, one Event seat, and access to Forrester Teleconferences. Inquiry enables clients to contact our analysts for quick feedback on projects they may have underway, to discuss ideas and models in the research, or for answers to questions about unfolding industry events. Typically, Inquiry sessions are 30-minute phone calls, scheduled upon client request, or e-mail responses coordinated through our research |
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| specialists. Events bring together executives and other participants for one or multi-day conferences to network with their peers and to hear business leaders discuss the issues and solutions most pertinent to their roles and responsibilities. Forrester Teleconferences are hour-long audio conferences on selected topics of interest to particular professional roles that typically are held several times a week. They consist of an analyst-led presentation followed by questions from participants. Members may access the analyst Web presentation and participate in the subsequent forum for questions and discussion among all attendees. Teleconferences are also made available for member download. |
| • | RoleView Reader Licenses. RoleView Reader Licenses provide access to our written research. |
Both Member and Reader clients receive access to our research
specialists, who provide additional information about our
research, methodologies, coverage areas, and sources. The
research specialists are available to help clients navigate our
website, find relevant information, and put clients in contact
with the appropriate analyst for inquiries.
Forrester
Leadership Boards
Our Forrester Leadership Boards are exclusive offerings for
executives and other key employees at large companies worldwide.
Clients may choose to participate in one or more Forrester
Leadership Boards. Memberships are available in the Chief
Information Officer (CIO) Group and the Chief Marketing Officer
(CMO) Group and in a number of additional IT, marketing, and
executive programs and councils addressing issues of interest to
the professional roles we cover. In addition to a Member license
to access the appropriate RoleView research offering, members of
our Forrester Leadership Boards receive access to the following:
| • | Advisors to assist members with individual research-related questions, and topics of specific relevance to the challenges these clients face. | |
| • | Membership-directed research which includes comprehensive coverage of industry trends and best practices. | |
| • | Exclusive industry-specific benchmark data. | |
| • | Peer-to-peer networking through premier event meetings and group audio-conferences, individual member to member conversations, and virtual community activities. |
Data
Products & Services
Our Data products and services focus on consumers’ and
business users’ attitudes about and behavior toward
technology, including ownership, future purchases, and adoption
trends. These products incorporate extensive survey research
designed and analyzed by our staff. Clients can leverage our
data products and services or choose to have us conduct data
analysis on their behalf. Our data products and services include:
| • | Consumer Technographics ® Data & Services. Consumer Technographics delivers both primary data and quantitative research, based on surveys of over 250,000 households and individuals in North America, Europe and Asia Pacific, and Latin America. Marketing and strategy professionals rely on our Consumer Technographics data for unique insights into how technology impacts the way consumers select, purchase, use, and communicate about products and services. We combine respondent data sets from our Consumer Technographics surveys into four offerings: North American Consumer Technographics, European Consumer Technographics, Asia Pacific Consumer Technographics and Latin America Consumer Technographics. Additionally, clients have access to a Technographics data specialist to help them use the data effectively to meet their specific business needs. | |
| • | Business Data Services. 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 18,000 business and IT executives at North American, European, and other global 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. |
5
Forrester
Consulting
Our research-based advisory and project consulting services
leverage our RoleView research offerings and our data products
and services to deliver focused insights and recommendations to
assist clients in developing and executing technology and
business strategy, informing critical decisions and reducing
business risk, and making large technology investments. For
example, we help IT professionals with vendor selection, compare
best practices, analyze whether outsourcing is advisable, and
validate technology infrastructure; marketing and strategy
professionals with consumer product strategy, direct marketing
technology investments, eBusiness strategy, and interactive
marketing strategy, including Web 2.0; and technology industry
professionals with market and competitive assessments,
go-to-market
strategy, custom market research, and product development.
Our consulting services include Website Reviews that provide
targeted, action-oriented assessments of clients’ websites,
extranets, or intranets. Feedback is based on a comprehensive
examination of the clients’ website and web strategies as
well as reviews and comparisons with competitors’ websites,
other channels and industry benchmarks.
Forrester
Events
We host multiple Events in various locations in North America
and Europe throughout the year. Events build upon our research
and data products and services to bring together executives and
other participants serving or interested in the particular
professional role(s) in which an event focuses. Event
participants come together to network with their peers, meet
with Forrester analysts, and to hear business leaders discuss
business and technology issues of interest or significance to
the professional roles in attendance and the impact of
technology on the professionals and their businesses.
Sales and
Marketing
Our business is organized into three principal global client
groups that support our role-based strategy and closely align
with our client base: the IT Client Group, the
Marketing & Strategy Client Group, and the Technology
Industry Client Group. We sell our products and services through
each client group’s direct sales force in various locations
in North America, Europe, and Australia. We also sell our
products and services through independent sales representatives
in select international locations. We employed 315 salespersons
as of December 31, 2009, a decrease of 11% from 353 as of
December 31, 2008. We also sell certain of our research
products directly online through our website.
For information on our operating segments and our international
operations, see Note 11 of the Notes to Consolidated
Financial Statements included herein.
Our marketing activities are designed to increase awareness of
the Forrester brand and further our reputation as a leader in
role-based business and technology research. We actively promote
brand awareness via our website, Forrester Events, extensive
worldwide press relations, and direct mail campaigns. We also
employ an integrated direct marketing strategy that uses
Internet, mail, and telephone channels for identifying and
attracting high-quality sales leads. We encourage our analysts
to increase our visibility by having their research ideas
selectively distributed through various Internet, print, and
television outlets.
As of December 31, 2009, our research was delivered to more
than 2,500 client companies. No single client company accounted
for more than 2% of our 2009 revenues.
Pricing
and Contracts
We report our revenue from client contracts in two categories of
revenue: (1) research services and (2) advisory
services and other. 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. Revenue from
memberships to the Forrester Leadership Boards is classified as
research services revenue, and revenue from Forrester Events is
classified as other revenue in our advisory services and other
revenue classification.
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
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users, and the amount and type of advisory services. We track
the agreement value of contracts to purchase research and
advisory services as a significant business indicator. We
calculate agreement value as the total revenues recognizable
from all research and advisory service contracts in force at a
given time (but not including advisory-only contracts), without
regard to how much revenue has already been recognized.
Agreement value decreased 12% to $194.8 million at
December 31, 2009 from $222.5 million at
December 31, 2008.
Research
Analysts and Methodology
We employ a structured methodology in our research that enables
us to identify and analyze technology trends, markets, and
audiences and ensures consistent research quality and
recommendations across all coverage areas. We seek to provide
relevant research that will contribute to the success of our
clients in their professional roles.
We ascertain the issues important to our clients and technology
users through thousands of interactions and surveys with vendors
and business, marketing, and IT professionals, and accordingly,
the majority of our research is focused on the issues our
clients face each day. We use the following primary research
inputs:
| • | Confidential interviews with early adopters and mainstream users of new technologies. | |
| • | In-depth interviews with technology vendors and suppliers of related services. | |
| • | Ongoing briefings with vendors to review current positions and future directions. | |
| • | Continuous dialogue with our clients to identify technology issues in the marketplace. |
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
tm
combines in-depth product test results and user interviews with
market and strategic analysis to score attributes of emerging
technologies. We then apply this research and strategic analysis
to determine the weighting of each attribute and create
interactive spreadsheets, databases, and reports.
Collaboration among analysts is an integral part of our process,
leading to higher-quality research and a unified perspective.
All RoleView research begins either with a client or vendor
catalyst or with discussion sessions among analysts to generate
ideas for research. Analysts test ideas throughout the research
process at both informal and weekly research meetings and using
social media technologies. Our reports are consistent in format,
and we require our analysts to write in a structure that
combines graphics with
easy-to-read
text to deliver concise, decisive, relevant, and objective
research to our clients.
Competition
We believe that the principal competitive factors in our
industry include the following:
| • | Quality of research and analysis and related services. | |
| • | The ability to offer products and services that meet the changing needs of organizations and executives for research and analysis. | |
| • | Customer service. | |
| • | Independent analysis and opinions. | |
| • | Timely delivery of information. | |
| • | The ability to leverage new technologies. | |
| • | Price. |
We believe that we compete favorably with respect to each of
these factors. We believe that our role-based strategy and focus
on emerging technologies are significant competitive advantages.
Additionally, we believe that
7
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, as well as
providers of peer networking services and Internet and digital
media measurement services. In addition, our indirect
competitors include the internal planning and marketing staffs
of our current and prospective clients, as well as other
information providers such as electronic and print publishing
companies, survey-based general market research firms, and
general business consulting firms. Our indirect competitors
could choose to compete directly against us in the future. In
addition, there are relatively few barriers to entry into our
market, and new competitors could readily seek to compete
against us in one or more market segments addressed by our
research. Increased competition could adversely affect our
operating results through pricing pressure and loss of market
share. There can be no assurance that we will be able to
continue to compete successfully against existing or new
competitors.
Employees
As of December 31, 2009, we employed a total of
947 persons, including 362 research staff and 315 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, our
products and services, corporate culture, values and goals.
| Item 1A. | Risk Factors |
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:
Our Business may be Adversely Affected by the Current
Economic Environment.
Our business is in part
dependent on technology spending and is impacted by economic
conditions. The current global credit crisis and economic
environment may materially and adversely affect demand for our
products and services. If current conditions in the United
States and global economy were to lead to a further decrease in
technology spending, or in demand for our research and advisory
services, this could have an adverse effect on our results of
operations and financial condition.
Our international operations expose us to a variety of
operational risks which could negatively impact our results of
operations.
We have clients in over 60 countries
and approximately 30% of our revenue comes from international
sales. Our operating results are subject to the risks inherent
in international business activities, including challenges in
staffing and managing foreign operations, changes in regulatory
requirements, compliance with numerous foreign laws and
regulations, differences between U.S. and foreign tax rates
and laws, and the difficulty of enforcing client agreements,
collecting accounts receivable and protecting intellectual
property rights in international jurisdictions. Furthermore, we
rely on local independent sales representatives in some
international locations. If any of these arrangements are
terminated by our representative or us, we may not be able to
replace the arrangement on beneficial terms or on a timely
basis, or clients of the local sales representative may not want
to continue to do business with us or our new representative.
A Decline in Renewals for Our Membership-Based Research
Services.
Our success depends in large part upon
retaining (on both a client company and dollar basis) and
enriching existing memberships for our research products and
services. Our client and dollar retention rate and enrichment
rate (see Item 7 — Management’s Discussion and
Analysis of Financial Conditions and Results of
Operations — Overview) declined in 2008 as compared
with 2007. Our client and dollar retention rate increased in
2009 as compared with 2008 however our enrichment rate continued
to decline in 2009 as compared to 2008. Future declines in
client retention, dollar retention, and enrichment could have an
adverse effect on our results of operations.
8
Ability To Develop and Offer New Products And
Services.
Our future success will depend in part
on our ability to offer new products and services. These new
products and services must successfully gain market acceptance
by anticipating and identifying changes in client requirements
and changes in the technology industry and by addressing
specific industry and business organization sectors. The process
of internally researching, developing, launching and gaining
client acceptance of a new product or service, or assimilating
and marketing an acquired product or service, is risky and
costly. We may not be able to introduce new, or assimilate
acquired, products or services successfully. Our failure to do
so would adversely affect our ability to maintain a competitive
position in our market and continue to grow our business.
Loss of Key Management.
Our future success
will depend in large part upon the continued services of a
number of our key management employees. The loss of any one of
them, in particular George F. Colony, our founder, Chairman of
the Board and Chief Executive Officer, could adversely affect
our business.
The Ability To Attract and Retain Qualified Professional
Staff.
Our future success will depend in large
measure upon the continued contributions of our senior
management team, research analysts, and experienced sales and
marketing personnel. Thus, our future operating results will be
largely dependent upon our ability to retain the services of
these individuals and to attract additional professionals from a
limited pool of qualified candidates. We experience competition
in hiring and retaining professionals from developers of
Internet and emerging-technology products, other research firms,
management consulting firms, print and electronic publishing
companies and financial services companies, many of which have
substantially greater ability, either through cash or equity, to
attract and compensate professionals. If we lose professionals
or are unable to attract new talent, we will not be able to
maintain our position in the market or grow our business.
Failure To Anticipate and Respond To Market
Trends.
Our success depends in part upon our
ability to anticipate rapidly changing technologies and market
trends and to adapt our research to meet the changing
information needs of our clients. The technology and commerce
sectors that we analyze undergo frequent and often dramatic
changes. The environment of rapid and continuous change presents
significant challenges to our ability to provide our clients
with current and timely analysis, strategies and advice on
issues of importance to them. Meeting these challenges requires
the commitment of substantial resources. Any failure to continue
to provide insightful and timely analysis of developments,
technologies, and trends in a manner that meets market needs
could have an adverse effect on our market position and results
of operations.
Competition.
We compete in the market for
research products and services with other independent providers
of similar services. We may also face increased competition from
Internet-based research firms. Some of our competitors have
substantially greater financial, information-gathering, and
marketing resources than we do. In addition, our indirect
competitors include the internal planning and marketing staffs
of our current and prospective clients, as well as other
information providers such as electronic and print publishing
companies, survey-based general market research firms and
general business consulting firms. Our indirect competitors may
choose to compete directly against us in the future. In
addition, there are relatively few barriers to entry into our
market, and new competitors could readily seek to compete
against us in one or more market segments addressed by our
products and services. Increased competition could adversely
affect our operating results through pricing pressure and loss
of market share.
Fluctuations in Our Operating Results.
Our
revenues and earnings may fluctuate from quarter to quarter
based on a variety of factors, many of which are beyond our
control, and which may affect our stock price. These factors
include, but are not limited to:
| • | Trends in technology spending in the marketplace and general economic conditions. | |
| • | The timing and size of new and renewal memberships for our research services from clients. | |
| • | The utilization of our advisory services by our clients. | |
| • | The timing of revenue-generating Events sponsored by us. | |
| • | The introduction and marketing of new products and services by us and our competitors. | |
| • | The hiring and training of new analysts and sales personnel. |
9
| • | Changes in demand for our research and advisory services. |
As a result, our operating results in future quarters may be
below the expectations of securities analysts and investors,
which could have an adverse effect on the market price for our
common stock. Factors such as announcements of new products,
services, offices, acquisitions or strategic alliances by us,
our competitors, or in the technologies services industry
generally may have a significant impact on the market price of
our common stock. The market price for our common stock may also
be affected by movements in prices of stocks in general.
We may realize losses on our investments or be unable to
liquidate these investments at desired times and in desired
amounts.
At December 31, 2009, we had
approximately $10.0 million of long-term marketable
investments in municipal notes with an auction reset feature
(“auction rate securities” or “ARS”). In
February 2008, auctions had begun to fail for these securities,
which means that the parties wishing to sell securities could
not. Based on current market conditions, it is likely that
auction failures will continue and as a result, our ability to
liquidate our investment and fully recover the carrying value of
our investment in the near term may be limited or not exist.
| Item 1B. | Unresolved Staff Comments |
We have not received written comments from the Securities and
Exchange Commission that remain unresolved.
| Item 2. | Properties |
Our headquarters are located in approximately
145,000 square feet of office space in Cambridge,
Massachusetts, substantially all of which is currently occupied
by the Company. This facility accommodates research, marketing,
sales, technology, and operations personnel. The lease term of
this facility expires in September 2011. We have the option to
extend this lease for an additional five-year term.
On September 29, 2009, we entered into a
build-to-suit
net lease (“Lease”) with BHX, LLC, as trustee of Acorn
Park I Realty Trust and predecessor to 200 Discovery Park, LLC
(“Landlord”) pursuant to which the Landlord will build
a new corporate headquarters building for our Company in an
office park in the Alewife section of Cambridge, Massachusetts.
Pursuant to the Lease, as amended, the Landlord will construct
an approximately 190,000 square foot building
(“Building”) and lease the Building and parcel to us
to be used as our new corporate headquarters. During
construction, we will continue to occupy our current corporate
headquarters in Cambridge, Massachusetts under the existing
lease for such premises. The commencement date under the Lease
is presently expected to be on or about September 1, 2011.
We also rent office space in Foster City and San Francisco,
California, New York City, Dallas, McLean Virginia, Austin,
Texas, Amsterdam, Frankfurt, London and Paris. We also lease
office space on a relatively short-term basis in various other
locations in the North America, Europe and Asia.
We believe that our existing facilities are adequate for our
current needs and that additional facilities are available for
lease to meet future needs.
| Item 3. | Legal Proceedings |
We are not currently a party to any material legal proceedings.
10
| Item 5. | Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities |
Our common stock is listed on the Nasdaq Global Select Market
under the symbol “FORR.” We did not declare or pay any
dividends during the fiscal years ended December 31, 2008
and 2009. We anticipate that future earnings, if any, will be
retained for the development of our business, and we do not
presently intend to pay cash dividends on our common stock in
the foreseeable future.
As of March 10, 2010 there were approximately 44
stockholders of record of our common stock. On March 10,
2010 the closing price of our common stock was $31.63 per share.
