Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark one)
 
x 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2011
Or
 
¨ 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from             to            
Commission file number 1-14037

Moody’s Corporation
(Exact name of registrant as specified in its charter)

 
			
Delaware	 	13-3998945	
(State of Incorporation)	 	(I.R.S. Employer Identification No.)	
		
7 World Trade Center at 250
Greenwich Street, New York, N.Y.	 	10007	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s telephone number, including area code:
(212) 553-0300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months, or for such shorter period that the registrant was required to submit and post such files.    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	 	x	  	Accelerated filer	 	¨	
				
Non-accelerated filer	 	¨   (Do not check if a smaller reporting company)	  	Smaller reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Title of Each Class	 	Shares Outstanding at June 30, 2011	
Common Stock, par value $0.01 per share	 	228.7 million	

 

Table of Contents
MOODY’S CORPORATION
 INDEX TO FORM 10-Q

 	  	 	  	Page(s)	 	
	  	Glossary of Terms and Abbreviations	  	 	3-7	  	
		
PART I. FINANCIAL INFORMATION	  				
Item 1.	  	Financial Statements	  				
	  	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2011 and 2010	  	 	8	  	
	  	Consolidated Balance Sheets (Unaudited) at June 30, 2011 and December 31, 2010	  	 	9	  	
	  	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2011 and 2010	  	 	10	  	
	  	Notes to Condensed Consolidated Financial Statements (Unaudited)	  	 	11-31	  	
Item 2.	  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	32-63	  	
	  	The Company	  	 	32	  	
	  	Critical Accounting Estimates	  	 	32	  	
	  	Operating Segments	  	 	33	  	
	  	Results of Operations	  	 	33-47	  	
	  	Liquidity and Capital Resources	  	 	48-54	  	
	  	2011 Outlook	  	 	54-55	  	
	  	Recently Issued Accounting Pronouncements	  	 	55-56	  	
	  	Contingencies	  	 	56-59	  	
	  	Regulation	  	 	59-62	  	
	  	Forward-Looking Statements	  	 	63	  	
Item 3.	  	Quantitative and Qualitative Disclosures about Market Risk	  	 	64	  	
Item 4.	  	Controls and Procedures	  	 	64	  	
		
PART II. OTHER INFORMATION	  				
Item 1.	  	Legal Proceedings	  	 	65	  	
Item 1A.	  	Risk Factors	  	 	65	  	
Item 2.	  	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	65	  	
Item 5.	  	Other Information	  	 	65	  	
Item 6.	  	Exhibits	  	 	66	  	
		
SIGNATURES	  	 	67	  	
Exhibits Filed Herewith	  				
31.1	  	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	  				
31.2	  	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	  				
32.1	  	Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	  				
32.2	  	Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	  				
 
2

Table of Contents
 GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:

TERM	  	DEFINITION	
ACNielsen	  	ACNielsen Corporation – a former affiliate of Old D&B	
		
Analytics	  	Moody’s Analytics – a reportable segment of MCO formed in January 2008, which includes the non-rating commercial activities of MCO	
		
AOCI	  	Accumulated other comprehensive income (loss); a separate component of shareholders’ equity (deficit)	
		
ASC	  	The FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants	
		
ASU	  	The FASB Accounting Standards Update to the ASC. It also provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC	
		
Basel II	  	Capital adequacy framework published in June 2004 by the Basel Committee on Banking Supervision	
		
Basel III	  	A new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. Basel III was developed in a response to the deficiencies in financial regulation revealed by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage.	
		
Board	  	The board of directors of the Company	
		
Bps	  	Basis points	
		
Canary Wharf Lease	  	Operating lease agreement entered into on February 6, 2008 for office space in London, England, occupied by the Company in the second half of 2009	
		
CDOs	  	Collateralized debt obligations	
		
CFG	  	Corporate finance group; an LOB of MIS	
		
CMBS	  	Commercial mortgage-backed securities; part of CREF	
		
Cognizant	  	Cognizant Corporation – a former affiliate of Old D&B; comprised the IMS Health and NMR businesses	
		
