Exhibit 99.1
Moody's Corporation Reports Results for the Third Quarter of 2004
NEW YORK--(BUSINESS WIRE)--Oct. 27, 2004--Moody's Corporation
(NYSE: MCO) today announced results for the third quarter of 2004.
Summary of Results for Third Quarter 2004
Moody's reported revenue of $357.9 million for the three months
ended September 30, 2004, an increase of 17% from $305.0 million for
the same quarter of 2003. Normal seasonal weakness did not occur in
the third quarter, as Moody's revenue equaled the previous record
level achieved in the second quarter. Important contributors to our
strong third quarter revenue were continued growth in our research
business, success of new products such as the Enhanced Analysis
Initiative, the unexpected decline in benchmark 10-year Treasury and
residential mortgage rates, and market share gains in real estate
securitizations. Operating income for the quarter was $197.8 million
and rose 23% from $161.2 million for the same period of last year.
Diluted earnings per share for the third quarter of 2004 rose to
$0.63, 13% higher than $0.56 in the third quarter of 2003. Earnings
per share for the third quarter of 2004 included a charge of $18.4
million, equivalent to $0.12 per diluted share, related to legacy
income tax exposures that were assumed by Moody's in connection with
its separation from Dun & Bradstreet in 2000, which are described in
Moody's annual and quarterly SEC filings. In addition, earnings per
share for the third quarter of 2004 included $6.7 million of pre-tax
expense related to stock options and other stock-based compensation
plans, equivalent to $0.03 per diluted share, compared with $3.0
million of similar expense, or $0.01 per diluted share, in the third
quarter of 2003.
John Rutherfurd, Chairman and Chief Executive Officer of Moody's
said "Moody's results for the third quarter of 2004 reflected strong
results across several of our major businesses. Geographically, we saw
good growth both in the U.S. and abroad. In the U.S., attractive
interest rates, the continuing strong real estate market and robust
consumer spending helped boost structured finance activity. A decline
in the benchmark 10-year U.S. Treasury yield, despite several
increases to the Federal Funds target interest rate, helped issuance
among corporations and financial institutions. In international
markets, corporate issuance was lackluster but structured finance
activity, particularly in Europe, was robust. Outside the ratings
business, our research activities continued to grow at an impressive
pace on a global basis."
In addition to its reported results, Moody's has included in this
earnings release certain 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 growth. These non-GAAP financial measures
relate to: (1) presenting results for the third quarter and first nine
months of 2004 before charges related to legacy income tax exposures;
(2) presenting results for the first nine months of 2003 before a
non-recurring gain on an insurance recovery, and (3) presenting
results for the third quarter and first nine months of 2004 and 2003
before the impact of expensing stock-based compensation plans, which
is being phased in for annual stock option grants commencing in 2003
over the current four-year stock plan vesting period. In addition, the
full-year 2004 outlook presented below includes a discussion of
projected 2004 earnings per share growth excluding the following
items: (1) the impacts in 2003 and 2004 of expensing stock-based
compensation; (2) the impact in 2003 of the non-recurring gain on the
insurance recovery; and (3) the impacts in 2003 and 2004 of the
charges related to legacy income tax exposures. Attached to this
earnings release are tables showing adjustments to Moody's 2004 and
2003 results to arrive at non-GAAP financial measures excluding the
impacts noted above.
Revenue
Revenue at Moody's Investors Service for the third quarter of 2004
was $328.1 million, an increase of 18% from the prior year period. The
favorable impact of currency translation, mainly due to the strength
of the euro relative to the U.S. dollar, contributed approximately 200
basis points to revenue growth in the quarter and had a small positive
impact on operating income growth. Ratings revenue totaled $285.1
million, rising 16% from $245.7 million a year ago, and research
revenue totaled $43.0 million, 36% higher than in the third quarter of
2003.
Within the ratings business, global structured finance revenue
totaled $142.6 million for the third quarter of 2004, an increase of
30% from $110.1 million a year earlier. U.S. structured finance
revenue rose in the high-twenties percent range, benefiting from
strong growth from rating residential mortgage and home equity
securities, commercial mortgage-backed securities and credit
derivatives. International structured finance revenue grew more than
30% driven by robust activity in Europe, including growth of
approximately 25% in credit derivatives ratings. International
structured finance revenue also benefited from favorable foreign
currency translation.
