UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 18, 2007
FactSet Research Systems Inc.
(Exact name of Registrant as specified in its charter)
| Delaware | 1-11869 | 13-3362547 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
601 Merritt 7
Norwalk, Connecticut 06851
(Address of principal executive offices)
(203) 810-1000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition |
On December 18, 2007, FactSet Research Systems Inc. issued a press release announcing its results for the three months ended November 30, 2007. The press release is attached as Exhibit 99.1 to this report on Form 8-K. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
| Exhibit No. | Description | |
| 99.1 | Press Release of FactSet Research Systems Inc., dated December 18, 2007 | |
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, hereunto duly authorized.
| FACTSET RESEARCH SYSTEMS INC. (Registrant) | ||||||||
| Date: December 18, 2007 | By: | /s/ Peter G. Walsh | ||||||
| Peter G. Walsh Senior Vice President, Chief Financial Officer and Treasurer | ||||||||
EXHIBIT INDEX
| Exhibit No. | Description of Document | |
| 99.1 | Press Release of Registrant, dated December 18, 2007 reporting the results of operations for the Registrant’s first fiscal quarter ended November 30, 2007. | |
Exhibit 99.1
FactSet Research Systems Inc.
601 Merritt 7
Norwalk, Connecticut 06851
203.810.1000 / 203.810.1001 Fax
| News Release | Contact: | |||||
| Peter Walsh | ||||||
| FactSet Research Systems Inc. | ||||||
| FOR IMMEDIATE RELEASE |
203.810.1000 |
FactSet Research Systems Net Income Advances 24% for the First Quarter of Fiscal 2008
Norwalk, Connecticut – December 18, 2007 – FactSet Research Systems Inc. (NYSE: FDS), a leading provider of integrated financial information and analytical applications to the global investment community, today announced its results for the first quarter of fiscal 2008.
For the quarter ended November 30, 2007, revenues increased $25.3 million, up 23.2% compared to the prior year. Operating income for the first quarter advanced to $42.5 million, up 20.0% over the prior year. On a constant currency basis, revenues increased 22% while operating income advanced 23% over the year ago quarter. Net income rose 23.6% to $29.4 million as compared to $23.8 million a year ago. Diluted earnings per share were $0.58, up from $0.47 in the same period of fiscal 2007.
Consolidated Statements of Income
(Condensed and Unaudited)
| Three Months Ended November 30, |
|||||||||
| (In thousands, except per share data) |
2007 | 2006 | Change | ||||||
| Revenues |
$ | 134,175 | $ | 108,881 | 23.2 | % | |||
| Total operating expenses |
91,678 | 73,460 | 24.8 | % | |||||
| Income from operations |
42,497 | 35,421 | 20.0 | % | |||||
| Net income |
29,399 | 23,795 | 23.6 | % | |||||
| Diluted earnings per common share |
$ | 0.58 | $ | 0.47 | 23.4 | % | |||
| Diluted weighted average common shares |
50,610 | 51,079 | |||||||
Philip A. Hadley, Chairman and CEO said, “We delivered subscription growth of at least $20 million in each of the last four quarters. We were pleased to achieve this in the first quarter given an environment in which many large banks are carefully managing expenses.”
First Quarter Financial Highlights
Subscriptions increased $24.3 million during the quarter and were up $21.1 million excluding currency. On a constant currency basis, subscriptions advanced $97.2 million over the last twelve months, up 22.2%. At November 30, 2007 subscriptions were $541.2 million. Of this total, subscriptions from FactSet’s domestic operations were $373.7 million, while overseas operations were $167.5 million.
“Subscriptions” at any given point in time represent the forward-looking revenues for the next 12 months from all subscription services currently being supplied to clients.
Demand for FactSet’s services continued unabated. Users rose to 37,800, up from 35,000 at the beginning of the quarter. Client count was 1,993 as of November 30, a net increase of 40 clients during the quarter.
