##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the quarterly period ended June 30, 2006
 or
 o
    
    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
  Delaware
    
    52-2056410(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)2000 Pennsylvania Avenue, NWSuite 6000Washington, D.C.
    
    20006(Address of principal executive offices)
    
    (Zip Code)
 (202) 777-5000
 Not applicable.
 þ o
  þ o o
 o þ




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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
INDEX TO FORM 10-Q
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2006 and December 31, 2005
    
    
    3Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 1A. Risk Factors
    
    
    17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19
 2




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements.
 THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 June 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    225,626
    
    
    $
    424,276Marketable securities
    
    
    107,490
    
    
    
    2,264Membership fees receivable, net
    
    
    76,826
    
    
    
    120,242Deferred income taxes, net
    
    
    36,646
    
    
    
    11,880Deferred incentive compensation
    
    
    11,029
    
    
    
    11,489Prepaid expenses and other current assets
    
    
    12,045
    
    
    
    7,671Total current assets
    
    
    469,662
    
    
    
    577,822Deferred income taxes, net
    
    
    3,740
    
    
    
    2,958Marketable securities
    
    
    205,380
    
    
    
    118,096Goodwill and other intangibles
    
    
    8,153
    
    
    
    8,445Other non-current assets
    
    
    7,480
    
    
    
    1,273Property and equipment, net
    
    
    22,714
    
    
    
    18,401Total assets
    
    $
    717,129
    
    
    $
    726,995Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    31,029
    
    
    $
    43,667Accrued incentive compensation
    
    
    19,123
    
    
    
    27,045Deferred revenues
    
    
    254,334
    
    
    
    261,300Total current liabilities
    
    
    304,486
    
    
    
    332,012Other liabilities
    
    
    14,205
    
    
    
    9,569Total liabilities
    
    
    318,691
    
    
    
    341,581Stockholders equity:Common stock, par value $0.01; 100,000,000
shares authorized and 42,778,432 and 41,399,533
shares issued, and 40,263,967 and 39,482,727
shares outstanding as of June 30, 2006 and
December 31, 2005, respectively
    
    
    428
    
    
    
    414Additional paid-in capital
    
    
    339,594
    
    
    
    277,028Retained earnings
    
    
    225,820
    
    
    
    214,892Accumulated elements of other comprehensive loss
    
    
    (2,245
    )
    
    
    (124
    )Treasury stock, 2,514,465 and 1,916,806 shares,
at cost, at June 30, 2006 and December 31,
2005, respectively
    
    
    (165,159
    )
    
    
    (106,796
    )Total stockholders equity
    
    
    398,438
    
    
    
    385,414Total liabilities and stockholders equity
    
    $
    717,129
    
    
    $
    726,995
  3




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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    111,662
    
    
    $
    87,351
    
    
    $
    216,731
    
    
    $
    168,959Cost of services (1)
    
    
    39,059
    
    
    
    30,088
    
    
    
    76,519
    
    
    
    56,482Gross profit
    
    
    72,603
    
    
    
    57,263
    
    
    
    140,212
    
    
    
    112,477Costs and expenses:Member relations and marketing (1)
    
    
    31,925
    
    
    
    23,478
    
    
    
    60,775
    
    
    
    45,091General and administrative (1)
    
    
    15,498
    
    
    
    9,385
    
    
    
    30,525
    
    
    
    18,779Depreciation and amortization
    
    
    2,425
    
    
    
    1,921
    
    
    
    4,422
    
    
    
    3,370Total costs and expenses
    
    
    49,848
    
    
    
    34,784
    
    
    
    95,722
    
    
    
    67,240Income from operations
    
    
    22,755
    
    
    
    22,479
    
    
    
    44,490
    
    
    
    45,237Other income, net
    
    
    6,128
    
    
    
    3,154
    
    
    
    12,228
    
    
    
    6,173Income before provision for income taxes
    
    
    28,883
    
    
    
    25,633
    
    
    
    56,718
    
    
    
    51,410Provision for income taxes
    
    
    11,120
    
    
    
    8,587
    
    
    
    21,836
    
    
    
    17,222Net income
    
    $
    17,763
    
    
    $
    17,046
    
    
    $
    34,882
    
    
    $
    34,188Earnings per share:Basic
    
    $
    0.44
    
    
    $
    0.43
    
    
    $
    0.87
    
    
    $
    0.87Diluted
    
    $
    0.43
    
    
    $
    0.41
    
    
    $
    0.85
    
    
    $
    0.84Dividends per share
    
    $
    0.30
    
    
    $
    0.10
    
    
    $
    0.60
    
    
    $
    0.20Weighted average shares used in the
calculation of earnings per share:Basic
    
