- 2Q17 revenue of $1.0 billion up 8% from
2Q16
- 2Q17 operating income of $457.5 million
up 12% from 2Q16
- 2Q17 diluted EPS of $1.61 up 24% from
2Q16; adjusted diluted EPS of $1.51 up 16%(1)
- FY 2017 diluted EPS guidance range is
now $5.69 to $5.84; adjusted diluted EPS guidance range is now
$5.35 to $5.50; both ranges exclude Bureau van Dijk’s projected
financial results as the acquisition has not yet closed
Moody’s Corporation (NYSE: MCO) today announced results for the
second quarter of 2017 and provided its current outlook for full
year 2017.
“In the second quarter, Moody’s recorded $1.0 billion in
quarterly revenue, as well as double-digit EPS growth,” said
Raymond McDaniel, President and Chief Executive Officer of Moody’s.
“Given the strength of the first half and a supportive market
environment, we are raising our full year 2017 diluted EPS and
adjusted diluted EPS guidance ranges to $5.69 to $5.84 and $5.35 to
$5.50, respectively.”
Mr. McDaniel added, “We continue to expect our previously
announced acquisition of Bureau van Dijk to close in the third
quarter of 2017 and look forward to further extending Moody’s
position as a leader in risk data and analytical insight.”
SECOND QUARTER 2017
HIGHLIGHTS
Moody’s Corporation reported record revenue of $1.0 billion for
the three months ended June 30, 2017, up 8% from the same period of
2016.
Operating expense totaled $543.0 million, up 5% from the same
period in 2016. Operating income was $457.5 million, up 12% from
the prior-year period, and adjusted operating income (operating
income before depreciation, amortization and expenses associated
with the pending acquisition of Bureau van Dijk, referred to as
“Acquisition-Related Expenses”) was $497.0 million, up 13%. The
operating margin for the second quarter was 45.7% and the adjusted
operating margin was 49.7%.
Diluted EPS of $1.61 was up 24% from the second quarter of 2016
and adjusted diluted EPS of $1.51 was up 16%. Second quarter 2017
adjusted diluted EPS excludes a $0.13 unrealized gain on a foreign
currency collar to economically hedge the Bureau van Dijk
euro-denominated purchase price (the “Purchase Price Hedge Gain”)
and $0.03 of Acquisition-Related Expenses.
MCO SECOND QUARTER 2017 REVENUE UP
8%
Moody’s Corporation reported global revenue of $1.0 billion for
the second quarter of 2017, up 8% from the second quarter of
2016.
U.S. revenue was $567.8 million, up 4%, and non-U.S. revenue was
$432.7 million, up 13%. Revenue generated outside the U.S.
constituted 43% of total revenue, up from 41% in the prior-year
period. The impact of foreign currency translation was
negligible.
MIS Second Quarter Revenue Up
10%
Global revenue for Moody’s Investors Service (MIS) for the
second quarter of 2017 was $686.7 million, up 10% from the
prior-year period. U.S. revenue was $412.4 million, up 3%, and
non-U.S. revenue was $274.3 million, up 21%. The impact of foreign
currency translation was negligible.
Corporate finance revenue was $355.8 million, up 17% from the
prior-year period. This result reflected a favorable mix within
each of U.S. leveraged finance issuance and EMEA investment grade
issuance, as well as strong growth in EMEA bank loan issuance and
Asian bond issuance. U.S. and non-U.S. corporate finance revenues
were up 6% and 40%, respectively.
Structured finance revenue totaled $119.2 million, up 7% from
the prior-year period, primarily driven by the continued strength
of U.S. CLO issuance. U.S. structured finance revenue was up 12%,
while non-U.S. revenue was down 3%.
Financial institutions revenue was $102.4 million, up 14%
compared to the prior-year period. This result was largely driven
by an increase in issuance from infrequent issuers in EMEA. U.S.
and non-U.S. financial institutions revenues were up 8% and 20%,
respectively.
Public, project and infrastructure finance revenue was $104.7
million, down 7% from the prior-year period. This result was
primarily driven by a decline in U.S. issuance and a change in mix
of European infrastructure issuance. The revenue decline was
partially offset by strong growth in infrastructure issuance in
Asia. U.S. public, project and infrastructure finance revenue was
down 12%, while non-U.S. revenue was up 4%.
MA Second Quarter Revenue Up
3.5%
Global revenue for Moody’s Analytics (MA) for the second quarter
2017 was $313.8 million, up 3.5% from the second quarter of 2016.
U.S. revenue was $155.4 million, up 6%, and non-U.S. revenue was
$158.4 million, up 1%. The impact of foreign currency translation
was negligible.
Revenue from research, data and analytics (RD&A) was $180.9
million, up 7% from the prior-year period. This result was
primarily driven by strength in sales of credit research and
ratings data feeds. U.S. and non-U.S. RD&A revenues were up 6%
and 10%, respectively.
Enterprise risk solutions (ERS) revenue of $97.3 million was
flat to the second quarter of 2016 primarily due to the timing of
revenue recognition for customer projects, many of which are
expected to complete in the second half of the year. U.S. ERS
revenue was up 7%, while non-U.S. revenue was down 5%.
Revenue from professional services of $35.6 million was down 5%
from the prior-year period. U.S. professional services revenue was
up 6%, while non-U.S. revenue was down 10%.
SECOND QUARTER 2017 OPERATING EXPENSE
UP 5%
Second quarter 2017 operating expense for Moody’s Corporation
was $543.0 million, up 5% from the prior-year period. The increase
was primarily attributable to annual salary increases, higher
accruals for incentive compensation and the Acquisition-Related
Expenses, partially offset by a decline in non-compensation
expenses and a favorable foreign currency translation impact of
2%.
