Business Context and Reporting Period
This Form 8-K filing by MSCI Inc. is dated October 31, 2014. The report discloses a Regulation FD event where management will provide investors with information regarding a proposed private offering of approximately $800 million in senior notes due 2024. The filing includes historical and current non-GAAP financial metrics to assist investors in evaluating the company's performance.
Key Financial Metrics
The filing provides a reconciliation of Net Income to Adjusted EBITDA and Cash EBITDA. Key figures for the twelve months ended September 30, 2014, and pro forma historical periods are as follows:
| Metric (in thousands) | 2011 (Pro Forma) | 2012 (Pro Forma) | 2013 (Pro Forma) | 12 Months Ended Sept 30, 2014 (Actual) |
|---|---|---|---|---|
| Net Income | $158,936 | $164,791 | $199,910 | $287,030 |
| Income from Continuing Operations | $158,936 | $164,791 | $199,910 | $196,548 |
| Operating Income | $297,162 | $318,235 | $340,331 | $335,719 |
| Adjusted EBITDA | $376,047 | $389,817 | $405,148 | $404,883 |
| Cash EBITDA | N/A | N/A | N/A | $428,486 |
Note: The filing does not provide specific values for total revenue, cash flow from operations, debt levels (other than the proposed issuance), or liquidity ratios. The historical data for 2011-2013 is presented on a pro forma basis to reflect the sale of the Governance segment (ISS and CFRA) as if it occurred on December 31, 2010.
Material Changes and Adjustments
- Discontinued Operations: For the twelve months ended September 30, 2014, income from discontinued operations was $(90,482) thousand, significantly impacting the difference between Net Income and Income from Continuing Operations.
- Pro Forma Adjustments: Historical Adjusted EBITDA figures exclude the Governance segment to provide a comparable view of the company's core operations post-divestiture.
- Acquisitions: The 2012 pro forma data includes IPD Group Limited results from November 30, 2012, and 2013 data includes Investor Force Holdings, Inc. from January 29, 2013.
- Restructuring and Lease Costs: The reconciliation includes adjustments for lease exit charges related to vacating 88 Pine Street and restructuring costs associated with the RiskMetrics Group acquisition.
Guidance, Outlook, and Risks
Capital Markets Activity: The company is proceeding with a private offering of $800 million in senior notes due 2024, exempt from registration under the Securities Act of 1933. These notes are offered to qualified institutional buyers under Rule 144A and to non-U.S. investors under Regulation S.
Management Commentary: Management asserts that Adjusted EBITDA and Cash EBITDA supplement GAAP data by enhancing the understanding of financial performance and period-to-period comparability. However, the filing explicitly states these non-GAAP measures have limitations, are not substitutes for GAAP measures, and may not be comparable to similarly titled measures used by other companies.
Risks and Contingencies: The filing notes that the notes have not been registered and cannot be offered or sold in the United States absent registration or an applicable exemption. The report does not constitute an offer to sell the notes.
Investor Verification Checklist
- Verify the final terms and interest rate of the proposed $800 million senior notes due 2024.
- Confirm the exact closing date of the private offering and the use of proceeds.
- Review the full GAAP financial statements for the twelve months ended September 30, 2014, to understand the impact of the $(90.5) million discontinued operations loss on Net Income.
- Assess the company's total debt load post-issuance to evaluate leverage ratios, as current debt levels are not detailed in this specific filing.
- Compare the non-GAAP Adjusted EBITDA and Cash EBITDA definitions with industry peers to ensure accurate benchmarking.