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Barra reports 4th quarter and fiscal year results

30 April 2004  |  1324 views  |  0

Barra, Inc. (Nasdaq: BARZ) a global leader in risk management technology for investment professionals, today reported consolidated revenues from continuing operations of $38.0 million and a loss from continuing operations of $1.6 million, or $.09 per basic and diluted earnings share based on Generally Accepted Accounting Principles (GAAP) for the quarter ended March 31, 2004. Loss from continuing operations for the March 2004 quarter includes goodwill impairment charges of $10.2 million or $.54 per share related to our Financial Engineering Associates operating subsidiary (FEA).

For the three months ended March 31, 2003, consolidated revenues from continuing operations were $36.2 million and income from continuing operations, under GAAP, was $5.9 million or $.30 per diluted share. Income from continuing operations for the March 2003 quarter included an impairment loss on certain investments in unconsolidated companies of $6.9 million or $.24 per diluted share and non-recurring tax credits of $2.9 million or $.15 per diluted share. Net income, including results from discontinued operations, for the three months ended March 31, 2003, was $6.6 million or $.33 per diluted share.

For the fiscal year ended March 31, 2004, consolidated revenues from continuing operations were $151.9 million and income from continuing operations under GAAP was $22.5 million or $1.13 per diluted share. Income from continuing operations for the fiscal year ended March 31, 2004 includes goodwill impairment charges of $10.2 million or $.51 per diluted share and restructuring charges of $2.5 million or $.08 per diluted share. Net income for the fiscal year ended March 31, 2004, including results from discontinued operations, was $27.1 million or $1.36 per diluted share.

For the fiscal year ended March 31, 2003, consolidated revenues from continuing operations were $141.1 million and income from continuing operations under GAAP was $33.2 million or $1.59 per diluted share. Income from continuing operations for the fiscal year ended March 31, 2003 includes an impairment loss on certain investments in unconsolidated companies of $6.9 million or $.24 per diluted share and non-recurring tax credits of $2.9 million or $.15 per diluted share. Net income for the fiscal year ended March 31 2003, including results from discontinued operations, was $34.0 million or $1.63 per diluted share.

Barra to Be Acquired and Combined With MSCI

On April 6, 2004, Morgan Stanley Capital International Inc. ("MSCI") and Barra announced the signing of a definitive merger agreement. Under the terms of the agreement, MSCI's majority shareholder, Morgan Stanley, will acquire Barra for $41.00 per share in cash, or an aggregate consideration of approximately $816.4 million. Barra's operations will be combined with MSCI following the close of the transaction.

On April 26, 2004, Barra announced that it had received notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act in connection with the acquisition of Barra by Morgan Stanley.

The transaction, which is expected to close in 60 to 120 days from the announcement, remains subject to Barra shareholder approval and other customary closing conditions.

Core Business

Total revenues for the March 2004 quarter for risk management products were $34.3 million (or $32.4 million after adjusting for the positive impact of changes in foreign currency translation rates) as compared to $33.3 million for the same quarter a year ago. Revenues from products and services of FEA that are included in core business revenues were $1.2 million and $1.9 million, respectively, for the three months ended March 31, 2004 and 2003.

Recurring subscription revenues for portfolio and enterprise risk management products combined were $29.9 million compared to $30.0 million for the same quarter a year ago. Non-recurring revenues from enterprise risk implementation projects and other one-time fees were $1.2 million in the March 2004 quarter, a decrease of 6 percent when compared to the same quarter a year ago. Approximately 38 percent of the subscription base was subject to renewal during the quarter, and we achieved 86 percent revenue retention.

Core business operating losses amounted to 7 percent of core business operating revenues for the March 2004 quarter, including the effect of goodwill impairment charges and amortization of intangibles, which reduced core operating margins by 31 percent for the March 2004 quarter. This compares to core business operating margins of 23 percent for the same quarter last year, including the effect of amortization of intangibles which reduced core operating margins by 1 percent for the March 2003 quarter.

At March 31, 2004, the total annual value of all core product subscriptions was approximately $127 million, unchanged from March 31, 2003.

POSIT Venture

Revenues from the Portfolio System for Institutional Trading (POSIT) joint venture for the March 2004 quarter were $3.7 million as compared to $3.0 million for the same quarter a year ago, an increase of 24 percent. These revenues consist of royalties directly related to trading volume in the U.S. and European POSIT systems.

Goodwill Impairment

As of March 31, 2004, the Company completed its annual test for impairment and recorded an impairment loss of $10.2 million or $.54 per basic and diluted share for its FEA reporting unit as the carrying amount of goodwill exceeded its fair value. The impairment loss is a non-cash charge and not deductible for income tax purposes.

Dividend

Barra's board of directors declared a special cash dividend of $1.00 per common share payable on January 2, 2004 to shareholders of record as of December 8, 2003. The dividend amounted to approximately $19.5 million.

On February 5, 2004 Barra's board of directors declared a cash dividend of $.125 cents per common share payable on March 15, 2004 to shareholders of record at the close of business on February 23, 2004. The quarterly dividend amounted to approximately $2.4 million.

Under terms of the pending acquisition by Morgan Stanley, all future dividends have been suspended.

Stock Repurchase Plan

During the March 2004 quarter, as part of its previously announced stock repurchase program, Barra repurchased 396,400 of its shares for a cost of approximately $12.5 million. As of April 30, 2004, Barra has remaining authorization to repurchase up to 1,075,000 shares. As a result of the pending acquisition, all future stock repurchases under this program have been suspended.

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