<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTER ENDED JUNE 30, 1996
OR
[ ] 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 0-015144
GARTNER GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3099750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 10212 06904-2212
56 Top Gallant Road (Zip Code)
Stamford, CT
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 964-0096
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the Registrant (1) has filed all reports 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 .
--- ---
The number of shares outstanding of the Registrant's capital stock as of
June 30, 1996 was 89,661,224 shares of Common Stock, Class A and 1,600,000
shares of Common Stock, Class B.
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1996 and
September 30, 1995
Consolidated Statements of Operations for the Three Months
ended June 30, 1996 and 1995, and for the Nine Months
ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flow for
the Nine Months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II OTHER INFORMATION
EXHIBITS None
<PAGE> 3
ITEM 1 FINANCIAL STATEMENTS
GARTNER GROUP, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 107,875 $ 66,581
Marketable securities 10,850 28,833
Fees receivable, net 100,082 112,159
Deferred commissions 9,178 16,493
Prepaid expenses and other current assets 14,922 12,162
--------- ---------
Total current assets 242,907 236,228
--------- ---------
Long-term marketable securities 10,740 --
Property and equipment, net 29,994 23,973
Goodwill, net 65,871 62,871
Other assets 8,264 9,834
--------- ---------
Total assets $ 357,776 $ 332,906
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 2,275 $ 6,725
Accounts payable and accrued liabilities 47,673 59,173
Commissions payable 6,907 13,008
Accrued bonuses payable 12,150 15,277
Deferred revenues 159,303 161,001
--------- ---------
Total current liabilities 228,308 255,184
--------- ---------
Deferred revenues 5,315 3,446
Minority interest 0 25
Commitments
Stockholders' equity:
Preferred stock 0 0
Common stock: $.0005 par value 51 51
Additional paid-in capital 88,915 73,278
Cumulative translation adjustment (2,444) (2,500)
Accumulated earnings 51,396 17,257
--------- ---------
137,918 88,086
Less: Treasury stock, at cost (13,765) (13,835)
--------- ---------
Total stockholders' equity 124,153 74,251
--------- ---------
Total liabilities and stockholders' equity $ 357,776 $ 332,906
========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
GARTNER GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 30, June 30,
--------------------------- -------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Continuous services $ 77,458 $ 60,240 $ 224,471 $ 169,230
Other 19,948 16,169 60,244 44,024
--------- --------- --------- ---------
Total revenues 97,406 76,409 284,715 213,254
--------- --------- --------- ---------
Costs and expenses:
Cost of services and product development 38,967 30,458 110,192 81,557
Selling and marketing 23,620 20,501 71,622 58,445
General and administrative 10,504 9,928 31,959 27,165
Transaction costs -- -- 1,665 --
Depreciation 2,202 1,663 6,451 5,018
Amortization of intangibles 910 939 2,565 2,745
--------- --------- --------- ---------
Total costs and expenses 76,203 63,489 224,454 174,930
--------- --------- --------- ---------
Operating income 21,203 12,920 60,261 38,324
Interest income, net 939 668 2,567 1,366
--------- --------- --------- ---------
Income before minority interest and income taxes 22,142 13,588 62,828 39,690
Minority interest -- -- (25) --
--------- --------- --------- ---------
Income before income taxes 22,142 13,588 62,853 39,690
Provision for income taxes 9,521 6,114 27,027 17,304
--------- --------- --------- ---------
Net income $ 12,621 $ 7,474 $ 35,826 $ 22,386
========= ========= ========= =========
Net income per common share $ 0.13 $ 0.08 $ 0.36 $ 0.24
========= ========= ========= =========
Weighted average shares outstanding 100,094 95,372 98,896 94,282
========= ========= ========= =========
</TABLE>
See accompanying notes.
