Date of report (Date of earliest event reported): March 20, 2007
FactSet Research Systems Inc.
(Exact name of Registrant as specified in its charter)
Delaware | 1-11869 | 13-3362547 |
(State or other jurisdiction of | (Commission | (I.R.S. Employer |
incorporation or organization) | File Number) | Identification Number) |
601 Merritt 7 | ||
Norwalk, Connecticut 06851 | ||
(Address of principal executive offices) | ||
(203) 810-1000 | ||
(Registrants 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 March 20, 2007, FactSet Research Systems Inc. issued a press release announcing its results for the three and six months ended February 28, 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.
Exhibit | ||
No. | Description | |
| | |
99.1 | Press Release of FactSet Research Systems Inc., dated March 20, 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) | |||
By: | |||
Date: | March 20, 2007 | /s/ Peter G. Walsh | |
| |||
Peter G. Walsh | |||
Senior Vice President, | |||
Chief Financial Officer and Treasurer |
EXHIBIT 99.1
EXHIBIT INDEX
Exhibit | ||
No. | Description of Document | |
| | |
99.1 | Press Release of Registrant, dated March 20, 2007 reporting the results of | |
operations for the Registrants second fiscal quarter ended February 28, 2007. |
FactSet Research Systems Inc. | Contact: |
601 Merritt 7 | Peter Walsh |
Norwalk, Connecticut 06851 | FactSet Research Systems Inc. |
203.810.1000 / 203.810.1001 Fax | 203.810.1000 |
News Release
FOR IMMEDIATE RELEASE
FactSet Research Systems Reports Record Second Quarter Results, Doubles its Dividend and Increases its Share Repurchase Program by $100 Million
Norwalk, Connecticut March 20, 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 second quarter of fiscal 2007.
For the quarter ended February 28, 2007, revenues increased to $116.3 million, up 24% compared to the prior year. Operating income for the second quarter rose to $37.8 million from $29.6 million in the same period of fiscal 2006. Net income advanced 38% to $26.5 million as compared to $19.2 million a year ago. Diluted earnings per share increased to $0.52, up from $0.38 in the same period of fiscal 2006. The effective tax rate for the quarter was 33.1%, down from 36.3% a year ago. Included in the second quarter was an income tax benefit of $1.1 million, resulting in an increase in diluted earnings of $0.03 per share. The tax benefit was caused by the reenactment of the U.S. Federal R&D tax credit in December 2006, retroactive to January 1, 2006.
To aid an investors ability to make more precise interpretations of FactSets financial results, a supplementary schedule is presented on page 7 of this press release to summarize revenues related to services that are not included in the calculation of FactSets subscription value.
The Company also announced today that its Board of Directors approved increasing the quarterly cash dividend by 100% to $0.12 per share, or $0.48 per share per annum, beginning with the Companys next dividend payment in June 2007. The Board also approved an expansion of the existing share repurchase program by an additional $100 million. There is no timeframe to complete the repurchase program and it is expected that share repurchases and cash dividends will be paid using existing and future cash generated by operations.
Consolidated Statements of Income | |||||||||||
(Condensed and Unaudited) | Three Months Ended | Six Months Ended | |||||||||
February 28, |
February 28, | ||||||||||
(In thousands, except per share data) | 2007 | 2006 | Change | 2007 | 2006 | Change | |||||
Revenues | $116,313 | $93,665 | 24.2 % | $225,194 | $183,319 | 22.8 % | |||||
Total operating expenses | 78,528 | 64,021 | 22.7 | 151,988 | 126,272 | 20.4 | |||||
Income from operations | 37,785 | 29,644 | 27.5 | 73,206 | 57,047 | 28.3 | |||||
Net Income | 26,481 | 19,242 | 37.6 | 50,276 | 38,437 | 30.8 | |||||
Diluted earnings per common share | $0.52 | $0.38 | 36.8 | $0.98 | $0.76 | 28.9 | |||||
Diluted weighted average common shares | 51,314 | 50,767 | 51,230 | 50,308 | |||||||
Philip A. Hadley, Chairman and CEO said, Were pleased with our second quarter results and our record of delivering strong performance over the last ten years. The dividend increase and additional share repurchase authorization reflect the consistency of our subscription business model, our historical free cash flow and our continued focus to enhance long-term shareholder value.
