UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

10-K/A

Amendment No. 1

 

(MARK ONE)

þxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2014
OR
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number:File Number 1-14443

GARTNER, INC.

(Exact name of registrantRegistrant as specifiedSpecified in its charter)

Charter)

Delaware04-3099750
(State or other jurisdictionOther Jurisdiction of Incorporation or Organization)(I.R.S. Employer
incorporation or organization) Identification Number)Identification No.)
  
P.O. Box 10212
56 Top Gallant Road
Stamford, CT
06902-7700 
56 Top Gallant Road(Address of Principal Executive Offices)(Zip Code) 
Stamford, CT06902-7700
(Address of principal executive offices)(Zip Code)
  
(203) 316-1111 
(Registrant’s telephone number, 
including area code)(Registrant’s Telephone Number, Including Area Code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each classEach Class: 
Name of each exchange
Each Exchange on which registered
Registered
Common Stock, $.0005 par value $0.0005 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þNoo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes oNo þ

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 þ   No o

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

Large accelerated filerþ
Accelerated filero
Non-accelerated filer  o

Smaller reporting company o
(Do not check if a smaller reporting company)Smaller reporting
company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso  Noþ

As of June 30, 2014,2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $6,067,265,349$7,771,510,947 based on the closing sale price as reported on the New York Stock Exchange.

The number of shares outstanding of the registrant’s common stock was 87,522,46882,652,880 as of January 31, 2015.

2017.

DOCUMENTS INCORPORATED BY REFERENCE

None.

DocumentParts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to
be held May 28, 2015 (Proxy Statement)

Explanatory Note

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends Gartner, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, originally filed with the Securities and Exchange Commission, or SEC, on February 22, 2017 (the “Original Filing”). We are amending and refiling Part III to include information required by Items 10, 11, 12, 13 and 14. Accordingly, reference to the proxy statement for our annual meeting of stockholders on the cover page has been deleted.

In addition, pursuant to the rules of the SEC, we have also included as exhibits currently dated certifications required under Section 302 of The Sarbanes-Oxley Act of 2002. Because no financial statements are contained within this Amendment, we are not including certifications pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. We are amending and refiling Part IV to reflect the inclusion of those certifications.

Except as described above, no other changes have been made to the Original Filing. Except as otherwise indicated herein, this Amendment continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing. The filing of this Annual Report on Form 10-K/A is not a representation that any statements contained in items of our Annual Report on Form 10-K other than Part III, Items 10 through 14, and Part IV are true or complete as of any date subsequent to the Original Filing.

2




GARTNER, INC.

2014

AMENDMENT NO. 1

to

ANNUAL REPORT ON FORM 10-K

10-K/A

FOR THE PERIOD ENDED DECEMBER 31, 2016

TABLE OF CONTENTS


  
4
. 
4
EXECUTIVE COMPENSATION8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSMATTTERS36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE38
PRINCIPAL ACCOUNTANTACCOUNTING FEES AND SERVICES39
PART IV40
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES40
ITEM 16.FORM 10–K SUMMARY41
SIGNATURES42
3

PART III

34ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS

Our Board of Directors, or Board, currently has ten directors who serve for annual terms. Our Chief Executive Officer, Eugene A. Hall, has an employment agreement with the Company that obligates the Company to include him on the slate of nominees to be elected to our Board during the term of the agreement. SeeExecutive Compensation – Employment Agreements with Executive Officers included in Item 11 of this Annual Report on Form 10-K. There are no other arrangements between any director or nominee and any other person pursuant to which the director or nominee was selected. None of our directors or executive officers is related to another director or executive officer by blood, marriage or adoption.

Set forth below are the name, age, principal occupation for the last five years, public company board experience, selected additional biographical information and period of service as a director of the Company of each director, as well as a summary of each director’s experience, qualifications and background which, among other factors, support their respective qualifications to continue to serve on our Board.

Michael J. Bingle,
44, director since
2004
Mr. Bingle is a Managing Partner and Managing Director of Silver Lake, a private equity firm that he joined in January 2000. Prior thereto, he was a principal with Apollo Management, L.P., a private equity firm, and an investment banker at Goldman, Sachs & Co. He is a former director of TD Ameritrade Holding and Virtu Financial Inc.
  
 Mr. Bingle’s investing, investment banking and capital markets expertise, coupled with his extensive working knowledge of Gartner (a former Silver Lake portfolio company), its financial model and core financial strategies, provide valuable perspective and guidance to our Board and Compensation and Governance Committees.
  
Peter E. Bisson,
59, director since
August 2016
Mr. Bisson recently retired from McKinsey & Company where he last served as Director and Global Leader of the High Tech Practice. Mr. Bisson held a number of other leadership positions at McKinsey & Company, including chair of its knowledge committee, which guides the firm’s knowledge investment and communication strategies, member of the firm’s shareholders committee, and leader of the firm’s strategy and telecommunications practices. In more than 30 years at McKinsey & Company, Mr. Bisson advised a variety of multinational public companies in the technology-based products and services industry. Mr. Bisson is also a director of ADP.
  
Mr. Bisson’s experience includes advising clients on corporate strategy and M&A, design and execution of performance improvement programs and marketing and technology development, which qualifies him to serve as a director.
 
Richard J. Bressler, 59, director since
2006
Mr. Bressler is President and Chief Financial Officer of iHeartMedia, Inc., and Chief Financial Officer of Clear Channel Outdoor Holdings, Inc. Prior to joining iHeartMedia, he served as Managing Director of Thomas H. Lee Partners, L.P., a Boston-based private equity firm, from 2006 to July 2013. He joined Thomas H. Lee Partners from his role as Senior Executive Vice President and Chief Financial Officer of Viacom Inc., where he managed all strategic, financial, business development and technology functions. Mr. Bressler has also served in various capacities with Time Warner Inc., including Chairman and Chief Executive Officer of Time Warner Digital Media and Executive Vice President and Chief Financial Officer of Time Warner Inc. Prior to joining Time Inc., he was a partner with the accounting firm of Ernst & Young. Mr. Bressler is currently a Director of iHeartMedia, Inc., and a former director of The Nielsen Company B.V. and Warner Music Group Corp.
Mr. Bressler qualifies as an audit committee financial expert, and his extensive financial and operational roles at large U.S. public companies bring a wealth of management, financial, accounting and professional expertise to our Board and Audit Committee.

Raul E. Cesan,
69, director since
2012
Mr. Cesan has been the Founder and Managing Partner of Commercial Worldwide LLC, an investment firm. Prior thereto, he spent 25 years at Schering – Plough Corporation, serving in various capacities of substantial responsibility: the President and Chief Operating Officer (from 1998 to 2001); Executive Vice President of Schering-Plough Corporation and President of Schering-Plough Pharmaceuticals (from 1994 – 1998); President of Schering Laboratories, U.S. Pharmaceutical Operations (from 1992 to 1994); and President of Schering – Plough International (from 1988 to 1992). Mr. Cesan is also a director of The New York Times Company.
Mr. Cesan’s extensive operational and international experiences provide valuable guidance to our Board and Compensation Committee.
Karen E. Dykstra,
58, director since
2007
Ms. Dykstra served as Chief Financial and Administrative Officer from November 2013 to July 2015, and as Chief Financial Officer from September 2012 to November 2013, of AOL, Inc. From January 2007 until December 2010, Ms. Dykstra was a Partner of Plainfield Asset Management LLC (“Plainfield”), and she served as Chief Operating Officer and Chief Financial Officer of Plainfield Direct LLC, Plainfield’s business development company, from May 2006 to 2010, and as a director from 2007 to 2010. Prior thereto, she spent over 25 years with Automatic Data Processing, Inc., serving most recently as Chief Financial Officer from January 2003 to May 2006, and prior thereto as Vice President – Finance, Corporate Controller and in other capacities. Ms. Dykstra is a director of VMware, Inc. and Boston Properties, Inc., and a former director of Crane Co. and AOL, Inc.
Ms. Dykstra qualifies as an audit committee financial expert, and her extensive management, financial, accounting and oversight experience provide important expertise to our Board and Audit Committee.
Anne Sutherland
Fuchs, 69,
director since
July 1999
Ms. Fuchs served as Group President, Growth Brands Division, Digital Ventures, a division of J.C. Penney Company, Inc., from November 2010 until April 2012. She also served as Chair of the Commission on Women’s Issues for New York City during the Bloomberg Administration, a position she held from 2002 through 2013. Previously, Ms. Fuchs served as a consultant to companies on branding and digital initiatives, and as a senior executive with operational responsibility at LVMH Moët Hennessy Louis Vuitton, Phillips de Pury & Luxembourg and several publishing companies, including Hearst Corporation, Conde Nast, Hachette and CBS. Ms. Fuchs is also a director of Pitney Bowes Inc.
Ms. Fuchs’ executive management, content and branding skills plus operations expertise, her knowledge of government operations and government partnerships with the private sector, and her keen interest and knowledge of diversity, governance and executive compensation matters provide important perspective to our Board and its Governance and Compensation Committees.
William O. Grabe, 78, director since 1993Mr. Grabe is an Advisory Director of General Atlantic LLC, a global private equity firm. Prior to joining General Atlantic in 1992, Mr. Grabe was a Vice President and Corporate Officer of IBM Corporation. Mr. Grabe is presently a director of Covisint Corporation, QTS Realty Trust, Inc. and Lenovo Group Limited. He is a former director of Infotech Enterprises Limited, Compuware Corporation and iGate Computer Systems Limited (f/k/a Patni Computer Systems Ltd.).
Mr. Grabe’s extensive senior executive experience, his knowledge of business operations and his vast knowledge of the global information technology industry have made him a valued member of the Board and Governance Committee.


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PART I
5
ITEM 1. BUSINESS.
GENERAL
Gartner, Inc. (“Gartner”) (NYSE: IT) is the world’s leading information technology research and advisory company. We deliver the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, digital marketing professionals and technology investors, we
Eugene A. Hall,
60, director since
2004
Mr. Hall is the Chief Executive Officer of Gartner. Prior to joining Gartner in 2004, Mr. Hall was a senior executive at Automatic Data Processing, Inc., a Fortune 500 global technology and service company, serving most recently as President, Employers Services Major Accounts Division, a provider of human resources and payroll services. Prior to joining ADP in 1998, Mr. Hall spent 16 years at McKinsey & Company, most recently as Director.
As Gartner’s CEO, Mr. Hall is responsible for developing and executing on the Company’s operating plan and business strategies in consultation with the Board of Directors and for driving Gartner’s business and financial performance, and is the sole management representative on the Board.
Stephen G.
Pagliuca,62,
director since
1990
Mr. Pagliuca is a Managing Director of Bain Capital Partners, LLC and is also a Managing Partner and an owner of the Boston Celtics basketball franchise. Mr. Pagliuca joined Bain & Company in 1982, and founded the Information Partners private equity fund for Bain Capital in 1989. Prior to joining Bain, Mr. Pagliuca worked as a senior accountant and international tax specialist for Peat Marwick Mitchell & Company in the Netherlands. Mr. Pagliuca is a former director of Burger King Holdings, Inc., HCA, Inc. (Hospital Corporation of America), Quintiles Transnational Corporation and Warner Chilcott PLC.
He has deep subject matter knowledge of Gartner’s history, the development of its business model and the global information technology industry, as well as financial and accounting matters.
James C. Smith,
76, director since
October 2002 and
Chairman of the
Board since 2004
Mr. Smith was Chairman of the Board of First Health Group Corp., a national health benefits company until its sale in 2004. He also served as First Health’s Chief Executive Officer from January 1984 through January 2002 and President from January 1984 to January 2001.
Mr. Smith’s long-time expertise and experience as the founder, senior-most executive and chairman of the board of a successful large public company provides a unique perspective and insight into management and operational issues faced by the Board, Audit Committee and our CEO. This experience, coupled with Mr. Smith’s personal leadership qualities, qualify him to continue to serve as Chairman of the Board.

EXECUTIVE OFFICERS

Set forth below are the valuablename, age, and other biographical information of each of our executive officers.

Eugene A. Hall
60
Chief Executive Officer and director since 2004. Prior to joining Gartner, he was a senior executive at Automatic Data Processing, Inc., a Fortune 500 global technology and services company, serving most recently as President, Employers Services Major Accounts Division, a provider of human resources and payroll services. Prior to joining ADP in 1998, Mr. Hall spent 16 years at McKinsey & Company, most recently as Director.
Ken Davis
48
Senior Vice President, Business and IT Leaders, Products & Services since 2008. Previously at Gartner, he has served as Senior Vice President, End User Programs, High Tech & Telecom Programs, and Strategy, Marketing and Business Development. Prior to joining Gartner in 2005, Mr. Davis spent ten years at McKinsey & Company, where he was a partner assisting clients in the IT industry.
Alwyn Dawkins
50
Senior Vice President, Worldwide Events & Marketing since 2008. Previously at Gartner, he has served as Group Vice President, Asia/Pacific Sales, based in Sydney, Australia, and prior thereto, as Group Vice President, Gartner Events, where he held global responsibility for exhibit and sponsorship sales across the portfolio of Gartner events. Prior to joining Gartner in 2002, Mr. Dawkins spent ten years at Richmond Events, culminating in his role as Executive Vice President responsible for its North American business.
6
Mike Diliberto
51
Senior Vice President & Chief Information Officersince 2016.Previously, he served as CIO at Priceline, a leader in online travel and related services. Before joining Priceline, he held several senior technology positions at the online division of News Corp, where he was instrumental in establishing an online presence for News Corp brands such as Fox News, Fox Sports, TV Guide and Sky Sports, including launching the first major league baseball website. Previously, he held several leadership positions at Prodigy Services Company, one of the pioneering consumer-focused online services.
David Godfrey
45
Senior Vice President, Worldwide Sales since 2010. Previously at Gartner, he led North American field sales, and prior to this role, he led the Europe, Middle East and Africa (EMEA) and the Americas inside sales organizations. Before joining Gartner in 1999 as a sales executive, Mr. Godfrey spent seven years in business development at Exxon Mobil.
Robin Kranich
46
Senior Vice President, Human Resources since 2008. During her 22 years at Gartner, she has served as Senior Vice President, End User Programs; Senior Vice President, Research Operations and Business Development; Senior Vice President and General Manager of Gartner EXP; Vice President and Chief of Staff to Gartner’s president; and various sales and sales management roles. Prior to joining Gartner, Ms. Kranich was part of the Technology Advancement Group at Marriott International.
David McVeigh
47
Senior Vice President, New Markets Programssince August 2015. Prior to joining Gartner, he was a managing director at Hellman & Friedman LLC, an operating partner at Blackstone Group and a partner at McKinsey & Company.
Daniel S. Peale
44
Senior Vice President, General Counsel & Corporate Secretary since January 2016. Prior to joining Gartner in October 2015, he was a corporate and securities partner with the law firm of Wilson Sonsini Goodrich & Rosati in Washington, D.C., where he was in private practice for 15 years.
Craig W. Safian
48
Senior Vice President & Chief Financial Officer since June 2014. In his 14 years at Gartner, he has served as Group Vice President, Global Finance and Strategy & Business Development from 2007 until his appointment as CFO, and previously as Group Vice President, Strategy and Managing Vice President, Financial Planning and Analysis. Prior to joining Gartner, he held finance positions at Headstrong (now part of Genpact) and Bristol-Myers Squibb, and was an accountant for Friedman, LLP where he achieved CPA licensure.
Peter
Sondergaard
52
Senior Vice President, Research since 2004. During his 28 years at Gartner, he has held various roles, including Head of Research for the Technology & Services Sector, Hardware & Systems Sector, Vice President and General Manager for Gartner Research EMEA. Prior to joining Gartner, Mr. Sondergaard was research director at International Data Corporation in Europe.
Chris Thomas
45
Senior Vice President, Executive Programs since April 2013. During his 15 years at Gartner, he has held various roles, including Group Vice President, Sales, leading the Americas IT, Digital Marketing and Global Supply Chain sales group; head of North America and Europe, Middle East and Africa (EMEA) Small and Medium Business sales organizations, and a number of other roles, including sales operations and field sales leadership. Before joining Gartner, he spent seven years in procurement, sales and marketing at Exxon Mobil.
Per Anders
Waern
55
Senior Vice President, Gartner Consulting since 2008. Since joining Gartner in 1998, he has held senior consulting roles principally in EMEA, and served most recently as head of Gartner’s global core consulting team. Prior to joining Gartner, Mr. Waern led corporate IT strategy at Vattenfall in Sweden.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of our Common Stock to clients in 9,958 distinct enterprises. We work with clients to research, analyzefile reports of ownership and interpret the businesschanges of IT within the context of their individual roles. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and as of December 31, 2014, had 6,758 associates, including 1,556 research analysts and consultants, and clients in over 90 countries.

The foundation for all Gartner products and services is our independent research on IT and supply chain issues. The findings from this research are delivered through our three business segments – Research, Consulting and Events: 

Research provides objective insight on critical and timely technology and supply chain initiatives for CIOs, other IT professionals, supply chain leaders, digital marketing professionals, technology companies and the institutional investment community through reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enable our clients to make better decisions about their IT, supply chain and digital marketing investments.

Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency and quality.

Events provides IT, supply chain, and business professionals the opportunity to attend various symposia, conferences and exhibitions to learn, contribute and network with their peers. From our flagship event Symposium/ITxpo, to summits focused on specific technologies and industries, to experimental workshop-style seminars, our events distill the latest Gartner research into applicable insight and advice.

For more information regarding Gartner and our products and services, visit gartner.com.

References to “the Company,” “we,” “our,” and “us” are to Gartner, Inc. and its consolidated subsidiaries. 

MARKET OVERVIEW
Technological innovations are changing how businesses and organizations work and what they do at an increasingly rapid pace. Today, everyone is living and working in the midst of a technological revolution. The nexus of four powerful forces – social, mobile, cloud and information, coupledownership with the "Internet of things" – are blurring the line between the physicalSEC and digital worlds, creating unprecedented change on a scale not seen before facing every organization around the world, from business enterprises and units within enterprises of every size, to governments and government agencies, as well as other organizations. This change falls into three categories: optimizing the use of technology to improve performance across every function in the organization; managing disruptive technology-based innovation; and protecting the organization from security threats. This technology revolution will remain vibrant for decades to come.
Information technology (IT) is critical to supporting increased productivity, service and performance improvement, revenue growth and cyber-security. As the costs of IT solutions continue to rise, IT executives and professionals have realized the importance of making well-informed decisions and increasingly seek to maximize their returns on IT capital investments. As a result, every IT investment decision in an enterprise is subject to increased financial scrutiny, especially in the current challenging economic climate. In addition, today’s IT marketplace is dynamic and complex. Technology providers continually introduce new productsfurnish us with a wide variety of standards and features that are prone to shorter life cycles. Users of technology – a group that encompasses nearly all organizations – must keep abreast of new developments in technology to ensure that their IT systems are reliable, efficient, secure, and meet both their current and future needs.
Given the strategic and critical nature of technology decision-making and spending, business enterprises, governments and their agencies, and other organizations turn to Gartner for guidance in order to make the right decisions to maximize the value of their IT investments.


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OUR SOLUTION
We provide IT decision makers with the insight they need to understand where – and how – to successfully harness technology to achieve their mission critical priorities. We employ a diversified business model that utilizes and leverages the breadth and depth of our intellectual capital. The foundation of our business model is our ability to create and distribute our proprietary research content as broadly as possible via published reports and briefings, consulting and advisory services, and our events, including Gartner Symposium/ITxpo.
We have 1,021 analysts located around the world who create compelling, relevant, independent and objective research and fact-based analysis on every major IT initiative and all aspectscopies of the IT industry, including supply chainreports they file. To assist with this reporting obligation, the Company prepares and digital marketing. Through our robust product portfolio, our global research team provides thought leadershipfiles ownership reports on behalf of its officers and technology insights that CIOs, supply chain professionals, digital marketing professionals, executives and other technology practitioners needdirectors pursuant to makepowers of attorney issued by the right decisions, every day. In additionofficer or director to our analysts, we have 535 experienced consultants who combine our objective, independent research with a practical business perspective focused on the IT industry. Finally, our events are the largest of their kind, gathering highly qualified audiences of CIOs, other senior business executives and IT professionals, supply chain leaders, and purchasers and providers of technology and supply chain products and services.
PRODUCTS AND SERVICES
Our diversified business model provides multiple entry points and synergies that facilitate increased client spendingCompany. Based solely on our research, consulting servicesreview of these reports, or written representations from certain reporting persons, there were no late filings in 2016.

CORPORATE GOVERNANCE

Code of Ethics and events. A critical partCode of our long-term strategy is to increase business volume with our most valuable clients, identifying relationships with the greatest sales potential and expanding those relationships by offering strategically relevant research and advice. We also seek to extend the Conduct

Gartner brand name to develop new client relationships, augment our sales capacity, and expand into new markets around the world. In addition, we seek to increase our revenue and operating cash flow through more effective pricing of our products and services. These initiatives have created additional revenue streams through more effective packaging, campaigning and cross-selling of our products and services.

Our principal products and services are delivered via our Research, Consulting and Events segments:
RESEARCH. Gartner delivers independent, objective IT research and insight primarily throughhas adopted a subscription-based, digital media service. Gartner research is the fundamental building block for all Gartner services and covers all technology-related markets, topics and industries, as well as supply chain and digital marketing. We combine our proprietary research methodologies with extensive industry and academic relationships to create Gartner solutions that address each role within an IT organization. Our research agenda is defined by clients’ needs, focusing on the critical issues, opportunities and challenges they face every day. Our research analysts are in regular contact with both technology providers and technology users, enabling them to identify the most pertinent topics in the IT marketplace and develop relevant product enhancements to meet the evolving needs of users of our research. They provide in-depth analysis on all aspects of technology, including hardware; software and systems; services; IT management; market data and forecasts; and vertical-industry issues. Our proprietary research content, presented in the form of reports, briefings, updates and related tools, is delivered directly to the client’s desktop via our website and/or product-specific portals. Clients normally sign subscription contracts that provide access to our research content for individual users over a defined period of time. The majority of our research subscription agreements are for twelve months. However, with increasing frequency we are entering into multi-year agreements.

CONSULTING. Gartner Consulting deepens relationships with our Research clients by extending the reach of our research through custom consulting engagements. Gartner Consulting brings together our unique research insight, benchmarking data, problem-solving methodologies and hands-on experience to improve the return on a client’s IT investment. Our consultants provide fact-based consulting services to help clients use and manage IT to optimize business performance.

Consulting solutions capitalize on Gartner assets that are invaluable to IT decision making, including: (1) our extensive research, which ensures that our consulting analyses and advice are based on a deep understanding of the IT environment and the business of IT; (2) our market independence, which keeps our consultants focused on our clients' success; and (3) our market-leading benchmarking capabilities, which provide relevant comparisons and best practices to assess and improve performance.

Gartner Consulting provides solutions to CIOs and other IT executives, and to those professionals responsible for IT applications, enterprise architecture, go-to-market strategies, infrastructure and operations, program and portfolio management, and sourcing and vendor relationships. Consulting also provides targeted consulting services to professionals

4



in specific industries. Finally, we provide actionable solutions for IT cost optimization, technology modernization and IT sourcing optimization initiatives.

EVENTS. Gartner Symposium/ITxpo events and Gartner Summit events are gatherings of technology’s most senior IT professionals, business strategists and practitioners. Gartner Events offers current, relevant and actionable technology sessions led by Gartner analysts, while facilitating peer exchanges. These sessions are augmented with technology showcases, peer exchanges, analyst one-on-one meetings, workshops and keynotes by technology’s top leaders. They also provide attendees with an opportunity to interact with business executives from the world’s leading technology companies.

Gartner events attract high-level IT and business professionals who seek in-depth knowledge about technology products and services. Gartner Symposium/ITxpo events are large, strategic conferences held in various locations throughout the world for CIOs and other senior IT and business professionals. Gartner Summit events focus on specific topics, technologies and industries including supply chain and digital marketing, providing IT professionals with the insight, solutions and networking opportunities to succeed in their job role. Finally, we offer targeted events for CIOs and IT executives, such as CIO Leadership Forum.

COMPETITION
We believe that the principal factors that differentiate us from our competitors are the following:
Superior IT research content – We believe that we create the broadest, highest-quality and most relevant research coverage of the IT industry, with offerings for every member of an IT organization. Our research analysis generates unbiased insight that we believe is timely, thought-provoking and comprehensive, and that is known for its high quality, independence and objectivity.

Our leading brand name – We have provided critical, trusted insight under the Gartner name for 35 years.

Our global footprint and established customer base – We have a global presence with clients in over 90 countries on six continents. A substantial portion of our revenues is derived from sales outside of the U.S.

Experienced management team – Our management team is composed of IT research veterans and experienced industry executives with long tenure at Gartner.

Substantial operating leverage in our business model — We have the ability to distribute our intellectual property and expertise across multiple platforms, including research publications, consulting engagements, conferences and executive programs, to derive incremental revenue and profitability.

Vast network of analysts and consultants – As of December 31, 2014, we had 1,556 research analysts and consultants located around the world. Our analysts collectively speak 50 languages and are located in 26 countries, enabling us to cover all aspects of IT on a global basis.

Notwithstanding these differentiating factors, we face competition from a significant number of independent providers of information products and services. We compete indirectly with consulting firms and other information providers, including electronic and print media companies. These indirect competitors could choose to compete directly with us in the future. In addition, we face competition from free sources of information that are available to our clients through the Internet. Limited barriers to entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start to provide additional or complementary services. While we believe the breadth and depth of our research assets position us well versus our competition, increased competition could result in loss of market share, diminished value in our products and services, reduced pricing, and increased sales and marketing expenditures.
INTELLECTUAL PROPERTY
Our success has resulted in part from proprietary methodologies, software, reusable knowledge capital and other intellectual property rights. We rely on a combination of patent, copyright, trademark, trade secret, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. We have policies related to confidentiality, ownership, and the use and protection of Gartner’s intellectual property. We also enter into agreements with our employees as appropriate that protect our intellectual property, and we enforce these agreements if necessary. We recognize the value of our intellectual property in the marketplace and vigorously identify, create and protect it. Additionally, we actively monitor and enforce contract compliance by our end users.

5




EMPLOYEES
We had 6,758 employees as of December 31, 2014, an increase of 13% compared to the prior year end as we continued to invest for future growth. We have 1,291 employees located at our headquarters in Stamford, Connecticut and a nearby office in Trumbull, Connecticut; 2,605 employees located elsewhere in the United States in 30 offices; and 2,862 employees located outside of the United States in 65 offices. Our employees may be subject to collective bargaining agreements at a company or industry level, or works councils, in those foreign countries where this is part of the local labor law or practice. We have experienced no work stoppages and consider our relations with our employees to be favorable.
AVAILABLE INFORMATION
Our Internet address is www.gartner.com and the Investor Relations section of our website is located at www.investor.gartner.com. We make available free of charge, on or through the Investor Relations section of our website, printable copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
Also available at www.investor.gartner.com, under the “Corporate Governance” link, are printable and current copies of our (i) CEO & CFO Code of Ethics which applies to our Chief Executive Officer, Chief Financial Officer, ControllerCEO, CFO, controller and other financial managers, (ii)and a Global Code of Conduct, which applies to all Gartner officers, directors and employees, wherever located. Annually, each officer, director and employee affirms compliance with the Global Code of Conduct. The current electronic printable copies of the full text of these codes can be found at the investor relations section of our website, located (iii)at www.investor.gartner.com under the “Corporate Governance” link. This information is also available in print to any stockholder who makes a written request to Investor Relations, Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904 - 2212.

DIRECTOR NOMINATIONS

There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors since those procedures were described in our proxy statement for our 2016 annual meeting of stockholders.

AUDIT COMMITTEE

Gartner has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act consisting of Ms. Dykstra and Messrs. Bressler and Smith. Our Board Principleshas determined that both Ms. Dykstra and Practices,Mr. Bressler qualify as audit committee financial experts, as defined by the rules of the SEC, and that all members have the requisite accounting or related financial management expertise and are financially literate as required by the NYSE corporate governance principles that have been adopted by our Boardlisting standards.

ITEM 11.EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion & Analysis, or “CD&A”, describes and (iv) charters for each ofexplains the Board’s standing committees: Audit, CompensationCompany’s compensation philosophy and Governance/Nominating.

ITEM 1A. RISK FACTORS
We operate in a highly competitive and rapidly changing environment that involves numerous risks and uncertainties, some of which are beyond our control. In addition, we and our clients are affected by global economic conditions. The following sections discuss many, but not all, of the risks and uncertainties that may affect our future performance, but is not intended to be all-inclusive. Any of the risks described below could have a material adverse impact on ourbusiness, prospects, results of operations, financial condition, and cash flows, and couldtherefore have a negative effect on the trading price of our common stock. Additionally risks not currently known to us or that we now deem immaterial mayalso harm us and negatively affect your investment.
Risks related to our business
Our operating results could be negatively impacted by global economicconditions. Our business is impacted by general economic conditions and trends, in the U.S and abroad. U.S. economic data continues to be mixed, but the overall economy continues to grow and unemployment continues to fall. However, economic growth continues to be uneven globally, with continuing weakness across Europe and emerging markets, as recent geopolitical events add to the uncertainty. These conditions could negatively and materially affect future demand for our products and services. Such difficulties could include the ability to maintain client retention, wallet retention and consulting utilization rates, achieve contract value and consulting backlog growth, attract attendees and exhibitors to our events or obtain new clients. Such developments could negatively impact our financial condition, results of operations, and cash flows.
We face significant competition and our failure to compete successfully couldmaterially and adversely affect our results of operations, financial condition, and cash flows. We face direct competition from a significant number of independent providers of information products and services, including information available on the Internet free of charge. We also compete indirectly against consulting firms and other information providers, including electronic and print media companies, some of which may have greater financial, information gathering and marketing resources than we do. These indirect competitors could also choose to compete directly with us in the future. In addition, low barriers to entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start to provide additional or complementary services. Additionally, technological advances may provide increased competition from a variety of sources.
There can be no assurance that we will be able to successfully compete against current and future competitors and our failure to do so could result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing expenditures. Furthermore, we may not be successful if we cannot compete effectively on quality of research and analysis, timely

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delivery of information, customer service, and the ability to offer products to meet changing market needs for information and analysis, or price.
We may not be able to maintain the quality of our existing products and services. We operate in a rapidly evolving market, and our success depends upon our ability to deliver high quality and timely research and analysis to our clients. Any failure to continue to provide credible and reliable information that is useful to our clients could have a material adverse effect on future business and operating results. Further, if our data, viewpoints, or predictions prove to be wrong or are not substantiated by appropriate research, our reputation may suffer and demand for our products and services may decline. In addition, we must continue to improve our methods for delivering our products and services in a cost-effective manner, including via the Internet and mobile applications. Failure to maintain state of the art electronic delivery capabilities could adversely affect our future business and operating results.
We may not be able to enhance and develop our existing products and services,or introduce the new products and services that are needed to remaincompetitive. The market for our products and services is characterized by rapidly changing needs for information and analysis on the IT industry as a whole. The development of new products is a complex and time-consuming process. Nonetheless, to maintain our competitive position, we must continue to anticipate the needs of our client organizations, develop, enhance and improve our existingexecutive compensation program, as well as new productscompensation awarded to and services to address those needs, deliver all products and services in a timely, user-friendly and state of the art manner, and appropriately position and price new products and services relative to the marketplace and our costs of developing them. Any failure to achieve successful client acceptance of new products and services could have a material adverse effect on our business, results of operations and financial position. Additionally, significant delays in new product or services releases or significant problems in creating new products or services could adversely affect our business, results of operations and financial position.
We depend on renewals of subscription-based services and sales of newsubscription-based services for a significant portion of our revenue, and ourfailure to renew at historical rates or generate new sales of such servicescould lead to a decrease in our revenues. A large portion of our success depends on our ability to generate renewals of our subscription-based research products and services and new sales of such products and services, both to new clients and existing clients. These products and services constituted 72% and 71% of our total revenues for 2014 and 2013, respectively. Generating new sales of our subscription-based products and services, both to new and existing clients, is a challenging, costly, and often time consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues will be adversely affected.

The majority of our research subscription agreements are for twelve months. However, we do enter into multi-year agreements, which have been increasing in frequency. Our ability to maintain contract renewals is subject to numerous factors, including the following:
delivering high-quality and timely analysis and advice to our clients;

understanding and anticipating market trends and the changing needs of our clients; and

delivering products and services of the quality and timeliness necessary to withstand competition.

Additionally, as we continue to adjust our products and service offerings to meet our clients’ continuing needs, we may shift the type and pricing of our products which may impact client renewal rates. While our Research enterprise client retention rate was 85% at December 31, 2014 and 83% at December 31, 2013, there can be no guarantee that we will continue to maintain this rate of client renewals.
We depend on non-recurring consulting engagements and our failure to secure newengagements could lead to a decrease in our revenues. Consulting segment revenues constituted 17% of our total revenues in 2014 and 18% in 2013. Consulting engagements typically are project-based and non-recurring. Our ability to replace consulting engagements is subject to numerous factors, including the following:
delivering consistent, high-quality consulting services to our clients;

tailoring our consulting services to the changing needs of our clients; and

our ability to match the skills and competencies of our consulting staff to the skills required for the fulfillment of existing or potential consulting engagements.


