UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 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)1919 North Lynn StreetArlington, Virginia
    
    22209(Address of principal executive offices)
    
    (Zip Code)
 (571) 303-3000
 Not applicable
 þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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 at September 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 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
    
    
    18Item 6. Exhibits
    
    
    18
 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)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,432
    
    
    $
    47,585Marketable securities
    
    
    28,491
    
    
    
    24,153Membership fees receivable, net
    
    
    86,220
    
    
    
    161,336Deferred income taxes, net
    
    
    14,541
    
    
    
    12,710Deferred incentive compensation
    
    
    11,491
    
    
    
    15,544Prepaid expenses and other current assets
    
    
    8,253
    
    
    
    10,638Total current assets
    
    
    160,428
    
    
    
    271,966Deferred income taxes, net
    
    
    24,945
    
    
    
    24,307Marketable securities
    
    
    47,005
    
    
    
    72,618Property and equipment, net
    
    
    107,546
    
    
    
    91,904Goodwill
    
    
    42,626
    
    
    
    42,626Intangible assets, net
    
    
    17,787
    
    
    
    22,143Other non-current assets
    
    
    15,549
    
    
    
    19,208Total assets
    
    $
    415,886
    
    
    $
    544,772Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    37,833
    
    
    $
    62,681Accrued incentive compensation
    
    
    21,738
    
    
    
    31,355Deferred revenues
    
    
    246,277
    
    
    
    323,395Total current liabilities
    
    
    305,848
    
    
    
    417,431Other liabilities
    
    
    65,407
    
    
    
    59,794Total liabilities
    
    
    371,255
    
    
    
    477,225Stockholders equity:Common stock, par value $0.01; 100,000,000
shares authorized, 43,194,645 and 43,119,512
shares issued, and 34,033,117 and 34,993,581
shares outstanding at September 30, 2008 and
December 31, 2007, respectively
    
    
    432
    
    
    
    431Additional paid-in capital
    
    
    394,549
    
    
    
    383,636Retained earnings
    
    
    277,779
    
    
    
    269,429Accumulated elements of other comprehensive loss
    
    
    (534
    )
    
    
    (194
    )Treasury stock, at cost, 9,161,528 and
8,125,931 shares at September 30, 2008 and
December 31, 2007, respectively
    
    
    (627,595
    )
    
    
    (585,755
    )Total stockholders equity
    
    
    44,631
    
    
    
    67,547Total liabilities and stockholders equity
    
    $
    415,886
    
    
    $
    544,772
  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 September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    142,409
    
    
    $
    136,288
    
    
    $
    421,605
    
    
    $
    390,510Cost of services
    
    
    44,051
    
    
    
    45,600
    
    
    
    134,718
    
    
    
    137,540Gross profit
    
    
    98,358
    
    
    
    90,688
    
    
    
    286,887
    
    
    
    252,970Costs and expenses:Member relations and marketing
    
    
    39,642
    
    
    
    38,063
    
    
    
    122,318
    
    
    
    109,791General and administrative
    
    
    16,584
    
    
    
    16,898
    
    
    
    59,183
    
    
    
    52,923Depreciation and amortization
    
    
    5,021
    
    
    
    4,176
    
    
    
    15,766
    
    
    
    10,247Total costs and expenses
    
    
    61,247
    
    
    
    59,137
    
    
    
    197,267
    
    
    
    172,961Income from operations
    
    
    37,111
    
    
    
    31,551
    
    
    
    89,620
    
    
    
    80,009Other (expense) income, net
    
    
    (3,889
    )
    
    
    3,233
    
    
    
    (2,250
    )
    
    
    14,437Income before provision for income taxes
    
    
    33,222
    
    
    
    34,784
    
    
    
    87,370
    
    
    
    94,446Provision for income taxes
    
    
    12,389
    
    
    
    13,392
    
    
    
    34,048
    
    
    
    36,361Net income
    
    $
    20,833
    
    
    $
    21,392
    
    
    $
    53,322
    
    
    $
    58,085Earnings per share:Basic
    
    $
    0.61
    
    
    $
    0.60
    
    
    $
    1.56
    
    
    $
    1.57Diluted
    
    $
    0.61
    
    
    $
    0.59
    
    
    $
    1.55
    
    
    $
    1.54Dividends per share
    
    $
    0.44
    
    
    $
    0.40
    
    
    $
    1.32
    
    
    $
    1.20Weighted average shares used in the
calculation of earnings per share:Basic
    
    
    34,022
    
    
    
    35,932
    
    
    
    34,253
    
    
    
    37,106Diluted
    
    
    34,117
    
    
    
    36,346
    
    
    
    34,374
    
    
    
    37,626
  4




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THE CORPORATE EXECUTIVE BOARD COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)  (Unaudited)
 Nine months endedSeptember 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    53,322
    