Global corporate finance revenue of $72.2 million in the third
quarter of 2004 rose 4% from $69.4 million in the same quarter of
2003. Revenue in the U.S. grew in the high single-digit percent range
reflecting a strong year-over-year increase in bank loan ratings
partially offset by declines in revenue from investment grade and high
yield corporate bond ratings. Outside the U.S., corporate finance
revenue declined modestly from the prior year period as weak issuance
in the European market, combined with difficult prior year
comparisons, more than offset good activity in some smaller markets.
Global financial institutions and sovereigns revenue totaled $50.1
million for the third quarter of 2004, up 12% compared with the prior
year period. The most significant contributors to this increase
included strong issuance by U.S. real estate companies and banks as
spreads narrowed.
U.S. public finance revenue was $20.2 million for the third
quarter of 2004, 6% lower than in the third quarter of 2003. Both "new
money" and refinancing issuance declined from the prior year,
reflecting higher interest rates and lower borrowing needs as a result
of improving tax receipts.
Moody's research revenue rose to $43.0 million, up 36% from the
same quarter of 2003. The continued strong growth reflected robust
demand for traditional credit research as well as good adoption of
newly-offered products that support clients' growing interest in
credit data and credit risk analysis tools.
Revenue at Moody's KMV ("MKMV") for the third quarter of 2004 was
$29.8 million, an increase of 8% from the third quarter of 2003. MKMV
generated double-digit percent revenue growth from quantitative credit
risk assessment subscription products. The quarter's revenue growth
was negatively impacted by credit processing software sales that
closed in the second quarter of 2004 but had been expected in the
second half of the year.
Moody's U.S. revenue of $228.0 million for the third quarter of
2004 was up 19% from the third quarter of 2003. International revenue
of $129.9 million was 15% higher than in the prior year period
including favorable currency impacts. International revenue accounted
for 36% of Moody's total in the quarter, roughly in line with the
year-ago period.
Expenses
Moody's operating expenses were $160.1 million in the third
quarter of 2004, 11% higher than in the prior year period. Expenses
for the third quarter of 2004 included $6.7 million related to
stock-based compensation plans compared with $3.0 million in the third
quarter of 2003. The year-to-year increase reflects, in part, the
phasing-in commencing January 1, 2003 of expense related to annual
option grants over the current four-year stock plan vesting period.
Moody's operating margin for the third quarter of 2004 was 55%
compared with 53% in the third quarter of 2003.
Year-to-date Results
Revenue for the first nine months of 2004 totaled $1,046.7
million, an increase of 17% from $895.9 million for the same period of
2003. Year-to-date operating income of $580.2 million was up 19% from
$487.0 million for the prior year period. Currency translation
accounted for approximately 170 basis points of revenue growth and had
a small positive impact on operating income growth. Net income for the
first nine months of 2004 was $302.5 million, an increase of 9% from
$278.4 million in the first nine months of 2003. Diluted earnings per
share for the first nine months of 2004 were $2.00 compared with $1.83
for the first nine months of 2003, an increase of 9%.
As noted above, diluted earnings per share for the third quarter
of 2004 included a charge of $18.4 million related to legacy income
tax exposures, equivalent to $0.12 per diluted share. This is in
addition to a legacy tax charge of $10 million, or $0.07 per share, in
the second quarter of this year. Excluding both of these charges,
pro-forma diluted earnings per share for the first nine months of 2004
would have been $2.18. Moody's results for the first nine months of
2003 included a $13.6 million non-recurring gain on an insurance
recovery, equivalent to $0.05 per diluted share. In addition, earnings
per share for the first nine months of 2004 included $19.1 million of
expense related to stock options and other stock-based compensation
plans, equivalent to $0.07 per diluted share, compared with $8.0
million of similar expense, or $0.03 per diluted share, in the first
nine months of 2003.
At Moody's Investors Service, global ratings revenue was $830.9
million for the first nine months of 2004, up 14% from $726.8 million
in the previous year. The global corporate finance, structured finance
and financial institutions businesses all achieved good growth while
U.S. public finance revenue declined slightly year-to-year. Research
revenue rose to $124.9 million for the first nine months of 2004, up
38% from the first nine months of 2003. Currency translation also
contributed to revenue growth in the period. Revenue at MKMV for the
first nine months of 2004 totaled $90.9 million, 16% higher than in
the prior year period.