The following table represents the ranges of high and low sale
prices of our common stock for the years ended December 31,
2008 and December 31, 2009:
| 2008 | 2009 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
|
First Quarter
|
$ | 28.39 | $ | 23.60 | $ | 28.14 | $ | 16.49 | ||||||||
|
Second Quarter
|
$ | 32.23 | $ | 25.03 | $ | 25.44 | $ | 19.41 | ||||||||
|
Third Quarter
|
$ | 35.66 | $ | 28.57 | $ | 26.64 | $ | 21.59 | ||||||||
|
Fourth Quarter
|
$ | 28.63 | $ | 19.55 | $ | 27.66 | $ | 24.70 | ||||||||
Through 2009, our Board of Directors has authorized an aggregate
$200.0 million to purchase common stock under the stock
repurchase program. During the quarter ended December 31,
2009, we purchased the following shares of our common stock
under the stock repurchase program:
|
Maximum Dollar
|
||||||||||||
|
Value that May
|
||||||||||||
|
Yet be Purchased
|
||||||||||||
|
Total Number of
|
Average Price
|
Under the Stock
|
||||||||||
|
Period
|
Shares Purchased(1) | Paid per Share | Repurchase Program | |||||||||
| (In thousands) | ||||||||||||
|
October 1 — October 31
|
— | $ | — | $ | 63,919 | |||||||
|
November 1 — November 30
|
134,538 | $ | 25.28 | $ | 60,518 | |||||||
|
December 1 — December 31
|
69,495 | $ | 25.41 | $ | 58,752 | |||||||
| 204,033 | $ | 25.32 | $ | 58,752 | ||||||||
| (1) | All purchases of our common stock were made under the previously announced stock repurchase program. |
11
The following graph contains the cumulative stockholder return
on our common stock during the period from December 31,
2004 through December 31, 2009 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 | ||||||||||||||||||||||||
| 12/31/2004 | 12/31/2005 | 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | |||||||||||||||||||
|
Forrester Research
|
100.00 | 104.52 | 151.11 | 156.19 | 157.25 | 144.65 | ||||||||||||||||||
|
Nasdaq Stock Market (US Companies)
|
100.00 | 102.13 | 112.19 | 121.68 | 58.64 | 84.28 | ||||||||||||||||||
|
Russell 2000
|
100.00 | 103.32 | 120.89 | 117.57 | 76.65 | 95.98 | ||||||||||||||||||
12
| Item 6. | Selected Consolidated Financial Data |
The selected financial data presented below is derived from our
consolidated financial statements and should be read in
connection with those statements.
| Years Ended December 31, | ||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
|
Consolidated Statement of Income Data
|
||||||||||||||||||||
|
Research services
|
$ | 96,699 | $ | 114,876 | $ | 131,163 | $ | 155,339 | $ | 157,726 | ||||||||||
|
Advisory services and other
|
54,700 | 66,597 | 80,893 | 85,536 | 75,626 | |||||||||||||||
|
Total revenue
|
151,399 | 181,473 | 212,056 | 240,875 | 233,352 | |||||||||||||||
|
Operating income
|
14,783 | 20,042 | 22,651 | 37,964 | 32,420 | |||||||||||||||
|
Other income, net
|
4,722 | 6,052 | 7,353 | 6,846 | 1,315 | |||||||||||||||
|
Income from continuing operations
|
$ | 12,262 | $ | 16,057 | $ | 18,943 | $ | 29,215 | $ | 18,866 | ||||||||||
|
Basic income per common share from continuing operations
|
$ | 0.57 | $ | 0.72 | $ | 0.82 | $ | 1.27 | $ | 0.83 | ||||||||||
|
Diluted income per common share from continuing operations
|
$ | 0.56 | $ | 0.70 | $ | 0.80 | $ | 1.24 | $ | 0.82 | ||||||||||
|
Basic weighted average shares outstanding
|
21,413 | 22,195 | 23,074 | 23,062 | 22,645 | |||||||||||||||
|
Diluted weighted average shares outstanding
|
21,876 | 22,973 | 23,729 | 23,585 | 22,884 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Consolidated Balance Sheet Data
|
||||||||||||||||||||
|
Cash, cash equivalents and marketable investments
|
$ | 132,268 | $ | 207,833 | $ | 248,974 | $ | 259,929 | $ | 259,792 | ||||||||||
|
Working capital
|
99,005 | 166,274 | 209,527 | 166,001 | 190,667 | |||||||||||||||
|
Total assets
|
308,342 | 384,143 | 426,357 | 454,951 | 470,196 | |||||||||||||||
|
Deferred revenue
|
86,663 | 99,875 | 111,418 | 113,844 | 117,888 | |||||||||||||||
|
Total liabilities
|
118,995 | 139,238 | 151,341 | 151,454 | 158,251 | |||||||||||||||
The following items impact the comparability of our consolidated
data:
| • | The results of JupiterResearch, LLC, and its parent company, JUPR Holdings, Inc. (“JupiterResearch”) are included in our consolidated results beginning July 31, 2008, the date of acquisition. See Note 2 in the Notes to the Consolidated Financial Statements. | |
| • | The 2008 other income amount includes a net foreign exchange loss of approximately $1.6 million ($1.2 million after tax) resulting primarily from the remeasurement of certain intercompany payables and receivables. Of the net $1.6 million loss, approximately $1.9 million related to periods prior to 2008. | |
| • | Effective January 1, 2006, we adopted a new accounting standard update requiring the recognition of stock-based compensation expense in our Consolidated Statements of Income based upon the fair value of the award recognized over the related service period. During the years ended December 31, 2006, 2007, 2008 and 2009, we recognized approximately $7.2 million, $8.3 million, $5.4 million and $6.1 million of stock-based compensation expense, respectively. | |
| • | The 2009 operating income amount includes a $5.4 million reorganization charge for facility consolidations and a reduction-in-force of approximately 50 employees. See Note 10 in the Notes to the Consolidated Financial Statements. |
13
| Item 7. | Management’s 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. We offer contracts for
our research products that are typically renewable annually and
payable in advance. Research revenues are recognized as revenue
ratably over the term of the contract. Accordingly, a
substantial portion of our billings are initially recorded as
deferred revenue. Clients purchase advisory services
independently
and/or
to
supplement their memberships to our research. Billings
attributable to advisory services 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.
Our primary operating expenses consist of cost of services and
fulfillment, selling and marketing expenses and general and
administrative expenses. Cost of services and fulfillment
represents the costs associated with the production and delivery
of our products and services, including salaries, bonuses,
employee benefits and stock-based compensation expense for
research personnel and all associated editorial, travel, and
support services. Selling and marketing expenses include
salaries, bonuses, employee benefits, 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 stock-based
compensation expense. Overhead costs such as facilities are
allocated to these categories according to the number of
employees in each group.
Deferred revenue, agreement value, client retention, dollar
retention and enrichment are metrics we believe are important to
understanding our business. We believe that the amount of
deferred revenue, along with the agreement value of contracts to
purchase research and advisory services, provide a significant
measure of our business activity. 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, 2009. We calculate client
retention as the percentage of client companies with memberships
expiring during the most recent twelve-month period who renewed
one or more of those memberships during that 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
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:
|
Years Ended
|
Absolute
|
Percentage
|
||||||||||||||
| December 31, |
Increase
|
Increase
|
||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Deferred revenue (in millions at year-end)
|
$ | 113.8 | $ | 117.9 | $ | 4.1 | 3.6 | % | ||||||||
|
Agreement value (in millions at year-end)
|
$ | 222.5 | $ | 194.8 | $ | (27.7 | ) | (12.4 | )% | |||||||
|
Client retention
|
73 | % | 74 | % | 1 | 1.4 | % | |||||||||
|
Dollar retention
|
84 | % | 86 | % | 2 | 2.4 | % | |||||||||
|
Enrichment
|
102 | % | 96 | % | (6 | ) | (5.9 | )% | ||||||||
|
Number of clients (at year-end)
|
2,643 | 2,519 | (124 | ) | (4.7 | )% | ||||||||||
14
|
Years Ended
|
Absolute
|
Percentage
|
||||||||||||||
| December 31, |
Increase
|
Increase
|
||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Deferred revenue (in millions at year-end)
|
$ | 111.4 | $ | 113.8 | $ | 2.4 | 2 | % | ||||||||
|
Agreement value (in millions at year-end)
|
$ | 197.2 | $ | 222.5 | $ | 25.3 | 13 | % | ||||||||
|
Client retention
|
75 | % | 73 | % | (2 | ) | (3 | )% | ||||||||
|
Dollar retention
|
85 | % | 84 | % | (1 | ) | (1 | )% | ||||||||
|
Enrichment
|
105 | % | 102 | % | (3 | ) | (3 | )% | ||||||||
|
Number of clients (at year-end)
|
2,468 | 2,643 | 175 | 7 | % | |||||||||||
The increase in deferred revenue from 2008 to 2009 is primarily
due to increased demand for our products due to the improvement
in the economy in the fourth quarter of 2009 compared to 2008
and well as the effect of the JupiterResearch and Strategic
Oxygen acquisitions completed in July 2008 and December 2009,
respectively. See Note 2 — Acquisitions in the
Notes to the Consolidated Financial Statements. The decrease in
agreement value from 2008 to 2009 is reflective of the economic
downturn in the second half of 2008 through the majority of 2009
which resulted in a lower number of clients and lower enrichment
rates in 2009 compared to 2008 and also is due to the exclusion
in 2009 of agreement value in excess of the first year value for
multiple year contracts signed in 2009. Client and dollar
retention amounts were essentially flat in 2009 compared to 2008.
The increase in deferred revenue from 2007 to 2008 is primarily
due to the acquisition of JupiterResearch. The increase in
agreement value from 2007 to 2008 is primarily due to an
increase in the average contract size and to the acquisition of
JupiterResearch. The acquisition of JupiterResearch accounted
for $13.3 million of agreement value at December 31,
2008. Client retention, dollar retention and enrichment all
declined slightly year over year primarily due to the effects of
a global economic downturn in the second half of 2008.
Critical
Accounting Policies and Estimates
Management’s discussion and analysis of financial condition
and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United
States of America (“GAAP”). The preparation of these
financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our
policies and estimates, including but not limited to, those
related to our revenue recognition, stock-based compensation,
allowance for doubtful accounts, non-marketable investments,
goodwill and intangible assets, income taxes and valuation and
impairment of marketable investments. Management bases its
estimates on historical experience, data available at the time
the estimates are made and various assumptions that are believed
to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
We consider the following accounting policies to be those that
require the most subjective judgment or that involve uncertainty
that could have a material impact on our financial statements.
If actual results differ significantly from management’s
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 management’s judgment in its
application. There are also areas in which management’s
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 beginning on
page F-6.
| • | Revenue Recognition. We generate revenues from licensing our research, performing advisory services and consulting projects, 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 |
15
| 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 and consulting project revenues are recognized as the services are provided. 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 Forrester Teleconferences, and the right to attend one event, are accounted for as one unit of accounting and recognized ratably as research services revenue over the membership period. We offer our clients a service guarantee, which gives them the right to cancel their contracts prior to the end of the contract term and receive a refund for unused products or services. Furthermore, our revenue recognition determines the timing of commission expenses, which are deferred and recognized as expense as the related revenue is recognized. We evaluate the recoverability of deferred commissions at each balance sheet date. |
| • | Stock-Based Compensation. Stock-based compensation is recognized as an expense based upon the fair value of the award at the time of grant. The determination of the fair value of stock-based compensation requires significant judgment and the use of estimates, particularly surrounding assumptions such as stock price volatility, expected option lives and forfeiture rates. These estimates involve inherent uncertainties and the application of management judgment. As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future. |
The development of an expected life assumption involves
projecting employee exercise behaviors (expected period between
stock option vesting dates and stock option exercise dates). We
are also required to estimate future forfeitures of stock-based
awards for recognition of compensation expense. We will record
additional expense if the actual forfeitures are lower than
estimated and will record a recovery of prior recognized expense
if the actual forfeitures are higher than estimated. In
addition, for our performance-vested options and restricted
stock units, we make estimates of the performance outcome at
each period end in order to estimate the actual number of shares
that will be earned
and/or
the
vesting period of the award. The actual expense recognized over
the vesting period will only be for those awards that vest. If
our actual forfeiture rate or performance outcomes are
materially different from our estimate, the actual stock-based
compensation expense could be significantly different from what
we have recorded in the current period.
| • | Non-Marketable Investments. We hold minority interests in technology-related investment funds. These investment funds are not publicly traded, and, therefore, because no established market for these securities exists, the estimate of the fair value of our investments requires significant judgment. Investments that are accounted for using the cost method are valued at cost unless an other-than-temporary impairment in their value occurs or the investment is liquidated. For investments that are accounted for using the equity method, we record our share of the investee’s operating results each period. We review the fair value of our investments on a regular basis to evaluate whether an other-than-temporary impairment in the investment has occurred. We record impairment charges when we believe that an investment has experienced a decline in value that is other-than-temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future. | |
| • | Goodwill, Intangible Assets and Other Long-Lived Assets. As of December 31, 2009, we had $80.4 million of goodwill and intangible assets with finite lives recorded on our Consolidated Balance Sheets. Goodwill is required to be measured for impairment at least annually or whenever events indicate that there may be an impairment. In order to determine if an impairment exists, we compare each of our reporting unit’s carrying value to the reporting unit’s fair value. Determining the reporting unit’s 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 to perform 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 results of operations. |
16
Intangible assets with finite lives consist of acquired customer
relationships, technology, research content and trademarks and
are valued according to the future cash flows they are estimated
to produce. These assigned values are amortized on a basis which
best matches the periods in which the economic benefits are
expected to be realized. Tangible assets with finite lives
consist of property and equipment, which are depreciated and
amortized over their estimated useful lives. We continually
evaluate whether events or circumstances have occurred that
indicate that the estimated remaining useful life of our
intangible and long-lived tangible assets may warrant revision
or that the carrying value of these assets may be impaired. To
compute whether intangible assets have been impaired, the
estimated undiscounted future cash flows for the estimated
remaining useful life of the assets are compared to the carrying
value. To the extent that the future cash flows are less than
the carrying value, the assets are written down to their
estimated fair value.
| • | 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 acquisitions). Such amounts are adjusted as appropriate to reflect changes in the tax rates expected to be in effect when the temporary differences reverse. 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. A valuation allowance is established for any deferred income tax asset for which realization is less than likely. |
We record accruals for income taxes and associated interest that
may become payable in future years as a result of audits by tax
authorities. We recognize tax benefits when it is more likely
than not (likelihood of greater than 50%), based on technical
merits, that the position will be sustained upon examination.
Tax positions that meet the more-likely-than-not threshold are
measured and recorded, using a probability weighted approach, as
the largest amount of tax benefit that is greater than 50%
likely of being realized upon settlement. Whether the
more-likely-than-not recognition threshold is met for a tax
position is a matter of judgment based on the individual facts
and circumstances of that position, evaluated in light of all
available evidence.
| • | Valuation and Impairment of Marketable Investments. Our investment portfolio may at any time contain investments in U.S. Treasury and U.S. government agency securities, taxable and/or tax exempt municipal notes (some of which may have an auction reset feature), corporate notes and bonds, commercial paper and money market funds. The assessment of the fair value of certain of the debt securities can be difficult and subjective due in part to limited trading activity of certain of these debt instruments. |
We conduct periodic reviews to identify and evaluate each
investment that has an unrealized loss, in accordance with the
meaning of
other-than-temporary
impairment and its application to certain investments, as
required under current accounting standards. An unrealized loss
exists when the current fair value of an individual security is
less than its amortized cost basis. Unrealized losses on
available-for-sale
securities that are determined to be temporary, and not related
to credit loss, are recorded, net of tax, in accumulated other
comprehensive loss.
For
available-for-sale
debt securities with unrealized losses, management performs an
analysis to assess whether we intend to sell or whether we would
more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where we intend
to sell a security, or may be required to do so, the
security’s decline in fair value would be deemed to be
other-than-temporary
and the full amount of the unrealized loss would be recorded
within earnings as an impairment loss. Regardless of our intent
to sell a security, we perform additional analysis on all
securities with unrealized losses to evaluate losses associated
with the creditworthiness of the security. Credit losses are
identified where we do not expect to receive cash flows
sufficient to recover the amortized cost basis of a security.
As of December 31, 2009, we held municipal bonds with a
fair value of $39.5 million ($42.7 million at par
value) with an auction reset feature (“auction rate
securities” or “ARS”) with two investment
advisors. The fair value of the ARS was determined by utilizing
a discounted cash flow approach. The assumptions used in
preparing the discounted cash flow model include estimates,
based on data available at December 31, 2009,
17
of interest rates, timing and amount of cash flows, credit and
liquidity premiums, and expected holding periods of the ARS. The
assumptions used in valuing the ARS are volatile and subject to
change as the underlying sources of these assumptions and market
conditions change, which may lead us in the future to take an
impairment charge for these securities.
In November 2008, we accepted an offer (the “Right”)
from UBS AG (“UBS”), one of our investment advisors,
entitling us to sell at par value auction-rate securities
originally purchased from UBS (approximately $31.7 million,
par value) at anytime during a two-year period from
June 30, 2010 through July 2, 2012 (“UBS
ARS”). Although the Company expects to sell its UBS ARS
under the Right, if the Right is not exercised before
July 2, 2012, it will expire and UBS will have no further
rights or obligation to buy the Company’s UBS ARS.
UBS’s obligations under the Right are not secured by its
assets and do not require UBS to obtain any financing to support
its performance obligations under the Right. If UBS has
insufficient funding to buy back the UBS ARS and the auction
process continues to fail, we may incur further losses on the
carrying value of the UBS ARS.
The Right is recognized as a freestanding instrument that is
accounted for at fair value separately from the underlying UBS
ARS investment. We valued the Right using a discounted cash flow
approach including estimates of interest rates and timing and
amount of cash flow, based on data available at
December 31, 2009 and adjusted for any bearer risk
associated with UBS’s financial ability to repurchase the
ARS beginning June 30, 2010. These assumptions are volatile
and subject to change as the underlying sources of these
assumptions and market conditions change and any change in these
assumptions and market conditions would affect the value of this
Right. The value of the Right of $2.1 million, which
largely offsets the unrealized loss on the UBS ARS securities
subject to the Right, is included in the Consolidated Balance
Sheets as of December 31, 2009 within marketable securities
and changes in its value are included in the Consolidated
Statements of Income, together with the change in the unrealized
loss on the UBS ARS subject to the Right for the year ended
December 31, 2008 and 2009, as other income, net. We
believe that any subsequent changes in the value of the Right
will largely offset any fair value changes of the UBS ARS,
subject to the continued expected performance by the financial
institution of its obligations under the agreement.
Our remaining ARS are held by another investment advisor, who
has not made an offer similar to UBS. We continue to classify
the non-UBS ARS as long-term
available-for-sale
securities. Accordingly, any change in associated market value
has been recorded in other comprehensive loss in the
Consolidated Balance Sheets during the years ended
December 31, 2008 and 2009. If the market conditions
deteriorate further, we may be required to record unrealized
losses in other comprehensive loss or impairment charges within
the Consolidated Statements of Income. We may not be able to
liquidate these investments unless the issuer calls the
security, a successful auction occurs, a buyer is found outside
of the auction process, or the security matures.
Results
of Operations for the years ended December 31, 2007, 2008
and 2009
The following table sets forth our Consolidated Statements of
Income as a percentage of total revenues for the years noted.
|
Years Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Revenues:
|
||||||||||||
|
Research services
|
62 | % | 64 | % | 68 | % | ||||||
|
Advisory services and other
|
38 | 36 | 32 | |||||||||
|
Total revenues
|
100 | 100 | 100 | |||||||||
18
|
Years Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Operating expenses:
|
||||||||||||
|
Cost of services and fulfillment
|
38 | 36 | 36 | |||||||||
|
Selling and marketing
|
34 | 33 | 33 | |||||||||
|
General and administrative
|
14 | 12 | 12 | |||||||||
|
Depreciation
|
2 | 2 | 2 | |||||||||
|
Amortization of intangible assets
|
1 | 1 | 1 | |||||||||
|
Reorganization costs
|
— | — | 2 | |||||||||
|
Income from operations
|
11 | 16 | 14 | |||||||||
|
Other income, net
|
4 | 2 | 1 | |||||||||
|
Gains (losses) on investments, net
|
(1 | ) | 1 | (1 | ) | |||||||
|
Income before income taxes
|
14 | 19 | 14 | |||||||||
|
Income tax provision
|
5 | 7 | 6 | |||||||||
|
Net income
|
9 | % | 12 | % | 8 | % | ||||||
2009
compared to 2008
Revenues
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Revenues (dollars in millions)
|
$ | 240.9 | $ | 233.4 | $ | (7.5 | ) | (3 | )% | |||||||
|
Revenues from research services (dollars in millions)
|
$ | 155.4 | $ | 157.7 | $ | 2.3 | 1 | % | ||||||||
|
Revenues from advisory services and other (dollars in millions)
|
$ | 85.5 | $ | 75.6 | $ | (9.9 | ) | (12 | )% | |||||||
|
Revenues attributable to customers outside of the US (dollars in
millions)
|
$ | 67.9 | $ | 69.3 | $ | 1.4 | 2 | % | ||||||||
|
Percentage of revenue attributable to customers outside of the US
|
28 | % | 30 | % | 2 | 7 | % | |||||||||
|
Number of clients (at end of period)
|
2,643 | 2,519 | (124 | ) | (5 | )% | ||||||||||
|
Number of research employees (at end of period)
|
409 | 362 | (47 | ) | (11 | )% | ||||||||||
|
Number of events
|
14 | 14 | — | — | ||||||||||||
The decrease in total revenues in 2009 is primarily attributable
to lower demand for our advisory and other services and the
adverse effect of foreign exchange during 2009. The effects of
foreign exchange resulted in an approximate 2% decrease in total
revenues during 2009. The increase in revenue from research
services in 2009 is due in part to our objective to drive a
higher percentage of our revenue from research services, which
was accomplished in part through greater alignment of our sales
compensation plan with this objective, as well as the
acquisition of JupiterResearch in July 2008. These increases
were offset in part by a decline in the number of clients in
2009 due to the global economic slowdown. The decrease in
advisory services and other revenue is reflective of the global
economic slowdown in 2009 as well as our objective to drive a
higher percentage of revenue from research services. No single
client company accounted for more than 2% of revenues during
2008 or 2009.
