~~Gartner generated over $205.0 million~~ As of ~~cash from operating activities in 2010. We~~December 31, 2011, we had ~~$120.2~~$142.7 million of cash and cash equivalents, ~~as of December 31, 2010,~~ and we had ~~$376.0~~almost $377.0 million of available borrowing capacity under ~~our new~~the revolving credit facility. ~~We believe we have a strong cash position and liquidity.~~

FLUCTUATIONS IN QUARTERLY RESULTS

Our quarterly and annual revenue, operating income, and cash flow fluctuate as a result of many factors, including: the timing of our SymposiumITxpo series, ~~that~~which are normally ~~are~~ held during the fourth calendar quarter, ~~and~~as well as other events; the amount of new business generated; the mix ofbetween domestic and international business; changes in market demand for our products and services; changes in foreign currency rates; the timing of the development, introduction and marketing of our new products and services; competition in the industry; general economic conditions; and other factors. The potential fluctuations 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.~~

results and cash flows.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements requires the application of appropriate accounting policies and the use of estimates. Our significant accounting policies are described in Note 1 in the Notes to Consolidated Financial Statements. Management considers 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 ~~also~~ described below.

The preparation of our financial statements also requires us to make estimates and assumptions about future events. We develop our estimates using both current and historical experience, as well as other factors, including the general economic environment and actions we may take in the future. We adjust such estimates when facts and circumstances dictate. However, our estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on our best judgment at a point in time and as such these estimates may ultimately differ from actual results. On-going changes in our estimates could be material and would be reflected in the Company’s financial statements in future periods.

Our critical accounting policies are as follows:

Revenue recognition— ~~We recognize revenue~~Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”), and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). ~~Once~~Revenue is only recognized once all required criteria for revenue recognition have been ~~met, revenue~~met. Revenue by significant source is accounted for as follows:


•	Research revenues are derived from subscription contracts for research products and are deferred and recognized ratably over the applicable contract term. Fees from research reprints are recognized when the reprint is shipped.

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

Research revenues are derived from subscription contracts for research products and are deferred and recognized ratably over the applicable contract term. Fees from research reprints are recognized when the reprint is shipped.

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

~~Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition.~~

•
Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition.
The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All research contracts are non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim.

For those government contracts that permit cancellation, historically we only recorded fees receivables to the extent amounts were earned and deferred revenue to the extent cash was received. As of September 30, 2010, based on an analysis of historic contract cancellations, we determined that the likelihood of such cancellations was remote. Accordingly, as of that date we record the entire billable contract amount as fees receivable at the time the contract is signed with a corresponding amount to deferred revenue, consistent with other contracts. This change in estimate had an immaterial impact.

Uncollectible fees receivable— ~~The~~We maintain an allowance for losses which is composed of a bad debt allowance and a sales reserve. Provisions are charged against earnings, either as a reduction in revenues or an increase to expense. The measurement of likely and probable losses

and the allowance for losses is based on historical loss experience, aging of outstanding receivables, an assessment of current economic conditions and the financial health of specific clients. This evaluation is inherently judgmental and requires ~~material~~ estimates. These valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectibility of fees receivable becomes available. Circumstances that could cause our valuation reserves to increase include changes in our clients’ liquidity and credit quality, other factors negatively impacting our clients’ ability to pay their obligations as they come due, and the effectiveness of our collection efforts.

The following table provides our total fees receivable and the related allowance for losses (in thousands):

December 31,
2010 2009
Total fees receivable $ 372,018 $ 325,698
Allowance for losses (7,200 ) (8,100 )

Fees receivable, net $ 364,818 $ 317,598

December 31,

2011

2010

Total fees receivable

$
428,293

$
372,018

Allowance for losses

(7,260
)

(7,200
)

Fees receivable, net

$
421,033

$
364,818

~~Impairment of goodwill~~Goodwill and other intangible assets— The ~~evaluation of~~Company evaluates recorded goodwill ~~is performed~~ in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, an impairment evaluation of our amortizable intangible assets ismay also be performed on a periodic ~~basis.~~

~~Our annual~~basis should events or circumstances indicate potential impairment. If we determine that the fair value of a reporting unit or an intangible asset is less than its related carrying amount, we must recognize an impairment charge against earnings. Among the factors we consider important that could trigger an impairment review are the following:
•
Significant under-performance relative to historical or projected future operating results;
•
Significant changes in the manner of our use of acquired assets or the strategy for our overall business;
•
Significant negative industry or general economic trends;
•
Significant decline in our stock price for a sustained period; and
•
Our market capitalization relative to net book value.
Since 2002, the U.S. GAAP goodwill ~~assessment requires us to estimate~~impairment rules required a quantitative approach in which the fair values of our reporting units was determined based on estimates of future business ~~operations~~results and market and economic conditions in developing long-term forecasts. ~~If we determine~~In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08,Intangibles-Goodwill and Other–Testing Goodwill for Impairment(“ASU No. 2011-08”). ASU No. 2011-08 optionally permits an evaluation of goodwill based on a qualitative assessment of whether it is more likely than not that ~~the~~a reporting unit’s fair value ~~of any reporting unit~~ is less than its carrying ~~amount, we must recognize an impairment charge for~~amount. As a ~~portion~~result of the ~~associated~~issuance of ASU No. 2011-08, the required annual goodwill impairment test may now be either quantitative or qualitative in nature, or both. The annual determination of ~~that~~the estimated fair value of reporting unit ~~against earnings in our financial statements.~~

~~Factors we consider important that could trigger a review for impairment include the following:~~

~~Significant under-performance relative to historical~~goodwill, whether quantitative or ~~projected future operating results;~~

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

~~Significant negative industry or economic trends;~~

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

~~Our market capitalization relative to net book value.~~

~~Due to the numerous variables associated with our~~qualitative, contains judgments and assumptions ~~relating to the valuation of the reporting units~~regarding future trends and ~~the effects of changes in circumstances affecting these valuations,~~events. As a result, both the precision and reliability of the resulting estimates are subject to ~~uncertainty, and as additional information becomes known,~~uncertainty.
In 2010, we ~~may change our estimates.~~

We completed the required annual goodwill impairment ~~testing in~~test utilizing the ~~quarter ended September 30, 2010~~quantitative approach and concluded that the fair values of each of the Company’s reporting units substantially exceeded their respective carrying values. In ~~addition, management~~2011, we early adopted ASU No. 2011-08 and evaluated reporting unit goodwill utilizing a qualitative assessment. Based on this assessment, the Company believes the fair value of goodwill for each of the Company’s reporting units continue to substantially exceed their respective carrying

values and thus concluded that ~~none of~~it was not necessary to conduct the two-step goodwill impairment ~~triggers discussed above occurred in the fourth quarter of 2010. See~~test (see Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements for additional ~~goodwill disclosures.~~

discussion).
Accounting for income taxes— As we prepare our consolidated financial statements, 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. We record a valuation allowance to reduce our deferred tax assets when future realization is in question. We consider the availability of loss carryforwards, existing deferred tax liabilities, future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event we determine that we are able to realize our deferred tax assets in the future in excess of ~~our~~the net recorded amount, an adjustment is made to reduce the valuation allowance and increase income in the period such determination is made. Likewise, if we determine that

we will not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the valuation allowance is charged against income in the period such determination is made.

Accounting for stock-based compensation— The Company accounts for stock-based compensation in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). The Company recognizes stock-based compensation expense, which is based on the fair value of the award on the date of grant, over the related service period, net of estimated forfeitures (see Note 98 — Stock-Based Compensation in the Notes to the Consolidated Financial Statements).

Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain ~~highly~~ complex and subjective assumptions, including the expected life of the stock compensation ~~awards~~award and the Company’s Common Stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the rate of employee forfeitures and the likelihood of achievement of certain performance targets. The assumptions used in calculating the fair value of stock compensation awards and the associated periodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock compensation expense could be materially different from what has been recorded in the current period.

Restructuring and other accruals— We may record accruals for severance costs, costs associated with excess facilities that we have leased, contract terminations, asset impairments, and other costs as a result of on-going actions we undertake to streamline our organization, reposition certain businesses and reduce ongoing costs. Estimates of costs to be incurred to complete these actions, such as future lease payments, sublease income, the fair value of assets, and severance and related benefits, are based on assumptions at the time the actions are initiated. These accruals may need to be adjusted to the extent actual costs differ from such estimates. In addition, these actions may be revised due to changes in business conditions that we did not foresee at the time such plans were approved.

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

RESULTS OF OPERATIONS

~~Overall~~
Consolidated Results

The following tables summarize the changes in selected line items in our Consolidated Statements of Operation for the three years ended December 31, ~~2010~~2011 (dollars in thousands):

For the twelve months ended December 31, 2011 and 2010:

Twelve Months
Ended
December 31,
2011

Twelve Months
Ended
December 31,
2010

Income
Increase
(Decrease)
$

Income
Increase
(Decrease)
%

Total revenues

$
1,468,588

$
1,288,454

$
180,134

14
%
Costs and expenses:

Cost of services & product development

608,755

552,238

(56,517
)

(10
)%
Selling, general and administrative

613,707

543,174

(70,533
)

(13
)%
Depreciation

25,539

25,349

(190
)

(1
)%
Amortization of intangibles

6,525

10,525

4,000

38
%
Acquisition & integration charges

—

7,903

7,903

100
%

Operating income

214,062

149,265

64,797

43
%
Interest expense, net

(9,967
)

(15,616
)

5,649

36
%
Other (expense) income, net

(1,911
)

436

(2,347
)

>(100
)%
Provision for income taxes

(65,282
)

(37,800
)

(27,482
)

(73
)%

Net income

$
136,902

$
96,285

$
40,617

42
%

For the twelve months ended December 31, 2010 and 2009:

Twelve Months Twelve Months Income Income
Ended Ended Increase Increase
December 31, December 31, (Decrease) (Decrease)
2010 2009 (1) $ %
Total revenues $ 1,288,454 $ 1,139,800 $ 148,654 13 %
Costs and expenses:
Cost of services & product development 552,238 498,363 (53,875 ) (11 )%
Selling, general and administrative 543,174 477,003 (66,171 ) (14 )%
Depreciation 25,349 25,387 38 — %
Amortization of intangibles 10,525 1,636 (8,889 ) >(100 )%
Acquisition & integration charges 7,903 2,934 (4,969 ) >(100 )%

Operating income 149,265 134,477 14,788 11 %
Interest expense, net (15,616 ) (16,032 ) 416 3 %
Other income (expense), net 436 (2,919 ) 3,355 >100 %
Provision for income taxes 37,800 32,562 (5,238 ) (16 )%

Net income $ 96,285 $ 82,964 $ 13,321 16 %

~~For the twelve months ended December 31, 2009 and 2008:~~

Twelve Months Twelve Months Income Income
Ended Ended Increase Increase
December 31, December 31, (Decrease) (Decrease)
2009 (1) 2008 $ %
Total revenues $ 1,139,800 $ 1,279,065 $ (139,265 ) (11 )%
Costs and expenses:
Cost of services & product development 498,363 572,208 73,845 13 %
Selling, general and administrative 477,003 514,994 37,991 7 %
Depreciation 25,387 25,880 493 2 %
Amortization of intangibles 1,636 1,615 (21 ) (1 )%
Acquisition & integration charges 2,934 — (2,934 ) (100 )%

Operating income 134,477 164,368 (29,891 ) (18 )%
Interest expense, net (16,032 ) (19,269 ) 3,237 17 %
Other expense, net (2,919 ) (358 ) (2,561 ) >(100 )%
Provision for income taxes 32,562 47,593 15,031 32 %

Income from continuing operations 82,964 97,148 (14,184 ) (15 )%
Income from discontinued operations, net of taxes (2) — 6,723 (6,723 ) (100 )%

Net income $ 82,964 $ 103,871 $ (20,907 ) (20 )%

Twelve Months
Ended
December 31,
2010

Twelve Months
Ended
December 31,
2009 (1)

Income
Increase
(Decrease)
$

Income
Increase
(Decrease)
%

Total revenues

$
1,288,454

$
1,139,800

$
148,654

13
%
Costs and expenses:

Cost of services & product development

552,238

498,363

(53,875
)

(11
)%
Selling, general and administrative

543,174

477,003

(66,171
)

(14
)%
Depreciation

25,349

25,387

38

—
%
Amortization of intangibles

10,525

1,636

(8,889
)

>(100
)%
Acquisition & integration charges

7,903

2,934

(4,969
)

>(100
)%

Operating income

149,265

134,477

14,788

11
%
Interest expense, net

(15,616
)

(16,032
)

416

3
%
Other income (expense), net

436

(2,919
)

3,355

>100
%
Provision for income taxes

(37,800
)

(32,562
)

(5,238
)

(16
)%

Net income

$
96,285

$
82,964

$
13,321

16
%

~~(1)~~
(1)
In December 2009 we acquired AMR Research and Burton Group. The operating results of these businesses have been included in our consolidated results of operations beginning on their respective dates of acquisition. The results of these businesses were not material to the Company’s 2009 consolidated operating results.
2011 VERSUS 2010
TOTAL REVENUES for the twelve months ended December 31, 2011 increased $180.1 million, or 14%, compared to the twelve months ended December 31, 2010. Total revenues increased 11% excluding the impact of foreign currency. Revenues increased across all of our geographic regions and in all three of our business segments on a reported basis.
An overview of our results by geographic region follows:
•
Revenues from sales to United States and Canadian clients increased 12%, to $861.5 million in 2011 from $765.8 million in 2010.

~~(2)~~
•
Revenues from sales to clients in Europe, the Middle East and Africa increased to $437.2 million in 2011 from $380.8 million in 2010, a 15% increase.
~~Includes the gain on sale and operating results of the Company’s Vision Events business, which was sold~~
•
Revenues from sales to clients in ~~2008.~~our Other International region increased 20%, to $169.9 million in 2011 from $141.9 million in 2010.
21An overview of our results by segment follows:


•	Research revenues increased 17% in 2011, to $1,012.1 million compared to $865.0 million in 2010, and comprised 69% and 67% of our total revenues in 2011 and 2010, respectively.

•	Consulting revenues increased 2% in 2011, to $308.0 million compared to $302.1 million in 2010, and comprised approximately 21% and 23% of our total revenues in 2011 and 2010, respectively.

•	Events revenues increased 22% in 2011, to $148.5 million compared to $121.3 million in 2010, and comprised approximately 10% of total revenues in both 2011 and 2010.

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

COST OF SERVICES AND PRODUCT DEVELOPMENT (“COS”) expense increased 10% in 2011, or $56.5 million, to $608.8 million compared to $552.2 million in 2010. Approximately half of the increase was due to higher payroll and related benefits costs resulting from our investment in additional headcount and merit salary increases. The rest of the increase was primarily due to the negative impact of foreign currency translation, as well as incremental expenses and additional investment in the Events business. Cost of services and product development as a percentage of revenues improved by 2 points year-over-year, primarily driven by higher research revenues and the operating leverage inherent in our Research business.
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $70.5 million in 2011, or 13%, to $613.7 million from $543.2 million in 2010. The increase was primarily due to higher payroll and to a lesser extent, the negative impact of foreign currency translation. Excluding the unfavorable impact of foreign exchange, SG&A expense increased 11% year-over-year. The higher payroll costs resulted from additional investment in headcount, as well as higher sales commissions and merit salary increases. The increased headcount was primarily due to our investment in additional quota-bearing sales associates, which increased 21% compared to December 31, 2010.
DEPRECIATION expense increased slightly year-over-year. Capital spending increased to $42.0 million in 2011 from $21.7 million in 2010. The $42.0 million of capital expenditures in 2011 included $9.5 million of expenditures related to the renovation of our Stamford headquarters facility, of which $9.0 million was reimbursed by our landlord in 2011 and $0.5 million will be reimbursed in 2012 (see Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements for additional information).
AMORTIZATION OF INTANGIBLES decreased 38% year-over-year due to certain intangibles becoming fully amortized in 2010.
ACQUISITION AND INTEGRATION CHARGES was zero in 2011 and $7.9 million in 2010. These charges related to the acquisitions of AMR Research and Burton Group in December 2009 and included legal, consulting, severance, and other costs.
OPERATING INCOME increased $64.8 million year-over-year, or 43%, to $214.1 million in 2011 from $149.3 million in 2010. Operating income as a percentage of revenues improved by 3 points year-over-year, to 15% in 2011 compared to 12% in 2010, primarily due to a significantly higher segment contribution from the Research business and to a lesser extent, lower intangible amortization and acquisition and integration charges.
Please refer to the section of this MD&A entitled “Segment Results” below for a further discussion of revenues and results by segment.
INTEREST EXPENSE, NET was $10.0 million in 2011 compared to $15.6 million in 2010, a 36% decline. The $15.6 million of interest expense in 2010 included $3.7 million of incremental expense related to the refinancing of our debt (See Note 5 — Debt in the

Notes to the Consolidated Financial Statements). Excluding the $3.7 million incremental charge, Interest expense, net declined approximately 15% year-over-year, primarily due to a lower average amount of debt outstanding, which declined to $220.0 million in 2011 from $326.0 million in 2010.
OTHER (EXPENSE) INCOME, NET was $(1.9) million in 2011, which primarily consisted of net foreign currency exchange losses, and $0.4 million in 2010, which consisted of a $2.4 million gain from an insurance recovery related to a prior period loss, offset by net foreign currency exchange losses.
PROVISION FOR INCOME TAXES was $65.3 million in 2011 compared to $37.8 million in 2010 and the effective tax rate was 32.3% for 2011 compared to 28.2% for 2010. The lower effective tax rate in 2010 was primarily attributable to the release of valuation allowances relating to certain net operating losses.
NET INCOME was $136.9 million in 2011 and $96.3 million in 2010, an increase of $40.6 million, or 42%, primarily due to a substantially higher operating income, which was partially offset by higher income tax charges. Basic earnings per share increased 42% year-over-year while diluted earnings per share increased 45% due to the higher net income.
2010 VERSUS 2009
TOTAL REVENUES for the twelve months ended December 31, 2010 increased $148.7 million, or 13%, compared to the twelve months ended December 31, 2009. Revenues increased across all of our geographic regions and in all three of our business segments. Total revenues were also up 13% excluding the impact of foreign currency, which had an immaterial impact year-over-year.
An overview of our results by geographic region follows:
•
•
Revenues from sales to United States and Canadian clients increased 15%, to $765.8 million in 2010 from $663.8 million in 2009, with a substantial portion of the increase due to the AMR Research and Burton Group ~~businesses.~~businesses, which the Company acquired in December 2009.
•
Revenues from sales to clients in Europe, the Middle East and Africa ~~(“EMEA”)~~ increased to $380.8 million in 2010 from $360.8 million in 2009, a 6% increase.
•
Revenues from sales to clients in our Other International region increased 23%, to $141.9 million in 2010 from $115.2 million in 2009.
An overview of our results by segment follows:
•
•
Researchrevenues increased 15% in 2010, to $865.0 million compared to $752.5 million in 2009, and comprised 67% and 66% of our total revenues in 2010 and 2009, respectively.
•
Consultingrevenues increased 5% in 2010 to $302.1 million, compared to $286.8 million in 2009, and comprised approximately 23% and 25% of our total revenues in 2010 and 2009, respectively.
•
Eventsrevenues were $121.3 million in 2010, an increase of 21% from $100.4 million in 2009, and comprised approximately 10% and 9% of our total revenues in 2010 and 2009, respectively.
Please refer to the section of this MD&A below entitled “Segment Results” for a further discussion of revenues and results by segment.
COST OF SERVICES AND PRODUCT DEVELOPMENT ~~(“COS”)~~ increased 11% in 2010, or $53.9 million, to $552.2 million compared to $498.4 million in 2009. The impact of foreign currency on the year-over-year increase was not significant. We recognized $36.8 million in higher payroll, commissions, and related personnel costs in 2010, primarily due to the impact of the increased headcount from the AMR Research and Burton Group businesses. We had $12.0 million in higher conference and travel costs in 2010, due to the additional events we held and increased attendees, as well as a general increase in travel activity from the depressed 2009 levels, when the Company had strict travel restrictions in place due to the economic downturn. We also had $2.2 million in higher equity compensation expense due to a higher level of achievement on performance-based stock units.

