<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended March 31, 2000.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 000-21433
-------------
FORRESTER RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2797789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 Technology Square
Cambridge, Massachusetts 02139
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 497-7090
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 [ ]
As of May 11, 2000, 20,791,826 shares of the registrant's common stock were
outstanding.
<PAGE> 2
FORRESTER RESEARCH, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page
----
ITEM 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the Three Months
Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 13
ITEM 2. Changes in Securities 13
ITEM 3. Defaults Upon Senior Securities 13
ITEM 4. Submission of Matters to a Vote of Security-Holders 13
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORRESTER RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 38,587 $ 13,445
Marketable securities 121,109 85,342
Accounts receivable, net 28,615 36,988
Deferred commissions 5,590 4,850
Prepaid income taxes 1,187 1,187
Prepaid expenses and other current assets 5,703 4,142
--------- ---------
Total current assets 200,791 145,954
--------- ---------
Property and equipment, net 13,401 11,619
--------- ---------
Deferred income taxes 7,042 --
--------- ---------
Other assets 2,224 1,820
--------- ---------
Total assets $ 223,458 $ 159,393
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,604 $ 2,702
Customer deposits 903 716
Accrued expenses 19,365 9,447
Accrued income taxes 27 617
Deferred revenue 76,760 66,233
Deferred income taxes -- 873
--------- ---------
Total current liabilities 100,659 80,588
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized--500,000 shares
Issued and outstanding--none -- --
Common stock, $.01 par value
Authorized--125,000,000 shares
Issued and outstanding--20,715,144 and 19,408,064 shares
at March 31, 2000 and December 31, 1999, respectively 207 194
Additional paid-in capital 95,312 54,771
Retained earnings 27,958 24,434
Accumulated other comprehensive income (678) (594)
--------- ---------
Total stockholders' equity 122,799 78,805
--------- ---------
Total liabilities and stockholders' equity $ 223,458 $ 159,393
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
<S> <C> <C>
REVENUES:
Core research $23,759 $12,978
Advisory services and other 7,058 4,951
------- -------
Total revenues 30,817 17,929
------- -------
OPERATING EXPENSES:
Cost of services and fulfillment 9,295 6,612
Selling and marketing 12,214 6,192
General and administrative 3,780 2,041
Depreciation and amortization 1,432 873
------- -------
Total operating expenses 26,721 15,718
------- -------
Income from operations 4,096 2,211
OTHER INCOME 1,454 860
------- -------
Income before income tax provision 5,550 3,071
INCOME TAX PROVISION 2,081 1,167
------- -------
Net income $ 3,469 $ 1,904
======= =======
BASIC NET INCOME PER COMMON SHARE $ 0.17 $ 0.11
======= =======
DILUTED NET INCOME PER COMMON SHARE $ 0.15 $ 0.10
======= =======
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 19,949 17,492
======= =======
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 23,578 19,466
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,469 $ 1,904
Adjustments to reconcile net income to net cash provided by operating activities --
Depreciation and amortization 1,432 873
Deferred income taxes 2,081 267
Accretion of discount on marketable securities 30 22
Changes in assets and liabilities
Accounts receivable 8,372 3,294
Deferred commissions (740) (531)
Prepaid expenses and other current assets (1,402) (1,067)
Accounts payable 877 (545)
Customer deposits 187 (38)
Accrued expenses 9,882 40
Accrued income taxes -- 128
Deferred revenue 10,547 2,108
-------- --------
Net cash provided by operating activities 34,735 6,455
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,717) (521)
Purchase of non-marketable investment (1,000) --
Increase in other assets (10) --
Purchase of marketable securities (85,721) (98,481)
Proceeds from sales and maturities of marketable securities 49,913 87,756
-------- --------
Net cash used in investing activities (39,535) (11,246)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of common stock 22,647 --
Proceeds from issuance of common stock under stock option plan 7,328 2,506
-------- --------
Net cash provided by financing activities 29,975 2,506
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (33) (10)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 25,142 (2,295)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,445 10,414
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,587 $ 8,119
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ 755
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Increase in additional paid-in capital and decrease in accrued income taxes
related to the tax benefit on the exercises on stock options $ 10,587 $ 1,600
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
FORRESTER RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) for reporting on Form 10-Q.
