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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 ______________
FORM 8-K CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DateofReport(Dateofearliesteventreported):October 21, 2016
MOODY’S CORPORATION (ExactNameofRegistrantasSpecifiedinCharter)
Delaware 1-14037 13-3998945(StateorOtherJurisdictionof
Incorporation)(CommissionFileNumber) (IRSEmployerIdentificationNo.)
7 World Trade Center at 250 Greenwich Street New York, New York 10007
(AddressofPrincipalExecutiveOffices)(ZipCode)
Registrant’stelephonenumber,includingareacode:(212) 553-0300
ChecktheappropriateboxbelowiftheForm8-KfilingisintendedtosimultaneouslysatisfythefilingobligationoftheRegistrantunderanyofthefollowingprovisions:
⃞WrittencommunicationspursuanttoRule425undertheSecuritiesAct(17CFR230.425)
⃞SolicitingmaterialpursuanttoRule14a-12undertheExchangeAct(17CFR240.14a-12)
⃞Pre-commencementcommunicationspursuanttoRule14d-2(b)undertheExchangeAct(17CFR240.14d-2(b))
⃞Pre-commencementcommunicationspursuanttoRule13e-4(c)undertheExchangeAct(17CFR240.13e-4(c))
Item 2.02, "Results of Operations and Financial Condition"
OnOctober21,2016,Moody'sCorporation(the"Registrant")announceditsfinancialresultsforthequarterendedSeptember30,2016,aswellasothermatters.AcopyofthepressreleasecontainingtheannouncementisincludedasExhibit99.1.
TheinformationcontainedinthisCurrentReport,includingtheexhibithereto,isbeingfurnishedandshallnotbedeemed"filed"forthepurposeofSection18oftheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”)orotherwisesubjecttotheliabilitiesofthatSection.TheinformationinthisCurrentReportshallnotbeincorporatedbyreferenceintofuturefilingsundertheSecuritiesActof1933,asamended,ortheExchangeAct,unlessitisspecificallyincorporatedbyreferencetherein.
Item 7.01, "Regulation FD Disclosure"
TheinformationsetforthunderItem2.02,"ResultsofOperationsandFinancialCondition"isincorporatedhereinbyreference.
Item 9.01, "Financial Statements and Exhibits"
(d)Exhibits
99.1 PressreleaseofMoody'sCorporationdatedOctober21,2016,announcingresultsforthequarterendedSeptember30,2016.
SIGNATURE
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,theRegistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersignedhereuntodulyauthorized.
MOODY'SCORPORATION
By: /s/JohnJ.GogginsJohnJ.GogginsExecutiveVicePresidentandGeneralCounsel
Date: October21,2016
INDEX TO EXHIBITS
ExhibitNo. Description
99.1 PressreleaseofMoody'sCorporationdatedOctober21,2016,announcingresultsforthequarterendedSeptember30,2016.
Exhibit 99.1
Moody's Corporation Reports Results for Third Quarter 2016
3Q16 revenue of $917.1 million up 10% from 3Q15
3Q16 operating income of $397.5 million up 14% from 3Q15
3Q16 GAAP EPS of $1.31 up 15% from 3Q15; non-GAAP EPS of $1.34 up 21%
FY 2016 GAAP EPS guidance range is now $4.76 to $4.86; non-GAAP EPS guidance range is now $4.62 to $4.72
NEWYORK--(BUSINESSWIRE)--October21,2016--Moody’sCorporation(NYSE:MCO)todayannouncedresultsforthethirdquarterof2016andprovideditscurrentoutlookforfullyear2016.
"Moody’srevenueincreased10%inthethirdquarterprimarilyasaresultofrecordthirdquarterrevenueforMoody’sInvestorsService,drivenbyhigherleveragedfinanceissuanceandUSpublicfinanceactivity,aswellassolidgrowthfromMoody’sAnalytics,”saidRaymondMcDaniel,PresidentandChiefExecutiveOfficerofMoody’s.“Inlightofthestrongthirdquarterperformance,coupledwithcontinuedexpensemanagement,weareincreasingourfullyear2016GAAPEPSguidancerangeto$4.76to$4.86andournon-GAAPEPSguidancerangeto$4.62to$4.72.”
THIRD QUARTER 2016 HIGHLIGHTS
Moody’sCorporationreportedrevenueof$917.1millionforthethreemonthsendedSeptember30,2016,up10%fromthesameperiodof2015.
Operatingexpense,whichincludesan$8.4millionrestructuringchargeassociatedwithcostmanagementinitiatives,totaled$519.6million,up7%.Operatingincomewas$397.5million,up14%fromtheprior-yearperiod.Adjustedoperatingincome(operatingincomebeforedepreciation,amortizationandtherestructuringcharge)was$438.6million,up16%.Operatingmarginforthethirdquarterof2016was43.3%andadjustedoperatingmarginwas47.8%.
GAAPEPSof$1.31wasup15%fromthethirdquarterof2015;non-GAAPEPSof$1.34wasup21%.Thirdquarter2016non-GAAPEPSexcludesa$0.03impactfromtherestructuringcharge.Thirdquarter2015non-GAAPEPSexcludesa$0.03benefitfromalegacytaxmatter.
MCO THIRD QUARTER 2016 REVENUE UP 10%
Moody’sCorporationreportedglobalrevenueof$917.1millionforthethirdquarterof2016,up10%fromthethirdquarterof2015.
USrevenuewas$545.7million,up13%,andnon-USrevenuewas$371.4million,up5%.RevenuegeneratedoutsidetheUSconstituted40%oftotalrevenue,downfrom42%intheprior-yearperiod.ForeigncurrencytranslationunfavorablyimpactedMoody’srevenueby1%.
