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Technology Stocks : FactSet Research Systems - FDS
FDS 338.76+0.9%Jul 6 4:00 PM EDT

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From: JakeStraw3/21/2006 12:54:47 PM
   of 15
FactSet Research Systems Reports Earnings per Share of $0.38 for the Second Quarter of Fiscal Year 2006
Tuesday March 21, 7:00 am ET

NORWALK, Conn.--(BUSINESS WIRE)--March 21, 2006--FactSet Research Systems Inc. (NYSE: FDS), a major supplier of computer-based financial and economic data to the investment community, today announced its results for the second quarter of fiscal 2006.

For the quarter ended February 28, 2006, revenues increased to $93.7 million, up 22.5% compared to the prior year period. GAAP operating income for the second quarter rose to $29.6 million from $27.0 million in the same period of fiscal 2005. GAAP net income advanced to $19.2 million. This compares to GAAP net income of $17.2 million a year ago. GAAP diluted earnings per share increased to $0.38, up from $0.34 in the same period of fiscal 2005.

GAAP financial measures including operating income, net income, and diluted earnings per share have been adjusted to exclude charges related to stock-based compensation and incremental expenses incurred in the UK real estate consolidation. Non-GAAP operating income for the quarter was $31.9 million, up 17.9%. Non-GAAP net income advanced 21.5% to $20.9 million and non-GAAP diluted earnings per share increased 20.6% to $0.41. A reconciliation between GAAP and non-GAAP financial measures is presented on page 8 of this press release.

Consolidated Statements of Income (Condensed and Unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
---------------------- -------------------------
(In thousands, except
per share data) 2006 2005 Change 2006 2005 Change
------- ------- ------ -------- -------- ------
Revenues $93,665 $76,472 22.5 % $183,319 $150,535 21.8 %
Total operating
expenses 64,021 49,440 29.5 126,272 97,658 29.3
Income from operations 29,644 27,032 9.7 57,047 52,877 7.9
Net income 19,242 17,170 12.1 38,437 33,567 14.5
Diluted earnings per
common share $0.38 $0.34 11.8 $0.76 $0.67 13.4
Diluted weighted
average common shares 50,767 50,397 50,308 50,213

"FactSet continued to prosper in the second quarter," said Philip A. Hadley, Chairman and CEO. "Broad-based growth is the underlying factor behind our performance. We've continued to invest in the development of a wide range of products to meet the needs of a global client base. The success of this strategy is reflected in our results."

Second Quarter Financial Highlights

Subscriptions increased $18.4 million during the quarter and totaled $380.3 million at quarter end. On a constant currency basis and excluding the acquisition of Limited, the subscription increase was $15.0 million. Of this total, subscriptions from FactSet's domestic operations were $270.2 million, while overseas operations were $110.1 million. Clients totaled 1,666, including those acquired from europrospectus. Excluding europrospectus, client count was 1,646 at February 28, a net increase of 32 clients for the quarter. Users rose to 27,700 professionals. 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.

Other operational highlights of the second quarter of fiscal 2006 include:

Revenues from FactSet's European and Pacific Rim operations were $21.6 million and $4.9 million, up 28.0% and 32.1% respectively, from the same period a year ago.
Demand for FactSet's PA Workstation application continued to rise, with 446 clients consisting of 3,600 users, subscribing to this service as of February 28, 2006.
On January 5, 2006, the executors of the estate of Howard E. Wille sold effectively all of its position in the company's common stock. Mr. Wille, a founder of FactSet, passed away on September 6, 2005. At that date, he owned approximately 11% of FactSet common stock.
Year-to-Date Results of Operations

For the six months ended February 28, 2006, revenues increased 21.8% to $183.3 million and GAAP operating income rose 7.9% to $57.0 million. GAAP net income grew 14.5% to $38.4 million while GAAP diluted earnings per share increased 13.4% to $0.76.

For the six months ended February 28, 2006, non-GAAP operating income advanced 16.9% to $61.8 million and non-GAAP net income increased 19.6% to $40.1 million. Non-GAAP diluted earnings per share increased 17.9% to $0.79 during the first half of fiscal 2006 as compared to the same period a year ago. A reconciliation between GAAP and non-GAAP financial measures is presented on page 9 of this press release.

Recent Events and Business Outlook

The following forward-looking statements reflect FactSet's expectations as of March 21, 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.

On February 17, 2006, FactSet acquired all the outstanding share capital of Limited for $7.5 million in cash. europrospectus provides access to equity, fixed income and derivatives prospectuses. The impact from this acquisition on the financial results for the second quarter was immaterial in all respects. The company is headquartered in England and supported by approximately 25 employees. The acquisition increased subscriptions at February 28 by $3.2 million and is expected to reduce diluted earnings per common share by $0.01 over the next 12 months.

On January 19, 2006, FactSet announced that FactSet Europe Limited agreed to lease space to serve as the new headquarters for FactSet's London-based operations. The new location will be governed by a 15-year lease with an option to extend for an additional 10 years. FactSet will consolidate its four London-based offices into one, new location. FactSet continues to occupy its existing leased office space until the new facility is ready for occupancy in the summer of 2006. As a result, incremental expenses primarily representing a significant short-term redundancy of leased office space will be incurred. Incremental expenses from this action were $0.3 million during the second quarter and are expected to range between $1.7 million and $1.9 million over the remaining six months of the fiscal year. Approximately $0.6 million of the remaining incremental expenses should be incurred during the third fiscal quarter and approximately $1.2 million incurred during the fourth quarter.

Third Quarter Fiscal 2006 Expectations

Revenues are expected to range between $95.0 million and $97.0 million.
Operating margins are expected to range between 31% and 33%, including the impact from SFAS 123®. Excluding stock-based compensation expense between $1.8 million and $2.1 million and redundant London occupancy costs of $0.6 million, operating margins would be between 33% and 35%.
The effective tax rate is expected to range between 36.3% and 36.8%.

Full Year Fiscal 2006

Capital expenditures should total approximately $18 million to $22 million and includes the build out of the new headquarters for FactSet's London-based operations.
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