##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)



| | [X] | Quarterly report pursuant to Section 13 or 15(d) of
      the Securities Exchange Act of 1934
      For the quarterly period ended September 30, 2003 or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | [  ]      Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| |  | --------------------------------------------------------------------------------------------------

Commission File Number: 000-24799

THE CORPORATE EXECUTIVE BOARD COMPANY
(Exact Name of Registrant as Specified in Its Charter)

Delaware
    
    52-2056410(State or Other Jurisdiction
    
    (IRS Employerof Incorporation or Organization)
    
    Identification No.)2000 Pennsylvania Avenue, NWSuite 6000Washington, DC
    
    20006(Address of Principal Executive Offices)
    
    (Zip Code)


(202) 777-5000
(Registrants Telephone Number, Including Area Code)

Not applicable.
(Former Name, Former Address and Former Fiscal Year, if Changed, Since Last Report.)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes þ     No  ̈

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes þ     No  ̈

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

As
of November 7, 2003, we had outstanding 37,274,019 shares of Common Stock,
par value $0.01 per share.





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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
INDEX TO FORM 10-Q



|PART I. FINANCIAL INFORMATION |                                                                                                      |                                                                                                     
|----------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------
|                              |                                                                                                      |                                                                                                     
|                              | Item 1. Financial Statements.                                                                        |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              |                                                                                                      | Condensed Balance Sheets at September 30, 2003 and
      December 31, 2002                          
|                              |                                                                                                      |                                                                                                     
|                              |                                                                                                      | Condensed Statements of Income for the Three and Nine Months
      Ended September 30, 2003 and 2002
|                              |                                                                                                      |                                                                                                     
|                              |                                                                                                      | Condensed Statements of Cash Flows for the Nine Months
      Ended  September 30, 2003 and 2002     
|                              |                                                                                                      |                                                                                                     
|                              |                                                                                                      | Notes to Condensed Financial Statements                                                             
|                              |                                                                                                      |                                                                                                     
|                              | Item 2. Managements Discussion and
      Analysis of Financial Condition and Results of Operations. |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 3. Quantitative and Qualitative Disclosures
      About Market Risk.                            |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 4. Controls and Procedures.                                                                     |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|PART II. OTHER INFORMATION    |                                                                                                      |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 1. Legal Proceedings.                                                                           |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 2. Changes in Securities and Use
      of Proceeds.                                             |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 3. Defaults Upon Senior Securities.                                                             |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 4. Submission of Matters to a Vote
      of Security Holders.                                   |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 5. Other Information.                                                                           |                                                                                                     
|                              |                                                                                                      |                                                                                                     
|                              | Item 6. Exhibits and Reports on Form 8-K.                                                            |                                                                                                     
|                              |                                                                                                      |                                                                                                     

2



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##### 



PART I. FINANCIAL INFORMATIONItem 1. Financial Statements.

THE CORPORATE EXECUTIVE BOARD COMPANYCONDENSED BALANCE SHEETS
(In thousands, except share amounts)

September 30, 2003
      
      December 31, 2002(unaudited)AssetsCurrent
          assets:Cash
          and cash equivalents
      
      $
      58,908
      
      
      $
      71,346Marketable
          securities
      
      
      21,585
      
      
      
      17,030Membership
          fees receivable, net
      
      
      28,751
      
      
      
      50,356Deferred
          income taxes, net
      
      
      24,568
      
      
      
      28,806Deferred
          incentive compensation
      
      
      4,759
      
      
      
      4,974Prepaid
          expenses and other current assets
      
      
      6,149
      
      
      
      3,668Total
          current assets
      
      
      144,720
      
      
      
      176,180Deferred
          income taxes, net
      
      
      18,957
      
      
      
      30,920Marketable
          securities
      
      
      179,590
      
      
      
      137,565Property
          and equipment, net
      
      
      15,458
      
      
      
      14,916Total
          assets
      
      $
      358,725
      
      
      $
      359,581Liabilities
          and stockholders equityCurrent
          liabilities:Accounts
          payable and accrued liabilities
      
      $
      11,896
      
      
      $
      12,549Accrued
          incentive compensation
      
      
      7,275
      
      
      
      9,660Deferred
          revenues
      
      
      106,260
      
      
      
      121,415Total
          current liabilities
      
      
      125,431
      
      
      
      143,624Other
          liabilities
      
      
      2,694
      
      
      
      2,600Total
          liabilities
      
      
      128,125
      
      
      
      146,224Stockholders
          equity:Preferred
          stock, par value $0.01; 5,000,000 shares authorized, no
shares issued and outstanding
      
      
      
      
      
      
      Common
          stock, par value $0.01; 100,000,000 shares authorized and 37,814,021
          and 37,182,846 shares issued as of September 30, 2003 and
December 31, 2002, respectively and 37,271, 269 and 37,182,846 shares outstanding as of September 30, 2003
          and December 31, 2002, respectively
      
      
      378
      
      
      
      372Additional
          paid-in capital
      
      
      142,934
      
      
      
      129,846Retained
          earnings
      
      
      101,180
      
      
      
      77,844Accumulated
          elements of other comprehensive income
      
      
      5,312
      
      
      
      5,295Treasury
          stock, 542,752 and 0 shares, at cost, at September 30, 2003 and December 31,
          2002, respectively
      
      
      (19,204
      )
      
      
      Total
          stockholders equity
      
      
      230,600
      
      
      
      213,357Total
          liabilities and stockholders equity
      
      $
      358,725
      
      
      $
      359,581


See accompanying notes to condensed financial
  statements.

