================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
FEBRUARY 3, 2005
-----------------
GARTNER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14443 04-3099750
-------- ------- ----------
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
P.O. BOX 10212
56 TOP GALLANT ROAD
STAMFORD, CT 06902-7747
(Address of Principal Executive Offices, including Zip Code)
(203) 316-1111
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[X] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On February 3, 2005, Gartner, Inc. announced financial results for the quarter
and year ended December 31, 2004. A copy of the Company's press release is
furnished as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this
Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liability of that
section, and shall not be incorporated by reference into any registration
statement or other document filed under the Securities Act of 1933, as amended,
or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------
99.1 Press Release issued February 3, 2005, with respect to
financial results for Gartner, Inc. (the "Company") for the
quarter and year ended December 31, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Gartner, Inc.
Date: February 3, 2005 By: /s/ Christopher Lafond
---------------------------------
Christopher Lafond
Executive Vice President,
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
99.1 Press Release issued February 3, 2005, with respect to
financial results for Gartner, Inc. for the quarter and year
ended December 31, 2004.
.
.
.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
CONTACTS
- --------
INVESTORS MEDIA
Lisa Nadler (Lisa.Nadler@gartner.com) Matt Benson (mbenson@sardverb.com)
203-964-0096 Brooke Morganstein (bmorganstein@sardverb.com)
Citigate Sard Verbinnen
212-687-8080
GARTNER REPORTS FOURTH QUARTER
AND FULL YEAR 2004 RESULTS
PROVIDES OUTLOOK FOR 2005
- --------------------------------------------------------------------------------
STAMFORD, CONN. -- FEBRUARY 3, 2005 -- Gartner, Inc. (NYSE: IT and
ITB), the leading provider of research and analysis on the global information
technology industry, today reported results for the fourth quarter and year
ended December 31, 2004.
FOURTH QUARTER 2004 RESULTS
Total revenue for the fourth quarter of 2004 was $255 million, a 5%
increase from $244 million in the corresponding period in 2003. Net income was
$5 million, or $0.04 per diluted share, including charges of $14.7 million. The
charges, which include $9.7 million of cash charges and $5.0 million of non-cash
charges, consist of $5.9 million for severance, $4.3 million related to asset
impairments and the exit of certain non-core product lines, $2.3 million related
to an adjustment to restructured facilities, $1.9 million for the restructuring
of certain internal systems, and $0.3 million for restructuring within the
Company's international operations. These charges are not related to Gartner's
pending acquisition of META Group, Inc. In the fourth quarter of 2003, the
Company reported net income of $7 million, or $0.05 per diluted share, including
a $24 million charge.
Normalized EPS for the fourth quarter, which excludes the previously
mentioned charges, was $0.14, down from $0.18 a year ago. Normalized EPS is a
non-GAAP financial measure. See "Non-GAAP Financial Measures" for a further
discussion of normalized EPS.
1
Excluding the effect of foreign currency, total revenue for the 2004
fourth quarter would have increased 2% as a result of strong performance in the
Events business; cost of services and product development would have increased
10% as a result of growth in both Executive Programs and Events; and selling,
general and administrative expenses would have increased 4% due to increased
sales commissions and marketing related expenses. The impact of foreign currency
on net income was less than $1 million. Research contract value would have
increased 2% from the fourth quarter of 2003, excluding the effect of foreign
currency.
Gene Hall, Gartner's chief executive officer, said, "Overall, I am
pleased with the actions we've taken in the fourth quarter and the company's
overall direction. At the same time, our fourth quarter results do not reflect
Gartner's strong long-term potential, particularly with respect to our core
Research business. Over the past several months, the management team has been
working diligently to expand our sales efforts and to ensure that our portfolio
of research offerings is strong, highly relevant and meets appropriate levels of
profitability. While I am encouraged by the progress we saw this quarter,
including the fact that Research contract value exceeded $500 million for the
first time since the second quarter of 2002, as well as continued increases in
both client and wallet retention rates, we have much more work to do."
Mr. Hall added, "Given ever-tougher demands on IT departments, I
believe Gartner's value proposition is greater than ever and its growth
potential is significant. We are keenly focused on seizing the opportunity
before us."
