Annual Reports

 
Quarterly Reports

  • 10-Q (Aug 8, 2017)
  • 10-Q (May 9, 2017)
  • 10-Q (Nov 8, 2016)
  • 10-Q (Aug 9, 2016)
  • 10-Q (May 10, 2016)
  • 10-Q (Nov 6, 2015)

 
8-K

 
Other

Forrester Research 10-Q 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
forr-10q_20170331.htm

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED March 31, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NUMBER: 000-21433

 

FORRESTER RESEARCH, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

04-2797789

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

60 Acorn Park Drive

CAMBRIDGE, MASSACHUSETTS

 

02140

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 613-6000

 

Indicate by check mark whether the registrant: (1) has filed all reports required 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       No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

Emerging growth company

 

  

 

 

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of May 5, 2017 17,738,000 shares of the registrant’s common stock were outstanding.

 

 

 

 


 

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q

 

 

  

PAGE

 

PART I. FINANCIAL INFORMATION

  

3

 

ITEM 1. Financial Statements (Unaudited)

  

3

 

Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016

  

3

 

Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016

  

4

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016

  

5

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016

  

6

 

Notes to Consolidated Financial Statements

  

7

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

15

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

  

22

 

ITEM 4. Controls and Procedures

  

22

 

PART II. OTHER INFORMATION

  

23

 

ITEM 1A. Risk Factors

  

23

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

ITEM 6. Exhibits

  

24

 

  

 

 

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,176

 

 

$

76,958

 

Marketable investments (Note 3)

 

 

60,417

 

 

 

61,147

 

Accounts receivable, net

 

 

55,029

 

 

 

58,812

 

Deferred commissions

 

 

12,287

 

 

 

12,052

 

Prepaid expenses and other current assets

 

 

14,312

 

 

 

14,467

 

Total current assets

 

 

216,221

 

 

 

223,436

 

Property and equipment, net

 

 

23,413

 

 

 

23,894

 

Goodwill

 

 

73,552

 

 

 

73,193

 

Intangible assets, net

 

 

1,280

 

 

 

1,464

 

Other assets

 

 

13,336

 

 

 

13,798

 

Total assets

 

$

327,802

 

 

$

335,785

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

328

 

 

$

1,806

 

Accrued expenses and other current liabilities

 

 

29,779

 

 

 

41,403

 

Deferred revenue

 

 

156,256

 

 

 

134,265

 

Total current liabilities

 

 

186,363

 

 

 

177,474

 

Non-current liabilities

 

 

8,188

 

 

 

8,275

 

Total liabilities

 

 

194,551

 

 

 

185,749

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Note 7):

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 500 shares; issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

 

 

Issued - 21,809 and 21,719 shares as of March 31, 2017 and December 31, 2016, respectively

 

 

 

 

 

 

 

 

Outstanding - 17,883 and 18,361 shares as of March 31, 2017 and December 31, 2016, respectively

 

 

218

 

 

 

217

 

Additional paid-in capital

 

 

162,159

 

 

 

157,569

 

Retained earnings

 

 

121,069

 

 

 

121,799

 

Treasury stock - 3,926 and 3,358 shares as of March 31, 2017 and December 31, 2016, respectively, at cost

 

 

(143,429

)

 

 

(121,976

)

Accumulated other comprehensive loss

 

 

(6,766

)

 

 

(7,573

)

Total stockholders’ equity

 

 

133,251

 

 

 

150,036

 

Total liabilities and stockholders’ equity

 

$

327,802

 

 

$

335,785

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

3


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

Revenues:

 

 

 

 

 

 

 

 

Research services

 

$

51,743

 

 

$

53,248

 

Advisory services and events

 

 

25,451

 

 

 

24,153

 

Total revenues

 

 

77,194

 

 

 

77,401

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

31,396

 

 

 

31,123

 

Selling and marketing

 

 

30,622

 

 

 

30,404

 

General and administrative

 

 

10,170

 

 

 

9,973

 

Depreciation

 

 

1,679

 

 

 

1,965

 

Amortization of intangible assets

 

 

191

 

 

 

209

 

Reorganization costs

 

 

 

 

 

1,015

 

Total operating expenses

 

 

74,058

 

 

 

74,689

 

Income from operations

 

 

3,136

 

 

 

2,712

 