MIS Third Quarter Revenue Up 12%
Moody’sInvestorsService(MIS)reportedrecordthirdquarterglobalrevenuein2016of$612.3million,up12%fromtheprior-yearperiod.MIS’sUSrevenuewas$391.3million,up11%,anditsnon-USrevenuewas$221.0million,up13%.TheimpactofforeigncurrencytranslationonMISrevenuewasnegligible.
Globalcorporatefinancerevenuewas$299.6million,up21%fromtheprior-yearperiod.Thisresultprimarilyreflectedhigherlevelsofbankloanandspeculativegradebondissuanceasstronginvestordemandandtightercreditspreadsdrovedebtrefinancingactivity.USandnon-UScorporatefinancerevenueswereup16%and32%,respectively.
Globalstructuredfinancerevenuewas$104.2million,down7%fromthethirdquarterof2015.ReducedUSCMBSandCLOactivitywasonlypartiallyoffsetbyincreasedUSRMBSandREITactivity.USandnon-USstructuredfinancerevenuesweredown9%and4%,respectively.
Globalfinancialinstitutionsrevenuewas$95.8million,up7%comparedtotheprior-yearperiodasaresultofincreasedAsianbankingissuance.USandnon-USfinancialinstitutionsrevenueswereup2%and11%,respectively.
Globalpublic,projectandinfrastructurefinancerevenuewas$105.2million,up16%overtheprior-yearperiodprimarilydrivenbystrongUSpublicfinanceissuance.USpublic,projectandinfrastructurefinancerevenuewasup29%,whilenon-USrevenuewasdown8%.
MA Third Quarter Revenue Up 6%
GlobalrevenueforMoody’sAnalytics(MA)forthethirdquarterof2016was$304.8million,up6%fromthethirdquarterof2015.MA’sUSrevenuewas$154.4million,up19%,whileitsnon-USrevenuewas$150.4million,down4%.ForeigncurrencytranslationunfavorablyimpactedMArevenueby3%.
Globalresearch,dataandanalytics(RD&A)revenueof$167.7millionwasup6%fromtheprior-yearperioddrivenbystrengthinsalesofcreditresearchandratingsdatafeeds.USRD&Arevenuewasup14%,whilenon-USrevenuewasdown4%.ForeigncurrencytranslationunfavorablyimpactedRD&Arevenueby3%.
Globalenterpriserisksolutions(ERS)revenueof$101.5millionwasup10%fromthethirdquarterof2015primarilyduetotheMarch2016acquisitionofGGYaswellasgrowthinthecreditassessmentandstresstestingproductlines.USERSrevenuewasup39%,whilenon-USrevenuewasdown3%.ForeigncurrencytranslationunfavorablyimpactedERSrevenueby4%.
Globalprofessionalservicesrevenueof$35.6millionwasdown3%fromtheprior-yearperiod.USprofessionalservicesrevenuewasup6%,whilenon-USrevenuewasdown7%.
THIRD QUARTER 2016 EXPENSE UP 7%
Thirdquarter2016expenseforMoody’sCorporationwas$519.6million,up7%fromtheprior-yearperiod.TheincreasewasprimarilyattributabletoadditionalheadcountinMAtosupportbusinessgrowthandfromtheMarchacquisitionofGGY,therestructuringchargeandincreasedincentivecompensationacrosstheCompany.Foreigncurrencytranslationfavorablyimpactedexpenseby2%.
Operatingincomewas$397.5million,up14%.Theimpactofforeigncurrencytranslationwasnegligible.Adjustedoperatingincomeof$438.6millionwasup16%fromtheprior-yearperiod.Theoperatingmarginwas43.3%,upfrom41.9%.Theadjustedoperatingmarginwas47.8%,upfrom45.3%.
Moody’seffectivetaxratewas30.5%forthirdquarterof2016,comparedwith32.0%fortheprior-yearperiod.
YEAR-TO-DATE 2016 REVENUE UP 2%
ForMoody’sCorporationoverall,globalrevenuewas$2.7billionforthefirstninemonthsof2016,up2%from2015.USrevenuewas$1.6billion,up3%,whilenon-USrevenuewas$1.1billion,flattotheprior-yearperiod.ForeigncurrencytranslationunfavorablyimpactedMoody’srevenueby1%.
Year-to-Date MIS Revenue Down 1%
MISrevenuetotaled$1.8billionforthefirstninemonthsof2016,down1%fromtheprior-yearperiod.USrevenueof$1.1billionwasalsodown1%.Non-USrevenuewas$636.7million,down3%,andrepresented36%ofMISrevenue,downfrom37%inthefirstninemonthsof2015.
Year-to-Date MA Revenue Up 8%
MArevenuetotaled$899.1millionforthefirstninemonthsof2016,up8%fromtheprior-yearperiod.USrevenueof$445.3millionwasup14%.Non-USrevenuewas$453.8million,up4%,andrepresented50%ofMArevenue,downfrom53%inthefirstninemonthsof2015.
YEAR-TO-DATE 2016 EXPENSE UP 5%
ExpenseforMoody’sCorporationinthefirstninemonthsof2016was$1.6billion,up5%fromtheprior-yearperiod.Foreigncurrencytranslationfavorablyimpactedexpenseby2%.
Operatingincomewas$1.1billion,down2%fromthefirstninemonthsof2015.Theimpactofforeigncurrencytranslationwasnegligible.Adjustedoperatingincomeof$1.2billionwasdown1%fromtheprior-yearperiod.Moody’sreportedoperatingmarginwas41.8%anditsadjustedoperatingmarginwas45.7%.
Theeffectivetaxrateforthefirstninemonthsof2016was31.5%,downfrom31.7%intheprior-yearperiod.
GAAPEPSof$3.55forthefirstninemonthsof2016wasessentiallyflattothesameperiodin2015.Non-GAAPEPSof$3.59forthefirstninemonthsof2016grew2%fromthesameperiodin2015.Year-to-date2016non-GAAPEPSexcludesa$0.04impactfromtherestructuringcharge.Year-to-date2015non-GAAPEPSexcludesa$0.03benefitfromalegacytaxmatterinthethirdquarterofthatyear.
