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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
May 6, 2003
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Date of Report (Date of earliest event reported)
GARTNER, INC
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-14443 04-3099750
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(State or Other Jurisdiction of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
P.O. Box 10212
56 Top Gallant Road
Stamford, CT 06902-7747
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(Address of Principal Executive Offices, Including Zip Code)
(203) 316-1111
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(Registrant's telephone number, including area code)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
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99.1 Press Release issued May 6, 2003, with respect to
financial results for Gartner, Inc. for the
quarter ended March 31, 2003.
ITEM 9. REGULATION FD DISCLOSURE AND INFORMATION PROVIDED UNDER ITEM 12
("RESULTS OF OPERATIONS AND FINANCIAL CONDITION").
The information contained in this Item 9 is furnished pursuant to Item 12 of
Form 8-K "Results of Operations and Financial Condition," in accordance with SEC
Release No. 33-8216. This information and the exhibit hereto are being furnished
and shall not be deemed to be "filed" for the purposes of Section 18 of, or
otherwise regarded as filed under, the Securities Exchange Act of 1934, as
amended. The information contained in this report shall not be incorporated by
reference into any filing of Gartner, Inc. with the SEC, whether made before or
after the date hereof, regardless of any general incorporation language in such
filings.
On May 6, 2003, Gartner, Inc. announced financial results for the quarter ended
March 31, 2003, the full text of which is attached hereto as Exhibit 99.1.
The attached press release contains a non-GAAP financial measure. For purposes
of the Securities and Exchange Commission's Regulation G, a non-GAAP financial
measure is a numerical measure of a company's performance, financial position,
or cash flows that either excludes or includes amounts that are not normally
excluded or included in the most directly comparable measure calculated and
presented in accordance with accounting principles generally accepted in the
United States ("GAAP"). In the attached press release, Gartner, Inc. uses the
non-GAAP measures of normalized EPS. This non-GAAP financial measure is provided
to enhance the reader's overall understanding of Gartner's current financial
performance and prospects for the future. Gartner believes normalized EPS is an
important measure of Gartner's recurring operations as it excludes items that
may not be indicative of our core operating results and calculates earnings per
share in a manner consistent with prior periods by including the effect of debt
conversion. Normalized EPS is based on net income (loss), excluding other
charges, income from minority-owned investments, and gains from the sale of
businesses. Normalized EPS includes the effect of the convertible debt as if it
had been converted as of the beginning of each period as the convertible debt is
expected to have a dilutive effect on EPS for the full year of 2003. In the
attached press release, a reconciliation of normalized net income and normalized
EPS to GAAP net loss and GAAP net loss per share is provided under "Supplemental
Information" at the end of the release.
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: May 6, 2003 By: /s/ MAUREEN E. O'CONNELL
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Maureen E. O'Connell
Executive Vice President, Chief Financial and
Administrative Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- -------------------------- -------------------------------------------------
99.1 Press Release issued May 6, 2003, with respect to
financial results for Gartner, Inc. for the
quarter ended March 31, 2003.
Exhibit 99.1
Gartner Reports First Quarter 2003 Results
STAMFORD, Conn.--(BUSINESS WIRE)--May 6, 2003--Gartner, Inc.
(NYSE: IT and ITB), the world's leading technology research and
advisory firm, today reported results for the first quarter ended
March 31, 2003.
Results for the quarter were in line with the Company's guidance:
-- Total revenue was $204 million, an increase of 2% over the
prior year.
-- On a GAAP basis, net loss was $2 million, or a loss of $0.02
per diluted share, including a previously announced $5 million
charge for a reduction in headcount. Net loss for the year-ago
quarter was $4 million, a loss of $0.05 per diluted share,
including a charge of $17 million.
-- Normalized EPS was $0.04 per diluted share, compared with
$0.07 per diluted share a year ago. Normalized EPS is a
Non-GAAP financial measure. See "Non-GAAP Financial Measures"
for a further discussion of Normalized EPS.
-- Cash on hand was $135 million, an increase of $26 million over
December 31, 2002.
The 2003 first quarter results reflected the Company's strategy of
making moderate investments in its core Research business to position
Gartner for future growth as business conditions improve.
Michael Fleisher, Gartner chairman and chief executive officer,
stated, "Our financial performance in the first quarter was within the
expected range, despite the fact that the war in Iraq added a new
element of uncertainty to an already inhospitable business
environment. We continued to pursue initiatives to further strengthen
Gartner's market leadership and value proposition: deepening our
relationships with clients, developing integrated products tailored to
clients' functional roles, and structuring our sales and marketing
efforts for maximum effectiveness. We're confident that these
investments will position Gartner for growth and increasing
profitability as our markets recover."
