MSCI Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

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MSCI Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

NEW YORK--(BUSINESS WIRE)-- MSCI Inc. (NYS: 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 fourth quarter and full year ended December 31, 2012.

(Note: Percentage changes are referenced to the comparable period in 2011, unless otherwise noted.)

  • Operating revenues increased 9.3% to $247.1 million in fourth quarter 2012 and 5.5% to $950.1 million for the full year 2012.
  • Net income increased 22.4% to $54.5 million in fourth quarter 2012 and net income grew 6.2% to $184.2 million for full year 2012.
  • Adjusted EBITDA (defined below) grew by 12.5% to $116.6 million in fourth quarter 2012. For full year 2012, Adjusted EBITDA grew by 3.8% to $434.5 million. Fourth quarter 2012 Adjusted EBITDA margin increased to 47.2% from 45.8% and full year 2012 Adjusted EBITDA margin fell to 45.7% from 46.5%.
  • Diluted EPS for fourth quarter 2012 rose 22.2% to $0.44 and full year 2012 Diluted EPS increased 5.0% to $1.48.
  • Fourth quarter 2012 Adjusted EPS (defined below) rose 15.6% to $0.52. Full year 2012 Adjusted EPS rose 4.9% to $1.94.
  • MSCI entered into a $100 million accelerated share repurchase agreement in December 2012 and its Board of Directors authorized an additional $200 million repurchase program.
  • MSCI's run rate grew by 9.7% to $967.4 million in fourth quarter 2012, driven by organic subscription growth of 5.1%, organic asset-based fee growth of 6.2% and the acquisition of IPD.

"We are proud of what MSCI achieved in 2012," Henry A. Fernandez, Chairman and CEO, said. "Despite the challenging environment, MSCI reported total run rate growth of 9.7%. MSCI's growth underscores the importance of being able to offer our clients a diverse portfolio of investment decision support tools. While our sales to active portfolio managers slowed, our run rate from passive investment products grew by 6.2%, even after factoring in the loss of the Vanguard ETFs. We also benefited from renewed growth in our governance segment. Since acquiring this business as part of the purchase of RiskMetrics in 2010, we have focused on broadening its product offering and it is gratifying to see these efforts begin to pay off.

"Strong cash flows enabled MSCI to pursue a balanced approach to capital deployment," added Mr. Fernandez. "During 2012 we continued to fund our organic investments, acquired IPD for $125 million to strengthen our multi-asset class product offering and repaid more than $200 million of debt. We spent another $100 million to repurchase MSCI shares and have the authorization to repurchase an additional $200 million.

"We enter 2013 with an enhanced platform of products that are better positioned than ever to compete in a market in which clients, financial markets and technology are constantly evolving. Our strong cash flows enable us to continue to invest in our business, repay our scheduled debt obligations, and return capital to shareholders," concluded Mr. Fernandez.

                
Table 1: MSCI Inc. Selected Financial Information (unaudited)
 
Three Months EndedChange fromYear EndedChange From
Dollars in thousands,December 31,December 31,December 31,December 31,December 31,December 31,
except per share data      201220112011201220112011
Operating revenues$247,080$226,1349.3%$950,141$900,9415.5%
Operating expenses151,773144,5015.0%603,205578,9434.2%
Net income54,45244,48622.4%184,238173,4546.2%

% Margin

22.0%19.7%19.4%19.3%
Diluted EPS$0.44$0.3622.2%$1.48$1.415.0%
 
Adjusted EPS1$0.52$0.4515.6%$1.94$1.854.9%
Adjusted EBITDA2$116,567$103,64812.5%$434,460$418,7403.8%

% Margin

47.2%45.8%45.7%46.5%
 
1 Per share net income before after-tax impact of amortization of intangibles, non-recurring stock-based compensation, restructuring costs, debt repayment and refinancing expenses and the lease exit charge. See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS (unaudited)" and information about the use of non-GAAP financial information provided under "Notes Regarding the Use of Non-GAAP Financial Measures."
 
2 NetIncome before income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs, and the lease exit charge. See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income (unaudited)" 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 Fourth Quarter 2012 compared to Fourth Quarter 2011

Operating Revenues - See Table 4

Total operating revenues for the three months ended December 31, 2012 ("fourth quarter 2012") increased $20.9 million, or 9.3%, to $247.1 million compared to $226.1 million for the three months ended December 30, 2011 ("fourth quarter 2011"). On an organic basis, which excludes the impact of the revenues of IPD Group Limited ("IPD"), acquired on November 30, 2012, revenues grew by $17.3 million, or 7.7%.

