MSCI INC Reports Operating Results (10-Q)

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May 06, 2011
MSCI INC (MXB, Financial) filed Quarterly Report for the period ended 2011-03-31.

Msci Inc. has a market cap of $2.47 billion; its shares were traded at around $0 with a P/E ratio of 21.2.

Highlight of Business Operations:

On June 1, 2010, we completed our acquisition of RiskMetrics in a cash-and-stock transaction valued at approximately $1,572.4 million. In connection with the acquisition, we entered into a senior secured credit agreement, which was comprised of (i) a $1,275.0 million six-year term loan facility (2010 Term Loan) and (ii) a $100.0 million five-year revolving credit facility. We assigned a significant value to the intangible assets of RiskMetrics as part of the acquisition, which increased the amortization expense we recognized in the three months ended March 31, 2011 and that we will recognize in the future. See Note 9, Intangible Assets for further information. We also have incurred increased interest expense as a result of the credit facility we entered into in connection with the acquisition. We therefore expect that the acquisition of RiskMetrics will have a significant impact on our financial results in future periods.

On March 14, 2011, we completed the repricing of the 2010 Term Loan. The repricing provided for the incurrence of a new senior secured loan (the 2011 Term Loan) in an aggregate principal amount of $1,125.0 million. The proceeds of the 2011 Term Loan, together with $87.6 million of cash on hand, were used to repay the remaining $1,212.6 million outstanding balance of the 2010 Term Loan in full. The 2011 Term Loan matures in March 2017. The repricing decreased the interest rate applicable to the 2011 Term Loan from the London Interbank Offered Rate (LIBOR) plus 3.25% (with a leverage-based stepdown) to LIBOR plus 2.75% (with a leverage-based stepdown) and reduced the LIBOR floor applicable to the 2011 Term Loan from 1.50% to 1.00%. We incurred $6.1 million in fees associated with the repricing which are reflected in other expense (income) on the Companys Condensed Consolidated Statement of Income for the three months ended March 31, 2011.

Our index and ESG products primarily consist of equity index subscriptions, equity index asset based fees products and ESG products. Our index and ESG products are used to benchmark investment performance, as a basis for index linked investment products, for research and for investment manager selection. We derive revenues from our index and ESG products through index data and ESG subscriptions, fees based on assets in investment products linked to our indices and non-recurring licenses of our index historical data. Revenues related to index products increased 33.1% to $100.0 million for the three months ended March 31, 2011 compared to $75.2 million for the three months ended February 28, 2010.

Revenues from the index and ESG products subscriptions sub-category were up 23.8% to $62.2 million for the three months ended March 31, 2011 compared to $50.2 million for the three months ended February 28, 2010. Approximately $4.4 million of the growth was comprised of revenues contributed by the acquisitions made during the second half of the year ended November 30, 2010. The remaining $7.6 million increase was attributable to growth primarily in our benchmark products.

Revenues attributable to the index asset based fees products sub-category increased 51.8% to $37.9 million for the three months ended March 31, 2011 compared to $24.9 million for the three months ended February 28, 2010. The increase in asset based fees products sub-category was primarily driven by the increased average values of assets in ETFs linked to MSCI equity indices. The average value of assets in ETFs linked to MSCI equity indices in the aggregate increased 41.1% to $337.6 billion for the three months ended March 31, 2011 compared to $239.3 billion for the three months ended February 28, 2010. As of March 31, 2011, the value of assets in ETFs linked to MSCI equity indices was $350.1 billion, representing an increase of 49.9% from $233.5 billion as of February 28, 2010. The increase in asset based fees products sub-category also includes the impact of $4.3 million of non-recurring revenue recognized during the three months ended March 31, 2011.

The three MSCI indices with the largest amount of ETF assets linked to them as of March 31, 2011 were the MSCI Emerging Markets, EAFE and U.S. Broad Market Indices with $102.1 billion, $45.4 billion and $19.5 billion in assets, respectively.

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