LITIGATION UPDATE
Followingtheglobalcreditcrisisof2008,Moody’shasperiodicallyreceivedsubpoenasandinquiriesfromvariousgovernmentalauthorities,includingtheUSDepartmentofJustice(DOJ)andstatesattorneysgeneral.InaletterdatedSeptember29,2016,theDOJstatedthatitispreparingacivilcomplainttobefiledagainstMoody’sandMISintheUSDistrictCourtfortheDistrictofNewJerseyallegingcertainviolationsoftheFinancialInstitutionsReform,Recovery,andEnforcementActinconnectionwiththeratingsMISassignedtoresidentialmortgage-backedsecuritiesandcollateralizeddebtobligationsintheperiodleadinguptothe2008financialcrisis.TheDOJalsostatedthatitsinvestigationremainsongoingandmayexpandtoincludeadditionaltheories.Anumberofstatesattorneysgeneralhaveindicatedthattheyalsoexpecttopursuesimilarclaimsunderstatelaw,whichclaimsmayincludeadditionalperiods,theories,assetclassesoractivities.TheCompanyiscontinuingtorespondtotheDOJ’sandstates’subpoenasandinquiries.
2016 CAPITAL ALLOCATION AND LIQUIDITY
$263.9 Million Returned to Shareholders in Third Quarter
Duringthethirdquarterof2016,Moody’srepurchased1.9millionsharesatatotalcostof$193.0million,oranaveragecostof$103.00pershare,andissued0.8millionsharesaspartofitsemployeestock-basedcompensationplans.Additionally,Moody’sreturned$70.9milliontoitsshareholdersviadividendpaymentsduringthethirdquarterof2016.
Overthefirstninemonthsof2016,Moody’srepurchased7.1millionsharesatatotalcostof$678.9million,oranaveragecostof$95.51pershare,andissued2.7millionsharesaspartofitsemployeestock-basedcompensationplans.Additionally,Moody’sreturned$214.5milliontoitsshareholdersviadividendpaymentsduringthefirstninemonthsof2016.
OutstandingsharesasofSeptember30,2016totaled191.2million,down3%fromSeptember30,2015.AsofSeptember30,2016,Moody’shad$0.8billionofsharerepurchaseauthorityremaining.
Atquarter-end,Moody’shad$3.4billionofoutstandingdebtand$1.0billionofadditionalborrowingcapacityunderitscommercialpaperprogramwhichisbackstoppedbyanundrawn$1.0billionrevolvingcreditfacility.Totalcash,cashequivalentsandshort-terminvestmentsatquarter-endwere$2.1billion,up$116.6millionfromSeptember30,2015.Freecashflowinthefirstninemonthsof2016was$771.8million,down7%fromthefirstninemonthsof2015,primarilyduetolowernetincome.
ASSUMPTIONS AND OUTLOOK FOR FULL YEAR 2016
Moody’soutlookfor2016isbasedonassumptionsaboutmanygeopoliticalconditionsandmacroeconomicandcapitalmarketfactors,includinginterestrates,foreigncurrencyexchangerates,corporateprofitabilityandbusinessinvestmentspending,mergersandacquisitions,consumerborrowingandsecuritization,andtheamountofdebtissued.Theseassumptionsaresubjecttouncertainty,andresultsfortheyearcoulddiffermateriallyfromourcurrentoutlook.Ourguidanceassumesforeigncurrencytranslationatend-of-quarterexchangerates.Specifically,ourforecastreflectsexchangeratesfortheBritishpound(£)of$1.30to£1andfortheeuro(€)of$1.12to€1.Post-thirdquartermovementsinforeignexchangerateshavehadnomeaningfulimpactonthefullyear2016outlook.
MCO Full Year 2016 Outlook
Moody’sfullyear2016revenueisstillexpectedtoincreaseinthelow-single-digitpercentrange.
Operatingexpenseisstillexpectedtoincreaseinthemid-single-digitpercentrange.
Moody’sstillprojectsanoperatingmarginofapproximately41%andanadjustedoperatingmarginofapproximately45%.Theeffectivetaxrateisstillexpectedtobe31%to31.5%.
Fullyear2016GAAPEPSisnowexpectedtobe$4.76to$4.86,whichincludesananticipatednon-cashforeignexchangegainof$0.18relatedtoasubsidiaryreorganization,offsetinpartbya$0.04restructuringchargeassociatedwithcostmanagementinitiatives.Excludingtheseitems,theCompanyexpectsfullyear2016non-GAAPEPSof$4.62to$4.72.TheCompanyexpectstorecordtheforeignexchangegaininitsfourthquarterresults.
Freecashflowisstillexpectedtobeapproximately$1billion.Moody’snowexpectssharerepurchasestobeapproximately$750million,subjecttoavailablecash,marketconditionsandotherongoingcapitalallocationdecisions.Capitalexpendituresarenowexpectedtobeapproximately$120million.Depreciationandamortizationexpenseisstillexpectedtobeapproximately$130million.
MIS Full Year 2016 Outlook
ForMIS,Moody’snowexpects2016revenuetobeapproximatelyflat.USrevenueisstillexpectedtobeapproximatelyflat,whilenon-USrevenueisnowalsoexpectedtobeapproximatelyflat.
Corporatefinancerevenueisnowexpectedtobeapproximatelyflat.Structuredfinancerevenueisnowexpectedtodecreaseinthemid-single-digitpercentrange.Financialinstitutionsrevenueisnowexpectedtoincreaseinthelow-single-digitpercentrange.Public,projectandinfrastructurefinancerevenueisstillexpectedtoincreaseapproximately10%.
