MSCI Inc. (NYSE: MSCI), a leading global provider of investment
decision support tools, including indices, portfolio risk and
performance analytics and corporate governance services, today
announced results for the third quarter and nine months ended
September 30, 2011. For comparative purposes, selected pro forma
results are also presented, as if MSCI had acquired RiskMetrics
Group, Inc. (“RiskMetrics”) on December 1, 2009. In December 2010,
MSCI changed its fiscal year end from November 30 to
December 31, effective with fiscal year 2011.
(Note: Percentage changes are referenced to the comparable
fiscal period in fiscal year 2010, unless otherwise noted.)
- Operating revenues increased 11.0% to
$225.0 million in third quarter 2011 and 50.1% to $674.8 million
for nine months 2011. Compared to pro forma 2010, nine months 2011
revenues rose 11.9%.
- Net income increased 382.5% to $49.8
million in third quarter 2011 and 108.3% to $129.0 million for nine
months 2011. Pro forma net income increased 59.9% to $129.0 million
for nine months 2011.
- Adjusted EBITDA (defined below) grew by
18.9% to $103.6 million in third quarter 2011 and 51.3% to $315.1
million in nine months 2011. Compared to pro forma 2010, nine
months 2011 Adjusted EBITDA grew by 22.5%. The Adjusted EBITDA
margin was 46.0% in third quarter 2011 and 46.7% for nine months
2011.
- Diluted EPS for third quarter 2011 rose
400.0% to $0.40 and 90.9% to $1.05 for nine months 2011.
- Third quarter 2011 Adjusted EPS
(defined below) rose 48.5% to $0.49. Nine months 2011 Adjusted EPS
rose 36.3% to $1.39.
Henry A. Fernandez, Chairman and CEO, said, “We reported double
digit revenue and Adjusted EBITDA growth in the third quarter of
2011. During the quarter, MSCI's revenues grew 11% and our Adjusted
EBITDA grew 19%.
While the weakness in global financial markets during the third
quarter did have an impact on our asset-based fees, our
subscription run rate continued to expand. We believe our growth is
underpinned by long-term trends, including the globalization of
investing, the growing popularity of passive investments, the
increased need to measure, manage and report risk and,
increasingly, the integration of corporate governance concerns into
the investment process,” added Mr. Fernandez.
Table 1: MSCI Inc. Selected Financial Information
(unaudited)
Three Months Ended Change from Nine Months Ended Change from
September 30, August 31, August 31, September 30, August 31,
August 31, In thousands, except per share data 2011 2010
2010 2011 2010 2010 Operating revenues $ 225,026 $ 202,733 11.0% $
674,807 $ 449,583 50.1% Operating expenses 142,781 161,284 -11.5%
434,442 314,180 38.3% Net income 49,787 10,319 382.5% 128,968
61,904 108.3% % Margin 22.1% 5.1% 19.1% 13.8% Diluted EPS $ 0.40 $
0.08 400.0% $ 1.05 $ 0.55 90.9% Adjusted EPS1 $ 0.49 $ 0.33
48.5% 1.39 1.02 36.3% Adjusted EBITDA2 $ 103,624 $ 87,118
18.9% $ 315,093 $ 208,202 51.3% % Margin 46.0% 43.0% 46.7% 46.3% 1
Per share net income before after-tax impact of amortization of
intangibles, non-recurring stock-based compensation, restructuring
costs, third party transaction expenses associated with the
acquisition of RiskMetrics and debt repayment expenses. See Table
15 titled "Reconciliation of Adjusted Net Income and Adjusted EPS
to Net Income and EPS" and information about the use of non-GAAP
financial information provided under "Notes Regarding the Use of
Non-GAAP Financial Measures.”
2 Net Income before interest income,
interest expense, other expense (income), provision for income
taxes, depreciation, amortization, non-recurring stock-based
compensation, restructuring costs, and third party transaction
expenses associated with the acquisition of RiskMetrics. See Table
13 titled "Reconciliation of Adjusted EBITDA to Net Income" and
information about the use of non-GAAP financial information
provided under "Notes Regarding the Use of Non-GAAP Financial
Measures.”
Summary of Results for Third Quarter 2011 compared to Third
Quarter 2010
Operating Revenues – See Table 4
Total operating revenues for the three months ended September
30, 2011 (third quarter 2011) increased $22.3 million, or 11.0%, to
$225.0 million compared to $202.7 million for the three months
ended August 31, 2010 (third quarter 2010). Total subscription
revenues rose $12.4 million, or 7.2%, to $183.7 million while
asset-based fees increased $9.9 million, or 39.4%, to $35.0
million. Non-recurring revenues were essentially flat at $6.3
million.
By segment, Performance and Risk revenues rose $23.8 million, or
13.8%, to $196.2 million. The Performance and Risk segment is
comprised of index and ESG (defined below) products, risk
management analytics, portfolio management analytics, and energy
and commodity analytics. Revenues for the Governance segment
declined $1.5 million, or 5.0%, to $28.8 million.
Index and ESG products: Our index and ESG products
primarily consist of index subscriptions, equity index asset-based
fee products and environmental, social and governance (“ESG”)
products. Revenues related to index and ESG products increased
$17.2 million, or 20.4%, to $101.3 million. Index and ESG
subscription revenue grew by $7.3 million, or 12.4%, to $66.3
million as double digit growth in benchmark product revenues were
supplemented by strong growth in revenues from the sale of
derivative licenses. Also included in the index and ESG revenues
were $2.2 million of non-recurring revenues, which fell from $2.4
million in third quarter 2010.
Revenues attributable to equity index asset-based fees rose $9.9
million, or 39.4%, to $35.0 million. The increase in asset-based
fees was driven primarily by an increase in assets under management
in exchange traded funds (“ETFs”) linked to MSCI indices.
The quarterly average value of assets in ETFs linked to MSCI
equity indices increased 30.6% to $329.1 billion for third quarter
2011 compared to $252.0 billion for the three months ended August
31, 2010. As of September 30, 2011, the value of assets in ETFs
linked to MSCI equity indices was $290.1 billion, representing an
increase of 12.1% from $258.7 billion as of August 31, 2010 but a
decline of $70.4 billion, or 19.5%, from $360.5 billion as of June
30, 2011. We estimate that the $70.4 billion sequential decrease in
third quarter 2011 was substantially attributable to net asset
depreciation.
