UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

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 February 7, 2011, Gartner, Inc. (the “Company”) announced financial results for the three and twelve months ended December 31, 2010. 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 Item 2.02 and in Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

     (d) Exhibits

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued February 7, 2011 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2010.

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.

EXHIBIT INDEX

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued February 7, 2011 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2010.

Exhibit 99.1

		Press Release

CONTACT:
Andrew Spender
Vice President
Corporate Communications
+1 203 316 3286
andrew.spender@gartner.com

Gartner Reports Financial Results for Fourth Quarter and Full Year 2010

Contract Value was $978 Million, Highest in Gartner’s History, Up 25% YoY

Full Year 2010 Diluted Income per Share was $0.96, Up 13% YoY

Full Year 2010 Free Cash Flow was $191.8 Million, Up 31% YoY

STAMFORD, Conn., February 7, 2011 — Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for fourth quarter and full year 2010, and provided its preliminary financial outlook for 2011.

For fourth quarter 2010, total revenue was $382.3 million, up 17% year-over-year excluding the impact of foreign exchange and 16% as reported. Net income increased 43% and Normalized EBITDA increased 25% to $72.5 million. Diluted income per share was $0.37 compared to $0.26 per share for fourth quarter 2009. Both the fourth quarter of 2010 and 2009 were negatively impacted by Acquisition Adjustments totaling $(0.02) per share after-tax. Diluted Income Per Share Excluding Acquisition Adjustments was $0.39 for fourth quarter 2010 and $0.28 for fourth quarter 2009. See “Non-GAAP Financial Measures” for a discussion of Normalized EBITDA and Diluted Income Per Share Excluding Acquisition Adjustments.

For full year 2010, total revenue was $1,288.5 million, an increase of 13%, and net income was $96.3 million. Normalized EBITDA was $230.4 million, an increase of 20% over 2009. Diluted income per share was $0.96 compared to $0.85 in 2009. The 2010 net income and diluted income per share were negatively impacted by Acquisition Adjustments totaling $22.0 million pre-tax, or $(0.14) per share after-tax. The 2009 results were positively impacted by tax benefits not expected to recur totaling $4.7 million, or $0.05 per share and negatively impacted by Acquisition Adjustments totaling $2.9 million pre-tax, or $(0.02) per share after-tax. Diluted Income Per Share Excluding Acquisition Adjustments was $1.10 for 2010 and $0.87 for 2009.

Gene Hall, Gartner’s chief executive officer, commented, “We achieved record levels of new business and contract value, our client and wallet retention metrics improved for the fifth consecutive quarter, and many of our other key business metrics continued to accelerate during the fourth quarter. We delivered double-digit revenue, normalized EBITDA and EPS growth for the full year 2010 and expect to deliver double-digit growth across those measures in 2011 as well.”

Business Segment Highlights

Research

Revenue for fourth quarter 2010 was $230.6 million, up 19% year-over-year excluding the impact of foreign exchange. Gross contribution margin improved 2 percentage points year-over-year to 65%.

-more-

For full year 2010, revenue was $865.0 million, up 14% year-over-year excluding the impact of foreign exchange. Gross contribution margin was 65% for both periods.

Contract value was $977.7 million at December 31, 2010, up 25% year-over-year and the highest reported contract value in Gartner’s history. Year-over-year, contract value increased 20% excluding the impact of foreign exchange. Client and wallet retention rates for fourth quarter 2010 were 83% and 98%, respectively, up from 78% and 87% for 2009. The 2009 metrics exclude the acquisitions of AMR Research and Burton Group.

Consulting

Revenue for fourth quarter 2010 was $89.3 million, up 11% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased 1 percentage point year-over-year to 42%.

For full year 2010, revenue was $302.1 million, up 6% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased by 1 point, to 40%.

Fourth quarter 2010 utilization was 66% and billable headcount was 473. Backlog was $100.8 million at December 31, 2010, up almost 11% versus December 31, 2009. The 2009 metrics exclude the acquisitions of AMR Research and Burton Group.

Events

Revenue for fourth quarter 2010 was $62.4 million, up 21% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased 6 percentage points year-over-year to 53%.