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Any material decline in our ability to replace consulting arrangements could have an adverse impact on our revenues and our financial condition. In addition, revenue in our contract optimization business can fluctuate from period to period.
The profitability and success of our conferences, symposia and events could beadversely affected by external factors beyond our control. The market for desirable dates and locations for conferences, symposia and events is highly competitive. If we cannot secure desirable dates and suitable venues for our conferences, symposia and events their profitability could suffer, and our financial condition and results of operations may be adversely affected. In addition, because our events are scheduled in advance and held at specific locations, the success of these events can be affected by circumstances outside of our control, such as labor strikes, transportation shutdowns and travel restrictions, economic slowdowns, reductions in government spending, geo-political crises, terrorist attacks, weather, natural disasters, communicable diseases, and other occurrences impacting the global, regional, or national economies, the occurrence of any of which could negatively impact the success of the event. We also face the challenge of procuring venues that are sizeable enough at a reasonable cost to accommodate some of our major events.
Our sales to governments are subject to appropriations and may be terminated. We derive significant revenues from research and consulting contracts with the U.S. government and its respective agencies, numerous state and local governments and their respective agencies, and foreign governments and their agencies. At December 31, 2014 and 2013, approximately $310.0 million and $283.0 million, respectively, of our total contracts were attributable to government entities. We believe substantially all of the amounts attributable to government entities at December 31, 2014 will be filled in 2015. Our U.S. government contracts are subject to the approval of appropriationsearned by, the U.S. Congress to fund the agencies contracting for our services. Additionally, our contracts at the state and local levels, as well as foreign government contracts, are subject to various governmental authorizations and funding approvals and mechanisms. In general, most if not all of these contracts may be terminated at any time without cause or penaltyfollowing persons who were Named Executive Officers (“termination for convenience”NEOs”). Similarly, contracts with U.S. federal, state and local, and foreign governments and their respective agencies are subject to increasingly complex bidding procedures, compliance requirements and intense competition. Should appropriations for the governments and agencies that contract with us be curtailed, or should our government contracts be terminated for convenience, we may experience a significant loss of segment and consolidated revenues.
We may not be able to attract and retain qualified personnel which couldjeopardize our future growth plans, as well as the quality of our products and services. Our success depends heavily upon the quality of our senior management, research analysts, consultants, sales and other key personnel. We face competition for qualified professionals from, among others, technology companies, market research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a greater ability to attract and compensate these professionals. Recent improvements in the U.S economy have heightened this competition. Additionally, some of the personnel that we attempt to hire are subject to non-compete agreements that could impede our short-term recruitment efforts. Any inability to retain key personnel, or to hire and train additional qualified personnel to support the evolving needs of clients or the projected growth in our business, could adversely affect the quality of our products and services, as well as future business and operating results.
We may not be able to maintain the equity in our brand name. We believe that our “Gartner” brand, including our independence, is critical to our efforts to attract and retain clients and that the importance of brand recognition will increase as competition increases. We may expand our marketing activities to promote and strengthen the Gartner brand and may need to increase our marketing budget, hire additional marketing and public relations personnel, and expend additional sums to protect our brand and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote and maintain the Gartner brand, or incur excessive expenses in doing so, our future business and operating results could be adversely impacted.
Our international operations expose us to a variety of operational risks whichcould negatively impact our future revenue and growth. We have clients in over 90 countries and a substantial amount of our revenues is earned outside of the U.S. Our operating results are subject to the risks inherent in international business activities, including general political and economic conditions in each country, changes in market demand as a result of tariffs and other trade barriers, challenges in staffing and managing foreign operations, changes in regulatory requirements, compliance with numerous foreign laws and regulations, differences between U.S. and foreign tax rates and laws, and the difficulty of enforcing client agreements, collecting accounts receivable and protecting intellectual property rights in international jurisdictions. Furthermore, we rely on local distributors or sales agents in some international locations. If any of these arrangements are terminated by our agent or us, we may not be able to replace the arrangement on beneficial terms or on a timely basis, or clients of the local distributor or sales agent may not want to continue to do business with us or our new agent.
We are exposed to volatility in foreign currencyexchange rates from our international operations. Revenues earned outside the U.S. are typically transacted in local currencies, which may fluctuate significantly against the U.S. dollar. While we may use forward exchange contracts to a limited extent to seek to mitigate foreign currency risk, our revenues and results of operations could be adversely affected by unfavorable foreign currency fluctuations. Additionally, our effective tax rate is increased as the U.S dollar strengthens against foreign currencies, which could impact our operating results.

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Natural disasters or geo-political events may disrupt our business. A major weather event, terrorist attack, earthquake, flood, volcanic activity, or other catastrophic disaster could significantly disrupt our operations. Such events could cause delays in initiating or completing sales, impede delivery of our products and services to our clients, disrupt other critical client-facing and business processes, or dislocate our critical internal functions and personnel. Our corporate headquarters is located approximately 30 miles from New York City, and we have an operations center located in Ft. Myers, Florida, a hurricane-prone area. We also operate in numerous international locations, and we have offices in a number of major cities across the globe. Abrupt political change, terrorist activity, communicable diseases, and armed conflict pose a risk of general economic disruption in affected countries and regions, which may negatively impact our sales and increase our operating costs. Additionally, these conditions also may add uncertainty to the timing and budget decisions of our clients. Such events could significantly harm our ability to conduct normal business operations and negatively impact our financial condition and operating results.

Privacy concerns could damage our reputation and deter current and potential clients from using our products and services or attending our events. Concerns relating to global data privacy have the potential todamage our reputation and deter current and prospective clients from using our products and services or attending our events. In the ordinary course of our business and in accordance with applicable laws, we collect personal information (i) from our employees (ii) from the users of our products and services, including event attendees; and (iii) from prospective clients. We collect only basic personal information from our clients and prospects (name, email address, job title) and do not as a rule collect sensitive personal information like SSNs and credit card numbers. 

Even if unfounded, concerns about our practices with regard to the collection, use, disclosure, or security of this personal information or other data privacy related matters, could damage our reputation and adversely affect our operating results.  In addition, because many of our products and services are web-based, the amount of data we store on our servers (including personal information) has been increasing. Any systems failure or compromise of our security that results in the disclosure of our users’ personal data could seriously limit the consumption of our products and services and the attendance at our events, as well as harm our reputation and brand and, therefore, our business.
In addition, while we are a Safe Harbor certified company and while we have implemented a company-wide privacy compliance program, regulatory authorities around the world continue to adopt new laws, regulations and penalties concerning data privacy. The interpretation and application of these laws in the U.S., Europe and elsewhere are often uncertain, inconsistent and ever changing. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data privacy practices. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
Internet and critical internal computer system failures, cyber-attacks, or compromises of our systems or security could damage our reputation and harm our business. A significant portion of our business is conducted over the Internet and we rely heavily on computer systems to conduct our operations. Individuals, groups, and state-sponsored organizations may take steps that pose threats to our operations, our computer systems, our employees, and our customers. They may develop and deploy malicious software to gain access to our networks and attempt to steal confidential information, launch distributed denial of service attacks, or attempt other coordinated disruptions. These threats are constantly evolving and becoming more sophisticated, thereby increasing the difficulty of detecting and successfully defending against them. A cyber-attack, widespread Internet failure, or disruption of our critical information technology systems through denial of service, viruses, or other events could cause delays in initiating or completing sales, impede delivery of our products and services to our clients, disrupt other critical client-facing or business processes, or dislocate our critical internal functions. Such events could significantly harm our ability to conduct normal business operations and negatively impact our financial results.

We take steps to secure our management information systems, including our computer systems, intranet, proprietary websites, email and other telecommunications and data networks, and we carefully scrutinize the security of outsourced website and service providers prior to retaining their services. However, the security measures implemented by us or by our outside service providers may not be effective and our systems (and those of our outside service providers) may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or security breaches, cyber-attacks, computer viruses, power loss, or other disruptive events. Our reputation, brand, financial condition and operating results could be adversely affected if, as a result of a significant cyber event or other technology-related catastrophe, our operations are disrupted or shutdown; our confidential, proprietary information is stolen or disclosed; we incur costs or are required to pay fines in connection with stolen customer, employee, or other confidential information; we are required to dedicate significant resources to system repairs or increase cyber security protection; or we otherwise incur significant litigation or other costs as a result of these occurrences.

We may experience outages and disruptions of our online services if we fail tomaintain an adequate operations infrastructure. Our increasing user traffic and complexity of our products and services demand more computing power. We have spent and expect

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to continue to spend substantial amounts to maintain data centers and equipment, to upgrade our technology and network infrastructure to handle increased traffic on our websites, and to deliver our products and services through emerging channels, such as mobile applications. However, any inefficiencies or operational failures could diminish the quality of our products, services, and user experience, resulting in damage to our reputation and loss of current and potential users, subscribers, and advertisers, potentially harming our financial condition and operating results.

Our outstanding debt obligation could impact our financial condition or future operating results. We have a credit arrangement that provides for a five-year, $400.0 million term loan and a $1.1 billion revolving credit facility (the “2014 Credit Agreement”). In addition, the credit arrangement contains an expansion feature by which the term loan and revolving facility may be increased, at our option and under certain conditions, by up to an additional $500.0 million in the aggregate. At December 31, 2014, we had a total of $400.0 million outstanding under the term loan of the 2014 Credit Agreement.
The affirmative, negative and financial covenants of the 2014 Credit Agreement could limit our future financial flexibility. Additionally, a failure to comply with these covenants could result in acceleration of all amounts outstanding under the arrangement, which would materially impact our financial condition unless accommodations could be negotiated with our lenders. No assurance can be given that we would be successful in doing so in this current financial climate, or that any accommodations that we were able to negotiate would be on terms as favorable as those presently contained in the credit arrangement. The associated debt service costs of this credit arrangement could impair our future operating results. The outstanding debt may limit the amount of cash or additional credit available to us, which could restrain our ability to expand or enhance products and services, respond to competitive pressures or pursue future business opportunities requiring substantial investments of additional capital.
We may require additional cash resources which may not be available onfavorable terms or at all. We believe that our existing cash balances, projected cash flow from operations, and the borrowing capacity we have under our revolving credit facility will be sufficient to fund our plans for the next 12 months and the foreseeable future.
However, we may require additional cash resources due to changed business conditions, implementation of our strategy and stock repurchase program, to repay indebtedness or to pursue future business opportunities requiring substantial investments of additional capital, including acquisitions. If our existing financial resources are insufficient to satisfy our requirements, we may seek additional borrowings or issue debt. Prevailing credit and debt market conditions may negatively affect debt availability and cost, and, as a result, financing may not be available in amounts or on terms acceptable to us, if at all. In addition, the incurrence of additional indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would further restrict our operations.
If we are unable to enforce and protect our intellectual property rights ourcompetitive position may be harmed. We rely on a combination of copyright, trademark, trade secret, patent, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain and use technology or other information that we regard as proprietary. Our intellectual property rights may not survive a legal challenge to their validity or provide significant protection for us. The laws of certain countries, particularly in emerging markets, do not protect our proprietary rights to the same extent as the laws of the United States. Accordingly, we may not be able to protect our intellectual property against unauthorized third-party copying or use, which could adversely affect our competitive position. Additionally, there can be no assurance that another party will not assert that we have infringed its intellectual property rights.

Our employees are subject to non-compete agreements to the extent permitted under applicable law. When the non-competition period expires, former employees may compete against us. If a former employee chooses to compete against us prior to the expiration of the non-competition period, we seek to enforce these non-compete provisions but there is no assurance that we will be successful in our efforts.
We have grown, and may continue to grow, through acquisitions and strategicinvestments, which could involve substantial risks. We have made and may continue to make acquisitions of, or significant investments in, businesses that offer complementary products and services or otherwise support our growth objectives. The risks involved in each acquisition or investment include the possibility of paying more than the value we derive from the acquisition, dilution of the interests of our current stockholders should we issue stock in the acquisition, decreased working capital, increased indebtedness, the assumption of undisclosed liabilities and unknown and unforeseen risks, the ability to retain key personnel of the acquired company, the inability to integrate the business of the acquired company, the time to train the sales force to market and sell the products of the acquired business, the potential disruption of our ongoing business and the distraction of management from our day to day business. The realization of any of these risks could adversely affect our business. Additionally, we face competition in identifying acquisition targets and consummating acquisitions.

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We face risks related to litigation. We are, and in the future may be, subject to a variety of legal actions, such as employment, breach of contract, intellectual property-related, and business torts, including claims of unfair trade practices and misappropriation of trade secrets. Given the nature of our business, we are also subject to defamation (including libel and slander), negligence, or other claims relating to the information we publish. Regardless of the merits and despite vigorous efforts to defend any such claim can affect our reputation, and responding to any such claim could be time consuming, result in costly litigation and require us to enter into settlements, royalty and licensing agreements which may not be offered or available on reasonable terms. If a claim is made against us which we cannot defend or resolve on reasonable terms, our business, brand, and financial results could be materially and adversely affected.

We face risks related to taxation. We are a global company with operations and clients in over 90 countries. A substantial amount of our earnings is generated outside of the U.S. and taxed at rates significantly less than the U.S. statutory federal income tax rate. Our effective tax rate, financial position and results of operations could be adversely affected by earnings being higher than anticipated in jurisdictions with higher statutory tax rates and, conversely, lower than anticipated in jurisdictions that have lower statutory tax rates, by changes in the valuation of our deferred tax assets and/or by changes in tax laws or accounting principles and their interpretation by relevant authorities.

At the present time, the United States and other countries where we do business have either changed or are actively considering changes in their tax, accounting and other related laws. In the United States, proposed tax law changes, particularly those directed at taxing unremitted and future foreign earnings, could increase our effective tax rate. In addition, Ireland recently modified its tax residency rules. While, at the present time, these changes are not effective until 2020 for many companies with Irish resident operations, including Gartner, the new rules could increase our effective tax rate at that future date. Likewise, certain international organizations such as the Organization for Economic Development and Cooperation, are actively considering proposals, certain of which, if enacted by foreign governments, could significantly increase our tax obligations in many countries where we do business. These actual, potential, and other changes, both individually and collectively, could materially increase our effective tax rate and negatively impact our financial position, results of operations, and cash flows.

In addition, our tax filings for various years are subject to examination by domestic and international taxing authorities and, during the ordinary course of business, we are under audit by tax authorities. Although we believe that our tax filings and related accruals are reasonable, the final resolution of tax audits may be materially different from what is reflected in our historical tax provisions and accruals and could have a material adverse effect on our effective tax rate, financial position, results of operations, and cash flows, particularly in major taxing jurisdictions including, but not limited to: the United States, Ireland, India, Canada, United Kingdom, Japan, France, and Italy.

Our corporate compliance program cannot guarantee that we are in compliance with all applicable laws and regulations. We operate in a number of countries, including emerging markets, and as a result we are required to comply with numerous, and in many cases, changing international and U.S. federal, state and local laws and regulations. As a result, we have developed and instituted a corporate compliance program which includes the creation of appropriate policies defining employee behavior that mandate adherence to laws, employee training, annual affirmations, monitoring and enforcement. However, if any employee fails to comply with, or intentionally disregards, any of these laws, regulations or our policies, a range of liabilities could result for the employee and for the Company, including, but not limited to, significant penalties and fines, sanctions and/or litigation, and the expenses associated with defending and resolving any of the foregoing, any of which could have a negative impact on our reputation and business.
Risks related to our Common Stock
Our operating results may fluctuate from period to period and may not meet theexpectations of investors or the financial guidance we have given,which may cause the price of our Common Stock to decline. Our quarterly and annual operating results may fluctuate in the future as a result of many factors, including the timing of the execution of research contracts, the extent of completion of consulting engagements, the timing of symposia and other events, the amount of new business generated, the mix of domestic and international business, currency fluctuations, changes in market demand for our products and services, the timing of the development, introduction and marketing of new products and services, and competition in the industry. An inability to generate sufficient earnings and cash flow, and achieve our forecasts, may impact our operating and other activities. The potential fluctuations in our operating results could cause period-to-period comparisons of operating results not to be meaningful and may provide an unreliable indication of future operating results. Furthermore, our operating results may not meet the expectations of investors or the financial guidance we have previously provided. If this occurs, the price of our Common Stock could decline.
Our stock price may be impacted by factors outside of our control and you maynot be able to resell shares of our Common Stock at or above the price youpaid. The price of our Common Stock is subject to significant fluctuations in response to, among other factors, developments in the industries in which we do business, general economic conditions, general market conditions, geo-

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political events, changes in the nature and composition of our stockholder base, changes in securities analysts’ recommendations regarding our securities and our performance relative to securities analysts’ expectations for any quarterly period, as well as other factors outside of our control including any and all factors that move the securities markets generally. These factors may adversely affect the market price of our Common Stock.
Future sales of our Common Stock in the public market could lower our stockprice. Sales of a substantial number of shares of Common Stock in the public market by our current stockholders, or the threat that substantial sales may occur, could cause the market price of our Common Stock to decrease significantly or make it difficult for us to raise additional capital by selling stock. Furthermore, we have various equity incentive plans that provide for awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards which have the effect of adding shares of Common Stock into the public market. At the present time, we are executing against a board-approved share repurchase program to reduce the number of outstanding shares of our Common Stock. At December 31, 2014, $413.3 million remained available for share purchases under this program. No assurance can be given that we will continue these activities in the future when the program is completed, or in the event that the price of our Common Stock reaches levels at which repurchases are not accretive.
As of December 31, 2014, the aggregate number of shares of our Common Stock issuable pursuant to outstanding grants and awards under these plans was approximately 2.9 million shares (approximately 0.6 million of which have vested). In addition, at the present time, approximately 8.0 million shares may be issued in connection with future awards under our equity incentive plans. Shares of Common Stock issued under these plans are freely transferable and have been registered under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by affiliates (as that term is defined in Rule 144 under the Securities Act) which are subject to certain limitations. We cannot predict the size of future issuances of our Common Stock or the effect, if any, that future issuances and sales of shares of our Common Stock will have on the market price of our Common Stock.
Interests of certain of our significant stockholders may conflict with yours. To our knowledge, as of the date hereof, and based upon publicly-available SEC filings, four institutional investors each presently hold over 5% of our Common Stock. While no stockholder or institutional investor individually holds a majority of our outstanding shares, these significant stockholders may be able, either individually or acting together, to exercise significant influence over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, adoption or amendment of equity plans and approval of significant transactions such as mergers, acquisitions, consolidations and sales or purchases of assets. In addition, in the event of a proposed acquisition of the Company by a third party, this concentration of ownership may delay or prevent a change of control in us. Accordingly, the interests of these stockholders may not always coincide with our interests or the interests of other stockholders, or otherwise be in the best interests of us or all stockholders.

Our anti-takeover protections may discourage or prevent a change of control,even if a change in control would be beneficial to our stockholders. Provisions of our restated certificate of incorporation and bylaws and Delaware law may make it difficult for any party to acquire control of us in a transaction not approved by our Board of Directors. These provisions include:  

the ability of our Board of Directors to issue and determine the terms of preferred stock;
advance notice requirements for inclusion of stockholder proposals at stockholder meetings; and
the anti-takeover provisions of Delaware law.

These provisions could discourage or prevent a change of control or change in management that might provide stockholders with a premium to the market price of their Common Stock.  

ITEM 1B. UNRESOLVED STAFF COMMENTS.
The Company has no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Exchange Act.
ITEM 2. PROPERTIES.
We currently lease 32 domestic and 65 international offices and we have a significant presence in Stamford, Connecticut; Ft. Myers, Florida; and Egham, the United Kingdom. The Company does not own any properties.
Our corporate headquarters is located in 213,000 square feet of leased office space in three buildings located in Stamford. This facility also accommodates research and analysis, marketing, sales, client support, production, corporate services, and administration. The Company's lease on the Stamford facility expires in 2028 and we have three options to renew the lease at fair market value for five years each.

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Our Ft. Myers operations are currently located in 120,000 square feet of leased office space in one building for which the lease will expire in 2026. We have also leased an additional 132,000 square feet of space in Ft. Myers in an adjoining building, which is under construction. We currently anticipate this facility will open in mid-2015, and the lease will expire in 2030. Our Egham location has approximately 72,000 square feet of leased office space located in two separate buildings. However, we recently exercised our rights to early termination of one of the Egham leases, and we have entered into agreements with the landlord to occupy under lease a new 120,000 square foot building in the location of one of the existing buildings. Our other domestic and international locations support our research, consulting, domestic and international sales efforts, and other functions.
Our existing and planned facility expansions are adequate for our currently anticipated needs. However, we expect to continue to invest in our business by adding headcount. As a result, we may need additional office space in various locations. Should additional space be necessary, we believe that it will be available and at reasonable terms.  

ITEM 3. LEGAL PROCEEDINGS.
We are involved in various legal and administrative proceedings and litigation arising in the ordinary course of business. The outcome of these individual matters is not predictable at this time. However, we believe that the ultimate resolution of these matters, after considering amounts already accrued and insurance coverage, will not have a material adverse effect on our financial position, results of operations, or cash flows in future periods.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.




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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our Common Stock is listed on the New York Stock Exchange under the symbol IT. As of January 31, 2015, there were 1,493 holders of record of our Common Stock. Our 2015 Annual Meeting of Stockholders will be held on May 28, 2015 at the Company’s corporate headquarters in Stamford, Connecticut. We did not submit any matter to a vote of our stockholders during the fourth quarter of 2014.
The following table sets forth the high and low sale prices for our Common Stock as reported on the New York Stock Exchange for the periods indicated:  
 2014 2013
 High Low High Low
Quarter ended March 31$73.53
 $61.28
 $54.52
 $46.52
Quarter ended June 3075.61
 65.55
 59.09
 53.01
Quarter ended September 3076.82
 67.83
 63.00
 55.75
Quarter ended December 31$87.58
 $71.22
 $71.49
 $57.19
DIVIDEND POLICY
We currently do not pay cash dividends on our Common Stock. In addition, our 2014 Credit Agreement contains a negative covenant which may limit our ability to pay dividends.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The equity compensation plan information set forth in Part III, Item 12 of this Form 10-K is hereby incorporated by reference into this Part II, Item 5.
SHARE REPURCHASES
The Company has an $800.0 million share repurchase program, of which $413.3 million remained available for repurchases as of December 31, 2014. The Company may repurchase its common stock from time-to-time in amounts and at prices the Company deems appropriate, subject to the availability of stock, prevailing market conditions, the trading price of the stock, the Company’s financial performance and other conditions. Repurchases may be made through open market purchases, private transactions, or other transactions and will be funded from cash on hand and borrowings under the Company’s credit agreement. Repurchases may also be made from time-to-time in connection with the settlement of the Company's share-based compensation awards.

The following table summarizes the repurchases of our Common Stock in the three months ended December 31, 2014 pursuant to our $800.0 million share repurchase authorization and pursuant to the settlement of share-based compensation awards:  
Period 
Total Number of Shares Purchased
(#)
 
Average Price Paid Per Share
($)
  
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
($000’s)
October 460,905 $74.51
   
November 7,473 85.42
   
December 78,153 84.18
   
Total (1) 546,531 $76.04
  $413,300
2016:

Eugene A. HallChief Executive Officer
 

Craig W. SafianSenior Vice President & Chief Financial Officer
(1)ForPer Anders WaernSenior Vice President, Gartner Consulting
David GodfreySenior Vice President, Sales
Alwyn DawkinsSenior Vice President, Events

The CD&A is organized into three sections:

·The Executive Summary, which highlights the year ended December 31, 2014, the Company repurchased a totalimportance of 5.9 million shares.our Contract Value (herein “CV”) metric, our 2016 corporate performance and our pay-for-performance approach and our compensation practices, all of which we believe are relevant to stockholders as they consider their votes on Proposal Two (advisory vote on executive compensation, or “Say-on-Pay”)
·The Compensation Setting Process for 2016
·Other Compensation Policies and Information


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ITEM 6. SELECTED FINANCIAL DATA
The fiscal years presented below are for the respective twelve-month period from January 1 through December 31. Data for all years was derived or compiled from our audited consolidated financial statements included herein or from submissions of our Form 10-K in prior years. The selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes contained in this Annual Report on Form 10-K.
(In thousands, except per share data) 2014 2013 2012 2011 2010
STATEMENT OF OPERATIONS DATA:  
  
  
  
  
Revenues:  
  
  
  
  
Research $1,445,338
 $1,271,011
 $1,137,147
 $1,012,062
 $865,000
Consulting 348,396
 314,257
 304,893
 308,047
 302,117
Events 227,707
 198,945
 173,768
 148,479
 121,337
Total revenues 2,021,441
 1,784,213
 1,615,808
 1,468,588
 1,288,454
Operating income 286,162
 275,492
 245,707
 214,062
 149,265
Net income $183,766
 $182,801
 $165,903
 $136,902
 $96,285
           
PER SHARE DATA:  
  
  
  
  
Basic income per share $2.06
 $1.97
 $1.78
 $1.43
 $1.01
Diluted income per share $2.03
 $1.93
 $1.73
 $1.39
 $0.96
           
Weighted average shares outstanding:  
  
  
  
  
Basic 89,337
 93,015
 93,444
 96,019
 95,747
Diluted 90,719
 94,830
 95,842
 98,846
 99,834
           
OTHER DATA:  
  
  
  
  
Cash and cash equivalents $365,302
 $423,990
 $299,852
 $142,739
 $120,181
Total assets 1,904,351
 1,783,582
 1,621,277
 1,379,872
 1,285,658
Long-term debt 385,000
 136,250
 115,000
 150,000
 180,000
Stockholders’ equity 161,171
 361,316
 306,673
 181,784
 187,056
Cash provided by operating activities $346,779
 $315,654
 $279,814
 $255,566
 $205,499
The following items impact the comparability and presentation of our consolidated data:

In 2014 we refinanced our debt (see Note 5 — Debt in the Notes to the Consolidated Financial Statements). We also refinanced our debt in 2013 and 2010.

In 2014 we repurchased 5.9 million of our common shares. We also repurchased 3.4 million, 2.7 million, 5.9 million, and 3.9 million of our common shares in 2013, 2012, 2011, and 2010, respectively (see Note 7 — Stockholders’ Equity in the Notes to the Consolidated Financial Statements).

In 2014 we acquired three businesses and recognized $21.9 million in pre-tax acquisition and integration charges (see Note 2 — Acquisitions in the Notes to the Consolidated Financial Statements). The operating results of these three businesses, which were not material, were included in our consolidated financial results beginning on their respective acquisition dates. We also recognized $2.4 million and $7.9 million of pre-tax acquisition and integration charges in 2012 and 2010, respectively, related to other acquisitions.




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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The purpose of the following Management’s Discussion and Analysis (“MD&A”) is to help facilitate the understanding of significant factors influencing the operating results, financial condition and cash flows of Gartner, Inc. Additionally, the MD&A also conveys our expectations of the potential impact of known trends, events or uncertainties that may impact future results. You should read this discussion in conjunction with our consolidated financial statements and related notes included in this report. Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References to “the Company,” “we,” “our,” and “us” are to Gartner, Inc. and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains certain forward-looking statements. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expect,” “should,” “could,” “believe,” “plan,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” or other words of similar meaning.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Part 1, Item 1A, Risk Factors. Readers should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur. Readers should review carefully any risk factors described in other reports we filed with the SEC.
BUSINESS OVERVIEW
Gartner, Inc. is the world’s leading information technology research and advisory company that helps executives use technology to build, guide and grow their enterprises. We offer independent and objective research and analysis on the information technology, computer hardware, software, communications and related technology industries. We provide comprehensive coverage of the IT industry to thousands of client organizations across the globe. Our client base consists primarily of CIOs and other senior IT and executives from a wide variety of business enterprises, government agencies and the investment community.
We have three business segments: Research, Consulting and Events.
Research provides objective insight on critical and timely technology and supply chain initiatives for CIOs, other IT professionals, supply chain leaders, digital marketing professionals, technology companies and the institutional investment community through reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enable our clients to make better decisions about their IT, supply chain and digital marketing investments.

Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency, and quality.

Events provides IT, supply chain, and business professionals the opportunity to attend various symposia, conferences and exhibitions to learn, contribute and network with their peers. From our flagship event Symposium/ITxpo, to Summits focused on specific technologies and industries, to experimental workshop-style Seminars, our events distill the latest Gartner research into applicable insight and advice.



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BUSINESS MEASUREMENTS
We believe the following business measurements are important performance indicators for our business segments:  
8

The CD&A is followed by the Compensation Tables and Narrative Disclosures, which report and describe the compensation and benefit amounts paid to our NEOs in 2016.

EXECUTIVE SUMMARY

Contract Value – A Unique Key Performance Metric for Gartner

BUSINESS SEGMENTBUSINESS MEASUREMENTS
Research
ContractTotal contract value (“CV”) represents the value attributable to all of our subscription-related research products that recognize revenue on a ratable basis. Contract valuecontracts. It is calculated as the annualized value of all subscription research contracts in effect at a specific point in time, without regard to the duration of the contract. CV primarily includes research deliverables for which revenue is recognized on a ratable basis, and, commencing in 2016, includes other deliverables (primarily events tickets) for which revenue is recognized when the deliverable is utilized.

Unique to the business of Gartner, Contract Value is oursingle most important performance metric. It focuses all of our executives on driving bothshort-term andlong - term success for our business and stockholders.

Contract Value = Both Short-Termand Long-Term Measures of Success

Short-TermüMeasures the value of all subscription research contracts in effect at a specific point in time
Long-TermüMeasures revenue that is highly likely to recur over a multi-year period

Comparing CV year over year measures the short term growth of our business. More importantly, CV is also an appropriate measure of long – term performance due to the nature of our Research subscription business. Our Research business is our largest business segment (75% of 2016 gross revenues) with our highest margins (69% for 2016). Our Research enterprise client retention (84% in 2016) and retained contract value (104% enterprise wallet retention in 2016) are consistently very high. The combination of annual contracts and high renewal rates are predictive of revenuehighly likely to recur over a 3 – 5 year period.

Accordingly, growing CV drives bothshort- term andlong – term corporate performance and shareholder value due to these unique circumstances. As such, all Gartner executives and associates are focused at all times on growing CV. This, coupled with the fact that our investors are also focused on this metric, ensures that we are aligned on the long - term success of the Company.

Record 2016 Performance

2016 was another year of record achievements for Gartner:

üCV, Revenue, EBITDA* and EPS* grew 14%, 14%, 10% and 24%, respectively, excluding the impact of foreign exchange where applicable
   
 ü
Client retention rate represents a measure of client satisfactionCV and renewed business relationshipsRevenues ended the year at a specific point in time. Client retention is calculated on a percentage basis by dividing our current clients, who were also clients a year ago, by all clients from a year ago.
record $1.93 billion and $2.44 billion, respectively  
   
 ü
Wallet retention rate represents a measure of the amount of contract value we have retained with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the contract value of clients, who were clients oneFive year earlier, by the total contract value from a year earlier, excluding the impact of foreign currency exchange. When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both.
Consulting
Consulting backlog represents future revenue to be derived from in-process consulting, measurementCAGR for CV, EBITDA and strategic advisory services engagements.
EPS was 12%, 10% and 16%, respectively  
   
 ü
Utilization rate represents a measure of productivity of our consultants. Utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours availableOur Common Stock rose 11.4% in 2016, as compared to bill.
the S&P 500, which rose 9.5%, and NASDAQ Total Return, which rose 7.5%
   
 üCompound annual growth rates on our common stock were 11%, 12% and 24% on a 1, 3 and 5 year basis, out-performing the S&P 500 and NASDAQ Total Return indices for the corresponding periods

*In the disclosure included in this Item 11, EBITDA refers to Normalized EBITDA, which represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, stock-based compensation expense and acquisition-related adjustments. EPS refers to diluted EPS excluding acquisition adjustments.

9

Gartner 2016 Performance Charts (CV and EBITDA $ in millions)

The laser focus throughout our global organization on growing CV has resulted in a strong, sustained track record of growth across this measure, as well as EBITDA and EPS, over many years, as the following charts demonstrate.

 

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These strong results have fueled stock price growth which leads all comparison groups as follows:

Key Attribute of our Executive Compensation Program – Pay for Performance

Our executive compensation plan design has successfully motivated senior management to drive outstanding corporate performance since it was first implemented in 2006. It is heavily weighted towards incentive compensation.

Its key features are as follows:

üBilling rate100% of executive equity awards and executive bonus awards are performance-based. represents earned billable revenue divided by total billable hours.
   
 ü
Average annualized revenue per billable headcount represents a measure70% of our executive equity awards, and 100% of our executive bonus awards are subject to forfeiture in the revenue generating ability of an average billable consultant and is calculated periodicallyevent the Company fails to achieve performance objectives established by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year.our Compensation Committee.
Events
Number of events represents the total number of hosted events completed during the period.
   