Cost of services and product development as a percentage of sales was 43% in 2010 and 44% in 2009, a 1 point improvement, primarily driven by the substantial increase in our fourth quarter 2010 revenues, which increased 16% over the fourth quarter of 2009, and was substantially greater than the increase in the quarterly cost of services. ~~The improvement reflects the operating leverage of our business model.~~
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $66.2 million in 2010, or 14%, to $543.2 million from $477.0 million in 2009. Excluding the unfavorable impact of foreign exchange, SG&A expense increased 13% year-over-year. We had $47.0 million of higher sales commissions, payroll and benefits, and other personnel charges in 2010, which included the additional headcount costs attributable to the AMR Research and Burton Group businesses. We also had $4.3 million of additional stock-based compensation expense due to the higher level of achievement on performance-based stock units and higher travel charges of $7.1 million, primarily due to additional sales headcount and the loosening of travel restrictions. The unfavorable impact of foreign currency added $3.1 million of additional expense.
DEPRECIATION expense decreased slightly year-over-year. Capital spending increased to $21.7 million in 2010 from $15.1 million in 2009, a 43% increase. The Company had reduced its capital expenditures in 2009 due to the economic downturn.
AMORTIZATION OF INTANGIBLES was $10.5 million in 2010 compared to $1.6 million in 2009. The increase iswas due to the amortization of the intangibles acquired from AMR Research and Burton Group.
22
ACQUISITION AND INTEGRATION CHARGESwas $7.9 million in 2010 and $2.9 million in 2009. ~~Included is these~~These charges ~~are legal fees and consultant fees in connection with~~related to the acquisitions ~~and integration~~ of AMR Research and Burton Group ~~as well as~~and included legal, consulting, severance, ~~costs related to redundant headcount.~~
and other costs.
OPERATING INCOME increased 11% year-over-year, to $149.3 million in 2010 from $134.5 million in 2009. The increase was due to the significantly higher gross contribution from our three business segments in 2010, which increased 15% year-over-year, to $742.3 million in 2010 from $642.9 million in 2009. The increased gross contribution was partially offset by higher charges in 2010 for SG&A as well as higher intangible amortization and acquisition and integration charges related to our acquisitions. Operating income as a percentage of revenues was 12% for both 2010 and 2009.
Please refer to the section of this MD&A entitled “Segment Results” below for a further discussion of revenues and results by segment.
INTEREST EXPENSE, NET was $15.6 million in 2010 and $16.0 million in 2009, a 3% decline. The 2010 period includes $3.7 million of incremental expense related to the refinancing of our debt in December 2010 (See Note 65 — Debt in the Notes to the Consolidated Financial Statements). Excluding the $3.7 million incremental charge, Interest expense, net would have declined approximately 26% year-over-year, due to lower average debt outstanding and a lower weighted-average rate.
OTHER (EXPENSE) INCOME, ~~(EXPENSE),~~ NET was $0.4 million in 2010, ~~and~~which consisted of a $2.4 million gain for an insurance recovery related to a prior period loss offset by net foreign currency exchange losses. The $(2.9) expense in 2009 primarily consisted of net foreign currency exchange losses.
PROVISION FOR INCOME TAXES was $37.8 million in 2010 compared to $32.6 million in 2009 and the effective tax rate was 28.2% for both periods. Year-over-year increases in the rate attributable to a higher financial statement cost of repatriation and higher net reserve increases were substantially offset by reductions in the rate ~~year over year~~year-over-year attributable to larger releases of valuation allowances.
The Internal Revenue Service (“IRS”) has completed its examination of the federal income tax return of the Company for the tax year ended December 31, 2007. In December 2010, the Company received a report of the audit findings. The Company disagrees with certain of the proposed adjustments and intends to vigorously dispute this matter through applicable IRS and judicial procedures, as appropriate. The Company believes that it has recorded reserves sufficient to cover exposures related to these issues. However, the resolution of such matters involves uncertainties and there are no assurances that the ultimate resolution will not exceed the amounts recorded. Although the final resolution of the proposed adjustments is uncertain, we believe the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position, cash flows, or results of operations.
NET INCOME was $96.3 million in 2010 and $83.0 million in 2009, an increase of $13.3 million, or 16%, primarily due to a $14.8 million year-over-year increase in operating income. We also had a $0.4 million gain from other income (expense) activity in 2010 compared to a loss of $(2.9) million in 2009, as well as slightly lower interest expense in 2010. These increases were partially offset by higher income tax charges in 2010.
Basic earnings per share increased 15% year-over-year while diluted earnings per share increased 13% year-over-year. The increased earnings per share were due to the higher net income in 2010, which was slightly reduced by higher weighted-average shares outstanding in 2010.
~~2009 VERSUS 2008~~
TOTAL REVENUES for the twelve months ended December 31, 2009 decreased $139.3 million, or 11%, compared to the twelve months ended December 31, 2008. Revenues declined across all of our geographic regions and in all three of our business segments. The impact of foreign currency had a negative impact on our revenues in 2009, and excluding this impact, total revenues in 2009 were down 8% compared to 2008. Our revenues and operating results were negatively impacted by global economic conditions in 2009.
~~An overview of our results by geographic region follows:~~
• ~~Revenues from sales to United States and Canadian clients decreased 8%, to $663.8 million in 2009 from $723.2 million in 2008.~~
• ~~Revenues from sales to clients in Europe, the Middle East and Africa (“EMEA”) decreased to $360.8 million in 2009 from $430.4 million in 2008, a 16% decrease.~~
23
~~Revenues from sales to clients in our Other International region decreased 8%, to $115.2 million in 2009 from $125.4 million in 2008.~~
~~An overview of our results by segment follows:~~
• ~~Research~~~~revenues decreased 4% in 2009 to $752.5 million compared to $781.6 million in 2008, and comprised approximately 66% and 61% of our total revenues in 2009 and 2008, respectively.~~
• ~~Consulting~~~~revenues decreased 17% in 2009 to $286.8 million, compared to $347.4 million in 2008, and comprised approximately 25% and 27% of our total revenues in 2009 and 2008, respectively.~~
• ~~Events~~~~revenues were $100.4 million in 2009, a decrease of 33% from $150.1 million in 2008, and comprised approximately 9% and 12% of our total revenues in 2009 and 2008, respectively.~~
~~Please refer to the section of this MD&A below entitled “Segment Results” for a further discussion of revenues and results by segment.~~
COST OF SERVICES AND PRODUCT DEVELOPMENT decreased $73.8 million year-over-year, or 13%. The favorable impact of foreign currency translation reduced expense by about $19.0 million. We had lower conference expenses of $18.5 million primarily due to discontinued events. We also had reduced travel and internal meeting charges of $16.7 million and lower personnel costs of about $12.5 million, primarily due to our tight cost controls. The remaining $7.1 million net decrease was spread across a number of other expense categories. Cost of services and product development as a percentage of sales declined by 1 point, to 44% in 2009 from 45% in 2008, primarily due to tight expense controls across our businesses.
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense decreased by about $38.0 million in 2009, or 7%, compared to 2008, despite increasing our sales force. The impact of foreign currency translation reduced expense by about $18.0 million. We also had lower travel, internal meeting, and recruiting costs of about $19.0 million, again due to our tight cost controls. The remaining net reduction was spread across a number of other expense categories. Excluding the 60 sales associates that joined us from AMR Research and Burton Group, we had 942 quota-bearing sales associates at December 31, 2009, a 2% increase from the prior year end. This additional investment in sales associates resulted in $9.0 million of higher payroll and benefits costs, which was offset by lower G&A charges.
DEPRECIATION expense decreased 2% year-over-year which reflects reduced capital spending during 2009. Capital spending decreased to $15.1 million in 2009 from $24.3 million in 2008, a 38% decline, which reflects the Company’s reduced 2009 capital expenditures.
~~AMORTIZATION OF INTANGIBLES was $1.6 million for both 2009 and 2008.~~
~~ACQUISITION AND INTEGRATION CHARGES~~was $2.9 million in 2009 and zero in 2008. Included is these charges are legal fees and consultant fees in connection with the acquisitions and integration of AMR Research and Burton Group, as well as severance costs related to redundant headcount.
OPERATING INCOME decreased 18% year-over-year, to $134.5 million in 2009 from $164.4 million in 2008. Operating income as a percentage of revenues declined 1 point year-over-year, primarily due to lower profitability in our Consulting and Events segments and the $2.9 million acquisition and integration charge related to AMR Research and Burton Group.
~~Please refer to the section of this MD&A entitled “Segment Results” below for a further discussion of revenues and results by segment.~~
INTEREST EXPENSE, NET was $16.0 million in 2009 and $19.3 million in 2008, a 17% decline. The 2009 period includes $1.1 million of expense related to the discontinuance of hedge accounting on an interest rate swap contract (See Note 6 — Debt in the Notes to the Consolidated Financial Statements). Excluding the $1.1 million charge, Interest expense, net would have declined approximately 22% year-over-year. The year-over-year decline is primarily attributable to a reduction in the weighted-average amount of debt outstanding.
24
OTHER (EXPENSE) INCOME, NET of $(2.9) million in 2009 consisted of net foreign currency exchange losses. The $(0.4) million Other expense in 2008 primarily consisted of a $1.2 million gain related to the settlement of a litigation matter offset by net foreign currency exchange losses.
PROVISION FOR INCOME TAXES on continuing operations was $32.6 million in 2009 as compared to $47.6 million in 2008. The effective tax rate was 28.2% in 2009 and 32.9% in 2008. The lower effective tax rate in 2009 as compared to 2008 is attributable to several items. The most significant of these items include the following: (a) the release of reserves for uncertain tax positions relating to the expiration of statutes of limitation was larger in 2009 than in 2008 while pretax income was lower, and (b) differences relating to the taxability of life insurance contracts year-over-year.
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES, includes the results of the Company’s Vision Events business, which we sold in early 2008. The $6.7 million of income for 2008 includes a net gain on sale of approximately $7.1 million and a $(0.4) million operating loss.
NET INCOME was $83.0 million in 2009 and $103.9 million in 2008, a decline of $20.9 million or 20%. The decline was primarily driven by the reduced contributions by our three business segments in the 2009 period and to a lesser extent, the $2.9 million acquisition and integration charge we recorded related to AMR Research and Burton Group. These decreases were partially offset by lower SG&A charges, a lower effective income tax rate, and reduced interest expense. Also contributing to the year-over-year decline in net income was the $6.7 million net gain from the sale of the Company’s former Vision Events business recorded in the 2008 period.
~~Basic earnings per share from continuing operations decreased 14% year-over-year. Diluted earnings per share from continuing operations decreased 13% year-over-year.~~
SEGMENT RESULTS
We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income excluding certain Cost of services and product development charges, ~~and~~ SG&A, Depreciation, Acquisition and

integration charges, and Amortization of ~~intangibles, and Other charges.~~intangibles. Gross contribution margin is defined as gross contribution as a percentage of revenues.
The following sections present the results of our three segments:
Research

2010 vs. 2009 2009 vs. 2008
As Of And As Of And As Of And As Of And
For The For the For The For the
Twelve Months Twelve Months Twelve Months Twelve Months
Ended Ended Percentage Ended Ended Percentage
December 31, December 31, Increase Increase December 31, December 31, Increase Increase
2010 2009 (Decrease) (Decrease) 2009 2008 (Decrease) (Decrease)
Financial Measurements:(1)

Revenues (2) $ 865,000 $ 752,505 $ 112,495 15 % $ 752,505 $ 781,581 $ (29,076 ) (4 )%
Gross contribution (2) $ 564,527 $ 489,862 $ 74,665 15 % $ 489,862 $ 495,440 $ (5,578 ) (1 )%
Gross contribution margin 65 % 65 % — — 65 % 63 % 2 points —
Business Measurements:(3)

Contract value (2) $ 977,710 $ 784,443 $ 193,267 25 % $ 784,443 $ 834,321 $ (49,878 ) (6 )%
Client retention 83 % 78 % 5 points — 78 % 82 % (4) points —
Wallet retention 98 % 87 % 11 points — 87 % 95 % (8) points —
Exec. program members 4,297 3,651 646 18 % 3,651 3,733 (82 ) (2 )%

2011 vs. 2010

2010 vs. 2009

As Of And
For The
Twelve Months
Ended
December 31,
2011

As Of And
For the
Twelve Months
Ended
December 31,
2010

Increase
(Decrease)

Percentage
Increase
(Decrease)

As Of And
For The
Twelve Months
Ended
December 31,
2010

As Of And
For the
Twelve Months
Ended
December 31,
2009

Increase
(Decrease)

Percentage
Increase
(Decrease)

Financial Measurements:(1)

Revenues(2)

$
1,012,062

$
865,000

$
147,062

17%

$
865,000

$
752,505

$
112,495

15%

Gross contribution(2)

$
682,136

$
564,527

$
117,609

21%

$
564,527

$
489,862

$
74,665

15%

Gross contribution margin

67%

65%

2 points

—

65%

65%

—

—

Business Measurements:(1)

Contract value(2)

$
1,115,801

$
977,710

$
138,091

14%

$
977,710

$
784,443

$
193,267

25%

Client retention

82%

83%

(1) point

—

83%

78%

5 points

—

Wallet retention

99%

98%

1 point

—

98%

87%

11 points

—

(1)
The operating results of AMR Research and Burton Group are included beginning on their respective dates of acquisition in December 2009. The operating results of these businesses were not material to the Research segment in 2009. The 2009 business measurements exclude these acquisitions.
(2)
Dollars in thousands.
~~(3)~~ ~~The 2009 and 2008 metrics exclude AMR Research and Burton Group.~~
25
2011 VERSUS 2010
Research segment revenues increased 17% in 2011 compared to 2010 and reached the one billion dollar level for the first time. Research revenues increased across all of our regions, products, and client types. Excluding the favorable effect of foreign currency translation, Research segment revenues increased 14%. The segment gross contribution margin increased by 2 points, to 67%, as higher segment revenues and the operating leverage in this business resulted in a higher segment contribution. Contribution margin improved in spite of an 8% increase in headcount to deliver on revenue growth and new clients.
Research contract value increased 14% in 2011, to $1,115.8 million, which is the highest reported contract value in the Company’s history. Foreign currency translation had an immaterial impact year-over-year on contract value. We had double-digit contract value growth in most of our Research product lines, client sizes, and industry groups, with the number of research client organizations we serve up 20% since 2009. We attribute the increase in contract value to our extraordinary research content, our continuing focus on sales effectiveness, and the expansion in the number of our quota-bearing sales associates. Both client retention and wallet retention remained strong at 82% and 99%, respectively.
2010 VERSUS 2009
Research revenues increased 15% in 2010, but excluding the favorable effect of foreign currency translation, revenues increased 14%. Approximately 39% of the $112.5 million revenue increase was attributable to the AMR Research and Burton Group businesses. The segment gross contribution margin was flat at 65%, despite additional headcount expenses from the AMR Research and Burton Group businesses.
Research contract value was $977.7 million at December 31, 2010, an increase of 25% compared to December 31, ~~2009 and the highest reported contract value in the Company’s history.~~2009. Excluding the favorable impact of foreign currency translation, research contract value increased 20% over 2009. ~~We attribute the increase to our continuing focus on sales effectiveness and the improving economic environment.~~ The ~~increase is also due to the~~ AMR Research and Burton Group businesses ~~which~~ contributed approximately 30% of the ~~$193.3 million~~ increase in contract value. Client retention and wallet retention improved 5 points and 11 points, respectively.

~~2009 VERSUS 2008~~
~~Research revenues declined 4% year-over-year, but excluding the unfavorable effect of foreign currency translation, Research revenues were down about 1%.~~
In spite of lower revenues, the Research contribution margin increased 2 points year-over-year. The improved margin was primarily driven by tight cost controls, which resulted in lower costs concentrated in personnel, travel, and internal meetings, and our ability to implement price increases for our products.
~~Contract value decreased 6% when comparing December 31, 2009 to December 31, 2008, but excluding the impact of foreign currency translation, contract value was down 1% year-over-year.~~
While down year-over-year, contract value increased $42.0 million in the fourth quarter of 2009, or 6%, with growth across all industries, geographies, and client sizes. We believe the increase reflects both improved sales effectiveness as well as an improving economic environment.
Consulting

2010 vs. 2009 2009 vs. 2008
As Of And As Of And As Of And As Of And
For the For the For the For the
Twelve Months Twelve Months Twelve Months Twelve Months
Ended Ended Percentage Ended Ended Percentage
December 31, December 31, Increase Increase December 31, December 31, Increase Increase
2010 2009 (Decrease) (Decrease) 2009 2008 (Decrease) (Decrease)
Financial Measurements:(1)

Revenues (2) $ 302,117 $ 286,847 $ 15,270 5 % $ 286,847 $ 347,404 $ (60,557 ) (17 )%
Gross contribution (2) $ 121,885 $ 112,099 $ 9,786 9 % $ 112,099 $ 141,395 $ (29,296 ) (21 )%
Gross contribution margin 40 % 39 % 1 point — 39 % 41 % (2) points —
Business Measurements:(3)

Backlog (2) $ 100,839 $ 90,891 $ 9,948 11 % $ 90,891 $ 97,169 $ (6,278 ) (6 )%
Billable headcount 473 442 31 7 % 442 499 (57 ) (11 )%
Consultant utilization 68 % 68 % — — 68 % 72 % (4) points —
Average annualized revenue per billable headcount (2) $ 424 $ 409 $ 15 4 % $ 409 $ 460 $ (51 ) (11 )%

2011 vs. 2010

2010 vs. 2009

As Of And
For The
Twelve Months
Ended
December 31,
2011

As Of And
For the
Twelve Months
Ended
December 31,
2010

Increase
(Decrease)

Percentage
Increase
(Decrease)

As Of And
For The
Twelve Months
Ended
December 31,
2010

As Of And
For the
Twelve Months
Ended
December 31,
2009

Increase
(Decrease)

Percentage
Increase
(Decrease)

Financial Measurements:(1)

Revenues(2)

$
308,047

$
302,117

$
5,930

2%

$
302,117

$
286,847

$
15,270

5%

Gross contribution(2)

$
114,838

$
121,885

$
(7,047
)

(6)%

$
121,885

$
112,099

$
9,786

9%

Gross contribution margin

37%

40%

(3) points

—

40%

39%

1 point

—

Business Measurements:(1)

Backlog(2)

$
100,564

$
100,839

$
(275
)

—

$
100,839

$
90,891

$
9,948

11%

Billable headcount

481

473

8

2%

473

442

31

7%

Consultant utilization

65%

68%

(3) points

—

68%

68%

—

—

Average annualized revenue per billable headcount (2)

$
424

$
424

$
—

—

$
424

$
409

$
15

4%

(1)
The operating results of AMR Research and Burton Group are included beginning on their respective dates of acquisition in December 2009. The operating results of these businesses were not material to the Consulting segment in 2009. The 2009 business measurements exclude these acquisitions.
(2)
Dollars in thousands.
~~(3)~~ ~~The 2009 and 2008 metrics exclude AMR Research and Burton Group.~~
26
2011 VERSUS 2010
Consulting revenues increased 2% year-over-year, primarily due to higher revenues in core consulting. Excluding the favorable impact of foreign currency translation, revenues were down slightly. The gross contribution margin declined by 3 points, due to lower utilization in core consulting and higher payroll and benefit costs resulting from merit salary increases and the full year impact in 2011 from the additional headcount we added in the fourth quarter of 2010. Backlog was down slightly year-over-year, to $100.6 million at December 31, 2011.
2010 VERSUS 2009
Consulting revenues increased 5% in 2010, but excluding the unfavorable impact of foreign currency translation, revenues increased 6%. The AMR Research and Burton Group businesses added approximately 35% of the ~~$15.3 million~~ revenue increase. The gross contribution margin improved by 1 point, primarily due to additional revenues in our contract optimization and SAS businesses, ~~both of~~ which have higher margins than core consulting.
Consulting billable headcount was 473 at December 31, 2010, an increase of 7% ~~year-over-year.~~from year-end 2009, with the majority of the additional headcount added in the fourth quarter of 2010. Backlog ~~was $100.8 million at December 31, 2010, and increase of $9.9 million or~~increased 11% ~~over the prior year. Backlog increased~~year-over-year with increases across all of our geographic regions. ~~The AMR Research and Burton Group businesses added approximately $0.3 million of the increase.~~
~~2009 VERSUS 2008~~
Consulting revenues declined 17% when comparing 2009 with 2008, with the majority of the decline in core consulting, and to a lesser extent, in our SAS and contract optimization businesses. The decline in core consulting was driven by lower headcount, utilization, and billing rates. The decline in revenue in our contract optimization business reflects a large contract received at the end of 2008 which was not repeated in 2009. SAS revenues declined due to approximately 17% fewer fulfilled SAS days. Excluding the unfavorable impact of foreign currency, overall Consulting revenues were down about 15%.
The 2 point decline in the Consulting contribution margin reflects lower revenue in our SAS and contract optimization businesses, which have higher margins than core consulting. To a lesser extent, the decline also reflects lower utilization and billing rates in core consulting.
We ended 2009 with 442 billable consultants, a decline of 11% from the prior year end as we tightly managed resources to match demand. The decline reflects normal attrition as well as the termination of approximately 30 consultants in January 2009 to better align our delivery resources with lower backlog.
Consulting backlog declined 6% year-over-year but increased 7% sequentially in the fourth quarter of 2009 to $90.9 million, as demand for our consulting services was solid in the U.S. while demand in Europe lagged.
Events

2010 vs. 2009 2009 vs. 2008
As Of And As Of And As Of And As Of And
For the For the For the For the
Twelve Months Twelve Months Twelve Months Twelve Months
Ended Ended Percentage Ended Ended Percentage
December 31, December 31, Increase Increase December 31, December 31, Increase Increase
2010 2009 (Decrease) (Decrease) 2009 2008 (Decrease) (Decrease)
Financial Measurements:(1)

Revenues (2) $ 121,337 $ 100,448 $ 20,889 21 % $ 100,448 $ 150,080 $ (49,632 ) (33 )%
Gross contribution (2) $ 55,884 $ 40,945 $ 14,939 37 % $ 40,945 $ 64,954 $ (24,009 ) (37 )%
Gross contribution margin 46 % 41 % 5 points — 41 % 43 % (2) points —
Business Measurements:(3)

Number of events 56 54 2 4 % 54 70 (16 ) (23 )%
Number of attendees 37,219 30,610 6,609 22 % 30,610 41,352 (10,742 ) (26 )%

2011 vs. 2010

2010 vs. 2009

As Of And
For The
Twelve Months
Ended
December 31,
2011

As Of And
For the
Twelve Months
Ended
December 31,
2010

Increase
(Decrease)

Percentage
Increase
(Decrease)

As Of And
For The
Twelve Months
Ended
December 31,
2010

As Of And
For the
Twelve Months
Ended
December 31,
2009

Increase
(Decrease)

Percentage
Increase
(Decrease)

Financial Measurements:(1)

Revenues(2)

$
148,479

$
121,337

$
27,142

22%

$
121,337

$
100,448

$
20,889

21%

Gross contribution(2)

$
66,265

$
55,884

$
10,381

19%

$
55,884

$
40,945

$
14,939

37%

Gross contribution margin

45%

46%

(1) point

—

46%

41%

5 points

—

Business Measurements:(1)

Number of events

60

56

4

7%

56

54

2

4%

Number of attendees

42,748

37,219

5,529

15%

37,219

30,610

6,609

22%

(1)
The operating results of AMR Research and Burton Group are included beginning on their respective dates of acquisition in December 2009. The operating results of these businesses were not material to the Events segment in 2009. The 2009 business measurements exclude these acquisitions.
(2)
Dollars in thousands.
~~(3)~~ ~~The 2009 and 2008 metrics exclude AMR Research and Burton Group.~~
2011 VERSUS 2010
Events revenues increased 22% year-over-year, or $27.1 million. Excluding the favorable impact of foreign currency translation, revenues increased 21% year-over-year. We held 60 events in 2011, which consisted of 53 ongoing events and 7 new event launches, compared to 56 events in 2010. We discontinued 3 events in 2011 that had been held in prior years.

The additional revenue we earned in 2011 was attributable to significantly higher revenue at our ongoing events, with double-digit increases in the number of attendees and exhibitors. Average revenue per attendee rose 2% and average revenue per exhibitor increased 5%. Events revenue was strong in the fourth quarter of 2011, rising to $76.4 million, an increase of 22% over the fourth quarter of 2010 and the highest reported fourth quarter revenue in Gartner history. For full year 2011, gross contribution margin decreased 1 point, primarily due to incremental expenses and additional investment in the business to strengthen the portfolio and provide a foundation for future growth.
2010 VERSUS 2009
Events revenues increased $20.9 million in 2010, or 21%, compared to 2009, with little impact from foreign currency translation. We held 2 additional events in 2010, for a total of 56 events, which consisted of 48 ongoing events and 8 new event launches. We
27
discontinued 6 events that had been held in prior years. We had a 22% increase in attendees and a 24% increase in exhibitors, while average revenue increased 12% for attendees but was down slightly for exhibitors. Revenues increased $21.1 million and $5.2 million from our ongoing and new events, respectively, which was partially offset by a $5.4 million revenue loss from discontinued events.
The gross contribution margin increased 5 points, primarily due to higher contribution from our ongoing events, reflecting the strength in attendee volume and average revenue per attendee as well as higher exhibitor volume.
~~2009 VERSUS 2008~~
Events revenue was down $49.6 million, or 33% in 2009 due to the impact of discontinued events and a decline in revenue from our on-going events. We held 54 events in 2009, a decline of 16 events compared to the prior year. The 54 events held in 2009 consisted of 51 on-going events and 3 new events. The number of attendees at our 51 on-going events was down 12% while the number of exhibitors was down 31%. Excluding the unfavorable impact of foreign currency, Events revenues were down 32% year-over-year.
Approximately $24.0 million of the revenue decrease was due to 19 discontinued events, including our Spring Symposium, which was a significant event in prior years. We discontinued these events in 2009 in response to the difficult operating environment, with tight travel restrictions and budget cuts at many companies due to the weak economy. We also had a $30.0 million decline in revenue from our 51 on-going events. These declines were slightly offset by approximately $4.0 million in higher revenue from new event launches and other miscellaneous events revenues. The Events contribution margin was down 2 points year-over-year primarily due to lower average attendee and exhibitor revenue at our 51 on-going events.
While the number of attendees was down significantly year-over-year, this trend began to show improvement in the fourth quarter of 2009 with attendance at our on-going events up 2%. We also began to see improvement in exhibitor participation. We believe these trends reflect a loosening of corporate travel budgets, resumed growth in marketing spend by technology companies, and our continuing efforts to increase client retention by enhancing the value and experience that our clients derive from our events.