Accordingly, certain information and footnote disclosures required for complete
financial statements are not included herein. It is recommended that these
financial statements be read in conjunction with the consolidated financial
statements and related notes of Forrester Research, Inc. (the "Company") as
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 1999. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
financial position, results of operations, and cash flows at the dates and for
the periods presented have been included. The consolidated balance sheet
presented as of December 31, 1999 has been derived from the consolidated
financial statements that have been audited by the Company's independent public
accountants. The results of operations for the quarter ended March 31, 2000 may
not be indicative of the results that may be expected for the year ended
December 31, 2000, or any other period.
NOTE 2 - NET INCOME PER COMMON SHARE
Basic net income per common share was computed by dividing net income by the
basic weighted average number of common shares outstanding during the period.
Diluted net income per common share was computed by dividing net income by the
diluted weighted average number of common shares outstanding during the period.
The weighted average number of common equivalent shares outstanding has been
determined in accordance with the treasury-stock method. Common stock
equivalents consist of common stock issuable on the exercise of outstanding
options. Reconciliation of basic to diluted weighted average shares outstanding
is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
<S> <C> <C>
Basic weighted average common shares outstanding 19,949 17,492
Weighted average common equivalent shares 3,629 1,974
------ ------
Diluted weighted average shares outstanding 23,578 19,466
------ ------
</TABLE>
As of March 31, 2000 and 1999, 165,000 and 1,129,314 stock options,
respectively, were excluded from the calculation of diluted weighted average
shares outstanding as the effect would have been anti-dilutive. All per share
information gives effect to the two-for-one stock split effected as a 100%
dividend on February 7, 2000.
NOTE 3 - COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, requires disclosure of comprehensive income and the
components of comprehensive income. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. The components of other
comprehensive income for the three month periods ended March 31, 2000 and 1999
are as follows (in thousands):
6
<PAGE> 7
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
<S> <C> <C>
Unrealized loss on marketable securities, net of taxes $ (10) $ (87)
Cumulative translation adjustment (74) (109)
----- -----
Total other comprehensive income $ (84) $(196)
===== =====
</TABLE>
NOTE 4 - NON-MARKETABLE INVESTMENTS
In March 2000, the Company invested $1.0 million in the common stock of
Doculabs, Inc. ("Doculabs"), an independent technology research firm, resulting
in approximately a 3.9% ownership interest. This investment is being accounted
for using the cost method and, accordingly, is being valued at cost unless a
permanent impairment in its value occurs or the investment is liquidated. As of
March 31, 2000, the Company has determined that a permanent impairment has not
occurred.
The Company also has an option to purchase an additional $2.0 million of
Doculab's equity. The purchase price and the number of shares issuable upon
exercise of the option may vary according to Doculabs' valuation as of December
31, 2000, as determined pursuant to the purchase documents.
In May 1999, the Company invested $1.0 million in a holding company that is the
majority shareholder of Greenfield Online, Inc. (Greenfield), an Internet-based
marketing research firm. As a result of this investment, the Company effectively
owns approximately a 3.4% ownership interest in Greenfield. This investment is
being accounted for using the cost method and, accordingly, is being valued at
cost unless a permanent impairment in its value occurs or the investment is
liquidated. As of March 31, 2000, the Company has determined that a permanent
impairment has not occurred.
In March 2000, the holding company entered into a Note and Warrant Purchase
Agreement with Greenfield. Pursuant to this agreement, the Company loaned the
holding company $108,000 in exchange for a subordinated note, which bears
interest at 10% per annum and is payable June 30, 2000. The value of this note
is included in Other Current Assets in the accompanying Consolidated Balance
Sheet as of March 31, 2000. In addition, the Company was issued warrants to
obtain approximately 2,300 shares of Class A common stock at $7.15. The warrants
are immediately exercisable and expire on March 3, 2005.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
is effective for all periods beginning after June 15, 2000, and establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Adoption of SFAS No. 133 is not expected to have a material impact on the
Company's consolidated financial position or results from operations.
NOTE 6 - SEGMENT AND ENTERPRISE WIDE REPORTING
SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, establishes selected standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to stockholders. SFAS No. 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are defined as components of an enterprise about which separate, discrete
financial information is evaluated regularly by the chief operating decision
maker, or
7
<PAGE> 8
decision-making group, in deciding how to allocate resources and assess
performance. The Company's chief decision-making group, as defined under SFAS
No. 131, is its Executive Team, consisting of its executive officers. To date,
the Company has viewed its operations and managed its business principally as
one segment, research services. As a result, the financial information disclosed
herein materially represents all of the financial information related to the
Company's principal operating segment. Foreign assets represented approximately
4% and 2% of total consolidated assets as of March 31, 2000 and December 31,
1999, respectively.
