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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
July 31, 2003
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Date of Report (Date of earliest event reported)
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GARTNER, INC
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-14443 04-3099750
- ------------------------------------ ------------------------ ------------------
(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
- ----------------------- -----------------------------------------------------
99.1 Press Release issued July 31, 2003, with
respect to financial results for Gartner, Inc. for
the quarter ended June 30, 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 July 31, 2003, Gartner, Inc. announced financial results for the quarter
ended June 30, 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. Normalized EPS is based on
net income, excluding other charges, gains and losses on investments, and gains
from the sale of certain assets. In the attached press release, a reconciliation
of normalized net income and normalized EPS to GAAP net income and GAAP net
income 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: July 31, 2003 By: /s/ Maureen E. O'Connell
----------------------------------------------
Maureen E. O'Connell
Executive Vice President, Chief Financial and
Administrative Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------------------- -----------------------------------------------------
99.1 Press Release issued July 31, 2003, with
respect to financial results for Gartner, Inc. for
the quarter ended June 30, 2003.
Exhibit 99.1
Gartner Reports Second Quarter 2003 Results;
Increases Share Repurchase Authorization by $75 Million
STAMFORD, Conn.--(BUSINESS WIRE)--July 31, 2003--Gartner, Inc.
(NYSE: IT and ITB), the world's leading technology research and
advisory firm, today reported results for the second quarter and six
months ended June 30, 2003.
Results for the quarter were in line with the Company's prior
guidance:
-- Total revenue was $213 million, a decrease of 10% from the
prior year period.
-- On a GAAP basis, net income was $13 million, or $0.13 per
diluted share. Net income for the year ago quarter was $18
million, or $0.16 per diluted share.
-- Normalized EPS was $0.10 per diluted share, compared with
$0.17 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.
-- Second quarter total revenue increased 4% sequentially from
the first quarter of 2003, and normalized EPS rose to $0.10
from $0.04.
For the first six months of 2003:
-- Total revenue was $418 million, a 4% decline from the same
period last year.
-- On a GAAP basis, net income was $11 million, or $0.14 per
diluted share. Net income for the same six months of 2002 was
$14 million, or $0.15 per diluted share.
-- Normalized EPS was $0.14 per diluted share, compared with
$0.25 per diluted share a year ago. See "Non-GAAP Financial
Measures" for a further discussion of normalized EPS.
Michael Fleisher, Gartner chairman and chief executive officer,
stated, "The results for the second quarter of 2003 reflect a
stabilization of our core Research business, which has been the major
focus of Gartner's investment strategy and sales efforts this year.
These developments validate our strategy of making moderate
investments to stabilize and grow revenues in our core Research
business in the near-term, while positioning Gartner for stronger
growth in the future."
Share Repurchase Authorization Increased
The Board of Directors authorized an increase of $75 million in
the Gartner common share repurchase program, bringing the total
authorization to date to $200 million.
Business Segment Highlights
Research revenue was $118 million for the second quarter of 2003,
a decrease of 3% compared with the prior year period, but a sequential
increase of 2% over the first quarter of 2003. For the 2003 first
half, Research revenue was $234 million, down 4% from a year ago.
Contract value was $468 million at June 30, 2003, decreasing 7% from a
year ago. On a sequential basis the decrease in contract value was
only 1% from the prior quarter. Client retention in Research improved
as compared to the first quarter, reaching 75%. Wallet share, a
measure of dollar retention in the Research business remained strong
at 83% for the first two quarters of this year.
Consulting revenue for the recent quarter was $67 million,
decreasing 8% from the same 2002 period, but rising 8% sequentially
over the first quarter of 2003. For the first six months of this year,
Consulting revenue decreased 7% to $128 million from the first six
months of 2002. The Consulting backlog was $91 million at June 30,
2003, versus $98 million at March 31, 2003.
Events revenue was $25 million for the 2003 second quarter,
compared with $38 million in the year-ago period. The decrease was 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. Comparing
the first six months of 2003 and 2002, which included the Spring
Symposium in both periods, Events revenue increased 3% to $49 million.
