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 16, 2008
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 16, 2008, FactSet Research Systems Inc. issued a press release announcing its results for the three months ended November 30, 2008. 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 16, 2008 | |
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 16, 2008 | By: | /s/ Peter G. Walsh | ||||||
| Peter G. Walsh Executive Vice President, Chief Financial Officer and Treasurer | ||||||||
EXHIBIT INDEX
| Exhibit No. |
Description of Document | |
| 99.1 | Press Release of Registrant, dated December 16, 2008 reporting the results of operations for the Registrant’s first fiscal quarter ended November 30, 2008. | |
| FactSet Research Systems Inc. 601 Merritt 7 Norwalk, Connecticut 06851 203.810.1000 / 203.810.1001 Fax |
Exhibit 99.1 | |
| News Release
FOR IMMEDIATE RELEASE |
Contact: Peter Walsh FactSet Research Systems | |
FactSet Research Systems Reports Earnings per Share Growth of 26% during the First Quarter of Fiscal 2009
Norwalk, Connecticut – December 16, 2008 – 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 2009.
For the quarter ended November 30, 2008, revenues increased to $155.6 million, an increase of 16% compared to the prior year. Operating income for the first quarter advanced to $51.3 million, up 21% from $42.5 million in the same period of fiscal 2008. Net income rose to $35.6 million as compared to $29.4 million a year ago. Diluted earnings per share increased to $0.73, up from $0.58 in the same period of fiscal 2008. Included in the just completed first quarter were income tax benefits of $1.4 million or $0.03 per diluted share related to the reenactment of the U.S. Federal R&D credit in October 2008, retroactive to January 1, 2008. The first quarter of fiscal 2009 marked the first full quarter of operations for FactSet Fundamentals. FactSet Fundamentals increased revenues by $0.8 million and reduced diluted earnings per share by $0.03 per share.
Consolidated Statements of Income
(Condensed and Unaudited)
| Three Months Ended | |||||||||
| November 30, | |||||||||
| (In thousands, except per share data) | 2008 | 2007 | Change | ||||||
| Revenues |
$ | 155,632 | $ | 134,175 | 16.0 | % | |||
| Operating income |
51,330 | 42,497 | 20.8 | % | |||||
| Other income |
618 | 2,042 | (69.7 | )% | |||||
| Provision for income taxes |
16,363 | 15,140 | 8.1 | % | |||||
| Net income |
35,585 | 29,399 | 21.0 | % | |||||
| Diluted earnings per common share |
$ | 0.73 | $ | 0.58 | 25.9 | % | |||
| Diluted weighted average common shares |
49,076 | 50,610 | |||||||
Philip A. Hadley, Chairman and CEO said, “Our earnings results in the first quarter clearly demonstrate the strength of FactSet’s business model. In the most turbulent three months for our clients in decades, FactSet was able to find productivity solutions for them and grow both our ASV and EPS.”
Annual Subscription Value (“ASV”)
ASV increased $7.0 million when excluding currency effects during the first quarter and rose 14.5% or $78.4 million over the prior year. Including foreign exchange, ASV increased $5.2 million during the quarter.
ASV was $620 million at November 30, 2008. Of this total, 79% of ASV is derived from buy-side institutions and the remainder derives from the sell-side firms who perform M&A advisory work and equity research. Many sources are predicting that the current market turmoil will result in a reduction of the number of hedge funds. The contribution from hedge funds to FactSet’s total ASV is 6%. ASV at any given point in time represents the forward-looking revenues for the next 12 months from all annual subscription services currently being supplied to clients.