Operating income was $457.5 million, up 12% from the prior-year
period. Foreign currency translation favorably impacted operating
income by 1%. Adjusted operating income of $497.0 million was up
13% from the prior-year period. Operating margin was 45.7%, up from
44.2%. Adjusted operating margin was 49.7%, up from 47.5%.
Moody’s effective tax rate for the second quarter of 2017 was
32.1%, up from 31.9% in the prior-year period.
FIRST HALF 2017 REVENUE UP
13%
For Moody’s Corporation overall, global revenue was $1,975.7
million for the first half of 2017, up 13% from the first half of
2016. U.S. revenue was $1,145.6 million, up 12%, while non-U.S.
revenue was $830.1 million, up 15% from the prior-year period. The
impact of foreign currency translation was negligible.
MIS revenue totaled $1,354.9 million for the first half of 2017,
up 18% from the prior-year period. U.S. revenue was $834.9 million,
up 14%. Non-U.S. revenue was $520.0 million, up 25%, and
represented 38% of MIS revenue, up from 36% in the first half of
2016.
MA revenue totaled $620.8 million for the first half of 2017, up
4% from the prior-year period. U.S. revenue of $310.7 million was
up 7%. Non-U.S. revenue was $310.1 million, up 2%, and represented
50% of MA revenue, down from 51% in the first half of 2016.
FIRST HALF 2017 OPERATING EXPENSE UP
4%
Operating expense for Moody’s Corporation in the first half of
2017 was $1,074.8 million, up 4% from the prior-year period.
Foreign currency translation favorably impacted expense by 2%.
Operating income was $900.9 million, up 26% from the first half
of 2016. Foreign currency translation favorably impacted operating
income by 1%. Adjusted operating income of $972.9 million was up
25% from the prior-year period. Moody’s reported operating margin
was 45.6% and its adjusted operating margin was 49.2%.
The effective tax rate for the first half of 2017 was 27.8%,
down from 32.1% in the prior-year period, primarily due to a first
quarter non-cash, non-taxable gain from a strategic realignment and
expansion involving Moody’s Chinese affiliate China Cheng Xin
International Credit Rating Co. Ltd. (the “CCXI Gain”) and a tax
benefit from the adoption of the new accounting standard for equity
compensation ASU 2016-09, “Improvements to Employee Share-Based
Payment Accounting.”
Diluted EPS of $3.39 for the first half of 2017 was up 51%
compared to the same period in 2016. Adjusted diluted EPS of $2.99
for the first half of 2017 was up 33% from the same period in 2016.
First half 2017 adjusted diluted EPS excludes the $0.31 per share
CCXI Gain, the $0.13 per share Purchase Price Hedge Gain and $0.04
per share of Acquisition-Related Expenses.
2017 CAPITAL ALLOCATION AND
LIQUIDITY
$152.1 Million Returned to Shareholders
in Second Quarter
During the second quarter of 2017, Moody’s repurchased 0.7
million shares at a total cost of $79.5 million, or an average cost
of $115.35 per share, and issued 0.4 million shares as part of its
employee stock-based compensation plans. Moody’s also returned
$72.6 million to its shareholders via dividend payments during the
second quarter of 2017.
Over the first half of 2017, Moody’s repurchased 1.2 million
shares at a total cost of $134.5 million, or an average cost of
$114.06 per share, and issued 1.9 million shares as part of its
employee stock-based compensation plans. Moody’s also returned
$145.2 million to its shareholders via dividend payments during the
first half of 2017.
Outstanding shares as of June 30, 2017 totaled 191.0 million,
down 1% from June 30, 2016. As of June 30, 2017, Moody’s had $0.6
billion of share repurchase authority remaining.
As part of Moody’s financing of the pending acquisition of
Bureau van Dijk, in June 2017, Moody’s issued $1.0 billion of notes
consisting of $500.0 million of 2.625% senior unsecured notes due
2023 and $500.0 million of 3.250% senior unsecured notes due 2028.
At quarter-end, Moody’s had $4.9 billion of outstanding debt and
$1.5 billion of additional debt capacity available under its
revolving credit facility and undrawn term loan.
Total cash, cash equivalents and short-term investments at
quarter-end were $3.4 billion, up 51% from December 31, 2016,
primarily reflecting the financing for the pending acquisition of
Bureau van Dijk. Cash flow from operations for the first half of
2017 was $(47.7) million, a decline from $546.4 million in the
first half of 2016. Free cash flow for the first half of 2017 was
$(90.5) million, a decline from $492.1 million in the first half of
2016. These declines in cash flow were due to payments the Company
made in the first quarter of 2017 pursuant to its 2016 settlement
with the Department of Justice and various states attorneys
general.
ASSUMPTIONS AND OUTLOOK FOR FULL YEAR
2017
Moody’s outlook for 2017 is based on assumptions about many
geopolitical conditions and macroeconomic and capital market
factors, including interest rates, foreign currency exchange rates,
corporate profitability and business investment spending, mergers
and acquisitions, consumer borrowing and securitization, and the
amount of debt issued. These assumptions are subject to
uncertainty, and results for the year could differ materially from
our current outlook. The Company’s guidance assumes foreign
currency translation at end-of-quarter exchange rates.
Specifically, the Company’s forecast reflects exchange rates for
the British pound (£) of $1.30 to £1 and for the euro (€) of $1.14
to €1.
Certain components of Moody’s 2017 guidance have been modified
to reflect the company’s current view of business conditions. This
guidance does not include estimates of Bureau van Dijk’s financial
results as the acquisition has not yet closed.