Business Segment Highlights
Research revenue was $116 million for the 2003 first quarter, a 6%
decrease compared with the prior year period. Contract value was $474
million at March 31, 2003, a decline of 7% from a year ago. Client
retention in Research remained strong, averaging 74%, and almost 90%
among clients spending more than $100,000 annually. Gartner's premium
products, EXP and Gartner G2, continue to increase revenue at
double-digit rates year-over-year.
Consulting revenue for the recent quarter was $62 million, a
reduction of 6% from the same quarter of 2002 and up 6% sequentially.
The Consulting backlog was $98 million at March 31, 2003, compared
with $111 million at December 31, 2002. The Company attributed the
backlog decline to the fact that a number of government sector clients
chose to defer decisions on future Consulting projects as a result of
the war in Iraq. A focus on key practices and productivity
improvements led to an increase in consulting utilization, billing
rate and average engagement size as compared with the year-ago
quarter.
Events revenue was $24 million for the 2003 first quarter,
compared with $9 million the prior year. The increase was largely due
to the timing of the Spring Symposium, which was held in the first
quarter this year, instead of the second quarter as in 2002. Direct
expenses increased $10 million in the quarter due to the costs
associated with Spring Symposium. The Company noted that Symposium
attendance remained relatively stable as compared with prior years, at
2,400, despite a general reduction in corporate travel due to the war.
Exhibitor renewals for future events were sharply higher than a year
ago.
Gartner maintained a strong cash position of $135 million at March
31, 2003, compared with $110 million at December 31, 2002. During the
recent quarter, the Company spent $7 million to repurchase common
stock.
Business Outlook
Maureen O'Connell, chief financial and administrative officer,
said, "In this challenging economic environment, our top priority
continues to be stabilizing and then growing Research contract value.
We believe that our intense focus in this area will produce improving
trends in the Research business. We also believe that our Events
business remains on track for this year. We expect Consulting will
continue to experience pressure due to the softness in some sectors of
government, particularly at the state and local levels. We also
recognize that our primary sales effort must be focused on growing
Research." Accordingly, she said that Gartner was reaffirming 2003
guidance for its Research and Events businesses, while revising
guidance for Consulting and the Company as a whole in line with
reduced expectations for government sector spending.
For full calendar 2003, the Company is targeting:
-- Total revenue of approximately $835 million to $880 million.
-- Research revenue of approximately $453 million to $478
million.
-- Consulting revenue of approximately $260 million to $275
million.
-- Events revenue of approximately $104 million to $108 million.
-- Other revenue of approximately $18 million to $19 million.
-- Normalized EPS of $0.40 to $0.45 per share on 128 million
diluted shares, before the $5 million restructuring charge
recognized in the first quarter. Including the $5 million
restructuring charge, GAAP EPS would be $0.37 to $0.42 per
share. See "non-GAAP financial measures" for a further
discussion of normalized EPS.
For the second quarter ending June 30, 2003, the Company is
targeting:
-- Total revenue of approximately $206 million to $217 million.
-- Research revenue of approximately $113 million to $116
million.
-- Consulting revenue of approximately $66 million to $73
million.
-- Events revenue of approximately $23 million.
-- Other revenue of approximately $4 million to $5 million.
-- GAAP and normalized EPS of $0.09 to $0.12 on 128 million
diluted shares. See "non-GAAP financial measures" for a
further discussion of normalized EPS.
Conference Call Information
The Company has scheduled a conference call at 10:00 a.m. eastern
time on Tuesday, May 6, 2003, to discuss its financial results for the
first quarter of 2003. The conference call will also 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.
About Gartner
Gartner, Inc. is a research and advisory firm that helps more than
10,500 clients leverage technology to achieve business success.
Gartner's businesses consist of Research, Consulting, Measurement,
Events and Executive Programs. Founded in 1979, Gartner is
headquartered in Stamford, Connecticut and has 4,000 associates,
including more than 1,000 research analysts and consultants, in more
than 75 locations worldwide. Revenue for the twelve months ended
December 31, 2002, totaled $887.6 million. For more information, visit
www.gartner.com.