Commission	  	European Commission	
		
Company	  	Moody’s Corporation and its subsidiaries; MCO; Moody’s	
		
Corporate Family Ratings	  	Rating opinion of a corporate family’s ability to honor all of its financial obligations which is assigned to the corporate family as if it had a single class of debt and a single consolidated legal entity structure. This rating is often issued in connection with ratings of leveraged finance transactions	
		
COSO	  	Committee of Sponsoring Organizations of the Treadway Commission	
		
CP	  	Commercial paper	
		
CP Notes	  	Unsecured commercial paper notes	
		
CP Program	  	The Company’s commercial paper program entered into on October 3, 2007	
		
CRAs	  	Credit rating agencies	
 
3

Table of Contents

TERM	  	DEFINITION	
CREF	  	Commercial real estate finance which includes REITs, commercial real estate CDOs and mortgage-backed securities; part of SFG	
		
CSI	  	CSI Global Education, Inc.; an acquisition completed in November 2010; part of the MA segment; a provider of financial learning, credentials, and certification in Canada	
		
D&B Business	  	Old D&B’s Dun & Bradstreet operating company	
		
DBPP	  	Defined benefit pension plans	
		
Debt/EBITDA	  	Ratio of Total Debt to EBITDA	
		
EBITDA	  	Earnings before interest, taxes, depreciation and amortization	
		
ECAIs	  	External Credit Assessment Institutions	
		
ECB	  	European Central Bank	
		
EMEA	  	Represents countries within Europe, the Middle East and Africa	
		
EPS	  	Earnings per share	
		
ESMA	  	European Securities and Market Authority	
		
ESPP	  	The 1999 Moody’s Corporation Employee Stock Purchase Plan	
		
ETR	  	Effective tax rate	
		
EU	  	European Union	
		
EUR	  	Euros	
		
Eurosystem	  	The monetary authority of the Eurozone, the collective of European Union member states that have adopted the euro as their sole official currency. The Eurosystem consists of the European Central Bank and the central banks of the member states that belong to the Eurozone	
		
Excess Tax Benefits	  	The difference between the tax benefit realized at exercise of an option or delivery of a restricted share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP	
		
Exchange Act	  	The Securities Exchange Act of 1934, as amended	
		
FASB	  	Financial Accounting Standards Board	
		
FCIC	  	Financial Crisis Inquiry Commission; commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010	
		
FIG	  	Financial institutions group; an LOB of MIS	
		
Financial Reform Act	  	Dodd-Frank Wall Street Reform and Consumer Protection Act	
		
FX	  	Foreign exchange	
		
GAAP	  	U.S. Generally Accepted Accounting Principles	
		
GBP	  	British pounds	
		
G-8	  	The finance minister and central bank governors of the group of eight countries consisting of Canada, France, Germany, Italy, Japan, Russia, U.S. and U.K., that meet annually	
 
4

Table of Contents

TERM	  	DEFINITION	
G-20	  	The G-20 is an informal forum of industrial and emerging-market countries on key issues related to global economic stability. The G-20 is comprised of: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the U.K. and the U.S. and The EU who is represented by the rotating Council presidency and ECB	
		
IMS Health	  	A spin-off of Cognizant; provides services to the pharmaceutical and healthcare industries	
		
Indenture	  	Indenture and supplemental indenture dated August 19, 2010, relating to the 2010 Senior Notes	
		
Indicative Ratings	  	These are ratings which are provided as of a point in time, and not published or monitored. They are primarily provided to potential or current issuers to indicate what a rating may be based on business fundamentals and financial conditions as well as based on proposed financings	
		
IOSCO	  	International Organization of Securities Commissions	
		
IOSCO Code	  	Code of Conduct Fundamentals for Credit Rating Agencies	
		
IRS	  	Internal Revenue Service	
		
KIS	  	Korea Investors Service; a leading Korean rating agency and consolidated subsidiary of the Company	
		
Legacy Tax Matter(s)	  	Exposures to certain potential tax liabilities assumed in connection with the 2000 Distribution	
		
LIBOR	  	London Interbank Offered Rate	
		
LOB	  	Line of business	
		
MA	  	Moody’s Analytics – a reportable segment of MCO formed in January 2008, which includes the non-rating commercial activities of MCO	
		