Other income (expense), net

 

 

9

 

 

 

(328

)

Losses on investments, net

 

 

(203

)

 

 

 

Income before income taxes

 

 

2,942

 

 

 

2,384

 

Income tax provision (benefit)

 

 

(88

)

 

 

1,095

 

Net income

 

$

3,030

 

 

$

1,289

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.17

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

 

$

0.16

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

18,230

 

 

 

17,762

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

18,536

 

 

 

17,925

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.19

 

 

$

0.18

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2017

 

 

2016

 

Net income

$

3,030

 

 

$

1,289

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of taxes:

 

 

 

 

 

 

 

Foreign currency translation

 

790

 

 

 

1,481

 

Net change in market value of investments

 

17

 

 

 

117

 

Other comprehensive income

 

807

 

 

 

1,598

 

Comprehensive income

$

3,837

 

 

$

2,887

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

3,030

 

 

$

1,289

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

Depreciation

 

1,679

 

 

 

1,965

 

Amortization of intangible assets

 

191

 

 

 

209

 

Net losses from investments

 

203

 

 

 

 

Deferred income taxes

 

(257

)

 

 

(177

)

Stock-based compensation

 

2,049

 

 

 

2,135

 

Amortization of premium on investments

 

61

 

 

 

107

 

Foreign currency losses

 

215

 

 

 

464

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Accounts receivable

 

3,839

 

 

 

18,138

 

Deferred commissions

 

(235

)

 

 

213

 

Prepaid expenses and other current assets

 

138

 

 

 

(2,987

)

Accounts payable

 

(1,485

)

 

 

763

 

Accrued expenses and other liabilities

 

(11,512

)

 

 

(14,125

)

Deferred revenue

 

21,538

 

 

 

13,582

 

Net cash provided by operating activities

 

19,454

 

 

 

21,576

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(1,540

)

 

 

(1,144

)

Purchases of marketable investments

 

(11,503

)

 

 

(2,206

)

Proceeds from sales and maturities of marketable investments

 

12,200

 

 

 

8,710

 

Other investing activity

 

184

 

 

 

(20

)

Net cash provided by (used in) investing activities

 

(659

)

 

 

5,340

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid on common stock

 

(3,462

)

 

 

(3,201

)

Repurchases of common stock

 

(21,453

)

 

 

 

Proceeds from issuance of common stock under employee equity

   incentive plans

 

2,723

 

 

 

1,182

 

Taxes paid related to net share settlements of stock-based compensation awards

 

(56

)

 

 

(25

)

Net cash used in financing activities

 

(22,248

)

 

 

(2,044

)

Effect of exchange rate changes on cash and cash equivalents

 

671

 

 

 

451

 

Net increase (decrease) in cash and cash equivalents

 

(2,782

)

 

 

25,323

 

Cash and cash equivalents, beginning of period

 

76,958

 

 

 

53,331

 

Cash and cash equivalents, end of period

$

74,176

 

 

$

78,654

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

6


 

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1 — Interim Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations, comprehensive income and cash flows as of the dates and for the periods presented have been included. The results of operations for the three months ended March 31, 2017 may not be indicative of the results for the year ending December 31, 2017, or any other period.

Fair Value Measurements

The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. See Note 3 – Marketable Investments - for the fair value of the Company’s marketable investments.

 

 

Adoption of New Accounting Pronouncements

 

The Company adopted the guidance in Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, on January 1, 2017. Under this standard, entities are permitted to make an accounting policy election to either estimate forfeitures on share-based payment awards, as previously required, or to recognize forfeitures as they occur. The Company has elected to recognize forfeitures as they occur and the impact of that change in accounting policy has been recorded as a $0.2 million cumulative effect adjustment to increase retained earnings as of January 1, 2017.

 

Additionally, ASU No. 2016-09 requires that all income tax effects related to settlements of share-based payment awards be reported in earnings as an increase or decrease to income tax expense (benefit). Previously, income tax benefits at settlement of an award were reported as an increase (or decrease) to additional paid-in capital to the extent that those benefits were greater than (or less than) the income tax benefits reported in earnings during the award's vesting period. The requirement to report those income tax effects in earnings has been applied on a prospective basis to settlements occurring on or after January 1, 2017, and the impact of applying this guidance was not material to the consolidated financial statements for the three months ended March 31, 2017. Application of this guidance may result in fluctuations in the Company’s effective tax rate depending on how many options are exercised, how many restricted stock units vest and the volatility of the Company’s stock price.

