Form 10-Q
United States Securities And Exchange Commission
Washington, D.C. 20549
|X| Quarterly Report pursuant to Section 13 or 15(D) of the Securities Exchange
Act of 1934 for the fiscal quarter ended February 28, 1998
|_| Transition Report pursuant to Section 13 or 15(D) of the Securities Exchange
Act Of 1934 for the transition period from ____ to ____
Commission File Number: 1-11869
FactSet Research Systems Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3362547
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Greenwich Plaza, Greenwich, Connecticut 06830
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (203) 863-1500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No|_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of each class Outstanding at February 28, 1998
................... ................................
Common Stock, par value $.01 9,635,068
<PAGE>
FactSet Research Systems Inc.
Form 10-Q
Table of Contents
Part I FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Statements of Income
for the three and six months ended February 28, 1998 and 1997......3
Consolidated Statements of Financial Condition
at February 28, 1998 and at August 31, 1997........................4
Consolidated Statements of Cash Flows
for the six months ended February 28, 1998 and 1997................5
Notes to the Consolidated Financial Statements......................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................8
Part II OTHER INFORMATION
Item 1. Legal Proceedings...................................................11
Item 2. Changes in Securities...............................................11
Item 3. Defaults Upon Senior Securities.....................................11
Item 4. Submission of Matters to a Vote of Security Holders.................11
Item 5. Other Information...................................................11
Item 6. Exhibits and Reports on Form 8-K....................................11
Signatures....................................................................11
<PAGE>
<TABLE>
<CAPTION>
FactSet Research Systems Inc.
CONSOLIDATED STATEMENTS OF INCOME-Unaudited Three Months Ended Six Months Ended
In thousands, except per share data February 28, February 28,
1998 1997 1998 1997
.......................................................................................................
<S> <C> <C> <C> <C>
Subscription Revenues
Commissions $8,203 $6,721 $15,979 $13,113
Fees 10,854 7,264 20,572 13,696
------ ------ ------ ------
Total subscription revenues 19,057 13,985 36,551 26,809
------ ------ ------ ------
.......................................................................................................
Expenses
Cost of services 7,630 5,693 14,501 10,790
Selling, general, and administrative 5,799 4,285 11,117 8,173
Other expenses 772 506 1,479 1,005
------ ----- ------ -----
Total operating expenses 14,201 10,484 27,097 19,968
.......................................................................................................
Operating income 4,856 3,501 9,454 6,841
Other income 384 206 751 323
----- ----- ----- -----
Income before income taxes and extraordinary gain 5,240 3,707 10,205 7,164
Income taxes 2,311 1,615 4,501 3,110
------ ------ ------ ------
Net income before extraordinary gain 2,929 2,092 5,704 4,054
Extraordinary gain, net of income taxes 242 - 242 -
------ ------ ----- -----
Net income $3,171 $2,092 $5,946 $4,054
====== ====== ====== ======
.......................................................................................................
Weighted average common shares 10,949 10,814 10,941 10,821
.......................................................................................................
Earnings per common share $0.29 $0.19 $0.54 $0.37
.......................................................................................................
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
FactSet Research Systems Inc.
<CAPTION>
ASSETS
February 28, August 31,
Unaudited and in thousands 1998 1997
...............................................................................
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $30,586 $26,816
Investments - 1,375
Receivable from clients and clearing brokers 9,247 7,335
Receivable from employees 494 549
Deferred taxes 3,031 3,149
Other current assets 183 731
------ ------
Total current assets 43,541 39,955
...............................................................................
PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Property, equipment, and leasehold improvements, at cost 33,743 26,880
Less accumulated depreciation (20,295) (17,658)
------ ------
Property, equipment, and leasehold improvements, net 13,448 9,222
...............................................................................
OTHER NON-CURRENT ASSETS
Deferred taxes 865 927
Other assets 727 731
------- -------
TOTAL ASSETS $58,581 $50,835
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
February 28, August 31,
Unaudited and in thousands 1998 1997
...............................................................................
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $6,316 $2,216
Accrued compensation 4,385 3,676
Deferred fees and commissions 3,465 4,499
Current taxes payable 103 2,426
Deferred rent 75 68
------ ------
Total current liabilities 14,344 12,885
------ ------
...............................................................................
