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)

July 27, 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):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 28, 2005, Gartner, Inc. announced financial results for the quarter ended June 30, 2005. 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 5.02 DEPARTURE OF DIRECTORS OR PRINCIPALS OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.

On July 27, 2005, Glenn H. Hutchins resigned from the Board of Directors of the Company. Additionally, on July 27, 2005 the Board of Directors of the Company elected John R. Joyce
to fill Mr. Hutchins’s term. Messrs. Hutchins and Joyce, as well as Michael J. Bingle, who is also a member of the Board of Directors of the Company, are managing directors of Silver Lake Partners, L.P. which owns approximately 34% of the Company’s outstanding common stock. Mr. Joyce also was appointed to Mr. Hutchins’s position on the Company’s Governance Committee. Mr. Hutchins cited time commitments from other Silver Lake Partners’ investments as his reason for deciding to leave the Board of Directors of the Company at this time.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued July 28, 2005, with respect to financial results for Gartner, Inc. (the “Company”) for the quarter ended June 30, 2005.

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: July 28, 2005		By:		/s/ Christopher Lafond
				Christopher Lafond Executive Vice President, Chief Financial Officer

EXHIBIT INDEX

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued July 28, 2005, with respect to financial results for Gartner, Inc. for the quarter ended June 30, 2005.

EXHIBIT 99.1

 

     For the first six months of 2005, total revenue was $474.4 million, an increase of 9% from $436.5 million in the first half of 2004. GAAP EPS was $(0.14) and normalized EPS was $0.15. See “Non-GAAP Financial Measures” for a further discussion of normalized EPS.

     Excluding the effect of foreign currency, total revenue for the 2005 second quarter and for the six-month period ending June 30, 2005 would have increased 19% and 7%, respectively. The impact of foreign currency on net income for each of the same time periods was less than $1 million. Excluding the effect of foreign currency, research contract value increased 13% from the second quarter of 2004.

     Gene Hall, Gartner’s chief executive officer, said, “Overall, we were pleased with our results for the quarter. Although the accounting treatment for deferred revenue from META affected our results, operationally we remain well on track with our strategy to accelerate top line growth and profitability, as evidenced by the growth in contract value for the quarter. In addition, the integration of META is nearly complete and we are pleased with the progress we are making on renewing the contracts of former META clients.”

Business Segment Highlights

     Research. At June 30, 2005, Research contract value, a leading indicator of future revenue, was $565 million, up 16% from $489 million at June 30, 2004. Client retention was 80% for the second quarter of 2005, up from 78% in the second quarter of 2004. Wallet retention was 92% for the second quarter of 2005 compared with 93% in the second quarter of 2004.

     Consulting. Utilization averaged 64% during the second quarter of 2005 compared with 66% for the quarter ended June 30, 2004. Consulting backlog was $125 million at June 30, 2005, up from $98 million at June 30, 2004.

     Events. Events revenue was $57 million for the second quarter of 2005 versus $37 million in the second quarter of 2004. This increase in Events revenue is consistent with the planned shift in the Event’s calendar as discussed during last quarter’s earnings call. The Company held 34 events in the second quarter of 2005, as compared to 20 events in the same period in 2004. For the first six months of 2005, Events revenue was $65 million, compared with $55 million in the same period last year. The Company expects to

hold 14 events in the third quarter, which historically has a light calendar of events due to seasonal factors. The Company is scheduled to hold over 64 events in 2005 versus 56 in 2004.

Guidance

     As a result of the previously discussed $10 million reduction to deferred revenue, the Company now estimates total revenue of $970 million to $990 million. By segment, for the full year 2005, the Company is targeting Research revenue of $523 million to $531 million, Consulting revenue of $277 million to $284 million, Events revenue of $159 million to $163 million, and other revenue of $11 million to $12 million.

     The Company has refined its expectation for total pre-tax charges in 2005 to $42 million to $45 million, versus its previous expectation of $39 million to $45 million. As a result of the acquisition of META, the Company will now incur $10 million of amortization expense related to intangible assets in 2005. As a result, the Company’s guidance for GAAP EPS for 2005 is $(0.04) to $0.03. Gartner continues to expect normalized EBITDA of $95 million to $105 million for fiscal 2005 and normalized EPS of $0.32 to $0.38. Excluding the impact of the previously explained deferred revenue loss, the Company would have increased EBITDA guidance by $10 million. The estimated fully diluted share count is 113 million shares. See “Non-GAAP Financial Measures” for a further discussion of normalized EBITDA and normalized EPS.

