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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
April 29, 2004
---------------------------------------------------
Date of Report (Date of earliest event reported)
GARTNER, INC
---------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-14443 04-3099750
- ------------------------------ ------------------------- ---------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of 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)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------
99.1 Press Release issued April 29, 2004, with respect to:
-- Financial results for Gartner, Inc. (the
"Company") for the quarter ended March 31, 2004; and
-- The announcement that Michael Fleisher, Chairman
and CEO, intends to leave the Company.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On April 29, 2004, Gartner, Inc. announced financial results for the quarter
ended March 31, 2004. A copy of the Company's press release is furnished
herewith as Exhibit 99.1 and is incorporated herein by reference. 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.
The press release issued by the Company and furnished herewith as Exhibit 99.1
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 measure 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. These measures however should be
considered in addition to and not as a substitute for, or superior to other
measures of financial performance prepared in accordance with GAAP. Normalized
EPS is based on net income (loss), excluding other charges, income from
investments, goodwill impairment and other non-cash charges. Normalized EPS for
2003 also includes the effect of the convertible debt as if it had been
converted at the beginning of 2003. In the attached press release, a
reconciliation of normalized net income and normalized EPS to GAAP net income
(loss) and GAAP net income (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: April 29, 2004 By: /s/ Christopher Lafond
---------------------------
Christopher Lafond
Executive Vice President,
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------
99.1 Press Release issued April 29, 2004, with respect to:
-- Financial results for Gartner, Inc. (the
"Company") for the quarter ended March 31, 2004; and
-- The announcement that Michael Fleisher, Chairman
and CEO, intends to leave the Company.
Exhibit 99.1
Gartner, Inc. Reports Strong 2004 First Quarter Results;
Michael Fleisher, Chairman and CEO, Announces Intention to Leave
Company Following Transition Period
STAMFORD, Conn.--(BUSINESS WIRE)--April 29, 2004--Gartner, Inc.
(NYSE: IT and ITB), the world's leading technology research and
advisory firm, today reported its financial results for the first
quarter ended March 31, 2004.
Highlights of Gartner's performance for the first quarter of 2004
included the following:
-- Total revenue was $209 million, a 2% increase compared with
the same period of 2003. Taking into account a shift of
scheduled events into the 2004 second quarter, revenues grew
by 6%.
-- Net income was $464,000, or $0.00 per diluted share, on a GAAP
basis. This included a charge of $11 million associated with
previously announced staffing reductions in certain
businesses, and $3.6 million in non-cash charges related to
eliminating certain operations in Latin America. In the same
period of 2003, Gartner had a net loss of $1.5 million, or
$0.02 per diluted share, on a GAAP basis, after a $5 million
charge for staff reductions.
-- Normalized EPS was $0.09 per share, compared with $0.04 per
share a year ago. Normalized EPS is a non-GAAP financial
measure. See "Non-GAAP Financial Measures" for a further
discussion of normalized EPS.
-- Research contract value, a key indicator of future revenue in
Gartner's core Research business, was $493 million at March
31, 2004, up from $474 million at March 31, 2003.
-- Cash position was $263 million at March 31, 2004, compared
with $135 million at March 31, 2003.
Michael Fleisher, Gartner's chairman and chief executive officer,
said, "Gartner's performance for the first quarter exceeded our
guidance, and each of our businesses made significant progress against
our strategic objectives. Our results clearly demonstrate that we have
now achieved our key objective of stabilizing and then growing our
research business. While we are encouraged by these results, the focus
remains on delivering significant growth in 2005 and beyond."
Maureen O'Connell, the Company's president and chief operating
officer, said, "Gartner is continuing to follow a highly disciplined
approach to building a foundation for growth. Our earlier efforts
created an effective and targeted sales organization. More recently,
we have structured our business units around our most significant
client opportunities. We are extremely well positioned to drive
profitable growth as the IT sector continues to recover."
Management and Director Changes
Separately, Mr. Fleisher has informed the Board of Directors of
his intention to leave Gartner. At the Board's request, Mr. Fleisher
has agreed to remain at the Company for a period of time to help
ensure a smooth transition. The Board has formed a search committee,
which, in turn, has engaged the services of Spencer Stuart to assist
it in the search process. A slate of both internal and external
candidates is being identified as part of the search process.
Mr. Fleisher said, "After more than eleven years with Gartner and
with the Company clearly writing an exciting new chapter in its long
and distinguished history, I've decided that now is the appropriate
time for me to explore other opportunities and challenges. Gartner is
a fantastic company, with clear franchise leadership in the technology
research advisory industry. We are on a trajectory for increased
growth and profitability. And we have a solid leadership team to take
the Company forward."