MA Full Year 2016 Outlook
ForMA,2016revenueisstillexpectedtoincreaseinthemid-single-digitpercentrange.USrevenueisstillexpectedtoincreaseinthelow-double-digitpercentrange,whilenon-USrevenueisstillexpectedtoincreaseinthelow-single-digitpercentrange.
Research,dataandanalyticsrevenueandenterpriserisksolutionsrevenueareeachstillexpectedtoincreaseinthehigh-single-digitpercentrange.Professionalservicesrevenueisstillexpectedtodecreaseinthelow-single-digitpercentrange.
CONFERENCE CALL
Moody’swillholdaconferencecalltodiscussitsthirdquarter2016resultsanditsupdated2016outlookonOctober21,2016,at11:30a.m.EasternTime.IndividualswithintheUSandCanadacanaccessthecallbydialing+1-877-400-0505.Othercallersshoulddial+1-719-234-7477.Pleasedialintothecallby11:20a.m.EasternTime.Thepasscodeforthecallis“Moody’sCorporation.”
TheteleconferencewillalsobewebcastwithanaccompanyingslidepresentationwhichcanbeaccessedthroughMoody'sInvestorRelationswebsite,http://ir.moodys.comunder“EventsandPresentations”.Thewebcastwillbeavailableuntil3:30p.m.EasternTimeonNovember19,2016.
Areplayoftheteleconferencewillbeavailablefrom3:30p.m.EasternTime,October21,2016until3:30p.m.EasternTime,November19,2016.ThereplaycanbeaccessedfromwithintheUnitedStatesandCanadabydialing+1-888-203-1112.Othercallerscanaccessthereplayat+1-719-457-0820.Thereplayconfirmationcodeis1743691.
*****
ABOUT MOODY'S CORPORATION
Moody'sisanessentialcomponentoftheglobalcapitalmarkets,providingcreditratings,research,toolsandanalysisthatcontributetotransparentandintegratedfinancialmarkets.Moody’sCorporation(NYSE:MCO)istheparentcompanyofMoody'sInvestorsService,whichprovidescreditratingsandresearchcoveringdebtinstrumentsandsecurities,andMoody'sAnalytics,whichoffersleading-edgesoftware,advisoryservicesandresearchforcreditandeconomicanalysisandfinancialriskmanagement.Thecorporation,whichreportedrevenueof$3.5billionin2015,employsapproximately10,900peopleworldwideandmaintainsapresencein36countries.Furtherinformationisavailableatwww.moodys.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Certainstatementscontainedinthisreleaseareforward-lookingstatementsandarebasedonfutureexpectations,plansandprospectsforMoody’sbusinessandoperationsthatinvolveanumberofrisksanduncertainties.Moody’soutlookfor2016andotherforward-lookingstatementsinthisreleasearemadeasofOctober21,2016,andtheCompanydisclaimsanydutytosupplement,updateorrevisesuchstatementsonagoing-forwardbasis,whetherasaresultofsubsequentdevelopments,changedexpectationsorotherwise.Inconnectionwiththe“safeharbor”provisionsofthePrivateSecuritiesLitigationReformActof1995,theCompanyisidentifyingcertainfactorsthatcouldcauseactualresultstodiffer,perhapsmaterially,fromthoseindicatedbytheseforward-lookingstatements.Thosefactors,risksanduncertaintiesinclude,butarenotlimitedto,thecurrentworld-widecreditmarketdisruptionsandeconomicslowdown,whichisaffectingandcouldcontinuetoaffectthevolumeofdebtandothersecuritiesissuedindomesticand/orglobalcapitalmarkets;othermattersthatcouldaffectthevolumeofdebtandothersecuritiesissuedindomesticand/orglobalcapitalmarkets,includingcreditqualityconcerns,changesininterestratesandothervolatilityinthefinancialmarkets;thelevelofmergerandacquisitionactivityintheUSandabroad;theuncertaineffectivenessandpossiblecollateralconsequencesofUSandforeigngovernmentinitiativestorespondtothecurrentworld-widecreditmarketdisruptionsandeconomicslowdown;concernsinthemarketplaceaffectingMoody’scredibilityorotherwiseaffectingmarketperceptionsoftheintegrityorutilityofindependentcreditagencyratings;theintroductionofcompetingproductsortechnologiesbyothercompanies;pricingpressurefromcompetitorsand/orcustomers;thelevelofsuccessofnewproductdevelopmentandglobalexpansion;theimpactofregulationasanNRSRO,thepotentialfornewUS,stateandlocallegislationandregulations,includingprovisionsintheFinancialReformActandregulationsresultingfromthatAct;thepotentialforincreasedcompetitionandregulationintheEUandotherforeignjurisdictions;exposuretolitigationrelatedtoMoody’sratingopinions,aswellasanyotherlitigation,governmentandregulatoryproceedings,investigationsandinquiriestowhichtheCompanymaybesubjectfromtimetotime;provisionsintheFinancialReformActlegislationmodifyingthepleadingstandards,andEUregulationsmodifyingtheliabilitystandards,applicabletocreditratingagenciesinamanneradversetocreditratingagencies;provisionsofEUregulationsimposingadditionalproceduralandsubstantiverequirementsonthepricingofservices;thepossiblelossofkeyemployees;failuresormalfunctionsofMoody’soperationsandinfrastructure;anyvulnerabilitiestocyberthreatsorothercybersecurityconcerns;theoutcomeofanyreviewbycontrollingtaxauthoritiesoftheCompany’sglobaltaxplanninginitiatives;theoutcomeofthoseLegacyTaxMattersandlegalcontingenciesthatrelatetotheCompany,itspredecessorsandtheiraffiliatedcompaniesforwhichMoody’shasassumedportionsofthefinancialresponsibility;exposuretopotentialcriminalsanctionsorcivilremediesiftheCompanyfailstocomplywithforeignandUSlawsandregulationsthatareapplicableinthejurisdictionsinwhichtheCompanyoperates,includingsanctionslaws,anti-corruptionlawsandlocallawsprohibitingcorruptpaymentstogovernmentofficials;theimpactofmergers,acquisitionsorotherbusinesscombinationsandtheabilityoftheCompanytosuccessfullyintegrateacquiredbusinesses;currencyandforeignexchangevolatility;theleveloffuturecashflows;thelevelsofcapitalinvestments;andadeclineinthedemandforcreditriskmanagementtoolsbyfinancialinstitutions;andotherriskfactorsasdiscussedintheCompany’sannualreportonForm10-KfortheyearendedDecember31,2015andinotherfilingsmadebytheCompanyfromtimetotimewiththeSecuritiesandExchangeCommission.