 ü
Number91% percent of attendees representsour CEO’s target total compensation (77% in the case of our other NEOs) is in the form of incentive compensation (bonus and equity awards).
ü81% of our CEO’s target total numbercompensation (61% in the case of people who attend events.our other NEOs) is in the form of equity awards.
üEarned equity awards may increase or decrease in value based upon stock price movement during the vesting period.
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Our Compensation Best Practices

Our compensation practices motivate our executives to achieve our operating plans and execute our corporate strategy without taking undue risks. These practices, which are consistent with “best practices” trends, include the following:

üWe have an independent Compensation Committee.
üWe have an independent compensation consultant that reports directly to the Compensation Committee.
üWe annually assess the Company’s compensation policies to ensure that the features of our program do not encourage undue risk.
üAll executive officers are “at will” employees and only our CEO has an employment agreement.
üWe have a clawback policy applicable to all executive incentive compensation (cash bonus and equity awards).
üWe have robust stock ownership guidelines for our directors and executive officers.
üWe have holding period requirements that require 50% of net after tax shares from all released equity awards to be held by a director or executive officer until stock ownership guidelines are satisfied.
üWe prohibit hedging and pledging transactions in company securities.
üWe do not provide excise tax gross up payments.
üWe encourage retention by having equity awards vest 25% per year over 4 years, commencing on the grant date anniversary.
üThe potential annual payout on incentive compensation elements is limited to 2 times target.
üOur equity plan prohibits:
oless than a 12 month vesting period on equity awards;
orepricing stock options and surrendering outstanding options for new options with a lower exercise price without stockholder approval;
ocash buyouts of underwater options or stock appreciation rights without stockholder approval; and
ogranting options or stock appreciation rights with an exercise price less than the fair market value of the Company’s common stock on the date of grant.

üWe do not grant equity awards during closed trading windows.

COMPENSATION SETTING PROCESS FOR 2016

This discussion explains the objectives of the Company’s compensation policies; what the compensation program is designed to reward; each element of compensation and why the Company chooses to pay each element; how the Company determines the amount (and, where applicable, the formula) for each element to pay; and how each compensation element and the Company’s decisions regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements.

The Objectives of the Company’s Compensation Policies

The objectives of our compensation policies are threefold:

EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION
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Øto attract, motivate and  retain highly talented, creative and entrepreneurial individuals by paying market-based compensation;
Øto motivate our executives to maximize the performance of our Company through pay-for-performance compensation components based on the achievement of corporate performance targets that are aggressive, but attainable, given economic conditions; and
Øto ensure that, as a public company, our compensation structure and levels are reasonable from a stockholder perspective.

What the Compensation Program Is Designed to Reward

Our guiding philosophy is that the more executive compensation is linked to corporate performance, the stronger the inducement is for management to strive to improve Gartner’s performance. In addition, we believe that the design of the total compensation package must be competitive with the marketplace from which we hire our executive talent in order to achieve our objectives and attract and retain individuals who are critical to our long-term success. Our compensation program for executive officers is designed to compensate individuals for achieving and exceeding corporate performance objectives. We believe this type of compensation encourages outstanding team performance (not simply individual performance), which builds stockholder value.

Both short-term and long-term incentive compensation is earned by executives only upon the achievement by the Company of certain measurable performance objectives that are deemed by the Compensation Committee and management to be critical to the Company’s short-term and long-term success. The amount of compensation ultimately earned will increase or decrease depending upon Company performance and the underlying price of our Common Stock (in the case of long-term incentive compensation).

Principal Compensation Elements and Objectives

To achieve the objectives noted above, we have designed executive compensation to consist of three principal elements:

Base SalaryØPay competitive salaries to attract and retain the executive talent necessary to develop and implement our corporate strategy and business plan
ØAppropriately reflect responsibilities of the position, experience of the executive and marketplace in which we compete for talent
Short-Term Incentive Compensation (cash bonuses)ØMotivate executives to generate outstanding performance and achieve or exceed annual operating plan
ØAlign compensation with results
Long-Term Incentive Compensation (equity awards)ØInduce enhanced performance and promote retention
ØAlign executive rewards with long-term stock price appreciation
ØMake executives stakeholders in the success of Gartner and thereby create alignment with stockholders

How the Company Determines Executive Compensation

In General

The Company set aggressive performance goals in planning 2016 executive compensation. In order for our executives to earn target compensation, the Company needed to exceed double digit growth in two key performance metrics, as discussed below.

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The Compensation Committee established performance objectives for short-term (bonus) and long-term (equity) incentive awards at levels that it believed would motivate performance and be adequately challenging. The target performance objectives were intended to compel the level of performance necessary to enable the Company to achieve its operating plan for 2016.

As in prior years, the short- and long-term incentive compensation elements provided executives with opportunities to increase their total compensation package based upon the over-achievement of corporate performance objectives; similarly, in the case of under-achievement of corporate performance objectives, the value of these incentive elements would fall below their target value (with the possibility of total forfeiture of the short-term element and 70% of the long-term element), and total compensation would decrease correspondingly. We assigned greater weight to the long-term incentive compensation element, as compared to the salary and short-term elements, in order to promote long-term decision-making that would deliver top corporate performance, align management to stockholder interests and retain executives. We believe that previously granted and unvested equity awards serve as a strong retention incentive.

Salary, short-term and long-term incentive compensation levels for executive officers (other than the CEO) are recommended by the CEO and are subject to approval by the Compensation Committee. In formulating his recommendation to the Compensation Committee, the CEO undertakes a performance review of these executives and considers input from human resources personnel at the Company, as well as benchmarking data from the compensation consultant and external market data (discussed below).

Salary, short-term and long-term incentive compensation levels for the CEO’s compensation are established by the Compensation Committee within the parameters of Mr. Hall’s employment agreement with the Company. In making its determination with respect to Mr. Hall’s compensation, the Compensation Committee evaluates his performance in conjunction with the Governance Committee and after soliciting additional input from the Chairman of the Board and other directors; considers input from the Committee’s compensation consultant; and reviews benchmarking data pertaining to CEO compensation practices at our proxy peer companies and general trends. SeeEmployment Agreements with Executive Officers – Mr. Hall elsewhere in this Item 11 for a detailed discussion of Mr. Hall’s agreement.

Effect of Stockholder Advisory Vote on Executive Compensation, or Say on Pay

2016 Say on Pay Approval = 93.5% of shares voted, and 88.2% of outstanding shares

The Board has resolved to present Say on Pay proposals to stockholders on an annual basis, respecting the sentiment of our stockholders as expressed in 2011. This year, we are asking our stockholders once again to indicate their preference for the frequency of Say on Pay proposals; however, the Company is committed to annual Say on Pay proposals. The Company and the Compensation Committee will consider the results on this year’s advisory Say on Pay proposal in future executive compensation planning activities. Over the past several years, stockholders have consistently strongly supported our executive compensation program.

Benchmarking and Peer Group

Executive compensation planning for 2016 began mid-year in 2015. Our Compensation Committee commissioned Exequity, an independent compensation consultant, to perform a competitive analysis of our executive compensation practices (the “Compensation Study”). Exequity’s findings were considered by the Compensation Committee and by management in planning our 2016 executive compensation program. The Compensation Study utilized market data provided by Aon Hewitt pertaining to 2015 compensation paid to individuals occupying senior executive positions at Gartner’s selected peer group of companies for executive compensation benchmarking purposes (the “Peer Group”).

The Compensation Committee reviews the Peer Group annually to ensure comparability based on Gartner’s operating characteristics, labor market relevance and defensibility. The 2016 competitive analysis compared Gartner’s target compensation to the Peer Group. The Peer Group comprised 14 publicly-traded high tech

14

companies that resemble Gartner in size (in terms of revenues and number of employees), have a similar business model and with whom Gartner competes for executive talent. Gartner ranked at the 36th percentile in revenues and 43rd percentile in market cap relative to the Peer Group. Peer Group companies included:

Adobe Systems IncorporatedIntuit Inc.
Autodesk, Inc.Moody’s Corporation
Cadence Design Systems, Inc.Nuance Communications, Inc.
Citrix Systems, Inc.PTC Inc.
The Dun & Bradstreet Corporationsalesforce.com, inc
Equifax Inc.Synopsys, Inc.
IHS Market LtdVerisign, Inc.

Management and the Compensation Committee concluded that the Peer Group, which remained unchanged from the prior year with the exception of the removal of three companies that no longer reported due to acquisitions or privatization, was appropriate for 2016 executive compensation planning purposes given their continued comparability to Gartner.

The Compensation Committee does not target NEO’s pay to a specified percentile, but rather reviews Peer Group market data at the 25th, 50th and 75th percentile for each element of compensation, including Base Salary, Target Total Cash (Base Salary, plus Target Bonus) and Target Total Compensation (Target Total Cash plus long-term incentives).

The result of the competitive analysis indicated that Gartner’s CEO and NEO Base Salary approximated the Peer Group median, Target Total Cash was below the Peer Group median and Target Total Compensation approximated the median of the Peer Group. As a result, in order to remain competitive in the market place and in light of Gartner’s philosophy to pay a greater percentage of total compensation in the form of performance-based compensation and, in particular, performance-based long-term incentive compensation, the Committee approved a 3% merit increase to base salary, a 5% increase in the short term incentive compensation (bonus) percentage and a 8% merit increase to the long-term incentive compensation award value for all NEOs (other than Mr. Safian). Mr. Safian is relatively new in his role of CFO, and as a result trailed the market median of the Peer Group in all elements of compensation, consistent with the Company’s philosophy of moving executives to fully competitive rates over two to three years. As such, in 2016 the Committee adjusted his compensation to more closely approximate the Peer Group median by increasing his base salary by 10%, increasing his bonus target by 5% and increasing his long-term incentive award by 18.6%.

In addition, the Compensation Committee annually reviews an analysis conducted by Exequity that evaluates the connection between Gartner’s executive pay and Company performance as measured by Total Shareholder Return and Shareholder Value against the relationship exhibited by Gartner’s peer companies. The analysis indicates that pay realized by Gartner’s NEOs is generally well aligned with proven financial results. Gartner has historically performed above its peer group median and has paid at or above median total compensation which is consistent with the Company’s pay-for-performance philosophy.

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Executive Compensation Elements Generally

Pay Mix

The following pie charts illustrate the relative mix of target compensation elements for the NEOs in 2016. Long-term incentive compensation consists of performance-based restricted stock units (PSUs) and stock appreciation rights (SARs), and represents a majority of the compensation we pay to our NEOs – 81% to the CEO and 60% to all other NEOs. We allocate more heavily to long-term incentive compensation because we believe that it contributes to a greater degree to the delivery of top performance and the retention of employees than does cash and short-term compensation (bonus).

 

Base Salary

We set base salaries of executive officers when they join the Company or are promoted to an executive role, by evaluating the responsibilities of the position, the experience of the individual and the marketplace in which we compete for the executive talent we need. In addition, where possible, we consider salary information for comparable positions for members of our Peer Group or other available benchmarking data. In determining whether to award salary merit increases, we consider published projected U.S. salary increase data for the technology industry and general market, as well as available world-wide salary increase data. Mr. Hall’s salary increase is established each year by the Compensation Committee after completion of Mr. Hall’s performance evaluation for the preceding year.

Short-Term Incentive Compensation (Cash Bonuses)

All bonuses to executive officers are awarded pursuant to Gartner’s stockholder-approved Executive Performance Bonus Plan. This plan is designed to motivate executive officers to achieve goals relating to the performance of Gartner, its subsidiaries or business units, or other objectively determinable goals, and to reward them when those objectives are satisfied. We believe that the relationship between proven performance and the amount of short-term incentive compensation paid promotes, among executives, decision-making that increases stockholder value and promotes Gartner’s success. Bonuses awarded under this plan to eligible employees are designed to qualify as deductible performance-based compensation within the meaning of Code Section 162(m).

In 2016, bonus targets for all executive officers, including Mr. Hall, were based solely upon achievement of 2016 company-wide financial performance objectives (with no individual performance component). The financial objectives and weightings used for 2016 executive officer bonuses were:

2016 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), which measures overall profitability from business operations (weighted 50%), on a foreign exchange neutral basis, and

Contract Value (CV) at December 31, 2016, which measures the long–term prospects of our business (weighted 50%), on a foreign exchange neutral basis.

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As noted earlier, management and our Compensation Committee continue to believe that EBITDA and CV are the most significant measurements ofprofitabilityand long-term business growth for our Company, respectively. They have been successfully used for several years as performance metrics applicable to short-term incentive compensation that drive business performance and that motivate executive officers to achieve outstanding performance.

For 2016, each executive officer was assigned a bonus target that was expressed as a percentage of salary, varied from 50% to 100% of salary depending upon the executive’s level of responsibility and in most cases was 5% greater than the previous year. Salaries and bonuses were each increased by the amount of the merit increase. With respect to our NEOs, 2016 bonus targets, as a percentage of base salary, were 105% for Mr. Hall and 70% for each of Messrs. Safian, Waern, Godfrey and Dawkins. The maximum payout for 2016 bonus was 200% of target if the maximum level of EBITDA and CV were achieved; the minimum payout was $0 if minimum levels were not achieved.

The chart below describes the performance metrics applicable to our 2016 short–term incentive compensation element. As noted above, for this purpose actual results, measured on a foreign exchange neutral basis, were as follows:

2016 Performance
Objective/ Weight
  Target
(100%)
  Target
Growth
YOY
 < Minimum
(0%)
  =/>
Maximum
(200%)
  Actual
(measured
at 12/31/16)
  Payout
(% of
Target)
 Actual
Growth
YOY
 2016 EBITDA/50%   

$458

million

   13.6%  $363 million   $480 million   $446 million   90.3%  10.7%
                               
 12/31/16 Contract Value/50%   

$1,884

million

   11%  $1,527 million   $1,969 million   $1,930 million   162.0%  13.7%

In 2016, the Company exceeded both the EBITDA and CV target performance objectives. Since each objective was weighted 50%, based on these results, the Compensation Committee determined that earned cash bonuses for executive officers were 126.2% of target bonus amounts. These bonuses were paid in February 2017. SeeSummary Compensation Table – Non-Equity Incentive Plan Compensation elsewhere in this Item 11 for the amount of cash bonuses earned by our Named Executive Officers in 2016. While the Compensation Committee has discretion to eliminate or reduce a bonus award, it did not take any such action in 2016.

Long - Term Incentive Compensation (Equity Awards)

Promoting stock ownership is a key element of our compensation program philosophy. Stock-based incentive compensation awards –especially when they are assigned a combination of performance and time-based vesting criteria – induce enhanced performance, promote retention of executive officers and align executives’ personal rewards with long-term stock price appreciation, thereby integrating management and stockholder interests. We have executed a consistent growth strategy since 2005evaluated different types of long-term incentives based on their motivational value, cost to drive double-digit annual revenuethe Company and earnings growth. The fundamentalsappropriate share utilization under our stockholder-approved 2014 Long-Term Incentive Plan (“2014 Plan”) and have determined that stock-settled stock appreciation rights (“SARs”) and performance-based restricted stock units (“PSUs”) create the right balance of motivation, retention, alignment with stockholders and share utilization.

SARs permit executives to benefit from an increase in stock price over time. SAR value can be realized only after the SAR vests. Our SARs are stock-settled and may be exercised seven years from grant. When the SAR is exercised, the executive receives shares of our strategy includeCommon Stock equal in value to the aggregate appreciation in the price of our Common Stock from the date of grant to the exercise date for all SARs exercised. Therefore, SARs only have value to the extent the price of our Common Stock exceeds the grant price of the SAR. In this way, SARs motivate our executives to increase stockholder value and thus align their interests with those of our stockholders.

PSUs offer executives the opportunity to receive our Common Stock contingent on the achievement of performance goals and continued service over the vesting period. PSU recipients are eligible to earn a focustarget fixed number of restricted stock units if and to the extent stipulated one-year performance goals are achieved. They can

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earn more units if the Company over-performs (up to 200% of their target number of units), and they will earn fewer units (and potentially none) if the Company under-performs. Shares of Common Stock subject to earned PSU awards are released to the executive on creating extraordinary research content,the date they vest, or 25% per year over four years, commencing on the anniversary of the grant date, thereby encouraging executives to increase stockholder value while promoting executive retention over the long-term. Released shares have value even if our Common Stock price does not increase, which is not the case with SARs.

Consistent with weightings in prior years, 30% of each executive’s long-term incentive compensation award value was granted in SARs and 70% was granted in PSUs. PSUs deliver value utilizing fewer shares since the executive can earn the full share rather than just the appreciation in value over the grant price (as is the case with SARs). Additionally, the cost efficiency of PSUs enhances the Company’s ability to conservatively utilize the Plan share pool, which is why we convey a larger portion of the 2014 overall long-term incentive compensation value in PSUs rather than in SARs. For purposes of determining the number of SARs awarded, the allocated SAR award value is divided by the Black-Scholes-Merton valuation on the date of grant using assumptions appropriate on that date. For purposes of determining the target number of PSUs awarded, the allocated target PSU award value is divided by the closing price of our Common Stock on the date of grant as reported by the New York Stock Exchange.

Both SARs and PSUs vest 25% per year commencing one (1) year from grant and on each anniversary thereof, subject to continued service on the vesting date. We believe that this vesting schedule effectively focuses our executives on delivering innovativelong-term value growth for our stockholders and drives retention. The maximum payout for 2016 PSUs was 200% of target if the maximum level of CV was achieved; the PSUs are subject to forfeiture if minimum levels are not achieved.

The Compensation Committee approved CV (measured at December 31, 2016) as the performance measure underlying PSUs awarded in 2016. As noted earlier, we continue to believe that CV is the best performance metric to measure the long–term prospects of our business. At the present time, most of these contracts have multi – year terms. For this reason, CV growth continues to be predictive of future revenue for the PSU award.

The chart below describes the performance metrics applicable to the PSU portion of our 2016 long–term incentive compensation element measured on a foreign exchange neutral basis:

2016 Performance
Objective/Weight
  Target
(100%)
  Target
Growth
YOY
 <Minimum
(0%)
  Maximum
(200%)
  Actual
(measured at
12/31/16)
  Payout
(% of
Target)
 Actual
Growth
YOY
 Contract Value/100%   $1,884 million   11%  $1,527 million   $1,969 million   $1,930 million   162.0%  13.7%

As noted above, in 2016 actual CV was $1,930 million, exceeding the target amount. Based on this, the Compensation Committee determined that 162.0% of the target number of PSUs would be awarded. The PSUs were adjusted by this factor in February 2017 after certification of the achievement of this performance measure by the Compensation Committee, and 25% of the adjusted awards vested on the first anniversary of the grant date. SeeGrants of Plan-Based Awards Table – Possible Payouts Under Equity Incentive Plan Awards and accompanying footnotes elsewhere in this Item 11 for the actual number of SARs and PSUs awarded to our Named Executive Officers in 2016.

No performance objectives for any PSU intended to qualify under Code Section 162(m) (i.e., awards to executive officers) may be modified by the Committee. While the Committee does have discretion to modify other aspects of the awards (subject to the terms of the Plan), no modifications were made in 2016.

Additional Compensation Elements

We maintain a non-qualified deferred compensation plan for our highly differentiated product offerings, buildingcompensated employees, including our executive officers, to assist eligible participants with retirement and tax planning by allowing them to defer compensation in excess of amounts permitted to be deferred under our 401(k) plan. This plan allows eligible

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participants to defer up to 50% of base salary and/or 100% of bonus to a strong sales capability,future period. In addition, as a further inducement to participation in this plan, the Company presently matches contributions by executive officers, subject to certain limits. For more information concerning this plan, seeNon-Qualified Deferred Compensation Tableand accompanying narrative and footnotes elsewhere in this Item 11.

In order to further achieve our objective of providing world class client servicea competitive compensation package with great retention value, we provide various other benefits to our executive officers that we believe are typically available to, and expected by, persons in senior business roles. Our basic executive perquisites program includes 35 days paid time off (PTO) annually, severance and change in control benefits (discussed below) and relocation services where necessary due to a promotion. Mr. Hall’s perquisites, severance and change in control benefits are governed by his employment agreement with the Company, which is discussed in detail underEmployment Agreements With Executive Officers – Mr. Hallelsewhere in this Item 11. For more information concerning perquisites, seeOther Compensation Table and accompanying footnotes elsewhere in this Item 11.

OTHER COMPENSATION POLICIES AND INFORMATION

Executive Stock Ownership and Holding Period Guidelines

In order to align management and stockholder interests, the Company has adopted stock ownership guidelines for our executive officers as follows: the CEO is required to hold shares of Common Stock with a focusvalue at least equal to six (6) times his base salary, and all other executive officers are required to hold shares of Common Stock with a value at least equal to three (3) times their base salary. For purposes of computing the required holdings, officers may count shares directly held, as well as vested and unvested restricted stock units and PSUs, but not options or SARs.

Additionally, the Company imposes a holding period requirement on client engagementour executive officers.If an executive officer of the Company is not in compliance with the stock ownership guidelines, the executive is required to maintain ownership of at least 50% of the net after-tax shares of common stock acquired from the Company pursuant to any equity-based awards – PSUs and SARs - received from the Company, until such individual’s stock ownership requirement is met. At December 31, 2016, our CEO and all other executive officers were in compliance with these guidelines.

Clawback Policy

The Company has adopted a clawback policy which provides that the Board of Directors (or a committee thereof) may seek recoupment to the Company from a current or former executive officer of the Company who engages in fraud, omission or intentional misconduct that results in a required restatement of any financial reporting under the securities or other laws, and that the cash-based or equity-based incentive compensation paid to the officer exceeds the amount that should have been paid based upon the corrected accounting restatement, resulting in an excess payment. Recoupment includes the reimbursement of any cash-based incentive compensation (bonuses) paid to the Executive, cancellation of vested and unvested performance-based restricted stock units, stock options and stock appreciation rights, and reimbursement of any gains realized on the sale of released stock unit awards and the exercise of stock options or stock appreciation rights and subsequent sale of underlying shares

Pursuant to the Dodd-Frank Act, the SEC has issued proposed rules applicable to the national securities exchanges (including the NYSE on which our Common Stock is listed for trading) prohibiting the listing of any security of an issuer that does not provide for the recovery of erroneously awarded incentive-based compensation where there has been an accounting restatement. We are awaiting adoption of the final SEC rules on this matter, at which time we will determine whether an amendment to our policy is necessary.

Hedging and Pledging Policies

The Company’s Insider Trading Policy prohibits all executive officers and directors from engaging in any short selling, hedging and/or pledging transactions with respect to Company securities.

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Accounting and Tax Impact

In setting compensation, the Compensation Committee and management consider the potential impact of Code Section 162(m), which precludes a public corporation from deducting on its corporate income tax return individual compensation in excess of $1 million for its chief executive officer or any of its three other highest-paid officers (other than the chief financial officer). Section 162(m) also provides for certain exemptions to this limitation, specifically compensation that is performance-based (within the meaning of Section 162(m)) and issued under a stockholder-approved plan. Our 2016 short-term incentive (bonus) awards were performance-based and were made pursuant to our stockholder-approved Executive Performance Bonus Plan and, therefore, are deductible under Section 162(m). The PSU component of the 2016 long–term incentive award was performance-based and issued under the 2014 Plan, which has been approved by stockholders and, therefore, is deductible under Section 162(m). Although the Compensation Committee endeavors to maximize deductibility of compensation under Section 162(m), it maintains the discretion in establishing compensation elements to approve compensation that may not be deductible under Section 162(m), if the Committee believes the compensation element to be necessary or appropriate under the circumstances.

Grant of Equity Awards

The Board of Directors has a formal policy with respect to the grant of equity awards under our equity plans. Under our 2014 Long Term Incentive Plan, equity awards may include stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs) and performance-based restricted stock units (PSUs). The Committee may not delegate its authority with respect to Section 16 persons, nor in any other way which would jeopardize the plan’s qualification under Code Section 162(m) or Exchange Act Rule 16b-3. Accordingly, our policy specifies that all awards to our Section 16 executive officers must be approved by the Compensation Committee on or prior to the award grant date, and that all such awards will be made and priced on the date of Compensation Committee approval, except in the case of new hires, which is discussed below.

Our equity plan provides for a minimum vesting period of 12 months on all equity awards, subject to certain limited exceptions. It also prohibits the repricing of stock options and the surrender of any outstanding option to the Company as consideration for the grant of a new option with a lower exercise price without stockholder approval. It also prohibits the granting of options with an exercise price less than the fair market value of the Company’s common stock on the date of grant, and a cash buyout of out-of-the-money options or SARs without stockholder approval.

Consistent with the equity plan, the Compensation Committee annually approves a delegation of authority to the CEO to make equity awards under our equity Plan to Gartner employees (other than Section 16 reporting persons) on account of new hires, retention or promotion without the approval of the Compensation Committee. In 2016, the delegation of authority specified a maximum grant date award value of $500,000 per individual, and a maximum aggregate grant date award value of $2,000,000 for the calendar year. For purposes of this computation, in the case of RSAs, RSUs and PSUs, value is calculated based upon the fair market value (defined as the closing price on the date of grant as reported by the New York Stock Exchange) of a share of our Common Stock, multiplied by the number of RSAs, RSUs or PSUs awarded. In the case of options and SARs, the grant date value of the award will be the Black-Scholes-Merton calculation of the value of the award using assumptions appropriate on the award date. Any awards made under the CEO-delegated authority are reported to the Compensation Committee at the next regularly scheduled committee meeting.

As discussed above, the structure and value of annual long-term incentive awards comprising the long-term incentive compensation element of our compensation package to executive officers are established and approved by the Compensation Committee in the first quarter of each year. The specific terms of the awards (number of PSUs and SARs and related performance criteria) are determined, and the awards are approved and made, on the same date and after the release of the Company’s prior year financial results.

It is the Company’s policy not to make equity awards to executive officers prior to the release of material non-public information. The 2016 incentive awards to executive officers were approved by the Compensation Committee and made on February 8, 2016, after release of our 2015 financial results. Generally speaking, awards for newly hired executives that are given as an inducement to joining the Company are made on the 15th or 30th day of the month first following the executive’s start date (and after approval by the Compensation Committee), and retention and continuously improving our operational effectiveness.promotion awards are made on the 15th or 30th day of the month first following the date of Compensation Committee approval; however, we may delay making these awards pending the release of material non-public information.

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We had total revenues

COMPENSATION COMMITTEE REPORT

The Compensation Committee of $2.021 billion in 2014, an increasethe Board of 13% over 2013 on a reported basisDirectors of Gartner, Inc. has reviewed and 14% adjusted for foreign exchange impact. Diluted earnings per share increased by $.10 per share, or 5%,discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to $2.03 per share in 2014.

Research revenues rose 14% year-over-year, to $1.445 billion in 2014,the Board of Directors that the Compensation Discussion and the contribution margin was 69%, the same as 2013. At December 31, 2014, Research contract value was $1.603 billion, an increase of 13% over December 31, 2013 on a reported basis and 14% adjusted for the impact of foreign exchange. Enterprise client retention was 85% and enterprise wallet retention was 106% at December 31, 2014.
Consulting revenues in 2014 increased 11% when compared to 2013, while the gross contribution margin was 34%, the same as 2013. Consultant utilization was 68% for 2014 compared to 64% in 2013, and we had 535 billable consultants at December 31, 2014 compared to 509 at year-end 2013. Backlog decreased 3% year-over-year, to $102.6 million at December 31, 2014.

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Events revenues increased 14% year-over-year, to $227.7 million, and 16% adjusted for foreign currency impact. The segment contribution margin was 49% in 2014, a 3 point increase over 2013. We held 61 events in 2014 compared to 64 in 2013, while the number of attendees increased 9% year-over-year, to over 49,000.

For a more detailed discussion of our results, see the Segment Results section below.
Cash flow from our operating activities was $346.8 million in 2014, an increase of 10% compared to 2013. We continue to focus on maximizing shareholder value, and in 2014 we repurchased 5.9 million of our outstanding common shares. We ended 2014 with $365.3 million in cash and cash equivalents. We refinanced our existing credit facility during the fourth quarter of 2014 to take advantage of favorable market conditions, provide for additional liquidity, and extend the maturity of our debt. Our total borrowing capacity under the new arrangement is $1.5 billion, which consists of a $400.0 million term loan and a $1.1 billion revolving credit arrangement. The new facility has a five year maturity. At December 31, 2014, approximately $1.1 billion was available for borrowing under the revolver. We believe that we have adequate liquidity to meet our currently anticipated needs.

The Company completed three business acquisitions in 2014 (the "2014 Acquisitions"). These include Software Advice, Inc., which assists customers with software purchases; Market Visio Oy, a Finnish company and former sales agent for Gartner research in Finland and Russia; and SircleIT, Inc., a provider of cloud-based search technology that identifies subject-matter experts. Note 2 - AcquisitionsAnalysis be included in the Notes to the Consolidated Financial Statements included in thisCompany’s Annual Report on Form 10-K provides additional information regarding the 2014 Acquisitions. The operating results of these acquisitions have been included in our consolidated and segment operating results beginning on their respective dates of acquisition. The results of these businesses were not material to our consolidated or segment results for the year ended December 31, 2014.  
FLUCTUATIONS IN QUARTERLY RESULTS
Our quarterly and annual revenue, operating income, and cash flow fluctuate as a result of many factors, including: the timing of our Symposium/ITxpo series, which are normally held during the fourth calendar quarter, as well as other events; the timing and amount of new business generated; the mix between domestic and international business; changes in market demand for our products and services; changes in foreign currency rates; the timing2016.

Compensation Committee of the development, introductionBoard of Directors

Anne Sutherland Fuchs

Michael J. Bingle

Raul E. Cesan

March 6, 2017

The foregoing compensation committee report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, and marketing ofshall not otherwise be deemed filed under these acts, except to the extent we specifically incorporate by reference into such filings.

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COMPENSATION TABLES AND NARRATIVE DISCLOSURES

All compensation data contained in this section is stated in U.S. Dollars.

Summary Compensation Table

This table describes compensation earned by our new productsCEO, CFO and services; competitionnext three most highly compensated executive officers (collectively, the “Named Executive Officers” or “NEOs”) in the industry; general economic conditions;years indicated. As you can see from the table and other factorsconsistent with our compensation philosophy discussed above, long-term incentive compensation in the form of equity awards comprises a significant portion of total compensation.

Name and Principal Position Year Base
Salary
(1)
 Stock
Awards
(2)
 Option
Awards
(2)
 Non-Equity
Incentive Plan
Compensation
(1), (3)
 All Other
Compensation
(4)
 Total 
Eugene A. Hall, Chief Executive Officer (PEO) (5)  2016  $901,584 $5,608,763 $2,403,764 $1,203,451 $141,364 $10,258,926 
   2015   875,324  5,193,290  2,225,705  1,215,044  135,844  9,645,207 
   2014   847,831  4,721,176  2,023,365  1,273,821  115,034  8,981,227 
Craig W. Safian, SVP & Chief Financial Officer (PFO)  2016   503,260  999,949  428,561  454,951  54,712  2,441,433 
   2015   457,402  842,783  361,205  419,223  28,239  2,108,852 
   2014   409,869  949,977    321,216  11,349  1,692,411 
Per Anders Waern, SVP, Gartner Consulting  2016   448,115  834,385  357,588  398,769  59,569  2,098,426 
   2015   435,063  772,577  331,090  392,545  50,480  1,981,755 
   2014   418,531  702,314  300,999  379,877  41,991  1,843,712 
David Godfrey, SVP, Sales  2016   448,115  834,385  357,588  398,769  54,742  2,093,599 
Alwyn Dawkins, SVP, Events  2016   448,115  834,385  357,588  398,769  54,065  2,092,922 
   2015   435,063  772,577  331,090  392,545  50,637  1,981,912 
   2014   418,531  702,314  300,999  379,877  41,571  1,843,292 

(1)     All NEOs elected to defer a portion of their 2016 salary and/or 2016 bonus under the Company’s Non-Qualified Deferred Compensation Plan. Amounts reported include the 2016 deferred portion, and accordingly does not include amounts, if any, released in 2016 from prior years’ deferrals. SeeNon-Qualified Deferred Compensation Tableelsewhere in this Item 11.

(2)     Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for performance restricted stock units, or PSUs (Stock Awards) and stock-settled stock appreciation rights, or SARs (Option Awards) granted to Messrs. Hall, Safian, Waern, Godfrey and Dawkins. The value reported for the PSUs is based upon the probable outcome of the performance objective as of the grant date, which are beyond our control.is consistent with the grant date estimate of the aggregate compensation cost to be recognized over the service period, excluding the effect of forfeitures, for the target grant date award value. The potential fluctuationsmaximum value of the PSUs, assuming attainment of the highest level of the performance conditions, is 200% of the target value, and all PSUs and SARs are subject to forfeiture. There were no forfeitures in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could provide an unreliable indication of future operating results and cash flows.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements requires the application of appropriate accounting policies and the use of estimates. Our significant accounting policies are described in2016. See also Note 18 – Stock-Based Compensation - in the Notes to Consolidated Financial Statements. Management considersStatements contained in our Annual Report on Form 10-K for the policiesyear ended December 31, 2016 for additional information.

(3)     Represents performance-based cash bonuses earned at December 31 of the applicable year and paid in the following February. See footnote (1) toGrants of Plan-Based Awards Table elsewhere in this Item 11 for additional information.

(4)     SeeOther Compensation Table elsewhere in this Item 11for additional information.