Full year 2017 diluted EPS is now expected to be $5.69 to $5.84
which includes the CCXI Gain, the Purchase Price Hedge Gain and
Acquisition-Related Expenses. Excluding these items, full year 2017
adjusted diluted EPS is now expected to be $5.35 to $5.50. Please
refer to Table 11 – 2017 Outlook for a reconciliation of diluted
EPS to adjusted diluted EPS. Both ranges include an estimated $0.16
per share tax benefit due to the adoption of the new accounting
standard for equity compensation as well as an estimated $0.14 per
share impact from the financing expenses related to the pending
acquisition of Bureau van Dijk and a reduction of share repurchase
activity as a consequence of financing the acquisition.
Moody’s now projects an adjusted operating margin of
approximately 47%.
Moody’s now expects revenue to increase in the high-single-digit
percent range.
For MIS, Moody’s now expects revenue to increase in the
high-single-digit-percent range. U.S. revenue is still expected to
increase in the mid-single-digit percent range, while non-U.S.
revenue is now expected to increase in the low-teens percent
range.
Corporate finance revenue is now expected to increase in the
low-teens percent range. Financial institutions revenue is now
expected to increase in the high-single-digit percent range.
For MA, Moody’s now expects revenue to increase in the
high-single-digit-percent range. U.S. revenue is now expected to
increase in the mid-single-digit percent range and non-U.S. revenue
is now expected to increase in the low-double digit percent
range.
RD&A revenue is now expected to increase in the
low-double-digit percent range.
A full summary of Moody’s guidance as of July 21, 2017, is
included in Table 11 – 2017 Outlook at the end of this press
release.
_________________________
(1) Refer to “Table 10 – Adjusted Net Income and Diluted
Earnings per Share Attributable to Moody’s Common Shareholders,”
for reconciliation of this measure to its comparable GAAP
measure.
CONFERENCE CALL
Moody’s will hold a conference call to discuss its second
quarter 2017 results and its current 2017 outlook on July 21, 2017,
at 11:30 a.m. ET. Individuals within the U.S. and Canada can access
the call by dialing +1-877-400-0505. Other callers should dial
+1-719-234-7477. Please dial into the call by 11:20 a.m. ET. The
passcode for the call is 6159765.
The teleconference will also be webcast with an accompanying
slide presentation, which can be accessed through Moody's Investor
Relations website, ir.moodys.com, under “Featured Events and
Presentations”. The webcast will be available until 3:30 p.m.
Eastern Time on August 19, 2017.
A replay of the teleconference will be available from 3:30 p.m.
Eastern Time, July 21, 2017 until 3:30 p.m. Eastern Time, August
19, 2017. The replay can be accessed from within the United States
and Canada by dialing +1-888-203-1112. Other callers can access the
replay at +1-719-457-0820. The replay confirmation code is
6159765.
*****
ABOUT MOODY'S
CORPORATION
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 offers
leading-edge software, advisory services and research for credit
and economic analysis and financial risk management. The
corporation, which reported revenue of $3.6 billion in 2016,
employs approximately 10,600 people worldwide and maintains a
presence in 36 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. The forward-looking statements in this
release are made as of the date hereof, 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 examples of factors,
risks and uncertainties that could cause actual results to differ,
perhaps materially, from those indicated by these forward-looking
statements. Those factors, risks and uncertainties include, but are
not limited to, world-wide credit market disruptions or an economic
slowdown, which could affect the volume of debt and other
securities issued in domestic and/or global capital markets; other
matters that could affect the volume of debt and other securities
issued in domestic and/or global capital markets, including
regulation, credit quality concerns, changes in interest rates and
other volatility in the financial markets such as that due to the
U.K.’s referendum vote whereby the U.K. citizens voted to withdraw
from the EU; the level of merger and acquisition activity in the
U.S. and abroad; the uncertain effectiveness and possible
collateral consequences of U.S. and foreign government actions
affecting world-wide credit markets, international trade and
economic policy; concerns in the marketplace affecting our
credibility or otherwise affecting market perceptions of the
integrity or utility of independent credit agency ratings; the
introduction of competing products or technologies by other
companies; pricing pressure from competitors and/or customers; the
level of success of new product development and global expansion;
the impact of regulation as an NRSRO, the potential for new U.S.,
state and local legislation and regulations, including provisions
in the Financial Reform Act and regulations resulting from that
Act; the potential for increased competition and regulation in the
EU and other foreign jurisdictions; exposure to litigation related
to our rating opinions, as well as any other litigation, government
and regulatory proceedings, investigations and inquires to which
the Company may be subject from time to time; provisions in the
Financial Reform Act legislation modifying the pleading standards,
and EU regulations modifying the liability standards, applicable to
credit rating agencies in a manner adverse to credit rating
agencies; provisions of EU regulations imposing additional
procedural and substantive requirements on the pricing of services;
the possible loss of key employees; failures or malfunctions of our
operations and infrastructure; any vulnerabilities to cyber threats
or other cybersecurity concerns; the outcome of any review by
controlling tax authorities of the Company’s global tax planning
initiatives; exposure to potential criminal sanctions or civil
remedies if the Company fails to comply with foreign and U.S. laws
and regulations that are applicable in the jurisdictions in which
the Company operates, including sanctions laws, anti-corruption
laws, and local laws prohibiting corrupt payments to government
