Item 16. Form 10-K Summary

| --- | --- |

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

MSCI INC.
By:		/S/ HENRY A. FERNANDEZ
		Name:		Henry A. Fernandez
		Title:		Chairman and Chief Executive Officer

Date: February 22, 2019

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kathleen A. Winters, Frederick W. Bogdan and Cecilia Aza, and each or any one of them, his or her true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in the capacities indicated below, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming his or her signatures as they may be signed by his or her said attorneys-in-fact and agents, or their substitute or substitutes, to any and all amendments to this Annual Report on Form 10-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/S/ HENRY A. FERNANDEZ		Chairman and Chief Executive Officer		February 22, 2019
Henry A. Fernandez		(principal executive officer)
/S/ KATHLEEN A. WINTERS		Chief Financial Officer and Treasurer		February 22, 2019
Kathleen A. Winters		(principal financial officer)
/S/ JENNIFER MAK		Principal Accounting Officer and Global Controller		February 22, 2019
Jennifer Mak		(principal accounting officer)
/S/ ROBERT G. ASHE		Director		February 22, 2019
Robert G. Ashe
/S/ BENJAMIN F. DUPONT		Director		February 22, 2019
Benjamin F. duPont
/S/ WAYNE EDMUNDS		Director		February 22, 2019
Wayne Edmunds
/S/ ALICE W. HANDY		Director		February 22, 2019
Alice W. Handy
/S/ CATHERINE R. KINNEY		Director		February 22, 2019
Catherine R. Kinney
/S/ WENDY E. LANE		Director		February 22, 2019
Wendy E. Lane
/S/ JACQUES P. PEROLD		Director		February 22, 2019
Jacques P. Perold /S/ LINDA H. RIEFLER		Director		February 22, 2019
Linda H. Riefler
/S/ GEORGE W. SIGULER		Director		February 22, 2019
George W. Siguler
/S/ MARCUS L. SMITH		Director		February 22, 2019
Marcus L. Smith

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Financial Condition as of December 31, 2018 and December 31, 2017		F-4
Consolidated Statements of Income for the Years Ended December 31, 2018, December 31, 2017, and December 31, 2016		F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, December 31, 2017, and December 31, 2016		F-6
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2018, December 31, 2017, and December 31, 2016		F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, December 31, 2017, and December 31, 2016		F-8
Notes to Consolidated Financial Statements		F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of MSCI Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of MSCI Inc. and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report On Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made

F-2

only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 22, 2019

We have served as the Company’s auditor since 2014.

F-3

MSCI INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

		As of
		December 31,				December 31,
		2018				2017
		(In thousands, except per share and share data)
ASSETS
Current assets:
Cash and cash equivalents		$	904,176			$	889,502
Accounts receivable (net of allowances of $1,027 and $1,700 at December 31, 2018 and December 31, 2017, respectively)			473,433				327,597
Prepaid income taxes			19,273				15,103
Prepaid and other assets			38,207				34,927
Total current assets			1,435,089				1,267,129
Property, equipment and leasehold improvements (net of accumulated depreciation and amortization of $185,505 and $171,280 at December 31, 2018 and December 31, 2017, respectively)			90,877				94,437
Goodwill			1,545,761				1,560,621
Intangible assets (net of accumulated amortization of $541,967 and $507,612 at December 31, 2018 and December 31, 2017, respectively)			280,803				321,836
Deferred tax assets			14,903				12,013
Other non-current assets			20,519				19,632
Total assets		$	3,387,952			$	3,275,668
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	3,892			$	1,612
Income taxes payable			16,253				14,828
Accrued compensation and related benefits			137,045				131,156
Other accrued liabilities			113,841				85,710
Deferred revenue			537,977				374,365
Total current liabilities			809,008				607,671
Long-term debt			2,575,502				2,078,093
Deferred tax liabilities			82,008				78,027
Other non-current liabilities			87,928				110,865
Total liabilities			3,554,446				2,874,656
Commitments and Contingencies (see Note 5 and Note 9)
Shareholders' equity (deficit):
Preferred Stock (par value $0.01, 100,000,000 shares authorized, no shares issued)			—				—
Common stock (par value $0.01; 750,000,000 common shares authorized; 130,029,926 and 129,543,856 common shares issued and 84,174,138 and 90,104,885 common shares outstanding at December 31, 2018 and December 31, 2017, respectively)			1,300				1,295
Treasury shares, at cost (45,855,788 and 39,438,971 common shares held at December 31, 2018 and December 31, 2017, respectively)			(3,272,774	)			(2,321,989	)
Additional paid in capital			1,306,428				1,264,849
Retained earnings			1,856,951				1,505,204
Accumulated other comprehensive loss			(58,399	)			(48,347	)
Total shareholders' equity (deficit)			(166,494	)			401,012
Total liabilities and shareholders' equity (deficit)		$	3,387,952			$	3,275,668

See Notes to Consolidated Financial Statements.

F-4

MSCI INC.

CONSOLIDATED STATEMENTS OF INCOME

		Years Ended
		December 31,				December 31,				December 31,
		2018					2017			2016
		(In thousands, except per share data)
Operating revenues		$	1,433,984			$	1,274,172			$	1,150,669
Operating expenses:
Cost of revenues			287,335				273,681				252,107
Selling and marketing			192,923				177,121				166,666
Research and development			81,411				75,849				75,204
General and administrative			99,882				87,764				87,235
Amortization of intangible assets			54,189				44,547				47,033
Depreciation and amortization of property, equipment and leasehold improvements			31,346				35,440				34,320
Total operating expenses			747,086				694,402				662,565
Operating income			686,898				579,770				488,104
Interest income			(19,669	)			(6,314	)			(2,906	)
Interest expense			133,114				116,098				101,651
Other expense (income)			(56,443	)			3,087				3,421
Other expense (income), net			57,002				112,871				102,166
Income before provision for income taxes			629,896				466,899				385,938
Provision for income taxes			122,011				162,927				125,083
Net income		$	507,885			$	303,972			$	260,855
Earnings per basic common share		$	5.83			$	3.36			$	2.72
Earnings per diluted common share		$	5.66			$	3.31			$	2.70
Weighted average shares outstanding used in computing earnings per share:
Basic			87,179				90,336				95,986
Diluted			89,701				91,914				96,540

See Notes to Consolidated Financial Statements.

F-5

MSCI INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
		(in thousands)
Net income		$	507,885			$	303,972			$	260,855
Other comprehensive income (loss):
Foreign currency translation adjustments			(14,113	)			13,358				(24,871	)
Income tax effect			—				—				(714	)
Foreign currency translation adjustments, net			(14,113	)			13,358				(25,585	)
Pension and other post-retirement adjustments			2,351				(525	)			660
Income tax effect			(227	)			(445	)			(65	)
Pension and other post-retirement adjustments, net			2,124				(970	)			595
Net investment hedge adjustments			1,937				—				—
Income tax effect			—				—				—
Net investment hedge adjustments, net			1,937				—				—
Other comprehensive (loss) income, net of tax			(10,052	)			12,388				(24,990	)
Comprehensive income		$	497,833			$	316,360			$	235,865

See Notes to Consolidated Financial Statements.

F-6

MSCI INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

																		Accumulated
										Additional								Other
		Common				Treasury				Paid-in				Retained				Comprehensive
		Stock				Stock				Capital				Earnings				Income (Loss)				Total
		(in thousands)
Balance at December 31, 2015		$	1,282			$	(1,395,695	)		$	1,173,183			$	1,158,462			$	(35,745	)		$	901,487
Net income															260,855								260,855
Dividends ($1.00 per common share)											34				(97,093	)							(97,059	)
Other comprehensive income (loss), net of tax																			(24,990	)			(24,990	)
Common stock issued			5																				5
Compensation payable in common stock and options											39,648												39,648
Common stock repurchased and held in treasury							(774,565	)															(774,565	)
Common stock issued to directors and held in treasury							(479	)			38												(441	)
Exercise of stock options			3								5,037												5,040
Excess tax benefits from employee stock incentive plans											7,625												7,625
Balance at December 31, 2016		$	1,290			$	(2,170,739	)		$	1,225,565			$	1,322,224			$	(60,735	)		$	317,605
Net income															303,972								303,972
Dividends ($1.32 per common share)											20				(120,992	)							(120,972	)
Other comprehensive income (loss), net of tax																			12,388				12,388
Common stock issued			4																				4
Compensation payable in common stock and options											36,572												36,572
Common stock repurchased and held in treasury							(150,461	)															(150,461	)
Common stock issued to directors and held in treasury							(789	)			58												(731	)
Exercise of stock options			1								2,634												2,635
Excess tax benefits from employee stock incentive plans																							-
Balance at December 31, 2017		$	1,295			$	(2,321,989	)		$	1,264,849			$	1,505,204			$	(48,347	)		$	401,012
Net income															507,885								507,885
ASC Topic 606 Retained Earnings Adjustment															16,135								16,135
Dividends ($1.92 per common share)							(77	)			119				(172,273	)							(172,231	)
Other comprehensive income (loss), net of tax																			(10,052	)			(10,052	)
Common stock issued			5																				5
Compensation payable in common stock and options											40,838												40,838
Common stock repurchased and held in treasury							(949,888	)															(949,888	)
Common stock issued to directors and held in treasury							(820	)			17												(803	)
Exercise of stock options											605												605
Balance at December 31, 2018		$	1,300			$	(3,272,774	)		$	1,306,428			$	1,856,951			$	(58,399	)		$	(166,494	)

See Notes to Consolidated Financial Statements.