    
    40,394
    
    
    
    39,926
    
    
    
    40,026
    
    
    
    39,475Diluted
    
    
    41,233
    
    
    
    41,194
    
    
    
    41,241
    
    
    
    40,886(1)      The following table summarizes the share-based compensation recognized in accordance with
Statement of Financial Accounting Standards No. 123(R) included in the condensed consolidated
statements of income above.Cost of services
    
    $
    3,242
    
    
    $
    
    
    
    $
    6,328
    
    
    $
    Member relations and marketing
    
    
    1,426
    
    
    
    
    
    
    
    2,933
    
    
    
    General and administrative
    
    
    1,896
    
    
    
    
    
    
    
    3,838
    
    
    
    
  4




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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six months endedJune 30,2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    34,882
    
    
    $
    34,188Adjustments to reconcile net income to net cash flows provided by operating activities:Depreciation and amortization
    
    
    4,424
    
    
    
    3,370Deferred income taxes
    
    
    21,960
    
    
    
    17,222Share-based compensation
    
    
    13,099
    
    
    
    Excess tax benefits from share-based compensation arrangements
    
    
    (18,180
    )
    
    
    Amortization of marketable securities premiums, net
    
    
    (932
    )
    
    
    1,240Changes in operating assets and liabilities:Membership fees receivable, net
    
    
    43,416
    
    
    
    40,442Deferred incentive compensation
    
    
    460
    
    
    
    960Prepaid expenses and other current assets
    
    
    (4,791
    )
    
    
    (873
    )Other non-current assets
    
    
    (6,206
    )
    
    
    Accounts payable and accrued liabilities
    
    
    (12,969
    )
    
    
    3,004Accrued incentive compensation
    
    
    (7,980
    )
    
    
    (976
    )Deferred revenues
    
    
    (6,966
    )
    
    
    (11,859
    )Other liabilities
    
    
    4,631
    
    
    
    756Net cash flows provided by operating activities
    
    
    64,848
    
    
    
    87,474Cash flows from investing activities:Purchases of property and equipment, net
    
    
    (8,116
    )
    
    
    (3,024
    )(Purchases) sales and maturities of marketable securities, net
    
    
    (194,787
    )
    
    
    78,608Net cash flows (used in) provided by investing activities
    
    
    (202,903
    )
    
    
    75,584Cash flows from financing activities:Proceeds from the exercise of common stock options
    
    
    2,630
    
    
    
    44,905Proceeds from the issuance of common stock under the employee stock purchase plan
    
    
    912
    
    
    
    655Excess tax benefits from share-based compensation arrangements
    
    
    18,180
    
    
    
    Purchase of treasury shares
    
    
    (58,363
    )
    
    
    (27,534
    )Payment of dividends
    
    
    (23,954
    )
    
    
    (7,862
    )Reimbursement of common stock offering costs
    
    
    70
    
    
    
    35Payment of common stock offering costs
    
    
    (70
    )
    
    
    (2
    )Net cash flows (used in) provided by financing activities
    
    
    (60,595
    )
    
    
    10,197Net (decrease) increase in cash and cash equivalents
    
    
    (198,650
    )
    
    
    173,255Cash and cash equivalents, beginning of period
    
    
    424,276
    
    
    
    113,996Cash and cash equivalents, end of period
    
    $
    225,626
    
    
    $
    287,251
  5




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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Description of operations
  Note 2. Condensed consolidated financial statements
   Note 3. Recent accounting pronouncements
  Note 4. Share-based compensation
   6




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##### 



Equity incentive plans
  Valuation assumptions
  7




---



##### 



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Risk-free interest rate
    
    
    5.1
    %
    
    
    3.7
    %
    
    
    4.8
    %
    
    
    4.3
    %Dividend yield
    
    
    1.2
    %
    
    
    0.6
    %
    
    
    1.3
    %
    
    
    0.6
    %Expected life of option (in years)
    
    
    5.2
    
    
    
    4.5
    
    
    
    4.5
    
    
    
    4.4Expected volatility
    
    
    30
    %
    
    
    30
    %
    
    
    30
    %
    
    
    30
    %Weighted-average fair value of share-based
compensation awards granted
    
    $
    31.17
    
    
    $
    19.70
    
    
    $
    26.17
    
    
    $
    19.49
  Pro-forma information for periods prior to the adoption of FAS 123(R)
   Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2005
    