NON-CURRENT LIABILITIES
Deferred taxes - 180
Deferred rent 236 143
------ ------
Total liabilities 14,580 13,208
------ ------
...............................................................................
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares
authorized, none issued - -
Common stock 97 96
Capital in excess of par value 2,806 1,995
Retained earnings 41,534 35,588
Unrealized gain on investment, net of taxes - 239
Less treasury stock (436) (291)
------ ------
Total stockholders' equity 44,001 37,627
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,581 $50,835
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FactSet Research Systems Inc.
<CAPTION>
Unaudited and in thousands Six Months Ended February 28, 1998 1997
..............................................................................
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $5,946 $4,054
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 2,637 2,163
Deferred tax expense (benefit) 180 (259)
Gain on sale of investment (433) -
Accrued ESOP contribution 375 300
----- -----
Net income adjusted for non-cash items 8,705 6,258
Changes in working capital
Receivable from clients and clearing brokers (1,912) (1,667)
Accounts payable and accrued expenses 4,100 1,267
Accrued compensation 934 514
Deferred fees and commissions (1,034) (227)
Current taxes payable (2,323) (360)
Other working capital accounts, net 707 242
----- -----
Net cash provided by operating activities 9,177 6,027
..............................................................................
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment, and
leasehold improvements (6,862) (4,661)
Proceeds from sale of investments 1,389 -
----- ------
Net cash used in investing activities (5,473) (4,661)
..............................................................................
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock from employees (5) (113)
Proceeds from exercise of stock options 71 -
-- ---
Net cash provided by (used in) financing activities 66 (113)
..............................................................................
Net increase in cash and cash equivalents 3,770 1,253
Cash and cash equivalents at beginning of period 26,816 15,700
------- -------
Cash and cash equivalents at end of period $30,586 $16,953
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FactSet Research Systems Inc.
February 28, 1998
(Unaudited)
1. ORGANIZATION AND NATURE OF BUSINESS
FactSet Research Systems Inc. (the "Company") provides online integrated
database services to the financial community. The Company's revenues are derived
from subscription charges. Solely at the option of each client, these charges
may be paid either in commissions on securities transactions (in which case
subscription revenues are recorded as "Commissions") or on a cash basis (in
which case subscription revenues are recorded as "Fees").
To facilitate the receipt of subscription revenues on a commission basis, the
Company's wholly owned subsidiary, FactSet Data Systems, Inc. ("FDS"), is a
member of the National Association of Securities Dealers, Inc. and is a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934. FDS's only function is to facilitate the receipt of payments with respect
to subscription charges and it does not otherwise engage in the securities
business.
Subscription revenues paid in commissions are based on securities transactions
introduced and cleared on a fully disclosed basis through one of two designated
clearing brokers. A client paying subscription charges on a commission basis
directs the clearing broker, at the time the client executes a securities
transaction, to credit the commission on the transaction to FDS's account.
FactSet Pacific, Inc. and FactSet Limited are wholly owned subsidiaries of the
Company and are U.S. corporations with branches in Tokyo and London,
respectively.
2. ACCOUNTING POLICIES
The accompanying interim consolidated financial statements of FactSet Research
Systems Inc. ("the Company") have been prepared in conformity with generally
accepted accounting principles, consistent in all material respects with those
applied in the Annual Report on Form 10-K for the fiscal year ended August 31,
1997. Interim financial information is unaudited, but reflects all normal
adjustments which are, in the opinion of management, necessary to present fairly
the results for the interim periods presented. The interim financial statements
should be read in connection with the financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 1997.
The significant accounting policies of the Company and its subsidiaries are
summarized below.
Financial Statement Presentation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany activity and balances
have been eliminated from the consolidated financial statements.
The financial reporting format of the Consolidated Statements of Income has been
revised to enhance comparability with other companies in the online information
services industry and to improve understanding of the Company's results of
operations. The Consolidated Statements of Income have been reclassified in all
prior periods presented to conform to the current year presentation.
Cost of services is composed of compensation and benefits for the employees of
the software engineering and consulting departments, clearing fees, data costs,
computer maintenance and depreciation expenses, and communication costs.