William Grabe, an eleven-year member of the Gartner Board of
Directors and chairman of the governance committee, said, "Michael's
vision and leadership--most recently reflected in the financial
results announced today--have enabled Gartner to substantially grow
its value to its clients, employees, and stockholders. We appreciate
Michael's accomplishments and wish him the very best in his future
endeavors."
Board member Glenn Hutchins, a founding principal of Silver Lake
Partners, which holds an approximately 36% ownership interest in
Gartner, Inc., said, "Michael's leadership and business savvy have
helped build the value of Gartner for stockholders over the past
eleven-plus years, and particularly over the past five with Michael as
CEO. We appreciate Michael's many contributions to the Company's
success and wish him the very best. Looking ahead, we have great
confidence in Maureen O'Connell, Chris Lafond and the entire senior
team at Gartner and expect that the transition to a new chairman and
CEO will be a smooth one."
Mr. Fleisher, 39, was named chairman of the Board of Gartner in
October 2001 and has been its chief executive officer and a director
since October 1999. Before being named CEO, Mr. Fleisher was chief
financial officer. Prior to joining Gartner in 1993, Mr. Fleisher was
an associate at Bain Capital and a consultant at Bain & Company. Mr.
Fleisher is a director of Ameritrade Holding Corp. and also is on the
Board of NYC 2012, Inc.
The Company noted that in recent months several executives with
solid track records of growing businesses have been appointed to key
leadership positions, reporting to Ms. O'Connell. Bill Pardue has been
named president of the Gartner Intelligence business unit, which
includes Research and Events, joining Gartner from LexisNexis Group.
The new president of Gartner Consulting, Bob Patton, joined the
Company from Cap Gemini Ernst & Young. Mike McCarty, recently named
senior vice president of the Sales organization, has extensive sales
management experience with IBM and other companies. Beverly Parker has
been named chief marketing officer, and comes to Gartner with more
than twenty years of marketing and sales experience with companies
including LexisNexis Group and Bank of America.
In addition, the Company said that the Board of directors has
nominated Jeffrey Ubben, a founder and managing partner of ValueAct
Capital, an investment partnership that holds an approximately 10%
ownership position in Gartner, to stand for election as a director. If
elected, Mr. Ubben will take the Board seat currently occupied by
Dennis Sisco, who, after fourteen years of Board service, has decided
not to stand for re-election. The Company deeply appreciates Mr.
Sisco's valuable service as a Board member over the past fourteen
years, and looks forward to welcoming Mr. Ubben to the Board.
Mr. Ubben said: "I am pleased to have been invited to join the
Gartner Board. Gartner is truly a unique franchise, combined with a
rock-solid balance sheet. I look forward to actively working with my
Board colleagues and to helping the leadership team maximize the
opportunity to drive significant long-term value for all
shareholders."
First Quarter Results: Business Segment Highlights
Research revenue was $122 million for the 2004 first quarter, a 6%
increase over the same 2003 period. Research contract value, a leading
indicator of future revenue, was $493 million at March 31, 2004,
increasing $19 million since the first quarter of 2003. This
represents the third consecutive quarter of contract value growth and
Gartner's first year-over-year increase in more than three years.
Client retention was 77% for the most recent quarter, compared to 74%
a year ago. Wallet share, a measure of dollar retention in the
Research business, was 92%, up from 83% a year ago.
Consulting revenue was $65 million for the 2004 first quarter, a
5% increase from the prior year. Consulting backlog was $92 million at
March 31, 2004, compared with $98 million at March 31, 2003. The
backlog decrease was largely due to a decision to reduce headcount and
exit certain less profitable Consulting practice areas and geographies
as part of the Company's initiative to refocus its Consulting business
on core practices with an emphasis on Sourcing and IT Management. In
addition, higher utilization rates resulted in a higher conversion of
backlog into revenue during the first quarter of 2004. Consulting
utilization rates were 62% for the most recent quarter, compared with
58% in the 2003 first quarter.
Events revenue was $18 million for the first quarter of 2004,
compared with $24 million a year ago. The decrease in revenue was
attributable to timing factors, as several events held during the
first quarter last year are scheduled to be held during this year's
second quarter. Taking into account such timing factors, Events
revenues grew 7% over the prior-year period.
Excluding the effects of foreign currency and the timing of
events, 2004 first quarter revenues would have increased approximately
1% over the year-ago period; cost of services and product development
would have decreased approximately 7%; and selling, general and
administrative expenses would have been flat. The impact of foreign
currency on net income was negligible. Research contract value would
have increased approximately 1% from the first quarter 2003, excluding
the effects of foreign currency.
