FORM 10-K 10-K/A
Amendment No. 1
(MARK ONE)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016 |
| OR | ||
| o | TRANSITION 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)
| Delaware | 04-3099750 | |
| (State or | (I.R.S. Employer | |
| P.O. Box 10212 56 Top Gallant Road Stamford, CT | 06902-7700 | |
| (Zip Code) | ||
| (203) 316-1111 | ||
Securities registered pursuant to Section 12(b) of the Act:
| Title of | Name of Each Exchange on which Registered | |||
| Common Stock, | 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
þNooIndicate 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
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 oIndicate 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
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.
þIndicate 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:
Large accelerated filerþ | Accelerated filero | Non-accelerated filer 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). Yes
o NoþAs of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $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 82,652,880 as of January 31, 2017.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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.
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GARTNER, INC.
AMENDMENT NO. 1
to
ANNUAL REPORT ON FORM 10-K
FOR THE PERIOD ENDED DECEMBER 31, 2016
TABLE OF CONTENTS
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| ITEM 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 world’s leading information technology ("IT") research and advisory company. We deliverCompany that obligates the technology-related insight necessary for our clientsCompany to makeinclude him on the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies,slate of nominees to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, marketing professionals and technology investors, we are a valuable partner to clients. As of December 31, 2016, we had clients in 11,122 distinct enterprises. We work with clients to research, analyze and interpret the business of IT, supply chain, and marketing within the context of their individual roles. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and as of December 31, 2016, had 8,813 employees, including 1,922 research analysts and consultants, and clients in over 90 countries.
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 charge,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 orour 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. |
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| 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 1993 | Mr. 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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| 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 Investor Relations sectionname, age, and other biographical information of each of our website, printableexecutive 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. |
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| 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 file reports of ownership and changes of ownership with the SEC and to furnish us with copies of our annualthe reports they file. To assist with this reporting obligation, the Company prepares and files ownership reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-Kbehalf of its officers and amendments to those reports filed or furnisheddirectors pursuant to Section 13(a)powers of attorney issued by the officer 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 itdirector to the SecuritiesCompany. Based solely on our review of these reports, or written representations from certain reporting persons, there were no late filings in 2016.
CORPORATE GOVERNANCE
Code of Ethics and Exchange Commission (the “SEC”).
Gartner has adopted a 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.
| 2016 | 2015 | ||||||||||||||
| High | Low | High | Low | ||||||||||||
| Quarter ended March 31 | $ | 89.73 | $ | 77.80 | $ | 86.28 | $ | 74.39 | |||||||
| Quarter ended June 30 | 103.00 | 86.17 | 89.10 | 82.35 | |||||||||||
| Quarter ended September 30 | 100.74 | 87.86 | 92.46 | 79.93 | |||||||||||
| Quarter ended December 31 | $ | 105.45 | $ | 84.54 | $ | 94.82 | $ | 81.52 | |||||||
| 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 (in billions) | ||||||||
| October | 51,590 | $ | 84.96 | ||||||||
| November | 11,868 | 104.03 | |||||||||
| December | 4,434 | 103.56 | |||||||||
| Total (1) | 67,892 | $ | 89.51 | $ | 1.1 | ||||||
| Eugene A. Hall | Chief Executive Officer |
| Craig W. Safian | Senior Vice President & Chief Financial Officer | |
| Senior Vice President, Gartner Consulting | ||
| David Godfrey | Senior Vice President, Sales | |
| Alwyn Dawkins | Senior Vice President, Events |
The CD&A is organized into three sections:
| · | The Executive Summary, which highlights the | |
| · | The Compensation Setting Process for 2016 | |
| · | Other Compensation Policies and Information |
| (In thousands, except per share data) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
| STATEMENT OF OPERATIONS DATA: | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Research | $ | 1,829,721 | $ | 1,583,486 | $ | 1,445,338 | $ | 1,271,011 | $ | 1,137,147 | ||||||||||
| Consulting | 346,214 | 327,735 | 348,396 | 314,257 | 304,893 | |||||||||||||||
| Events | 268,605 | 251,835 | 227,707 | 198,945 | 173,768 | |||||||||||||||
| Total revenues | 2,444,540 | 2,163,056 | 2,021,441 | 1,784,213 | 1,615,808 | |||||||||||||||
| Operating income | 305,141 | 287,997 | 286,162 | 275,492 | 245,707 | |||||||||||||||
| Net income | $ | 193,582 | $ | 175,635 | $ | 183,766 | $ | 182,801 | $ | 165,903 | ||||||||||
| PER SHARE DATA: | ||||||||||||||||||||
| Basic income per share | $ | 2.34 | $ | 2.09 | $ | 2.06 | $ | 1.97 | $ | 1.78 | ||||||||||
| Diluted income per share | $ | 2.31 | $ | 2.06 | $ | 2.03 | $ | 1.93 | $ | 1.73 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 82,571 | 83,852 | 89,337 | 93,015 | 93,444 | |||||||||||||||
| Diluted | 83,820 | 85,056 | 90,719 | 94,830 | 95,842 | |||||||||||||||
| OTHER DATA: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 474,233 | $ | 372,976 | $ | 365,302 | $ | 423,990 | $ | 299,852 | ||||||||||
| Total assets | 2,367,335 | 2,168,517 | 1,904,351 | 1,783,582 | 1,621,277 | |||||||||||||||
| Long-term debt | 672,500 | 790,000 | 385,000 | 136,250 | 115,000 | |||||||||||||||
| Stockholders’ equity (deficit) | 60,878 | (132,400 | ) | 161,171 | 361,316 | 306,673 | ||||||||||||||
| Cash provided by operating activities | $ | 365,632 | $ | 345,561 | $ | 346,779 | $ | 315,654 | $ | 279,814 | ||||||||||
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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
Total contract value (“CV”) represents the value attributable to all of our subscription-related contracts. It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract. |
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-Term | ü | |
| Long-Term | ü | Measures 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:
| ü | CV, Revenue, EBITDA* and EPS* grew 14%, 14%, 10% and 24%, respectively, excluding the | |
| ü | ||
| ü | ||
| ü | ||
| ü | Compound 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.
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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:
| ü | ||
| ü | ||
| ü | ||
| ü | 81% of our CEO’s target total | |
| ü | Earned 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:
| ü | We have an independent Compensation Committee. | |
| ü | We have an independent compensation consultant that reports directly to the Compensation Committee. | |
| ü | We annually assess the Company’s compensation policies to ensure that the features of our program do not encourage undue risk. | |
| ü | All executive officers are “at will” employees and only our CEO has an employment agreement. | |
| ü | We have a clawback policy applicable to all executive incentive compensation (cash bonus and equity awards). | |
| ü | We have robust stock ownership guidelines for our directors and executive officers. | |
| ü | We 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. | |
| ü | We prohibit hedging and pledging transactions in company securities. | |
| ü | We do not provide excise tax gross up payments. | |
| ü | We encourage retention by having equity awards vest 25% per year over 4 years, commencing on the grant date anniversary. | |
| ü | The potential annual payout on incentive compensation elements is limited to 2 times target. | |
| ü | Our equity plan prohibits: |
| o | less than a 12 month vesting period on equity awards; | |
| o | repricing stock options and surrendering outstanding options for new options with a lower exercise price without stockholder approval; | |
| o | cash buyouts of underwater options or stock appreciation rights without stockholder approval; and | |
| o | granting 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. |
| ü | We 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:
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| Ø | to attract, motivate and retain highly talented, creative and entrepreneurial individuals by paying market-based compensation; | |
| Ø | to 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 | |
| Ø | to 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 Salary | Ø | Pay competitive salaries to attract and retain the executive talent necessary to develop and implement our corporate strategy and business plan |
| Ø | Appropriately reflect responsibilities of the position, experience of the executive and marketplace in which we compete for talent | |
| Short-Term Incentive Compensation (cash bonuses) | Ø | Motivate executives to generate outstanding performance and achieve or exceed annual operating plan |
| Ø | Align compensation with results | |
| Long-Term Incentive Compensation (equity awards) | Ø | Induce enhanced performance and promote retention |
| Ø | Align executive rewards with long-term stock price appreciation | |
| Ø | Make 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
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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 Incorporated | Intuit Inc. | ||
| Autodesk, Inc. | Moody’s Corporation | ||
| Cadence Design Systems, Inc. | Nuance Communications, Inc. | ||
| Citrix Systems, Inc. | PTC Inc. | ||
| The Dun & Bradstreet Corporation | salesforce.com, inc | ||
| Equifax Inc. | Synopsys, Inc. | ||
| IHS Market Ltd | Verisign, 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 insight,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 retention, and continuously improving our operational effectiveness.
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 increaseexcess payment. Recoupment includes the reimbursement of 9% over December 31, 2015any 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 a reported basisthe sale of released stock unit awards and 14% adjustedthe 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 foreign currency exchange. Both clientCode 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 wallet retention remained strong, at 84%issued under a stockholder-approved plan. Our 2016 short-term incentive (bonus) awards were performance-based and 104%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), respectively, at December 31, 2016.
Grant of foreign currency exchange wasEquity 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 significant. The gross contribution margin was 31%delegate its authority with respect to Section 16 persons, nor in 2016 comparedany 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 33%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 2015. Consultant utilization was 66% in both periods. We had 628 billable consultants at December 31, 2016 comparedthe 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 606 at year-end 2015. Backlog was $103.8 million at December 31, 2016.
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 2016 compared to 52% in 2015. We held 66 events in 2016 compared to 65 in 2015, whilethe 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 attendees increased 4% in 2016,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 54,602.
As discussed above, the structure and value of annual long-term incentive awards comprising the long-term incentive compensation element of our results, seecompensation package to executive officers are established and approved by the Segment Results section below.
It is the Company’s policy not to make equity awards to executive officers prior to the Consolidated Financial Statementsrelease 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 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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COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of Gartner, Inc. has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in thisthe Company’s Annual Report on Form 10-K for additional information). Wethe year ended 2016 with $474.2 million in cash and cash equivalents while $1.1 billion was available for borrowingDecember 31, 2016.
Compensation Committee of the Board 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 revolving credit line.
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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 outstanding common stockCEO, CFO and we also acquired two businesses. In addition, in January 2017 we announced that we have entered into a definitive agreement whereby Gartner will acquire all ofnext three most highly compensated executive officers (collectively, the outstanding shares of CEB Inc., an industry leader in providing best practice and talent management insights (see Note 16 — Subsequent Events“Named Executive Officers” or “NEOs”) in the Notes toyears indicated. As you can see from the Consolidated Financial Statements for additional information).
| 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 other factors which are beyond our control. The potential fluctuationsaccordingly does not include amounts, if any, released 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.
(2) Represents the policies discussed below to be critical to an understanding of our financial statements because their application requires complex and subjective management judgments and estimates. Specific risks for these critical accounting policies are described below.
| December 31, | |||||||
| 2016 | 2015 | ||||||
| Total fees receivable | $ | 650,413 | $ | 587,663 | |||
| Allowance for losses | (7,400 | ) | (6,900 | ) | |||
| Fees receivable, net | $ | 643,013 | $ | 580,763 | |||
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Income Increase (Decrease) $ | Income Increase (Decrease) % | |||||||||||
| Total revenues | $ | 2,444,540 | $ | 2,163,056 | $ | 281,484 | 13 | % | ||||||
| Costs and expenses: | ||||||||||||||
| Cost of services & product development | 945,648 | 839,076 | (106,572 | ) | (13 | ) | ||||||||
| Selling, general and administrative | 1,089,184 | 962,677 | (126,507 | ) | (13 | ) | ||||||||
| Depreciation | 37,172 | 33,789 | (3,383 | ) | (10 | ) | ||||||||
| Amortization of intangibles | 24,797 | 13,342 | (11,455 | ) | (86 | ) | ||||||||
| Acquisition & integration charges | 42,598 | 26,175 | (16,423 | ) | (63 | ) | ||||||||
| Operating income | 305,141 | 287,997 | 17,144 | 6 | ||||||||||
| Interest expense, net | (25,116 | ) | (20,782 | ) | (4,334 | ) | (21 | ) | ||||||
| Other income (expense), net | 8,406 | 4,996 | 3,410 | 68 | ||||||||||
| Provision for income taxes | (94,849 | ) | (96,576 | ) | 1,727 | 2 | ||||||||
| Net income | $ | 193,582 | $ | 175,635 | $ | 17,947 | 10 | % | ||||||
(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 year ended December 31, 2015. ExcludingNamed Executive Officer’s 401(k) account (subject to limitations).
(2) Represents the impactCompany’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 foreign currency exchange,which individually exceeded the greater of $25,000 or 10% of the total revenues increased 14%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 comparedpursuant to 2015. Year-over-year reported segment revenues increased by 16% innon-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 Research segment, 6% in Consulting and 7% in Events.2014 Plan).