Selling, general, and administrative expenses include compensation and benefits
for employees involved with sales, product development and various support
functions, promotional expenses, rent, amortization of leasehold improvements,
depreciation of furniture and fixtures, and office expenses. The components of
other expenses are professional fees and miscellaneous expenses.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Subscription charges are quoted to clients on an annual basis, but are earned as
services are provided on a month-to-month basis. Subscription revenues, whether
commissions or fees, are recorded as earned each month, based on one-twelfth of
the annual subscription charge quoted to each client. Amounts that have been
earned but not yet paid through the receipt of commissions on securities
transactions or through cash payments are reflected on the Consolidated
Statements of Financial Condition as receivable from clients. Amounts that have
been received through commissions on securities transactions or through cash
payments that are in excess of earned subscription revenues are reflected on the
Consolidated Statements of Financial Condition as deferred fees and commissions.
<PAGE>
Clearing Fees
When subscription charges are recorded on a commission basis, the Company incurs
clearing fees, which are the charges imposed by the clearing brokers used to
execute and settle clients' securities transactions.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and money market
investments with original maturities of three months or less.
Investments
Investment securities are classified as available-for-sale securities and are
reported at market value or fair value as determined by management. Unrealized
gains and losses on available-for-sale securities are recognized as a separate
component of stockholders' equity, net of tax until sold.
Property, Equipment, and Leasehold Improvements
Depreciation of computers and related equipment acquired before September 1,
1994 is recognized using the double declining balance method over estimated
useful lives of five years. Computers and related equipment acquired after
September 1, 1994 are depreciated on a straight-line basis over estimated useful
lives of three years. Depreciation of furniture and fixtures is recognized using
the double declining balance method over estimated useful lives of five years.
Leasehold improvements are amortized on a straight-line basis over the terms of
the related leases or estimated useful lives of the improvements, whichever
period is shorter.
Deferred Taxes
Deferred taxes are determined using a balance sheet approach. The income
statement effect is derived from changes in deferred taxes on the balance sheet.
This approach gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities. A valuation allowance is established to the extent management
considers it more likely than not that some portion or all of the deferred tax
assets will be realized. The effect on deferred taxes from income tax law
changes are recognized immediately upon enactment. The Company records deferred
taxes for such items as accrued compensation, deferred fees and commissions, and
property, equipment, and leasehold improvements.
Stock-Based Compensation
The Company follows the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Earnings Per Share
The computation of earnings per share in each year is based on the weighted
average number of common shares and common share equivalents outstanding. The
weighted average number of shares outstanding includes shares issued to the
Company's employee stock ownership plan at the date authorized by the Board of
Directors. Shares available pursuant to grants made under the Company's stock
option plans are included as share equivalents using the treasury stock method.
On June 4, 1996, the Company increased the number of shares of common stock
authorized from 5 million to 40 million, authorized 10 million shares of
preferred stock issuable in series, and effected a 4-for-1 stock split with
respect to the common stock. In connection with the stock splits, the par value
of the common stock was reduced from $1.00 to $0.01 per share. For purposes of
these financial statements, all common stock and per share amounts have been
restated to reflect the stock splits.
New Accounting Pronouncements
In February 1997, SFAS No. 128, Earnings Per Share ("SFAS 128") was issued. This
statement requires dual presentation of basic and diluted earnings per share
("EPS") on the face of the income statement and reconciliation of the numerator
and the denominator between the basic and diluted EPS computations. SFAS 128
will be effective for the Company's 1999 fiscal year. Had SFAS 128 been
effective for fiscal years 1998 and 1997 basic EPS for the three months ended
February 28, 1997 and 1996 would have been $0.33 and $0.22, respectively. For
the first half of fiscal years 1998 and 1997, basic EPS would have been $0.62
and $0.42, respectively. EPS reported on the face of the income statement is
identical to diluted EPS calculated under the provisions of SFAS 128.
In June 1997, SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, were
issued. Disclosures required by these statements will be effective for the
Company's 1999 fiscal year.
