NEW YORK--(BUSINESS WIRE)--
Moody's Corporation (NYSE: MCO) today announced results for the second
quarter of 2009.
Summary of Results for Second Quarter 2009
Moody's reported revenue of $450.7 million for the three months ended
June 30, 2009, a decrease of 8% from $487.6 million for the second
quarter of 2008. Operating income for the quarter was $187.2 million, a
20% decline from $233.7 million for the same period last year. Diluted
earnings per share of $0.46 for the second quarter of 2009 included a
benefit of $0.03 associated with certain legacy tax matters and costs
for previously announced restructuring activities. Excluding these items
from both periods, diluted earnings per share of $0.43 for the quarter
declined 16% from $0.51 in the prior-year period.
"Moody's results in the second quarter reflected some improvement in
credit market activity," said Raymond McDaniel, Chairman and Chief
Executive Officer of Moody's. "We are raising our full-year 2009 EPS
guidance to $1.45 to $1.55 based on first half performance; however, we
remain cautious about business conditions for the remainder of the year."
Second Quarter Revenue
For Moody's Corporation overall, global revenue of $450.7 million
declined 8% from the second quarter of 2008. Excluding the unfavorable
impact of foreign currency translation, revenue declined 4 percent. U.S.
revenue of $237.1 million for the second quarter of 2009 decreased 10%
from the second quarter of 2008, while non-U.S. revenue of $213.6
million decreased 5% from the prior-year period. Excluding the
unfavorable impact of foreign currency translation, non-U.S. revenue
increased 3 percent. Non-U.S. revenue accounted for 47% of Moody's total
revenue for the quarter, essentially flat with 46% in the year-ago
period.
Global revenue for Moody's Investors Service ("MIS") for the second
quarter of 2009 was $310.3 million, a decrease of 13% from the
prior-year period. Excluding the unfavorable impact of foreign currency
translation, revenue declined 9 percent. U.S. revenue of $173.7 million
for the second quarter of 2009 decreased 13% from the second quarter of
2008. Outside the U.S., revenue of $136.6 million declined 13% from the
year-ago period.
Within the ratings business, global structured finance revenue totaled
$74.6 million for the second quarter of 2009, a decrease of 35% from a
year earlier. U.S. structured finance revenue decreased 33%, with
limited new issuance. Non-U.S. structured finance revenue decreased 38%,
driven by declines in all asset classes.
Global corporate finance revenue of $107.5 million in the second quarter
of 2009 increased 9% from the same quarter of 2008. U.S. corporate
finance revenue increased 15% from the second quarter of 2008, primarily
driven by better activity in the high-yield market. Outside the U.S.,
revenue was about flat with the prior-year period, with increased
activity in the investment-grade sector in Europe offset by declines in
other regions.
Global financial institutions revenue of $67.3 million in the second
quarter of 2009 decreased 10% compared to the same quarter of 2008.
Financial institutions revenue in the U.S. decreased 17% due to issuance
declines in the insurance and banking sectors. Outside the U.S., revenue
decreased 5% as increased issuance activity in the insurance sector was
more than offset by declines in banking revenue.
Global public, project and infrastructure finance revenue was $60.9
million for the second quarter of 2009, decreasing 8% from the second
quarter of 2008. U.S. revenue decreased 18% from the prior-year period,
primarily due to lower issuance activity in the municipal sector.
Non-U.S. revenue increased 22% with strong issuance in project and
infrastructure finance in Europe.
Global revenue for Moody's Analytics for the second quarter of 2009
reached $140.4 million, up 7% from the same quarter of 2008. Excluding
the unfavorable impact of foreign currency translation, revenue
increased 9 percent. Subscription revenue of $117.8 million was about
flat with the prior-year period, and represented more than 80% of
Moody's Analytics revenue. Software revenue grew 83% while revenue in
professional services was about flat with the prior-year period.
In the U.S., Moody's Analytics revenue of $63.4 million for the second
quarter of 2009 decreased 2% from the second quarter of 2008. Weakness
among financial services customers resulted in higher customer attrition
rates, partially offset by new subscription contracts, software licenses
and professional services engagements. Outside the U.S., revenue
increased 14% over the prior-year period to $77.0 million, primarily due
to the impact of acquisitions made in 2008.