The three MSCI indices with the largest amount of ETF assets
linked to them as of September 30, 2011 were the MSCI Emerging
Markets, EAFE (an index of stocks in developed markets outside
North America) and US Broad Market indices. The assets linked to
these indices were $81.8 billion, $42.4 billion, and $17.0 billion,
respectively, at the end of the quarter.
Risk management analytics: Our risk management analytics
products offer a consistent risk and performance assessment
framework for managing and monitoring investments in a variety of
asset classes and are based on our proprietary integrated
fundamental multi-factor risk models, value-at-risk methodologies,
performance attribution, and asset valuation models. Driven by
strong growth in revenues from BarraOne and hedge fund risk
reporting, revenues related to risk management analytics increased
$7.3 million, or 13.3%, to $61.9 million. Excluding the impact of
the acquisition of Measurisk in third quarter 2010, organic growth
was 8.6%.
Portfolio management analytics: Our portfolio management
analytics products consist of analytics tools for equity and fixed
income portfolio management. Revenues related to portfolio
management analytics decreased by $0.2 million, or 0.5%, to $30.3
million.
Energy and commodity analytics: Our energy and commodity
analytics products consist of software applications that help users
value and model physical assets and derivatives across a number of
market segments that include energy and commodity assets. Revenues
from energy and commodity analytics products declined by $0.5
million, or 15.0%, to $2.8 million.
Governance: Our governance products consist of corporate
governance products and services, including proxy research,
recommendation and voting services for asset owners and asset
managers as well as governance advisory and compensation services
for corporations. It also includes forensic accounting research as
well as class action monitoring and claims filing services to aid
institutional investors in the recovery of funds from securities
litigation. Governance revenues declined $1.5 million, or 5.0%, to
$28.8 million in third quarter 2011. Non-recurring Governance
revenues declined $0.5 million to $2.7 million.
Operating Expenses – See Table 6
Total operating expense decreased $18.5 million, or 11.5%, to
$142.8 million in third quarter 2011 compared to third quarter
2010. The third quarter 2010 included $20.6 million of costs
related to transaction expenses and restructuring costs related to
the RiskMetrics acquisition. MSCI’s operating expenses benefited
from the reversal of $1.0 million of previously accrued
restructuring reserves relating to the RiskMetrics acquisition in
the third quarter 2011.
Compensation costs: Total compensation costs rose $1.5
million, or 1.7%, to $86.3 million in third quarter 2011. Excluding
non-recurring stock-based compensation expense, total compensation
costs rose $3.9 million, or 4.8%, to $85.0 million. The increase
reflects MSCI’s success in leveraging emerging market centers to
offset the cost impact of a 10.4% growth in the number of employees
versus the third quarter 2010.
Non-compensation costs excluding depreciation and
amortization: Total non-compensation operating expenses
excluding depreciation and amortization, transaction costs
associated with the acquisition of RiskMetrics and restructuring
costs rose $1.9 million, or 5.4%, to $36.4 million in third quarter
2011. The growth was driven by increases in recruiting expenses,
office costs and travel and entertainment expenses.
Cost of services: Total cost of services expenses fell by
$0.8 million, or 1.1%, to $69.0 million. Within costs of services,
compensation expenses declined by $1.4 million, or 2.6%, and
non-compensation expenses increased by $0.6 million, or 3.3%.
Selling, general and administrative expense (SG&A):
Total SG&A expense declined by $9.6 million, or 15.1%, to $53.7
million. Excluding the impact of transaction expenses related to
the acquisition of Risk Metrics, SG&A expense rose by $4.1
million, or 8.3%. Within SG&A, compensation expenses increased
by $2.8 million, or 8.5%, and non-compensation expenses excluding
transaction costs increased by $1.3 million, or 7.8%.
Amortization of intangibles: Amortization of intangibles
expense totaled $16.4 million, flat from third quarter 2010.
Other Expense (Income), Net
Other expense (income), net for third quarter 2011 was $11.9
million, a decline of $8.9 million from third quarter 2010. The
significant decline from the prior year resulted from both lower
interest costs and a lower total level of indebtedness. In
addition, the prior period quarter included $2.0 million of
interest expense associated with the amortization of deferred
financing fees related to the RiskMetrics acquisition.
Provision for Income Taxes
The provision for income tax expense was $20.5 million for third
quarter 2011, an increase of $10.2 million, or 99.0%, compared to
$10.3 million for the same period in 2010, driven primarily by
higher pre-tax income. The effective tax rate was 29.2% for third
quarter 2011. The third quarter 2011 tax provision was impacted by
$4.2 million of certain non-recurring benefits relating to prior
tax periods. Excluding those benefits, the rate was 35.1%. The
effective tax rate for third quarter 2010 was 50.0%, a rate that
was impacted by transaction expenses which were not deductible.
Net Income and Earnings per Share – See Table 15
Net income increased $39.5 million, or 382.5%, to $49.8 million
for third quarter 2011. The net income margin increased to 22.1%
versus 5.1% in third quarter 2010. Diluted EPS increased 400.0% to
$0.40.
Adjusted net income, which excludes $11.1 million of after-tax
impact of amortization of intangibles, non-recurring stock-based
compensation expense, transaction expenses, restructuring costs and
debt repayment and refinancing expenses, rose $20.7 million, or
51.6%, to $60.9 million. Adjusted EPS, which excludes the
after-tax, per share impact of amortization of intangibles,
non-recurring stock-based compensation expense, transaction
expenses, restructuring costs and debt repayment and refinancing
expenses totaling $0.09, rose 48.5% to $0.49.
See table 15 titled “Reconciliation of Adjusted Net Income and
Adjusted EPS to Net Income and EPS.”
Adjusted EBITDA – See Table 13
Adjusted EBITDA, which excludes, among other things, the impact
of non-recurring stock-based compensation and restructuring costs,
was $103.6 million, an increase of $16.5 million, or 18.9%, from
third quarter 2010. Adjusted EBITDA margin rose to 46.0% from
43.0%.