In March 1998, Statement of Position 98-1, Accounting for The Costs of Computer
Software Developed or Obtained for Internal Use was issued. This statement is
effective for the Company's fiscal year ending in 2000. The impact from adoption
of this new accounting pronouncement has not yet been determined.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company
FactSet Research Systems Inc. is the leading provider of online integrated
database services to the financial community. The Company's software technology
combines multiple large-scale databases into a single mainframe information
system accessible from clients' personal computers. Simultaneous access to over
85 databases creates a comprehensive, "one stop" source for financial and
economic information, news, and commentary on tens of thousands of companies and
securities worldwide. The Company's proprietary software tools enable clients to
easily download, screen, manipulate, and analyze data in a virtually infinite
array of formats, principally custom reports designed by and for the user.
FactSet markets its services to investment managers, investment banks, and other
financial services institutions throughout the world.
Business Environment
Demand for online information by the financial community is, to some degree,
impacted by the health of global financial markets.
The strength of the US and European equity markets have caused the population of
potential users of FactSet's products and services to expand. The Company has no
reason to believe that future demand for its products and services will
diminish. However, a significant decline in the global equity markets could
adversely impact the Company's results of operations, cash flows and financial
position.
The Asian and Pacific Rim financial markets have experienced significant
volatility during the past year. Revenues from the Company's Asian and Pacific
Rim operations are not significant when compared to the Company's total
consolidated revenues. Accordingly, should declines in the Asian and Pacific Rim
stock markets continue, the impact on the Company's future results of
operations, cash flows and financial position are not expected to be material.
Future Investments
Major investments in technology and people are ongoing to expand the Company's
presence in the global marketplace. During the first half of fiscal 1998, the
Company installed various processor, memory and network upgrades, and purchased
a fourth mainframe for both of its data centers. A fifth mainframe will likely
be installed in both data centers in the second half of the fiscal year.
The worldwide employee base continues to expand in conjunction with the
Company's growth. At February 28, 1998, the Company employed 219 individuals
(240 as of March 31, 1998), an increase of 42% from the end of the second
quarter of fiscal 1997. As a result of this rapid growth, the Company has
arranged for additional office space in New York City, San Mateo (California)
and Tokyo and is seeking to add office space in Connecticut. Accordingly, the
projected level of the Company's total capital spending in fiscal 1998 will
likely be more than double the fiscal 1997 amount of $6.0 million.
The Company is actively developing programs to adjust mainframe applications and
data provided by third parties to be fully year 2000 compliant. While there can
be no absolute assurance of completion by year 2000, the Company does not
believe this transition will have an adverse material impact on its future
results of operations, cash flows, or financial position.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Three Months Ending Six Months Ending
February 28, February 28,
Unaudited and in thousands, except per share data 1998 1997 Change 1998 1997 Change
...............................................................................................................
<S> <C> <C> <C> <C> <C> <C>
Revenues $19,057 $13,985 36.3% $36,551 $26,809 36.3%
Operating expenses 14,201 10,484 35.5 27,097 19,968 35.7
Operating income 4,856 3,501 38.7 9,454 6,841 38.2
Income before income taxes and extraordinary gain 5,240 3,707 41.3 10,205 7,164 42.4
Net income before extraordinary gain 2,929 2,092 40.0 5,704 4,054 40.7
Extraordinary gain, net of income taxes 242 - 242 -
Net income 3,171 2,092 51.6 5,946 4,054 46.7
Earnings per share $0.29 $0.19 52.6% $0.54 $0.37 46.0%
...............................................................................................................
</TABLE>
<PAGE>
Revenues
Revenues for the second fiscal quarter ended February 28, 1998 were $19.1
million. For the first half, revenues totaled $36.6 million. For both the
quarter and the half, revenues increased by 36.3% over the comparable periods a
year earlier. Additional subscriptions to services, databases and passwords, and
new client additions were the underlying growth drivers.
At quarter-end, the number of passwords in use grew to over 12,000,
approximately a 50% increase from the second quarter of fiscal 1997. Client
count totaled 521 at February 28, 1998, a net addition of 60 clients over the
past twelve months. Retention of existing clients continued at a rate in excess
of 95%.