FULL YEAR 2004 RESULTS
For fiscal 2004, total revenue was $894 million, an increase of 4% from
$858 million in 2003. Net income for 2004 was $17 million, or $0.13 per diluted
share, including $44 million of special charges. Net income for 2003 was $24
million, or $0.26 per diluted share, including $30 million of special charges.
Normalized EPS for 2004 was $0.40, compared with $0.39 for 2003. See "Non-GAAP
Financial Measures" for a further discussion of normalized EPS.
2
Excluding the effect of foreign currency, total revenue for fiscal 2004
would have increased 1%; cost of services and product development would have
increased 2%; and selling, general and administrative expenses would have
increased 2%. The impact on net income was negligible.
BUSINESS SEGMENT HIGHLIGHTS
RESEARCH. Research revenue was $120 million for the 2004 fourth
quarter, an increase of 2% from the same period of 2003. For the full year 2004,
Research revenue totaled $480 million, an increase of 3% for the year. At
December 31, 2004, Research contract value, a leading indicator of future
revenue, was $509 million, up from $489 million at September 30, 2004, and $482
million at December 31, 2003. This represents the Company's highest reported
contract value since the first quarter of 2002. Client retention was 80% for the
fourth quarter of 2004, versus 78% in both the third quarter of 2004 and fourth
quarter of 2003. Wallet retention, a measure of dollar retention for the
Research business, was 95% for the fourth quarter, up from 93% in the third
quarter and 89% in the fourth quarter of 2003.
CONSULTING. Consulting revenue was $67 million for the 2004 fourth
quarter, flat with the fourth quarter of 2003. For the full year 2004,
Consulting revenue was $259 million, the same level as 2003. Utilization
averaged 60% during the fourth quarter and 63% for the year, compared with
average utilization of 54% and 55%, respectively, for same periods of 2003.
Billable headcount was 493 as of December 31, 2004, down 6% from 526 at the end
of 2003. Consulting backlog was $112 million at December 31, 2004, a $9 million
sequential increase from September 30, 2004.
EVENTS. Events revenue was $64 million for the fourth quarter of 2004,
up 18% from the fourth quarter of 2003. For 2004, Events revenue totaled $138
million, an increase of 16% from the prior year. The Company held 56 events in
the year as compared to 57 in 2003, and had approximately 31,000 worldwide
attendees in 2004, a 12% increase compared to 2003.
BUSINESS OUTLOOK
Gartner also provided its outlook for 2005. The Company noted that the
following outlook does not include the impact of its pending acquisition of META
Group, Inc., which is expected to close in the second quarter of 2005.
3
For the full year 2005, the Company is targeting total revenue of
approximately $916 million to $942 million. By segment, for the full year 2005
the company is targeting Research revenue of approximately $485 million to $495
million, Consulting revenue of approximately $263 million to $273 million,
Events revenue of approximately $154 million to $159 million, and other revenue
of approximately $14 million to $15 million.
Based on this revenue the Company is targeting EBITDA for the full year
2005 of $85 million to $95 million, GAAP EPS of $0.15 to $0.24 and normalized
EPS, excluding special charges, of $0.30 to $0.35. The estimated fully diluted
share count is 115 million shares. See "Non-GAAP Financial Measures" for a
further discussion of EBITDA and normalized EPS.
In the first quarter of 2005, Gartner expects to record special charges in
the range of $10 million to $20 million related to the further restructuring of
international operations and severance. The Company anticipates additional
charges of approximately $6 million to be taken during the second or third
quarter of 2005 related to the continued consolidation of real estate
facilities.
The Company also noted that the 2005 forecast includes an adjustment of
approximately $20 million for employee compensation.
Commenting on the Company's outlook, Mr. Hall said, "The business is
now clearly headed in the right direction, and 2005 will be dedicated to the
continued, aggressive execution of important changes aimed at laying the
groundwork for significant profitable growth in the years ahead. As detailed
above, we plan to take several charges during the year, as we rationalize our
product portfolio and trim on-going operating expenses. We are also reversing a
temporary decrease in employee compensation instituted several years ago in the
face of challenging economic conditions. In today's more robust economic
environment, it is imperative that we restore compensation to competitive levels
to reduce turnover and retain the employees who are key to the success of our
business."