For full year 2010, revenue was $121.3 million, up 21% excluding the impact of foreign exchange. Gross contribution margin was 46%, an increase of 5 points.

During fourth quarter 2010, the Company held 12 events with 18,194 attendees. During full year 2010, the Company held 56 events with 37,219 attendees.

Cash Flow and Balance Sheet Highlights

Gartner generated cash provided by operating activities of $79.1 million during fourth quarter 2010 and $205.5 million during full year 2010. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) were $9.5 million for fourth quarter 2010 and $21.7 million for full year 2010. Free Cash Flow for full year 2010 was $191.8 million, an increase of 31% over 2009. See “Non-GAAP Financial Measures” for a definition of Free Cash Flow.

The Company had cash of $120.2 million at December 31, 2010. During 2010, the Company deployed its cash principally to repurchase 3.9 million of its shares and to pay down debt.

As of December 31, 2010, the Company had total debt of $220.2 million compared to total debt of $329.0 million at year-end 2009. The Company refinanced its debt in late 2010 to take advantage of favorable financing conditions and to obtain greater financial flexibility and liquidity through a larger revolving credit facility. The new credit arrangement provides for a five-year, $200.0 million term loan and a $400.0 million revolving credit facility.

Gartner, Inc.		page 2

Preliminary Financial Outlook for 2011

Gartner also provided its preliminary financial outlook for 2011:

Projected Revenue

($ in millions)		2011 Projected				% Change
Research		$	990 – 1,010				14% – 17	%
Consulting			310 – 330				3% – 9	%
Events			130 – 140				7% – 15	%
Total Revenue		$	1,430 – 1,480				11% – 15	%

Projected Earnings and Cash Flow

($ in millions, except per share data)		2011 Projected				% Change
Diluted Income Per Share (1)		$	1.29 – $1.41				34% – 47	%
Normalized EBITDA (2)		$	270 – 290				17% – 26	%
Operating cash flow (3)		$	250 – 270				22% – 31	%
Capital Expenditures (3)			(39) – (41	)
Free Cash Flow (2)		$	211 – 229				10% – 19	%

Conference Call and Investor Day Information

Gartner has scheduled a conference call at 8:30 a.m. Tuesday, February 8, 2011, 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 approximately 90 days following the call.

The Company will also host an Investor Day for institutional investors and sell-side analysts beginning at 9:00 a.m. eastern time on Wednesday, February 16, 2011 in Greenwich, Connecticut. The Investor Day is by invitation only and registration is required. It will also be webcast live via the Internet on the Company’s web site at http://investor.gartner.com and a replay will be available following the event. Please contact Germaine Scott at 203-316-3411 for further information.

Annual Meeting of Stockholders

Gartner will hold its 2011 Annual Meeting of Stockholders at 10:00 a.m. eastern time on Thursday, June 2, 2011, at the Company’s offices in Stamford, Connecticut.

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to 60,000 clients in 11,000 distinct organizations. Through the resources of Gartner

Gartner, Inc.		page 3

Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,500 associates, including 1,200 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

Investors are cautioned that Normalized EBITDA, Diluted Income Per Share Excluding Acquisition Adjustments, and Free Cash Flow 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.

Normalized EBITDA: Represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, stock based compensation expense, Acquisition Adjustments, and Other charges. We believe Normalized EBITDA is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Diluted Income Per Share Excluding Acquisition Adjustments: Represents diluted income per share excluding charges related to the acquisitions of AMR Research and Burton Group, which primarily consist of amortization of identifiable intangibles, fair value adjustments on pre-acquisition deferred revenue and certain non-recurring costs such as legal, consulting, severance and other exit costs (“Acquisition Adjustments”). We believe Diluted Income Per Share Excluding Acquisition Adjustments is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Free Cash Flow: Represents cash provided by operating activities excluding cash charges related to the acquisitions of AMR Research and Burton Group, which primarily consist of certain non-recurring costs such as severance and other exit costs (“Cash Acquisition and Integration Charges”), less additions to property, equipment and leasehold improvements (“Capital Expenditures”). We believe that Free Cash Flow is an important measure of the recurring cash generated by the Company’s core operations that is available to be used to repurchase stock, repay debt obligations and invest in future growth through new business development activities or acquisitions.