F-7

MSCI INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
		(in thousands)
Cash flows from operating activities
Net income		$	507,885			$	303,972			$	260,855
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets			54,189				44,547				47,033
Stock-based compensation expense			38,897				36,576				32,001
Depreciation and amortization of property, equipment and leasehold improvements			31,346				35,440				34,320
Amortization of debt origination fees			3,715				3,396				3,068
Deferred taxes			(780	)			(18,902	)			(16,967	)
Gain on divestitures, net of costs			(61,402	)			—				(449	)
Other non-cash adjustments			(188	)			704				1,192
Changes in assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable			(153,942	)			(105,593	)			(18,494	)
Prepaid income taxes			(4,069	)			(3,069	)			41,332
Prepaid and other assets			(2,015	)			(4,470	)			624
Accounts payable			2,300				1,027				(1,912	)
Accrued compensation and related benefits			8,532				8,659				13,089
Income taxes payable			(2,890	)			—				—
Other accrued liabilities			29,096				15,933				19,741
Deferred revenue			185,077				38,555				21,809
Other			(22,989	)			47,383		(1)		5,121
Net cash provided by operating activities			612,762				404,158				442,363
Cash flows from investing activities
Proceeds from sales of investments			—				771				—
Proceeds from divestitures			83,825				—				657
Proceeds from the sale of capital equipment			10				—				—
Capital expenditures			(30,257	)			(33,177	)			(32,284	)
Capitalized software development costs			(18,704	)			(15,640	)			(10,344	)
Acquisitions, net of cash acquired			—				—				(60	)
Net cash provided by (used in) investing activities			34,874				(48,046	)			(42,031	)
Cash flows from financing activities
Proceeds from borrowing			500,000				—				500,000
Proceeds from exercise of stock options			605				2,635				5,040
Repurchase of common stock held in treasury			(949,888	)			(150,461	)			(774,565	)
Payment of dividends			(170,938	)			(119,717	)			(96,191	)
Payment of debt issuance costs in connection with debt			(6,262	)			-				(7,183	)
Net cash used in financing activities			(626,483	)			(267,543	)			(372,899	)
Effect of exchange rate changes			(6,479	)			9,099				(13,305	)
Net increase in cash			14,674				97,668				14,128
Cash and cash equivalents, beginning of period			889,502				791,834				777,706
Cash and cash equivalents, end of period		$	904,176			$	889,502			$	791,834
Supplemental disclosure of cash flow information:
Cash paid for interest		$	125,986			$	112,502			$	89,139
Cash paid for income taxes		$	143,215			$	128,727			$	97,845
Supplemental disclosure of non-cash investing activities
Property, equipment and leasehold improvements in other accrued liabilities		$	2,999			$	4,588			$	4,422
Supplemental disclosure of non-cash financing activities
Cash dividends declared, but not yet paid		$	862			$	1,197			$	830
(1) Includes $43.6 million accrual for amounts payable after December 31, 2018 related to the estimated one-time tax charge on the deemed repatriation of historic earnings and profits of foreign subsidiaries. See Note 11, “Income Taxes,” for additional information.

See Notes to Consolidated Financial Statements.

F-8

MSCI INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. INTRODUCTION AND BASIS OF PRESENTATION

Organization

MSCI Inc., together with its wholly-owned subsidiaries (the “Company” or “MSCI”) provides mission critical investment decision support tools and services. MSCI is dynamic and flexible in the delivery of content and capabilities, such as indexes; portfolio construction tools and risk-management services; environmental, social and governance (“ESG”) research and ratings; and real estate benchmarks, return analytics services and market insights; much of which can be accessed by clients through multiple channels and platforms.

Basis of Presentation

The consolidated financial statements include the accounts of MSCI Inc. and its wholly-owned subsidiaries. The Company’s policy is to consolidate all entities in which it owns more than 50% of the outstanding voting stock unless it does not control the entity. It is also the Company’s policy to consolidate any variable interest entity for which the Company is the primary beneficiary, as required by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 810-10, “Consolidations.” As of December 31, 2018, the Company had no such variable interest entities or investments.

The Company’s operating expenses are grouped and presented in the following activity categories: cost of revenues, selling and marketing, research and development and general and administrative. Costs are assigned to these activity categories based on the nature of the expense to which they directly relate, or, when not directly attributable, based on an allocation method that considers the type of effort related to such activities.

Cost of revenues consists of costs related to the production and servicing of the Company’s products and services and primarily includes related information technology costs, including data center, platform and infrastructure costs; costs to acquire, produce and maintain market data information; costs of research to support and maintain existing products; costs of product management teams; costs of client service and consultant teams to support customer needs; as well as other support costs directly attributable to the cost of revenues including certain human resources, finance and legal costs.

Selling and marketing expenses consist of costs associated with acquiring new clients or selling new products or product renewals to existing clients and primarily includes the costs of MSCI’s sales force and marketing teams as well as costs incurred in other groups associated with acquiring new business, including product management, research, technology and sales operations.

Research and development expenses consist of costs to develop new or enhance existing products and the costs to develop new or improved technology and service platforms for the delivery of MSCI’s products and services and primarily includes the costs of development, research, product management, project management and the technology support associated with these efforts.

General and administrative expenses consist of costs primarily related to finance operations, human resources, office of the CEO, legal, corporate technology, corporate development and certain other administrative costs that are not directly attributed, but are instead allocated, to a product or service.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Significant Accounting Policies

Basis of Financial Statements and Use of Estimates

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require the Company to

F-9

make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Significant estimates and assumptions made by management include the deferral and recognition of revenue, research and development and software capitalization, impairment of long-lived assets, accrued compensation, income taxes and other matters that affect the consolidated financial statements and related disclosures. The Company believes that estimates used in the preparation of these consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.

Inter-company balances and transactions are eliminated in consolidation.

Revenue Recognition

MSCI adopted the new revenue standard set forth under Accounting Standards Codification Topic 606 “Revenue from Contracts with Customers,” or ASC Topic 606, as of January 1, 2018 using the Modified Retrospective Approach and as such, applied the new revenue standard only to contracts that were not completed at the January 1, 2018 adoption date and did not adjust prior reporting periods. An adjustment was recorded within the Consolidated Statement of Financial Condition as of January 1, 2018. The adoption resulted in more revenue being recognized upfront or earlier in the life of new client contracts for certain of the Company’s products and services, including fees related to the licensing of certain desktop applications as they relate to the energy and commodity analytics products, implementation services as they relate to Analytics products and services and the Company’s hosted applications and set-up fees as they relate to the Company’s custom index products. The new revenue standard also has the impact of ratably allocating revenue recognition as it relates to multi-year deals. The adoption of the standard also resulted in higher accounts receivable and deferred revenue balances. Under the old revenue standard, MSCI generally recorded the value of an invoice to accounts receivable and deferred revenue once the service period began. Under the new revenue standard, MSCI records accounts receivable and a corresponding offset to deferred revenue when an invoice is issued. See Note 3, “Revenue Recognition,” for further discussion of the impact of the change upon adoption of ASC Topic 606.

Performance Obligations and Transaction Price

For revenue arrangements containing multiple products or services, the Company accounts for the individual products or services as a separate performance obligation if they are distinct, the product or service is separately identifiable from other items in the arrangement, and if a client can benefit from it on its own or with other resources that are readily available to the client. If these criteria are not met, the promised products or services are accounted for as a combined performance obligation.

The Company allocates the transaction price to each performance obligation based on the best estimate of the relative standalone selling price of each distinct product or service in the contract. The transaction price in the contract is allocated at contract inception to the distinct product or service underlying each performance obligation in proportion to the standalone selling prices. This standalone selling price may be the contract price, but is more often than not the best estimate of the price the Company would receive for selling the product or service to other similar customers. Discounts applied to the contract will be allocated based on the same proportion of standalone selling prices.

For services where the transaction price is variable based upon assets under management (“AUM”), volume of trades or number of investments linked to MSCI’s indexes, the transaction price is based upon pricing models and is not allocated at the inception of the contract but rather falls within the sales and usage-based royalty exception under which the price and associated revenue are based upon actual known performance or best estimates of actual performance during the performance period.

Revenue is recognized when a customer obtains control of promised products or services in an amount that reflects the consideration the entity expects to receive in exchange for those products or services. Revenue is recognized exclusive of any applicable sales or other indirect taxes. Determining when control has transferred can sometimes require management’s judgement (e.g., implementation services), which could affect the timing of revenue recognition. The Company has determined that the above methods provide a faithful depiction of the transfer of control of products or services to the customer.

F-10

Disaggregation of Revenue

Our revenues are characterized by type, which broadly reflects the nature of how they are recognized or earned. Our revenue types are recurring subscription, asset-based fees and non-recurring revenues. We also group our revenues by segment.

Revenues By Type

Recurring subscription revenues represent fees earned from clients primarily under renewable contracts or agreements and are generally paid annually or quarterly in advance and recognized in most cases ratably over the term of the license or service pursuant to the contract terms. Revenues from subscription agreements for the receipt of periodic benchmark reports, digests and other publications, which are most often associated with our real estate offerings, are generally billed and recognized upon delivery of such reports or data updates.

Asset-based fees are principally recognized based on the estimated AUM linked to our indexes from independent third-party sources or the most recently reported information provided by the client. Asset-based fees also include revenues related to futures and options contracts linked to our indexes, which are primarily based on trading volumes. Asset-based fees are generally variable based upon AUM or the volume of trades and are generally billed quarterly in arrears.

Non-recurring revenues primarily represent fees earned on products and services where we do not have renewal contracts and primarily include revenues for providing customized reports, historical data sets, certain derivative financial products and certain implementation and consulting services, as well as revenues from particular products and services that are purchased on a non-renewal basis. Based on the nature of the services provided, non-recurring revenues are generally billed upon delivery and recognized upon delivery or over the service period.

Revenues By Segment

For products within the Index segment, with respect to index data subscriptions, MSCI’s performance obligation to deliver the data is satisfied over time and, accordingly, revenue is recognized ratably over the term of the agreement pursuant to the contract terms. With respect to licenses to create index-linked investment products, such as ETFs, passively managed funds, or licenses which allow certain exchanges to use MSCI’s indexes as the basis for futures and options contracts, MSCI’s performance obligation allows customers to use the Company’s intellectual property (e.g., the indexes) as the basis of the funds or other investment products the customers create over the term of the agreement. The fees earned for these rights are typically variable, in which case they are accrued under the sales and usage-based royalty exception pursuant to the level of performance achieved, which is measured based on AUM, volume of trades or other factors. The level of performance achieved is based on information obtained from independent third-party sources or best estimates taking into account the most recently reported information from the client.

For products within the Analytics segment, MSCI’s performance obligations include providing access to its proprietary models or hosted applications and, in some cases, delivery of managed services, which are all satisfied over time, and accordingly, revenue is recognized ratably over the term of the service period. For implementation services, MSCI meets its performance obligation once the implementation service is complete and the related service is available for the client to use and revenue is recognized at the point in time when the implementation service is completed.

For products within the All Other segment, MSCI’s performance obligations under its ESG products are satisfied over time for the majority of the data subscriptions as MSCI provides and updates the data to the customer throughout the term of the agreement and revenue is recognized ratably over the term of the agreement. For custom ESG research data, the performance obligation is complete, and revenue is recognized, at the point in time that the data is updated and available to the customer. MSCI’s Real Estate products primarily include periodic benchmark reports, Market Information and other publications. MSCI primarily satisfies its performance obligations, and revenue is recognized, at the point in time when the Company delivers reports or publications. For Market Information products, publications are delivered throughout the year, and the revenue is recognized over time.