19
Cost
of Services and Fulfillment
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Cost of services and fulfillment (dollars in millions)
|
$ | 87.8 | $ | 84.3 | $ | (3.5 | ) | (4 | )% | |||||||
|
Cost of services and fulfillment as a percentage of total
revenues
|
36 | % | 36 | % | — | — | ||||||||||
|
Number of research and fulfillment employees (at end of period)
|
495 | 441 | (54 | ) | (11 | )% | ||||||||||
The decrease in the dollar amount of cost of services and
fulfillment in 2009 is largely due to lower salary and benefit
costs resulting from a lower number of employees in 2009, a
decrease in discretionary spending due to management’s
focus on expense management in light of the global economic
downturn, a decrease in outsourced costs and a general freeze in
salary increases in 2009. We expect to reinstate salary merit
increases in 2010.
Selling
and Marketing
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Selling and marketing expenses (dollars in millions)
|
$ | 79.9 | $ | 76.1 | $ | (3.8 | ) | (5 | )% | |||||||
|
Selling and marketing expenses as a percentage of total revenues
|
33 | % | 33 | % | — | — | ||||||||||
|
Selling and marketing employees (at end of period)
|
403 | 358 | (45 | ) | (11 | )% | ||||||||||
The decrease in the dollar amount of selling and marketing
expenses in 2009 is primarily due to a decrease in compensation
resulting from lower headcount and lower sales commissions due
to lower sales volume in 2009, reduced discretionary spending
and a general salary freeze in 2009. In 2010, we expect to
increase sales headcount by 15% to 20% and resume salary merit
increases.
General
and Administrative
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
General and administrative expenses (dollars in millions)
|
$ | 29.7 | $ | 28.5 | $ | (1.2 | ) | (4 | )% | |||||||
|
General and administrative expenses as a percentage of total
revenues
|
12 | % | 12 | % | — | — | ||||||||||
|
General and administratvie employees (at end of period)
|
150 | 148 | (2 | ) | (1 | )% | ||||||||||
The decrease in the dollar amount of general and administrative
expenses in 2009 is primarily due to a decrease in professional
services fees as approximately $0.9 million of fees were
incurred in 2008 related to our historical stock option
investigation. The decrease in 2009 is also attributable to
lower discretionary spending, lower hiring costs and a general
salary freeze in 2009. We expect to reinstate salary merit
increases in 2010.
Depreciation
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Depreciation expense (dollars in millions)
|
$ | 4.0 | $ | 4.4 | $ | 0.4 | 10 | % | ||||||||
|
Depreciation expense as a percentage of total revenues
|
2 | % | 2 | % | — | — | ||||||||||
The increase in depreciation expense in 2009 is primarily
attributable to leasehold improvements completed in 2009.
20
Amortization
of Intangible Assets
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Amortization expense (dollars in millions)
|
$ | 1.4 | $ | 2.3 | $ | 0.9 | 64 | % | ||||||||
|
Amortization expense as a percentage of total revenues
|
1 | % | 1 | % | — | — | ||||||||||
The increase in amortization expense in 2009 is primarily
attributable to amortization of intangible assets from the
acquisition of JupiterResearch on July 31, 2008 and
Strategic Oxygen on December 1, 2009, partially offset by a
decrease in amortization from an acquisition in 2003 that became
fully amortized in 2008.
Reorganization
Costs
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Reorganization costs (dollars in millions)
|
$ | — | $ | 5.4 | $ | 5.4 | N/A | |||||||||
|
Reorganization costs as a percentage of total revenues
|
— | 2 | % | 2 | N/A | |||||||||||
Reorganization costs in 2009 consist of $3.1 million
incurred in the first quarter of 2009 primarily for severance
and related benefit costs in connection with the termination of
approximately 50 positions and approximately $2.3 million
incurred in the fourth quarter of 2009 for costs related to
facility consolidations primarily in Cambridge, Massachusetts.
Other
Income, Net
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Other income, net (dollars in millions)
|
$ | 5.4 | $ | 2.3 | $ | (3.1 | ) | (57 | )% | |||||||
|
Other income, net as a percentage of total revenues
|
2 | % | 1 | % | (1 | ) | 50 | % | ||||||||
Other income, net, which consists primarily of interest income
and foreign exchange gains and losses, declined in 2009
primarily due to a decline interest income resulting from a
significant decrease in the rates of return on our investments.
Gains
(Losses) on Investments
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Gain (losses) on investments, net (dollars in millions)
|
$ | 1.5 | $ | (1.0 | ) | $ | (2.5 | ) | (165 | )% | ||||||
|
Gains (losses) on investments, net as a percentage of total
revenues
|
1 | % | (1 | )% | (2 | ) | (200 | )% | ||||||||
In 2008 we sold the remainder of our investment in comScore,
Inc. and received proceeds of approximately $2.3 million
resulting in a gain of approximately $2.0 million. In 2008
and 2009, we recognized net losses from our non-marketable
investments of approximately $0.6 million and
$1.0 million, respectively.
Provision
for Income Taxes
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2008 | 2009 | (Decrease) | (Decrease) | |||||||||||||
|
Provision for income taxes (dollars in millions)
|
$ | 15.6 | $ | 14.9 | $ | (0.7 | ) | (4 | )% | |||||||
|
Effective tax rate
|
35 | % | 44 | % | 9 | 26 | % | |||||||||
The increase in our effective tax rate in 2009 is primarily due
to an increase in state taxes, an increase in non-deductible
expenses including stock-based compensation and a non-cash
foreign exchange loss on the
21
remeasurement of a euro-denominated deferred tax liability. In
addition, the 2008 effective tax rate was reduced by a reduction
in a valuation allowance on foreign deferred tax assets that did
not recur in 2009.
2008
compared to 2007
Revenues
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Revenues (dollars in millions)
|
$ | 212.1 | $ | 240.9 | $ | 28.8 | 14 | % | ||||||||
|
Revenues from research services (dollars in millions)
|
$ | 131.2 | $ | 155.4 | $ | 24.2 | 18 | % | ||||||||
|
Revenues from advisory services and other (dollars in millions)
|
$ | 80.9 | $ | 85.5 | $ | 4.6 | 6 | % | ||||||||
|
Revenues attributable to customers outside of the US (dollars in
millions)
|
$ | 62.3 | $ | 67.9 | $ | 5.6 | 9 | % | ||||||||
|
Percentage of revenue attributable to customers outside of the US
|
29 | % | 28 | % | (1 | ) | (3 | )% | ||||||||
|
Number of clients (at end of period)
|
2,468 | 2,643 | 175 | 7 | % | |||||||||||
|
Number of research employees (at end of period)
|
336 | 409 | 73 | 22 | % | |||||||||||
|
Number of events
|
13 | 14 | 1 | 8 | % | |||||||||||
The increase in total revenues, research services revenues and
international revenues in 2008 is primarily due to an increase
in the number of clients, which resulted primarily from an
increase in sales personnel, the acquisition of JupiterResearch,
favorable exchange rates, reduced discounting and increased
prices. Of the 14% increase in revenues, the acquisition of
JupiterResearch accounted for 3% and the impact of exchange
rates accounted for 1%. The increase in advisory services and
other revenues is primarily attributable to an increased demand
for these services and an increase in research personnel
available to deliver such services. No single client company
accounted for more than 2% of revenues during 2007 or 2008.
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.
Research services revenues as a percentage of total revenues
increased from 62% in 2007 to 64% in 2008 as a result of our
objective to drive a higher percentage of our total revenue from
research services. In 2008 we modified our sales compensation
plan for greater alignment with this objective.
Cost
of Services and Fulfillment
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Cost of services and fulfillment (dollars in millions)
|
$ | 81.6 | $ | 87.8 | $ | 6.2 | 8 | % | ||||||||
|
Cost of services and fulfillment as a percentage of total
revenues
|
38 | % | 36 | % | (2 | ) | (5 | )% | ||||||||
|
Number of research and fulfillment employees (at end of period)
|
412 | 495 | 83 | 20 | % | |||||||||||
The increase in cost of services and fulfillment in dollars is
primarily attributable to increased compensation and benefits
costs resulting from an increase in the number of research and
fulfillment employees, both as a result of the acquisition of
JupiterResearch and organically, partially offset by a decrease
in stock-based compensation. The acquisition of JupiterResearch
resulted in additional cost of services and fulfillment expense
of $3.3 million. The decrease in cost of services and
fulfillment as a percentage of total revenues is primarily
attributable to an increased revenue base and the focus on
expense management in the second half of 2008 in light of the
global economic downturn.
22
Selling
and Marketing
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Selling and marketing expenses (dollars in millions)
|
$ | 71.8 | $ | 79.9 | $ | 8.1 | 11 | % | ||||||||
|
Selling and marketing expenses as a percentage of total revenues
|
34 | % | 33 | % | (1 | ) | (3 | )% | ||||||||
|
Selling and marketing employees (at end of period)
|
357 | 403 | 46 | 13 | % | |||||||||||
The increase in selling and marketing expenses in dollars is
primarily attributable to increased compensation and benefits
costs resulting from an increase in the number of selling and
marketing employees, including as a result of the acquisition of
JupiterResearch. The acquisition of JupiterResearch resulted in
additional selling and marketing expense of $1.4 million.
The decrease in selling and marketing expenses as a percentage
of total revenues is primarily attributable to an increased
revenue base and the focus on expense management in the second
half of 2008 in light of the global economic downturn.
General
and Administrative
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
General and administrative expenses (dollars in millions)
|
$ | 30.7 | $ | 29.7 | $ | (1.0 | ) | (3 | )% | |||||||
|
General and administrative expenses as a percentage of total
revenues
|
14 | % | 12 | % | (2 | ) | (14 | )% | ||||||||
|
General and administratvie employees (at end of period)
|
134 | 150 | 16 | 12 | % | |||||||||||
The decrease in general and administrative expenses in dollars
and as a percentage of total revenues is primarily attributable
to decreased professional services costs associated with the
historical stock option investigation offset by increased
compensation and benefits costs resulting from an increase in
the number of general and administrative employees, including
those added as a result of the acquisition of JupiterResearch.
The acquisition of JupiterResearch resulted in additional
general and administrative expense of $0.4 million.
Depreciation
Depreciation expense remained consistent at $4.0 million
for the year ended December 31, 2008 compared to the year
ended December 31, 2007.
Amortization
of Intangible Assets
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Amortization expense (dollars in millions)
|
$ | 1.2 | $ | 1.4 | $ | 0.2 | 17 | % | ||||||||
|
Amortization expense as a percentage of total revenues
|
1 | % | 1 | % | — | — | ||||||||||
The increase in amortization expense is primarily attributable
to amortization of intangible assets from the acquisition of
JupiterResearch on July 31, 2008, offset by a decrease in
the amortization of the intangible assets from an acquisition in
2003 that became fully amortized in 2008.
Other
Income, Net
Other income, net decreased 36% to $5.4 million in 2008
from $8.4 million in 2007. The decrease is primarily due to
a net foreign exchange loss of $1.6 million resulting
primarily from the remeasurement of certain intercompany
payables and receivables. Of the loss recognized,
$1.9 million related to periods prior to 2008. Also
contributing to the decrease in other income was lower interest
income primarily attributable to lower returns on invested
capital.
23
Gains
(Losses) on Investments
In 2007, we sold approximately 20,000 shares of comScore,
Inc., receiving proceeds of approximately $0.7 million and
recognizing a gain of approximately $0.6 million related to
the sale. In 2008, we sold the remaining 106,000 shares of
comScore, receiving proceeds of approximately $2.3 million
and recording a gain of approximately $2.0 million related
to the sale. In 2007 and 2008, we recognized net losses from our
non-marketable investments of approximately $1.6 million
and $0.6 million, respectively.
Provision
for Income Taxes
|
Absolute
|
Percentage
|
|||||||||||||||
|
Increase
|
Increase
|
|||||||||||||||
| 2007 | 2008 | (Decrease) | (Decrease) | |||||||||||||
|
Provision for income taxes (dollars in millions)
|
$ | 11.1 | $ | 15.6 | $ | 4.5 | 41 | % | ||||||||
During 2008, our effective tax rate was 35% compared to 37% in
2007. The decrease in our effective tax rate for 2008 resulted
primarily from a decrease in a valuation allowance against
foreign deferred tax assets and a decrease in nondeductible
expenses including nondeductible stock compensation, partially
offset by a decrease in tax exempt investment income.
Liquidity
and Capital Resources
We have financed our operations primarily through funds
generated from operations. Memberships for research services,
which constituted approximately 68% of our revenues during 2009,
are annually renewable and are generally payable in advance. We
generated cash from operating activities of $43.1 million
during 2009 and $43.7 million during 2008. The slight
decrease in cash provided from operations is primarily
attributable to a $10.3 million decrease in net income in
2009 that was almost completely offset by changes in working
capital and an increase in non-cash depreciation and
amortization charges in 2009.
During 2009, we used $59.5 million of cash in investing
activities, consisting primarily of $33.5 million used for
net purchases of marketable investments and a $16.8 million
increase in restricted cash. The restricted cash was comprised
of $14.8 million placed in escrow under a lease signed in
2009 for leasehold improvements for our new headquarters to be
constructed in Cambridge, Massachusetts, as well as
$2.0 million of the purchase price placed in escrow in
connection our acquisition of Strategic Oxygen in December 2009.
Investing activities in 2009 also included $5.6 million for
acquisitions of businesses and $4.3 million for purchases
of property and equipment. During 2008, we generated
$38.6 million of cash from investing activities, consisting
primarily of $63.7 million generated from net sales of
marketable investments, partially offset by $22.4 million
for the acquisition of JupiterResearch and $3.7 million for
the purchase of property and equipment. We regularly invest
excess funds in short and intermediate-term interest-bearing
obligations of investment grade.
Our financing activities principally consist of repurchases of
our common stock and the issuance of stock under our equity
incentive and employee stock purchase plans. During 2009, we
used $20.4 million to repurchase stock and received
approximately $4.3 million of proceeds from exercises of
stock options and our employee stock purchase plan. During 2008,
we used $30.4 million to repurchase stock and received
approximately $27.1 million of proceeds from exercises of
stock options and our employee stock purchase plan. Our Board of
Directors has authorized an aggregate $200.0 million to
purchase our common stock under a stock repurchase program. As
of December 31, 2009, we had cumulatively repurchased
approximately 7.0 million shares of common stock at an
aggregate cost of approximately $141.3 million. We plan to
continue to repurchase our common stock during 2010.
As of December 31, 2009, we held approximately
$39.5 million ($42.7 million at par value) of state
and municipal bonds with an auction reset feature (auction rate
securities or “ARS”) whose underlying assets are
generally student loans which are substantially backed by the
federal government or municipalities. In February 2008, auctions
began to fail for these securities. Throughout 2009 auction
failures continued and, as a result, our ability to liquidate
our investment and fully recover the carrying value of our
investment in the near term may be limited or not exist. In
November 2008, we accepted an offer (the “Right”) from
UBS AG (“UBS”), one of our investment advisors,
entitling us to sell at par ARS originally purchased from UBS
(approximately $31.7 million, par value) at anytime during
a two-year period from June 30, 2010 —
July 2, 2012 (“UBS ARS”). We currently
24
intend to sell our UBS ARS, valued at $29.6 million at
December 31, 2009, to UBS under the Right during the second
half of 2010. Based on our expected operating cash flows and our
cash resources, we do not anticipate the current lack of
liquidity on our ARS investments will affect our ability to
execute our current business plan.
As of December 31, 2009, we had cash and cash equivalents
of $97.8 million and marketable investments of
$162.0 million. We do not have a line of credit and do not
presently anticipate the need to access a line of credit in the
foreseeable future. We plan to continue to introduce new
products and services and expect to make the requisite
investments in our infrastructure during the next
12 months. We believe that our current cash balance,
marketable investments, and cash flows from operations will
satisfy working capital, financing activities, and capital
expenditure requirements for at least the next two years.
As of December 31, 2009, we had future contractual
obligations as follows:
|
Contractual
|
||||||||||||||||||||||||||||
|
Obligations
|
Total | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
|
Operating leases
|
$ | 107,598 | $ | 9,487 | $ | 7,010 | $ | 6,785 | $ | 6,391 | $ | 6,286 | $ | 71,639 | ||||||||||||||
Under a
build-to-suit
lease entered into on September 29, 2009, whereby the
landlord will build a new corporate headquarters for us in
Cambridge, Massachusetts, we have committed to construct
approximately $14.8 million of leasehold improvements in
the building under the terms of the lease. Due to the
uncertainty regarding the timing and final amount of the
payments, the above table does not include the
$14.8 million of future leaseholds. We expect to incur the
majority of these costs in 2011. The funding for the leasehold
improvements has been placed in an escrow account and is
included in restricted cash on the Consolidated Balance Sheets
at December 31, 2009. The $14.8 million in escrow will
be increased or decreased based upon the final estimate of
construction costs and will be released from escrow as the
leasehold improvements are constructed.
Off-Balance
Sheet Arrangements
We do not maintain any off-balance sheet financing arrangements.
Recent
Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial
Statements for a full description of recent accounting
pronouncements including the respective expected dates of
adoption and effects on results of operations and financial
condition.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
The following discussion about our market risk disclosures
involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking
statements. We are exposed to market risk related to changes in
interest rates and foreign currency exchange rates. We do not
use derivative financial instruments.
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 marketable investments in a variety of
securities, including U.S. government agencies, municipal
notes which may have an auction reset feature (“auction
rate securities” or “ARS”), corporate notes and
bonds, commercial paper, and money market funds. The securities,
other than money market funds, and the ARS for which we have
accepted the Right from UBS, are classified as
available-for-sale
and consequently are recorded on the Consolidated Balance Sheets
at fair value with unrealized gains or losses reported as a
component of accumulated other comprehensive income (loss) in
the Consolidated Balance Sheets. If interest rates rise, the
market value of our investments may decline, which could result
in a realized loss if we are forced to sell an investment before
its scheduled maturity. We have the ability to hold our fixed
income investments until maturity (without giving effect to any
future acquisitions or mergers). Therefore, we would not expect
our operating results or cash flows to be affected to any
significant degree by a sudden change in market interest rates
on our securities portfolio.
25
At December 31, 2009, we held approximately
$39.5 million ($42.7 million at par value) of ARS. In
February 2008, auctions for these securities began to fail and
continued to fail throughout 2009. The Right from UBS, one of
our investment advisors, entitles us to sell at par value
auction-rate securities originally purchased from UBS at anytime
during a two-year period from June 30, 2010 through
July 2, 2012 (“UBS ARS”). At December 31,
2009, ARS subject to the Right had a fair value and par value of
$29.6 million and $31.7 million, respectively. In
accepting the Right, we granted UBS the authority to sell or
auction the UBS ARS at par at any time up until the expiration
date of the offer and released UBS from any claims relating to
the marketing and sale of the UBS ARS. Although we expect to
sell our UBS ARS under the Right, if the Right is not exercised
before July 2, 2012 it will expire and UBS will have no
further rights or obligation to buy our ARS. In lieu of our
acceptance of the Right, the UBS ARS will continue to accrue and
pay interest as determined by the auction process or the terms
specified in the prospectus of the UBS ARS if the auction
process fails. The value of the Right may largely offset the
decline in fair value of the UBS ARS. We valued the Right as a
put option asset using a discounted cash flow approach including
estimates of interest rates, timing and amount of cash flow,
adjusted for any bearer risk associated with UBS’s
financial ability to repurchase the UBS ARS beginning
June 30, 2010. The combined fair value of the right and the
UBS ARS is equal to the par value of the UBS ARS. The
assumptions used in valuing both the UBS ARS and the put option
are volatile and subject to change as the underlying sources of
these assumptions and market conditions change, which could
result in significant changes to their fair value. The remaining
$9.9 million ($11.0 at par value) of ARS may not be
accessible for in excess of twelve months because of continued
failed auctions and have been classified in the Consolidated
Balance Sheets as long-term marketable investments as of
December 31, 2009. Based on current market conditions, it
is likely that auction failures will continue and as a result,
our ability to liquidate our investment and fully recover the
carrying value of our investment in the near term may be limited
or not exist. If the issuers are unable to successfully close
future auctions and their credit ratings deteriorate, we may in
the future be required to record an impairment charge on these
investments. We valued the ARS using a discounted cash flow
model. The assumptions used in preparing the discounted cash
flow model include estimates of interest rates, timing and
amount of cash flows, credit and liquidity premiums, and
expected holding periods of the ARS, based on data available at
December 31, 2009. The assumptions used in valuing these
ARS are volatile and subject to change as the underlying sources
of these assumptions and market conditions change, which could
result in significant changes to the fair value of these ARS
The following table provides information about our investment
portfolio (excluding the value of the Right of
$2.1 million). For investment securities, the table
presents principal cash flows and related weighted-average
interest rates by expected maturity dates.
