CAPITAL ALLOCATION AND LIQUIDITY
During the third quarter of 2012, Moody’s repurchased 0.6 million shares at a total cost of $25.1 million and issued 1.2 million shares under employee stock-based compensation plans. Outstanding shares as of September 30, 2012 totaled 222.9 million, essentially flat to the prior-year period. As of September 30, 2012, Moody’s had $0.7 billion of share repurchase authority remaining under its current program. At quarter-end, Moody’s had $1.7 billion of outstanding debt and $1.0 billion of additional debt capacity available under its revolving credit facility. Total cash and cash equivalents at quarter-end were $1.5 billion, an increase of $664.3 million from a year earlier, primarily reflecting Moody’s August 2012 bond offering of $500 million of unsecured notes. For the first nine months of 2012, free cash flow was $460.8 million, a decrease of $151.9 million from a year ago, due in part to payments of approximately $121 million related to the settlement of state and local tax matters, as well as movement in other working capital accounts.
ASSUMPTIONS AND OUTLOOK FOR FULL-YEAR 2012
Moody’s outlook for 2012 is based on assumptions about many macroeconomic and capital market factors, including interest rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitization, and the amount of debt issued. There is an important degree of uncertainty surrounding these assumptions, especially as they relate to Europe, and, if actual conditions differ, Moody’s results for the year may differ materially from the current outlook. Our guidance assumes foreign currency translation at end-of-quarter exchange rates.Moody’s is raising its EPS guidance for the full-year 2012 to a range of $2.95 to $3.05 from the previous range of $2.76 to $2.86. Full-year pro-forma EPS, which excludes the impact of a legacy tax benefit, is now expected to be in the range of $2.89 to $2.99, versus the previous range of $2.70 to $2.80. Certain components of 2012 guidance have also been modified to reflect our current view of credit market conditions. For Moody’s overall, the Company now expects full-year 2012 revenue to grow in the mid-teens percent range. Full-year 2012 expenses are also now projected to increase in the mid-teens percent range. Full-year 2012 operating margin is now projected to be approximately 40 percent and adjusted operating margin for the year is still expected to be approximately 43 percent. The effective tax rate is still expected to be approximately 32 percent.