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TheStreet Open House

Moody's Corporation Reports Results For Second Quarter 2012

For MA, full-year 2012 revenue is still expected to increase in the high-teens percent range. Within the U.S., MA revenue is now expected to increase in the high-teens to 20 percent range, while non-U.S. revenue is still expected to increase in the high-teens percent range. Revenue growth is still projected in the mid-single-digit percent range for research, data and analytics and in the low 20’s percent range for enterprise risk solutions, reflecting the December 2011 acquisition of Barrie & Hibbert as well as growth in the base business. Professional services revenue is now projected to grow by approximately 75%, inclusive of revenue from the late 2011 acquisition of a majority stake in Copal Partners and growth in MA’s existing financial training and certification business.

CONFERENCE CALL

A conference call to discuss second quarter 2012 results will be held this morning, July 26, 2012, at 11:30 a.m. Eastern Time. Individuals within the U.S. and Canada can access the call by dialing 1-877-400-0505. Other callers should dial +1-719-234-7477. Please dial into the call by 11:20 a.m. Eastern Time. The passcode for the call is “Moody’s Corporation.”

The teleconference will be webcast with a slide presentation and can be accessed on Moody's Investor Relations website, http://ir.moodys.com, until 11:59 p.m. Eastern Time, August 24, 2012.

A replay of the teleconference will be available from 3:30 p.m. Eastern Time, July 26, 2012 until 11:59 p.m. Eastern Time, August 24, 2012. The replay can be accessed from within the U.S. and Canada by dialing 888-203-1112. Other callers can access the replay at +1-719-457-0820. The replay confirmation code is 7945945.

*****

ABOUT MOODY'S CORPORATION

Moody's is an essential component of the global capital markets, providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets. Moody’s Corporation (NYSE: MCO) is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers leading-edge software, advisory services and research for credit and economic analysis and financial risk management. The Corporation, which reported revenue of $2.3 billion in 2011, employs approximately 6,500 people worldwide and maintains a presence in 28 countries. Further information is available at www.moodys.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this release are forward-looking statements and are based on future expectations, plans and prospects for Moody’s business and operations that involve a number of risks and uncertainties. Moody’s outlook for 2012 and other forward-looking statements in this release are made as of July 26, 2012, and the Company disclaims any duty to supplement, update or revise such statements on a going-forward basis, whether as a result of subsequent developments, changed expectations or otherwise. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company is identifying certain factors that could cause actual results to differ, perhaps materially, from those indicated by these forward-looking statements. Those factors include, but are not limited to, the current world-wide credit market disruptions and economic slowdown, which is affecting and could continue to affect the volume of debt securities issued in domestic and/or global capital markets; other matters that could affect the volume of debt securities issued, including credit quality concerns, changes in interest rates and other volatility in the financial markets; the uncertain effectiveness and possible collateral consequences of U.S. and foreign government initiatives to respond to the economic slowdown; possible loss of market share through competition; introduction of competing products or technologies by other companies; pricing pressures from competitors and/or customers; the potential emergence of government-sponsored credit rating agencies; both proposed and recently adopted legislation and regulations in the U.S., EU, other foreign, state and local jurisdictions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; regulations relating to the oversight of credit rating agencies; provisions in the Dodd-Frank Act, and potential EU regulations, modifying the pleading and liability standards applicable to credit rating agencies in a manner adverse to rating agencies; possible judicial decisions in various jurisdictions regarding the status of and potential liabilities of credit rating agencies; the possible loss of key employees; the outcome of any review by controlling tax authorities of the Company’s global tax planning initiatives; the outcome of those legacy tax and legal contingencies that relate to the Company, its predecessors and their affiliated companies for which Moody’s has assumed portions of the financial responsibility; the outcome of other legal actions to which the Company, from time to time, may be named as a party; the ability of the Company to successfully integrate acquired businesses; a decline in the demand from financial institutions for credit risk management tools; and other risk factors as discussed in the Company’s annual report on Form 10-K for the year ended December 31, 2011 and in other filings made by the Company from time to time with the Securities and Exchange Commission.