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| Geographic Region | December 31, 2016 | December 31, 2015 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||
| U.S. and Canada | $ | 1,519,748 | $ | 1,347,676 | $ | 172,072 | 13 | % | ||||||||
| Europe, Middle East, Africa | 616,721 | 557,165 | 59,556 | 11 | ||||||||||||
| Other International | 308,071 | 258,215 | 49,856 | 19 | ||||||||||||
| Totals | $ | 2,444,540 | $ | 2,163,056 | $ | 281,484 | 13 | % | ||||||||
| Segment | December 31, 2016 | December 31, 2015 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||
| Research | $ | 1,829,721 | $ | 1,583,486 | $ | 246,235 | 16 | % | ||||||||
| Consulting | 346,214 | 327,735 | 18,479 | 6 | ||||||||||||
| Events | 268,605 | 251,835 | 16,770 | 7 | ||||||||||||
| Totals | $ | 2,444,540 | $ | 2,163,056 | $ | 281,484 | 13 | % | ||||||||
| 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 comparedbased solely upon achievement of specified financial performance objectives for 2016 and ranging from 0% (threshold) to 2015, to $945.6 million compared to $839.1 million in 2015. COS expense increased 14% in 2016 when compared to 2015 adjusted for the impact200% (maximum) of foreign exchange. The year-over-year increase in COS expense was due to $88.0 million in higher
(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%) expense increased by $126.5 millionoriginally 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 2016, or 13%,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 $1,089.2 million comparedcontinued 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 $962.7 millionthe Summary Compensation Table included in 2015. Excluding the impact of foreign currency exchange, SG&A expense increased 15% year-over-year. The increase was primarily duethis Item 11.
Employment Agreements with Executive Officers
Only our Chief Executive Officer, Mr. Hall, is a party to $115.0 million in higher payroll and related benefits costs from additional headcount, higher sales commissions, and merit salary increases, and we also had $27.5 million in additional legal, recruiting and training, and workplace costs. Partially offsetting these additional charges was approximately $16.0 million in foreign exchange impact. SG&A headcount increased 13% overall,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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| Component | Description | |
| Base Salary | Ø | $908,197, subject to adjustment on an annual basis by the Compensation Committee |
| Target Bonus | Ø | 105% of annual base salary (target), adjusted for achievement of specified Company and individual objectives |
| Ø | The 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 | Ø | Aggregate 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”) |
| Ø | The 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 | |
| Ø | The 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 | |
| Other | Ø | 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 | |
| Ø | Entitled 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:
| Component | Description | |
| Base Salary | Ø | accrued base salary and unused paid time off (“PTO”) through termination |
| Ø | 36 months continued base salary paid pursuant to normal payroll schedule | |
| Short-Term Incentive Award (Bonus) | Ø | earned but unpaid bonus |
| Ø | 300% of the average of Mr. Hall’s earned annual bonuses for the three years preceding termination, payable in a lump sum | |
| Ø | 36 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) |
| Other | Ø | reimbursement 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:
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| Component | Description | |
| Ø | accrued base salary and unused PTO through termination | |
| Base Salary | Ø | 3 times base salary then in effect, payable 6 months following termination |
| Short-Term Incentive Award (Bonus) | Ø | any earned but unpaid bonus |
| Ø | 3 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 |
| Ø | all 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 | |
| Other | Ø | reimbursement 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 increasemembers 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.
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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:
| Component | Description | |
| Base Salary | Ø | accrued base salary and unused PTO (not to exceed 25 days) through termination |
| Ø | 12 months continued base salary paid pursuant to normal payroll schedule | |
| Long – Term Incentive Awards | Ø | If 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 |
| Ø | If no Change in Control, unvested equity awards are forfeited (except in the case of death, disability and retirement, discussed below) | |
| Other | Ø | Reimbursement 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 paid to any executive who refuses to accept an offer 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 Event | Treatment of Unvested Equity Awards | |
| Death or Disability – pre 2015 awards | Ø 12 months additional vesting upon event | |
| Death or Disability – 2015 et seq. awards | Ø 100% vesting upon event | |
| Retirement – not eligible | Ø Unvested awards forfeited | |
| Retirement – pre 2015 awards - eligible | Ø 12 months additional vesting upon event | |
| Termination Event | Treatment 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 |
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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 NEOs, only Mr. Hall qualified for the additional quota-bearing sales associatesvesting benefit upon retirement. Disability is defined in our current equity award agreements as total and permanent 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 disability, and through the expiration date in the case of retirement. In each case, upon termination for any 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 support staff. Quota-bearing sales associates increased 12% year-over-year,performance metric upon certification by the Compensation Committee. In all cases related to 2,423retirement, 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 entitled 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 from 2,171are 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 table 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 year-end 2015.
Involuntary | Involuntary | Total | Death, | Change in | Change in | Total | ||||||
| 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 comparedbonus; 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 Common 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 2015 which reflects our additional investment in fixed assets.
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and 2016 compared to $2.06that would have vested within 12 months following the Termination Date and (ii) all unvested SARs awarded in 2015 due to the higher net income and to a lesser extent, a decrease in2016, multiplied by the number of weighted-average sharessuch 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 the Year End Price of all unvested PSUs on the Termination Date (at target in the case of unadjusted 2016 period.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.
Other Named Executive Officers
The table 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 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 end of 2016.
Named Executive Officer | Involuntary | Value of | Value of | Total Change In | ||||
| 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 effect 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 executive must be employed on the bonus payment date (February 2017 in order to receive earned but unpaid 2016 bonus, in the event of termination on December 31, 2016, 2016 bonus would have been forfeited 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 the 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 retirement benefits on December 31, 2016 and would have forfeited all unvested equity had they retired on the Termination Date.
(3) Represents (x) the fair market value using the Year End Price of all 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.
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Outstanding Equity Awards at Fiscal Year-End Table
This table provides information on each option (including stock appreciation rights or SARs) and stock (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 2016 PSU award (see footnote 4)) were fully satisfied as of December 31, 2016, and the award is fixed. The market value of the stock awards is based on the closing price of our 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. |
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| (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 | Value | Number of | Value | ||||
| 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
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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 presentsprovides information (in dollars) concerning contributions to the changesDeferred Compensation Plan in selected line items2016 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 | Company | Aggregate | Aggregate Withdrawals/ | Aggregate | |||||
| 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 our Consolidated Statements of Operationsthe “Base Salary” and/or “Non-Equity Incentive Plan Compensation” columns in the Summary Compensation Table for the two years ended December 31, 2015 (in thousands):
Year Ended December 31, 2015 | Year Ended December 31, 2014 | Income Increase (Decrease) $ | Income Increase (Decrease) % | |||||||||||
| Total revenues | $ | 2,163,056 | $ | 2,021,441 | $ | 141,615 | 7 | % | ||||||
| Costs and expenses: | ||||||||||||||
| Cost of services & product development | 839,076 | 797,933 | (41,143 | ) | (5 | ) | ||||||||
| Selling, general and administrative | 962,677 | 876,067 | (86,610 | ) | (10 | ) | ||||||||
| Depreciation | 33,789 | 31,186 | (2,603 | ) | (8 | ) | ||||||||
| Amortization of intangibles | 13,342 | 8,226 | (5,116 | ) | (62 | ) | ||||||||
| Acquisition & integration charges | 26,175 | 21,867 | (4,308 | ) | (20 | ) | ||||||||
| Operating income | 287,997 | 286,162 | 1,835 | 1 | ||||||||||
| Interest expense, net | (20,782 | ) | (10,887 | ) | (9,895 | ) | (91 | ) | ||||||
| Other income (expense), net | 4,996 | (592 | ) | 5,588 | >100 | |||||||||
| Provision for income taxes | (96,576 | ) | (90,917 | ) | (5,659 | ) | (6 | ) | ||||||
| Net income | $ | 175,635 | $ | 183,766 | $ | (8,131 | ) | (4 | )% | |||||
(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 year ended December 31, 2015 increased $141.6 million, or 7%, comparedNEOs.
DIRECTOR COMPENSATION
Compensation of Directors
The Governance Committee annually reviews all forms of independent director compensation and recommends changes to the year ended December 31, 2014. Revenues increasedBoard, when appropriate. The Governance Committee is supported in this review by double-digitsExequity, LLP. The review examines director compensation in our Researchrelation to two comparator groups: Proxy Peer Group and Events businesses but declined 6% in Consulting. ExcludingGeneral Industry Reference Group. The Proxy Peer Group includes the impactsame companies used to benchmark executive pay (see page 21). The General Industry Reference Group includes 100 companies with median revenues similar to that of foreign currency exchange, total revenues increased 13% in 2015 compared to 2014.
| Geographic Region | December 31, 2015 | December 31, 2014 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||
| U.S. and Canada | $ | 1,347,676 | $ | 1,204,476 | $ | 143,200 | 12 | % | ||||||||
| Europe, Middle East, Africa | 557,165 | 570,334 | (13,169 | ) | (2 | ) | ||||||||||
| Other International | 258,215 | 246,631 | 11,584 | 5 | ||||||||||||
| Totals | $ | 2,163,056 | $ | 2,021,441 | $ | 141,615 | 7 | % | ||||||||
| Segment | December 31, 2015 | December 31, 2014 | Increase (Decrease) $ | Increase (Decrease) % | ||||||||||||
| Research | $ | 1,583,486 | $ | 1,445,338 | $ | 138,148 | 10 | % | ||||||||
| Consulting | 327,735 | 348,396 | (20,661 | ) | (6 | ) | ||||||||||
| Events | 251,835 | 227,707 | 24,128 | 11 | ||||||||||||
| Totals | $ | 2,163,056 | $ | 2,021,441 | $ | 141,615 | 7 | % | ||||||||
Directors who are directly-related to our acquisitionsalso employees receive no fees for their services as directors. Non-management directors are reimbursed for their meeting attendance expenses and primarily include amounts accruedreceive the following compensation for payments contingent on the achievement of certain employment conditions, legal, consulting, and severance costs.
| 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. |
2016 | 2015 | Increase (Decrease) | % Increase (Decrease) | 2015 | 2014 | Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||
| Financial Measurements: | |||||||||||||||||||||||||
Revenues (1) | $1,829,721 | $1,583,486 | $ | 246,235 | 16 | % | $1,583,486 | $1,445,338 | $ | 138,148 | 10 | % | |||||||||||||
Gross contribution (1) | $1,267,760 | $1,096,827 | $ | 170,933 | 16 | % | $1,096,827 | $1,001,914 | $ | 94,913 | 9 | % | |||||||||||||
| Gross contribution margin | 69 | % | 69 | % | — | — | 69 | % | 69 | % | — | — | |||||||||||||
| Business Measurements: | |||||||||||||||||||||||||
Total contract value (1), (2) | $1,930,000 | $1,768,300 | $ | 161,700 | 9 | % | $1,768,300 | $1,605,945 | $ | 162,355 | 10 | % | |||||||||||||
Research contract value (1), (3) | $1,922,500 | $1,760,700 | $ | 161,800 | 9 | % | $1,760,700 | $1,603,200 | $ | 157,500 | 10 | % | |||||||||||||
| Client retention | 84 | % | 84 | % | — | — | 84 | % | 85 | % | (1) point | — | |||||||||||||
| Wallet retention | 104 | % | 105 | % | (1) point | — | 105 | % | 106 | % | (1) point | — | |||||||||||||
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| 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) |
| (2) | Except for Mr. Bisson, represents the grant date value of an annual 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 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). |
| 2016 | 2015 | Increase (Decrease) | % Increase (Decrease) | 2015 | 2014 | Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||
| Financial Measurements: | |||||||||||||||||||||||||||||
| Revenues (1) | $346,214 | $327,735 | $ | 18,479 | 6 | % | $327,735 | $348,396 | $ | (20,661 | ) | (6 | )% | ||||||||||||||||
| Gross contribution (1) | $107,585 | $107,193 | $ | 392 | — | % | $107,193 | $119,931 | $ | (12,738 | ) | (11 | )% | ||||||||||||||||
| Gross contribution margin | 31 | % | 33 | % | (2) points | — | 33 | % | 34 | % | (1) point | — | |||||||||||||||||
| Business Measurements: | |||||||||||||||||||||||||||||
| Backlog (1) | $103,800 | $117,700 | $ | (13,900 | ) | (12 | )% | $117,700 | $102,600 | $ | 15,100 | 15 | % | ||||||||||||||||
| Billable headcount | 628 | 606 | 22 | 4 | % | 606 | 535 | 71 | 13 | % | |||||||||||||||||||
| Consultant utilization | 66 | % | 66 | % | — | — | 66 | % | 68 | % | (2) points | — | |||||||||||||||||
| Average annualized revenue per billable headcount (1) | $ | 383 | $ | 391 | $ | (8 | ) | (2 | )% | $ | 391 | $ | 442 | $ | (51 | ) | (12 | )% | |||||||||||
Director Stock Ownership and Holding Period Guidelines
The Board believes directors should have a financial interest in the Company. Accordingly, each director is required to $346.2 million,hold shares of Gartner common stock with a value of not less than five (5) times the increase mostlyAnnual Director Retainer Fee ($60,000). Directors are required to achieve the guideline within three years of joining the Board. In the event a director has not satisfied the guideline within the three year period, he/she will be required to hold 50% of net after-tax shares received from the Company either in our core consulting practice. Revenue in our contract optimization practice increased slightly but declined in our strategic advisory service ("SAS") practice. The impactthe form of foreign currency exchange was not significant. The year-over-year gross contribution margin declined by 2 points, dueequity awards or released CSEs until the guideline is achieved. We permit directors to several factors, including higher payroll costs resulting from higher headcountapply deferred and severance, as well as the revenue decline in our SAS practice, which has a higher contribution margin than core consulting. Backlog decreased by $13.9 million year-over-year, or 12%, mostly due to a large individual contract booked in 2015. Excluding that contract, backlog decreased by about 4% year-over-year. The $103.8 million of backlog at year-end 2016 represents approximately 4 months of forward backlog, which is in line with the Company's operational target.