    
    $
    58,085Adjustments to reconcile net income to net cash flows provided by operating activities:Depreciation and amortization
    
    
    15,766
    
    
    
    10,247Deferred income taxes
    
    
    (877
    )
    
    
    (2,759
    )Share-based compensation
    
    
    9,681
    
    
    
    18,103Excess tax benefits from share-based compensation arrangements
    
    
    
    
    
    
    (2,409
    )Amortization of marketable securities premiums (discounts), net
    
    
    533
    
    
    
    (633
    )Changes in operating assets and liabilities:Membership fees receivable, net
    
    
    75,116
    
    
    
    70,159Deferred incentive compensation
    
    
    4,053
    
    
    
    2,100Prepaid expenses and other current assets
    
    
    2,385
    
    
    
    734Other non-current assets
    
    
    4,659
    
    
    
    (5,291
    )Accounts payable and accrued liabilities
    
    
    (16,760
    )
    
    
    (20,244
    )Accrued incentive compensation
    
    
    (9,617
    )
    
    
    (2,229
    )Deferred revenues
    
    
    (77,118
    )
    
    
    (56,356
    )Other liabilities
    
    
    5,614
    
    
    
    2,400Net cash flows provided by operating activities
    
    
    66,757
    
    
    
    71,907Cash flows from investing activities:Purchases of property and equipment, net
    
    
    (38,141
    )
    
    
    (16,482
    )Cost method investment
    
    
    
    
    
    
    (3,829
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (58,288
    )Sales and maturities of marketable securities, net
    
    
    20,810
    
    
    
    219,098Net cash flows (used in) provided by investing activities
    
    
    (17,331
    )
    
    
    140,499Cash flows from financing activities:Proceeds from the exercise of common stock options
    
    
    100
    
    
    
    691Proceeds from the issuance of common stock under the employee stock purchase plan
    
    
    1,133
    
    
    
    1,630Excess tax benefits from share-based compensation arrangements
    
    
    
    
    
    
    2,409Purchase of treasury shares
    
    
    (41,840
    )
    
    
    (270,764
    )Payment of dividends
    
    
    (44,972
    )
    
    
    (43,833
    )Net cash flows used in financing activities
    
    
    (85,579
    )
    
    
    (309,867
    )Net decrease in cash and cash equivalents
    
    
    (36,153
    )
    
    
    (97,461
    )Cash and cash equivalents, beginning of period
    
    
    47,585
    
    
    
    171,367Cash and cash equivalents, end of period
    
    $
    11,432
    
    
    $
    73,906
  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. Accounting pronouncements
 Recently adopted
   6




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Not yet adopted
   Note 4. Fair value measurement
  
 
 
  Fair Value Measurements at Reporting Date UsingFair Valueas ofSeptember 30,2008
    
    Level 1
    
    Level 2
    
    Level 3Financial assetsCash and cash equivalents
    
    $
    11,432
    
    
    $
    11,432
    
    
    $
    
    
    
    $
    Available-for-sale marketable securities
    
    
    75,496
    
    
    
    75,496
    
    
    
    
    
    
    
    Variable insurance products held in a Rabbi Trust
    
    
    13,166
    
    
    
    
    
    
    
    13,166
    
    
    
    Financial liabilitiesForward currency exchange contracts
    
    $
    2,931
    
    
    $
    
    
    
    $
    2,931
    
    
    $
    
 7




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Note 5. Other liabilities
  September 30,
    
    
    December 31,2008
    
    
    2007Deferred compensation
    
    $
    10,285
    
    
    $
    12,242Lease incentives
    
    
    36,050
    
    
    
    31,201Deferred rent benefit  long term
    
    
    11,307
    
    
    
    8,081Accrued lease restructuring charges
    
    
    4,963
    
    
    
    5,165Deferred revenues  long term
    
    
    2,802
    
    
    
    3,105Total other liabilities
    
    $
    65,407
    
    
    $
    59,794
 Note 6. Stockholders equity and share-based compensation
 Share-based compensation
  Three months ended September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of services
    
    $
    1,724
    
    
    $
    2,760
    
    
    $
    4,402
    
    
    $
    8,624Member relations and marketing
    
    
    632
    
    
    
    1,248
    
    
    
    798
    
    
    
    3,772General and administrative
    
    
    1,183
    
    
    
    1,997
    
    
    
    4,481
    
    
    
    5,7073,539
    
    
    
    6,005
    
    
    
    9,681
    
    
    
    18,103Income tax benefit
    
    
    (1,416
    )
    
    
    (2,312
    )
    
    
    (3,872
    )
    
    
    (6,970
    )Total share-based compensation, net of tax benefit
    
    $
    2,123
    
    
    $
    3,693
    
    
    $
    5,809
    
    
    $
    11,133
     Share Repurchases
  8




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Dividends
  Note 7. Earnings per share
  Three months ended September 30,
    