LIQUIDITY AND CAPITAL RESOURCES
On December 22, 2010, the Company entered into a new credit facility with a syndication of banks led by JPMorgan Chase to take advantage of favorable financing conditions and to obtain greater financial flexibility and liquidity through a larger revolving credit facility. The new credit arrangement provides for a five-year, $200.0 million term loan and a $400.0 million revolving credit facility. The new credit facility contains an expansion feature by which the term loan and revolving credit facility may be increased, at the Company’s option and under certain conditions, by up to an additional $150.0 million in the aggregate.
We finance our operations primarily through cash generated from our on-going operating ~~activities, and our 2010~~activities. For 2011, we had operating cash flow ~~increased 27%~~of $255.6 million, which was the highest in the Company’s history and an increase of 24% over ~~the prior year.~~2010. As of December 31, ~~2010,~~2011, we had ~~$120.2~~$142.7 million of cash and cash equivalents and ~~$376.0~~$376.8 million of available borrowing capacity under our revolving credit facility. We believe that we have adequate liquidity to meet our currently anticipated needs.
Our cash and cash equivalents are held in numerous locations throughout the ~~world, with approximately 75%~~world. At December 31, 2011, $123.0 million of our cash was held outside the ~~United States~~U.S., and approximately one-third of this amount represented unremitted earnings of non-U.S subsidiaries. Under U.S. GAAP accounting rules, no provision for U.S. federal and local taxes is required for these unremitted overseas earnings if the Company intends to reinvest such funds overseas. Our current plans do not demonstrate a need to repatriate these undistributed earnings to fund our U.S. operations or otherwise satisfy our U.S. liquidity needs, and 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, no provision for U.S. federal and state income taxes has been recorded for these unremitted earnings. However, should we decide to repatriate some or all of these unremitted earnings, we may be required to accrue for U.S. taxes as ~~of December 31, 2010.~~
~~We believe that we have adequate liquidity~~a result, and ~~that the~~these charges could be material and would be recorded in future periods.
Changes in cash ~~we expect to earn from our on-going operating activities, our existing~~and cash ~~balances, and the expanded borrowing capacity we have under our revolving credit facility will be sufficient for our expected short-term and foreseeable long-term operating needs.~~
equivalents
The following ~~table summarizes~~tables summarize the ~~Company’s~~ changes in cash and cash equivalents for the three years ending December 31, ~~2010:~~2011 (in thousands):

2011 vs. 2010

2010 vs. 2009

Twelve Months
Ended
December 31,
2011

Twelve Months
Ended
December 31,
2010

Increase
(Decrease)

Twelve Months
Ended
December 31,
2010

Twelve Months
Ended
December 31,
2009

Increase
(Decrease)

Cash provided by operating activities

$
255,566

$
205,499

$
50,067

$
205,499

$
161,937

$
43,562

Cash used by investing activities

(41,954
)

(33,845
)

(8,109
)

(33,845
)

(119,665
)

85,820

Cash used in financing activities

(186,559
)

(171,556
)

(15,003
)

(171,556
)

(73,780
)

(97,776
)

Net increase (decrease)

27,053

98

26,955

98

(31,508
)

31,606

Effects of exchange rates

(4,495
)

3,509

(8,004
)

3,509

7,153

(3,644
)
Beginning cash and cash equivalents

120,181

116,574

3,607

116,574

140,929

(24,355
)

Ending cash and cash equivalents

$
142,739

$
120,181

$
22,558

$
120,181

$
116,574

$
3,607

2010 vs. 2009 2009 vs. 2008
Twelve Months Twelve Months Twelve Months Twelve Months
Ended Ended Dollar Ended Ended Dollar
December 31, December 31, Increase December 31, December 31, Increase
2010 2009 (Decrease) 2009 2008 (Decrease)
Cash provided by operating activities $ 205,499 $ 161,937 $ 43,562 $ 161,937 $ 184,350 $ (22,413 )
Cash used by investing activities (33,845 ) (119,665 ) 85,820 (119,665 ) (16,455 ) (103,210 )
Cash used in financing activities (171,556 ) (73,780 ) (97,776 ) (73,780 ) (119,835 ) 46,055

Net increase (decrease) 98 (31,508 ) 31,606 (31,508 ) 48,060 (79,568 )
Effects of exchange rates 3,509 7,153 (3,644 ) 7,153 (17,076 ) 24,229
Beginning cash and cash equivalents 116,574 140,929 (24,355 ) 140,929 109,945 30,984

Ending cash and cash equivalents $ 120,181 $ 116,574 $ 3,607 $ 116,574 $ 140,929 $ (24,355 )

28
2011 VERSUS 2010
Operating
Operating cash flow increased by 24%, or $50.1 million, in 2011 compared to 2010. The increase was primarily due to $40.6 million in higher net income and approximately $15.0 million in lower cash payments for acquisition costs, severance, and other costs. We also received $9.0 million in landlord cash reimbursements for capital expenditures on the renovation of our Stamford headquarters facility. These increased cash flows were partially offset by higher cash bonus and commission payments we paid in 2011 due to our stronger financial performance. Excluding the $9.0 million in landlord reimbursements we received in 2011 related to the renovation of our Stamford headquarters facility, our operating cash flow increased 20% year-over-year.
Investing
We used $8.1 million of additional cash in our investing activities in 2011 compared to 2010, due to higher capital expenditures. Capital expenditures were $42.0 million in 2011 compared to $21.7 million in 2010. We also made $12.2 million in payments related to the acquisition of Burton Group in early 2010, which we acquired in December 2009.
The $42.0 million of capital expenditures in the 2011 period included $9.5 million we paid for the renovation of our Stamford headquarters facility, which is fully reimbursable by the landlord. The Company received reimbursement of $9.0 million of this amount in 2011, which is recorded as an operating cash flow benefit. The Company will receive the remaining $0.5 million landlord reimbursement in 2012, which will also be recorded as an operating cash flow benefit when received.
Financing
We used an additional $15.0 million of cash in our financing activities in 2011 compared to 2010, primarily due to additional share repurchases. During 2011, we used $212.0 million for share repurchases, compared to $99.8 million in 2010. The increase in cash used for share repurchases in 2011 was substantially offset by lower debt repayments in 2011 compared to 2010. On a net basis, we repaid $99.8 million of our debt in 2010 and we paid $4.8 million in fees related to our refinancing, compared to $20.1 million of debt repayments in 2011.
2010 VERSUS 2009
Operating
~~Our 2010 operating~~
Operating cash flow increased by $43.6 million, or 27%, when comparing 2010 to 2009, primarily due to the $13.3 million year-over-year increase in net income, a $9.0 million decrease in cash payments for income taxes, and a $12.1 million decrease in payments for severance, interest payments on our debt, and excess facilities. We also received $2.4 million in cash in 2010 from an insurance recovery, and approximately $19.8 million of improvements in our working capital accounts, which ~~includes increased~~included improved cash ~~collections~~collection on our receivables. Partially offsetting these increases were $8.0 million in acquisition and integration payments made in 2010 related to the acquisitions of AMR Research and Burton Group and $5.0 million more in 2010 bonus payments.
Investing
Cash used in our investing activities declined by $85.8 million in 2010 due to the acquisitions of AMR Research and Burton Group in 2009. We paid $104.5 million in cash for these acquisitions in December 2009 and an additional $12.2 million in January 2010. We used $21.7 million of cash in 2010 for capital expenditures compared to $15.1 million in the 2009 period, an increase of $6.6 million, or 43%.
Financing
Cash used in our financing activities was $97.8 million higher in 2010 compared to 2009, with a total of $171.6 million used in 2010 compared to $73.8 million used in 2009. The additional cash used was due to higher debt repayments and additional share repurchases in 2010.
On a net basis, we repaid $108.8 million of debt in 2010 compared to $87.3 million in the prior year, an increase in cash used of $21.6 million. We used $99.8 million of cash for share repurchases in 2010 compared to $3.7 million in 2009, an increase in cash used of $96.1 million. We also paid $4.8 million in cash in 2010 for fees related to our debt refinancing. Partially offsetting these higher uses of cash was an additional $24.7 million in cash realized from option exercises and excess tax benefits as a higher average stock price in 2010 resulted in a significantly increased number of option exercises.

~~2009 VERSUS 2008~~
~~Operating~~
Our operating cash flow decreased by 12% in 2009, or $22.4 million. We had a decline of approximately $23.0 million in cash from our core operations, along with $14.5 million more in cash taxes paid and $8.0 million in higher severance payments due to the workforce reduction completed in early January 2009. Partially offsetting the declines were $14.8 million in lower interest payments on our debt, bonus payments, and payments on our excess facilities, and an $8.3 million improvement in working capital. The improved working capital primarily reflects improved cash collection on receivables.
~~Investing~~
We used an additional $103.2 million of cash in our investing activities in 2009 due to the $104.5 million of cash used for the acquisitions of AMR Research and Burton Group. We had $15.1 million of capital expenditures in 2009, a decline of 38% compared to the $24.3 million of capital expenditures in 2008. The decline reflects the Company’s tight focus on reducing costs. We also realized $7.8 million of cash proceeds in 2008 from the sale of our Vision Events business.
~~Financing~~
Cash used in financing activities declined by $46.1 million, primarily due to a significant decline in the use of cash for stock repurchases. Cash used for stock repurchases declined by about $197.1 million. Offsetting the decline in cash used for share repurchases was an increase in the use of cash to repay debt of about $108.7 million and a decline in cash proceeds from option exercises and excess tax benefits from equity compensation of approximately $42.3 million.
29
OBLIGATIONS AND COMMITMENTS
At December 31, ~~2010,~~2011, we had ~~$220.0~~$200.0 million outstanding under our 2010 Credit Agreement which provides for a five-year, $200.0 million term loan and a $400.0 million revolving credit facility. The 2010 Credit Agreement contains an expansion feature by which the term loan and revolving credit facility may be increased, at the Company’s option and under certain conditions, by up to an additional $150.0 million in the aggregate.
The term loan will be repaid in 19 consecutive quarterly installments ~~commencing~~which commenced in March ~~31,~~ 2011, ~~plus a~~with the final payment due onin December ~~22,~~ 2015, and may be prepaid at any time without penalty or premium at the Company’s option. The revolving credit facility may be used for loans, and up to $40.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until December ~~22,~~ 2015, at which time all amounts borrowed must be repaid. See Note 65 — Debt in the Notes to the Consolidated Financial Statements for additional information regarding the 2010 Credit Agreement.
Cash Commitments
The following table presents our contractual cash commitments due after December 31, ~~2010~~2011 (in thousands):

Less Than 2-3 4-5 More Than
Commitment Type: 1 Year Years Years 5 Years Total
Operating leases (1) $ 30,775 $ 43,300 $ 27,875 $ 66,640 $ 168,590
Debt outstanding (2) 20,000 70,000 130,156 — 220,156
Deferred compensation arrangement (3) 1,930 4,230 2,865 17,265 26,290
Tax liabilities (4) 1,275 — — — 1,275

Totals $ 53,980 $ 117,530 $ 160,896 $ 83,905 $ 416,311

Commitment Type:

Less Than
1 Year

2-3
Years

4-5
Years

More Than
5 Years

Total

Debt and interest rate swap (1)

$
37,520

$
105,040

$
87,520

$
—

$
230,080

Operating leases (2)

35,810

57,765

29,545

82,530

205,650

Deferred compensation arrangement (3)

2,570

4,550

3,440

17,540

28,100

Stamford leasehold improvements (4)

15,500

—

—

—

15,500

Tax liabilities (5)

1,980

140

—

—

2,120

Other (6)

10,000

8,100

1,800

—

19,900

Totals

$
103,380

$
175,595

$
122,305

$
100,070

$
501,350

~~(1)~~ ~~The Company leases various facilities, furniture, and computer equipment expiring between 2011 and 2025.~~
~~(2)~~
(1)
Represents amounts due under the Company’s 2010 Credit ~~Agreement.~~Agreement and interest rate swap contract (see Note 5 — Debt in the Notes to the Consolidated Financial Statements). Amounts drawn under the ~~revolver~~revolving credit arrangement have been classified in the 4-5 Years category since the amounts are not contractually due until December 2015.
The Company has a $200.0 million notional interest rate swap that converts the variable interest payments on the debt to a fixed rate, resulting in an effective interest rate on the debt of 3.76% as of December 31, 2011. This rate has been used to estimate the contractual interest due for all periods presented.
(2)
~~Interest payments on our outstanding debt are excluded from the amounts payable due to the variable nature of the interest rates~~
The Company leases various facilities, furniture, and resulting payment amounts. Information regarding current interest rates on the Company’s debt is contained in Note 6 — Debt in the Notes to the Consolidated Financial Statements. For the years ended December 31, 2010, 2009computer equipment. These leases expire between 2012 and ~~2008, we paid cash interest on our debt of $11.5 million, $13.9 million, and $22.4 million, respectively.~~2027.
(3)
Represents the Company’s liability to participants in the supplemental deferred compensation ~~arrangement.~~arrangement (see Note 13 — Employee Benefits in the Notes to the Consolidated Financial Statements). Amounts payable to active employees whose payment date is unknown have been included in the More Than 5 Years category since the Company cannot determine when the amounts will be paid.
(4)
The Company has a remaining contractual commitment of $15.5 million for leasehold improvements on its Stamford headquarters facility (seeProperty, equipment and leasehold improvementsin Note 1 — Business and Significant Accounting Policies). The $15.5 million commitment is contractually reimbursable from the Company’s landlord.
(5)
Includes interest and penalties. In addition to the ~~$1.3~~$2.1 million liability, approximately ~~$15.8~~$17.6 million of unrecognized tax benefits have been recorded as liabilities, and we are uncertain as to if or when such amounts may be settled. Related to the unrecognized tax benefits not included in the table, the Company has also recorded a liability for potential interest and penalties of ~~$2.5~~$3.4 million.
(6)
Includes contractual commitments for software and other services.

QUARTERLY FINANCIAL DATA
The following tables present our quarterly operating results for the two year period ended December 31, ~~2010:~~

2010
(In thousands, except per share data) First Second Third Fourth
Revenues $ 295,833 $ 314,195 $ 296,122 $ 382,304
Operating income 29,198 34,230 32,763 53,074
Net income 19,403 20,113 20,075 36,694
Net income per share (1)
Basic $ 0.20 $ 0.21 $ 0.21 $ 0.38

Diluted $ 0.19 $ 0.20 $ 0.20 $ 0.37

302011:

2009
(In thousands, except per share data) First Second Third Fourth
Revenues $ 273,533 $ 269,971 $ 267,469 $ 328,827
Operating income 34,451 30,761 27,521 41,744
Net income 19,996 17,185 20,067 25,716
Net income per share (1)
Basic $ 0.21 $ 0.18 $ 0.21 $ 0.27

Diluted $ 0.21 $ 0.18 $ 0.21 $ 0.26

2011
(In thousands, except per share data)

First

Second

Third

Fourth

Revenues

$
329,567

$
365,543

$
345,784

$
427,694

Operating income

45,781

51,568

47,250

69,463

Net income

29,191

32,223

30,464

45,024

Net income per share: (1)

Basic

$
0.30

$
0.33

$
0.32

$
0.48

Diluted

$
0.29

$
0.32

$
0.31

$
0.46

2010
(In thousands, except per share data)

First

Second

Third

Fourth

Revenues

$
295,833

$
314,195

$
296,122

$
382,304

Operating income

29,198

34,230

32,763

53,074

Net income

19,403

20,113

20,075

36,694

Net income per share: (1)

Basic

$
0.20

$
0.21

$
0.21

$
0.38

Diluted

$
0.19

$
0.20

$
0.20

$
0.37

(1)
The aggregate of the four quarters’ basic and diluted earnings per common share may not equal the reported full calendar year amounts due to the effects of share repurchases, dilutive equity compensation, and rounding.
~~NEW~~
RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting guidance issued by the various standard setting and governmental authorities that have not yet become effective with respect to our Consolidated Financial Statements are described below, together with our assessment of the potential impact they may have on our Consolidated Financial Statements:
Comprehensive Income.In ~~January 2010,~~June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220-10): Presentation of Comprehensive Income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, the new rule will require an entity to present net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The Company will adopt this new rule in the quarter ending March 31, 2012. While the adoption of this new guidance will change the presentation of comprehensive income, it is not expected to have an impact on the Company’s results of operations, cash flows, or financial position.
Fair Value Measurements. In May 2011, the FASB issued ASU ~~2010-06,~~No. 2011-04,“Fair Value ~~Measurements~~Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and ~~Disclosures.”~~Disclosure Requirements in U.S. GAAP and IFRSs.ASU ~~2010-06 requires~~No. 2011-04 establishes a number of new requirements for fair value ~~hierarchy disclosures~~measurements. These include: (1) a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to ~~be further disaggregated by class~~the group; (2) an extension of ~~assets~~the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and ~~liabilities. A class is often~~(3) a ~~subset~~requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of ~~assets or liabilities within a line item in~~ the ~~balance sheet.~~valuation process used and qualitative details about the sensitivity of the measurements. In addition, ~~significant transfers between Levels 1 and 2 of~~for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy ~~are required~~that applies to ~~be disclosed. These additional disclosure requirements became effective January 1, 2010. In general, we do not anticipate transfers between the different levels of~~ the fair value ~~hierarchy,~~measurement disclosed. This ASU is effective for interim and ~~for~~annual periods beginning after December 15, 2011. The Company will adopt this new rule in the ~~year ended December~~quarter ending March 31, ~~2010, there were none. Our required~~2012. The adoption of this ASU may result in additional fair value disclosures ~~are presented in Note 12 —~~~~Fair Value Disclosures~~~~, herein in the Notes~~but is not expected to ~~the Consolidated Financial Statements. Beginning January 1, 2011, the FASB will also require additional disclosures regarding changes in Level 3 instruments. The Company currently does not~~ have ~~any Level 3 instruments.~~
~~In September 2009, the FASB issued ASU 2009-13,~~~~“Revenue Arrangements with Multiple Deliverables.”~~ ~~ASU 2009-13 requires companies to allocate revenue in arrangements involving multiple deliverables based~~an impact on the ~~estimated selling price~~Company’s results of ~~each deliverable, even though such deliverables are not sold separately either by the company itself~~operations, cash flows, or other vendors. ASU 2009-13 eliminates the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the overall arrangement fee that is attributable to items that already have been delivered. As a result, the new guidance is expected to allow some companies to recognize revenue on transactions that involve multiple deliverables earlier than under current requirements. ASU 2009-13 will be effective for Gartner beginning January 1, 2011. The Company’s multiple revenue arrangements are limited and as a result we do not expect any impact on our Consolidated Statement of Operations related to the adoption of this guidance.
financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
We have exposure to changes in interest rates arising from borrowings under our 2010 Credit ~~Agreement, and at~~Agreement. At December 31, ~~2010~~2011, we had ~~$200.0~~$180.0 million outstanding under the term loan and $20.0 million outstanding under the revolver. Borrowings under this facility are floating rate, which may be either prime-based or Eurodollar-based. ~~Interest rates under~~The rate paid for these borrowings ~~include~~includes a base floating rate plus a margin between 0.50% and 1.25% on prime borrowings and between 1.50% and 2.25% on Eurodollar-based borrowings.

As of December 31, 2010, the annualized interest rate on the term loan was 2.30%, which consisted of a 0.3% three-month Eurodollar base rate plus a margin of 2.0%, and 2.26% on the revolver, which consisted of a 0.26% one-month Eurodollar base rate plus a margin of 2.0%.
We have an interest rate swap contract which effectively converts the floating base rate on the first $200.0 million of our borrowings to a 2.26% fixed rate.
The Company only hedges the base interest rate risk on the first $200.0 million of its outstanding borrowings. Accordingly, we are exposed to interest rate risk on borrowings in excess of $200.0 million. A 25 basis point increase or decrease in interest rates would change pre-tax annual interest expense on the additional ~~$400.0 million~~revolver borrowing capacity under the 2010 Credit Agreement (not including the expansion feature) by approximately ~~$1.0~~$0.9 million.
31
FOREIGN CURRENCY ~~EXCHANGE~~ RISK
We have customers in 85numerous countries, and ~~44%~~46% and ~~45%~~44% of our revenues for ~~2010~~the fiscal years ended December 31, 2011 and ~~2009,~~2010, respectively, were derived from sales outside of the U.S. As a result, we conduct business in numerous currencies other than the U.S dollar. Among the major foreign currencies in which we conduct business are the Euro, the British Pound, the Japanese Yen, the Australian dollar, and the Canadian dollar. Our foreign currency exposure results in both translation risk and transaction risk:

TRANSLATION RISK
We are exposed to foreign currency translation risk since the functional currencies of our foreign operations are generally denominated in the local currency. Translation risk arises since the assets and liabilities that we report for our foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates, and these exchange rates fluctuate over time. These foreign currency translation adjustments are deferred and are recorded as a component of stockholders’ equity and do not impact our operating results.
A measure of the potential impact of foreign currency translation on our Condensed Consolidated Balance Sheets can be determined through a sensitivity analysis of our cash and cash equivalents. ~~As of~~At December 31, ~~2010,~~2011, we had ~~over $120.0~~$142.7 million of cash and cash equivalents, a substantial portion of which was denominated in foreign currencies. If the foreign exchange rates of the major currencies in which we operate changed in comparison to the U.S. dollar by 10%, the amount of cash and cash equivalents we would have reported on December 31, ~~2010~~2011 would have increased or decreased by approximately ~~$5.0~~$9.0 million.
Because our foreign subsidiaries generally operate in a local functional currency that differs from the U.S. dollar, revenues and expenses in these foreign currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S. dollar continuously weakens or strengthens against these other currencies. Therefore, changes in exchange rates may affect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations. Historically, this impact on our consolidated earnings has not been material since foreign currency movements in the major currencies in which we operate tend to impact our revenues and expenses fairly equally.

TRANSACTION RISK
We also have foreign exchange transaction risk since we typically enter into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency in which the foreign subsidiary operates.
We typically enter into foreign currency forward exchange contracts to offset the effects of foreign currency transaction risk. These contracts are normally short term in duration and unrealized and realized gains and losses are recognized in current period earnings. At December 31, ~~2010,~~2011, we had 6360 outstanding foreign currency forward contracts with a total notional amount of ~~$250.2~~$99.6 million and aan immaterial net unrealized ~~gain of $0.6 million.~~gain. All of these contracts matured by the end of January ~~2011.~~
~~CONCENTRATION OF~~ 2012.
CREDIT RISK
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, accounts receivable, and interest rate swap contracts. The majority of the Company’s cash and cash equivalents and its interest rate swap ~~contract~~contracts are with large investment grade commercial banks that are participants in the Company’s 2010 Credit Agreement. Accounts receivable balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements for 2011, 2010, ~~2009,~~ and ~~2008,~~2009, together with the reports of KPMG LLP, our independent registered public accounting firm, are included herein in this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE.
~~None.~~
32
None.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Management conducted an evaluation, as of December 31, ~~2010,~~2011, of the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material Company information required to be disclosed by us in reports filed or submitted under the Act.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Gartner management is responsible for establishing and maintaining adequate internal control over financial 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 reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2010.~~2011. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment was reviewed with the Audit Committee of the Board of Directors.
Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, ~~2010,~~2011, Gartner’s internal control over financial reporting was effective.
The effectiveness of management’s internal control over financial reporting as of December 31, ~~2010~~2011 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report on Form 10-K in Part IV, Item 15.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting during the quarter ended December 31, ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
33
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be furnished pursuant to this item will be set forth under the captions “Proposal One: Election of Directors,” “Executive Officers,” “Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Miscellaneous — Available Information” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, ~~2011.~~2012. If

the Proxy Statement is not filed with the SEC by April 30, ~~2011,~~2012, such information will be included in an amendment to this Annual Report filed by April 30, ~~2011.~~2012. See also Item 1. Business — Available Information.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be furnished pursuant to this item is incorporated by reference from the information set forth under the caption “Executive Compensation” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, ~~2011.~~2012. If the Proxy Statement is not filed with the SEC by April 30, ~~2011,~~2012, such information will be included in an amendment to this Annual Report filed by April 30, ~~2011.~~
2012.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS.
The information required to be furnished pursuant to this item will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement to be filed with the SEC by April 30, ~~2011.~~2012. If the Proxy Statement is not filed with the SEC by April 30, ~~2011,~~2012, such information will be included in an amendment to this Annual Report filed by April 30, ~~2011.~~
2012.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORINDEPENDENCE.
The information required to be furnished pursuant to this item will be set forth under the captions “Transactions With Related Persons” and “Corporate Governance — Director Independence” in the Company’s Proxy Statement to be filed with the SEC by April 30, ~~2011.~~2012. If the Proxy Statement is not filed with the SEC by April 30, ~~2011,~~2012, such information will be included in an amendment to this Annual Report filed by April 30, ~~2011.~~
2012.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required to be furnished pursuant to this item will be set forth under the caption “Principal Accountant Fees and Services” in the Company’s Proxy Statement to be filed with the SEC no later than April 30, ~~2011.~~2012. If the Proxy Statement is not filed with the SEC by April 30, ~~2011,~~2012, such information will be included in an amendment to this Annual Report filed by April 30, ~~2011.~~
34
2012.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) 1. and 2. Consolidated Financial Statements and Schedules
The reports of our independent registered public accounting firm and consolidated financial statements listed in the Index to Consolidated Financial Statements herein are filed as part of this report.
All financial statement schedules not listed in the Index have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.