3



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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

Three months ended
        September 30,
      
      Nine months ended
        September 30,2003
      
      2002
      
      2003
      
      2002Revenues
      
      $
      53,758
      
      
      $
      41,275
      
      
      $
      151,380
      
      
      $
      117,845Cost
          of services
      
      
      18,225
      
      
      
      14,126
      
      
      
      51,380
      
      
      
      40,659Gross
          profit
      
      
      35,533
      
      
      
      27,149
      
      
      
      100,000
      
      
      
      77,186Costs
          and expenses:Member
          relations and marketing
      
      
      14,375
      
      
      
      10,248
      
      
      
      39,727
      
      
      
      29,222General
          and administrative
      
      
      5,293
      
      
      
      4,388
      
      
      
      15,789
      
      
      
      13,215Depreciation
      
      
      1,343
      
      
      
      1,399
      
      
      
      4,092
      
      
      
      3,988Stock
          option and related expenses (1)
      
      
      
      
      
      
      
      
      
      
      113
      
      
      
      668Total
          costs and expenses
      
      
      21,011
      
      
      
      16,035
      
      
      
      59,721
      
      
      
      47,093Income
          from operations
      
      
      14,522
      
      
      
      11,114
      
      
      
      40,279
      
      
      
      30,093Other
          income, net
      
      
      1,925
      
      
      
      1,734
      
      
      
      5,580
      
      
      
      4,563Income
          before provision for income taxes
      
      
      16,447
      
      
      
      12,848
      
      
      
      45,859
      
      
      
      34,656Provision
          for income taxes
      
      
      10,934
      
      
      
      5,011
      
      
      
      22,523
      
      
      
      13,299Net
          income
      
      $
      5,513
      
      
      $
      7,837
      
      
      $
      23,336
      
      
      $
      21,357Earnings
          per share:Basic
      
      $
      0.15
      
      
      $
      0.21
      
      
      $
      0.63
      
      
      $
      0.58Diluted
      
      $
      0.14
      
      
      $
      0.21
      
      
      $
      0.61
      
      
      $
      0.57Weighted
          average shares used in the calculation of earnings per share:Basic
      
      
      37,308
      
      
      
      37,123
      
      
      
      37,298
      
      
      
      36,572Diluted
      
      
      38,762
      
      
      
      37,734
      
      
      
      38,403
      
      
      
      37,607(1) Composition
          of Stock option and related expenses:Cost
          of services
      
      $
      
      
      
      $
      
      
      
      $
      74
      
      
      $
      330Member
          relations and marketing
      
      
      
      
      
      
      
      
      
      
      5
      
      
      
      160General
          and administrative
      
      
      
      
      
      
      
      
      
      
      34
      
      
      
      178Total
      
      $
      
      
      
      $
      
      
      
      $
      113
      
      
      $
      668


See accompanying notes to condensed financial statements.

4



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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Nine Months EndedSeptember 30,2003
    
    2002CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    23,336
    
    
    $
    21,357Adjustments to reconcile net income to net cash flows from operating activities:Depreciation
    
    
    4,092
    
    
    
    3,988Deferred income taxes
    
    
    21,777
    
    
    
    13,299Amortization of marketable securities premiums, net
    
    
    1,550
    
    
    
    1,072Changes in operating assets and liabilities:Membership fees receivable, net
    
    
    21,605
    
    
    
    15,575Deferred incentive compensation
    
    
    215
    
    
    
    665Prepaid expenses and other current assets
    
    
    (2,481
    )
    
    
    (1,281
    )Accounts payable and accrued liabilities
    
    
    (669
    )
    
    
    (222
    )Accrued incentive compensation
    
    
    (2,385
    )
    
    
    717Deferred revenues
    
    
    (15,155
    )
    
    
    (11,682
    )Other liabilities
    
    
    94
    
    
    
    846Net cash flows provided by operating activites
    
    
    51,979
    
    
    
    44,334CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment, net
    
    
    (4,634
    )
    
    
    (2,483
    )Maturity (purchase) of marketable securities, net
    
    
    (49,166
    )
    
    
    (69,176
    )Net cash flows used in investing activities
    
    
    (53,800
    )
    
    
    (71,659
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the exercise of common stock options
    
    
    8,031
    
    
    
    12,409Proceeds from the issuance of common stock under the employee stock purchase plan
    
    
    540
    
    
    
    485Purchase
of treasury stock
    
    
    (19,204
    )
    
    
    Reimbursement of common stock offering costs
    
    
    175
    
    
    
    300Payment of common stock offering costs
    
    
    (159
    )
    
    
    (172
    )Net cash flows provided by (used in) financing activities
    
    
    (10,617
    )
    
    
    13,022NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (12,438
    )
    
    
    (14,303
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    71,346
    
    
    
    48,271CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    58,908
    
    
    $
    33,968


See accompanying notes to condensed financial statements.