Gartner maintained a strong cash position of $167 million at June
30, 2003, compared with $110 million at December 31, 2002. During the
recent quarter, the Company repurchased $17 million in common stock,
or $24 million year to date.
Business Outlook
Maureen O'Connell, chief financial and administrative officer,
said, "We are starting to see traction in the Research business from
our recent strategies, especially our efforts to focus the sales force
on building client relationships with companies over $1 billion in
sales. Research contract value, while not yet growing, is decreasing
at a slower rate. Wallet share, stands at 83%, maintaining the 300
basis point gain made last quarter. And we have recorded $20 million
or more in new Research business for the 11th consecutive quarter. "
For full calendar 2003, the Company is maintaining its previous
full year guidance.
For the third quarter ending September 30, 2003, the Company is
targeting:
-- Total revenue of approximately $193 million to $204 million.
-- Research revenue of approximately $114 million to $116
million.
-- Consulting revenue of approximately $63 million to $70
million.
-- Events revenue of approximately $13 to $15 million.
-- Other revenue of approximately $3 million.
-- GAAP and Normalized EPS of $0.05 to $0.08 per share 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. ET on
Thursday, July 31, 2003, to discuss the Company's financial results.
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
10,000 clients leverage technology to achieve business success.
Gartner's businesses are Research, Consulting, Measurement, Events and
Executive Programs. Founded in 1979, Gartner is headquartered in
Stamford, Conn., and has more than 3,800 associates, including
approximately 1,000 research analysts and consultants, in more than 75
locations worldwide. Revenue for calendar year 2002 totaled $888
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
because it excludes items that may not be indicative of our core
operating results. Normalized EPS is based on net income, excluding
other charges, gains and losses from investments and gains from the
sale of certain assets. See "Supplemental Information" at the end of
this release for a reconciliation of GAAP net income 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.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
-------- -------- --------- ---------
Revenues:
Research $117,793 $121,619 -3% $ 233,517 $ 244,354 -4%
Consulting 66,525 72,611 -8% 128,304 138,504 -7%
Events 25,292 38,438 -34% 48,801 47,538 3%
Other 3,708 3,489 6% 6,978 6,856 2%
-------- -------- --------- ---------
Total revenues 213,318 236,157 -10% 417,600 437,252 -4%
Costs and expenses:
Cost of services
and product
Development 103,440 106,045 -2% 205,773 194,386 6%
Selling, general
and
administrative 80,730 84,412 -4% 164,234 170,444 -4%
Depreciation 8,964 10,577 -15% 18,789 20,921 -10%
Amortization of
intangibles 338 445 -24% 743 948 -22%
Other charges (1) - - 5,426 17,246 -69%
-------- -------- --------- ---------
Total costs and
expenses 193,472 201,479 -4% 394,965 403,945 -2%
Operating income 19,846 34,678 -43% 22,635 33,307 -32%
Gain (loss) on
investments 5,491 (2,532) F 5,522 (2,454) F
Interest (expense),
net (5,542) (5,282) 5% (11,154) (10,613) 5%
Other (expense)
income, net (39) 452 U 496 436 14%
-------- -------- --------- ---------
Income before income
taxes 19,756 27,316 -28% 17,499 20,676 -15%
Provision for income
taxes 6,902 9,061 -24% 6,157 6,737 -9%
-------- -------- --------- ---------
Net income $ 12,854 $ 18,255 -30% $ 11,342 $ 13,939 -19%
======== ======== ========= =========
Basic income per
common share $ 0.16 $ 0.22 -27% $ 0.14 $ 0.17 -18%
Diluted income per
common share $ 0.13 $ 0.16 -19% $ 0.14 $ 0.15 -7%
Weighted average shares
outstanding:
Basic 79,234 83,719 -5% 79,863 84,166 -5%
Diluted 127,959 132,299 -3% 128,260 132,645 -3%
SUPPLEMENTAL INFORMATION
- -------------------------
Normalized EPS (2) $ 0.10 $ 0.17 -41% $ 0.14 $ 0.25 -44%
(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 ($10.0 million), a reduction in
workforce ($5.8 million), and the write-off of certain database
related assets ($1.4 million).