Net revenues by geographic destination and as a percentage of total revenues are
as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
<S> <C> <C>
United States $22,851 $14,193
United Kingdom 2,629 957
Europe (excluding United Kingdom) 2,454 1,285
Canada 1,463 755
Other 1,420 739
------- -------
$30,817 $17,929
======= =======
United States 74% 79%
United Kingdom 9 6
Europe (excluding United Kingdom) 8 7
Canada 5 4
Other 4 4
------- -------
100% 100%
------- -------
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "expects," "believes," "anticipates," "intends," "plans,"
"estimates," or similar expressions are intended to identify these
forward-looking statements. These statements are based on the Company's current
plans and expectations and involve risks and uncertainties that could cause
actual future activities and results of operations to be materially different
from those set forth in the forward-looking statements. Important factors that
could cause actual results to differ materially from those indicated by
forward-looking statements include, among others, the need to attract and retain
professional staff, management of growth, variability of quarterly operating
results, possible volatility of stock price, dependence on renewals of
membership-based core research, dependence on key personnel, the ability to
integrate acquisitions effectively, risks associated with anticipating market
trends, new products and services, and competition. The Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise. Unless the context
otherwise requires, references in this Quarterly Report to "we", "us", and "our"
refer to Forrester Research, Inc. and our Subsidiaries.
We are a leading independent Internet research firm that conducts research
and analysis on the impact of the Internet and emerging technologies on business
strategy, consumer behavior and society. Our clients, which include senior
management, business strategists and marketing and technology professionals
within large enterprises use our prescriptive, actionable research to understand
and capitalize on the Internet and emerging business models and technologies.
We derive revenues from memberships to our core research and from our
advisory services and Forum events. We offer contracts for our products and
services that are typically renewable annually and payable in advance.
Accordingly, a substantial portion of our billings are initially recorded as
deferred revenue. Research revenues are recognized pro rata on a monthly basis
over the term of the contract. Our advisory services clients purchase such
services together with memberships to our research. Billings attributable to
advisory services are initially recorded as deferred revenue and recognized as
revenue when performed. Similarly, Forum billings are initially recorded as
deferred revenue and are recognized upon completion of each event.
Our operating expenses consist of cost of services and fulfillment, selling
and marketing expenses, general and administrative expenses and depreciation and
amortization. Cost of services and fulfillment represent the costs associated
with the production and delivery of our products and services, and include the
costs of salaries, bonuses and related benefits for research personnel and all
associated editorial, travel and support services. Selling and marketing
expenses include salaries, employee benefits, travel expenses, promotional
costs, sales commissions and other costs incurred in marketing and selling our
products and services. General and administrative expenses include the costs of
the operations, technology, finance and strategy groups and our other
administrative functions.
We believe that the "agreement value" of contracts to purchase research and
advisory services provides a significant measure of our business volume. We
calculate agreement value as the total revenues recognizable from all research
and advisory service contracts in force at a given time, without regard to how
much revenue has already been recognized. Agreement value increased 71% to
$128.7 million at March 31, 2000 from $75.3 million at March 31, 1999. No single
client accounted for more than 2% of agreement value at March 31, 2000. Our
experience is that a substantial portion of client companies renew expiring
contracts for an equal or higher level of total research and advisory service
fees each year. Approximately 74% of our client companies with memberships
expiring during the twelve-months ended March 31, 2000 renewed one or more
memberships for our products and services. This renewal rate is not necessarily
indicative of the rate of future retention of our revenue base.
9
<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
<S> <C> <C>
Core research 77% 72%
Advisory services and other 23 28
--- ---
Total revenues 100 100
Cost of services and fulfillment 30 37
Selling and marketing 40 35
General and administrative 12 11
Depreciation and amortization 5 5
--- ---
Income from operations 13 12
Other income 5 5
--- ---
Income tax provision 18 17
Provision for income taxes 7 6
--- ---
Net income 11% 11%
=== ===
</TABLE>
THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
REVENUES. Total revenues increased 72% to $30.8 million in the three months
ended March 31, 2000 from $17.9 million in the three months ended March 31,
1999. Revenues from core research increased 83% to $23.8 million in the three
months ended March 31, 2000 from $13.0 million in the three months ended March
31, 1999. The increase in revenues from core research was attributable primarily
to an increase in the number of client companies to 1,926 at March 31, 2000 from
1,340 at March 31, 1999, an increase in the sales organization to 183 employees
at March 31, 2000 from 113 at March 31, 1999, and sales of additional core
research to existing clients. No single client company accounted for more than
2% of revenues for the three months ended March 31, 2000.