officials; the impact of mergers, acquisitions or other business
combinations and the ability of the Company to successfully
integrate acquired businesses; currency and foreign exchange
volatility; the level of future cash flows; the levels of capital
investments; and a decline in the demand for credit risk management
tools by financial institutions. Other factors, risks and
uncertainties relating to our pending acquisition of Bureau van
Dijk could cause our actual results to differ, perhaps materially,
from those indicated by these forward-looking statements, including
the ability of the parties to successfully complete the proposed
acquisition on anticipated terms and timing, or at all; risks
relating to the integration of Bureau van Dijk’s operations,
products and employees into Moody’s and the possibility that
anticipated synergies and other benefits of the proposed
acquisition will not be realized in the amounts anticipated or will
not be realized within the expected timeframe; risks that the
proposed acquisition could have an adverse effect on the business
of Bureau van Dijk or its prospects, including, without limitation,
on relationships with venders, suppliers or customers; claims made,
from time to time, by venders, suppliers or customers; changes in
the European or global marketplaces that have an adverse effect on
the business of Bureau van Dijk; and other factors, risks and
uncertainties relating to the transaction as set forth under the
caption “‘Safe Harbor’ Statement under the Private Securities
Litigation Reform Act of 1995 ” in Moody’s report on Form 8-K filed
on May 15, 2017, which are incorporated by reference herein. These
factors, risks and uncertainties as well as other risks and
uncertainties that could cause Moody’s actual results to differ
materially from those contemplated, expressed, projected,
anticipated or implied in the forward-looking statements are
described in greater detail under “Risk Factors” in Part I, Item 1A
of the Company’s annual report on Form 10-K for the year ended
December 31, 2016, and in other filings made by the Company from
time to time with the SEC or in materials incorporated herein or
therein. Stockholders and investors are cautioned that the
occurrence of any of these factors, risks and uncertainties may
cause the Company’s actual results to differ materially from those
contemplated, expressed, projected, anticipated or implied in the
forward-looking statements, which could have a material and adverse
effect on the Company’s business, results of operations and
financial condition. New factors may emerge from time to time, and
it is not possible for the Company to predict new factors, nor can
the Company assess the potential effect of any new factors on
it.
Table 1 - Consolidated Statements of Operations
(Unaudited) Three Months
Ended Six Months Ended June 30, June 30,
2017 2016 2017 2016
Amounts in millions, except per share
amounts
Revenue
$ 1,000.5 $ 928.9
$ 1,975.7 $ 1,745.0
Expenses: Operating 285.8 258.9 563.2 508.1 Selling,
general and administrative 217.7 228.6 439.6 461.5 Depreciation and
amortization 32.9 31.2 65.4 61.1 Acquisition-Related Expenses
6.6 - 6.6 -
Total expenses 543.0 518.7 1,074.8
1,030.7
Operating income
457.5 410.2 900.9
714.3 Non-operating (expense)
income, net Interest expense, net (45.0 ) (34.3 ) (87.4 ) (68.4
) Other non-operating income (expense), net 8.3 3.0 (1.1 ) 8.6 CCXI
Gain - - 59.7 - Purchase Price Hedge Gain 41.2
- 41.2 - Total non-operating
income (expense), net 4.5 (31.3 )
12.4 (59.8 )
Income before provision for
income taxes 462.0 378.9 913.3
654.5 Provision for income taxes 148.4
120.8 253.8 209.8
Net
income 313.6 258.1 659.5 444.7 Less: net income
attributable to noncontrolling interests 1.4
2.6 1.7 4.8
Net
income attributable to Moody's Corporation $
312.2 $ 255.5 $
657.8 $ 439.9
Earnings
per share attributable to Moody's common shareholders Basic $
1.63 $ 1.32 $ 3.44 $ 2.27 Diluted $ 1.61 $
1.30 $ 3.39 $ 2.24
Weighted average number of shares outstanding Basic 191.0
193.4 191.1 194.2 Diluted 193.8
195.8 194.1 196.8
Table 2 - Supplemental Revenue Information
(Unaudited) Three Months
Ended Six Months Ended June 30, June 30,
Amounts in millions
2017 2016 2017
2016
Moody's Investors
Service Corporate Finance $ 355.8 $ 304.9 $ 708.6 $ 545.2
Structured Finance 119.2 111.5 219.4 202.1 Financial Institutions
102.4 89.7 214.7 184.6 Public, Project and Infrastructure Finance
104.7 112.3 202.8 203.8 MIS Other 4.6 7.3 9.4 15.1 Intersegment
royalty 27.0 24.6 53.0
48.6 Sub-total MIS 713.7 650.3 1,407.9 1,199.4
Eliminations (27.0 ) (24.6 ) (53.0 )
(48.6 ) Total MIS revenue 686.7 625.7
1,354.9 1,150.8
Moody's
Analytics Research, Data and Analytics 180.9 168.3 356.3 333.2
Enterprise Risk Solutions 97.3 97.5 193.2 187.0 Professional
Services 35.6 37.4 71.3 74.0 Intersegment revenue 3.8
2.8 7.5 5.6 Sub-total MA
317.6 306.0 628.3 599.8 Eliminations (3.8 ) (2.8 )
(7.5 ) (5.6 )
Total MA revenue
313.8 303.2 620.8
594.2
Total Moody's Corporation revenue
$ 1,000.5 $ 928.9
$ 1,975.7 $ 1,745.0
Moody's Corporation
revenue by geographic area United States $ 567.8 $ 545.9
$ 1,145.6 $ 1,025.9 International 432.7 383.0
830.1 719.1
$
1,000.5 $ 928.9 $
1,975.7 $ 1,745.0
Table 3 - Selected Consolidated Balance Sheet Data
(Unaudited)
June
30,
December 31, 2017 2016 Amounts in millions
Cash and cash equivalents $ 3,280.9 $ 2,051.5 Short-term
investments 86.3 173.4 Total current assets 4,559.1 3,253.1
Non-current assets 1,977.2 2,074.2 Total assets 6,536.3 5,327.3
Total current liabilities (1,2) 1,237.2 2,428.2 Total debt (3)
4,887.1 3,363.0 Other long-term liabilities 879.5 863.4 Total
shareholders' (deficit) (467.5 ) (1,027.3 ) Total liabilities and
shareholders' (deficit) 6,536.3 5,327.3 Actual number of
shares outstanding 191.0 190.7 (1) The 2016 amount includes
an $863.8 million accrued settlement charge related to the
agreement with the U.S. Department of Justice and 21 U.S. states
and the District of Columbia to resolve pending and potential civil
claims related to credit ratings that MIS assigned to certain
structured finance instruments in the financial crisis era. This
settlement charge was paid by the Company in the first quarter of
2017. (2) The 2016 amount includes $300 million of debt classified
as a current liability as it was set to mature in September 2017.
