-- Reported 3Q09 EPS of $0.42; excluding restructuring, EPS of $0.43
-- 3Q09 revenue of $451.8 million, up 4% from prior-year period
-- Raising FY 2009 EPS guidance to range of $1.60 to $1.68
NEW YORK--(BUSINESS WIRE)--
Moody's Corporation (NYSE: MCO) today announced results for the third
quarter of 2009.
Summary of Results for Third Quarter 2009
Moody's reported revenue of $451.8 million for the three months ended
September 30, 2009, an increase of 4% from $433.4 million for the third
quarter of 2008. Operating income for the quarter was $172.5 million, a
9% decline from $189.8 million for the same period last year. Diluted
earnings per share of $0.42 for the third quarter of 2009 included a
charge of $0.01 related to previously announced restructuring
activities. Excluding the restructuring adjustment from both periods and
the benefit related to legacy tax matters in the prior-year period,
diluted earnings per share of $0.43 for the quarter declined 4% from
$0.45 in the prior-year period.
"Moody's third quarter results reflected continuing strength in
corporate debt issuance as well as growth from Moody's Analytics," said
Raymond McDaniel, Chairman and Chief Executive Officer of Moody's.
"While improvement in other sectors of the credit markets remains
uneven, we are raising our full-year 2009 EPS guidance to a range of
$1.60 to $1.68 to reflect our expectation that corporate bond activity
will remain strong through year-end."
Third Quarter Revenue
For Moody's Corporation overall, global revenue of $451.8 million
increased 4% from the third quarter of 2008. Excluding the unfavorable
impact of foreign currency translation, revenue increased 6 percent.
U.S. revenue of $229.7 million for the third quarter of 2009 increased
5% from the third quarter of 2008, while non-U.S. revenue of $222.1
million increased 3% from the prior-year period. Excluding the
unfavorable impact of foreign currency translation, non-U.S. revenue
increased 8 percent. Non-U.S. revenue accounted for 49% of Moody's total
revenue for the quarter, essentially flat with 50% in the year-ago
period.
Global revenue for Moody's Investors Service ("MIS") for the third
quarter of 2009 was $305.3 million, an increase of 3% from the
prior-year period. Excluding the unfavorable impact of foreign currency
translation, revenue grew 5 percent. U.S. revenue of $164.8 million for
the third quarter of 2009 increased 8% from the third quarter of 2008.
Outside the U.S., revenue of $140.5 million declined 2% from the
year-ago period.
Within MIS, global corporate finance revenue of $101.4 million in the
third quarter of 2009 increased 32% from the same quarter of 2008. U.S.
corporate finance revenue increased 35% from the third quarter of 2008,
primarily driven by better activity in the high-yield market. Outside
the U.S., revenue increased 27% from the prior-year period, primarily
due to issuance of investment-grade securities in Europe.
Global structured finance revenue totaled $79.2 million for the third
quarter of 2009, a decrease of 17% from a year earlier. U.S. structured
finance revenue decreased 8%, with new issuance limited primarily to
TALF-related securitizations. Non-U.S. structured finance revenue
decreased 24%, driven by revenue declines in derivatives and
asset-backed securities.
Global financial institutions revenue of $62.9 million in the third
quarter of 2009 decreased 2% compared to the same quarter of 2008, due
to issuance declines in the banking sector. U.S. financial institutions
revenue decreased 4%, while non-U.S. revenue decreased 1 percent.
Global public, project and infrastructure finance revenue was $61.8
million for the third quarter of 2009, an increase of 4% from the third
quarter of 2008. U.S. revenue decreased 2% from the prior-year period,
primarily due to lower issuance activity in the municipal sector.
Non-U.S. revenue increased 14% with strong issuance in European
infrastructure finance.
Global revenue for Moody's Analytics ("MA") for the third quarter of
2009 reached $146.5 million, up 7% from the same quarter of 2008.
Excluding the unfavorable impact of foreign currency translation,
revenue increased 10 percent. Subscription revenue of $118.9 million was
about flat with the prior-year period, and represented more than 80% of
Moody's Analytics revenue. Software revenue grew 82%, while revenue in
professional services increased 9% from the prior-year period.