Quarterly revenues from international operations were $2.3 million for the three
months ending February 28, 1998, a 64% increase over fiscal 1997's comparable
period. Overseas revenues over the first half of fiscal 1998 increased to $4.4
million, or 71% over the year ago period. Revenues from international sources
now account for 12% of consolidated revenues for both the second fiscal quarter
and the first half of fiscal 1998, up from 10% for the comparable periods a year
earlier. The majority of international clients pay for services in U.S. dollars
and the net monetary assets held by the Company's foreign offices was
immaterial. Accordingly, the Company's exposure to foreign currency fluctuations
was insignificant.
Total client commitments reached $78.7 million at February 28, 1998, up 35% from
a year prior. Additional subscription services to and passwords from existing
clients increased the average commitment per client to $151,000, or 19% from a
year ago. ("Commitments" represent a freeze frame of the annual revenues that
the Company would receive from a particular client based on the services
currently being supplied to that client.) At the end of 1998's second fiscal
quarter, no individual client accounted for more than 4% of total commitments
and commitments among the top ten clients did not exceed 15% of the total. As a
matter of policy, the Company does not seek to enter into written contracts with
its clients. Accordingly, clients are free to add or delete services at any
time. Historically, commitments have grown in virtually every month.
Operating Expenses
Cost of services includes employee compensation and benefits, clearing fees,
data costs, computer maintenance and depreciation expenses, and communication
costs. For the quarter ended February 28, 1998, cost of services were $7.6
million, up 34.0% over the comparable period in fiscal 1997. In the first half
of fiscal 1998, cost of services totaled $14.5 million, an increase of 34.4%
over the year earlier period. New employees and additional clearing fees were
largely the cause of these increases. Personnel in the engineering and
consulting departments increased by over 40% during the past twelve months.
Accordingly, employee compensation and benefits rose by $900,000 on a quarter
over quarter basis and by $1.6 million for the six months ended February 28,
1998. New clients paying for services by way of commissions on securities
transactions caused clearing fees to rise by $400,000 for the second quarter and
by $700,000 for the first half of fiscal 1998, increases of more than 30% over a
comparable periods in fiscal 1997.
Selling, general, and administrative ("SG&A") expenses include employee
compensation and benefits, promotional expenses, rent, amortization of leasehold
improvements, depreciation of furniture and fixtures, and office expenses. SG&A
expenses in 1998's second fiscal quarter were $5.8 million, an increase of 35.3%
over the year earlier period. During the first half of fiscal 1998, SG&A
expenses totaled $11.1 million, a rise of 36.0% when compared to the six months
ending February 28, 1997. Employee additions and merit raises were the primary
sources of these increases. Over the past twelve months, the number of employees
in the sales, product development, and various support departments increased by
33% when compared February 28, 1997. As a result, employee compensation
increased by $1.0 million in the second quarter and by $2.0 million during the
first half of fiscal 1998 versus fiscal 1997's comparable totals.
Operating Margins
Operating margins for the quarter ending February, 28 1998 increased by 50 basis
points when compared to the year ago period. For the six months ended February
28, 1998 operating margins grew by 35 basis points when compared to the same
period in fiscal 1997. Margin expansion was primarily caused in the mix between
fee and commission revenues and declining depreciation and data costs as a
percentage of revenues. These improvements were partially offset by additional
compensation and benefits related to the increased staffing levels.
<PAGE>
Fee (cash) revenues produces a higher margin than Commission revenues. While net
revenues to the Company is essentially the same under both payment methods, to
cover the clearing charges, commission clients pay a higher amount than clients
who pay in cash. During the second quarter of fiscal 1998, the percentage of
cash revenues increased to 57% of the consolidated total versus 52% during the
year ago quarter. Over the first half of fiscal 1998, cash revenues represented
56% of consolidated revenues as compared to 51% for the six moths ending
February 28, 1997. Depreciation expense on computer equipment decreased as a
percentage of revenues primarily due to the timing of capital expenditures in
fiscal 1998 and the level of computer equipment that had become fully
depreciated at 1997's fiscal year end. Data costs in fiscal 1998 has increased
slower than revenues since the purchase of additional data by the Company has
not been required to support its growth objectives.
