Common use of Results of Operations Clause in Contracts

Results of Operations. The following table sets forth for the periods indicated selected financial data and the percentage of the Company's net sales represented by each income statement line item presented. AS A PERCENTAGE OF NET SALES YEAR ENDED DECEMBER 31, 1996 1995 1994 Net sales................................................................................ 100.0% 100.0% 100.0% Cost of products sold.................................................................... 67.1 69.3 66.3 Gross profit............................................................................. 32.9 30.7 33.7 Selling, general and administrative expenses............................................. 5.8 5.5 5.7 Depreciation............................................................................. 4.0 3.0 3.3 Income from operations................................................................... 23.1 22.2 24.7 Interest expense......................................................................... .3 .1 .6 Income before provision for income taxes and extraordinary item.......................... 22.8 22.1 24.1 Provision for income taxes............................................................... 8.1 7.3 9.4 Income before extraordinary item......................................................... 14.7 14.8 14.7 Extraordinary loss (net of income tax benefit)........................................... -- -- (1.9) Net income............................................................................... 14.7% 14.8% 12.8% Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995 NET SALES. The Company's net sales increased $6.7 million, or 8.7%, to $84.5 million in 1996 from $77.8 million in 1995. Foreign net sales increased $3.6 million, or 9.4%, to $42.1 million in 1996 from $38.5 million in 1995. The increase in foreign net sales was due primarily to increased sales volumes with existing customers, and to a lesser extent, sales to several new customers. Domestic net sales increased $3.1 million, or 8.0%, to $42.4 million in 1996 from $39.3 million in 1995. This increase was due primarily to increased sales to existing customers. Notwithstanding the Company's record sales in 1996, the Company's foreign sales in the last half of 1996 were negatively affected by weak international economies, certain customers' excess inventories, and a slowing in the overall rate of outsourcing of captive production. The Company anticipates that its foreign sales will continue to be affected by one or more of these negative factors in 1997. In addition, in the fourth quarter of 1996, two of the Company's major customers have informed the Company of their intention to bring in-house in 1997 a portion of their business (in the aggregate, approximately $9.0 million in net sales) that was previously outsourced to the Company. Management anticipates that the loss of these sales in 1997 should be offset, at least partially, by additional sales to other existing customers. For information concerning the Company's quarterly results of operations for the year ended December 31, 1996, See Note 13 of the Notes to Financial Statements. GROSS PROFIT. Gross profit increased by $3.9 million, or 16.3%, to $27.8 million in 1996 from $23.9 million in 1995. As a percentage of net sales, gross profit increased to 32.9% in 1996 from 30.7% in 1995. During 1995, gross profit was adversely affected as a result of increased raw material costs resulting from a steel shortage and inefficiencies associated with the steel shortage and capacity constraints, including increased labor and transportation costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." During the first quarter of 1996, the steel shortage abated and, in addition, the Company brought additional capacity on-line with the addition of the Mountain City, Tennessee facility which allowed for more efficient operations. During the third quarter of 1996, the Company implemented a new financial reporting software package which allowed for more efficient tracking and controlling of costs. Additionally, during 1996, the Company recorded approximately $700,000 of duty drawback associated with 1995 and 1996 imports of raw material which had not been previously recorded. This amount is an offset to export fees paid. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $641,000, or 15.1%, to $4.9 million from

Results of Operations. The following table sets forth the percentage of total revenues represented by certain consolidated statement of operations data for the periods indicated selected financial data and the percentage of the Company's net sales represented by each income statement line item presented. AS A PERCENTAGE OF NET SALES indicated: YEAR ENDED DECEMBER 31JUNE 30, 1996 1995 1994 Net sales................................................................................ 100.01997 1998 Revenues: Software licenses......................................... 61.1% 100.053.2% 100.055.2% Service and other......................................... 38.9 46.8 44.8 Total revenues.............................................. 