| 2016 | 2015 | Increase (Decrease) | % Increase (Decrease) | 2015 | 2014 | Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||
| Financial Measurements: | |||||||||||||||||||||||||
| Revenues (1) | $268,605 | $251,835 | $ | 16,770 | 7 | % | $251,835 | $227,707 | $ | 24,128 | 11 | % | |||||||||||||
| Gross contribution (1) | $136,655 | $130,527 | $ | 6,128 | 5 | % | $130,527 | $112,384 | $ | 18,143 | 16 | % | |||||||||||||
| Gross contribution margin | 51 | % | 52 | % | (1) point | — | 52 | % | 49 | % | 3 points | — | |||||||||||||
| Business Measurements: | |||||||||||||||||||||||||
| Number of events | 66 | 65 | 1 | 2 | % | 65 | 61 | 4 | 7 | % | |||||||||||||||
| Number of attendees | 54,602 | 52,595 | 2,007 | 4 | % | 52,595 | 49,047 | 3,548 | 7 | % | |||||||||||||||
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 $585.0 million outstandingany relationship with the Company required to be disclosed under Certain Relationships And Related Transactions disclosed in Item 13 hereof. Additionally, during 2016, no executive officer of the term loanCompany: (i) served as a member of the compensation committee (or full board in the absence of such a committee) or as a director of another entity, one of whose executive officers served on our Compensation Committee; or (ii) served as a member of the compensation committee (or full board in the absence of such a committee) of another entity, one of whose executive officers served on our Board.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based on our review of information on file with the SEC and $115.0 million underour stock records, the revolverfollowing 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 us 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 $1.1 billion(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 address for those listed below is c/o Gartner, Inc., 56 Top Gallant Road, Stamford, CT 06904. The amounts shown do not include CSEs that release upon termination of available revolver borrowing capacity underservice 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 2016 Credit Agreement. We had $474.2 millionpayment of cashexercise price and cash equivalents at December 31, 2016.
| 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 majority of our Research customer contracts are paid in advance, and combined with a strong customer retention rate and high incremental margins, has resulted in continuously strong operating cash flow. Our cash flow generation has also benefited from our continuing efforts to improve the operating efficiencies of our businesses as well as a focus on the optimal management of our working capital as we increase our sales volume.
| Column A | Column B | Column C | ||||
Plan Category | Number of Securities | Weighted Average | Number of Securities | |||
| 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 DIRECTOR 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 expenses incurred in connectionPractices, 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 acquisition.conflict must abstain from voting on any such matter. The closingGovernance Committee is charged with resolving any conflict of interest issues brought to its attention and has the transactionpower 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 borrowings will significantly increaseparty transactions involving Gartner employees must be reported to, and pre-approved by, the Company's outstanding debt.
In 2016, there were no related party transactions in numerous locations throughout the world. At December 31, 2016, approximately $432.0 millionwhich any director, executive officer or a greater than 5% owner of our total $474.2 million in cash and cash equivalents was held outside the U.S. Of the $432.0 millionstock, or immediate family member of cash and cash equivalents held outside the United States at December 31, 2016, approximately $340.0 million represents accumulated undistributed earningsany of our non-U.S. subsidiaries. Under U.S. GAAP rules, no provision for income taxes that may result from the remittance of such earnings is required if the Company has the ability and intent to reinvest such funds overseas indefinitely. Our current plans do not demonstrate a need to repatriate these undistributed earnings to fund our U.S. operationsthem, had 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 income tax expense that could result from the remittance of these earnings.
| 2016 vs. 2015 | 2015 vs. 2014 | ||||||||||||||||||||||
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Increase (Decrease) | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Increase (Decrease) | ||||||||||||||||||
| Cash provided by operating activities (1) | $ | 365,632 | $ | 345,561 | $ | 20,071 | $ | 345,561 | $ | 346,779 | $ | (1,218 | ) | ||||||||||
| Cash used in investing activities | (84,049 | ) | (242,357 | ) | 158,308 | (242,357 | ) | (162,777 | ) | (79,580 | ) | ||||||||||||
| Cash used by financing activities | (174,686 | ) | (67,690 | ) | (106,996 | ) | (67,690 | ) | (208,670 | ) | 140,980 | ||||||||||||
| Net increase (decrease) | 106,897 | 35,514 | 71,383 | 35,514 | (24,668 | ) | 60,182 | ||||||||||||||||
| Effects of exchange rate changes | (5,640 | ) | (27,840 | ) | 22,200 | (27,840 | ) | (34,020 | ) | 6,180 | |||||||||||||
| Beginning cash and cash equivalents | 372,976 | 365,302 | 7,674 | 365,302 | 423,990 | (58,688 | ) | ||||||||||||||||
| Ending cash and cash equivalents | $ | 474,233 | $ | 372,976 | $ | 101,257 | $ | 372,976 | $ | 365,302 | $ | 7,674 | |||||||||||
| 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) | $ | 20,627 | $ | 41,209 | $ | 741,149 | $ | 2,515 | $ | 805,500 | ||||||||||
| Operating leases (2) | 49,250 | 74,714 | 48,350 | 142,930 | 315,244 | |||||||||||||||
| Deferred compensation arrangement (3) | 3,870 | 6,475 | 4,900 | 28,470 | 43,715 | |||||||||||||||
| Other (4) | 11,580 | 12,230 | 11,940 | 30,630 | 66,380 | |||||||||||||||
| Totals | $ | 85,327 | $ | 134,628 | $ | 806,339 | $ | 204,545 | $ | 1,230,839 | ||||||||||
| 2016 | ||||||||||||||||
| (In thousands, except per share data) | First | Second | Third | Fourth | ||||||||||||
| Revenues | $ | 557,266 | $ | 609,998 | $ | 574,059 | $ | 703,217 | ||||||||
| Operating income | 64,429 | 83,299 | 48,726 | 108,687 | ||||||||||||
| Net income (1) | 44,987 | 51,626 | 30,484 | 66,485 | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic (1), (2) | $ | 0.55 | $ | 0.63 | $ | 0.37 | $ | 0.80 | ||||||||
| Diluted (1), (2) | $ | 0.54 | $ | 0.62 | $ | 0.36 | $ | 0.79 | ||||||||
| 2015 | ||||||||||||||||
| (In thousands, except per share data) | First | Second | Third | Fourth | ||||||||||||
| Revenues | $ | 471,186 | $ | 547,936 | $ | 500,166 | $ | 643,768 | ||||||||
| Operating income | 48,682 | 85,220 | 52,474 | 101,621 | ||||||||||||
| Net income | 28,351 | 51,155 | 30,366 | 65,763 | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic (2) | $ | 0.33 | $ | 0.61 | $ | 0.37 | $ | 0.80 | ||||||||
| Diluted (2) | $ | 0.32 | $ | 0.61 | $ | 0.36 | $ | 0.78 | ||||||||
DIRECTOR INDEPENDENCE
Our Board Guidelines require that our consolidated financial statements when adopted but could impactBoard be comprised of a majority of directors who meet the timingcriteria 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 recognition of taxes on future intra-entity transfers.
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
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commercial, financial, familial, employment and maintaining adequate internal control over financial reporting 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 regarding the reliability of financial reportingother relationships between each director and the preparation of financial statements for external purposes in accordanceCompany, its auditors and other companies that do business with accounting principles generally accepted inGartner.
After analysis and recommendation by the United States.Governance Committee, the Board determined that:
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 Board of Directors.
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 their report which is included in thisits Annual Report on Form 10-K, audit of internal controls over financial reporting and reviews of the Company’s quarterly financial information contained in Part IV, Item 15.
Audit-Related Fees
Audit-related fees relate to professional services rendered by KPMG primarily for an agreed upon procedures report and issuance of a report-writer IT application operatedconsent in connection with the Company’s enterprise resourcefiling of a registration statement.
Tax Fees
Tax fees relate to professional services rendered by KPMG for permissible tax compliance, tax advice and tax planning systems. Specifically, we didservices.
All Other Fees
This category of fees covers all fees for any permissible service not have effective controls over the configuration of the reports and completeness and accuracy of information presentedincluded in the reports. Reports producedabove categories.
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Pre-Approval Policies
The Audit Committee’s policy is to pre-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 report-writer IT application are usedbeginning 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 operation of certain key internal controls. We have determined that these deficienciesimmediately preceding fiscal quarter in our internal control over financial reporting constituted a material weakness that originated in periods prior to the fourth quarter of 2016. The deficiencies resulted in no misstatements to the current or previously issued financial statements.
(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
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 (3) | Credit Agreement, dated as of 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(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(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. | |
| 10.3(6) | 2011 Employee Stock Purchase Plan. | |
| 10.4(7) | 2003 Long -Term Incentive Plan, as amended and restated effective June 4, 2009. | |
| 10.5(8) | 2014 Long-Term Incentive Plan, effective May 29, 2014. | |
| 10.6(9) | Amended and Restated Employment Agreement between Eugene A. Hall and the Company dated as of March 19, 2016. |
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| 10.7(10) | Company Deferred Compensation Plan, effective January 1, 2009. | |
| 10.8(11) | Form of 2017 Stock Appreciation Right Agreement for executive officers. | |
| 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. | |
| 24.1** | Power of | |
| 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. |
| * | 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 filed on August 9, 2010. |
| (6) | Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed 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. |
| (9) | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on May 5, 2016. |
| (10) | Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 20, 2009. |
| (11) | Incorporated by reference from the Company’s Current Report on Form 8-K dated February 6, 2017 and filed on February 7, 2017. |
| (12) | Incorporated by reference from the Company’s Current Report on Form 8-K dated and filed January 5, 2017. |
None.
