-- 1Q10 revenue up 17%
-- Reported 1Q10 EPS of $0.47 up 24% from 1Q09
-- FY 2010 EPS guidance of $1.75 to $1.85 reaffirmed
NEW YORK--(BUSINESS WIRE)--
Moody's Corporation (NYSE: MCO) today announced results for the first
quarter 2010.
Summary of Results for First Quarter 2010
Moody's reported revenue of $476.6 million for the three months ended
March 31, 2010, an increase of 17% from $408.9 million for the first
quarter of 2009. Operating income for the quarter was $196.8 million, a
32% increase from $148.9 million for the same period last year. Diluted
earnings per share were $0.47 for the first quarter of 2010, 24% higher
than $0.38 reported in the first quarter of 2009. Excluding the
restructuring charge in 2009 and minor restructuring-related adjustments
in 2010, diluted earnings per share of $0.47 in 2010 were 15% higher
than $0.41 in the prior-year period.
"Moody's first quarter results reflected strong activity in corporate
and financial institution debt markets, largely driven by high-yield
bond and loan issuance," said Raymond McDaniel, Chairman and Chief
Executive Officer of Moody's. "Despite good first quarter performance,
we are reaffirming our full-year 2010 EPS guidance of $1.75 to $1.85 due
to uncertainty that issuance levels later in the year will continue to
overcome weakness in some areas of structured finance."
First Quarter Revenue
For Moody's Corporation overall, global revenue of $476.6 million
increased 17% from the first quarter of 2009. Excluding the favorable
impact of foreign currency translation, revenue increased 14 percent.
U.S. revenue of $254.6 million for the first quarter of 2010 increased
22% from the first quarter of 2009, while revenue generated outside the
U.S. of $222.0 million increased 11% from the prior-year period. Revenue
generated outside the U.S. represented 47% of Moody's total revenue for
the quarter, down from 49% in the year-ago period.
Global revenue for Moody's Investors Service ("MIS") for the first
quarter of 2010 was $335.5 million, an increase of 24% from the
prior-year period. Excluding the favorable impact of foreign currency
translation, revenue grew 21 percent. U.S. revenue of $189.2 million for
the first quarter of 2010 increased 30% from the first quarter of 2009.
Outside the U.S., revenue of $146.3 million increased 17% from the
year-ago period.
Within MIS, global corporate finance revenue of $126.4 million in the
first quarter of 2010 increased 50% from the same quarter of 2009. U.S.
corporate finance revenue grew 49% from the first quarter of 2009, while
outside the U.S., revenue increased 53% from the prior-year period.
Growth was primarily driven by strength of issuance activity in the
high-yield bond and loan market.
Global structured finance revenue totaled $71.5 million for the first
quarter of 2010, a decline of 1% from a year earlier. U.S. structured
finance revenue grew 21% from the year-ago period, reflecting increased
issuance activity from asset-backed securities and commercial
real-estate finance. Non-U.S. structured finance revenue decreased 17%,
driven primarily by declines within Europe in most asset classes as
better credit market conditions improved issuers' access to liquidity
and reduced issuance of new securitizations for government-sponsored
facilities.
Global financial institutions revenue of $76.2 million in the first
quarter of 2010 increased 35% compared to the same quarter of 2009,
primarily due to higher levels of issuance in the banking and insurance
sectors. U.S. financial institutions revenue increased 39%, while
non-U.S. revenue increased 33 percent.
Global public, project and infrastructure finance revenue was $61.4
million for the first quarter of 2010, an increase of 7% from the first
quarter of 2009. U.S. revenue grew 6% from the prior-year period
reflecting stronger public finance issuance across most sectors as well
as improved project finance market conditions. Non-U.S. revenue
increased 8%, primarily driven by investment-grade activity within
project and infrastructure finance.
Global revenue for Moody's Analytics ("MA") for the first quarter of
2010 was $141.1 million, up 2% from the first quarter of 2009. Excluding
the favorable impact of foreign currency translation, revenue grew 1
percent. Reflecting the realignment of revenue by product grouping in
both periods, revenue from research, data and analytics of $104.6
million increased by 3% from the prior-year period and risk management
software revenue of $33.3 million grew 4 percent. Professional services
revenue of $3.2 million declined 30% from the prior-year period.
In the U.S., MA revenue of $65.4 million for the first quarter of 2010
increased 3% from the prior-year period. Outside the U.S., revenue of
$75.7 million grew 1% compared to the same quarter of 2009.
First Quarter Expenses
First quarter 2010 expenses for Moody's Corporation of $279.8 million
were 8% greater than in the prior-year period primarily due to higher
accruals for performance-based compensation. Moody's reported operating
margin for the first quarter of 2010 was 41.3 percent. Excluding the
restructuring charge in 2009 and minor adjustments to this charge in
2010, Moody's first quarter 2010 expenses of $280.5 million were 13%
higher in 2010 than in the prior-year period and operating margin was
41.1%, compared to 39.3% in the first quarter of 2009. Without the
unfavorable impact of foreign currency translation, reported expenses
increased 5 percent.
