8K-1q2007

 

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 19, 2006


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
(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 19, 2006, FactSet Research Systems Inc. issued a press release announcing its results for the three months ended November 30, 2006. 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 


                 (c)         Exhibits


 
Exhibit    
 No.   Description
 –––––   ––––––––––––––––––––––––––––––
 99.1    Press Release of FactSet Research Systems Inc., dated December 19, 2006

 

 

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: December 19, 2006         /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 December 19, 2006 reporting the results of
      operations for the Registrant’s first fiscal quarter ended November 30, 2006.

 

 

   
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 First Quarter Results

Norwalk, Connecticut – December 19, 2006—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 2007.

For the quarter ended November 30, 2006, revenues increased to $108.9 million, up 21% compared to the prior year. Operating income for the first quarter rose to $35.4 million from $27.4 million in the same period of fiscal 2006. Net income advanced 24% to $23.8 million as compared to $19.2 million a year ago. Diluted earnings per share increased to $0.47, up from $0.38 in the same period of fiscal 2006. Included in net income in the first quarter of fiscal 2006 was an after-tax gain of $0.9 million from the sale of company-owned real estate. The effective tax rate for the quarter was 35.5%, up from 34.0% a year ago. Included in last year’s first quarter rate were tax benefits of $0.8 million or $0.02 per share from the completion of an audit and the favorable effect of the U.S. Federal R&D tax credit which was enacted at the time.

             
Consolidated Statements of Income
(Condensed and Unaudited) Three Months Ended
  November 30,
(In thousands, except per share data) 2006   2005   Change
Revenues $108,881   $89,654   21 %
Total operating expenses 73,460   62,251   18  
Income from operations 35,421   27,403   29  
Net income 23,795   19,195   24  
Diluted earnings per common share $0.47   $0.38   24  
Diluted weighted average common shares 51,079   50,061      

“We are pleased to report a solid first quarter,” said Philip A. Hadley, Chairman and CEO. “Revenues and profitability improved, while we continued to invest in areas critical for future growth.”

First Quarter Financial Highlights
Subscriptions increased $16.9 million during the quarter and totaled $439.5 million at November 30, 2006. On a constant currency basis, the subscription increase was $16.4 million. Of this total, subscriptions from FactSet’s domestic operations were $308.2 million, while overseas operations were $131.3 million. FactSet’s client retention rate continued to be above 95%. “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.

Operational highlights of the first quarter of fiscal 2007 include:  
  •   Users rose to 31,000, up from 29,800 at the beginning of the quarter.
  •   Client count was 1,830 at November 30, a net increase of 45 clients during the quarter.
  •   Approximately 485 clients consisting of 4,000 users subscribe to the PA 2.0 application at quarter-end.
  •   Revenues from non-U.S. operations increased 28% to $32.4 million. On a constant currency basis and excluding the acquisition of europrospectus.com Limited, revenues from non-U.S. operations advanced 22%.
  •   Employee count at November 30, 2006 was 1,432, up 17% from a year ago and up 5% over the last three months.
  •   FactSet successfully held its second annual Investment Process Symposium in October 2006 with 270 client attendees.

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Recent Events and Business Outlook
The following forward-looking statements reflect FactSet’s expectations as of December 19, 2006. 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 2007 Expectations      
  •   Revenues are expected to range between $112 million and $115 million.
  •   Operating margins are expected to range between 31.5% and 33.5%.
  •   The effective tax rate is expected to range between 35.3% and 36.3%. This guidance assumes the U.S. Federal R&D tax credit is reenacted for all periods in fiscal 2007. If the U.S. Federal R&D tax credit is reenacted retroactive to January 1, 2006, the second quarter will include a favorable impact of $0.02 per share from reducing FactSet’s estimated taxes from January to November 2006.

Full Year Fiscal 2007      
  •   Capital expenditures should total approximately $31 million to $35 million. Approximately 50% relates to computer-related equipment and the remainder for the expansion of various office locations.

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 ability to integrate newly acquired companies; 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.

Conference Call
The Company will host a conference call today, December 19, 2006 at 11:00 a.m. (EST) to review the first quarter fiscal 2007 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-two locations worldwide, including Boston, New York, Chicago, San Mateo, London, Frankfurt, Paris, Milan, Tokyo, Hong Kong, and Sydney.