~~3. Exhibits~~

~~EXHIBIT~~
3. Exhibits
~~NUMBER~~
EXHIBIT
NUMBER
DESCRIPTION OF DOCUMENT
~~3.1a(1)~~
3.1(1)
Restated Certificate of Incorporation of the Company.
3.2(2)
Bylaws as amended through ~~May 1, 2007.~~February 2, 2012.
4.1(1)
Form of Certificate for Common Stock as of June 2, 2005.
4.2*
4.2(3)
Credit Agreement, dated as of December 22, 2010, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative ~~agent~~agent.
~~10.1(3)~~
10.1(4)
Lease dated April 16, 2010 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.
~~10.2(3)~~
10.2(4)
First Amendment to 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(4)~~
10.4(5)+
~~1991 Stock Option Plan as amended and restated on October 19, 1999.~~
~~10.4(5)+~~ ~~2002~~
2011 Employee Stock Purchase ~~Plan, as amended and restated effective June 1, 2008.~~Plan.
10.5(6)+
1999 Stock Option Plan.
10.6(7)+
2003 Long-Term Incentive Plan, as amended and restated on June 4, 2009.
10.7(8)+
Amended and Restated Employment Agreement between Eugene A. Hall and the Company dated as of ~~December 31, 2008.~~April 13, 2011.
~~10.8(8)~~
10.8(9)+
Company Deferred Compensation Plan, effective January 1, 2009.
~~10.9(9)~~
10.9(10)+
Form of Stock Appreciation Right Agreement for executive officers.
~~10.10(9)~~
10.10(10)+
Form of Performance Stock Unit Agreement for executive officers.
21.1*
Subsidiaries of Registrant.
23.1*
Consent of Independent Registered Public Accounting Firm
24.1
Power of Attorney (see Signature Page).
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.
35
+
+
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 ~~May 3, 2007~~February 2, 2012 as filed on ~~May 3, 2007.~~February 7, 2012.
(3)
Incorporated by reference from the Company’s Annual Report on Form 10-K as filed on February 15, 2011.
(4)
Incorporated by reference from the Company’s Quarterly Report on form 10-Q as filed on August 9, ~~2010~~2010.
~~(4)~~
(5)
Incorporated by reference from the Company’s ~~Annual Report on Form 10-K filed on December 22, 1999.~~
~~(5)~~ ~~Incorporated by reference from the Company’s Quarterly Report on Form 10-Q~~Proxy Statement (Schedule 14A) as filed on ~~May 8, 2008.~~April 18, 2011.
(6)
Incorporated by reference from the Company’s Form S-8 as filed on February 16, 2000.
(7)
Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) as filed on April 21, 2009.
(8)
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q as filed on August 2, 2011.
(9)
Incorporated by reference from the Company’s Annual Report on Form 10-K as filed on February 20, 2009.
~~(9)~~
(10)
Incorporated by reference from the Company’s Current Report on Form 8-K dated February ~~10, 2010~~9, 2012 as filed on February ~~16, 2010.~~15, 2012.

36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GARTNER, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
38
35
Report of Independent Registered Public Accounting Firm
39
36
Consolidated Balance Sheets as of December 31, ~~2010~~2011 and ~~2009~~2010
40
37
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 ~~2009~~ and ~~2008~~2009
41
38
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income ~~(Loss)~~ for the Years Ended December 31, 2011, 2010 ~~2009~~ and ~~2008~~2009
42
39
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 ~~2009~~ and ~~2008~~2009
43
40
Notes to Consolidated Financial Statements
44
41
All financial statement schedules have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.

37
~~Report~~Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Gartner, Inc.:
We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries (the Company) as of December 31, ~~2010~~2011 and ~~2009,~~2010, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income, ~~(loss),~~ and cash flows for each of the years in the three-year period ended December 31, ~~2010.~~2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gartner, Inc. and subsidiaries as of December 31, ~~2010~~2011 and ~~2009,~~2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, ~~2010,~~2011, 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, ~~2010,~~2011, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February ~~15, 2011~~23, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
(KPMG LLP LOGO)
/s/ KPMG LLP
New York, New York
February ~~15, 2011~~23, 2012

38
~~Report~~Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Gartner, Inc.:
We have audited Gartner, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, ~~2010,~~2011, based on criteria established inInternal Control — Integrated Frameworkissued 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, ~~2010,~~2011, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.
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, ~~2010~~2011 and ~~2009,~~2010, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income, ~~(loss),~~ and cash flows for each of the years in the three-year period ended December 31, ~~2010,~~2011, and our report dated February ~~15, 2011~~23, 2012 expressed an unqualified opinion on those consolidated financial statements.
(KPMG LLP LOGO)
/s/ KPMG LLP
New York, New York
February ~~15, 2011~~23, 2012

39
GARTNER, INC.

~~CONSOLIDATED~~CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

December 31,
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $ 120,181 $ 116,574
Fees receivable, net of allowances of $7,200 and $8,100 respectively 364,818 317,598
Deferred commissions 71,955 70,253
Prepaid expenses and other current assets 64,148 53,400

Total current assets 621,102 557,825
Property, equipment and leasehold improvements, net 47,614 52,466
Goodwill 510,265 513,612
Intangible assets, net 13,584 24,113
Other assets 93,093 67,263

Total Assets $ 1,285,658 $ 1,215,279

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 247,733 $ 255,966
Deferred revenues 523,263 437,207
Current portion of long-term debt 40,156 205,000

Total current liabilities 811,152 898,173
Long-term debt 180,000 124,000
Other liabilities 107,450 80,571

Total liabilities 1,098,602 1,102,744
Stockholders’ equity:
Preferred stock:
$.01 par value, authorized 5,000,000 shares; none issued or outstanding — —
Common stock:
$.0005 par value, authorized 250,000,000 shares for both periods; 156,234,415 shares issued for both periods 78 78
Additional paid-in capital 611,782 590,864
Accumulated other comprehensive income, net 14,638 11,322
Accumulated earnings 605,677 509,392
Treasury stock, at cost, 60,245,718 and 60,356,672 common shares, respectively (1,045,119) (999,121 )

Total stockholders’ equity 187,056 112,535

Total Liabilities and Stockholders’ Equity $ 1,285,658 $ 1,215,279

December 31,

2011

2010

ASSETS

Current assets:

Cash and cash equivalents

$
142,739

$
120,181

Fees receivable, net of allowances of $7,260 and $7,200 respectively

421,033

364,818

Deferred commissions

78,492

71,955

Prepaid expenses and other current assets

63,521

64,148

Total current assets

705,785

621,102

Property, equipment and leasehold improvements, net

68,132

47,614

Goodwill

508,550

510,265

Intangible assets, net

7,060

13,584

Other assets

90,345

93,093

Total Assets

$
1,379,872

$
1,285,658

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$
259,490

$
247,733

Deferred revenues

611,647

523,263

Current portion of long-term debt

50,000

40,156

Total current liabilities

921,137

811,152

Long-term debt

150,000

180,000

Other liabilities

126,951

107,450

Total liabilities

1,198,088

1,098,602

Stockholders’ equity:

Preferred stock:

$.01 par value, authorized 5,000,000 shares; none issued or outstanding

—

—

Common stock:

$.0005 par value, authorized 250,000,000 shares for both periods; 156,234,415 shares issued for both periods

78

78

Additional paid-in capital

646,815

611,782

Accumulated other comprehensive income, net

5,793

14,638

Accumulated earnings

742,579

605,677

Treasury stock, at cost, 62,891,251 and 60,245,718 common shares, respectively

(1,213,481
)

(1,045,119
)

Total stockholders’ equity

181,784

187,056

Total Liabilities and Stockholders’ Equity

$
1,379,872

$
1,285,658

See Notes to Consolidated Financial Statements.

40
GARTNER, INC.

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Year Ended December 31,
2010 2009 2008
Revenues:
Research $ 865,000 $ 752,505 $ 781,581
Consulting 302,117 286,847 347,404
Events 121,337 100,448 150,080

Total revenues 1,288,454 1,139,800 1,279,065
Costs and expenses:
Cost of services and product development 552,238 498,363 572,208
Selling, general and administrative 543,174 477,003 514,994
Depreciation 25,349 25,387 25,880
Amortization of intangibles 10,525 1,636 1,615
Acquisition and integration charges 7,903 2,934 —

Total costs and expenses 1,139,189 1,005,323 1,114,697

Operating income 149,265 134,477 164,368
Interest income 1,156 830 3,121
Interest expense (16,772 ) (16,862 ) (22,390 )
Other income (expense), net 436 (2,919 ) (358 )

Income before income taxes 134,085 115,526 144,741
Provision for income taxes 37,800 32,562 47,593

Income from continuing operations 96,285 82,964 97,148
Income from discontinued operations, net of taxes — — 6,723

Net income $ 96,285 $ 82,964 $ 103,871

Net income per share:
Basic:
Income from continuing operations $ 1.01 $ 0.88 $ 1.02
Income from discontinued operations — — .07

$ 1.01 $ 0.88 $ 1.09

Diluted:
Income from continuing operations $ 0.96 $ 0.85 $ 0.98
Income from discontinued operations — — .07

$ 0.96 $ 0.85 $ 1.05

Weighted average shares outstanding:
Basic 95,747 94,658 95,246
Diluted 99,834 97,549 99,028

Year Ended December 31,

2011

2010

2009

Revenues:

Research

$
1,012,062

$
865,000

$
752,505

Consulting

308,047

302,117

286,847

Events

148,479

121,337

100,448

Total revenues

1,468,588

1,288,454

1,139,800

Costs and expenses:

Cost of services and product development

608,755

552,238

498,363

Selling, general and administrative

613,707

543,174

477,003

Depreciation

25,539

25,349

25,387

Amortization of intangibles

6,525

10,525

1,636

Acquisition and integration charges

—

7,903

2,934

Total costs and expenses

1,254,526

1,139,189

1,005,323

Operating income

214,062

149,265

134,477

Interest income

1,249

1,156

830

Interest expense

(11,216
)

(16,772
)

(16,862
)
Other (expense) income, net

(1,911
)

436

(2,919
)

Income before income taxes

202,184

134,085

115,526

Provision for income taxes

65,282

37,800

32,562

Net income

$
136,902

$
96,285

$
82,964

Net income per share:

Basic

$
1.43

$
1.01

$
0.88

Diluted

$
1.39

$
0.96

$
0.85

Weighted average shares outstanding:

Basic

96,019

95,747

94,658

Diluted

98,846

99,834

97,549

See Notes to Consolidated Financial Statements.

41
GARTNER, INC.
CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~STOCKHOLDERS’ EQUITY (DEFICIT) AND COMPREHENSIVEINCOME ~~(LOSS)~~

(IN THOUSANDS)

Accumulated
Other Total
Additional Comprehensive Stockholders’
Common Paid-In Income Accumulated Treasury Equity
Stock Capital (Loss), Net Earnings Stock (Deficit)
Balance at December 31, 2007 $ 78 $ 545,268 $ 23,641 $ 322,557 $ (874,046 ) $ 17,498
Comprehensive income:
Net income — — — 103,871 — 103,871
Other comprehensive loss:
Foreign currency translation adjustments — — (20,497 ) — — (20,497 )
Interest rate swaps, net of tax — — (6,060 ) — — (6,060 )
Pension unrecognized gain, net of tax — — 1,175 — — 1,175

Other comprehensive loss (25,382 ) (25,382 )
Comprehensive income 78,489
Issuances under stock plans — (10,128 ) — — 55,874 45,746
Excess tax benefits from stock compensation — 14,831 — — — 14,831
Purchase of shares for treasury — — — — (198,576 ) (198,576 )
Stock compensation expense — 20,696 — — — 20,696

Balance at December 31, 2008 $ 78 $ 570,667 $ (1,741 ) $ 426,428 $ (1,016,748 ) $ (21,316 )
Comprehensive income:
Net income — — — 82,964 — 82,964
Other comprehensive income:
Foreign currency translation adjustments — — 9,088 — — 9,088
Interest rate swaps, net of tax — — 3,535 — — 3,535
Pension unrecognized gain, net of tax — — 440 — — 440

Other comprehensive income 13,063 13,063
Comprehensive income 96,027
Issuances under stock plans — (6,522 ) — — 21,371 14,849
Excess tax benefits from stock compensation — 653 — — — 653
Purchase of shares for treasury — — — — (3,744 ) (3,744 )
Stock compensation expense — 26,066 — — — 26,066

Balance at December 31, 2009 $ 78 $ 590,864 $ 11,322 $ 509,392 $ (999,121 ) $ 112,535
Comprehensive income:
Net income — — — 96,285 — 96,285
Other comprehensive income:
Foreign currency translation adjustments — — 582 — — 582
Interest rate swaps, net of tax — — 3,746 — — 3,746
Pension unrecognized gain, net of tax — — (1,012 ) — — (1,012 )

Other comprehensive income 3,316 3,316
Comprehensive income 99,601
Issuances under stock plans — (30,254 ) — — 53,822 23,568
Excess tax benefits from stock compensation — 18,520 — — — 18,520
Purchase of shares for treasury — — — — (99,820 ) (99,820 )
Stock compensation expense — 32,652 — — — 32,652

Balance at December 31, 2010 $ 78 $ 611,782 $ 14,638 $ 605,677 $ (1,045,119 ) $ 187,056

Common
Stock

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income
(Loss), Net

Accumulated
Earnings

Treasury
Stock

Total
Stockholders’
Equity
(Deficit)

Balance at December 31, 2008

$
78

$
570,667

$
(1,741
)
$
426,428

$
(1,016,748
)
$
(21,316
)
Comprehensive income:

Net income

—

—

—

82,964

—

82,964

Other comprehensive income:

Foreign currency translation adjustments

—

—

9,088

—

—

9,088

Interest rate swaps, net of tax

—

—

3,535

—

—

3,535

Pension unrecognized gain, net of tax

—

—

440

—

—

440

Other comprehensive income

13,063

13,063

Comprehensive income

96,027

Issuances under stock plans

—

(6,522
)

—

—

21,371

14,849

Excess tax benefits from stock compensation

—

653

—

—

—

653

Purchase of shares for treasury

—

—

—

—

(3,744
)

(3,744
)
Stock compensation expense

—

26,066

—

—

—

26,066

Balance at December 31, 2009

$
78

$
590,864

$
11,322

$
509,392

$
(999,121
)
$
112,535

Comprehensive income:

Net income

—

—

—

96,285

—

96,285

Other comprehensive income:

Foreign currency translation adjustments

—

—

582

—

—

582

Interest rate swaps, net of tax

—

—

3,746

—

—

3,746

Pension unrecognized loss, net of tax

—

—

(1,012
)

—

—

(1,012
)

Other comprehensive income

3,316

3,316

Comprehensive income

99,601

Issuances under stock plans

—

(30,254
)

—

—

53,822

23,568

Excess tax benefits from stock compensation

—

18,520

—

—

—

18,520

Purchase of shares for treasury

—

—

—

—

(99,820
)

(99,820
)
Stock compensation expense

—

32,652

—

—

—

32,652

Balance at December 31, 2010

$
78

$
611,782

$
14,638

$
605,677

$
(1,045,119
)
$
187,056

Comprehensive income:

Net income

—

—

—

136,902

—

136,902

Other comprehensive loss:

Foreign currency translation adjustments

—

—

(4,454
)

—

—

(4,454
)
Interest rate swaps, net of tax

—

—

(4,674
)

—

—

(4,674
)
Pension unrecognized gain, net of tax

—

—

283

—

—

283

Other comprehensive loss

(8,845
)

(8,845
)
Comprehensive income

128,057

Issuances under stock plans

—

(23,579
)

—

—

43,624

20,045

Excess tax benefits from stock compensation

—

25,778

—

—

—

25,778

Purchase of shares for treasury

—

—

—

—

(211,986
)

(211,986
)
Stock compensation expense

—

32,834

—

—

—

32,834

Balance at December 31, 2011

$
78

$
646,815

$
5,793

$
742,579

$
(1,213,481
)
$
181,784

See Notes to Consolidated Financial Statements.

42
GARTNER, INC.

~~CONSOLIDATED~~CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

Year Ended December 31,
2010 2009 2008
Operating activities:
Net income $ 96,285 $ 82,964 $ 103,871
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles 35,874 27,023 27,495
Stock-based compensation expense 32,634 26,066 20,696
Excess tax benefits from stock-based compensation expense (18,364 ) (2,392 ) (14,831 )
Deferred taxes (2,609 ) 5,003 2,617
Amortization and write-off of debt issue costs 1,567 1,480 1,222
Gain on sale of business — — (7,061 )
Changes in assets and liabilities:
Fees receivable, net (48,177 ) 25,349 20,987
Deferred commissions (2,184 ) (16,750 ) (1,403 )
Prepaid expenses and other current assets (376 ) 13,059 (21 )
Other assets (34,130 ) 532 2,907
Deferred revenues 85,336 5,101 (308 )
Accounts payable, accrued, and other liabilities 59,643 (5,498 ) 28,179

Cash provided by operating activities 205,499 161,937 184,350

Investing activities:
Additions to property, equipment and leasehold improvements (21,694 ) (15,142 ) (24,302 )
Acquisitions (net of cash received) (12,151 ) (104,523 ) —
Net proceeds from sale of business — — 7,847

Cash used in investing activities (33,845 ) (119,665 ) (16,455 )

Financing activities:
Proceeds from stock issued for stock plans 23,527 14,822 44,702
Proceeds from debt issuance 200,000 78,000 180,000
Payments for debt issuance costs (4,783 ) — (801 )
Payments on debt (308,844 ) (165,250 ) (157,750 )
Purchases of treasury stock (99,820 ) (3,744 ) (200,817 )
Excess tax benefits from stock-based compensation expense 18,364 2,392 14,831

Cash used by financing activities (171,556 ) (73,780 ) (119,835 )

Net increase (decrease) in cash and cash equivalents 98 (31,508 ) 48,060
Effects of exchange rates on cash and cash equivalents 3,509 7,153 (17,076 )
Cash and cash equivalents, beginning of period 116,574 140,929 109,945

Cash and cash equivalents, end of period $ 120,181 $ 116,574 $ 140,929

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 11,484 $ 13,942 $ 22,380
Income taxes, net of refunds received $ 25,486 $ 34,438 $ 19,961

Year Ended December 31,

2011

2010

2009

Operating activities:

Net income

$
136,902

$
96,285

$
82,964

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangibles

32,064

35,874

27,023

Stock-based compensation expense

32,865

32,634

26,066

Excess tax benefits from employee stock-based compensation exercises

(25,572
)

(18,364
)

(2,392
)
Deferred taxes

(965
)

(2,609
)

5,003

Amortization and write-off of debt issue costs

2,288

1,567

1,480

Changes in assets and liabilities:

Fees receivable, net

(58,887
)

(48,177
)

25,349

Deferred commissions

(6,928
)

(2,184
)

(16,750
)
Prepaid expenses and other current assets

3,540

(376
)

13,059

Other assets

4,397

(34,130
)

532

Deferred revenues

91,765

85,336

5,101

Accounts payable, accrued, and other liabilities

44,097

59,643

(5,498
)

Cash provided by operating activities

255,566

205,499

161,937

Investing activities:

Additions to property, equipment and leasehold improvements

(41,954
)

(21,694
)

(15,142
)
Acquisitions (net of cash received)

—

(12,151
)

(104,523
)

Cash used in investing activities

(41,954
)

(33,845
)

(119,665
)

Financing activities:

Proceeds from employee stock-based compensation plans and ESP Plan

20,011

23,527

14,822

Proceeds from debt issuance

—

200,000

78,000

Payments on debt

(20,156
)

(313,627
)

(165,250
)
Purchases of treasury stock

(211,986
)

(99,820
)

(3,744
)
Excess tax benefits from employee stock-based compensation exercises

25,572

18,364

2,392

Cash used by financing activities

(186,559
)

(171,556
)

(73,780
)

Net increase (decrease) in cash and cash equivalents

27,053

98

(31,508
)
Effects of exchange rates on cash and cash equivalents

(4,495
)

3,509

7,153

Cash and cash equivalents, beginning of period

120,181

116,574

140,929

Cash and cash equivalents, end of period

$
142,739

$
120,181

$
116,574

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest

$
13,312

$
11,484

$
13,942

Income taxes, net of refunds received

$
24,126

$
25,486

$
34,438

See Notes to Consolidated Financial Statements.

43
GARTNER, INC.

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENTS~~STATEMENTS

1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business.Gartner, Inc. (“Gartner” or the “Company”) is a global information technology research and advisory company founded in 1979 with its headquarters in Stamford, Connecticut. Gartner ~~Inc.~~ delivers its principal products and services through three business segments: Research, Consulting, and Events.
When used in these notes, the terms “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 ~~Inc. (the “Company”)~~ represents the twelve-month period from January 1 through December 31. ~~When used in these notes, the terms “Gartner,” “Company,” “we,” “us,” or “our” mean Gartner, Inc. and its consolidated subsidiaries.~~ All references to 2011, 2010, and 2009 ~~and 2008 relate~~refer to the fiscal year unless otherwise indicated.
In December 2009 we acquired AMR Research, Inc. (“AMR Research”) and Burton Group, Inc. (“Burton Group”). The results of these businesses are included in our operating results beginning on their respective dates of acquisition (see Note 2 — Acquisitions).
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 accounts receivable, goodwill, intangible assets, and other long-lived assets, as well as tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax expense, performance-based compensation charges, depreciation and amortization, and the allowance for losses. Management believes its use of estimates in the accompanying consolidated financial statements to be reasonable.
Management continuously evaluates and revises ~~these~~its estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. ~~We adjust such~~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 our 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.
~~Subsequent events.~~The Company has evaluated the potential impact of subsequent events on the consolidated financial statements herein through the date of filing of this Annual Report on Form 10-K. See Note 17 — subsequent events regarding a secondary offering of the Company’s shares.
Revenues.Revenue is recognized in accordance with U.S. GAAP and SEC Staff Accounting Bulletin No. 101,Revenue Recognitionin Financial Statements (“SAB 101”), and SEC Staff Accounting Bulletin No. 104,Revenue Recognition(“SAB 104”). Revenues are only recognized once all required criteria for recognition ~~criteria~~ have been met. The Consolidated Statement of Operations ~~present~~presents revenues net of any sales or value-added taxes that we collect from customers and remit to government authorities.
The Company’s revenues by significant source are as follows:

Researchrevenues are ~~generally~~ derived from annual subscription contracts for research products. These revenues are deferred and recognized ratably over the applicable contract term. The Company typically enters into annually renewable subscription contracts for research products. Reprint fees are recognized when the reprint is shipped.
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 have not produced material cancellations to date. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim.
44
For those government contracts that permit cancellation, historically we only recorded fees receivables to the extent amounts were earned and deferred revenue to the extent cash was received. As of September 30, 2010, based on an analysis of historic contract cancellations, we determined that the likelihood of such cancellations was remote. Accordingly, as of that date we record the entire billable contract amount as fees receivable at the time the contract is signed with a corresponding amount to deferred revenue, consistent with other contracts. This change in estimate had an immaterial impact.
Consultingrevenues, 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 ~~for such projects~~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. ~~Unbilled fees receivable associated with consulting engagements were $29.4 million at December 31, 2010 and $30.0 million at December 31, 2009.~~ Revenues related to contract optimization ~~contracts~~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 $29.2 million at December 31, 2011 and $29.4 million at December 31, 2010.