In the U.S., MA revenue of $64.9 million for the third quarter of 2009
was about flat with the third quarter of 2008. Modestly higher attrition
from financial institution customers was offset by new subscription
business and growth in software revenue. Outside the U.S., revenue
increased 14% over the prior-year period to $81.6 million, primarily due
to the impact of acquisitions made in 2008.
Third Quarter Expenses
Third quarter 2009 expenses for Moody's Corporation of $279.3 million
were 15% higher than in the prior-year period. The increase reflects
incremental expenses from businesses acquired in the fourth quarter of
2008 and higher accruals for incentive compensation reflecting the
stronger full-year outlook. Moody's reported operating margin for the
third quarter of 2009 was 38.2%. Excluding the restructuring adjustments
in both periods, expenses were 12% higher than the prior-year period and
operating margin was 39.0%, compared to 43.4% in the prior-year period.
Without the favorable impact of foreign currency translation, reported
expenses increased 18% and reported operating income declined 8% percent.
Moody's effective tax rate was 37.5% for the third quarter of 2009,
compared with 38.4% for 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 nine months of 2009 totaled
$1,311.4 million, a decrease of 3% from $1,351.7 million for the same
period of 2008. Expenses for the first nine months of 2009 were $802.8
million, an increase of 10% from a year ago. Year-to-date operating
income of $508.6 million was down 18% from $622.8 million for the same
period of 2008. Excluding the negative impact of foreign currency
translation, revenue for the first nine months of 2009 was about flat
with the prior-year period and operating income decreased 17 percent.
Diluted earnings per share of $1.26 for the first nine months of 2009
included a net charge of $0.02, reflecting costs related to previously
announced restructuring plans partially offset by a benefit from certain
legacy tax matters. Excluding these items in both periods, diluted
earnings per share of $1.28 for the first nine months of 2009 decreased
11% from $1.44 for the first nine months of 2008.
Revenue at Moody's Investors Service totaled $885.8 million for the
first nine months of 2009, a decrease of 7% from the prior-year period.
Moody's Analytics revenue rose to $425.6 million for the first nine
months of 2009, up 6% from the first nine months of 2008.
Share Repurchases and Debt Capacity
During the third quarter of 2009, Moody's did not repurchase shares and
issued 0.2 million shares under employee stock-based compensation plans.
Outstanding shares as of September 30, 2009 totaled 236.5 million,
representing a 1% decrease from a year earlier. Additionally, as of
September 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 $450 million of
additional debt capacity available under its revolving credit facility.
Moody's reduced total outstanding debt by approximately $50 million
during the third quarter and $187 million for the first nine months 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 due to continuing
strength in corporate debt issuance. This outlook assumes foreign
currency translation at end of third quarter exchange rates. We now
expect revenue for the full-year 2009 to be about flat versus full-year
2008. 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 high-single-digit percent
range. Full-year 2009 operating margin is now projected in the
high-thirties percent range and the effective tax rate is now expected
in the range of 37 to 38 percent. The Company now expects diluted
earnings per share for full-year 2009 in the range of $1.60 to $1.68.
For the global MIS business, we now expect revenue for the full-year
2009 to decline in the low-single-digit percent range. Within the U.S.,
we now expect MIS revenue to be about flat with the prior-year period.
We continue to expect MIS revenue outside the U.S. to decline in the
mid-single-digit percent range. We now expect corporate finance revenue
for full-year 2009 to increase in the low-thirties percent range from
full-year 2008, reflecting strong activity in both investment-grade and
speculative-grade issuance. We still expect structured finance revenue
for full-year 2009 to decrease in the mid-twenties percent range, with
declines across all asset classes. Revenue from financial institution
ratings is still expected to decline in the mid-single-digit percent
range, while revenue from public, project and infrastructure finance for
the full-year 2009 is now expected to increase in the low-single-digit
percent range.