Share-Based Compensation

Certain of the Company’s employees have received share-based compensation under various compensation programs. The Company’s compensation expense reflects the fair value method of accounting for share-based payments under ASC Subtopic 718-10, “Compensation—Stock Compensation.” ASC Subtopic 718-10 requires

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measurement of compensation cost for equity-based awards at fair value and recognition of compensation cost over the service period, net of estimated forfeitures.

The fair value of MSCI restricted stock units (“RSUs”) is measured using the closing price of MSCI’s common stock on the date prior to grant. Restricted stock units subject to performance conditions that are not linked to a market condition (“PSUs”) are based on performance measures that impact the amount of shares that each recipient will receive upon vesting. The fair value of PSUs is measured using the closing price of MSCI’s common stock on the date prior to grant. Restricted stock units that are subject to the achievement of multi-year total shareholder return targets (“MSUs”) are performance awards with a market condition. The fair value of MSUs is determined using a Monte Carlo simulation model that creates a normal distribution of future stock prices, which is then used to value the awards based on their individual terms.

The fair value of MSCI standard stock options is determined using the Black-Scholes valuation model and the single grant life method. Under the single grant life method, option awards with graded vesting are valued using a single weighted-average expected option life. The fair value of MSCI stock options that contain stock price contingencies is determined using a Monte Carlo simulation model.

The Company recognizes the expense for an award granted to an employee who is not retirement-eligible utilizing the graded vesting method over the requisite service period. For all awards, the Company bases initial accruals of compensation cost on the estimated number of units for which the requisite service is expected to be rendered and, for PSUs, the performance targets expected to be achieved is also considered. If the estimated number of units or the number of units ultimately delivered changes from previous estimates, the cumulative effect on current and prior periods of a change is recognized in compensation cost in the period of the change. Because the probability of actual shares expected to be earned is reflected in the fair value of MSUs on the grant date, the expense to be recognized for these awards is not adjusted to reflect the actual shares earned.

Based on interpretive guidance related to share-based compensation, the Company’s policy is to accrue the estimated cost of share-based awards that are granted to retirement-eligible employees over the course of the prior year in which they were earned rather than expensing the awards on the date of grant. A portion of the awards granted to retirement-eligible employees consisted of PSUs. For those PSUs, the Company bases initial accruals of compensation cost on the estimated number of units for which the requisite service is expected to be rendered. If the estimated number of units expected to convert changes from previous estimates based on the performance targets expected to be achieved, the cumulative effect of a change is recognized in compensation cost in the period of the change.

Research and Development

The Company accounts for research and development costs in accordance with several accounting pronouncements, including ASC Subtopic 730-10, “Research and Development.” ASC Subtopic 730-10 requires that research and development costs generally be expensed as incurred. The majority of the Company’s research and development costs are incurred in developing, reviewing and enhancing the methodologies and data models offered within its product portfolio by monitoring investment trends and drivers globally, as well as analyzing product-specific needs in areas such as capitalization-weighted, factor and specialized indexes, and instrument valuation, risk modeling, portfolio construction, asset allocation and value-at-risk simulation.

The Company applies the provisions of ASC Subtopic 350-40, “Internal Use Software,” and accounts for the cost of computer software developed for internal use by capitalizing qualifying costs, which are substantially incurred during the application development stage. The amounts capitalized are included in Intangible Assets on the Consolidated Statement of Financial Condition and include external direct costs of services used in developing internal-use software and payroll and payroll-related costs of employees directly associated with the development activities. Additionally, costs incurred relating to upgrades and enhancements to the software are capitalized if it is determined that these upgrades or enhancements provide additional functionality to the software.

During the years ended December 31, 2018 and 2017, the Company capitalized $18.7 million and $15.6 million, respectively, of costs related to software developed for internal use in the Consolidated Statement of Financial Condition.

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Capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the related product, which is typically three to five years, beginning with the date the software is placed into service.

Costs incurred in the preliminary and post-implementation stages of MSCI’s products are expensed as incurred.

Income Taxes

Provision for income taxes is provided for using the asset and liability method, under which deferred tax assets and deferred tax liabilities are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities using currently enacted tax rates. The Company elects to account for Global Intangible Low-Taxed Income (“GILTI”) in the year the tax is incurred. The Company recognizes interest and penalties related to income tax matters within “Provision for income taxes” in the Consolidated Statement of Income.

The Company regularly evaluates the likelihood of additional assessments in each of the taxing jurisdictions in which it is required to file income tax returns. The Company has recorded additional tax expense related to open tax years, which the Company’s management believes is adequate in relation to the potential for assessments. These amounts have been recorded in “Other non-current liabilities” on the Consolidated Statement of Financial Condition. The Company’s management believes the resolution of tax matters will not have a material effect on the Company’s consolidated financial condition. However, to the extent the Company is required to pay amounts in excess of its reserves, a resolution could have a material impact on its Consolidated Statement of Income for a particular future period. In addition, an unfavorable tax settlement could require use of cash and result in an increase in the effective tax rate in the period in which such resolution occurs.

Deferred Revenue

Deferred revenues represent both cash received and/or the amounts billed to customers for products and services in advance of services being provided and before the service period has begun. Deferred revenue is generally amortized ratably over the service period as the performance obligations are satisfied.

Accounts Receivable

The Company’s clients generally pay subscription fees annually or quarterly in advance. MSCI’s policy is to record to a receivable when a customer is billed. For products and services that are provided in advance of billing, such as for our asset-based fee products, unbilled revenue (or a “contract asset”) is included in Accounts Receivable on the Company’s Consolidated Statement of Financial Condition.

Goodwill

Goodwill is recorded as part of the Company’s acquisitions of businesses when the purchase price exceeds the fair value of the net tangible and separately identifiable intangible assets acquired. The Company’s goodwill is not amortized, but rather is subject to an impairment test each year, or more often if conditions indicate impairment may have occurred, pursuant to ASC Subtopic 350-10, “Intangibles—Goodwill and Other.”

The Company tests goodwill for impairment on an annual basis on July 1 and on an interim basis when certain events and circumstances exist. The testing for impairment is performed at the reporting unit level. Goodwill impairment is determined by comparing the fair value of a reporting unit with its carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of impairment, if any. If necessary, an impairment charge will be recorded up to, but not more than, the total amount of goodwill allocated to the reporting unit.

The Company completed its annual goodwill impairment test as of July 1, 2018 on its four reporting units, which are the same as its four operating segments. The Company performed a step zero, qualitative impairment test on each of its operating segments and determined that it was more likely than not that the fair value for each operating segment was not less than the carrying value for each.

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As the estimated fair value of the Company’s reporting units exceeded their carrying value on the testing dates, no impairment of goodwill was recorded during the years ended December 31, 2018, 2017 and 2016.

Intangible Assets

The Company amortizes definite-lived intangible assets over their estimated useful lives. Definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company also reviews the useful lives on a quarterly basis to determine if the period of economic benefit has changed. If the carrying value of an intangible asset exceeds its fair value, an impairment charge would be recognized in an amount equal to the amount by which the carrying value of the intangible asset exceeds its fair value.

During the year ended December 31, 2018, management decided to discontinue the use of the IPD tradename utilized by the Real Estate segment and has rebranded the segment to MSCI Real Estate. As a result, the remaining unamortized value of $7.9 million was written off.

The Company had no indefinite-lived intangible assets.

Foreign Currency Translation

Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at year-end exchange rates, and income statement accounts are translated at weighted average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements, net of any related tax effects, are reflected in accumulated other comprehensive loss, a separate component of shareholders’ equity (deficit). Gains or losses resulting from foreign currency transactions incurred in currencies other than the local functional currency are included in non-operating “Other expense (income)” on the Consolidated Statement of Income.

Derivative Instruments

The Company applies ASC Subtopic 815-10, “Derivatives and Hedging,” which establishes accounting and reporting standards for derivative instruments and hedging activities. The Company may use interest rate swaps and forward contracts on foreign currency to manage risks generally associated with interest rate and foreign exchange rate fluctuations, respectively. The Company’s derivative financial instruments are used as risk management tools and not for speculative or trading purposes.

For derivative instruments that are designated and qualify as hedging instruments for accounting purposes, the Company documents and links the relationships between the hedging instruments and hedged items. The Company also assesses and documents at the hedge’s inception whether the derivatives used in hedging transactions were effective in offsetting changes in fair values associated with the hedged items. ASC Subtopic 815-10 provides that, for derivative instruments that qualify for hedge accounting being used to hedge cash flows, changes in the fair value are recognized in accumulated other comprehensive income (loss), a separate component of shareholders’ equity, until the hedged item is recognized in earnings. In addition, the ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

The Company manages foreign currency exchange rate risk through the use of derivative financial instruments comprised principally of forward contracts on foreign currency which are not designated as hedging instruments for accounting purposes. The objective of the derivative instruments is to minimize the income statement impact associated with assets and liabilities that are denominated in certain foreign currencies. Derivative instruments that do not qualify for hedge accounting are carried at fair value on the Consolidated Statement of Financial Condition with gains and losses recorded in the Consolidated Statement of Income in the period in which they are realized.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation of furniture and fixtures, computer and communications equipment and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset.

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Treasury Stock

The Company holds repurchased shares of common stock as treasury stock. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of shareholders’ equity (deficit).

Allowance for Doubtful Accounts

The Company periodically reviews receivable balances and maintains an allowance on customer accounts where estimated losses may result from the inability of its customers to make required payments. The Company does not require collateral.

An allowance for doubtful accounts is recorded when it is probable and estimable that a receivable will not be collected. Changes in the allowance for doubtful accounts from December 31, 2015 to December 31, 2018 were as follows:

		Amount
		(in thousands)
Balance as of December 31, 2015		$	1,117
Addition to provision			1,011
Amounts written off, net of recoveries			(1,093	)
Balance as of December 31, 2016		$	1,035
Addition to provision			1,422
Amounts written off, net of recoveries			(757	)
Balance as of December 31, 2017		$	1,700
Reduction to provision			(224	)
Amounts written off, net of recoveries			(449	)
Balance as of December 31, 2018		$	1,027

Accrued Compensation

The Company makes significant estimates in determining its accrued non-stock-based compensation and benefits expenses. A significant portion of the Company’s employee incentive compensation programs are discretionary. At the end of each fiscal year, the Company determines the amount of discretionary cash bonus expense. These estimates reflect an assessment of performance versus targets and other key performance indicators at the Company, operating segment and employee level. The Company also reviews compensation and benefits expenses throughout the year to determine how overall performance compares to management’s expectations. These and other factors, including historical performance, are taken into account in accruing discretionary cash compensation estimates quarterly.