Board Changes

     The Company has appointed John Joyce, a managing director of Silver Lake Partners, to its board of directors. Mr. Joyce, 51, spent 30 years with IBM, most recently as the head of IBM’s Global Services Business. He served as the company’s Chief Financial Officer from 1999-2004. He will succeed Glenn Hutchins, also a managing director of Silver Lake Partners and a Gartner board member since 2000. Mr. Joyce’s term as a director will expire in 2006.

     Mr. Hall said, “John Joyce is an outstanding addition to the Gartner board. He is a recognized leader in the global technology market with a strong financial background. We look forward to working with John as we progress on our growth strategy. I also want to thank Glenn for his valuable service to the board and shareholders over the past five years.”

Conference Call Information

     Gartner has scheduled a conference call at 10 a.m. ET today, Thursday, July 28, 2005, to discuss the Company’s financial results. The conference call will be available via the Internet by accessing the

Company’s web site at http://investor.gartner.com. A replay of the webcast will be available for 30 days following the call.

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 over 3,900 associates, including more than 1,100 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 normalized 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 normalized 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. Normalized 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, amortization of acquired intangible assets, and gains and losses on investments. 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.

Safe Harbor Statement

     Statements contained in this press release regarding the growth and prospects of the business, including those of the acquired META Group, Inc. business, the Company’s full year 2005 financial results, future pre-tax charges 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 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.

###

GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)

		Three Months Ended												Six Months Ended
		June 30,												June 30,
		2005				2004								2005				2004
Revenues:
Research		$	134,926			$	118,966				13	%		$	260,122			$	241,208				8	%
Consulting			79,092				67,609				17	%			143,102				132,235				8	%
Events			56,949				37,211				53	%			65,004				55,382				17	%
Other			3,602				4,071				-12	%			6,165				7,699				-20	%
Total revenues			274,569				227,857				21	%			474,393				436,524				9	%
Costs and expenses:
Cost of services and product development			140,517				114,386				23	%			235,795				209,862				12	%
Selling, general and administrative			102,727				81,588				26	%			194,273				169,222				15	%
Depreciation			6,423				6,844				-6	%			12,502				14,781				-15	%
Amortization of intangibles			3,370				190				U				3,398				387				U
Goodwill impairments			—				—				—				—				739				-100	%
META integration charges			8,168				—				100	%			11,573				—				100	%
Other charges			8,226				9,063				-9	%			22,500				19,576				15	%
Total costs and expenses			269,431				212,071				27	%			480,041				414,567				16	%
Operating income (loss)			5,138				15,786				-67	%			(5,648	)			21,957				U
(Loss) gain from investments			(263	)			19				U				(5,369	)			39				U
Interest (expense) income, net			(3,318	)			370				U				(4,663	)			615				U
Other (expense), net			(2,058	)			(323	)			U				(2,362	)			(3,436	)			F
(Loss) income before income taxes			(501	)			15,852				U				(18,042	)			19,175				U
Provision (benefit) for income taxes			566				4,824				-88	%			(2,268	)			7,683				F
Net (loss) income		$	(1,067	)		$	11,028				U			$	(15,774	)		$	11,492				U
(Loss) income per common share:
Basic		$	(0.01	)		$	0.08				U			$	(0.14	)		$	0.09				U
Diluted		$	(0.01	)		$	0.08				U			$	(0.14	)		$	0.09				U
Weighted average shares outstanding:
Basic			111,880				132,129				-15	%			111,602				131,183				-15	%
Diluted			112,649				135,335				-17	%			112,522				134,242				-16	%
SUPPLEMENTAL INFORMATION
Normalized EPS (1)		$	0.12			$	0.12				0	%		$	0.15			$	0.21				-29	%

GARTNER, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)