Second Quarter Financial Highlights
Subscriptions increased $23.3 million
during the quarter and up $23.4 million excluding currency. On a constant currency basis,
subscriptions advanced $79.5 million over the last twelve months, up 21%. As of February
28, 2007, subscriptions totaled $462.8 million. Of this total, subscriptions from
FactSets domestic operations were $324.4 million, while overseas operations were
$138.4 million. Demand for FactSets services continued to rise. Users rose to
32,000, up from 31,000 at the beginning of the quarter. Client count was 1,872 as of
February 28, a net increase of 42 clients during the quarter.
Page 1 of 7
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.
Other financial and operational highlights of the second quarter of fiscal 2007 include: |
| Client retention rate remained above 95%. |
| 500 clients, consisting of 4,200 users, subscribed to the PA 2.0 application at quarter-end. |
| Revenues from U.S. business produced revenues of $81.9 million for the three months ended February 28, 2007, up 22% over the prior year. |
| Revenues from non-U.S. operations increased 30% to $34.4 million. On a constant currency basis and excluding non-subscription revenues, revenues from non-U.S. operations advanced 21%. |
| Cash provided by operating activities of $25.1 million less capital expenditures of $7.3 million resulted in $17.8 million of free cash flow. |
| New lease agreements were executed to support operations in New York and London. New space will accommodate approximately 315 professionals. In New York, five office locations will be consolidated into one. |
| Shares repurchased totaled 271,900 shares. Including the increase in the share repurchase program, $115.2 million is authorized for future repurchases. |
| Joseph R. Zimmel, a private investor and retired Managing Director of Goldman, Sachs & Co., was elected to the FactSet Board of Directors. |
| Employee count as of February 28, 2007 was 1,486, up 17% from a year ago and up 10% since the beginning of the fiscal year. |
Year-to-Date Results of Operations
For the six months ended February 28, 2007, revenues increased 23% to $225.2 million and
operating income rose 28% to $73.2 million. Net income grew 31% to $50.3 million,
while diluted earnings per share increased 29% to $0.98.
Recent Events and Business Outlook
The following forward-looking
statements reflect FactSets expectations as of March 20, 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.
Third Quarter Fiscal 2007 Expectations |
| Revenues are expected to range between $118 million and $121 million. Included in this amount is a $1.0 million reduction in non-subscription revenues compared to the just completed second quarter. |
| Operating margins are expected to range between 31.5% and 33.5%. |
| The effective tax rate is expected to range between 35.0% and 36.0%. |
Full Year Fiscal 2007 |
| Capital expenditures are expected to range between $35 million to $39 million. The increase in capital expenditures is a result of accelerating our plan to expand and consolidate New York office space from the first quarter of fiscal 2008 to the fourth quarter of fiscal 2007. |
Page 2 of 7
Dividend Declaration
FactSets Board of Directors
approved an increase in the regular quarterly dividend to $0.12 per share. The cash
dividend will be paid on June 19, 2007 to holders of record of FactSets common stock
on May 31, 2007.
Forward looking statements
This news release contains
forward-looking statements based on managements current expectations, estimates and
projections. All statements that address expectations or projections about the future,
including statements about the Companys 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
FactSets 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 ability to integrate newly acquired companies; the ability to hire
qualified personnel; the maintenance of the Companys leading technological position;
the impact of global market trends on the Companys 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.