Concentrations

For the years ended December 31, 2018 and 2017, BlackRock, Inc. accounted for 11.9% and 11.5%, respectively, of the Company’s consolidated operating revenues while no single customer represented 10.0% or more of the Company’s consolidated operating revenues for the year ended December 31, 2016. For the years ended December 31, 2018, 2017 and 2016, BlackRock, Inc. accounted for 20.1%, 20.0% and 17.3%, respectively, of the Index segment’s operating revenues. No single customer accounted for 10.0% or more of operating revenues within the Analytics and All Other segments for the years ended December 31, 2018, 2017 and 2016.

2. RECENT ACCOUNTING STANDARDS UPDATES

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842),” or ASU 2016-02. The FASB issued ASU 2016-02 in order to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB amended the FASB Accounting Standards Codification and

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created Topic 842, Leases. ASU 2016-02 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2018.

In July 2018, the FASB issued Accounting Standards Update No. 2018-10, “Codification Improvements to Topic 842, Leases,” or ASU 2018-10, and Accounting Standards Update No. 2018-11, “Targeted Improvements,” or ASU 2018-11. The amendments in ASU 2018-10 include how an entity should perform the lease classification reassessment, a clarification that a change in a reference index or rate upon which some or all of the variable lease payments in the contract are based does not constitute the resolution of a contingency and a clarification as to whether to recognize a transition adjustment in earnings rather than through equity when an entity initially applies Topic 842 retrospectively to each prior reporting period. The amendments in ASU 2018-11 provide an optional transition method that permits an entity to initially apply the new guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and not recast comparative periods. As a result, prior period financial statements and disclosures will continue to be presented in accordance with ASC Topic 840. In addition, ASU 2018-11 also includes a practical expedient for lessors to not separate the lease and non-lease components of a contract. The effective date for this amendment is the same as ASU 2016-02 discussed above.

The Company will be adopting ASU 2016-02 effective January 1, 2019 using the optional transition method available under ASU 2018-11. In preparation for adoption of the guidance, the Company is implementing internal controls and key system functionality to enable the preparation of financial information. MSCI will take advantage of the transition package of practical expedients permitted within the new guidance which, among other things, will allow the Company to carryforward the historical lease classification. In addition, MSCI will elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company will make an accounting policy election that will keep leases with an initial term of 12 months or less off of the Consolidated Statement of Financial Condition and will result in recognizing those lease payments in the Consolidated Statement of Income on a straight-line basis over the lease term.

While the Company is continuing to assess all potential impacts of the guidance, the guidance will have a material impact on the Consolidated Statement of Financial Condition but will not have a material impact on the Consolidated Statement of Income or Consolidated Statement of Cash Flows. The most significant impact will be the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases. Adoption of the guidance will result in the recognition and presentation of total operating lease ROU assets estimated to be approximately $170.0 million to $190.0 million and total operating lease liabilities estimated to be approximately $190.0 million to $210.0 million, both as of January 1, 2019.

MSCI does not believe the new guidance will have a material impact on its liquidity and under its current agreements it will have no impact on its debt-covenant compliance.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” or ASU 2016-13. The amendments in ASU 2016-13 introduce an approach based on expected losses to estimate credit losses on certain types of financial instruments, modify the impairment model for available-for-sale debt securities and provide for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018. The adoption of ASU 2016-13 is not expected to have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” or ASU 2017-01. The amendments in ASU 2017-01 provide a screen to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Under ASU 2017-01, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it is not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. ASU 2017-01 also narrows the definition of outputs by more closely aligning it with how outputs are described in ASC Topic 606. The adoption of ASU 2017-01 did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” or ASU 2017-04. The amendments in ASU

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2017-04 simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities. Instead, under the amendments in ASU 2017-04, an entity performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but not more than the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2019, with early adoption permitted. The adoption of ASU 2017-04 is not expected to have a material effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued Accounting Standards Update No. 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” or ASU 2017-07. The FASB issued ASU 2017-07 in order to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. ASU 2017-07 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2017. Entities should apply these amendments retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. As a result of the adoption of ASU 2017-07, the Company has restated the Consolidated Statement of Income for the year ended December 31, 2017 by reclassifying $0.6 million of non-service related pension costs from “Operating Expenses” to “Other expense (income).”

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, “Compensation—Stock Compensation (Topic 718), Scope of Modification Accounting,” or ASU 2017-09. The FASB issued ASU 2017-09 in order to reduce the diversity in practice, as well as the cost and complexity when applying the guidance in Topic 718, “Compensation—Stock Compensation,” to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, “Compensation—Stock Compensation.” ASU 2017-09 provides that an entity shall account for the effects of a modification of the terms or conditions of an equity award as an exchange of the original award for a new award, unless the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used), the vesting conditions and the classification of the modified award are the same as the original award immediately before the award is modified. ASU 2017-09 requires reporting organizations to apply the amendments prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-09 did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued Accounting Standards Update No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40),” or ASU 2018-15, to help entities evaluate the accounting for costs of implementation activities incurred in a cloud computing arrangement that is a service contract. ASU 2018-15 aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with those incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2019, with early adoption permitted. The Company will be early-adopting ASU 2018-15 under the prospective transition method effective January 1, 2019.

In August 2018, the SEC issued release number 33-10532, “Disclosure Update and Simplification,” to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments in this release are effective for annual reporting periods, including interim periods within those periods, beginning after November 5, 2018. As a result of the amendments, the Company will be required to, among other things, present, in the form of a reconciliation either as a separate statement or in the footnotes in interim and annual periods, an analysis of changes in each caption of stockholders’ equity and non-controlling interests, which will need to be accompanied by dividends per share and in the aggregate for its common shares outstanding.

3. REVENUE RECOGNITION

MSCI adopted the new revenue standard set forth under ASC Topic 606, as of January 1, 2018 using the Modified Retrospective Approach and as such, applied the new revenue standard only to contracts that were not

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completed at the January 1, 2018 adoption date, while prior reporting periods are not adjusted and continue to be reported in accordance to our historic accounting policy under Accounting Standards Codification 605 “Revenue Recognition.” The cumulative impact of adoption on the Company’s Consolidated Statement of Financial Condition was as follows (in thousands):

Selected line items		As reported at December 31, 2017				Adjustments due to Adoption of ASC Topic 606				Adjusted as of December 31, 2017
Statement of Financial Condition
Accounts receivable		$	327,597			$	145,803			$	473,400
Income taxes payable		$	14,828			$	4,314			$	19,142
Other accrued liabilities		$	85,710			$	5,128			$	90,838
Deferred revenue		$	374,365			$	120,226			$	494,591
Retained earnings		$	1,505,204			$	16,135			$	1,521,339

Included in the above adjustments is an increase of approximately $135.5 million primarily to accounts receivable and deferred revenue and other accrued liabilities with no impact to retained earnings. Under the new revenue standard, the Company now records an accounts receivable and an associated deferred revenue and other accrued liabilities when it bills the customer. Under the old revenue standard, these amounts were not recorded until the contract service start date.

The impact of adopting the new revenue standard on the Company’s Consolidated Statement of Income through the date of December 31, 2018 is as follows (in thousands):

		For the Year Ended December 31, 2018
Selected line items		As reported				Impact of Change				Without Adoption of ASC Topic 606
Statement of Income
Operating revenues		$	1,433,984			$	(6,181	)		$	1,427,803
Operating income		$	686,898			$	(6,181	)		$	680,717
Income before provision for income taxes		$	629,896			$	(6,181	)		$	623,715
Provision for income taxes		$	122,011			$	(1,236	)		$	120,775
Net income		$	507,885			$	(4,945	)		$	502,940
Earnings per basic common share		$	5.83			$	(0.06	)		$	5.77
Earnings per diluted common share		$	5.66			$	(0.06	)		$	5.60

The impact of adopting the new revenue standard on the Company’s Consolidated Statement of Financial Condition through the date of December 31, 2018 is as follows (in thousands):

		December 31, 2018
Selected line items		As reported				Impact of Change				Without Adoption of ASC Topic 606
Statement of Financial Condition
Accounts receivable		$	473,433			$	(148,209	)		$	325,224
Income taxes payable		$	16,253			$	(5,550	)		$	10,703
Other accrued liabilities		$	113,841			$	(6,078	)		$	107,763
Deferred revenue		$	537,977			$	(115,501	)		$	422,476
Retained earnings		$	1,856,951			$	(21,080	)		$	1,835,871

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The table that follows presents the disaggregated revenues for the periods indicated (in thousands):

		For the Year Ended December 31, 2018
		Segments
		Index				Analytics				All Other				Total
Product Types
Recurring subscriptions		$	477,612			$	474,334			$	114,590			$	1,066,536
Asset-based fees			336,565				—				—				336,565
Non-recurring			21,298				5,605				3,980				30,883
Total		$	835,475			$	479,939			$	118,570			$	1,433,984

The table that follows presents the change in accounts receivable and deferred revenue between the dates indicated (in thousands):

		December 31, 2018
		Accounts receivable				Deferred revenue
Opening (1/1/2018)		$	473,400			$	494,591
Closing (12/31/2018)			473,433				537,977
Increase/(decrease)		$	33			$	43,386

The amount of revenue recognized in the period that was included in the opening current deferred revenue, which reflects the contract liability amounts, was $478.8 million. The difference between the opening and closing balances of the Company’s deferred revenue was primarily driven by an increase in billings, partially offset by the amortization of deferred revenue to operating revenues. MSCI had an insignificant long-term deferred revenue balance as of December 31, 2018 reflected as a part of “Other non-current liabilities” on its Consolidated Statement of Financial Condition.

The majority of MSCI’s contracts have a duration of one year or less and, accordingly, revenue associated with these performance obligations will be recognized within 12 months. For these contracts, the Company has chosen to use the practical expedient available under the new revenue standard and, as such, has not disclosed either the remaining performance obligation as of the end of the reporting period or when the Company expects to recognize the revenue. The remaining performance obligations for contracts that have a duration of greater than one year is $483.4 million as of December 31, 2018, which is expected to be recognized as follows:

	•	Approximately $254.2 million of the remaining performance obligations over the next 12-month period;

	•	Approximately $137.9 million of the remaining performance obligations over the second 12-month period;

	•	Approximately $56.2 million of the remaining performance obligations over the third 12-month period; and

	•	Approximately $35.1 million of the remaining performance obligations in the periods thereafter.

4. EARNINGS PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to MSCI common shareholders by the weighted average number of common shares outstanding during the period. Common shares outstanding include common stock and vested restricted stock unit awards where recipients have satisfied either the explicit vesting terms or retirement-eligible requirements. Diluted EPS reflects the assumed conversion of all dilutive securities. There were 2,704, 987 and 398 anti-dilutive securities excluded from the calculation of diluted EPS for the years ended December 31, 2018, 2017 and 2016, respectively, because of their anti-dilutive effect.