<PAGE> 5
GARTNER GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the nine months ended June 30,
----------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating activities:
Cash provided by operating activities $ 40,317 $ 39,433
Investing activities:
Payment for net assets of subsidiaries acquired (excluding cash) (18,292) (1,895)
Additions of property and equipment, net (12,246) (10,100)
Sale (purchase) of short-term investments, net 7,243 (14,405)
Cash received on disposals of property and equipment -- 11,826
Other investing (25) (13)
--------- ---------
Cash used for investing activities (23,320) (14,587)
--------- ---------
Financing activities:
Principal payments on long-term debt and capital lease obligations (4,450) (4,825)
Issuance of common stock and warrants 7,487 2,876
Purchase of treasury stock -- (11)
Distributions of capital between Dataquest and its
former parent (1,687) (9,349)
Tax benefits of stock transactions with employees 23,223 7,500
--------- ---------
Cash provided by (used for) financing activities 24,573 (3,809)
--------- ---------
Net increase in cash and cash equivalents 41,570 21,037
Effects of foreign exchange rates on cash and cash equivalents (276) 165
Cash and cash equivalents, beginning of period 66,581 48,805
--------- ---------
Cash and cash equivalents, end of period $ 107,875 $ 70,007
========= =========
</TABLE>
See accompanying notes.
<PAGE> 6
GARTNER GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and should be read in conjunction with
the consolidated financial statements and related notes of Gartner Group, Inc.
(the "Company") on Form 10-K for the fiscal year ended September 30, 1995. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of financial position,
results of operations and cash flows at the dates and for the periods presented
have been included.
All historical financial information has been restated to reflect the
acquisition of Dataquest, Incorporated ("Dataquest") in a manner similar to
pooling of interests accounting. (See Note 2 - Acquisition of Dataquest.)
Note 2 - Acquisition of Dataquest
On December 1, 1995, the Company acquired Dataquest, a wholly-owned subsidiary
of The Dun & Bradstreet Corporation (the majority shareholder of the Company).
Consideration consisted of $15.0 million in cash, 3,000,000 shares of Class A
Common Stock from treasury and a five year warrant to purchase 600,000 shares of
Class A Common Stock at $16.42 per share. The Company has accounted for the
acquisition as a transfer and exchange between companies under common control.
Accordingly, the accounts of Dataquest have been combined with the Company's at
historical cost in a manner similar to a pooling of interests. Dataquest is a
provider of information technology ("IT") market research and consulting for the
IT vendor manufacturer and financial communities which complements the Company's
end user focus. Similar to the Company, Dataquest provides annual subscription
services, custom research and consulting. The Company anticipates it will
benefit from the combined broader geographical presence, expanded distribution
capabilities, strengthened research expertise and the elimination of redundant
administrative functions. In connection with the acquisition, the Company
recorded a one time charge in the first fiscal quarter of 1996 of $1.7 million
for certain transaction costs, principally legal and other professional fees.
Further information on the acquisition of Dataquest, including pro forma
financial information, is available in the Company's Current Report on Form 8-K
dated December 1, 1995 and Form 8-K/A dated February 9, 1996.
Note 3 - Subsequent Event, Acquisition of J3 Learning Corporation
On July 31, 1996, the Company acquired J3 Learning Corporation ("J3") for
consideration of approximately $7.9 million in cash and 1,136,658 shares of
Class A Common Stock of Gartner with an approximate market value of $37.1
million. J3 publishes, markets and distributes software educational materials
for corporate and individual training. Training products available in video,
multimedia and computer-based training formats, address software training needs
relating to desktop applications, operating systems, relational databases,
networking technologies and developer languages and tools. The acquisition will
be accounted for as a purchase, and approximately $32.2 million of the
consideration paid will be expensed as in-process research and development
immediately following the closing of the transaction. At June 30, 1996, the
Company had in other receivables a short-term loan receivable from J3
of $800,000 which accrues interest at a floating interest rate of prime plus
three percent annually. Further information is available in the Company's
Registration Statement on Form S-4 filed July 3, 1996. The following unaudited
pro forma summary presents the consolidated results of operations as if the
acquisition of J3 had occurred at the beginning of the periods and does not
purport to be indicative of what would have occurred had the acquisition been
made as of those dates or of results which may occur in the future (in
thousands, except per share data):
<PAGE> 7
<TABLE>
<CAPTION>
For the nine months ended June 30,
----------------------------------
1996 1995
---- ----
<S> <C> <C>
Total revenue $294,686 $224,507
Net income $28,915 $15,785
Net income per common share $0.29 $0.17
</TABLE>
<PAGE> 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below under
"Quarterly Operating Income Trends," "Other Factors that may Affect Future
Performance" and elsewhere in this report.