Make Whole Amount	  	The prepayment penalty amount relating to the Series 2005-1 Notes, Series 2007-1 Notes, and 2010 Senior Notes which is a premium based on the excess, if any, of the discounted value of the remaining scheduled payments over the prepaid principal	
		
MCO	  	Moody’s Corporation and its subsidiaries; the Company; Moody’s	
		
MD&A	  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
		
MIS	  	Moody’s Investors Service – a reportable segment of MCO; consists of four LOBs – SFG, CFG, FIG and PPIF	
		
MIS Code	  	Moody’s Investors Service Code of Professional Conduct	
		
Moody’s	  	Moody’s Corporation and its subsidiaries; MCO; the Company	
		
Net Income	  	Net income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder	
		
New D&B	  	The New D&B Corporation – which comprises the D&B business	
		
NM	  	Percentage change is not meaningful	
		
NMR	  	Nielsen Media Research, Inc.; a spin-off of Cognizant; a leading source of television audience measurement services	
		
NRSRO	  	Nationally Recognized Statistical Rating Organization	
 
5

Table of Contents

TERM	  	DEFINITION	
Old D&B	  	The former Dun and Bradstreet Company which distributed New D&B shares on September 30, 2000, and was renamed Moody’s Corporation	
		
Post-Retirement Plans	  	Moody’s funded and unfunded pension plans, the post-retirement healthcare plans and post-retirement life insurance plans	
		
PPIF	  	Public, project and infrastructure finance; an LOB of MIS	
		
Profit Participation Plan	  	Defined contribution profit participation plan that covers substantially all U.S. employees of the Company	
		
PSI	  	The U.S. Senate’s Permanent Subcommittee on Investigations	
		
RD&A	  	Research, Data and Analytics; an LOB within MA that produces, sells and distributes research, data and related content. Includes products generated by MIS, such as analyses on major debt issuers, industry studies, and commentary on topical credit events, as well as economic research, data, quantitative risk scores, and other analytical tools that are produced within MA	
		
Reform Act	  	Credit Rating Agency Reform Act of 2006	
		
REITs	  	Real estate investment trusts	
		
RMBS	  	Residential mortgage-backed security; part of SFG	
		
RMS	  	The Risk Management Software LOB within MA which provides both economic and regulatory capital risk management software and implementation services	
		
S&P	  	Standard & Poor’s Ratings Services; a division of The McGraw-Hill Companies, Inc.	
		
SEC	  	U.S. Securities and Exchange Commission	
		
Securities Act	  	Securities Act of 1933	
		
Series 2005-1 Notes	  	Principal amount of $300 million, 4.98% senior unsecured notes due in September 2015 pursuant to the 2005 Agreement	
		
Series 2007-1 Notes	  	Principal amount of $300 million, 6.06% senior unsecured notes due in September 2017 pursuant to the 2007 Agreement	
		
SFG	  	Structured finance group; an LOB of MIS	
		
SG&A	  	Selling, general and administrative expenses	
		
T&E	  	Travel and entertainment expenses	
		
Total Debt	  	All indebtedness of the Company as reflected on the consolidated balance sheets, excluding current accounts payable and deferred revenue incurred in the ordinary course of business	
		
U.K.	  	United Kingdom	
		
U.S.	  	United States	
		
USD	  	U.S. dollar	
		
UTBs	  	Unrecognized tax benefits	
		
UTPs	  	Uncertain tax positions	
 
6

Table of Contents

TERM	  	DEFINITION	
2000 Distribution	  	The distribution by Old D&B to its shareholders of all the outstanding shares of New D&B common stock on September 30, 2000	
		
2000 Distribution
Agreement	  	Agreement governing certain ongoing relationships between the Company and New D&B after the 2000 Distribution including the sharing of any liabilities for the payment of taxes, penalties and interest resulting from unfavorable IRS rulings on certain tax matters and certain other potential tax liabilities	
		
2005 Agreement	  	Note purchase agreement dated September 30, 2005, relating to the Series 2005-1 Notes	
		
2007 Agreement	  	Note purchase agreement dated September 7, 2007, relating to the Series 2007-1 Notes	
		
2007 Facility	  	Revolving credit facility of $1 billion entered into on September 28, 2007, expiring in 2012	
		
2008 Term Loan	  	Five-year $150 million senior unsecured term loan entered into by the Company on May 7, 2008	
		
2010 Senior Notes	  	Principal amount of $500 million, 5.50% senior unsecured notes due in September 2020 pursuant to the Indenture	
		