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The following table presents the computation of basic and diluted EPS:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
(in thousands, except per share data)
Net income		$	507,885			$	303,972			$	260,855
Basic weighted average common shares outstanding			87,179				90,336				95,986
Effect of dilutive securities:
Stock options and restricted stock units			2,522				1,578				554
Diluted weighted average common shares outstanding			89,701				91,914				96,540
Earnings per basic common share		$	5.83			$	3.36			$	2.72
Earnings per diluted common share		$	5.66			$	3.31			$	2.70

5. COMMITMENTS AND CONTINGENCIES

Legal matters. From time to time, the Company is party to various litigation matters incidental to the conduct of its business. The Company is not presently party to any legal proceedings the resolution of which the Company believes would have a material effect on its business, operating results, financial condition or cash flows.

Leases. The Company leases facilities under non-cancelable operating lease agreements. The terms of certain lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on the straight-line basis over the lease period and has accrued for rent expense incurred but not paid. Rent expense for the years ended December 31, 2018, 2017 and 2016 was $25.3 million, $24.2 million and $24.2 million, respectively.

Future minimum commitments for the Company’s operating leases in place as of December 31, 2018 are as follows:

Years Ending December 31,		Amount
		(in thousands)
2019		$	25,868
2020			24,619
2021			23,452
2022			21,832
2023			21,818
Thereafter			107,800
Total		$	225,389

Senior Notes. The Company has issued an aggregate of $2.6 billion in senior unsecured notes (collectively, the “Senior Notes”) in the four discrete private offerings described below.

F-20

				Principal amount outstanding at				Carrying value at				Carrying value at				Fair Value at				Fair Value at
		Maturity Date		December 31, 2018				December 31, 2018				December 31, 2017				December 31, 2018				December 31, 2017
		(in thousands)
Long-term debt
5.25% senior unsecured notes due 2024		November 15, 2024		$	800,000			$	793,054			$	791,880			$	802,576			$	847,064
5.75% senior unsecured notes due 2025		August 15, 2025			800,000				793,016				791,967				807,088				858,848
4.75% senior unsecured notes due 2026		August 1, 2026			500,000				494,916				494,246				475,520				525,185
5.375% senior unsecured notes due 2027		May 15, 2027			500,000				494,516			—					489,745			—
Total debt				$	2,600,000			$	2,575,502			$	2,078,093			$	2,574,929			$	2,231,097

The fair market value of the Company’s debt obligations is determined in accordance with accounting standards related to the determination of fair value and represents Level 2 valuations, which are based on one or more quoted prices in markets that are not considered to be active or for which all significant inputs are observable, either directly or indirectly. The Company utilizes the market approach and obtains security pricing from a vendor who uses broker quotes and third-party pricing services to determine fair values.

The $800.0 million aggregate principal amount of 5.25% senior unsecured notes due 2024 (the “2024 Senior Notes”) are scheduled to mature and be paid in full on November 15, 2024. At any time prior to November 15, 2019, the Company may redeem all or part of the 2024 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2024 Senior Notes, together with accrued and unpaid interest, on or after November 15, 2019, at redemption prices set forth in the indenture governing the 2024 Senior Notes.

The $800.0 million aggregate principal amount of 5.75% senior unsecured notes due 2025 (the “2025 Senior Notes”) are scheduled to mature and be paid in full on August 15, 2025. At any time prior to August 15, 2020, the Company may redeem all or part of the 2025 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2025 Senior Notes, together with accrued and unpaid interest, on or after August 15, 2020, at redemption prices set forth in the indenture governing the 2025 Senior Notes.

The $500.0 million aggregate principal amount of 4.75% senior unsecured notes due 2026 (the “2026 Senior Notes”) are scheduled to mature and be paid in full on August 1, 2026. At any time prior to August 1, 2021, the Company may redeem all or part of the 2026 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2026 Senior Notes, together with accrued and unpaid interest, on or after August 1, 2021, at redemption prices set forth in the indenture governing the 2026 Senior Notes. At any time prior to August 1, 2019, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2026 Senior Notes, including any permitted additional notes, at a redemption price equal to 104.75% of the principal amount plus accrued and unpaid interest, if any, to the redemption date.

On May 18, 2018, the Company completed its private offering of $500.0 million aggregate principal amount of 5.375% senior unsecured notes due 2027 (the “2027 Senior Notes”) reflected in the table above. The $495.0 million of net proceeds from the offering of the 2027 Senior Notes were allocated for general corporate purposes, including, without limitation, buybacks of the Company’s common stock and potential acquisitions.

F-21

The 2027 Senior Notes are scheduled to mature and be paid in full on May 15, 2027. At any time prior to May 15, 2022, the Company may redeem all or part of the 2027 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem all or part of the 2027 Senior Notes, together with accrued and unpaid interest, on or after May 15, 2022, at redemption prices set forth in the indenture governing the 2027 Senior Notes. At any time prior to May 15, 2021, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2027 Senior Notes, including any permitted additional notes, at a redemption price equal to 105.375% of the principal amount plus accrued and unpaid interest, if any, to the redemption date.

Interest payments attributable to the 2024 Senior Notes and 2027 Senior Notes are due on May 15th and November 15th of each year. Interest payments attributable to the 2025 Senior Notes are due on February 15th and August 15th of each year. Interest payments attributable to the 2026 Senior Notes are due on February 1st and August 1st of each year.

Revolver. On November 20, 2014, the Company entered into a $200.0 million senior unsecured revolving credit agreement (as amended, the “Revolving Credit Agreement”) with a syndicate of banks. The Revolving Credit Agreement had an initial term of five years with an option to extend for two additional one-year terms. On August 4, 2016, the Company entered into Amendment No. 1 (the “First Amendment”) to the Revolving Credit Agreement. The First Amendment, among other things, (i) increased aggregate commitments available to be borrowed to $220.0 million, (ii) increased the maximum consolidated leverage ratio and (iii) extended the initial term to August 2021 with an option to extend for an additional one-year term. On May 15, 2018, the Company entered into Amendment No. 2 (the “Second Amendment”) to the Revolving Credit Agreement. The Second Amendment, among other things, (i) increased aggregate commitments available to be borrowed to $250.0 million, (ii) extended the term to May 2023 with an option to extend for an additional one-year term and (iii) decreased the applicable rate and applicable fee rate for loans and commitments. At December 31, 2018, the Revolving Credit Agreement was undrawn.

In connection with the closings of the Senior Notes offerings and entry into the Revolving Credit Agreement and the First and Second Amendments, the Company paid certain fees which, together with the existing fees related to prior credit facilities, are being amortized over their related lives. At December 31, 2018, $26.3 million of the deferred financing fees remain unamortized, $0.4 million of which is included in “Prepaid and other assets,” $1.4 million of which is included in “Other non-current assets” and $24.5 million of which is grouped and presented as part of “Long-term debt” on the Consolidated Statement of Financial Condition.

6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements at December 31, 2018 and 2017 consisted of the following:

				As of
		Estimated		December 31,				December 31,
		Useful Lives		2018				2017
				(in thousands)
Computer & related equipment		2 to 5 years		$	200,414			$	200,592
Furniture & fixtures		7 years			12,033				10,591
Leasehold improvements		1 to 21 years			53,429				51,128
Work-in-process		—			10,506				3,406
Subtotal					276,382				265,717
Accumulated depreciation and amortization					(185,505	)			(171,280	)
Property, equipment and leasehold improvements, net				$	90,877			$	94,437

Depreciation and amortization expense of property, equipment and leasehold improvements was $31.3 million, $35.4 million and $34.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

F-22

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The change to the Company’s goodwill was as follows:

(in thousands)		Index				Analytics				All Other				Total
Goodwill at December 31, 2016		$	1,202,448			$	302,611			$	50,791			$	1,555,850
Foreign exchange translation adjustment			2,952				—				1,819				4,771
Goodwill at December 31, 2017		$	1,205,400			$	302,611			$	52,610			$	1,560,621
Changes to goodwill			—				(11,635	)	(1)		—				(11,635	)
Foreign exchange translation adjustment			(1,996	)			—				(1,229	)			(3,225	)
Goodwill at December 31, 2018		$	1,203,404			$	290,976			$	51,381			$	1,545,761

(1)	Reflects the $2.9 million and $8.7 million impact of the Financial Engineering Associates, Inc. (“FEA”) and Investor Force Holdings, Inc. (“InvestorForce”) divestitures, respectively. See Note 12, “Divestitures” for further information regarding the FEA and InvestorForce divestitures.

Through the year ended December 31, 2018, the Company has never recognized an impairment of goodwill on its consolidated financial statements.

Intangible Assets

Amortization expense related to intangible assets for the years ended December 31, 2018, 2017 and 2016 was $54.2 million, $44.5 million and $47.0 million, respectively. The amortization expense of acquired intangible assets for the years ended December 31, 2018, 2017 and 2016 was $44.0 million, $39.2 million and $44.6 million, respectively. The amortization expense of internally developed capitalized software for the years ended December 31, 2018, 2017 and 2016 was $10.2 million, $5.4 million and $2.4 million, respectively.

During the year ended December 31, 2018, management decided to discontinue the use of the IPD tradename utilized by the Real Estate segment and has rebranded the segment to MSCI Real Estate. As a result, the remaining unamortized value associated with the trade name of $7.9 million was written off.

F-23

The gross carrying and accumulated amortization amounts related to the Company’s identifiable intangible assets were as follows:

				As of
		Estimated		December 31,				December 31,
		Useful Lives		2018				2017
				(in thousands)
Gross intangible assets:
Customer relationships(1)		5 to 21 years		$	356,700			$	361,199
Trademarks/trade names(1)		5 to 21.5 years			208,320				223,382
Technology/software(1), (2)		3 to 8.5 years			238,692				225,407
Proprietary data		13 years			28,627				28,627
Subtotal					832,339				838,615
Foreign exchange translation adjustment					(9,569	)			(9,167	)
Total gross intangible assets				$	822,770			$	829,448
Accumulated amortization:
Customer relationships(1)				$	(209,867	)		$	(189,100	)
Trademarks/trade names(1)					(123,345	)			(116,691	)
Technology/software(1), (2)					(198,974	)			(193,095	)
Proprietary data					(12,197	)			(10,352	)
Subtotal					(544,383	)			(509,238	)
Foreign exchange translation adjustment					2,416				1,626
Total accumulated amortization				$	(541,967	)		$	(507,612	)
Net intangible assets:
Customer relationships				$	146,833			$	172,099
Trademarks/trade names					84,975				106,691
Technology/software					39,718				32,312
Proprietary data					16,430				18,275
Subtotal					287,956				329,377
Foreign exchange translation adjustment					(7,153	)			(7,541	)
Total net intangible assets				$	280,803			$	321,836

(1) A portion of the change reflects the impact of the InvestorForce divestiture. See Note 12, “Divestitures” for further information regarding the InvestorForce divestiture.

