##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 2003 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
(Exact Name Of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
    
    52-2056410
(IRS Employer
Identification No.)2000 Pennsylvania Avenue, NW
Suite 6000
Washington, DC
(Address of Principal Executive Offices)
    
    20006
(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 o

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

Yes þ      No o

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

As
of August 8, 2003, we had outstanding 37,803,265 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 INFORMATIONItem 1. Financial Statements.Condensed Balance Sheets at June 30, 2003 and December 31, 2002
    3Condensed Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002
    4Condensed
Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002
    5Notes to Condensed Financial Statements
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    9Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    13Item 4. Controls and Procedures.
    13PART II. OTHER INFORMATIONItem 1. Legal Proceedings.
    14Item 2. Changes in Securities and Use of Proceeds.
    14Item 3. Defaults Upon Senior Securities.
    14Item 4. Submission of Matters to a Vote of Security Holders.
14Item 5. Other Information.
    15Item 6. Exhibits and Reports on Form 8-K.
    15


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##### 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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

June 30, 2003
    
    December 31, 2002(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    41,680
    
    
    $
    71,346Marketable securities
    
    
    24,528
    
    
    
    17,030Membership fees receivable, net
    
    
    28,030
    
    
    
    50,356Deferred income taxes, net
    
    
    29,876
    
    
    
    28,806Deferred incentive compensation
    
    
    4,718
    
    
    
    4,974Prepaid expenses and other current assets
    
    
    6,365
    
    
    
    3,668Total current assets
    
    
    135,197
    
    
    
    176,180Deferred income taxes, net
    
    
    22,477
    
    
    
    30,920Marketable securities
    
    
    186,209
    
    
    
    137,565Property and equipment, net
    
    
    15,339
    
    
    
    14,916Total assets
    
    $
    359,222
    
    
    $
    359,581Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    9,559
    
    
    $
    12,549Accrued incentive compensation
    
    
    5,985
    
    
    
    9,660Deferred revenues
    
    
    111,363
    
    
    
    121,415Total current liabilities
    
    
    126,907
    
    
    
    143,624Other liabilities
    
    
    2,845
    
    
    
    2,600Total liabilities
    
    
    129,752
    
    
    
    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
37,800,822 and 37,182,846 shares issued and outstanding as of June 30, 2003 and December 31, 2002, respectively
    
    
    378
    
    
    
    372Additional paid-in capital
    
    
    142,504
    
    
    
    129,846Retained earnings
    
    
    95,667
    
    
    
    77,844Accumulated elements of comprehensive income
    
    
    5,718
    
    
    
    5,295Treasury stock, 439,652 and 0 shares, at cost, at June 30, 2003 and December 31, 2002,
respectively
    
    
    (14,797
    )
    
    
    Total stockholders equity
    
    
    229,470
    
    
    
    213,357Total liabilities and stockholders equity
    
    $
    359,222
    
    
    $
    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 June 30,
    
    Six months ended June 30,2003
    
    2002
    
    2003
    
    2002Revenues
    
    $
    50,339
    
    
    $
    39,547
    
    
    $
    97,622
    
    
    $
    76,570Cost of services
    
    
    17,037
    
    
    
    13,016
    
    
    
    33,155
    
    
    
    26,533Gross profit
    
    
    33,302
    
    
    
    26,531
    
    
    
    64,467
    
    
    
    50,037Costs and expenses:Member relations and marketing
    
    
    12,965
    
    
    
    9,866
    
    
    
    25,352
    
    
    
    18,974General and administrative
    
    
    5,166
    
    
    
    4,606
    
    
    
    10,496
    
    
    
    8,827Depreciation
    
    
    1,393
    
    
    
    1,385
    
    
    
    2,749
    
    
    
    2,589Stock option and related expenses (1)
    
    
    2
    
    
    
    45
    
    
    
    113
    
    
    
    668Total costs and expenses
    
    
    19,526
    
    
    
    15,902
    
    
    
    38,710
    
    
    