Principal amounts by expected maturity or auction reset dates in
U.S. dollars (dollars in thousands):
|
Years Ended
|
||||||||||||
| December 31, | ||||||||||||
| 2010 | 2011 | 2012 | ||||||||||
|
State and municipal agency obligations
|
$ | 69,301 | $ | 16,096 | $ | — | ||||||
|
Federal agency and corporate obligations
|
34,827 | 30,047 | 9,616 | |||||||||
|
Total investments
|
$ | 104,128 | $ | 46,143 | $ | 9,616 | ||||||
|
Weighted average interest rates
|
1.63 | % | 1.56 | % | 1.77 | % | ||||||
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 may enter into
hedging agreements in the future to attempt to mitigate the
financial effect of future fluctuations in the euro or other
foreign currencies. As of December 31, 2009, the total
assets, excluding goodwill and intangible assets, related to
non-U.S. dollar
denominated currencies were approximately $66.2 million.
26
| 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 2009 Annual
Report on
Form 10-K.
FORRESTER
RESEARCH, INC.
INDEX TO
FINANCIAL STATEMENTS
| Page | ||||
| F-1 | ||||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
27
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, 2009 and 2008 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, 2009. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Forrester Research, Inc. and subsidiaries at
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2009
,
in conformity
with accounting principles generally accepted in the United
States of America.
As described in Note 6 of the consolidated financial
statements, effective January 1, 2007, the company adopted
accounting standards related to uncertainty in income taxes.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of
December 31, 2009, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated March 12, 2010 expressed an
unqualified opinion thereon.
/s/ BDO
Seidman, LLP
Boston, Massachusetts
March 12, 2010
F-1
FORRESTER
RESEARCH, INC.
| December 31, | ||||||||
| 2008 | 2009 | |||||||
|
(In thousands, except
|
||||||||
| per share data) | ||||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS:
|
||||||||
|
Cash and cash equivalents
|
$ | 129,478 | $ | 97,805 | ||||
|
Marketable investments (Note 4)
|
83,951 | 152,037 | ||||||
|
Accounts receivable, net (Note 12)
|
64,226 | 67,436 | ||||||
|
Deferred income taxes (Note 6)
|
7,947 | 5,276 | ||||||
|
Deferred commissions
|
9,749 | 9,631 | ||||||
|
Prepaid expenses and other current assets
|
15,553 | 8,616 | ||||||
|
Total current assets
|
310,904 | 340,801 | ||||||
|
Long-term marketable securities (Note 4)
|
46,500 | 9,950 | ||||||
|
Restricted cash (Notes 2 and 7)
|
— | 16,770 | ||||||
|
Property and equipment, net (Note 12)
|
6,759 | 5,823 | ||||||
|
Deferred income taxes (Note 6)
|
8,523 | 10,323 | ||||||
|
Goodwill (Note 3)
|
67,424 | 68,314 | ||||||
|
Intangible assets, net (Note 3)
|
7,138 | 12,108 | ||||||
|
Non-marketable investments (Note 5)
|
7,000 | 5,546 | ||||||
|
Other assets
|
703 | 561 | ||||||
|
Total assets
|
$ | 454,951 | $ | 470,196 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Accounts payable
|
$ | 3,532 | $ | 2,078 | ||||
|
Accrued expenses (Note 12)
|
27,527 | 30,168 | ||||||
|
Deferred revenue
|
113,844 | 117,888 | ||||||
|
Total current liabilities
|
144,903 | 150,134 | ||||||
|
Non-current liabilities
|
6,551 | 8,117 | ||||||
|
Total liabilities
|
151,454 | 158,251 | ||||||
|
COMMITMENTS (NOTE 7)
|
||||||||
|
STOCKHOLDERS’ EQUITY (NOTE 8):
|
||||||||
|
Preferred stock, $.01 par value
|
||||||||
|
Authorized — 500 shares, issued and
outstanding — none
|
— | — | ||||||
|
Common stock, $.01 par value
|
||||||||
|
Authorized — 125,000 shares
|
||||||||
|
Issued — 29,146 and 29,362 in 2008 and 2009,
respectively
|
||||||||
|
Outstanding — 23,045 and 22,334 in 2008 and 2009,
respectively
|
291 | 294 | ||||||
|
Additional paid-in capital
|
315,149 | 325,207 | ||||||
|
Retained earnings
|
110,693 | 129,559 | ||||||
|
Treasury stock — 6,101 and 7,028 in 2008 and 2009
respectively, at cost
|
(120,851 | ) | (141,250 | ) | ||||
|
Accumulated other comprehensive loss
|
(1,785 | ) | (1,865 | ) | ||||
|
Total stockholders’ equity
|
303,497 | 311,945 | ||||||
|
Total liabilities and stockholders’ equity
|
$ | 454,951 | $ | 470,196 | ||||
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
FORRESTER
RESEARCH, INC.
| Years Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
| (In thousands, except per share data) | ||||||||||||
|
REVENUES:
|
||||||||||||
|
Research services
|
$ | 131,163 | $ | 155,339 | $ | 157,726 | ||||||
|
Advisory services and other
|
80,893 | 85,536 | 75,626 | |||||||||
|
Total revenues
|
212,056 | 240,875 | 233,352 | |||||||||
|
OPERATING EXPENSES:
|
||||||||||||
|
Cost of services and fulfillment
|
81,608 | 87,802 | 84,266 | |||||||||
|
Selling and marketing
|
71,830 | 79,944 | 76,094 | |||||||||
|
General and administrative
|
30,749 | 29,723 | 28,461 | |||||||||
|
Depreciation
|
3,986 | 4,007 | 4,380 | |||||||||
|
Amortization of intangible assets
|
1,232 | 1,435 | 2,290 | |||||||||
|
Reorganization costs
|
— | — | 5,441 | |||||||||
|
Total operating expenses
|
189,405 | 202,911 | 200,932 | |||||||||
|
Income from operations
|
22,651 | 37,964 | 32,420 | |||||||||
|
Other income, net
|
8,372 | 5,373 | 2,297 | |||||||||
|
Gains (losses) on investments, net
|
(1,019 | ) | 1,473 | (982 | ) | |||||||
|
Income before income taxes
|
30,004 | 44,810 | 33,735 | |||||||||
|
Income tax provision
|
11,061 | 15,595 | 14,869 | |||||||||
|
Net income
|
$ | 18,943 | $ | 29,215 | $ | 18,866 | ||||||
|
Basic income per common share
|
$ | 0.82 | $ | 1.27 | $ | 0.83 | ||||||
|
Diluted income per common share
|
$ | 0.80 | $ | 1.24 | $ | 0.82 | ||||||
|
Basic weighted average common shares outstanding
|
23,074 | 23,062 | 22,645 | |||||||||
|
Diluted weighted average common shares outstanding
|
23,729 | 23,585 | 22,884 | |||||||||
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
FORRESTER
RESEARCH, INC.
COMPREHENSIVE INCOME
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
| Common Stock |
Additional
|
Treasury Stock |
Other
|
Total
|
||||||||||||||||||||||||||||||||
|
Number of
|
$.01 Par
|
Paid-in
|
Retained
|
Number of
|
Comprehensive
|
Stockholders’
|
Comprehensive
|
|||||||||||||||||||||||||||||
| Shares | Value | Capital | Earnings | Shares | Cost | (Loss) | Equity | Income | ||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2006
|
27,884 | $ | 279 | $ | 270,306 | $ | 62,766 | 4,839 | $ | (85,834 | ) | $ | (2,612 | ) | $ | 244,905 | ||||||||||||||||||||
|
Cumulative effect of adoption of accounting for uncertain tax
positions
|
— | — | — | (231 | ) | — | — | — | (231 | ) | ||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of options and under
stock purchase plan, 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 marketable investments, net of tax
|
— | — | — | — | — | — | 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 | ||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of options and under
stock purchase plan, including tax benefit
|
981 | 9 | 25,429 | — | — | — | — | 25,438 | ||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | 5,289 | — | — | — | — | 5,289 | ||||||||||||||||||||||||||||
|
Purchase of common stock
|
— | — | — | — | 1,090 | (30,423 | ) | — | (30,423 | ) | ||||||||||||||||||||||||||
|
Net income
|
— | — | — | 29,215 | — | — | — | 29,215 | $ | 29,215 | ||||||||||||||||||||||||||
|
Unrealized loss on marketable investments, net of tax
|
— | — | — | — | — | — | (1,724 | ) | (1,724 | ) | (1,724 | ) | ||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | — | — | — | — | 686 | 686 | 686 | |||||||||||||||||||||||||||
|
Total comprehensive income
|
$ | 28,177 | ||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2008
|
29,146 | 291 | 315,149 | 110,693 | 6,101 | (120,851 | ) | (1,785 | ) | 303,497 | ||||||||||||||||||||||||||
|
Issuance of common stock upon exercise of options and under
stock purchase plan, including tax benefit
|
216 | 3 | 4,013 | — | — | — | — | 4,016 | ||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | 6,045 | — | — | — | — | 6,045 | ||||||||||||||||||||||||||||
|
Purchase of common stock
|
— | — | — | — | 927 | (20,399 | ) | — | (20,399 | ) | ||||||||||||||||||||||||||
|
Net income
|
— | — | — | 18,866 | — | — | — | 18,866 | $ | 18,866 | ||||||||||||||||||||||||||
|
Unrealized loss on marketable investments, net of tax
|
— | — | — | — | — | — | (440 | ) | (440 | ) | (440 | ) | ||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | — | — | — | — | 360 | 360 | 360 | |||||||||||||||||||||||||||
|
Total comprehensive income
|
$ | 18,786 | ||||||||||||||||||||||||||||||||||
|
Balance, December 31, 2009
|
29,362 | $ | 294 | $ | 325,207 | $ | 129,559 | 7,028 | $ | (141,250 | ) | $ | (1,865 | ) | $ | 311,945 | ||||||||||||||||||||
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
FORRESTER
RESEARCH, INC.
| Years Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$ | 18,943 | $ | 29,215 | $ | 18,866 | ||||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
|
Depreciation and asset write-offs
|
3,986 | 4,007 | 5,278 | |||||||||
|
Amortization of intangible assets
|
1,232 | 1,435 | 2,290 | |||||||||
|
Net losses (gains) from investments
|
1,019 | (1,473 | ) | 982 | ||||||||
|
Deferred income taxes
|
6,878 | 1,503 | 1,943 | |||||||||
|
Stock-based compensation
|
8,326 | 5,358 | 6,111 | |||||||||
|
Amortization of premium on investments
|
607 | 870 | 1,167 | |||||||||
|
Foreign currency losses
|
— | 1,611 | 1,107 | |||||||||
|
Changes in assets and liabilities, net of acquisitions
|
||||||||||||
|
Accounts receivable
|
(9,486 | ) | 7,400 | (2,090 | ) | |||||||
|
Deferred commissions
|
(514 | ) | 881 | 119 | ||||||||
|
Prepaid expenses and other current assets
|
(3,552 | ) | (4,184 | ) | 7,092 | |||||||
|
Accounts payable
|
1,171 | (893 | ) | (2,342 | ) | |||||||
|
Accrued expenses
|
(315 | ) | (2,289 | ) | (69 | ) | ||||||
|
Deferred revenue
|
9,841 | 211 | 2,645 | |||||||||
|
Net cash provided by operating activities
|
38,136 | 43,652 | 43,099 | |||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Acquisitions
|
— | (22,406 | ) | (5,592 | ) | |||||||
|
Purchases of property and equipment
|
(5,106 | ) | (3,698 | ) | (4,284 | ) | ||||||
|
Purchases of marketable investments
|
(1,240,584 | ) | (1,224,793 | ) | (645,312 | ) | ||||||
|
Proceeds from sales and maturities of marketable investments
|
1,217,367 | 1,288,532 | 611,859 | |||||||||
|
Increase in restricted cash
|
— | — | (16,770 | ) | ||||||||
|
Other investing activity
|
3,036 | 937 | 558 | |||||||||
|
Net cash (used in) provided by investing activities
|
(25,287 | ) | 38,572 | (59,541 | ) | |||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Proceeds from issuance of common stock under employee equity
incentive plans and employee stock purchase plan
|
4,896 | 18,577 | 4,282 | |||||||||
|
Excess tax benefits from stock-based compensation
|
101 | 8,476 | — | |||||||||
|
Repurchases of common stock
|
(4,594 | ) | (30,423 | ) | (20,399 | ) | ||||||
|
Net cash provided by (used in) financing activities
|
403 | (3,370 | ) | (16,117 | ) | |||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
754 | (2,539 | ) | 886 | ||||||||
|
Net increase (decrease) in cash and cash equivalents
|
14,006 | 76,315 | (31,673 | ) | ||||||||
|
Cash and cash equivalents, beginning of year
|
39,157 | 53,163 | 129,478 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 53,163 | $ | 129,478 | $ | 97,805 | ||||||
|
Supplemental disclosure of cash flow information:
|
||||||||||||
|
Cash paid for taxes
|
$ | 3,719 | $ | 7,992 | $ | 10,945 | ||||||
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2009
| (1) | Summary of Significant Accounting Policies |
Basis
of Presentation
Principles
of Consolidation
Forrester Research, Inc. (“Forrester” or “the
Company”) conducts independent research and provides
pragmatic and forward-thinking advice to global leaders in
business and technology. Forrester’s products and services
are targeted to specific roles, including principally senior
management, business strategists, and marketing and technology
professionals at $1 billion-plus revenue companies who
collaborate with Forrester to align their technology investments
with their business goals. The accompanying consolidated
financial statements include the accounts of Forrester and its
wholly-owned subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation.
Management
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Forrester considers
the more significant of these estimates to be revenue
recognition, stock-based compensation, allowance for doubtful
accounts, non-marketable investments, goodwill and intangible
assets, income taxes and valuation and impairment of marketable
investments. On an ongoing basis, management evaluates its
estimates. Actual results could differ from these estimates.
Reclassifications
Certain items in the prior year’s consolidated financial
statements have been reclassified to conform to the current year
presentation.
Fair
Value Measurements
Effective January 1, 2009, the Company adopted a newly
issued accounting standard for fair value measurements of all
nonfinancial assets and nonfinancial liabilities not recognized
or disclosed at fair value in the financial statements on a
recurring basis. The adoption of the accounting standard for
these assets and liabilities did not have a material impact on
our financial position or results of operations.
Effective January 1, 2008, the Company adopted a newly
issued accounting standard for fair value measurements for our
financial assets and liabilities that are re-measured and
reported at fair value at each reporting period, and
non-financial assets and liabilities that are re-measured and
reported at fair value at least annually. The adoption of the
accounting standard did not have a material impact on our
financial position or results of operations.
The Company has certain financial assets recorded at fair value
which have been classified as Level 1, 2 or 3 within the
fair value hierarchy as described in the accounting standards
for fair value measurements.
Level 1 — Fair value based on quoted prices in
active markets for identical assets or liabilities.
Level 2 — Fair value based on inputs other than
Level 1 inputs that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities.
Level 3 — Fair value based on unobservable inputs
that are supported by little or no market activity and such
inputs are significant to the fair value of the assets or
liabilities.
F-6
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The carrying amounts reflected in the Consolidated Balance
Sheets for cash, cash equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair value due to
their short-term maturities.
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 Company’s investments
with an auction reset feature and for which the Company does not
have the ability to sell within one year from the balance sheet
date are classified as long-term investments.
The Company’s investments are comprised of securities of
U.S. government agencies, municipal notes some of which
mature on auction reset feature (Auction Rate Securities or
ARS), corporate notes and bonds, commercial paper and money
market funds meeting certain criteria. Forrester accounts for
all marketable investments, except for ARS subject to the right
offering with UBS as discussed further in Note 4, as
available-for-sale
securities and as such are carried at fair value, with
unrealized gains and losses (not related to credit losses)
recorded in accumulated other comprehensive loss in the
Consolidated Balance Sheets. Realized gains and losses on
securities are included in earnings and are determined using the
specific identification method. The Company conducts periodic
reviews to identify and evaluate each investment that has an
unrealized loss, in accordance with the meaning of
other-than-temporary
impairment and its application to certain investments, as
required under current accounting standards. An unrealized loss
exists when the current fair value of an individual security is
less than its amortized cost basis. Unrealized losses on
available-for-sale
securities that are determined to be temporary, and not related
to credit loss, are recorded, net of tax, in accumulated other
comprehensive loss. The determination of whether a loss is
considered temporary is based in part on whether the Company
intends to sell the security or whether the Company would more
likely than not be required to sell the security before the
expected recovery of the amortized cost basis. During the years
ended December 31, 2007, 2008 and 2009 the Company did not
record any
other-than-temporary
impairment charges on its
available-for-sale
securities.
During the fourth quarter of 2008, the Company reclassified ARS
held by UBS from
available-for-sale
to trading securities. Investments that the Company designates
as trading assets are reported at fair value, with gains or
losses resulting from changes in fair value recognized in other
income, net, in the Consolidated Statements of Income. See
Note 4.
Concentrations
of Credit Risk
Forrester has no significant off-balance sheet or concentration
of credit risk such as foreign exchange contracts, option
contracts, or other foreign hedging arrangements. Financial
instruments that potentially subject Forrester to concentrations
of credit risk are principally cash equivalents, marketable
investments, and accounts receivable. Forrester places its
investments in highly rated securities. No single customer
accounted for greater than 2% of revenues or accounts receivable
in any of the periods presented.
Deferred
Commissions
Commissions incurred in acquiring new or renewing existing
contracts are deferred and expensed to operations as the related
revenue is recognized. Forrester evaluates the recoverability of
deferred commissions at each balance sheet date.
Goodwill
Goodwill is not amortized; however, it is required to be tested
for impairment annually using a fair value approach at the
reporting unit level. Furthermore, testing for impairment is
required on an interim basis if an event or circumstance
indicates that it is more likely than not an impairment loss has
been incurred. An impairment loss shall be recognized to the
extent that the carrying amount of goodwill exceeds its implied
fair value. Absent an event that indicates a specific impairment
may exist, the Company has selected November 30th as
the date for performing the annual goodwill impairment test.
Goodwill impairment charges have not been required for the years
ended December 31, 2007, 2008 and 2009.
F-7
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Impairment
of Other Long-Lived Tangible and Intangible Assets
Forrester continually evaluates whether events or circumstances
have occurred that indicate that the estimated remaining useful
life of long-lived assets and intangible assets may warrant
revision or if events or circumstances indicate that the
carrying value of these assets may be impaired. To compute
whether assets have been impaired, the estimated undiscounted
future cash flows for the estimated remaining useful life of the
assets are compared to the carrying value. To the extent that
the future cash flows are less than the carrying value, the
assets are written down to the estimated fair value of the asset.
Foreign
Currency
The functional currency of the majority of Forrester’s
wholly-owned subsidiaries is their respective local currencies.
