NEW YORK--(BUSINESS WIRE)--
Moody's Corporation (NYSE: MCO):
-- Reported FY08 EPS of $1.87 down 28% from FY07 EPS
-- Reported 4Q08 EPS of $0.37 down 24% from 4Q07 EPS
-- FY08 revenue down 22%; 4Q08 revenue down 20%
-- Projected FY09 EPS between $1.40 and $1.50 per share
Moody's Corporation (NYSE: MCO) today announced results for the fourth
quarter and full-year 2008.
Summary of Results for Fourth Quarter 2008
Moody's reported revenue of $403.7 million for the three months ended
December 31, 2008, a decrease of 20% from $504.9 million for the fourth
quarter of 2007. Operating income for the quarter was $125.4 million, a
41% decline from $212.1 million for the same period last year. Diluted
earnings per share were $0.37 for the fourth quarter of 2008, and
included $0.04 of dilution relating to the acquisition of Fermat
International ("Fermat") which closed in October 2008. Excluding
restructuring charges in 2007, diluted earnings per share declined 38%
to $0.37 for the fourth quarter of 2008 versus $0.60 in the prior-year
period.
Summary of Results for Full-Year 2008
Moody's Corporation revenue for the full-year 2008 totaled $1,755.4
million, a decrease of 22% from $2,259.0 million for the same period of
2007. Operating income of $748.2 million was down 34% from $1,131.0
million for the full-year 2007. Excluding the positive impact from
foreign currency translation, global revenue and operating income
declined 23% and 36%, respectively. Diluted earnings per share of $1.87
for the full-year 2008 included a benefit of $0.05 related to the
resolution of certain legacy tax matters, minor adjustments to the 2007
restructuring reserve and dilution of $0.04 relating to the acquisition
of Fermat. Excluding the legacy tax matters and restructuring items in
both years, diluted earnings per share of $1.82 for the full-year 2008
decreased 27% from $2.50 for the full-year of 2007.
Raymond McDaniel, Chairman and Chief Executive Officer of Moody's, said,
"Weak credit market conditions that prevailed throughout most of 2008
were exacerbated in the fourth quarter by the broader downturn in global
economic activity. Moody's performance in this difficult environment
reflects ongoing cost management efforts and resilience from the areas
of our business that generate recurring revenue." Referring to the
company's outlook for 2009, Mr. McDaniel added, "Unusually challenging
conditions are likely to persist through much of 2009, and we will
remain focused on activities aimed at restoring investor confidence,
supporting global regulatory and policymaking efforts that respond to
the crisis, and meeting the needs of financial market participants."
Fourth Quarter Revenue
For Moody's Corporation overall, global revenue declined 20% from the
fourth quarter of 2007. Excluding the unfavorable impact of foreign
currency translation, revenue declined 18 percent. U.S. revenue of
$195.5 million for the fourth quarter of 2008 decreased 29% from the
fourth quarter of 2007, while non-U.S. revenue of $208.2 million
decreased 9% from the prior-year period. Non-U.S. revenue accounted for
52% of Moody's total revenue for the quarter, up from 45% in the
year-ago period.
Global revenue for Moody's Investors Service ("MIS") for the fourth
quarter of 2008 was $253.9 million, a decrease of 32% from the
prior-year period. Excluding the unfavorable impact of foreign currency
translation, revenue declined 29 percent. U.S. revenue of $125.9 million
for the fourth quarter of 2008 decreased 40% from the fourth quarter of
2007. Outside the U.S., revenue of $128.0 million, representing 50% of
global MIS revenue, declined 21% from the year-ago period.
Within the ratings business, global structured finance revenue totaled
$92.2 million for the fourth quarter of 2008, a decrease of 42% from a
year earlier. U.S. structured finance revenue decreased 57%, driven by
declines in issuance across all asset classes. Non-U.S. structured
finance revenue decreased 26%, led by declines in European commercial
real-estate finance and credit derivatives.