By segment, Adjusted EBITDA for the Performance and Risk segment
increased $16.5 million, or 20.7%, to $96.0 million from third
quarter 2010. Adjusted EBITDA margin for this segment rose to 48.9%
from 46.1% in third quarter 2010. Adjusted EBITDA for the
Governance segment rose by 0.5% to $7.6 million and the Adjusted
EBITDA margin increased to 26.5% from 25.1%.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net
Income” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Summary of Results for Nine Months Ended September 30, 2011
compared to Nine Months Ended August 31, 2010
Operating Revenues – See Table 5
Total operating revenues for the nine months ended September 30,
2011 (nine months 2011) increased $225.2 million, or 50.1%, to
$674.8 million compared to $449.6 million for the nine months ended
August 31, 2010 (nine months 2010). The acquisitions of RiskMetrics
and Measurisk added revenues of $247.6 million in nine months 2011.
Total subscription revenue rose $181.7 million, or 50.3%, to $542.7
million, while asset-based fees rose $29.2 million, or 38.5%, to
$104.9 million. Total non-recurring revenues increased $14.3
million, or 111.4%, to $27.2 million.
By product line, index and ESG products revenues grew 27.0% from
nine months 2010. Risk management analytics revenues grew by
137.1%, driven largely by the acquisition of RiskMetrics. Portfolio
management analytics revenues declined 3.7% and energy and other
commodity analytics revenues fell 15.3%.
By segment, Performance and Risk revenues rose $164.5 million,
or 39.2%, to $583.8 million for nine months 2011. Governance
revenues rose $60.7 million, or 200.3%, to $91.0 million.
Operating Expenses – See Table 7
Total operating expenses increased $120.3 million, or 38.3%, to
$434.4 million in nine months 2011 compared to nine months 2010.
Operating expenses included restructuring costs of $3.5 million in
nine months 2011 and $7.0 million in nine months 2010 as well as
transaction expenses of $21.2 million in nine months 2010.
Excluding these expenses, total operating expenses would have risen
by $145.0 million, or 50.7%. The increase reflects increases of
$78.5 million, or 60.6%, in cost of services, $38.7 million, or
32.3%, in SG&A expense, $3.1 million, or 25.8%, in depreciation
and amortization expense and $24.6 million, or 99.0%, in
amortization of intangibles.
Other Expense (Income), Net
Other expense (income), net for nine months 2011 was $47.1
million, an increase of $14.1 million from nine months 2010. The
increase was driven by increased indebtedness resulting from our
acquisition of RiskMetrics. Other expense (income), net includes
debt repayment and refinancing expenses of $6.4 million in nine
months 2011 and $8.3 million in nine months 2010.
Provision for Income Taxes
The provision for income tax expense was $64.3 million for nine
months 2011, an increase of $23.8 million, or 58.8%, compared to
$40.5 million for nine months 2010. Our effective tax rate for nine
months 2011 was 33.3% compared to 39.6% for nine months 2010. The
income tax provision for nine months 2011 was impacted by $4.2
million of certain non-recurring benefits relating to prior tax
periods. Excluding that benefit, the effective tax rate was 35.4%
in nine months 2011.
Net Income and Earnings per Share – See Table 15
Net income increased $67.1 million, or 108.3%, to $129.0 million
and the net income margin increased to 19.1% from 13.8%. Diluted
EPS rose by 90.9% to $1.05 from $0.55.
Adjusted net income, which excludes the after-tax impact of
amortization of intangibles, non-recurring stock-based compensation
expense, transaction expenses, debt repayment expenses, and
restructuring costs totaling $42.7 million, rose $57.2 million, or
50.0%, to $171.7 million. Adjusted EPS, which excludes the
after-tax, per share impact of amortization of intangibles,
non-recurring stock-based compensation expense, transaction
expenses, debt repayment expenses, and restructuring costs totaling
$0.34, rose 36.3% to $1.39 in nine months 2011.
See table 15 titled “Reconciliation of Adjusted Net Income and
Adjusted EPS to Net Income and EPS.”
Adjusted EBITDA – See Table 13
Adjusted EBITDA was $315.1 million, an increase of $106.9
million, or 51.3%, from nine months 2010. Adjusted EBITDA margin
rose to 46.7% from 46.3%.
By segment, Adjusted EBITDA for the Performance and Risk segment
increased $89.9 million, or 44.8%, to $290.5 million from nine
months 2010. Adjusted EBITDA margin rose to 49.8% from 47.8% in
nine months 2010. Adjusted EBITDA for the Governance segment
increased $17.0 million, or 223.7%, to $24.6 million and the
Adjusted EBITDA margin rose to 27.0% from 25.1%.
See Table 13 titled “Reconciliation of Adjusted EBITDA to Net
Income” and “Notes Regarding the Use of Non-GAAP Financial
Measures” below.
Summary of Results for Nine Months Ended September 30, 2011
compared to Pro Forma Nine Months 2010
Operating Revenues – See Table 5
Total operating revenues for nine months 2011 compared to pro
forma nine months 2010 rose $71.7 million, or 11.9%, to $674.8
million. Excluding the impact of the acquisition of Measurisk in
third quarter 2010, revenues grew 10.3%. Subscription revenue rose
$40.5 million, or 8.1%, to $542.7 million, driven by growth in
index and ESG subscriptions and risk management analytics, which
more than offset declines from portfolio management analytics and
governance. Asset-based fees rose $29.2 million, or 38.5%, to
$104.9 million. Non-recurring revenues increased by $2.0 million,
or 8.0%, to $27.2 million, as higher risk management analytics and
index and ESG products revenues offset a decline in non-recurring
governance revenues.
By segment, Performance and Risk revenues rose $75.6 million, or
14.9%, to $583.8 million. Governance revenues declined $3.9
million, or 4.1%, to $91.0 million.
Operating Expenses – See Table 7
Compared to pro forma nine months 2010, total operating expense
for nine months 2011 increased $8.9 million, or 2.1%, to $434.4
million.
Total compensation expense excluding non-recurring stock-based
compensation increased $12.1 million, or 5.0%, to $253.4 million.
Non-compensation costs excluding depreciation and amortization and
restructuring costs increased $1.7 million, or 1.6%, to $106.4
million.
Compared to pro forma nine months 2010, total cost of services
rose $4.2 million, or 2.1%, to $208.0 million. The growth was
driven by an increase of $0.5 million, or 0.3%, in compensation
excluding non-recurring stock-based compensation expense and a $3.8
million, or 7.2%, increase in non-compensation expenses.
Total SG&A increased $8.5 million, or 5.6%, to $158.5
million in nine months 2011. The increase was driven by growth of
$11.6 million, or 12.5%, in compensation excluding non-recurring
stock-based compensation partially offset by a decrease of $2.1
million, or 4.8%, in non-compensation expenses.