5



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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1  Description of operations

The Corporate Executive Board Company (the Company) provides best
practices research and quantitative analysis focusing on corporate strategy,
operations and general management issues. Best practices research supports
senior executive decision making by identifying and analyzing specific
management initiatives, processes and strategies that have been determined to
produce the best results in solving common business problems or challenges. For
a fixed annual fee, members of each of its research programs have access to an
integrated set of services, including best practices research studies,
executive education seminars, customized research briefs and Web-based access
to the programs content database and decision support tools.

Note 2  Condensed financial statements

The accompanying condensed unaudited financial statements included herein
have been prepared by the Company in accordance with accounting principles
generally accepted in the United States for interim financial information and
pursuant to the rules and regulations of the Securities and Exchange Commission
(the SEC) for reporting on Form 10-Q. Accordingly, certain information and
footnote disclosures required for complete financial statements are not
included herein. It is recommended that these condensed financial statements be
read in conjunction with the financial statements and related notes as reported
on the Companys Form 10-K filed with the SEC on February 28, 2003, as amended
by the Companys Form 10-K/A filed with the SEC on July 3, 2003.

In managements opinion, all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of the condensed
financial position, results of operations and cash flows at the dates and for
the periods presented have been included. The condensed balance sheet presented
as of December 31, 2002 has been derived from the financial statements that
have been audited by the Companys independent auditors. The results of
operations for the three and nine months ended September 30, 2003, may not be
indicative of the results that may be expected for the year ending December 31,
2003, or any other period within calendar year 2003.

Note
3  New accounting standards

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities(FIN 46).
The objective of FIN 46 is to improve financial reporting by companies involved
with variable interest entities. FIN 46 requires variable interest entities to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entitys activities or is entitled to
receive a majority of the entitys residual returns or both. The Company does
not expect the adoption of the new standard to have a material impact on its
consolidated financial position or results of operations. The provisions of FIN
46 are applicable in the first reporting period beginning after December 15,
2003 to variable interest entities acquired before February 1, 2003.

Note 4  Public offerings of common stock

In March 2003 and 2002, certain of the Companys shareholders sold 588,000
and 2,100,000 shares of our common stock, respectively, in registered public
offerings. The Company did not directly receive any proceeds from the sale of
our common stock pursuant to these registered public offerings. However, it did
receive cash from the exercise of common stock options in conjunction with the
registered public offerings. In addition, the Company recognized $83,000 and
$623,000 in compensation expense reflecting additional Federal Insurance
Corporation Act (FICA) taxes as a result of the taxable income that the
employees recognized upon the exercise of non-qualified common stock options in
conjunction with the registered public offerings in March 2003 and 2002,
respectively. The additional FICA taxes are included within Stock option and
related expenses on the condensed statements of income for the three and nine
months ended September 30, 2003 and 2002.

Note 5  Earnings per share

Basic earnings per share was computed by dividing net income by the number
of basic weighted average common shares outstanding during the period. Diluted
earnings per share was computed by dividing net income by the number of diluted
weighted average common shares outstanding during the period. The number of
weighted average common share equivalents outstanding has

6



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##### 



been determined in accordance with the treasury-stock method. Common share
equivalents consist of common shares issuable upon the exercise of outstanding
common stock options. A reconciliation of basic to diluted weighted average
common shares outstanding is as follows (in thousands):

Three months
        

 
    Nine monthsended September 30,
    
    ended September 30,2003
    
    2002
    
    2003
    
    2002Basic weighted average common
shares outstanding
    
    
    37,308
    
    
    
    37,123
    
    
    
    37,298
    
    
    
    36,572Weighted average common share
equivalents outstanding
    
    
    1,454
    
    
    
    611
    
    
    
    1,105
    
    
    
    1,035Diluted weighted average common
shares outstanding
    
    
    38,762
    
    
    
    37,734
    
    
    
    38,403
    
    
    
    37,607


Note 6  Comprehensive income

Comprehensive income is defined as net income plus the net-of-tax impact
of foreign currency items, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities.
Comprehensive income for the three months ended September 30,
2003 and 2002, was
$5.1 million and $11.4 million, respectively. Comprehensive income for the nine
months ended September 30, 2003 and 2002, was $23.3 million
and $26.1 million,
respectively. The accumulated elements of other comprehensive income, net of tax,
included within stockholders equity on the condensed balance sheets are
composed solely of the change in unrealized gains on available-for-sale
marketable securities.

Note 7  Supplemental cash flows disclosures

For the nine months ended September 30, 2003 and 2002, the Company
recognized $4.5 million and $22.1 million, respectively, in
additional paid-in capital for tax deductions associated with the exercise of non-qualified common
stock options and disqualifying dispositions of incentive stock options.
Estimated current income tax payments for the nine months ended September 30,
2003 and 2002, have been reduced by the consideration of the tax deductions
associated with the exercise of non-qualified common stock options and
disqualifying dispositions of incentive stock options.