Effective Tax Rate
Moody's effective tax rate for the third quarter of 2004 was 50.8%
on a reported basis and 41.4% on a pro-forma basis, excluding the
$18.4 million charge related to legacy income tax exposures. The
effective tax rate for the third quarter of 2003 was 44.4% on a
reported basis and 42.4% on a pro-forma basis, excluding the impact of
a retroactive change in New York tax legislation that was recorded in
that period. The year-to-year reduction in Moody's pro forma tax rate
reflects income growth in jurisdictions with lower tax rates than New
York.
Share Repurchases
Moody's repurchased approximately 0.5 million shares during the
third quarter of 2004 at a total cost of $35 million, which partially
offset shares issued under employee stock plans. Since becoming a
public company in September 2000 and through September 30, 2004,
Moody's has repurchased 26.4 million shares at a total cost of $1.1
billion, including 12.0 million shares to offset shares issued under
employee stock plans.
Outlook for Full Year 2004
Moody's outlook for the full year 2004 is based on assumptions
about many macroeconomics and capital market factors, including
interest rates, consumer spending, corporate profitability and
business investment spending and capital markets issuance activity.
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 from the outlook presented in
this press release.
We expect revenue in the fourth quarter to reflect a resumption of
many of the macroeconomics and capital markets conditions that we saw
at the beginning of the third quarter and to be generally the same as
revenue in the third quarter. We expect that residential mortgage and
home equity securitizations will decline versus the third quarter
level, offsetting seasonal increases in asset-backed securities and
credit derivatives. We also expect that the third quarter declines we
saw in the 10-year treasury rate, off which many debt securities are
priced, will begin to reverse in the fourth quarter. And we anticipate
further weakness in public finance issuance and a seasonally strong
fourth quarter at MKMV. Consistent with our expense pattern in 2003,
we expect increases in fourth quarter expenses over our third quarter
levels. Areas of potential increased spending in the fourth quarter
include improving our technology infrastructure and administrative
systems, office relocation and expansion, Sarbanes Oxley compliance,
marketing programs, and a grant to the Moody's Foundation. Our outlook
for the full year 2004 reflects these expectations for the fourth
quarter.
In the U.S., we expect low double-digit percent revenue growth for
the ratings and research business for the full year 2004. While the
Federal Reserve has increased its target interest rate three times
since June 30th, the yield on 10-year U.S. treasuries has fallen.
Moody's benefited from stronger-than-expected issuance in the third
quarter, in part as a result of this decline, but we expect that the
10-year rate will resume rising as we saw earlier in the year. We
expect that higher borrowing costs, combined with sufficient profits
from current production to reduce the need for corporations to fund
business investment with debt, will result in a continuing weakness in
U.S. investment grade corporate issuance for the remainder of the
year. We believe issuance in the high yield bond market for the
remainder of 2004 will likely continue its downward trend from the
very strong levels of the second half of 2003 and the first half of
2004, though this may be partly offset by continuing strong activity
in the leveraged loan sector of that market. For the full year 2004,
we expect moderate growth in U.S. corporate finance and good growth in
financial institutions revenue versus 2003, including the benefits of
new products, particularly our Enhanced Analysis Initiative.
In the U.S. structured finance market, revenue from rating
residential mortgage and home equity securities has been stronger than
last year and much stronger than we anticipated at the start of this
year, driven by persistently low interest rates and the strength of
real estate prices. For the full year 2004 we now expect revenue from
rating residential mortgage-backed securities, including home equity
loans, to grow approximately 40% compared with 2003. We expect 2004
revenue from rating asset-backed securitizations, including credit
card and vehicle transactions, to decline slightly compared to 2003.
Asset-backed commercial paper should continue to show flat to modestly
negative revenue growth, but we expect good growth in commercial
mortgage-backed securities and credit derivatives. Accordingly, for
the full year we expect mid-teens percent revenue growth in U.S.
structured finance.