(5)     Mr. Hall is a party to an employment agreement with the Company.See Employment Agreements With Executive Officers – Mr. Hallelsewhere in this Item 11.

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Other Compensation Table

This table describes each component of the All Other Compensation column in the Summary Compensation Table.

Name Year Company
Match
Under
Defined
Contribution
Plans
(1)
 Company
Match Under
Non-qualified
Deferred
Compensation
Plan
(2)
 Other
(3)
 Total
Eugene A. Hall 2016 7,200 75,951 58,213 141,364
  2015 7,200 78,766 49,878 135,844
  2014 7,000 60,563 47,471 115,034
Craig W. Safian 2016 7,200 28,841 18,671 54,712
  2015 7,200 11,096 9,943 28,239
  2014 7,000  4,349 11,349
Per Anders Waern 2016 7,200 25,674 26,695 59,569
  2015 7,200 25,398 17,882 50,480
  2014 7,000 19,495 15,496 41,991
David Godfrey 2016 7,200 25,674 21,868 54,742
Alwyn Dawkins 2016 7,200 25,674 21,191 54,065
  2015 7,200 25,398 18,039 50,637
  2014 7,000 19,495 15,076 41,571

(1)     Represents the Company’s 4% matching contribution in all years to the Named Executive Officer’s 401(k) account (subject to limitations).

(2)     Represents the Company’s matching contribution to the executive’s contributions to our Non-Qualified Deferred Compensation Plan. SeeNon-Qualified Deferred Compensation Table elsewhere in this Item 11 for additional information.

(3)     In addition to specified perquisites and benefits, includes other perquisites and personal benefits provided to the executive, none of which individually exceeded the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for the executive. In 2016, includes a car allowance of $29,204 received by Mr. Hall per the terms of his employment agreement.

Grants of Plan-Based Awards Table

This table provides information about awards made to our Named Executive Officers in 2016 pursuant to non-equity incentive plans (our short-term incentive cash bonus program) and equity incentive plans (performance restricted stock units (PSUs), restricted stock units (RSUs) and stock appreciation rights (SARs) awards comprising long-term incentive compensation under our 2014 Plan).

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    Possible Payouts Under Non- Possible Payouts Under Equity Exercise Grant
    Equity Incentive Plan Awards (1) Incentive Plan Awards (2) or Base Date Fair
                Price of Value of
                Option Stock and
                Awards Option
  Grant Threshold Target Maximum Threshold Target Maximum ($/Sh) Awards
Name Date ($) ($) ($) (#) (# ) (#) ($)(3) ($)(4)
Eugene A. Hall 2/8/16    0 70,057 PSUs 140,114  5,608,763
  2/8/16     145,703 SARs  80.06 2,403,764
   0 953,607 1,902,2145     
Craig W. Safian 2/8/16    0 12,490 PSUs 24,980  999,949
  2/8/16     25,977 SARs  80.06 428,561
   0 360,500 721,000     
Per Anders Waern 2/8/16    0 10,422 PSUs 20,844   834,385
  2/8/16     21,675 SARs   80.06 357,588
   0 315,981 631,962     
David Godfrey 2/8/16    0 10,422 PSUs 20,844   834,385
  2/8/16     21,675 SARs   80.06 357,588
   0 315,981 631,962     
Alwyn Dawkins 2/8/16    0 10,422 PSUs 20,844   834,385
  2/8/16     21,675 SARs   80.06 357,588
   0 315,981 631,962     

(1)     Represents cash bonuses that could have been earned in 2016 based solely upon achievement of specified financial performance objectives for 2016 and ranging from 0% (threshold) to 200% (maximum) of target (100%). Bonus targets (expressed as a percentage of base salary) were 105% for Mr. Hall, and 70% for each of Messrs. Safian, Waern, Godfrey and Dawkins. Performance bonuses earned in 2016 and paid in February 2017 were adjusted to 126.2% of their target bonus and are reported under Non-Equity Incentive Plan Compensation in the Summary Compensation Table. SeeShort-Term Incentive Compensation (Cash Bonuses) in the Compensation Discussion and Analysis included in this Item 11 for additional information.

(2)     Represents the number of performance-based Restricted Stock Units (PSUs) and stock-settled Stock Appreciation Rights (SARs) awarded on February 8, 2016 under our 2014 Plan. The target number of PSUs (100%) originally awarded on that date was subject to adjustment ranging from 0% (threshold) to 200% (maximum) based solely upon achievement of an associated financial performance objective, and was adjusted to 162.0% of target in February 2017. The adjusted number of PSUs awarded was: Mr. Hall – 113,942; Mr. Safian – 20,233; and Messrs. Waern, Godfrey and Dawkins – 16,883). The PSUs, SARs and RSUs vest 25% per year commencing one year from grant, subject to continued employment on the vesting date except in the case of death, disability and retirement. SeeLong-Term Incentive Compensation (Equity Awards) in the Compensation Discussion and Analysis included in this Item 11 for additional information.

(3)     Represents the closing price of our Common Stock on the New York Stock Exchange on the grant date.

(4)     See footnote (2) to the Summary Compensation Table included in this Item 11.

Employment Agreements with Executive Officers

Only our Chief Executive Officer, Mr. Hall, is a party to a long-term employment agreement with the Company.

Mr. Hall – Employment Agreement

The Company and Mr. Hall are parties to an Amended and Restated Employment Agreement pursuant to which Mr. Hall has agreed to serve as chief executive officer of the Company and is entitled to be nominated to the board of directors (the “CEO Agreement”) until December 31, 2021. The CEO Agreement provides for automatic one year renewals commencing on January 1, 2022, and continuing each year thereafter, unless either party provides the other with at least 60 days prior written notice of an intention not to extend the term.

Under the CEO Agreement, Mr. Hall is entitled to the following annual compensation components:

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ComponentDescription
Base SalaryØ$908,197, subject to adjustment on an annual basis by the Compensation Committee
Target Bonus Ø105% of annual base salary (target), adjusted for achievement of specified Company and individual objectives
 ØThe actual bonus paid may be higher or lower than target based upon over - or under - achievement of objectives, subject to a maximum actual bonus of 210% of base salary
Long – term incentive award ØAggregate annual value on the date of grant at least equal to $9,874,375 minus the sum of base salary and target bonus for the year of grant (the “Annual Incentive Award”)
 ØThe Annual Incentive Award will be 100% unvested on the date of grant, and vesting will depend upon the achievement of performance goals to be determined by the Compensation Committee
 ØThe terms and conditions of each Annual Incentive Award will be determined by the Compensation Committee, and will be divided between restricted stock units (RSUs) and stock appreciation rights (SARs)
 Ø

The number of RSUs initially granted each year will be based upon the assumption that specified Company objectives set by the Compensation Committee will be achieved, and may be adjusted so as to be higher or lower than the number initially granted for over- or under- achievement of such specified Company objectives

OtherØ

Car allowance

Ø

All benefits provided to senior executives, executives and employees of the Company generally from time to time, including medical, dental, life insurance and long-term disability

ØEntitled to be nominated for election to the Board
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Termination and Related Payments – Mr. Hall

Involuntary or Constructive Termination(no Change in Control)

Mr. Hall’s employment is at will and may be terminated by him or us upon 60 days’ notice. If we terminate Mr. Hall’s employment involuntarily (other than within 24 months following a Change In Control (defined below)) and without Business Reasons (as defined in the CEO Agreement) or a Constructive Termination (as defined in the CEO Agreement) occurs, or if the Company elects not to renew the CEO Agreement upon its expiration and Mr. Hall terminates his employment within 90 days following the expiration of the CEO Agreement, then Mr. Hall will be entitled to receive the following benefits:

ComponentDescription
Base SalaryØaccrued base salary and unused paid time off (“PTO”) through termination
Ø36 months continued base salary paid pursuant to normal payroll schedule
Short-Term
Incentive Award
(Bonus)
Øearned but unpaid bonus
Ø300% of the average of Mr. Hall’s earned annual bonuses for the three years preceding termination, payable in a lump sum
Ø36 months’ continued vesting in accordance with their terms (including achievement of applicable performance objectives) of all outstanding equity awards
Long – Term
Incentive Award
Ø

a lump sum payment in cash equal to the value of any ungranted Annual Incentive Awards, multiplied by the percentage of such award that would vest within 36 months following termination (i.e., 75% in the case of a four year vesting period)

OtherØreimbursement for up to 36 months’ COBRA premiums for Mr. Hall and his family  

Payment of severance amounts is conditioned upon execution of a general release of claims against the Company and compliance with 36 month non-competition and non-solicitation covenants. In certain circumstances, payment will be delayed for six months following termination under Code Section 409A.

Involuntary or Constructive Termination, and Change in Control

Within 24 months of a Change In Control: if Mr. Hall’s employment is terminated involuntarily and without Business Reasons; or a Constructive Termination occurs; or if the Company elects not to renew the CEO Agreement upon its expiration and Mr. Hall terminates his employment within 90 days following the expiration of the CEO Agreement (i.e., double trigger), Mr. Hall will be entitled to receive the following benefits:

26
ComponentDescription
Ø

accrued base salary and unused PTO through termination

Base SalaryØ3 times base salary then in effect, payable 6 months following termination
Short-Term
Incentive Award
(Bonus)
Ø

any earned but unpaid bonus

Ø3 times target bonus for fiscal year in which Change In Control occurs, payable 6 months following termination
Long – Term
Incentive Award
Ø

any ungranted but earned Annual Incentive Awards

Øall unvested outstanding equity will vest in full, all performance goals or other vesting criteria will be deemed achieved at target levels and all stock options and SARs will be exercisable as to all covered shares
OtherØreimbursement for up to 36 months’ COBRA premiums for Mr. Hall and his family  

Immediately upon a Change In Control, all of Mr. Hall’s unvested outstanding equity awards will vest in full, all performance goals or other vesting criteria will be deemed achieved at target levels and all stock options and SARs will be exercisable as to all covered shares. Additionally, any ungranted, but accrued Annual Incentive Awards will be awarded prior to consummation of the Change in Control.

Should any payments received by Mr. Hall upon a Change In Control constitute a “parachute payment” within the meaning of Code Section 280G, Mr. Hall may elect to receive either the full amount of his Change In Control payments, or such lesser amount as will ensure that no portion of his severance and other benefits will be subject to excise tax under Code Section 4999 of the Code. Additionally, certain payments may be delayed for six months following termination under Code Section 409A.

The CEO Agreement utilizes the 2014 Plan definition of “Change In Control” which currently provides that a Change In Control will occur when (i) there is a change in ownership of the Company such that any person (or group) becomes the beneficial owner of 50% of our voting securities, (ii) there is a change in the ownership of a substantial portion of the Company’s assets and (iii) there is a change in the effective control of the Company such that a majority of members of the Board is replaced during any 12 month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of appointment or election.

In the CEO Agreement, Mr. Hall also agrees not to engage in any competitive activities and not to solicit Gartner employees for 36 months following termination of employment.

27

Termination and Related Payments – Other Executive Officers

In the event of termination for cause, voluntary resignation or as a result of death, disability or retirement, no severance benefits are provided. In the event of termination for cause or voluntary resignation, all equity awards are forfeited except as discussed below underDeath, Disability and Retirement. In the event of termination without cause (including in connection with a Change In Control), other executive officers are entitled to receive the following benefits:

ComponentDescription
Base SalaryØaccrued base salary and unused PTO (not to exceed 25 days) through termination
Ø12 months continued base salary paid pursuant to normal payroll schedule
Long – Term
Incentive Awards
ØIf terminated within 12 months of a Change in Control, all unvested outstanding equity will vest in full (upon adjustment if performance adjustment has not occurred on termination), and all stock options and SARs will be exercisable as to all covered shares for 12 months following termination; otherwise unvested awards are forfeited
ØIf no Change in Control, unvested equity awards are forfeited (except in the case of death, disability and retirement, discussed below)
OtherØReimbursement for up to 12 months’ COBRA premiums for executive and family

In order to receive severance benefits, the executive officers who are terminated are required to execute and comply with a separation agreement and release of claims in which, among other things, the executive reaffirms his or her commitment to confidentiality and non-competition obligations (that bind all employees for one year following termination of employment) and releases the Company from various employment-related claims. In addition, in the case of Named Executive Officers (other than Mr. Hall), severance will not be criticalpaid to any executive who refuses to accept an understandingoffer of comparable employment from Gartner or who does not cooperate or ceases to cooperate when being considered for a new position with Gartner, in each case as determined by the Company. Finally, under certain circumstances, payments and release of shares may be delayed for six months following termination under Code Section 409A.

Death, Disability and Retirement

For all equity awards made prior to 2015, in the case of termination due to death, disability or retirement (as defined), our executive officers are entitled to immediate vesting of all PSUs and SARs that would have vested (assuming continued service) during the 12 months following termination. Commencing with the 2015 equity awards, our executive officers are entitled to immediate vesting of all outstanding awards in the case of termination due to death or disability, and continued vesting depending upon the age of the officer in the case of retirement (as defined) as described in the following table:

Termination EventTreatment of Unvested Equity Awards
Death or Disability – pre 2015 awardsØ     12 months additional vesting upon event
Death or Disability – 2015 et seq. awardsØ     100% vesting upon event
Retirement – not eligibleØ     Unvested awards forfeited
Retirement – pre 2015 awards - eligibleØ     12 months additional vesting upon event
Termination EventTreatment of Unvested Equity Awards
Retirement – 2015 et seq. awards – eligible

Ø     If < 60 years of age, 12 months continued vesting

Ø     If 60, 24 months continued vesting

Ø     If 61, 36 months continued vesting

Ø     If 62 or more, unvested awards vest in full in accordance with its term

28

In order to receive retirement vesting, an officer must be retirement “eligible” on the date of retirement; if not, all unvested awards are forfeited upon retirement. Retirement eligibility is defined in our current equity award agreements as follows: (i) on the date of retirement the officer must be at least 55 years old and have at least 5 years continued service and (ii) the sum of the officer���s age and years of continued service must be 65 or greater. At December 31, 2016, of our financial statements because their application requires complexNEOs, only Mr. Hall qualified for the additional vesting benefit upon retirement. Disability is defined in our current equity award agreements as total and subjective management judgmentspermanent disability.

For all SAR awards prior to 2015, the SARs remain exercisable for the earlier of the applicable expiration date or one year from termination in the case of death, disability or retirement. Commencing with the 2015 SAR awards, the SARs remain exercisable for the earlier of the applicable expiration date or one year from termination in the case of death and estimates. Specific risksdisability, and through the expiration date in the case of retirement. In each case, upon termination for these critical accounting policiesany other reason, vested SARs remain exercisable for the earlier of the applicable expiration date or 90 days from the date of termination. In the case of death, disability or retirement, unvested and unadjusted PSUs to which the officer is entitled will be adjusted based upon achievement of the related performance metric upon certification by the Compensation Committee. In all cases related to retirement, the officer must be retirement eligible.

Potential Payments Upon Termination or Change in Control

Employment Agreements With Executive Officers above contains a detailed discussion of the payments and other benefits to which our CEO and other Named Executive Officers are describedentitled in the event of termination of employment or upon a Change In Control, and the amounts payable assuming termination under various circumstances at December 31, 2016 are set forth below.

In each case, each Named Executive Officer would also be entitled to receive accrued personal time off (PTO) and the balance in his deferred compensation plan account.

Mr. Hall, CEO

The preparationtable below quantifies (in dollars) amounts that would be payable by the Company, and the value of shares of Common Stock that would be released, to Mr. Hall had his employment been terminated on December 31, 2016 (the “Termination Date”) as a result of (i) involuntary termination without cause and/or constructive termination; (ii) death, disability or retirement; or (iii) a Change In Control. SeeOutstanding Equity Awards At Fiscal Year End Table included in this Item 11 for a list of Mr. Hall’s unvested equity awards at the end of 2016.Mr. Hall was eligible for retirement benefits at December 31, 2016.

Involuntary
termination
(severance
benefits)
(1)

 

Involuntary
termination
(continued
vesting of
equity
awards) (2)

 

Total
Involuntary
termination
(1), (2)

 

Death,
disability or
retirement
(value of
unvested
equity awards) (3)

 

Change in
Control
(severance
benefits) (4)

 

Change in
Control
(acceleration of
unvested
equity awards) (5)

 

Total
Change in
Control (4),
(5)

7,347,612 34,412,566 35,147,327 33,630,984 6,878,322 33,655,560 40,533,882

(1)     Represents the sum of (w) three times base salary in effect at Termination Date; (x) 300% of the average actual bonus paid for the prior three years (2013, 2014 and 2015); (y) unpaid 2016 bonus; and (z) the amount of health insurance premiums for Mr. Hall, his spouse and immediate family for 36 months (at rate in effect on the Termination Date).

(2)     Represents (x) the fair market value using the closing price of our financial statements also requires usCommon Stock on December 31, 2016, or $101.07 (the “Year End Price”) of unvested PSUs that would have vested within 36 months following the Termination Date, plus (y) the spread between the Year End Price and the exercise price for all in-the-money SARs that would have vested within 36 months following the Termination Date, multiplied by the number of such SARs.

(3)     Represents (x) the fair market value using the Year End Price of (i) unvested PSUs awarded prior to make estimates2015 that would have vested within 12 months following the Termination Date and assumptions about future events. We develop our estimates(ii) all unvested PSUs awarded in 2015 and 2016, plus (y) the spread between the Year End Price and the exercise price for all in-the-money SARs awarded in 2015

29

and 2016 that would have vested within 12 months following the Termination Date and (ii) all unvested SARs awarded in 2015 and 2016, multiplied by the number of such SARs. 2016 PSUs are adjusted based upon applicable performance metrics.

(4)     Represents the sum of (w) three times base salary in effect at Termination Date, (x) three times 2016 target bonus, (y) unpaid 2016 bonus, and (z) the amount of health insurance premiums for Mr. Hall, his spouse and immediate family for 36 months (at premiums in effect on the Termination Date).

(5)     Represents (x) the fair market value using both current and historical experience, as well as other factors, including the general economic environment and actions we may takeYear End Price of all unvested PSUs on the Termination Date (at target in the future. We adjustcase of unadjusted 2016 PSUs), plus (y) the spread between the Year End Price and the exercise price of all in-the-money unvested SARs on the Termination Date, multiplied by the number of such estimates when facts and circumstances dictate. However, our estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on our best judgment at a point in time and as such these estimates may ultimately differ from actual results. On-going changes in our estimates could be material andSARs.

Other Named Executive Officers

The table below quantifies (in dollars) amounts that would be reflectedpayable by the Company, and the value of shares of Common Stock that would be released, to our Named Executive Officers (other than Mr. Hall) had their employment been terminated on December 31, 2016 (the “Termination Date”) as a result of (i) involuntary termination without cause and/or constructive termination; (ii) death or disability; or (iii) a Change In Control. None of these NEOs were eligible for retirement benefits at December 31, 2016. SeeOutstanding Equity Awards At Fiscal Year End Table included in this Item 11 for a list of unvested equity awards held by each Named Executive Officer at the Company’s financial statementsend of 2016.

Named Executive Officer

 

Involuntary
termination
(severance
benefits)
(1)

 

Value of
unvested equity
awards
(death, disability
or retirement)
(2)

 

Value of
unvested equity
awards (Change
In Control)
(3)

 

Total Change In
Control
(1), (3)

Craig W. Safian 537,096 4,818,667 4,392,151 4,929,247
Per Anders Waern 473,596 4,984,529 4,988,210 5,461,806
David Godfrey 473,596 4,984,529 4,988,210 5,461,806
Alwyn Dawkins 473,596 4,984,529 4,988,210 5,461,806

(1)     Represents 12 months’ base salary in future periods.

Our critical accounting policies are as follows:
Revenue recognition — Revenue is recognizedeffect on the Termination Date plus the amount of health insurance premiums for the executive, his spouse and immediate family for 12 months (at premiums in effect on the Termination Date) payable in accordance with normal payroll practices. Since the requirementsexecutive must be employed on the bonus payment date (February 2017 in order to receive earned but unpaid 2016 bonus, in the event of U.S. GAAP and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). Revenue is only recognized once all required criteria for revenue recognitiontermination on December 31, 2016, 2016 bonus would have been met. Revenueforfeited and, therefore, is excluded. SeeNon-Equity Incentive Plan Compensation in the Summary Compensation Table included in this Item 11 for these bonus amounts.

(2)     Represents (x) the fair market value using the closing price of our Common Stock on December 31, 2016, or $101.07 (the “Year End Price”) of (i) unvested PSUs awarded prior to 2015 that would have vested within 12 months following the Termination Date, and (ii) 100% of unvested PSUs awarded in 2015 and 2016, plus (y) the spread between the Year End Price and the exercise price of (i) all in-the-money SARs awarded prior to 2015 that would have vested within 12 months following the Termination Date, and (ii) 100% of unvested SARs awarded in 2015 and 2016, multiplied by significant source is accountedthe number of such SARs, in the event of death or disability. 2016 PSUs are adjusted based upon applicable performance metrics. Messrs. Safian, Waern, Godfrey and Dawkins were not eligible for as follows:

Research revenues are derived from subscription contracts for research productsretirement benefits on December 31, 2016 and are deferred and recognized ratably overwould have forfeited all unvested equity had they retired on the applicable contract term. Fees from research reprints are recognized whenTermination Date.

(3)     Represents (x) the reprint is delivered.


Consulting revenues are principally generated from fixed fee and time and material engagements. Revenues from fixed fee contracts are recognized on a proportional performance basis. Revenues from time and materials engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization contracts are contingent in nature and are only recognized upon satisfactionfair market value using the Year End Price of all conditions related to their payment.

unvested PSUs on the Termination Date (at target in the case of unadjusted 2016 PSUs), plus (y) the spread between the Year End Price and the exercise price of all in-the-money unvested SARs on the Termination Date, multiplied by the number of such SARs.

18




30
Events revenues are deferred

Outstanding Equity Awards at Fiscal Year-End Table

This table provides information on each option (including stock appreciation rights or SARs) and then recognized uponstock (including restricted stock units (RSUs) and performance restricted stock units (PSUs) award held by each Named Executive Officer at December 31, 2016. All performance criteria associated with these awards (except for the completion2016 PSU award (see footnote 4)) were fully satisfied as of December 31, 2016, and the award is fixed. The market value of the related symposium, conference or exhibition.


The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All research contracts are non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim.
Uncollectible fees receivable — We maintain an allowance for losses which is composed of a bad debt allowance and a sales reserve. Provisions are charged against earnings, either as a reduction in revenues or an increase to expense. The measurement of likely and probable losses and the allowance for lossesstock awards is based on historical loss experience, aging of outstanding receivables, an assessment of current economic conditions and the financial health of specific clients. This evaluation is inherently judgmental and requires estimates. These valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectability of fees receivable becomes available. Circumstances that could cause our valuation reserves to increase include changes in our clients’ liquidity and credit quality, other factors negatively impacting our clients’ ability to pay their obligations as they come due, and the effectivenessclosing price of our collection efforts.
Common Stock on the New York Stock Exchange on December 31, 2016, which was $101.07. Upon exercise of, or release of restrictions on, these awards, the number of shares ultimately issued to each executive will be reduced by the number of shares withheld by Gartner for tax withholding purposes and/or as payment of exercise price in the case of options and SARs.

 Option Awards Stock Awards
Named Executive
Officer
 Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
 Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
 Option
Exercise
Price
($)
 Option
Expiration
Date
 Number of
Shares or
Units of
Stock
That
Have
Not
Vested
(#)
 Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested
($)
 Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
 Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
That Have
Not
Vested
($)
Eugene A. Hall                
 (1), (5) 98,062 32,687 49.37 2/12/20 26,918 2,720,602  
(2), (5) 67,491 67,490 64.64 2/10/21 63,031 6,360,543  
(3), (5) 31,688 95,062 77.92 2/9/22 79,878 8,073,269  
(4), (5)  145,703 80.60 2/08/23   70,057 7,080,661
Craig W. Safian                
(1)     2,025 204,667  
(2)     3,480 351,727  
(3)     12,962 1,310,069  
(6)  15,427 77.92  3,566 360,416  
(4), (5)  25,977 80.06 2/8/23   12,490 1,262,364
Per Anders Waern                
(1), (5)  4,726 49.37 2/12/20 3,892 393,364  
(2), (5)  10,040 64.64 2/10/21 9,376 947,632  
(3), (5)  14,141 77.92 2/9/22 11,883 1,201,015  
(4), (5)  21,675 80.60 2/08/23   10,422 1,053,352
David Godfrey        
(1), (5)  4,726 49.37 2/12/20 3,892 393,364  
(2), (5) 10,040 10,040 64.64 2/10/21 9,376 947,632  
(3), (5) 4,714 14,141 77.92 2/9/22 11,883 1,201,015  
(4), (5)  21,675 80.60 2/08/23   10,422 1,053,352
Alwyn Dawkins                
(5) 20,239  37.81 2/09/19     
(1), (5) 14,179 4,726 49.37 2/12/20 3,892 393,364  
(2), (5) 10,040 10,040 64.64 2/10/21 9,376 947,632  
(3), (5) 4,714 14,141 77.92 2/9/22 11,883 1,201,015  
(4), (5)  21,675 80.60 2/08/23   10,422 1,053,352

 

(1)Vest 25% per year commencing 2/12/14.
31
(2)Vest 25% per year commencing 2/10/15.

(3)Vest 25% per year commencing 2/9/16.

(4)Vests 25% per year commencing 2/8/17. The market value of the Stock Award is presented at target (100%), and the amount ultimately awarded could range from 0% to 200% of the target award and the maximum payout value is 200% of target. After certification of the applicable performance metric in February 2017, the amount actually awarded on account of Stock Awards was adjusted to 162% of target. The actual number of PSUs awarded to the NEOs is reported in footnote (2) to theGrants of Plan – Based Awards Table.

(5)The amounts shown under Option Awards represent SARs that will be stock-settled upon exercise; accordingly, the number of shares ultimately received upon exercise will be less than the number of SARs held by the executive and reported in this table.

(6)Vest 25% per year commencing 6/13/15.

Option Exercises and Stock Vested Table

This table provides information for the NEOs for the aggregate number of SARs that were exercised, and stock awards that vested and released, during 2016 on an aggregate basis, and does not reflect shares withheld by the Company for exercise price or withholding taxes.

  Option Awards Stock Awards

Name

 

Number of
Shares
Acquired on
Exercise (#)

 

Value
Realized on
Exercise ($)
(1)

 

Number of
Shares
Acquired on
Vesting (#) (2)

 

Value
Realized on
Vesting
($)(3)

Eugene A. Hall 45,594 4,466,844 62,527 5,050,620
Craig W. Safian   7,386 613,729
Per Anders Waern 4,198 414,930 10,332 834,974
David Godfrey 9,999 980,625 10,332 834,894
Alwyn Dawkins 4,379 419,990 9,973 805,849

(1)     Represents the spread between (i) the market price of our Common Stock at exercise and (ii) the exercise price for all SARs exercised during the year, multiplied by the number of SARs exercised.

(2)     Represents PSUs awarded in prior years as long-term incentive compensation that released in 2016.

(3)     Represents the number of shares that released multiplied by the market price of our Common Stock on the release date.

Non-Qualified Deferred Compensation Table

The Company maintains a Non-Qualified Deferred Compensation Plan for certain officers and key personnel whose aggregate compensation in 2016 was expected to exceed $325,000. This plan currently allows qualified U.S.-based employees to defer up to 50% of annual salary and/or up to 100% of annual bonus earned in a fiscal year. In addition, in 2016 the Company made a contribution to the account of each Named Executive Officer who deferred compensation equal to the amount of such executive’s contribution (not to exceed 4% of base salary and bonus), less $7,200. Deferred amounts are deemed invested in several independently-managed investment portfolios selected by the participant for purposes of determining the amount of earnings to be credited by the Company to that participant’s account. The Company may, but need not, acquire investments corresponding to the participants’ designations.

Upon termination of employment for any reason, all account balances will be distributed to the participant in a lump sum, except that a participant whose account balance is in excess of $25,000 may defer distributions for an

32

additional year, or elect to receive the balance in 20, 40 or 60 quarterly installments. In the event of an unforeseen emergency (which includes a sudden and unexpected illness or accident of the participant or a dependent, a loss of the participant’s property due to casualty or other extraordinary and unforeseeable circumstance beyond the participant’s control), the participant may request early payment of his or her account balance, subject to approval.

The following table provides our total fees receivableinformation (in dollars) concerning contributions to the Deferred Compensation Plan in 2016 by the participating Named Executive Officers, the Company’s matching contributions, 2016 earnings, aggregate withdrawals and distributions and account balances at year end:

Name

 

Executive
Contributions
in 2016 (1)

 

Company
Contributions
in 2016 (2)

 

Aggregate
Earnings
(loss) in
2016

 

Aggregate Withdrawals/
Distributions
in 2016

 

Aggregate
Balance at
12/31/16

Eugene A. Hall 84,665 75,951 59,669 170,643 606,327
Craig W. Safian 36,899 28,841 7,705  102,503
Per Anders Waern 33,626 25,674 37,905  472,648
David Godfrey 57,179 25,674 30,258  301,385
Alwyn Dawkins 39,254 25,674 33,019 198,844 258,021

(1)   Executive Contributions are included in the “Base Salary” and/or “Non-Equity Incentive Plan Compensation” columns in the Summary Compensation Table for the NEOs.

(2)   Company Contributions are included in the “All Other Compensation” column of the Summary Compensation Table, and in the “Company Match Under Non-qualified Deferred Compensation Plan” column of the Other Compensation Table for the NEOs.

DIRECTOR COMPENSATION

Compensation of Directors

The Governance Committee annually reviews all forms of independent director compensation and recommends changes to the Board, when appropriate. The Governance Committee is supported in this review by Exequity, LLP. The review examines director compensation in relation to two comparator groups: Proxy Peer Group and General Industry Reference Group. The Proxy Peer Group includes the same companies used to benchmark executive pay (see page 21). The General Industry Reference Group includes 100 companies with median revenues similar to that of Gartner. Regular review of the director compensation program ensures that the director compensation is reasonable, and reflects a mainstream approach to the structure of the compensation components and the related allowance for losses (in thousands):

 December 31,
 2014 2013
Total fees receivable$558,807
 $497,923
Allowance for losses(6,700) (7,000)
Fees receivable, net$552,107
 $490,923

Goodwill and other intangible assets — The Company evaluates recorded goodwill in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever events ormethod of delivery. No changes in circumstances indicate that the carrying value may not be recoverable. In addition, an impairment evaluation of our amortizable intangible assets may also be performed on a periodic basis should events or circumstances indicate potential impairment. If we determine that the fair value of a reporting unit is less than its related carrying amount, we must recognize an impairment charge against earnings. Among the factors we consider important that could trigger an impairment review are the following:
Significant under-performance relative to historical or projected future operating results;

Significant changes in the manner of our use of acquired assets or the strategy for our overall business;

Significant negative industry or general economic trends;

Significant decline in our stock price for a sustained period; and

Our market capitalization relative to net book value.

The annual assessment of the recoverability of recorded goodwill can be based on either a quantitative or qualitative assessment or a combination of the two. Both methods require the use of estimates which in turn contain judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resulting estimates are subject to uncertainty. In 2014, we completed the required annual goodwill impairment test utilizing a qualitative approach. Based on this assessment, the Company believes the fair values of the Company’s reporting units continue to exceed their respective carrying amounts. See Note 1 — Business and Significant Accounting Policies in the Noteshave been made to the Consolidated Financial Statements for additional discussion.
Accounting for income taxesdirector compensation program since 2013. The Company uses the asset and liability method of accounting for income taxes. We estimate our income taxes in each of the jurisdictions where we operate. This process involves estimating our current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. In assessing the realizability of deferred tax assets, management considers if it is more likely than notsection that some or all of the deferred tax assets will not be realized. We consider the availability of loss carryforwards, projected reversal of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible tax planning strategies in making this assessment. The Company recognizes the tax

19



benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained based on the technical merits of the position.

Accounting for stock-based compensation — The Company accounts for stock-based compensation in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). The Company recognizes stock-based compensation expense, which is based on the fair value of the award on the date of grant, over the related service period, net of estimated forfeitures (see Note 8 — Stock-Based Compensation in the Notes to the Consolidated Financial Statements for additional information regarding stock-based compensation).
Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain complex and subjective assumptions, including the expected life of the stock compensation award and the Company’s Common Stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the rate of employee forfeitures and the likelihood of achievement of certain performance targets. The assumptions used in calculating the fair value of stock compensation awards and the associated periodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock compensation expense could be materially different from what has been recorded infollows describes the current period.
Restructuringdirector compensation program and other accruals — We may record accrualscomponents.