Advisory services and other revenues increased 43% to $7.1 million in the
three months ended March 31, 2000 from $5.0 million in the three months ended
March 31, 1999. This increase was attributable primarily to increased demand for
our advisory services programs.
Revenues attributable to customers outside the United States increased 113%
to $8.0 million in the three months ended March 31, 2000 from $3.7 million in
the three months ended March 31, 1999, and increased as a percentage of total
revenues to 26% for the three months ended March 31, 2000 from 21% for the same
period in 1999. The increase in international revenues is attributable primarily
to the Company's continued expansion of its European headquarters in Amsterdam,
the Netherlands, the acquisition of United Kingdom-based Fletcher Research
Limited in November 1999, and an increase in international sales personnel. We
invoice our international clients in U.S. dollars, except for those billed by
our subsidiary Fletcher Research Limited, which invoices its clients in British
Pounds Sterling.
COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
decreased as a percentage of total revenues to 30% in the three months ended
10
<PAGE> 11
March 31, 2000 from 37% in the three months ended March 31, 1999. These expenses
increased 41% to $9.3 million in the three months ended March 31, 2000 from $6.6
million in the three months ended March 31, 1999. The decrease in expense as a
percentage of total revenues reflects a larger revenue base in 2000, a decrease
in the number of events held during the quarter to two in 2000 from three in
1999, and lower production costs resulting from the leverage of our eResearch
platform. The expense increase in the current period reflects increased research
analyst staffing and related compensation expense.
SELLING AND MARKETING. Selling and marketing expenses increased as a
percentage of total revenues to 40% in the three months ended March 31, 2000
from 35% in the three months ended March 31, 1999. These expenses increased 97%
to $12.2 million in the three months ended March 31, 2000 from $6.2 million in
the three months ended March 31, 1999. The increases in expense and expense as a
percentage of total revenues were principally due to the addition of direct
salespeople and related commission and travel expenses.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
as a percentage of total revenues to 12% in the three months ended March 31,
2000 from 11% in the three months ended March 31, 1999. These expenses increased
85% to $3.8 million in the three months ended March 31, 2000 from $2.0 million
in the three months ended March 31, 1999. The increases in expense and expense
as a percentage of total revenues were principally due to increased staffing in
the Company's operations, finance, and technology groups and related
compensation and recruiting expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 64% to $1.4 million in the three months ended March 31, 2000 from
$873,000 in the three months ended March 31, 1999. The increase in these
expenses was principally due to purchases of computer equipment, software,
office furnishings and leasehold improvements to support business growth.
OTHER INCOME, NET. Other income, consisting primarily of interest income,
increased 69% to $1.5 million in the three months ended March 31, 2000 from
$860,000 in the three months ended March 31, 1999. The increase was due to
additional interest income from higher cash and marketable securities balances
resulting from positive cash flows from operations, proceeds of $22.6 million
from our offering of common stock in February 2000 and $7.3 million for
exercises of stock options by employees.
PROVISION FOR INCOME TAXES. During the three months ended March 31, 2000,
we recorded a tax provision of $2.1 million, reflecting an effective tax rate of
37.5%. During the three months ended March 31, 1999, we recorded a tax provision
of $1.2 million, which reflected an effective tax rate of 38%. The decrease in
our effective tax rate resulted from a reduction in our effective state tax rate
and an increase in our investments in tax-exempt marketable securities.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations during these periods primarily through
funds generated from operations. Memberships for core research, which
constituted approximately 77% of our revenues for the three months ended March
31, 2000, are annually renewable and are generally payable in advance. We
generated $34.8 million and $6.5 million in cash from operating activities
during the three-month periods ended March 31, 2000 and 1999, respectively.
During the three-months ended March 31, 2000, we used $39.5 million of cash
in investing activities, consisting of $2.7 million for purchases of property
and equipment, $1.0 million for a minority investment in an independent industry
analyst research firm and $35.8 million for net purchases of marketable
securities. We regularly invest excess funds in short- and intermediate-term
interest-bearing obligations of investment grade.
During the three-months ended March 31, 2000, we generated $30.0 million
from financing activities, consisting of $22.6 million of net proceeds from our
public offering of common stock and $7.3 million in proceeds from exercises of
employee stock options. As a result of these option exercises during the
three-months ended March 31, 2000, we will receive a tax benefit in the form of
a tax deduction
11
<PAGE> 12
that will offset approximately $10.6 million of our taxable income. This tax
benefit is reflected as an increase in our Shareholders' Equity.