Safe Harbor Statement

Statements contained in this press release regarding the growth and prospects of the business, the Company’s projected 2011 financial results 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, the ability to expand or retain Gartner’s customer base; the ability to grow or sustain revenue from individual customers; the ability to retain and expand the professional staff of research analysts and consultants upon whom Gartner is dependent; the ability to achieve and effectively manage growth; the ability to pay Gartner’s debt obligations; the ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; the ability to carry out Gartner’s strategic initiatives and manage associated costs; the ability to effectively integrate the businesses of AMR Research and Burton Group; 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 Gartner’s businesses and operations; general economic conditions; risks associated with the creditworthiness of governments and agencies; and all other risks described from time to time in Gartner’s

Gartner, Inc.		page 4

reports filed with the Securities and Exchange Commission, including Gartner’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These filings can be found on Gartner’s website at www.gartner.com/investors and the SEC’s website at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and Gartner 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.		page 5

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

		Three Months Ended												Twelve Months Ended
		December 31,												December 31,
		2010 (a)				2009								2010 (a)				2009
Revenues:
Research		$	230,552			$	195,180				18	%		$	865,000			$	752,505				15	%
Consulting			89,321				81,506				10	%			302,117				286,847				5	%
Events			62,431				52,141				20	%			121,337				100,448				21	%
Total revenues			382,304				328,827				16	%			1,288,454				1,139,800				13	%
Costs and expenses:
Cost of services and product development			164,959				146,499				13	%			552,238				498,363				11	%
Selling, general and administrative			154,796				131,023				18	%			543,174				477,003				14	%
Depreciation			6,131				6,211				-1	%			25,349				25,387				0	%
Amortization of intangibles			2,531				416				>100	%			10,525				1,636				>100	%
Acquisition and integration charges			813				2,934				-72	%			7,903				2,934				>100	%
Total costs and expenses			329,230				287,083				15	%			1,139,189				1,005,323				13	%
Operating income			53,074				41,744				27	%			149,265				134,477				11	%
Interest expense, net			(6,047	)			(2,927	)			>100	%			(15,616	)			(16,032	)			-3	%
Other (expense) income, net			(300	)			(414	)			-28	%			436				(2,919	)			>100	%
Income before income taxes			46,727				38,403				22	%			134,085				115,526				16	%
Provision for income taxes			10,033				12,687				-21	%			37,800				32,562				16	%
Net income		$	36,694			$	25,716				43	%		$	96,285			$	82,964				16	%
Income per common share:
Basic:		$	0.38			$	0.27				41	%		$	1.01			$	0.88				15	%
Diluted:		$	0.37			$	0.26				42	%		$	0.96			$	0.85				13	%
Weighted average shares outstanding:
Basic			95,895				95,493				0	%			95,747				94,658				1	%
Diluted			99,567				99,241				0	%			99,834				97,549				2	%

BUSINESS SEGMENT DATA
(Dollars in thousands)

						Direct				Gross				Contribution
		Revenue				Expense				Contribution				Margin
Three Months Ended 12/31/10 (a)
Research		$	230,552			$	81,333			$	149,219				65	%
Consulting			89,321				51,658				37,663				42	%
Events			62,431				29,234				33,197				53	%
TOTAL		$	382,304			$	162,225			$	220,079				58	%
Three Months Ended 12/31/09
Research		$	195,180			$	72,125			$	123,055				63	%
Consulting			81,506				47,721				33,785				41	%
Events			52,141				27,496				24,645				47	%
TOTAL		$	328,827			$	147,342			$	181,485				55	%
Twelve Months Ended 12/31/10 (a)
Research		$	865,000			$	300,473			$	564,527				65	%
Consulting			302,117				180,232				121,885				40	%
Events			121,337				65,453				55,884				46	%
TOTAL		$	1,288,454			$	546,158			$	742,296				58	%
Twelve Months Ended 12/31/09
Research		$	752,505			$	262,643			$	489,862				65	%
Consulting			286,847				174,748				112,099				39	%
Events			100,448				59,503				40,945				41	%
TOTAL		$	1,139,800			$	496,894			$	642,906				56	%