Directors who are also employees receive no fees for severance costs, costs associated with excess facilities that we have leased, contract terminations, asset impairments,their services as directors. Non-management directors are reimbursed for their meeting attendance expenses and other costsreceive the following compensation for their service as a result of on-going actions we undertake to streamline our organization, reposition certain businesses and reduce ongoing costs. Estimates of costs to be incurred to complete these actions, such as future lease payments, sublease income, the fair value of assets, and severance and related benefits, are based on assumptions at the time the actions are initiated. These accruals may need to be adjusted to the extent actual costs differ from such estimates. In addition, these actions may be revised due to changes in business conditions that we did not foresee at the time such plans were approved.

director:

Annual Director Retainer Fee:$60,000 per director and an additional $100,000 for our non-executive Chairman of the Board, payable in arrears in four equal quarterly installments, on the first business day of each quarter. These amounts are paid in common stock equivalents (CSEs) granted under the Company’s 2014 Long-Term Incentive Plan (“2014 Plan”), except that a director may elect to receive up to 50% of this fee in cash. The CSEs convert into Common Stock on the date the director’s continuous status as a director terminates, unless the director elects accelerated release as provided in the 2014 Plan. The number of CSEs awarded is determined by dividing the aggregate director fees owed for a quarter (other than any amount payable in cash) by the closing price of the Common Stock on the first business day following the close of that quarter.
Annual Committee Chair Fee:$10,000 for the chair of our Governance Committee and $15,000 for the chairs of our Audit and Compensation Committees. Amounts are payable in the same manner as the Annual Fee.
Annual Committee Member Fee:$7,500 for our Governance Committee members, $10,000 for our Compensation Committee members and $15,000 for our Audit Committee members. Committee chairs receive both a committee chair fee and a committee member fee. Amounts are payable in the same manner as the Annual Fee.

We also record accruals during the year for our various employee cash incentive programs. Amounts accrued at the end of each reporting period are based on our estimates and may require adjustment as the ultimate amount paid for these incentives are sometimes not known with certainty until after year end.


20



RESULTS OF OPERATIONS
Consolidated Results
2014 VERSUS 2013

The following table presents the changes in selected line items in our Consolidated Statements of Operations for the two years ended December 31, 2014 (in thousands):  
 
Twelve Months
Ended
December 31,
2014
 
Twelve Months
Ended
December 31,
2013
 
Income Increase
(Decrease)
$
 
Increase
(Decrease)
%
Total revenues$2,021,441
 $1,784,213
 $237,228
 13 %
Costs and expenses: 
  
  
  
Cost of services & product development797,933
 713,484
 (84,449) (12)
Selling, general and administrative876,067
 760,458
 (115,609) (15)
Depreciation31,186
 28,996
 (2,190) (8)
Amortization of intangibles8,226
 5,446
 (2,780) (51)
Acquisition & integration charges21,867
 337
 (21,530) >(100)
Operating income286,162
 275,492
 10,670
 4
Interest expense, net(10,887) (8,837) (2,050) (23)
Other expense, net(592) (216) (376) >(100)
Provision for income taxes(90,917) (83,638) (7,279) (9)
Net income$183,766
 $182,801
 $965
 1 %
TOTAL REVENUES for the twelve months ended December 31, 2014 increased $237.2 million, or 13%, compared to the twelve months ended December 31, 2013. Total revenues increased 14% excluding the unfavorable impact of foreign currency. Revenues increased in all three of our business segments and across all geographic regions.

The following table presents total revenues by geographic region for the twelve months ended (in thousands):  
Geographic Region December 31, 2014 December 31, 2013 Increase (Decrease) $ Increase (Decrease) % 
U.S. and Canada $1,204,476
 $1,049,734
 $154,742
 15% 
Europe, Middle East, Africa 570,334
 508,755
 61,579
 12
 
Other International 246,631
 225,724
 20,907
 9
 
Totals $2,021,441
 $1,784,213
 $237,228
 13% 

The following table presents our revenues by segment for the twelve months ended (in thousands):
Segment December 31, 2014 December 31, 2013 Increase (Decrease) $ Increase (Decrease) % 
Research $1,445,338
 $1,271,011
 $174,327
 14% 
Consulting 348,396
 314,257
 34,139
 11
 
Events 227,707
 198,945
 28,762
 14
 
Totals $2,021,441
 $1,784,213
 $237,228
 13% 

Please refer to the section of this MD&A below entitled “Segment Results” for a further discussion of revenues and results by segment.

21



COST OF SERVICES AND PRODUCT DEVELOPMENT (“COS”) expense increased 12% in 2014 compared to 2013, or $84.4 million, to $797.9 million compared to $713.5 million in 2013. The impact of foreign currency exchange for the full year was not significant. The increase was primarily due to higher payroll and related benefits costs from additional headcount, which increased 12%. The headcount increase reflects our continued investment in our Research business and includes the additional employees resulting from the 2014 Acquisitions. COS as a percentage of revenues was 39% in the 2014 period compared to 40% in the 2013 period.
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $115.6 million in 2014, or 15%, to $876.1 million compared to $760.5 million in 2013. Excluding the favorable impact of foreign currency exchange, SG&A expense increased 16% year-over-year. The increase was primarily due to higher payroll and related benefits costs from additional headcount, higher sales commissions, and merit salary increases. The increased headcount includes our investment in additional quota-bearing sales associates, which increased to 1,881 at December 31, 2014, a 14% increase over year-end 2013.
DEPRECIATION expense increased 8% in 2014 compared to 2013, which reflects our additional investment in fixed assets.

AMORTIZATION OF INTANGIBLES increased 51% year-over-year due to the intangibles arising from the 2014 Acquisitions.

ACQUISITION AND INTEGRATION CHARGES was $21.9 million in 2014 compared to $0.3 million in 2013. These charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions, legal, consulting, and severance costs.
OPERATING INCOME increased $10.7 million year-over-year, or 4%, to $286.2 million in 2014 from $275.5 million in 2013. The increased operating income was attributable to higher segment contributions from our Research and Events businesses. Operating income as a percentage of revenues was 14% in 2014 and 15% in 2013.
INTEREST EXPENSE, NET increased 23% year-over-year due to additional borrowings in the 2014 period.
OTHER EXPENSE, NET was $0.6 million in 2014 and $0.2 million in 2013. These expenses primarily consisted of net foreign currency exchange gains and losses.
PROVISION FOR INCOME TAXES was $90.9 million in 2014 compared to $83.6 million in 2013 and the effective tax rate was 33.1% for 2014 compared to 31.4% for 2013. The higher effective tax rate in 2014 was primarily due to the impact of certain favorable items in 2013, as well as the unfavorable mix of pretax income by jurisdiction in 2014 which was partially offset by foreign tax credit benefits in 2014. The favorable items in 2013 included the enactment of certain beneficial legislation in 2013, the release of tax reserves due to audit settlements, and increased tax exempt income.

During 2014, the Internal Revenue Service closed its audit of the Company's 2011 and 2010 federal income tax returns. The resolution of the audit did not have a material adverse effect on the Company's consolidated financial position, cash flows, or results of operations.

NET INCOME was $183.8 million in 2014 and $182.8 million in 2013, an increase of 1%, as the increased operating income in 2014 was substantially offset by additional income tax charges. Diluted earnings per share increased 5% year-over-year, to $2.03 in 2014, primarily due to a lower number of weighted-average shares outstanding.

22



2013 VERSUS 2012

The following table presents the changes in selected line items in our Consolidated Statements of Operations for the two years ended December 31, 2013 (in thousands):  
 
Twelve Months
Ended
December 31,
2013
 
Twelve Months
Ended
December 31,
2012
 
Income Increase
(Decrease)
$
 
Increase
(Decrease)
%
Total revenues$1,784,213
 $1,615,808
 $168,405
 10 %
Costs and expenses: 
  
  
  
Cost of services & product development713,484
 659,067
 (54,417) (8)
Selling, general and administrative760,458
 678,843
 (81,615) (12)
Depreciation28,996
 25,369
 (3,627) (14)
Amortization of intangibles5,446
 4,402
 (1,044) (24)
Acquisition & integration charges337
 2,420
 2,083
 86
Operating income275,492
 245,707
 29,785
 12
Interest expense, net(8,837) (8,859) 22
 
Other expense, net(216) (1,252) 1,036
 83
Provision for income taxes(83,638) (69,693) (13,945) (20)
Net income$182,801
 $165,903
 $16,898
 10 %
TOTAL REVENUES for the twelve months ended December 31, 2013 increased $168.4 million, or 10%, compared to the twelve months ended December 31, 2012. Total revenues increased 11% excluding the unfavorable impact of foreign currency. Revenues increased in all three of our business segments and across all of our geographic regions.

The following table presents total revenues by geographic region for the twelve months ended (in thousands):  
Geographic Region December 31, 2013 December 31, 2012 Increase (Decrease) $ Increase (Decrease) % 
U.S. and Canada $1,049,734
 $947,075
 $102,659
 11% 
Europe, Middle East, Africa 508,755
 458,675
 50,080
 11
 
Other International 225,724
 210,058
 15,666
 7
 
Totals $1,784,213
 $1,615,808
 $168,405
 10% 

The following table presents our revenues by segment for the twelve months ended (in thousands):
Segment December 31, 2013 December 31, 2012 Increase (Decrease) $ Increase (Decrease) % 
Research $1,271,011
 $1,137,147
 $133,864
 12% 
Consulting 314,257
 $304,893
 9,364
 3
 
Events 198,945
 $173,768
 25,177
 14
 
Totals $1,784,213
 $1,615,808
 $168,405
 10% 

Please refer to the section of this MD&A below entitled “Segment Results” for a further discussion of revenues and results by segment.
COST OF SERVICES AND PRODUCT DEVELOPMENT (“COS”) expense increased 8% in 2013 compared to 2012, or $54.4 million, to $713.5 million compared to $659.1 million in 2012. The increase was primarily due to higher payroll and related benefits costs from additional headcount as we continued to invest to support the growth in our business, and to a lesser extent, merit salary increases. We also had higher conference costs due to an increase in the number of events, a double-digit increase in the number of exhibitors at our events, and the upgrading of facilities in several locations to support anticipated growth in the

23



events business. These additional costs were partially offset by the favorable impact of foreign currency. COS as a percentage of revenues was 40% in the 2013 period compared to 41% in the 2012 period.
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $81.6 million in 2013, or 12%, to $760.5 million compared to $678.8 million in 2012. The increase was primarily due to higher payroll and related benefits costs, which was partially offset by favorable foreign currency impact. The higher payroll and benefit cost was primarily driven by our investment in additional headcount, and to a lesser extent, higher sales commissions and merit salary increases. The increased headcount includes additional quota-bearing sales associates, which increased to 1,643 at December 31, 2013, a 16% increase over year-end 2012.
DEPRECIATION expense increased 14% in 2013 compared to 2012, primarily due to additional depreciation on leasehold improvements from two renovated buildings on our Stamford headquarters campus being placed into service during 2013.
AMORTIZATION OF INTANGIBLES increased 24% year-over-year due to a full year of amortization in 2013 of the intangible assets recorded from the Ideas International acquisition in mid-2012.
ACQUISITION AND INTEGRATION CHARGES was $0.3 million in 2013 compared to $2.4 million in 2012. These charges are directly-related to our acquisitions and primarily include legal, consulting, and severance costs.
OPERATING INCOME increased $29.8 million year-over-year, or 12%, to $275.5 million in 2013 from $245.7 million in 2012. The increased operating income was primarily attributable to a substantially higher segment contribution from our Research segment. Operating income as a percentage of revenues was 15% for both periods.
INTEREST EXPENSE, NET was flat year-over-year.
OTHER EXPENSE, NET was $0.2 million in 2013 and $1.3 million in 2012. These expenses primarily consisted of net foreign currency exchange gains and losses.
PROVISION FOR INCOME TAXES was $83.6 million in 2013 compared to $69.7 million in 2012 and the effective tax rate was 31.4% for 2013 compared to 29.6% for 2012. The higher effective tax rate in 2013 was primarily attributable to a change in the annual mix of pre-tax income by jurisdiction as well as the impact of certain state tax credits recognized in 2012.

In 2013 the Company closed the Internal Revenue Service (“IRS”) audit of its 2008 and 2009 federal income tax returns. The resolution of the audit did not have a material adverse effect on the consolidated financial position, cash flows, or results of operations of the Company. In late 2013 the Company received notice that the IRS would conduct an audit of the Company's 2010 and 2011 tax years.

The American Taxpayer Relief Act of 2012 (the “2012 Tax Act”) was enacted in January of 2013 and contained beneficial tax provisions for the Company which applied retroactively to 2012. However, since the 2012 Tax Act was passed in 2013, approximately $1.5 million of tax benefits relating to its retroactive application were recorded by the Company in early 2013.
NET INCOME was $182.8 million in 2013 and $165.9 million in 2012, an increase of $16.9 million, or 10%, primarily due to the higher operating income, which was partially offset by higher income tax charges. Diluted earnings per share increased 12% year-over-year due to the higher net income and to a lesser extent a lower number of weighted-average shares outstanding.


24



SEGMENT RESULTS
We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income excluding certain Cost of services and product development charges, SG&A, Depreciation, Acquisition and integration charges, and Amortization of intangibles. Gross contribution margin is defined as gross contribution as a percentage of revenues.
The following sections present the results of our three business segments.
Research

The following table presents the financial results and business measurements of our Research segment as of and for the twelve months ended December 31:
 

2014
 2013 

Increase
(Decrease)
 
%
Increase
(Decrease)
 2013 2012 

Increase
(Decrease)
 
%
Increase
(Decrease)
Financial Measurements: 
  
  
  
  
  
  
  
Revenues (1)$1,445,338 $1,271,011 $174,327
 14% $1,271,011 $1,137,147 $133,864
 12%
Gross contribution (1)$1,001,914 $879,384 $122,530
 14% $879,384 $774,342 $105,042
 14%
Gross contribution margin69% 69%  
 69% 68% 1 point
 
Business Measurements: 
  
  
  
  
  
  
  
Contract value (1)$1,603,200 $1,423,179 $180,021
 13% $1,423,179 $1,262,865 $160,314
 13%
Enterprise client retention (2)85% 83% 2 points
 
 83% 84% (1) point
 
Enterprise wallet retention (2)106% 104% 2 points
 
 104% 105% (1) point
 
Organization client retention (2)84% 82% 2 points
 
 82% 83% (1) point
 
Organization wallet retention (2)100% 98% 2 points
 
 98% 99% (1) point
 
33

Annual Equity Grant:$200,000 in value of restricted stock units (RSUs), awarded annually on the date of the Annual Meeting. The number of RSUs awarded is determined by dividing $200,000 by the closing price of the Common Stock on the award date. The restrictions lapse one year after grant subject to continued service as director through that date; release may be deferred at the director’s election.

2016 Director Compensation Table

This table sets forth compensation earned or paid in cash, and the grant date fair value of equity awards made, to our non-management directors on account of services rendered as a director in 2016. Mr. Hall receives no additional compensation for service as director.

Name Fees
Earned Or Paid
($)(1)
 Stock
Awards
($)(2)(3)
 Total
($)
Michael J. Bingle 77,500 200,000 277,500
Peter Bisson 24,822 162,740 187,562
Richard J. Bressler 90,000 200,000 290,000
Raul E. Cesan 70,000 200,000 270,000
Karen E. Dykstra 75,000 200,000 275,000
Anne Sutherland Fuchs 92,500 200,000 292,500
William O. Grabe 77,500 200,000 277,500
Steven G. Pagliuca 60,000 200,000 260,000
James C. Smith 175,000 200,000 375,000
(1)DollarsIncludes amounts earned in thousands.2016 and paid in cash and/or common stock equivalents (CSEs) on account of the Annual Director Retainer Fee, Annual Committee Chair Fee and/or Annual Committee Member Fee, described above. For Mr. Bisson, represents the pro rata Director Retainer Fee from August 2, 2016, the date of his appointment to the board. Does not include reimbursement for meeting attendance expenses.
(2)
We defineExcept for Mr. Bisson, represents the grant date value of an enterprise as a single company or customer. We defineannual equity award computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, consisting of 1,960 restricted stock units (RSUs) that vest on May 26, 2017, one year from the date of the 2016 Annual Meeting (unless deferred release was elected), subject to continued service through that date. Accordingly, the number of RSUs awarded was calculated by dividing $200,000 by the closing price of our Common Stock on May 26, 2016 ($102.02).
(3)For Mr. Bisson, represents the grant date value of an organization as a buying center within an enterprise, such as a location or department. A single enterprise may have multiple organizations.annual equity award computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, consisting of 1,743 restricted stock units (RSUs) that vest on May 26, 2017, one year from the date of the 2016 Annual Meeting, subject to continued service through that date. The number of RSUs awarded was calculated by dividing $162,740 ($200,000 pro-rated from August 2, 2016, the date of his appointment to the board, to May 26, 2017) by the closing price of our Common Stock on August 15, 2016, the date of grant ($93.32).

2014 VERSUS 2013
Research segment revenues in 2014 increased 14% compared to 2013. The impact of foreign exchange translation was not significant. The segment gross contribution margin was 69% for both periods. Contribution margin remained at 69% in spite of a 16% increase in segment headcount, which includes the additional employees from the 2014 Acquisitions.
Research contract value increased 13% in 2014 to $1.603 billion, and increased 14% year-over-year adjusted for the impact of foreign currency translation. Our growth in contract value was broad-based, with every region, industry segment, and client size growing at double-digit rates compared to 2013. The number of our research client enterprises increased by 10% in 2014, to 9,958. Both enterprise client retention and wallet retention remained strong, at 85% and 106% as of December 31, 2014, respectively.

2013 VERSUS 2012
Research segment revenues in 2013 increased 12% compared to 2012. The impact of foreign exchange translation was not significant. The segment gross contribution margin increased by 1 point, to 69%, driven by the operating leverage in this business. Contribution margin improved in spite of an 8% increase in segment headcount. Research contract value increased 13% in 2013 to $1.423 billion, and increased 12% year-over-year adjusted for the impact of foreign currency translation. Our growth in contract value was broad-based, with almost every region, industry segment, and client size growing at double-digit rates compared to 2012. Enterprise client retention and wallet retention were 83% and 104% at December 31, 2013, respectively.

25



Consulting

The following table presents the financial results and business measurements of our Consulting segment as of and for the twelve months ended December 31:
 2014 2013 
$
Increase
(Decrease)
 
%
Increase
(Decrease)
 2013 2012 
$
Increase
(Decrease)
 
%
Increase
(Decrease)
Financial Measurements: 
  
  
  
  
  
  
  
Revenues (1)$348,396 $314,257 $34,139
 11 % $314,257 $304,893 $9,364
 3 %
Gross contribution (1)$119,931 $107,565 $12,366
 11 % $107,565 $109,253 $(1,688) (2)%
Gross contribution margin34% 34% 
 
 34% 36% (2) points
 
Business Measurements: 
  
  
  
  
  
  
  
Backlog (1)$102,600 $106,130 $(3,530) (3)% $106,130 $102,718 $3,412
 3 %
Billable headcount535 509
 26
 5 % 509
 503
 6
 1 %
Consultant utilization68% 64% 4 points
 
 64% 67% (3) points
 
Average annualized revenue per billable headcount (1)$442
 $409
 $33
 8 % $409
 $430
 $(21) (5)%
34

(1)Dollars in thousands.

2014 VERSUS 2013
Consulting revenues increased 11% year-over-year

Director Stock Ownership and 12% when adjusted for the impact of foreign exchange. Holding Period Guidelines

The increase was primarily due to higher core consulting revenues and toBoard believes directors should have a lesser extent, higher contract optimization revenues. Contract optimization revenues can fluctuate from period to period but are generally about 10-15% of total annual Consulting segment revenues. The gross contribution margin was 34% for both periods. Backlog decreased $3.5 million, or 3%, year-over-year, to $102.6 million at December 31, 2014.

2013 VERSUS 2012
Consulting revenues increased 3% year-over-year and 4% when adjusted for the impact of foreign exchange. The increase was due to higher contract optimization revenue. The increased contract optimization revenues were partially offset by slightly lower core consulting and strategic advisory (“SAS”) revenues. The gross contribution margin declined by 2 points due to higher payroll and benefit costs from additional headcount and merit salary increases, and to a lesser extent, lower utilization in core consulting. Backlog increased $3.4 million, or 3%, year-over-year, to $106.1 million at December 31, 2013.
Events

The following table presents the financial results and business measurements of our Events segment as of and for the twelve months ended December 31:
 2014 2013 
$
Increase
(Decrease)
 
%
Increase
(Decrease)
 2013 2012 
$
Increase
(Decrease)
 
%
Increase
(Decrease)
Financial Measurements: 
  
  
  
  
  
  
  
Revenues (1)$227,707 $198,945 $28,762
 14 % $198,945 $173,768 $25,177
 14 %
Gross contribution (1)$112,384 $91,216 $21,168
 23 % $91,216 $80,119 $11,097
 14 %
Gross contribution margin49% 46% 3 points
 
 46% 46% 
 
Business Measurements: 
  
  
  
  
  
  
  
Number of events61
 64
 (3) (5)% 64
 62
 2
 3 %
Number of attendees49,047
 44,986
 4,061
 9 % 44,986
 46,307
 (1,321) (3)%

(1)Dollars in thousands.


26



2014 VERSUS 2013
Events revenues increased $28.8 million when comparing 2014 to 2013, or 14%. Excluding the impact of foreign currency translation, revenues increased 16% year-over-year. We held 61 events in 2014, consisting of 59 ongoing events and 2 new events, compared to 64 events in 2013. Five events that were held in 2013 were discontinued in 2014. The year-over-year revenue increase was primarily attributable to higher exhibitor revenue at our ongoing events and to a lesser extent, higher attendee revenue. The overall number of attendees increased 9%, while the number of exhibitors increased 10%. Average revenue per attendee rose 6% and average revenue per exhibitor increased 9%. The gross contribution margin increased 3 points year-over-year.

2013 VERSUS 2012
Events revenues increased $25.2 million when comparing 2013 to 2012, or 14%, but excluding the impact of foreign currency translation, revenues increased 15% year-over-year. We held 64 events in 2013, consisting of 58 ongoing events and 6 new events, compared to 62 events in 2012. The year-over-year revenue increase was primarily attributable to higher exhibitor revenue at our ongoing events. The overall number of attendees declined slightly while the number of exhibitors increased 11%. Average revenue per attendee rose 15% and average revenue per exhibitor increased 6%. The gross contribution margin was flat year-over-year at 46%.  

LIQUIDITY AND CAPITAL RESOURCES
We finance our operations primarily through cash generated from our operating activities. For 2014, we had operating cash flow of $346.8 million, which was the highestinterest in the Company’s history and represented an increaseCompany. Accordingly, each director is required to hold shares of 10% over 2013. Our operating cash flow has been continuously enhanced by the leverage characteristics of our subscription-based business model as well as our focus on operational efficiencies. Revenues in our Research segment, which increased 14% in 2014 compared to 2013, constituted 72% and 71% of our total revenues in 2014 and 2013, respectively. The majority of our research contracts renew annually and typically are paid in advance, and combinedGartner common stock with a strong customer retention rate and high incremental margins, has generally resulted in strong growth in operating cash flow each year. Our cash flow generation has also benefited from our continuing effortsvalue of not less than five (5) times the Annual Director Retainer Fee ($60,000). Directors are required to improveachieve the operating efficienciesguideline within three years of our businesses as well asjoining the Board. In the event a focus on the optimal management of our working capital as we increase our sales volume.
We had over $365.0 million of cash and cash equivalents at year-end 2014. We refinanced our debt in 2014 to take advantage of favorable market conditions and we had approximately $1.1 billion of available borrowing capacity under our revolving credit facility at year-end 2014. We believe that our consistently strong operating cash flow, as well as our existing cash balances and our available borrowing capacity, provide us with adequate liquidity to meet our currently anticipated needs.
Our cash and cash equivalents are held in numerous locations throughout the world. At December 31, 2014, $305.0 million of our cash and cash equivalents was held outside the U.S. Approximately 61% of the cash and cash equivalents held overseas represents unremitted earnings of our non-U.S subsidiaries. Under U.S. accounting rules, no provision for income taxes that may result from the remittance of such earnings is required if the Company intends to reinvest such funds overseas. Our current plans do not demonstrate a need to repatriate these undistributed earnings to fund our U.S. operations or otherwise satisfy the liquidity needs of our U.S operations. We intend to reinvest these earnings in our non-U.S. operations, except in instances in which the repatriation of these earnings would result in minimal additional tax. As a result, the Companydirector has not recognized additional income tax expense that may result fromsatisfied the remittance of these earnings. However, should our liquidity needs change or we decide to repatriate some or all of these unremitted earnings, we mayguideline within the three year period, he/she will be required to accrue additional taxes which could have a material effect on our consolidated financial position, cash flows, and resultshold 50% of operations.


27



Changes in cash and cash equivalents
The following disclosure summarizes and explainsnet after-tax shares received from the changes in our cash and cash equivalents for the three years ended December 31, 2014 (in thousands): 
 2014 vs. 2013 2013 vs. 2012
 
Twelve Months
Ended
December 31,
2014
 
Twelve Months
Ended
December 31,
2013
 
Increase
(Decrease)
 
Twelve Months
Ended
December 31,
2013
 
Twelve Months
Ended
December 31,
2012
 
Increase
(Decrease)
Cash provided by operating activities$346,779
 $315,654
 $31,125
 $315,654
 $279,813
 $35,841
Cash used in investing activities(162,777) (36,498) (126,279) (36,498) (54,673) 18,175
Cash used by financing activities(208,670) (153,855) (54,815) (153,855) (72,570) (81,285)
Net (decrease) increase(24,668) 125,301
 (149,969) 125,301
 152,570
 (27,269)
Effects of exchange rate changes (1)(34,020) (1,163) (32,857) (1,163) 4,543
 (5,706)
Beginning cash and cash equivalents423,990
 299,852
 124,138
 299,852
 142,739
 157,113
Ending cash and cash equivalents$365,302
 $423,990
 $(58,688) $423,990
 $299,852
 $124,138

(1)During 2014, a number of foreign currencies in which we hold cash weakened relative to the U.S. Dollar. As a result, the effects of exchange rates had a significant impact on the December 31, 2014 cash and cash equivalent balance.

2014 VERSUS 2013

Operating
Operating cash flow increased by $31.1 million, or 10%, when comparing 2014 to 2013. The increase was primarily due to additional cash collections in our Research and Events businesses and other positive working capital changes. Partially offsetting the additional collections were higher cash payments for bonuses, commissions, and income taxes.

Investing

We used an additional $126.3 million of cash in our investing activities in 2014 compared to 2013, principally due to the 2014 Acquisitions, in which we paid a total of $109.9 million (net of the cash acquired), and an additional $14.4 million was placed in escrow. The Company used both existing cash and additional borrowings to finance the 2014 Acquisitions. We also used an additional $2.0 million in cash for capital expenditureseither in the 2014 period.
Financing
form of equity awards or released CSEs until the guideline is achieved. We used $208.7 million of cash in our financing activities during 2014 comparedpermit directors to $153.9 million of cash used in 2013. During 2014, the Company used $432.0 million of cash for share repurchases, which was partially offset by $195.4 million of net proceeds from debt issuanceapply deferred and related debt issuance costs and $28.0 million from employee share-based activity. During 2013 the Company used $182.0 million of cash for share repurchases and $4.0 million for debt refinancing fees, which was partially offset by $32.0 million from employee share-based activities.

2013 VERSUS 2012

Operating
Operating cash flow increased by $35.8 million, or 13%, when comparing 2013 to 2012. The increase was primarily due to higher net income in the 2013 period, as well as additional receivable collections and other positive working capital changes. These increases were partially offset by additional cash payments in the 2013 period for bonus, commissions, and income taxes, and we also had lower cash reimbursements in the 2013 period related to the completion of the renovation of our Stamford headquarters facility.

Investing
Cash used in our investing activities declined by $18.2 million in 2013 compared to 2012. The decrease was primarily due to $10.3 million of cash used in 2012 for the acquisition of Ideas International and to a lesser extent, higher capital expenditures in 2012.

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Capital expenditures were $36.5 million in 2013 compared to $44.3 million in 2012, which included $7.7 million and $17.0 million, respectively, that were paid for the renovation of our Stamford headquarters facility. The Company's total expenditures on the renovation were approximately $34.2 million. The Company received a total of $25.0 million of reimbursements from the facility landlord for the renovation, of which $3.0 million was received in 2013, $13.0 million in 2012, and $9.0 million in 2011, which were recorded in operating cash flows.
Financing
We used $154.0 million of cash in our financing activities in 2013 compared to $73.0 million in 2012, an increase in cash used of $81.0 million, primarily due to share repurchases. We used $182.0 million of cash in 2013 for share repurchases compared to $111.0 million in 2012. We also had lower cash proceeds from employee share-based activity in the 2013 period, and we also paid $4.0 million of fees related to our debt refinancing in the 2013 period.
OBLIGATIONS AND COMMITMENTS
2014 Credit Agreement

The Company has a five-year credit arrangement that it entered into in December 2014 that provides for a $400.0 million term loan and a $1.1 billion revolving credit facility (the “2014 Credit Agreement”). Under the revolving credit facility, amounts may be borrowed, repaid, and re-borrowed through the maturity date of the agreement in December 2019. The term and revolving facilities may be increased, at the Company's option, by up to an additional $500.0 million in the aggregate.unvested equity awards towards satisfying these requirements. As of December 31, 2014,2016, all of our directors are in compliance with these guidelines

Compensation Committee Interlocks and Insider Participation.

During 2016, no member of the Compensation Committee served as an officer or employee of the Company, was formerly an officer of the Company or had $400.0 million outstanding under the term facility and zero under the revolver. See Note 5 - Debt in the Notes to the Consolidated Financial Statements for additional information regarding the 2014 Credit Agreement.

Off-Balance Sheet Arrangements

Through December 31, 2014, we have not entered into any off-balance sheet arrangements or transactionsrelationship with unconsolidated entities or other persons.

Contractual Cash Commitments
The Company has certain contractual commitments that require future cash payments. The following table summarizes these contractual cash commitments due after December 31, 2014 (in thousands):
Commitment Description: 
Due In Less Than
1 Year
 
Due In 2-3
Years
 
Due In 4-5
Years
 
Due In More Than
5 Years
 Total
Debt – principal and interest (1), (2) $28,950
 $61,660
 $341,570
 $5,120
 $437,300
Operating leases (3) 35,230
 51,445
 35,535
 100,960
 223,170
Deferred compensation arrangement (4) 4,190
 5,725
 3,300
 25,625
 38,840
Tax liabilities (5) 1,200
 
 
 
 1,200
Other (6) 17,100
 6,620
 6,335
 18,845
 48,900
Totals $86,670
 $125,450
 $386,740
 $150,550
 $749,410
(1)Includes amounts due under the 2014 Credit Agreement, which matures in December 2019. Amounts borrowed under the term loan arrangement have been classified in the table based on the scheduled repayment dates. Interest payments on amounts outstanding under the 2014 Credit Agreement were based on the floating rate as of December 31, 2014.

(2)The Company's $5.0 million State of Connecticut economic development loan is included in the Due In More Than 5 Years category since it has a 10 year maturity. Interest payments on the loan have been calculated based on the contractual fixed rate of interest of 3%. Under certain circumstances, part or all of this debt may be forgiven by the State. See Note 5 — Debt in the Notes to the Consolidated Financial Statements for additional information.


29



(3)The Company leases various facilities, furniture, autos, and computer equipment. These leases expire between 2015 and 2028. See Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements for additional information on the Company's leases.

(4)Represents the Company’s liability to participants in its supplemental deferred compensation arrangement (see Note 13 — Employee Benefits in the Notes to the Consolidated Financial Statements for additional information). Amounts payable to active employees whose payment date is unknown have been included in the Due In More Than 5 Years category since the Company cannot determine when the amounts will be paid.

(5)Includes interest and penalties. In addition to the amount presented in the table, the Company also has recorded liabilities of $19.9 million for unrecognized tax benefits and $2.9 million for related potential interest and penalties. We are uncertain as to when or if such amounts may be settled.

(6)Includes (i) contractual commitments for software, building maintenance, and telecom services; (ii) amounts due for share repurchase transactions that occurred in late December 2014 but were settled in early January 2015; and (iii) projected cash contributions to the Company's defined benefit pension plans.

QUARTERLY FINANCIAL DATA
The following tables present our quarterly operating results for the two-year period ended December 31, 2014:
2014        
(In thousands, except per share data) First Second Third Fourth
Revenues $446,702
 $519,820
 $470,940
 $583,979
Operating income 59,170
 81,761
 49,391
 95,840
Net income 37,736
 53,040
 33,846
 59,144
Net income per share: (1)  
  
    
Basic $0.41
 $0.59
 $0.38
 $0.67
Diluted $0.40
 $0.58
 $0.38
 $0.66

2013        
(In thousands, except per share data) First Second Third Fourth
Revenues $406,754
 $446,047
 $410,705
 $520,707
Operating income 54,005
 73,987
 58,743
 88,757
Net income 36,675
 46,514
 38,194
 61,418
Net income per share: (1)  
  
    
Basic $0.39
 $0.50
 $0.41
 $0.67
Diluted $0.38
 $0.49
 $0.40
 $0.65

(1)The aggregate of the four quarters’ basic and diluted earnings per common share may not equal the reported full calendar year amounts due to the effects of share repurchases, dilutive equity compensation, and rounding.