Note 8  Stockholders equity

In February 2003, the Companys Board of Directors authorized a share
repurchase of up to $75.0 million of the Companys common stock. Repurchases will
be made from time to time in open market and privately negotiated transactions
subject to market conditions. No minimum number of shares has been fixed. The
Company will fund its share repurchases with cash on hand and cash generated
from operations. During the nine months ending September 30, 2003, the Company
purchased treasury stock totaling $19.2 million. As of September 30, 2003,
542,752 shares have been repurchased under the program.

Note 9  Stock-based compensation

At September 30, 2003, the Company had several stock-based employee
compensation plans. These plans provide for the granting of stock options and
restricted stock to employees and non-employee members of our Board of
Directors. The Company accounts for those plans using the intrinsic value
method of expense recognition and measurement prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations (collectively, APB No. 25). Pursuant
to FASB Interpretation No. 44, stock incentives granted to non-employee members
of our Board of Directors are accounted for under the provisions of APB No. 25.
In accordance with FASB Statement No. 123, Accounting for Stock-Based
Compensation(SFAS No. 123), as amended by FASB Statement No. 148, Accounting
for Stock-Based Compensation-Transition and Disclosure, the following table
illustrates the effect on net income and basic and diluted earnings per share
if the Company had applied the fair value-based method of expense recognition
and measurement provisions of SFAS No. 123 to stock-based employee
compensation.

7



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##### 



For the three months
    
    For the nine monthsended September 30,
    
    ended September 30,2003
    
    2002
    
    2003
    
    2002Net income, as reported
    
    $
    5,513
    
    
    $
    7,837
    
    
    $
    23,336
    
    
    $
    21,357Deduct: Total stock-based employee
compensation expense determined
under fair value based methods for
all awards, net of related tax
effects
    
    
    5,068
    
    
    
    4,620
    
    
    
    13,009
    
    
    
    12,534Pro
forma net income (loss)
    
    $
    445
    
    
    $
    3,217
    
    
    $
    10,327
    
    
    $
    8,823Earnings per share:Basic  as reported
    
    $
    0.15
    
    
    $
    0.21
    
    
    $
    0.63
    
    
    $
    0.58Basic  pro forma
    
    $
    0.01
    
    
    $
    0.09
    
    
    $
    0.27
    
    
    $
    0.24Diluted  as
reported
    
    $
    0.14
    
    
    $
    0.21
    
    
    $
    0.61
    
    
    $
    0.57Diluted  pro forma
    
    $
    0.01
    
    
    $
    0.09
    
    
    $
    0.27
    
    
    $
    0.24Assumptions:Risk-free interest
rate
    
    
    3.1
    %
    
    
    3.1
    %
    
    
    2.9
    %
    
    
    3.1
    %Dividend yield
    
    zero
    
    zero
    
    zero
    
    zeroExpected life of
option (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Expected volatility
    
    
    55
    %
    
    
    63
    %
    
    
    55
    %
    
    
    63
    %


As described more
  fully in Note 10, below, the Company has been qualified for certain tax incentives
  relating to its qualification as a Qualified High Technology Company. In addition
  to the effect on net income, as reported, which is discussed in Note 10 below,
  the effect of this qualification was a charge to pro forma net income for the
  three months ended September 30, 2003 of approximately
$516,000, or $0.01 and $0.01
  per pro forma basic and diluted earnings per share, respectively, relating primarily to the income tax benefits
  associated with compensation expense on non-qualified stock options,
  as calculated in accordance with SFAS No. 123 and recorded for pro forma
  presentation, during the six months ending June 30, 2003.

Under the SFAS No. 123 pro forma disclosure provisions, the fair value of
options granted subsequent to December 15, 1995, has been estimated using the
Black-Scholes option valuation model. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions, including
the expected stock price characteristics that are significantly different from
those of traded options. Because changes in the subjective input assumptions
can materially affect the fair value estimate, in managements opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of the Companys outstanding options.

The weighted-average fair value of Company options granted during the
three months ended September 30, 2003 and 2002 was $21.38 per share and $15.97
per share, respectively. The weighted-average fair value of Company options
granted during the nine months ended September 30, 2003 and 2002 was $16.14 per
share and $17.85 per share, respectively. For purposes of pro forma
disclosures, the estimated fair value of options is amortized to expense over
the vesting period. The stock-based compensation expense calculated above,
under the provisions of SFAS No. 123, may not necessarily be indicative of
future results.

Note 10  Income taxes

Washington, D.C. income tax incentives

The Office of Tax
  and Revenue of the Government of the District of Columbia (the Office
  of Tax and Revenue) has adopted regulations in accordance with the New
  E-Conomy Transformation Act of 2000 (the Act) that modify the income
  and franchise tax, sales and use tax and personal property tax regulations,
  effective April 2001. Specifically, the regulations provide certain credits,
  exemptions and other benefits to a Qualified High Technology Company (QHTC).
  In October 2003, the Company received notification from the Office of Tax
  and Revenue that its certification as a QHTC under the Act had been accepted.
  As a QHTC, the Companys Washington, D.C. statutory income tax rate will
  be 0.0% through 2005 and 6.0% thereafter, versus 9.975% prior to this qualification.
  In addition, the Company is also eligible for certain Washington, D.C. income
  tax credits and other benefits.