100.0 100.0 100.0 Expenses: Cost of products sold.................................................................... 67.1 69.3 66.3 Gross profit............................................................................. 32.9 30.7 33.7 Selling, general software licenses................................. 3.5 2.9 3.2 Cost of service and administrative other................................. 23.7 27.8 27.1 Selling and marketing..................................... 31.9 28.9 29.7 Research and development.................................. 19.4 17.3 17.2 General and administrative................................ 9.3 8.8 8.0 Charge for in-process research and development............ 21.3 4.5 3.4 Costs related to acquisitions............................. -- -- 2.0 Total expenses............................................. 5.8 5.5 5.7 Depreciation............................................................................. 4.0 3.0 3.3 .............................................. 109.1 90.2 90.6 Income (loss) from operations................................................................... 23.1 22.2 24.7 ............................... (9.1) 9.8 9.4 Interest income........................................... 3.3 2.9 2.3 Interest expense......................................................................... .3 .1 .6 .......................................... (1.2) (0.1) (0.1) Other income (expense), net............................... (0.1) (0.1) (0.2) Income (loss) before provision for income taxes and extraordinary item.......................... 22.8 22.1 24.1 taxes............. (7.1) 12.5 11.4 Provision for income taxes............................................................... 8.1 7.3 9.4 Income before extraordinary item......................................................... 14.7 14.8 14.7 Extraordinary loss ................................ 5.4 5.2 5.6 Net income (net of income tax benefitloss)........................................... -- -- (1.9) Net income............................................................................... 14.712.5)% 7.3% 14.85.8% 12.8===== ===== ===== COMPARISON OF FISCAL 1998 TO FISCAL 1997 REVENUES. Revenues are derived from software licenses and services. Total revenues for fiscal 1998 increased 30.1% Year Ended December 31to $252.6 million from $194.1 million in fiscal 1997. Software license revenues represented 55.2% and 53.2% of total revenues for fiscal 1998 and 1997, 1996 Compared respectively. Revenues from software licenses in fiscal 1998 increased 35.1% to the Year Ended December 31, 1995 NET SALES$139.4 million from $103.2 million in fiscal 1997. The Company's net sales increased $6.7 milliongrowth in software license revenues was attributable to software license renewals covering existing users, or 8.7%the expansion of existing customer relationships through licenses covering additional users, to $84.5 million in 1996 from $77.8 million in 1995. Foreign net sales increased $3.6 millionlicenses of additional software products, or 9.4%and, to $42.1 million in 1996 from $38.5 million in 1995. The increase in foreign net sales was due primarily to increased sales volumes with existing customers, and to a lesser extent, sales to several the addition of new customers. Domestic net Total revenues from customers outside the United States were $114.7 million or 45.4% of total revenues and $97.0 million or 50.0% of total revenues for fiscal 1998 and 1997, respectively. The geographical mix of revenues can vary from quarter to quarter. Revenues from service and other consist of consulting services, post-contract support on software licenses, training and sales of documentation. Revenues from service and other for fiscal 1998 increased $3.1 million, or 8.0%, 24.5% to $42.4 113.2 million from $90.9 million for fiscal 1997. This increase reflects a continued focus during fiscal 1998 on providing high value-added consulting and training services to existing customers. Revenues from service and other for fiscal 1998 was adversely affected by lower-than-planned levels of consultant utilization attributable to temporary mismatches between types and geographies of scheduled projects, the skill sets and locations of available personnel and the timing of certain project starts. During the second half of fiscal 1998 the Company implemented programs intended to mitigate these issues through, for example, targeted sales incentives and improved information flow between sales and consulting personnel. Neither the Company's joint venture or similar activities nor any discounting or similar activities have historically had a material effect on the Company's revenues. COST OF SOFTWARE LICENSES. Cost of software licenses consists of royalties, amortization of previously capitalized software costs, costs related to delivery of software (including disk duplication and third-party software costs), printing of manuals and packaging. Cost of software licenses for fiscal 1998 increased 47.6% to $8.2 million from $5.5 million in 1996 fiscal 1997. Cost of software licenses as a percentage of revenues from $39.3 million in 1995software licenses increased to 5.9% for fiscal 1998 from 5.4% for fiscal 1997. This increase was due primarily to increased the generation of a