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FactSet Research Systems Inc.
Consolidated Statements of Financial Condition
       
       
(In thousands) November 30,    August 31,   
  2006    2006   
  (unaudited)     
ASSETS
Cash and cash equivalents $138,877     $126,549  
Investments 16,908     16,641  
Receivables from clients and clearing broker, net 61,199     59,190  
Deferred taxes 1,500     1,600  
Other current assets     3,911         3,000  
       Total current assets 222,395     206,980  
Property, equipment and leasehold improvements, net 63,461     59,812  
Goodwill 144,058     141,354  
Intangible assets, net 42,000     43,074  
Deferred taxes 4,219     3,554  
Other assets       2,422           2,454  
          Total assets $478,555     $457,228  
  =======     =======  
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Accounts payable and accrued expenses $  19,174     $  18,110  
Accrued compensation 6,981     21,407  
Deferred fees 22,821     25,322  
Dividends payable 2,939     2,933  
Taxes payable  19,026        9,689  
Note payable    1,924        1,840  
       Total current liabilities 72,865     79,301  
Deferred taxes 8,373     8,536  
Deferred rent and other non-current liabilities  11,692      10,703  
          Total liabilities 92,930   98,540
  =====   =====
Stockholders’ Equity  
    Common stock 556   554
    Capital in excess of par value 137,907   130,033
    Retained earnings 398,705   377,846
    Treasury stock   ( 158,196 )     ( 153,073 )
    Accumulated other comprehensive income     6,653       3,328  
       Total stockholders’ equity 385,625   358,688
          Total liabilities and stockholders’ equity $478,555   $457,228
  =======   =======


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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) 2006   2005  
 
Revenues $108,881   $89,654  
         
Operating expenses        
   Cost of services 34,941   28,064  
   Selling, general and administrative   38,519     34,187  
Total operating expenses 73,460   62,251  
         
Income from operations 35,421   27,403  
         
Other income    1,487      1,702  
         
Income before income taxes 36,908   29,105  
         
Provision for income taxes   13,113      9,910  
         
Net income $23,795   $19,195  
  ======   ======  
         
Basic earnings per common share $0.49   $0.40  
  ====   ====  
Diluted earnings per common share $0.47   $0.38  
  ====   ====  
Weighted average common shares (Basic) 48,957   48,373  
  =====   =====  
Weighted average common shares (Diluted) 51,079   50,061  
  =====   =====  


Page 4 of  5     

           
FactSet Research Systems Inc.  
Consolidated Statements of Cash Flows       Three Months Ended
              November 30,
(In thousands and unaudited) 2006     2005  
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income $23,795     $19,195  
Adjustments to reconcile net income to net cash provided by operating activities        
     Depreciation and amortization 6,574     5,675  
     Stock-based compensation expense 2,449     2,538
     Deferred income taxes (961 )   (1,014 )
     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 ( 1,972 )   ( 1,740 )
     Accounts payable and accrued expenses 1,023     ( 5,694 )
     Accrued compensation ( 14,540 )   ( 10,982 )
     Deferred fees ( 2,717 )   ( 949 )
     Taxes payable 9,308     6,134  
     Landlord contributions 359     ––  
     Other working capital accounts, net    ( 371 )        235  
Net cash provided by operating activities 22,947     12,056  
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of investments, net of proceeds from sales ( 284 )   ( 621 )
Acquisition of businesses, net of cash acquired ––     ( 21,163 )
Proceeds from sale of Company-owned real estate ––     2,910  
Purchases of property, equipment and leasehold improvements  ( 7,973 )    ( 1,417 )
Net cash used in investing activities ( 8,257 )   ( 20,291 )
           
CASH FLOWS FROM FINANCING ACTIVITIES  
Dividend payments  ( 2,931 )    ( 2,378 )
Repurchase of common stock ( 5,123 )   ( 256 )
Proceeds from employee stock plans 3,978     1,822
Income tax benefits from stock option exercises    1,447          343  
Net cash used in financing activities ( 2,629 )   ( 469 )
           
Effect of exchange rate changes on cash and cash equivalents       267           318  
           
Net increase (decrease) in cash and cash equivalents 12,328   ( 8,386 )
           
Cash and cash equivalents at beginning of period  126,549       59,457  
Cash and cash equivalents at end of period $138,877     $51,071  
  =======     ======  


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