8



---



##### 



The Company recorded a non-cash income tax charge
  to earnings of $8.2 million during the three and nine months ended September
  30, 2003 for the impact on its deferred tax assets of lowering the Washington,
  D.C. income tax rate to 0.0%, partially offset by the recognition of certain
  Washington, D.C. income tax credits. Additionally, during the three months ended
  September 30, 2003, the Company reduced the provision for income taxes by $2.4
  million to reflect a true-up of the provision for income taxes originally recorded
  at 39.4% during the six months ended June 30, 2003.

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report
  on Form 10-Q of The Corporate Executive Board Company contains forward-looking
  statements within the meaning of the Private Securities Litigation Reform Act
  of 1995. These statements are based on our current plans and expectations and
  involve risks and uncertainties that could cause actual future activities and
  results of operations to be materially different from those set forth in the
  forward-looking statements. Factors that could cause actual results to differ
  materially from those indicated by forward-looking statements include, among
  others, our dependence on renewals of our membership-based services, our inability
  to know in advance if new products will be successful, difficulties we may experience
  in anticipating market trends, our need to attract and retain a significant
  number of highly skilled employees, restrictions on selling our products and
  services to the health care industry, continued consolidation in the financial
  institutions industry, which may limit our business with such companies, fluctuations
  in operating results, our potential inability to protect our intellectual property
  rights, our potential exposure to litigation related to our content, our potential
  exposure to loss of revenue resulting from our unconditional service guarantee,
  various factors that could affect our estimated income tax rate or our ability
  to use our existing deferred tax assets, changes to our effective income tax
  rate, whether the Washington, D.C. Office of Tax and Revenue reassesses our
  Qualified High Technology Company status and possible volatility of our stock
  price. These factors are discussed more fully below and in our 2002 annual report
  on Form 10-K that we filed with the Securities and Exchange Commission on February 28,
  2003, as amended. We undertake no obligation to update any forward-looking statements,
  whether as a result of new information, future events or otherwise.

Overview

We provide best practices research and quantitative analysis focusing on
corporate strategy, operations and general management issues. Best practices
research supports senior executive decision making by identifying and analyzing
specific management initiatives, processes and strategies that have been
determined to produce the best results in solving common business problems or
challenges. For a fixed annual fee, members of each of our research programs
have access to an integrated set of services, including best practices research
studies, executive education seminars, customized research briefs and Web-based
access to the programs content database and decision support tools.

Memberships, which are principally annually renewable agreements, are
generally payable by members at the beginning of the contract term. Billings
attributable to memberships in our research programs initially are recorded as
deferred revenues and then recognized pro rata over the membership contract
term, which is typically 12 months. At any time, a member may request a refund
of their membership fee for a research program, which is provided on a pro rata
basis relative to the remaining term of the membership.

Our growth strategy
  is to cross-sell additional research programs to existing members, to add new
  members and to develop new research programs and decision support tools. The
  implementation of our growth strategy can be seen in our operating results.
  One measure of our business is its annualized Contract value, which we calculate
  as the aggregate annualized revenue attributed to all agreements in effect at
  a given point in time, without regard to the remaining duration of any such
  agreement. Our experience has been that a substantial portion of members renew
  subscriptions for an equal or higher level each year. Contract value has increased
  27.2% to $207.8 million at September 30, 2003, from $163.4 million
  at September 30, 2002.

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Our operating costs and expenses consist of cost of services, member
relations and marketing, general and administrative
expenses, depreciation and stock option and related expenses. Cost of
services represents the costs associated with the production and delivery of
our products and services, including compensation of research personnel and
in-house faculty, the production of published materials, the organization of
executive education seminars and all associated support services. Member
relations and marketing expenses include the costs of acquiring new members,
the costs of maintaining and renewing existing members, compensation expense
(including sales commissions), travel and all associated support services.
General and administrative expenses include the costs of human resources and
recruiting, finance and accounting, management information systems, facilities
management, new product development and other administrative functions. Stock
option and related expenses includes additional cash payroll taxes for
compensation expense relating to the taxable income recognized by employees
upon the exercise of non-qualified common stock options.