Net Income and Adjusted EBITDA – See Table 14
Compared to pro forma nine months 2010, net income increased
$48.3 million, or 59.9%, to $129.0 million from $80.7 million.
Compared to pro forma nine months 2010, nine months 2011
Adjusted EBITDA increased $57.9 million, or 22.5%, to $315.1
million and the margin expanded to 46.7% from 42.4%. By segment,
Performance and Risk Adjusted EBITDA rose $56.8 million, or 24.3%,
to $290.5 million. The margin expanded to 49.8% from 46.0%.
Governance Adjusted EBITDA increased $1.1 million, or 4.8%, to
$24.6 million and the margin rose to 27.0% from 24.7%.
See Table 14 titled “Reconciliation of Pro Forma Adjusted EBITDA
to Pro Forma Net Income” and “Notes Regarding the Use of Non-GAAP
Financial Measures” below.
Conference Call Information
Investors will have the opportunity to listen to MSCI Inc.'s
senior management review third quarter 2011 results on Wednesday,
November 2, 2011 at 11:00 am Eastern Time. To listen to the live
event, visit the investor relations section of MSCI's website,
http://ir.msci.com/events.cfm, or dial 1-877-312-9206 within the
United States. International callers dial 1-408-774-4001.
An audio recording of the conference call will be available on
our website approximately two hours after the conclusion of the
live event and will be accessible through November 8, 2011. To
listen to the recording, visit http://ir.msci.com/events.cfm, or
dial 1-855-859-2056 (passcode: 19108203) within the United States.
International callers dial 1-404-537-3406 (passcode: 19108203).
About MSCI Inc.
MSCI Inc. is a leading provider of investment decision support
tools to investors globally, including asset managers, banks, hedge
funds and pension funds. MSCI products and services include
indices, portfolio risk and performance analytics, and governance
tools.
The company’s flagship product offerings are: the MSCI indices
which include more than 145,000 daily indices covering more than 70
countries; Barra portfolio risk and performance analytics covering
global equity and fixed income markets; RiskMetrics market and
credit risk analytics; ISS governance research and outsourced proxy
voting and reporting services; MSCI environmental, social and
governance research; FEA valuation models and risk management
software for the energy and commodities markets; and CFRA forensic
accounting risk research, legal/regulatory risk assessment, and
due-diligence. MSCI is headquartered in New York, with research and
commercial offices around the world. MSCI#IR
For further information on MSCI Inc. or our products please
visit www.msci.com.
Forward-Looking Statements
This press release contains forward-looking statements. These
statements relate to future events or to future financial
performance and involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different
from any future results, levels of activity, performance, or
achievements expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking
statements by the use of words such as “may,” “could,” “expect,”
“intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,”
“predict,” “potential,” or “continue” or the negative of these
terms or other comparable terminology. You should not place undue
reliance on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors that are, in
some cases, beyond our control and that could materially affect
actual results, levels of activity, performance, or
achievements.
Other factors that could materially affect actual results,
levels of activity, performance or achievements can be found in
MSCI's Annual Report on Form 10-K for the fiscal year ended
November 30, 2010 and filed with the Securities and Exchange
Commission (SEC) on January 31, 2011, and in quarterly reports on
Form 10-Q and current reports on Form 8-K filed with the SEC. If
any of these risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may
vary significantly from what we projected. Any forward-looking
statement in this release reflects our current views with respect
to future events and is subject to these and other risks,
uncertainties and assumptions relating to our operations, results
of operations, growth strategy and liquidity. We assume no
obligation to publicly update or revise these forward-looking
statements for any reason, whether as a result of new information,
future events, or otherwise.
Notes Regarding the Use of Non-GAAP Financial
Measures
MSCI has presented supplemental non-GAAP financial measures as
part of this earnings release. A reconciliation is provided below
that reconciles each non-GAAP financial measure with the most
comparable GAAP measure. The presentation of non-GAAP financial
measures should not be considered as alternative measures for the
most directly comparable GAAP financial measures. These measures
are used by management to monitor the financial performance of the
business, inform business decision making and forecast future
results.
Adjusted EBITDA is defined as net income before provision for
income taxes, other net expense and income, depreciation and
amortization, non-recurring stock-based compensation expense,
restructuring costs, and third party transaction expenses related
to the acquisition of RiskMetrics.
Adjusted net income and Adjusted EPS are defined as net income
and EPS, respectively, before provision for non-recurring
stock-based compensation expenses, amortization of intangible
assets, third party transaction expenses related to the acquisition
of RiskMetrics, restructuring costs, and the accelerated interest
expense resulting from the termination of an interest rate swap and
the accelerated amortization of deferred financing and debt
discount costs (debt repayment expenses), as well as for any
related tax effects.
We believe that adjustments related to restructing costs,
transaction expenses and debt repayment expenses are useful to
management and investors because it allows for an evaluation of
MSCI’s underlying operating performance by excluding the costs
incurred in connection with the acquisition of RiskMetrics.
Additionally, we believe that adjusting for non-recurring
stock-based compensation expenses and the amortization of
intangible assets may help investors compare our performance to
that of other companies in our industry as we do not believe that
other companies in our industry have as significant a portion of
their operating expenses represented by one-time non-recurring
stock-based compensation expenses and amortization of intangible
assets. We believe that the non-GAAP financial measures presented
in this earnings release facilitate meaningful period-to-period
comparisons and provide a baseline for the evaluation of future
results.
Adjusted EBITDA, Adjusted net income and Adjusted EPS are not
defined in the same manner by all companies and may not be
comparable to other similarly titled measures of other
companies.
Table 2: MSCI Inc.
Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended September 30, August 31, June
30, September 30, August 31, In thousands, except per share data
2011 2010 2011 2011 2010 Operating revenues $ 225,026 $
202,733 $ 226,483 $ 674,807 $ 449,583 Operating expenses
Cost of services 68,968 69,741 68,840 208,026 129,495 Selling,
general and administrative 53,724 63,306 53,321 158,463 140,944
Restructuring costs (1,002) 6,953 40 3,469 6,953 Amortization of
intangible assets 16,422 16,350 16,423 49,537 24,905 Depreciation
and amortization of property, equipment, and leasehold improvements
4,669 4,934 5,168 14,947 11,883
Total operating expenses $ 142,781 $ 161,284 $ 143,792 $ 434,442 $
314,180 Operating income 82,245 41,449 82,691 240,365
135,403 Operating Margin 36.5% 20.4% 36.5% 35.6% 30.1%
Interest income (184) (114) (186) (513) (865) Interest expense
13,113 20,415 12,852 42,552 33,842 Other expense (income)
(983) 524 383 5,041 14 Other expense,
net $ 11,946 $ 20,825 $ 13,049 $ 47,080 $ 32,991 Income
before income taxes 70,299 20,624 69,642 193,285 102,412
Provision for income taxes 20,512 10,305 23,982 64,317 40,508
Net income $ 49,787 $ 10,319 $
45,660 $ 128,968 $ 61,904 Net Income Margin 22.1% 5.1% 20.2% 19.1%
13.8% Earnings per basic common share $ 0.41 $ 0.09 $ 0.38 $
1.06 $ 0.56 Earnings per diluted common share $ 0.40 $ 0.08 $ 0.37
$ 1.05 $ 0.55 Weighted average shares outstanding used in
computing earnings per share Basic 120,831 118,339
120,592 120,570 109,672 Diluted 122,303
120,341 122,235 122,186 110,762
Table 3: MSCI Inc. Selected Balance
Sheet Items (unaudited) As of September
30, November 30, In thousands
2011 2010 Cash and cash equivalents $ 221,575 $
226,575 Short-term investments 142,754 73,891 Trade receivables,
net of allowances 166,948 147,662 Deferred revenue $ 291,045
$ 271,300 Current maturities of long-term debt 10,334 54,916
Long-term debt, net of current maturities 1,104,116 1,207,881
Table 4: Third Quarter 2011
Operating Revenues by Product Category
Three Months Ended % Change from September 30, August 31,
June 30, August 31, June 30, In thousands 2011 2010 2011
2010 2011 Index and ESG products Subscriptions $ 66,279 $ 58,979 $
66,275 12.4% 0.0% Asset-based fees 35,030 25,138
36,287 39.4% (3.5%) Index and ESG products total 101,309
84,117 102,562 20.4% (1.2%) Risk management analytics 61,861 54,594
60,806 13.3% 1.7% Portfolio management analytics 30,263 30,424
29,193 (0.5%) 3.7% Energy and commodity analytics 2,797
3,290 2,949 (15.0%) (5.2%) Total Performance and Risk
revenues $ 196,230 $ 172,425 $ 195,510 13.8% 0.4% Total
Governance revenues 28,796 30,308 30,973
(5.0%) (7.0%) Total operating revenues $ 225,026 $ 202,733 $
226,483 11.0% (0.6%) Subscriptions $ 183,735 $ 171,380 $
182,251 7.2% 0.8% Asset-based fees 35,030 25,138 36,287 39.4%
(3.5%) Non-recurring revenues 6,261 6,215
7,945 0.7% (21.2%) Total operating revenues $ 225,026 $ 202,733 $
226,483 11.0% (0.6%)
Table 5: Nine Months 2011 Operating Revenues by Product
Category Nine Months Ended,
Pro Forma
% Change from September 30, August 31, Nine Months 9 Mos. PF 9 Mos.
In thousands 2011 2010 2010 1 2010 2010 Index and ESG
products Subscriptions $ 194,713 $ 163,453 $ 172,519 19.1% 12.9%
Asset-based fees 109,186 75,758 75,758 44.1%
44.1% Index and ESG products total 303,899 239,211 248,277 27.0%
22.4% Risk management analytics 181,533 76,558 156,363 137.1% 16.1%
Portfolio management analytics 88,740 92,149 92,149 (3.7%) (3.7%)
Energy and commodity analytics 9,616 11,357
11,357 (15.3%) (15.3%) Total Performance and Risk revenues $
583,788 $ 419,275 $ 508,146 39.2% 14.9% Total Governance
revenues 91,019 30,308 94,955 200.3% (4.1%)
Total operating revenues $ 674,807 $ 449,583 $ 603,101 50.1% 11.9%
Subscriptions $ 542,711 $ 360,974 $ 502,174 50.3% 8.1%
Asset-based fees 104,924 75,758 75,758 38.5% 38.5% Non-recurring
revenues 27,172 12,851 25,169 111.4% 8.0%
Total operating revenues $ 674,807 $ 449,583 $ 603,101 50.1% 11.9%
1 Includes MSCI's results for the nine
months ended August 31, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
Table 6: Additional Third
Quarter 2011 Operating Expenses Detail
Three Months Ended % Change from September 30, August
31, June 30, August 31, June 30, In thousands 2011 2010 2011
2010 2011 Cost of services Compensation $ 50,114 $ 50,562 $ 48,118
(0.9%) 4.1% Non-Recurring Stock Based Comp 470 1,375
1,108 (65.8%) (57.6%) Total Compensation $ 50,584 $ 51,937 $
49,226 (2.6%) 2.8% Non-Compensation 18,384 17,804
19,614 3.3% (6.3%) Total cost of services $ 68,968 $ 69,741
$ 68,840 (1.1%) 0.2% Selling, general and administrative
Compensation 34,874 30,518 34,370 14.3% 1.5% Non-Recurring Stock
Based Comp 820 2,365 1,565 (65.3%) (47.7%)
Total Compensation $ 35,694 $ 32,883 $ 35,935 8.5% (0.7%)
Transaction expenses - 13,692 - (100.0%) n/m Non-compensation excl.