The following table sets forth certain results of operations as a percentage of
total revenues:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 30, June 30,
-------------------------- -------------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Continuous services 79.5% 78.8% 78.8% 79.4%
Other 20.5 21.2 21.2 20.6
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0
----- ----- ----- -----
Costs and expenses:
Cost of services and product development 40.0 39.9 38.7 38.2
Selling and marketing 24.2 26.8 25.2 27.4
General and administrative 10.8 13.0 11.2 12.7
Transaction costs -- -- 0.6 --
Depreciation 2.3 2.2 2.3 2.4
Amortization of intangibles 0.9 1.2 0.9 1.3
----- ----- ----- -----
Total costs and expenses 78.2 83.1 78.8 82.0
----- ----- ----- -----
Operating income 21.8 16.9 21.2 18.0
Interest income, net 1.0 0.9 0.9 0.6
----- ----- ----- -----
Income before minority interest and income taxes 22.8 17.8 22.1 18.6
Minority interest -- -- -- --
----- ----- ----- -----
Income before income taxes 22.8 17.8 22.1 18.6
Provision for income taxes 9.8 8.0 9.5 8.1
----- ----- ----- -----
Net income 13.0% 9.8% 12.6% 10.5%
===== ===== ===== =====
</TABLE>
TOTAL REVENUES increased 27% to $97.4 million for the third quarter of fiscal
1996 from $76.4 million in the corresponding quarter of fiscal 1995. For the
nine months ended June 30, 1996, total revenues increased 34% to $284.7 million,
as compared to $213.3 million for the nine months ended June 30, 1995.
For the third quarter of fiscal 1996, revenues from continuous services
increased by 29% to $77.5 million from $60.2 million for the same quarter in
fiscal 1995. For the nine months ended June 30, 1996, revenues from continuous
services increased 33% to $224.5 million as compared to $169.2 million in the
same period in 1995. Continuous services revenues comprised approximately 80%
and 79% of total revenues for the 1996 third quarter and for the nine months
ended June 30, 1996, respectively, compared to 79% for both periods in the
preceding year. Continuous services are annually renewable subscription services
which, on
<PAGE> 9
an ongoing basis, highlight industry developments, review new products
and technologies, provide quantitative market research and analyze industry
trends within a particular technology or market sector. Revenues from continuous
services contracts are recognized ratably over the contract period, generally
twelve months. The increases in revenues from continuous services were
volume-oriented as prices have remained relatively constant during the periods
highlighted, and reflect primarily continuing strong market acceptance of new
services introduced in 1996, domestic expansion resulting from a change in sales
strategy which targets clients with revenues ranging from $500 million to $2
billion, as well as continued growth from the existing client base and the
Company's international expansion. During the third quarter the Company launched
a number of internet based products that are expected to expand the distribution
channels for the Company's products beginning in the fourth quarter of fiscal
1996.