(2) A portion of the change reflects the impact of the FEA divestiture. See Note 12, “Divestitures” for further information regarding the FEA divestiture.

Estimated amortization expense for succeeding years is presented below:

Years Ending December 31,		Amortization Expense
		(in thousands)
2019		$	47,886
2020			46,339
2021			42,286
2022			35,819
2023			32,778
Thereafter			75,695
Total		$	280,803

F-24

8. EMPLOYEE BENEFITS

The Company sponsors a 401(k) plan for eligible U.S. employees and defined contribution and defined benefit pension plans that cover substantially all of its non-U.S. employees. For the years ended December 31, 2018, 2017 and 2016, costs relating to 401(k), pension and post-retirement benefit expenses were $22.8 million, $22.5 million and $21.6 million, respectively, which are included in various categories on the Company’s Consolidated Statements of Income. Amounts included in “Cost of revenues” for the years ended December 31, 2018, 2017 and 2016 were $10.2 million, $10.3 million and $9.5 million, respectively. Amounts included in “Selling and marketing” for the years ended December 31, 2018, 2017 and 2016 were $6.9 million, $6.5 million and $6.7 million, respectively. Amounts included in “Research and development” for the years ended December 31, 2018, 2017 and 2016 were $3.8 million, $3.8 million and $4.0 million, respectively. Amounts included in “General and administrative” for the years ended December 31, 2018, 2017 and 2016 were $1.8 million, $1.3 million and $1.3 million, respectively. Amounts included in “Other expense (income)” for the years ended December 31, 2018 and 2017 were less than $0.1 million and $0.6 million, respectively.

401(k) and Other Defined Contribution Plans. Eligible employees may participate in the MSCI 401(k) plan (or any other regional defined contribution plan sponsored by MSCI) immediately upon hire. Eligible employees receive 401(k) and other defined contribution plan matching contributions, which are subject to vesting and certain other limitations. The Company’s expenses associated with the 401(k) plan and other defined contribution plans for the years ended December 31, 2018, 2017 and 2016 were $19.2 million, $18.6 million and $17.6 million, respectively.

Net Periodic Benefit Expense. Net periodic benefit expense incurred by the Company related to defined benefit pension plans was $3.6 million, $3.9 million and $4.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company uses a measurement date of December 31 to calculate obligations under its pension and postretirement plans. As of December 31, 2018 and 2017, the Company carried a net liability of $21.3 million and $22.0 million, respectively, in “Other non-current liabilities” on the Consolidated Statement of Financial Condition related to its future pension obligations. The fair value of the defined benefit plan assets were $21.7 million and $20.6 million at December 31, 2018 and 2017, respectively.

9. SHAREHOLDERS’ EQUITY (DEFICIT)

This note reflects the share repurchases and related activity as well as share-based compensation activity recognized by the Company, for all periods referenced.

Return of capital

On October 26, 2016, the Board of Directors approved a stock repurchase program for the purchase of up to $750.0 million worth of shares of the Company’s common stock (together with the amount then remaining under a previously existing share repurchase program, the “2016 Repurchase Program”).

On May 1, 2018, the Board of Directors authorized an additional stock repurchase program for the purchase of up to $1.0 billion worth of shares of the Company’s common stock (together with the $523.1 million of authorization then remaining under the 2016 Repurchase Program, the “2018 Repurchase Program”). Share repurchases made pursuant to the 2018 Repurchase Program may take place in the open market or in privately negotiated transactions from time to time based on market and other conditions. This authorization may be modified, suspended or terminated by the Board of Directors at any time without prior notice. As of December 31, 2018, there was $808.1 million of available authorization remaining under the 2018 Repurchase Program.

F-25

The following table provides information with respect to repurchases of the Company’s common stock pursuant to open market repurchases:

Year Ended		Average Price Paid Per Share				Total Number of Shares Repurchased				Dollar Value of Shares Repurchased
		(in thousands, except per share data)
December 31, 2018		$	148.34				6,236			$	924,989
December 31, 2017		$	87.96				1,556			$	136,899
December 31, 2016		$	73.71				10,303			$	759,427

The following table presents cash dividends declared and distributed per common share for the periods indicated:

		Dividends
		Per Share				Declared				Distributed				Deferred
2018		(in thousands, except per share data)
Three Months Ended March 31,		$	0.38			$	34,848			$	34,900			$	(52	)
Three Months Ended June 30,			0.38				34,254				33,935				319
Three Months Ended September 30,			0.58				52,264				51,764				500
Three Months Ended December 31,			0.58				50,907				50,434				473
Year Ended December 31,		$	1.92			$	172,273			$	171,033			$	1,240
2017
Three Months Ended March 31,		$	0.28			$	25,769			$	25,500			$	269
Three Months Ended June 30,			0.28				25,710				25,444				266
Three Months Ended September 30,			0.38				34,768				34,403				365
Three Months Ended December 31,			0.38				34,745				34,448				297
Year Ended December 31,		$	1.32			$	120,992			$	119,795			$	1,197
2016
Three Months Ended March 31,		$	0.22			$	22,046			$	21,889			$	157
Three Months Ended June 30,		0.22					21,588				21,391				197
Three Months Ended September 30,		0.28					26,936				26,680				256
Three Months Ended December 31,		0.28					26,524				26,304				220
Year Ended December 31,		$	1.00			$	97,094			$	96,264			$	830

F-26

Common Stock

The following table presents activity related to shares of common stock issued and repurchased for the periods indicated:

		Common				Treasury				Common Stock
		Stock Issued				Stock				Outstanding
Balance At December 31, 2015			128,200,189				(27,187,041	)			101,013,148
Dividend payable/paid			892				(472	)			420
Common stock issued and exercise of stock options			788,304				—				788,304
Shares withheld for tax withholding and exercises			—				(219,921	)			(219,921	)
Shares repurchased under stock repurchase programs			—				(10,303,047	)			(10,303,047	)
Shares issued to directors			6,959				(6,273	)			686
Balance At December 31, 2016			128,996,344				(37,716,754	)			91,279,590
Dividend payable/paid			684				(528	)			156
Common stock issued and exercise of stock options			538,448				—				538,448
Shares withheld for tax withholding and exercises			—				(157,667	)			(157,667	)
Shares repurchased under stock repurchase programs			—				(1,556,313	)			(1,556,313	)
Shares issued to directors			8,380				(7,709	)			671
Balance At December 31, 2017			129,543,856				(39,438,971	)			90,104,885
Dividend payable/paid			734				(579	)			155
Common stock issued and exercise of stock options			479,277				—				479,277
Shares withheld for tax withholding and exercises			—				(174,991	)			(174,991	)
Shares repurchased under stock repurchase programs			—				(6,235,629	)			(6,235,629	)
Shares issued to directors			6,059				(5,618	)			441
Balance At December 31, 2018			130,029,926				(45,855,788	)			84,174,138

Shared-Based Compensation

The Company regularly issues share-based compensation to its employees and directors who are not employees of the Company. The accounting guidance for share-based compensation requires measurement of compensation cost for share-based awards at fair value and recognition of compensation cost over the service period, net of estimated forfeitures.

In February 2019, the Company granted a portion of its employees awards in the form of RSUs and MSUs. The total number of units granted was 396,090. The aggregate fair value of the awards was $50.4 million, of which approximately $0.2 million had been expensed in the year ended December 31, 2018 in relation to awards granted to retirement-eligible employees under the award terms. A portion of the awards granted consisted of RSUs vesting over a three-year period, with one-third vesting on each anniversary of the grant in 2020, 2021 and 2022. A smaller portion of the awards granted consisted of MSUs that will time-vest over a three-year period and a five-year period and are subject to the achievement of the applicable absolute total shareholder return compounded annual growth rate measured over a three-year and five-year performance period, respectively.

For a small group of awards granted by the Company, all or a portion of the award may be cancelled in certain limited situations, including termination for cause, if employment is terminated before the end of the relevant restriction period. For the remainder of the awards granted by the Company, all or a portion of the award may be canceled if employment is terminated for certain reasons before the end of the relevant restriction period for non-retirement-eligible employees.

In connection with awards under its equity-based compensation and benefit plans, the Company is authorized to use newly issued shares or certain shares of common stock held in treasury.

F-27

The components of share-based compensation expense related to the awards to Company employees and directors who are not employees of the Company are presented below:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2018				2017				2016
Share-based Awards		$	40,563			$	37,921			$	32,525

The following table presents the amount of share-based compensation expense by category for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2018				2017				2016
Cost of revenues		$	10,334			$	9,707			$	7,971
Selling and marketing			12,851				11,355				9,526
Research and development			4,175				3,477				2,970
General and administrative			13,203				13,382				12,058
Total share-based compensation expense		$	40,563			$	37,921			$	32,525

The tax benefits for share-based compensation expense related to RSUs, PSUs and MSUs (together, the “Share-based Awards”) as well as stock options granted to Company employees and to directors who are not employees of the Company were $8.8 million, $5.5 million and $7.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

As of December 31, 2018, $24.6 million of compensation cost related to MSCI unvested share-based awards granted to the Company’s employees and to directors who are not employees of the Company had not yet been recognized. The unrecognized compensation cost relating to unvested stock-based awards expected to vest will be recognized primarily over the next one to three years.

In connection with awards under its equity-based compensation and benefit plans, the Company is authorized to issue shares of common stock. As of December 31, 2018, 7.0 million shares of common stock were available for future grants under these plans.

Share-based Awards. Certain Company employees have been granted share-based awards pursuant to a share-based compensation plan. The plan provides for the deferral of a portion of certain employees’ discretionary compensation with awards made in the form of Share-based Awards. Recipients of Share-based Awards generally have rights to receive dividend equivalents that are subject to vesting. The Company reports the target number of PSUs and MSUs granted unless it has determined, based on the actual achievement of performance measures, that an employee will receive a different amount of shares underlying the PSUs and MSUs, in which case the Company reports the amount of shares employees are likely to receive.

F-28

The following table presents activity concerning the Company’s vested and unvested Share-based Awards applicable to its employees (share data in thousands) for the period indicated:

						Weighted
						Average
						Grant
		Number of				Date Fair
For the Year Ended December 31, 2018		Shares				Value
Vested and unvested Share-based Awards at December 31, 2017			1,419			$	68.50
Granted			332			$	117.64
Conversion to common stock			(451	)		$	65.40
Canceled			(12	)		$	87.17
Vested and unvested Share-based Awards at December 31, 2018 (1)			1,288			$	82.09

(1)	As of December 31, 2018, 1,261 Share-based Awards, with a weighted average price of $81.51, were vested or expected to vest.