Table 1 - Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months EndedSeptember 30, September 30,
2016 2015 2016 2015
Amountsinmillions,exceptpershareamounts
Revenue $ 917.1 $ 834.9 $ 2,662.1 $ 2,618.6
Expenses:Operating 253.2 236.1 761.3 724.4Selling,generalandadministrative 225.3 220.8 683.2 669.1Restructuring 8.4 - 12.0 -Depreciationandamortization 32.7 28.3 93.8 84.8
Total expenses 519.6 485.2 1,550.3 1,478.3 Operating income 397.5 349.7 1,111.8 1,140.3 Non-operating (expense) income, net
Interestexpense,net (35.4) (25.8) (103.8) (87.0)Othernon-operatingincome,net 6.9 19.7 15.5 14.0
Totalnon-operatingexpense,net (28.5) (6.1) (88.3) (73.0)Income before provision for income taxes 369.0 343.6 1,023.5 1,067.3
Provisionforincometaxes 112.4 109.8 322.2 338.1Net income 256.6 233.8 701.3 729.2
Less:netincomeattributabletononcontrollinginterests 1.3 2.2 6.1 5.8Net income attributable to Moody's Corporation $ 255.3 $ 231.6 $ 695.2 $ 723.4
Earnings per share attributable to Moody's common shareholders
Basic $ 1.33 $ 1.16 $ 3.60 $ 3.60Diluted $ 1.31 $ 1.14 $ 3.55 $ 3.54
Weighted average number of shares outstanding
Basic 191.7 199.4 193.3 201.1Diluted 194.3 202.5 196.0 204.5
Table 2 - Supplemental Revenue Information (Unaudited)
Three Months Ended Nine Months EndedSeptember 30, September 30,
Amountsinmillions 2016 2015 2016 2015
Moody's Investors Service
CorporateFinance $ 299.6 $ 248.3 $ 844.7 $ 866.6StructuredFinance 104.2 112.5 306.3 335.0FinancialInstitutions 95.8 89.5 280.4 273.7Public,ProjectandInfrastructureFinance 105.2 90.6 309.0 291.2MISOther 7.5 7.2 22.6 23.1Intersegmentroyalty 25.3 23.5 73.9 69.5
Sub-totalMIS 637.6 571.6 1,836.9 1,859.1Eliminations (25.3) (23.5) (73.9) (69.5)
TotalMISrevenue 612.3 548.1 1,763.0 1,789.6
Moody's AnalyticsResearch,DataandAnalytics 167.7 157.9 500.9 465.0EnterpriseRiskSolutions 101.5 92.2 288.5 252.5ProfessionalServices 35.6 36.7 109.7 111.5Intersegmentrevenue 4.2 3.3 9.8 9.7
Sub-totalMA 309.0 290.1 908.9 838.7Eliminations (4.2) (3.3) (9.8) (9.7)
TotalMArevenue 304.8 286.8 899.1 829.0
Total Moody's Corporation revenue $ 917.1 $ 834.9 $ 2,662.1 $ 2,618.6
Moody's Corporation revenue by geographic area
UnitedStates $ 545.7 $ 482.1 $ 1,571.6 $ 1,527.8International 371.4 352.8 1,090.5 1,090.8
$ 917.1 $ 834.9 $ 2,662.1 $ 2,618.6
Table 3 - Selected Consolidated Balance Sheet Data (Unaudited)
September 30, December 31,2016 2015*
Amountsinmillions
Cashandcashequivalents $ 1,746.1 $ 1,757.4Short-terminvestments 311.8 474.8Totalcurrentassets 3,016.9 3,243.1Non-currentassets 2,002.4 1,859.9Totalassets 5,019.3 5,103.0Totalcurrentliabilities** 1,402.5 1,218.5Totaldebt** 3,418.1 3,380.6Otherlong-termliabilities 856.5 836.9Totalshareholders'(deficit) (357.9) (333.0)Totalliabilitiesandshareholders'(deficit) 5,019.3 5,103.0
Actualnumberofsharesoutstanding 191.2 196.1
*Inthefirstquarterof2016,theCompanyadoptedanewaccountingupdateonaretrospectivebasiswhichrequiresdebtissuancecoststobepresentedasareductionofdebtratherthanasanasset.Accordingly,theCompanyreclassifieddebtissuancecosts,whichwerepreviouslyincludedinnon-currentassets,asareductionoftotaldebt.