    Nine months ended September 30,2008
    
    2007
    
    2008
    
    2007Basic weighted average common shares outstanding
    
    
    34,022
    
    
    
    35,932
    
    
    
    34,253
    
    
    
    37,106Effect of dilutive common shares outstanding
    
    
    95
    
    
    
    414
    
    
    
    121
    
    
    
    520Diluted weighted average common shares outstanding
    
    
    34,117
    
    
    
    36,346
    
    
    
    34,374
    
    
    
    37,626
  Note 8. Comprehensive income
  Three months ended September 30,
    
    
    Nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    20,833
    
    
    $
    21,392
    
    
    $
    53,322
    
    
    $
    58,085Unrealized gains and (losses) of marketable securities, net of tax
    
    
    (9
    )
    
    
    861
    
    
    
    41
    
    
    
    818Unrealized gains and (losses) on forward currency contracts, net
of tax
    
    
    (1,295
    )
    
    
    (67
    )
    
    
    (803
    )
    
    
    496Total comprehensive income
    
    $
    19,529
    
    
    $
    22,186
    
    
    $
    52,560
    
    
    $
    59,399
  Note 9. Commitments and contingencies
  9




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Note 10. Subsequent events
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Business Overview
    10




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Critical Accounting Policies
  Recent Accounting Pronouncements
  11




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Results of Operations
  Three months ended September 30,
    
    Nine months ended September 30,2008
    
    2007
    
    2008
    
    2007Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of services
    
    
    30.9
    
    
    
    33.5
    
    
    
    32.0
    
    
    
    35.2Gross profit
    
    
    69.1
    
    
    
    66.5
    
    
    
    68.0
    
    
    
    64.8Costs and expenses:Member relations and marketing
    
    
    27.8
    
    
    
    27.9
    
    
    
    29.0
    
    
    
    28.1General and administrative
    
    
    11.6
    
    
    
    12.4
    
    
    
    14.0
    
    
    
    13.6Depreciation and amortization
    
    
    3.5
    
    
    
    3.1
    
    
    
    3.7
    
    
    
    2.6Total costs and expenses
    
    
    43.0
    
    
    
    43.4
    
    
    
    46.8
    
    
    
    44.3Income from operations
    
    
    26.1
    
    
    
    23.2
    
    
    
    21.3
    
    
    
    20.5Other (expense) income, net
    
    
    (2.7
    )
    
    
    2.4
    
    
    
    (0.5
    )
    
    
    3.7Income before provision for income taxes
    
    
    23.3
    
    
    
    25.5
    
    
    
    20.7
    
    
    
    24.2Provision for income taxes
    
    
    8.7
    
    
    
    9.8
    
    
    
    8.1
    
    
    
    9.3Net income
    
    
    14.6
    %
    
    
    15.7
    %
    
    
    12.6
    %
    
    
    14.9
    %
 Three and Nine Months Ended September 30, 2008 and 2007
  Revenues.
  Cost of services.
   12




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Gross profit.
  Member relations and marketing.
   General and administrative.
   13




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Depreciation and amortization.
  Other (expense) income, net.
    Provision for income taxes.
  Liquidity and Capital Resources
  Cash flows from operating activities.
  14




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Cash flows from investing activities.
   Cash flows from financing activities.
     Contractual obligations
  15




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Off-Balance Sheet Arrangements
  Forward looking statements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Interest rate risk
  Foreign currency exchange rate risk
  16




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Item 4. Controls and Procedures.
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  Recent
turmoil in the credit markets, the financial services industry, and
the related economic downturn may negatively impact our business,
results of operations, financial condition or liquidity.
   17




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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 PlansJuly 1, 2008 to July 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,441,080August 1, 2008 to August 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    22,441,080September 1, 2008 to September 30, 2008 (1)
    
    
    1,010
    
    
    $
    35.81
    
    
    
    1,010
    
    
    $
    22,404,907Total
    
    
    1,010
    
    
    $
    35.81
    
    
    
    1,010
 
 (1)
    
    Amounts include the effect of employees using common stock received from the exercise
of share-based awards to satisfy the statutory minimum federal and state withholding
requirements generated from the exercise of such awards. In effect, the Company
repurchased, at fair market value, a portion of the common stock received by employees upon
exercise of their awards. The Company repurchased 1,010 shares for approximately $36,200.  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 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 amended31.2
    
    Certification of the Chief Financial Officer pursuant to Rule
13a  14(a) of the Securities Exchange Act of 1934, as amended32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350
 18




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SIGNATURES
  THE CORPORATE EXECUTIVE BOARD COMPANY(Registrant)Date: November 10, 2008
    By:
    /s/ Chao LiuChao LiuChief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer) 19




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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 amended31.2
    
    Certification of the Chief Financial Officer pursuant to Rule
13a  14(a) of the Securities Exchange Act of 1934, as amended32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350
 20