Global corporate finance revenue of $56.6 million in the fourth quarter
of 2008 declined 37% from the same quarter of 2007. U.S. corporate
finance revenue decreased 45% from the fourth quarter of 2007. Outside
the U.S., revenue declined 23% from the prior-year period. Declines were
driven by the reduction in issuance of both investment-grade and
speculative-grade securities.
Global financial institutions revenue of $56.5 million in the fourth
quarter of 2008 decreased 15% compared to the same quarter of 2007.
Financial institutions revenue in the U.S. decreased 16% due to declines
in issuance for the banking and insurance sectors. Outside the U.S.,
revenue decreased 14% primarily driven by declines in European bank
issuance.
Global public, project and infrastructure finance revenue was $48.6
million for the fourth quarter of 2008, declining 15% from the fourth
quarter of 2007. U.S. revenue declined 19% due to lower levels of
activity in the public finance sector. Non-U.S. revenue decreased 7%
with strong increases in project and infrastructure finance activity in
the Europe, Middle East and Africa region more than offset by difficult
market conditions for the rest of the non-U.S. business.
Global revenue for Moody's Analytics for the fourth quarter of 2008
reached $149.8 million, up 13% from the same quarter of 2007. Revenue
from the subscription line of business increased 9% from the prior-year
period to $122.0 million, which continued to represent more than 80% of
Moody's Analytics revenue and contributed the majority of dollar growth.
The smaller software and consulting business lines produced revenue
growth of 39% and 40%, respectively.
In the U.S., Moody's Analytics revenue of $69.6 million for the fourth
quarter of 2008 increased 6% from the fourth quarter of 2007. U.S.
revenue growth was driven by the subscription and consulting business
lines, reflecting demand from new and existing customers for credit and
economic research and other offerings. Outside the U.S., revenue
increased 21% over the prior-year period to $80.2 million, representing
54% of global Moody's Analytics revenue. Growth outside the U.S. was
strong in all areas, especially in the software line of business where
results were positively impacted by the fourth quarter acquisition of
Fermat.
Fourth Quarter and Full Year Expenses
Fourth quarter 2008 operating expenses for Moody's Corporation of $278.3
million were 5% lower than in the prior-year period. Excluding the
restructuring charge in 2007 and minor adjustments to this charge in
2008, Moody's operating expenses were 14% higher in 2008 than in the
prior-year period. The primary driver of the increase was higher
incentive costs compared to the fourth quarter of 2007, when
compensation accruals were adjusted to reflect weak performance for the
second half of 2007. It was also due to incremental expenses from
businesses acquired in 2008. Moody's reported operating margin for the
fourth quarter of 2008 was 31.1%.
Full-year 2008 operating expenses for Moody's Corporation of $1,007.2
million were 11% lower than the prior year. Excluding the restructuring
charge in 2007 and minor adjustments to this charge in 2008, Moody's
operating expenses were 6% lower in 2008, due primarily to reduced
compensation costs.
Fourth Quarter Effective Tax Rate
Moody's effective tax rate was 28.6% for the fourth quarter of 2008,
compared with 33.8% for the prior-year period. The decrease was due
primarily to a larger portion of consolidated taxable income generated
in lower tax jurisdictions outside the U.S., and the realization of
benefits available for U.S.-based manufacturing and research activities.
Full-Year 2008 Results
Revenue at Moody's Investors Service totaled $1,204.7 million for the
full-year 2008, a decrease of 32% from full-year 2007. Excluding the
favorable impact of foreign currency translation, revenue declined 33%.
U.S. revenue of $645.0 million decreased 42%, while non-U.S. revenue of
$559.7 million decreased 15% from the prior year. The public, project
and infrastructure business line achieved modest growth, with all other
MIS business lines recording declines from the prior year, led by
structured finance.
Moody's Analytics revenue rose to $550.7 million for the full-year 2008,
up 15% from the full-year 2007. Both the subscription and consulting
business lines generated good growth, and the software line of business
grew by 25% over the prior year, including the impact of the Fermat
acquisition. U.S. revenue of $265.1 million for the full-year 2008
increased 9% from the full-year 2007. Non-U.S. revenue of $285.6 million
increased 21% from 2007 and represented 52% of global revenue, compared
to 49% a year earlier.