 

ASU 2016-09 also requires that all income tax-related cash flows resulting from share-based payments be reported as operating activities in the statement of cash flows. Previously, income tax benefits at settlement of an award were reported as a reduction to operating cash flows and an increase to financing cash flows to the extent that those benefits exceeded the income tax benefits reported in earnings during the award's vesting period. In addition, the standard requires that cash paid by directly withholding shares for tax withholding purposes be classified as a financing activity in the statement of cash flows. For the three months ended March 31, 2017, the Company reflected $0.1 million of tax withholding in financing activities. The Company has elected to apply the changes in cash flow classification on a retrospective basis, resulting in an increase in operating cash flows, with a corresponding decrease in financing cash flows, of $39,000 for the three months ended March 31, 2016, as compared to the amounts previously reported.

 

The Company elected to early adopt the guidance in ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, on January 1, 2017. The guidance in this standard eliminates for all intra-entity sales of assets other than inventory, the exception under existing standards that permits the tax effects of intra-entity asset transfers to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. As a result, a reporting entity would recognize the tax

 

7


 

expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs and any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. As a result, the Company has recorded a $0.5 million cumulative effect adjustment to reduce retained earnings as of January 1, 2017.

 

 

Note 2 — Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2017

 

$

(83

)

 

$

(7,490

)

 

$

(7,573

)

Foreign currency translation

 

 

 

 

 

790

 

 

 

790

 

Unrealized gain on investments, net of tax of $11

 

 

17

 

 

 

 

 

 

17

 

Balance at March 31, 2017

 

$

(66

)

 

$

(6,700

)

 

$

(6,766

)

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2016

 

$

(100

)

 

$

(4,726

)

 

$

(4,826

)

Foreign currency translation

 

 

 

 

 

1,481

 

 

 

1,481

 

Unrealized gain on investments, net of tax of $76

 

 

117

 

 

 

 

 

 

117

 

Balance at March 31, 2016

 

$

17

 

 

$

(3,245

)

 

$

(3,228

)

 

 

 

Note 3 — Marketable Investments

The following table summarizes the Company’s marketable investments (in thousands):

 

 

 

As of  March 31, 2017

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Federal agency obligations

 

$

1,800

 

 

$

 

 

$

(5

)

 

$

1,795

 

Corporate obligations

 

 

58,723

 

 

 

1

 

 

 

(102

)

 

 

58,622

 

Total

 

$

60,523

 

 

$

1

 

 

$

(107

)

 

$

60,417

 

 

 

 

As of December 31, 2016

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Federal agency obligations

 

$

1,800

 

 

$

 

 

$

(7

)

 

$

1,793

 

Corporate obligations

 

 

59,481

 

 

 

2

 

 

 

(129

)

 

 

59,354

 

Total

 

$

61,281

 

 

$

2

 

 

$

(136

)

 

$

61,147

 

 

Realized gains and losses on investments are included in earnings and are determined using the specific identification method. Realized gains or losses on the sale of the Company’s marketable investments were not material in the three months ended March 31, 2017 or 2016.

The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of March 31, 2017 (in thousands).

 

 

 

FY 2017

 

 

FY 2018

 

 

FY 2019

 

 

Total

 

Federal agency obligations

 

$

 

 

$

1,795

 

 

$

 

 

$

1,795

 

Corporate obligations

 

 

24,934

 

 

 

28,937

 

 

 

4,751

 

 

 

58,622

 

Total

 

$

24,934

 

 

$

30,732

 

 

$

4,751

 

 

$

60,417

 

 

 

8


 

The following table shows the gross unrealized losses and market value of Forrester’s available-for-sale securities with unrealized losses that are not deemed to be other-than-temporary, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

 

As of  March 31, 2017

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Federal agency obligations

 

$

1,795

 

 

$

5

 

 

$

 

 

$

 

Corporate obligations

 

 

53,880

 

 

 

101

 

 

 

1,000

 

 

 

1

 

Total

 

$

55,675

 

 

$

106

 

 

$

1,000

 

 

$

1

 

 

 

 

As of December 31, 2016

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Federal agency obligations

 

