01—Abstract
Summary
Summary of the 10-K filed January 29, 2009. Cited figures are marked; the original filing is the authoritative source.
MSCI Inc. reported fiscal 2008 (year ended November 30, 2008) operating revenues of $431.0 milliona, up 16.5% from $369.9 million in fiscal 2007, driven by growth in equity indices, equity portfolio analytics and multi-asset class analytics.
Operating income rose 4.5% to $135.8 millionb, but operating margin fell to 31.5% from 35.1%, largely due to a $25.6 million founders grant expense and costs of replacing services previously provided by Morgan Stanley. Net income declined 15.8% to $68.3 million, and diluted earnings per share were $0.67 compared with $0.96. The filing highlights a sharp decline in the value of assets in ETFs linked to MSCI equity indices, which fell 37.9% to $119.0 billion as of November 30, 2008, reflecting $99.7 billion of net asset depreciation partially offset by $27.0 billion of net inflows.
Asset-based fees were 16.9% of revenues in fiscal 2008 versus 18.6% in fiscal 2007. Management stated that the fourth quarter showed slowing revenue growth and lower retention rates, with the Aggregate Retention Rate at 89.9% for the year versus 91.8% in 2007. Total Run Rate was $407.9 millionc, up 3.3%, while the asset-based fee Run Rate fell 35.0%.
Morgan Stanley remains the controlling shareholder, holding 100.0% of the class B common stock, approximately 65.7% of the combined voting power and approximately 27.7% of the economic interest. The company carries $402.8 milliond outstanding under its secured Credit Facility and held $268.1 million in cash and cash equivalents at year end. Operating cash flow was $155.1 million, and the company does not intend to pay dividends in the foreseeable future.
02—Key points
Key Highlights
- Operating revenues of $430.96 million rose 16.5% in fiscal 2008; equity index subscriptions grew 23.9% to $169.8 million.
- Net income fell 15.8% to $68.3 million and diluted EPS declined to $0.67 from $0.96, while operating income rose 4.5% to $135.8 million.
- Total operating expenses increased 23.0% to $295.2 million, including a $25.6 million founders grant expense and $27.5 million of replacement expenses for services formerly provided by Morgan Stanley.
- Assets in ETFs linked to MSCI equity indices declined 37.9% to $119.0 billion, driven by $99.7 billion of net asset depreciation.
- Aggregate Retention Rate was 89.9% (versus 91.8%) and Core Retention Rate was 92.1% (versus 93.3%); the filing notes 48% of fiscal 2008 cancellations occurred in the fourth quarter.
- Barclays accounted for 11.0% of operating revenues, and the ten largest clients accounted for 28.6% of revenues.
- The company had $402.8 million outstanding under its Credit Facility, $75.0 million of unused revolver capacity and $268.1 million of cash at November 30, 2008; operating cash flow was $155.1 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed January 29, 2009Financial Statements
| Revenue | $430.96M |
| SG&A Expenses | $138.31M |
| Operating Income | $135.79M |
| Interest Expense | $26.93M |
| Net Income | $68.27M |
| EPS (Basic) | $0.66 |
| EPS (Diluted) | $0.66 |
| Shares Outstanding (Basic) | 100.04M |
| Shares Outstanding (Diluted) | 100.28M |
05—Questions
Frequently Asked Questions
How did MSCI perform financially in fiscal 2008?
Operating revenues grew 16.5% to $431.0 million and operating income rose 4.5% to $135.8 million. However, net income declined 15.8% to $68.3 million, and diluted EPS fell to $0.67 from $0.96. Higher operating expenses, including the founders grant and costs of replacing Morgan Stanley services, contributed to the lower operating margin of 31.5% versus 35.1% in 2007.
How exposed is MSCI to market declines in ETF assets?
Asset-based fees were 16.9% of revenues in fiscal 2008, down from 18.6% in 2007. ETF assets linked to MSCI equity indices fell to $119.0 billion from $191.7 billion, and the asset-based fee Run Rate decreased 35.0%. The filing states that continued market volatility could further reduce these fees.
Who controls MSCI and what does that mean for shareholders?
Morgan Stanley holds all of the class B common stock, representing approximately 65.7% of the combined voting power and 27.7% of the economic interest. The filing says Morgan Stanley can direct the election of all board members, and that its interests may differ from those of class A shareholders. MSCI is also a controlled company exempt from certain NYSE governance requirements.
Does MSCI pay dividends and what are its debt obligations?
MSCI does not intend to pay cash dividends in the foreseeable future and plans to retain funds for growth, including acquisitions. It has $402.8 million outstanding under its secured Credit Facility, which contains restrictive covenants and limits on dividend payments, with maturities in November 2012 and November 2014.
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