    31,058Income from operations
    
    
    13,776
    
    
    
    10,629
    
    
    
    25,757
    
    
    
    18,979Other income, net
    
    
    1,880
    
    
    
    1,612
    
    
    
    3,655
    
    
    
    2,829Income before provision for income taxes
    
    
    15,656
    
    
    
    12,241
    
    
    
    29,412
    
    
    
    21,808Provision for income taxes
    
    
    6,169
    
    
    
    4,652
    
    
    
    11,589
    
    
    
    8,288Net income
    
    $
    9,487
    
    
    $
    7,589
    
    
    $
    17,823
    
    
    $
    13,520Earnings per share:Basic
    
    $
    0.25
    
    
    $
    0.20
    
    
    $
    0.48
    
    
    $
    0.37Diluted
    
    $
    0.25
    
    
    $
    0.20
    
    
    $
    0.47
    
    
    $
    0.36Weighted average shares used in the
calculation of earnings per share:Basic
    
    
    37,372
    
    
    
    37,042
    
    
    
    37,298
    
    
    
    36,292Diluted
    
    
    38,415
    
    
    
    38,104
    
    
    
    38,146
    
    
    
    37,611(1)
Composition of Stock Option and Related Expenses:Cost of services

    $
    
    
    
    $
    13
    
    
    $
    74
    
    
    $
    330Member relations and marketing
    
    2
    
    
    
    32
    
    
    
    5
    
    
    
    160General and administrative
    
    
    
    
    
    
    
    
    
    34
    
    
    
    178Total

    $
    2
    
    
    $
    45
    
    
    $
    113
    
    
    $
    668


See accompanying notes to condensed financial statements.

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

Six months ended June 30,2003
    
    2002CASH
FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    17,823
    
    
    $
    13,520Adjustments to reconcile net income to net cash flows provided by
operating activities:Depreciation
    
    
    2,749
    
    
    
    2,589Deferred income taxes
    
    
    11,468
    
    
    
    8,288Amortization of marketable securities premiums, net
    
    
    870
    
    
    
    638Changes in operating assets and liabilities:Membership fees receivable, net
    
    
    22,326
    
    
    
    17,318Deferred incentive compensation
    
    
    256
    
    
    
    837Prepaid expenses and other current assets
    
    
    (2,697
    )
    
    
    (389
    )Accounts payable and accrued liabilities
    
    
    (3,006
    )
    
    
    (956
    )Accrued incentive compensation
    
    
    (3,675
    )
    
    
    (483
    )Deferred revenues
    
    
    (10,052
    )
    
    
    (9,882
    )Other liabilities
    
    
    245
    
    
    
    598Net cash flows provided by operating activities
    
    
    36,307
    
    
    
    32,078CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment, net
    
    
    (3,172
    )
    
    
    (1,875
    )Maturities
(purchases) of marketable securities, net
    
    
    (56,200
    )
    
    
    (66,864
    )Net cash flows used in investing activities
    
    
    (59,372
    )
    
    
    (68,739
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the exercise of common stock options
    
    
    7,842
    
    
    
    11,960Proceeds from the issuance of common stock under the
employee stock purchase plan
    
    
    338
    
    
    
    325Purchase
of treasury stock
    
    
    (14,797
    )
    
    
    Reimbursement of common stock offering costs
    
    
    175
    
    
    
    300Payment of common stock offering costs
    
    
    (159
    )
    
    
    (172
    )Net cash flows provided by (used in) financing activities
    
    
    (6,601
    )
    
    
    12,413NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (29,666
    )
    
    
    (24,248
    )Cash and cash equivalents, beginning of period
    
    
    71,346
    
    
    
    48,271Cash and cash equivalents, end of period
    
    $
    41,680
    
    
    $
    24,023


See accompanying notes to condensed financial statements.