Second Quarter Expenses
Second quarter 2009 expenses for Moody's Corporation of $263.5 million
were 4% higher than in the prior-year period, and Moody's reported
operating margin for the second quarter of 2009 was 41.5%. Excluding the
restructuring adjustments in both periods, expenses were 2% higher than
the prior-year period and operating margin was 42.2%, compared to 47.9%
in the prior-year period. Without the favorable impact of foreign
currency translation, reported expenses increased 9% and reported
operating income declined 19 percent.
Second Quarter Effective Tax Rate
Moody's effective tax rate was 36.4% for the second quarter of 2009,
compared with 38.5% for the prior-year period. Excluding certain legacy
tax matters and restructuring efforts in both periods, the effective tax
rate was 38.8% for the second quarter of 2009, compared with 39.6% in
the prior-year period. The decrease was primarily due to a higher
proportion of taxable income generated internationally in lower tax
jurisdictions.
Year-to-Date Results
Moody's Corporation revenue for the first six months of 2009 totaled
$859.6 million, a decrease of 6% from $918.3 million for the same period
of 2008. Expenses for the first six months of 2009 were $523.5 million,
and increased 8% from a year ago. First half operating income of $336.1
million was down 22% from $433.0 million for the same period of 2008.
Excluding the negative impact of foreign currency translation, revenue
and operating income for the first six months of 2009 decreased 2% and
21%, respectively. Diluted earnings per share of $0.84 for the first
half of 2009 included a charge of $0.01 associated with certain legacy
tax matters and the previously announced restructuring plans. Excluding
these items in both periods, diluted earnings per share of $0.85 for the
first half of 2009 decreased 14% from $0.99 for the first half of 2008.
Revenue at Moody's Investors Service totaled $580.5 million for the
first six months of 2009, a decrease of 11% from the prior-year period.
Moody's Analytics revenue rose to $279.1 million for the first half of
2009, up 6% from the first half of 2008.
Share Repurchases and Debt Capacity
During the second quarter of 2009, Moody's had no share repurchase
activity and issued 0.6 million shares under employee stock-based
compensation plans. Outstanding shares as of June 30, 2009 totaled 236.3
million, representing a 3% decrease from a year earlier. Additionally,
as of June 30, 2009, Moody's had $1.4 billion of share repurchase
authority remaining under its current program. At quarter-end, Moody's
had $1.3 billion of outstanding debt and approximately $400 million of
additional debt capacity available under its revolving credit facility.
Moody's reduced total outstanding debt by $80 million during the second
quarter and $137 million for the first half of 2009.
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.
Moody's is revising its outlook for the full-year 2009 to reflect
stronger first half performance and anticipated weakness in business
conditions for the rest of the year. This outlook assumes foreign
currency translation at current exchange rates. While our expectations
for revenue have modestly improved, the Company still expects full-year
2009 revenue to decline in the mid-single-digit percent range. Revenue
expectations for certain areas have changed based on conditions specific
to those businesses and geographies. We now expect full-year 2009
expenses to increase in the mid-single-digit percent range. Full-year
2009 operating margin is still projected in the mid- to high-thirties
percent range. The Company now expects diluted earnings per share for
full-year 2009 in the range of $1.45 to $1.55.
For the global MIS business, we still expect revenue for the full-year
2009 to decline in the high-single-digit percent range. Within the U.S.,
we continue to expect MIS revenue to decline in the high-single-digit
percent range, while we now expect MIS revenue outside the U.S. to
decline in the mid-single-digit percent range. We now expect structured
finance revenue for full-year 2009 to decrease in the mid-twenties
percent range, with declines across all asset classes. Corporate finance
revenue for full-year 2009 is now expected to increase in the
high-single-digit percent range from full-year 2008, reflecting strong
investment- and speculative-grade activity in the first half of this
year. Revenue from financial institution ratings is still expected to
decline in the mid-single-digit percent range and public, project and
infrastructure finance revenue for full-year 2009 is still expected to
be about flat with full-year 2008.