Results of Operations

The following table sets forth certain financial data as a percentage of
revenues for the periods indicated:

Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of services
    
    
    33.9
    
    
    
    34.2
    
    
    
    33.9
    
    
    
    34.5Gross profit
    
    
    66.1
    
    
    
    65.8
    
    
    
    66.1
    
    
    
    65.5Costs and expenses:Member relations and marketing
    
    
    26.7
    
    
    
    24.8
    
    
    
    26.2
    
    
    
    24.8General and administrative
    
    
    9.8
    
    
    
    10.6
    
    
    
    10.4
    
    
    
    11.2Depreciation
    
    
    2.5
    
    
    
    3.4
    
    
    
    2.7
    
    
    
    3.4Stock option and related expenses
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.6Total costs and expenses
    
    
    39.1
    
    
    
    38.8
    
    
    
    39.5
    
    
    
    40.0Income from operations
    
    
    27.0
    
    
    
    26.9
    
    
    
    26.6
    
    
    
    25.5Other income, net
    
    
    3.6
    
    
    
    4.2
    
    
    
    3.7
    
    
    
    3.9Income before provision for income taxes
    
    
    30.6
    
    
    
    31.1
    
    
    
    30.3
    
    
    
    29.4Provision for income taxes
    
    
    20.3
    
    
    
    12.1
    
    
    
    14.9
    
    
    
    11.3Net income
    
    
    10.3
    %
    
    
    19.0
    %
    
    
    15.4
    %
    
    
    18.1
    %


Three and Nine months Ended September 30, 2003 and 2002

Revenues.Revenues
  increased 30.2% to $53.8 million for the three months ended September 30,
  2003, from $41.3 million for the three months ended September 30,
  2002. Revenues increased 28.5% to $151.4 million for the nine months ended
  September 30, 2003, from $117.8 million for the nine months ended
  September 30, 2002. The largest drivers of the increase in revenues during
  the three and nine months ended September 30, 2003 were the cross-selling
  of additional subscriptions to existing members and price increases. Other drivers
  contributing to the increase in revenues for the three and nine months ended
  September 30, 2003 included the introduction of new research programs and
  the addition of new members.

Cost of services.Cost of services increased 29.0% to $18.2 million for
the three months ended September 30, 2003, from $14.1
million for the three months ended September 30, 2002. Cost of services
increased 26.4% to $51.4 million for the nine months ended September 30, 2003,
from $40.7 million for the nine months ended September 30, 2002. The increase
in cost of services was

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principally due to compensation costs for new research
and executive education staff and an increase in external consulting expenses
to support our new and existing program launches. Over the past four quarters
we have launched five new research programs. Cost of services as a percentage
of revenues decreased to 33.9% for the three months ended September 30, 2003,
from 34.2% for the three months ended September 30, 2002. Cost of services as a
percentage of revenues decreased to 33.9% for the nine months ended September
30, 2003, from 34.5% for the nine months ended September 30, 2002. The
year-over-year changes in the three and nine months ended September 30, 2003
are due to the leverage inherent in our membership-based business model. Cost
of services as a percentage of revenues may fluctuate from quarter to quarter
due to the timing of executive education seminars, the timing of the completion
and delivery of best practices research studies and the introduction of new
research programs. Accordingly, the cost of services as a percentage of
revenues for the three and nine months ended September 30, 2003 may not be
indicative of future results.

Gross profit.Historically, the gross profit margin (gross profit as a percentage of revenues)
  has fluctuated based upon the growth in revenues offset by the costs of
  delivering best practices research studies, the timing of executive education
  seminars, the hiring of personnel and the introduction of new membership programs.
  Accordingly, the gross profit margin for the three and nine months ended September 30,
  2003, may not be indicative of future results. A number of the factors that
  impact gross profit margin are discussed in the costs of services description
  above.

Member relations and marketing.Member relations and marketing costs
increased 40.3% to $14.4 million for the three months ended September 30, 2003
from $10.2 million for the three months ended September 30, 2002. Member
relations and marketing costs increased 35.9% to $39.7 million for the nine
months ended September 30, 2003 from $29.2 million for the nine months ended
September 30, 2002. The increase in member relations and marketing costs is due
to the increase in sales staff and related costs, the increase in travel
expenses associated with the new sales staff, the increase in commission
expense associated with increased revenues and, to a lesser extent, the
increase in member relations personnel and related costs to support our
expanding membership base. Member relations and marketing costs as a percentage
of revenues has increased to 26.7% for the three months ended September 30,
2003, from 24.8% for the three months ended September 30, 2002. Member
relations and marketing costs as a percentage of revenues has increased to
26.2% for the nine months ended September 30, 2003, from 24.8% for the nine
months ended September 30, 2002. The year-over-year increase in
member relations and marketing costs as a percentage of revenues for the three and
nine months ending September 30, 2003 is due primarily to the
addition of sales staff and the related costs to support our
expanding member base.

General and administrative.General and administrative expenses increased 20.6% to $5.3 million
  for the three months ended September 30, 2003, from $4.4 million for the
  three months ended September 30, 2002. General and administrative expenses
  increased 19.5% to $15.8 million for the nine months ended September 30,
  2003, from $13.2 million for the nine months ended September 30, 2002.
  The increase in general and administrative expenses is principally due to recruiting
  costs for new research and executive education staff. The additional costs were
  attributable to the increased use of external search firms and the payment of
  signing and referral incentives. As a percentage of revenues, general and administrative
  expenses decreased to 9.8% and 10.6% for the three and nine months ended September 30,
  2003, respectively, from 10.4% and 11.2% for the three and nine months ended
  September 30, 2002, respectively. This decrease is due to the fixed nature
  of a portion of these costs, which are not significantly affected on a quarterly
  basis by growth in revenues.