Eventsrevenues 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 policy is to defer only those costs, primarily prepaid site and production services costs, which are incremental and are directly attributable to a specific event. Other costs of organizing and producing our events, primarily Company personnel and non-event specific expenses, are expensed in the period incurred. At the end of each fiscal quarter, the Company assesses on an event-by-event basis whether expected direct costs of producing a scheduled event will exceed expected revenues. If such costs are expected to exceed revenues, the Company records the expected loss in the period determined.
~~Uncollectible fees receivable.~~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 as an increase to expense. The amount of the allowance for losses is based on historical loss experience, aging of outstanding receivables, an assessment of current economic conditions and the financial health of specific clients.
Cost of services and product development (“COS”).COS expense includes the direct costs incurred in the creation and delivery of our products and services.
Selling, general and administrative (“SG&A”).SG&A expense includes direct and indirect selling costs, ~~and~~ general and administrative ~~costs.~~
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 ~~corresponding~~ deferred obligation as commission expense over the estimated period in which the related revenues are earned. Commission expense is included in SG&A in the Consolidated Statements of Operations.
Stock-based compensation expense.The Company accounts for stock-based compensation in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). Stock-based compensation cost is based on the fair value of the award on the date of grant, which is expensed over the related service period, net of estimated forfeitures. The service period is the period over which the employee performs the related services, which is normally the same as the vesting period.
During 2011, 2010, ~~2009,~~ and ~~2008,~~2009, the Company recognized $32.9 million, $32.6 million, ~~$26.1 million,~~ and ~~$20.7~~$26.1 million, respectively, of stock-based compensation expense (see Note 98 — Stock-Based Compensation), which is recorded in both COS and SG&A in the Consolidated Statements of Operations.
Income tax expense.The provision for income taxes is the sum of the amount of income tax paid or payable for the year as determined by applying the provisions of enacted tax laws to taxable income for that year and the net changes during the year in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized based on differences between the book and tax basis of assets and liabilities using presently enacted tax rates. We credit additional paid-in capital for realized tax benefits arising from stock transactions with employees. The tax benefit on a nonqualified stock option is equal to the tax effect of the difference between the market price of Common Stock on the date of exercise and the exercise price.
Cash and cash equivalents.~~All~~Includes cash and all highly liquid investments with original maturities of three months or less, which are ~~classified as~~considered cash equivalents. The carrying value of ~~these investments~~cash equivalents approximates fair value ~~based upon~~due to their short-term maturity. Investments with maturities of more than three months are classified as marketable securities. Interest earned on investments 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
45
rent increases, rent concessions, and landlord incentives, are recognized ratably over the life of the related lease agreement. Lease expense was $26.2 million, $23.5 million, ~~in 2010~~ and $22.5 million in ~~both~~2011, 2010, and 2009, ~~and 2008.~~
respectively.
Equipment, leasehold improvements, and other fixed assets owned by the Company are recorded at cost less accumulated ~~depreciation and~~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 ~~assets~~improvements or the remaining term of the related leases. The Company had total depreciation expense of $25.5 million, $25.3 million, and $25.4 million in 2011, 2010, and ~~$25.9 million in 2010,~~ 2009, ~~and 2008,~~ respectively.

Property, equipment and leasehold improvements, less accumulated depreciation and amortization, consist of the following (in thousands):

Useful Life December 31,
(Years) 2010 2009
Computer equipment and software 2 - 7 $ 123,988 $ 118,487
Furniture and equipment 3 - 8 32,093 32,183
Leasehold improvements 2 - 10 46,516 46,945

202,597 197,615
Less — accumulated depreciation and amortization (154,983 ) (145,149 )

$ 47,614 $ 52,466

Useful Life
(Years)

December 31,

2011

2010

Computer equipment and software

2 - 7

$
130,733

$
123,988

Furniture and equipment

3 - 8

34,828

32,093

Leasehold improvements

2 - 15

63,773

46,516

229,334

202,597

Less — accumulated depreciation and amortization

(161,202
)

(154,983
)

$
68,132

$
47,614

The Company capitalizes certain eligible costs incurred to develop internal use software in accordance with FASB ASC Topic 350. At December 31, 2011 and 2010, ~~and 2009,~~net capitalized development costs for internal use software were ~~$14.3~~$13.6 million and ~~$16.1 million, respectively, which are net of accumulated amortization of $23.7 million and $20.4~~$14.3 million, respectively. Amortization of capitalized internal software development costs, which is classified in Depreciation in the Consolidated Statements of Operations, totaled $7.8 million, $7.9 million, and $8.3 million during 2011, 2010, and ~~$7.4 million during 2010,~~ 2009, ~~and 2008,~~ respectively.
The Company’s corporate headquarters is located in approximately 213,000 square feet of leased office space in three buildings ~~located~~ in Stamford, Connecticut. The Stamford facility accommodates research and analysis, marketing, sales, client support, production, corporate services, executive offices, and administration. In ~~April~~ 2010 the Company entered into a new 15 year lease agreement for this ~~facility. The new lease grants the Company three options to renew at fair market value~~facility which provides for ~~five years each, and an option to purchase the facility at fair market value.~~
a reduced rental until completion of certain renovation work. In accordance with FASB ASC Topic 840, the Company ~~accounts~~accounted for the new Stamford lease as an operating lease arrangement. The total minimum payments the Company will be obligated to pay under this lease, including contractual escalation clauses and reduced rents during the renovation period, will be expensed on a straight-line basis over the lease term. ~~As of December 31, 2010, the total minimum lease payments under this non-cancelable lease agreement were $84.5 million.~~
Under the terms of the new Stamford lease, the landlord ~~will provide up to~~has provided a $25.0 million tenant improvement allowance to be used to renovate the three buildings and the parking areas comprising the facility. The renovation work ~~will occur~~began in 2011 and is expected to be completed in late 2012. The $25.0 million contractual amount due from the landlord was recorded as a tenant improvement allowance in Other assets and as deferred rent in Other ~~liabilities~~Liabilities on the Consolidated Balance Sheets. As the renovation work progresses and payments are received from the landlord, the tenant improvement receivable will be relieved and leasehold improvement assets will be recorded in Property, equipment, and leasehold improvements. The leasehold improvement assets will then be amortized to Depreciation expense over their useful lives, beginning when the assets are placed in service. The amount recorded as deferred rent will be amortized as a reduction to rent expense (SG&A) on a straight-line basis over the term of the lease. ~~For the year ended~~
As of December 31, ~~2010, approximately $1.0~~2011, the Company had $22.5 million of ~~the~~remaining unamortized deferred rent ~~balance~~resulting from the tenant improvement allowance, of which $1.5 million is recorded in Accounts payable and accrued liabilities and $21.0 million is recorded in Other liabilities on the Company’s Consolidated Balance Sheets. The Company paid $9.5 million in renovation costs for this project in 2011, of which $9.0 million was ~~amortized~~reimbursed in 2011 and $0.5 will be reimbursed in 2012. The Company expects to ~~rent expense.~~
utilize the entire remaining $15.5 million improvement allowance in 2012.
Intangible assets.Intangible assets are amortized using the straight-line method over their expected useful lives. Intangible assets subject to amortization include the following (in thousands):

Trade Customer Noncompete
December 31, 2010 Content Name Relationships Agreements Total
Gross cost $ 10,634 $ 5,758 $ 7,210 $ 207 $ 23,809
Accumulated amortization (7,089 ) (1,152 ) (1,803 ) (181 ) (10,225 )

Net $ 3,545 $ 4,606 $ 5,407 $ 26 $ 13,584

46

Trade Customer Noncompete
December 31, 2009 Content Name Relationships Agreements Total
Gross cost (1) $ 10,634 $ 5,758 $ 14,910 $ 416 $ 31,718
Accumulated amortization — — (7,315 ) (290 ) (7,605 )

Net $ 10,634 $ 5,758 $ 7,595 $ 126 $ 24,113

December 31, 2011

Content

Trade
Name

Customer
Relationships

Total

Gross cost

$
10,634

$
5,758

$
7,210

$
23,602

Accumulated amortization

(10,634
)

(2,303
)

(3,605
)

(16,542
)

Net

$
—

$
3,455

$
3,605

$
7,060

December 31, 2010

Content

Trade
Name

Customer
Relationships

Total

Gross cost

$
10,634

$
5,758

$
7,210

$
23,602

Accumulated amortization

(7,089
)

(1,152
)

(1,777
)

(10,018
)

Net

$
3,545

$
4,606

$
5,433

$
13,584

~~(1)~~
~~The Company recorded $23.6 million of purchased intangibles from the acquisitions of AMR Research and Burton Group in December 2009 (see Note 2 — Acquisitions).~~
~~Intangible assets will be amortized against earnings over the following period:~~

Intangible assets are being amortized against earnings over the following periods:

~~Useful Life~~
Useful Life
(Years)
~~Content~~
~~1.5~~
~~Trade Name~~
Content
5
1.5
~~Customer Relationships~~
Trade Name
4
5
~~Noncompete Agreements~~
Customer Relationships
~~2-5~~
4
Aggregate amortization expense on intangible assets was ~~$10.5~~$6.5 million, ~~$1.6~~$10.5 million, and $1.6 million ~~for~~in 2011, 2010, and 2009, ~~and 2008,~~ respectively.
The estimated future amortization expense by year from purchased intangibles is as follows (in thousands):

2011 $ 6,530
2012 2,955
2013 2,955
2014 1,144

$ 13,584

2012

$
2,955

2013

2,955

2014

1,150

$
7,060

Goodwill.Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value of the tangible and identifiable intangible net assets acquired. The evaluation of the recoverability of goodwill is performed in accordance with FASB ASC Topic 350, which requires an annual assessment of potential goodwill impairment at the reporting unit ~~level. A~~level and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has three reporting ~~unit can~~units: Research, Consulting, and Events. Since 2002, when the current goodwill impairment rules were first adopted, goodwill must be ~~an operating segment or~~tested annually for impairment under a ~~business if discrete financial information is prepared and reviewed by management.~~two-step impairment test. Under the ~~impairment~~two-step test, if a reporting unit’s carrying amount exceeds its estimated fair value, goodwill impairment is recognized to the extent that the reporting unit’s carrying amount of goodwill exceeds the implied fair value of the goodwill. The ~~fair value of reporting units is estimated using~~Company uses discounted cash flows, market multiples, and other valuation ~~techniques.~~
techniques to measure the estimated fair value of a reporting unit. .
In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08,Intangibles-Goodwill and Other–Testing Goodwill for Impairment(“ASU No. 2011-08”). ASU No. 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount rather than automatically applying the two-step goodwill impairment test. If the entity’s qualitative assessment does not allow it to reach this conclusion, then it is necessary to perform the two-step goodwill impairment test to determine the amount, if any, of impaired goodwill. Otherwise, the two-step goodwill impairment test is not required. The objective of ASU No. 2011-08 is to both simplify and reduce the on-going cost of goodwill impairment testing for both private and public companies.
The Company conducted the annually required two-step goodwill impairment test in 2010 in the quarter ended September 30 and concluded that the fair values of each of the Company’s reporting units substantially exceeded their respective carrying values. In 2011, the Company made the decision to early adopt ASU No. 2011-08 and conduct a qualitative assessment of reporting unit fair value as of September 30, based in part on the demonstrated historical trend of the fair values of the Company’s reporting units substantially exceeding their carrying values. Among the factors included in the Company’s qualitative assessment were general economic conditions and the competitive environment; actual and expected segment financial performance; forward-looking business measurements; and external market assessments. Based on the results of the qualitative assessment, the Company believes the fair value of goodwill of each of the Company’s reporting units continue to substantially exceed their respective carrying values and concluded that it was not necessary to conduct the two-step goodwill impairment test. As a result, the adoption of ASU No. 2011-08 did not impact the Company’s results of operations, financial position, or cash flows.
The following table presents changes to the carrying amount of goodwill by reporting ~~segment~~unit during the two ~~years~~year period ended December 31, ~~2010~~2011 (in thousands):

Research Consulting Events Total
Balance, December 31, 2008 (1) $ 280,161 $ 84,048 $ 34,528 $ 398,737
Foreign currency translation adjustments 4,386 1,434 73 5,893
Additions due to AMR Research and Burton Group acquisitions 86,083 15,262 7,637 108,982

Balance, December 31, 2009 $ 370,630 $ 100,744 $ 42,238 $ 513,612
Foreign currency translation adjustments and other (2) (2,109 ) (927 ) (311 ) (3,347 )

Balance, December 31, 2010 $ 368,521 $ 99,817 $ 41,927 $ 510,265

Research

Consulting

Events

Total

Balance, December 31, 2009 (1)

$
370,630

$
100,744

$
42,238

$
513,612

Foreign currency translation adjustments

(2,109
)

(927
)

(311
)

(3,347
)

Balance, December 31, 2010

$
368,521

$
99,817

$
41,927

$
510,265

Foreign currency translation adjustments

(1,541
)

(140
)

(34
)

(1,715
)

Balance, December 31, 2011

$
366,980

$
99,677

$
41,893

$
508,550

~~(1)~~
(1)
The Company has not recorded ~~charges for~~ goodwill impairment losses since its adoption of the ~~current~~two-step goodwill impairment rules ~~on January 1,~~in 2002. Accordingly, the Company considers the recorded amount of goodwill ~~amount~~ as of December 31, ~~2008~~2009 to be the gross amount of goodwill.
~~(2)~~ ~~Includes the impact of foreign currency translation and certain immaterial goodwill adjustments.~~

Impairment of long-lived assets and intangible assets.The Company reviews long-lived assets and intangible assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of the respective asset may
47
not be recoverable. Such evaluation may be based on a number of factors including current and projected operating results and cash flows, changes in management’s strategic direction as well as external economic and market factors.
The Company’s policy regarding long-lived assets and intangible assets other than goodwill is to evaluate the recoverability of these assets by determining whether the balance can be recovered through undiscounted future operating cash flows. Should events or circumstances indicate that the carrying value might not be recoverable based on undiscounted future operating cash flows, an impairment loss would be recognized. The amount of impairment, if any, is measured based on the difference between projected discounted future operating cash flows using a discount rate reflecting the Company’s average cost of funds and the carrying value of the asset.
Pension obligations.The Company has defined-benefit pension plans in three of its international locations (see Note 1413 — Employee Benefits). Benefits earned under these plans are generally based on years of service and level of employee compensation. The Company accounts for defined benefit plans in accordance with the requirements of FASB ASC Topic 715. The Company determines the periodic pension expense and related liabilities for these plans through actuarial assumptions and valuations. The Company recognized ~~$2.4~~$2.7 million, ~~$2.2~~$2.4 million, and $2.2 million of expense for these plans in 2011, 2010, ~~2009,~~ and ~~2008,~~2009, respectively. The Company classifies pension expense in SG&A in the Consolidated Statements of Operations.
Foreign currency exposure.All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates for the year. The resulting translation adjustments are recorded as foreign currency translation adjustments, a component of Accumulated ~~Other Comprehensive Income (Loss),~~other comprehensive income, net within the Stockholders’ equity section of the Consolidated Balance Sheets. ~~Income and expense items are translated at average exchange rates for the year.~~
Currency transaction gains or losses arising from transactions denominated in currencies other than the functional currency of a subsidiary are included in results of operations in Other income (expense), net within the Consolidated Statements of Operations. Net currency transaction (losses) ~~gains~~ were $(1.3) million, $(4.8) million, and $(3.6) million in 2011, 2010, and ~~$(0.9) million in 2010,~~ 2009, ~~and 2008,~~ respectively.
~~We enter~~ The Company enters into foreign currency forward exchange contracts to ~~offset~~mitigate the effects of adverse fluctuations in foreign currency exchange ~~rates.~~rates on these transactions. These contracts generally have a short duration and are recorded at fair value with unrealized and realized gains and losses also recorded in Other income (expense)., net. The net (loss) gain ~~(loss)~~ from these contracts was $(1.2) million, $2.8 million, and $0.7 million in 2011, 2010, and ~~$(0.6) million for 2010,~~ 2009, ~~and 2008,~~ respectively.
Fair value disclosures.The Company’s fair value disclosures are included in Note 1312 — Fair Value Disclosures.
Concentrations of credit risk.Assets that may subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, accounts receivable, interest rate swaps, and a pension reinsurance asset. The majority of the Company’s cash equivalent investments and its interest rate swap contract are with investment grade commercial banks that are participants in the Company’s 2010 Credit Agreement. Accounts receivable balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion. The Company’s pension reinsurance asset (see Note 1413 — Employee Benefits) is maintained with a large international insurance company that was rated investment grade as of December 31, ~~2010.~~
2011.
Stock repurchase programs.The Company records the cost to repurchase its own shares to treasury stock. During 2011, 2010 ~~2009~~ and ~~2008,~~2009, the Company recorded $212.0 million, $99.8 million, ~~$3.7 million,~~ and ~~$198.6~~$3.7 million, respectively, of stock repurchases (see Note 8—7 — Stockholders’ Equity). Shares repurchased by the Company are added to treasury shares and are not retired.
Recent accounting developments.The following disclosures highlight new and significant accounting rules that the Company has adopted or will adopt in future periods:
Accounting ~~Developments~~Standards Adopted
On September 30, 2011, the Company early adopted FASB ASU No. 2011-08,Intangibles-Goodwill and Other–Testing Goodwill for Impairment(“ASU No. 2011-08”) (see discussion inGoodwillabove). The adoption of ASU No. 2011-08 did not impact the Company’s results of operations, financial position, or cash flows.

Accounting Standards to be adopted in Future Accounting Periods
Final accounting rules issued by the FASB that have not yet become effective and may impact the Company’s consolidated financial statements or related disclosures in future periods are described below:
Comprehensive Income. In ~~January 2010,~~June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220-10): Presentation of Comprehensive Income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of stockholders’ equity. Instead, the new rule will require an entity to present net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The Company will adopt this new rule in the quarter ending March 31, 2012.
Fair Value Measurements. In May 2011, the FASB issued ASU ~~2010-06,~~No. 2011-04,“Fair Value ~~Measurements~~Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and ~~Disclosures.”~~Disclosure Requirements in U.S. GAAP and IFRSs.ASU ~~2010-06 requires~~No. 2011-04 establishes a number of new requirements for fair value ~~hierarchy disclosures~~measurements. These include: (1) a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to ~~be further disaggregated by class~~the group; (2) an extension of ~~assets~~the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and ~~liabilities. A class is often~~(3) a ~~subset~~requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of ~~assets or liabilities within a line item in~~ the ~~balance sheet.~~valuation process used and qualitative details about the sensitivity of the measurements. In addition, ~~significant transfers between Levels 1 and 2 of~~for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy ~~are required~~that applies to ~~be disclosed. These additional disclosure requirements became effective January 1, 2010. In general, Gartner does not anticipate transfers between the different levels of~~ the fair value ~~hierarchy, and for the twelve months ended December 31, 2010, there were none. Our required fair value disclosures are presented in Note 13 —~~~~Fair Value Disclosures.~~~~Beginning January 1, 2011, the FASB will also require additional disclosures regarding changes in Level 3 instruments.~~
48
~~In September 2009, the FASB issued~~measurement disclosed. This ASU ~~2009-13,~~~~“Revenue Arrangements with Multiple Deliverables.”~~ ASU 2009-13 requires companies to allocate revenue in arrangements involving multiple deliverables based on the estimated selling price of each deliverable, even though such deliverables are not sold separately either by the company itself or other vendors. ASU 2009-13 eliminates the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the overall arrangement fee that is attributable to items that already have been delivered. As a result, the new guidance is expected to allow some companies to recognize revenue on transactions that involve multiple deliverables earlier than under current requirements. ASU 2009-13 will be effective for ~~the~~interim and annual periods beginning after December 15, 2011. The Company ~~beginning~~will adopt this new rule in the ~~first~~ quarter ~~of fiscal year 2012, but early adoption is permitted.~~
ending March 31, 2012.
2 — ACQUISITIONS
In December 2009 the Company acquired all of the outstanding shares of AMR Research and Burton Group for a total net cash of ~~$117.7~~$116.7 million, of which $12.2 million was paid in ~~cash.~~2010 and $104.5 million was paid in 2009. The Company’s consolidated results include the operating results of these businesses beginning on their respective acquisition dates. ~~In September 2010 the Company finalized the allocation of the purchase price related to these acquisitions, resulting in immaterial adjustments to recorded goodwill.~~ The Company recorded an aggregate of $7.9 million of acquisition and integration expenses related to these acquisitions during 2010 and $2.9 million in 2009. Included in these charges are legal fees and consultant fees in connection with the acquisition and integration, as well as severance costs related to redundant headcount.
The Company received contractual indemnifications from the selling shareholders of AMR Research and Burton Group for certain pre-acquisition liabilities, which the Company estimated at $6.1 million. In accordance with FASB ASC Topic 805, the Company recorded a $6.1 million indemnification receivable in Prepaid expenses and other current assets and a $6.1 million liability in Accrued liabilities, which were included in the purchase price allocation. Separately, a portion of the sale proceeds were placed in an escrow account pending resolution of these pre-acquisition liabilities.
During 2010, the Company paid $5.1 million to settle these pre-acquisition liabilities and received reimbursement from the escrow account for the same amount. As a result, the settlement of these liabilities had no impact on the Company’s results of operations, cash flows, or recorded goodwill. The Company believes the remaining $1.0 million recorded in Accrued liabilities is a reasonable estimate of the amount necessary to satisfy the remaining liabilities, which is fully reimbursable from the escrow account.

3 ~~— DISCONTINUED OPERATIONS~~
In 2008 the Company sold its Vision Events business, which had been part of the Company’s Events segment. The Company realized net cash proceeds from the sale of $7.8 million and recorded a net gain on the sale of approximately $7.1 million after deducting direct costs to sell, a charge of $1.8 million of allocated Events segment goodwill, and related tax charges. The results of operations of this business and the gain on sale are recorded in Income from discontinued operations, net of taxes in the Consolidated Statements of Operations.
4 — OTHER ASSETS
Other assets consist of the following (in thousands):

December 31,
2010 2009
Security deposits $ 3,959 $ 3,545
Debt issuance costs 4,987 1,384
Benefit plan related assets 36,089 30,903
Non-current deferred tax assets 21,166 29,527
Tenant improvement allowance (1) 24,570 —
Other 2,322 1,904

Total other assets $ 93,093 $ 67,263

December 31,

2011

2010

Security deposits

$
6,581

$
3,959

Debt issuance costs

3,866

4,987

Benefit plan-related assets

38,403

36,089

Non-current deferred tax assets

22,795

21,166

Tenant improvement allowance (1)

16,062

24,570

Other

2,638

2,322

Total other assets

$
90,345

$
93,093

~~(1)~~
(1)
~~Represents~~
Includes contractual amounts receivable ~~for~~related to the renovation of the Company’s Stamford headquarters ~~renovation.~~facility (seeProperty, equipment and leasehold improvementsin Note 1 — Business and Significant Accounting Policies for additional description).