4
Mr. Hall continued, "Looking further ahead, we expect the recent launch
of a number of important initiatives and programs to begin achieving positive
results in 2005 and to have a material impact on our earnings in 2006, on the
order of $15 million to $20 million of EBITDA. We also expect the acquisition of
META and subsequent integration to result in increased EBITDA of approximately
$20 million in 2006. Based on this outlook, we are driving toward total EBITDA
for 2006 in the range of $125 million to $135 million."
CORPORATE GOVERNANCE AND CAPITAL STRUCTURE
Gartner also announced that its Board of Directors has approved the
elimination of its classified Board structure. Additionally, as previously
announced, the Board has approved the combination of the Company's A and B share
classes. Both of these items are subject to stockholder approval at our annual
meeting to take place in the late spring or early summer of 2005.
The Company also noted that while existing cash and credit facilities
are adequate to finance the pending META Group acquisition, Gartner will
continue to evaluate current capital markets and seek opportunities to optimize
its capital structure.
CONFERENCE CALL AND INVESTOR DAY INFORMATION
The Company has scheduled a conference call at 10:00 a.m. ET today,
Thursday, February 3, 2005, to discuss the Company's financial results. The
conference call will be available via the Internet by accessing Gartner's Web
site at www.gartner.com/investors. A replay of the webcast will be available for
30 days following the call.
The Company will also host an Investor Day conference on Thursday,
February 17, 2005 at Cipriani in New York City. The conference will begin at
9:00 a.m. EST and will conclude at approximately 1:00 p.m. EST. Registration is
required. Please contact Amy Cohen of Citigate Sard Verbinnen at 212-687-8080
for further information. Details regarding the webcast of the Investor Day
conference will be available next week.
5
ABOUT GARTNER
Gartner, Inc. is the leading provider of research and analysis on the
global information technology industry. Gartner serves more than 10,000 clients,
including chief information officers and other senior IT executives in
corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth
analysis and actionable advice to enable clients to make more informed business
and technology decisions. The Company's businesses consist of Research and
Events for IT professionals; Gartner Executive Programs, membership programs and
peer networking services; and Gartner Consulting, customized engagements with a
specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is
headquartered in Stamford, Connecticut, and has 3,700 associates, including more
than 1,000 research analysts and consultants, in more than 75 locations
worldwide. For more information, visit www.gartner.com.
NON-GAAP FINANCIAL MEASURES
Investors are cautioned that EBITDA and normalized EPS information
contained in this press release are not financial measures under generally
accepted accounting principles. In addition, they should not be construed as
alternatives to any other measures of performance determined in accordance with
generally accepted accounting principles. These non-GAAP financial measures are
provided to enhance the user's overall understanding of the Company's current
financial performance and the Company's prospects for the future. We believe
EBITDA and normalized EPS are important measures of our recurring operations as
they exclude items that may not be indicative of our core operating results and
calculate earnings per share in a manner consistent with prior periods by
including the effect of our debt conversion which occurred during the fourth
quarter of 2003. EBITDA is based on operating income, excluding depreciation and
amortization, goodwill impairments, and other charges. Normalized EPS is based
on net income (loss), excluding other charges, non-cash charges, goodwill
impairments, and gains and losses on investments. For 2003, normalized EPS
includes the effect of the convertible debt as if it had been converted at the
beginning of the period, as the convertible debt had a dilutive effect when
including the normalized adjustments. See "Supplemental Information" at the end
of this release for reconciliation of GAAP net income and loss and EPS to
normalized net income and EPS.