7WTC	  	The Company’s corporate headquarters located at 7 World Trade Center in New York, NY	
		
7WTC Lease	  	Operating lease agreement entered into on October 20, 2006	
 
7

Table of Contents
 PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements
 MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in millions, except per share data)

 	  	Three Months Ended	 	 	Six Months Ended	 	
 	  	June 30,	 	 	June 30,	 	
 	  	2011	 	 	2010	 	 	2011	 	 	2010	 	
Revenue	  	$	 605.2	  	 	$	 477.8	  	 	$	 1,182.3	  	 	$	 954.4	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses	  				 				 				 				
Operating	  	 	170.5	  	 	 	134.3	  	 	 	331.3	  	 	 	270.2	  	
Selling, general and administrative	  	 	142.9	  	 	 	137.5	  	 	 	291.4	  	 	 	266.3	  	
Restructuring	  	 	(0.1	) 	 	 	0.3	  	 	 	(0.1	) 	 	 	(0.4	) 	
Depreciation and amortization	  	 	21.8	  	 	 	15.2	  	 	 	39.5	  	 	 	31.0	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Expenses	  	 	335.1	  	 	 	287.3	  	 	 	662.1	  	 	 	567.1	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Income	  	 	270.1	  	 	 	190.5	  	 	 	520.2	  	 	 	387.3	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-operating (expense) income, net	  				 				 				 				
Interest (expense) income, net	  	 	(14.1	) 	 	 	(9.0	) 	 	 	(32.3	) 	 	 	(22.3	) 	
Other non-operating (expense) income, net	  	 	8.2	  	 	 	(3.6	) 	 	 	11.5	  	 	 	(4.6	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total non-operating (expense) income, net	  	 	(5.9	) 	 	 	(12.6	) 	 	 	(20.8	) 	 	 	(26.9	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before provisions for income taxes	  	 	264.2	  	 	 	177.9	  	 	 	499.4	  	 	 	360.4	  	
Provision for income taxes	  	 	73.5	  	 	 	55.3	  	 	 	151.6	  	 	 	123.1	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	 	190.7	  	 	 	122.6	  	 	 	347.8	  	 	 	237.3	  	
Less: Net income attributable to noncontrolling interests	  	 	1.7	  	 	 	1.6	  	 	 	3.3	  	 	 	2.9	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Moody’s	  	$	189.0	  	 	$	121.0	  	 	$	344.5	  	 	$	234.4	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share attributable to Moody’s common shareholders	  				 				 				 				
Basic	  	$	0.83	  	 	$	0.51	  	 	$	1.51	  	 	$	0.99	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.82	  	 	$	0.51	  	 	$	1.49	  	 	$	0.99	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding	  				 				 				 				
Basic	  	 	228.2	  	 	 	235.3	  	 	 	228.6	  	 	 	236.1	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	231.5	  	 	 	236.5	  	 	 	231.4	  	 	 	237.8	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends declared per share attributable to Moody’s common shareholders	  	$	0.14	  	 	$	0.105	  	 	$	0.14	  	 	$	0.105	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of the consolidated financial statements.
 
8

Table of Contents
 MOODY’S CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in millions, expect share and per share data)

 	  	June 30,	 	 	December 31,	 	
 	  	2011	 	 	2010	 	
ASSETS	  				 				
Current assets:	  				 				
Cash and cash equivalents	  	$	938.5	  	 	$	659.6	  	
Short-term investments	  	 	11.0	  	 	 	12.7	  	
Accounts receivable, net of allowances of $30.5 in 2011 and $33.0 in 2010	  	 	492.6	  	 	 	497.5	  	
Deferred tax assets, net	  	 	44.3	  	 	 	45.3	  	
Other current assets	  	 	56.7	  	 	 	127.9	  	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	1,543.1	  	 	 	1,343.0	  	
Property and equipment, net of accumulated depreciation of $232.7 in 2011 and $200.8 in 2010	  	 	325.2	  	 	 	319.3	  	
Goodwill	  	 	470.4	  	 	 	465.5	  	
Intangible assets, net	  	 	166.8	  	 	 	168.8	  	
Deferred tax assets, net	  	 	181.1	  	 	 	187.9	  	
Other assets	  	 	58.0	  	 	 	55.8	  	
	  	 	 	 	 	 	 	 	