transaction expenses 18,030 16,731 17,386 7.8%
3.7% Total selling, general and administrative $ 53,724 $ 63,306 $
53,321 (15.1%) 0.8% Restructuring costs (1,002) 6,953 40
n/m
n/m Amortization of intangible assets 16,422 16,350 16,423 0.4%
(0.0%) Depreciation and amortization 4,669 4,934
5,168 (5.4%) (9.7%) Total operating expenses $ 142,781 $
161,284 $ 143,792 (11.5%) (0.7%) In thousands
Total non-recurring stock based comp $
1,290 $ 3,740 2,673 (65.5%) (51.7%) Compensation excluding
non-recurring comp 84,988 81,080 82,488 4.8% 3.0% Transaction
expenses - 13,692 - (100.0%) n/m Non-compensation excluding
transaction expenses 36,414 34,535 37,000 5.4% (1.6%)
Restructuring costs
(1,002) 6,953 40
n/m
n/m Amortization of intangible assets 16,422 16,350 16,423 0.4%
(0.0%) Depreciation and amortization 4,669 4,934
5,168 (5.4%) (9.7%) Total operating expenses $
142,781 $ 161,284 $ 143,792 (11.5%) (0.7%)
Table 7: Additional Nine Months Ended 2011 Operating
Expenses Detail
Nine Months Ended
Pro Forma
% Change from September 30, August 31,
Nine Months
9 Mos. PF 9 Mos. In thousands 2011 2010 2010 1 2010 2010
Cost of services Compensation $ 149,316 $ 93,885 $ 148,817 59.0%
0.3% Non-Recurring Stock Based Comp 2,707 2,772
2,772 (2.3%) (2.3%) Total Compensation $ 152,023 $ 96,657 $
151,589 57.3% 0.3% Non-compensation 56,003 32,838
52,219 70.5% 7.2% Total cost of services $ 208,026 $ 129,495
$ 203,808 60.6% 2.1% Selling, general and administrative
Compensation 104,049 72,872 92,451 42.8% 12.5% Non-Recurring Stock
Based Comp 4,068 5,080 5,080 (19.9%) (19.9%)
Total Compensation $ 108,117 $ 77,952 $ 97,531 38.7% 10.9%
Transaction expenses - 21,206 - (100.0%) n/m Non-compensation excl.
transaction expenses 50,346 41,786 52,459
20.5% (4.0%) Total selling, general and administrative $ 158,463 $
140,944 $ 149,990 12.4% 5.6% Restructuring costs 3,469 6,953 6,953
(50.1%) (50.1%) Amortization of intangible assets 49,537 24,905
48,710 98.9% 1.7% Depreciation and amortization 14,947
11,883 16,130 25.8% (7.3%) Total operating expenses $
434,442 $ 314,180 $ 425,591 38.3% 2.1% In thousands
Total non-recurring stock based
comp $ 6,775 $ 7,852 $ 7,852 (13.7%) (13.7%) Compensation excluding
non-recurring comp 253,365 166,757 241,268 51.9% 5.0% Transaction
expenses - 21,206 - (100.0%) n/m Non-compensation excluding
transaction expenses 106,349 74,624
104,678
42.5% 1.6%
Restructuring costs
3,469 6,953 6,953 (50.1%) (50.1%) Amortization of intangible assets
49,537 24,905 48,710 98.9% 1.7% Depreciation and amortization
14,947 11,883 16,130 25.8% (7.3%) Total
operating expenses $ 434,442 $ 314,180 $ 425,591 38.3% 2.1%
1 Includes MSCI's results for the nine
months ended August 31, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
Table 8: Summary Third Quarter 2011 Segment
Information Three Months
Ended % Change from September 30, August 31, June 30, August 31,
June 30, In thousands 2011 2010 2011 2010 2011
Revenues: Performance and Risk $ 196,230 $ 172,425 $ 195,510
13.8% 0.4% Governance 28,796 30,308 30,973
(5.0%) (7.0%)
Total Operating revenues $
225,026 $ 202,733 $ 226,483
11.0% (0.6%) Operating Income
Performance and Risk 78,957 38,672 79,855 104.2% (1.1%) Margin
40.2% 22.4% 40.8% Governance 3,288 2,777 2,836 18.4% 16.0% Margin
11.4% 9.2% 9.2%
Total Operating Income $
82,245 $ 41,449 $ 82,691
98.4% (0.5%) Margin 36.5% 20.4% 36.5%
Adjusted EBITDA Performance and Risk 95,986 79,519 99,549
20.7% (3.6%) Margin 48.9% 46.1% 50.9% Governance 7,638 7,599 7,446
0.5% 2.6% Margin 26.5% 25.1% 24.0%
Total Adjusted EBITDA
$ 103,624 $ 87,118 $
106,995 18.9% (3.2%) Margin 46.0% 43.0% 47.2%
Table 9: Summary Nine Months 2011
Segment Information
Nine Months Ended Pro Forma % Change from September 30,
August 31, Nine Months 9 Mos. PF 9 Mos. In thousands
2011 2010 2010 1 2010 2010
Revenues: Performance and
Risk $ 583,788 $ 419,275 $ 508,146 39.2% 14.9% Governance
91,019 30,308 94,955 200.3% (4.1%)
Total Operating
revenues $ 674,807 $ 449,583
$ 603,101 50.1% 11.9%
Operating Income Performance and Risk 231,458 132,626
167,723 74.5% 38.0% Margin 39.6% 31.6% 33.0% Governance 8,907 2,777
9,787 220.7% (9.0%) Margin 9.8% 9.2% 10.3%
Total Operating
Income $ 240,365 $ 135,403 $
177,510 77.5% 35.4% Margin 35.6% 30.1% 29.4%
Adjusted EBITDA Performance and Risk 290,496 200,603
233,694 44.8% 24.3% Margin 49.8% 47.8% 46.0% Governance 24,597
7,599 23,461 223.7% 4.8% Margin 27.0% 25.1% 24.7%
Total Adjusted
EBITDA $ 315,093 $ 208,202 $
257,155 51.3% 22.5% Margin 46.7% 46.3% 42.6%
1 Includes MSCI's results for the nine
months ended August 31, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
Table 10: Key Operating Metrics
As of or For the Quarter Ended % Change from September 30,
June 30, September 30, June 30, Dollars in thousands
2011 2010 2011 2010 2011 Run Rates 1 Index and ESG
products Subscriptions $ 264,722 $ 229,323 $ 257,470 15.4% 2.8%
Asset-based fees 117,928 108,150 140,144 9.0%
(15.9%) Index and ESG products total 382,650 337,473 397,614 13.4%
(3.8%) Risk management analytics 251,804 229,099 249,048 9.9% 1.1%
Portfolio management analytics 119,220 122,323 118,452 (2.5%) 0.6%
Energy and commodity analytics 15,343 15,170
15,074 1.1% 1.8% Total Performance and Risk Run Rate $ 769,017 $
704,065 $ 780,188 9.2% (1.4%) Governance Run Rate
107,152 106,228 107,755 0.9% (0.6%) Total Run Rate $
876,169 $ 810,293 $ 887,943 8.1% (1.3%) Subscription total
758,241 702,143 747,799 8.0% 1.4% Asset-based fees total
117,928 108,150 140,144 9.0% (15.9%) Total Run Rate $
876,169 $ 810,293 $ 887,943 8.1% (1.3%) Subscription Run
Rate by region % Americas 53% 53% 52% % non-Americas 47% 47% 48%
New Recurring Subscription Sales $ 31,661 $ 35,373 $
30,298 (10.5%) 4.5% Subscription Cancellations (15,364)
(19,654) (14,965) (21.8%) 2.7% Net New Recurring
Subscription Sales $ 16,297 $ 15,719 $ 15,333 3.7% 6.3%
Non-recurring sales 6,561 5,787 8,415 13.4% (22.0%)
Employees 2,277 2,071 2,133 9.9% 6.8% % Employees by
location Developed Market Centers 62% 71% 65% Emerging Market
Centers 38% 29% 35%
1 The run rate at a particular point in
time represents the forward-looking fees for the next 12 months
from all subscriptions and investment product licenses we currently
provide to our clients under renewable contracts assuming all
contracts that come up for renewal are renewed and assuming
then-current exchange rates. For any subscription or license whose
fees are linked to an investment product’s assets or trading
volume, the run rate calculation reflects an annualization of the
most recent periodic fee earned under such license or subscription.