For Moody's Analytics, full-year 2009 revenue growth is now expected to
be in the low-single-digit percent range. We expect strong growth in
software revenue to offset a decline in subscription revenue in the
low-single-digit percent range and a decline in professional services
revenue in the high-single-digit percent range, reflecting reduced
customer spend for training services through this challenging economic
environment. Within the U.S., we still project Moody's Analytics revenue
to decline in the low-single-digit percent range. Outside the U.S., we
now expect Moody's Analytics revenue to increase in the
high-single-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, which encompasses the growing array
of Moody's non-ratings businesses including risk management software for
financial institutions, quantitative credit analysis tools, economic
research and data services, data and analytical tools for the structured
finance market, and training and other professional services. The
Corporation, which reported revenue of $1.8 billion in 2008, employs
approximately 3,900 people worldwide and maintains a presence in 27
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 July 29, 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, 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 Six Months Ended
June 30, June 30,
Amounts in millions, except per 2009 2008 2009 2008
share amounts
Revenue $ 450.7 $ 487.6 $ 859.6 $ 918.3
Expenses:
Operating 128.0 123.3 250.4 243.2
Selling, general and administrative 116.7 114.0 226.9 213.7
Restructuring 3.1 (0.2 ) 14.9 (0.9 )
Depreciation and amortization 15.7 16.8 31.3 29.3
Total expenses 263.5 253.9 523.5 485.3
Operating income 187.2 233.7 336.1 433.0
Non-operating (expense) income, net
Interest (expense) income, net (6.1 ) (12.4 ) (9.4 ) (23.9 )
Other non-operating (expense) (6.5 ) 2.5 (10.5 ) 11.4
income, net
Total (12.6 ) (9.9 ) (19.9 ) (12.5 )
Income before provision for income 174.6 223.8 316.2 420.5
taxes
Provision for income taxes 63.6 86.2 114.1 161.7
Net income 111.0 137.6 202.1 258.8
Less: net income attributable to 1.7 2.4 2.6 2.9
noncontrolling interests
Net income attributable to Moody's $ 109.3 $ 135.2 $ 199.5 $ 255.9
Corporation
Earnings per share attributable to
Moody's common shareholders
Basic $ 0.46 $ 0.55 $ 0.85 $ 1.04
Diluted $ 0.46 $ 0.54 $ 0.84 $ 1.03
Weighted average number of shares
outstanding
Basic 236.1 244.6 235.8 246.0
Diluted 238.1 248.1 237.3 249.5
Moody's Corporation
Supplemental Revenue Information (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
Amounts in millions 2009 2008 2009 2008
Moody's Investors Service
Structured Finance $ 74.6 $ 115.6 $ 147.0 $ 218.0
Corporate Finance 107.5 98.9 191.6 172.2
Financial Institutions 67.3 75.1 123.6 142.1
Public, Project and Infrastructure 60.9 66.2 118.3 121.7
Finance
Intersegment royalty 14.4 15.7 29.1 31.7
Sub-total MIS 324.7 371.5 609.6 685.7
Eliminations (14.4 ) (15.7 ) (29.1 ) (31.7 )
Total MIS revenue 310.3 355.8 580.5 654.0
Moody's Analytics
Subscriptions 117.8 117.1 234.8 235.3
Software 17.4 9.5 33.5 19.0
Professional Services * 5.2 5.2 10.8 10.0
Total MA revenue 140.4 131.8 279.1 264.3
Total Moody's Corporation revenue $ 450.7 $ 487.6 $ 859.6 $ 918.3
Moody's Corporation revenue by
geographic area
United States $ 237.1 $ 263.5 $ 446.0 $ 496.4
International 213.6 224.1 413.6 421.9
$ 450.7 $ 487.6 $ 859.6 $ 918.3
* During the second quarter of 2009 the Company renamed its 'Consulting'
line of business within the MA operating segment to 'Professional
Services'. The new name more accurately reflects the type of services
rendered in this area, primarily training and other specialized projects
undertaken at the request of customers.
Moody's Corporation
Consolidated Interest (Expense) / Income, Net (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Amounts in millions
Interest (expense) / income:
Expense on borrowings $ (12.5 ) $ (14.3 ) $ (24.4 ) $ (29.7 )
Income 0.6 3.2 1.4 10.2
Legacy Tax(a) 6.5 2.3 6.5 2.3
FIN 48 and other tax (0.7 ) (3.7 ) 6.7 (6.8 )
Interest capitalized - 0.1 0.4 0.1
Total interest (expense) income, $ (6.1 ) $ (12.4 ) $ (9.4 ) $ (23.9 )
net
(a) The 2009 amount represents interest income related to the favorable
settlement of the 1993 - 1996 legacy tax matter; the 2008 amount represents
a reduction of accrued interest due to the favorable resolution of legacy
tax matters.