Other Financial Highlights
| • | ASV from FactSet’s U.S. operations were $421 million, while overseas operations support ASV of $199 million. |
| • | U.S. revenues were $106 million, up 13% from the year ago quarter. |
| • | Non-U.S. revenues increased 22% to $49 million. |
| • | Operating margins were 33.0%, up 130 basis points from the first quarter last year. |
| • | Other income declined 70% to $0.6 million from a reduction in U.S. interest rates during the last twelve months. |
| • | Free cash flow was $30.4 million, more than three times the amount generated in the first quarter of last year. |
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Operational Highlights
| • | Client retention rate remained above 95%. |
| • | Users rose to 40,200 at quarter end, up 100 professionals over the past three months. |
| • | Client count was 2,079 at November 30, a net decrease of 6 clients. The number of gross client additions during the quarter was 43% lower than the average over the last four quarters. |
| • | PA 2.0 was deployed by 649 clients and 5,867 users at quarter end, a user increase of 16% over the prior year. |
| • | Employee count at November 30, 2008 was 2,054, up 120 employees during the quarter. Excluding FactSet Fundamentals, the quarterly increase in employees was 40 or 2%. |
| • | Capital expenditures were $8.7 million, net of landlord contributions for construction. Expenditures for computer equipment were $5.4 million and the remainder covered office space expansion. |
| • | The Company repurchased 976,881 shares for $42.3 million. At November 30, 2008, $62.7 million remains authorized for future repurchases. Common shares outstanding at November 30, 2008 were 47.1 million. |
Foreign Currency
The U.S. dollar strengthened during the first quarter of fiscal 2009, particularly against the British Pound and Euro, which reduced FactSet’s expense base. Since 96% of the Company’s revenues are billed in U.S. dollars, this improved operating income by $2.1 million or $0.03 per share.
Financial Position Update
FactSet has $124 million of cash on hand and no long-term debt. During the last 12 months, the Company generated $138 million of free cash flow. FactSet’s strong financial position provides a high degree of financial flexibility to fund both its operations and capital allocation process.
Business Outlook
The following forward-looking statements reflect FactSet’s expectations as of December 16, 2008. 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 2009 Expectations
| • | Revenues are expected to range between $156 million and $159 million. |
| • | Operating margins are expected to range between 31.5% and 33%. This guidance includes FactSet Fundamentals. |
| • | Other income is expected to be between $0.4 million and $0.7 million. |
| • | The effective tax rate is expected to range between 33.6% and 34.2%. |
| • | EPS dilution from FactSet Fundamentals should be $0.04 per share. The primary expense drivers are the cost of the Transition Services Agreement (“TSA”) with Thomson Reuters Inc. and new employee growth to support the Fundamentals collection operation. |
Full Year Fiscal 2009
| • | The guidance for capital expenditures, net of landlord contributions, remains unchanged between $32 million and $38 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
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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 status of the global economy; the ability to integrate newly acquired companies; 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 continued performance of Thomson Reuters under the TSA; 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.
Conference Call
The Company will host a conference call today, December 16, 2008 at 11:00 a.m. (EST) to review the first quarter fiscal 2009 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 from more than twenty-three locations worldwide.
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FactSet Research Systems Inc.
Consolidated Statements of Income—Unaudited
| Three Months Ended November 30, | ||||||
| (In thousands, except per share data) | 2008 | 2007 | ||||
| Revenues |
$ | 155,632 | $ | 134,175 | ||
| Operating expenses |
||||||
| Cost of services |
53,332 | 44,943 | ||||
| Selling, general and administrative |
50,970 | 46,735 | ||||
| Total operating expenses |
104,302 | 91,678 | ||||
| Operating income |
51,330 | 42,497 | ||||
| Other income |
618 | 2,042 | ||||
| Income before income taxes |
51,948 | 44,539 | ||||
| Provision for income taxes |
16,363 | 15,140 | ||||
| Net income |
$ | 35,585 | $ | 29,399 | ||
| Basic earnings per common share |
$ | 0.75 | $ | 0.61 | ||
| Diluted earnings per common share |
$ | 0.73 | $ | 0.58 | ||
| Weighted average common shares (Basic) |
47,412 | 48,381 | ||||
| Weighted average common shares (Diluted) |
49,076 | 50,610 | ||||
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FactSet Research Systems Inc.