Net Income and Earnings Per Share
During the fiscal quarter ended February 28, 1998, net income increased to $3.1
million, or 51.6 % from the year earlier period. For the first six months of
fiscal 1998, net income was $5.9 million, up 46.7% from fiscal 1997's comparable
period. A $242,000 extraordinary gain was recorded in connection with the sale
of the Company's investment in a limited partnership during the second quarter
of fiscal 1998. Excluding this extraordinary gain, second quarter net income was
$2.9 million, a 40.0% increase over the comparable period in fiscal 1997. For
the six months ending February 28, 1998, net income was $5.7 million, an
increase of 40.7% versus the year ago period. Earnings per share ("EPS") for
1998's second quarter totaled $0.29 and for the first half, EPS was $0.54.
Excluding the extraordinary gain, EPS was $0.27 in the second quarter, up 42%
from a year ago. For the first half of fiscal 1998 without the extraordinary
gain, EPS increased to $0.52 or 41% over the comparable period in fiscal 1997.
Liquidity
Cash generated by operating activities totaled $9.2 million for the six months
ended February 28, 1998 versus $6.0 million a year ago. Cash used in investing
activities were $5.5 million, up from fiscal 1997's comparable total of $4.7
million. In the second quarter of fiscal 1998, capital spending totaled $6.0
million. A fourth Digital Equipment Alpha mainframe machine was added to each of
the Company's data center. Each mainframe machine was also upgraded to run on
eight 625mhz CPU's and 10 gigabytes of RAM. As discussed above under the caption
"Future Investments," the Company expects that capital expenditures for fiscal
1998 will likely be more than twice the $6.0 million incurred during fiscal
1997.
All capital and operating expense requirements have been financed by cash from
operations. At February 28, 1998, cash and cash equivalents totaled $30.6
million. The Company has no outstanding indebtedness.
Accounting Pronouncements
In June 1997, SFAS No. 128, Earnings Per Share; SFAS No. 130, Reporting
Comprehensive Income; and SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, were issued. In March 1998, Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use was issued. Refer to Note 2, "Accounting Policies" for
further information.
Forward-Looking Statements
This Management's Discussion and Analysis of the Company's results of operations
and financial condition contains forward-looking statements that are based on
management's current expectations and beliefs. The phrases "no reason to
believe," "could adversely impact," "are not expected," "are ongoing,"
"continues," "is seeking," "will likely be" "does not believe," and
"commitments" are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties, and assumptions which are difficult to predict ("future
factors"). Therefore, actual results may differ materially from what is
expressed or forecasted in such forward-looking statements. The Company
undertakes no obligation to publicly update any forward-looking statements as a
result of new information, future events, or otherwise. Future factors include
the ability to hire qualified personnel, maintenance of the Company's leading
technological position; the successful negotiation of contract terms supporting
new and existing databases; the ongoing employment of key personnel; the absence
of U.S. or foreign governmental regulation restricting international business;
and the sustainability of historical levels of profitability and growth rates in
cash flow generation.
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Shareholders of FactSet Research Systems Inc. was held on
January 8, 1998.
1. Each of the four nominees to the Board of Directors was elected:
Director Term For Not For Abstain
-------- ---- --- ------- -------
Joseph E. Laird, Jr. 1 yr. 8,998,347 215,894 214,064
Walter F. Siebecker 2 yrs. 9,212,411 1,830 214,064
David R. Korus 3 yrs. 9,118,667 95,574 214,064
John C. Mickle 3 yrs. 9,212,311 1,930 214,064
2. The appointment of Price Waterhouse LLP as independent public accountants of
the Company was ratified:
For 9,211,624
Not For 1,700
Abstain 907
3. The adoption of the Non-employee Directors' Stock Option Plan was ratified:
For 8,643,501
Not For 543,662
Abstain 25,328
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
3.1....................................Restated Certificate of Incorporation (1)
3.2..................................................................By-laws (1)
4.1.....................................................Form of Common Stock (1)
10.1........................Form of Employment Agreement between the Company
and Howard E. Wille and Charles J. Snyder (1)
10.2.................Letter Agreement between the Company and Ernest S. Wong (1)
27..................................................Financial Data Schedules
(1)Incorporated by reference to the Company's Registration Statement on Form S-1
(File No.333-4238)
(b) Reports on Form 8-K: None
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FACTSET RESEARCH SYSTEMS INC.
Date: April 13, 1998 BY: /s/ ERNEST S. WONG
Ernest S. Wong,
Senior Vice President, Chief Financial Officer
and Secretary