Total assets	  	$	2,744.6	  	 	$	2,540.3	  	
	  	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS’ DEFICIT	  				 				
Current liabilities:	  				 				
Accounts payable and accrued liabilities	  	$	302.1	  	 	$	414.4	  	
Current portion of long-term debt	  	 	15.0	  	 	 	11.3	  	
Deferred revenue	  	 	534.9	  	 	 	508.1	  	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	852.0	  	 	 	933.8	  	
Non-current portion of deferred revenue	  	 	96.0	  	 	 	96.6	  	
Long-term debt	  	 	1,228.0	  	 	 	1,228.3	  	
Deferred tax liabilities, net	  	 	35.0	  	 	 	36.9	  	
Unrecognized tax benefits	  	 	187.2	  	 	 	180.8	  	
Other liabilities	  	 	363.0	  	 	 	362.3	  	
	  	 	 	 	 	 	 	 	
Total liabilities	  	 	2,761.2	  	 	 	2,838.7	  	
Contingencies (Note 12)	  				 				
Shareholders’ deficit:	  				 				
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	  	 	—  	  	 	 	—  	  	
Series common stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding	  	 	—  	  	 	 	—  	  	
Common stock, par value $.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at June 30, 2011 and December 31, 2010, respectively.	  	 	3.4	  	 	 	3.4	  	
Capital surplus	  	 	369.1	  	 	 	391.5	  	
Retained earnings	  	 	4,048.8	  	 	 	3,736.2	  	
Treasury stock, at cost; 114,210,759 and 112,116,581 shares of common stock at June 30, 2011 and December 31, 2010, respectively	  	 	(4,448.9	) 	 	 	(4,407.3	) 	
Accumulated other comprehensive income (loss)	  	 	1.5	  	 	 	(33.4	) 	
	  	 	 	 	 	 	 	 	
Total Moody’s shareholders’ deficit	  	 	(26.1	) 	 	 	(309.6	) 	
Noncontrolling interests	  	 	9.5	  	 	 	11.2	  	
	  	 	 	 	 	 	 	 	
Total shareholders’ deficit	  	 	(16.6	) 	 	 	(298.4	) 	
	  	 	 	 	 	 	 	 	
Total liabilities and shareholders’ deficit	  	$	2,744.6	  	 	$	2,540.3	  	
	  	 	 	 	 	 	 	 	
The accompanying notes are an integral part of the consolidated financial statements.
 
9

Table of Contents
 MOODY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in millions)