(2) Normalized net income & EPS is based on net income, excluding
other charges, gains and losses on investments, and gains from the
sale of certain assets. 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.
GARTNER, INC.
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2003 2002
------------ ---------
(unaudited)
ASSETS
Cash and cash equivalents $166,685 $109,657 52%
Fees receivable, net 226,086 283,068 -20%
Deferred commissions 22,167 25,016 -11%
Prepaid expenses and other current
assets 20,954 30,425 -31%
------------ ---------
TOTAL CURRENT ASSETS 435,892 448,166 -3%
Property & equipment, net 63,460 71,006 -11%
Goodwill & intangible assets, net 228,447 226,114 1%
Other assets 72,000 71,018 1%
------------ ---------
TOTAL ASSETS $799,799 $816,304 -2%
============ =========
Liabilities and Stockholders' Deficit
Accounts payable and accrued
liabilities $133,226 $140,891 -5%
Deferred revenues 287,645 305,887 -6%
------------ ---------
TOTAL CURRENT LIABILITIES 420,871 446,778 -6%
Other liabilities 48,556 46,688 4%
Long-term convertible debt 362,201 351,539 3%
------------ ---------
TOTAL LIABILITIES 831,628 845,005 -2%
Total Stockholders' Deficit (31,829) (28,701) 11%
------------ ---------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $799,799 $816,304 -2%
============ =========
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended
June 30,
2003 2002
-------- --------
Operating activities:
Net income $ 11,342 $ 13,939
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of intangibles 19,532 21,869
Non-cash compensation 511 595
Tax benefit associated with employee exercise
of stock options - 1,338
Deferred taxes 68 (665)
(Gain) loss from investments and sales of
assets, net (5,522) 1,961
Accretion of interest and amortization of debt
issue costs 11,781 11,048
Non-cash charges associated with impairment of
long-lived assets - 1,424
Changes in assets and liabilities:
Fees receivable, net 64,051 61,689
Deferred commissions 3,345 8,240
Prepaid expenses and other current assets 11,313 21,607
Other assets (1,543) 7,822
Deferred revenues (26,314) (30,990)
Accounts payable and accrued liabilities (10,390) (7,966)
-------- --------
Cash provided by operating activities 78,174 111,911
-------- --------
Investing activities:
Proceeds from insurance recovery 5,464 -
Purchases of businesses - (3,960)
Proceeds from sale of assets - 239
Investments (1,500) -
Additions to property, equipment and leasehold
improvements (9,765) (9,320)
-------- --------
Cash used in investing activities (5,801) (13,041)
-------- --------
Financing activities:
Proceeds from stock issued for stock plans 2,575 14,736
Payments for debt issuance costs (220) (238)
Purchase of treasury stock (23,504) (33,063)
-------- --------
Cash used in financing activities (21,149) (18,565)
-------- --------
Net increase in cash and cash equivalents 51,224 80,305
Effects of exchange rates on cash and cash
equivalents 5,804 2,152
Cash and cash equivalents, beginning of period 109,657 27,431
-------- --------
Cash and cash equivalents, end of period $166,685 $109,888
======== ========
SELECTED STATISTICAL DATA
(Dollars In thousands)
June 30, June 30,
2003 2002
-------- --------
Research contract value $468,470 $502,937
Consulting backlog $ 90,958 $124,382
Research client organizations 8,696 9,226
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
--------- --------- ------------ --------
Three Months Ended 6/30/03
Research $117,793 $ 42,392 $ 75,401 64%
Consulting 66,525 43,782 22,743 34%
Events 25,292 14,760 10,532 42%
Other 3,708 1,116 2,592 70%
-------- -------- --------
TOTAL $213,318 $102,050 $111,268 52%
======== ======== ========
Three Months Ended 6/30/02