		June 30,				December 31,
		2005				2004
Assets
Current assets:
Cash and cash equivalents		$	70,480			$	160,126				-56	%
Fees receivable, net			236,823				257,689				-8	%
Deferred commissions			29,603				32,978				-10	%
Prepaid expenses and other current assets			42,266				37,052				14	%
Total current assets			379,172				487,845				-22	%
Property, equipment and leasehold improvements, net			58,741				63,495				-7	%
Goodwill			412,753				231,759				78	%
Intangible assets, net			22,687				138				> 100	%
Other assets			76,443				77,957				-2	%
Total Assets		$	949,796			$	861,194				10	%
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	210,325			$	181,502				16	%
Deferred revenues			318,775				307,696				4	%
Current portion of long term debt			60,019				40,000				50	%
Total current liabilities			589,119				529,198				11	%
Long term debt			190,051				150,000				27	%
Other liabilities			50,909				51,948				-2	%
Total Liabilities			830,079				731,146				14	%
Total Stockholders’ Equity			119,717				130,048				-8	%
Total Liabilities and Stockholders’ Equity		$	949,796			$	861,194				10	%

GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

		Six Months Ended
		June 30,
		2005				2004
Operating activities:
Net (loss) income		$	(15,774	)		$	11,492
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of intangibles			15,900				15,168
Non-cash compensation			477				1,198
Tax benefit associated with employees’ exercise of stock options			474				4,377
Deferred taxes			(1,323	)			408
Loss (gain) from investments			5,369				(39	)
Amortization and writeoff of debt issue costs			1,029				602
Goodwill impairments			—				739
Non-cash charges associated with impairment of long-lived assets			—				2,943
Changes in assets and liabilities, net of effects of acquisition:
Fees receivable, net			43,516				50,141
Deferred commissions			3,369				1,896
Prepaid expenses and other current assets			1,529				523
Other assets			3,670				366
Deferred revenues			(16,811	)			(17,720	)
Accounts payable and accrued liabilities			(27,704	)			(30,787	)
Cash provided by operating activities			13,721				41,307
Investing activities:
Cash proceeds from sale of investment securities			286				—
Investment in intangibles			(150	)			—
Acquisition of META (net of cash acquired)			(159,751	)			—
Additions to property, equipment and leasehold improvements			(7,273	)			(9,197	)
Cash used in investing activities			(166,888	)			(9,197	)
Financing activities:
Proceeds from stock issued for stock plans			9,524				37,852
Proceeds from debt			327,000				—
Payments for debt issue costs			(1,082	)			—
Payments for debt			(267,883	)			—
Purchases of treasury stock			—				(6,113	)
Cash provided by financing activities			67,559				31,739
Net (decrease) increase in cash and cash equivalents			(85,608	)			63,849
Effects of exchange rates on cash and cash equivalents			(4,041	)			(2,814	)
Cash and cash equivalents, beginning of period			160,126				229,962
Cash and cash equivalents, end of period		$	70,480			$	290,997

SELECTED STATISTICAL DATA

		YTD
		June 30,				June 30,
		2005				2004
Research contract value		$	564,835	(1)		$	488,669	(1)
Research client retention			80	%			78	%
Research wallet retention			92	%			93	%
Research client organizations			9,220				8,558
Consulting backlog		$	124,779	(1)		$	97,707	(1)
Consulting utilization			63	%			64	%
Consulting billable headcount			524				467
Events—number of events			39				29
Events attendees			16,099				13,172

BUSINESS SEGMENT DATA
(Dollars in thousands)

						Direct				Gross				Contrib.
		Revenue				Expense				Contribution				Margin
Six Months Ended 6/30/05
Research		$	260,122			$	102,150			$	157,972				61	%
Consulting			143,102				88,368				54,734				38	%
Events			65,004				34,915				30,089				46	%
Other			6,165				741				5,424				88	%
TOTAL		$	474,393			$	226,174			$	248,219				52	%
Six Months Ended 6/30/04
Research		$	241,208			$	89,177			$	152,031				63	%
Consulting			132,235				82,156				50,079				38	%
Events			55,382				31,417				23,965				43	%
Other			7,699				928				6,771				88	%
TOTAL		$	436,524			$	203,678			$	232,846				53	%
Three Months Ended 6/30/05
Research		$	134,926			$	53,970			$	80,956				60	%
Consulting			79,092				47,499				31,593				40	%
Events			56,949				30,195				26,754				47	%
Other			3,602				350				3,252				90	%
TOTAL		$	274,569			$	132,014			$	142,555				52	%
Three Months Ended 6/30/04
Research		$	118,966			$	45,962			$	73,004				61	%
Consulting			67,609				42,774				24,835				37	%
Events			37,211				20,353				16,858				45	%
Other			4,071				457				3,614				89	%
TOTAL		$	227,857			$	109,546			$	118,311				52	%