These subsidiary financial statements 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, with translation gains and
losses accumulated as a component of accumulated other
comprehensive loss. Gains and losses related to the
remeasurement of monetary assets and liabilities denominated in
a currency other than an entity’s functional currency
(principally certain intercompany payables and receivables) are
included in other income, net in the Consolidated Statements of
Income. Forrester recorded net foreign exchange losses in other
income, net related to remeasurement of intercompany
transactions of $1.6 million during the year ended
December 31, 2008, of which $1.9 million related to
prior years. For the year ended December 31, 2009,
Forrester recorded $1.1 million of foreign exchange losses
in other income, net. In addition, Forrester’s German
holding companies, for which the functional currency is the
United States dollar, recognized $0.8 million,
$0.6 million and $(0.6) million of remeasurement gains
(losses) on its deferred tax liability in income tax expense for
the years ended December 31, 2007, 2008 and 2009,
respectively.
Accumulated
Other Comprehensive Loss
The components of accumulated other comprehensive loss as of
December 31, 2008 and 2009 are as follows (in thousands):
| 2008 | 2009 | |||||||
|
Net unrealized gain (loss) on marketable investments, net of
taxes
|
$ | 365 | $ | (75 | ) | |||
|
Cumulative translation adjustment
|
(2,150 | ) | (1,790 | ) | ||||
|
Total accumulated other comprehensive loss
|
$ | (1,785 | ) | $ | (1,865 | ) | ||
The components of comprehensive income are as follows (in
thousands):
| Years Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Net income
|
$ | 18,943 | $ | 29,215 | $ | 18,866 | ||||||
|
Cumulative translation adjustment
|
(331 | ) | 686 | 360 | ||||||||
|
Unrealized gain (loss) on marketable investments:
|
||||||||||||
|
Change in unrealized gain (loss) on marketable investments, net
of taxes
|
2,552 | (4,699 | ) | (440 | ) | |||||||
|
Reclassification adjustment for realized gains in net income,
net of taxes
|
(356 | ) | (1,095 | ) | — | |||||||
|
Reclassification adjustment for realized loss from transfer of
ARS from
available-for-sale
securities to trading securities, net of taxes
|
— | 4,070 | — | |||||||||
|
Total comprehensive income
|
$ | 20,808 | $ | 28,177 | $ | 18,786 | ||||||
F-8
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Revenue
Recognition
Forrester generates revenues from licensing research, performing
advisory services and consulting projects, 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 and consulting project revenues, which are
short-term in nature and based upon fixed-fee agreements, are
recognized as the services are provided. Losses on consulting
project contracts are recognized in the period in which the loss
first becomes probable and reasonably estimable. 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 that include access to research, unlimited phone or
email analyst inquiry, unlimited participation in Forrester
teleconferences, and the right to attend one event, are
accounted for as one unit of accounting and recognized ratably
as research services revenue over the membership period. Clients
are offered a service guarantee, which gives them the right to
cancel their contracts prior to the end of the contract term and
receive a refund for unused products or services.
Stock-Based
Compensation
Forrester recognizes the fair value of stock-based compensation
in net income over the requisite service period of the
individual grantee, which generally equals the vesting period.
Cash flows resulting from the tax benefits of tax deductions in
excess of the compensation expense recognized for stock-based
awards are classified as financing cash flows. The Company is
required to estimate future forfeitures of stock-based awards
for recognition of compensation expense. The Company will record
additional expense if the actual forfeitures are lower than
estimated and will record a recovery of prior recognized expense
if the actual forfeitures are higher than estimated. The actual
expense recognized over the vesting period will only be for
those awards that vest.
Forrester recorded approximately $8.3 million,
$5.4 million and $6.1 million of stock-based
compensation expense in the following expense categories for the
years ended December 31, 2007, 2008 and 2009, respectively,
(in thousands):
|
Year Ended
|
Year Ended
|
Year Ended
|
||||||||||
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2007 | 2008 | 2009 | ||||||||||
|
Cost of services and fulfillment
|
$ | 4,245 | $ | 2,776 | $ | 2,961 | ||||||
|
Selling and marketing
|
1,730 | 988 | 1,123 | |||||||||
|
General and administrative
|
2,351 | 1,594 | 2,027 | |||||||||
|
Total
|
$ | 8,326 | $ | 5,358 | $ | 6,111 | ||||||
The options granted under the equity incentive plans and shares
subject to the employee stock purchase plan were valued
utilizing the Black Scholes model using the following
assumptions and had the following fair values:
| Years Ended December 31, | ||||||||||||||||||||
| 2007 | 2008 | 2009 | ||||||||||||||||||
|
Equity Incentive
|
Equity Incentive
|
Employee Stock
|
Equity Incentive
|
Employee Stock
|
||||||||||||||||
| Plans | Plans | Purchase Plan | Plans | Purchase Plan | ||||||||||||||||
|
Average risk-free interest rate
|
4.50 | % | 2.59 | % | 2.41 | % | 1.85 | % | 0.29 | % | ||||||||||
|
Expected dividend yield
|
None | None | None | None | None | |||||||||||||||
|
Expected life
|
3.24 Years | 3.5 Years | 0.5 Years | 3.5 Years | 0.5 Years | |||||||||||||||
|
Expected volatility
|
35 | % | 35 | % | 35 | % | 44 | % | 44 | % | ||||||||||
|
Weighted average fair value
|
$ | 8.28 | $ | 8.00 | $ | 7.27 | $ | 8.38 | $ | 6.81 | ||||||||||
F-9
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
No shares under the employee stock purchase plan were issued in
2007. The dividend yield of zero is based on the fact that
Forrester had never paid cash dividends and had no intention to
pay regular cash dividends as of the grant date. Expected
volatility is based, in part, on the historical volatility of
Forrester’s common stock as well as management’s
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
award’s expected term. The expected term calculation is
based upon Forrester’s historical experience of exercise
patterns. The unamortized fair value of stock-based awards as of
December 31, 2009 was $4.6 million, with a weighted
average remaining recognition period of 1.55 years.
Allowance
for Doubtful Accounts
Forrester maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of our customers
to make contractually obligated payments. When evaluating the
adequacy of the allowance for doubtful accounts, the Company
makes judgments regarding the collectability of accounts
receivable by specifically analyzing historical bad debts,
customer concentrations, current economic trends, and changes in
the customer payment terms. If the financial condition of the
Company’s 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
Company’s 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 term 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 to 11 Years | |
|
Research content
|
1 to 2 Years | |
|
Registered trademarks
|
1 Year | |
|
Technology
|
7 Years |
Income
Taxes
Forrester recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the financial statements and tax basis of assets and
liabilities as well as operating loss carryforwards.
Forrester’s provision for income taxes is comprised of a
current and a deferred provision for federal, state and foreign
jurisdictions. The current provision is calculated as the
estimated taxes payable or refundable on tax returns for the
current year. The deferred income tax provision is calculated as
the net change during the year in deferred tax
F-10
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
assets and liabilities. Valuation allowances are provided if,
based on the weight of available evidence, it is more likely
than not that some or all of the deferred tax asset will not be
realized.
Forrester accounts for uncertain tax positions using a
“more-likely-than-not” threshold for recognizing and
resolving uncertain tax positions. The evaluation of uncertain
tax positions is based on factors including, but not limited to,
changes in tax law, the measurement of tax positions taken or
expected to be taken in tax returns, the effective settlement of
matters subject to audit, new audit activity, and changes in
facts or circumstances related to a tax position. The Company
evaluates these tax positions on a quarterly basis. The Company
also accrues for potential interest and penalties related to
unrecognized tax benefits in income tax expense.
Net
Income Per Common Share
Basic income per common share is computed by dividing net income
by the basic weighted average number of common shares
outstanding during the period. Diluted net income per common
share is computed by dividing net income by the diluted weighted
average number of common shares and common equivalent shares
outstanding during the period. The weighted average number of
common equivalent shares outstanding has been determined in
accordance with the treasury-stock method. Common stock
equivalents consist of common stock issuable upon the exercise
of outstanding stock options.
Basic and diluted weighted average common shares are as follows:
| Years Ended December 31, | ||||||||||||
| 2007 | 2008 | 2009 | ||||||||||
| (In thousands) | ||||||||||||
|
Basic weighted average common shares outstanding
|
23,074 | 23,062 | 22,645 | |||||||||
|
Weighted average common equivalent shares
|
655 | 523 | 239 | |||||||||
|
Diluted weighted average common shares outstanding
|
23,729 | 23,585 | 22,884 | |||||||||
As of December 31, 2007, 2008 and 2009, options to purchase
approximately 1.3 million, 1.5 million and
2.0 million shares, respectively, were outstanding but not
included in the diluted weighted average common share
calculation as the effect would have been anti-dilutive.
New
Accounting Pronouncements
In September 2009, the FASB issued Update
No. 2009-13,
“Multiple-Deliverable Revenue Arrangements — a
consensus of the FASB Emerging Issues Task Force”
(ASU
2009-13).
It
updates the existing multiple-element revenue arrangements
guidance currently included under ASC
605-25,
which originated primarily from the guidance in EITF Issue
No. 00-21,
“Revenue Arrangements with Multiple Deliverables”
(EITF 00-21).
The revised guidance primarily provides two significant changes:
1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a
delivered item to be treated as a separate unit of accounting,
and 2) eliminates the residual method to allocate the
arrangement consideration. In addition, the guidance also
expands the disclosure requirements for revenue recognition. ASU
2009-13
will
be effective for the first annual reporting period beginning on
or after June 15, 2010, with early adoption permitted
provided that the revised guidance is retroactively applied to
the beginning of the year of adoption. The Company is currently
assessing the future impact of this new accounting update to its
consolidated financial statements.
| (2) | Acquisitions |
Effective January 1, 2009, the Company adopted a new
accounting standard update regarding business combinations. This
update requires an entity to recognize the assets acquired,
liabilities assumed, contractual contingencies, and contingent
consideration at their fair value on the acquisition date. It
further requires that acquisition-related costs be recognized
separately from the acquisition and expensed as incurred; that
restructuring
F-11
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
costs generally be expensed in periods subsequent to the
acquisition date; and that changes in accounting for deferred
tax asset valuation allowances and acquired income tax
uncertainties after the measurement period be recognized as a
component of provision for taxes. The adoption did not have a
material impact on the Company’s financial position or
results of operations.
Strategic
Oxygen
On December 1, 2009, Forrester acquired the Strategic
Oxygen business to further support Forrester’s syndicated
business model and the Company’s role-based strategy. The
total purchase price was approximately $7.3 million, of
which approximately $4.6 million was paid on the
acquisition date, $0.5 million was paid in February 2010
and $0.4 million is payable in June 2011 subject to
reduction for indemnification claims. The remaining purchase
price of $1.8 million represented contingent purchase price
valued as of December 1, 2009, which was subject to
adjustment based on the achievement of certain financial metrics
related to the acquired business. Of the $1.8 million
contingent purchase price, $0.2 million was paid in
December 2009 and $1.2 million was paid by February 2010 as
full consideration. At December 31, 2009, the Company
maintained approximately $2.0 million in an escrow account
classified as restricted cash in the Consolidated Balance Sheets
related to the contingent purchase price. The results of
Strategic Oxygen, which were not material to the consolidated
financial statements, have been included in Forrester’s
consolidated financial statements since December 1, 2009 in
the Technology Industry Client Group segment. Pro forma
financial information has not been provided as it is not
material to the consolidated results of operations.
Forrester
Middle East FZ-LLC
On January 22, 2009, Forrester acquired all of the
outstanding share capital of Forrester Middle East FZ-LLC (FME),
a Dubai, UAE based reseller of Forrester’s products that
also offered consulting services to local customers, to expand
the Company’s direct geographical presence in the area. The
total purchase price was approximately $1.1 million of
which approximately $0.6 million was paid on the
acquisition date, $0.2 million was paid in the three months
ended June 30, 2009 and $0.3 million was contingent
upon the acquired company meeting certain financial metrics,
which were not met and accordingly the final $0.3 million
was not required to be paid by Forrester. The results of
FME’s operations, which were not material to the
consolidated financial statements, have been included in
Forrester’s consolidated financial statements since
January 22, 2009, with the revenue included within the
client group segment to which it relates. Pro forma financial
information has not been provided as it is not material to the
consolidated results of operations.
F-12
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of the purchase price allocation for Strategic Oxygen
and FME is as follows (in thousands):
|
Assets:
|
||||
|
Accounts receivable
|
$ | 1,972 | ||
|
Prepaid expenses
|
33 | |||
|
Property and equipment
|
26 | |||
|
Goodwill
|
1,409 | |||
|
Intangible assets
|
7,261 | |||
|
Total assets
|
10,701 | |||
|
Liabilities:
|
||||
|
Accounts payable
|
387 | |||
|
Accrued expenses
|
1,471 | |||
|
Deferred revenue
|
450 | |||
|
Total liabilities
|
2,308 | |||
|
Net assets acquired
|
$ | 8,393 | ||
A portion of the goodwill is expected to be deductible for tax
purposes.
Intangible assets are amortized according to the expected cash
flows to be received. The following are the identifiable
intangible assets acquired and their respective weighted average
lives (dollars in thousands):
|
Useful
|
||||||||
|
Assigned
|
Life
|
|||||||
| Value | (In Years) | |||||||
|
Customer relationships
|
$ | 2,958 | 10 | |||||
|
Technology
|
1,507 | 7 | ||||||
|
Research content
|
2,500 | 1 | ||||||
|
Trademarks and other
|
296 | 1 | ||||||
| $ | 7,261 | |||||||
On July 31, 2008, Forrester acquired all of the outstanding
capital stock of JUPR Holdings, Inc., (“Holdings”) the
parent company of JupiterResearch, LLC
(“JupiterResearch”). JupiterResearch provided business
professionals with syndicated research, analysis, and advice
backed by proprietary data. The acquisition supported the
Company’s role-based strategy and added greater depth and
breadth to the marketing and strategy syndicated product
offering, increased the number of client companies and was
expected to reduce operating expenses of the combined entity
through economies of scale. The total consideration was
$22.0 million which consisted of initial cash consideration
of $23.0 million less a working capital adjustment of
$1.0 million which was received in the fourth quarter of
2008. The aggregate purchase price of $22.6 million
consisted of $22.0 million for the acquisition of all
outstanding shares of Holdings common stock, $0.4 million
of direct acquisition costs and $0.2 million for severance
related to 14 employees of JupiterResearch terminated as a
result of the acquisition. The results of JupiterResearch’s
operations have been included in Forrester’s consolidated
financial statements since July 31, 2008 in the Marketing
and Strategy Client Group segment. Pro forma financial
information has not been provided as it is not material to the
consolidated results of operations.
F-13
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of the purchase price allocation for JupiterResearch
is as follows (in thousands):
|
Assets:
|
||||
|
Accounts receivable
|
$ | 2,636 | ||
|
Prepaid expenses and other current assets
|
500 | |||
|
Property and equipment, net
|
398 | |||
|
Deferred tax asset, net
|
1,738 | |||
|
Goodwill
|
14,807 | |||
|
Intangible assets
|
8,267 | |||
|
Total assets
|
28,346 | |||
|
Liabilities:
|
||||
|
Accounts payable
|
419 | |||
|
Accrued expenses
|
996 | |||
|
Deferred revenue
|
4,378 | |||
|
Total liabilities
|
5,793 | |||
|
Net assets acquired
|
$ | 22,553 | ||
A portion of the goodwill is expected to be deductible for tax
purposes.
| (3) | Goodwill and Other Intangible Assets |
A summary of the goodwill by segment and the changes in the
carrying amount of goodwill for the Information Technology
Client Group (“IT”), Technology Industry Client Group
(“TI”), Marketing and Strategy Client Group
(“M&S”) and Events segments is as follows (in
thousands):
| IT | TI | M&S | Events | Total | ||||||||||||||||
|
Balance, December 31, 2007
|
$ | 23,001 | $ | 24,104 | $ | 4,598 | $ | 1,974 | $ | 53,677 | ||||||||||
|
Acquisition of JupiterResearch
|
— | — | 15,404 | — | 15,404 | |||||||||||||||
|
Purchase accounting adjustments(1)
|
(472 | ) | (494 | ) | (94 | ) | (40 | ) | (1,100 | ) | ||||||||||
|
Translation adjustments
|
(238 | ) | (250 | ) | (48 | ) | (21 | ) | (557 | ) | ||||||||||
|
Balance, December 31, 2008
|
22,291 | 23,360 | 19,860 | 1,913 | 67,424 | |||||||||||||||
|
Acquistions
|
7 | 1,395 | 6 | 1 | 1,409 | |||||||||||||||
|
Purchase accounting adjustments(2)
|
— | — | (597 | ) | — | (597 | ) | |||||||||||||
|
Translation adjustments
|
26 | 27 | 23 | 2 | 78 | |||||||||||||||
|
Balance, December 31, 2009
|
$ | 22,324 | $ | 24,782 | $ | 19,292 | $ | 1,916 | $ | 68,314 | ||||||||||
| (1) | The Company reduced goodwill for the utilization or anticipated utilization of acquired net operating losses for which a valuation allowance was recorded at the acquisition date. | |
| (2) | Adjustments relate to the finalization of the JupiterResearch acquisition on July 31, 2009, primarily relating to tax attributes that were finalized in the first quarter of 2009. |
As of December 31, 2009, the Company had no accumulated
goodwill impairment losses.
F-14
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of Forrester’s intangible assets as of
December 31, 2008 and 2009 is as follows:
| December 31, 2008 | ||||||||||||
|
Gross
|
Net
|
|||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
||||||||||
| Amount | Amortization | Amount | ||||||||||
| (In thousands) | ||||||||||||
|
Amortizable intangible assets:
|
||||||||||||
|
Customer relationships
|
$ | 27,239 | $ | 20,862 | $ | 6,377 | ||||||
|
Research content
|
3,560 | 2,909 | 651 | |||||||||
|
Trademarks
|
802 | 692 | 110 | |||||||||
|
Total
|
$ | 31,601 | $ | 24,463 | $ | 7,138 | ||||||
| December 31, 2009 | ||||||||||||
|
Gross
|
Net
|
|||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
||||||||||
| Amount | Amortization | Amount | ||||||||||
| (In thousands) | ||||||||||||
|
Amortizable intangible assets:
|
||||||||||||
|
Customer relationships
|
$ | 30,478 | $ | 22,398 | $ | 8,080 | ||||||
|
Research content
|
6,060 | 3,727 | 2,333 | |||||||||
|
Technology
|
1,507 | 16 | 1,491 | |||||||||
|
Trademarks
|
876 | 808 | 68 | |||||||||
|
Other
|
223 | 87 | 136 | |||||||||
|
Total
|
$ | 39,144 | $ | 27,036 | $ | 12,108 | ||||||
Amortization expense related to intangible assets was
approximately $1.2 million, $1.4 million and
$2.3 million during the years ended December 31, 2007,
2008 and 2009, respectively. Estimated amortization expense
related to intangible assets that will continue to be amortized
is as follows (in thousands):
|
Year ending December 31, 2010
|
$ | 3,622 | ||
|
Year ending December 31, 2011
|
1,773 | |||
|
Year ending December 31, 2012
|
1,241 | |||
|
Year ending December 31, 2013
|
1,128 | |||
|
Year ending December 31, 2014
|
1,034 | |||
|
Thereafter
|
3,310 | |||
|
Total
|
$ | 12,108 | ||
F-15
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| (4) | Marketable Investments |
The following table summarizes the Company’s marketable
investments (in thousands):
|
Gross
|
Gross
|
|||||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
|
December 31, 2008
|
||||||||||||||||
|
Available-for-sale
securities
|
||||||||||||||||
|
State and municipal obligations
|
$ | 70,455 | $ | 701 | $ | — | $ | 71,156 | ||||||||
|
Federal agency and corporate obligations(1)
|
83,550 | 64 | (86 | ) | 83,528 | |||||||||||
|
Total short-term
available-for-sale
securities
|
154,005 | 765 | (86 | ) | 154,684 | |||||||||||
|
Non-UBS ARS, long-term
|
11,000 | — | — | 11,000 | ||||||||||||
|
Total
available-for-sale
securities
|
165,005 | 765 | (86 | ) | 165,684 | |||||||||||
|
Trading securities
|
||||||||||||||||
|
UBS ARS
|
35,500 | — | (6,887 | ) | 28,613 | |||||||||||
|
UBS Right
|
— | 6,887 | — | 6,887 | ||||||||||||
|
Total securities
|
$ | 200,505 | $ | 7,652 | $ | (6,973 | ) | $ | 201,184 | |||||||
|
Gross
|
Gross
|
|||||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
|
December 31, 2009
|
||||||||||||||||
|
Available-for-sale
securities
|
||||||||||||||||
|
State and municipal obligations
|
$ | 45,392 | $ | 482 | $ | (2 | ) | $ | 45,872 | |||||||
|
Federal agency and corporate obligations
|
73,992 | 498 | — | 74,490 | ||||||||||||
|
Total short-term
available-for-sale
securities
|
119,384 | 980 | (2 | ) | 120,362 | |||||||||||
|
Non-UBS ARS
|
11,000 | — | (1,050 | ) | 9,950 | |||||||||||
|
Total
available-for-sale
securities
|
130,384 | 980 | (1,052 | ) | 130,312 | |||||||||||
|
Trading securities
|
||||||||||||||||
|
UBS ARS
|
31,675 | — | (2,100 | ) | 29,575 | |||||||||||
|
UBS Right
|
— | 2,100 | — | 2,100 | ||||||||||||
|
Total securities
|
$ | 162,059 | $ | 3,080 | $ | (3,152 | ) | $ | 161,987 | |||||||
| (1) | $70.7 million of marketable investments with an original maturity of less than 90 days is included in cash and cash equivalents at December 31, 2008. |
In 2007, Forrester owned an approximate 1.2% ownership interest
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 (NASDAQ: SCOR) completed an
initial public offering in which Forrester’s ownership
interest was converted to approximately 126,000 shares. In
December 2007, Forrester sold approximately 20,000 shares
for proceeds of approximately $0.7 million and recognized a
gain of approximately $0.6 million. In 2008, Forrester sold
the remaining 106,000 shares of comScore for proceeds of
approximately $2.3 million and recognized a gain of
approximately $2.0 million.