Consolidated Statements of Financial Condition—Unaudited
| (In thousands) | November 30, 2008 |
August 31, 2008 |
||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 123,856 | $ | 117,986 | ||||
| Investments |
— | 25,032 | ||||||
| Accounts receivable, net of reserves |
71,313 | 74,859 | ||||||
| Prepaid FactSet Fundamentals database updates—current |
4,257 | 6,377 | ||||||
| Prepaid taxes |
— | 1,090 | ||||||
| Deferred taxes |
3,500 | 3,271 | ||||||
| Other current assets |
4,757 | 5,908 | ||||||
| Total current assets |
207,683 | 234,523 | ||||||
| Property, equipment, and leasehold improvements, net |
92,278 | 91,113 | ||||||
| Goodwill |
175,196 | 187,780 | ||||||
| Intangible assets, net |
49,409 | 58,333 | ||||||
| Prepaid FactSet Fundamentals database updates—non-current |
618 | 2,000 | ||||||
| Deferred taxes |
11,799 | 10,279 | ||||||
| Other assets |
4,296 | 3,246 | ||||||
| Total assets |
$ | 541,279 | $ | 587,274 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable and accrued expenses |
$ | 26,606 | $ | 22,366 | ||||
| Accrued compensation |
11,641 | 38,095 | ||||||
| Deferred fees |
21,842 | 23,531 | ||||||
| Dividends payable |
8,480 | 8,634 | ||||||
| Taxes payable |
12,162 | — | ||||||
| Total current liabilities |
80,731 | 92,626 | ||||||
| Deferred taxes |
3,965 | 5,122 | ||||||
| Taxes payable |
4,604 | 3,905 | ||||||
| Deferred rent and other non-current liabilities |
19,835 | 20,150 | ||||||
| Total liabilities |
$ | 109,135 | $ | 121,803 | ||||
| Stockholders’ Equity |
||||||||
| Common stock |
$ | 572 | $ | 571 | ||||
| Additional paid-in capital |
214,724 | 206,585 | ||||||
| Treasury stock, at cost |
(353,523 | ) | (311,248 | ) | ||||
| Retained earnings |
594,486 | 567,381 | ||||||
| Accumulated other comprehensive (loss) income |
(24,115 | ) | 2,182 | |||||
| Total stockholders’ equity |
432,144 | 465,471 | ||||||
| Total liabilities and stockholders’ equity |
$ | 541,279 | $ | 587,274 | ||||
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FactSet Research Systems Inc.
Consolidated Statements of Cash Flows—Unaudited
| Three Months Ended November 30, |
||||||||
| (In thousands) | 2008 | 2007 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 35,585 | $ | 29,399 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
| Depreciation and amortization |
8,455 | 7,112 | ||||||
| Stock-based compensation expense |
4,173 | 2,714 | ||||||
| Deferred income taxes |
(2,796 | ) | 2,475 | |||||
| (Gain) loss on sale of assets |
(130 | ) | 88 | |||||
| Tax benefits from share-based payment arrangements |
(376 | ) | (4,320 | ) | ||||
| Changes in assets and liabilities |
||||||||
| Accounts receivable, net of reserves |
3,546 | (3,410 | ) | |||||
| Accounts payable and accrued expenses |
4,820 | (5,016 | ) | |||||
| Accrued compensation |
(25,579 | ) | (20,911 | ) | ||||
| Deferred fees |
(1,689 | ) | (3,417 | ) | ||||
| Taxes payable, net of prepaid taxes |
14,946 | 8,381 | ||||||
| Landlord contributions |
687 | 90 | ||||||
| Other working capital accounts, net |
(1,882 | ) | 439 | |||||
| Net cash provided by operating activities |
39,760 | 13,624 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Proceeds from sales of investments |
25,260 | 4,154 | ||||||
| Purchases of investments |
— | (3,079 | ) | |||||
| Insurance proceeds from fixed asset recoveries |
— | 175 | ||||||
| Purchases of property, equipment and leasehold improvements |
(9,379 | ) | (5,750 | ) | ||||
| Net cash provided by (used in) investing activities |
15,881 | (4,500 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Dividend payments |
(8,586 | ) | (5,788 | ) | ||||
| Repurchase of common stock |
(42,275 | ) | (29,669 | ) | ||||
| Proceeds from employee stock plans |
3,487 | 7,760 | ||||||
| Tax benefits from share-based payment arrangements |
376 | 4,320 | ||||||
| Net cash used in financing activities |
(46,998 | ) | (23,377 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(2,773 | ) | 341 | |||||
| Net increase (decrease) in cash and cash equivalents |
5,870 | (13,912 | ) | |||||
| Cash and cash equivalents at beginning of period |
117,986 | 168,834 | ||||||
| Cash and cash equivalents at end of period |
$ | 123,856 | $ | 154,922 | ||||
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