Other financial and operational highlights of the first quarter of fiscal 2008 include:
| • | U.S. revenues were $93.9 million, up 22% excluding non-subscription revenues. |
| • | Revenues from non-U.S. operations increased 24% to $40.3 million. On a constant currency basis and excluding non-subscription revenues, the increase was 22%. |
| • | 565 clients, consisting of 5,070 users, subscribed to the PA 2.0 application at quarter-end. |
| • | Employee count as of November 30, 2007 was 1,743, up 5% during the quarter and up 22% over the last twelve months. |
| • | Client retention rate remained above 95%. |
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| • | The Company repurchased 443,065 shares for $29.3 million. At November 30, 2007, $27.8 million is authorized for future repurchases. Common shares outstanding at November 30, 2007 were 48.2 million. |
| • | FactSet successfully held its third annual Investment Process Symposium in November 2007 with 292 client attendees. |
Foreign Currency
The U.S. dollar weakened significantly during the first quarter of fiscal 2008, particularly against the Euro. The decline in value had the following effects in the first quarter when holding currencies constant from the fourth quarter of fiscal 2007.
| • | Increased revenues by $0.4 million and operating expenses by $0.9 million. |
| • | Decreased income from operations by $0.5 million and operating margins by 50 basis points. |
| • | Decreased diluted earnings per share by $0.01. |
Capital Expenditures
Capital expenditures in the first quarter of fiscal 2008 were $5.7 million, net of landlord contributions for construction. Expenditures for computer equipment were $5.6 million and the remainder covered office space expansion. Major expenditures included adding eight Hewlett Packard Integrity mainframes to the Company’s data centers. To recap where FactSet stands on its technology transition, 12 Integrity mainframes have been deployed in the last five months and four additional machines will be purchased in early 2008. The successful upgrade to Hewlett Packard Integrity mainframes from Hewlett Packard Alpha mainframes is scheduled to be completed in the upcoming second quarter of fiscal 2008.
Business Outlook
The following forward-looking statements reflect FactSet’s expectations as of December 18, 2007. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its forward-looking statements until its next quarterly results announcement, other than in publicly available statements.
Second Quarter Fiscal 2008 Expectations
| • | Revenues are expected to range between $137 million and $141 million. |
| • | Operating margins are expected to range between 30.5% and 32.5%. This operating margin guidance holds currencies constant and assumes no change in the expected outcome of performance based stock options. |
| • | The effective tax rate is expected to range between 34.0% and 35.0%. |
Full Year Fiscal 2008
| • | Capital expenditures, net of landlord contributions, are expected to range between $38 million and $44 million. |
Forward looking statements
This news release contains forward-looking statements based on management’s current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product development, market position, subscriptions, expected expenditures and financial results are forward-looking statements. Forward-looking statements may be identified by words like “expected,” “anticipates,” “plans,” “intends,” “projects,” “should,” “indicates,” “continues,” “subscriptions” and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in FactSet’s filings with the Securities and Exchange Commission, particularly its latest annual report on Form 10-K and quarterly reports on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, the stability of global securities markets; the ability to hire qualified personnel; the maintenance of the Company’s leading technological position; the impact of global market trends on the Company’s revenue growth rate and future results of operations; the negotiation of contract terms with corporate vendors, data suppliers and potential landlords; the retention of key clients; the successful resolution of ongoing audits by tax authorities; the continued 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.
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Conference Call
The Company will host a conference call today, December 18, 2007 at 11:00 a.m. (EST) to review the first quarter fiscal 2008 earnings release. To listen, please visit the investor relations section of the Company’s website at www.factset.com.
About FactSet
FactSet Research Systems Inc. combines integrated financial information, analytical applications, and client service to enhance the workflow and productivity of the global investment community. The Company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations along with its affiliates from more than twenty-three locations worldwide, including Boston, New York, Chicago, San Mateo, London, Frankfurt, Paris, Amsterdam, Milan, Tokyo, Hong Kong, and Sydney.
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FactSet Research Systems Inc.
Consolidated Statements of Financial Condition
| (In thousands and unaudited) | November 30, 2007 |
August 31, 2007 |
||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 154,922 | $ | 168,834 | ||||
| Investments |
16,386 | 17,388 | ||||||
| Receivables from clients and clearing broker, net |
62,989 | 59,579 | ||||||
| Deferred taxes |
2,930 | 2,808 | ||||||
| Other current assets |
4,354 | 3,723 | ||||||
| Total current assets |
241,581 | 252,332 | ||||||
| Property, equipment, and leasehold improvements, net |
79,280 | 78,945 | ||||||
| Goodwill |
149,127 | 146,187 | ||||||
| Intangible assets, net |
36,360 | 36,789 | ||||||
| Deferred taxes |
8,911 | 7,211 | ||||||
| Other assets |
2,407 | 2,286 | ||||||
| Total assets |
$ | 517,666 | $ | 523,750 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable and accrued expenses |
$ | 18,611 | $ | 23,461 | ||||
| Accrued compensation |
9,288 | 30,105 | ||||||
| Deferred fees |
22,313 | 25,730 | ||||||
| Dividends payable |
5,788 | 5,802 | ||||||
| Taxes payable |
8,920 | 5,552 | ||||||
| Total current liabilities |
64,920 | 90,650 | ||||||
| Deferred taxes |
6,443 | 6,450 | ||||||
| Taxes payable |
3,772 | — | ||||||
| Deferred rent and other non-current liabilities |
18,477 | 17,339 | ||||||
| Total liabilities |
$ | 93,612 | $ | 114,439 | ||||
| Stockholders’ Equity |
||||||||
| Common stock |
565 | 562 | ||||||
| Capital in excess of par value |
177,571 | 162,561 | ||||||
| Retained earnings |
494,781 | 469,880 | ||||||
| Treasury stock, at cost |
(263,043 | ) | (233,372 | ) | ||||
| Accumulated other comprehensive income |
14,180 | 9,680 | ||||||
| Total stockholders’ equity |
424,054 | 409,311 | ||||||
| Total liabilities and stockholders’ equity |
$ | 517,666 | $ | 523,750 | ||||
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FactSet Research Systems Inc.