6
SAFE HARBOR STATEMENT
Statements contained in this press release regarding the growth and
prospects of the business, the Company's first quarter and full year 2005 and
2006 financial results, future restructuring charges, the pending acquisition of
META Group, Inc. and all other statements in this release other than recitation
of historical facts are forward-looking statements (as defined in the Private
Securities Litigation Reform Act of 1995). Such forward-looking statements
include risks and uncertainties; consequently, actual results may differ
materially from those expressed or implied thereby. Factors that could cause
actual results to differ materially include, but are not limited to ability to
expand or even retain the Company's customer base; ability to grow or even
sustain revenue from individual customers; ability to attract and retain
professional staff of research analysts and consultants upon whom the Company is
dependent; ability to achieve and effectively manage growth; ability to pay the
Company's debt obligations; ability to achieve continued customer renewals and
achieve new contract value, backlog and deferred revenue growth in light of
competitive pressures; ability to integrate META Group's current operations and
businesses; ability to expand or even retain META Group's customers; ability to
carry out the Company's strategic initiatives and manage associated costs;
substantial competition from existing competitors and potential new competitors;
additional risks associated with international operations including foreign
currency fluctuations; the impact of restructuring and other charges on the
Company's businesses and operations; and other risks listed from time to time in
the Company's reports filed with the Securities and Exchange Commission. These
filings can be found on Gartner's Web site at www.gartner.com/investors and the
SEC's Web site at www.sec.gov. Forward-looking statements included herein speak
only as of the date hereof and the Company disclaims any obligation to revise or
update such statements to reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events or circumstances.
7
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Research $ 120,274 $ 117,560 2% $ 480,486 $ 466,907 3%
Consulting 67,111 67,326 0% 259,419 258,628 0%
Events 64,336 54,650 18% 138,393 119,355 16%
Other 3,688 4,406 -16% 15,523 13,556 15%
--------- --------- --------- ---------
Total revenues 255,409 243,942 5% 893,821 858,446 4%
Costs and expenses:
Cost of services and product 124,441 110,515 13% 434,499 410,666 6%
development
Selling, general and administrative 95,823 89,880 7% 350,135 333,283 5%
Depreciation 6,280 8,210 -24% 27,650 36,045 -23%
Amortization of intangibles 97 212 -54% 687 1,275 -46%
Goodwill impairment 1,972 - U 2,711 - U
Other charges 11,872 24,290 F 35,781 29,716 U
--------- --------- --------- ---------
Total costs and expenses 240,485 233,107 3% 851,463 810,985 5%
--------- --------- --------- ---------
Operating income 14,924 10,835 38% 42,358 47,461 -11%
(Loss) gain from investments (813) (884) F (2,958) 4,740 U
Interest (expense) income, net (1,330) (178) U (1,317) (17,106) F
Other (expense) income, net (297) 113 U (3,922) 461 U
--------- --------- --------- ---------
Income before income taxes 12,484 9,886 26% 34,161 35,556 -4%
Provision for income taxes 7,489 3,009 149% 17,514 11,863 48%
--------- --------- --------- ---------
Net income $ 4,995 $ 6,877 -27% $ 16,647 $ 23,693 -30%
========= ========= ========= =========
Income per common share:
Basic $ 0.05 $ 0.05 -17% $ 0.13 $ 0.26 -48%
Diluted $ 0.04 $ 0.05 -16% $ 0.13 $ 0.26 -49%
Weighted average shares outstanding:
Basic 110,279 126,088 -13% 123,603 91,123 36%
Diluted 112,402 129,826 -13% 126,326 92,579 36%
SUPPLEMENTAL INFORMATION
------------------------
Normalized EPS (1) $ 0.14 $ 0.18 -22% $ 0.40 $ 0.39 3%
(1) Normalized net income & EPS is based on net income, excluding other
charges, non-cash charges, goodwill impairments, and gains and losses from
investments. Normalized EPS for 2003 also includes the effect of the convertible
debt as if it had been converted at the beginning of 2003. We believe normalized
EPS is an important measure of our recurring operations. See "Supplemental
Information" at the end of this release for a reconciliation from GAAP net
income and EPS to normalized net income and EPS and a discussion of the
reconciling items.
8
GARTNER, INC.