             
Moody's Corporation
Consolidated Statements of Operations (Unaudited)
 
 
 
Three Months Ended Six Months Ended
June 30, June 30,
 
Amounts in millions, except per share amounts         2012       2011         2012       2011  
 
Revenue       $ 640.8   $ 605.2   $ 1,287.6   $ 1,182.3  
 
Expenses:
Operating 180.6 170.5 366.1 331.3
Selling, general and administrative 159.6 142.9 328.4 291.4
Restructuring - (0.1 ) - (0.1 )
Depreciation and amortization   22.1     21.8     45.6     39.5  
Total expenses 362.3 335.1 740.1 662.1
                       
Operating income         278.5       270.1         547.5       520.2  
Non-operating (expense) income, net
Interest (expense) income, net (16.6 ) (14.1 ) (26.9 ) (32.3 )
Other non-operating (expense) income, net   2.7     8.2     2.6     11.5  
Total   (13.9 )   (5.9 )   (24.3 )   (20.8 )
Income before provision for income taxes 264.6 264.2 523.2 499.4
Provision for income taxes   88.9     73.5     172.0     151.6  
Net income 175.7 190.7 351.2 347.8
Less: net income attributable to noncontrolling interests         3.2       1.7         5.2       3.3  
Net income attributable to Moody's Corporation $ 172.5   $ 189.0   $ 346.0   $ 344.5  
 
 
                       
Earnings per share attributable to Moody's common shareholders
Basic $ 0.77 $ 0.83 $ 1.55 $ 1.51
Diluted       $ 0.76     $ 0.82       $ 1.52     $ 1.49  
 
Weighted average number of shares outstanding
Basic 223.9 228.2 223.7 228.6
Diluted         227.2       231.5         227.3       231.4  
 

           
Moody's Corporation
Supplemental Revenue Information (Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
 
Amounts in millions         2012       2011       2012       2011  
 
 
 
Moody's Investors Service
Corporate Finance $ 191.5 $ 200.1 $ 392.0 $ 381.9
Structured Finance 90.7 86.3 185.0 175.7
Financial Institutions 77.8 79.1 156.6 156.0
Public, Project and Infrastructure Finance 81.2 72.5 160.3 137.0
Intersegment royalty   17.5     16.2     34.6     32.2  
Sub-total MIS 458.7 454.2 928.5 882.8
Eliminations   (17.5 )   (16.2 )   (34.6 )   (32.2 )
Total MIS revenue   441.2     438.0     893.9     850.6  
 
Moody's Analytics
Research, Data and Analytics 121.4 111.0 240.9 220.6
Enterprise Risk Solutions 51.5 41.7 99.6 84.9
Professional Services 26.7 14.5 53.2 26.2
Intersegment revenue   2.9     2.6     5.9     5.2  
Sub-total MA 202.5 169.8 399.6 336.9
Eliminations   (2.9 )   (2.6 )   (5.9 )   (5.2 )
Total MA revenue   199.6     167.2     393.7     331.7  
 
Total Moody's Corporation revenue $ 640.8   $ 605.2   $ 1,287.6   $ 1,182.3  
                     
 
Moody's Corporation revenue by geographic area
 
United States $ 343.8 $ 315.0 $ 687.8 $ 616.4
International   297.0     290.2     599.8     565.9  
 
$ 640.8   $ 605.2   $ 1,287.6   $ 1,182.3  
                     

                 
Moody's Corporation
Consolidated Interest (Expense) / Income, Net (Unaudited)
 
 
 
Three Months Ended Six Months Ended
June 30, June 30,
 
2012 2011 2012 2011
Amounts in millions                  
 
 
Interest (expense) / income:
Expense on borrowings $ (16.4 ) $ (16.3 ) $ (32.8 ) $ (32.7 )
Income 1.2 1.3 2.5 2.3
Legacy Tax (a) - 3.7 - 3.7
UTPs and other tax related liabilities (1.5 ) (3.4 ) 3.5 (7.0 )
Interest Capitalized   0.1     0.6     (0.1 )   1.4  
Total interest (expense) income, net $ (16.6 ) $ (14.1 ) $ (26.9 ) $ (32.3 )
 

(a) The three and six months ended June 30, 2011 amounts represent a reversal of $2.8 million of accrued interest expense relating to the favorable resolution of a Legacy Tax Matter and $0.9 million of interest income related to a pre-spinoff tax year.