As of March 31, 2000, we had cash and cash equivalents of $38.6 million and
$121.1 million in marketable securities. We do not have a line of credit and do
not anticipate the need for one in the foreseeable future. We plan to continue
to introduce new products and services and to invest in our infrastructure over
the next twelve months. We believe that our current cash balance, marketable
securities, and cash flows from operations will satisfy working capital,
financing activities, and capital expenditure requirements for at least the next
two years.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.
INTEREST RATE SENSITIVITY. We maintain an investment portfolio consisting
mainly of corporate obligations, federal agency obligations, state and municipal
bonds, and U.S. Treasury notes with a weighted average maturity of less than one
year. These held-to-maturity securities are subject to interest rate risk and
will fall in value if market interest rates increase. If market interest rates
were to increase immediately and uniformly by 10% from levels at March 31, 2000,
the fair market value of the portfolio would decline by an immaterial amount. We
have the ability to hold our fixed income investments until maturity. Therefore,
we would not expect our operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market interest rates on
our securities portfolio. The following table provides information about our
investment portfolio. For investment securities, the table presents principal
cash flows and related weighted average interest rated by expected maturity
dates.
Principal amounts by expected maturity in U.S. Dollars (in thousands,
except interest rates):
<TABLE>
<CAPTION>
FAIR VALUE AT FY 2003
MARCH 31, AND
2000 FY 2000 FY 2001 FY 2002 THEREAFTER
<S> <C> <C> <C> <C> <C>
Cash equivalents $ 36,188 $36,188 $ -- $ -- $ --
Weighted average interest rate 5.55% 5.55% --% --% --%
Investments $121,109 $62,918 $ 26,256 $11,063 $ 20,872
Weighted average interest rate 4.73% 4.31% 6.19% 4.71% 4.15%
Total portfolio $157,297 $99,106 $ 26,256 $11,063 $ 20,872
Weighted average interest rate 4.91% 4.76% 6.19% 4.71% 4.15%
</TABLE>
FOREIGN CURRENCY EXCHANGE. On a global level, we face exposure to adverse
movements in foreign currency exchange rates. This exposure may change over time
as business practices evolve and could have a material adverse impact on our
financial results. Historically, our primary exposure has been related to
non-dollar-denominated operating expenses in Europe, Canada, and Asia, where we
sell primarily in U.S. dollars. The introduction of the Euro as a common
currency for members of the European Monetary Union has taken place in our
fiscal year 2000. We have not determined what impact, if any, the Euro will have
on foreign exchange exposure. We are prepared to hedge against fluctuations in
the Euro if this exposure becomes material. As of March 31, 2000, the total
assets related to non-dollar-denominated currencies was approximately $10.0
million.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On February 7, 2000 a Special Meeting of Stockholders was held to approve an
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 25 million to 125 million
shares.
The proposal passed with the following vote:
- --------------------------------------------------------------------------------
For: 6,543,419
Against or withheld: 1,449,572
Abstentions and Broker Non-Votes: 150
- --------------------------------------------------------------------------------
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<PAGE> 14
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 thereunto duly authorized.
Forrester Research, Inc.
By: /s/ George F. Colony
---------------------------------------
George F. Colony
Chairman of the Board and
Chief Executive Officer
Date: May 12, 2000
By: /s/ Susan Whirty Maffei
---------------------------------------
Susan Whirty Maffei
Chief Financial Officer and Vice President,
Operations
(principal financial and accounting officer)
Date: May 12, 2000
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORRESTER
RESEARCH, INC.'S DECEMBER 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN
FORM 10-K.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 38,586,449
<SECURITIES> 121,109,199
<RECEIVABLES> 29,199,851
<ALLOWANCES> 585,248
<INVENTORY> 0
<CURRENT-ASSETS> 200,791,316
<PP&E> 22,293,492
<DEPRECIATION> 8,892,970
<TOTAL-ASSETS> 223,458,259
<CURRENT-LIABILITIES> 100,658,990
<BONDS> 0
0
0
<COMMON> 207,135
<OTHER-SE> 122,592,134
<TOTAL-LIABILITY-AND-EQUITY> 122,799,269
<SALES> 0
<TOTAL-REVENUES> 30,817,400
<CGS> 0
<TOTAL-COSTS> 9,294,572
<OTHER-EXPENSES> 17,426,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,549,704
<INCOME-TAX> 2,081,000
<INCOME-CONTINUING> 3,468,704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,468,704
<EPS-BASIC> .17
<EPS-DILUTED> .15
</TABLE>