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Pursuant to Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Peter E. Bisson Richard J. BresslerReport of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersGartner, Inc.:We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility isSIGNATURES 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, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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, 2016, 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 22, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.(KPMG LLP LOGO)/s/ KPMG LLPNew York, New YorkFebruary 22, 2017Report of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersGartner, Inc.:We have audited Gartner, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2016, 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, 2016, 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, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2016, and our report dated February 22, 2017 expressed an unqualified opinion on those consolidated financial statements.(KPMG LLP LOGO)/s/ KPMG LLPNew York, New YorkFebruary 22, 2017GARTNER, INC.CONSOLIDATED BALANCE SHEETS(IN THOUSANDS, EXCEPT SHARE DATA) December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $ 474,233 $ 372,976 Fees receivable, net of allowances of $7,400 and $6,900 respectively 643,013 580,763 Deferred commissions 141,410 124,831 Prepaid expenses and other current assets 84,540 62,427 Total current assets 1,343,196 1,140,997 Property, equipment and leasehold improvements, net 121,606 108,733 Goodwill 738,453 715,359 Intangible assets, net 76,801 96,544 Other assets 87,279 106,884 Total Assets $ 2,367,335 $ 2,168,517 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued liabilities $ 440,771 $ 387,691 Deferred revenues 989,478 900,801 Current portion of long-term debt 30,000 35,000 Total current liabilities 1,460,249 1,323,492 Long-term debt, net of deferred financing fees 664,391 783,831 Other liabilities 181,817 193,594 Total Liabilities 2,306,457 2,300,917 Stockholders’ Equity (Deficit): 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 periods 78 78 Additional paid-in capital 863,127 818,546 Accumulated other comprehensive loss, net (49,683 ) (44,402 ) Accumulated earnings 1,644,005 1,450,684 Treasury stock, at cost, 73,583,172 and 73,896,245 common shares, respectively (2,396,649 ) (2,357,306 ) Total Stockholders’ Equity (Deficit) 60,878 (132,400 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 2,367,335 $ 2,168,517 See Notes to Consolidated Financial Statements.GARTNER, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA) Year Ended December 31, 2016 2015 2014 Revenues: Research $ 1,829,721 $ 1,583,486 $ 1,445,338 Consulting 346,214 327,735 348,396 Events 268,605 251,835 227,707 Total revenues 2,444,540 2,163,056 2,021,441 Costs and expenses: Cost of services and product development 945,648 839,076 797,933 Selling, general and administrative 1,089,184 962,677 876,067 Depreciation 37,172 33,789 31,186 Amortization of intangibles 24,797 13,342 8,226 Acquisition and integration charges 42,598 26,175 21,867 Total costs and expenses 2,139,399 1,875,059 1,735,279 Operating income 305,141 287,997 286,162 Interest income 2,449 1,766 1,413 Interest expense (27,565 ) (22,548 ) (12,300 ) Other income (expense), net 8,406 4,996 (592 ) Income before income taxes 288,431 272,211 274,683 Provision for income taxes 94,849 96,576 90,917 Net income $ 193,582 $ 175,635 $ 183,766 Net income per share: Basic $ 2.34 $ 2.09 $ 2.06 Diluted $ 2.31 $ 2.06 $ 2.03 Weighted average shares outstanding: Basic 82,571 83,852 89,337 Diluted 83,820 85,056 90,719 See Notes to Consolidated Financial Statements.GARTNER, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(IN THOUSANDS) Year Ended December 31, 2016 2015 2014 Net income $ 193,582 $ 175,635 $ 183,766 Other comprehensive (loss) income, net of tax Foreign currency translation adjustments (5,986 ) (23,089 ) (27,461 ) Interest rate hedges - net change in deferred loss 1,670 (1,339 ) 2,163 Pension plans - net change in deferred actuarial loss (965 ) 1,196 (4,217 ) Other comprehensive (loss) income, net of tax (5,281 ) (23,232 ) (29,515 ) Comprehensive income $ 188,301 $ 152,403 $ 154,251 See Notes to Consolidated Financial Statements.GARTNER, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)(IN THOUSANDS) 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 income — — (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 Net income — — — 175,635 — 175,635 Other comprehensive loss — — (23,232 ) — — (23,232 ) Issuances under stock plans — (5,964 ) — — 13,495 7,531 Stock compensation tax benefits — 13,928 — — — 13,928 Common share repurchases — — — — (513,582 ) (513,582 ) Stock compensation expense — 46,149 — — — 46,149 Balance at December 31, 2015 $ 78 $ 818,546 $ (44,402 ) $ 1,450,684 $ (2,357,306 ) $ (132,400 ) Adoption of ASU No. 2016-09 — — — (261 ) — (261 ) Net income — — — 193,582 — 193,582 Other comprehensive loss — — (5,281 ) — — (5,281 ) Issuances under stock plans — (2,080 ) — — 12,419 10,339 Common share repurchases — — — — (51,762 ) (51,762 ) Stock compensation expense — 46,661 — — — 46,661 Balance at December 31, 2016 $ 78 $ 863,127 $ (49,683 ) $ 1,644,005 $ (2,396,649 ) $ 60,878 See Notes to Consolidated Financial Statements.GARTNER, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS) Year Ended December 31, 2016 2015 2014 Operating activities: Net income $ 193,582 $ 175,635 $ 183,766 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of intangibles 61,969 47,131 39,412 Stock-based compensation expense 46,661 46,149 38,845 Excess tax benefits from stock-based compensation exercises — (13,860 ) (20,193 ) Deferred taxes (2,648 ) 344 (759 ) Gain on extinguishment of debt (2,500 ) — — Amortization and write-off of debt issue costs 3,082 1,512 2,645 Changes in assets and liabilities: Fees receivable, net (68,661 ) (44,476 ) (76,424 ) Deferred commissions (18,673 ) (13,236 ) (12,340 ) Prepaid expenses and other current assets (21,604 ) (13,268 ) (3,017 ) Other assets 20,005 (14,733 ) (7,139 ) Deferred revenues 97,979 91,840 105,354 Accounts payable, accrued, and other liabilities 56,440 82,523 96,629 Cash provided by operating activities 365,632 345,561 346,779 Investing activities: Additions to property, equipment and leasehold improvements (49,863 ) (46,128 ) (38,486 ) Acquisitions (net of cash acquired) (34,186 ) (196,229 ) (124,291 ) Cash used in investing activities (84,049 ) (242,357 ) (162,777 ) Financing activities: Proceeds from ESP Plan 9,250 7,499 7,767 Proceeds from borrowings 715,000 440,000 400,000 Payments on debt (835,000 ) (20,000 ) (200,000 ) Purchases of treasury stock (58,961 ) (509,049 ) (432,006 ) Fees paid for debt refinancing (4,975 ) — (4,624 ) Excess tax benefits from stock-based compensation exercises — 13,860 20,193 Cash used by financing activities (174,686 ) (67,690 ) (208,670 ) Net increase (decrease) in cash and cash equivalents 106,897 35,514 (24,668 ) Effects of exchange rates on cash and cash equivalents (5,640 ) (27,840 ) (34,020 ) Cash and cash equivalents, beginning of period 372,976 365,302 423,990 Cash and cash equivalents, end of period $ 474,233 $ 372,976 $ 365,302 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 23,400 $ 21,200 $ 10,600 Income taxes, net of refunds received $ 86,300 $ 83,500 $ 70,100 See Notes to Consolidated Financial Statements.GARTNER, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESBusiness. 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 2016, 2015, and 2014 herein refer to the fiscal year unless otherwise indicated. Certain prior year balance sheet amounts have been reclassified to conform to the current year presentation.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. 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.Business Acquisitions. The Company completed acquisitions in each of the three years ended December 31, 2016 and detailed information related to these acquisitions is included in Note 2 — Acquisitions. The Company accounts for acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic No. 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 determination of the fair values of intangible and other assets acquired in acquisitions requires 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. Establishing the useful lives of the intangibles also requires management judgment and the evaluation of a number of factors, among them projected cash flows and the likelihood of competition.The Company classifies charges that are directly-related to its acquisitions in the line Acquisition and Integration Charges in the Consolidated Statements of Operations, and the Company recorded $42.6 million, $26.2 million, and $21.9 million of such charges in 2016, 2015, and 2014, respectively. Included in these directly-related and incremental charges are legal, consulting, retention, severance, and accruals for cash payments subject to the continuing employment of certain key employees of the acquired companies.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 present 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:ResearchResearch revenues are mainly derived from subscription contracts for research products. The related revenues are deferred and recognized ratably over the applicable contract term. Fees derived from assisting organizations in selecting the right business software for their needs is recognized as earned when the leads are provided to vendors.The Company typically enters into subscription contracts for research products for twelve-month periods or longer. 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 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.ConsultingConsulting 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 $45.7 million at December 31, 2016 and $43.2 million at December 31, 2015.EventsEvents 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 the expected direct costs of producing a scheduled event will exceed the 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 in revenues or an increase to expense. The determination of the allowance for losses is based on historical loss experience, an assessment of current economic conditions, the aging of outstanding receivables, the financial health of specific clients, and probable losses.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 No. 505 and 718 and 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 2016, 2015 and 2014, the Company recognized $46.7 million, $46.1 million and $38.8 million, respectively, of stock-based compensation expense, a portion of which is recorded in COS and SG&A in the Consolidated Statements of Operations. In 2016 the Company early adopted FASB Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting." See the "Adoption of new accounting standards" section below for additional information.Income taxes 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.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 $38.0 million, $33.8 million, and $31.5 million in 2016, 2015, and 2014, 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 $37.2 million, $33.8 million, and $31.2 million in 2016, 2015, and 2014, respectively. The Company's total fixed assets, less accumulated depreciation and amortization, consisted of the following (in thousands): Useful Life December 31, Category (Years) 2016 2015 Computer equipment and software 2-7 $ 166,385 $ 148,195 Furniture and equipment 3-8 43,137 39,072 Leasehold improvements 2-15 96,603 87,103 $ 306,125 $ 274,370 Less — accumulated depreciation and amortization (184,519 ) (165,637 ) Property, equipment, and leasehold improvements, net $ 121,606 $ 108,733 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 No. 350 are capitalized and amortized over future periods. Net capitalized development costs for internal use software was $16.6 million and $14.1 million at December 31, 2016 and 2015, respectively, 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 $8.8 million and $8.2 million in 2016 and 2015, respectively.Intangible assets. The Company has finite-lived 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, 2016 were as follows (in thousands):December 31, 2016 Content Software Non-Compete Total Gross cost, December 31, 2015 $ 4,144 $ 62,860 $ 5,450 $ 16,219 $ 29,330 $ 118,003 Additions due to acquisitions (1) 302 3,677 1,948 — — 5,927 Intangibles fully amortized — — (162 ) (125 ) — (287 ) Foreign currency translation impact (109 ) (3,168 ) (3,508 ) (69 ) (22 ) (6,876 ) Gross cost 4,337 63,369 3,728 16,025 29,308 116,767 Accumulated amortization (2), (3) (1,737 ) (16,744 ) (2,033 ) (8,904 ) (10,548 ) (39,966 ) Balance, December 31, 2016 $ 2,600 $ 46,625 $ 1,695 $ 7,121 $ 18,760 $ 76,801 December 31, 2015 Content Software Non-Compete Total Gross cost, December 31, 2014 $ 6,924 $ 27,933 $ 3,560 $ 6,569 $ 9,272 $ 54,258 Additions due to acquisitions (1) 3,260 42,620 2,000 11,656 20,075 79,611 Intangibles fully amortized (6,013 ) (7,210 ) — — — (13,223 ) Foreign currency translation impact (27 ) (483 ) (110 ) (2,006 ) (17 ) (2,643 ) Gross cost 4,144 62,860 5,450 16,219 29,330 118,003 Accumulated amortization (2), (3) (681 ) (9,028 ) (3,525 ) (3,699 ) (4,526 ) (21,459 ) Balance, December 31, 2015 $ 3,463 $ 53,832 $ 1,925 $ 12,520 $ 24,804 $ 96,544 (1)The additions are due to the Company's acquisitions. See Note 2 — Acquisitions for additional information.(2)Intangible assets are amortized against earnings over the following periods: Trade name—2 to 4 years; Customer relationships 4 to 7 years; Content—1.5 to 4 years; Software—3 years; Non-compete—3 to 5 years.(3)Aggregate amortization expense related to intangible assets was $24.8 million, $13.3 million, and $8.2 million in 2016, 2015, and 2014, respectively.The estimated future amortization expense by year from finite-lived intangibles is as follows (in thousands):2017 $ 23,356 2018 20,072 2019 15,081 2020 12,897 2021 and thereafter 5,395 $ 76,801 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 No. 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. If our annual goodwill impairment evaluation determines that the fair value of a reporting unit is less than its related carrying amount, we may recognize an impairment charge against earnings. In connection with its most recent annual impairment test of goodwill performedduring the third quarter of 2016, the Company utilized the qualitative approach in assessing the fair value of its reporting units relative to their respective carrying values, which indicated no impairment of recorded goodwill. The following table presents changes to the carrying amount of goodwill by segment during the two-year period ended December 31, 2016 (in thousands): Research Consulting Events Total Balance, December 31, 2014 (1) $ 445,460 $ 99,417 $ 41,788 $ 586,665 Additions due to acquisitions (2) 138,053 — — 138,053 Foreign currency translation adjustments (8,221 ) (1,005 ) (133 ) (9,359 ) Balance, December 31, 2015 $ 575,292 $ 98,412 $ 41,655 $ 715,359 Additions due to acquisitions (2) 28,465 — 5,843 34,308 Foreign currency translation adjustments (8,307 ) (1,932 ) (975 ) (11,214 ) Balance, December 31, 2016 $ 595,450 $ 96,480 $ 46,523 $ 738,453 (1)The Company does not have any accumulated goodwill impairment losses.