For Moody's Analytics, full-year 2009 revenue growth is still expected
to be in the low-single-digit percent range, driven by our expectations
for strong growth in software revenue attributable to the Fermat
acquisition. We now project subscription revenue to be about flat with
full-year 2008 results, while professional services revenue is now
expected to decline in the mid-single-digit percent range. Within the
U.S., we still anticipate MA revenue will decline in the
low-single-digit percent range, and outside the U.S., we still expect
revenue to increase in the high-single-digit percent range.
Conference Call
A conference call to discuss third quarter 2009 results will be held
this morning, October 29, at 11:30 a.m. Eastern Time. Individuals within
the U.S. and Canada can access the call by dialing 1-800-289-0722. Other
callers should dial +1-913-905-3198. 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 through Moody's Shareholder Relations website, http://ir.moodys.com
under "Featured Events", until midnight Eastern Time, November 12, 2009.
A replay of the teleconference will be available from 4:00 p.m. Eastern
Time, October 29, 2009 until midnight Eastern Time, November 12, 2009.
The replay can be accessed from within the U.S. and Canada by dialing
1-888-203-1112. Other callers can access the replay at +1-719-457-0820.
The replay confirmation code is 2430581.
*****
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 4,000 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 October 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 Nine Months Ended
September 30, September 30,
Amounts in millions, except per 2009 2008 2009 2008
share amounts
Revenue $ 451.8 $ 433.4 $ 1,311.4 $ 1,351.7
Expenses:
Operating 135.1 122.7 385.5 365.9
Selling, general and 124.3 108.1 351.2 321.8
administrative
Restructuring 3.7 (1.8 ) 18.6 (2.7 )
Depreciation and amortization 16.2 14.6 47.5 43.9
Total expenses 279.3 243.6 802.8 728.9
Operating income 172.5 189.8 508.6 622.8
Non-operating (expense) income,
net
Interest (expense) income, net (11.5 ) (12.6 ) (20.9 ) (36.5 )
Other non-operating (expense) 1.7 7.5 (8.8 ) 18.9
income, net
Total (9.8 ) (5.1 ) (29.7 ) (17.6 )
Income before provision for 162.7 184.7 478.9 605.2
income taxes
Provision for income taxes 61.0 70.9 175.1 232.6
Net income 101.7 113.8 303.8 372.6
Less: net income attributable 1.1 0.8 3.7 3.7
to noncontrolling interests
Net income attributable to $ 100.6 $ 113.0 $ 300.1 $ 368.9
Moody's Corporation
Earnings per share attributable
to Moody's common shareholders
Basic $ 0.43 $ 0.47 $ 1.27 $ 1.51
Diluted $ 0.42 $ 0.46 $ 1.26 $ 1.49
Weighted average number of
shares outstanding
Basic 236.4 241.3 236.0 244.4
Diluted 238.2 244.6 237.6 247.9
Moody's Corporation
Supplemental Revenue Information (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Amounts in millions 2009 2008 2009 2008
Moody's Investors Service
Structured Finance $ 79.2 $ 95.7 $ 226.2 $ 313.7
Corporate Finance 101.4 77.0 293.0 249.2
Financial Institutions 62.9 64.4 186.5 206.5
Public, Project and 61.8 59.7 180.1 181.4
Infrastructure Finance
Intersegment royalty 14.5 15.8 43.6 47.5
Sub-total MIS 319.8 312.6 929.4 998.3
Eliminations (14.5 ) (15.8 ) (43.6 ) (47.5 )
Total MIS revenue 305.3 296.8 885.8 950.8
Moody's Analytics
Subscriptions 118.9 118.7 353.7 354.0
Software 20.2 11.1 53.7 30.1
Professional Services 7.4 6.8 18.2 16.8
Total MA revenue 146.5 136.6 425.6 400.9
Total Moody's Corporation $ 451.8 $ 433.4 $ 1,311.4 $ 1,351.7