       
Moody's Corporation
Selected Consolidated Balance Sheet Data (Unaudited)
 
 
June 30, December 31,
  2012   2011  
Amounts in millions
 
Cash and cash equivalents $ 824.1 $ 760.0
Short-term investments 15.4 14.8
Total current assets 1,519.4 1,424.4
Non-current assets 1,444.5 1,451.7
Total assets 2,963.9 2,876.1
Total current liabilities 995.2 1,134.0
Total debt (1) 1,238.3 1,243.8
Other long-term liabilities 679.1 667.5
Total shareholders' equity(deficit) 108.3 (158.4 )
Redeemable noncontrolling interest* 70.5 60.5
Total liabilities, redeemable noncontrolling interest and shareholders' equity (deficit) 2,963.9 2,876.1
 
Actual number of shares outstanding 222.3 222.4
 
* Represents a noncontrolling interest related to the November 2011 acquisition of Copal Partners
 
June 30, December 31,
(1) Total debt consists of the following:   2012   2011  
Series 2005-1 Notes due 2015 (a) 313.5 311.5
Series 2007-1 Notes due 2017 300.0 300.0
2008 Term Loan due 2013 (b) 127.5 135.0
2010 Senior Notes due 2020 (c)   497.3   497.3  
Total debt (d)   1,238.3   1,243.8  
 

(a)Includes a $13.5 million and $11.5 million fair value adjustment on an interest rate hedge at June 30, 2012 and December 31, 2011, respectively.

 
(b) Various payments through 2013.
 
(c) Represents $500 million of 5.5% publicly traded Senior Notes which mature on September 1, 2020; the notes were offered to the public at 99.374% of the face amount.
 
(d) Of the total debt shown in the table above, $127.5 million and $71.3 million are classified within total current liabilities at June 30, 2012 and December 31, 2011, respectively, and consist of the current portion of borrowings under the 2008 Term Loan.

               
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
 
2011
Amounts in millions, except per share amounts Three Months Ended June 30, Six Months Ended June 30,

As Reported

Legacy Tax (a)

Non-GAAP Financial Measures*

As Reported

Legacy Tax (a)

Non-GAAP Financial Measures*

Interest (expense) income, net

$ (14.1 ) $ (0.9 ) $ (15.0 ) $ (32.3 ) $ (0.9 ) $ (33.2 )
Other non-operating (expense) income, net $ 8.2 $ (6.4 ) $ 1.8 $ 11.5 $ (6.4 ) $ 5.1
Provision for income taxes $ 73.5 $ (0.3 ) $ 73.2 $ 151.6 $ (0.3 ) $ 151.3
Net income attributable to Moody's Corporation $ 189.0 $ (7.0 ) $ 182.0 $ 344.5 $ (7.0 ) $ 337.5
 
Earnings per share attributable to Moody's common shareholders
Basic $ 0.83 $ (0.03 ) $ 0.80 $ 1.51 $ (0.03 ) $ 1.48
Diluted $ 0.82 $ (0.03 ) $ 0.79 $ 1.49 $ (0.03 ) $ 1.46
* In addition to its reported results, Moody's has included in the table above adjusted results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparison of the Company's results. May not add due to rounding.
 
The tables above show Moody's consolidated results for the three and six month periods ended June 30, 2011, adjusted to exclude the impact of the following:
(a) To exclude benefits relating to the resolution of certain legacy tax matters.




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