Share Repurchases and Debt Capacity
During the fourth quarter of 2008, Moody's repurchased 4.8 million
shares at a total cost of $120.1 million and issued 136 thousand shares
under employee stock-based compensation plans. Outstanding shares as of
December 31, 2008 totaled 235.1 million, representing a 6% decrease from
a year earlier. Fourth quarter share repurchases were funded by a
combination of free cash flow and borrowings. Additionally, as of
December 31, 2008, Moody's had $1.4 billion of share repurchase
authority remaining under its current program. At year-end, Moody's had
$1.5 billion of outstanding debt with additional debt capacity available
of approximately $300 million.
Assumptions and Outlook for Full-Year 2009
Moody's outlook for 2009 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
impact of government-sponsored economic stabilization initiatives. There
is an important degree of uncertainty surrounding these assumptions and,
if actual conditions differ from these assumptions, Moody's results for
the year may differ materially from our current outlook.
For Moody's overall, the Company expects full-year 2009 revenue to
decline in the low single-digit percent range. This outlook assumes
foreign currency translation in 2009 at current rates. Although Moody's
has a solid base of recurring revenue, we anticipate issuance-based
revenue to reflect generally weak conditions throughout 2009, with any
broad improvement in market liquidity and issuance expected to be modest
and to occur later in the year. Full-year 2009 operating expenses are
expected to increase in the mid single-digit percent range, including
costs associated with the Fermat acquisition. We expect the full-year
2009 operating margin will be in the mid- to high-thirties percent
range, due to lower ratings revenue and higher comparable expenses. The
Company projects diluted earnings per share for full-year 2009 in the
range of $1.40 to $1.50.
For the global MIS business, we expect revenue for the full-year 2009 to
decline in the high single-digit percent range, both in the U.S. and
internationally. Structured finance revenue for full-year 2009 is
expected to decrease in the high-teens to low-twenties percent range,
reflecting continued declines across all asset classes. Corporate
finance revenue for full-year 2009 is expected to decrease in the mid-
to high single-digit percent range, with weakness most pronounced in
speculative-grade issuance and bank loans. Revenue from financial
institutions and public, project and infrastructure finance ratings for
full-year 2009 is expected to be about flat with full-year 2008.
For Moody's Analytics, we expect full-year 2009 revenue growth in the
mid single-digit percent range, including revenue from Fermat. We expect
strong revenue growth in the software and consulting businesses to
offset a revenue decline in the subscription business in the low
single-digit percent range. Within the U.S., we project Moody's
Analytics revenue to be about flat with full-year 2008. Outside the U.S.
we expect Moody's Analytics revenue to increase in the low double-digit
percent range.
*****
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, encompassing the growing array of
Moody's non-ratings businesses including Moody's KMV, a provider of
quantitative credit analysis tools, Moody's Economy.com, which provides
economic research and data services, Moody's Wall Street Analytics, a
provider of software for structured finance analytics, and Moody's
Fermat, a provider of risk and performance management software. The
Corporation, which reported revenue of $1.8 billion in 2008, employs
approximately 3,900 people worldwide and maintains a presence in 31
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 2009 and other forward-looking