Conference Call
The Company will host a conference
call today, March 20, 2007 at 11:00 a.m. (EST) to review the second quarter fiscal 2007
earnings release. To listen, please visit the investor relations section of the
Companys 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-two
locations worldwide, including Boston, New York, Chicago, San Mateo, London, Frankfurt,
Paris, Milan, Tokyo, Hong Kong, and Sydney.
Page 3 of 7
FactSet Research Systems Inc. | |||||
Consolidated Statements of Financial Condition | |||||
(In thousands and unaudited) | February 28, | August 31, | |||
2007 | 2006 | ||||
ASSETS | |||||
Cash and cash equivalents | $139,142 | $126,549 | |||
Investments | 16,902 | 16,641 | |||
Receivables from clients and clearing broker, net | 69,787 | 59,190 | |||
Deferred taxes | 1,557 | 1,600 | |||
Other current assets | 4,325 | 3,000 | |||
Total current assets | 231,713 | 206,980 | |||
Property, equipment and leasehold improvements, net | 65,773 | 59,812 | |||
Goodwill | 143,763 | 141,354 | |||
Intangible assets, net | 39,948 | 43,074 | |||
Deferred taxes | 5,378 | 3,554 | |||
Other assets | 2,569 | 2,454 | |||
Total assets | $489,144 | $457,228 | |||
======= | ======= | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||
Accounts payable and accrued expenses | $ 19,009 | $ 18,110 | |||
Accrued compensation | 15,631 | 21,407 | |||
Deferred fees | 25,550 | 25,322 | |||
Dividends payable | 2,931 | 2,933 | |||
Taxes payable | 6,909 | 9,689 | |||
Note payable | | 1,840 | |||
Total current liabilities | 70,030 | 79,301 | |||
Deferred taxes | 7,980 | 8,536 | |||
Deferred rent and other non-current liabilities | 12,576 | 10,703 | |||
Total liabilities | 90,586 | 98,540 | |||
Stockholders Equity | |||||
Common stock | 557 | 554 | |||
Capital in excess of par value | 144,137 | 130,033 | |||
Retained earnings | 422,256 | 377,846 | |||
Treasury stock | (174,505 | ) | (153,073 | ) | |
Accumulated other comprehensive income | 6,113 | 3,328 | |||
Total stockholders equity | 398,558 | 358,688 | |||
Total liabilities and stockholders equity | $489,144 | $457,228 | |||
======= | ======= |
Page 4 of 7
FactSet Research Systems Inc. | |||||||||
Consolidated Statements of Income | |||||||||
Three Months Ended | Six Months Ended | ||||||||
February 28, | February 28, | ||||||||
(In thousands, except per share data and unaudited) | 2007 | 2006 | 2007 | 2006 | |||||
Revenues | $116,313 | $93,665 | $225,194 | $183,319 | |||||
Operating expenses | |||||||||
Cost of services | 36,730 | 29,122 | 71,671 | 57,186 | |||||
Selling, general and administrative | 41,798 | 34,899 | 80,317 | 69,086 | |||||
Total operating expenses | 78,528 | 64,021 | 151,988 | 126,272 | |||||
Income from operations | 37,785 | 29,644 | 73,206 | 57,047 | |||||
Other income | 1,797 | 562 | 3,284 | 2,264 | |||||
Income before income taxes | 39,582 | 30,206 | 76,490 | 59,311 | |||||
Provision for income taxes | 13,101 | 10,964 | 26,214 | 20,874 | |||||
Net income | $26,481 | $19,242 | $50,276 | $38,437 | |||||
====== | ====== | ====== | ====== | ||||||
Basic earnings per common share | $0.54 | $0.40 | $1.03 | $0.79 | |||||
==== | ==== | ==== | ==== | ||||||
Diluted earnings per common share | $0.52 | $0.38 | $0.98 | $0.76 | |||||
==== | ==== | ==== | ==== | ||||||
Weighted average common shares (Basic) | 48,957 | 48,569 | 48,957 | 48,471 | |||||
===== | ===== | ===== | ===== | ||||||
Weighted average common shares (Diluted) | 51,314 | 50,767 | 51,230 | 50,308 | |||||