SUPPLEMENTAL INFORMATION
GAAP to Normalized Reconcilations
(in thousands, except per share data)

Reconciliation — GAAP to Normalized EBITDA (1):

		Three Months Ended
		June 30,
		2005				2004
Net (loss) income		$	(1,067	)		$	11,028
Interest expense (income), net			3,318				(370	)
Other (income) expense, net			2,058				323
Loss (gain) from investments			263				(19	)
Tax provision			566				4,824
Operating income		$	5,138			$	15,786
Depreciation and amortization			9,793				7,034
Normalizing adjustments:
Other charges (2)			8,226				9,063
META integration charges (4)			8,168				—
Normalized EBITDA		$	31,325			$	31,883

Reconciliation — GAAP to Normalized Net Income and EPS (1):

		Three Months Ended June 30,
		2005												2004
		After-												After-
		Tax												Tax
		Income				Shares				EPS				Income				Shares				EPS
GAAP Basic EPS		$	(1,067	)			111,880			$	(0.01	)		$	11,028				132,129			$	0.08
Share equivalents from stock compensation shares			—				769				—				—				3,206				—
GAAP Diluted EPS		$	(1,067	)			112,649			$	(0.01	)		$	11,028				135,335			$	0.08
Other charges (2)			5,699				—				0.06				5,664				—				0.04
META integration charges (4)			5,662				—				0.05				—				—				—
Amortization of META intangibles (5)			2,461				—				0.02				—				—				—
Loss (gain) from investments (7)			264				—				—				(13	)			—				—
Normalized net income & EPS (8)		$	13,019				112,649			$	0.12			$	16,679				135,335			$	0.12

SUPPLEMENTAL INFORMATION
GAAP to Normalized Reconcilations
(in thousands, except per share data)

Reconciliation — GAAP to Normalized EBITDA (1):

		Six Months Ended
		June 30,
		2005				2004
Net (loss) income		$	(15,774	)		$	11,492
Interest expense (income), net			4,663				(615	)
Other (income) expense, net			2,362				3,436
Loss (gain) on investments			5,369				(39	)
Tax (benefit) provision			(2,268	)			7,683
Operating (loss) income		$	(5,648	)		$	21,957
Depreciation and amortization			15,900				15,168
Normalizing adjustments:
Other charges (2)			22,500				19,576
META integration charges (4)			11,573				—
Goodwill impairments (6)			—				739
Normalized EBITDA		$	44,325			$	57,440

Reconciliation — GAAP to Normalized Net Income and EPS (1):

		Six Months Ended June 30,
		2005												2004
		After-												After-
		Tax												Tax
		Income				Shares				EPS				Income				Shares				EPS
GAAP Basic EPS		$	(15,774	)			111,602			$	(0.14	)		$	11,492				131,183			$	0.09
Share equivalents from stock compensation shares			—				920				—				—				3,059				—
GAAP Diluted EPS		$	(15,774	)			112,522			$	(0.14	)		$	11,492				134,242			$	0.09
Other charges (2)			16,767				—				0.15				13,255				—				0.10
Non-cash charges (3)			—				—				—				2,943				—				0.02
META integration charges (4)			7,707				—				0.07				—				—				—
Amortization of META intangibles (5)			2,461				—				0.02				—				—				—
Goodwill impairments (6)			—				—				—				739				—				—
Loss (gain) from investments (7)			5,370				—				0.05				(26	)			—				—
Normalized net income & EPS (8)		$	16,531				112,522			$	0.15			$	28,403				134,242			$	0.21

Footnotes