Contract value increased 33% to $334.5 million at June 30, 1996 versus June 30,
1995. The Company believes that contract value, which is calculated as the
annualized subscription fees under all continuous service contracts in effect at
a given point in time, without regard to the duration of the contracts
outstanding at such time, is a significant measure of the Company's volume of
business. Historically, the Company has experienced that a substantial portion
of client companies have renewed subscriptions for an equal or higher level of
total subscription payments each year, and annual continuous services revenues
in any fiscal year have closely correlated to contract value at the beginning of
the fiscal year. As of June 30, 1996, 83% of the Company's clients have renewed
one or more subscriptions in the last twelve months. However, this renewal rate
is not necessarily indicative of the rate of retention of the Company's revenue
base, and contract value at any time may not be indicative of future continuous
services revenues or cash flows if the rate of renewal of continuous services
contracts or the timing of new business were to significantly change during the
following twelve months compared to historic patterns. Deferred revenues of
$164.6 million and $164.4 million at June 30, 1996 and September 30, 1995,
respectively, as presented in the Company's balance sheets, represent
unamortized revenues from continuous services contracts at the balance sheet
date plus unamortized revenues of certain other products and noncontinuous
services. Deferred revenues do not directly correlate to contract value as of
the same date, since contract value represents an annualized value of all
outstanding continuous services contracts without regard to the duration of such
contracts, and deferred revenue represents unamortized revenue remaining on all
outstanding contracts including continuous services and other products based on
an actual contract duration.
Other revenues for the third quarter of fiscal 1996 increased 23% compared to
the same quarter in fiscal 1995, to $19.9 million from $16.2 million. Other
revenues consist principally of revenues recognized as earned from conferences,
consulting engagements, publications, training on technology and other
noncontinuous services. The increase of $3.7 million in the current year's third
fiscal quarter over the third fiscal quarter of 1995 resulted primarily from new
conferences, consulting revenues of Nomos Ricera, an information technology
consulting firm located in Italy acquired in October 1995, and sales generated
from Relational Courseware, Inc., the Company's computer-based training business
acquired in July 1995. Other revenues for the nine months ended June 30, 1996
increased 37% to $60.2 million, reflecting primarily the increased revenues from
conferences, consulting, computer-based training products and publications.
OPERATING INCOME rose 64% to $21.2 million, or 22% of revenues, for the third
quarter of fiscal 1996, from $12.9 million or 17% of revenues in the
corresponding quarter last fiscal year. Operating income for the nine months
ended June 30, 1996 rose to $60.3 million, or 21% of revenues, an increase of
57%, from $38.3 million or 18% of revenues in the first nine months of the prior
year, despite a nonrecurring expense of $1.7 million in the first fiscal quarter
of 1996 for costs related to the Dataquest acquisition. As revenues continue to
grow, the Company has benefited from economies of scale, leveraged its resources
(additional revenues have been generated using essentially the same resources)
and, thereby, improved margins. Margin improvement measures implemented by the
Company in the prior two fiscal years continue to favorably impact operating
results, including the standardization of research methodology, electronic
distribution, improved productivity and expansion of the international sales
force, and the further utilization of additional sales channels to reach smaller
organizations.
While costs and expenses increased by $12.7 million to $76.2 million in the
third quarter of fiscal 1996, such costs decreased to 78% of total revenues from
83% in the corresponding quarter of fiscal 1995. The dollar increase in cost
growth reflected primarily the continuing expansion of the Company's
distribution system, RCI expenses incurred in the third quarter of fiscal 1996
with no comparable expenses in the third quarter of fiscal 1995, heavier than
normal conference activity which carries a higher proportion of direct
<PAGE> 10
costs and the additional personnel needed to provide high quality service and
support as the client base grows. In the third fiscal quarter of 1996 as
compared to the same quarter in fiscal 1995, these factors resulted in a 28%
increase in cost of services and product development, a 15% increase in sales
and marketing expense and a 6% increase in general and administrative expense.
However, expressed as a percentage of total revenues, the costs of services and
product development remained constant at 40% of total revenues, while sales and
marketing expenses decreased from 27% to 24%, and general and administrative
costs decreased from 13% to 11% of total revenues, in comparing the third
quarter of fiscal 1996 to the third quarter of fiscal 1995. Costs and expenses
increased to $224.5 million from $174.9 million for nine months ended June 30,
1996 and June 30, 1995, representing 79% and 82% of total revenues,
respectively.