The total fair value of Share-based Awards held by the Company’s employees that converted to MSCI common stock during the years ended December 31, 2018, 2017 and 2016 was $63.6 million, $30.3 million and $39.4 million, respectively.

The following table presents activity concerning the Company’s unvested Share-based Awards related to its employees (share data in thousands):

						Weighted
						Average
						Grant
		Number of				Date Fair
For the Year Ended December 31, 2018		Shares				Value
Unvested Share-based Awards at December 31, 2017			1,166			$	69.96
Granted			280			$	124.66
Vested			(332	)		$	68.41
Canceled			(12	)		$	87.17
Unvested Share-based Awards at December 31, 2018			1,102			$	84.14
Unvested Share-based Awards expected to vest			1,075			$	83.51

Stock Option Awards. No stock options were issued during the years ended December 31, 2018, 2017 and 2016.

The following table presents activity concerning MSCI stock options granted to the Company’s employees for the year ended December 31, 2018 (option data and dollar values in thousands, except exercise price):

										Weighted
						Weighted				Average
		Number				Average				Remaining				Aggregated
		of				Exercise				Life				Intrinsic
For the Year Ended December 31, 2018		Options				Price				(Years)				Value
Options outstanding at December 31, 2017			145			$	26.47				2.11			$	14,519
Granted or assumed			—			$	—			N/A				N/A
Forfeited			—			$	—			N/A				N/A
Conversion to common stock			(33	)		$	18.14			N/A				N/A
Options outstanding and exercisable at December 31, 2018			112			$	28.96			1.28				$	13,239

F-29

All outstanding stock options as of December 31, 2018 are vested and exercisable.

The following table presents information relating to the Company’s outstanding and exercisable stock options as of December 31, 2018 (number of options outstanding and aggregate intrinsic value data in thousands):

As of December 31, 2018				Options Outstanding
								Weighted				Average
								Average				Remaining				Aggregate
				Number				Exercise				Life				Intrinsic
Range of Exercise Prices				Outstanding				Price				(Years)				Value
$15.18 to $16.48					12			$	16.48				0.15			$	1,521
$20.45 to $24.11					14			$	20.45				0.65			$	1,798
$	25.64				36			$	25.64				0.96			$	4,409
$	36.70				50			$	36.70				1.95			$	5,511
Total					112											$	13,239

The intrinsic value of the stock options exercised by the Company’s employees during the years ended December 31, 2018, 2017 and 2016 was $4.8 million, $10.9 million and $11.3 million, respectively.

10. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As required by ASC Subtopic 220-10, “Comprehensive Income—Overall,” the following table presents the amounts reclassified from accumulated other comprehensive income (loss) by the respective line item in the Consolidated Statement of Income:

Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (1)

Details about Accumulated Other		Amount Reclassified from Accumulated												Affected Line Item in the
Comprehensive Income (Loss) Components		Other Comprehensive Income (Loss)												Consolidated Statements of Income
		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
						(in thousands)
Defined benefit pension plans
Amount recognized as a component of net periodic benefit expense for curtailments and settlements		$	(222	)		$	(281	)		$	(261	)
Income Taxes		54				77				73				Provision for income taxes
Total reclassifications for the period, net of tax		$	(168	)		$	(204	)		$	(188	)

(1)	Amounts in parentheses indicate expenses or losses moved to the Consolidated Statements of Income.

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11. INCOME TAXES

The provision for income taxes (benefits) by taxing jurisdiction consisted of:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
		(in thousands)
Current
U.S. federal		$	51,316			$	133,250			$	93,071
U.S. state and local			31,680				16,312				16,363
Non U.S.			39,795				32,267				32,616
			122,791				181,829				142,050
Deferred
U.S. federal			(1,406	)			(12,502	)			(13,010	)
U.S. state and local			5,566				(2,119	)			(2,235	)
Non U.S.			(4,940	)			(4,281	)			(1,722	)
			(780	)			(18,902	)			(16,967	)
Provision for income taxes		$	122,011			$	162,927			$	125,083

The following table reconciles the U.S. federal statutory income tax rate to the effective income tax rate:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
U.S. federal statutory income tax rate			21.00	%			35.00	%			35.00	%
U.S. state and local income taxes, net of U.S. federal income tax benefits			4.66	%			1.84	%			2.38	%
Change in tax rates applicable to non-U.S. earnings			(2.20	%)			(7.60	%)			(3.73	%)
Domestic tax credits and incentives			(0.30	%)			(0.24	%)			(0.26	%)
Net tax charge related to Tax Reform			(1.78	%)			7.40	%			—	%
Valuation allowance			(1.41	%)			—	%			—	%
Excess Stock Based Compensation			(1.14	%)			(1.25	%)			—	%
Other			0.54	%			(0.25	%)			(0.98	%)
Effective income tax rate			19.37	%			34.90	%			32.41	%

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Reform”). Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” (“SAB 118”), which allowed registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations.

Tax Reform significantly revised the U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates, implementing a territorial tax system and imposing a one-time tax on deemed repatriation of historic earnings and profits (“E&P”) of foreign subsidiaries (the “Toll Charge”). The provisions of Tax Reform began impacting the Company for the annual reporting periods, including interim periods within those periods, beginning after December 31, 2017 as well as during the three months ended December 31, 2017. The U.S. federal income tax rate reduction was effective as of January 1, 2018.

In the year ended December 31, 2017, the Company’s provisional accounting for the effects of Tax Reform resulted in a net charge of $34.5 million in the provision for income taxes for MSCI that primarily included an estimated tax charge of approximately $47.5 million related to the Toll Charge and an estimated tax charge of approximately $16.0 million related to a change in assertion that those profits were permanently reinvested overseas

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as of December 31, 2017, partially offset by an estimated tax benefit of approximately $29.0 million related to the revaluation of deferred taxes at the now-lower statutory corporate rate.

In the year ended December 31, 2018, the Company finalized the Toll Charge and determined the final impact of Tax Reform, resulting in a net benefit of $11.2 million that included a benefit of $5.7 million on the change to the provisional estimate of the Toll Charge and a benefit of $2.6 million for a reduction in the expected withholding taxes from Switzerland. The Company also recorded a benefit of $2.9 million related to the revaluation of deferred taxes at the lower statutory rate as a result of tax planning. The cumulative net charge of Tax Reform was $23.3 million.

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017, were as follows:

		As of
		December 31,				December 31,
		2018				2017
		(in thousands)
Deferred tax assets:
Employee compensation and benefit plans		$	19,698			$	19,646
Deferred rent			5,392				5,308
Pension			2,466				1,520
Unearned revenue			—				853
Loss carryforwards - non-current			2,941				18,105
Other			—				1,435
Subtotal			30,497				46,867
Less: valuation allowance			(632	)			(11,575	)
Total deferred tax assets		$	29,865			$	35,292
Deferred tax liabilities:
Intangible assets		$	(65,538	)		$	(73,634	)
Unearned revenue			(1,170	)			—
Unremitted foreign earnings			(12,872	)			(16,108	)
Property, equipment and leasehold improvements, net			(16,369	)			(11,564	)
Other			(1,021	)			—
Total deferred tax liabilities		$	(96,970	)		$	(101,306	)
Net deferred tax liabilities		$	(67,105	)		$	(66,014	)

During the year ended December 31, 2018, the Company sold two of its U.S. subsidiaries, InvestorForce and FEA. See Note 12, “Divestitures,” for additional information. As a result of these divestitures, the Company was able to utilize the $42.4 million of capital loss carryover held on the books, against which a full valuation allowance was recorded. The tax value of the U.S. portion of the net operating loss carryforwards is $16.0 million which is subject to an annual limitation on utilization and will begin to expire in 2024. As of December 31, 2018, the tax value of foreign net operating loss carryforwards was $0.6 million with a related valuation allowance of $0.6 million.

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The following table presents changes in the Company’s deferred tax asset valuation allowance for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
		(in thousands)
Beginning balance		$	11,575			$	17,807			$	21,052
Additions charged to cost and expenses			—				324				1,862
Additions charged to other accounts			—				—				—
Deductions			(10,943	)			(6,556	)			(5,107	)
Ending balance		$	632			$	11,575			$	17,807

The following table presents the components of income before provision for income taxes generated by domestic or foreign operations for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
		(in thousands)
Domestic		$	399,000			$	283,779			$	263,536
Foreign (1)			230,896				183,120				122,402
Total income before provision for income taxes		$	629,896			$	466,899			$	385,938

(1)	Foreign income before provision for income taxes is defined as income generated from operations located outside the U.S., which includes income from foreign branches of U.S. companies.

Cumulative earnings attributable to foreign subsidiaries were $289.5 million, $450.7 million and $341.6 million for the years ended December 31, 2018, 2017, and 2016, respectively. The Company has recorded a $16.0 million charge to provision for income taxes related to foreign withholding taxes that would be payable upon repatriation. As of December 31, 2018, the Company asserts that the earnings in its India subsidiary accumulated after January 1, 2018 will be permanently reinvested.

The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions in which it files income tax returns. The Company has established unrecognized tax benefits that the Company believes are adequate in relation to the potential for additional assessments. Once established, the Company adjusts unrecognized tax benefits only when more information is available or when an event occurs necessitating a change. As part of the Company’s periodic review of unrecognized tax benefits and based on new information regarding the status of federal and state examinations, the Company’s unrecognized tax benefits are remeasured. It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits and the impact on the effective tax rate over the next 12 months.

The Company believes the resolution of tax matters will not have a material effect on the Consolidated Statement of Financial Condition of the Company, although a resolution could have a material impact on the Company’s Consolidated Statement of Income for a particular future period and on the Company’s effective tax rate for any period in which such resolution occurs.

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The following table presents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2018, 2017 and 2016:

		Years Ended
		December 31,				December 31,				December 31,
Gross unrecognized tax benefits		2018				2017				2016
(in thousands)
Beginning balance		$	10,022			$	7,936			$	8,692
Increases based on tax positions related to the current period			3,928				3,389				575
Increases based on tax positions related to prior periods			1,892				519				135
Decreases based on tax positions related to prior periods			(297	)			(6	)			(3	)
Decreases related to settlements with taxing authorities			—				(1,152	)			(1,463	)
Decreases related to a lapse of applicable statute of limitations			(1,454	)			(664	)			—
Ending balance		$	14,091			$	10,022			$	7,936

The total amount of unrecognized tax benefits was $13.8 million, net of federal benefit of state issues, competent authority and foreign tax credit offsets, as of December 31, 2018, which, if recognized, would favorably affect the effective tax rate in future periods. The Company recognizes the accrual of interest and penalties related to unrecognized tax benefits in the “Provision for income taxes” in the Consolidated Statement of Income. For the year ended December 31, 2018, the Company recognized $0.2 million of interest in the Consolidated Statement of Income with respect to unrecognized tax benefits. No significant penalties were recognized in the Consolidated Statement of Income for the year ended December 31, 2018. The amount of accrued interest, which includes interest related to uncertain tax positions and accrued income tax expense, recorded on the Consolidated Statement of Financial Condition as of December 31, 2018 was $0.9 million.