greater portion of sales to existing customers. Notwithstanding the Company's record sales in 1996, the Company's foreign sales in the last half of 1996 were negatively affected by weak international economies, certain customers' excess inventories, having third-party software and a slowing in the overall rate of outsourcing of captive production. The Company anticipates that its foreign sales will continue to be affected by one or more of these negative factors in 1997. In addition, royalty costs in the fourth quarter of 1996, two of the Company's major customers have informed the Company of their intention to bring in-house in 1997 a portion of their business (in the aggregate, approximately $9.0 million in net sales) that was previously outsourced to the Company. Management anticipates that the loss of these sales in 1997 should be offset, at least partially, by additional sales to other existing customers. For information concerning the Company's quarterly results of operations for the year ended December 31, 1996, See Note 13 of the Notes to Financial Statements. GROSS PROFIT. Gross profit increased by $3.9 million, or 16.3%, to $27.8 million in 1996 from $23.9 million in 1995. As a percentage of net sales, gross profit increased to 32.9% in 1996 from 30.7% in 1995. During 1995, gross profit was adversely affected as a result of increased raw material costs resulting from a steel shortage and inefficiencies associated with the steel shortage and capacity constraints, including increased labor and transportation costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resourcesfiscal 1998." During the first quarter of 1996, the steel shortage abated and, in addition, the Company brought additional capacity on-line with the addition of the Mountain City, Tennessee facility which allowed for more efficient operations. During the third quarter of 1996, the Company implemented a new financial reporting software package which allowed for more efficient tracking and controlling of costs. Additionally, during 1996, the Company recorded approximately $700,000 of duty drawback associated with 1995 and 1996 imports of raw material which had not been previously recorded. This amount is an offset to export fees paid. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $641,000, or 15.1%, to $4.9 million from

Results of Operations. The following table sets forth selected financial data as a percentage of total revenues for the periods indicated selected financial data and the percentage of the Company's net sales represented by each income statement line item presented. AS A PERCENTAGE OF NET SALES indicated: YEAR ENDED DECEMBER 31, 1996 1995 1994 Net sales................................................................................ 100.0----------------------- 2001 ---- 2002 ---- 2003 ---- Research services........................................... 80% 100.073% 100.073% Advisory services and other................................. Total revenues............................................ 20 --- 100 27 --- 100 27 --- 100 Cost of products sold.................................................................... 67.1 69.3 66.3 Gross profit............................................................................. 32.9 30.7 33.7 Selling, general services and administrative expenses............................................. 5.8 5.5 5.7 Depreciation............................................................................. 4.0 3.0 3.3 fulfillment............................ 31 35 40 Selling and marketing....................................... 37 31 32 General and administrative.................................. 10 13 12 Depreciation and amortization............................... 6 9 5 Amortization of intangible assets........................... 1 -- 7 Integration costs........................................... -- -- 1 Reorganization costs........................................ 2 13 2 --- --- --- Income (loss) from operations................................................................... 23.1 22.2 24.7 Interest expense......................................................................... .3 .1 .6 ............................. 13 (1) 1 Other income, net........................................... 5 5 3 Impairments of non-marketable investments, net.............. (2) (4) (1) Gain on sale of Internet AdWatch............................ 1 -- -- --- --- --- Income before income tax provision for income taxes and extraordinary item.......................... 22.8 22.1 24.1 (benefit).............. 17 -- 3 Provision (benefit) for income taxes............................................................... 8.1 7.3 9.4 Income before extraordinary item......................................................... 14.7 14.8 14.7 Extraordinary loss ........................ 6 (net of income tax benefit)........................................... -- -- (1.91) 1 --- --- --- Net income............................................................................... 14.7................................................ 