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2004 2003
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 160,126 $ 229,962 -30%
Fees receivable, net 257,689 266,122 -3%
Deferred commissions 32,978 27,751 19%
Prepaid expenses and other current assets 31,024 25,642 21%
---------- ---------
Total current assets 481,817 549,477 -12%
Property, equipment and leasehold improvements, net 63,495 66,541 -5%
Goodwill 231,759 230,387 1%
Intangible assets, net -86%
138 985
Other assets 78,230 66,364 18%
---------- ---------
TOTAL ASSETS $ 855,439 $ 913,754 -6%
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 175,855 $ 173,693 1%
Deferred revenues 307,696 315,524 -2%
Current portion of long term debt 40,000 -
---------- ---------
Total current liabilities 523,551 489,217 7%
Other liabilities 52,655 50,385 5%
Long term debt 150,000 -
---------- ---------
TOTAL LIABILITIES 726,206 539,602 35%
TOTAL STOCKHOLDERS' EQUITY 129,233 374,152 -65%
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 855,439 $ 913,754 -6%
========== =========
9
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Twelve Months Ended
December 31,
2004 2003
--------- ---------
OPERATING ACTIVITIES:
Net income $ 16,647 $ 23,693
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of intangibles 28,337 37,320
Non-cash compensation 1,427 1,072
Tax benefit associated with employees' exercise of stock options 10,004 3,930
Deferred taxes (8,613) (4,567)
Loss (gain) from investments, net 2,957 (4,740)
Accretion of interest and amortization of debt issue costs 954 18,649
Goodwill impairment 2,711 -
Non-cash charges associated with long-lived assets 5,157 -
Changes in assets and liabilities:
Fees receivable, net 13,711 29,980
Deferred commissions (5,197) (1,689)
Prepaid expenses and other current assets (77) 3,829
Other assets (3,795) (937)
Deferred revenues (14,765) (4,467)
Accounts payable and accrued liabilities (1,129) 34,264
--------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES 48,329 136,337
--------- ---------
INVESTING ACTIVITIES:
Proceeds from insurance recovery - 5,464
Investments - (1,960)
Prepaid acquisition cost (3,870) -
Additions to property, equipment and leasehold improvements (25,104) (28,928)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (28,974) (25,424)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from stock issued for stock plans 67,786 41,655
Proceeds from debt 200,000 -
Payments for debt issuance costs (2,821) (1,182)
Payments for debt (10,000) -
Purchases of stock via tender offer, including costs (346,150) -
Purchases of treasury stock (6,112) (43,434)
--------- ---------
CASH USED IN FINANCING ACTIVITIES (97,297) (2,961)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (77,942) 107,952
EFFECTS OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 8,106 12,353
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 229,962 109,657
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 160,126 $ 229,962
========= =========
10
SELECTED STATISTICAL DATA
(Dollars In thousands)
December 31, December 31,
2004 2003
------------ ------------
Research contract value $ 509,204 $ 482,219
Consulting backlog $ 111,779 $ 99,718
Research client organizations 8,720 8,859
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
------- ------- ------------ --------
THREE MONTHS ENDED 12/31/04
Research $120,274 $ 51,653 $ 68,621 57%
Consulting 67,111 45,215 21,896 33%
Events 64,336 25,411 38,925 61%
Other 3,688 271 3,417 93%
-------- -------- --------
TOTAL $255,409 $122,550 $132,859 52%
======== ======== ========
THREE MONTHS ENDED 12/31/03
Research $117,560 $ 47,067 $ 70,493 60%
Consulting 67,326 45,856 21,470 32%
Events 54,650 22,741 31,909 58%
Other 4,406 660 3,746 85%
-------- -------- --------
TOTAL $243,942 $116,324 $127,618 52%
======== ======== ========
TWELVE MONTHS ENDED 12/31/04
Research $480,486 $187,782 $292,704 61%
Consulting 259,419 166,708 92,711 36%
Events 138,393 68,931 69,462 50%
Other 15,523 1,583 13,940 90%
-------- -------- --------
TOTAL $893,821 $425,004 $468,817 52%
======== ======== ========
TWELVE MONTHS ENDED 12/31/03
Research $466,907 $174,033 $292,874 63%
Consulting 258,628 171,850 86,778 34%
Events 119,355 63,351 56,004 47%
Other 13,556 3,475 10,081 74%