Total fourth quarter 2012 subscription revenues rose $12.2 million, or 6.4%, to $202.0 million while asset-based fees increased $7.1 million, or 22.8%, to $38.1 million. Non-recurring revenues rose $1.6 million to $6.9 million. The increase in non-recurring revenues was driven by the acquisition of IPD and by an increase in non-recurring governance revenues.

Performance and Risk segment revenues rose $18.4 million, or 9.3%, to $215.9 million, primarily driven by growth in index and environmental, social and governance ("ESG") products, and risk management analytics offset, in part, by declines in portfolio management analytics and energy and commodity analytics revenues.

  • Index and ESG products: Index and ESG products revenues increased $16.7 million, or 16.6%, to $117.4 million. Organic revenue growth was $13.1 million, or 13.0%. Subscription revenues grew by $9.6 million, or 13.8%, to $79.3 million, driven by growth in revenues of index benchmark products and, to a lesser extent, the acquisition of IPD.

    Revenues attributable to equity index asset-based fees rose $7.1 million, or 22.8%, to $38.1 million, largely as a result of higher assets under management and higher fees from other passive funds. The average assets under management ("AUM") in ETFs linked to MSCI indices increased 23.5% to $376.6 billion from $305.0 billion in fourth quarter 2011. The average AUM of ETFs for which Vanguard has announced its intention to switch the underlying indices was $133.0 billion in fourth quarter 2012.
  • Risk management analytics: Revenues related to risk management analytics products increased $4.6 million, or 7.4%, to $66.7 million. The increase in risk management analytics revenues was driven by higher revenues from our BarraOne and HedgePlatform products.
  • Portfolio management analytics: Revenues related to portfolio management analytics products declined $1.5 million, or 5.1%, to $28.6 million as a result of weak sales of equity analytics products and the continued migration of fixed income analytics systems to BarraOne.
  • Energy and commodity analytics: Revenues from energy and commodity analytics products were $3.3 million, down $1.4 million, or 29.6%, from fourth quarter 2011. At the beginning of 2012, we corrected an error in our revenue recognition policy for our energy and commodity analytics products. The correction resulted in a smaller proportion of annual revenue being recognized in fourth quarter 2012 than in fourth quarter 2011.

Governance segment revenues rose $2.6 million, or 9.0%, to $31.1 million in fourth quarter 2012, driven by higher revenues from advisory compensation data and analytics and higher revenues from our securities class action services. Non-recurring governance revenues grew by $0.6 million to $2.5 million.

Operating Expenses - See Table 6

Total operating expenses rose $7.3 million, or 5.0%, to $151.8 million, primarily driven by higher compensation costs offset, in part, by lower non-compensation expenses.

  • Compensation costs: Total compensation costs rose $7.9 million, or 9.2%, to $93.8 million in fourth quarter 2012. Excluding non-recurring stock-based compensation expense, total compensation costs rose $8.7 million, or 10.2%, to $93.5 million. Compensation costs were impacted by an increase in overall compensation and benefits expense and by the addition of IPD.
  • Non-compensation costs excluding the lease exit charge, depreciation and amortization, and restructuring costs declined $0.6 million, or 1.7%, to $37.1 million in fourth quarter 2012. The biggest drivers of the decline were lower information technology and recruiting expenses, which more than offset the addition of IPD's operating costs and the impact of higher professional fees and occupancy costs.
  • Lease exit charge: Fourth quarter 2012 included a $0.5 million charge associated with the exit of a lease resulting from the consolidation of our New York offices.
  • Depreciation and amortization: Amortization of intangibles expense totaled $15.4 million compared to $16.3 million in fourth quarter 2011, a decline of 5.2%. Depreciation and amortization of property, plant and equipment rose $0.5 million, or 11.4%, to $5.0 million.

Other Expense (Income), Net

Other expense (income), net for fourth quarter 2012 was $7.0 million, a decline of $4.5 million from fourth quarter 2011. Interest expense fell by $6.1 million to $7.2 million as a result of lower levels of indebtedness and lower interest rates following our second quarter 2012 refinancing.

Provision for Income Taxes

Income tax expense was $33.9 million in fourth quarter 2012, an increase of $8.2 million, or 32.1%, from fourth quarter 2011. Contributing to the increase in income tax expense was a $1.7 million charge relating to the finalization of amounts owed to Morgan Stanley regarding tax periods 2002 through 2006, which were prior to MSCI's initial public offering. The effective tax rate in fourth quarter 2012 was 38.3%, up from 36.6% in fourth quarter 2011.