The Company prepaid this debt in the first quarter of 2017. (3)
Includes debt classified in both current liabilities and long-term
debt.
Table 4 - Selected Consolidated Balance
Sheet Data (Unaudited) Continued
June 30, 2017
Amounts in millions
Principal Amount
Fair Value of Interest
Rate Swap
Unamortized (Discount)
Premium
Unamortized Debt
Issuance Costs
Carrying Value
Notes Payable: 5.50% 2010 Senior Notes, due 2020
$
500.0 $ 5.6 $ (1.2 )
$ (1.4 ) $ 503.0 4.50% 2012
Senior Notes, due 2022
500.0 0.1 (2.2 )
(1.9 ) 496.0 4.875% 2013 Senior Notes, due
2024
500.0 - (1.9 ) (2.5
) 495.6 2.75% 2014 Senior Notes (5-Year), due 2019
450.0 0.6 (0.3 ) (1.4 )
448.9 5.25% 2014 Senior Notes (30-Year), due 2044
600.0 - 3.3 (5.8 ) 597.5
1.75% 2015 Senior Notes, due 2027
570.3 - -
(3.6 ) 566.7 2.75% 2017 Senior Notes, due 2021
500.0 - (1.4 ) (3.7 )
494.9 2017 Floating Rate Senior Notes, due 2018
300.0
- - (1.0 ) 299.0 2.625% 2017
Private Placement Notes, due 2023
500.0 - (1.2
) (3.8 ) 495.0 3.25% 2017 Private
Placement Notes, due 2028
500.0 -
(5.4 ) (4.1 )
490.5 Total long-term debt
$
4,920.3 $ 6.3 $ (10.3
) $ (29.2 ) $ 4,887.1
December 31, 2016
Principal Amount
Fair Value of Interest
Rate Swap
Unamortized (Discount)
Premium
Unamortized Debt
Issuance Costs
Carrying Value
Notes Payable: 6.06% Series 2007-1 Notes due 2017 $ 300.0 $ - $ - $
- $ 300.0 5.50% 2010 Senior Notes, due 2020 500.0 5.5 (1.3 ) (1.6 )
502.6 4.50% 2012 Senior Notes, due 2022 500.0 (0.2 ) (2.4 ) (2.1 )
495.3 4.875% 2013 Senior Notes, due 2024 500.0 - (2.1 ) (2.7 )
495.2 2.75% 2014 Senior Notes (5-Year), due 2019 450.0 0.9 (0.4 )
(1.7 ) 448.8 5.25% 2014 Senior Notes (30-Year), due 2044 600.0 -
3.3 (5.9 ) 597.4 1.75% 2015 Senior Notes, due 2027 527.4
- - (3.7 ) 523.7
Total debt $ 3,377.4 $ 6.2 $ (2.9 ) $ (17.7 ) $ 3,363.0
Current portion (300.0 ) Total long-term debt $
3,063.0
Table 5 - Non-Operating (Expense)
Income, Net Three Months
Ended Six Months Ended June 30, June 30,
2017 2016 2017 2016 Amounts in
millions
Interest:
Expense on borrowings (1)
$ (46.4 ) $ (35.4 )
$ (91.1
) $ (70.0 ) Income
4.6 2.8
8.7 5.7 UTPs and
other tax related liabilities
(3.4 ) (1.7 )
(5.5 ) (4.5 ) Interest Capitalized
0.2
-
0.5 0.4
Total interest expense, net $ (45.0 ) $
(34.3 )
$ (87.4 ) $ (68.4 )
Other
non-operating (expense) income, net: FX gain (loss)
$
3.8 $ 0.8
$ (5.8 ) $ 4.8
Joint venture income
4.0 3.0
5.0 4.9 Other
0.5
(0.8 )
(0.3 ) (1.1 )
Other
non-operating (expense) income, net 8.3
3.0
(1.1 ) 8.6
CCXI Gain (2) - - 59.7 - Purchase Price Hedge Gain (3) 41.2
- 41.2 -
Total
non-operating (expense) income, net $ 4.5
$ (31.3 )
$ 12.4 $ (59.8 )
(1) The three and six month periods ending
June 30, 2017 reflect interest and fees on $1 billion in notes
issued and an undrawn bridge loan facility to fund the acquisition
of Bureau van Dijk. Additionally, the three and six month periods
ending June 30, 2017 reflect interest on the $800 million in notes
issued to fund a settlement with the U.S. Department of Justice and
various state attorneys general and the repayment of the Series
2007-1 Notes. The six month period ended June 30, 2017 includes a
$7 million early repayment penalty on the Series 2007-1 Notes.