statements in this release are made as of February 5, 2009, 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; proposed U.S., foreign, state and local legislation and
regulations; regulations relating to the oversight of Nationally
Recognized Statistical Rating Organizations; possible judicial decisions
in various jurisdictions regarding the status of and potential
liabilities of 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, 2007, the Company's quarterly
report on Form 10-Q for the quarter ended September 30, 2008, 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 Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Amounts in millions, except per
share amounts
Revenue $ 403.7 $ 504.9 $ 1,755.4 $ 2,259.0
Expenses
Operating, selling, general and 246.9 233.1 934.6 1,035.1
administrative expenses
Restructuring 0.2 47.8 (2.5 ) 50.0
Depreciation and amortization 31.2 11.9 75.1 42.9
Total expenses 278.3 292.8 1,007.2 1,128.0
Operating income 125.4 212.1 748.2 1,131.0
Interest and other
non-operating (expense) income, (1.1 ) (19.8 ) (22.4 ) (14.3 )
net
Income before provision for 124.3 192.3 725.8 1,116.7
income taxes
Provision for income taxes 35.6 65.0 268.2 415.2
Net income $ 88.7 $ 127.3 $ 457.6 $ 701.5
Earnings per share
Basic $ 0.38 $ 0.50 $ 1.89 $ 2.63
Diluted $ 0.37 $ 0.49 $ 1.87 $ 2.58
Weighted average number of
shares outstanding
Basic 236.2 256.2 242.4 266.4
Diluted 237.8 260.6 245.3 272.2
Moody's Corporation
Supplemental Revenue Information (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
Amounts in millions 2008 2007 2008 2007
Moody's Investors Service
Structured Finance $ 92.2 $ 158.6 $ 411.2 $ 873.3
Corporate Finance 56.6 90.1 300.5 411.5
Financial Institutions 56.5 66.5 263.0 274.3
Public, Project and 48.6 57.4 230.0 220.8
Infrastructure Finance
Intersegment royalty 16.1 14.8 63.6 55.5
Sub-total MIS 270.0 387.4 1,268.3 1,835.4
Eliminations (16.1 ) (14.8 ) (63.6 ) (55.5 )
Total MIS 253.9 372.6 1,204.7 1,779.9
Moody's Analytics
Subscription 122.0 112.4 475.9 421.5
Software 19.1 13.7 49.2 39.5
Consulting 8.7 6.2 25.6 18.1
Total MA 149.8 132.3 550.7 479.1
Total consolidated revenue $ 403.7 $ 504.9 $ 1,755.4 $ 2,259.0
Consolidated Revenue by
geographic area
United States $ 195.5 $ 277.2 $ 910.1 $ 1,361.8
International 208.2 227.7 845.3 897.2
Total consolidated revenue $ 403.7 $ 504.9 $ 1,755.4 $ 2,259.0
Moody's Corporation
Summary Impact of Reorganization on Revenue (Unaudited)
Amounts in Three Months Ended December 31, 2007 Twelve Months Ended December 31, 2007
millions
As Reclassifications 2008 As Reclassifications 2008
Reported (a) Adjusted Reported (a) Adjusted
Presentation Presentation
Structured $ 164.9 $ (6.3 ) $ 158.6 $ 890.6 $ (17.3 ) $ 873.3
finance
Corporate 104.5 (14.4 ) 90.1 465.4 (53.9 ) 411.5
finance
Financial 73.8 (7.3 ) 66.5 303.1 (28.8 ) 274.3
institutions
Public finance 29.4 (29.4 ) - 120.8 (120.8 ) -
Public,
project and - 57.4 57.4 - 220.8 220.8
infrastructure
finance
Total ratings 372.6 - 372.6 1,779.9 - 1,779.9
revenue
Research 88.1 (88.1 ) - 324.3 (324.3 ) -
revenue
Total Moody's
Investors 460.7 (88.1 ) 372.6 2,104.2 (324.3 ) 1,779.9
Service
Moody's KMV 44.2 (44.2 ) - 154.8 (154.8 ) -
Moody's - 132.3 132.3 - 479.1 479.1
Analytics
Total Moody's $ 504.9 $ - $ 504.9 $ 2,259.0 $ - $ 2,259.0
Corporation
(a) Reclassifications relate to the business reorganization announced in August
2007 which became effective in January 2008. It reflects the combination of the
research business, previously classified in Moody's Investors Service, and
Moody's KMV to form Moody Analytics. As part of the reorganization there were
several realignments within the MIS lines of business. Sovereign and
sub-sovereign ratings, which were previously part of financial institutions;
infrastructure/utilities ratings, which were previously part of corporate
finance; and project finance, which was previously part of structured finance,
