Exhibit 99.1

MSCI Inc. Reports Third Quarter 2011 Financial Results

New York – November 2, 2011 – 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.)

 

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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%.

 

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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.

 

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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.

 

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Diluted EPS for third quarter 2011 rose 400.0% to $0.40 and 90.9% to $1.05 for nine months 2011.

 

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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.”

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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%.

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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.

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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.

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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.

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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.

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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

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

 

MSCI Inc. Contact:
Edings Thibault, MSCI, New York			+ 1.212.804.5273
For media inquiries please contact:
Patrick Clifford, Abernathy MacGregor, New York			+ 1.212.371.5999
Sally Todd | Kristy Fitzpatrick, MHP Communications, London			+ 44.20.3128.8100

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.

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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 transaction expenses, restructuring costs 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.

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Table 2: MSCI Inc. Consolidated Statement 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

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Table 4: Third Quarter 2011 Operating Revenues by Product Category and Revenue Type

 

		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 and Revenue Type

 

		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 Expense 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	%)

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Table 7: Additional Nine Months 2011 Operating Expense 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.

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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

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Table 13: Reconciliation of Adjusted EBITDA to Net Income

 

		Three Months Ended September 30, 2011												Three Months Ended August 31, 2010
		Performance and Risk				Governance				Total				Performance and 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
		Performance and Risk				Governance				Total				Performance and 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			$	315,093			$	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
		Performance and 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.

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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 acquisiiton 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%.