49
54 — ACCOUNTS PAYABLE, ACCRUED, AND OTHER LIABILITIES
Accounts payable and accrued liabilities consist of the following (in thousands):

December 31,
2010 2009
Accounts payable $ 17,791 $ 14,312
Payroll, employee benefits, severance 62,882 63,600
Bonus payable 64,620 53,264
Commissions payable 41,503 39,705
Taxes payable 15,030 17,693
Acquisition payables (1) — 13,059
Rent and other facilities costs 7,108 9,666
Professional and consulting fees 3,706 4,112
Events fulfillment liabilities 4,367 3,905
Other accrued liabilities 30,726 36,650

Total accounts payable and accrued liabilities $ 247,733 $ 255,966

December 31,

2011

2010

Accounts payable

$
27,573

$
17,791

Payroll, employee benefits, severance

66,110

62,882

Bonus payable

62,191

64,620

Commissions payable

42,328

41,503

Taxes payable

15,917

15,030

Rent and other facilities costs

5,046

7,108

Professional, consulting, audit fees

6,907

11,987

Events fulfillment liabilities

2,255

4,367

Other accrued liabilities

31,163

22,445

Total accounts payable and accrued liabilities

$
259,490

$
247,733

~~(1)~~
~~Consists of amounts payable related to the acquisition of Burton Group in December 2009. These liabilities were paid in January 2010.~~
~~Other liabilities consist of the following (in thousands):~~

December 31,
2010 2009
Non-current deferred revenue $ 4,659 $ 3,912
Long-term taxes payable 18,193 15,064
Benefit plan-related liabilities 44,939 37,977
Deferred rent — Stamford lease (1) 23,813 —
Other 15,846 23,618

Total Other liabilities $ 107,450 $ 80,571

~~(1)~~
Other liabilities consist of the following (in thousands):

December 31,

2011

2010

Non-current deferred revenue

$
4,572

$
4,659

Interest rate swap liabilities

9,891

2,101

Long-term taxes payable

20,141

18,193

Deferred rent (1)

21,046

23,813

Benefit plan-related liabilities

47,326

44,939

Other

23,975

13,745

Total other liabilities

$
126,951

$
107,450

(1)
Represents unamortized deferred rent resulting from the $25.0 million tenant improvement allowance on the Company’s Stamford ~~lease.~~headquarters facility (seeProperty, equipment and leasehold improvements in Note 1 — Business and Significant Accounting Policies for additional description).
6
5 — DEBT
~~2010~~ Credit Agreement
On
In December ~~22,~~ 2010 the Company entered into a new credit facility (the “2010 Credit Agreement”) with a syndication of banks led by JPMorgan Chase to take advantage of favorable financing conditions and to obtain greater financial flexibility and liquidity through a larger revolving credit facility. The 2010 Credit Agreementarrangement that provides for a five-year, $200.0 million term loan and a $400.0 million revolving credit ~~facility. In addition,~~facility (the “2010 Credit Agreement”). The Company terminated its prior credit arrangement when it entered into the 2010 Credit Agreement and paid down the remaining amounts outstanding. The 2010 Credit Agreement contains an expansion feature by which the term loan and revolving credit facility may be increased, at the Company’s option and under certain conditions, by up to an additional $150.0 million in the aggregate. The ~~Company paid $4.8 million in debt issuance costs in 2010 related to the refinancing, which was capitalized and will be amortized to interest expense over the term of the 2010 Credit Agreement.~~
On December 22, 2010 the Company drew down $200.0 million from the term loan facility and $100.0 million from the revolving credit facility which was used to repay amounts outstanding under the Company’s prior credit arrangement, which was terminated in connection with the refinancing. At the end of December 2010 the Company repaid $80.0 million of the amount drawn down on the revolving credit facility. Future amounts to be drawn down under the revolving credit facility will be used for general working capital purposes.
~~The~~ term loan will be repaid in 19 consecutive quarterly installments ~~commencing~~which commenced on March 31, 2011, plus a final payment due on December 22, 2015, and may be prepaid at any time without penalty or premium at the Company’s option. The revolving credit facility may be used for loans, and up to $40.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until December 22, 2015, at which time all amounts borrowed must be repaid.
Amounts borrowed under the 2010 Credit Agreement bear interest at a rate equal to, at the Company’s option, either (i) the greatest of:
50
the administrative agent’s prime rate; the average rate on overnight federal funds plus 1/2 of 1%; and the eurodollar rate (adjusted for statutory reserves) plus 1%, in each case plus a margin equal to between 0.50% and 1.25% depending on the Company’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended, or (ii) the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between 1.50% and 2.25%, depending on the Company’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.
The 2010 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 the Company’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 these covenants as of December 31, ~~2010.~~2011.

The following table provides information regarding the Company’s borrowings:

Amount Contractual Amount
Outstanding Annualized Outstanding
December 31, Interest Rate December 31,
2010 (1), (2) December 31, 2009 (4)
Description: (In thousands) 2010 (3) (In thousands)
Term loans $ 200,000 2.30 % $ 201,000
Revolver 20,156 2.26 % 128,000

Total $ 220,156 $ 329,000

Description:

Amount
Outstanding
December 31,
2011
(In thousands)

Contractual
Annualized
Interest Rate
December 31,
2011 (2)

Amount
Outstanding
December 31,
2010
(In thousands)

Term loans

$
180,000

2.08%

$
200,000

Revolver (1)

20,000

2.08%

20,156

Total

$
200,000

$
220,156

~~(1)~~
The $220.2 million outstanding includes $220.0 million borrowed under the 2010 Credit Agreement and $0.2 million borrowed under a separate arrangement related to the renovation of a leased facility.
~~(2)~~
(1)
The Company had ~~approximately $376.0~~$376.8 million of available borrowing capacity on the revolver (not including the expansion feature) as of December 31, ~~2010.~~2011.
~~(3)~~
(2)
~~The~~
Both the term and revolver loan rate consisted of a ~~three-month 0.3%~~floating Eurodollar base rate 0.58% plus a margin of ~~2.0%, while~~1.5%. However, the ~~revolver rate consisted of a one-month Eurodollar base rate of 0.26% plus a margin of 2.0%. The~~ Company has an interest rate swap contract which converts the floating Eurodollar base rate to a fixed base rate on $200.0 million of ~~three-month~~ borrowings (see below).
~~(4)~~ ~~These loans were outstanding under~~ As a result, the ~~credit arrangement that~~Company’s effective annual interest rate on its debt as of December 31, 2011 was ~~terminated in December 2010. These amounts were repaid in 2010.~~3.76%.
In December 2010, the Company recorded certain incremental pre-tax charges due to the termination of the prior credit arrangement. ~~These~~The majority of these charges would have been recognized as expenses in 2011, but accounting rules required their accelerated recognition in 2010. These accelerated pre-tax charges included $3.3 million for deferred losses on interest rate swap contracts that had been recorded in Other Comprehensive Income (OCI) since the swaps had previously been designated as accounting hedges, and $0.4 million for the write-off of a portion of capitalized debt issuance costs ~~resulting from the extinguishment of~~related to the previous ~~long-term indebtedness.~~debt. In accordance with FASB ASC Topic 815, the deferral of the ~~amounts~~unrealized losses on the swaps recorded in OCI was no longer permitted since the forecasted interest payments related to the previous debt would not occur. Both the capitalized debt issuance write-off and the interest rate swap ~~charges~~charge were ~~recorded~~classified in Interest expense in the Consolidated Statements of ~~Operations.~~
Operations for the year ended December 31, 2010.
Interest Rate Swap Hedge
~~On December 22, 2010, the~~
The Company entered into a $200.0 million notional fixed-for-floating interest rate swap contract in December 2010 which it designated as a hedge of the forecasted interest payments on the Company’s variable rate borrowings. Under the swap terms, the Company pays a base fixed rate of 2.26% and in return receives a ~~three-month~~ Eurodollar base rate.
The Company accounts for the interest rate swap as a cash flow hedge in accordance with FASB ASC Topic 815. Since the swap is hedging forecasted interest payments, changes in the fair value of the swap are recorded in OCI as long as the swap continues to be a highly effective hedge of the designated interest rate risk. Any ineffective portion of change in the fair value of the hedge is recorded
51
in earnings. At December 31, ~~2010,~~2011, there was no ineffective portion of the hedge. The interest rate swap had a negative fair value to the Company of ~~$2.1~~$9.9 million at December 31, ~~2010,~~2011, which is ~~recorded~~classified in OCI, net of tax effect.
Letters of Credit
The Company ~~issues~~had $4.7 million of letters of credit and related guarantees outstanding at year-end 2011. The Company issues these instruments in the ordinary course of ~~business. At December 31, 2010~~business to facilitate transactions with customers and ~~2009, the Company had outstanding letters of credit and guarantees of approximately $4.7 million and $4.2 million, respectively.~~
7others.
6 — COMMITMENTS AND CONTINGENCIES
Contractual Lease Commitments.The Company leases various facilities, furniture, and computer equipment under operating lease arrangements expiring between ~~2011~~2012 and 2027. The future minimum annual cash payments under non-cancelable operating lease agreements at December 31, ~~2010,~~2011, are as follows (in thousands):

Year ended December 31,

2012

$
35,810

2013

31,690

2014

26,075

2015

18,100

2016

11,445

Thereafter

82,530

Total minimum lease payments (1), (2)

$
205,650

Year ended December 31,
2011 $ 30,775
2012 23,582
2013 19,718
2014 16,160
2015 11,715
Thereafter 66,640

Total minimum lease payments (1), (2) $ 168,590

~~(1)~~
(1)
Excludes ~~$25.0~~$16.1 million of future contractual ~~payments receivable for~~reimbursements related to leasehold improvements on the Company’s Stamford headquarters lease (seeProperty, equipment and leasehold improvementsin Note 1 — Business and Significant Accounting Policies for additional discussion).
(2)
Excludes ~~approximately $2.5~~$3.1 million of future contractual sublease rental income.
Legal Matters.We are involved in various legal and administrative proceedings and litigation arising in the ordinary course of business. The outcome of these individual matters is not predictable at this time. However, we believe that the ultimate resolution of these matters, after considering amounts already accrued and insurance coverage, will not have a material adverse effect on our financial position, results of operations, or cash flows in future periods.
Indemnifications.The Company has various agreements that may obligate us to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of the Company’s obligations and the unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of December 31, ~~2010,~~2011, we did not have any indemnification agreements that would require material payments.
The Company received cash proceeds of $1.2 million in 2008 related to the settlement of a litigation matter which was recorded as a gain in Other (expense) income, net in the Consolidated Statements of Operations.
8
7 — STOCKHOLDERS’ EQUITY
Common stock.Holders of Gartner’s Common Stock, par value $.0005 per share (“Common Stock”) are entitled to one vote per share on all matters to be voted by stockholders. The Company does not currently pay cash dividends on its Common Stock. Also, our credit arrangement contains a negative covenant which may limit our ability to pay dividends.
The following table summarizes transactions relating to Common Stock for the three years’ ending December 31, ~~2010:~~

Treasury
Issued Stock
Shares Shares
Balance at December 31, 2007 156,234,415 57,202,660
Issuances under stock plans — (4,568,658 )
Purchases for treasury — 9,719,573

Balance at December 31, 2008 156,234,415 62,353,575
Issuances under stock plans — (2,302,935 )
Purchases for treasury — 306,032

Balance at December 31, 2009 156,234,415 60,356,672
Issuances under stock plans — (4,029,673 )
Purchases for treasury — 3,918,719

Balance at December 31, 2010 156,234,415 60,245,718

2011:

Issued
Shares

Treasury
Stock
Shares

Balance at December 31, 2008

156,234,415

62,353,575

Issuances under stock plans

—

(2,302,935
)
Purchases for treasury

—

306,032

Balance at December 31, 2009

156,234,415

60,356,672

Issuances under stock plans

—

(4,029,673
)
Purchases for treasury

—

3,918,719

Balance at December 31, 2010

156,234,415

60,245,718

Issuances under stock plans

—

(3,244,705
)
Purchases for treasury (1)

—

5,890,238

Balance at December 31, 2011

156,234,415

62,891,251

(1)
Includes 2,148,434 shares the Company repurchased directly from ValueAct Capital Master Fund, L.P. (“ValueAct”) in two separate transactions during 2011. The total cost of the shares repurchased directly from ValueAct was $75.2 million.
52
Share repurchase program.The Company has a $500.0 million share repurchase program, of which ~~$481.9~~$293.5 million remained available for share repurchases as of December 31, 2010. The $500.0 million share repurchase program was approved by the Company’s Board of Directors in the third quarter of 2010 and replaced the Company’s prior repurchase program, which had been largely expended.
2011. Repurchases may be made from time-to-time through open market purchases, private transactions, tender offers or other transactions. The amount and timing of repurchases will be 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 also be made from time-to-time in connection with the settlement of the Company’s shared-based compensation awards. Repurchases ~~will~~may be funded from cash flow from operations or borrowings. ~~During 2010, 2009, and 2008, the~~
The Company ~~recorded~~paid cash of $212.0 million, $99.8 million, and $3.7 million, in 2011, 2010, and ~~$198.6~~2009, respectively, for common stock repurchases. The $212.0 million ~~respectively,~~paid for share repurchases in 2011 includes the cost of ~~Common Stock repurchases.~~the shares repurchased directly from ValueAct.

9
8 — STOCK-BASED COMPENSATION
The Company grants stock-based compensation awards as an incentive for employees and directors to contribute to the Company’s long-term success. The Company currently awards stock-settled stock appreciation rights, service- and performance-based restricted stock units, and common stock equivalents. At December 31, ~~2010,~~2011, the Company had approximately ~~7.0~~6.5 million shares of Common Stock available for awards of stock-based compensation under its 2003 Long-Term Incentive Plan.
The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics 505 and 718, as interpreted by SEC Staff Accounting Bulletins No. 107 (“SAB No. 107”) and No. 110 (“SAB No. 110”). Stock-based compensation expense is based on the fair value of the award on the date of grant, which is then recognized over the related service period, net of estimated forfeitures. The service period is the period over which the related service is performed, which is generally the same as the vesting period. ~~At the present time,~~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~~stock-based compensation awards requires the input of certain ~~highly~~ complex and subjective assumptions, including the expected life of the ~~stock~~stock-based compensation awards and the Common Stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the amount of employee forfeitures and the likelihood of the achievement of certain performance targets. The assumptions used in calculating the fair value of ~~stock~~stock-based compensation awards and the associated periodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future ~~stock~~stock-based compensation expense could be materially different from what has been recorded in the current period.
The Company recognized the following amounts of stock-based compensation expense (in millions) for the ~~year~~years ended December 31:

Award type: 2010 2009 2008
Stock appreciation rights (SARs) $ 4.6 $ 4.4 $ 3.2
Restricted stock — — 0.4
Restricted stock units (RSUs) 27.5 21.3 14.8
Common stock equivalents (CSEs) 0.5 0.4 0.4
Options — — 1.9

Total (1) $ 32.6 $ 26.1 $ 20.7

Award type:

2011

2010

2009

Stock appreciation rights (SARs)

$
4.4

$
4.6

$
4.4

Common stock equivalents (CSEs)

0.5

0.5

0.4

Restricted stock units (RSUs)

28.0

27.5

21.3

Total (1)

$
32.9

$
32.6

$
26.1

~~(1)~~
(1)
Includes charges of $3.1 million in both 2011 and 2010 and $1.9 million ~~and $1.3 million~~ in ~~2010,~~ 2009 ~~and 2008, respectively,~~ for awards to retirement-eligible employees.
53
Stock-based compensation (in millions) was recognized as follows in the Consolidated Statements of Operations for the ~~year~~years ended December 31:

Amount recorded in: 2010 2009 2008
Costs of services and product development $ 14.8 $ 12.6 $ 9.6
Selling, general, and administrative 17.8 13.5 11.1

Total stock-based compensation expense recognized $ 32.6 $ 26.1 $ 20.7

Amount recorded in:

2011

2010

2009

Costs of services and product development

$
14.8

$
14.8

$
12.6

Selling, general, and administrative

18.1

17.8

13.5

Total stock-based compensation expense recognized

$
32.9

$
32.6

$
26.1

As of December 31, ~~2010,~~2011, the Company had ~~$45.7~~$42.3 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 ~~1.8~~2.1 years.
Stock-Based Compensation Awards
The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards in accordance with FASB ASC Topic 505:
Stock Appreciation Rights
Stock-settled stock appreciation rights (SARs) are settled in common shares and ~~are similar to stock options as they~~ permit the holder to participate in the appreciation of the Common Stock. SARs ~~may be~~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. At the present time, SARs are awarded only 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 on the exercise date. The Company withholds a portion of the shares of Common Stock issued upon exercise to satisfy minimum statutory tax withholding requirements. SARs recipients do not have any ~~of the~~stockholder rights ~~of a Gartner stockholder, including voting rights and the right to receive dividends and distributions,~~ 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 ~~provides a summary of the~~summarizes changes in SARs outstanding for the year ended December 31, ~~2010:~~

Per Share Weighted-
Per Share Weighted- Average
Weighted- Average Remaining
SARs in Average Grant Date Contractual
millions Exercise Price Fair Value Term
Outstanding at December 31, 2009 2.9 $ 15.43 $ 6.09 4.67 years
Granted 0.5 22.06 8.27 6.12 years
Forfeited — — — —
Exercised (0.9 ) 14.60 6.00 na

Outstanding at December 31, 2010 (1) 2.5 $ 17.22 $ 6.62 4.55 years

Vested and exercisable at December 31, 2010 (1) 0.9 $ 17.79 $ 6.70 3.44 years

2011:

SARs in
millions

Per Share
Weighted-
Average
Exercise Price

Per Share
Weighted-
Average
Grant Date
Fair Value

Weighted-
Average
Remaining
Contractual
Term

Outstanding at December 31, 2010

2.5

$
17.22

$
6.62

4.55 years

Granted

0.4

38.05

13.58

6.15 years

Forfeited

—

—

—

—

Exercised

(0.4
)

38.26

6.38

na

Outstanding at December 31, 2011 (1), (2)

2.5

$
20.39

$
7.66

4.00 years

Vested and exercisable at December 31, 2011 (2)

1.1

$
18.07

$
6.77

2.96 years

na=not applicable

(1)
At December 31, ~~2010,~~2011, 1.4 million of the SARs were unvested. The Company expects that substantially all of these unvested awards will vest in future periods.
(2)
At December 31, 2011, SARs outstanding had an intrinsic value of ~~$40.5~~$36.8 million. SARs vested and exercisable had an intrinsic value of ~~$13.5~~$18.3 million.
54
The fair value of the SARs ~~grants~~ was determined on the grant date ~~of the grant~~ using the Black-Scholes-Merton valuation model with the following weighted-average assumptions for the years ended December 31:

2010 2009 2008
Expected dividend yield (1) 0 % 0 % 0 %
Expected stock price volatility (2) 40 % 50 % 36 %
Risk-free interest rate (3) 2.4 % 2.3 % 2.8 %
Expected life in years (4) 4.75 4.80 4.75

2011

2010

2009

Expected dividend yield (1)

0
%

0
%

0
%
Expected stock price volatility (2)

38
%

40
%

50
%
Risk-free interest rate (3)

2.2
%

2.4
%

2.3
%
Expected life in years (4)

4.75

4.75

4.80

~~(1)~~
(1)
The dividend yield assumption is based on both the history and expectation of the Company’s dividend payouts. Historically ~~Gartner~~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 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 in years represents a weighted-average estimate of the period of time the SARs are expected to be outstanding (that is, the period of time between the service inception date and the expected exercise date). The expected life is based on the “simplified” calculation ~~provided for in~~permitted by SAB No. 107. ~~The~~Under the simplified method, ~~determines~~ the expected life in years ~~based on~~is determined by taking the average of the vesting period plus the original contractual term and ~~contractual terms as set forth when the award is made.~~dividing by two. The Company continues to use the simplified method for ~~awards of stock-based compensation~~SARs since it does not have the necessary actual historical exercise and forfeiture data, ~~to determine an expected life for SARs,~~ as permitted by SAB No. 110.
Restricted Stock ~~Restricted Stock~~ Units ~~and Common Stock Equivalents~~
Restricted stock awards give the awardee the right to vote and to receive dividends and distributions on these shares; however, the awardee may not sell the restricted shares until all restrictions on the release of the shares have lapsed and the shares are released.
Restricted stock units (RSUs) give the awardee the right to receive shares of Common Stock when the vesting conditions are met and the restrictions lapse, and each RSU that vests entitles the awardee to one common share. RSU awardees do not have any ~~of the~~ stockholder

rights ~~of a Gartner stockholder, including voting rights and the right to receive dividends and distributions,~~ until after the common shares are released.
The fair value of RSUs is determined on the date of grant based on the closing price of the Common Stock as reported by the New York Stock Exchange on that date. Service-based RSUs vest ratably over four years and are expensed on a straight-line basis over four years. Performance-based RSUs are subject to both performance and service conditions, vest ratably over four years, and are expensed on an accelerated basis. Presently performance-based RSUs are awarded only to executive officers.
The following table summarizes the changes in RSUs outstanding during the year ended December 31, 2011:

Restricted
Stock Units
(RSUs)
(in millions)

Per Share
Weighted
Average
Grant Date
Fair Value

Outstanding at December 31, 2010

3.9

$
16.52

Granted (1)

0.8

38.02

Vested and released

(1.5
)

17.23

Forfeited

(0.1
)

21.48

Outstanding at December 31, 2011(2), (3)

3.1

$
21.53

(1)
The 0.8 million RSUs granted in 2011 consisted of 0.4 million performance-based RSUs awarded to executives and 0.4 million service-based RSUs awarded to non-executive employees and certain board members. The target number of performance-based RSUs granted was 0.3 million, which was tied to a targeted increase in the Company’s subscription-based contract value (“CV”) for 2011. The actual number of performance-based RSUs granted to executives could range from 0% to 200%, depending on the actual increase in CV for the year as measured on December 31, 2011. At year-end 2011, the actual CV increase achieved was 133% of the targeted amount, which resulted in the grant of 0.4 million performance-based RSUs to executives.
(2)
The Company expects that substantially all of the outstanding awards at December 31, 2011 will vest in future periods.
(3)
The weighted-average remaining contractual term of the outstanding RSUs is approximately 1.0 year.
Common Stock Equivalents
Common stock equivalents (CSEs) are convertible into Common Stock and each CSE entitles the holder to one common share. Members of our Board of Directors receive directors’ fees payable in CSEs unless they opt to receive up to 50% of the fees in cash. Generally, the CSEs have no defined term and are converted into common shares when service as a director terminates unless the director has elected an accelerated release.
The fair value of ~~restricted stock, RSUs, and~~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. The fair value of these awards is recognized as compensation expense as follows: (i) restricted stock awards vest based on the achievement of a market condition and are expensed on a straight-line basis over approximately three years; (ii) service-based RSUs vest ratably over four years and are expensed on a straight-line basis over four years; (iii) performance-based RSUs are subject to both performance and service conditions, vest ratably over four years, and are expensed on an accelerated basis; and (iv) CSEs vest immediately and as a result are recorded as expense on the date of grant.
~~A summary of~~
The following table summarizes the changes in ~~restricted stock, RSUs and~~ CSEs ~~during~~outstanding for the year ended December 31, ~~2010 follows:~~

Per Share Per Share Per Share
Weighted- Weighted- Common Weighted-
Average Restricted Average Stock Average
Restricted Grant Date Stock Units Grant Date Equivalents Grant Date
Stock Fair Value (RSUs) Fair Value (CSEs) Fair Value
Outstanding at December 31, 2009 200,000 $ 7.30 3,763,805 $ 14.57 135,224 na
Granted (1), (2) — — 1,619,624 22.18 18,298 $ 26.66
Vested or released (3) (200,000 ) 7.30 (1,443,065 ) 15.23 (36,314 ) na
Forfeited — — (72,093 ) 16.83 — na

Outstanding at December 31, 2010 (4) — $ — 3,868,271 $ 16.52 117,208 na

2011:

Common Stock
Equivalents
(CSEs)

Per Share
Weighted
Average
Grant Date
Fair Value

Outstanding at December 31, 2010

117,208

$
16.82

Granted

13,294

37.24

Converted to common shares

(33,234
)