**Includes$299.9millionofdebtclassifiedasacurrentliabilityasitmaturesinSeptember2017.
Table 4 - Selected Consolidated Balance Sheet Data (Unaudited) Continued
Totaldebtconsistsofthefollowing:September 30, 2016
Principal Amount
Fair Value of Interest Rate
Swap (1)
Unamortized (Discount) Premium
Unamortized Debt Issuance
Cost (2)Carrying
ValueNotesPayable:
6.06%Series2007-1Notesdue2017 $ 300.0 $ - $ - $ (0.1) $ 299.95.50%2010SeniorNotes,due2020 500.0 20.0 (1.4) (1.7) 516.94.50%2012SeniorNotes,due2022 500.0 - (2.5) (2.2) 495.34.875%2013SeniorNotes,due2024 500.0 - (2.1) (2.8) 495.12.75%2014SeniorNotes(5-Year),due2019 450.0 8.0 (0.5) (1.9) 455.65.25%2014SeniorNotes(30-Year),due2044 600.0 - 3.3 (6.0) 597.31.75%2015SeniorNotes,due2027 561.9 - - (3.9) 558.0
Totaldebt $ 3,411.9 $ 28.0 $ (3.2) $ (18.6) $ 3,418.1 Currentportion (299.9)Totallong-termdebt $ 3,118.2
December 31, 2015
Principal Amount
Fair Value of Interest Rate
Swap (1)
Unamortized (Discount) Premium
Unamortized Debt Issuance
Cost (2)Carrying
ValueNotesPayable:
6.06%Series2007-1Notesdue2017 $ 300.0 $ - $ - $ (0.2) $ 299.85.50%2010SeniorNotes,due2020 500.0 9.4 (1.6) (2.0) 505.84.50%2012SeniorNotes,due2022 500.0 - (2.8) (2.5) 494.74.875%2013SeniorNotes,due2024 500.0 - (2.3) (3.1) 494.62.75%2014SeniorNotes(5-Year),due2019 450.0 2.3 (0.5) (2.4) 449.45.25%2014SeniorNotes(30-Year),due2044 600.0 - 3.4 (6.2) 597.21.75%2015SeniorNotes,due2027 543.1 - - (4.0) 539.1
Totaldebt $ 3,393.1 $ 11.7 $ (3.8) $ (20.4) $ 3,380.6
(1) Reflectsinterestrateswapsonthe2010SeniorNotesandthe2014SeniorNotes(5-Year).
(2) Pursuanttoanewaccountingupdate,unamortizeddebtissuancecostsarepresentedasareductiontothecarryingvalueofthedebt.
Table 5 - Non-operating (expense) income, net
Three Months Ended Nine Months EndedSeptember 30, September 30,
2016 2015 2016 2015
Amountsinmillions
Interest:Expenseonborrowings $ (35.6) $ (29.8) $ (105.6) $ (88.8)Income 2.5 2.8 8.2 7.0LegacyTaxbenefit 0.2 0.7 0.2 0.7ExpenseonUTPsandothertaxrelatedliabilities (2.5) 0.4 (7.0) (6.3)InterestCapitalized - 0.1 0.4 0.4
Total interest expense, net $ (35.4) $ (25.8) $ (103.8) $ (87.0)Other non-operating (expense) income, net:
FXgain/(loss) $ 4.3 $ 9.7 $ 9.1 $ (2.5)LegacyTaxbenefit 1.6 6.4 1.6 6.4Jointventureincome 2.3 3.5 7.2 8.8Other (1.3) 0.1 (2.4) 1.3
Other non-operating (expense) income, net 6.9 19.7 15.5 14.0Total non-operating (expense) income, net $ (28.5) $ (6.1) $ (88.3) $ (73.0)
Table 6 - Financial Information by Segment:
Thetablebelowpresentsrevenue,adjustedoperatingincomeandoperatingincomebyreportablesegment.TheCompanydefinesadjustedoperatingincomeasoperatingincomeexcludingdepreciationandamortizationandrestructuring.
Three Months Ended September 30,
2016 2015MIS MA Eliminations Consolidated MIS MA Eliminations Consolidated
Revenue $ 637.6 $ 309.0 $ (29.5) $ 917.1 $ 571.6 $ 290.1 $ (26.8) $ 834.9Operating,selling,generalandadministrativeexpense 272.8 235.2 (29.5) 478.5 268.1 215.6 (26.8) 456.9Adjustedoperatingincome 364.8 73.8 - 438.6 303.5 74.5 - 378.0
Restructuring 7.6 0.8 - 8.4 - - - -Depreciationandamortization 19.1 13.6 - 32.7 16.9 11.4 - 28.3
Operatingincome $ 338.1 $ 59.4 $ - $ 397.5 $ 286.6 $ 63.1 $ - $ 349.7Adjustedoperatingmargin 57.2% 23.9% 47.8% 53.1% 25.7% 45.3%Operatingmargin 53.0% 19.2% 43.3% 50.1% 21.8% 41.9%
Nine Months Ended September 30,2016 2015
MIS MA Eliminations Consolidated MIS MA Eliminations ConsolidatedRevenue $ 1,836.9 $ 908.9 $ (83.7) $ 2,662.1 $ 1,859.1 $ 838.7 $ (79.2) $ 2,618.6Operating,selling,generalandadministrativeexpense 830.1 698.1 (83.7) 1,444.5 836.4 636.3 (79.2) 1,393.5Adjustedoperatingincome 1,006.8 210.8 - 1,217.6 1,022.7 202.4 - 1,225.1
Restructuring 10.2 1.8 - 12.0 - - - -Depreciationandamortization 54.8 39.0 - 93.8 48.7 36.1 - 84.8
Operatingincome $ 941.8 $ 170.0 $ - $ 1,111.8 $ 974.0 $ 166.3 $ - $ 1,140.3Adjustedoperatingmargin 54.8% 23.2% 45.7% 55.0% 24.1% 46.8%Operatingmargin 51.3% 18.7% 41.8% 52.4% 19.8% 43.5%
Table 7 - Transaction and Relationship Revenue
Thetablesbelowsummarizethesplitbetweentransactionandrelationshiprevenue.IntheMISsegment,excludingMISOther,transactionrevenuerepresentstheinitialratingofanewdebtissuanceaswellasotherone-timefeeswhilerelationshiprevenuerepresentstherecurringmonitoringofarateddebtobligationand/orentitiesthatissuesuchobligations,aswellasrevenuefromprogramssuchascommercialpaper,medium-termnotesandshelfregistrations.InMISOther,transactionrevenuerepresentsrevenuefromprofessionalservicesandoutsourcingengagementsandrelationshiprevenuerepresentssubscriptionbasedrevenues.IntheMAsegment,relationshiprevenuerepresentssubscription-basedrevenuesandsoftwaremaintenancerevenue.TransactionrevenueinMArepresentssoftwarelicensefeesandrevenuefromriskmanagementadvisoryprojects,trainingandcertificationservices,andoutsourcedresearchandanalyticalengagements.