Moody's Corporation
Selected Consolidated Balance Sheet Data (Unaudited)
June 30, December 31,
Amounts in millions 2009 2008
Cash and cash equivalents $ 392.8 $ 245.9
Short-term investments 4.9 7.1
Total current assets 900.6 809.1
Non-current assets 973.3 964.3
Total assets 1,873.9 1,773.4
Total current liabilities 1,305.1 1,393.1
Total debt (1) 1,330.4 1,467.7
Other long-term liabilities 568.3 616.4
Total shareholders' deficit (749.5 ) (986.1 )
Total liabilities and shareholders' deficit 1,873.9 1,773.4
Actual number of shares outstanding 236.3 235.1
(1) Includes long-term debt of $750.0 million at June 30, 2009 and
December 31, 2008. Additionally, this includes amounts outstanding under
the Company's commercial paper program and revolving credit facility of
$370.4 million and $210.0 million, respectively, at June 30, 2009, and
$104.7 million and $613.0 million, respectively, at December 31,
2008, which are included in total current liabilities.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Three Months Ended June 30,
Amounts in
millions, 2009 2008
except per
share amounts
Non-GAAP Non-GAAP
As Financial As Financial
Reported Adjustments Measures Reported Adjustments Measures
* *
Revenue $ 450.7 $ - $ 450.7 $ 487.6 $ - $ 487.6
Expenses 263.5 (3.1 ) (a) 260.4 253.9 0.2 (a) 254.1
Operating 187.2 3.1 190.3 233.7 (0.2 ) 233.5
income
Non-operating
(expense) (12.6 ) (6.5 ) (b) (19.1 ) (9.9 ) (8.7 ) (b) (18.6 )
income, net
Income before
provision for 174.6 (3.4 ) 171.2 223.8 (8.9 ) 214.9
income taxes
Provision for 63.6 2.9 (c) 66.5 86.2 (1.0 ) (c) 85.2
income taxes
Net income 111.0 (6.3 ) 104.7 137.6 (7.9 ) 129.7
Less: net
income
attributable 1.7 - 1.7 2.4 - 2.4
to
noncontrolling
interests
Net income
attributable $ 109.3 $ (6.3 ) $ 103.0 $ 135.2 $ (7.9 ) $ 127.3
to Moody's
Corporation
Earnings per
share
attributable
to Moody's
common
shareholders
Basic $ 0.46 $ 0.44 $ 0.55 $ 0.52
Diluted $ 0.46 $ 0.43 $ 0.54 $ 0.51
*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. May not add due to rounding.
The tables above show Moody's consolidated results for each of the three month
periods ended June 30, 2009 and 2008, adjusted to exclude the impact of the
following:
(a) To exclude adjustments relating to the fourth quarter 2007 restructuring
charge and the 2009 restructuring plan approved on March 27, 2009.
(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, and to exclude a $4.3 million tax benefit recorded in
the second quarter of 2009 related to the settlement of a legacy tax matter.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Six Months Ended June 30,
Amounts in
millions, 2009 2008
except per
share amounts
Non-GAAP Non-GAAP
As Financial As Financial
Reported Adjustments Measures Reported Adjustments Measures
* *
Revenue $ 859.6 $ - $ 859.6 $ 918.3 $ - $ 918.3
Expenses 523.5 (14.9 ) (a) 508.6 485.3 0.9 (a) 486.2
Operating 336.1 14.9 351.0 433.0 (0.9 ) 432.1
income
Non-operating
(expense) (19.9 ) (6.5 ) (b) (26.4 ) (12.5 ) (8.7 ) (b) (21.2 )
income, net
Income before
provision for 316.2 8.4 324.6 420.5 (9.6 ) 410.9
income taxes
Provision for 114.1 7.3 (c) 121.4 161.7 (1.2 ) (c) 160.5
income taxes
Net income 202.1 1.1 203.2 258.8 (8.4 ) 250.4
Less: net
income
attributable 2.6 - 2.6 2.9 - 2.9
to
noncontrolling
interests
Net income
attributable $ 199.5 $ 1.1 $ 200.6 $ 255.9 $ (8.4 ) $ 247.5
to Moody's
Corporation
Earnings per
share
attributable
to Moody's
common
shareholders
Basic $ 0.85 $ 0.85 $ 1.04 $ 1.01
Diluted $ 0.84 $ 0.85 $ 1.03 $ 0.99
*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. May not add due to rounding.
The tables above show Moody's consolidated results for each of the six month
periods ended June 30, 2009 and 2008, adjusted to exclude the impact of the
following:
(a) To exclude adjustments relating to the fourth quarter 2007 restructuring
charge and the 2009 restructuring plan approved on March 27, 2009.
(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, and to exclude a $4.3 million tax benefit recorded in
the second quarter of 2009 related to the settlement of a legacy tax matter.
Source: Moody's Corporation