Moody's effective tax rate was 37.2% for the first quarter of 2010,
compared with 35.7% for the prior-year period. The increase was
primarily due to reductions in unrecognized tax benefits and other
tax-related liabilities in the prior period that did not occur in the
current quarter.
Capital Allocation and Liquidity
During the first quarter of 2010, Moody's repurchased 1.1 million shares
at a total cost of $30 million and issued 1.4 million shares under
employee stock-based compensation plans. Outstanding shares as of March
31, 2010 totaled 237.0 million, representing a 1% increase from a year
earlier. As of March 31, 2010, Moody's had $1.4 billion of share
repurchase authority remaining under its current program. At
quarter-end, Moody's had $1.1 billion of outstanding debt and more than
$600 million of additional debt capacity available under its revolving
credit facility. Moody's reduced total outstanding debt by $72 million
during the first quarter. At quarter-end, total cash and cash
equivalents were $496 million, an increase of $155 million from a year
earlier.
Assumptions and Outlook for Full-Year 2010
Moody's outlook for 2010 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
eventual withdrawal 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 the
current outlook.
Moody's is reaffirming its 2010 full-year EPS guidance; however, certain
components of 2010 guidance have been modified to reflect our current
view of credit market conditions and implications for the Company. For
Moody's overall, the Company continues to expect full-year 2010 revenue
and expenses to increase in the high-single-digit percent range. The
Company continues to project the full-year 2010 operating margin in the
high-thirties percent range and the effective tax rate in the range of
37 to 38 percent. Share repurchase is expected to continue at modest
levels in 2010 subject to available cash flow and other capital
allocation decisions. The Company continues to expect diluted earnings
per share for full-year 2010 in the range of $1.75 to $1.85. This
outlook assumes foreign currency translation at end-of-quarter rates.
For the global MIS business, we continue to expect revenue for the
full-year 2010 to increase in the high-single- to low-double-digit
percent range. Within the U.S., we continue to expect MIS revenue to
increase in the mid-teens percent range, while non-U.S. revenue is now
expected to increase in the low-single-digit percent range. Corporate
finance revenue is now expected to increase in the low-twenties percent
range with anticipated growth in speculative-grade issuance activity
partially offset by moderation of investment-grade issuance from the
high volume of 2009. Structured finance revenue is now expected to
decrease in the low-single-digit percent range reflecting more limited
European issuance activity from asset-backed securitizations and
derivatives than previously anticipated. We continue to expect revenue
from financial institutions to increase in the low-single-digit percent
range, and revenue from public, project and infrastructure finance to
increase in the low-double-digit percent range.
For Moody's Analytics, we continue to expect full-year 2010 revenue to
increase in the mid-single-digit percent range. We continue to expect
revenue growth in the low-single-digit percent range for research, data
and analytics, while we now expect revenue growth in the high-single- to
low-double-digit percent range for risk management software, and in the
mid- to high-single-digit percent range for professional services. We
continue to expect MA revenue in the U.S. to increase in the
low-single-digit percent range and revenue outside the U.S. to grow in
the mid-single-digit percent range.
Conference Call
A conference call to discuss first quarter 2010 results will be held
this morning, April 21, 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 under "Featured Events" on Moody's Shareholder Relations
website, http://ir.moodys.com,
until midnight Eastern Time, May 31, 2010.
A replay of the teleconference will be available from 4:00 p.m. Eastern
Time, April 21, 2010 until midnight Eastern Time, May 31, 2010. 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 8378747.