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RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting rules issued by the various U.S. standard setting and governmental authorities that have not yet become effective and may impact our Consolidated Financial Statements in future periods are described below, together with our assessment of the potential impact they may have on our Consolidated Financial Statements and related disclosures in future periods:

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09"). ASU No. 2014-09 is intended to clarify the principles for recognizing revenue by: removing inconsistencies and weaknesses in revenue recognition requirements; providing a more robust framework for addressing revenue issues; improving comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and providing more useful information to users of financial statements through improved revenue disclosure requirements. The provisions of the new rule are effective for Gartner on January 1, 2017. Early adoption is not permitted. We continue to evaluate the impact of ASU No. 2014-09.

Discontinued Operations

In May 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"), which changes the criteria for determining which disposal transactions can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The Company adopted the new rule on January 1, 2015 and it did not have an impact on the Company's consolidated financial statements.

The FASB also continues to work on a number of significant accounting rules which may impact the Company’s accounting and disclosures in future periods. Since these rules have not yet been issued, the effective dates and potential impact are unknown.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK
The Company's 2014 Credit Agreement provides for a five-year, $400.0 million term loan and a $1.1 billion revolving credit facility. We have exposure to changes in interest rates arising from borrowings under the 2014 Credit Agreement since amounts borrowed are based on a floating base rate of interest. At December 31, 2014, we had $400.0 million outstanding under the term portion of the 2014 Credit Agreement and zero under the revolver. We have an interest rate swap contract which effectively converts the floating base rate on the first $200.0 million of our borrowings to a 2.26% fixed rate. Since the Company only hedges the base interest rate risk on the first $200.0 million of its outstanding borrowings, we are exposed to interest rate risk on floating rate borrowings in excess of $200.0 million. Assuming the Company borrowed the entire $1.5 billion under the 2014 Credit Agreement as of December 31, 2014, a 25 basis point increase or decrease in interest rates could change pre-tax annual interest expense by approximately $3.3 million.

FOREIGN CURRENCY RISK
For both the fiscal years ended December 31, 2014 and 2013, approximately 45% of our revenues were derived from sales outside of the U.S. As a result, we conduct business in numerous currencies other than the U.S dollar. Among the major foreign currencies in which we conduct business are the Euro, the British Pound, the Japanese Yen, the Australian dollar, and the Canadian dollar. This foreign currency exposure results in both translation risk and transaction risk:
Translation Risk

We are exposed to foreign currency translation risk since the functional currencies of our foreign operations are generally denominated in the local currency. Translation risk arises since the assets and liabilities that we report for our foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates, and these exchange rates fluctuate over time. For accounting purposes, these foreign currency translation adjustments are deferred and are recorded as a component of stockholders’ equity and do not impact our operating results.
A measure of the potential impact of foreign currency translation on our Consolidated Balance Sheets can be determined through a sensitivity analysis of our cash and cash equivalents. At December 31, 2014, we had over $365.0 million of cash and cash equivalents, with a substantial portion denominated in foreign currencies. If the foreign exchange rates of the five major foreign currencies in which we operate changed in comparison to the U.S. dollar by 10%, the amount of cash and cash equivalents we would have reported on December 31, 2014 could have increased or decreased by approximately $24.0 million.
Because our foreign subsidiaries generally operate in a local functional currency that differs from the U.S. dollar, revenues and expenses in these foreign currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S. dollar continuously weakens or strengthens against these other currencies. Therefore, changes in exchange rates may affect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations. Historically, this impact on our consolidated earnings has not been material since foreign currency movements in the major currencies in which we operate tend to impact our revenues and expenses fairly equally.
Transaction Risk
We also have foreign exchange transaction risk since foreign subsidiaries typically enter into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency in which the foreign subsidiary operates. We may enter into foreign currency forward exchange contracts to mitigate the effects of foreign currency transaction risk. These contracts are normally short term in duration and both realized and unrealized gains and losses are recognized in current period earnings. At December 31, 2014, we had 77 outstanding foreign currency forward contracts with a total notional amount of approximately $45.6 million and an immaterial net unrealized gain. Substantially all of these contracts matured by the end of January 2015.
CREDIT RISK
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, accounts receivable, and an interest rate swap contract. The majority of the Company’s cash and cash equivalents and its interest rate swap contract are with large investment grade commercial banks. Accounts receivable balances collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements for 2014, 2013, and 2012, together with the reports of KPMG LLP, our independent registered public accounting firm, are included herein in this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Management conducted an evaluation, as of December 31, 2014, of the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material Company information required to be disclosed by usunder Certain Relationships And Related Transactions disclosed in reports filed or submitted underItem 13 hereof. Additionally, during 2016, no executive officer of the Act.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Gartner management is responsible for establishing and maintaining adequate internal control over financial reportingCompany: (i) served as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Gartner’s internal control over financial reporting is a process designed to provide reasonable assurance regardingmember of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally acceptedcompensation committee (or full board in the United States.
Becauseabsence of its inherent limitations, internal control over financial reporting may not preventsuch a committee) or detect misstatements. In addition, projectionsas a director of any evaluationanother entity, one of effectiveness to future periods are subject towhose executive officers served on our Compensation Committee; or (ii) served as a member of the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forthcompensation committee (or full board in the Internal Control — Integrated Framework (2013) issued by the Committeeabsence of Sponsoring Organizationssuch a committee) of the Treadway Commission (COSO). Management’s assessment was reviewed with the Audit Committeeanother entity, one of the Board of Directors.whose executive officers served on our Board.

35
Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, 2014, Gartner’s internal control over financial reporting was effective.
The effectiveness of management’s internal control over financial reporting as of December 31, 2014 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report on Form 10-K in Part IV, Item 15.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION
Not applicable.

33



PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be furnished pursuant to this item will be set forth under the captions “Proposal One: Election of Directors,” “Executive Officers,” “Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Miscellaneous — Available Information” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2015. If the Proxy Statement is not filed with the SEC by April 30, 2015, such information will be included in an amendment to this Annual Report filed by April 30, 2015. See also Item 1. Business — Available Information.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be furnished pursuant to this item is incorporated by reference from the information set forth under the caption “Executive Compensation” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2015. If the Proxy Statement is not filed with the SEC by April 30, 2015, such information will be included in an amendment to this Annual Report filed by April 30, 2015.
ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS.
TheMATTTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based on our review of information required to be furnished pursuant to this item will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement to be filedon file with the SEC and our stock records, the following table provides certain information about beneficial ownership of shares of our Common Stock as of March 1, 2017 (including shares that will release (RSUs) or become exercisable (SARs) within 60 days following March 1, 2017) held by: (i) each person (or group of affiliated persons) which is known by April 30, 2015. Ifus to own beneficially more than five percent (5%) of our Common Stock; (ii) each of our directors; (iii) each Named Executive Officer who was employed on that date; and (iv) all directors, Named Executive Officers (who were employed on March 1, 2017) and other current executive officers as a group. Unless otherwise indicated, the Proxy Statementaddress for those listed below is c/o Gartner, Inc., 56 Top Gallant Road, Stamford, CT 06904. The amounts shown do not filed withinclude CSEs that release upon termination of service as a director, or deferred RSUs that will not release within 60 days. Since all stock appreciation rights (SARs) are stock-settled (i.e., shares are withheld for the SEC by April 30, 2015, such informationpayment of exercise price and taxes), the number of shares ultimately issued upon settlement will be includedless than the number of SARS that were settled. Except as indicated by footnote, and subject to applicable community property laws, the persons named in an amendmentthe table directly own, and have sole voting and investment power with respect to, this Annual Report filedall shares of Common Stock shown as beneficially owned by April 30, 2015.them. To the Company’s knowledge, none of these shares has been pledged.

Beneficial Owner Number of Shares
Beneficially
Owned
 Percent
Owned
Michael J. Bingle 25,795 *
Peter Bisson  *
Richard J. Bressler 17,488 *
Raul E. Cesan (1) 92,150 *
Karen E. Dykstra 18,673 *
Anne Sutherland Fuchs 32,736 *
William O. Grabe 128,333 *
Stephen G. Pagliuca 53,438 *
James C. Smith (2) 1,054,628 1.3
Eugene A. Hall (3) 1,505,413 1.8
Craig W. Safian (4) 34,878 *
Per Anders Waern  *
David Godfrey (5) 40,666 *
Alwyn Dawkins (6) 79,297 *
All current directors, Named Executive Officers and other
executive officers as a group (21 persons) (7)
 3,567,053 4.3
Baron Capital Group, Inc. (8)
767 Fifth Avenue, New York, NY 10153
 7,502,738 9.0
Blackrock, Inc. (9)

40 East 52nd Street, New York, NY 10022

 7,796,236 9.4
The Vanguard Group, Inc. (10)
100 Vanguard Blvd., Malvern, PA 19355
 6,388,272 7.7

*     Less than 1%

(1)Includes 30,000 shares held by a family foundation as to which Mr. Cesan may be deemed a beneficial owner.
36
(2)Includes 50,000 shares held by members of Mr. Smith’s immediate family and 211,900 shares held by a family foundation as to which Mr. Smith may be deemed a beneficial owner.
(3)Includes 331,787 shares issuable upon the exercise of stock appreciation rights (“SARs”).
(4)Includes 16,781 shares issuable upon the exercise of SARs.
(5)Includes 34,633 shares issuable upon the exercise of SARs.
(6)Includes 48,812 shares issuable upon the exercise of SARs.
(7)Includes 673,557 shares issuable upon the exercise of SARs
(8)Includes shares beneficially owned by Baron Capital Group, Inc. (“BCG”) and Ronald Baron; also includes 7,260,279 shares beneficially owned by BAMCO, Inc. and 242,459 shares beneficially owned by Baron Capital Management, Inc., subsidiaries of BCG. Ronald Baron owns a controlling interest in BCG.
(9)Includes shares held by various subsidiaries and/or affiliates of Blackrock, Inc.
(10)Includes shares beneficially owned by The Vanguard Group, Inc. as an investment adviser, and includes 43,404 shares beneficially owned by Vanguard Fiduciary Trust Company as investment manager of collective trust accounts, and 66,518 shares beneficially owned by Vanguard Investments Australia, Ltd as investment manager.

EQUITY COMPENSATION PLANS

The following table provides information as of December 31, 2016 regarding the number of shares of our Common Stock that may be issued upon exercise of outstanding options, stock appreciation rights and other rights (including restricted stock units, performance stock units and common stock equivalents) awarded under our equity compensation plans (and, where applicable, related weighted-average exercise price information), as well as shares available for future issuance under our equity compensation plans. All equity plans with outstanding awards or available shares have been approved by our stockholders.

  Column A Column B Column C

Plan Category

 

Number of Securities
to be Issued Upon
Exercise of
Outstanding Options
and Rights

 

Weighted Average
Exercise Price of
Outstanding
Options
and Rights ($)

 

Number of Securities
Remaining Available
For Future Issuance
Under Equity
Compensation Plans
(excluding shares in
Column A)

2003 Long - Term Incentive Plan (1) 1,202,355 54.12 
2014 Long – Term Incentive Plan (2) 1,513,921 79.08 6,710,331
2011 Employee Stock Purchase Plan   907,503
Total 2,716,276 61.28 7,617,834
(1)Award shares under the 2003 plan withheld for taxes, surrendered to pay exercise price or cancelled are retired; at the present time all awards are made under the 2014 Plan.
(2)Award shares under the 2014 Plan withheld for taxes, surrendered to pay exercise price or cancelled are returned to the available share pool.
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ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE.
INDEPENDENCE

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Gartner is a provider of comprehensive research coverage of the IT industry to over 10,000 distinct enterprises in over 90 countries. Because of our worldwide reach, it is not unusual for Gartner to engage in ordinary course of business transactions involving the sale of research or consulting services with entities in which one of our directors, executive officers or a greater than 5% owner of our stock, or immediate family member of any of them, may also be a director, executive officer, partner or investor, or have some other direct or indirect interest. We will refer to these transactions generally as related party transactions.

Our Governance Committee reviews all related party transactions to determine whether any director, executive officer or a greater than 5% owner of our stock, or immediate family member of any of them, has amaterial direct or indirect interest, or whether the independence from management of our directors may be compromised as a result of the relationship or transaction. Our Board Principles and Practices, which are posted onwww.investor.gartner.com, require directors to disclose all actual or potential conflicts of interest regarding a matter being considered by the Board or any of its committees and to excuse themselves from that portion of the Board or committee meeting at which the matter is addressed to permit independent discussion. Additionally, the member with the conflict must abstain from voting on any such matter. The information requiredGovernance Committee is charged with resolving any conflict of interest issues brought to its attention and has the power to request the Board to take appropriate action, up to and including requesting the involved director to resign. Our Audit Committee and/or Board of Directors reviews and approves all material related party transactions involving our directors in accordance with applicable provisions of Delaware law and with the advice of counsel, if deemed necessary.

The Company maintains a written conflicts of interest policy which is posted on our intranet and prohibits all Gartner employees, including our executive officers, from engaging in any personal, business or professional activity which conflicts with or appears to conflict with their employment responsibilities and from maintaining financial interests in entities that could create an appearance of impropriety in their dealings with the Company. Additionally, the policy prohibits all Gartner employees from entering into agreements on behalf of Gartner with any outside entity if the employee knows that the entity is a related party to a Gartner employee; i.e., that the contract would confer a financial benefit, either directly or indirectly, on a Gartner employee or his or her relatives. All potential conflicts of interest and related party transactions involving Gartner employees must be furnished pursuantreported to, this itemand pre-approved by, the General Counsel.

In 2016, there were no related party transactions in which any director, executive officer or a greater than 5% owner of our stock, or immediate family member of any of them, had or will have a direct or indirect material interest.

DIRECTOR INDEPENDENCE

Our Board Guidelines require that our Board be comprised of a majority of directors who meet the criteria for independence from management set forth by the New York Stock Exchange (“NYSE”) in its corporate governance listing standards.

Our committee charters likewise require that our standing Audit, Compensation and Governance/Nominating Committees be comprised only of independent directors. Additionally, the Audit Committee members must be independent under Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee members must be independent under Rule 16b-3 promulgated under the captions “Transactions With Related Persons”Exchange Act as well as applicable NYSE corporate governance listing standards, and “Corporatethey must qualify as outside directors under regulations promulgated under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”).

Utilizing all of these criteria, as well as all relevant facts and circumstances, the Board annually assesses the independence from management of all non-management directors and committee members by reviewing the

38

commercial, financial, familial, employment and other relationships between each director and the Company, its auditors and other companies that do business with Gartner.

After analysis and recommendation by the Governance — Director Independence”Committee, the Board determined that:

all non-management directors (Michael Bingle, Peter Bisson, Richard Bressler, Raul Cesan, Karen Dykstra, Anne Sutherland Fuchs, William Grabe, Stephen Pagliuca and James Smith) are independent under the NYSE listing standards;
our Audit Committee members (Ms. Dykstra and Messrs. Bressler and Smith) are independent under the criteria set forth in Section 10A-3 of the Exchange Act; and
our Compensation Committee members (Ms. Fuchs and Messrs. Bingle and Cesan) are independent under the criteria set forth in Exchange Act Rule 16b-3 as well as under applicable NYSE corporate governance listing standards, and qualify as “outside directors” under Code Section 162(m) regulations.

ITEM 14.     PRINCIPAL ACCOUNTING FEES AND SERVICES

During 2016, KPMG performed recurring audit services, including the audit of our annual consolidated financial statements and the audit of internal controls over financial reporting as of December 31, 2016, reviews of our quarterly financial information, and certain statutory audits and certain tax services for the Company. The aggregate fees billed for professional services by KPMG in 2015 and 2016 for various services performed by them were as follows:

Types of Fees

 

2015 ($)

 2016 ($)
Audit Fees 2,729,400 2,857,000
Audit-Related Fees 7,600 28,000
Tax Fees 513,277 545,000
All Other Fees  3,000
Total Fees 3,250,277 3,433,000

Audit Fees

Audit fees relate to professional services rendered by KPMG for the audit of the Company’s annual consolidated financial statements contained in its Annual Report on Form 10-K, audit of internal controls over financial reporting and reviews of the Company’s quarterly financial information contained in its Quarterly Reports on Form 10-Q, as well as work performed in connection with statutory and regulatory filings.

Audit-Related Fees

Audit-related fees relate to professional services rendered by KPMG primarily for an agreed upon procedures report and issuance of a consent in connection with the filing of a registration statement.

Tax Fees

Tax fees relate to professional services rendered by KPMG for permissible tax compliance, tax advice and tax planning services.

All Other Fees

This category of fees covers all fees for any permissible service not included in the Company’s Proxy Statementabove categories.

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Pre-Approval Policies

The Audit Committee’s policy is to be filedpre-approve all audit, audit-related and permissible non-audit services provided by KPMG. These services may include domestic and international audit services, audit-related services, tax services and other services. At the beginning of each fiscal year, the Audit Committee pre-approves aggregate fee limits for specific types of permissible services (e.g., domestic and international tax compliance and tax planning services; transfer pricing services, audit-related services and other permissible services) to allow management to engage KPMG expeditiously as needed as projects arise. At each regular quarterly meeting, KPMG and management report to the Audit Committee regarding the services for which the Company has engaged KPMG in the immediately preceding fiscal quarter in accordance with the SECpre-approved limits, and the related fees for such services as well as year-to-date cumulative fees for KPMG services. Pre-approved limits may be adjusted as necessary during the year, and the Audit Committee may also pre-approve particular services on a case-by-case basis. All services provided by April 30, 2015. IfKPMG in 2016 were pre-approved by the Proxy Statement is not filed with the SEC by April 30, 2015, such information will be included in an amendment to this Annual Report filed by April 30, 2015.

Audit Committee.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required to be furnished pursuant to this item will be set forth under the caption “Principal Accountant Fees and Services” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, 2015. If the Proxy Statement is not filed with the SEC by April 30, 2015, such information will be included in an amendment to this Annual Report filed by April 30, 2015.


34



PART IV

ITEM 15.     EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES.
SCHEDULES

(a) 1. and 2. Consolidated Financial Statements and Schedules

The reports of our independent registered public accounting firm and consolidated financial statements listed in the Index to Consolidated Financial Statements herein are filed as part of this report.

All financial statement schedules not listed in the Index have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.

3. Exhibits


Exhibits:

EXHIBIT NUMBER

 

DESCRIPTION OF DOCUMENT

3.1(1) Restated Certificate of Incorporation of the Company.
3.2(2) Bylaws as amended through February 2, 2012.
4.1(1) Form of Certificate for Common Stock as of June 2, 2005.
4.2*4.2 (3) Credit Agreement, dated as of December 16, 2014,June 17, 2016, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent.
4.3 (4) First Amendment to Credit Agreement, dated as of January 20, 2017, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent, filed as of January 24, 2017.
10.1(3)10.1(5) Amended and Restated Lease dated April 16, 2010 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.
10.2(3)10.2(5) First Amendment to Amended and Restated Lease dated April 16, 2010 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.
10.4(4)+10.3(6) 2011 Employee Stock Purchase Plan.
10.5(5)+10.4(7) 2003 Long -Term Incentive Plan, as amended and restated effective June 4, 2009.
10.6(6)+10.5(8) 2014 Long-Term Incentive Plan, effective May 29, 2014.
10.7(7)+10.6(9) Amended and Restated Employment Agreement between Eugene A. Hall and the Company dated as of April 13, 2011.March 19, 2016.
40
10.8(8)+
10.7(10) Company Deferred Compensation Plan, effective January 1, 2009.
10.9(9)+10.8(11) Form of 2017 Stock Appreciation Right Agreement for executive officers.
10.10(9)+10.9(11) Form of 2017 Performance Stock Unit Agreement for executive officers.
10.10 (12) Agreement and Plan of Merger by and among Gartner, Inc., Cobra Acquisition Corp. and CEB Inc., dated as of January 5, 2017.
10.11 (12)Commitment Letter among Gartner, Inc., JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA, dated January 5, 2017.
21.1** Subsidiaries of Registrant.
23.1** Consent of Independent Registered Public Accounting Firm.
24.124.1** Power of Attorney (see Signature Page).
Attorney.
31.1* Certification of chief executive officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of chief financial officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32** Certification under Section 906 of the Sarbanes-Oxley Act of 2002.

35



*Filed with this document.
**Previously filed or furnished with the Registrant’s Annual Report on Form 10-K, filed February 22, 2017.
+Management compensation plan or arrangement.
(1)Incorporated by reference from the Company’s Current Report on Form 8-K dated June 29, 2005 as filed on July 6, 2005.
(2)Incorporated by reference from the Company’s Current Report on Form 8-K dated February 2, 2012 as filed on February 7, 2012.
(3)Incorporated by reference from the Company’s Current Report on Form 8-K dated June 17, 2016.
(4)Incorporated by reference from the Company’s Current Report on Form 8-K dated January 20, 2017 and filed January 24, 2017.
(5)Incorporated by reference from the Company’s Quarterly Report on form 10-Q as filed on August 9, 2010.
(4)Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) as filed on April 18, 2011.
(5)Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) as filed on April 21, 2009
(6)Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) asfiled on April 18, 2011.
(7)Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 21, 2009
(8)Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 15, 2014.
(7)(9)Incorporated by reference from the Company’s Quarterly Report on Form 10-Q as filed on August 2, 2011.May 5, 2016.
(8)(10)Incorporated by reference from the Company’s Annual Report on Form 10-K as filed on February 20, 2009.
(9)(11)Incorporated by reference from the Company’s Current Report on Form 8-K dated February 9, 2015 as6, 2017 and filed on February 10, 2015.7, 2017.
(12)Incorporated by reference from the Company’s Current Report on Form 8-K dated and filed January 5, 2017.

ITEM 16.     FORM 10–K SUMMARY

None.

41


36



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GARTNER, INC.
CONSOLIDATED FINANCIAL STATEMENTS
All financial statement schedules have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.


37



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders

Gartner, Inc.:
We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility isSIGNATURES

Pursuant to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gartner, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
(KPMG LLP LOGO)
/s/ KPMG LLP
New York, New York

February 27, 2015


38



Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders

Gartner, Inc.:
We have audited Gartner, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Gartner, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and our report dated February 27, 2015 expressed an unqualified opinion on those consolidated financial statements.
(KPMG LLP LOGO)
/s/ KPMG LLP
New York, New York

February 27, 2015


39



GARTNER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
 December 31,
 2014 2013
ASSETS 
  
Current assets: 
  
Cash and cash equivalents$365,302
 $423,990
Fees receivable, net of allowances of $6,700 and $7,000 respectively552,107
 490,923
Deferred commissions115,381
 106,287
Prepaid expenses and other current assets63,868
 63,682
Total current assets1,096,658
 1,084,882
Property, equipment and leasehold improvements, net97,990
 91,759
Goodwill586,665
 519,203
Intangible assets, net30,689
 6,107
Other assets92,349
 81,631
Total Assets$1,904,351
 $1,783,582
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
Current liabilities: 
  
Accounts payable and accrued liabilities$353,761
 $325,059
Deferred revenues841,457
 766,114
Current portion of long-term debt20,000
 68,750
Total current liabilities1,215,218
 1,159,923
Long-term debt385,000
 136,250
Other liabilities142,962
 126,093
Total Liabilities1,743,180
 1,422,266
Stockholders’ equity: 
  
Preferred stock: 
  
$.01 par value, authorized 5,000,000 shares; none issued or outstanding
 
Common stock: 
  
$.0005 par value, authorized 250,000,000 shares for both periods; 156,234,415 shares issued for both periods78
 78
Additional paid-in capital764,433
 718,644
Accumulated other comprehensive (loss) income, net(21,170) 8,345
Accumulated earnings1,275,049
 1,091,283
Treasury stock, at cost, 68,713,890 and 64,268,863 common shares, respectively(1,857,219) (1,457,034)
Total Stockholders’ Equity161,171
 361,316
Total Liabilities and Stockholders’ Equity$1,904,351
 $1,783,582
See Notes to Consolidated Financial Statements.


40



GARTNER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 Year Ended December 31,
 2014 2013 2012
Revenues: 
  
  
Research$1,445,338
 $1,271,011
 $1,137,147
Consulting348,396
 314,257
 304,893
Events227,707
 198,945
 173,768
Total revenues2,021,441
 1,784,213
 1,615,808
Costs and expenses: 
  
  
Cost of services and product development797,933
 713,484
 659,067
Selling, general and administrative876,067
 760,458
 678,843
Depreciation31,186
 28,996
 25,369
Amortization of intangibles8,226
 5,446
 4,402
Acquisition and integration charges21,867
 337
 2,420
Total costs and expenses1,735,279
 1,508,721
 1,370,101
Operating income286,162
 275,492
 245,707
Interest income1,413
 1,551
 1,046
Interest expense(12,300) (10,388) (9,905)
Other expense, net(592) (216) (1,252)
Income before income taxes274,683
 266,439
 235,596
Provision for income taxes90,917
 83,638
 69,693
Net income$183,766
 $182,801
 $165,903
      
Net income per share: 
  
  
Basic$2.06
 $1.97
 $1.78
Diluted$2.03
 $1.93
 $1.73
Weighted average shares outstanding: 
  
  
Basic89,337
 93,015
 93,444
Diluted90,719
 94,830
 95,842
See Notes to Consolidated Financial Statements.


41



GARTNER, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
 Year Ended December 31,
 2014 2013 2012
Net income$183,766
 $182,801
 $165,903
Other comprehensive (loss) income, net of tax 
  
  
Foreign currency translation adjustments(27,461) 503
 4,318
Interest rate hedge - net change in deferred gain (loss)2,163
 2,107
 (76)
Pension - net change in deferred actuarial (loss) gain(4,217) (233) (4,067)
Other comprehensive (loss) income, net of tax(29,515) 2,377
 175
Comprehensive income$154,251
 $185,178
 $166,078
See Notes to Consolidated Financial Statements.


42



GARTNER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Accumulated
Earnings
 
Treasury
Stock
 
Total
Stockholders’
Equity
Balance at December 31, 2011$78
 $646,815
 $5,793
 $742,579
 $(1,213,481) $181,784
Net income
 
 
 165,903
 
 165,903
Other comprehensive income
 
 175
 
 
 175
Issuances under stock plans
 (24,626) 
 
 37,059
 12,433
Stock compensation tax benefits
 21,304
 
 
 
 21,304
Common share repurchases
 
 
 
 (111,304) (111,304)
Stock compensation expense
 36,378
 
 
 
 36,378
Balance at December 31, 2012$78
 $679,871
 $5,968
 $908,482
 $(1,287,726) $306,673
Net income
 
 
 182,801
 
 182,801
Other comprehensive income
 
 2,377
 
 
 2,377
Issuances under stock plans
 (21,354) 
 
 27,388
 6,034
Stock compensation tax benefits
 25,392
 
 
 
 25,392
Common share repurchases
 
 
 
 (196,696) (196,696)
Stock compensation expense
 34,735
 
 
 
 34,735
Balance at December 31, 2013$78
 $718,644
 $8,345
 $1,091,283
 $(1,457,034) $361,316
Net income
 
 
 183,766
 
 183,766
Other comprehensive loss
 
 (29,515) 
 
 (29,515)
Issuances under stock plans
 (11,727) 
 
 19,527
 7,800
Stock compensation tax benefits
 18,671
 
 
 
 18,671
Common share repurchases
 
 
 
 (419,712) (419,712)
Stock compensation expense
 38,845
 
 
 
 38,845
Balance at December 31, 2014$78
 $764,433
 $(21,170) $1,275,049
 $(1,857,219) $161,171
See Notes to Consolidated Financial Statements.


43



GARTNER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) 
 Year Ended December 31,
 2014 2013 2012
Operating activities: 
  
  
Net income$183,766
 $182,801
 $165,903
Adjustments to reconcile net income to net cash provided by operating activities: 
  
  
Depreciation and amortization of intangibles39,412
 34,442
 29,771
Stock-based compensation expense38,845
 34,735
 36,378
Excess tax benefits from employee stock-based compensation exercises(20,193) (25,392) (21,304)
Deferred taxes(759) 16,663
 973
Amortization and write-off of debt issue costs2,645
 2,710
 2,008
Changes in assets and liabilities: 
  
  
Fees receivable, net(76,424) (28,097) (38,617)
Deferred commissions(12,340) (18,608) (8,871)
Prepaid expenses and other current assets(3,017) (1,187) (10,604)
Other assets(7,139) (5,268) 15,113
Deferred revenues105,354
 80,938
 71,645
Accounts payable, accrued, and other liabilities96,629
 41,917
 37,418
Cash provided by operating activities346,779
 315,654
 279,813
Investing activities: 
  
  
Additions to property, equipment and leasehold improvements(38,486) (36,498) (44,337)
Acquisitions (net of cash acquired)(109,928) 
 (10,336)
Acquisitions - increase in restricted cash (escrow)(14,363) 
 
Cash used in investing activities(162,777) (36,498) (54,673)
Financing activities: 
  
  
Proceeds from employee stock-based compensation plans and ESP Plan7,767
 6,042
 12,430
Proceeds from borrowings400,000
 205,625
 35,000
Payments on debt(200,000) (205,625) (30,000)
Purchases of treasury stock(432,006) (181,736) (111,304)
Fees paid for debt refinancing(4,624) (3,553) 
Excess tax benefits from employee stock-based compensation exercises20,193
 25,392
 21,304
Cash used by financing activities(208,670) (153,855) (72,570)
Net (decrease) increase in cash and cash equivalents(24,668) 125,301
 152,570
Effects of exchange rates on cash and cash equivalents(34,020) (1,163) 4,543
Cash and cash equivalents, beginning of period423,990
 299,852
 142,739
Cash and cash equivalents, end of period$365,302
 $423,990
 $299,852
      
Supplemental disclosures of cash flow information: 
  
  
Cash paid during the period for: 
  
  
Interest$10,600
 $8,500
 $8,968
Income taxes, net of refunds received$70,100
 $50,767
 $46,907
See Notes to Consolidated Financial Statements.


44



GARTNER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business. Gartner, Inc. is a global information technology research and advisory company founded in 1979 with its headquarters in Stamford, Connecticut. Gartner delivers its principal products and services through three business segments: Research, Consulting, and Events. When used in these notes, the terms “Gartner,” “Company,” “we,” “us,” or “our” refer to Gartner, Inc. and its consolidated subsidiaries.
Basis of presentation. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270 for financial information and with the applicable instructions of U.S. Securities & Exchange Commission (“SEC”) Regulation S-X. The fiscal year of Gartner represents the twelve-month period from January 1 through December 31. All references to 2014, 2013, and 2012 herein refer to the fiscal year unless otherwise indicated.
Principles of consolidation. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.
Use of estimates. The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of fees receivable, goodwill, intangible assets, and other long-lived assets, as well as tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax expense, performance-based compensation charges, depreciation and amortization, and the allowance for losses on fees receivable. Management believes its use of estimates in the accompanying consolidated financial statements to be reasonable.
Management continuously evaluates and revises its estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. Management adjusts these estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time. As a result, differences between our estimates and actual results could be material and would be reflected in the Company’s consolidated financial statements in future periods.

Acquisitions. The Company accounts for acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic 805, Business Combinations. The acquisition method of accounting requires the Company to record the net assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill. Under the acquisition method, the operating results of acquired companies are included in the Company's consolidated financial statements beginning on the date of acquisition. The Company had acquisitions in 2014 and 2012, which are discussed in Note 2 — Acquisitions.

Revenue Recognition. Revenue is recognized in accordance with U.S. GAAP and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). Revenues are only recognized once all required criteria for recognition have been met. The accompanying Consolidated Statements of Operations presents revenues net of any sales or value-added taxes that we collect from customers and remit to government authorities.
The Company’s revenues by significant source are as follows:
Research
Research revenues are derived from subscription contracts for research products. These revenues are deferred and recognized ratably over the applicable contract term. The Company typically enters into twelve-month subscription contracts for research products, although multi-year contracts are being entered into with greater frequency. Reprint fees are recognized when the reprint is delivered.

45



The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. Research contracts are non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses, which historically have not produced material cancellations. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim.
Consulting
Consulting revenues, primarily derived from consulting, measurement and strategic advisory services (paid one-day analyst engagements), are principally generated from fixed fee or time and materials engagements. Revenues from fixed fee engagements are recognized on a proportional performance basis, while revenues from time and material engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization engagements are contingent in nature and are only recognized upon satisfaction of all conditions related to their payment. Unbilled fees receivable associated with consulting engagements were $44.0 million at December 31, 2014 and $37.0 million at December 31, 2013.