(2) Reflects the non-cash, non-taxable gain from a strategic
realignment and expansion involving Moody's China affiliate, China
Cheng Xin International Credit Rating Co. Ltd.
(3) Reflects an unrealized gain on a
foreign currency collar to economically hedge the Bureau van Dijk
euro-denominated purchase price.
Table 6 - Financial Information by Segment
The table below presents revenue, adjusted
operating income and operating income by reportable segment. The
Company defines adjusted operating income as operating income
excluding depreciation and amortization and Acquisition-Related
Expenses.
Amounts in millions
Three Months Ended June 30,
2017 2016 MIS MA
Eliminations Consolidated MIS
MA Eliminations Consolidated
Revenue
$ 713.7 $ 317.6 $
(30.8 ) $ 1,000.5 $ 650.3 $ 306.0 $
(27.4 ) $
928.9 Operating, selling, general and
administrative expense
291.4 242.9 (30.8
) 503.5 281.3 233.6 (27.4 )
487.5
Adjusted operating
income
422.3 74.7
- 497.0 369.0
72.4 - 441.4
Acquisition-Related Expenses
- 6.6 -
6.6 - - -
- Depreciation and amortization
18.9 14.0 -
32.9 18.2 13.0
-
31.2 Operating income
$
403.4 $ 54.1 $ -
$ 457.5 $ 350.8 $ 59.4 $
- $
410.2 Adjusted operating margin
59.2 % 23.5 % 49.7 %
56.7 % 23.7 % 47.5 %
Operating margin
56.5 % 17.0 %
45.7 % 53.9 % 19.4 %
44.2 % Six Months Ended June 30,
2017 2016 MIS MA Eliminations
Consolidated MIS MA Eliminations
Consolidated Revenue
$ 1,407.9 $
628.3 $ (60.5 ) $ 1,975.7
$ 1,199.4 $ 599.8 $ (54.2 ) $ 1,745.0 Operating, selling, general
and administrative expense
579.7 483.6 (60.5
) 1,002.8 559.9 463.9 (54.2 ) 969.6
Adjusted operating income
828.2 144.7
- 972.9 639.5
135.9 - 775.4
Acquisition-Related Expenses
- 6.6 -
6.6 - - - - Depreciation and amortization
37.8
27.6 -
65.4 35.7 25.4 -
61.1 Operating income
$ 790.4
$ 110.5 $ -
$ 900.9 $ 603.8 $ 110.5 $ -
$ 714.3 Adjusted operating margin
58.8
% 23.0 % 49.2 % 53.3
% 22.7 % 44.4 % Operating margin
56.1 % 17.6 % 45.6 %
50.3 % 18.4 % 40.9 %
Table 7 - Transaction and Relationship Revenue
The tables below summarize the split between transaction and
relationship revenue. In the MIS segment, excluding MIS Other,
transaction revenue represents the initial rating of a new debt
issuance as well as other one-time fees while relationship revenue
represents the recurring monitoring of a rated debt obligation
and/or entities that issue such obligations, as well as revenue
from programs such as commercial paper, medium-term notes and shelf
registrations. In MIS Other, transaction revenue represents revenue
from professional services and outsourcing engagements and
relationship revenue represents subscription based revenues. In the
MA segment, relationship revenue represents subscription-based
revenues and software maintenance revenue. Transaction revenue in
MA represents software license fees and revenue from risk
management advisory projects, training and certification services,
and analytical and research engagements.
Three Months
Ended June 30,
Amounts in millions
2017 2016 Transaction Relationship
Total Transaction Relationship Total Corporate
Finance $ 262.5 $ 93.3 $ 355.8 $ 215.6 $ 89.3 $ 304.9 74 % 26 % 100
% 71 % 29 % 100 % Structured Finance $ 75.2 $ 44.0 $ 119.2 $ 68.0 $
43.5 $ 111.5 63 % 37 % 100 % 61 % 39 % 100 % Financial Institutions
$ 43.9 $ 58.5 $ 102.4 $ 29.8 $ 59.9 $ 89.7 43 % 57 % 100 % 33 % 67
% 100 % Public, Project and Infrastructure Finance $ 67.2 $ 37.5 $
104.7 $ 73.2 $ 39.1 $ 112.3 64 % 36 % 100 % 65 % 35 % 100 % MIS
Other $ 0.3 $ 4.3 $ 4.6 $ 2.7 $ 4.6 $ 7.3 7 % 93 % 100 % 37 % 63 %
100 %
Total MIS $ 449.1 $ 237.6
$ 686.7 $ 389.3 $ 236.4 $ 625.7
65 %
35 % 100 % 62 % 38 % 100 %
Moody's
Analytics $ 62.8 $ 251.0 $
313.8 $ 72.8 $ 230.4 $ 303.2
20 % 80
% 100 % 24 % 76 % 100 %
Total Moody's
Corporation $ 511.9 $ 488.6
$ 1,000.5 $ 462.1 $ 466.8 $ 928.9
51 %
49 % 100 % 50 % 50 % 100 %
Six Months Ended June 30, 2017 2016
Transaction Relationship Total Transaction Relationship Total
Corporate Finance $ 523.1 $ 185.5 $ 708.6 $ 366.6 $ 178.6 $ 545.2
74 % 26 % 100 % 67 % 33 % 100 % Structured Finance $ 132.7 $ 86.7 $
219.4 $ 117.8 $ 84.3 $ 202.1 60 % 40 % 100 % 58 % 42 % 100 %
Financial Institutions $ 97.3 $ 117.4 $ 214.7 $ 66.8 $ 117.8 $
184.6 45 % 55 % 100 % 36 % 64 % 100 % Public, Project and
Infrastructure Finance $ 126.4 $ 76.4 $ 202.8 $ 127.0 $ 76.8 $
203.8 62 % 38 % 100 % 62 % 38 % 100 % MIS Other $ 0.6 $ 8.8 $ 9.4 $
5.6 $ 9.5 $ 15.1 6 % 94 % 100 % 37 % 63 % 100 %
Total MIS
$ 880.1 $ 474.8 $ 1,354.9
$ 683.8 $ 467.0 $ 1,150.8
65 % 35 %
100 % 59 % 41 % 100 %
Moody's Analytics
$ 127.4 $ 493.4 $ 620.8 $
142.1 $ 452.1 $ 594.2
21 % 79 %
100 % 24 % 76 % 100 %
Total Moody's
Corporation $ 1,007.5 $ 968.2
$ 1,975.7 $ 825.9 $ 919.1 $ 1,745.0
51
% 49 % 100 % 47 % 53 % 100 %