*****
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 2009, employs
approximately 4,000 people worldwide and maintains a presence in 26
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 2010 and other forward-looking
statements in this release are made as of April 21, 2010, 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 credit rating
agencies; possible judicial decisions in various jurisdictions regarding
the status of and potential liabilities of credit rating agencies; the
outcome of legislative initiatives attempting to modify, in a manner
adverse to credit rating agencies, the rules governing the potential
liability 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, 2009 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
March 31,
2010 2009
Amounts in millions, except per share amounts
Revenue $ 476.6 $ 408.9
Expenses:
Operating 135.9 122.4
Selling, general and administrative 128.8 110.2
Restructuring (0.7 ) 11.8
Depreciation and amortization 15.8 15.6
Total expenses 279.8 260.0
Operating income 196.8 148.9
Non-operating expense, net
Interest expense, net (13.3 ) (3.3 )
Other non-operating expense, net (1.0 ) (4.0 )
Total (14.3 ) (7.3 )
Income before provision for income taxes 182.5 141.6
Provision for income taxes 67.8 50.5
Net income 114.7 91.1
Less: net income attributable to noncontrolling interests 1.3 0.9
Net income attributable to Moody's Corporation $ 113.4 $ 90.2
Earnings per share attributable to Moody's common shareholders
Basic $ 0.48 $ 0.38
Diluted $ 0.47 $ 0.38
Weighted average number of shares outstanding
Basic 236.9 235.4
Diluted 239.1 236.5
Moody's Corporation
Supplemental Revenue Information (Unaudited)
Three Months Ended
March 31,
Amounts in millions 2010 2009
Moody's Investors Service
Structured Finance $ 71.5 $ 72.4
Corporate Finance 126.4 84.1
Financial Institutions 76.2 56.3
Public, Project and Infrastructure Finance 61.4 57.4
Intersegment royalty 15.3 14.7
Sub-total MIS 350.8 284.9
Eliminations (15.3 ) (14.7 )
Total MIS revenue 335.5 270.2
Moody's Analytics(a)
Research, Data and Analytics 104.6 102.0
Risk Management Software 33.3 32.1
Professional Services 3.2 4.6
Total MA revenue 141.1 138.7
Total Moody's Corporation revenue $ 476.6 $ 408.9
Moody's Corporation revenue by geographic area
United States $ 254.6 $ 208.9
International 222.0 200.0
$ 476.6 $ 408.9
(a) During the fourth quarter of 2009, the MA businesses were
realigned and renamed to reflect the reporting unit structure for the MA
segment at December 31, 2009. Certain prior-year amounts have been
reclassified to conform to the current presentation.
Moody's Corporation
Consolidated Interest (Expense) Income, Net (Unaudited)
Three Months Ended
March 31,
2010 2009
Amounts in millions
Interest (expense) income:
Expense on borrowings $ (10.8 ) $ (11.9 )
Income 0.6 0.8
Unrecognized tax benefits and other tax (3.5 ) 7.4
Interest capitalized 0.4 0.4
Total interest expense, net $ (13.3 ) $ (3.3 )
Moody's Corporation
Selected Consolidated Balance Sheet Data (Unaudited)
March 31, December 31,
2010 2009
Amounts in millions
Cash and cash equivalents $ 496.4 $ 473.9
Short-term investments 7.5 10.0
Total current assets 1,008.0 1,012.9
Non-current assets 995.3 990.4
Total assets 2,003.3 2,003.3
Total current liabilities 1,146.9 1,236.0
Total debt (1) 1,121.9 1,193.7
Other long-term liabilities 646.0 617.2
Total shareholders' deficit (534.0 ) (596.1 )
Total liabilities and shareholders' 2,003.3 2,003.3
deficit
Actual number of shares outstanding 237.0 236.9
(1) Includes long-term debt of $744.4 million and $746.2
million at March 31, 2010 and December 31, 2009, respectively.
Additionally, this includes amounts outstanding under the Company's
commercial paper program of $371.9 million and $443.7 million at March
31, 2010 and December 31, 2009, respectively, as well as the current
portion of long-term debt of $5.6 million and $3.8 million at March 31,
2010 and December 31, 2009, respectively, both of which are included in
total current liabilities.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Three Months Ended March 31,
Amounts in
millions, 2010 2009
except per
share amounts
Non-GAAP Non-GAAP
As Financial As Financial
Reported Adjustments Measures Reported Adjustments Measures
* *
Revenue $ 476.6 $ - $ 476.6 $ 408.9 $ - $ 408.9
Expenses 279.8 0.7 (a) 280.5 260.0 (11.8 ) 248.2
(a)
Operating 196.8 (0.7 ) 196.1 148.9 11.8 160.7
income
Non-operating (14.3 ) - (14.3 ) (7.3 ) - (7.3 )
expense, net
Income before
provision
182.5 (0.7 ) 181.8 141.6 11.8 153.4
for income
taxes
Provision for 67.8 (0.2 )(b) 67.6 50.5 4.5 (b) 55.0
income taxes
Net income 114.7 (0.5 ) 114.2 91.1 7.3 98.4
Less: net
income
attributable 1.3 - 1.3 0.9 - 0.9
to
noncontrolling
interests
Net income
attributable $ 113.4 $ (0.5 ) $ 112.9 $ 90.2 $ 7.3 $ 97.5
to Moody's
Corporation
Earnings per share
attributable to
Moody's common shareholders
Basic $ 0.48 $ 0.48 $ 0.38 $ 0.41
Diluted $ 0.47 $ 0.47 $ 0.38 $ 0.41
*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 tables above show Moody's consolidated results for each of the
three-month periods ended March 31, 2010 and 2009, adjusted to exclude
the impact of the following:
(a) To exclude the first quarter 2009 restructuring charge and
adjustments related to both the 2009 and 2007 restructuring charges
(b) To reflect the income tax impacts related to the adjustments
described in note (a) above
Source: Moody's Corporation