Net Income and Earnings per Share - See Table 14

Net income rose $10.0 million, or 22.4%, to $54.5 million for fourth quarter 2012. The net income margin increased to 22.0% from 19.7% as a result of the higher operating profit margin and lower interest costs offset, in part, by the higher tax rate. Diluted EPS rose by $0.08, or 22.2%, to $0.44.

Adjusted net income, which excludes the after-tax impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense and restructuring costs, rose $8.6 million, or 15.5%, to $64.2 million. Adjusted EPS, which excludes the after-tax, per share impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense and restructuring costs totaling $0.08, rose $0.07, or 15.6%, to $0.52.

See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Adjusted EBITDA - See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, restructuring costs and the lease exit charge, was $116.6 million, up $12.9 million, or 12.5%, from fourth quarter 2011. The Adjusted EBITDA margin increased to 47.2% from 45.8%.

By segment, Adjusted EBITDA for the Performance and Risk segment increased $10.5 million, or 10.9%, to $107.5 million in fourth quarter 2012. The Adjusted EBITDA margin for this segment increased to 49.8% from 49.1%. Adjusted EBITDA for the Governance segment increased $2.4 million, or 35.6%, to $9.1 million and the Adjusted EBITDA margin for this segment rose to 29.1% from 23.4%.

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 Full Year Ended December 31, 2012 compared to Full Year Ended December 31, 2011

Operating Revenues - See Table 5

Total operating revenues for the full year ended December 31, 2012 ("full year 2012") increased $49.2 million, or 5.5%, to $950.1 million compared to $900.9 million for the full year ended December 31, 2011 ("full year 2011"). Total subscription revenues rose $51.9 million, or 7.1%, to $784.3 million, and asset-based fees increased $4.9 million, or 3.6%, to $140.9 million. Total non-recurring revenues fell $7.6 million, or 23.3%, to $24.9 million.

Index and ESG products, risk management analytics and governance revenues grew 9.1%, 6.9% and 3.0%, respectively, in full year 2012. Partially offsetting these increases, Portfolio management analytics revenues declined 2.3% and energy and other commodity analytics revenues fell 36.4%, primarily as a result of a $5.2 million non-cash cumulative revenue reduction in first quarter 2012 to correct an error. By segment, Performance and Risk revenues rose $45.6 million, or 5.8%, to $827.0 million for full year 2012. Governance revenues rose $3.6 million, or 3.0%, to $123.2 million.

Operating Expenses - See Table 7

Total operating expenses increased $24.3 million, or 4.2%, to $603.2 million in full year 2012 compared to full year 2011, primarily driven by higher compensation costs and the lease exit charge, partially offset by lower restructuring expenses and amortization of intangibles. Excluding non-recurring stock-based compensation, compensation expenses rose $33.3 million, or 9.8%. The increase in compensation costs was primarily driven by an increase in average headcount and higher severance expenses.

Non-compensation expensescosts excluding the lease exit charge, depreciation and amortization, and restructuring costs were essentially flat, up $0.2 million to $144.3 million as lower professional fees and other expenses largely offset an increase in occupancy costs. Restructuring costs declined by $3.6 million. Depreciation and amortization expenses, including the amortization of intangibles, declined by $3.2 million, or 3.8%.

Other Expense (Income), Net

Other expense (income), net for full year 2012 was $57.5 million, a decline of $1.1 million from full year 2011. Other expense (income), net includes debt repayment and refinancing expenses of $20.6 million in full year 2012 and $6.4 million in full year 2011. Excluding the change in debt repayment and refinancing expenses, other expense declined by $15.3 million in full year 2012 as a result of lower levels of indebtedness and lower interest rates.

Provision for Income Taxes

The provision for income tax expense was $105.2 million in full year 2012, up $15.2 million, or 16.9%, from full year 2011. Contributing to the increase in income tax expense was a $1.7 million charge relating to the finalization of amounts owed to Morgan Stanley. The effective tax rate was 36.3% for full year 2012, up from 34.2% for full year 2011. Full year 2011 income tax expense benefited from $4.2 million of certain non-recurring benefits relating to prior tax periods.

Net Income and Earnings per Share - See Table 14

Net income rose $10.8 million, or 6.2%, to $184.2 million in full year 2012. The net income margin increased slightly to 19.4% from 19.3%. Diluted EPS increased $0.07, or 5.0%, to $1.48.

Adjusted net income, which excludes the after-tax impact of the lease exit charge, amortization of intangibles, non-recurring stock-based compensation expense, and restructuring costs, rose $13.9 million, or 6.1%, to $241.2 million. Adjusted EPS rose 4.9% to $1.94 in full year 2012.