Events
Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition. In addition, the Company defers certain costs directly related to events and expenses these costs in the period during which the related symposium, conference or exhibition occurs. The Company's policy is to defer only those costs, primarily prepaid site and production services costs, which are incremental and are directly attributable to a specific event. Other costs of organizing and producing our events, primarily Company personnel and non-event specific expenses, are expensed in the period incurred. At the end of each fiscal quarter, the Company assesses on an event-by-event basis whether expected direct costs of producing a scheduled event will exceed expected revenues. If such costs are expected to exceed revenues, the Company records the expected loss in the period determined.
Allowance for losses. The Company maintains an allowance for losses which is composed of a bad debt allowance and a sales reserve. Provisions are charged against earnings, either as a reduction of revenues or as an increase to expense. The amount of the allowance for losses is based on historical loss experience, aging of outstanding receivables, our assessment of current economic conditions and the financial health of specific clients.
Cost of services and product development (“COS”). COS expense includes the direct costs incurred in the creation and delivery of our products and services. These costs primarily relate to personnel.
Selling, general and administrative (“SG&A”). SG&A expense includes direct and indirect selling costs, general and administrative costs, and charges against earnings related to uncollectible accounts.
Commission expense. The Company records commission obligations upon the signing of customer contracts and amortizes the deferred obligation as commission expense over the period in which the related revenues are earned. Commission expense is included in SG&A in the Consolidated Statements of Operations.
Stock-based compensation expense. The Company accounts for stock-based compensation in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). Stock-based compensation cost is based on the fair value of the award on the date of grant, which is expensed over the related service period, net of estimated forfeitures. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period. During 2014, 2013 and 2012, the Company recognized $38.8 million, $34.7 million and $36.4 million, respectively, of stock-based compensation expense, a portion of which is recorded in both COS and SG&A in the Consolidated Statements of Operations (see Note 8 — Stock-Based Compensation for additional information).
Income tax expense. The Company uses the asset and liability method of accounting for income taxes. We estimate our income taxes in each of the jurisdictions where we operate. This process involves estimating our current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. In assessing the realizability of deferred tax assets, management considers if it is more likely than not that some or all of the deferred tax assets will not be realized. We consider the availability of loss carryforwards, projected reversal of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible tax planning strategies in making this assessment. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained based on the technical merits of the position.

46



Cash and cash equivalents. Includes cash and all highly liquid investments with original maturities of three months or less, which are considered cash equivalents. The carrying value of cash equivalents approximates fair value due to their short-term maturity. Investments with maturities of more than three months are classified as marketable securities. Interest earned is classified in Interest income in the Consolidated Statements of Operations.
Property, equipment and leasehold improvements. The Company leases all of its facilities and certain equipment. These leases are all classified as operating leases in accordance with FASB ASC Topic 840. The cost of these operating leases, including any contractual rent increases, rent concessions, and landlord incentives, are recognized ratably over the life of the related lease agreement. Lease expense was $31.5 million, $30.8 million, and $30.3 million in 2014, 2013, and 2012, respectively.
Equipment, leasehold improvements, and other fixed assets owned by the Company are recorded at cost less accumulated depreciation. Except for leasehold improvements, these fixed assets are depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the improvement or the remaining term of the related lease. The Company had total depreciation expense of $31.2 million, $29.0 million, and $25.4 million in 2014, 2013, and 2012, respectively. The Company's total fixed assets, less accumulated depreciation and amortization, consisted of the following (in thousands):
  Useful Life December 31,
Category (Years) 2014 2013
Computer equipment and software 2-7 $144,293
 $136,640
Furniture and equipment 3-8 37,221
 34,024
Leasehold improvements 2-15 78,094
 70,261
    $259,608
 $240,925
Less — accumulated depreciation and amortization   (161,618) (149,166)
Property, equipment, and leasehold improvements, net   $97,990
 $91,759
The Company incurs costs to develop internal use software used in our operations, and certain of these costs meeting the criteria outlined in FASB ASC Topic 350 are capitalized and amortized over future periods. Net capitalized development costs for internal use software was $14.1 million at both December 31, 2014 and 2013, which is included in the Computer equipment and software category above. Amortization of capitalized internal software development costs, which is classified in Depreciation in the Consolidated Statements of Operations, totaled $8.2 million in both 2014 and 2013, and $7.4 million in 2012.
Intangible assets. The Company has amortizable intangible assets which are amortized against earnings using the straight-line method over their expected useful lives. Changes in intangible assets subject to amortization during the two-year period ended December 31, 2014 are as follows (in thousands):
December 31, 2014 
Trade
Names
 
Customer
Relationships
 Content Software Non-Compete Total
Gross cost, December 31, 2013 $6,023
 $10,146
 $3,496
 $2,143
 $
 $21,808
Additions due to acquisitions (1) 915
 18,054
 206
 5,000
 7,800
 31,975
Non-competition agreement (2) 
 
 
 
 1,500
 1,500
Foreign currency translation impact (14) (267) (142) (574) (28) (1,025)
Gross cost 6,924
 27,933
 3,560
 6,569
 9,272
 54,258
Accumulated amortization (3), (4) (6,202) (11,072) (2,246) (2,603) (1,446) (23,569)
Balance, December 31, 2014 $722
 $16,861
 $1,314
 $3,966
 $7,826
 $30,689


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December 31, 2013 
Trade
Names
 
Customer
Relationships
 Content Software Total
Gross cost, December 31, 2012 $6,019
 $10,562
 $3,447
 $2,124
 $22,152
Foreign currency translation impact 4
 (416) 49
 19
 (344)
Gross cost 6,023
 10,146
 3,496
 2,143
 21,808
Accumulated amortization (3), (4) (4,817) (8,372) (1,388) (1,124) (15,701)
Balance, December 31, 2013 $1,206
 $1,774
 $2,108
 $1,019
 $6,107
(1)The additions are due to the Company's 2014 Acquisitions. See Note 2 — Acquisitions for additional information.

(2)The non-competition intangible relates to a separation agreement with the Company's former CFO.
(3)Intangible assets are amortized against earnings over the following periods: Trade name—2 to 5 years; Customer relationships 4 to 7 years; Content—1.5 to 4 years; Software—3 years; Non-compete—4 to 5 years.

(4)Aggregate amortization expense related to intangible assets was $8.2 million, $5.4 million, and $4.4 million in 2014, 2013, and 2012, respectively.

The estimated future amortization expense by year from amortizable intangibles is as follows (in thousands):

2015$8,094
20166,956
20175,507
20184,330
20192,807
Thereafter2,995
 $30,689
Goodwill. Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the tangible and identifiable intangible net assets acquired. The evaluation of the recoverability of goodwill is performed in accordance with FASB ASC Topic 350, which requires an annual assessment of potential goodwill impairment at the reporting unit level and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The annual assessment of the recoverability of recorded goodwill can be based on either a qualitative or quantitative assessment or a combination of the two. Both methods utilize estimates which in turn require judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resulting estimates are subject to uncertainty.
The Company conducted a qualitative assessment of the fair value of its reporting units as of September 30, 2014 based in part on the demonstrated historical trend of the fair values of the Company’s reporting units substantially exceeding their carrying values and the Company's recent financial performance. Among the factors included in the Company’s qualitative assessment were general economic conditions and the competitive environment; actual and projected reporting unit financial performance; forward-looking business measurements; and external market assessments. Based on the results of the qualitative assessment, the Company believes the fair values of its reporting units continue to exceed their respective carrying values.

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The following table presents changes to the carrying amount of goodwill by segment during the two-year period ended December 31, 2014 (in thousands):

 Research Consulting Events Total
Balance, December 31, 2012 (1)$377,225
 $100,349
 $41,932
 $519,506
Foreign currency translation adjustments(657) 328
 26
 (303)
Balance, December 31, 2013$376,568
 $100,677
 $41,958
 $519,203
Addition due to acquisitions (2)78,373
 
 
 78,373
Foreign currency translation adjustments(9,481) (1,260) (170) (10,911)
Balance, December 31, 2014$445,460
 $99,417
 $41,788
 $586,665
(1)The Company does not have an accumulated goodwill impairment loss.

(2)The addition is due to the 2014 Acquisitions (See Note 2—Acquisitions for additional discussion). All of the recorded goodwill from these acquisitions has been included in the Research segment.

Impairment of long-lived and intangible assets. The Company reviews its long-lived and intangible assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of the respective asset may not be recoverable. Such evaluation may be based on a number of factors including current and projected operating results and cash flows, changes in management’s strategic direction as well as external economic and market factors. The Company’s policy regarding long-lived assets and intangible assets other than goodwill is to evaluate the recoverability of these assets by determining whether the balance can be recovered through undiscounted future operating cash flows. Should events or circumstances indicate that the carrying value might not be recoverable based on undiscounted future operating cash flows, an impairment loss would be recognized. The amount of impairment, if any, is measured based on the difference between projected discounted future operating cash flows using a discount rate reflecting the Company’s average cost of funds and the carrying value of the asset. The Company did not record any material impairment charges for long-lived and intangible assets during the three year period ended December 31, 2014.
Pension obligations. The Company has defined-benefit pension plans in several of its international locations (see Note 13 — Employee Benefits). Benefits earned under these plans are generally based on years of service and level of employee compensation. The Company accounts for defined benefit plans in accordance with the requirements of FASB ASC Topic 715. The Company determines the periodic pension expense and related liabilities for these plans through actuarial assumptions and valuations. The Company recognized $3.4 million, $3.8 million, and $2.6 million of expense for these plans in 2014, 2013, and 2012, respectively. The Company classifies pension expense in SG&A in the Consolidated Statements of Operations.
Debt. The Company presents amounts borrowed in the Consolidated Balance Sheets at amortized cost. Interest accrued on amounts borrowed is classified in Interest expense in the Consolidated Statements of Operations. The Company refinanced its debt in 2014 and had $405.0 million of debt outstanding at December 31, 2014 (see Note 5—Debt for additional information).
Foreign currency exposure. The functional currency of our foreign subsidiaries is typically the local currency. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates for the year. The resulting translation adjustments are recorded as foreign currency translation adjustments, a component of Accumulated other comprehensive income, net within the Stockholders’ equity section of the Consolidated Balance Sheets.
Currency transaction gainsSection 13 or losses arising from transactions denominated in currencies other than the functional currency of a subsidiary are recognized in results of operations in Other expense, net within the Consolidated Statements of Operations. Net currency transaction losses were $(1.7) million, $(0.9) million, and $(2.3) million in 2014, 2013, and 2012, respectively. The Company enters into foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations in foreign currency exchange rates on these transactions. These contracts generally have a short duration and are recorded at fair value with both realized and unrealized gains and losses recorded in Other expense, net. The net gain (loss) from these contracts was $0.6 million, $(0.1) million, and $0.6 million in 2014, 2013, and 2012, respectively.

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Comprehensive income. The Company reports comprehensive income in a separate statement termed the Consolidated Statements of Comprehensive Income, which is included herein. The Company's comprehensive income disclosures are included in Note 7 — Stockholders' Equity.
Fair value disclosures. The Company has a limited number of assets and liabilities that are adjusted to fair value at each balance sheet date. The Company’s fair value disclosures are included in Note 12 — Fair Value Disclosures.
Concentrations of credit risk. Assets that may subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, accounts receivable, interest rate swaps, and a pension reinsurance asset. The majority of the Company’s cash equivalent investments and its interest rate swap contract are with investment grade commercial banks. Accounts receivable balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion. The Company’s pension reinsurance asset (see Note 13 — Employee Benefits) is maintained with a large international insurance company that was rated investment grade as of December 31, 2014.
Stock repurchase programs. The Company records the cost to repurchase its own common shares to treasury stock. During 2014, 2013 and 2012, the Company used $432.0 million, $181.7 million, and $111.3 million, respectively, in cash for stock repurchases (see Note 7 — Stockholders’ Equity). Shares repurchased by the Company are added to treasury shares and are not retired.

Adoption of new accounting rules. The Company adopted the following accounting rules in the year ended December 31, 2014:

Unrecognized Tax Benefits

The Company adopted ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" ("ASU No. 2013-11") on January 1, 2014. ASU No. 2013-11 addresses the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The balance sheet impact from the adoption of ASU No. 2013-11 was not material to the Company.

Cumulative Translation Adjustments

The Company adopted ASU No. 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU No. 2013-05"), on January 1, 2014. ASU No. 2013-05 provides updated guidance to resolve diversity in practice concerning the release of the cumulative foreign currency translation adjustment into net income when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. When a company ceases to have a controlling financial interest, the company should recognize any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary had resided. Upon a partial sale, the company should release into earnings a pro rata portion of the cumulative translation adjustment. The adoption of ASU No. 2013-05 did not impact the Company's financial statements and will only have an impact upon the occurrence of a transaction within its scope.

Recent accounting developments. Accounting rules that have been issued by the FASB that have not yet become effective and that may impact the Company’s consolidated financial statements or related disclosures in future periods are described below:
Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09"). ASU No. 2014 -09 is intended to clarify the principles for recognizing revenue by removing inconsistencies and weaknesses in revenue recognition requirements; providing a more robust framework for addressing revenue issues; improving comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and providing more useful information to users of financial statements through improved revenue disclosure requirements. The provisions of the new rule are effective for Gartner on January 1, 2017. Early adoption is not permitted. We continue to evaluate the impact of ASU No. 2014-09.


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Discontinued Operations

In May 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"), which changes the criteria for determining which disposal transactions can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The Company adopted the new rule on January 1, 2015 and it did not have an impact on the Company's consolidated financial statements.

The FASB also continues to work on a number of significant accounting rules which may impact the Company’s accounting and disclosures in future periods. Since these rules have not yet been issued, the effective dates and potential impact are unknown.

2 — ACQUISITIONS

The Company completed three acquisitions in the year ended December 31, 2014 (the "2014 Acquisitions") and one acquisition in 2012, which are discussed below.

2014

In March 2014, the Company acquired Software Advice, Inc., (“Software Advice”), a privately-owned company based in Austin, Texas with 120 employees. Software Advice assists customers with software purchases. At closing, the Company paid $103.2 million in cash for 100% of the outstanding shares of Software Advice. The Company is also obligated to pay up to an additional $31.9 million in cash related to the acquisition. This includes $13.5 million placed in escrow as security for potential losses. Release of the escrowed funds is also subject to the achievement of certain employment conditions. The escrow amount is considered restricted cash and is recorded in Other Assets in the Consolidated Balance Sheets. An additional $18.4 million is payable contingent on the achievement of certain employment conditions. This amount is also subject to any indemnified losses in excess of the escrowed funds. The $31.9 million obligation (adjusted for any indemnified losses) is being recognized as compensation expense over the two-year service period of the relevant employees in Acquisition and integration charges in the Consolidated Statements of Operations. If the employment conditions are not met, any expense previously accrued will be reversed in the period employment terminates.

In May 2014, the Company acquired 100% of the outstanding shares of Market-Visio Oy ("Market-Visio"), a privately-owned Finnish company with 68 employees, now named Gartner Finland Oy. Market-Visio was previously an independent sales agent of Gartner research products, as well as locally-created research content, in Finland and Russia. Gartner Finland Oy conducts its operations in Russia through a wholly-owned operating subsidiary, now named Gartner RUS LLC. The Company paid a total of $6.5 million in cash for Market-Visio, which included $4.1 million paid at close in May and $2.4 million paid in October for working capital adjustments.

In June 2014, the Company acquired 100% of the outstanding shares of SircleIT Inc., a developer of cloud-based knowledge automation software, for $5.7 million in cash. SircleIT Inc. is a domestic company that conducts its operations principally through Senexx Israel Ltd., its wholly-owned subsidiary in Israel with 2 employees. Gartner paid $4.9 million in cash at close and an additional $0.8 million was placed in escrow as security for certain indemnity claims, which is payable 18 months from the date of close.

The Company's financial statements include the operating results of these businesses beginning from their respective dates of acquisition. The operating results of these businesses were not material to the Company's consolidated and segment operating results for the fiscal year ended December 31, 2014. In addition, had the Company acquired these businesses in prior periods the impact to the Company's operating results for prior periods would not have been material, and as a result pro forma financial information for prior periods has not been presented. The Company recorded $21.9 million of pre-tax acquisition and integration charges in the fiscal year ended December 31, 2014 related to these acquisitions, which are classified in Acquisition and integration charges in the Condensed Consolidated Statements of Operations. Acquisition and integration charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions, legal, consulting, and severance costs.



51



The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed in the 2014 Acquisitions (in thousands):
 Software Advice Other Acquisitions (1) Total
Assets:     
Cash$1,450
 $3,203
 $4,653
Fees receivable and other current assets3,606
 3,694
 7,300
Property, equipment, and leasehold improvements235
 170
 405
Amortizable intangible assets (2)26,928
 5,047
 31,975
Goodwill (3)73,663
 4,710
 78,373
Total assets$105,882
 $16,824
 $122,706
      
Liabilities:     
Accounts payable and accrued liabilities$2,657
 $4,484
 $7,141
Total liabilities$2,657
 $4,484
 $7,141
      
Net assets acquired (4)$103,225
 $12,340
 $115,565

(1)Includes the SircleIT Inc. and Market-Visio acquisitions.
(2)See Note 1 - Business and Significant Accounting Policies for additional information regarding the types and amounts of amortizable intangibles recorded from the 2014 Acquisitions.

(3)During 2014, and subsequent to the 2014 Acquisitions, the Company recorded certain working capital, tax, and other minor adjustments which decreased the recorded goodwill resulting from the Market-Visio and SircleIT Inc. acquisitions by approximately $0.1 million and $0.2 million, respectively. In addition, the recorded amount of an amortizable intangible asset resulting from the Software Advice acquisition was reduced by $2.7 million and goodwill was increased by the same amount due to a change in the underlying assumptions used to value the amortizable intangible asset based on the consideration of additional information that became available.

(4)The Company paid $114.6 million in cash on a gross basis for the net assets acquired through December 31, 2014. On a net basis, and for cash flow reporting, the Company paid $109.9 million in cash through December 31, 2014, which represents the $114.6 million in cash paid on a gross basis minus the $4.7 million of cash acquired from the purchased companies.

The determination of the fair value of the amortizable intangibles required management judgment and the consideration of a number of factors, significant among them the historical financial performance of the acquired businesses and projected performance, estimates surrounding customer turnover, as well as assumptions regarding the level of competition and the cost to reproduce certain assets. In determining the fair value of the intangibles, management primarily relied on income methodologies, in particular the discounted cash flow approach. Establishing the useful lives of the amortizable intangibles also required management judgment and the evaluation of a number of factors, among them projected cash flows and the likelihood of competition.

The Company considers the allocation of the purchase price for the 2014 Acquisitions to be preliminary with respect to certain tax contingencies. The majority of the recorded goodwill and intangibles from these transactions will be deductible for tax purposes over 15 years. All of the recorded goodwill from the 2014 Acquisitions was included in the Company’s Research segment. The Company believes the recorded goodwill is supported by the anticipated revenue synergies, customer retention, and cost savings resulting from the combined operations.

2012

In 2012 the Company acquired 100% of the outstanding shares of Ideas International Limited (“Ideas International”), a publicly-owned Australian corporation for aggregate cash consideration of $18.8 million. The operating results of Ideas International were not material to the Company’s 2012 results. The Company recorded $7.5 million of goodwill and $8.5 million of amortizable intangible assets as a result of the acquisition. The Company also recorded $0.3 million and $2.4 million of pre-tax charges in 2013 and 2012, respectively, related to the acquisition, which are classified in Acquisition and integration charges in the Consolidated Statements of Operations.


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3 — OTHER ASSETS
Other assets consist of the following (in thousands):
 December 31,
 2014 2013
Security deposits$4,951
 $5,505
Debt issuance costs7,781
 4,878
Benefit plan-related assets43,293
 42,367
Non-current deferred tax assets17,960
 24,371
Acquisition escrow - restricted cash14,363
 
Other4,001
 4,510
Total other assets$92,349
 $81,631

4 — ACCOUNTS PAYABLE, ACCRUED, AND OTHER LIABILITIES
Accounts payable and accrued liabilities consist of the following (in thousands):

 December 31,
 2014 2013
Accounts payable$16,802
 $17,671
Payroll and employee benefits payable79,831
 72,650
Severance and retention bonus payable26,965
 10,574
Bonus payable83,000
 75,758
Commissions payable64,888
 57,078
Taxes payable18,538
 14,392
Rent and other facilities costs4,259
 3,903
Professional, consulting, audit fees9,429
 9,159
Events fulfillment liabilities6,586
 6,600
Other accrued liabilities43,463
 57,274
Total accounts payable and accrued liabilities$353,761
 $325,059
Other liabilities consist of the following (in thousands):

 December 31,
 2014 2013
Non-current deferred revenue$7,056
 $8,959
Interest rate swap liability2,900
 6,505
Long-term taxes payable8,506
 9,590
Deferred rent16,667
 18,127
Benefit plan-related liabilities64,994
 58,000
Other42,839
 24,912
Total other liabilities$142,962
 $126,093




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5 — DEBT
2014 Credit Agreement
The Company entered into a new credit arrangement in December 2014 (the “2014 Credit Agreement”) to take advantage of favorable credit conditions. The 2014 Credit Agreement provides for a five-year, $400.0 million term loan and a $1.1 billion revolving credit facility. In addition, the 2014 Credit Agreement contains an expansion feature by which the term loan and revolving credit facility may be increased, at the Company’s option and under certain conditions, by up to an additional $500.0 million in the aggregate.

The term loan will be repaid in 16 consecutive quarterly installments which will commence on March 31, 2015, plus a final payment due in December 2019, and may be prepaid at any time without penalty or premium (other than applicable breakage costs) at the Company’s option. The revolving credit facility may be used for loans, and up to $40.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until December 2019, at which time all amounts borrowed must be repaid. The Company recorded a charge of $0.5 million for capitalized debt issuance costs related to the termination of the previous credit arrangement, which is included in Interest expense, net in the Condensed Consolidated Statements of Operations. The Company incurred $4.6 million in debt issuance costs related to the new credit facility, which was capitalized and is being amortized to interest expense over the term of the 2014 Credit Agreement.

Amounts borrowed under the 2014 Credit Agreement bear interest at a rate equal to, at Gartner’s option, either:

(1) the greatest of: (i) the administrative agent’s prime rate; (ii) the average rate on overnight federal funds plus 1/2 of 1%; (iii) the eurodollar rate (adjusted for statutory reserves) plus 1%; in each case plus a margin equal to between 0.125% and 0.50% depending on Gartner’s consolidated leverage ratio as of the end of the four consecutive fiscal quarters most recently ended; or

(2) the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between 1.125% and 1.50%, depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.

The 2014 Credit Agreement contains certain customary restrictive loan covenants, including, among others, financial covenants requiring a maximum leverage ratio, a minimum interest expense coverage ratio, and covenants limiting Gartner’s ability to incur indebtedness, grant liens, make acquisitions, be acquired, dispose of assets, pay dividends, repurchase stock, make capital expenditures, make investments and enter into certain transactions with affiliates. The Company was in full compliance with the loan covenants as of December 31, 2014.

The following table summarizes the Company’s total outstanding borrowings (in thousands):
 Amount Outstanding December 31, Amount Outstanding December 31,
Description:2014 2013
Term loan (1)$400,000
 $144,375
Revolver (1), (2)
 55,625
Other (3)5,000
 5,000
Total (4)$405,000
 $205,000

(1)The contractual annual interest rate as of December 31, 2014 on the term loan was 1.42%, which consisted of a floating Eurodollar base rate of 0.17% plus a margin of 1.25%. However, the Company has an interest rate swap contract which converts the floating Eurodollar base rate to a 2.26% fixed base rate on the first $200.0 million of Company borrowings (see below). As a result, the Company’s weighted-average annual interest rate on the $400.0 million of outstanding debt under the 2014 Credit Facility as of December 31, 2014, including the margin, was approximately 2.46%.

(2)The Company had approximately $1.1 billion of available borrowing capacity on the revolver (not including the expansion feature) as of December 31, 2014.

(3)Consists of a $5.0 million State of Connecticut economic development loan with a 3.0% fixed rate of interest. The loan was originated in 2012 and has a 10 year maturity. Principal payments are deferred for the first five years and the loan may be

54



repaid at any point by the Company without penalty. The loan has a principal forgiveness provision in which up to $2.5 million of the loan may be forgiven if the Company meets certain employment targets during the first five years of the loan.

(4)As of December 31, 2014, $20.0 million of debt was classified as short term and $385.0 million was classified as long term on the Consolidated Balance Sheets.

Interest Rate Hedge
The Company has a $200.0 million notional fixed-for-floating interest rate swap contract which it designates as a hedge of the forecasted interest payments on the Company’s variable rate borrowings. Under the swap terms, the Company pays a base fixed rate of 2.26% and in return receives a floating Eurodollar rate. The swap contract expires in late 2015.
The Company accounts for the interest rate swap as a cash flow hedge in accordance with FASB ASC Topic 815. Since the swap is hedging forecasted interest payments, changes in the fair value of the swap are recorded in OCI as long as the swap continues to be a highly effective hedge of the designated interest rate risk. Any ineffective portion of change in the fair value of the hedge is recorded in earnings. At December 31, 2014, there was no ineffective portion of the hedge. The interest rate swap had a negative fair value (liability) to the Company of $2.9 million and $6.5 million as of December 31, 2014 and 2013, respectively, which is recorded in Other liabilities in the Consolidated Balance Sheets.

Subsequent to year-end 2014, the Company entered into an additional $200.0 million notional fixed-for-floating interest rate swap which will also hedge the forecasted interest payments on the Company's variable rate borrowings. The swap contract requires the Company to pay a fixed rate of 1.6% and in return receive a floating Eurodollar rate. The swap contract expires in September 2019.
Letters of Credit
The Company had $9.3 million of letters of credit and related guarantees outstanding at year-end 2014. The Company issues these instruments in the ordinary course of business to facilitate transactions with customers and others.

6 — COMMITMENTS AND CONTINGENCIES
Contractual Lease Commitments. The Company leases various facilities, computer and office equipment, furniture, and other assets under non-cancelable operating lease agreements expiring between 2015 and 2030. The future minimum annual cash payments under these operating lease agreements as of December 31, 2014 were as follows (in thousands):  
Year ended December 31, 
2015$35,230
201628,515
201722,930
201818,795
201916,740
Thereafter100,960
Total minimum lease payments (1)$223,170

(1)Excludes $0.1 million of future contractual sublease rental income.

Legal Matters. We are involved in various legal and administrative proceedings and litigation arising in the ordinary course of business. The outcome of these individual matters is not predictable at this time. However, we believe that the ultimate resolution of these matters, after considering amounts already accrued and insurance coverage, will not have a material adverse effect on our financial position, results of operations, or cash flows in future periods.
Indemnifications. The Company has various agreements that may obligate us to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of the Company’s obligations and the

55



unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of December 31, 2014, we did not have any indemnification agreements that could require material payments.
7 — STOCKHOLDERS’ EQUITY
Common stock. Holders of Gartner’s Common Stock, par value $.0005 per share (“Common Stock”) are entitled to one vote per share on all matters to be voted by stockholders. The Company does not currently pay cash dividends on its Common Stock. Also, our credit arrangement contains a negative covenant which may limit our ability to pay dividends. The following table summarizes transactions relating to Common Stock for the three years’ ending December 31, 2014:  
 
Issued
Shares
 
Treasury
Stock
Shares
Balance at December 31, 2011156,234,415
 62,891,251
Issuances under stock plans
 (2,756,389)
Purchases for treasury (1)
 2,738,238
Balance at December 31, 2012156,234,415
 62,873,100
Issuances under stock plans
 (2,037,091)
Purchases for treasury (1)
 3,432,854
Balance at December 31, 2013156,234,415
 64,268,863
Issuances under stock plans
 (1,452,419)
Purchases for treasury (1)
 5,897,446
Balance at December 31, 2014156,234,415
 68,713,890

(1)The Company used a total of $432.0 million, $181.7 million, and $111.3 million in cash for share repurchases in 2014, 2013, and 2012, respectively.

Share repurchase authorization. On February 4, 2014, the Company’s Board of Directors authorized $800.0 million to repurchase the Company's common stock. This authorization succeeded the Company’s prior $500.0 million share repurchase authorization, which was substantially utilized. The Company may repurchase its common stock from time to time in amounts and at prices the Company deems appropriate, subject to the availability of stock, prevailing market conditions, the trading price of the stock, the Company’s financial performance and other conditions. Repurchases may be made through open market purchases, private transactions or other transactions and will be funded from cash on hand and borrowings under the Company’s credit agreement. As of December 31, 2014, approximately $413.3 million of this authorization remained available for repurchases.

Accumulated other comprehensive income, net. The following tables disclose information about changes in accumulated other comprehensive income ("AOCI"), a component of equity, by component and the related amounts reclassified out of AOCI to income during the years indicated (net of tax, in thousands) (1):

2014
 Interest Rate Swap Defined Benefit Pension Plans Foreign Currency Translation Adjustments Total
Balance - December 31, 2013$(3,903) $(1,811) $14,059
 $8,345
Changes during the period:       
Change in AOCI before reclassifications to income(292) (4,275) (27,461) (32,028)
Reclassifications from AOCI to income during the period (2), (3)2,455
 58
 
 2,513
Other comprehensive income (loss) for the period2,163
 (4,217) (27,461) (29,515)
Balance - December 31, 2014$(1,740) $(6,028) $(13,402) $(21,170)




56



2013
 Interest Rate Swap Defined Benefit Pension Plans Foreign Currency Translation Adjustments Total
Balance - December 31, 2012$(6,010) $(1,578) $13,556
 $5,968
Changes during the period:       
Change in AOCI before reclassifications to income(297) (257) 503
 (51)
Reclassifications from AOCI to income during the period (2), (3)2,404
 24
 
 2,428
Other comprehensive income (loss) for the period2,107
 (233) 503
 2,377
Balance - December 31, 2013$(3,903) $(1,811) $14,059
 $8,345

(1) Amounts in parentheses represent debits (deferred losses).

(2) The reclassifications related to the interest rate swap (cash flow hedge) were recorded in Interest expense, net of tax effect. See Note 11 – Derivatives and Hedging for information regarding the hedge.

(3) The reclassifications related to defined benefit pension plans were recorded in Selling, general and administrative expense, net of tax effect. See Note 13 – Employee Benefits for information regarding the Company’s defined benefit pension plans.
8 — STOCK-BASED COMPENSATION
The Company grants stock-based compensation awards as an incentive for employees and directors to contribute to the Company’s long-term success. The Company currently awards stock-settled stock appreciation rights, service-based and performance-based restricted stock units, and common stock equivalents. At December 31, 2014, the Company had 8.0 million shares of Common Stock available for awards of stock-based compensation under its 2014 Long-Term Incentive Plan.
The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). Stock-based compensation expense is based on the fair value of the award on the date of grant, which is then recognized as expense over the related service period, net of estimated forfeitures. The service period is the period over which the related service is performed, which is generally the same as the vesting period. Currently the Company issues treasury shares upon the exercise, release or settlement of stock-based compensation awards.
Determining the appropriate fair value model and calculating the fair value of stock-based compensation awards requires the input of certain complex and subjective assumptions, including the expected life of the stock-based compensation awards and the Common Stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the amount of employee forfeitures and the likelihood of the achievement of certain performance targets. The assumptions used in calculating the fair value of stock-based compensation awards and the associated periodic expense represent management’s best estimates, which involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock-based compensation expense could be materially different from what has been recorded in the current period.
The Company recognized the following amounts of stock-based compensation expense by award type for the years ended December 31 (in millions):
Award type: 2014 2013 2012
Stock appreciation rights $5.0
 $5.2
 $6.4
Common stock equivalents 0.6
 0.6
 0.5
Restricted stock units 33.2
 28.9
 29.5
Total (1) $38.8
 $34.7
 $36.4


57



(1)
Includes charges of $14.8 million, $12.5 million, and $5.1 million in 2014, 2013 and 2012, respectively, for awards to retirement-eligible employees since these awards vest on an accelerated basis

Stock-based compensation expense was recognized by line item in the Consolidated Statements of Operations for the years ended December 31 (in millions):  
Amount recorded in: 2014 2013 2012
Costs of services and product development $17.6
 $15.3
 $15.3
Selling, general, and administrative 21.2
 19.4
 21.1
Total $38.8
 $34.7
 $36.4
As of December 31, 2014, the Company had $44.9 million of total unrecognized stock-based compensation cost, which is expected to be recognized as stock-based compensation expense over the remaining weighted-average service period of approximately 2.2 years.
Stock-Based Compensation Awards
The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards in accordance with FASB ASC Topic 505:
Stock Appreciation Rights
Stock-settled stock appreciation rights (SARs) permit the holder to participate in the appreciation of the Common Stock. SARs are settled in shares of Common Stock by the employee once the applicable vesting criteria have been met. SARs vest ratably over a four-year service period and expire seven years from the grant date. The fair value of SARs awards is recognized as compensation expense on a straight-line basis over four years. SARs have only been awarded to the Company’s executive officers.
When SARs are exercised, the number of shares of Common Stock issued is calculated as follows: (1) the total proceeds from the SARs exercise (calculated as the closing price of the Common Stock on the date of exercise less the exercise price of the SARs, multiplied by the number of SARs exercised) is divided by (2) the closing price of the Common Stock as reported on the New York Stock Exchange on the exercise date. The Company withholds a portion of the shares of Common Stock issued upon exercise to satisfy minimum statutory tax withholding requirements. SARs recipients do not have any stockholder rights until after actual shares of Common Stock are issued in respect of the award, which is subject to the prior satisfaction of the vesting and other criteria relating to such grants.
The following table summarizes changes in SARs outstanding for the year ended December 31, 2014:  
 
SARs in
millions
 
Per Share
Weighted-
Average
Exercise Price
 
Per Share
Weighted-
Average
Grant Date
Fair Value
 
Weighted-
Average
Remaining
Contractual
Term
Outstanding at December 31, 20131.6
 $34.14
 $11.63
 4.34 years
Granted0.4
 64.64
 14.99
 6.11 years
Forfeited(0.1) na
 na
 na
Exercised(0.5) 24.12
 8.82
 na
Outstanding at December 31, 2014 (1), (2)1.4
 $44.44
 $13.26
 4.34 years
Vested and exercisable at December 31, 2014 (1)0.6
 $33.36
 $11.62
 3.22 years

na = not applicable
(1)At December 31, 2014, 0.8 million of these SARs were unvested. The Company expects that substantially all of these unvested awards will vest in future periods.