36.15

Outstanding at December 31, 2011

97,268

$
17.79

~~na=not available~~
55
~~(1)~~ The 1.6 million RSUs granted in 2010 consisted of 0.9 million performance-based RSUs awarded to executives and 0.7 million service-based RSUs awarded to non-executive employees and certain board members. The number of performance-based RSUs granted was subject to the achievement of a performance condition tied to the annual increase in the Company’s subscription-based contract value for 2010, which ranged from 0% to 200% of the target number depending on the performance level achieved. The aggregate performance-based RSU target for 2010 was 0.5 million shares. The actual performance target achieved for 2010 was approximately 174%, resulting in the grant of 0.9 million performance-based RSUs.
~~(2)~~ CSEs represent fees paid to directors. The CSEs vest when granted and are convertible into common shares when the director leaves the Board of Directors or earlier if the director elects to accelerate the release.
~~(3)~~ ~~These restricted shares held by the Company’s CEO vested in the fourth quarter of 2010 after the designated market conditions were achieved. There was no remaining unamortized cost on these shares.~~
~~(4)~~ ~~The weighted-average remaining contractual term of the RSUs is 1.1 years. The CSEs have no defined contractual term.~~
Stock Options
Historically, the Company granted stock options to employees that allowed them to purchase shares of ~~the~~ Common Stock at a certain price. The Company has not made any stock option grants since 2006. All outstanding options are fully vested and there is no

remaining unamortized cost. The Company received ~~approximately~~$16.6 million, $20.7 million, ~~$12.2 million,~~ and ~~$42.0~~$12.2 million in cash from stock option exercises in ~~the twelve months ended December 31,~~2011, 2010, and 2009, ~~and 2008,~~ respectively.
The following table ~~provides a summary of~~summarizes the changes in stock options outstanding ~~for~~during the year ended December 31, ~~2010:~~

Weighted
Per Share Average
Weighted- Remaining
Options in Average Contractual
millions Exercise Price Term
Outstanding at December 31, 2009 4.7 $ 10.65 3.07 years
Expired — 10.81 na
Exercised (1) (2.1 ) 10.04 na

Outstanding at December 31, 2010 (2) 2.6 $ 11.13 2.59 years

2011:

Options in
millions

Per Share
Weighted-
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(in millions)

Vested and outstanding at December 31, 2010

2.6

$
11.13

2.59 years

$
58.2

Expired

—

—

na

na

Exercised

(1.4
)

11.29

na

39.6

Vested and outstanding at December 31, 2011

1.2

$
10.93

1.47 years

$
27.7

na=not applicable
~~(1)~~ ~~Options exercised during 2010 had an aggregate intrinsic value of $34.7 million.~~
~~(2)~~ ~~At December 31, 2010, options outstanding had an aggregate intrinsic value of $58.2 million.~~

Employee Stock Purchase Plan
~~Employee Stock Purchase Plan~~
The Company has an employee stock purchase plan (the ~~“ESPP~~“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, ~~2010,~~2011, the Company had approximately 1.4 million shares available for purchase under the ~~ESPP~~ESP Plan. The ~~ESPP~~ESP Plan is considered non-compensatory under FASB ASC Topic 718, and as a result the Company does not record stock-based compensation expense ~~related to these~~for employee share purchases. The Company received $3.4 million, $2.8 million, and $2.7 million in cash from share purchases under the ~~ESPP~~ESP Plan induring 2011, 2010, and ~~$2.7 million in both~~ 2009, ~~and 2008.~~
56
respectively.
109 — COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of shares of Common Stock outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in earnings. When the impact of common share equivalents is antidilutive, they are excluded from the calculation.
The following table sets forth the reconciliation of the basic and diluted earnings per share computations (in thousands, except per share amounts) for the years ended December 31:

2010 2009 2008
Numerator:

Net income used for calculating basic and diluted earnings per common share $ 96,285 $ 82,964 $ 103,871

Denominator:(1)

Weighted average number of common shares used in the calculation of basic earnings per share 95,747 94,658 95,246
Common share equivalents associated with stock-based compensation plans 4,087 2,891 3,782

Shares used in the calculation of diluted earnings per share 99,834 97,549 99,028

Earnings per share:

Basic (2) $ 1.01 $ 0.88 $ 1.09

Diluted (2) $ 0.96 $ 0.85 $ 1.05

2011

2010

2009

Numerator:

Net income used for calculating basic and diluted earnings per common share

$
136,902

$
96,285

$
82,964

Denominator:(1)

Weighted average number of common shares used in the calculation of basic earnings per share

96,019

95,747

94,658

Common share equivalents associated with stock-based compensation plans

2,827

4,087

2,891

Shares used in the calculation of diluted earnings per share

98,846

99,834

97,549

Earnings per share:

Basic

$
1.43

$
1.01

$
0.88

Diluted

$
1.39

$
0.96

$
0.85

~~(1)~~
(1)
During 2011, 2010 ~~2009~~ and ~~2008,~~2009, the Company repurchased 5.9 million, 3.9 million, ~~0.3 million,~~ and ~~9.7~~0.3 million shares of its Common Stock, respectively.
~~(2)~~ ~~Basic and diluted earnings per share include income from discontinued operations of $0.07 per share in 2008.~~
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 antidilutive. During periods with ~~reported~~net income, these common share equivalents were antidilutive because their exercise price was greater than the average market value of a share of Common Stock during the period. ~~During periods with reported loss, all common share equivalents would have an antidilutive effect.~~

2011

2010

2009

Antidilutive common share equivalents as of December 31 (in millions):

0.5

0.5

1.7

Average market price per share of Common Stock during the year

$
37.53

$
26.35

$
15.52

2010 2009 2008
Antidilutive common share equivalents as of December 31 (in millions): 0.5 1.7 1.3
Average market price per share of Common Stock during the year $ 26.35 $ 15.52 $ 20.17
11
10 — INCOME TAXES
Following is a summary of the components of income before income taxes for the years ended December 31 (in thousands):

2010 2009 2008
U.S. $ 78,933 $ 54,793 $ 79,393
Non-U.S. 55,152 60,733 65,348

Income before income taxes $ 134,085 $ 115,526 $ 144,741

2011

2010

2009

U.S.

$
124,915

$
78,933

$
54,793

Non-U.S.

77,269

55,152

60,733

Income before income taxes

$
202,184

$
134,085

$
115,526

The expense for income taxes on the above income consists of the following components (in thousands):

2010 2009 2008
Current tax expense (benefit):
U.S. federal $ 9,078 $ 8,749 $ 10,564
State and local 2,645 3,107 3,341
Foreign 10,341 14,340 15,614

Total current 22,064 26,196 29,519
Deferred tax (benefit) expense:
U.S. federal 4,263 7,477 (547 )
State and local 72 3,168 1,848
Foreign (6,013 ) 1,281 (2,798 )

Total deferred (1,678 ) 11,926 (1,497 )

Total current and deferred 20,386 38,122 28,022

2011

2010

2009

Current tax expense:

U.S. federal

$
23,327

$
9,078

$
8,749

State and local

4,236

2,645

3,107

Foreign

13,845

10,341

14,340

Total current

41,408

22,064

26,196

Deferred tax (benefit) expense:

U.S. federal

(5,192
)

4,263

7,477

State and local

1,269

72

3,168

Foreign

(1,434
)

(6,013
)

1,281

Total deferred

(5,357
)

(1,678
)

11,926

Total current and deferred

36,051

20,386

38,122

Benefit (expense) relating to interest rate swap used to increase (decrease) equity

3,134

(2,523
)

(2,530
)
Benefit from stock transactions with employees used to increase equity

25,812

18,559

621

Benefit (expense) relating to defined-benefit pension adjustments used to increase (decrease) equity

285

375

(296
)
Benefit (expense) of acquired tax assets (liabilities) used to decrease (increase) goodwill

—

1,003

(3,355
)

Total tax expense

$
65,282

$
37,800

$
32,562

57

2010 2009 2008
Benefit (expense) relating to interest rate swap used to increase (decrease) equity (2,523 ) (2,530 ) 3,776
Benefit from stock transactions with employees used to increase equity 18,559 621 15,876
Benefit (expense) relating to defined-benefit pension adjustments used to increase (decrease) equity 375 (296 ) (594 )
Benefit (expense) of acquired tax assets (liabilities) used to decrease (increase) goodwill 1,003 (3,355 ) 513

Tax expense on continuing operations 37,800 32,562 47,593
Tax expense on discontinued operations — — 622

Total tax expense $ 37,800 $ 32,562 $ 48,215

Current and long-term deferred tax assets and liabilities are comprised of the following (in thousands):

December 31,
2010 2009
Depreciation $ — $ 3,261
Expense accruals 39,892 28,751
Loss and credit carryforwards 19,999 35,232
Other assets 21,843 25,213

Gross deferred tax asset 81,734 92,457
Depreciation (5,595 ) —
Intangible assets (14,816 ) (17,259 )
Prepaid expenses (9,342 ) (7,098 )
Other liabilities (110 ) (1,190 )

Gross deferred tax liability (29,863 ) (25,547 )
Valuation allowance (2,634 ) (19,692 )

Net deferred tax asset $ 49,237 $ 47,218

December 31,

2011

2010

Expense accruals

$
40,438

$
39,892

Loss and credit carryforwards

24,282

19,999

Assets relating to equity compensation

18,226

16,599

Other assets

8,949

5,244

Gross deferred tax asset

91,895

81,734

Depreciation

(9,199
)

(5,595
)
Intangible assets

(17,024
)

(14,816
)
Prepaid expenses

(10,183
)

(9,342
)
Other liabilities

—

(110
)

Gross deferred tax liability

(36,406
)

(29,863
)
Valuation allowance

(1,869
)

(2,634
)

Net deferred tax asset

$
53,620

$
49,237

Current net deferred tax assets and current net deferred tax liabilities were $31.4 million and $0.6 million as of December 31, 2011 and $28.4 million and $0.4 million as of December 31, 2010, ~~and $19.0 million and $1.2 million as of December 31, 2009,~~ respectively, and are included in Prepaid expenses and other current assets and Accounts payable and accrued liabilities in the Consolidated Balance Sheets. Long-term net deferred tax assets and long-term net deferred tax liabilities were ~~$21.2~~$22.8 million and ~~$0.0 million~~zero as of December 31, ~~2010~~2011 and ~~$29.5~~$21.2 million and ~~$0.1 million~~zero as of December 31, ~~2009,~~2010, respectively, and are included in Other assets and Other liabilities in the Consolidated Balance Sheets. It is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.
The valuation allowances inof $1.9 million as of December 31, 2011 and $2.6 million as of December 31, 2010 relate primarily to non-U.S. net operating losses and domestic capital loss carryforwards that more likely than not will expire unutilized. The ~~valuation allowances in 2009 relate primarily to those items as well as domestic foreign tax credits. The~~ net decrease in

the valuation allowance of ~~$17.1~~$0.7 million in ~~2010~~2011 relates primarily to the ~~following items: (a) the~~ release of ~~approximately $6.0 million of~~ valuation allowance for changes in both actual and anticipated utilization of foreign tax credits, (b) the release of approximately $5.4 million of valuation allowance for changes in both actual and anticipated utilization of foreign net operating losses, and (c) the release of approximately $5.5 million of valuation allowanceallowances on federal and state capital loss carryovers.
The Company has established a full valuation allowance against domestic realized and unrealized capital losses, as the future utilization of these losses is uncertain. As of December 31, ~~2010,~~2011, the Company had U.S. federal capital loss carryforwards of ~~$2.1~~$0.8 million, ~~the majority~~all of which will expire in 2012. The Company also had ~~$2.1~~$0.8 million in state and local capital loss carryforwards that expire over a similar period of time.
As of December 31, ~~2010,~~2011, the Company had state and local tax net operating loss carryforwards of ~~$154.5~~$139.9 million, of which ~~$5.4~~$5.0 million expire within one to five years, ~~$110.0~~$114.2 million expire within six to fifteen years, and ~~$39.1~~$20.7 million expire within sixteen to twenty years. In addition, the Company had non-U.S. net operating loss carryforwards of ~~$29.0~~$27.3 million, of which ~~$3.3~~$2.6 million expire over the next 20 years and ~~$25.7~~$24.7 million that can be carried forward indefinitely. As of December 31, ~~2010~~2011 the Company also had foreign tax credit carryforwards of ~~$4.3~~$10.0 million, the majority of which expire in 2018.
58
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:

2010 2009 2008
Statutory tax rate 35.0 % 35.0 % 35.0 %
State income taxes, net of federal benefit 3.3 3.0 2.8
Foreign income taxed at different rates (6.2 ) (5.0 ) (4.4 )
Repatriation of foreign earnings 8.5 4.1 7.6
Record (release) valuation allowance (12.7 ) (4.5 ) (9.2 )
Foreign tax credits (0.8 ) (1.9 ) (1.0 )
(Release) increase reserve for tax contingencies 2.0 (3.5 ) (0.3 )
Other items (net) (0.9 ) 1.0 2.4

Effective tax rate 28.2 % 28.2 % 32.9 %

2011

2010

2009

Statutory tax rate

35.0
%

35.0
%

35.0
%
State income taxes, net of federal benefit

3.8

3.3

3.0

Foreign income taxed at different rates

(5.9
)

(6.2
)

(5.0
)
Repatriation of foreign earnings

(0.4
)

8.5

4.1

Record (release) valuation allowance

(0.4
)

(12.7
)

(4.5
)
Foreign tax credits

(2.3
)

(0.8
)

(1.9
)
Record (release) reserve for tax contingencies

3.1

2.0

(3.5
)
Other items, net

(0.6
)

(0.9
)

1.0

Effective tax rate

32.3
%

28.2
%

28.2
%

As of December 31, ~~2010~~2011 and December 31 ~~2009,~~2010, the Company had gross unrecognized tax benefits of ~~$15.8~~$18.3 million and ~~$13.8~~$15.8 million, respectively. The increase is primarily attributable to uncertainties surrounding the utilization of certain ~~carryforward~~tax attributes. It is reasonably possible that the gross unrecognized tax benefits will be decreased by ~~$0.1~~$2.9 million within the next 12 months due primarily to anticipated settlements of audits and the expiration of certain statutes of limitation.
The benefits in question relate primarily to the utilization of certain tax attributes.
The Company classifies uncertain tax positions not expected to be settled within one year as long term liabilities. As of December 31, ~~2010~~2011 and December 31, ~~2009,~~2010, the Company had Other Liabilities of ~~$15.7~~$15.4 million and ~~$13.5~~$15.7 million, respectively, related to long term uncertain tax positions.
The Company records accrued interest and penalties related to unrecognized tax benefits in its income tax provision. As of December 31, ~~2010~~2011 and December 31, ~~2009,~~2010, the Company had ~~$3.8~~$4.8 million and ~~$2.8~~$3.8 million of accrued interest and penalties, respectively, related to unrecognized tax benefits. These amounts are in addition to the gross unrecognized tax benefits noted above. The total amount of interest and penalties recognized in the Consolidated Statements of Operations for years ending December 31, 2011 and 2010 was $1.5 million and ~~2009 was~~ $1.0 million, ~~and $(0.5) million,~~ respectively.
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, for the years ending December 31 (in thousands):

2011

2010

Beginning balance

$
15,824

$
13,804

Additions based on tax positions related to the current year

2,269

3,999

Additions for tax positions of prior years

4,375

592

Reductions for tax positions of prior years

(746
)

(137
)
Reductions for expiration of statutes

(269
)

(610
)
Settlements

(2,661
)

(1,668
)
Change in foreign currency exchange rates

(447
)

(156
)

Ending balance

$
18,345

$
15,824

2010 2009
Beginning balance $ 13,804 $ 16,347
Additions based on tax positions related to the current year 3,999 953
Additions for tax positions of prior years 592 415
Reductions for tax positions of prior years (137 ) (334 )
Reductions for expiration of statutes (610 ) (3,349 )
Settlements (1,668 ) (447 )
Change in foreign currency exchange rates (156 ) 219

Ending balance $ 15,824 $ 13,804

In ~~2010,~~2011, the Company repatriated approximately ~~$85.0~~$32.6 million from its foreign subsidiaries. The cash cost of the repatriation was offset with the utilization of foreign tax credits and capital loss carryovers.
The number of years with open statutes of limitation varies depending on the tax jurisdiction. Generally, the Company’s statutes are open for tax years ended December 31, ~~2006~~2007 and forward. Major taxing jurisdictions include the U.S. (federal and state), the United Kingdom, France, Germany, Australia, Italy, Canada, Japan, the Netherlands, and Ireland.
The Internal Revenue Service (“IRS”) ~~has~~ completed its examination of the federal income tax return of the Company for the tax year ended December 31, 2007. In December 2010, the Company received a report of the audit findings. The Company disagrees with certain of the proposed adjustments and ~~intends to vigorously dispute~~is disputing this matter through applicable IRS and judicial procedures, as appropriate. In addition, in the second quarter of 2011 the IRS commenced an audit of the Company’s 2008 and 2009 tax years. The Company ~~believes that it has recorded reserves sufficient~~continues to ~~cover exposures related to these issues. However,~~comply with all information requests and no material adjustments of the Company’s tax positions have been proposed at this time for the 2008 and 2009 tax years. Although the final resolution of ~~such matters involves uncertainties~~these audits is uncertain and there are no assurances that the ultimate resolution will not exceed the amounts ~~recorded. Although~~recorded, the ~~final resolution of the proposed adjustments is uncertain, we believe~~Company believes that the ultimate disposition of ~~this matter~~these matters will not have a material adverse effect on ~~our~~its consolidated financial position, cash flows, or results of operations.
As
Earnings of a non-U.S. subsidiary or affiliate are subject to U.S. taxation when repatriated. The Company intends to reinvest earnings outside the U.S. except in instances where repatriating such earnings would result in minimal additional tax. The Company currently has no plan to remit earnings which will result in a material additional tax cost. Accordingly, the Company has not recognized U.S. tax expense on non-U.S. earnings. At December 31, ~~2010,~~2011, the ~~Company did not have any~~accumulated undistributed earnings of non-U.S. subsidiaries ~~outside~~approximated $41.3 million and were indefinitely invested. An estimate of the ~~United States. Accordingly, no provision for United States federal and state~~U.S. income ~~taxes has been provided thereon.~~
59
tax liability that would be payable if such earnings were not indefinitely reinvested is $9.7 million.
1211 — DERIVATIVES AND HEDGING
The Company enters into a limited number of derivative contracts to offset the potentially negative economic effects of interest rate and foreign exchange movements. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic 815, which requires all derivatives, to include 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 ~~twelve months~~years ended (in thousands, except for number of outstanding contracts):
December 31, ~~2010~~

Unrealized
Number of Contract Fair Value Gain (Loss)
Outstanding Notional Asset Balance Sheet Recorded in
Derivative Contract Type Contracts Amount (Liability) (5) Line Item OCI (6)
Interest Rate Swap (1) 1 $ 76,500 $ (2,625 ) Other Liabilities $ —
Interest Rate Swap (2) 1 71,250 (1,341 ) Other Liabilities —
Interest Rate Swap (3) 1 200,000 (2,101 ) Other Liabilities (1,261 )
Foreign Currency Forwards (4) 63 250,220 618 Other Current Assets —

Total 66 $ 597,970 $ (5,449 ) $ (1,261 )

~~December 31, 2009~~

Unrealized
Number of Contract Fair Value Gain (Loss)
Outstanding Notional Asset Balance Sheet Recorded in
Derivative Contract Type Contracts Amount (Liability) (5) Line Item OCI (6)
Interest Rate Swap (1) 1 $ 126,000 $ (6,594 ) Other Liabilities $ (3,956 )
Interest Rate Swap (2) 1 112,500 (2,769 ) Other Liabilities (1,090 )
Foreign Currency Forwards (4) 19 117,300 740 Other Current Assets —

Total 21 $ 355,800 $ (8,623 ) $ (5,046 )

2011

Derivative Contract Type

Number of
Outstanding
Contracts

Contract
Notional
Amount

Fair Value
Asset
(Liability) (4)

Balance Sheet
Line Item

OCI
Unrealized
(Loss), Net
Of Tax

Interest rate swap (1)

1

$
200,000

$
(9,891
)

Other liabilities

$
(5,934
)
Interest rate swaps (2)

2

30,750

(98
)

Accrued liabilities

—

Foreign currency forwards (3)

60

99,585

272

Other current assets

—

Total

63

$
330,335

$
(9,717
)

$
(5,934
)

December 31, 2010

Derivative Contract Type

Number of
Outstanding
Contracts

Contract
Notional
Amount

Fair Value
Asset
(Liability) (4)

Balance Sheet
Line Item

OCI
Unrealized
(Loss), Net
Of Tax

Interest rate swap (1)

1

$
200,000

$
(2,101
)

Other liabilities

$
(1,261
)
Interest rate swaps (2)

2

147,750

(3,966
)

Other liabilities

—

Foreign currency forwards (3)

63

250,220

618

Other current assets

—

Total

66

$
597,970

$
(5,449
)

$
(1,261
)

(1)
Changes in fair value of this swap have been recognized in earnings beginning in the third quarter of 2010. The swap was previously designated as a cash flow hedge of the forecasted interest payments on the Company’s debt, and as a result the changes in fair value were recorded in OCI, net of tax effect. Hedge accounting on this interest rate swap was discontinued in the third quarter of 2010. In December 2010 the Company refinanced its debt, and as a result the remaining deferred losses previously recorded in OCI were charged to expense (see Note 6 — Debt). The swap matures in January 2012.
~~(2)~~ Changes in fair value of this swap have been recognized in earnings beginning in the third quarter of 2009. The swap was previously designated as a cash flow hedge of the forecasted interest payments on the Company’s debt, and as a result the changes in fair value were recorded in OCI, net of tax effect. Hedge accounting on this interest rate swap was discontinued in the third quarter of 2009. In December 2010 the Company refinanced its debt, and as a result the remaining deferred losses previously recorded in OCI were charged to expense (see Note 6 — Debt). The swap matures in January 2012.
~~(3)~~
The Company ~~entered into this swap on December 22, 2010. The Company designated~~designates and accounts for this swap as a cash flow hedge of the forecasted interest payments on ~~borrowings~~borrowings. As a result, changes in fair value of this swap are deferred and are recorded in OCI, net of tax effect. The Company entered into this swap in December 2010 (see Note 65 — Debt).

(2)
Changes in the fair value of these swaps are recognized in earnings. Both swaps matured in January 2012.
~~(4)~~
(3)
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 ~~currencies.~~currency. The Company enters into short-term foreign currency forward exchange contracts to offset the economic effects of these foreign currency transaction risks. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other income (expense), net since the Company does not designate these contracts as hedges for accounting purposes. All 63 of the outstanding contracts at December 31, ~~2010~~2011 matured by the end of January ~~2011.~~2012.
~~(5)~~
(4)
See Note 1312 — Fair Value Disclosures for the determination of the fair value of these instruments.
~~(6)~~ ~~Represents the unrealized gain (loss) recorded in OCI, net of tax effect.~~
60
At December 31, ~~2010~~2011 the Company’s derivative counterparties were all large investment grade financial institutions. The Company did not have any collateral arrangements with its derivative counterparties, and none of the derivative contracts contained credit-risk related contingent features.
The following table provides information regarding derivative gains and losses that have been recognized in the Consolidated Statements of Operations for the years ended December 31 (in thousands):

Amount recorded in: 2010 2009 2008
Interest expense, net (1) $ 10.7 $ 9.6 $ 2.0
Other (income) expense, net (2) (2.8 ) (0.7 ) 0.6

Total expense, net $ 7.9 $ 8.9 $ 2.6

Amount recorded in:

2011

2010

2009

Interest expense, net (1)

$
4.1

$
10.7

$
9.6

Other expense (income), net (2)

1.2

(2.8
)

(0.7
)

Total expense, net

$
5.3

$
7.9

$
8.9

(1)
~~Includes~~
Consists of interest expense ~~recorded on~~from interest rate swap contracts.
(2)
~~Includes~~
Consists of realized and unrealized gains and losses on foreign currency forward contracts.
13
12 — FAIR VALUE DISCLOSURES
FASB ASC Topic 820 provides a framework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. 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 — Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.~~
Level 2 — Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the asset or liability being measured.
~~Level 3 — Valuation inputs are unobservable and significant to the fair value measurement.~~
The Company’s financial instruments include ~~cash and~~ 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.~~
Atvalue due to their short-term nature. The Company’s financial instruments also includes borrowings outstanding under its 2010 Credit Agreement, and at December 31, ~~2010,~~2011, the Company had ~~$220.0~~$200.0 million of floating rate debt outstanding under ~~its 2010 Credit Agreement,~~this arrangement, which is carried at amortized cost. The Company believes the carrying amount of the ~~debt~~outstanding borrowings reasonably approximates ~~its~~ fair value assince the rate of interest on the ~~term loan and revolver are floating rate which~~borrowings reflect current market rates of interest for similar instruments with comparable maturities.
FASB ASC Topic 820 provides a framework for the measurement of fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of assets and liabilities. Classification within the hierarchy is based upon the lowest level of input that is significant to the resulting fair value measurement. The ~~following table presents~~valuation hierarchy contains three levels. Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs, such as internally-created valuation models. The Company does not currently utilize Level 3 valuation inputs to remeasure any of its assets or liabilities. However, level 3 inputs may be used by the Company in its required annual impairment review of goodwill. Information regarding the periodic assessment of the Company’s goodwill is included in Note 1 — Business and Significant Accounting Policies.