Depreciation.Depreciation expense decreased 4.0% to $1.3 million for the
three months ended September 30, 2003, from $1.4 million for the three months
ended September 30, 2002. Depreciation expense increased 2.6% to $4.1 million
for the nine months ended September 30, 2003, from $4.0 million for the nine
months ended September 30, 2002. Depreciation expense principally consists of
the depreciation of leasehold improvements for office space in Washington, D.C.
and of computer equipment and software.

Stock option and related expenses.We recognized $113,000 and $668,000 in
compensation expense for the nine months ended September 30, 2003 and 2002,
respectively, reflecting additional FICA taxes as a result of the taxable
income that the employees recognized upon the exercise of non-qualified common
stock options, primarily in conjunction with the sale of our common stock in
the registered public offerings in March 2003 and March 2002. See the liquidity
and capital resources section below for further discussion of the sale of our
common stock in the registered public offerings of our common stock in March
2003 and 2002.

Other income,
  net.Other income, net increased 11.0% to $1.9 million for the three
  months ended September 30, 2003, from $1.7 million for the three months
  ended September 30, 2002. Other income, net increased 22.3% to $5.6 million
  for the nine months ended September 30, 2003, from $4.6 million for
  the nine months ended September 30, 2002. The growth in other income, net was
  principally from interest income associated with the increased levels of cash,
  cash equivalents and marketable securities.

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Cash, cash
  equivalents and marketable securities increased as a result of cash flows from
  operating activities and cash flows from financing activities which are discussed
  in the liquidity and capital resources section below.

Provision for income taxes.We recorded a provision for income taxes of $10.9
million and $5.0 million for the three months ended September 30, 2003 and
2002, respectively. We recorded a provision for income taxes of $22.5 million
and $13.3 million for the nine months ended September 30, 2003 and 2002,
respectively. The increase in the provision for income taxes and the effective
income tax rate for the three and nine months ended September 30, 2003, as
compared to 2002, primarily reflects a non-cash income tax charge to earnings
to recognize the benefits associated with our new status as a Qualified High
Technology Company (QHTC) within Washington, D.C.

In October 2003, we received notification from the Office of Tax and Revenue of
the Government of the District of Columbia (The Office of Tax and Revenue)
that our certification as a QHTC had been accepted. As a QHTC, our Washington,
D.C. statutory income tax rate will be 0.0% through 2005 and 6.0% thereafter,
versus 9.975% prior to this qualification. In addition, we are eligible for
certain Washington, D.C. income tax credits and other benefits. Accordingly, we recorded a non-cash income tax
charge to earnings of $8.2 million during the three and nine months
ended September 30, 2003 for the impact on our deferred tax assets of
lowering the Washington, D.C. income tax rate to 0.0%, partially
offset by the recognition of certain Washington, D.C. income tax
credits.  Additionally, during the three months ended September 30, 2003, we reduced the
provision for income taxes by $2.4 million to reflect a true-up of the
provision for income taxes originally recorded at 39.4% during the
six months ended June 30, 2003.

Liquidity and Capital Resources

Cash flows from
  operating activities.We have financed our operations to date through funds
  generated from operating activities. Membership subscriptions, which are principally
  annually renewable agreements, are generally payable by members at the beginning
  of the contract term. The combination of revenue growth and advance payment
  of membership subscriptions has historically resulted in net positive cash flows
  provided by operating activities. We generated net cash flows from operating
  activities of $52.0 million and $44.3 million for the nine months ended
  September 30, 2003 and 2002, respectively. For the nine months ended September 30,
  2003 and 2002, operating cash flows were generated within the period principally
  by net income, the utilization of tax benefits created by the exercise of common
  stock options, the consideration of the non-cash charge to earnings associated with our new QHTC status
 and the collection
  of membership fees receivable, offset by the decrease in deferred revenues and
  the increase in prepaid expenses and other current assets. As of September 30,
  2003, we had cash, cash equivalents and marketable securities of $260.1 million.
  We expect that our current cash, cash equivalents and marketable securities
  balances and anticipated net positive cash flows from operations will satisfy
  working capital, financing and capital expenditure requirements for the next
  twelve months.

Cash flows from investing activities.We used net cash flows from
investing activities of $53.8 million and $71.7 million during the nine months
ended September 30, 2003 and 2002, respectively. During the nine months ended
September 30, 2003 investing cash flows were used for purchases of leasehold
improvements for additional office space in Washington, D.C., computer
equipment and software of $4.6 million and for the purchase, net of sales and
maturities, of available-for-sale marketable securities of $49.2 million.
During the nine months ended September 30, 2002 investing cash flows were used
for purchases of leasehold improvements for
additional office space in Washington, D.C., computer equipment and
software of $2.5 million and for the purchase, net of maturities, of
available-for-sale marketable securities of $69.2 million.