The run rate does not include fees associated with “one-time” and
other non-recurring transactions. In addition, we remove from the
run rate the fees associated with any subscription or investment
product license agreement with respect to which we have received a
notice of termination or non-renewal during the period and we have
determined that such notice evidences the client's final decision
to terminate or not renew the applicable subscription or agreement,
even though the notice is not effective until a later date.
Table 11: Supplemental Operating
Metrics
Recurring Subscription Sales &
Subscription Cancellations
Three Months Ended 2010 Three Months Ended 2011 Nine Months
Ended March June September
December March June September Sept. 2010 Sept. 2011
New Recurring Subscription Sales $ 26,831 $ 33,847 $ 35,373 $
33,742 $ 34,612 $ 30,298 $ 31,661 $ 96,051 $ 96,571 Subscription
Cancellations (19,379 ) (18,222 )
(19,654 ) (30,174 ) (14,402 )
(14,965 ) (15,364 ) (57,255 )
(44,731 ) Net New Recurring Subscription Sales $ 7,452
$ 15,625 $ 15,719 $ 3,568
$ 20,210 $ 15,333 $ 16,297 $
38,796 $ 51,840
Aggregate & Core Retention Rates
Three Months Ended 2010 Three Months Ended 2011 Nine Months Ended
March June September December
March June September Sept. 2010 Sept. 2011 Aggregate
Retention Rate 1 Index and ESG products 94.4 % 90.2 % 92.4 % 89.8 %
95.0 % 92.8 % 95.2 % 92.3 % 94.3 % Risk management analytics 83.4 %
92.0 % 87.7 % 85.6 % 94.2 % 92.2 % 92.1 % 88.1 % 92.6 % Portfolio
management analytics 88.9 % 84.5 % 82.2 % 63.1 % 88.6 % 91.4 % 86.6
% 85.2 % 88.8 % Energy & commodity analytics 80.7 % 86.8 % 90.3
% 81.7 % 76.9 % 88.8 % 89.3 % 85.9 % 85.0 %
Total
Performance and Risk 88.7 % 89.4 %
88.3 % 82.1 % 93.0 %
92.2 % 92.2 % 89.0 %
92.4 % Total Governance 84.8
% 85.6 % 87.1 % 80.1
% 85.0 % 90.4 % 86.2
% 85.8 % 87.2 %
Total Aggregate Retention Rate
88.1 % 88.8 %
88.1 % 81.8 %
91.8 % 91.9 %
91.3 % 88.5 %
91.6 % Core Retention Rate 1 Index and
ESG products 95.1 % 90.7 % 92.6 % 90.1 % 95.2 % 92.8 % 95.2 % 92.8
% 94.4 % Risk management analytics 85.2 % 92.5 % 90.0 % 85.6 % 94.2
% 92.7 % 92.1 % 89.6 % 93.0 % Portfolio management analytics 90.9 %
86.7 % 86.0 % 64.1 % 89.9 % 93.2 % 88.3 % 87.9 % 90.5 % Energy
& commodity analytics 80.7 % 86.8 % 90.3 % 81.2 % 76.9 % 88.8 %
91.3 % 85.9 % 85.7 %
Total Performance and Risk
90.1 % 90.3 % 90.1 %
82.4 % 93.4 % 92.7 %
92.6 % 90.3 % 92.9 %
Total Governance 84.8 % 85.6
% 87.1 % 80.1 % 85.0
% 90.4 % 86.3 % 85.8
% 87.2 %
Total Core Retention Rate
89.2 %
89.5 % 89.6 %
82.0 % 92.1 %
92.4 % 91.6 %
89.6 % 92.0 %
1 The quarterly Aggregate Retention Rates
are calculated by annualizing the cancellations for which we have
received a notice of termination or non-renewal during the quarter
and we have determined that such notice evidences the client’s
final decision to terminate or not renew the applicable
subscription or agreement, even though such notice is not effective
until a later date. This annualized cancellation figure is then
divided by the subscription Run Rate at the beginning of the year
to calculate a cancellation rate. This cancellation rate is then
subtracted from 100% to derive the annualized Retention Rate for
the quarter. The Aggregate Retention Rate is computed on a
product-by-product basis. Therefore, if a client reduces the number
of products to which it subscribes or switches between our
products, we treat it as a cancellation. In addition, we treat any
reduction in fees resulting from renegotiated contracts as a
cancellation in the calculation to the extent of the reduction. For
the calculation of the Core Retention Rate the same methodology is
used except the amount of cancellations in the quarter is reduced
by the amount of product swaps.
Table 12: ETF Assets Linked to MSCI
Indices1
Three Months Ended 2010 Three Months Ended 2011 Nine Months
Ended
In Billions March June September
December March June September Sept. 2010
Sept. 2011 Beginning Period AUM in ETFs linked to MSCI
Indices $ 243.0 $ 255.4 $ 236.8 $ 290.7 $ 333.3
$ 350.1 $ 360.5 $ 243.0 $ 333.3 Cash Inflow/ Outflow
4.9 11.8 14.9 21.9 6.7 14.2 (0.0) 31.6 20.9
Appreciation/Depreciation 7.5 (30.4)
39.0 20.7 10.1 (3.8)
(70.4) 16.1 (64.2) Period End AUM in
ETFs linked to MSCI Indices
$ 255.4 $
236.8 $ 290.7 $
333.3 $ 350.1 $ 360.5
$ 290.1 $ 290.7 $
290.1 Period Average AUM in ETFs linked to MSCI
Indices $ 242.8 $ 249.6 $ 263.7 $ 317.0 $ 337.6 $ 356.8 $ 329.1 $
253.7 $ 340.1
1 Our ETF assets under management
calculation methodology is ETF net asset value (NAV) multiplied by
shares outstanding.