===== | ===== | ===== | ===== |
Page 5 of 7
FactSet Research Systems Inc. | |||||
Consolidated Statements of Cash Flows | Six Months Ended | ||||
February 28, | |||||
(In thousands and unaudited) | 2007 | 2006 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net income | $50,276 | $38,437 | |||
Adjustments to reconcile net income to net cash provided by operating activities | |||||
Depreciation and amortization | 13,573 | 11,432 | |||
Stock-based compensation expense | 4,604 | 4,413 | |||
Deferred income taxes | ( 2,549 | ) | ( 2,230 | ) | |
Gain on sale of assets | ( 61 | ) | | ||
Gain on sale of Company-owned real estate | | (1,342 | ) | ||
Changes in assets and liabilities, net of effects of acquisitions | |||||
Receivables from clients and clearing broker, net | ( 10,539 | ) | ( 3,377 | ) | |
Accounts payable and accrued expenses | 1,209 | ( 1,084 | ) | ||
Accrued compensation | ( 5,874 | ) | ( 8,806 | ) | |
Deferred fees | 28 | 703 | |||
Taxes payable | ( 2,815 | ) | 3,156 | ||
Landlord contributions | 416 | 84 | |||
Other working capital accounts, net | ( 161 | ) | 2,059 | ||
Net cash provided by operating activities | 48,107 | 43,445 | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Purchases of investments, net of proceeds from sales | ( 271 | ) | ( 671 | ) | |
Acquisition of businesses, net of cash acquired | | ( 27,873 | ) | ||
Proceeds from sale of Company-owned real estate | | 2,910 | |||
Purchases of property, equipment and leasehold improvements | ( 15,300 | ) | ( 7,090 | ) | |
Net cash used in investing activities | ( 15,571 | ) | ( 32,724 | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Dividend payments | ( 5,781 | ) | ( 4,755 | ) | |
Repurchase of common stock | ( 21,432 | ) | ( 687 | ) | |
Repayment of note | ( 2,210 | ) | | ||
Proceeds from employee stock plans | 6,596 | 6,155 | |||
Income tax benefits from stock option exercises | 2,602 | 1,825 | |||
Net cash (used in) provided by financing activities | ( 20,225 | ) | 2,538 | ||
Effect of exchange rate changes on cash and cash equivalents | 282 | 232 | |||
Net increase in cash and cash equivalents | 12,593 | 13,491 | |||
Cash and cash equivalents at beginning of period | 126,549 | 59,457 | |||
Cash and cash equivalents at end of period | $139,142 | $72,948 | |||
======= | ====== |
Page 6 of 7
Supplementary Schedule to the Second Quarter Earnings Press Release for the Quarter Ended February 28, 2007
To aid an investors ability to make more precise interpretations of FactSets financial results, the supplementary schedule below summarizes revenues related to services that are not included in the calculation of FactSets subscription value. Although the impact individually and in the aggregate has been immaterial to FactSets results, this table might enhance an investors overall understanding of quarterly revenues.
Non-Subscription Revenues (1) | |||||||||||
(In thousands and unaudited) | |||||||||||
Last four quarters ending February 28, | Q2 | Q1 | Q4 | Q3 | |||||||
2007 | $ 2,585 | $ 733 | $ 1,704 | $ 1,138 | |||||||
2006 | 620 | 463 | 791 | 886 | |||||||
$ Change | $ 1,965 | $ 270 | $ 913 | $ 252 | |||||||
====== | ===== | ====== | ====== | ||||||||
(1) Revenues from workstations purchased for use by summer interns and for FactSet services that are not sold on a subscription basis are excluded from FactSets reported annual subscription value (ASV). The aforementioned amounts were included in FactSets reported revenues each quarter.
Page 7 of 7