Three Months Ended September 30,
2016 2015Transaction Relationship Total Transaction Relationship Total
CorporateFinance $211.2 $88.4 $299.6 $161.6 $86.7 $248.370% 30% 100% 65% 35% 100%
StructuredFinance $62.8 $41.4 $104.2 $69.8 $42.7 $112.560% 40% 100% 62% 38% 100%
FinancialInstitutions $39.4 $56.4 $95.8 $30.9 $58.6 $89.541% 59% 100% 35% 65% 100%
Public,ProjectandInfrastructureFinance $66.7 $38.5 $105.2 $51.0 $39.6 $90.663% 37% 100% 56% 44% 100%
MISOther $2.6 $4.9 $7.5 $3.0 $4.2 $7.235% 65% 100% 42% 58% 100%
Total MIS $382.7 $229.6 $612.3 $316.3 $231.8 $548.163% 37% 100% 58% 42% 100%
Moody's Analytics $74.6 $230.2 $304.8 $71.5 $215.3 $286.824% 76% 100% 25% 75% 100%
Total Moody's Corporation $457.3 $459.8 $917.1 $387.8 $447.1 $834.950% 50% 100% 46% 54% 100%
Nine Months Ended September 30,2016 2015
Transaction Relationship Total Transaction Relationship TotalCorporateFinance $577.8 $266.9 $844.7 $608.0 $258.6 $866.6
68% 32% 100% 70% 30% 100%StructuredFinance $180.6 $125.7 $306.3 $211.9 $123.1 $335.0
59% 41% 100% 63% 37% 100%FinancialInstitutions $106.2 $174.2 $280.4 $101.4 $172.3 $273.7
38% 62% 100% 37% 63% 100%Public,ProjectandInfrastructureFinance $193.7 $115.3 $309.0 $178.1 $113.1 $291.2
63% 37% 100% 61% 39% 100%MISOther $8.2 $14.4 $22.6 $10.4 $12.7 $23.1
36% 64% 100% 45% 55% 100%Total MIS $1,066.5 $696.5 $1,763.0 $1,109.8 $679.8 $1,789.6
60% 40% 100% 62% 38% 100%Moody's Analytics $216.7 $682.4 $899.1 $199.2 $629.8 $829.0
24% 76% 100% 24% 76% 100%Total Moody's Corporation $1,283.2 $1,378.9 $2,662.1 $1,309.0 $1,309.6 $2,618.6
48% 52% 100% 50% 50% 100%
Non-GAAP Financial Measures:
ThetablesbelowreflectcertainadjustedresultsthattheSECdefinesas"non-GAAPfinancialmeasures"aswellasareconciliationofeachnon-GAAPmeasuretoitsmostdirectlycomparableGAAPmeasure.Managementbelievesthatsuchnon-GAAPfinancialmeasures,whenreadinconjunctionwiththeCompany'sreportedresults,canprovideusefulsupplementalinformationforinvestorsanalyzingperiod-to-periodcomparisonsoftheCompany'sperformance,facilitatecomparisonstocompetitors'operatingresultsandtoprovidegreatertransparencytoinvestorsofsupplementalinformationusedbymanagementinitsfinancialandoperationaldecision-making.Thesenon-GAAPmeasures,asdefinedbytheCompany,arenotnecessarilycomparabletosimilarlydefinedmeasuresofothercompanies.Furthermore,thesenon-GAAPmeasuresshouldnotbeviewedinisolationorusedasasubstituteforotherGAAPmeasuresinassessingtheoperatingperformanceorcashflowsoftheCompany.
Table 8 - Adjusted Operating Income and Adjusted Operating Margin:
ThetablebelowreflectsareconciliationoftheCompany’soperatingincometoadjustedoperatingincome.TheCompanydefinesadjustedoperatingincomeasoperatingincomeexcludingdepreciationandamortizationandrestructuringcharges.TheCompanyutilizesadjustedoperatingincomebecausemanagementdeemsthismetrictobeausefulmeasureforassessingtheoperatingperformanceofMoody’s,measuringtheCompany'sabilitytoservicedebt,fundcapitalexpenditures,andexpanditsbusiness.Adjustedoperatingincomeexcludesdepreciationandamortizationbecausecompaniesutilizeproductiveassetsofdifferentagesandusedifferentmethodsofbothacquiringanddepreciatingproductiveassets.AdjustedOperatingIncomealsoexcludesrestructuringchargesasthefrequencyandmagnitudeofthesechargesmayvarywidelyacrossperiodsandcompanies.Managementbelievesthattheexclusionoftheseitems,detailedinthereconciliationbelow,allowsforamoremeaningfulcomparisonoftheCompany’sresultsfromperiodtoperiodandacrosscompanies.TheCompanydefinesadjustedoperatingmarginasadjustedoperatingincomedividedbyrevenue.