Adjusted Operating Income and Adjusted Operating
Margin: The Company presents Adjusted Operating Income
because management deems this metric to be a useful measure of
assessing the operating performance of Moody’s. Adjusted Operating
Income excludes depreciation and amortization and
Acquisition-Related Expenses. Acquisition-Related Expenses consist
of expenses incurred to complete and integrate the pending
acquisition of Bureau van Dijk. Depreciation and amortization are
excluded because companies utilize productive assets of different
ages and use different methods of acquiring and depreciating
productive assets. Acquisition-Related Expenses are excluded due to
the material nature of these expenses which are not expected to
recur at this dollar magnitude subsequent to the completion of the
multi-year integration effort. Acquisition related expenses from
previous acquisitions were not material. Management believes that
the exclusion of depreciation and amortization and
Acquisition-Related Expenses, detailed in the reconciliation below,
allows for an additional perspective on the Company’s operating
results from period to period and across companies. The Company
defines Adjusted Operating Margin as Adjusted Operating Income
divided by revenue.
Table 8 - Adjusted Operating
Income and Adjusted Operating Margin
Three Months Ended June
30,
Six Months Ended June
30,
Amounts in millions
2017 2016 2017
2016 Operating income $
457.5 $ 410.2 $
900.9 $ 714.3 Depreciation & amortization
32.9
31.2
65.4 61.1 Acquisition-Related Expenses
6.6 -
6.6
-
Adjusted operating income $
497.0
$ 441.4 $
972.9 $ 775.4
Operating margin 45.7 % 44.2 %
45.6
% 40.9 %
Adjusted operating margin 49.7
% 47.5 %
49.2 % 44.4 %
Table
9 - Free Cash Flow: The table below reflects a
reconciliation of the Company’s net cash flows from operating
activities to free cash flow. The Company defines free cash flow as
net cash provided by operating activities minus payments for
capital additions. Management deems capital expenditures essential
to the Company’s product and service innovations and maintenance of
Moody’s operational capabilities. Accordingly, capital expenditures
are deemed to be a recurring use of Moody’s cash flow. Management
believes that free cash flow is a useful metric in assessing the
Company's cash flows to service debt, pay dividends and to fund
acquisitions and share repurchases.
Six Months Ended June
30,
Amounts in millions
2017 2016 Net cash
flows (used in) provided by operating activities $
(47.7
) $ 546.4 Capital additions
(42.8 )
(54.3 )
Free cash flow $
(90.5 ) $
492.1
Net cash provided by (used in) investing
activities $
39.9 $ (7.3 )
Net cash provided by (used
in) financing activities $
1,177.6 $ (640.4 )
Table 10 - Adjusted Net Income and Diluted Earnings per
Share Attributable to Moody's Common Shareholders The
Company presents this adjusted measure to exclude the CCXI Gain and
the Purchase Price Hedge Gain as the frequency and magnitude of
similar transactions may vary widely across periods. Additionally,
the Company excludes Acquisition-Related Expenses due to the
material nature of these expenses which are not expected to recur
at this dollar magnitude subsequent to the completion of the
multi-year integration effort. Acquisition-Related Expenses from
previous acquisitions were not material. Acquisition-Related
Expenses consist of expenses incurred to complete and integrate the
pending acquisition of Bureau van Dijk. This measure allows for an
additional perspective when comparing Moody’s net income and
diluted earnings per share from period to period. Below is a
reconciliation of this measure to its most directly comparable U.S.
GAAP amount: Amounts in millions
Three months ended June 30, Six months ended June 30,
2017 2016 2017
2016 Net income attributable to Moody's common
shareholders $
312.2 $
255.5 $
657.8 $
439.9
CCXI Gain
- - (59.7 ) -
Acquisition-Related Expenses (1)
6.6 - 6.6 - Pre-Tax Purchase
Price Hedge Gain $ (41.2 ) $ - $ (41.2 ) $ - Tax on Purchase Price
Hedge Gain 15.9 - 15.9
-
Net Purchase Price Hedge Gain
(25.3 ) (25.3
) - Adjusted net income attributable to
Moody's common shareholders $
293.5 $
255.5 $
579.4 $
439.9
Three
months ended June 30, Six months ended June 30,
2017 2016 2017 2016
Diluted EPS attributable to Moody's
common shareholders
$
1.61 $
1.30 $
3.39 $
2.24 CCXI Gain
- - (0.31 ) -
Acquisition-Related Expenses (1)
0.03 - 0.04 - Pre-Tax Purchase
Price Hedge Gain $ (0.21 ) $ - $ (0.21 ) $ - Tax on Purchase Price
Hedge Gain 0.08 - 0.08
-
Net Purchase Price Hedge Gain
(0.13 ) - (0.13
) -
Adjusted diluted EPS attributable to
Moody's common shareholders
$
1.51 $
1.30 $
2.99 $
2.24
(1) These Acquisition-Related Expenses are
not deductible for tax.