revenue
Moody's Corporation revenue by
geographic area
United States $ 229.7 $ 218.3 $ 675.7 $ 714.6
International 222.1 215.1 635.7 637.1
$ 451.8 $ 433.4 $ 1,311.4 $ 1,351.7
Moody's Corporation
Consolidated Interest (Expense) Income, Net (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Amounts in millions 2009 2008 2009 2008
Interest (expense) income:
Expense on borrowings $ (10.4 ) $ (14.5 ) $ (34.8 ) $ (44.2 )
Income 0.6 5.0 2.0 15.2
Legacy tax(a) - - 6.5 2.3
FIN 48 and other tax (2.4 ) (3.6 ) 4.3 (10.4 )
Interest capitalized 0.7 0.5 1.1 0.6
Total interest (expense) income, $ (11.5 ) $ (12.6 ) $ (20.9 ) $ (36.5 )
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)
September 30, December 31,
2009 2008
Amounts in millions
Cash and cash equivalents $ 422.7 $ 245.9
Short-term investments 6.8 7.1
Total current assets 896.5 809.1
Non-current assets 977.7 964.3
Total assets 1,874.2 1,773.4
Total current liabilities 1,202.3 1,393.1
Total debt (1) 1,281.0 1,467.7
Other long-term liabilities 571.3 616.4
Total shareholders' deficit (647.5 ) (986.1 )
Total liabilities and shareholders' deficit 1,874.2 1,773.4
Actual number of shares outstanding 236.5 235.1
(1)Includes long-term debt of $748.1 and $750.0 million at September 30,
2009 and December 31, 2008, respectively. Additionally, this includes
amounts outstanding under the Company's commercial paper program of
$531.0 million at September 30, 2009, and $104.7 million and $613.0
million under the commercial paper program and revolving credit
facility, 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 September 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 $ 451.8 $ - $ 451.8 $ 433.4 $ - $ 433.4
Expenses 279.3 (3.7 ) (a) 275.6 243.6 1.8 (a) 245.4
Operating 172.5 3.7 176.2 189.8 (1.8 ) 188.0
income
Non-operating
(expense) (9.8 ) - (9.8 ) (5.1 ) (4.6 ) (b) (9.7 )
income, net
Income before
provision for 162.7 3.7 166.4 184.7 (6.4 ) 178.3
income taxes
Provision for 61.0 1.4 (c) 62.4 70.9 (2.5 ) (c) 68.4
income taxes
Net income 101.7 2.3 104.0 113.8 (3.9 ) 109.9
Less: net
income
attributable 1.1 - 1.1 0.8 - 0.8
to
noncontrolling
interests
Net income
attributable $ 100.6 $ 2.3 $ 102.9 $ 113.0 $ (3.9 ) $ 109.1
to Moody's
Corporation
Earnings per share
attributable to Moody's
common shareholders
Basic $ 0.43 $ 0.44 $ 0.47 $ 0.45
Diluted $ 0.42 $ 0.43 $ 0.46 $ 0.45
* 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 September 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
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Nine Months Ended September 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 $ 1,311.4 $ - $ 1,311.4 $ 1,351.7 $ - $ 1,351.7
Expenses 802.8 (18.6 ) (a) 784.2 728.9 2.7 (a) 731.6
Operating 508.6 18.6 527.2 622.8 (2.7 ) 620.1
income
Non-operating
(expense) (29.7 ) (6.5 ) (b) (36.2 ) (17.6 ) (13.3 ) (b) (30.9 )
income, net
Income before
provision for 478.9 12.1 491.0 605.2 (16.0 ) 589.2
income taxes
Provision for 175.1 8.7 (c) 183.8 232.6 (3.7 ) (c) 228.9
income taxes
Net income 303.8 3.4 307.2 372.6 (12.3 ) 360.3
Less: net
income
attributable 3.7 - 3.7 3.7 - 3.7
to
noncontrolling
interests
Net income
attributable $ 300.1 $ 3.4 $ 303.5 $ 368.9 $ (12.3 ) $ 356.6
to Moody's
Corporation
Earnings per share
attributable to Moody's
common shareholders
Basic $ 1.27 $ 1.29 $ 1.51 $ 1.46
Diluted $ 1.26 $ 1.28 $ 1.49 $ 1.44
* 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 nine month periods ended
September 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