(2)The additions are due to the Company's acquisitions (See Note 2—Acquisitions for additional information).Impairment of long-lived assets. The Company's long-lived assets primarily consist of intangible assets other than goodwill and property, equipment, and leasehold improvements. The Company reviews its long-lived asset groups 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 evaluates the recoverability of these assets by determining whether the carrying value can be recovered through undiscounted future operating cash flows. If 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 impairment charges for long-lived asset groups during the three year period ended December 31, 2016.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 No. 715. The Company determines the periodic pension expense and related liabilities for these plans through actuarial assumptions and valuations. The Company recognized $3.5 million, $3.5 million, and $3.4 million of expense for these plans in 2016, 2015, and 2014, 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, net of deferred financing fees. Interest accrued on amounts borrowed is classified in Interest expense in the Consolidated Statements of Operations. The Company refinanced its debt in 2016 and had $702.5 million of debt outstanding at December 31, 2016 (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 (loss) income, net within the Stockholders’ Equity (Deficit) 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 income (expense), net within the Consolidated Statements of Operations. The Company had net currency transaction losses of $(0.4) million, $(2.6) million, and $(1.7) million in 2016, 2015, and 2014, 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 income (expense), net. The net (loss) gain from these contracts was $(0.3) million, $(0.1) million, and $0.6 million in 2016, 2015, and 2014, respectively.Comprehensive income. The Company reports comprehensive income in a separate statement called the Consolidated Statements of Comprehensive Income, which is included herein. The Company's comprehensive income disclosures are included in Note 7 — Stockholders' Equity (Deficit).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, fees receivable, interest rate swaps, and a pension reinsurance asset. The majority of the Company’s cash equivalent investments and its interest rate swap contracts are with investment grade commercial banks. Fees 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, 2016.Stock repurchase programs. The Company records the cost to repurchase its own common shares to treasury stock. During 2016, 2015 and 2014, the Company used $59.0 million, $509.0 million, and $432.0 million, respectively, in cash for stock repurchases (see Note 7 — Stockholders’ Equity (Deficit). Shares repurchased by the Company are added to treasury shares and are not retired.Adoption of new accounting standards. The Company adopted the following new accounting standards in the year ended December 31, 2016:Extraordinary Items — The Company adopted FASB ASU No. 2015-01, "Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items" ("ASU No. 2015-01") on January 1, 2016. ASU No. 2015-01 eliminated the concept of extraordinary items. Historically the concept caused uncertainty because it was somewhat unclear when an item should be considered both unusual and infrequent and it was rare that a transaction or event met the requirements. The adoption of ASU No. 2015-01 did not have an impact on the Company’s consolidated financial statements.Cloud Computing Arrangement Fees — The Company adopted FASB ASU No. 2015-05, "Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement" ("ASU No. 2015-05) on January 1, 2016. ASU No. 2015-05 provides guidance regarding the costs related to cloud computing and hosting arrangements by identifying what portion of the cost relates to purchased software, if any, and what portion relates to paying for a service. The adoption of ASU No. 2015-05 did not have an impact on the Company’s consolidated financial statements.Business Combinations — The Company adopted FASB ASU No. 2015-16, "Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments" ("ASU No. 2015-16") on January 1, 2016. ASU No. 2015-16 requires the recognition of adjustments to business combination provisional amounts, that are identified during the measurement period, in the reporting period in which the adjustments are determined. The effects of the adjustments to provisional amounts on depreciation, amortization or other income effects are required to be recognized in current-period earnings as if the accounting had been completed at the acquisition date. Certain disclosures are also required. The adoption of ASU No. 2015-16 did not have an impact on the Company’s consolidated financial statements.Debt Issuance Cost Presentation — The Company adopted FASB ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” ("ASU No. 2015-03") on January 1, 2016. ASU No. 2015-03 required that certain debt issuance costs be presented on the balance sheet as a direct deduction from the carrying amount of the liability rather than as deferred assets. The Company reclassified its current and prior year debt issuance costs as required by the rule.Stock-Based Compensation Accounting —The Company early adopted FASB ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU No. 2016-09"), in the third quarter of 2016. While the required effective date for the adoption of this rule was January 1, 2017, the Company elected to early adopt ASU No. 2016-09, as permitted by the amendment. ASU No. 2016-09 requires certain changes in accounting for stock-based compensation, some of which was required to be applied to the beginning of the Company's fiscal year beginning January 1, 2016. Our financial results for periods prior to 2016 were not impacted.Among the changes required by ASU No. 2016-09 is that excess tax benefits or deficiencies resulting from stock-based compensation awards must be recognized in income tax expense in the Consolidated Statement of Operations. Prior to ASU No. 2016-09, excess tax benefits or deficiencies were recorded in additional paid-in capital in Stockholders' Equity (Deficit) in the Consolidated Balance Sheet. As a result, the benefit from approximately $10.0 million in excess tax benefits from stock compensation awards was recognized in income tax expense in 2016. This benefit increased our 2016 basic and diluted income per share by $0.12 per share. In addition, ASU No. 2016-09 also requires excess tax benefits related to stock-based compensationawards to be reported as cash flows from operating activities along with all other income tax cash flows on the Consolidated Statement of Cash Flows. Previously these excess tax benefits were reported as cash flows from financing activities. ASU No. 2016-09 allows companies to elect either a prospective or retrospective application for the cash flow classification change, for which the Company elected to apply this classification amendment prospectively, effective January 1, 2016. The adoption of ASU No. 2016-09 increased the Company's 2016 operating cash flow by $10.0 million with a corresponding decrease in financing activities.ASU No. 2016-09 also permits companies to make an entity-wide accounting policy election to recognize forfeitures of share-based compensation awards as they occur or make an estimate by applying a forfeiture rate each quarter. The Company previously estimated forfeitures but optionally elected to change its accounting policy and account for forfeitures as they occur. ASU No. 2016-09 requires this change in accounting policy to be applied using a cumulative-effect adjustment to accumulated earnings as of the beginning of the period in which the rule is adopted. Accordingly, the Company recorded a $0.3 million decrease to its opening accumulated earnings effective January 1, 2016.Accounting standards issued but not yet adopted. The FASB has issued several accounting standards that have not yet become effective and that may impact the Company’s consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:Business Combinations — In January 2017, the FASB issued ASU No. 2017-01, "Clarifying the Definition of a Business" ("ASU No. 2017-01"), which is effective for Gartner on January 1, 2018. ASU No. 2017-01 changes the GAAP definition of a business which can impact the accounting for asset purchases, acquisitions, goodwill impairment, and other assessments. We are currently evaluating the impact of ASU No. 2017-01 on the Company's consolidated financial statements.Statement of Cash Flows — In November 2016, the FASB issued ASU No. 2016-18, "Restricted Cash" ("ASU No. 2016-18"). ASU No. 2016-18 requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If different, a reconciliation of the cash balances reported in the cash flow statement and the balance sheet would need to be provided along with explanatory information. ASU No. 2016-18 is effective for Gartner on January 1, 2018. We are currently evaluating the impact of ASU No. 2016-18 on the Company's consolidated financial statements.Income Taxes — In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" ("ASU No. 2016-16"). ASU No. 2016-16 accelerates the recognition of taxes on certain intra-entity transactions and is effective for Gartner on January 1, 2018. Current GAAP requires deferral of the income tax implications of an intercompany sale of assets until the assets are sold to a third party or recovered through use. Under the new rule, the seller’s tax effects and the buyer’s deferred taxes will be immediately recognized upon the sale. We have completed an initial evaluation of the impact of ASU No. 2016-16 and we do not expect it will have a material impact on our consolidated financial statements when adopted but could impact the timing of recognition of taxes on future intra-entity transfers.Statement of Cash Flows — In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU No. 2016-15"). ASU No. 2016-15 sets forth classification requirements for certain cash flow transactions. ASU No. 2016-15 is effective for Gartner on January 1, 2018, but early adoption is permitted. We have completed an initial evaluation of the impact of ASU No. 2016-15 and we do not expect it will have a material impact on our consolidated financial statements.Financial Instrument Credit Losses —In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU No. 2016-13"). ASU No. 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU No. 2016-13 is effective for Gartner on January 1, 2020, with early adoption permitted. We are currently evaluating the potential impact of ASU No. 2016-13 on our consolidated financial statements.Leases — In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU No. 2016-02") which will require significant changes in the accounting and disclosure for lease arrangements. Currently under U.S. GAAP, lease arrangements that meet certain criteria are considered operating leases and are not recorded on the balance sheet. All of the Company's existing lease arrangements are accounted for as operating leases and are thus not recorded on the Company's balance sheet. ASU No. 2016-02 will significantly change the accounting for leases since a right-of-use ("ROU") model must be used in which the lessee must record a ROU asset and a lease liability on the balance sheet for leases with terms longer than 12 months. Leases will be classified as either finance or operating arrangements, with classification affecting the pattern of expense recognition in the income statement. ASU No. 2016-02 also requires expanded disclosures about leasing arrangements. ASU No. 2016-02 will be effective for Gartner on January 1, 2019. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.Financial Instruments Recognition and Measurement — In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments Overall - Recognition and Measurement of Financial Assets and Liabilities" ("ASU No. 2016-01") to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among the significant changes required by ASU No. 2016-01 is that equity investments will be measured at fair value with changes in fair value recognized in net income. ASU No. 2016-01 will be effective for Gartner on January 1, 2018. We have completed an initial evaluation of the impact of ASU No. 2016-01 and we do not expect it will have a material impact on our consolidated financial statements but may require additional disclosures.Revenue — In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09"). ASU No. 2014-09 and related amendments require changes in revenue recognition policies as well as enhanced disclosures. ASU No. 2014-09 is intended to clarify the principles for recognizing revenue by removing inconsistencies and weaknesses in existing revenue recognition rules; provide a more robust framework for addressing revenue recognition issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provide more useful information to users of financial statements through improved disclosures. The Company has completed an initial assessment of the impact of ASU No. 2014-09 on its existing revenue recognition policies and plans to adopt the rule on January 1, 2018 using the cumulative effect method of adoption. ASU No. 2014-09 also requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, which the Company is currently compiling. While the Company has not completed its assessment of the impact of ASU No. 2014-09, based on the analysis completed to date, the Company does not currently anticipate that the new rule will have a material impact on its consolidated financial statements.The FASB also continues to work on a number of other significant accounting standards which if issued could materially impact the Company's accounting policies and disclosures in future periods. However, since these standards have not yet been issued, the effective dates and potential impact are unknown.2 — ACQUISITIONSThe Company accounts for business 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 completed the following business acquisitions during the years ended December 31:2016On November 9, 2016, the Company acquired 100% of the outstanding capital stock of Machina Research Limited ("Machina"), a privately-held firm based in London with 16 employees. The Company paid approximately $4.5 million in cash at close. Machina provides clients with subscription-based research that provides strategic insight and market intelligence in areas such as IOT ("Internet of things").On June 28, 2016, the Company acquired 100% of the outstanding capital stock of Newco 5CL Limited (which operates under the trade name "SCM World"), a privately-held firm based in London with 60 employees, for $34.2 million in cash paid at close. SCM World is a leading cross-industry peer network and learning community providing subscription-based research and conferences for supply chain executives. Net of cash acquired with the business and for cash flow reporting purposes, the Company paid approximately $27.9 million in cash for SCM World. The acquisition of SCM World also included an earn-out provision. The fair value of the earn-out was recorded on the acquisition date as part of the cost of the acquisition. The earn-out liability was subsequently adjusted to fair value with a charge to expense at September 30, 2016. At December 31, 2016, the Company determined the final amount of the earn-out and adjusted the liability with an additional charge to expense. In total, the Company recognized $6.5 million in expense related to the earn-out in 2016. The Company expects to pay the earn-out in cash in early 2017. In addition to the earn-out, the Company may also be required to pay up to an additional $5.4 million in cash in the future that is contingent on the achievement of certain employment conditions by several key employees (who are also former shareholders) of SCM World, which is being recognized as an expense over the related service period of two-years and is being reported in Acquisition and Integration Charges in the Consolidated Statements of Operations.The Company recorded $32.4 million of goodwill and $5.9 million of amortizable intangible assets for these two acquisitions and an immaterial amount of other assets on a net basis. The operating results and the related goodwill are being reported as part ofthe Company's Research and Events segments and goodwill resulting from these acquisitions will not be deductible for tax purposes. The Company considers the allocation of the purchase price to be preliminary with respect to the completion of certain tax contingencies. The Company believes the recorded goodwill is supported by the anticipated revenue synergies resulting from the acquisitions. The Company's financial statements include the operating results of the acquired businesses beginning from their respective acquisition dates, which were not material to either the Company's consolidated operating results or segment results for 2016. 