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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 us 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 six months ended June 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 interim period beginning after
June 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 six
months ended June 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 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):

6



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Three months
    
    Six monthsended June 30,
    
    ended June 30,2003
    
    2002
    
    2003
    
    2002Basic weighted average common shares outstanding
    
    
    37,372
    
    
    
    37,042
    
    
    
    37,298
    
    
    
    36,292Weighted average common share equivalents outstanding
    
    
    1,043
    
    
    
    1,062
    
    
    
    848
    
    
    
    1,319Diluted
weighted average common shares outstanding
    
    
    38,415
    
    
    
    38,104
    
    
    
    38,146
    
    
    
    37,611


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 June 30, 2003 and
2002, was $10.4 million and $9.5 million, respectively. Comprehensive income
for the six months ended June 30, 2003 and 2002, was $18.3 million and $14.7
million, respectively. The accumulated elements of comprehensive income, net
of tax, included within stockholders equity on the condensed balance sheets
are comprised solely of the change in unrealized gains on available-for-sale
marketable securities.

Note 7  Supplemental cash flows disclosures

For the six months ended June 30, 2003 and 2002, the Company recognized
$4.5 million and $21.8 million, respectively, in stockholders equity 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 six months ended June 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 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 six months ending June 30, 2003, the Company
purchased treasury stock totaling $14.8 million. As of June 30, 2003, 439,652
shares have been repurchased under the program.

Note 9  Stock-based compensation

At June 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 six monthsending June 30,
    
    ending June 30,2003
    
    2002
    
    2003
    
    2002Net income, as reported
    
    $
    9,487
    
    
    $
    7,589
    
    
    $
    17,823
    
    
    $
    13,520Deduct: Total stock-based employee compensation
expense determined under fair value based
methods for all awards, net of related tax
effects
    
    
    4,101
    
    
    
    4,923
    
    
    
    7,941
    
    
    
    7,914Pro forma net income
    
    $
    5,386
    
    
    $
    2,666
    
    
    $
    9,882
    
    
    $
    5,606Earnings per share:Basic  as reported
    
    $
    0.25
    
    
    $
    0.20
    
    
    $
    0.48
    
    
    $
    0.37Basic  pro forma
    
    $
    0.14
    
    
    $
    0.07
    
    
    $
    0.26
    
    
    $
    0.15Diluted  as reported
    
    $
    0.25
    
    
    $
    0.20
    
    
    $
    0.47
    
    
    $
    0.36Diluted  pro forma
    
    $
    0.14
    
    
    $
    0.07
    
    
    $
    0.26
    
    
    $
    0.15Assumptions:Risk-free interest rate
    
    
    2.6
    %
    
    
    3.1
    %
    
    
    2.7
    %
    
    
    3.1
    %Dividend yield
    
    zero
    
    zero
    
    zero
    
    zeroExpected life of option (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Expected volatility
    
    
    55
    %
    
    
    63
    %
    
    
    55
    %
    
    
    63
    %


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 June 30, 2003 and 2002 was $18.81 per share and $19.72 per
share, respectively. The weighted-average fair value of Company options granted
during the six months ended June 30, 2003 and 2002 was $16.12 per share and
$17.95 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  Commitments and contingencies

Washington, DC 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).

The Company has performed an analysis to support its position that it
meets the definition of a QHTC under the provisions of the Act. Accordingly,
the Company will amend its 2001 Washington, DC income tax return and certain
sales and use tax returns, to file as a QHTC. As a QHTC, the Companys
Washington, DC income tax rate will be 0.0% and the Company will be eligible
for certain Washington, DC income tax credits. In addition the Company will be
entitled to relief from certain sales and use taxes. While the Company believes
it qualifies as a QHTC, the Company believes it should not recognize the impact of
this election within the financial statements for the three and six months ended June
30, 2003, because of uncertainties inherent in its status under the regulations, as adopted.