    
    June 30, 2005(In thousands, except per share amounts)Net income, as reported
    
    $
    17,046
    
    
    $
    34,188Deduct: Total share-based
compensation expense determined under
fair value based methods for all
awards, net of related tax effects
    
    
    4,536
    
    
    
    7,997Pro-forma net income
    
    $
    12,510
    
    
    $
    26,191Earnings per share:Basic  as reported
    
    $
    0.43
    
    
    $
    0.87Basic  pro-forma
    
    $
    0.31
    
    
    $
    0.66Diluted  as reported
    
    $
    0.41
    
    
    $
    0.84Diluted  pro-forma
    
    $
    0.31
    
    
    $
    0.64
 Equity based award activity
  WeightedWeighted
    
    Average
    
    AggregateNumber
    
    Average
    
    Remaining
    
    Intrinsic Valueof Options
    
    Exercise Price
    
    Contractual Term
    
    (in millions)Options outstanding, December 31, 2005
    
    
    5,271,183
    
    
    $
    44.96
    
    
    
    6.14Options granted
    
    
    
    
    
    
    Options cancelled
    
    
    (103,262
    )
    
    
    50.48Options exercised
    
    
    (2,156,704
    )
    
    
    36.57Options outstanding, June 30, 2006
    
    
    3,011,217
    
    
    
    50.82
    
    
    
    5.63
    
    
    $
    148.7Options exercisable, June 30, 2006
    
    
    827,968
    
    
    $
    43.60
    
    
    
    5.65
    
    
    $
    46.9
 8




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##### 



Number ofStock
    
    Weighted
    
    Weighted Average
    
    AggregateAppreciation
    
    Average
    
    Remaining
    
    Intrinsic ValueRights
    
    Exercise Price
    
    Contractual Term
    
    (in millions)Stock appreciation rights outstanding, beginning of year
    
    
    
    
    
    $
    Stock appreciation rights granted
    
    
    623,150
    
    
    
    97.45
    
    
    
    6.70Stock appreciation rights cancelled
    
    
    
    
    
    
    Stock appreciation rights exercised
    
    
    
    
    
    
    Stock appreciation rights outstanding, June 30, 2006
    
    
    623,150
    
    
    $
    97.45
    
    
    
    6.70
    
    
    $
    1.7Stock appreciation rights exercisable, June 30, 2006
    
    
    
    
    
    
    
   Number
    
    Weighted
    
    Weighted Averageof Restricted
    
    Average
    
    RemainingStock Units
    
    Exercise Price
    
    TermRestricted stock units outstanding, beginning of year
    
    
    
    
    
    $
    Restricted stock units granted
    
    
    60,661
    
    
    
    0.00
    
    
    
    3.70Restricted stock units cancelled
    
    
    
    
    
    
    Restricted stock units exercised
    
    
    
    
    
    
    Restricted stock units outstanding, June 30, 2006
    
    
    60,661
    
    
    $
    0.00
    
    
    
    3.70Restricted stock units exercisable, June 30, 2006
    
    
    
    
    
    
    
   Employee stock purchase plan
  9




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##### 



Note 5. Sales of common stock
    Note 6. Earnings per share
  Three months
    
    Six monthsended June 30,
    
    ended June 30,2006
    

2005
    

2006
    

2005Basic weighted average common shares outstanding
    
    
    40,394
    
    
    
    39,926
    
    
    
    40,026
    
    
    
    39,475Dilutive common shares outstanding
    
    
    839
    
    
    
    1,268
    
    
    
    1,215
    
    
    
    1,411Diluted weighted average common shares outstanding
    
    
    41,233
    
    
    
    41,194
    
    
    
    41,241
    
    
    
    40,886
 Note 7. Comprehensive income (loss)
  10




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##### 



Note 8. Supplemental cash flow disclosures
  Note 9. Stockholders equity
    Note 10. Income taxes
  Note 11. Deferred compensation plan
  11




---



##### 



Note 12. Commitments and contingencies
   Note 13. Subsequent events
  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Business Overview
   12




---



##### 



Critical Accounting Policies
  Share-based compensation .
  13




---



##### 



Results of Operations
  Three months ended
    
    Six months endedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of services
    
    
    35.0
    
    
    
    34.4
    
    
    
    35.3
    
    
    
    33.4Gross profit
    
    
    65.0
    
    
    
    65.6
    
    
    
    64.7
    
    
    