SELECTED STATISTICAL DATA

		December 31,				December 31,
		2010 (a)				2009
Research contract value		$	977,710	(b)		$	784,443	(b)
Research client retention			83	%			78	%
Research wallet retention			98	%			87	%
Research client organizations			11,601				10,492
Consulting backlog		$	100,839	(b)		$	90,891	(b)
Consulting—quarterly utilization			66	%			68	%
Consulting billable headcount			473				422
Consulting—average annualized revenue per billable headcount		$	419	(b)		$	435	(b)
Events—number of events for the quarter			12				13
Events—attendees for the quarter			18,194				15,634

SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)

Reconciliation — Operating income to Normalized EBITDA (a):

		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2010				2009				2010				2009
Net income		$	36,694			$	25,716			$	96,285			$	82,964
Interest expense, net			6,047				2,927				15,616				16,032
Other expense (income), net			300				414				(436	)			2,919
Tax provision			10,033				12,687				37,800				32,562
Operating income		$	53,074			$	41,744			$	149,265			$	134,477
Normalizing adjustments:
Depreciation, accretion, and amortization (b)			8,777				6,769				36,475				27,704
Stock-based compensation expense (c)			9,336				6,589				32,634				26,066
Pre-acquisition deferred revenue (d)			522				—				4,095				—
Acquisition and integration charges (e)			813				2,934				7,903				2,934
Normalized EBITDA		$	72,522			$	58,036			$	230,372			$	191,181

Reconciliation — Diluted income per share to Diluted Income Per Share Excluding Acquisition Adjustments (a):

		Three Months Ended December 31,
		2010								2009
		After-tax								After-tax
		Amount				EPS				Amount				EPS
Diluted income per share		$	36,694			$	0.37			$	25,716			$	0.26
Acquisition adjustments, net of tax effect (b):
Amortization of intangibles (c)			1,519				0.02				—				—
Pre-acquisition deferred revenue (d)			316				—				—				—
Acquisition and integration charges (e)			492				—				1,775				0.02
Diluted Income Per Share Excluding Acquisition Adjustments (f)		$	39,021			$	0.39			$	27,491			$	0.28

		Twelve Months Ended December 31,
		2010								2009
		After-tax								After-tax
		Amount				EPS				Amount				EPS
Diluted income per share		$	96,285			$	0.96			$	82,964			$	0.85
Acquisition adjustments, net of tax effect (b):
Amortization of intangibles (c)			6,076				0.06				—				—
Pre-acquisition deferred revenue (d)			2,477				0.03				—				—
Acquisition and integration charges (e)			4,781				0.05				1,775				0.02
Diluted Income Per Share Excluding Acquisition Adjustments (g)		$	109,619			$	1.10			$	84,739			$	0.87

SUPPLEMENTAL INFORMATION continued (in thousands)

		Selected Balance Sheet Data
		(unaudited and preliminary)
		December 31,
		2010				2009
Cash and cash equivalents		$	120,181			$	116,574
Fees receivable, net			364,818				317,598
Total assets			1,285,658				1,215,279
Deferred revenues			523,263				437,207
Total current and long-term debt			220,156				329,000
Total liabilities			1,098,602				1,102,744
Total stockholders’ equity			187,056				112,535

		Selected Cash Flow Data
		(unaudited and preliminary)
		Twelve Months Ended
		December 31,
		2010				2009
Cash provided by operating activities		$	205,499			$	161,937
Additions to capital expenditures			(21,694	)			(15,142	)
Cash paid for AMR & Burton acquisitions			(12,151	)			(104,523	)
Purchases of treasury shares			(99,820	)			(3,744	)
Net debt activity			(108,844	)			(87,250	)
Payments for debt issue costs			(4,783	)			—

Reconciliation — Cash Provided by Operating Activities to Free Cash Flow (a):
(unaudited and preliminary)

		Twelve Months Ended
		December 31,
		2010				2009
Cash provided by operating activities		$	205,499			$	161,937
Adjustments:
Cash acquisition and integration charges			8,003				—
Additions to capital expenditures			(21,694	)			(15,142	)
Free Cash Flow		$	191,808			$	146,795