INTEREST INCOME, NET increased to $0.9 million in the third fiscal quarter of
the current year as compared to $0.7 million in the same period of fiscal 1995.
This increase is attributable primarily to an increase in the Company's average
available investable funds and the decrease in debt related to the purchase of
New Science Associates and Real Decisions Corporation, partially offset by lower
rates earned on the investable funds.
PROVISION FOR INCOME TAXES increased by $3.4 million to $9.5 million in the
third fiscal quarter of 1996, compared to the same quarter last year. The
effective rate for the quarter ended June 30, 1996 was 43%, a decrease from 45%
in the comparable fiscal quarter in fiscal 1995. For the nine months ended June
30, 1996, the provision for income taxes increased $9.7 million to $27.0 million
and the effective rate decreased from 44% to 43%.
EARNINGS PER SHARE increased 63% to 13 cents per common share for the third
fiscal quarter of 1996 as compared to 8 cents for the corresponding period last
year. For the nine months ended June 30, 1996 and June 30, 1995, earnings per
share rose to 36 cents versus 24 cents.
QUARTERLY OPERATING INCOME TRENDS. The Company has realized significant growth
in contract value at the end of quarters, particularly the fourth quarter of the
fiscal year. Consequently, fees receivable, deferred revenues, deferred
commissions and commissions payable reflect this activity and typically show
substantial increases at the end of quarters within a fiscal year, particularly
at year end. All contracts are billable upon signing, absent special terms
granted on a limited basis from time-to-time. All contracts are noncancellable
and nonrefundable, except for government contracts which have a 30 day
cancellation clause but have not produced material cancellations to date. The
Company's policy is to record at the time of signing of a continuous service
contract the entire amount of the contract billable as fees receivable and
deferred revenue. Revenues from continuous services contracts are recognized
ratably over the contract period, generally twelve months. The Company also
records the related commission obligation upon the signing of the contract and
amortizes the corresponding deferred commission expense over the contract period
in which the related continuous services revenues are earned and amortized to
income. Historically, continuous services revenues have increased significantly
in the first quarter of the ensuing fiscal year over the immediately preceding
quarter and other revenues have increased similarly from the annual conference
events held in the first quarter. The level of spending for operating expenses
as a percentage of total revenues has decreased gradually from quarter to
quarter during the current fiscal year as compared to increasing levels of
spending from quarter to quarter within the prior fiscal year. Accordingly,
operating income margin has improved each quarter in fiscal 1996, versus a
gradual decline in the prior fiscal year. This change in operating income trends
is due primarily to operating efficiencies gained after the acquisition of
Dataquest in December 1995, including the elimination of redundant selling and
marketing and general and administrative costs, and the leveraging of the
Company's resources (generating additional revenue with essentially the same
resources). Although the Company's operations are currently following these
trends, these trends may not be indicative of the future operating income
results.
OTHER FACTORS THAT MAY AFFECT FUTURE PERFORMANCE. The Company's future operating
results will depend upon the Company's ability to continue to compete
successfully in the market for information products and services. The Company
faces competition from a significant number of independent providers of similar
services as well as the internal marketing and planning organizations of the
Company's clients. The Company also competes indirectly against other
information providers, including electronic and print media companies and
consulting firms. In addition, there are limited barriers to entry into the
Company's market and additional new competitors could readily emerge. There can
be no assurance that the Company will be able to continue to provide the
products and services that meet client needs as the IT markets rapidly
<PAGE> 11
evolves, or that the Company can otherwise continue to compete successfully. In
this regard, the Company's ability to compete is largely dependent upon the
quality of its staff of IT analysts. Competition for qualified analysts is
intense. There can be no assurance that the Company will be able to hire
additional qualified IT analysts as may be required to support the evolving
needs of customers or any growth in the Company's business. Any failure to
maintain a premier staff of IT analysts could adversely affect the quality of
the Company's products and services, and therefore its future business and
operating results. Additionally, there may be increased business risk as the
Company expands product and service offerings to smaller domestic companies and
to other international markets.