Table 11 - 2017 Outlook Moody’s outlook
for 2017 is based on assumptions about many geopolitical conditions
and macroeconomic and capital market factors, including interest
rates, foreign currency exchange rates, corporate profitability and
business investment spending, mergers and acquisitions, consumer
borrowing and securitization, and the amount of debt issued. These
assumptions are subject to uncertainty, and results for the year
could differ materially from our current outlook. Our guidance
assumes foreign currency translation at end-of-quarter exchange
rates. Specifically, our forecast reflects exchange rates for the
British pound (£) of $1.30 to £1 and for the euro (€) of $1.14 to
€1. This guidance does not include revenue and operating expense
estimates related to the pending acquisition of Bureau van Dijk.
Full-year 2017 Moody's Corporation guidance
MOODY'S CORPORATION Current guidance
Last publicly disclosed guidance Revenue increase in
the high-single-digit percent range increase in the
mid-single-digit percent range Operating expense decrease in the
25% to 30% range NC
Adjusted operating expense (1)
increase in the mid-single-digit % range NC Depreciation &
amortization approximately $135 million NC Operating margin
approximately 43% NC
Adjusted operating margin (1)
approximately 47% Approximately 46% Effective tax rate
approximately 30% NC Diluted EPS $5.69 - $5.84 $5.46 - $5.61
Adjusted diluted EPS (1)
$5.35 - $5.50 $5.15 - $5.30 Capital expenditures approximately $100
million NC
Operating cash flow (2)
approximately $600 million NC
Free cash flow (1,2)
approximately $500 million NC Share repurchases
approximately $200 million (subject to available cash, market
conditions and other ongoing capital allocation decisions)
NC
Note: All last publicly disclosed guidance
is as of May 5, 2017 with the exception of share repurchase which
was as of May 15, 2017.
(1) These metrics are adjusted measures.
See below for reconciliation of these measures to their comparable
GAAP measure.
(2) Includes payment of the settlement
charge related to an agreement with the U.S. Department of Justice
and the attorneys general of 21 U.S. states and the District of
Columbia.
Table 11 Continued - 2017 Outlook
Full-year 2017 revenue guidance
MIS Current guidance Last publicly
disclosed guidance MIS global increase in the high-single-digit
percent range increase in the mid-single-digit percent range MIS
U.S. increase in the mid-single-digit percent range NC MIS non-U.S.
increase in the low-teens percent range increase in the
mid-single-digit percent range CFG increase in the low-teens
percent range increase in the mid-single-digit percent range SFG
increase in the mid-single-digit percent range NC FIG increase in
the high-single-digit percent range increase in the
mid-single-digit percent range PPIF increase in the
low-single-digit percent range NC
MA
MA global increase in the high-single-digit percent
range increase in the mid-single-digit percent range MA U.S.
increase in the mid-single-digit percent range increase in the
low-single-digit percent range MA non-U.S. increase in the
low-double-digit percent range increase in the high-single-digit
percent range RD&A increase in the low-double-digit percent
range increase in the high-single-digit percent range ERS increase
in the mid-single-digit percent range NC PS increase in the
low-single-digit percent range NC
NC- There is no difference between the
Company's current guidance and the last publicly disclosed guidance
for this item.
Note: All last publicly disclosed guidance
is as of May 5, 2017 with the exception of share repurchase which
was as of May 15, 2017.
Table 11 Continued - 2017 Outlook The
following are reconciliations of the Company's adjusted forward
looking measures to their comparable GAAP measure:
Projected for the Year Ended
December 31, 2017
Operating expense guidance Decrease in the 25% to 30% range Impact
of 2016 settlement and restructuring charges Impact of 2017
Acquisition-Related Expenses
Adjusted operating expense
guidance Increase in the mid-single-digit percent range
Projected for the Year Ending
December 31,
2017
Operating margin guidance Approximately 43% Depreciation and
amortization Approximately 3% Acquisition-Related Expenses
Approximately 1%
Adjusted operating margin guidance
Approximately 47%
Projected for the Year Ending
December 31, 2017
Net cash flows from operating activities guidance Approximately
$600 million Capital expenditures guidance Approximately $100
million
Free cash flow guidance Approximately $500
million
Projected for the Year Ending
December 31, 2017
Diluted EPS attributable to Moody's common shareholders - GAAP
Guidance $ 5.69 - 5.84 CCXI Gain (0.31)
Pre-Tax Acquisition-Related Expenses
$ 0.11
Tax on Acquisition-Related Expenses
(1)
(0.01)
Net Acquisition-Related Expenses
0.10 Pre-Tax Purchase Price Hedge Gain (0.21) Tax on Purchase Price
Hedge Gain 0.08
Net Purchase Price Hedge Gain
(0.13)
Adjusted diluted EPS attributable to
Moody's common shareholders - Guidance
$ 5.35 - 5.50
(1) Certain Acquisition-Related Expenses
are not deductible for tax.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170721005156/en/
Salli SchwartzGlobal Head of Investor Relations and
Communications212.553.4862sallilyn.schwartz@moodys.comorMichael
AdlerSenior Vice PresidentCorporate
Communications212.553.4667michael.adler@moodys.com
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