See Table 14 titled "Reconciliation of Adjusted Net Income and Adjusted EPS to Net Income and EPS" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Adjusted EBITDA - See Table 13

Adjusted EBITDA, which excludes income taxes, other net expense and income, depreciation, amortization, non-recurring stock-based compensation, the lease exit charge and restructuring costs, was $434.5 million, up $15.7 million, or 3.8%, from full year 2011. Adjusted EBITDA margin decreased to 45.7% from 46.5%.

Adjusted EBITDA for the Performance and Risk segment increased $17.2 million, or 4.4%, to $404.6 million from full year 2011. The Adjusted EBITDA margin for the Performance and Risk segment declined to 48.9% from 49.6% in full year 2011. Adjusted EBITDA for the Governance segment declined $1.5 million, or 4.7%, to $29.8 million in full year 2012. The Adjusted EBITDA margin for the Governance segment was 24.2%, down from 26.2% in full year 2011.

See Table 13 titled "Reconciliation of Adjusted EBITDA to Net Income" and "Notes Regarding the Use of Non-GAAP Financial Measures" below.

Key Operating Metrics - See Tables 10, 11, 12

Total run rate grew by $85.4 million, or 9.7%, to $967.4 million as of December 31, 2012 versus December 31, 2011. On an organic basis, run rate grew by 5.2%.

Performance and Risk segment run rate grew by $76.4 million, or 9.9%, to $850.2 million as of December 31, 2012. On an organic basis, Performance and Risk run rate grew by $36.9 million, or 4.8%.

  • Index and ESG products: Index and ESG subscription run rate grew by $68.2 million, or 25.3%, to $338.0 million. On an organic basis, run rate grew by $28.7 million, or 10.6%, driven by growth in equity index benchmark products and ESG products.

    Run rate attributable to asset-based fees grew by $7.4 million, or 6.2%, to $127.1 million. The growth was driven by higher overall levels of AUM in ETFs linked to MSCI indices, partially offset by the decision by Vanguard to switch the indices for 22 of its ETFs ("Vanguard ETFs"). Excluding the impact of the Vanguard ETFs in fourth quarter 2011, asset-based fee run rate grew by $25.4 million, or 25.0%.

    At the end of fourth quarter 2012, AUM in ETFs linked to MSCI indices were $402.3 billion, up $100.7 billion, or 33.4%, from the end of fourth quarter 2011 and up $38.6 billion, or 10.6%, from the end of third quarter 2012. Excluding the Vanguard ETFs, AUM in MSCI-linked ETFs was $263.8 billion, up $61.7 billion, or 30.5%, from the end of fourth quarter 2011 and up $31.3 billion, or 13.5%, from the end of third quarter 2012.

    ETFs linked to MSCI indices attracted net inflows of $25.9 billion in fourth quarter 2012, including $3.9 billion in the Vanguard ETFs and $22.0 billion in other ETFs linked to MSCI indices. For full year 2012, total inflows to MSCI-linked ETFs were $56.6 billion, of which $23.5 billion were into the Vanguard ETFs and $33.1 billion into all other ETFs.
  • Risk management analytics: Run rate related to risk management analytics products increased $11.1 million, or 4.4%, to $262.1 million. MSCI continued to benefit from strong growth in run rate associated with its HedgePlatform hedge fund transparency products and from its BarraOne risk management and reporting system.
  • Portfolio management analytics: Run rate related to portfolio management analytics products declined $8.5 million, or 7.2%, to $109.8 million. Run rate was negatively impacted by $3.0 million of product swaps (mostly to BarraOne), and by changes in foreign currency rates, which lowered run rate by $1.9 million. The impact of swaps and the foreign currency charges reduced fourth quarter 2012 run rate by $3.4 million relative to third quarter 2012.
  • Energy and commodity analytics: Run rate associated from energy and commodity analytics products declined to $13.1 million, down $1.8 million, or 12.1%, from fourth quarter 2011.

Governance run rate grew by $9.0 million, or 8.3%, to $117.3 million as of December 31, 2012, reflecting strong growth in the sales of our compensation data and analytics products, as well as gains in our institutional proxy research and voting products.

Acquisition of IPD

On November 30, 2012, MSCI completed the acquisition of IPD Group Limited for $125 million. IPD is a global real estate information business operating in 32 countries that provides institutional investors, fund managers, occupiers, lenders, advisors and researchers with objective benchmarks and market indices. Its detailed databases cover some $1.4 trillion of property investments. The acquisition of IPD added $3.6 million to fourth quarter 2012 revenues and $39.5 million to fourth quarter 2012 run rate.