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Cash flows from financing activities.We used net cash flows from
financing activities of $10.6 million during the nine months ended September
30, 2003 and we generated net cash flows from financing activities of $13.0
million during the nine months ended September 30, 2002. Net cash used in
financing activities during the nine months ending September 30, 2003 was
primarily attributed to the repurchase of shares of our common stock during the period,
for $19.2 million, partially offset by the receipt of $8.0 million in
cash from the exercise of common stock options, primarily in conjunction with
the sale of 588,000 shares of our common stock in a registered public offering
in March 2003. Net cash provided by financing activities during the nine months
ended September 30, 2002 was primarily attributed to the receipt of $12.4
million in cash from the exercise of common stock options primarily in
conjunction with the sale of 2,100,000 shares of our common stock in a
registered public offering in March 2002.

At September 30, 2003 and December 31, 2002, we had no off-balance sheet
financing or other arrangements with unconsolidated entities or financial
partnerships (such as entities often referred to as structured finance or
special purpose entities) established for purposes of facilitating off-balance
sheet financing or other debt arrangements or for other contractually narrow or
limited purposes.

Critical Accounting Policies

Our accounting policies, which are in compliance with accounting
principles generally accepted in the United States, require us to apply
methodologies, estimates and judgments that have a significant impact on the
results we report in our financial statements. In our annual report on Form
10-K, as amended, we have discussed those policies that we believe are critical
and require the use of complex judgment in their application. Since the date of
that Form 10-K, as amended, there have been no material changes to our critical
accounting policies or the methodologies or assumptions applied under
them, except for the policy surrounding Washington, D.C. income tax
incentives, discussed below.

Washington D.C. income tax incentives

The Office of Tax
  and Revenue has adopted regulations in accordance with the New E-Conomy Transformation
  Act of 2000 (the Act) that modify the Washington, D.C. income and
  franchise tax, sales and use tax and personal property tax regulations, effective
  April 2001. Specifically, the regulations provide certain credits, exemptions
  and other benefits to a QHTC. In October 2003, we received notification from
  the Office of Tax and Revenue that our certification as a QHTC under the Act
  has been accepted. As a QHTC, our Washington, D.C. statutory income tax rate
  will 0.0% through 2005 and 6.0% thereafter, versus 9.975% prior to this qualification.
  In addition, we are also eligible for certain Washington, D.C. income tax credits
  and other benefits.

We
recorded a non-cash income tax charge to earnings of
$8.2 million during the three and nine months ended
September 30, 2003 for the impact on our deferred tax assets of
lowering the Washington, D.C. income tax rate to 0.0%. Additionally,
during the three months ended September 30, 2003, we reduced the
provision for income taxes by $2.4 million to reflect a true-up
of the provision for income taxes originally recorded at 39.4% during
the six months ended June 30, 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to interest rate risk primarily through our portfolio of
cash, cash equivalents and marketable securities, which is designed for safety
of principal and liquidity. Cash and cash equivalents consist of highly liquid
U.S. Treasury obligations with maturities of less than three months. Marketable
securities consist primarily of U.S. Treasury notes and bonds and insured
Washington, D.C. tax exempt notes and bonds. We perform periodic evaluations of
the relative credit ratings related to the cash, cash equivalents and
marketable securities. This portfolio is subject to inherent interest rate risk
as investments mature and are reinvested at current market interest rates. We
currently do not use derivative financial instruments to adjust our portfolio
risk or income profile.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures: The Companys Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) have evaluated
the effectiveness of the Companys 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, as amended (the Exchange Act)) as of the end of the period
covered by this quarterly report based on the
evaluation of these controls and procedures required by Rules 13a-15(b) or
15d-15(b) of the Exchange Act. The Companys management, including the CEO and CFO, does not expect that
our disclosure controls and procedures or our internal control over financial
reporting will prevent all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute,
assurance that the control systems objectives will be met.
Based on their evaluation, such officers have
concluded that, as of the end of the period covered by this quarterly
report, the Companys disclosure controls
and procedures are effective in alerting them on a timely basis to material
information relating to the Company required to be included in the Companys
periodic filings under the Exchange Act. During the period covered by this
quarterly report, there have been no changes to our internal controls over
financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1.   Legal Proceedings.

From time to time, we are subject to certain legal proceedings and claims
in the ordinary course of business. We currently are not
   aware of any such
legal proceedings or claims that we believe will have, individually or in
the aggregate, a material adverse effect on
   our business, financial condition or operating results.

Item 2.   Change in Securities and Use of Proceeds.

None.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.   Submission of Matters to a Vote of Security Holders.

None.

Item 5.   Other Information.

None.

Item 6.   Exhibits and Reports on Form 8-K

(a) Exhibits:

Exhibit No.
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a -
14(a) of the Securities Exchange Act of 1934.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a -
14(a) of the Securities Exchange Act of 1934.32.1
    
    Certification pursuant to 18 U.S.C. Section 1350.


(b) Reports on Form 8-K:



|(i) |  | On July 25, 2003, the Company
furnished a Current Report on Form
8-K, which included a press release dated July 23, 2003, in which the
Company reported second quarter earnings for 2003 and provided a
financial outlook for fiscal 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: November 13, 2003

The Corporate Executive Board Company

By: /s/ Timothy R. Yost
Timothy R. Yost
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

14