    66.6Costs and expenses:Member relations and marketing
    
    
    28.6
    
    
    
    26.9
    
    
    
    28.0
    
    
    
    26.7General and administrative
    
    
    13.9
    
    
    
    10.7
    
    
    
    14.1
    
    
    
    11.1Depreciation and amortization
    
    
    2.2
    
    
    
    2.2
    
    
    
    2.0
    
    
    
    2.0Total costs and expenses
    
    
    44.6
    
    
    
    39.8
    
    
    
    44.2
    
    
    
    39.8Income from operations
    
    
    20.4
    
    
    
    25.7
    
    
    
    20.5
    
    
    
    26.8Other income, net
    
    
    5.5
    
    
    
    3.6
    
    
    
    5.6
    
    
    
    3.7Income before provision for income taxes
    
    
    25.9
    
    
    
    29.3
    
    
    
    26.2
    
    
    
    30.4Provision for income taxes
    
    
    10.0
    
    
    
    9.8
    
    
    
    10.1
    
    
    
    10.2Net income
    
    
    15.9
    %
    
    
    19.5
    %
    
    
    16.1
    %
    
    
    20.2
    %
 Three and Six Months Ended June 30, 2006 and June 30, 2005
 Revenues.
 Cost of services.
 14




---



##### 



Gross profit.
 Member relations and marketing.
 General and administrative.
 Depreciation and amortization.
 15




---



##### 



Other income, net.
 Provision for income taxes.
 Liquidity and Capital Resources
  Cash flows from operating activities.
 Cash flows from investing activities.
 Cash flows from financing activities.
 16




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Item 4. Controls and Procedures.
  PART II. OTHER INFORMATION
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors.
  Changes in estimates or interpretations under financial accounting standards related to share-based
payments could have a material adverse impact on our reported results of operations.
  17




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
 Total Number ofShares
    
    
    Approximate $Average
    
    
    Purchased as
    
    
    Value of SharesTotal
    
    
    Price
    
    
    Part of a
    
    
    That May Yet BeNumber of
    
    
    Paid Per
    
    
    Publicly
    
    
    PurchasedShares Purchased
    
    
    Share
    
    
    Announced Plan
    
    
    Under the PlansApril 1, 2006 to April 30, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    179,243,004May 1, 2006 to May 31, 2006
    
    
    98,972
    
    
    $
    101.67
    
    
    
    98,972
    
    
    $
    169,180,838June 1, 2006 to June 30, 2006
    
    
    93,100
    
    
    $
    100.12
    
    
    
    93,100
    
    
    $
    159,859,794Total
    
    
    192,072
    
    
    $
    100.92
    
    
    
    192,072
  Item 3. Defaults Upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  18




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##### 



Proposal Number 1  Election of directors.
 SHARES
    
    SHARESVOTED FOR
    
    WITHHELDJames J. McGonigle
    
    
    36,608,304
    
    
    
    678,687Thomas L. Monahan III
    
    
    37,177,625
    
    
    
    109,366Russell P. Fradin
    
    
    35,932,177
    
    
    
    1,354,814Robert C. Hall
    
    
    37,134,923
    
    
    
    152,068Nancy J. Karch
    
    
    37,136,200
    
    
    
    150,791David W. Kenny
    
    
    35,932,203
    
    
    
    1,354,788Daniel O. Leemon
    
    
    35,930,755
    
    
    
    1,356,236
 Proposal Number 2  Ratification of the appointment of Ernst & Young LLP as independent
registered public accounting firm for the year ending December 31, 2006.
  SHARES VOTED FOR
    
    
    37,148,906SHARES VOTED AGAINST
    
    
    128,568SHARES VOTED TO ABSTAIN
    
    
    9,517
 Item 5. Other Information.
  Item 6. Exhibits.
  Exhibit No.
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to
Rule 13a  14(a) of the Securities Exchange Act of 1934,
as amended.31.2
    
    Certification of the Chief Financial Officer pursuant to
Rule 13a  14(a) of the Securities Exchange Act of 1934,
as amended.32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350.
 19




---



##### 



SIGNATURES
  The Corporate
Executive Board
Company(Registrant)Date: August 9, 2006By:
    
    /s/ Timothy R. Yost

Timothy R. YostChief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer)
 20




---



##### 



Exhibit Index
 Exhibit No.
    
    Description31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a  14(a) of the Securities
Exchange Act of 1934, as amended.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a  14(a) of the Securities
Exchange Act of 1934, as amended.32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350.
 21