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 also recorded an additional $1.9 million of goodwill in 2016 related to its prior year acquisition of Capterra, Inc. The goodwill increase resulted from certain measurement period adjustments as well as payments related to the settlement of working capital provisions.2015The Company acquired 100% of the outstanding shares of Nubera eBusiness S.L., and Capterra, Inc., during 2015. Each of these businesses assist clients with selecting business software. The aggregate purchase price was $206.9 million in cash, which included $25.6 million placed in escrow which the Company expects to pay in late 2017. Net of cash acquired with the businesses and for cash flow reporting purposes the Company paid $196.2 million in cash in 2015. The Company may also be required to pay up to an additional $32.0 million in cash in the future subject to the continuing employment of certain key employees. The $32.0 million is being recognized as compensation expense over three years and is being reported in Acquisition and Integration Charges in the Consolidated Statements of Operations. The Company recorded $79.6 million and $138.1 million of amortizable intangible assets and goodwill, respectively, and $10.8 million in liabilities on a net basis for these acquisitions.2014The Company acquired 100% of the outstanding shares of three companies in 2014: Software Advice, Inc., Market-Visio Oy, and SircleIT Inc. Software Advice, Inc. assists clients with software purchases, while Market-Visio Oy was previously an independent sales agent of Gartner research products. SircleIT Inc. is a developer of cloud-based knowledge automation software. The aggregate purchase price of these businesses was $115.4 million in cash. Net of cash acquired with the businesses and for cash flow reporting purposes the Company paid $109.9 million. The Company also placed an additional $14.4 million in escrow, of which $0.8 million was paid in 2015. The Company recorded $110.3 million of goodwill and other intangible assets and $5.1 million of other assets on a net basis for these acquisitions. The Company also paid an additional $31.9 million in cash related to the continuing employment of certain key employees which was recognized as compensation expense over the two-year service period of the employees and was classified in Acquisition and Integration Charges in the Consolidated Statements of Operations. The Company paid $9.2 million of the $31.9 million in 2015 and $22.7 million in 2016, of which $13.6 million was paid from escrow.3 — OTHER ASSETSOther assets consist of the following (in thousands): December 31, 2016 2015 Benefit plan-related assets $ 45,958 $ 42,168 Non-current deferred tax assets 27,275 26,418 Other 14,046 38,298 Total other assets $ 87,279 $ 106,884 4 — ACCOUNTS PAYABLE, ACCRUED, AND OTHER LIABILITIESAccounts payable and accrued liabilities consist of the following (in thousands): December 31, 2016 2015 Accounts payable $ 41,009 $ 31,570 Payroll and employee benefits payable 87,821 85,575 Severance and retention bonus payable 22,425 38,557 Bonus payable 105,549 90,989 Commissions payable 68,273 66,054 Taxes payable 20,378 13,714 Other accrued liabilities 95,316 61,232 Total accounts payable and accrued liabilities $ 440,771 $ 387,691 Other liabilities consist of the following (in thousands): December 31, 2016 2015 Non-current deferred revenue $ 11,289 $ 7,603 Long-term taxes payable 19,737 13,784 Deferred rent 13,747 15,207 Benefit plan-related liabilities 67,747 62,675 Other 69,297 94,325 Total other liabilities $ 181,817 $ 193,594 5 — DEBT2016 Credit AgreementThe Company has a $1.8 billion credit arrangement that it entered into in mid-2016 (the “2016 Credit Agreement”) that provides for a five-year, $600.0 million term loan and a $1.2 billion revolving credit facility. The term loan will be repaid in 16 consecutive quarterly installments which commenced on September 30, 2016, plus a final payment due in June 2021, and may be prepaid at any time without penalty or premium (other than applicable breakage costs) at the option of the Company. The revolving credit facility may be used for loans, and up to $50.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until June 2021, at which time all amounts borrowed must be repaid.Amounts borrowed under the 2016 Credit Agreement bear interest at a rate equal to, at Gartner’s option, either:(1) the greater 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 3.00%, depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.The 2016 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, 2016. The 2016 Credit Agreement was amended on January 20, 2017 to permit the acquisition of CEB (see Note 16—Subsequent Events) and the incurrence of an additional $1.375 billion senior secured term loan B facility, $300.0 million 364-day senior unsecured bridge facility and a senior unsecured high-yield bridge facility of up to $600.0 million (or the issuance of a corresponding amount of debt securities) to finance, in part, the acquisition and repay certain debt of CEB, and to modify certain covenants.The following table summarizes the Company’s total outstanding borrowings (in thousands): Amount Outstanding December 31, Amount Outstanding December 31, Description: 2016 2015 Term loan (1) $ 585,000 $ 380,000 Revolver (1), (2) 115,000 440,000 Other (3) 2,500 5,000 Subtotal (4), (5) 702,500 825,000 Less: deferred financing fees (8,109 ) (6,169 ) Net carrying amount $ 694,391 $ 818,831 (1)The contractual annual interest rate as of December 31, 2016 on both the term loan and the revolver was 2.15%, which consisted of a floating Eurodollar base rate of 0.77% plus a margin of 1.38%. However, the Company has interest rate swap contracts which effectively convert the floating eurodollar base rate to a fixed base rate on $700.0 million of borrowings (see below).(2)The Company had $1.1 billion of available borrowing capacity on the revolver (not including the expansion feature) as of December 31, 2016.(3)Consists of a State of Connecticut economic development loan with a 3.0% fixed rate of interest that matures in 2022. During 2016, $2.5 million of the $5.0 million original balance was extinguished after the Company met certain employment targets. As a result of the loan extinguishment, the Company recorded a gain of $2.5 million, which was recorded in Other income (expense), net in the Consolidated Statements of Operations.(4)As of December 31, 2016, $30.0 million of the debt was classified as short-term and $672.5 million was classified as long- term on the Consolidated Balance Sheet.(5)The weighted-average annual interest rate on the Company's outstanding debt as of December 31, 2016 was 2.80%, which includes the impact of the Company's interest swap contracts, which are discussed below.Interest Rate HedgesAs of December 31, 2016, the Company had three fixed-for-floating interest rate swap contracts. The swaps have a total notional value of $700.0 million and mature in late 2019. The Company designates the swaps as accounting hedges of the forecasted interest payments on $700.0 million of the Company’s variable rate borrowings. The Company pays base fixed rates on these swaps ranging from 1.53% to 1.60% and in return receives a floating eurodollar base rate on $700.0 million of 30-day notional borrowings.The Company accounts for the interest rate swaps as cash flow hedges in accordance with FASB ASC Topic No. 815. Since the swaps hedge forecasted interest payments, changes in the fair value of the swaps are recorded in accumulated other comprehensive (loss) income, a component of equity, as long as the swaps continue to be highly effective hedges of the designated interest rate risk. Any ineffective portion of change in the fair value of the hedges is recorded in earnings. All of the swaps were highly effective hedges of the forecasted interest payments as of December 31, 2016. The interest rate swaps had a total negative fair value to the Company as of December 31, 2016 and 2015 of $2.3 million and $5.1 million, respectively, which is deferred and classified in accumulated other comprehensive (loss) income, net of tax effect.Letters of CreditThe Company had $8.5 million of letters of credit and related guarantees outstanding at year-end 2016. The Company issues these instruments in the ordinary course of business to facilitate transactions with customers and others.6 — COMMITMENTS AND CONTINGENCIESContractual Lease Commitments. The Company leases various facilities, computer and office equipment, furniture, and other assets under non-cancelable operating lease agreements expiring between 2017 and 2032. The future minimum annual cash payments under these operating lease agreements as of December 31, 2016 was as follows (in thousands): Year ended December 31, 2017 $ 49,250 2018 41,074 2019 33,640 2020 25,452 2021 22,898 Thereafter 142,930 Total minimum lease payments $ 315,244 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 unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of December 31, 2016, we did not have any indemnification agreements that could require material payments.7 — STOCKHOLDERS’ EQUITY (DEFICIT)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 2016 Credit Agreement 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 ended December 31, 2016: Balance at December 31, 2013 156,234,415 64,268,863 Issuances under stock plans (1,452,419 ) Purchases for treasury (1) 5,897,446 Balance at December 31, 2014 156,234,415 68,713,890 Issuances under stock plans — (1,003,746 ) Purchases for treasury (1) — 6,186,101 Balance at December 31, 2015 156,234,415 73,896,245 Issuances under stock plans — (923,696 ) Purchases for treasury (1) — 610,623 Balance at December 31, 2016 156,234,415 73,583,172 (1)The Company used a total of $59.0 million, $509.0 million, and $432.0 million in cash for share repurchases in 2016, 2015, and 2014, respectively.Share repurchase authorization. The Company has a $1.2 billion board authorization to repurchase the Company's common stock. 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 2016 Credit Agreement. As of December 31, 2016, approximately $1.1 billion of this authorization remained available for repurchases.Opening adjustment to accumulated earnings. The Company early adopted FASB ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" in 2016. The adoption of ASU No. 2016-09 resulted in a $0.3 million decrease to the Company's opening accumulated earnings balance effective January 1, 2016. Note 1 — Business and Significant Accounting Policies provides additional information regarding ASU No. 2016-09. Accumulated other comprehensive (loss) income, net. The following tables disclose information about changes in accumulated other comprehensive (loss) income ("AOCL/I"), a component of equity, by component and the related amounts reclassified out of AOCL/I to income during the years indicated (net of tax, in thousands) (1):2016 Interest Rate Swaps Defined Benefit Pension Plans Foreign Currency Translation Adjustments Total Balance - December 31, 2015 $ (3,079 ) $ (4,832 ) $ (36,491 ) $ (44,402 ) Changes during the period: Change in AOCL/I before reclassifications to income (2,902 ) (1,113 ) (5,986 ) (10,001 ) Reclassifications from AOCL/I to income during the period (2), (3) 4,572 148 — 4,720 Other comprehensive income (loss) for the period 1,670 (965 ) (5,986 ) (5,281 ) Balance - December 31, 2016 $ (1,409 ) $ (5,797 ) $ (42,477 ) $ (49,683 ) 2015 Interest Rate Swaps Defined Benefit Pension Plans Foreign Currency Translation Adjustments Total Balance - December 31, 2014 $ (1,740 ) $ (6,028 ) $ (13,402 ) $ (21,170 ) Changes during the period: Change in AOCL/I before reclassifications to income (6,356 ) 986 (23,089 ) (28,459 ) Reclassifications from AOCL/I to income during the period (2), (3) 5,017 210 — 5,227 Other comprehensive (loss) income for the period (1,339 ) 1,196 (23,089 ) (23,232 ) Balance - December 31, 2015 $ (3,079 ) $ (4,832 ) $ (36,491 ) $ (44,402 ) (1) Amounts in parentheses represent debits (deferred losses).(2) The reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net of tax effect. See Note 11 – Derivatives and Hedging for information regarding the hedges.(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 COMPENSATIONThe 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, 2016, the Company had 6.2 million shares of its Common Stock, par value $.0005 per share available for stock-based compensation awards under its 2014 Long-Term Incentive Plan.The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics No. 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. 