Non-GAAP Financial Measures
Investors are cautioned that normalized EPS information contained
in this press release is not a financial measure under generally
accepted accounting principles. In addition, it should not be
construed as an alternative to any other measures of performance
determined in accordance with generally accepted accounting
principles. This non-GAAP financial measure is 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 EPS is an important measure of our recurring operations as
it excludes items that may not be indicative of our core operating
results and calculates earnings per share in a manner consistent with
prior periods by including the effect of debt conversion. Normalized
EPS is based on net income (loss), excluding other charges, income
from minority-owned investments, and gains from the sale of
businesses. Normalized EPS includes the effect of the convertible debt
as if it had been converted as of the beginning of each period as the
convertible debt is expected to have a dilutive effect on EPS for the
full year of 2003. See "Supplemental Information" at the end of this
release for a reconciliation of GAAP net loss and EPS to normalized
net income and EPS.
Safe Harbor Statement
This press release contains statements regarding the Company's
business outlook, the development of the Company's services, the
demand for the Company's products and services 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 in light of the adverse current economic conditions,
including the impact of the September 11 terrorist attacks; the war in
Iraq; ability to grow or even sustain revenue from individual
customers in light of the adverse impact of the current economic
conditions on overall IT spending; the duration and severity of the
current economic slowdown; 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,
particularly as the Company seeks to reduce its overall workforce;
ability to achieve continued customer renewals and achieve new
contract value, backlog and deferred revenue growth in light of
competitive pressures; ability to integrate operations of possible
acquisitions; ability to carry out the Company's strategic initiatives
and manage associated costs; ability to manage the Company's strategic
partnerships; rapid technological advances which may provide increased
indirect competition to the Company from a variety of sources;
substantial competition from existing competitors and potential new
competitors; risks associated with intellectual property rights
important to the Company's products and services; additional risks
associated with international operations including foreign currency
fluctuations; and other risks listed from time to time in the
Company's reports filed with the Securities and Exchange Commission,
including the Company's Transitional Report on Form 10-KT for the
three month transitional period ended December 31, 2002. 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.
Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
2003 2002
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Revenues:
Research $115,724 $122,735 -6%
Consulting 61,779 65,893 -6%
Events 23,509 9,100 158%
Other 3,270 3,367 -3%
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Total revenues 204,282 201,095 2%
Costs and expenses:
Cost of services and product development 102,333 88,341 16%
Selling, general and administrative 83,504 86,032 -3%
Depreciation 9,825 10,344 -5%
Amortization of intangibles 405 503 -19%
Other charges (1) 5,426 17,246 -69%
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Total costs and expenses 201,493 202,466 0%
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Operating income (loss) 2,789 (1,371) F
Income from minority-owned investments 31 78 U
Interest (expense), net (5,612) (5,331) U
Other income (expense), net 535 (16) F
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Loss before income taxes (2,257) (6,640) F
Benefit for income taxes (745) (2,324) U
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Net loss $(1,512) $(4,316) F
========= =========
Basic loss per common share $(0.02) $(0.05) F
Diluted loss per common share $(0.02) $(0.05) F
Weighted average shares outstanding:
Basic 80,492 84,613 -5%
Diluted 80,492 84,613 -5%
SUPPLEMENTAL INFORMATION
- ----------------------------------------------
Normalized EPS (2) $0.04 $0.07
(1) Other charges for 2003 are for costs associated with a
reduction in workforce. Other charges for 2002 include
costs/losses associated with a reduction in facilities ($10
million), a reduction in workforce ($6 million), and the
write-off of assets ($1 million).
(2) Normalized EPS is based on net income (loss), excluding other
charges, income from minority-owned investments, and the $0.5
million gain from the sale of a business in 2002. Normalized
EPS includes the effect of the convertible debt as if it had
been converted as of the beginning of each period. We believe
normalized EPS is an important measure of our recurring
operations and the effect of debt conversion, as the
convertible debt is expected to have a dilutive effect on EPS
for the full year of 2003. See "Supplemental Information" at
the end of this release.
GARTNER, INC.
Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2003 2002
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(unaudited)
ASSETS
Cash and cash equivalents $135,431 $109,657 24%
Fees receivable, net 257,930 283,068 -9%
Deferred commissions 23,319 25,016 -7%
Prepaid expenses and other current
assets 33,994 41,524 -18%
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TOTAL CURRENT ASSETS 450,674 459,265 -2%
Property & equipment, net 64,821 71,006 -9%
Intangible assets, net 225,513 226,114 0%
Other assets 69,898 71,018 -2%
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TOTAL ASSETS $810,906 $827,403 -2%
============ =========
Liabilities and Stockholders' Deficit
Accounts payable and accrued
liabilities $140,811 $151,990 -7%
Deferred revenues 301,361 305,887 -1%
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TOTAL CURRENT LIABILITIES 442,172 457,877 -3%
Other liabilities 46,474 46,688 0%
Long-term convertible debt 356,805 351,539 1%
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TOTAL LIABILITIES 845,935 856,104 -1%
Total Stockholders' Deficit (34,545) (28,701) 20%
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TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $810,906 $827,403 -2%
============ =========
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months
Ended
March 31,
2003 2002
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Operating activities:
Net loss $(1,512) $(4,316)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of intangibles 10,230 10,847
Non-cash compensation 251 298
Tax benefit associated with exercise of stock
options 1,189
Deferred taxes 5 (145)
Income from minority-owned investments (31) (78)
Accretion of interest and amortization of debt
issue costs 5,822 5,454
Gain from sale of business (493)
Non-cash charges associated with asset
impairment 1,424
Changes in assets and liabilities:
Fees receivable 25,934 22,467
Deferred commissions 1,728 4,210
Prepaid expenses and other current assets 7,691 17,177
Other assets 72 5,670
Deferred revenues (5,257) 8,551
Accounts payable and accrued liabilities (11,207) (17,727)
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Cash provided by operating activities 33,726 54,528
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Investing activities:
Purchases of businesses (99)
Proceeds from sale of business 239
Additions to property, equipment and leasehold
improvements (3,357) (4,532)
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Cash used in investing activities (3,357) (4,392)
--------- --------
Financing activities:
Proceeds from stock issued for stock plans 2,021 13,462
Purchase of treasury stock (6,808) (12,153)
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Cash (used in) provided by financing activities (4,787) 1,309
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Net increase in cash and cash equivalents 25,582 51,445
Effects of exchange rates on cash and cash
equivalents 192 (96)
Cash and cash equivalents, beginning of period 109,657 27,431
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Cash and cash equivalents, end of period $135,431 $78,780
========= ========
SELECTED STATISTICAL DATA
(Dollars In thousands)
March 31, March 31,
2003 2002
--------- ---------
Research contract value $474,440 $511,241
Consulting backlog $ 98,307 $127,487
Events deferred revenue $ 36,623 $ 54,282
Research client organizations 8,772 9,331
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
--------- -------- ------------ --------
Three Months Ended 3/31/03
Research $115,724 $42,074 $ 73,650 64%
Consulting 61,779 40,894 20,885 34%
Events 23,509 15,109 8,400 36%
Other 3,270 902 2,368 72%
--------- -------- ------------
TOTAL $204,282 $98,979 $105,303 52%
========= ======== ============
Three Months Ended 3/31/02
Research $122,735 $39,751 $ 82,984 68%
Consulting 65,893 43,360 22,533 34%
Events 9,100 4,875 4,225 46%
Other 3,367 1,837 1,530 45%
--------- -------- ------------
TOTAL $201,095 $89,823 $111,272 55%
========= ======== ============
SUPPLEMENTAL INFORMATION
EPS Reconciliation - GAAP to
Normalized
(in thousands, except per share data)
Three Months Ended March 31,
---------------------------------
2003 2002
---------------- ----------------
After- EPS After- EPS
Tax Tax
-------- ------- -------- -------
Net loss for GAAP EPS $(1,512) $(0.02) (4,316) $(0.05)
Other charges 3,635 0.05 11,210 0.13
Gain from sale of business (320) (0.00)
Income from minority-owned
investments (21) (0.00) (51) (0.00)
Shares (1) (0.00) (0.01)
Interest on convertible long-term
debt (2) 3,129 0.01 3,057 (0.00)
-------- ------- -------- -------
Normalized net income & EPS $ 5,231 $ 0.04 $9,580 $ 0.07
Average shares used for reported GAAP
EPS 80,492 84,613
Average shares used for normalized
EPS 128,596 132,967
General Notes
-- Normalized net income & EPS is based on net income (loss),
excluding other charges, income from minority-owned
investments, and gains from the sale of businesses. Normalized
EPS includes the effect of the convertible debt as if it had
been converted as of the beginning of each period. We believe
normalized EPS is an important measure of our recurring
operations and the effect of debt conversion, as the
convertible debt is expected to have a dilutive effect on EPS
for the full year of 2003.
-- The normalized effective tax rate was 33% for the three months
ended March 31, 2003 and 35% for the three months ended March
31, 2002.
Footnotes
(1) Common share equivalents are included in diluted EPS, unless
the resulting EPS calculation is anti-dilutive.
(2) After-tax interest on convertible long-term debt has been
added back to income when calculating normalized EPS, since it
is expected that on an "as if converted" method the
convertible long-term debt will be dilutive for the full year
of 2003.
CONTACT: Gartner, Inc.
Heather McConnell, 203/316-6768
heather.mcconnell@gartner.com