Share Repurchase Authorization

On December 14, 2012, MSCI announced that it had entered into an Accelerated Share Repurchase ("ASR") agreement with Morgan Stanley & Co., LLC ("Morgan Stanley"), which began immediately. Under the ASR agreement, MSCI paid Morgan Stanley $100 million in cash and received approximately 2.2 million shares of its common stock at the inception of the ASR agreement and may receive from Morgan Stanley additional shares at or prior to maturity of the ASR agreement. The total number of shares to be repurchased will be based primarily on the arithmetic average of the volume-weighted average prices of MSCI common stock on each trading day during the repurchase period. This average price will be capped such that only under limited circumstances, the company may be required to deliver shares or, at its election, pay cash to Morgan Stanley at settlement. MSCI anticipates that all repurchases under the ASR agreement will be completed no later than July 2013, although Morgan Stanley has the right to accelerate settlement of the ASR agreement under certain circumstances. Because of the timing of the ASR agreement, the reduced share count had only a marginal effect on MSCI's average shares outstanding figure in both fourth quarter and full year 2012.

In addition, MSCI also announced that its Board of Directors authorized the repurchase of up to an additional $200 million of MSCI's shares of common stock, which will be available for utilization from time to time through 2014 at MSCI's discretion.

Acquisition of Investor Force Holdings, Inc.

On January 29, 2013, MSCI completed the previously announced acquisition of Investor Force Holdings, Inc. ("InvestorForce") for a purchase price of approximately $23.5 million, funded through existing cash. InvestorForce is a leading provider of performance reporting solutions to the institutional investment community in the United States, providing investment consultants with an integrated solution for daily monitoring, analysis and reporting on institutional assets. The acquisition is not expected to have a material impact on MSCI's results of operations in fiscal year 2013.

Conference Call Information

Investors will have the opportunity to listen to MSCI Inc.'s senior management review fourth quarter and full year 2012 results on Thursday, February 7, 2013 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 February 9, 2013. To listen to the recording, visit http://ir.msci.com/events.cfm, or dial 1-855-859-2056 (passcode: 90364207) within the United States. International callers dial 1-404-537-3406 (passcode: 90364207).

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 with approximately USD 7 trillion estimated to be benchmarked to them on a worldwide basis1; Barra multi-asset class factor models, portfolio risk and performance analytics; RiskMetrics multi-asset class market and credit risk analytics; ISS governance research and outsourced proxy voting and reporting services; and FEA valuation models and risk management software for the energy and commodities markets. MSCI is headquartered in New York, with research and commercial offices around the world. MSCI#IR

1As of March 31, 2012, as published by eVestment, Lipper and Bloomberg in September, 2012.

For further information on MSCI Inc. or our products please visitwww.msci.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 December 31, 2011 filed with the Securities and Exchange Commission (SEC) on February 29, 2012, 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 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, the lease exit charge and restructuring costs.

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, lease exit charge, restructuring costs and the accelerated amortization or write off of deferred financing and debt discount costs as a result of debt repayment (debt repayment and refinancing expenses), as well as for any related tax effects.

We believe that adjustments related to the lease exit charge, restructuring costs and debt repayment and refinancing expenses are useful to management and investors because it allows for an evaluation of MSCI's underlying operating performance. Additionally, we believe that adjusting for non-recurring stock-based compensation expenses, debt repayment and refinancing expenses and depreciation and amortization 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 these items. 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 Statement of Income (unaudited)
 
Three Months EndedYear Ended
Dollars in thousands,December 31,December 31,September 30,December 31,December 31,
except per share data 20122011201220122011
 
Operating revenues$247,080$226,134$235,444$950,141$900,941
 
Operating expenses

Cost of services

74,19169,12168,350288,075277,147

Selling, general and administrative

57,17254,50962,973233,183212,972

Restructuring costs

-125-(51)3,594

Amortization of intangible assets

15,42116,26815,95963,29865,805

Depreciation and amortization of property,

equipment and leasehold improvements

 4,989  4,478  4,633  18,700  19,425 
Total operating expenses$151,773 $144,501 $151,915 $603,205 $578,943 
 
Operating income$95,307$81,633$83,529$346,936$321,998
Operating margin38.6%36.1%35.5%36.5%35.7%
 
Interest income(242)(335)(252)(954)(848)
Interest expense7,17813,2677,31456,42855,819
Other expense (income) 56  (1,427) 873  2,053  3,614 
Other expenses (income), net$6,992 $11,505 $7,935  Read Full Story

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