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 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.Adoption of ASU No. 2016-09The Company early adopted FASB ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," in the third quarter of 2016. ASU No. 2016-09 requires certain changes in accounting for stock compensation under FASB ASC Topic No. 718. Among the changes required by ASU No. 2016-09 is that excess tax benefits or deficiencies resulting from stock-based compensation awards must be recognized in income tax expense in the Consolidated Statements of Operations. Prior to ASU No. 2016-09, excess tax benefits or deficiencies were recorded in additional paid-in capital in Stockholders' Equity (Deficit) in the Consolidated Balance Sheets. ASU No. 2016-09 also requires that excess tax benefits related to stock-based compensation awards be reported as cash flows from operating activities on the Consolidated Statements of Cash Flows; previously these excess tax benefits were reported as cash flows from financing activities. ASU No. 2016-09 allows companies to elect either a prospective or retrospective application for the cash flow classification change, for which the Company has elected to apply this classification amendment prospectively, effective January 1, 2016. ASU No. 2016-09 also permits companies to make an entity-wide accounting policy election to recognize forfeitures of stock-based compensation awards as they occur or make an estimate by applying a forfeiture rate each quarter. The Company previously estimated forfeitures but optionally selected to change its accounting policy and account for forfeitures as they occur, the impact of which was not material. The adoption of ASU No. 2016-09 increased the Company's diluted net income per share for 2016 by $0.12 per share. In addition, ASU No. 2016-09 increased the Company's operating cash flow in 2016 by $10.0 million with a corresponding decrease in financing activities cash flow. The Company's financial results for periods prior to 2016 were not impacted.Stock-Based Compensation ExpenseThe Company recognized the following amounts of stock-based compensation expense by award type for the years ended December 31 (in millions):Award type: 2016 2015 2014 Stock appreciation rights $ 5.6 $ 5.7 $ 5.0 Common stock equivalents 0.7 0.6 0.6 Restricted stock units 40.4 39.8 33.2 Total (1) $ 46.7 $ 46.1 $ 38.8 Stock-based compensation expense was recognized by line item in the Consolidated Statements of Operations for the years ended December 31 as follows (in millions): Amount recorded in: 2016 2015 2014 Costs of services and product development $ 21.9 $ 20.6 $ 17.6 Selling, general, and administrative 24.8 25.5 21.2 Total (1) $ 46.7 $ 46.1 $ 38.8 (1)Includes charges of $19.4 million, $20.1 million, and $14.8 million in 2016, 2015 and 2014, respectively, for awards to retirement-eligible employees. These awards vest on an accelerated basis.As of December 31, 2016, the Company had $49.4 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 2.3 years.Stock-Based Compensation AwardsThe 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 No. 505:Stock Appreciation RightsStock-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 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, 2016: Outstanding at December 31, 2015 1.3 $ 56.47 $ 14.92 4.46 years Granted 0.4 80.06 16.50 6.11 years Forfeited — — — — Exercised (0.4 ) 40.65 13.03 na Outstanding at December 31, 2016 (1), (2) 1.3 $ 66.22 $ 15.77 4.40 years Vested and exercisable at December 31, 2016 (2) 0.5 $ 55.15 $ 14.91 3.25 years na = not applicable(1)At December 31, 2016, 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, 2016, SARs outstanding had an intrinsic value of $46.8 million. SARs vested and exercisable had an intrinsic value of $25.1 million.The fair value of the SARs is determined on the date of grant using the Black-Scholes-Merton valuation model with the following weighted-average assumptions for the years ended December 31: 2016 2015 2014 Expected dividend yield (1) — % — % — % Expected stock price volatility (2) 22 % 24 % 25 % Risk-free interest rate (3) 1.1 % 1.5 % 1.3 % Expected life in years (4) 4.39 4.41 4.43 (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 UnitsRestricted 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 rights 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 the satisfaction of 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, 2016: Outstanding at December 31, 2015 1.4 $ 62.80 Granted (1) 0.6 81.41 Vested and released (0.6 ) 58.15 Forfeited (0.1 ) 69.40 Outstanding at December 31, 2016 (2), (3) 1.3 $ 73.19 (1)The 0.6 million RSUs granted in 2016 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 0.3 million of performance-based RSUs was determined based on the achievement of an increase in the Company's total contract value in 2016. Total contract value represents the value attributable to all of our subscription-related contracts.(2)The Company expects that substantially all of the outstanding awards at December 31, 2016 will vest in future periods.(3)The weighted-average remaining contractual term of the outstanding RSUs is approximately 1.1 years.Common Stock EquivalentsCommon 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, 2016: Outstanding at December 31, 2015 105,664 $ 19.57 Granted 7,069 93.90 Converted to common stock (5,395 ) 93.90 Outstanding at December 31, 2016 107,338 $ 20.74 Employee Stock Purchase PlanThe 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, 2016, the Company had approximately 0.9 million shares available for purchase under the ESP Plan. The ESP Plan is considered non-compensatory under FASB ASC Topic No. 718, and as a result the Company does not record stock-based compensation expense for employee share purchases. The Company received $9.3 million, $7.5 million, and $7.8 million in cash from share purchases under the ESP Plan during 2016, 2015, and 2014, respectively. 9 — COMPUTATION OF EARNINGS PER SHAREBasic 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): 2016 2015 2014 Numerator: Net income used for calculating basic and diluted earnings per common share $ 193,582 $ 175,635 $ 183,766 Weighted average number of common shares used in the calculation of basic earnings per share 82,571 83,852 89,337 Common share equivalents associated with stock-based compensation plans 1,249 1,204 1,382 Shares used in the calculation of diluted earnings per share 83,820 85,056 90,719 Earnings per share: Basic $ 2.34 $ 2.09 $ 2.06 Diluted $ 2.31 $ 2.06 $ 2.03 (1)The Company repurchased 0.6 million, 6.2 million, and 5.9 million shares of its Common Stock in 2016, 2015, and 2014, 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. 2016 2015 2014 Anti-dilutive common share equivalents as of December 31 (in millions): 0.2 0.3 0.3 Average market price per share of Common Stock during the year $ 92.58 $ 86.02 $ 73.27 10 — INCOME TAXESThe following is a summary of the components of the Company's income before income taxes for the years ended December 31 (in thousands): 2016 2015 2014 U.S. $ 182,178 $ 165,848 $ 188,963 Non-U.S. 106,253 106,363 85,720 Income before income taxes $ 288,431 $ 272,211 $ 274,683 The expense for income taxes on the above income consists of the following components (in thousands): 2016 2015 2014 Current tax expense: U.S. federal $ 58,616 $ 48,801 $ 49,281 State and local 11,292 10,300 5,135 Foreign 27,536 23,225 16,653 Total current 97,444 82,326 71,069 Deferred tax (benefit) expense: U.S. federal (61 ) (884 ) (6,670 ) State and local (349 ) (702 ) 6,477 Foreign (1,626 ) 1,550 779 Total deferred (2,036 ) (36 ) 586 Total current and deferred 95,408 82,290 71,655 Benefit (expense) relating to interest rate swaps used to increase (decrease) equity (1,113 ) 893 (1,442 ) Benefit from stock transactions with employees used to increase equity 52 13,960 18,704 Benefit (expense) relating to defined-benefit pension adjustments used to increase (decrease) equity 502 (567 ) 2,000 Total tax expense $ 94,849 $ 96,576 $ 90,917 Long-term deferred tax assets and liabilities are comprised of the following (in thousands): December 31, 2016 2015 Accrued liabilities $ 62,439 $ 67,888 Loss and credit carryforwards 7,766 8,522 Assets relating to equity compensation 25,569 22,686 Other assets 6,652 6,712 Gross deferred tax assets 102,426 105,808 Property, equipment, and leasehold improvements (11,796 ) (9,904 ) Intangible assets (43,548 ) (55,275 ) Prepaid expenses (32,971 ) (28,535 ) Other liabilities (7,925 ) (7,244 ) Gross deferred tax liabilities (96,240 ) (100,958 ) Valuation allowance (1,431 ) (1,828 ) Net deferred tax assets $ 4,755 $ 3,022 Net deferred tax assets and net deferred tax liabilities were $27.3 million and $22.5 million as of December 31, 2016, respectively, and $26.4 million and $23.4 million as of December 31, 2015, respectively, and are reported in Other assets and Other liabilities in the Consolidated Balance Sheets. 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, 2016.The valuation allowances of $1.4 million as of December 31, 2016 and $1.8 million as of 2015, primarily relate to net operating losses which are not likely to be realized.As of December 31, 2016, the Company had state and local tax net operating loss carryforwards of $2.4 million, of which $0.1 million expire within one to five years and $2.3 million expire within six to fifteen years. The Company also had state tax credits of $1.9 million, a majority of which will expire in five to six years years. As of December 31, 2016, the Company had non-U.S. net operating loss carryforwards of $19.5 million, of which $0.9 million expire over the next 20 years and $18.6 million can be carried forward indefinitely. In addition, the Company also had foreign tax credit carryforwards of $0.6 million, the majority of which will expire at the end of 2027. These amounts have been reduced for associated unrecognized tax benefits, consistent with FASB ASU No. 2013-11.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: 2016 2015 2014 Statutory tax rate 35.0 % 35.0 % 35.0 % State income taxes, net of federal benefit 2.4 3.3 3.1 Effect of non-U.S. operations (5.9 ) (6.5 ) (6.3 ) Record (release) reserve for tax contingencies 3.2 1.7 1.8 Excess tax benefits from stock based compensation (3.8 ) — — Nondeductible acquisition costs 2.6 0.8 0.1 Record (release) valuation allowance (0.2 ) 0.5 — Other items, net (0.4 ) 0.7 (0.6 ) Effective tax rate 32.9 % 35.5 % 33.1 % As disclosed in Note 1 — Business and Significant Accounting Policies, the Company adopted FASB ASU No. 2016-09 in the third quarter of 2016. The effect of the adoption reduced the provision for income taxes by $10.0 million for the twelve months ended December 31, 2016.For 2016 and 2015, state income taxes, net of federal tax benefit, include approximately $(0.3) million and $1.6 million, respectively, of benefit/(expense) relating to economic development tax credits associated with the renovation of the Company’s Stamford headquarters facility.In July 2015, the United States Tax Court (the “Court”) issued an opinion relating to the treatment of stock-based compensation expense in an inter-company cost-sharing arrangement. In its opinion, the Court held that affiliated companies may exclude stock-based compensation expense from their cost-sharing arrangement. The Internal Revenue Service is appealing the decision. Because of uncertainty related to the final resolution of this litigation and the recognition of potential benefits to the Company, the Company has not recorded any financial statement benefit associated with this decision. The Company will monitor developments related to this case and the potential impact of those developments on the Company’s consolidated financial statementsAs of December 31, 2016 and December 31, 2015, the Company had unrecognized tax benefits of $37.1 million and $25.9 million, respectively. The increase is primarily attributable to positions taken with respect to the exclusion of stock-based compensation expense from the Company's cost-sharing arrangement and certain state refund claims. The unrecognized tax benefits as of December 31, 2016 related primarily to the utilization of certain tax attributes, state income tax positions, the ability to realize certain refund claims, and intercompany transactions. It is reasonably possible that unrecognized tax benefits will be decreased by $1.7 million within the next 12 months due to anticipated closure of audits and the expiration of certain statutes of limitation.Included in the balance of unrecognized tax benefits at December 31, 2016 are potential benefits of $33.4 million that if recognized would reduce the effective tax rate on income from continuing operations. Also included in the balance of unrecognized tax benefitsas of December 31, 2016 are potential benefits of $3.7 million that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, for the years ended December 31 (in thousands): 2016 2015 Beginning balance $ 25,911 $ 20,645 Additions based on tax positions related to the current year 7,086 5,150 Additions for tax positions of prior years 6,443 7,839 Reductions for tax positions of prior years (496 ) (3,880 ) Reductions for expiration of statutes (1,006 ) (2,287 ) Settlements (544 ) (960 ) Change in foreign currency exchange rates (295 ) (596 ) Ending balance $ 37,099 $ 25,911 The Company accrues interest and penalties related to unrecognized tax benefits in its income tax provision. As of December 31, 2016 and 2015, the Company had $4.3 million and $3.7 million, respectively, 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 income tax provision for both the years ended December 31, 2016 and December 31, 2015 was $0.9 million.The number of years with open statutes of limitation varies depending on the tax jurisdiction. The Company’s statutes are open with respect to the U.S. federal jurisdiction for 2013 and forward, and India for 2003 and forward. For other major taxing jurisdictions including the U.S. states, the United Kingdom, Canada, Japan, France, and Ireland, the Company's statutes vary and are open as far back as 2009.Under U.S. GAAP rules, no provision for income taxes that may result from the remittance of earnings held overseas is required if the Company has the ability and intent to indefinitely 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 income tax expense that may result from the remittance of these earnings. The accumulated undistributed earnings of non-U.S. subsidiaries were approximately $340.0 million as of December 31, 2016. The income tax that would be payable if such earnings were not indefinitely invested is estimated at $69.0 million.11 — DERIVATIVES AND HEDGINGThe Company enters into a limited number of derivative contracts to mitigate the cash flow risk associated with changes in interest rates on variable rate debt and changes in foreign exchange rates on forecasted foreign currency transactions. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic No. 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 December 31 (in thousands, except for number of outstanding contracts):2016Derivative Contract Type Interest rate swaps (1) 3 $ 700,000 $ (2,349 ) Other liabilities $ (1,409 ) Foreign currency forwards (2) 84 86,946 (320 ) Other current assets — Total 87 $ 786,946 $ (2,669 ) $ (1,409 ) 2015Derivative Contract Type Interest rate swap (1) 3 $ 700,000 $ (5,132 ) Other liabilities $ (3,079 ) Foreign currency forwards (2) 102 193,610 235 Other current assets — Total 105 $ 893,610 $ (4,897 ) $ (3,079 ) (1)The swaps have been designated and are accounted for as cash flow hedges of the forecasted interest payments on borrowings. As a result, changes in the fair value of the swaps are deferred and are recorded in AOCL/I, 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 mitigate the cash flow risk associated with changes in foreign currency rates on forecasted foreign currency transactions. 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. All of the outstanding contracts at December 31, 2016 matured by the end of January 2017.(3)See Note 12 — Fair Value Disclosures for the determination of the fair value of these instruments.At December 31, 2016, the Company’s derivative counterparties were 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 millions): Amount recorded in: 2016 2015 2014 Interest expense (1) $ 7.6 $ 8.5 $ 4.1 Other expense (income), net (2) 0.3 0.1 (0.5 ) Total expense $ 7.9 $ 8.6 $ 3.6 (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 DISCLOSURESThe 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 include its outstanding borrowings under the 2016 Credit Agreement, and at December 31, 2016, the Company had $700.0 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 these variable rate borrowings reflect current market rates of interest for similar instruments with comparable maturities.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.FASB ASC Topic No. 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 Company's periodic assessment of 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’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,