8



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For financial
reporting purposes, the Company has valued its deferred income tax assets and
liabilities using Washington, DCs currently enacted income tax rate of
9.975%. Additionally, the Company has continued to provide for income, sales and use
taxes as if it were not a QHTC. However, if the Company had received a determination
that it qualified for QHTC status, it would have recorded a charge to
earnings of approximately $8.2 million, representing the impact on its
existing deferred tax asset of lowering the Washington, DC income tax rate
to 0.0%, net of any income tax credits discussed above, and it would have
recognized a refund for an immaterial amount of sales and use taxes paid or
accrued for and after 2001. When the Company concludes  it is more likely than not that
it will receive a favorable determination from the Office of Tax and Revenue
accepting its election as a QHTC, the Company will record the applicable charge.
A determination of its QHTC status by the Office of Tax and Revenue could be
in the form of a positive outcome of a QHTC audit, a refund of previously
paid sales and use tax or another form of communication from the Office of
Tax and Revenue.   However, the Company cannot be certain as to the form or timing of
such determination.

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, whether the Washington, DC Office of Tax and Revenue accepts
our QHTC status, 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, 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 27.1% to $193.4 million at June 30,
2003, from $152.2 million at June 30, 2002.

9



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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
    
    
    
    
    
    Six monthsended June 30,
    
    
    
    
    
    ended June 30,2003
    
    
    
    
    
    2002
    
    
    
    
    
    2003
    
    
    
    
    
    2002Revenues
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %
    
    
    
    
    
    
    100.0
    %Cost of services
    
    
    33.8
    
    
    
    
    
    
    
    32.9
    
    
    
    
    
    
    
    34.0
    
    
    
    
    
    
    
    34.7Gross profit
    
    
    66.2
    
    
    
    
    
    
    
    67.1
    
    
    
    
    
    
    
    66.0
    
    
    
    
    
    
    
    65.3Costs and expenses:Member relations and marketing
    
    
    25.8
    
    
    
    
    
    
    
    24.9
    
    
    
    
    
    
    
    26.0
    
    
    
    
    
    
    
    24.8General and administrative
    
    
    10.3
    
    
    
    
    
    
    
    11.6
    
    
    
    
    
    
    
    10.8
    
    
    
    
    
    
    
    11.5Depreciation
    
    
    2.8
    
    
    
    
    
    
    
    3.5
    
    
    
    
    
    
    
    2.8
    
    
    
    
    
    
    
    3.4Stock option and related expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    1.0Total costs and expenses
    
    
    38.8
    
    
    
    
    
    
    
    40.2
    
    
    
    
    
    
    
    39.7
    
    
    
    
    
    
    
    40.6Income from operations
    
    
    27.4
    
    
    
    
    
    
    
    26.9
    
    
    
    
    
    
    
    26.4
    
    
    
    
    
    
    
    24.8Other income, net
    
    
    3.7
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7Income before provision for income taxes
    
    
    31.1
    
    
    
    
    
    
    
    31.0
    
    
    
    
    
    
    
    30.1
    
    
    
    
    
    
    
    28.5Provision for income taxes
    
    
    12.3
    
    
    
    
    
    
    
    11.8
    
    
    
    
    
    
    
    11.9
    
    
    
    
    
    
    
    10.8Net income
    
    
    18.8
    %
    
    
    
    
    
    
    19.2
    %
    
    
    
    
    
    
    18.3
    %
    
    
    
    
    
    
    17.7
    %


Three and Six Months Ended June 30, 2003 and 2002

Revenues.Revenues increased 27.3% to $50.3 million for the three months
ended June 30, 2003, from $39.5 million for the three months ended June 30,
2002. Revenues increased 27.5% to $97.6 million for the six months ended June
30, 2003, from $76.6 million for the six months ended June 30, 2002. The
largest driver of the increase in revenues during the three and six months
ended June 30, 2003 was the

10



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##### 



cross-selling of additional subscriptions to
existing members. Other drivers contributing to the increase in revenues for
the three and six months ended June 30, 2003 included the introduction of new
research programs, price increases and the addition of new members.