-------- -------- --------
TOTAL $858,446 $412,709 $445,737 52%
======== ======== ========
11
SUPPLEMENTAL INFORMATION
EPS Reconciliation - GAAP to Normalized
(in thousands, except per share data)
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
2004 2003
---------------------------------------- ----------------------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
------------ ------------ ----------- ------------ ------------ ------------
GAAP Basic EPS $ 4,995 110,279 $ 0.05 $6,877 126,088 $ 0.05
Share equivalents from stock
compensation shares - 2,123 (0.01) - 3,738 (0.00)
Convertible long-term debt - - - - - -
------------ ------------ ----------- ------------ ------------ ------------
GAAP Diluted EPS $ 4,995 112,402 $ 0.04 $6,877 129,826 $ 0.05
Other charges (1) 6,968 - 0.06 15,725 - 0.12
Non-cash charges (2) 1,597 - 0.02 - - -
Goodwill impairments (3) 1,423 - 0.01 - - -
Loss from investments (4) 818 - 0.01 862 - 0.01
Convertible long-term debt (5) - - - 239 3,188 0.00
------------ ------------ ----------- ------------ ------------ ------------
Normalized net income & EPS $ 15,801 112,402 $ 0.14 $23,703 133,014 $ 0.18
============ ============ =========== ============ ============ ============
TWELVE MONTHS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
2004 2003
-------------------------------------- -------------------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
------------ ----------- ---------- ----------- ----------- -----------
GAAP Basic EPS $ 16,647 123,603 $ 0.13 $23,693 91,123 $ 0.26
Share equivalents from stock
compensation shares - 2,723 0.00 - 1,456 (0.00)
Convertible long-term debt - - - - - -
------------ ----------- ---------- ----------- ----------- -----------
GAAP Diluted EPS $ 16,647 126,326 $ 0.13 $23,693 92,579 $ 0.26
Other charges (1) 23,921 - 0.19 19,360 - 0.21
Non-cash charges (2) 4,540 - 0.04 - - -
Goodwill impairments (3) 2,162 - 0.02 - - -
Loss (gain) from investments (4) 2,977 - 0.02 (2,523) - (0.03)
Convertible long-term debt (5) - - - 10,148 37,035 (0.05)
------------ ----------- ---------- ----------- ----------- -----------
Normalized net income & EPS $ 50,247 126,326 $ 0.40 $50,678 129,614 $ 0.39
============ =========== ========== =========== =========== ===========
GENERAL NOTES & FOOTNOTES
- Normalized net income & EPS is based on net income (loss), excluding other
charges, non-cash charges, goodwill impairments, and gains and losses from
investments. For 2003, normalized net income and EPS also includes the
effect of the convertible debt as if it had been converted at the beginning
of the period as the convertible debt had a dilutive effect when including
the normalized adjustments. We believe normalized EPS is an important
measure of our recurring operations.
- The normalized effective tax rate was 36% in 2004 and 33% in 2003.
(1) Other charges during 2004 included costs related to a reduction in
workforce, the exit from certain non-core product lines, an adjustment to
previously abandoned facilities, and the closing of certain operations in
South America. Other charges during 2003 were for costs associated with a
reduction in workforce and facilities.
12
(2) The non-cash charges in 2004 were associated with the abandonment of
certain internal systems and the exit from certain non-core product lines,
which were recorded in "Other charges," and the closing of certain
operations in South America recorded in "Other (expense) income, net."
(3) The goodwill impairments in 2004 were associated with the exit from certain
non-core product lines and our closing of certain operations in South
America and were recorded in "Goodwill impairment."
(4) The 2004 loss on investments was related to losses in minority owned
investments recorded in "(Loss) gain from investments." The 2003 (gain)
from investments includes a $0.9 million impairment charge during the
fourth quarter, and a $5.5 million insurance recovery during the second
quarter relating to previous losses incurred associated with the sale of a
business.
(5) Normalized net income and EPS for 2003 includes the effect of convertible
debt as if it had been converted at the beginning of 2003 in order to be on
a comparable basis with 2004.
13