The Company has a limited number of assets and liabilities ~~measured at~~recorded in its Consolidated Balance Sheets that are remeasured to fair value on a recurring basis, ~~utilizing Level 1 and Level 2 measurement inputs~~which are presented in the following table (in thousands):

Fair Value Fair Value
December 31, December 31,
Description: 2010 2009
Assets:
Deferred compensation plan assets (1) $ 24,113 $ 20,214
Foreign currency forward contracts (2) 618 740

$ 24,731 $ 20,954

Liabilities:
Interest rate swap contracts (3) $ 6,067 $ 9,363

Description:

Fair Value
December 31,
2011

Fair Value
December 31,
2010

Assets:

Deferred compensation plan assets (1)

$
25,050

$
24,113

Pension reinsurance asset (2)

12,980

11,680

Foreign currency forward contracts (3)

272

618

$
38,302

$
36,411

Liabilities:

Deferred compensation plan liabilities (1)

$
28,100

$
26,900

Interest rate swap contracts (4)

9,989

6,067

$
38,089

$
32,967

(1)
The Company has a ~~supplemental~~ deferred compensation ~~arrangement~~plan for the benefit of certain highly compensated officers, managers and other key employees (see Note 1413 — Employee Benefits). The plan’s assets consist of investments in money market and mutual funds, and company-owned life ~~insurance.~~
61insurance contracts.

The money market ~~and mutual~~ funds consist of cash equivalents while the mutual fund investments consist of publicly-traded and ~~securities traded in active markets, and the~~quoted equity shares. The Company considers the fair value of these assets to be based on a Level 1 ~~input. These~~inputs, and these assets had a fair value of ~~$7.5~~$8.0 million and ~~$8.4~~$7.5 million as of December 31, ~~2010~~2011 and ~~2009,~~2010, respectively. The ~~fair value~~carrying amount of the ~~Company-owned~~ life insurance iscontracts equals their cash surrender value, as required by U.S. GAAP, which approximates fair value. Cash surrender value represents the estimated amount that the Company would receive upon termination of the contract. The Company considers the life insurance contracts to be valued based on ~~indirectly observable prices which the Company considers to be~~a Level 2 ~~inputs. These~~input, and these assets had a fair value of ~~$16.6~~$17.0 million and ~~$11.8~~$16.6 million at December 31, 2011 and 2010, ~~and 2009,~~ respectively. The related deferred compensation plan liabilities are recorded at fair value, or the amount needed to settle the liability, which the Company also considers to be based on a Level 2 input.
(2)
The Company maintains a pension reinsurance asset to fund payments for one of its defined benefit pension plans (see Note 13—Employee Benefits). The reinsurance asset is carried at its cash surrender value, which approximates its fair value. The Company considers the reinsurance contract to be valued based on a Level 2 input
(3)
The Company enters into foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates (see Note 1211 — Derivatives and Hedging). Valuation of the foreign currency forward contracts is based on foreign currency exchange rates in active ~~markets; thus~~markets, which the Company ~~measures the fair value of these contracts under~~considers a Level 2 input.
~~(3)~~
(4)
~~The~~
On December 31, 2011, the Company ~~has~~had three outstanding interest rate swap contracts (see Note 1211 — Derivatives and Hedging). To determine the fair value of ~~the swaps,~~these over-the-counter financial instruments, the Company relies on mark-to-market valuations prepared by third-party ~~brokers~~brokers. These valuations are based on observable interest ~~rate yield curves.~~rates from recently executed market transactions or broker quotes corroborated by other observable market data. Accordingly, the fair value of the swaps is determined under a Level 2 input. The Company independently corroborates the reasonableness of the swap valuations prepared by third-party brokers through the use of an electronic quotation service.
With the exception of goodwill, the Company does not utilize Level 3 valuation inputs to measure any of its assets or liabilities. Level 3 inputs are used by the Company in its periodic impairment reviews of goodwill. Information regarding the periodic assessment of goodwill is included in Note 1 — Business and Significant Accounting Policies.
14
13 — EMPLOYEE BENEFITS

Savings and investment plan.The Company has a savings and investment plan covering substantially all domestic 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 ~~2010,~~2011, the maximum match was $6,600. In addition, the Company may also ~~contributes~~contribute at least 1% of an employee’s base compensation, subject to an IRS annual limitation of $2,450 for ~~2010.~~2011. Amounts expensed in connection with the plan totaled $15.9 million, $14.6 million, and $13.0 million, in 2011, 2010, and ~~$12.5 million, in 2010,~~ 2009, ~~and 2008,~~ respectively.

Deferred compensation ~~arrangement.~~plan.The Company has a supplemental deferred compensation ~~arrangement~~plan for the benefit of certain highly compensated officers, managers and other key employees, which is structured as a rabbi trust. The plan’s investment assets are classified in Other assets on the Consolidated Balance Sheets at fair value. The value of ~~the~~these assets was ~~$24.1~~$25.1 million and ~~$20.2~~$24.1 million at December 31, 2011 and 2010, ~~and 2009, respectively.~~
respectively (see Note 12 — Fair Value Disclosures for a description regarding the determination of fair value for these assets). The corresponding deferred compensation liability of ~~$26.9~~$28.1 million and ~~$23.0~~$26.9 million at December 31, ~~2010~~2011 and ~~2009,~~2010, respectively, is carried at fair value, and is adjusted with a corresponding charge or credit to compensation cost to reflect the fair value of the amount owed to the employees ~~and~~which is ~~included~~classified in Other liabilities on the Consolidated Balance Sheets. Total compensation expense ~~(benefit)~~ recognized for ~~this arrangement~~the plan was $0.3 million in 2011, zero in 2010, and $0.1 million in ~~2009, and $(0.4) million in 2008.~~
2009.
Defined benefit pension plans.The Company has defined-benefit pension plans in several of its ~~international~~non-U.S. locations. Benefits earned under these plans are based on years of service and level of employee compensation. The Company accounts for ~~material~~ defined benefit plans in accordance with the requirements of FASB ASC Topics 715 and 960.

The following are the components of net periodic pension expense for the years ended December 31 (in thousands):

2010 2009 2008
Service cost $ 1,875 $ 1,465 $ 1,470
Interest cost 840 742 717
Recognition of actuarial (gain)/loss (350 ) (200 ) (74 )
Recognition of termination benefits 65 192 40

Net periodic pension expense $ 2,430 $ 2,199 $ 2,153

2011

2010

2009

Service cost

$
1,890

$
1,875

$
1,465

Interest cost

1,010

840

742

Expected return on plan assets

(125
)

—

—

Recognition of actuarial gain

(135
)

(350
)

(200
)
Recognition of termination benefits

65

65

192

Net periodic pension expense (1)

$
2,705

$
2,430

$
2,199

(1)
Pension expense is classified in SG&A in the Consolidated Statements of Operations.
The following are the assumptions used in the computation of net periodic pension expense for the years ended December 31:

2010 2009 2008
Weighted-average discount rate 3.95 % 4.85 % 5.09 %
Average compensation increase 2.80 % 3.27 % 3.27 %

2011

2010

2009

Weighted-average discount rate

4.40
%

3.95
%

4.85
%
Average compensation increase

2.65
%

2.80
%

3.27
%
62
~~The weighted-average discount rate was~~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):

December 31,
2010 2009 2008
Projected benefit obligation at beginning of year $ 14,358 $ 13,286 $ 13,224
Service cost 1,875 1,465 1,470
Interest cost 840 742 717
Actuarial gain 1,100 (1,034 ) (1,799 )
Addition of foreign pension plan (1) 1,961 — —
Benefits paid (2) (220 ) (562 ) (583 )
Foreign currency impact (184 ) 461 257

Projected benefit obligation at end of year (3) $ 19,730 $ 14,358 $ 13,286

2011

2010

2009

Projected benefit obligation at beginning of year

$
19,730

$
14,358

$
13,286

Service cost

1,890

1,875

1,465

Interest cost

1,010

840

742

Actuarial (gain) loss

(948
)

1,100

(1,034
)
Addition of foreign pension plan (1)

—

1,961

—

Benefits paid (2)

(390
)

(220
)

(562
)
Foreign currency impact

(132
)

(184
)

461

Projected benefit obligation at end of year (3)

$
21,160

$
19,730

$
14,358

(1)
The Company adopted the defined benefit pension plan accounting provisions of FASB ASC Topics 715 and 960 for a ~~foreign pension~~non-U.S. plan ~~during~~on December 31, 2010. Previously the Company had accounted for this plan in accordance with local statutory accounting requirements. The ~~impact~~adoption of FASB ASC Topics 715 and 960 for this ~~adoption was immaterial to~~plan did not result in the ~~Company’s Consolidated Financial Statements.~~recognition of additional expense.
(2)
The ~~estimated benefits to~~Company projects the following amounts will be paid in future years ~~are as follows: $0.3 million in 2011;~~to plan participants: $0.4 million in 2012; ~~$1.0~~$1.2 million in 2013; ~~$1.1~~$1.3 million in 2014; ~~$0.6~~$0.8 million in 2015; $0.9 million in 2016; and ~~$4.7~~$6.5 million in the five years thereafter.
(3)
Measured as of December 31.
The following table provides information ~~related to~~regarding the ~~funded status of the plans~~plan projected benefit obligation and ~~the~~other amounts recorded in the Consolidated Balance Sheets as of December 31 (in thousands):

December 31,
Funded status of the plans: 2010 2009 2008
Projected benefit obligation $ 19,730 $ 14,358 $ 13,286
Plan assets at fair value (1) (2,130 ) — —

Funded status (2) $ 17,600 $ 14,358 $ 13,286

Amounts recorded in the Consolidated Balance Sheets:

Other assets — reinsurance asset (3) $ 11,680 $ 10,451 $ 9,141

Other liabilities — accrued pension obligation $ 17,600 $ 14,358 $ 13,286

Stockholders’ equity — unrealized actuarial gain (4) $ 2,205 $ 3,217 $ 2,777

2011

2010

2009

Projected benefit obligation

$
21,160

$
19,730

$
14,358

Plan assets at fair value (1)

(2,480
)

(2,130
)

—

Funded status – shortfall (2)

$
18,680

$
17,600

$
14,358

Amounts recorded in the Consolidated Balance Sheets:

Other assets — reinsurance asset (3)

$
12,980

$
11,680

$
10,451

Other liabilities — accrued pension obligation (2)

$
18,680

$
17,600

$
14,358

Stockholders’ equity — unrealized actuarial gain (4)

$
2,488

$
2,205

$
3,217

(1)
~~The $2.1 million plan asset as~~
Consists of ~~December 31, 2010 represents~~ the assets of a ~~defined benefit pension~~non-U.S. plan for which the Company adopted the accounting provisions of FASB ASC Topics 715 and 960 inon December 31, 2010. These assets are considered assets of the plan for accounting purposes and are thus not recorded on the ~~Company��s~~Company’s Consolidated Balance Sheets. The assets are maintained with a third-party insurance company and are invested in a diversified portfolio of equities, bonds, and other investments. The assets are primarily valued based on Level 1 and Level 2 inputs under the fair value hierarchy in FASB ASC Topic 820, and the Company considers the overall portfolio of these assets to be of medium investment risk. The projected long-term rate of return on these plan assets ~~is 5.0%.~~was 4.1% as of December 31, 2011. For the year-ended December 31, 2011, the Company contributed $0.6 million to this plan, the actual return on plan assets was $(0.1) million, and benefits paid to participants was $0.1 million.

(2)
The funded status — shortfall represents the amount of the projected benefit obligation that the Company has not funded. This amount is recorded as a liability in Other Liabilities on the Company’s Consolidated Balance Sheets. The Company expects to contribute ~~$0.7~~approximately $0.6 million to ~~the~~these plans in ~~2011.~~2012.
(3)
Consists of a reinsurance asset arrangement with a large international insurance company that was rated investment grade as of December 31, ~~2010.~~2011. The purpose of the reinsurance asset arrangement is to fund the benefit ~~obligation~~payments under one of the Company’s foreign defined benefit pension plans. However, the reinsurance asset is not legally segregated or restricted for purposes of meeting the pension obligation and as a result is not acknowledged as a pension plan asset ~~for accounting purposes.~~under U.S. GAAP. As a result, the reinsurance asset is carried on the Company’s Consolidated Balance Sheets at its cash surrender value, which the Company believes reasonably approximates its fair value.

(4)
The balance recorded in Stockholders’ ~~equity,~~Equity, net of tax ~~effect~~ represents the plan’s net unrealized actuarial gain which will be amortized toagainst net periodic pension cost, thereby reducing the amount of the charge, over approximately 15 years. Amortization of the unrealized gain at December 31, ~~2010~~2011 is projected to reduce the Company’s net periodic pension cost in ~~2011~~2012 by approximately ~~$0.1~~$0.2 million.
63
1514 — SEGMENT INFORMATION
The Company manages its business inthrough three reportable segments: Research, Consulting and Events. Research consists primarily of subscription-based research products, access to research inquiry, ~~as well as~~ peer networking services, and membership programs. Consulting consists primarily of consulting, measurement engagements, and strategic advisory services. Events consists of various symposia, conferences and exhibitions.
The Company evaluates reportable segment performance and allocates resources based on gross contribution margin. Gross contribution, as presented in the table below, is defined as operating income excluding certain COS and SG&A expenses, depreciation, acquisition and integration charges, and amortization of ~~intangibles, and Other charges.~~intangibles. Certain bonus and fringe benefit costs included in consolidated COS are not allocated to segment expense. The accounting policies used by the reportable segments are the same as those used by the Company. There are no intersegment revenues.
The Company earns revenue from clients in many countries. Other than the United States, there is no individual country in which revenues from external clients represent 10% or more of the Company’s consolidated revenues. Additionally, no single client accounted for 10% or more of total revenue and the loss of a single client, in management’s opinion, would not have a material adverse effect on revenues.
The Company does not identify or allocate assets, including capital expenditures, by reportable segment. Accordingly, assets are not being reported by segment because the information is not available by segment and is not reviewed in the evaluation of performance or making decisions in the allocation of resources.
The following tables present operating information about the Company’s reportable segments for the years ended December 31 (in thousands):

Research

Consulting

Events

Consolidated

2011

Revenues

$
1,012,062

$
308,047

$
148,479

$
1,468,588

Gross contribution

682,136

114,838

66,265

863,239

Corporate and other expenses

(649,177
)

Operating income

$
214,062

Research

Consulting

Events

Consolidated

2010

Revenues

$
865,000

$
302,117

$
121,337

$
1,288,454

Gross contribution

564,527

121,885

55,884

742,296

Corporate and other expenses

(593,031
)

Operating income

$
149,265

Research

Consulting

Events

Consolidated

2009

Revenues

$
752,505

$
286,847

$
100,448

$
1,139,800

Gross contribution

489,862

112,099

40,945

642,906

Corporate and other expenses

(508,429
)

Operating income

$
134,477

Research Consulting Events Consolidated
2010

Revenues $ 865,000 $ 302,117 $ 121,337 $ 1,288,454
Gross contribution 564,527 121,885 55,884 742,296
Corporate and other expenses (593,031 )

Operating income $ 149,265

Research Consulting Events Consolidated
2009

Revenues $ 752,505 $ 286,847 $ 100,448 $ 1,139,800
Gross contribution 489,862 112,099 40,945 642,906
Corporate and other expenses (508,429 )

Operating income $ 134,477

Research Consulting Events Consolidated
2008

Revenues $ 781,581 $ 347,404 $ 150,080 $ 1,279,065
Gross contribution 495,440 141,395 64,954 701,789
Corporate and other expenses (537,421 )

Operating income $ 164,368

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 ~~precisely~~ 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, Canada, and Europe, Middle East, Africa.
64
Summarized information by geographic location as of and for the years ended December 31 follows (in thousands):

2010 2009 2008
Revenues:
United States and Canada $ 765,793 $ 663,832 $ 723,247
Europe, Middle East and Africa 380,771 360,791 430,401
Other International 141,890 115,177 125,417

Total revenues $ 1,288,454 $ 1,139,800 $ 1,279,065

Long-lived assets (1):
United States and Canada $ 69,163 $ 65,896 $ 67,753
Europe, Middle East and Africa 21,856 21,924 19,324
Other International 6,175 2,404 4,325

Total long-lived assets $ 97,194 $ 90,224 $ 91,402

2011

2010

2009

Revenues:

United States and Canada

$
861,481

$
765,793

$
663,832

Europe, Middle East and Africa

437,194

380,771

360,791

Other International

169,913

141,890

115,177

Total revenues

$
1,468,588

$
1,288,454

$
1,139,800

Long-lived assets: (1)

United States and Canada

$
85,194

$
69,163

$
65,896

Europe, Middle East and Africa

23,673

21,856

21,924

Other International

10,754

6,175

2,404

Total long-lived assets

$
119,621

$
97,194

$
90,224

(1)
Excludes goodwill and other intangible assets.
16
15 — VALUATION AND QUALIFYING ACCOUNTS
The Company maintains an allowance for losses which is composed of a bad debt allowance and a revenue reserve. Provisions are charged against earnings either as an increase to expense or a reduction in revenues. The following table summarizes activity in the Company’s allowance for ~~doubtful accounts and returns and allowances (in~~the years ended December 31(in thousands):

Balance at
Beginning
of Year

Additions
Charged to
Expense

Additions
Charged
Against
Revenues

Deductions
from
Reserve

Balance
at End
of Year

2009:

Allowance for doubtful accounts and returns and allowances

$
7,800

$
2,100

$
6,000

$
(7,800
)
$
8,100

2010:

Allowance for doubtful accounts and returns and allowances

$
8,100

$
800

$
2,000

$
(3,700
)
$
7,200

2011:

Allowance for doubtful accounts and returns and allowances

$
7,200

$
930

$
4,390

$
(5,260
)
$
7,260

Additions Additions
Balance at Charged to Charged Deductions Balance
Beginning Costs and Against Other from at End
of Year Expenses Accounts(1) Reserve of Year

2008:

Allowance for doubtful accounts and returns and allowances $ 8,450 $ 1,650 $ 5,000 $ (7,300 ) $ 7,800

2009:

Allowance for doubtful accounts and returns and allowances $ 7,800 $ 2,100 $ 6,000 $ (7,800 ) $ 8,100

2010:

Allowance for doubtful accounts and returns and allowances $ 8,100 $ 800 $ 2,000 $ (3,700 ) $ 7,200

~~(1)~~ ~~Amounts charged against revenues.~~
~~17 — SUBSEQUENT EVENT~~SIGNATURES
On February 15, 2011, the Company announced that ValueAct Capital Master Fund L.P (“ValueAct Capital”) will sell approximately 8,000,000 shares of the Company’s Common Stock in a registered public offering underwritten by Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co. The underwriters will also have an option to purchase up to an additional 1,200,000 shares of the Company’s Common Stock from ValueAct Capital to cover over-allotments, if any. The Company will not receive any proceeds from the sale of the shares of its Common Stock in the offering.
The Company also announced it has entered into an agreement with ValueAct Capital pursuant to which the Company will purchase an aggregate of 500,000 shares of its Common Stock from ValueAct Capital at the net price per share to be received by ValueAct Capital in the offering, so long as the public offering is completed.
65
~~SIGNATURES~~
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this Report on Form 10-K to be signed on its behalf by the undersigned, duly authorized, in Stamford, Connecticut, on February ~~15, 2011.~~
23, 2012.
~~Gartner, Inc.~~
Gartner, Inc.
Date: February ~~15, 2011~~23, 2012
By:
~~By:~~
/s/ Eugene A. Hall
Eugene A. Hall
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Eugene A. Hall and Christopher J. Lafond and each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in all capacities, to sign all amendments to this Report on Form 10-K, and to file the same, with appropriate exhibits and other related documents, with the Securities and Exchange Commission. Each of the undersigned, ratifies and confirms his or her signatures as they may be signed by his or her attorney-in-fact to any amendments to this Report. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Name
Title
Date
/s/ Eugene A. Hall
~~Eugene A. Hall~~
Director and Chief Executive Officer
February 23, 2012
(Principal Executive Officer)
~~February 15, 2011~~
Eugene A. Hall
/s/ Christopher J. Lafond
~~Christopher J. Lafond~~
Executive Vice President and Chief Financial Officer
February 23, 2012
(Principal Financial and Accounting ~~Officer)~~Officer)
~~February 15, 2011~~
Christopher J. Lafond
/s/ Michael J. Bingle
Director
February 23, 2012
Michael J. Bingle
~~Director~~
~~February 15, 2011~~
/s/ Richard J. Bressler
Director
February 23, 2012
Richard J. Bressler
~~Director~~
~~February 15, 2011~~
/s/ Raul E. Cesan
Director
February 23, 2012
Raul E. Cesan
/s/ Karen E. Dykstra
Director
February 23, 2012
Karen E. Dykstra
~~Director~~
~~February 15, 2011~~
~~/s/ Russell P. Fradin~~
~~Russell P. Fradin~~
~~Director~~ ~~February 15, 2011~~
/s/ Anne Sutherland Fuchs
Director
February 23, 2012
Anne Sutherland Fuchs
~~Director~~
~~February 15, 2011~~
/s/ William O. Grabe
Director
February 23, 2012
William O. Grabe
~~Director~~
~~February 15, 2011~~
/s/ Stephen G. Pagliuca
Director
February 23, 2012
Stephen G. Pagliuca
~~Director~~
~~February 15, 2011~~
/s/ James C. Smith
Director
February 23, 2012
James C. Smith
~~Director~~
~~February 15, 2011~~
~~/s/ Jeffrey W. Ubben~~
~~Jeffrey W. Ubben~~
~~Director~~ ~~February 15, 2011~~
6662


þ UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


~~Delaware~~		~~04-3099750~~

Commission file number: 1-14443

GARTNER, INC.
(Exact name of registrant as specified in its charter)


Delaware	04-3099750
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

P.O. Box 10212
56 Top Gallant Road
Stamford, CT		06902-7700
(Address of principal executive offices)		(Zip Code)

(203) 316-1111
(Registrant’s telephone number,
including area code)


Title of each class		Name of each exchange
~~Title of each class~~		on which registered

Common Stock, $.0005 par value per share		New York Stock Exchange


Large accelerated filerþ	Accelerated filero	Non-accelerated filero	Smaller reporting companyo
		(Do not check if a smaller reporting company)


þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o	For the fiscal year ended December 31, 2011

OR

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


Document		Parts Into Which Incorporated

Proxy Statement for the Annual Meeting of Stockholders to be held June ~~2, 2011~~7, 2012 (Proxy Statement)		Part III