11% 14.81% 12.82% Year Ended December YEARS ENDED DECEMBER 31, 1996 Compared to the Year Ended December 2003 AND DECEMBER 31, 1995 NET SALES2002 === === === REVENUES. Total revenues increased 30% to $126.0 million in 2003 from $96.9 million in 2002. The Companyacquisition of Giga closed on February 28, 2003, and as such, Giga's net sales operations have been included in the consolidated financial statements since February 28, 2003. Revenues from research services increased $6.7 million, or 8.7%, 30% to $84.5 92.3 million in 1996 2003 from $77.8 71.0 million in 19952002. Foreign net sales Increases in total revenues and revenues from research services were primarily attributable to increases in agreement value and client companies as a result of the Giga acquisition. No single client company accounted for more than 3% of revenues during 2003 or 2002. Advisory services and other revenues increased $3.6 million, or 9.4%, 30% to $42.1 33.7 million in 1996 2003 from $38.5 26.0 million in 19952002. During 2003, we held 8 Forrester Events and four legacy-Giga events as compared to 14 Forrester Events held during 2002. The increase in foreign net sales was due advisory services and other revenues is primarily attributable to increased sales volumes with existing customers, and to a lesser extent, sales to several new customers. Domestic net sales increased $3.1 million, or 8.0%, to $42.4 million in 1996 from $39.3 million in 1995. This increase was due primarily to increased sales to existing customers. Notwithstanding the Company's record sales in 1996, the Company's foreign sales increases in the last half number of 1996 were negatively affected by weak international economies, certain customers' excess inventories, and a slowing in the overall rate of outsourcing of captive production. The Company anticipates that its foreign sales will continue clients to be affected by one or more of these negative factors in 1997. In addition, in the fourth quarter of 1996, two of the Company's major customers have informed the Company of their intention to bring in-house in 1997 a portion of their business (in the aggregate, approximately $9.0 million in net sales) that was previously outsourced to the Company. Management anticipates that the loss of these sales in 1997 should be offset, 1,812 at least partially, by additional sales to other existing customers. For information concerning the Company's quarterly results of operations for the year ended December 31, 19962003 from 1,125 at December 31, See Note 13 2002, and in the number of research employees delivering advisory services to 193 employees at December 31, 2003 from 101 employees at December 31, 2002, which more than offset the Notes decrease in event revenue attributable to Financial Statementsour holding fewer events during 2003 than during 2002. GROSS PROFITThe increase in clients and headcount in our research organization is primarily attributable to the acquisition of Giga. Gross profit Revenues attributable to customers outside the United States increased by 32% to $3.9 million, or 16.3%, to 36.6 million in 2003 from $27.8 million in 1996 from $23.9 million in 19952002. As Revenues attributable to customers outside the United States remained constant as a percentage of net sales, gross profit increased total revenues at 29% during 2003 and 2002. The increase in international revenues in dollars is primarily attributable to 32.9% the acquisition of Giga. We invoice our United Kingdom customers in 1996 from 30.7% in 1995. During 1995, gross profit was adversely affected as a result of increased raw material costs resulting from a steel shortage and inefficiencies associated with the steel shortage and capacity constraints, including increased labor and transportation costs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." During the first quarter of 1996pound sterling, the steel shortage abated and, functional currency of our London subsidiary; our continental European customers in additioneuros, the Company brought additional capacity onfunctional currency of our Amsterdam subsidiary; and all other international customers in U.S. dollars. The effect of changes in currency exchange rates have historically not had a significant impact on our results of operations. Assuming the acquisition of Giga occurred on January 1, 2002, whereby pre-line with the addition acquisition revenues of Giga would be added to ▇▇▇▇▇▇▇▇▇'▇ revenues, total revenues would have been $160.1 million in 2002 compared to $136.6 million in 2003. The decrease of $24.0 million is primarily attributable to a more difficult economic environment in 2002, resulting in lower revenues in 2003 because of the Mountain City, Tennessee facility which allowed for more efficient operations. During annual nature of our research contracts and the third quarter of 1996, the Company implemented a new financial reporting software package which allowed for more efficient tracking and controlling of costs. Additionally, during 1996, the Company recorded approximately $700,000 of duty drawback associated with 1995 and 1996 imports of raw material which had not been previously recorded. This amount is an offset to export fees paid. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $641,000, or 15.1%, to $4.9 million fromrelated revenue recognition policies.