2016 December 31,
2015Assets: Values based on Level 1 inputs: Deferred compensation plan assets (1) $ 10,247 $ 8,671 Total Level 1 inputs $ 10,247 $ 8,671 Values based on Level 2 inputs: Deferred compensation plan assets (1) $ 27,847 $ 25,474 Foreign currency forward contracts (2) 165 610 Total Level 2 inputs $ 28,012 $ 26,084 Total Assets $ 38,259 $ 34,755 Liabilities: Values based on Level 2 inputs: Deferred compensation plan liabilities (1) $ 43,075 $ 39,071 Foreign currency forward contracts (2) 485 375 Interest rate swap contracts (3) 2,349 5,132 Total Level 2 inputs $ 45,909 $ 44,578 Total Liabilities $ 45,909 $ 44,578 (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 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 $10.2 million and $8.7 million as of December 31, 2016 and 2015, 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 fairvalue. The Company considers the life insurance contracts to be valued based on a Level 2 input, and these assets had a fair value of $27.8 million and $25.5 million at December 31, 2016 and 2015, respectively. The related deferred compensation plan liabilities are recorded at fair value, or the estimated amount needed to settle the liability, which the Company considers to be 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 interest rate swap contracts which hedge the variability of interest payments on its borrowings (see Note 11 — Derivatives and Hedging). The fair value of the swaps is based on mark-to-market valuations provided by a third-party broker. The valuations are 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 valuations prepared by the third-party broker through the use of an electronic quotation service.13 — EMPLOYEE BENEFITSDefined 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 2016, the maximum match was $7,200. Amounts expensed in connection with the 401k Plan totaled $22.9 million, $20.0 million, and $17.4 million, in 2016, 2015, and 2014, 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 recorded in Other assets on the Consolidated Balance Sheets at fair value. The value of these assets was $38.1 million and $34.1 million at December 31, 2016 and 2015, respectively (see Note 12 — Fair Value Disclosures for fair value information). The corresponding deferred compensation liability, which was $43.1 million and $39.1 million at December 31, 2016 and 2015, respectively, is carried at fair value, and is adjusted with a corresponding charge or credit to compensation expense to reflect the fair value of the amount owed to the employees and is classified in Other liabilities on the Consolidated Balance Sheets. Compensation expense recognized for the plan was $0.1 million, $0.5 million, and $0.6 million, in 2016, 2015, and 2014, respectively.Defined benefit pension plans. The Company has defined-benefit pension plans in several of its international locations. Benefits paid under these plans are based on years of service and level of employee compensation. The Company's defined benefit pension plans are accounted for in accordance with FASB ASC Topics No. 715 and 960. The following are the components of defined benefit pension expense for the years ended December 31 (in thousands): 2016 2015 2014 Service cost $ 2,780 $ 2,620 $ 2,630 Interest cost 850 790 1,190 Expected return on plan assets (375 ) (345 ) (540 ) Recognition of actuarial loss 200 300 75 Recognition of termination benefits — 85 30 Total defined benefit pension plan expense (1) $ 3,455 $ 3,450 $ 3,385 (1)Pension expense is classified in SG&A in the Consolidated Statements of Operations.The following are the key assumptions used in the computation of pension expense for the years ended December 31: 2016 2015 2014 Weighted-average discount rate (1) 1.78 % 2.19 % 2.15 % Average compensation increase 2.67 % 2.66 % 2.65 % (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): 2016 2015 2014 Projected benefit obligation at beginning of year $ 35,870 $ 38,115 $ 34,585 Service cost 2,780 2,620 2,630 Interest cost 850 790 1,190 Actuarial loss (gain) due to assumption changes and plan experience 1,480 (1,190 ) 6,300 Additions and contractual termination benefits — 85 30 Benefits paid (1) (1,640 ) (775 ) (1,350 ) Foreign currency impact (940 ) (3,775 ) (5,270 ) Projected benefit obligation at end of year (2) $ 38,400 $ 35,870 $ 38,115 (1)The Company projects the following benefit payments will be made in future years to plan participants: $1.4 million in 2017; $2.0 million in 2018; $1.1 million in 2019, $1.5 million in 2020, $1.5 million in 2021; and $9.5 million in total in the five years thereafter.(2)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: 2016 2015 2014 Projected benefit obligation $ 38,400 $ 35,870 $ 38,115 Pension plan assets at fair value (1) (14,465 ) (13,190 ) (13,220 ) Funded status – shortfall (2) $ 23,935 $ 22,680 $ 24,895 Amounts recorded in the Consolidated Balance Sheets for the plans: Other liabilities — accrued pension obligation (2) $ 23,935 $ 22,680 $ 24,895 Stockholders’ equity — deferred actuarial loss (3) $ (5,797 ) $ (4,832 ) $ (6,028 ) (1)The pension 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 No. 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 reasonable based on the composition of the assets and both current and projected market conditions. For the year-ended December 31, 2016, the Company contributed $2.4 million to these plans, and benefits paid to participants were $1.6 million.(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, 2016 is recorded in AOCL/I and will be reclassified out of AOCL/I and recognized as pension expense over approximately 13 years, subject to certain limitations set forth in FASB ASC Topic No. 715. The impact of this amortization on pension expense in 2017 is projected to result in approximately $0.3 million of additional expense. The amortization of deferred actuarial losses from AOCL/I to pension expense in each of the three years ended December 31, 2016 was immaterial.The Company also maintains a reinsurance asset arrangement with a large international insurance company whose purpose is to provide funding for benefit payments for one of the plans. The reinsurance asset is not a pension plan asset but is an asset of the Company. At December 31, 2016 and 2015, the reinsurance asset was recorded at its cash surrender value of $7.8 million and $7.9 million, respectively, and is classified in Other Assets on the Company's Consolidated Balance Sheets. 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 No. 820.14 — SEGMENT INFORMATIONThe Company manages its business through three reportable segments: Research, Consulting and Events. Research primarily consists of subscription-based research products, access to research inquiry, peer networking services, and membership programs. Consulting consists 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 Cost of services and product development expenses, Selling, general and administrative expenses, Depreciation, Amortization of intangibles, and Acquisition and integration charges. Certain bonus and fringe benefit costs included in consolidated Cost of services and product development 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 does not identify or allocate assets, including capital expenditures, by reportable segment. Accordingly, assets are not reported by segment because the information is not available by segment and is not reviewed in the evaluation of segment performance or in making decisions in the allocation of resources.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 following tables present operating results for the Company’s reportable segments for the years ended December 31 (in thousands): Research Consulting Events Consolidated 2016 Revenues $ 1,829,721 $ 346,214 $ 268,605 $ 2,444,540 Gross contribution 1,267,760 107,585 136,655 1,512,000 Corporate and other expenses (1,206,859 ) Operating income $ 305,141 Research Consulting Events Consolidated 2015 Revenues $ 1,583,486 $ 327,735 $ 251,835 $ 2,163,056 Gross contribution 1,096,827 107,193 130,527 1,334,547 Corporate and other expenses (1,046,550 ) Operating income $ 287,997 Research Consulting Events Consolidated 2014 Revenues $ 1,445,338 $ 348,396 $ 227,707 $ 2,021,441 Gross contribution 1,001,914 119,931 112,384 1,234,229 Corporate and other expenses (948,067 ) Operating income $ 286,162 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, 2016 2015 2014 Total segment gross contribution $ 1,512,000 $ 1,334,547 $ 1,234,229 Costs and expenses: Cost of services and product development - unallocated (1) 13,108 10,567 10,721 Selling, general and administrative 1,089,184 962,677 876,067 Depreciation and amortization 61,969 47,131 39,412 Acquisition and integration charges 42,598 26,175 21,867 Operating income 305,141 287,997 286,162 Interest expense and other 16,710 15,786 11,479 Provision for income taxes 94,849 96,576 90,917 Net income $ 193,582 $ 175,635 $ 183,766 (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): 2016 2015 2014 Revenues: United States and Canada $ 1,519,748 $ 1,347,676 $ 1,204,476 Europe, Middle East and Africa 616,721 557,165 570,334 Other International 308,071 258,215 246,631 Total revenues $ 2,444,540 $ 2,163,056 $ 2,021,441 Long-lived assets: (1) United States and Canada $ 143,921 $ 163,933 $ 142,963 Europe, Middle East and Africa 42,326 31,130 34,093 Other International 24,630 16,050 13,282 Total long-lived assets $ 210,877 $ 211,113 $ 190,338 (1)Excludes goodwill and other intangible assets.15 — VALUATION AND QUALIFYING ACCOUNTSThe 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): 2016: Allowance for doubtful accounts and returns and allowances $ 6,900 $ 4,750 $ 4,850 $ (9,100 ) $ 7,400 2015: Allowance for doubtful accounts and returns and allowances $ 6,700 $ 3,480 $ 5,420 $ (8,700 ) $ 6,900 2014: Allowance for doubtful accounts and returns and allowances $ 7,000 $ 2,950 $ 3,240 $ (6,490 ) $ 6,700 16 — SUBSEQUENT EVENTSOn January 5, 2017, Gartner and CEB Inc. (NYSE: CEB) ("CEB"), an industry leader in providing best practice and talent management insights, announced that they had entered into a definitive agreement whereby Gartner will acquire all of the outstanding shares of CEB in a cash and stock transaction valued at approximately $2.6 billion. Gartner will also assume (and refinance) approximately $0.9 billion in CEB debt. The transaction has been unanimously approved by the Boards of Directors of both companies. Closing of the transaction is subject to the approval of CEB shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. On February 1, 2017, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to the proposed transaction. Closing of the transaction is expected to be completed in the first half of 2017. In connection with the proposed acquisition, the Company entered into a commitment letter for the purposes of financing the majority of the cash consideration payable and to refinance CEB’s indebtedness. The commitment letter provides for a total of $2.275 billion in additional financing, which includes a seven-year senior secured term loan B facility of up to $1.375 billion, a 364-day senior unsecured bridge facility of up to $300.0 million, and a senior unsecured high-yield bridge facility of up to $600.0 million. It is expected that on or prior to the closing of the CEB acquisition, senior unsecured notes will be issued and sold to pursuant to an offering pursuant to Rule 144A or a private placement in lieu of a portion of, or all of the drawings under, the high-yield bridge facility. The Company expects that the proceeds from the additional financing described above, together with its balance sheet cash and available borrowing capacity under its revolving credit facility, will be sufficient to pay the aggregate cash consideration and refinance CEB's indebtedness, as well as pay for certain fees and expenses incurred in connection with the acquisition.On February 6, 2017, the Company filed a Registration Statement on Form S-4 with the SEC pertaining to the shares of Gartner common stock that will be issued in connection with the proposed transaction and a prospectus relating to the special meeting of the CEB stockholders that will be called for purposes of voting on the proposed transaction.SIGNATURESPursuant 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 22, 2017. Gartner, Inc. Date:February 22, 2017By: /s/ Eugene A. Hall Eugene A. Hall Chief Executive Officer March 6, 2017 POWER OF ATTORNEYEach 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. Reportreport has been signed below by the following persons on behalf of the Registrantregistrant and in the capacities and on the dates indicated:NameSignature Title Date /s/ Eugene A. Hall Director and Chief Executive Officer February 22,March 6, 2017Eugene A. Hall (Principal Executive Officer) Senior Vice President and Chief /s/ Craig W. Safian Senior Vice President and Chief Financial Officer February 22, 2017Craig W. Safian (Principal Financial and Accounting Officer) March 6, 2017 * Michael J. Bingle Director * /s/ Michael J. Bingle Director February 22, 2017Michael J. Bingle* /s/ Peter E. Bisson Director February 22, 2017Peter E. Bisson* /s/ Richard J. BresslerRaul E. Cesan Director February 22, 2017Richard J. Bressler* /s/ RaulKaren E. CesanDykstra Director February 22, 2017Raul E. Cesan* /s/ Karen E. DykstraAnne Sutherland Fuchs Director February 22, 2017Karen E. Dykstra* /s/ Anne Sutherland FuchsWilliam O. Grabe Director February 22, 2017Anne Sutherland Fuchs* /s/ William O. GrabeStephen G. Pagliuca Director February 22, 2017William O. Grabe* /s/ Stephen G. PagliucaDirectorFebruary 22, 2017Stephen G. Pagliuca/s/ James C. SmithDirectorFebruary 22, 2017James C. Smith Director *By: /s/ Eugene A. Hall March 6, 2017 Eugene A. Hall, �� Attorney-in-Fact 42 77