F-16
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table summarizes the maturity periods of the
marketable securities in the Company’s portfolio as of
December 31, 2009. In February 2008, certain ARS that
Forrester held experienced failed auctions that limited the
liquidity of these securities. These auction failures have
continued throughout 2009 and based on current market
conditions, it is likely that auction failures will continue.
The following table reflects the ARS at their current auction
reset dates. The actual contractual maturities of these
investments were they not to reset would occur at various dates
between 2016 and 2041 with $0.3 million maturing in five to
ten years and $39.2 million maturing after ten years.
| FY 2010 | FY 2011 | FY2012 | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Federal agency and corporate obligations
|
$ | 34,827 | $ | 30,047 | $ | 9,616 | $ | 74,490 | ||||||||
|
Non-ARS state and municipal obligations
|
29,776 | 16,096 | — | 45,872 | ||||||||||||
|
UBS ARS
|
29,575 | — | — | 29,575 | ||||||||||||
|
Non-UBS ARS
|
9,950 | — | — | 9,950 | ||||||||||||
|
UBS Right
|
2,100 | — | — | 2,100 | ||||||||||||
|
Total
|
$ | 106,228 | $ | 46,143 | $ | 9,616 | $ | 161,987 | ||||||||
The following table shows the gross unrealized losses and market
value of Forrester’s
available-for-sale
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
loss position (in thousands):
| As of December 31, 2008 | ||||||||||||||||
| Less Than 12 Months | 12 Months or Greater | |||||||||||||||
|
Market
|
Unrealized
|
Market
|
Unrealized
|
|||||||||||||
| Value | Losses | Value | Losses | |||||||||||||
|
Federal agency and corporate obligations
|
$ | 8,533 | $ | 86 | $ | — | $ | — | ||||||||
| As of December 31, 2009 | ||||||||||||||||
| Less Than 12 Months | 12 Months or Greater | |||||||||||||||
|
Market
|
Unrealized
|
Market
|
Unrealized
|
|||||||||||||
| Value | Losses | Value | Losses | |||||||||||||
|
State and municipal bonds
|
$ | 1,148 | $ | 2 | $ | — | $ | — | ||||||||
|
Non-UBS ARS
|
11,000 | 1,050 | — | — | ||||||||||||
|
Total
|
$ | 12,148 | $ | 1,052 | $ | — | $ | — | ||||||||
In November 2008, the Company accepted an offer (the
“Right”) from UBS AG (“UBS”), one of its
investment advisors, entitling the Company to sell at par value
auction-rate securities originally purchased from
UBS ($29.6 million fair value and $31.7 million
par value at December 31, 2009) at any time during a
two-year period from June 30, 2010 through July 2,
2012 (“UBS ARS”). In accepting the Right, the Company
also granted UBS the authority to sell or auction the UBS ARS at
par at any time up until the expiration date of the offer and
released UBS from any claims relating to the marketing and sale
of the UBS ARS. Although the Company expects to sell its UBS ARS
under the Right, if the Right is not exercised before
July 2, 2012, it will expire and UBS will have no further
rights or obligation to buy the Company’s UBS ARS. As the
Company intends to exercise the Right during 2010, it has
classified the UBS ARS in current assets in the Consolidated
Balance Sheets. If the Company does not exercise the Right, the
UBS ARS will continue to accrue interest as determined by the
auction process or the terms outlined in the prospectus of the
UBS ARS if the auction process fails. UBS’s obligations
under the Right are not secured by its assets and do not require
UBS to obtain any financing to support its performance
obligations under the Right. UBS has disclaimed any assurance
that it will have sufficient financial resources to satisfy its
obligations under the Right.
The enforceability of the Right results in a put option that is
recognized as a separate freestanding asset and is accounted for
separately from the ARS investment. As of December 31,
2009, the fair value of the Right was
F-17
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
approximately $2.1 million, which is classified as a
marketable investment in current assets in the Consolidated
Balance Sheets. The Company made an election to measure the
Right at fair value in order to match the changes in the fair
value of the ARS. The Company valued the Right using a
discounted cash flow approach including estimates of interest
rates and timing and amount of cash flow, based on data
available as of December 31, 2009 and adjusted for any
bearer risk associated with UBS’s financial ability to
repurchase the UBS ARS beginning June 30, 2010. These
assumptions are volatile and subject to change as the underlying
sources of these assumptions and market conditions change.
Prior to accepting the UBS offer, the Company classified its ARS
as
available-for-sale
investments, and therefore recorded resulting unrealized gains
or losses, net of tax, in accumulated other comprehensive loss
on the Consolidated Balance Sheets. In connection with the
acceptance of the UBS offer in November 2008, the Company
reclassified its ARS subject to the Right from
available-for-sale
to trading securities. The transfer to trading securities
reflects the Company’s intent to exercise its put option
during the period June 30, 2010 to July 3, 2012. Prior
to its agreement with UBS, the Company’s intent was to hold
the UBS ARS until the earlier of an anticipated recovery in
market value or maturity. Upon transfer to trading securities,
the Company recognized an unrealized loss of approximately
$6.9 million, included in other income, net for the year
ended December 31, 2008, for the amount of the unrealized
loss not previously recognized in earnings. This amount offset a
$6.9 million gain recognized for the initial value of the
Right for the year ended December 31, 2008.
The Company holds additional ARS ($10.0 million fair value
and $11.0 million par value at December 31,
2009) with another investment advisor who has not made an
offer similar to UBS. These ARS will continue to be held as
available-for-sale
and are classified as a long-term asset in the Consolidated
Balance Sheets. The Company intends to retain its investment in
the issuer of these ARS until the earlier of an anticipated
recovery in market value or maturity and as a result has not
recorded an
other-than-temporary
loss on these ARS.
There were no gross realized gains or losses on sales of the
Company’s federal obligations, state and municipal bonds
and corporate bonds for the years ended December 31, 2007,
2008 or 2009.
The following table represents the Company’s fair value
hierarchy for its financial assets (cash equivalents and
marketable investments) measured at fair value on a recurring
basis as of December 31, 2008 and 2009 (in thousands):
| As of December 31, 2008 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Money market funds(1)
|
$ | 14,529 | $ | — | $ | — | $ | 14,529 | ||||||||
|
Federal agency and corporate obligations(2)
|
— | 83,528 | — | 83,528 | ||||||||||||
|
State and municipal obligations
|
— | 71,156 | 39,613 | 110,769 | ||||||||||||
|
UBS Right
|
— | — | 6,887 | 6,887 | ||||||||||||
|
Total
|
$ | 14,529 | $ | 154,684 | $ | 46,500 | $ | 215,713 | ||||||||
| As of December 31, 2009 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Money market funds(1)
|
$ | 50,472 | $ | — | $ | — | $ | 50,472 | ||||||||
|
Federal agency and corporate obligations
|
— | 74,490 | — | 74,490 | ||||||||||||
|
State and municipal obligations
|
— | 45,872 | 39,525 | 85,397 | ||||||||||||
|
UBS Right
|
— | — | 2,100 | 2,100 | ||||||||||||
|
Total
|
$ | 50,472 | $ | 120,362 | $ | 41,625 | $ | 212,459 | ||||||||
| (1) | included in cash and cash equivalents. | |
| (2) | $70.7 million included in cash and cash equivalents. |
F-18
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Prior to 2008, the fair value of the ARS investments
approximated par value due to the frequent resets through the
auction process. While the Company continues to earn interest on
its ARS investment at the contractual rate, these investments
trade infrequently and therefore do not have a readily
determinable market value. Accordingly, the estimated fair value
of the ARS no longer approximates par value. At
December 31, 2009, the Company held ARS with two investment
advisors, both of which provided a valuation of Level 3
inputs for the ARS investments. One investment advisor utilized
a discounted cash flow approach to arrive at this valuation,
which was corroborated by a separate and comparable discounted
cash flow analysis prepared by the Company. The assumptions used
in preparing the discounted cash flow model include estimates,
based on data available at December 31, 2009, of interest
rates, timing and amount of cash flows, credit and liquidity
premiums, and expected holding periods of the ARS. The
discounted cash flow technique was used to value the ARS
investments that were principally backed by student loans, which
has had virtually no market activity since the auction failures
began in 2008. The Company valued the Right as a put option
asset using a discounted cash flow approach including estimates
of interest rates, timing and amount of cash flow, adjusted for
any bearer risk associated with UBS’s financial ability to
repurchase the ARS beginning June 30, 2010, based on
Level 3 data available at December 31, 2009. The
combined fair value of the Right and the UBS ARS is equal to the
par value of the UBS ARS. The other investment advisor provided
a valuation at par value based on the limited market activity,
which Forrester considered to be a Level 3 input, in
addition to the underlying credit rating of the ARS, which was
generally related to municipalities. In addition to the
valuation provided by the investment advisor, Forrester
completed a valuation of the securities using a discounted cash
flow model that included estimates of interest rates, timing and
amount of cash flows, credit and liquidity premiums and expected
holding periods of the securities. Forrester relied most heavily
on its own valuation, based primarily on the lack of market
activity in these securities, which resulted in an unrealized
loss recorded in other comprehensive loss in the Consolidated
Balance Sheets of $1.1 million. The Company believes that
the loss is temporary due to the underlying credit rating of the
securities and the fact that the Company has the intent and
ability to hold the securities until a full recovery has
occurred. The assumptions used in valuing both the ARS and the
Right are volatile and subject to change as the underlying
sources of these assumptions and market conditions change.
The following table provides a summary of changes in fair value
of the Company’s Level 3 financial assets as of
December 31, 2008 and 2009 (in thousands):
|
UBS
|
||||||||
| Right | ARS | |||||||
|
Balance at December 31, 2007
|
$ | — | $ | — | ||||
|
Transferred to Level 3
|
120,200 | |||||||
|
Sales/Maturities
|
— | (73,700 | ) | |||||
|
Issuance of Right
|
6,887 | |||||||
|
Total loss included in earnings
|
— | (6,887 | ) | |||||
|
Balance at December 31, 2008
|
6,887 | 39,613 | ||||||
|
Sales/Maturities
|
— | (3,825 | ) | |||||
|
Total gains (losses):
|
||||||||
|
Included in other comprehensive loss
|
— | (1,050 | ) | |||||
|
Included in earnings
|
(4,787 | ) | 4,787 | |||||
|
Balance at December 31, 2009
|
$ | 2,100 | $ | 39,525 | ||||
| (5) | Non-Marketable Investments |
At December 31, 2008 and 2009, the carrying value of the
Company’s non-marketable investments, which were comprised
primarily of interests in private equity funds, were
$7.0 million and $5.5 million, respectively.
One of the Company’s investments, with a book value of
$2.5 million and $1.9 million at December 31,
2008 and 2009, respectively, is being accounted for using the
cost method and, accordingly, is valued at cost unless an
F-19
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
other-than-temporary
impairment in its value occurs or the investment is liquidated.
The other investments are being accounted for using the equity
method as the investments are limited partnerships and Forrester
has an ownership interest in excess of 5% and, accordingly,
Forrester records its share of the investee’s operating
results each period. During the years ended December 2007, 2008
and 2009, the Company recorded losses of approximately
$1.6 million, $0.6 million and $1.0 million,
respectively, which are included in investment gains (losses) in
the Consolidated Statements of Income. During the years ended
December 31, 2007, 2008 and 2009, gross distributions of
$1.9 million, $0.6 million and $0.1 million,
respectively, were received from the funds.
| (6) | Income Taxes |
Income from continuing operations before income tax provision
for the years ended December 31, 2007, 2008 and 2009
consists of the following (in thousands):
| 2007 | 2008 | 2009 | ||||||||||
|
Domestic
|
$ | 25,886 | $ | 40,076 | $ | 33,094 | ||||||
|
Foreign
|
4,118 | 4,734 | 641 | |||||||||
|
Total
|
$ | 30,004 | $ | 44,810 | $ | 33,735 | ||||||
The components of the income tax provision for the years ended
December 31, 2007, 2008 and 2009 are as follows (in
thousands):
| 2007 | 2008 | 2009 | ||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | 334 | $ | 9,238 | $ | 8,853 | ||||||
|
State
|
2,238 | 3,325 | 3,488 | |||||||||
|
Foreign
|
1,611 | 1,515 | 585 | |||||||||
| 4,183 | 14,078 | 12,926 | ||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
7,513 | 2,059 | 1,774 | |||||||||
|
State
|
151 | (43 | ) | (346 | ) | |||||||
|
Foreign
|
(786 | ) | (499 | ) | 515 | |||||||
| 6,878 | 1,517 | 1,943 | ||||||||||
|
Income tax provision
|
$ | 11,061 | $ | 15,595 | $ | 14,869 | ||||||
A reconciliation of the federal statutory rate to
Forrester’s effective tax rate for the years ended
December 31, 2007, 2008 and 2009 is as follows:
| 2007 | 2008 | 2009 | ||||||||||
|
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
|
6.2 | 4.7 | 6.1 | |||||||||
|
Non-deductible expenses
|
1.5 | 0.4 | 0.7 | |||||||||
|
Tax-exempt interest income
|
(8.1 | ) | (3.8 | ) | (3.0 | ) | ||||||
|
Stock option compensation deduction
|
2.7 | (0.3 | ) | 1.1 | ||||||||
|
Other, net
|
4.1 | 1.6 | 3.0 | |||||||||
|
Change in tax rate
|
(5.8 | ) | — | — | ||||||||
|
Exchange rate (gain) loss
|
(1.9 | ) | (1.7 | ) | 1.8 | |||||||
|
Change in valuation allowance
|
3.2 | (1.1 | ) | (0.6 | ) | |||||||
|
Effective tax rate
|
36.9 | % | 34.8 | % | 44.1 | % | ||||||
F-20
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The components of deferred income taxes as of December 31,
2008 and 2009 are as follows (in thousands):
| 2008 | 2009 | |||||||
|
Non-deductible reserves and accruals
|
$ | 3,645 | $ | 4,469 | ||||
|
Stock compensation
|
3,996 | 5,542 | ||||||
|
Depreciation and amortization
|
820 | 1,727 | ||||||
|
Net operating loss and other carryforwards
|
22,072 | 19,445 | ||||||
|
Gross deferred tax asset
|
30,533 | 31,183 | ||||||
|
Less — valuation allowance
|
(10,922 | ) | (11,672 | ) | ||||
|
Sub-total
|
19,611 | 19,511 | ||||||
|
Goodwill amortization
|
(5,291 | ) | (6,930 | ) | ||||
|
Deferred commissions
|
(3,831 | ) | (3,912 | ) | ||||
|
Net deferred tax asset
|
$ | 10,489 | $ | 8,669 | ||||
The Company considers all available evidence, both positive and
negative, to determine whether, based on the weight of that
evidence, a valuation allowance is needed for some portion or
all of a net deferred income tax asset. Judgment is used in
considering the relative impact of negative and positive
evidence. In arriving at these judgments, the weight given to
the potential effect of negative and positive evidence is
commensurate with the extent to which it can be objectively
verified. Although realization is not assured, based upon
projections of Forrester’s 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.
As of December 31, 2009 and 2008, the Company maintained a
valuation allowance of approximately $11.7 million and
$10.9 million, respectively, which primarily relates to
foreign NOL carryforwards from a prior acquisition, foreign tax
credit carryforwards and domestic capital losses.
As of December 31, 2009, the Company had federal NOL
carryforwards of approximately $21.5 million. If unused,
the NOL carryforwards would expire on various dates from 2013
through 2028. The use of these NOL carryforwards may be limited
pursuant to Internal Revenue Code Section 382 as a result
of future ownership changes.
As of December 31, 2009 the Company had federal and state
capital loss carryforwards of $1.0 million that expire in
2013 and had foreign tax credit carryforwards of
$0.8 million that expire between 2012 and 2018.
The Company also has foreign net operating loss carryforwards of
approximately $35.1 million, which can be carried forward
indefinitely. Approximately $6.7 million of the foreign net
operating loss carryforwards relate to a prior acquisition, the
utilization of which is subject to limitation under the tax law
of the United Kingdom.
Upon the adoption of a newly issued accounting standard as of
January 1, 2009 with respect to accounting for
acquisitions, changes in deferred tax asset valuation allowances
and income tax uncertainties after the acquisition date
generally will affect income tax expense, including charges and
uncertainties associated with acquisitions that closed prior to
January 1, 2009.
During the years ended December 31, 2007 and 2008, the
Company recognized approximately $0.1 million and
$8.5 million, respectively, of tax benefits from excess tax
deductions resulting from employee stock option exercises. The
tax benefit was recorded as an increase to additional
paid-in-capital.
Excess tax benefits from share-based payments are recognized in
the year that the deduction reduces the amount of cash payable
for taxes. No such tax benefits were recognized in the year
ended December 31, 2009.
As of December 31, 2009, the Company has not provided for
U.S. deferred income taxes on undistributed earnings of
approximately $11.3 million for its foreign subsidiaries,
since these earnings are to be indefinitely reinvested.
Determination of the amount of U.S. income tax liability
that would be incurred is not practicable.
F-21
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Effective January 1, 2007, the Company adopted a new
accounting standard concerning the accounting for income tax
contingencies. This standard clarified the accounting for
uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribed a two step process for the
measurement of uncertain tax positions that have been taken or
are expected to be taken in a tax return. The first step is a
determination of whether the tax position should be recognized
in the financial statements. The second step determines the
measurement of the tax position. The standard also provides
guidance on derecognition of such tax positions, classification,
potential interest and penalties, accounting in interim periods
and disclosure. The adoption of this standard did not have a
material impact on our consolidated financial position or
results of operations.