Cost of services.Cost of services increased 30.9% to $17.0 million for
the three months ended June 30, 2003, from $13.0 million for the three months
ended June 30, 2002. Cost of services increased 25.0% to $33.2 million for the
six months ended June 30, 2003, from $26.5 million for the six months ended
June 30, 2002. The increase in cost of services was principally due to
compensation costs for new research and executive education staff and the
increase in external research and consulting expenses to support our new
program launches. Over the past four quarters we have launched five new
research programs. Cost of services as a percentage of revenues increased to
33.8% for the three months ended June 30, 2003, from 32.9% for the three months
ended June 30, 2002. Cost of services as a percentage of revenues
decreased to 34.0% for the six months ended June 30, 2003, from 34.7% for the
six months ended June 30, 2002. The year-over-year changes in
the three and six months
ended June 30, 2003 are due to the leverage inherent in our membership-based
business model and a shift in the timing of our publishing and executive
education seminar schedule relative to the period ending June 30, 2002. 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 six months ended June 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 six months ended June
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 31.4% to $13.0 million for the three months ended June 30, 2003 from
$9.9 million for the three months ended June 30, 2002. Member relations and
marketing costs increased 33.6% to $25.4 million for the six months ended June
30, 2003 from $19.0 million for the six months ended June 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 25.8% for the three months ended June 30, 2003,
from 24.9% for the three months ended June 30, 2002. Member relations and
marketing costs as a percentage of revenues has increased to 26.0% for the six
months ended June 30, 2003, from 24.8% for the six months ended June 30, 2002.
The year-over-year increase for the three and six months ending June 30, 2003
is due to the addition of member relations and marketing personnel and the
related costs to support our expanding member base.

General and administrative.General and administrative expenses increased
12.2% to $5.2 million for the three months ended June 30, 2003, from $4.6
million for the three months ended June 30, 2002. General and administrative
expenses increased 18.9% to $10.5 million for the six months ended June 30,
2003, from $8.8 million for the six months ended June 30, 2002. The increase in
general and administrative expenses is principally due to recruiting costs for
new research, executive education and sales staff. The additional costs were
attributable to the increased use of external search firms and the payment of
signing and referral incentives. Although general and administrative
expenses increased for the reasons
noted above during the three and six months ended June 30, 2003 as compared to
the three and six months ended June 30, 2002, general and administrative
expenses as a percentage of revenues decreased slightly. As a percentage of
revenues, general and administrative expenses decreased to 10.3% and 10.8% for
the three and six months ended June 30, 2003, respectively, from 11.6% and
11.5% for the three and six months ended June 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 and we expect
that the general and administrative expenses as a percentage of revenues will
decline across the remainder of 2003.

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Depreciation.Depreciation expense increased 0.6% to $1.4 million for the
three months ended June 30, 2003, from $1.4 million for the three months ended
June 30, 2002. Depreciation expense increased 6.2% to $2.7 million for the six
months ended June 30, 2003, from $2.6 million for the six months ended June 30,
2002. Depreciation expense principally consists of the depreciation of leasehold improvements for office space in
Washington, DC and of computer equipment and software.

Stock option and related expenses.We recognized $2,000 and $45,000 in
compensation expense for the three months ended June 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. We recognized $113,000 and $668,000 in compensation expense for
the six months ended June 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 16.6% to $1.9 million for
the three months ended June 30, 2003, from $1.6 million for the three months
ended June 30, 2002. Other income, net increased 29.2% to $3.7 million for the
six months ended June 30, 2003, from $2.8 million for the six months ended June
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. 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
$6.2 million and $4.7 million for the three months ended June 30, 2003 and
2002, respectively. We recorded a provision for income taxes of $11.6 million
and $8.3 million for the six months ended June 30, 2003 and 2002, respectively.
The increase in our effective income tax rate to 39.4% for the three and six
months ended June 30, 2003 from 38.0% for the three and six months ended June
30, 2002 primarily reflects a decrease in the amount of tax-exempt interest
income earned on our portfolio of cash, cash equivalents and marketable
securities and, to a lesser extent, a reduction in the benefit from Federal
income tax incentives associated with the location of our Washington, DC office
facilities.