Gartner had a cash position of $263 million at March 31, 2004,
compared with $135 million a year earlier. The conversion of the
convertible subordinated notes in October 2003 eliminated the
Company's non-cash interest expense associated with the notes. During
the 2004 first quarter, the Company repurchased $4 million of its
common stock under its previously announced share repurchase program.
Chris Lafond, chief financial officer, commented, "Gartner's cash
position is a source of great strength and financial flexibility. It
will support our efforts to enhance shareholder value through our
planned investments in growing our businesses, as well as future share
repurchases under our previously announced share repurchase program.
We are very pleased with our first quarter financial performance and
continue to be optimistic about the long-term prospects for our
business."
Business Outlook
For the second quarter ending June 30, 2004, the Company is
targeting:
-- Total revenue of approximately $218 million to $228 million.
-- Research revenue of approximately $119 million to $122
million.
-- Consulting revenue of approximately $62 million to $66
million.
-- Events revenue of approximately $34 million to $36 million.
-- Other revenue of approximately $3 million to $4 million.
-- GAAP and Normalized EPS of $0.07 to $0.10 per share. The
estimated fully diluted share count is 134 million shares.
Conference Call Information
Gartner has scheduled a conference call at 8:00 a.m. ET on Friday,
April 30, 2004, to discuss the Company's financial results and
management and board changes. 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 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 technology and business
decisions. The Company's businesses consist of Gartner Intelligence,
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 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. Normalized EPS for 2003 also includes the effect of the
convertible debt as if it had been converted at the beginning of 2003.
Normalized EPS is based on net income (loss), excluding other charges,
income from investments, and goodwill impairments and other non-cash
charges. 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
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;
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 Annual
Report on Form 10-K for the year ended December 31, 2003. 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
March 31,
2004 2003
-------- --------
Revenues:
Research $122,242 $115,724 6%
Consulting 64,626 61,779 5%
Events 18,171 23,509 -23%
Other 3,628 3,270 11%
-------- --------
Total revenues 208,667 204,282 2%
Costs and expenses:
Cost of services and
product development 95,476 102,333 -7%
Selling, general and
administrative 87,634 83,504 5%
Depreciation 7,937 9,825 -19%
Amortization of
intangibles and
goodwill impairments 936 405 131%
Other charges 10,513 5,426 94%
-------- --------
Total costs and expenses 202,496 201,493 0%
-------- --------
Operating income 6,171 2,789 121%
Income from investments 20 31 -35%
Interest income (expense),
net 245 (5,612) F
Other (expense) income,
net (3,113) 535 U
-------- --------
Income (loss) before
income taxes 3,323 (2,257) F
Provision (benefit) for
income taxes 2,859 (745) U
-------- --------
Net income (loss) $ 464 $ (1,512) F
======== ========
Income (loss) per common
share:
Basic $ 0.00 $ (0.02) F
Diluted $ 0.00 $ (0.02) F
Weighted average shares
outstanding:
Basic 130,311 80,492 62%
Diluted 133,180 80,492 65%
SUPPLEMENTAL INFORMATION
- ---------------------------
Normalized EPS (1) $ 0.09 $ 0.04 125%
(1) Normalized net income & EPS is based on net income (loss),
excluding other charges, income from investments, goodwill
impairments and other non-cash charges. 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 (loss) and EPS to
Normalized net income and EPS and a discussion of the
reconciling items.
GARTNER, INC.