A reconciliation of the beginning and ending amount of our
unrecognized tax benefits is summarized as follows:
| 2007 | 2008 | 2009 | ||||||||||
|
Unrecognized tax benefits at January 1
|
$ | 1,110 | $ | 1,409 | $ | 1,222 | ||||||
|
Gross increases for tax positions of prior years
|
320 | 398 | — | |||||||||
|
Gross decreases for tax positions of prior years
|
— | (12 | ) | (19 | ) | |||||||
|
Settlements
|
— | (320 | ) | — | ||||||||
|
Lapse of applicable statute of limitations
|
(21 | ) | (253 | ) | (284 | ) | ||||||
|
Unrecognized tax benefits at December 31
|
$ | 1,409 | $ | 1,222 | $ | 919 | ||||||
The Company and its subsidiaries file income tax returns in the
United States and various state and international jurisdictions.
Major taxing jurisdictions include the U.S., the Netherlands and
the United Kingdom. The Company is no longer subject to
U.S. state or local and
non-U.S. income
tax examinations by tax authorities in its major jurisdictions
for years before 2002, except to the extent of net operating
loss and tax credit carryforwards from those years.
The Company recognizes interest and penalties related to
uncertain tax positions in income tax expense and such amounts
were not material in the years ended December 31, 2007,
2008 and 2009. As of December 31, 2008 and 2009, the
Company had approximately $0.2 million and
$0.2 million, respectively, of accrued interest and
penalties related to uncertain tax positions.
Total amount of unrecognized tax benefits that would affect the
effective tax rate if recognized is $0.9 million as of
December 31, 2008 and $0.5 million as of
December 31, 2009. It is reasonably possible that the gross
unrecognized benefits will be decreased by a range of zero to
$0.4 million within the next twelve months due primarily to
the expiration of the relevant statutes of limitations.
| (7) | Commitments |
As of December 31, 2009, Forrester had future contractual
obligations as follows for operating leases (in thousands):
|
2010
|
$ | 9,487 | ||
|
2011
|
7,010 | |||
|
2012
|
6,785 | |||
|
2013
|
6,391 | |||
|
2014
|
6,286 | |||
|
Thereafter
|
71,639 | |||
|
Total minimum lease payments
|
$ | 107,598 | ||
On September 29, 2009, the Company entered into a
build-to-suit
net lease (“Lease”) pursuant to which the landlord
will build a new corporate headquarters building for the Company
in Cambridge, Massachusetts. Pursuant to the Lease, as amended,
the landlord will construct an approximately 190,000 square
foot building (“Building”) and lease the Building and
parcel to the Company to be used as its new corporate
headquarters. During construction, the Company will continue to
occupy its current corporate headquarters in Cambridge,
Massachusetts under the existing lease for such premises. In
accordance with the Lease, the Company placed $14.8 million
in escrow for
F-22
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
leasehold improvements for the Building, which is classified as
restricted cash on the Consolidated Balance Sheets. The
$14.8 million in escrow will be increased or decreased
based upon the final estimate of construction costs and will be
released from escrow as the leasehold improvements are
constructed.
Aggregate rent expenses, net of sublease income, were
approximately $9.4 million, $9.4 million and
$10.0 million for the years ended December 31, 2007,
2008, and 2009, respectively.
| (8) | 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 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
Forrester’s Board of Directors has authorized an aggregate
$200 million to purchase common stock under the stock
repurchase program. The shares repurchased may be used, among
other things, in connection with Forrester’s equity
incentive and purchase plans. As of December 31, 2009,
Forrester had repurchased approximately 7.0 million shares
of common stock at an aggregate cost of $141.3 million,
including commissions paid for the acquisition of the common
stock.
Equity
Plans
Forrester maintains the following four equity compensation
plans: the 2006 Equity Incentive Plan (the “2006
Plan”), the Amended and Restated 1996 Equity Incentive Plan
(the “1996 Plan”), the 2006 Stock Option Plan for
Directors’ (the “2006 Directors’ Plan”)
and the 1996 Stock Option Plan for Non-Employee Directors (the
“1996 Directors’ Plan”). Upon approval of
the 2006 Plan and the 2006 Directors Plan by stockholders,
no future awards under the 1996 Plan and 1996 Directors
Plan could be granted or issued.
In May 2006, the 2006 Plan was approved by the stockholders of
the Company. The 2006 Plan provides for the issuance of
stock-based awards, including incentive stock options
(“ISOs”), non-qualified stock options
(“NSOs”), and restricted stock units
(“RSUs”) to purchase up to 4,350,000 shares
authorized in the 2006 Plan plus up to 2,500,000 shares
returned from the 1996 Plan. Under the terms of the 2006 Plan,
ISOs may not be granted at less than fair market value on the
date of grant (and in no event less than par value). Options
generally vest annually over two to four years and expire after
10 years and RSUs generally vest over three years, in each
case sometimes subject to performance conditions in addition to
the passage of time. Options and RSUs granted under the 2006
Plan immediately vest upon certain events, as described in the
2006 Plan. As of December 31, 2009, approximately
3.3 million shares were available for future grant of
awards under the 2006 Plan.
The 1996 Plan provided for the issuance of stock-based awards,
including ISOs and NSOs, to purchase up to
13,500,000 shares of common stock. Under the terms of the
1996 Plan, ISOs were not granted at less than fair market value
on the date of grant (and in no event less than par value). ISO
grants to holders of 10% of the combined voting power of all
classes of Forrester stock were required to be granted at an
exercise price not less than 110% of the fair market value at
the date of grant. Options generally vest ratably over two to
four years and expire after 10 years and are sometimes
subject to performance conditions in addition to the passage of
time. Options granted under the 1996 Plan immediately vest upon
certain events, as described in the 1996 Plan.
In May 2006, the 2006 Directors’ Plan was approved by
the stockholders of the Company. The 2006 Directors’
Plan provides for the issuance of options to purchase up to
450,000 shares of common stock. Under the
2006 Directors’ Plan, each non-employee director shall
be awarded an option to purchase 6,000 shares of common
stock, at an exercise price equal to the fair market value of
the common stock upon his or her election as a director. These
options vest in four equal annual installments, with the first
installment vested on the date of grant. In
F-23
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 Forrester’s
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
2006 Directors’ Plan immediately vest upon certain
events, as described in the 2006 Directors’ Plan. As
of December 31, 2009, approximately 0.2 million shares
were available for future grant of awards under the
2006 Directors Plan.
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 Forrester’s
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.
Stock
Options
Stock option activity for the year ended December 31, 2009
is presented below (in thousands, except per share data):
|
Weighted-
|
Weighted -
|
|||||||||||||||
|
Average
|
Average
|
|||||||||||||||
|
Exercise
|
Remaining
|
Aggregate
|
||||||||||||||
|
Number
|
Price Per
|
Contractual
|
Intrinsic
|
|||||||||||||
| of Shares | Share | Term (In Years) | Value | |||||||||||||
|
Outstanding at December 31, 2008
|
2,934 | $ | 25.16 | |||||||||||||
|
Granted
|
460 | 24.80 | ||||||||||||||
|
Exercised
|
(134 | ) | 19.08 | |||||||||||||
|
Forfeited
|
(170 | ) | 28.60 | |||||||||||||
|
Outstanding at December 31, 2009
|
3,090 | $ | 25.18 | 6.30 | $ | 8,734 | ||||||||||
|
Exercisable at December 31, 2009
|
2,096 | $ | 24.67 | 5.26 | $ | 7,988 | ||||||||||
|
Vested and expected to vest at December 31, 2009
|
2,975 | $ | 25.16 | 6.30 | $ | 8,625 | ||||||||||
The total intrinsic value of options exercised during 2007, 2008
and 2009 was $2.5 million, $10.4 million and
$0.7 million, respectively.
On April 3, 2006, Forrester issued to its employees options
to purchase 587,500 shares of common stock. These options
were subject to performance criteria and would vest only if
certain pro forma operating margin targets related to full year
2006 performance were achieved. The vesting of these options was
over 24 or 36 months, or the options could be forfeited,
depending on the actual 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. The actual pro forma
operating margin for 2006 resulted in accelerated vesting of the
options over 24 months and the compensation expense
associated with the accelerated vesting was recognized on a
prospective basis through the remainder of the vesting period.
The expense related to these options was recognized on a graded
basis.
On April 2, 2007, Forrester issued to its employees options
to purchase 293,600 shares of common stock. These options
were subject to performance criteria and would vest only if
certain pro forma operating margin targets related to full year
2007 performance were achieved. The vesting of these options was
over 24 or 36 months,
F-24
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
or the options could be forfeited, depending on the actual pro
forma operating margin achieved for 2007. During 2007, operating
performance was expected to result in the options vesting over
36 months and expense was recognized assuming that vesting
period. The actual pro forma operating margin for 2007 resulted
in the options vesting over 36 months and the expense
related to these options is being recognized on a graded basis.
On April 1, 2008, Forrester issued to its employees options
to purchase 370,000 shares of common stock. These options
were subject to performance criteria and would vest only if
certain pro forma operating profit targets related to full year
2008 performance were achieved. The vesting of these options was
over 24, 36 or 48 months, or the options could be
forfeited, depending on the actual pro forma operating profit
achieved for 2008. During 2008, operating performance was
expected to result in the options vesting over 48 months
and expense was recognized assuming that vesting period. The
actual pro forma operating profit targets for 2008 resulted in
accelerated vesting of the options over 24 months and the
compensation expense associated with the accelerated vesting
will be recognized on a prospective basis through the remainder
of the vesting period. The expense related to these options is
being recognized on a graded basis.
Terminated employees have three months from date of termination
to exercise their vested options. During 2007, following the
Company’s conclusion that its historical financial
statements could no longer be relied upon, the registration
statement covering the offer and sale of stock upon the exercise
of stock 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 was lifted, but no later than December 31, 2007
(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
Company’s inability to provide shares upon exercise. When
the Company’s 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 the options
were tolled in conjunction with the employee’s termination.
A summary of the options tolled during 2007 is as follows:
|
Total
|
||||||||||||
|
Number of
|
Number of
|
Expense
|
||||||||||
| Individuals | Shares | (in 000’s) | ||||||||||
|
Amount related to the modification of previously issued stock
options
|
16 | 76,800 | $ | 533 | ||||||||
|
Tolled stock options accounted for as liability awards and
related fair market value adjustments
|
8 | 66,588 | 478 | |||||||||
| 24 | 143,388 | $ | 1,011 | |||||||||
During 2007, the Board of Directors approved a tender offer to
amend or replace certain previously granted stock options that
had exercise prices less than the market value of the
Company’s common 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. In total, 117 employees had options to
purchase approximately 213,000 shares modified in December
2007 in connection with the tender offer. The total incremental
cost of the modification was approximately $0.4 million.
Restricted
Stock Units
In 2009, Forrester issued to its employees 95,496
performance-based restricted stock units (“RSUs”).
Each RSU represents the right to receive one share of Forrester
common stock when the restrictions lapse and the vesting
F-25
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
conditions are met. The vesting of the RSUs is subject to
performance criteria and will vest at 100% or 40% on
April 1, 2012, or the RSUs could be forfeited, depending on
whether specified revenue growth and pro forma operating targets
related to full year 2011 performance are achieved. Compensation
expense in 2009 was recognized based on the assumption of 100%
vesting of the RSUs.
RSU activity for the year ended December 31, 2009 is
presented below (in thousands, except per share data):
|
Weighted-
|
||||||||
|
Average
|
||||||||
|
Grant Date
|
||||||||
| RSUs | Fair Value | |||||||
|
Unvested at December 31, 2008
|
— | $ | — | |||||
|
Granted
|
95,496 | 25.21 | ||||||
|
Vested or settled
|
— | — | ||||||
|
Forfeited
|
(1,294 | ) | 25.25 | |||||
|
Unvested at December 31, 2009
|
94,202 | $ | 25.21 | |||||
Employee
Stock Purchase Plan
In September 1996, Forrester adopted the 1996 Employee Stock
Purchase Plan (the “Stock Purchase Plan”). The Stock
Purchase Plan, as amended and restated in 2009, provides for the
issuance of up to 1.5 million shares of common stock and as
of December 31, 2009 approximately 0.6 million shares
remain available for issuance. With certain limited exceptions,
all employees of Forrester who have completed six months or more
of continuous service in the employ of Forrester and whose
customary employment is more than 20 hours per week,
including officers and directors who are employees, are eligible
to participate in the Stock Purchase Plan. Purchase periods
under the Stock Purchase Plan are generally six months in length
and commence on each successive January 1 and July 1.
During each purchase period under the Stock Purchase Plan, the
maximum number of shares of common stock that may be purchased
by an employee is limited to the number of shares equal to
$12,500 divided by the fair market value of a share of common
stock on the first day of the purchase period. An employee may
elect to have up to 10% deducted from his or her compensation
for the purpose of purchasing shares under the Stock Purchase
Plan. The price at which the employee’s shares are
purchased is the lower of: a) 85% of the closing price of
the common stock on the day that the purchase period commences,
or b) 85% of the closing price of the common stock on the
day that the purchase period terminates. The Company did not
have purchase periods during 2007. Shares purchased by employees
under the Stock Purchase Plan are as follows:
|
Shares
|
Purchase
|
|||||||
|
Purchase Period Ended
|
Purchased | Price | ||||||
|
June 30, 2008
|
32,356 | $ | 23.38 | |||||
|
December 31, 2008
|
35,598 | $ | 23.98 | |||||
|
June 30, 2009
|
43,174 | $ | 20.87 | |||||
|
December 31, 2009
|
38,212 | $ | 21.46 | |||||
| (9) | Employee Pension Plans |
Forrester sponsors several defined contribution plans for
eligible employees. Generally, the defined contribution plans
have funding provisions which, in certain situations, require
contributions based upon formulas relating to employee wages or
the level of elective participant contributions, as well as
allow for additional discretionary contributions. Further,
certain plans contain vesting provisions. Forrester’s
contributions to these plans totaled approximately
$2.0 million for each of the years ended December 31,
2007, 2008, and 2009.
F-26
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| (10) | Reorganization |
During the first quarter of 2009, Forrester announced a
reduction of its workforce by approximately 50 positions in
response to conditions and demands of the market and a slower
economy. Additionally, Forrester identified certain leased
office space that was no longer required to support the ongoing
business. As a result, Forrester recorded a reorganization
charge of approximately $3.1 million in the three months
ended March 31, 2009. Approximately 44% of the terminated
employees were members of the sales force, while 38% and 18%
held research and administrative roles, respectively. In
addition, during the fourth quarter of 2009, Forrester incurred
additional reorganization costs of $2.3 million related to
facility consolidations primarily in Cambridge, Massachusetts.
Of the $2.3 million fourth quarter charge, approximately
$1.4 million relates to future lease payments through
September 2011 and $0.9 million relates to the write-off of
leasehold improvements.
The activity related to the reorganization during the year ended
December 31, 2009 is as follows (in thousands):
|
Workforce
|
Facility
|
|||||||||||
| Reduction | Consolidation | Total | ||||||||||
|
Total charge
|
$ | 2,872 | $ | 2,569 | $ | 5,441 | ||||||
|
Cash payments
|
(2,774 | ) | (84 | ) | (2,858 | ) | ||||||
|
Non-cash portion of charge
|
— | (898 | ) | (898 | ) | |||||||
|
Accrual at December 31, 2009
|
$ | 98 | $ | 1,587 | $ | 1,685 | ||||||
The costs accrued at December 31, 2009 are expected to be
paid in the amount of $1.3 million in 2010 and
$0.4 million in 2011.
| (11) | Operating Segment and Enterprise Wide Reporting |
Forrester is organized into three client groups with each client
group responsible for writing relevant research for the roles
within the client organizations on a worldwide basis. The three
client groups are: Information Technology (“IT”),
Technology Industry (“TI”), and Marketing and Strategy
(“M&S”). All of the client groups generate
revenues through sales of research and advisory and other
service offerings targeted at specific roles within their
targeted clients. Each of the client groups consists of sales
personnel responsible for selling to clients within the client
group’s target client base and research personnel focused
primarily on issues relevant to particular roles and to the
day-to-day
responsibilities of persons within the roles. Amounts included
in the “Events” segment relate to the operations of
the events sales and production departments. Revenue reported in
the Events segment consists primarily of sponsorships and event
tickets to Forrester events.
Forrester evaluates reportable segment performance and allocates
resources based on direct margin. Direct margin, as presented
below, is defined as operating income excluding certain selling
and marketing expenses, client services, stock-based
compensation expense, general and administrative expenses,
depreciation expense, amortization of intangible assets and
reorganization costs. The accounting policies used by the
reportable segments are the same as those used in the
consolidated financial statements.
Forrester does not identify or allocate assets, including
capital expenditures, by operating segment. Accordingly, assets
are not being reported by segment because the information is not
available by segment and is not reviewed in the evaluation of
performance or making decisions in the allocation of resources.
F-27
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following tables present information about reportable
segments (in thousands).