Consolidated Statements of Income
| Three Months Ended November 30, | ||||||
| (In thousands, except per share data and unaudited) | 2007 | 2006 | ||||
| Revenues |
$ | 134,175 | $ | 108,881 | ||
| Operating expenses |
||||||
| Cost of services |
44,943 | 34,941 | ||||
| Selling, general and administrative |
46,735 | 38,519 | ||||
| Total operating expenses |
91,678 | 73,460 | ||||
| Income from operations |
42,497 | 35,421 | ||||
| Other income |
2,042 | 1,487 | ||||
| Income before income taxes |
44,539 | 36,908 | ||||
| Provision for income taxes |
15,140 | 13,113 | ||||
| Net income |
$ | 29,399 | $ | 23,795 | ||
| Basic earnings per common share |
$ | 0.61 | $ | 0.49 | ||
| Diluted earnings per common share |
$ | 0.58 | $ | 0.47 | ||
| Weighted average common shares (Basic) |
48,381 | 48,957 | ||||
| Weighted average common shares (Diluted) |
50,610 | 51,079 | ||||
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FactSet Research Systems Inc.
Consolidated Statements of Cash Flows
| Three Months Ended November 30, |
||||||||
| (In thousands and unaudited) | 2007 | 2006 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 29,399 | $ | 23,795 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
| Depreciation and amortization |
7,112 | 6,574 | ||||||
| Stock-based compensation expense |
2,714 | 2,449 | ||||||
| Deferred income taxes |
(1,845 | ) | (961 | ) | ||||
| Loss on sale of assets |
88 | — | ||||||
| Changes in assets and liabilities, net of effects of acquisitions |
||||||||
| Receivables from clients and clearing broker, net |
(3,410 | ) | (1,972 | ) | ||||
| Accounts payable and accrued expenses |
(5,016 | ) | 1,023 | |||||
| Accrued compensation |
(20,911 | ) | (14,540 | ) | ||||
| Deferred fees |
(3,417 | ) | (2,717 | ) | ||||
| Taxes payable |
8,381 | 9,308 | ||||||
| Deferred rent |
930 | 916 | ||||||
| Landlord contributions |
90 | 359 | ||||||
| Other working capital accounts, net |
(491 | ) | (1,287 | ) | ||||
| Net cash provided by operating activities |
13,624 | 22,947 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Proceeds from sales of investments |
4,154 | 5,154 | ||||||
| Purchases of investments |
(3,079 | ) | (5,438 | ) | ||||
| Insurance proceeds from fixed asset recoveries |
175 | — | ||||||
| Purchases of property, equipment and leasehold improvements |
(5,750 | ) | (7,973 | ) | ||||
| Net cash used in investing activities |
(4,500 | ) | (8,257 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Dividend payments |
(5,788 | ) | (2,931 | ) | ||||
| Repurchase of common stock |
(29,669 | ) | (5,123 | ) | ||||
| Proceeds from employee stock plans |
7,760 | 3,978 | ||||||
| Income tax benefits from stock option exercises |
4,320 | 1,447 | ||||||
| Net cash used in financing activities |
(23,377 | ) | (2,629 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
341 | 267 | ||||||
| Net (decrease) increase in cash and cash equivalents |
(13,912 | ) | 12,328 | |||||
| Cash and cash equivalents at beginning of period |
168,834 | 126,549 | ||||||
| Cash and cash equivalents at end of period |
$ | 154,922 | $ | 138,877 | ||||
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