We continue to expect a year-to-year revenue decline in U.S.
public finance, and we are forecasting continued strong growth in the
U.S. research business.
Outside the U.S. we continue to expect mid single-digit percent
revenue growth in the combined corporate and financial institutions
ratings businesses. We are also projecting mid-teens percent
year-over-year revenue growth for international structured finance
ratings, primarily due to strong growth in European and Japanese
residential and commercial mortgage-backed securities, European
asset-backed commercial paper, and Japanese asset-backed securities.
We expect strong growth in international research revenue to continue.
These expectations, which include favorable foreign currency impacts,
should produce mid-teens percent ratings and research revenue growth
in Europe, and mid to high teens percent revenue growth in other
international regions in 2004.
Finally, we continue to expect low teens percent revenue growth at
Moody's KMV on a global basis. This expectation is lower than MKMV's
growth rate in the first half of 2004 due to factors that include
earlier than expected sales of credit process software and longer
product development and sales cycles than anticipated for new, more
complex risk analytics products.
For Moody's overall, we now expect low teens percent revenue
growth for the full year, up from our high single-digit growth
expectation at the end of the second quarter. We expect the operating
margin before the impact of expensing stock-based compensation to be
more than 100 basis points higher in 2004 compared with 2003. This
reflects the unexpectedly robust revenue growth that we have seen in
several of our businesses this year, partially offset by investments
we are making.
For 2004 we expect that year-over-year growth in diluted earnings
per share will be in the high teens percent range. This expected
growth excludes the impacts of the insurance gain in 2003, the legacy
tax provisions in 2003 and 2004, and the expensing of stock-based
compensation in both years. The impact of expensing stock-based
compensation is expected to be in the range of $26 million pre-tax in
2004, equivalent to $0.10 - $0.11 per diluted share, compared to $10.8
million, or $0.04 per diluted share, in 2003.
Moody's Corporation (NYSE: MCO) is the parent company of Moody's
Investors Service, a leading provider of credit ratings, research and
analysis covering debt instruments and securities in the global
capital markets, and Moody's KMV, a leading provider of market-based
quantitative services for banks and investors in credit-sensitive
assets serving the world's largest financial institutions. The
corporation, which reported revenue of $1.2 billion in 2003, employs
approximately 2,300 people worldwide and maintains offices in 18
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 and other information
are made as of October 27, 2004, 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, changes in
the volume of debt securities issued in domestic and/or global capital
markets; changes in interest rates and other volatility in the
financial markets; 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, including
those relating to Nationally Recognized Statistical Rating
Organizations; possible judicial decisions in various jurisdictions
regarding the status of and potential liabilities of rating agencies;
the possible loss of key employees to investment or commercial banks
or elsewhere and related compensation cost pressures; the outcome of
any review by controlling tax authorities of the Company's global tax
planning initiatives; the outcome of those tax and legal contingencies
that relate to Old D&B, its predecessors and their affiliated
companies for which the Company 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 the KMV and MRMS businesses; a
decline in the demand for credit risk management tools by financial
institutions; and other risk factors as discussed in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 and in
other filings made by the Company from time to time with the
Securities and Exchange Commission.
Moody's Corporation
Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2004 2003 2004 2003
Amounts in millions, except
per share amounts
- ------------------------------------------------ ---------------------
Revenue $ 357.9 $ 305.0 $ 1,046.7 $ 895.9
- ------------------------------------------------ ---------------------
Expenses
Operating, selling,
general and
administrative expenses 151.8 135.7 441.2 385.1
Depreciation and
amortization 8.3 8.1 25.3 23.8
--------------------- ---------------------
Total expenses 160.1 143.8 466.5 408.9
- ------------------------------------------------ ---------------------
Operating income 197.8 161.2 580.2 487.0
- ------------------------------------------------ ---------------------
Interest and other non-
operating expense, net (3.5) (7.4) (14.9) (3.6)
Income before
provision for income
taxes 194.3 153.8 565.3 483.4
Provision for income
taxes 98.8 68.2 262.8 205.0
- ------------------------------------------------ ---------------------
Net income $ 95.5 $ 85.6 $ 302.5 $ 278.4
- ------------------------------------------------ ---------------------
- ------------------------------------------------ ---------------------
Earnings per share
Basic $ 0.65 $ 0.57 $ 2.04 $ 1.87
Diluted $ 0.63 $ 0.56 $ 2.00 $ 1.83
- ------------------------------------------------ ---------------------
Weighted average number of
shares outstanding (a)
Basic 147.6 149.4 148.5 148.8
Diluted 150.7 152.9 151.5 152.0
- ------------------------------------------------ ---------------------
(a) Certain prior year amounts have been reclassified to conform to
the current presentation.