Research $121,619 $ 41,975 $ 79,644 65%
Consulting 72,611 44,855 27,756 38%
Events 38,438 20,692 17,746 46%
Other 3,489 1,121 2,368 68%
-------- -------- --------
TOTAL $236,157 $108,643 $127,514 54%
======== ======== ========
Six Months Ended 6/30/03
Research $233,517 $ 84,466 $149,051 64%
Consulting 128,304 84,676 43,628 34%
Events 48,801 29,869 18,932 39%
Other 6,978 2,018 4,960 71%
-------- -------- --------
TOTAL $417,600 $201,029 $216,571 52%
======== ======== ========
Six Months Ended 6/30/02
Research $244,354 $ 81,726 $162,628 67%
Consulting 138,504 88,215 50,289 36%
Events 47,538 25,567 21,971 46%
Other 6,856 2,958 3,898 57%
-------- -------- --------
TOTAL $437,252 $198,466 $238,786 55%
======== ======== ========
SUPPLEMENTAL INFORMATION
EPS Reconciliation - GAAP to Normalized
(in thousands, except per share data)
Three Months Ended June 30,
---------------------------------------------------
2003 2002
------------------------ ------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
-------- -------- ------- -------- -------- -------
GAAP Basic EPS $12,854 79,234 $ 0.16 $18,255 83,719 $ 0.22
Share equivalents
from stock
Compensation
shares 413 (0.00) 2,929 (0.01)
Convertible long-
term debt 3,323 48,312 (0.03) 3,132 45,651 (0.05)
------- -------- ------ ------- -------- ------
GAAP Diluted EPS $16,177 127,959 $ 0.13 $21,387 132,299 $ 0.16
(Gain) loss from
investments (1) (3,317) (0.03) 1,670 0.01
------- -------- ------ ------- -------- ------
Normalized net
income & EPS $12,860 127,959 $ 0.10 $23,057 132,299 $ 0.17
Six Months Ended June 30,
---------------------------------------------------
2003 2002
------------------------ ------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
-------- -------- ------- -------- -------- -------
GAAP Basic EPS $11,342 79,863 $ 0.14 $13,939 84,166 $ 0.17
Share equivalents
from stock
Compensation
shares 440 (0.00) 3,164 (0.01)
Convertible long-
term debt 6,567 47,957 (0.00) 6,190 45,315 (0.01)
------- -------- ------ ------- -------- ------
GAAP Diluted EPS $17,909 128,260 $ 0.14 $20,129 132,645 $ 0.15
(Gain) loss from
investments (1) (3,317) (0.03) 1,620 0.01
Other charges (2) 3,635 0.03 11,382 0.09
Gain from sale of
assets (3) - - (325) (0.00)
------- -------- ------ ------- -------- ------
Normalized net
income & EPS $18,227 128,260 $ 0.14 $32,806 132,645 $ 0.25
General Notes
- -------------
- -- Normalized net income & EPS is based on net income, excluding
other charges, gains and losses on investments, and gains from
the sale of certain assets. We believe normalized EPS is an
important measure of our recurring operations.
- -- The normalized effective tax rate was 33% for 2003 periods and
34% for 2002 periods.
Footnotes
- ---------
(1) The 2003 gain from investments includes a pre-tax $5.5 million
insurance recovery relating to previous losses incurred associated
with the sale of a business. The 2002 loss from investments includes a
pre-tax $2.5 million impairment charge on investments.
(2) Other charges for 2003 are for costs associated with a
reduction in workforce. Other charges for 2002 include pre-tax
costs/losses associated with a reduction in facilities ($10.0
million), a reduction in workforce ($5.8 million), and the write-off
of certain database related assets ($1.4 million).
(3) The 2002 gain from the sale of assets was caused by the sale
of certain assets associated with a product line resulting in a $0.5
million pre-tax gain recorded in Other (expense) income, net during
the first calendar quarter of 2002.
CONTACT: Gartner, Inc.
Investor Contact:
Heather McConnell, 203-316-6768
Vice President, Investor Relations
heather.mcconnell@gartner.com
www.gartner.com/investors