Condensed Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2004 2003
-------------- -------------
(unaudited)
Assets
Current assets:
Cash and cash
equivalents $262,742 $229,962 14%
Fees receivable, net 235,699 266,122 -11%
Deferred commissions 25,210 27,751 -9%
Prepaid expenses and
other current assets 26,376 25,642 3%
-------------- -------------
Total current assets 550,027 549,477 0%
Property, equipment and
leasehold improvements,
net 61,996 66,541 -7%
Goodwill 230,360 230,387 0%
Intangible assets, net 784 985 -20%
Other assets 69,185 69,874 -1%
-------------- -------------
Total Assets $912,352 $917,264 -1%
============== =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities $150,802 $175,609 -14%
Deferred revenues 316,837 315,524 0%
-------------- -------------
Total current liabilities 467,639 491,133 -5%
Other liabilities 51,388 50,385 2%
-------------- -------------
Total Liabilities 519,027 541,518 -4%
Total Stockholders' Equity 393,325 375,746 5%
-------------- -------------
Total Liabilities and
Stockholders' Equity $912,352 $917,264 -1%
============== =============
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Three Months Ended
March 31,
2004 2003
-------- --------
Operating activities:
Net income (loss) $ 464 $ (1,512)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization,
including goodwill impairment 8,873 10,230
Non-cash compensation 485 251
Tax benefit associated with
employee exercise of stock options 1,494 -
Deferred taxes 542 5
Income from minority-owned
investments (20) (31)
Accretion of interest and
amortization of debt issue costs 299 5,822
Non-cash charges associated
with South America closings 2,943 -
Changes in assets and liabilities:
Fees receivable 30,389 25,934
Deferred commissions 2,609 1,728
Prepaid expenses and other
current assets (790) 2,427
Other assets (115) 72
Deferred revenues 2,285 (5,257)
Accounts payable and accrued
liabilities (24,763) (5,943)
-------- --------
Cash provided by operating activities 24,695 33,726
-------- --------
Investing activities:
Additions to property, equipment
and leasehold improvements (3,005) (3,357)
-------- --------
Cash used in investing activities (3,005) (3,357)
-------- --------
Financing activities:
Proceeds from stock issued for
stock plans 16,270 2,021
Purchase of treasury stock (4,000) (6,808)
-------- --------
Cash provided by (used in)
financing activities 12,270 (4,787)
-------- --------
Net increase in cash and cash
equivalents 33,960 25,582
Effects of exchange rates on cash
and cash equivalents (1,180) 192
Cash and cash equivalents,
beginning of period 229,962 109,657
-------- --------
Cash and cash equivalents, end of
period $262,742 $135,431
======== =========
SELECTED STATISTICAL DATA
(Dollars In thousands)
March 31, March 31,
2004 2003
-------- --------
Research contract value $492,899 $474,440
Consulting backlog $ 91,657 $ 98,307
Research client organizations 8,860 8,772
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
--------- -------- ------------ --------
Three Months Ended 3/31/04
Research $122,242 $43,215 $ 79,027 65%
Consulting 64,626 39,382 25,244 39%
Events 18,171 11,064 7,107 39%
Other 3,628 471 3,157 87%
-------- ------- --------
TOTAL $208,667 $94,132 $114,535 55%
======== ======= ========
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%
======== ======= ========
SUPPLEMENTAL INFORMATION
EPS Reconciliation - GAAP to
Normalized
(in thousands, except per
share data)
Three Months Ended March 31,
--------------------------------------------------
2004 2003
------------------------ ------------------------
After- After-Tax
Tax Income
Income Shares EPS (loss) Shares EPS
-------- -------- ------- -------- -------- ------
GAAP Basic EPS $ 464 130,311 $ 0.00 $(1,512) 80,492 $(0.02)
Share equivalents
from stock
compensation
shares - 2,869 (0.00) - - -
------- -------- ------ ------- -------- ------
GAAP Diluted EPS $ 464 133,180 $ 0.00 $(1,512) 80,492 $(0.02)
Other charges (1) 7,591 - 0.06 3,635 - 0.05
Non-cash charges (2) 2,943 - 0.02 - - -
Goodwill impairments
(3) 739 - 0.01 - - -
Income from
investments (13) - (0.00) (21) - (0.00)
Share equivalents
from stock
compensation
shares - - - - 502 (0.00)
Convertible debt - - - 3,244 47,602 0.01
------- -------- ------ ------- ------- ------
Normalized net
income & EPS $11,724 133,180 $ 0.09 $ 5,346 128,596 $ 0.04
======= ======== ====== ======= ======= ======
General Notes & Footnotes
-- Normalized net income & EPS is based on net income (loss),
excluding other charges, income from investments, goodwill
impairments and other non-cash charges. Normalized EPS
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.
-- The normalized effective tax rate was 33% for 2004 and 2003.
(1) Other charges during both years were for costs associated with
reductions in workforce. Other charges during 2004 also
included costs associated with closing certain operations in
South America.
(2) The non-cash charges in 2004 were associated with our closing
of certain operations in South America and were recorded in
Other (expense) income, net.
(3) The goodwill impairments in 2004 were associated with our
closing of certain operations in South America and were
recorded in Amortization of intangibles and goodwill
impairments.
CONTACT: Gartner, Inc.
Investor Contact:
Heather McConnell, 203-316-6768
heather.mcconnell@gartner.com
www.gartner.com/investors
or
Media Contact:
Tom Hayes, 203-316-6835
tom.hayes@gartner.com