| IT | TI | M&S | Events | Consolidated | ||||||||||||||||
|
Year ended December 31, 2007
|
||||||||||||||||||||
|
Revenue
|
$ | 89,818 | $ | 64,936 | $ | 46,351 | $ | 10,951 | $ | 212,056 | ||||||||||
|
Direct margin
|
39,238 | 34,279 | 16,090 | 4,074 | 93,681 | |||||||||||||||
|
Corporate expenses
|
(69,798 | ) | ||||||||||||||||||
|
Amortization of intangible assets
|
(1,232 | ) | ||||||||||||||||||
|
Income from operations
|
$ | 22,651 | ||||||||||||||||||
|
Year ended December 31, 2008
|
||||||||||||||||||||
|
Revenue
|
$ | 99,869 | $ | 69,621 | $ | 58,773 | $ | 12,612 | $ | 240,875 | ||||||||||
|
Direct margin
|
44,904 | 35,877 | 20,244 | 5,397 | 106,422 | |||||||||||||||
|
Corporate expenses
|
(67,023 | ) | ||||||||||||||||||
|
Amortization of intangible assets
|
(1,435 | ) | ||||||||||||||||||
|
Income from operations
|
$ | 37,964 | ||||||||||||||||||
|
Year ended December 31, 2009
|
||||||||||||||||||||
|
Revenue
|
$ | 92,950 | $ | 66,848 | $ | 63,910 | $ | 9,644 | $ | 233,352 | ||||||||||
|
Direct margin
|
43,497 | 34,408 | 22,970 | 3,183 | 104,058 | |||||||||||||||
|
Corporate expenses
|
(63,807 | ) | ||||||||||||||||||
|
Amortization of intangible assets
|
(2,290 | ) | ||||||||||||||||||
|
Reorganization costs
|
(5,541 | ) | ||||||||||||||||||
|
Income from operations
|
$ | 32,420 | ||||||||||||||||||
Net long-lived tangible assets by location as of
December 31, 2008 and 2009 are as follows (in thousands):
| 2008 | 2009 | |||||||
|
United States
|
$ | 5,447 | $ | 4,793 | ||||
|
Europe (excluding United Kingdom)
|
934 | 765 | ||||||
|
United Kingdom
|
370 | 258 | ||||||
|
Other
|
8 | 7 | ||||||
| $ | 6,759 | $ | 5,823 | |||||
Net revenues by geographic destination and as a percentage of
total revenues for the years ended December 31, 2007, 2008,
and 2009 are as follows (in thousands):
| 2007 | 2008 | 2009 | ||||||||||
|
United States
|
$ | 149,745 | $ | 172,973 | $ | 164,031 | ||||||
|
Europe (excluding United Kingdom)
|
25,328 | 31,179 | 31,011 | |||||||||
|
United Kingdom
|
16,348 | 14,294 | 15,200 | |||||||||
|
Canada
|
11,731 | 13,267 | 13,706 | |||||||||
|
Other
|
8,904 | 9,162 | 9,404 | |||||||||
| $ | 212,056 | $ | 240,875 | $ | 233,352 | |||||||
F-28
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2007 | 2008 | 2009 | ||||||||||
|
United States
|
71 | % | 72 | % | 70 | % | ||||||
|
Europe (excluding United Kingdom)
|
12 | % | 13 | % | 13 | % | ||||||
|
United Kingdom
|
8 | % | 6 | % | 7 | % | ||||||
|
Canada
|
6 | % | 6 | % | 6 | % | ||||||
|
Other
|
3 | % | 3 | % | 4 | % | ||||||
| 100 | % | 100 | % | 100 | % | |||||||
| (12) | Certain Balance Sheet Accounts |
Property
and Equipment:
Property and equipment as of December 31, 2008 and 2009
consist of the following (in thousands):
| 2008 | 2009 | |||||||
|
Computers and equipment
|
$ | 10,787 | $ | 10,758 | ||||
|
Computer software
|
10,155 | 10,828 | ||||||
|
Furniture and fixtures
|
3,909 | 4,653 | ||||||
|
Leasehold improvements
|
5,975 | 6,043 | ||||||
|
Total property and equipment
|
30,826 | 32,282 | ||||||
|
Less accumulated depreciation and amortization
|
24,067 | 26,459 | ||||||
| $ | 6,759 | $ | 5,823 | |||||
Accrued
Expenses:
Accrued expenses as of December 31, 2008 and 2009 consist
of the following (in thousands):
| 2008 | 2009 | |||||||
|
Payroll and related
|
$ | 9,873 | $ | 16,153 | ||||
|
Taxes
|
7,805 | 2,896 | ||||||
|
Other
|
9,849 | 11,119 | ||||||
| $ | 27,527 | $ | 30,168 | |||||
Allowance
for Doubtful Accounts:
A roll-forward of the allowance for doubtful accounts as of and
for the years ended December 31, 2007, 2008, and 2009 is as
follows (in thousands):
| 2007 | 2008 | 2009 | ||||||||||
|
Balance, beginning of year
|
$ | 717 | $ | 727 | $ | 485 | ||||||
|
Provision for doubtful accounts
|
480 | 594 | 490 | |||||||||
|
Additions from acquisition
|
— | 107 | — | |||||||||
|
Write-offs
|
(470 | ) | (943 | ) | (569 | ) | ||||||
|
Balance, end of year
|
$ | 727 | $ | 485 | $ | 406 | ||||||
F-29
FORRESTER
RESEARCH, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| (13) | Summary Selected Quarterly Financial Data (unaudited) |
The following is a summary of selected quarterly financial data
for the years ended December 31, 2008 and 2009 (in
thousands, except per share data):
|
Unaudited Consolidated Statement of Income Data for the
|
||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
|
March 31,
|
June 30,
|
September 30,
|
December 31,
|
March 31,
|
June 30,
|
September 30,
|
December 31,
|
|||||||||||||||||||||||||
| 2008 | 2008 | 2008 | 2008 | 2009 | 2009 | 2009 | 2009 | |||||||||||||||||||||||||
|
Total revenues
|
$ | 54,974 | $ | 63,474 | $ | 59,506 | $ | 62,921 | $ | 56,407 | $ | 61,578 | $ | 53,881 | $ | 61,486 | ||||||||||||||||
|
Income from operations
|
$ | 6,543 | $ | 10,430 | $ | 8,595 | $ | 12,396 | $ | 3,185 | $ | 12,218 | $ | 7,950 | $ | 9,067 | ||||||||||||||||
|
Net income
|
$ | 5,028 | $ | 8,645 | $ | 6,388 | $ | 9,154 | $ | 2,631 | $ | 6,152 | $ | 4,300 | $ | 5,783 | ||||||||||||||||
|
Basic income per common share
|
$ | 0.22 | $ | 0.38 | $ | 0.28 | $ | 0.40 | $ | 0.11 | $ | 0.27 | $ | 0.19 | $ | 0.26 | ||||||||||||||||
|
Diluted income per common share
|
$ | 0.21 | $ | 0.37 | $ | 0.27 | $ | 0.39 | $ | 0.11 | $ | 0.27 | $ | 0.19 | $ | 0.26 | ||||||||||||||||
The Company recorded $1.4 million of net foreign exchange
losses related to the remeasurement of intercompany transactions
in the fourth quarter of 2008, of which, $1.9 million
related to prior years.
F-30
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Not Applicable.
| Item 9A. | Controls and Procedures |
Evaluation
of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of the end of the period covered
by this report. Based on the evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of
December 31, 2009.
Management’s
Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Rule 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act of 1934. Internal control over
financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles (GAAP).
Internal control over financial reporting includes those
policies and procedures that: 1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
Company; 2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company;
and 3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, a system of internal
control over financial reporting can provide only reasonable
assurance and may not prevent or detect material misstatements.
Further, because of changes in conditions, effectiveness of
internal controls over financial reporting may vary over time.
Management assessed the effectiveness of the Company’s
internal control over financial reporting as of
December 31, 2009. In making its assessment, management
used the criteria set forth in
Internal Control —
Integrated Framework
issued by the Committee of Sponsoring
Organizations (“COSO”) of the Treadway Commission.
Based on this assessment, management believes that as of
December 31, 2009, the Company’s internal control over
financial reporting is effective based on those criteria.
The effectiveness of our internal control over financial
reporting as of December 31, 2009 has been audited by BDO
Seidman, LLP, our independent registered public accounting firm,
as stated in their report, which appears on page 29 of this
Annual Report on
Form 10-K.
Changes
in Internal Control Over Financial Reporting
There was no change in our internal control over financial
reporting in the quarter ending December 31, 2009 that has
materially affected or is reasonably likely to materially affect
our internal control over financial reporting.
28
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
INTERNAL CONTROL OVER FINANCIAL REPORTING
Board of Directors and Shareholders
Forrester Research, Inc.
Cambridge, MA
We have audited Forrester Research, Inc. (the
“Company”) and subsidiaries internal control over
financial reporting as of December 31, 2009, based on
criteria established in
Internal Control —
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Item 9A,
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Forrester Research, Inc. and subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on
the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Forrester Research, Inc. and
subsidiaries as of December 31, 2009 and 2008, 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, 2009 and our
report dated March 12, 2010 expressed an unqualified
opinion thereon.
/s/ BDO
Seidman, LLP
Boston, Massachusetts
March 12, 2010
29
| Item 10. | Directors, Executive Officers and Corporate Governance |
Executive
Officers
The following table sets forth information about our executive
officers as of March 1, 2010.
|
Name
|
Age
|
Position
|
||||
|
George F. Colony
|
56 | Chairman of the Board, Chief Executive Officer | ||||
|
Michael A. Doyle
|
54 | Chief Financial Officer and Treasurer | ||||
|
Dwight Griesman
|
52 | Chief Marketing Officer | ||||
|
Elizabeth Lemons
|
53 | Chief People Officer | ||||
|
Gail S. Mann, Esq.
|
58 | Chief Legal Officer and Secretary | ||||
|
Julie Meringer
|
41 | Managing Director, Information Technology Client Group | ||||
|
Mark R. Nemec
|
40 | Managing Director, Technology Industry Client Group | ||||
|
Gregory Nelson
|
37 | Chief Sales Officer | ||||
|
George Orlov
|
52 | Chief Information Officer and Chief Technology Officer | ||||
|
Charles Rutstein
|
37 | Chief Operating Officer | ||||
|
Dennis van Lingen
|
45 | Managing Director, Marketing & Strategy Client Group; Chief EMEA (Europe, Middle East, and Africa) Officer | ||||
George F. Colony
, Forrester’s founder, has served as
Chairman of the Board of Directors and Chief Executive Officer
since the Company’s inception in July 1983, and as
President since September 2001 and from
1983-2000.
Michael A. Doyle
began serving as the Company’s
Chief Financial Officer and Treasurer in September 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.
Dwight Griesman
became Forrester’s Chief Marketing
Officer in August 2008. Mr. Griesman joined the Company in
2005 as Vice President and Practice Leader, Forrester Leadership
Boards. Previously, he was Managing Director at the Forbes
Consulting Group Quantitative Analytics Division from 2001-2004.
Elizabeth Lemons
became Forrester’s 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 Forrester’s 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 Forrester. Prior to 2002 Ms. Mann was 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
Forrester’s Information Technology Client Group in January
2007. Ms. Meringer joined Forrester in 1991. From 2005
until 2007, Ms. Meringer served as Vice President of
Forrester’s 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.
Gregory Nelson
became Chief Sales Officer in August 2009.
Previously, he served as Vice President of Sales for our
Information Technology Client Group — EMEA region from
September 2007 to August 2009. From January 2004 to September
2007 Mr. Nelson served as a regional sales director for the
Company, and
30
prior to that, he held sales positions with the Company and with
Giga Information Group, Inc., which we acquired in 2003.
Mark R. Nemec
, Ph.D. became Managing Director of
Forrester’s 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 Forrester’s 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 Forrester’s 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 Forrester’s 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.
Our Code of Business Conduct and Ethics covers all employees,
officers and directors, including our principal executive,
financial and accounting officers. A copy of our Code of
Business Conduct and Ethics can be found on our web site,
www.forrester.com
.
We intend to satisfy the disclosure requirements under
Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Company’s Code of Business Conduct and Ethics, and that
relates to a substantive amendment or material departure from a
provision of the Code, by posting such information on our
Internet website at
www.forrester.com
. We also intend to
satisfy the disclosure requirements of the Nasdaq Stock Market
regarding waivers of the Code of Business Conduct and Ethics by
posting such information on our Internet website at
www.forrester.com
.
The remainder of the response to this item is contained in our
Proxy Statement for our 2010 Annual Meeting of Stockholders (the
“2010 Proxy Statement”) under the captions
“Election of Directors” and “Section 16(a)
Beneficial Ownership Reporting Compliance”, all of which is
incorporated herein by reference.
| Item 11. | Executive Compensation |
The response to this item is contained in the 2010 Proxy
Statement under the captions “Directors’
Compensation” and “Executive Compensation” and is
incorporated herein by reference.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The response to this item is contained in the 2010 Proxy
Statement under the caption “Security Ownership of Certain
Beneficial Owners and Management” and is incorporated
herein by reference.
31
The following table summarizes, as of December 31, 2009,
the number of options issued under our equity compensation plans
and the number of shares available for future issuance under
these plans:
|
(a)
|
(c)
|
|||||||||||
|
Number of Securities
|
(b)
|
Number of Securities Remaining
|
||||||||||
|
to be Issued Upon Exercise
|
Weighted Average Exercise
|
Available for Future Issuance Under
|
||||||||||
|
of Outstanding Options,
|
Price of Outstanding options,
|
Equity Compensation Plans (Excluding
|
||||||||||
|
Plan Category
|
Warrants and Rights | Warrants and Rights | Securities Reflected in Column (a)(1) | |||||||||
|
Equity compensation plans approved by stockholders(1)
|
3,183,756 | $ | 25.18 | 4,056,054 | ||||||||
|
Equity compensation plans not approved by stockholders
|
N/A | N/A | N/A | |||||||||
|
Total
|
3,183,756 | $ | 25.18 | 4,056,054 | ||||||||
| (1) | Column (c) includes, as of December 31, 2009, 3,273,116 shares available for issuance under our 2006 Equity Incentive Plan, 200,000 shares under our 2006 Director’s Stock Option Plan, and 582,938 shares that are available for issuance under our Amended and Restated Employee Stock Purchase Plan. |
The shares available under out 2006 Equity Incentive Plan are
available to be awarded as restricted or unrestricted stock or
stock units.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
The response to this item is contained in the Company’s
2010 Proxy Statement under the captions “Information with
respect to Board of Directors”, “Certain Relationships
and Related Transactions”, and “Related Person
Transactions” and is incorporated herein by reference.
| Item 14. | Principal Accounting Fees and Services |
The response to this item is contained in the Company’s
2010 Proxy Statement under the caption “Independent
Registered Public Accounting Firm” and is incorporated
herein by reference.
| Item 15. | Exhibits, Financial Statements Schedules. |
a.
Financial Statements.
See Index on
page 27.
b. Financial Statement Schedules.
None.
c.
Exhibits.
A complete listing of
exhibits required is given in the Exhibit Index that
precedes the exhibits filed with this report on page 33
hereof.
32
EXHIBIT INDEX
|
Exhibit No.
|
Description
|
|
|
2.1(1)
|
Agreement and Plan of Merger dated as of January 20, 2003 between Forrester Research, Inc., Whitcomb Acquisition Corp. and Giga Information Group, Inc. | |
|
3.1(2)
|
Restated Certificate of Incorporation of Forrester Research, Inc. | |
|
3.2(3)
|
Certificate of Amendment of the Certificate of Incorporation of Forrester Research, Inc. | |
|
3.3(4)
|
Bylaws of Forrester Research, Inc., as amended | |
|
4(3)
|
Specimen Certificate for shares of Common Stock, $.01 par value, of Forrester Research, Inc. | |
|
10.1+(3)
|
Registration Rights and Non-Competition Agreement | |
|
10.2+(5)
|
1996 Amended and Restated Equity Incentive Plan, as amended | |
|
10.3+(16)
|
Amended and Restated Employee Stock Purchase Plan | |
|
10.4+(6)
|
1996 Amended and Restated Stock Option Plan for Non-Employee Directors | |
|
10.5+(7)
|
2006 Equity Incentive Plan | |
|
10.6+(7)
|
2006 Stock Option Plan for Directors | |
|
10.7+(8)
|
Form of Stock Option Certificate (1996 Amended and Restated Equity Incentive Plan) | |
|
10.8+(9)
|
Form of Performance-Based Option Certificate (1996 Amended and Restated Equity Incentive Plan) | |
|
10.9+(10)
|
Form of Director’s Option Certificate (1996 Amended and Restated Stock Option Plan for Non-Employee Directors) | |
|
10.10+(11)
|
Form of Incentive Stock Option Certificate (2006 Equity Incentive Plan) | |
|
10.11+(11)
|
Form of Non-Qualified Stock Option Certificate (2006 Equity Incentive Plan) | |
|
10.12+(12)
|
Form of Performance-Based Option Certificate (2006 Equity Incentive Plan) | |
|
10.13+(17)
|
Form of Restricted Stock Unit Award Agreement (2006 Equity Incentive Plan) | |
|
10.14+(12)
|
Form of Director’s Option Certificate (2006 Stock Option Plan for Directors) | |
|
10.15+(13)
|
Description of Matrix Bonus Plan | |
|
10.16+(18)
|
Executive Cash Incentive Plan | |
|
10.17+(12)
|
Employment Offer Letter from Company to Michael A. Doyle dated July 24, 2007 | |
|
10.18+(14)
|
Employment Agreement between Forrester Research B.V. and Dennis Van Lingen dated as of June 20, 2000, and Addendum thereto dated May 21, 2001 | |
|
10.19(19)
|
Lease dated May 6, 1999 between Technology Square LLC and the Company for the premises located at 400 Technology Square, Cambridge, Massachusetts | |
|
10.20(5)
|
Fifth Amendment to Lease dated as of January 1, 2005 between Technology Square Finance, LLC and the Company for the premises located at 400 Technology Square, Cambridge, Massachusetts | |
|
10.21(14)
|
Sixth Amendment to Lease date as of April 22, 2008 between ARE-Tech Square, LLC and Forrester Research, Inc. for the premises located at 400 Technology Square, Cambridge, Massachusetts | |
|
10.22(20)
|
Lease of Premises at Cambridge Discovery Park, Cambridge, Massachusetts dated as of September 29, 2009 from BHX, LLC, as Trustee of Acorn Park I Realty Trust to the Company | |
|
10.23(15)
|
First Amendment of Lease dated as of December 21, 2009 by 200 Discovery Park, LLC, successor to BHX, LLC, as Trustee of Acorn Park I Realty Trust, and the Company | |
|
10.24(20)
|
Agreement Regarding Project Rights dated as of September 29, 2009, by BHX, LLC, a Massachusetts limited liability company, as Trustee of Acorn Park I Realty Trust, a Massachusetts nominee trust, and the Company | |
|
14.1(12)
|
Code of Business Conduct and Ethics | |
|
21(15)
|
Subsidiaries of the Registrant | |
|
23.1(15)
|
Consent of BDO Seidman, LLP | |
|
31.1(15)
|
Certification of the Principal Executive Officer | |
|
31.2(15)
|
Certification of the Principal Financial Officer |
33
|
Exhibit No.
|
Description
|
|
|
32.1(15)
|
Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
|
32.2(15)
|
Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| + | Denotes management contract or compensation arrangements. | |
| (1) | Filed as an Exhibit to Forrester’s Current Report on Form 8-K filed on January 22, 2003 (File No. 000-21433) and incorporated herein by reference. | |
| (2) | Filed as an Exhibit to Forrester’s Registration Statement on Form S-1 filed on September 26, 1996 (File No. 333-12761) and incorporated by reference herein. | |
| (3) | Filed as an Exhibit to Forrester’s Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 000-21433) and incorporated by reference herein. | |
| (4) | Filed as an exhibit to Forrester’s Current Report on Form 8-K filed on February 4, 2010 (File No. 000-21433) and incorporated herein by reference. | |
| (5) | Filed as an Exhibit to Forrester’s Annual Report on 10-K for the year ended December 31, 2004 (File No. 000-21433) and incorporated herein by reference. | |
| (6) | Filed as an Exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002 (File No. 000-21433) and incorporated herein by reference. | |
| (7) | Filed as an exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference. | |
| (8) | Filed as an Exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 000-21433) and incorporated herein by reference. | |
| (9) | Filed as an Exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 000-21433) and incorporated herein by reference. | |
| (10) | Filed as an Exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 000-21433) and incorporated herein by reference. | |
| (11) | Filed as an exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 000-21433) and incorporated herein by reference. | |
| (12) | Filed as an Exhibit to Forrester’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 000-21433) and incorporated herein by reference. | |
| (13) | Included in Forrester’s Current Report on Form 8-K filed on January 24, 2007 (File No. 000-21433) and incorporated herein by reference. | |
| (14) | Filed as an Exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 000-21433) and incorporated herein by reference. | |
| (15) | Filed herewith. | |
| (16) | Included as Exhibit A in Forrester’s Proxy Statement for its 2009 Annual Meeting of Stockholders filed on April 3, 2009 (File No. 000-21433) and incorporated herein by reference. | |
| (17) | Filed as an exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (File No. 000-21433) and incorporated herein by reference. | |
| (18) | Filed as an exhibit to Forrester’s Current Report on Form 8-K filed on February 17, 2010 (File No. 000-21433) and incorporated herein by reference. | |
| (19) | Filed as an exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-21433) and incorporated herein by reference. | |
| (20) | Filed as an exhibit to Forrester’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (File No 000-21433) and incorporated herein by reference. |
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FORRESTER RESEARCH, INC.
| By: |
/s/
GEORGE
F. COLONY
|
George F. Colony
Chairman of the Board and Chief Executive Officer
Date: March 12, 2010
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant in the capacities and on the dates
indicated.
|
Signature
|
Capacity In Which Signed
|
Date
|
||||
|
/s/
GEORGE
F. COLONY
|
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | March 12, 2010 | ||||
|
/s/
MICHAEL
A. DOYLE
|
Chief Financial Officer (Principal Financial Officer) | March 12, 2010 | ||||
|
/s/
SCOTT
R. CHOUINARD
|
Chief Accounting Officer (Principal Accounting Officer) | March 12, 2010 | ||||
|
/s/
HENK
W. BROEDERS
|
Member of the Board of Directors | March 12, 2010 | ||||
|
/s/
ROBERT
M. GALFORD
|
Member of the Board of Directors | March 12, 2010 | ||||
|
/s/
GEORGE
R. HORNIG
|
Member of the Board of Directors | March 12, 2010 | ||||
|
/s/
GRETCHEN
TEICHGRAEBER
|
Member of the Board of Directors | March 12, 2010 | ||||
|
/s/
MICHAEL
H. WELLES
|
Member of the Board of Directors | March 12, 2010 | ||||
35
TABLE OF CONTENTS
Part IItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters, and Issuer Purchases Of Equity SecuritiesItem 6. Selected Consolidated Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Consolidated Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statements Schedules