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 $36.3
million and $32.1 million for the six months ended June 30, 2003 and 2002,
respectively. For the six months ended June 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
and the collection of membership fees receivable, offset by the decrease in
deferred revenues, accrued incentive compensation and accounts payable and
accrued liabilities. As of June 30, 2003, we had cash, cash equivalents and
marketable securities of $252.4 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.

12



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Cash flows from investing activities.We used net cash flows from
investing activities of $59.4 million and $68.7 million during the six months
ended June 30, 2003 and 2002, respectively. During the six months ended June
30, 2003 investing cash flows were used for purchases of leasehold improvements
for additional office space in Washington, DC, computer equipment and software
of $3.2 million and for the purchase, net of sales and
maturities, of available-for-sale marketable
securities of $56.2 million. During the six months ended June 30, 2002
investing cash flows were used for purchases of leasehold improvements for
additional office space in Washington, DC, computer equipment and software of
$1.9 million and for the purchase, net of maturities, of available-for-sale marketable securities
of $66.9 million

Cash flows from financing activities.We used net cash flows from
financing activities of $6.6 million during the six months ended June 30, 2003
and we generated net cash flows from financing activities of $12.4
million during the
six months ended June 30, 2002. Net cash used in financing activities during
the six months ending June 30, 2003 was primarily attributed to the repurchase
of our common stock during the period, which totaled $14.8 million, partially
offset by the receipt of $7.8 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 six months ended June 30, 2002 was primarily
attributed to the receipt of 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, which totaled $11.2 million.

At
June 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.

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, DC 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 (the Evaluation Date), based on the evaluation of these
controls and procedures required by Rules 13a-15(b) or 15d-15(b) of the
Exchange Act. Based on such evaluation, such officers have concluded that, as
of the Evaluation Date, 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.

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.

13



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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.



| |  | The Annual Meeting of Stockholders of The Corporate Executive Board Company was held on
June 6, 2003. The following is a tabulation of the voting on the
proposals presented at
the Annual Meeting of Stockholders:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Proposal No. 1  Election of Directors.
The following nominees were elected as directors, each to serve until
the next annual meeting of stockholders or until a succesor is named
and qualified:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SHARES
    
    SHARESVOTED FOR
    
    WITHHELDJames J. McGonigle
    
    
    19,803,067
    
    
    
    13,908,666Robert C. Hall
    
    
    32,180,388
    
    
    
    1,531,345Nancy J. Karch
    
    
    32,180,977
    
    
    
    1,530,756David W. Kenny
    
    
    32,180,026
    
    
    
    1,531,707Thomas L. Monahan III
    
    
    19,646,760
    
    
    
    14,064,973Harold L. Siebert
    
    
    33,302,488
    
    
    
    409,245




| |  | Proposal No. 2  Ratification of the Appointment of Ernst & Young LLP as the Companys
Independent Auditors for the Year Ending December 31, 2003
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------

The appointment of Ernst & Young LLP was ratifiedSHARES VOTED FOR
    
    
    32,287,111SHARES VOTED AGAINST
    
    
    416,927SHARES VOTED TO ABSTAIN
    
    
    7,695


14



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##### 



Item 5. Other Information.



| | None. | 
| | ----- | 

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits:
|--- |  | ---------

Exhibit No.
    
    Description31
    
    Certifications pursuant to Rule 13a-14(a)/15d-14(a)32
    
    Certifications pursuant to 18 U.S.C. Section 1350




|(b) |  | Reports on Form 8-K:
|--- |  | --------------------



|(i) |  | On April 24, 2003, the Company filed a Current Report on Form 8-K, which included a press
release dated April 23, 2003, in which the Company reported first 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:
August 12, 2003

|                                     
|-------------------------------------
|The Corporate Executive Board Company
|                                     
|By: /s/ Timothy R. Yost              
|Timothy R. Yost                      
|Chief Financial Officer              
|(Principal Financial Officer and     
|Principal Accounting Officer)        

15