Three Months Ended
September 30,Nine Months Ended
September 30,(amountsinmillions) 2016 2015 2016 2015Operating income $ 397.5 $ 349.7 $ 1,111.8 $ 1,140.3
Restructuring 8.4 - 12.0 -Depreciation&amortization 32.7 28.3 93.8 84.8
Adjusted operating income $ 438.6 $ 378.0 $ 1,217.6 $ 1,225.1Operating margin 43.3% 41.9% 41.8% 43.5%Adjusted operating margin 47.8% 45.3% 45.7% 46.8%
Projected for the Year Ending December 31,
2016Operatingmarginguidance Approximately41%Depreciationandamortization Approximately4%Restructuring NegligibleimpactAdjustedoperatingmarginguidance Approximately45%
Table 9 - Free Cash Flow
ThetablebelowreflectsareconciliationoftheCompany’snetcashflowsfromoperatingactivitiestofreecashflow.TheCompanydefinesfreecashflowasnetcashprovidedbyoperatingactivitiesminuspaymentsforcapitaladditions.ManagementbelievesthatfreecashflowisausefulmetricinassessingtheCompany’scashflowstoservicedebt,paydividendsandtofundacquisitionsandsharerepurchases.ManagementdeemscapitalexpendituresessentialtotheCompany’sproductandserviceinnovationsandmaintenanceofMoody’soperationalcapabilities.Accordingly,capitalexpendituresaredeemedtobearecurringuseofMoody’scashflow.
Nine Months Ended
September 30,(amountsinmillions) 2016 2015Net cash flows from operating activities $ 856.6 $ 893.5
Capitaladditions (84.8) (65.9)Free cash flow $ 771.8 $ 827.6Net cash used in investing activities $ (2.4) $ (81.5)Net cash used in financing activities $ (882.6) $ (512.5)
Projected for the Year Ending
December 31, 2016Netcashflowsfromoperatingactivitiesguidance Approximately$1.1billionCapitaladditionsguidance (Approximately$120million)Freecashflowguidance Approximately$1.0billion
Table 10 - Non-GAAP diluted earnings per share attributable to Moody's common shareholders:
TheCompanypresentsthisnon-GAAPmeasuretoexcluderestructuringchargesin2016andaLegacyTaxbenefitinthethirdquarterof2015toallowforamoremeaningfulcomparisonofMoody’sdilutedearningspersharefromperiodtoperiod.BelowisareconciliationofthesemeasurestotheirmostdirectlycomparableU.S.GAAPamount:
(amountsinmillions) Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015Diluted EPS - GAAP $ 1.31 $ 1.14 $ 3.55 $ 3.54Restructuring 0.03 - 0.04 -LegacyTax - (0.03) - (0.03)Diluted EPS - Non-GAAP $ 1.34 $ 1.11 $ 3.59 $ 3.51
Projected for the Year Ending
December 31, 2016
Diluted EPS attributable to Moody's common shareholders - GAAP Guidance $ 4.76-4.86FXgainduetosubsidiaryreorganization (0.18)Restructuring 0.04Diluted EPS attributable to Moody's common shareholders - Non-GAAP Guidance $ 4.62-4.72
Table 11 - 2016 Outlook
Moody’soutlookfor2016isbasedonassumptionsaboutmanygeopoliticalconditionsandmacroeconomicandcapitalmarketfactors,includinginterestrates,foreigncurrencyexchangerates,corporateprofitabilityandbusinessinvestmentspending,mergerandacquisitionactivity,consumerborrowingandsecuritization,andtheamountofdebtissued.Theseassumptionsaresubjecttosomedegreeofuncertainty,andresultsfortheyearcoulddiffermateriallyfromourcurrentoutlook.Moody’sguidanceassumesforeigncurrencytranslationatend-of-quarterexchangerates.Specifically,ourforecastreflectsexchangeratesfortheBritishpound(£)of$1.30to£1andfortheeuro(€)of$1.12to€1.Post-thirdquartermovementsinforeignexchangerateshadnomeaningfulimpactonthefullyear2016outlook.
Full-year 2016 Moody's Corporation guidance
MOODY'S CORPORATION Current guidance as of October 21, 2016 Last publicly disclosed guidance on September 28, 2016
Revenue increaseinthelow-single-digitpercentrange NCOperatingexpenses increaseinthemid-single-digitpercentrange NCDepreciation&amortization Approximately$130million NCOperatingmargin Approximately41% NCAdjustedoperatingmargin Approximately45% NCEffectivetaxrate 31%-31.5% NCGAAPEPS $4.76to$4.86 $4.70to$4.80Non-GAAPEPS $4.62to$4.72 $4.55to$4.65Capitalexpenditures Approximately$120million Approximately$125millionFreecashflow Approximately$1billion NCSharerepurchases1 Approximately$750million Approximately$1billion
Full-year 2016 revenue guidance
MIS Current guidance as of October 21, 2016 Last publicly disclosed guidance on September 28, 2016
MISglobal Approximatelyflat decreaseinthelow-single-digitpercentrangeMISU.S. Approximatelyflat NCMISNon-U.S. Approximatelyflat decreaseinthelow-single-digitpercentrangeCFG Approximatelyflat decreaseinthelow-single-digitpercentrangeSFG decreaseinthemid-single-digitpercentrange decreaseinthehigh-single-digitpercentrangeFIG increaseinthelow-single-digitpercentrange increaseinthemid-single-digitpercentrangePPIF increaseapproximately10% NCMA MAglobal increaseinthemid-single-digitpercentrange NCMAU.S. increaseinthelow-double-digitpercentrange NCMANon-U.S. increaseinthelow-single-digitpercentrange NCRD&A increaseinthehigh-single-digitpercentrange NCERS increaseinthehigh-single-digitpercentrange NCPS decreaseinthelow-single-digitpercentrange NCNC- There is no difference between the Company's current guidance range and the last publicly disclosed guidance range for this item.1 Subject to available cash, market conditions and other ongoing capital allocation decisions
CONTACT:SalliSchwartzGlobalHeadofInvestorRelationsandCommunications212.553.4862sallilyn.schwartz@moodys.comorMichaelAdlerSeniorVicePresidentCorporateCommunications212.553.4667michael.adler@moodys.com