(2)At December 31, 2014, SARs outstanding had an intrinsic value of $58.5 million. SARs vested and exercisable had an intrinsic value of $30.8 million.

58




The fair value of the SARs granted was estimated on the date of grant using the Black-Scholes-Merton valuation model with the following weighted-average assumptions for the years ended December 31:

 2014 2013 2012
Expected dividend yield (1)% % %
Expected stock price volatility (2)25% 35% 40%
Risk-free interest rate (3)1.3% 0.8% 0.8%
Expected life in years (4)4.43
 4.49
 4.61

(1)The dividend yield assumption is based on both the history and expectation of the Company’s dividend payouts. Historically the Company has not paid cash dividends on its Common Stock.

(2)The determination of expected stock price volatility was based on both historical Common Stock prices and the implied volatility from publicly traded options in Common Stock.

(3)The risk-free interest rate is based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award.

(4)The expected life represents the Company’s weighted-average estimate of the period of time the SARs are expected to be outstanding (that is, the period between the service inception date and the expected exercise date).

Restricted Stock Units
Restricted stock units (RSUs) give the awardee the right to receive shares of Common Stock when the vesting conditions are met and the restrictions lapse, and each RSU that vests entitles the awardee to one common share. RSU awardees do not have any of the right of a Gartner stockholder, including voting rights and the right to receive dividends and distributions, until the shares are released.

The fair value of RSUs is determined on the date of grant based on the closing price of the Common Stock as reported by the New York Stock Exchange on that date. Service-based RSUs vest ratably over four years and are expensed on a straight-line basis over four years. Performance-based RSUs are subject to both performance and service conditions, vest ratably over four years, and are expensed on an accelerated basis.
The following table summarizes the changes in RSUs outstanding during the year ended December 31, 2014:  
 
Restricted
Stock Units
(RSUs)
(in millions)
 
Per Share
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 20131.8
 $38.83
Granted (1)0.6
 65.48
Vested and released(0.9) 34.17
Forfeited(0.1) 
Outstanding at December 31, 2014 (2), (3)1.4
 $50.76

(1)
The 0.6 million RSUs granted in 2014 consisted of 0.3 million performance-based RSUs awarded to executives and 0.3 million service-based RSUs awarded to non-executive employees and non-management board members. The aggregate target number of performance-based RSUs awarded in 2014 was 0.2 million, subject to adjustment from 0% to 200% of the target number depending upon the increase in the Company's subscription-based contract value ("CV') measured on December 31, 2014 compared to December 31, 2013. The actual CV increase achieved for 2014 was 172.6%, which resulted in the final grant of approximately 0.3 million performance-based RSUs to the executives.

59




(2)The Company expects that substantially all of the outstanding awards at December 31, 2014 will vest in future periods.

(3)The weighted-average remaining contractual term of the outstanding RSUs is approximately 1 year.

Common Stock Equivalents
Common stock equivalents (CSEs) are convertible into Common Stock and each CSE entitles the holder to one common share. Members of our Board of Directors receive directors’ fees payable in CSEs unless they opt to receive up to 50% of the fees in cash. Generally, the CSEs have no defined term and are converted into common shares when service as the director terminates unless the director has elected an accelerated release. The fair value of the CSEs is determined on the date of grant based on the closing price of the Common Stock as reported by the New York Stock Exchange on that date. CSEs vest immediately and as a result are recorded as expense on the date of grant.

The following table summarizes the changes in CSEs outstanding for the year ended December 31, 2014:  
 
Common Stock
Equivalents
(CSEs)
 
Per Share
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2013102,479
 $17.71
Granted8,509
 74.48
Converted to common shares(6,785) 74.48
Outstanding at December 31, 2014104,203
 $18.65

Employee Stock Purchase Plan
The Company has an employee stock purchase plan (the “ESP Plan”) under which eligible employees are permitted to purchase Common Stock through payroll deductions, which may not exceed 10% of an employee’s compensation (or $23,750 in any calendar year), at a price equal to 95% of the closing price of the Common Stock as reported by the New York Stock Exchange at the end of each offering period. At December 31, 2014, the Company had approximately 1.1 million shares available for purchase under the ESP Plan. The ESP Plan is considered non-compensatory under FASB ASC Topic 718, and as a result the Company does not record stock-based compensation expense for employee share purchases. The Company received $7.8 million, $6.0 million, and $12.4 million in cash from share purchases under the ESP Plan and exercises of stock options during 2014, 2013, and 2012, respectively.  

9 — COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of shares of Common Stock outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in earnings. When the impact of common share equivalents is anti-dilutive, they are excluded from the calculation. The following table sets forth the reconciliation of the basic and diluted earnings per share computations for the years ended December 31 (in thousands, except per share amounts):
 2014 2013 2012
Numerator:     
Net income used for calculating basic and diluted earnings per common share$183,766
 $182,801
 $165,903
Denominator: (1)
 
  
  
Weighted average number of common shares used in the calculation of basic earnings per share89,337
 93,015
 93,444
Common share equivalents associated with stock-based compensation plans1,382
 1,815
 2,398
Shares used in the calculation of diluted earnings per share90,719
 94,830
 95,842
Earnings per share: 
  
  
Basic$2.06
 $1.97
 $1.78
Diluted$2.03
 $1.93
 $1.73

60




(1)The Company repurchased 5.9 million, 3.4 million, and 2.7 million shares of its Common Stock in 2014, 2013, and 2012, respectively.

The following table presents the number of common share equivalents that were not included in the computation of diluted EPS in the table above because the effect would have been anti-dilutive. During periods with net income, these common share equivalents were anti-dilutive because their exercise price was greater than the average market value of a share of Common Stock during the period.
 2014 2013 2012
Anti-dilutive common share equivalents as of December 31 (in millions):0.3
 0.3
 0.7
Average market price per share of Common Stock during the year$73.27
 $57.50
 $43.80

10 — INCOME TAXES
Following is a summary of the components of income before income taxes for the years ended December 31 (in thousands):
 2014 2013 2012
U.S.$188,963
 $186,330
 $150,023
Non-U.S.85,720
 80,109
 85,573
Income before income taxes$274,683
 $266,439
 $235,596
The expense for income taxes on the above income consists of the following components (in thousands):

 2014 2013 2012
Current tax expense: 
  
  
U.S. federal$49,281
 $20,215
 $25,270
State and local5,135
 4,928
 2,508
Foreign16,653
 17,167
 18,822
Total current71,069
 42,310
 46,600
Deferred tax (benefit) expense: 
  
  
U.S. federal(6,670) 18,824
 8,379
State and local6,477
 2,742
 (770)
Foreign779
 (4,688) (7,797)
Total deferred586
 16,878
 (188)
Total current and deferred71,655
 59,188
 46,412
Benefit (expense) relating to interest rate swap used to increase (decrease) equity(1,442) (1,405) 51
Benefit from stock transactions with employees used to increase equity18,704
 25,373
 21,304
Benefit (expense) relating to defined-benefit pension adjustments used to increase (decrease) equity2,000
 482
 1,926
Total tax expense$90,917
 $83,638
 $69,693

61



Current and long-term deferred tax assets and liabilities are comprised of the following (in thousands):
 December 31,
 2014 2013
Accrued liabilities$67,066
 $56,787
Loss and credit carryforwards13,350
 17,648
Assets relating to equity compensation19,920
 19,773
Other assets3,420
 1,306
Gross deferred tax assets103,756
 95,514
Property, equipment, and leasehold improvements(10,817) (12,067)
Intangible assets(29,400) (25,338)
Prepaid expenses(26,584) (22,517)
Other liabilities(3,591) 
Gross deferred tax liabilities(70,392) (59,922)
Valuation allowance(570) (617)
Net deferred tax assets$32,794
 $34,975

Current net deferred tax assets and current net deferred tax liabilities were $17.5 million and $2.1 million as of December 31, 2014 and $19.5 million and $8.7 million as of December 31, 2013, respectively, and are included in Prepaid expenses and other current assets and Accounts payable and accrued liabilities in the Consolidated Balance Sheets. Long-term net deferred tax assets and long-term net deferred tax liabilities were $18.0 million and $0.6 million as of December 31, 2014 and $24.4 million and $0.2 million as of December 31, 2013, respectively, and are included in Other assets and Other liabilities in the Consolidated Balance Sheets. Based on its assessment, management has concluded it is more likely than not that the reversal of deferred tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets, net of the valuation allowance at December 31, 2014.
The valuation allowances of $0.6 million as of both December 31, 2014 and 2013 largely relate to certain net operating losses.
As of December 31, 2014, the Company had state and local tax net operating loss carryforwards of $7.8 million, of which $0.7 million expire within one to five years, $6.3 million expire within six to fifteen years, and $0.8 million expire within sixteen to twenty years. The Company also had state tax credits of $1.6 million which will expire within two to five years. These amounts have been reduced for unrecognized tax benefits, consistent with FASB ASU 2013-11.

As of December 31, 2014, the Company had non-U.S. net operating loss carryforwards of $30.2 million, of which $2.6 million expire over the next 20 years and $27.6 million can be carried forward indefinitely. In addition, the Company also had foreign tax credit carryforwards of $3.4 million, of which approximately half will expire at the end of 2017 and the remainder at the end of 2024.

The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate on income before income taxes for the years ended December 31 follow:
 2014 2013 2012
Statutory tax rate35.0 % 35.0 % 35.0 %
State income taxes, net of federal benefit3.1
 3.2
 1.8
Effect of non-U.S. operations (1)(7.0) (6.1) (6.4)
Record (release) reserve for tax contingencies2.6
 0.9
 0.7
Record (release) valuation allowance
 (0.5) 
Other items, net(0.6) (1.1) (1.5)
Effective tax rate33.1 % 31.4 % 29.6 %


62



(1)Includes the effect of foreign income taxed at different rates, U.S. tax on actual and deemed distributions, and foreign tax credits.
For 2014 and 2013 state income taxes, net of federal tax benefit, include approximately $1.3 million and $1.3 million, respectively, of benefit relating to economic development tax credits associated with the renovation of the Company’s Stamford headquarters facility.
As of December 31, 2014 and December 31, 2013, the Company had unrecognized tax benefits of $20.6 million and $14.5 million, respectively. The increase is primarily attributable to positions taken with respect to state income tax apportionment and the realizability of certain refund claims. It is reasonably possible that the unrecognized tax benefits will be decreased by $4.9 million within the next 12 months due to anticipated closure of audits and the expiration of certain statutes of limitation. The unrecognized tax benefits relate primarily to the utilization of certain tax attributes, state income tax positions, and intercompany transactions.
The Company classifies uncertain tax positions not expected to be settled within one year as long term liabilities. As of December 31, 2014 and December 31, 2013, the Company had $15.7 million and $11.4 million, respectively, related to long term uncertain tax positions.

The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, for the years ending December 31 (in thousands):
 2014 2013
Beginning balance$14,488
 $17,552
Additions based on tax positions related to the current year6,351
 4,237
Additions for tax positions of prior years4,112
 827
Reductions for tax positions of prior years(2,317) (1,973)
Reductions for expiration of statutes(1,027) (3,860)
Settlements(143) (1,575)
Change in foreign currency exchange rates(819) (720)
Ending balance$20,645
 $14,488

Included in the balance of unrecognized tax benefits at December 31, 2014 are potential benefits of $16.5 million that if recognized would reduce the effective tax rate on income from continuing operations. Also included in the balance of unrecognized tax benefits as of December 31, 2014 are potential benefits of $4.1 million that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
The Company accrues interest and penalties related to unrecognized tax benefits in its income tax provision. As of both December 31, 2014 and December 31, 2013, the Company had $3.3 million of accrued interest and penalties related to unrecognized tax benefits. These amounts are in addition to the unrecognized tax benefits disclosed above. The total amount of interest and penalties recognized in the Consolidated Statements of Operations for the years ending December 31, 2014 and December 31, 2013 was $0.1 million and $0.3 million, respectively.
The number of years with open statutes of limitation varies depending on the tax jurisdiction. Generally, the Company’s statutes are open for tax years ended December 31, 2010 and forward, with the exception of India which is open for tax years 2003 and forward. Major taxing jurisdictions include the U.S. (federal and state), the United Kingdom, Canada, Japan, Italy, India, France, and Ireland.

During 2014, the Internal Revenue Service closed the audit of the Company's 2010 and 2011 federal income tax returns. The resolution of the audit did not have a material adverse effect on the consolidated financial position, cash flows, or results of operations of the Company.

Under U.S. accounting rules, no provision for income taxes that may result from the remittance of earnings held overseas is required if the Company intends to reinvest such funds overseas. Our current plans do not demonstrate a need to repatriate these undistributed earnings to fund our U.S. operations or otherwise satisfy the liquidity needs of our U.S operations. We intend to reinvest these earnings in our non-U.S. operations, except in instances in which the repatriation of these earnings would result in minimal additional tax. As a result, the Company has not recognized additional income tax expense that may result from the remittance of these earnings. The accumulated undistributed earnings of non-U.S. subsidiaries were approximately $186.5 million as of December

63



31, 2014. An estimate of the income tax liability that would be payable if such earnings were not indefinitely invested is $35.8 million.

11 — DERIVATIVES AND HEDGING
The Company enters into a limited number of derivative contracts to offset the potentially negative economic effects of interest rate and foreign exchange movements. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic 815, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value.
The following tables provide information regarding the Company’s outstanding derivatives contracts as of, and for, the years ended (in thousands, except for number of outstanding contracts):
December 31, 2014
Derivative Contract Type 
Number of
Outstanding
Contracts
 
Contract
Notional
Amount
 
Fair Value
Asset
(Liability) (3)
 
Balance Sheet
Line Item
 
OCI
Unrealized
(Loss), Net
Of Tax
Interest rate swap (1) 1
 $200,000
 $(2,900) Other liabilities $(1,740)
Foreign currency forwards (2) 77
 45,650
 238
 Other current liabilities 
Total 78
 $245,650
 $(2,662)   $(1,740)
December 31, 2013
Derivative Contract Type 
Number of
Outstanding
Contracts
 
Contract
Notional
Amount
 
Fair Value
Asset
(Liability) (3)
 
Balance Sheet
Line Item
 
OCI
Unrealized
(Loss), Net
Of Tax
Interest rate swap (1) 1
 $200,000
 $(6,505) Other liabilities $(3,903)
Foreign currency forwards (2) 89
 61,325
 (60) Other current assets 
Total 90
 $261,325
 $(6,565)   $(3,903)

(1)The swap is designated as a cash flow hedge of the forecasted interest payments on borrowings. As a result, changes in the fair value of this swap are deferred and are recorded in OCI, net of tax effect (see Note 5 — Debt for additional information).

(2)The Company has foreign exchange transaction risk since it typically enters into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into short-term foreign currency forward exchange contracts to offset the economic effects of these foreign currency transaction risks. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other expense, net since the Company does not designate these contracts as hedges for accounting purposes. Substantially all of the outstanding contracts at December 31, 2014 matured by the end of January 2015.

(3)See Note 12 — Fair Value Disclosures for the determination of the fair value of these instruments.

At December 31, 2014, the Company’s derivative counterparties were all large investment grade financial institutions. The Company did not have any collateral arrangements with its derivative counterparties, and none of the derivative contracts contained credit-risk related contingent features.
The following table provides information regarding amounts recognized in the Consolidated Statements of Operations for derivative contracts for the years ended December 31 (in thousands):  
Amount recorded in: 2014 2013 2012
Interest expense (1) $4.1
 $4.0
 $3.6
Other expense, net (2) (0.5) 0.1
 (0.6)
Total expense $3.6
 $4.1
 $3.0

64



(1)Consists of interest expense from interest rate swap contracts.

(2)Consists of realized and unrealized gains and losses on foreign currency forward contracts.

12 — FAIR VALUE DISCLOSURES
The Company’s financial instruments include cash equivalents, fees receivable from customers, accounts payable, and accruals which are normally short-term in nature. The Company believes the carrying amounts of these financial instruments reasonably approximates their fair value due to their short-term nature. The Company’s financial instruments also includes borrowings outstanding under its 2014 Credit Agreement, and at December 31, 2014, the Company had $400.0 million of floating rate debt outstanding under this arrangement, which is carried at amortized cost. The Company believes the carrying amount of the outstanding borrowings reasonably approximates fair value since the rate of interest on the borrowings reflect current market rates of interest for similar instruments with comparable maturities.
FASB ASC Topic 820 provides a framework for the measurement of fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of assets and liabilities. Classification within the hierarchy is based upon the lowest level of input that is significant to the resulting fair value measurement. The valuation hierarchy contains three levels. Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs, such as internally-created valuation models. The Company does not currently utilize Level 3 valuation inputs to remeasure any of its assets or liabilities. However, level 3 inputs may be used by the Company in its required annual impairment review of goodwill. Information regarding the periodic assessment of the Company’s goodwill is included in Note 1 — Business and Significant Accounting Policies. The Company does not typically transfer assets or liabilities between different levels of the fair value hierarchy.

The Company enters into a limited number of derivatives transactions but does not enter into repurchase agreements, securities lending transactions, or master netting arrangements. Receivables or payables that result from derivatives transactions are recorded gross in the Company’s Consolidated Balance Sheets. The Company’s assets and liabilities that are remeasured to fair value are presented in the following table (in thousands):
  Fair Value Fair Value
Description: December 31,
2014
 December 31,
2013
Assets:  
  
Values based on Level 1 inputs:    
Deferred compensation plan assets (1) $7,650
 $7,775
Total Level 1 inputs $7,650
 $7,775
Values based on Level 2 inputs:    
Deferred compensation plan assets (1) $27,000
 $24,780
Foreign currency forward contracts (2) 458
 116
Total Level 2 inputs $27,458
 $24,896
Total Assets $35,108
 $32,671
Liabilities:  
  
Values based on level 2 inputs:    
Deferred compensation plan liabilities (1) $39,100
 $36,410
Foreign currency forward contracts (2) 220
 176
Interest rate swap contract (3) 2,900
 6,505
Total Level 2 inputs $42,220
 $43,091
Total Liabilities $42,220
 $43,091


65



(1)The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees (see Note 13 — Employee Benefits). The plan’s assets consist of investments in money market and mutual funds, and company-owned life insurance contracts.

The money market funds consist of cash equivalents while the mutual fund investments consist of publicly-traded and quoted equity shares. The Company considers the fair value of these assets to be based on Level 1 inputs, and these assets had a fair value of $7.7 million and $7.8 million as of December 31, 2014 and 2013, respectively. The carrying amount of the life insurance contracts equals their cash surrender value. Cash surrender value represents the estimated amount that the Company would receive upon termination of the contract, which approximates fair value. The Company considers the life insurance contracts to be valued based on a Level 2 input, and these assets had a fair value of $27.0 million and $24.8 million at December 31, 2014 and 2013, respectively. The related deferred compensation plan liabilities are recorded at the amount needed to settle the liability, which approximates fair value, and is based on a Level 2 input.

(2)The Company enters into foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates (see Note 11 — Derivatives and Hedging). Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active markets, which the Company considers a Level 2 input.

(3)The Company has an interest rate swap contract which hedges the risk from variability of interest rates on its borrowings (see Note 11 — Derivatives and Hedging). The fair value of the swap is based on a mark-to-market valuation prepared by a third-party broker. Valuation is based on observable interest rates from recently executed market transactions and other observable market data, which the Company considers Level 2 inputs. The Company independently corroborates the reasonableness of the valuation prepared by the third-party broker through the use of an electronic quotation service.
13 — EMPLOYEE BENEFITS
Defined contribution plan. The Company has a savings and investment plan (the “401k Plan”) covering substantially all U.S. employees. Company contributions are based upon the level of employee contributions, up to a maximum of 4% of the employee’s eligible salary, subject to an annual maximum. For 2014, the maximum match was $7,000. Amounts expensed in connection with the 401k Plan totaled $17.4 million, $15.8 million, and $14.2 million, in 2014, 2013, and 2012, respectively.
Deferred compensation plan. The Company has a supplemental deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees, which is structured as a rabbi trust. The plan’s investment assets are classified in Other assets on the Consolidated Balance Sheets at fair value. The value of these assets was $34.7 million and $32.6 million at December 31, 2014 and 2013, respectively (see Note 12 — Fair Value Disclosures for detailed fair value information). The corresponding deferred compensation liability of $39.1 million and $36.4 million at December 31, 2014 and 2013, respectively, is carried at fair value, and is adjusted with a corresponding charge or credit to compensation cost to reflect the fair value of the amount owed to the employees which is classified in Other liabilities on the Consolidated Balance Sheets. Total compensation expense recognized for the plan was $0.6 million in 2014 and $0.4 million in both 2013 and 2012.
Defined benefit pension plans. The Company has defined-benefit pension plans in several of its non-U.S. locations. Benefits earned under these plans are based on years of service and level of employee compensation. The Company accounts for defined benefit plans in accordance with the requirements of FASB ASC Topics 715 and 960.
The following are the components of defined benefit pension expense for the years ended December 31 (in thousands):  
 2014 2013 2012
Service cost (1)$2,630
 $2,545
 $1,775
Interest cost1,190
 1,075
 980
Expected return on plan assets(540) (340) (115)
Recognition of actuarial loss (gain)75
 30
 (215)
Recognition of termination benefits30
 455
 175
Total defined benefit pension expense (2)$3,385
 $3,765
 $2,600

(1)The higher service cost beginning in 2013 was primarily due to additional employees covered under the plans.
(2)Pension expense is classified in SG&A in the Consolidated Statements of Operations.

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The following are the assumptions used in the computation of pension expense for the years ended December 31:
 2014 2013 2012
Weighted-average discount rate (1)2.15% 3.35% 3.20%
Average compensation increase2.65% 2.70% 2.70%

(1)Discount rates are typically determined by utilizing the yields on long-term corporate or government bonds in the relevant country with a duration consistent with the expected term of the underlying pension obligations.

The following table provides information related to changes in the projected benefit obligation for the years ended December 31 (in thousands):
 2014 2013 2012
Projected benefit obligation at beginning of year$34,585
 $31,605
 $21,160
Service cost2,630
 2,545
 1,775
Interest cost1,190
 1,075
 980
Actuarial loss (gain) due to assumption changes and plan experience (1)6,300
 625
 6,265
Additions and contractual termination benefits30
 460
 1,925
Benefits paid (2)(1,350) (1,255) (680)
Foreign currency impact(5,270) (470) 180
Projected benefit obligation at end of year (3)$38,115
 $34,585
 $31,605

(1)The 2014 and 2012 actuarial losses were primarily due to significant declines in the weighted-average discount rate.

(2)
The Company projects the following approximate amounts will be paid in future years to plan participants: $1.0 million in 2015; $1.9 million in 2016; $1.4 million in each of the years 2017, 2018, and 2019; and $9.6 million in total in the five years thereafter.

(3)Measured as of December 31.

The following table provides information regarding the funded status of the plans and related amounts recorded in the Company’s Consolidated Balance Sheets as of December 31 (in thousands):
Funded status of the plans:
 2014 2013 2012
Projected benefit obligation$38,115
 $34,585
 $31,605
Plan assets at fair value (1)(13,220) (13,870) (8,885)
Funded status – shortfall (2)$24,895
 $20,715
 $22,720
Amounts recorded in the Consolidated Balance Sheets for the plans:     
Other liabilities — accrued pension obligation (2)$24,895
 $20,715
 $22,720
Stockholders’ equity — deferred actuarial loss (3)$(6,028) $(1,811) $(1,578)

(1)The plan assets are held by third-party trustees and are invested in a diversified portfolio of equities, high quality government and corporate bonds, and other investments. The assets are primarily valued based on Level 1 and Level 2 inputs under the fair value hierarchy in FASB ASC Topic 820, with the majority of the invested assets considered to be of low-to-medium investment risk. The Company projects a future long-term rate of return on these plan assets of 2.7%, which it believes is

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reasonable based on the composition of the assets and both current and projected market conditions. For the year-ended December 31, 2014, the Company contributed $2.8 million to these plans, and benefits paid to participants were $1.4 million.

In addition to the plan assets held with third-party trustees, the Company also maintains a reinsurance asset arrangement with a large international insurance company. The reinsurance asset is an asset of the Company whose purpose is to provide funding for benefit payments for one of the plans. At December 31, 2014, the reinsurance asset was carried on the Company’s Consolidated Balance Sheets at its cash surrender value of $8.5 million and is classified in Other Assets. The Company believes the cash surrender value approximates fair value and is equivalent to a Level 2 input under the FASB’s fair value framework in ASC Topic 820.

(2)The Funded status — shortfall represents the amount of the projected benefit obligation that the Company has not funded with a third-party trustee. This amount is a liability of the Company and is recorded in Other Liabilities on the Company’s Consolidated Balance Sheets.

(3)
The deferred actuarial loss as of December 31, 2014 is recorded in Accumulated Other Comprehensive Income (“AOCI”) and will be reclassified out of AOCI and recognized as pension expense over approximately 14 years, subject to certain limitations set forth in FASB ASC Topic 715. The impact of this amortization on the periodic pension expense in 2015 is projected to be approximately $0.4 million. The actual amortization of deferred actuarial losses (gains) from AOCI to pension expense was less than $0.1 million in 2014 and 2013 and $(0.2) million in 2012.


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14 — SEGMENT INFORMATION
The Company manages its business through three reportable segments: Research, Consulting and Events. Research consists primarily of subscription-based research products, access to research inquiry, peer networking services, and membership programs. Consulting consists primarily of consulting, measurement engagements, and strategic advisory services. Events consists of various symposia, conferences and exhibitions.
The Company evaluates reportable segment performance and allocates resources based on gross contribution margin. Gross contribution, as presented in the table below, is defined as operating income excluding certain COS expenses, SG&A expense, depreciation, acquisition and integration charges, and amortization of intangibles. Certain bonus and fringe benefit costs included in consolidated COS are not allocated to segment expense. The accounting policies used by the reportable segments are the same as those used by the Company. There are no intersegment revenues.
The Company earns revenue from clients in many countries. Other than the United States, there is no individual country in which revenues from external clients represent 10% or more of the Company’s consolidated revenues. Additionally, no single client accounted for 10% or more of total revenue and the loss of a single client, in management’s opinion, would not have a material adverse effect on revenues. The Company does not identify or allocate assets, including capital expenditures, by reportable segment. Accordingly, assets are not being reported by segment because the information is not available by segment and is not reviewed in the evaluation of performance or making decisions in the allocation of resources.

The following tables present operating information about the Company’s reportable segments for the years ended December 31 (in thousands):
 Research Consulting Events Consolidated
2014 
  
  
  
Revenues$1,445,338
 $348,396
 $227,707
 $2,021,441
Gross contribution1,001,914
 119,931
 112,384
 1,234,229
Corporate and other expenses 
  
  
 (948,067)
Operating income 
  
  
 $286,162
 Research Consulting Events Consolidated
2013 
  
  
  
Revenues$1,271,011
 $314,257
 $198,945
 $1,784,213
Gross contribution879,384
 107,565
 91,216
 1,078,165
Corporate and other expenses 
  
  
 (802,673)
Operating income 
  
  
 $275,492
 Research Consulting Events Consolidated
2012 
  
  
  
Revenues$1,137,147
 $304,893
 $173,768
 $1,615,808
Gross contribution774,342
 109,253
 80,119
 963,714
Corporate and other expenses 
  
  
 (718,007)
Operating income 
  
  
 $245,707


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The following table provides a reconciliation of total segment gross contribution to net income for the periods indicated (in thousands):
  Twelve months ended
  December 31,
  2014 2013 2012
Total segment gross contribution $1,234,229
 $1,078,165
 $963,714
Costs and expenses:      
Cost of services and product development - unallocated (1) 10,721
 7,436
 6,973
Selling, general and administrative 876,067
 760,458
 678,843
Depreciation and amortization 39,412
 34,442
 29,771
Acquisition and integration charges 21,867
 337
 2,420
Operating income 286,162
 275,492
 245,707
Interest expense and other 11,479
 9,053
 10,111
Provision for income taxes 90,917
 83,638
 69,693
Net income $183,766
 $182,801
 $165,903

(1)The unallocated amounts consist of certain bonus and related fringe costs recorded in Consolidated cost of services and product development expense that are not allocated to segment expense. The Company's policy is to only allocate bonus and related fringe charges to segments for up to 100% of the segment employee's target bonus. Amounts above 100% are absorbed by corporate.

The Company’s revenues are generated primarily through direct sales to clients by domestic and international sales forces and a network of independent international sales agents. Most of the Company’s products and services are provided on an integrated worldwide basis, and because of this integrated delivery, it is not practical to precisely separate our revenues by geographic location.

Accordingly, the separation set forth in the table below is based upon internal allocations, which involve certain management estimates and judgments. Revenues in the table are reported based on where the sale is fulfilled; “Other International” revenues are those attributable to all areas located outside of the United States and Canada, as well as Europe, Middle East, and Africa.
Summarized information by geographic location as of and for the years ended December 31 follows (in thousands):
 2014 2013 2012
Revenues: 
  
  
United States and Canada$1,204,476
 $1,049,734
 $947,075
Europe, Middle East and Africa570,334
 508,755
 458,675
Other International246,631
 225,724
 210,058
Total revenues$2,021,441
 $1,784,213
 $1,615,808
Long-lived assets: (1) 
  
  
United States and Canada$142,963
 $123,877
 $114,557
Europe, Middle East and Africa34,093
 34,363
 30,967
Other International13,282
 13,936
 16,956
Total long-lived assets$190,338
 $172,176
 $162,480

(1)Excludes goodwill and other intangible assets.






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15 — VALUATION AND QUALIFYING ACCOUNTS
The Company maintains an allowance for losses which is composed of a bad debt allowance and a revenue reserve. Provisions are charged against earnings either as an increase to expense or a reduction in revenues. The following table summarizes activity in the Company’s allowance for the years ended December 31(in thousands):
 
Balance at
Beginning
of Year
 
Additions
Charged to
Expense
 
Additions
Charged
Against
Revenues
 
Deductions
from
Reserve
 
Balance
at End
of Year
2014:         
Allowance for doubtful accounts and returns and allowances$7,000
 $2,950
 $3,240
 $(6,490) $6,700
2013: 
  
  
  
  
Allowance for doubtful accounts and returns and allowances$6,400
 $2,350
 $5,050
 $(6,800) $7,000
2012: 
  
  
  
  
Allowance for doubtful accounts and returns and allowances$7,260
 $1,930
 $1,860
 $(4,650) $6,400


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SIGNATURES
Pursuant to the requirements15(d) of the Securities Exchange Act of 1934, as amended, the Registrantregistrant has duly caused this Report on Form 10-Kreport to be signed on its behalf by the undersigned, thereunto duly authorized, in Stamford, Connecticut, on February 27, 2015.  
authorized.

 Gartner, Inc.
  
Date:February 27, 2015By:/s/ Eugene A. Hall
  Eugene A. Hall
  Chief Executive Officer
March 6, 2017
POWER OF ATTORNEY
Each person whose signature appears below appoints Eugene A. Hall and Craig W. Safian and each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in all capacities, to sign all amendments to this Report on Form 10-K, and to file the same, with appropriate exhibits and other related documents, with the Securities and Exchange Commission. Each of the undersigned ratifies and confirms his or her signatures as they may be signed by his or her attorney-in-fact to any amendments to this Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Reportreport has been signed below by the following persons on behalf of the Registrantregistrant and in the capacities and on the dates indicated:

indicated.

NameSignature Title Date
     
/s/ Eugene A. Hall Director and Chief Executive Officer February 27, 2015March 6, 2017
Eugene A. Hall (Principal Executive Officer)  
   Senior Vice President and Chief  
/s/ Craig W. Safian Senior Vice President and Chief Financial Officer February 27, 2015
Craig W. Safian (Principal Financial and Accounting Officer) March 6, 2017
*
Michael J. BingleDirector
*     
/s/ Michael J. Bingle

Peter E. Bisson

 Director February 27, 2015
Michael J. Bingle*
     
/s/

Richard J. Bressler

 Director February 27, 2015
Richard J. Bressler*
     
/s/ Raul E. CesanDirectorFebruary 27, 2015
Raul E. Cesan  Director  
*     
/s/ Karen E. DykstraDirectorFebruary 27, 2015
Karen E. Dykstra  Director  
*     
/s/ Anne Sutherland FuchsDirectorFebruary 27, 2015
Anne Sutherland Fuchs  Director  
*     
/s/ William O. GrabeDirectorFebruary 27, 2015
William O. Grabe  Director  
*     
/s/ Stephen G. PagliucaDirectorFebruary 27, 2015
Stephen G. Pagliuca  Director  
*     
/s/ James C. SmithDirectorFebruary 27, 2015
James C. Smith  Director  

*By:/s/ Eugene A. HallMarch 6, 2017
Eugene A. Hall,��
Attorney-in-Fact
42




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