$

1,793

 

 

$

7

 

 

$

 

 

$

 

Corporate obligations

 

 

53,647

 

 

 

129

 

 

 

 

 

 

 

Total

 

$

55,440

 

 

$

136

 

 

$

 

 

$

 

 

Fair Value

The Company measures certain financial assets at fair value on a recurring basis, including cash equivalents and available-for-sale securities. The fair values of these financial assets have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis (in thousands):

 

 

 

As of  March 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

3,904

 

 

$

 

 

$

 

 

$

3,904

 

Federal agency obligations

 

 

 

 

 

1,795

 

 

 

 

 

 

1,795

 

Corporate obligations

 

 

 

 

 

58,622

 

 

 

 

 

 

58,622

 

Total

 

$

3,904

 

 

$

60,417

 

 

$

 

 

$

64,321

 

 

 

 

As of December 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

2,522

 

 

$

 

 

$

 

 

$

2,522

 

Federal agency obligations

 

 

 

 

 

1,793

 

 

 

 

 

 

1,793

 

Corporate obligations

 

 

 

 

 

59,354

 

 

 

 

 

 

59,354

 

Total

 

$

2,522

 

 

$

61,147

 

 

$

 

 

$

63,669

 

 

(1)

Included in cash and cash equivalents. 

Level 2 assets consist of the Company’s entire portfolio of marketable investments. Level 2 assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation methods, including both income and market based

 

9


 

approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

 

 

Note 4 — Non-Marketable Investments

At March 31, 2017 and December 31, 2016, the carrying value of the Company’s non-marketable investments, which were composed primarily of interests in technology-related private equity funds, was $2.3 million and $2.8 million, respectively, and is included in other assets in the Consolidated Balance Sheets.

The Company’s investments at March 31, 2017 are being accounted for using the equity method as the investments are limited partnerships and the Company has an ownership interest in excess of 5% and, accordingly, the Company records its share of the investee’s operating results each period. Losses from non-marketable investments were $0.2 million during the three months ended March 31, 2017 and were insignificant during the three months ended March 31, 2016 and are included in losses on investments, net in the Consolidated Statements of Income. At December 31, 2016, the Company’s investments also included an investment with a book value of $0.4 million, which was accounted for using the cost method. This investment was fully liquidated during the three months ended March 31, 2017. During the three months ended March 31, 2017, distributions of $0.4 million were received from the funds. During the three months ended March 31, 2016, no distributions were received from the funds.

 

 

 

Note 5 — Reorganization

 

In the first quarter of 2016, the Company implemented a reduction in its workforce of approximately 2% of its employees across various geographies and functions. The Company recorded $1.0 million of severance and related costs for this action during the three months ended March 31, 2016. All costs under this plan were paid during 2016.

 

 

 

Note 6 — Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding options and vesting of restricted stock units when dilutive.

Basic and diluted weighted average common shares are as follows (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

Basic weighted average common shares outstanding

 

18,230

 

 

 

17,762

 

 

Weighted average common equivalent shares

 

306

 

 

 

163

 

 

Diluted weighted average common shares outstanding

 

18,536

 

 

 

17,925

 

 

Share based awards excluded from diluted weighted average share

   calculation as effect would have been anti-dilutive

 

374

 

 

 

1,736

 

 

 

 

 

10


 

Note 7 — Stockholders’ Equity

Equity Plans

Stock option activity for the three months ended March 31, 2017 is presented below (in thousands, except per share data and contractual term):

 

 

 

 

 

 

 

Weighted -

 

 

Weighted -

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Exercise

 

 

Remaining

 

 

Aggregate

 

 

 

Number

 

 

Price Per

 

 

Contractual

 

 

Intrinsic

 

 

 

of Shares

 

 

Share

 

 

Term (in years)

 

 

Value

 

Outstanding at December 31, 2016

 

 

1,540

 

 

$

34.35

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(63

)

 

 

30.15

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(21

)

 

 

33.86

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2017

 

 

1,456

 

 

$

34.54

 

 

 

6.29

 

 

$

7,605

 

Exercisable at March 31, 2017

 

 

856

 

 

$

33.80

 

 

 

5.18

 

 

$

5,094

 

Vested and expected to vest at March 31, 2017

 

 

1,456

 

 

$

34.54

 

 

 

6.29