Moody's Corporation
Supplemental Revenue Information (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
Amounts in millions 2004 2003 2004 2003
- ------------------------------------------------ ---------------------
Moody's Investors Service
Structured finance $ 142.6 $ 110.1 $ 387.4 $ 324.8
Corporate finance 72.2 69.4 226.9 202.4
Financial institutions
and sovereign risk 50.1 44.8 154.4 134.6
Public finance 20.2 21.4 62.2 65.0
---------- ---------- ---------- ----------
Total ratings revenue 285.1 245.7 830.9 726.8
Research 43.0 31.6 124.9 90.4
---------- ---------- ---------- ----------
Total Moody's Investors
Service 328.1 277.3 955.8 817.2
Moody's KMV 29.8 27.7 90.9 78.7
---------- ---------- ---------- ----------
Total revenue $ 357.9 $ 305.0 $ 1,046.7 $ 895.9
- ------------------------------------------------ ---------------------
Revenue by geographic area (a)
United States $ 228.0 $ 192.4 $ 670.9 $ 578.6
International 129.9 112.6 375.8 317.3
---------- ---------- ---------- ----------
Total revenue $ 357.9 $ 305.0 $ 1,046.7 $ 895.9
- ------------------------------------------------ ---------------------
(a) Certain prior year amounts have been reclassified to conform to
the current presentation.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Three Months Ended
September 30, 2004
--------------------------------------
Amounts in millions, except per
share amounts
Non-GAAP
As Financial
Reported Adjustments Measures*
----------- ----------- ------------
Revenue $ 357.9 $ 357.9
Expenses 160.1 (6.7)(a) 153.4
----------- ----------- ------------
Operating income 197.8 6.7 204.5
Interest and other non-
operating expense, net (3.5) - (3.5)
----------- ----------- ------------
Income before provision for
income taxes 194.3 6.7 201.0
Provision for income taxes 98.8 (15.6)(b) 83.2
----------- ----------- ------------
Net income $ 95.5 $ 22.3 $ 117.8
----------- ----------- ------------
Basic earnings per share $ 0.65 $ 0.80
----------- ------------
Diluted earnings per share $ 0.63 $ 0.78
----------- ------------
Three Months Ended
September 30, 2003
--------------------------------------
Amounts in millions, except per
share amounts
Non-GAAP
As Financial
Reported Adjustments Measures*
----------- ----------- ------------
Revenue $ 305.0 $ 305.0
Expenses 143.8 (3.0)(a) 140.8
----------- ----------- ------------
Operating income 161.2 3.0 164.2
Interest and other non-
operating expense, net (7.4) (7.4)
----------- ----------- ------------
Income before provision for
income taxes 153.8 3.0 156.8
Provision for income taxes 68.2 1.2 (b) 69.4
----------- ----------- ------------
Net income $ 85.6 $ 1.8 $ 87.4
----------- ----------- ------------
Basic earnings per share $ 0.57 $ 0.58
----------- ------------
Diluted earnings per share $ 0.56 $ 0.57
----------- ------------
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 growth. The table above shows Moody's results for the
three months ended September 30, 2004 and 2003, adjusted to reflect
the following:
(a) To exclude operating expenses of $6.7 million and $3.0 million in
the three months ended September 30, 2004 and 2003, respectively,
relating to the expensing of stock options and other stock-based
compensation on a prospective basis for options and other stock
awards granted on or after January 1, 2003.
(b) To reflect the income tax impact related to the adjustment
described in note (a) and to exclude the $18.4 million of income
tax provisions in the third quarter of 2004 related to reserves
for legacy tax exposures.