Source: Bloomberg and MSCI
Table 13: Reconciliation of Adjusted
EBITDA to Net Income
Three Months Ended September 30, 2011 Three Months Ended
August 31, 2010
Performanceand Risk
Governance Total
Performanceand Risk
Governance Total
Net Income
$ 49,787 $ 10,319 Plus:
Provision for income taxes 20,512 10,305 Plus: Other expense
(income), net 11,946
20,825
Operating income
$ 78,957 $ 3,288
$ 82,245 $ 38,672
$ 2,777 $ 41,449 Plus:
Non-recurring stock based comp 1,246 44 1,290 3,740 - 3,740 Plus:
Transaction costs - - - 13,692 - 13,692 Plus: Depreciation and
amortization 3,529 1,140 4,668 4,383 551 4,934 Plus: Amortization
of intangible assets 13,072 3,350 16,422 13,000 3,350 16,350 Plus:
Restructuring costs (818 ) (184 )
(1,002 ) 6,032 921 6,953
Adjusted EBITDA $ 95,986
$ 7,638 $ 103,624
$ 79,519 $ 7,599 $
87,118 Nine Months Ended September 30,
2011 Nine Months Ended August 31, 2010
Performanceand Risk
Governance Total
Performanceand Risk
Governance Total
Net Income $
128,968 $ 61,904 Plus: Provision for
income taxes 64,317 40,508 Plus: Other expense (income), net
47,080
32,991
Operating income $
231,458 $ 8,907
$ 240,365 $ 132,626
$ 2,777 $ 135,403 Plus:
Non-recurring stock based comp 6,432 343 6,775 7,852 - 7,852 Plus:
Transaction costs - - - 21,206 - 21,206 Plus: Depreciation and
amortization 11,549 3,398 14,947 11,332 551 11,883 Plus:
Amortization of intangible assets 39,487 10,050 49,537 21,555 3,350
24,905 Plus: Restructuring costs 1,570
1,899 3,469 6,032
921 6,953
Adjusted EBITDA $
290,496 $ 24,597
$ 315,092 $ 200,603
$ 7,599 $ 208,202
Table 14: Reconciliation of Nine Months
2010 Pro Forma Adjusted EBITDA to Pro Forma Net Income
Pro Forma Nine Months 20101
Performanceand Risk
Governance Total
Net Income
$ 80,655 Plus: Provision for income taxes 44,395
Plus: Other expense (income), net
52,460
Operating income $ 167,723
$ 9,787 $ 177,510
Plus: Non-recurring stock based comp
7,852 - 7,852 Plus: Transaction costs - - - Plus: Depreciation and
amortization 13,427 2,703 16,130 Plus: Amortization of intangible
assets 38,660 10,050 48,710 Plus: Restructuring costs 6,032
921 6,953
Adjusted EBITDA
$ 233,694 $ 23,461
$ 257,155
1 Includes MSCI's results for the nine
months ended August 31, 2010 and RiskMetrics' fourth quarter ended
December 31, 2009 and first quarter ended March 31, 2010.
Table 15: Reconciliation of Adjusted
Net Income and Adjusted EPS to Net Income and EPS
Three Months Ended Nine Months Ended September 30, August
31, June 30, September 30, August 31, 2011 2010 2011 2011 2010 GAAP
- Net income $ 49,787 $ 10,319 $ 45,660 $ 128,968 $ 61,904 Plus:
Non-recurring stock based comp 1,290 3,740 2,673 6,775 7,852 Plus:
Amortization of intangible assets 16,422 16,350 16,423 49,537
24,905 Plus: Transaction costs1 - 14,526 - - 22,040 Plus: Debt
repayment and refinancing expenses2 - 1,994 - 6,404 8,274 Plus:
Restructuring costs $ (1,002) $ 6,953 $ 40 $ 3,469 $ 6,953 Less:
Income tax effect3 (5,585) (13,698) (6,590)
(23,450) (17,461)
Adjusted net income $
60,912 $ 40,184 $ 58,206
$ 171,703 $ 114,467 GAAP - EPS $
0.40 $ 0.08 $ 0.37 $ 1.05 $ 0.55 Plus: Non-recurring stock based
comp 0.01 0.03 0.02 0.05 0.07 Plus: Amortization of intangible
assets 0.13 0.13 0.13 0.40 0.22 Plus: Transaction costs1 0.00 0.12
0.00 0.00 0.20 Plus: Debt repayment and refinancing expenses2 0.00
0.02 0.00 0.05 0.07 Plus: Restructuring costs (0.01) 0.06 0.00 0.03
0.06 Less: Income tax effect3 (0.04) (0.11)
(0.05) (0.19) (0.15)
Adjusted EPS $
0.49 $ 0.33 $ 0.47 $
1.39 $ 1.02
1 Third party transaction expenses related
to the acquisition of RiskMetrics
2 In the first quarter of 2011, MSCI
repaid $88.0 million of its outstanding term loan. At the same
time, MSCI repriced the remaining $1.125 million loan. As a result,
MSCI recorded $6.1 million of underwriting fees in conjunction with
the repricing and $0.3 million of accelerated deferred financing
expense related to the $88 million repayment. MSCI also incurred
$8.3 million of expenses in nine months 2010 resulting from the
refinancing of its indebtedness to complete the acquisition of
RiskMetrics. $2.0 million of that expense was recorded in third
quarter 2010.
3 For the purposes of calculating Adjusted
EPS, non-recurring stock based compensation, amortization of
intangible assets, debt repayment and refinancing expenses, and
restructuring costs are assumed to be taxed at the effective tax
rate excluding transaction costs and, in 2011, non-recurring
benefits of $4.2 million. For third quarter 2011, the rate is
35.1%. For third quarter 2010, the effective tax rate excluding
transaction costs was 37.4%. For nine months 2011, the rate is
35.4% and for nine months 2010, the rate was 37.0%.
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