The Company is expanding its presence in the IT training industry with the
acquisition of J3. (See Note 3 - Acquisition of J3 Learning Corporation). The
success of the Company in the IT training industry will depend on its ability to
compete with vendors of IT products and services which include a range of
education and training specialists, hardware and system manufacturers, software
vendors, system integrators, dealers, value-added resellers and
network/communications vendors. There can be no assurance that the Company will
be able to provide products that compare favorably with new competitive products
or that competitive pressures will not require the Company to reduce prices.
Future success will also depend on the Company's ability to develop new training
products that are released timely with the introductions of the underlying
software products. Further information regarding the acquisition is available in
the Company's Registration Statement on Form S-4 as filed on July 3, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through cash provided
by operating activities. The combined historical revenue growth and operating
margin improvements have contributed to positive cash provided by operating
activities. In addition, cash flow has been enhanced by the Company's continuing
management of working capital requirements to support increased sales volumes.
The Company's cash and cash equivalents balance at June 30, 1996 and September
30, 1995 was $107.9 million and $66.6 million, respectively, while the
marketable securities balance (including both current and long-term maturities)
decreased to $21.6 million at June 30, 1996 from $28.8 million at September 30,
1995. Cash provided by operating activities totaled $40.3 million for the nine
months ended June 30, 1996, compared with $39.4 million for the comparable
period of the prior year. Cash used for investing activities increased to $23.3
million and primarily consisted of the $15.0 million payment to acquire
Dataquest, $12.2 million for the net purchase of property and equipment, offset
partially by the net sale of marketable securities for $7.3 million. Cash
provided by financing activities totaled $24.6 million in the first nine months
of fiscal 1996 compared to a $3.8 million use of cash for the comparable period
of the prior fiscal year. The increase in fiscal 1996 reflects $23.2 million in
tax benefits from stock transactions with employees. This benefit is due to a
reduction in the corporate income tax liability based on an imputed compensation
deduction equal to employees' gain upon the exercise of stock options at an
exercise price below fair market value. As the market value of the Company's
stock has increased, both the volume of exercises and gains on those exercises
has increased, thereby resulting in significant tax benefits being realized in
the current fiscal year.
At June 30, 1996, short-term debt and capital lease obligations were $2.3
million, a decrease of $4.5 million from the fiscal year end, which represents
settlement of a promissory note for the acquisition of Real Decisions
Corporation. In addition, the Company has available unsecured credit lines in
the amount of $5.0 million each, with The Bank of New York and Chase Manhattan
Bank, under neither of which are there borrowings outstanding. The Company has
outstanding letters of credit with Chase Manhattan Bank of $5.5 million. The
Company currently has no material capital commitments. The Company believes that
its current cash balance, marketable securities, cash provided by operating
activities, and borrowings available under the existing lines of credit, will be
sufficient for the anticipated short-term and foreseeable long-term cash needs
of the Company, including planned acquisitions.
<PAGE> 12
PART II OTHER INFORMATION
None
<PAGE> 13
SIGNATURE
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.
Gartner Group, Inc.
-------------------
Date August 13, 1996 /s/ John F. Halligan
----------------------------
John F. Halligan
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 107,875
<SECURITIES> 10,850
<RECEIVABLES> 104,173
<ALLOWANCES> 4,091
<INVENTORY> 0
<CURRENT-ASSETS> 242,907
<PP&E> 63,489
<DEPRECIATION> 33,495
<TOTAL-ASSETS> 357,776
<CURRENT-LIABILITIES> 228,308
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 357,725
<TOTAL-LIABILITY-AND-EQUITY> 357,776
<SALES> 284,715
<TOTAL-REVENUES> 284,715
<CGS> 110,192
<TOTAL-COSTS> 110,192
<OTHER-EXPENSES> 131,990
<LOSS-PROVISION> 1,665
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> 62,853
<INCOME-TAX> 27,027
<INCOME-CONTINUING> 35,826
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,826
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