* May not add due to rounding.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Nine Months Ended
September 30, 2004
--------------------------------------
Amounts in millions, except per
share amounts
Non-GAAP
As Financial
Reported Adjustments Measures*
----------- ----------- ------------
Revenue $ 1,046.7 $ 1,046.7
Expenses 466.5 (19.1)(a) 447.4
----------- ----------- ------------
Operating income 580.2 19.1 599.3
Interest and other non-
operating expense, net (14.9) - (14.9)
----------- ----------- ------------
Income before provision for
income taxes 565.3 19.1 584.4
Provision for income taxes 262.8 (20.5)(c) 242.3
----------- ----------- ------------
Net income $ 302.5 $ 39.6 $ 342.1
----------- ----------- ------------
Basic earnings per share $ 2.04 $ 2.30
----------- ------------
Diluted earnings per share $ 2.00 $ 2.26
----------- ------------
Nine Months Ended
September 30, 2003
--------------------------------------
Amounts in millions, except per
share amounts
Non-GAAP
As Financial
Reported Adjustments Measures*
----------- ----------- ------------
Revenue $ 895.9 $ 895.9
Expenses 408.9 (8.0)(a) 400.9
----------- ----------- ------------
Operating income 487.0 8.0 495.0
Interest and other non-
operating expense, net (3.6) (13.6)(b) (17.2)
----------- ----------- ------------
Income before provision for
income taxes 483.4 (5.6) 477.8
Provision for income taxes 205.0 (2.3)(c) 202.7
----------- ----------- ------------
Net income $ 278.4 $ (3.3) $ 275.1
----------- ----------- ------------
Basic earnings per share $ 1.87 $ 1.85
----------- ------------
Diluted earnings per share $ 1.83 $ 1.81
----------- ------------
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 growth. The table above shows Moody's results for the
nine months ended September 30, 2004 and 2003, adjusted to reflect the
following:
(a) To exclude operating expenses of $19.1 million and $8.0 million in
the nine months ended September 30, 2004 and 2003, respectively,
relating to the expensing of stock options and other stock-based
compensation on a prospective basis for options and other stock
awards granted on or after January 1, 2003.
(b) To exclude a non-operating gain of $13.6 million on an insurance
recovery related to the September 11th tragedy, which was recorded
in the first quarter of 2003.
(c) To reflect income tax impacts related to the adjustments described
in notes (a) and (b) and to exclude $10.0 million of income tax
provisions in the second quarter of 2004 and $18.4 million of
income tax provisions in the third quarter of 2004 related to
reserves for legacy tax exposures.
* May not add due to rounding.
Moody's Corporation
Reconciliation to Non-GAAP Financial Measures (Unaudited)
Twelve Months Ended
December 31, 2003
--------------------------------------
Amounts in millions, except per
share amounts
Non-GAAP
As Financial
Reported Adjustments Measures*
----------- ----------- ------------
Revenue $ 1,246.6 $ 1,246.6
Expenses 583.5 (10.8)(a) 572.7
----------- ----------- ------------
Operating income 663.1 10.8 673.9
Interest and other non-
operating expense, net (6.7) (13.6)(b) (20.3)
----------- ----------- ------------
Income before provision for
income taxes 656.4 (2.8) 653.6
Provision for income taxes 292.5 (17.4)(c) 275.1
----------- ----------- ------------
Net income $ 363.9 $ 14.6 $ 378.5
----------- ----------- ------------
Basic earnings per share $ 2.44 $ 2.54
----------- ------------
Diluted earnings per share $ 2.39 $ 2.49
----------- ------------
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 growth. The table above shows Moody's results for the
year ended December 31, 2003, adjusted to reflect the following:
(a) To exclude operating expenses of $10.8 million relating to the
expensing of stock options and other stock-based compensation on a
prospective basis for options and other stock awards granted on or
after January 1, 2003.
(b) To exclude a non-operating gain of $13.6 million on an insurance
recovery related to the September 11th tragedy, which was recorded
in the first quarter of 2003.
(c) To reflect income tax impacts related to the adjustments described
in notes (a) and (b) and to exclude $16.2 million of income tax
provisions in the fourth quarter of 2003 related to reserves for
legacy tax exposures.
* May not add due to rounding.
CONTACT: Moody's Corporation
Investor Relations and Corporate Finance:
Michael Courtian, 212-553-7194
michael.courtian@moodys.com