were combined with the public finance business to form a new line of business
called public, project and infrastructure finance. In addition, real estate
investment trust ratings were moved from financial institutions and corporate
finance to the structured finance business. Furthermore, in August 2008 the
global managed investments group moved from structured finance to the financial
institutions business.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008
Amounts in
millions,
except per
share amounts
Non-GAAP Non-GAAP
As Financial As Financial
Reported Adjustments Measures* Reported Adjustments Measures*
Revenue $ 403.7 $ - $ 403.7 $ 1,755.4 $ - $ 1,755.4
Expenses 278.3 (0.2 ) (a) 278.1 1,007.2 2.5 (a) 1,009.7
Operating 125.4 0.2 125.6 748.2 (2.5 ) 745.7
income
Interest and
other
non-operating (1.1 ) - (1.1 ) (22.4 ) (13.3 ) (b) (35.7 )
income
(expense),
net
Income before
provision for 124.3 0.2 124.5 725.8 (15.8 ) 710.0
income taxes
Provision for 35.6 0.1 (c) 35.7 268.2 (3.5 ) (c) 264.7
income taxes
Net income $ 88.7 $ 0.1 $ 88.8 $ 457.6 $ (12.3 ) $ 445.3
Basic
earnings per $ 0.38 $ 0.38 $ 1.89 $ 1.84
share
Diluted
earnings per $ 0.37 $ 0.37 $ 1.87 $ 1.82
share
*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 financial
measures, when read in conjunction with the company's reported results, can
provide useful supplemental information for investors analyzing period to period
comparisons of the company's results. The table above shows Moody's results for
the three and twelve months ended December 31, 2008, adjusted to reflect the
following:
(a) To exclude adjustments made in 2008 relating to the 2007 restructuring
charge.
(b) To exclude benefits relating to the resolution of certain legacy tax
matters.
(c) To reflect the income tax impacts related to the adjustments described in
notes (a) and (b) above.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2007 December 31, 2007
Amounts in
millions,
except per
share amounts
Non-GAAP Non-GAAP
As Financial As Financial
Reported Adjustments Measures* Reported Adjustments Measures*
Revenue $ 504.9 $ - $ 504.9 $ 2,259.0 $ - $ 2,259.0
Expenses 292.8 (47.8 ) (a) 245.0 1,128.0 (50.0 ) (a) 1,078.0
Operating 212.1 47.8 259.9 1,131.0 50.0 1,181.0
income
Interest and
other
non-operating (19.8 ) - (19.8 ) (14.3 ) (31.9 ) (b) (46.2 )
income
(expense),
net
Income before
provision for 192.3 47.8 240.1 1,116.7 18.1 1,134.8
income taxes
Provision for 65.0 19.2 (c) 84.2 415.2 40.4 (c) 455.6
income taxes
Net income $ 127.3 $ 28.6 $ 155.9 $ 701.5 $ (22.3 ) $ 679.2
Basic
earnings per $ 0.50 $ 0.61 $ 2.63 $ 2.55
share
Diluted
earnings per $ 0.49 $ 0.60 $ 2.58 $ 2.50
share
*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 financial
measures, when read in conjunction with the company's reported results, can
provide useful supplemental information for investors analyzing period to period
comparisons of the company's results. The table above shows Moody's results for
the three and twelve months ended December 31, 2007, adjusted to reflect the
following:
(a) To exclude the 2007 restructuring charge.
(b) To exclude benefits relating to the resolution of certain legacy tax
matters.
(c) To reflect the income tax impacts related to the adjustments described in
notes (a) and (b) above.
Moody's Corporation
Selected Consolidated Balance Sheet Data (Unaudited)
December 31,
2008 2007
Amounts in millions
Cash and cash equivalents $ 245.9 $ 426.3
Short-term investments 7.1 14.7
Total current assets 816.9 989.1
Non-current assets 954.7 725.5
Total assets 1,771.6 1,714.6
Total current liabilities 1,392.4 1,349.2
Long-term debt 750.0 600.0
Other long-term liabilities 624.7 549.0
Shareholders' deficit (995.5 ) (783.6 )
Total liabilities and shareholders' deficit $ 1,771.6 $ 1,714.6
Shares outstanding 235.1 251.4
Source: Moody's Corporation