The Company is under examination by the IRS and other tax authorities in certain jurisdictions, including foreign jurisdictions, such as India, and states in which the Company has significant operations, such as New York. The tax years currently under examination vary by jurisdiction but include years ranging from 2006 through 2017. As a result of having previously been a member of the Morgan Stanley consolidated group, the Company may have future settlements with Morgan Stanley related to the ultimate disposition of their New York State and New York City examination relating to the tax years 2007 and 2008 and their IRS examination relating to the tax years 2006 through 2008. The Company does not believe it has any material exposure to the New York State and New York City examinations. Additionally, the Company believes it has adequate reserves for any tax issues that may arise out of the IRS examination relating to the tax years 2006 through 2008 and therefore does not believe any related settlement with Morgan Stanley will have a material impact.

12. DIVESTITURES

Divestiture of FEA

On April 9, 2018, MSCI completed the FEA divestiture for $21.0 million in cash. The sale included $2.9 million of goodwill, $2.7 million of fully amortized identifiable intangible assets, $6.1 million of other net assets and $1.4 million of transaction costs, which resulted in a gain of $10.6 million included in “Other expense (income)” within the Consolidated Statement of Income. FEA was included as a component of the Analytics segment through the date of divestiture. The results of operations from FEA were not material to the Company.

Divestiture of InvestorForce

On October 12, 2018, the Company completed the InvestorForce divestiture for $62.0 million in cash plus an additional $0.8 million for working capital adjustment which is subject to change, $8.7 million of allocated goodwill, $4.0 million of identifiable intangible assets, net of accumulated amortization, $0.7 million of other net

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assets and $2.8 million of transaction costs, which resulted in a gain of approximately $46.6 million included in “Other expense (income)” within the Consolidated Statement of Income. InvestorForce was included as a component of the Analytics segment through the date of divestiture. The results of operations from InvestorForce were not material to the Company.

13. SEGMENT INFORMATION

ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, in deciding how to allocate resources and assess performance. MSCI’s Chief Executive Officer and its President, who are considered to be its CODM, review financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates reportable segments based on segment operating revenues as well as Adjusted EBITDA and other measures. The Company excludes the following items from segment Adjusted EBITDA: provision for income taxes, other expense (income), net, depreciation and amortization of property, equipment and leasehold improvements, amortization of intangible assets and, at times, certain other transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or to assess segment performance. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net income and are included in the reconciliation that follows.

The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same fashion.

Operating revenues and expenses directly associated with each segment are included in determining its operating results. Other expenses that are not directly attributable to a particular segment are based upon allocation methodologies, including time estimates, revenue, headcount, sales targets, data center consumption and other relevant usage measures. Due to the integrated structure of our business, certain costs incurred by one segment may benefit other segments. A segment may use the content and data produced by another segment without incurring an arm’s-length intersegment charge.

The CODM does not review any information regarding total assets on an operating segment basis. Operating segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for MSCI as a whole.

The Company has four operating segments: Index, Analytics, ESG and Real Estate.

The Index operating segment is primarily a provider of equity indexes. The indexes are used in many areas of the investment process, including index-linked product creation and performance benchmarking, as well as portfolio construction and rebalancing and asset allocation.

The Analytics operating segment offers risk management, performance attribution and portfolio management content, applications and services that provide clients with an integrated view of risk and return and an analysis of market, credit, liquidity and counterparty risk across all major asset classes, spanning short, medium and long-term time horizons. Clients access Analytics content through MSCI’s own proprietary applications and application programming interfaces, or through third party applications or directly on their own platforms. The Analytics operating segment also provides various managed services to help clients operate more efficiently as well as address the needs of certain specialized areas of the investment community by providing a reporting service and performance reporting tools to institutional consultants and investors in hedge funds.

The ESG operating segment offers products and services that help institutional investors understand how ESG factors can impact the long-term risk of their investments. In addition, MSCI ESG Research data and ratings are used in the construction of equity and fixed income indexes to help institutional investors more effectively benchmark ESG investment performance, issue index-based investment products, as well as manage, measure and report on ESG mandates.

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The Real Estate operating segment includes research, reporting, market data and benchmarking offerings that provide real estate performance analysis for funds, investors and managers. Real Estate performance and risk analytics range from enterprise-wide to property-specific analysis. The Real Estate operating segment also provides business intelligence to real estate owners, managers, developers and brokers worldwide. During the year ended December 31, 2016, the Company disposed of the Real Estate occupiers business and recorded an immaterial gain on the disposition which was recorded in “Other expense (income),” in the Consolidated Statement of Income.

The operating segments of ESG and Real Estate do not individually meet the segment reporting thresholds and have been combined and presented as part of All Other for disclosure purposes.

The following table presents operating revenues by reportable segment for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
	(in thousands)
Operating revenues
Index		$	835,475			$	718,959			$	613,551
Analytics			479,939				458,269				448,353
All Other			118,570				96,944				88,765
Total		$	1,433,984			$	1,274,172			$	1,150,669

The following table presents segment profitability and a reconciliation to net income for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
		2018				2017				2016
	(in thousands)
Index Adjusted EBITDA		$	607,853			$	522,241			$	431,478
Analytics Adjusted EBITDA			143,645				125,624				128,507
All Other Adjusted EBITDA			20,935				11,892				9,472
Total operating segment profitability			772,433				659,757				569,457
Amortization of intangible assets			54,189				44,547				47,033
Depreciation and amortization of property, equipment and leasehold improvements			31,346				35,440				34,320
Operating income			686,898				579,770				488,104
Other expense (income), net			57,002				112,871				102,166
Provision for income taxes			122,011				162,927				125,083
Net income		$	507,885			$	303,972			$	260,855

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Revenue by geography is based on the shipping address of the ultimate customer utilizing the product. The following table presents revenue by geographic area for the periods indicated:

		Years Ended
		December 31,				December 31,				December 31,
(in thousands)		2018					2017			2016
Operating revenues
Americas:
United States		$	662,345			$	622,132			$	556,777
Other			58,065				48,139				45,185
Total Americas			720,410				670,271				601,962
Europe, the Middle East and Africa ("EMEA"):
United Kingdom			214,204				193,831				175,749
Other			293,252				250,267				229,010
Total EMEA			507,456				444,098				404,759
Asia & Australia:
Japan			67,100				54,351				52,161
Other			139,018				105,452				91,787
Total Asia & Australia			206,118				159,803				143,948
Total		$	1,433,984			$	1,274,172			$	1,150,669

Long-lived assets consist of property, equipment, leasehold improvements, goodwill and intangible assets, net of accumulated depreciation and amortization. The following table presents long-lived assets by geographic area on the dates indicated:

		As of
		December 31,				December 31,
		2018				2017
		(in thousands)
Long-lived assets
Americas:
United States		$	1,803,321			$	1,847,605
Other			6,560				1,685
Total Americas			1,809,881				1,849,290
EMEA:
United Kingdom			80,039				94,782
Other			19,369				22,394
Total EMEA			99,408				117,176
Asia & Australia:
Japan			411				432
Other			7,741				9,996
Total Asia & Australia			8,152				10,428
Total		$	1,917,441			$	1,976,894

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14. QUARTERLY RESULTS OF OPERATIONS (unaudited):

		2018																2017
		First				Second				Third				Fourth				First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter				Quarter				Quarter				Quarter				Quarter
		(in thousands, except per share data)
Operating revenues		$	351,316			$	363,046			$	357,934			$	361,688			$	301,207			$	316,089			$	322,097			$	334,779
Cost of revenues			71,304				71,368				70,906				73,757				67,463				68,538				68,433				69,247
Selling and marketing			46,409				47,416				46,149				52,949				42,972				41,550				44,873				47,726
Research and development			20,707				19,801				20,591				20,312				18,970				18,196				17,974				20,709
General and administrative			26,187				24,036				24,751				24,908				20,981				21,424				22,079				23,280
Amortization of intangible assets			11,338				19,537				11,681				11,633				11,251				11,122				10,614				11,560
Depreciation and amortization of property, equipment and leasehold improvements			8,205				7,377				7,453				8,311				8,838				9,159				9,325				8,118
Total operating expenses			184,150				189,535				181,531				191,870				170,475				169,989				173,298				180,640
Operating income			167,166				173,511				176,403				169,818				130,732				146,100				148,799				154,139
Interest income			(2,770	)			(4,281	)			(6,522	)			(6,096	)			(932	)			(1,310	)			(1,835	)			(2,237	)
Interest expense			29,560				31,761				35,902				35,891				29,024				29,027				29,020				29,027
Other expense (income)			938				(10,292	)			177				(47,266	)			1,015				872				811				389
Other expense (income), net			27,728				17,188				29,557				(17,471	)			29,107				28,589				27,996				27,179
Income before provision for income taxes			139,438				156,323				146,846				187,289				101,625				117,511				120,803				126,960
Provision for income taxes			24,346				39,494				23,014				35,157				28,674				36,245				35,650				62,358
Net income		$	115,092			$	116,829			$	123,832			$	152,132			$	72,951			$	81,266			$	85,153			$	64,602
Earnings per basic common share		$	1.28			$	1.31			$	1.39			$	1.75			$	0.80			$	0.90			$	0.94			$	0.72
Earnings per diluted common share		$	1.24			$	1.28			$	1.36			$	1.70			$	0.80			$	0.89			$	0.93			$	0.70
Weighted average shares outstanding used in computing per share data
Basic			90,075				89,112				88,796				86,968				90,708				90,404				90,112				90,130
Diluted			92,587				91,586				91,372				89,495				91,624				91,708				91,868				92,467

15. SUBSEQUENT EVENTS

On January 30, 2019, the Board of Directors of the Company declared a quarterly dividend of $0.58 per share of common stock to be paid on March 15, 2019 to shareholders of record as of the close of trading on February 22, 2019.

Subsequent to the year ended December 31, 2018 and through February 15, 2019, the Company repurchased an additional 0.7 million shares of common stock at an average price of $147.97 per share for a total value of $102.1 million.

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