 	  	Six Months Ended
June 30,	 	
 	  	2011	 	 	2010	 	
Cash flows from operating activities	  				 				
Net income	  	$	347.8	  	 	$	237.3	  	
Reconciliation of net income to net cash provided by operating activities:	  				 				
Depreciation and amortization	  	 	39.5	  	 	 	31.0	  	
Stock-based compensation expense	  	 	30.3	  	 	 	27.7	  	
Excess tax benefits from stock-based compensation plans	  	 	(5.9	) 	 	 	(3.3	) 	
Legacy Tax Matters	  	 	(6.4	) 	 	 	—  	  	
Changes in assets and liabilities:	  				 				
Accounts receivable	  	 	11.2	  	 	 	45.8	  	
Other current assets	  	 	72.6	  	 	 	6.0	  	
Other assets	  	 	5.5	  	 	 	(23.2	) 	
Accounts payable and accrued liabilities	  	 	(78.0	) 	 	 	(55.0	) 	
Restructuring	  	 	(0.2	) 	 	 	(4.3	) 	
Deferred revenue	  	 	20.5	  	 	 	12.1	  	
Unrecognized tax benefits	  	 	6.4	  	 	 	6.9	  	
Other liabilities	  	 	2.6	  	 	 	23.0	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	445.9	  	 	 	304.0	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities	  				 				
Capital additions	  	 	(35.6	) 	 	 	(35.3	) 	
Purchases of short-term investments	  	 	(16.6	) 	 	 	(14.3	) 	
Sales and maturities of short-term investments	  	 	18.9	  	 	 	16.3	  	
Cash paid for acquisitions	  	 	(7.1	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(40.4	) 	 	 	(33.3	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities	  				 				
Issuance of commercial paper	  	 	—  	  	 	 	1,909.9	  	
Repayments of commercial paper	  	 	—  	  	 	 	(1,997.1	) 	
Repayments of notes	  	 	(3.8	) 	 	 	—  	  	
Net proceeds from stock-based compensation plans	  	 	35.1	  	 	 	14.3	  	
Cost of treasury shares repurchased	  	 	(127.6	) 	 	 	(99.9	) 	
Excess tax benefits from stock-based compensation plans	  	 	5.9	  	 	 	3.3	  	
Payment of dividends	  	 	(58.2	) 	 	 	(49.5	) 	
Payment of dividends to noncontrolling interests	  	 	(4.5	) 	 	 	(4.1	) 	
Payments under capital lease obligations	  	 	—  	  	 	 	(0.7	) 	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(153.1	) 	 	 	(223.8	) 	
Effect of exchange rate changes on cash and cash equivalents	  	 	26.5	  	 	 	(34.9	) 	
	  	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	  	 	278.9	  	 	 	12.0	  	
Cash and cash equivalents, beginning of the period	  	 	659.6	  	 	 	473.9	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents, end of the period	  	$	938.5	  	 	$	485.9	  	
	  	 	 	 	 	 	 	 	
The accompanying notes are an integral part of the condensed consolidated financial statements.
 
10

Table of Contents
 MOODY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(tabular dollar and share amounts in millions, except per share data)
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analytical tools, (iii) risk management software and (iv) quantitative credit risk measures, credit portfolio management solutions, training, and financial credentialing and certification services. The Company has two reportable segments: MIS and MA. The MIS segment publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide. Revenue is derived from the originators and issuers of such transactions who use MIS’s ratings to support the distribution of their debt issues to investors. The MA segment, which contains all non-rating commercial activities of the Company, develops a wide range of products and services that support the credit risk management activities of institutional participants in global financial markets. These offerings include quantitative credit risk scores, credit processing software, economic research, analytical models, financial data, specialized advisory and training services and financial credentialing and certification services. MA also distributes investor-oriented research and data developed by MIS as part of its rating process, including in-depth research on major debt issuers, industry studies and commentary on topical events.
The Company operated as part of Old D&B until September 30, 2000, when Old D&B separated into two publicly traded companies – Moody’s Corporation and New D&B. At that time, Old D&B distributed to its shareholders shares of New D&B stock. New D&B comprised the business of Old D&B’s Dun & Bradstreet operating company. The remaining business of Old D&B consisted solely of the business of providing ratings and related research and credit risk management services and was renamed Moody’s Corporation. For purposes of governing certain ongoing relationships between the Company and New D&B after the 2000 Distribution and to provide for an orderly transition, the Company and New D&B entered into various agreements including a distribution agreement, tax allocation agreement and employee benefits agreement.
These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and related notes in the Company’s 2010 annual report on Form 10-K filed with the SEC on February 28, 2011. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Certain prior year amounts have been  reclassified to conform to the current year presentation.
NOTE 2. STOCK-BASED COMPENSATION
Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:

 	  	Three Months Ended
June 30,	 	  	Six Months Ended
June 30,	 	
 	  	2011	 	  	2010	 	  	2011	 	  	2010	 	
Stock compensation cost	  	$	14.3	  	  	$	12.9	  	  	$	30.3	  	  	$	27.7	  	
Tax benefit	  	$	5.6	  	  	$	4.7	  	  	$	11.2	  	  	$	10.6	  	
 
11

Table of Contents
During the first half of 2011, the Company granted 0.6 million employee stock options, which had a weighted average grant date fair value of $12.45 per share based on the Black-Scholes option-pricing model. The Company also granted 1.5 million shares of restricted stock in the first half of 2011, which had a weighted average grant date fair value of $30.05 per share and generally vest ratably over a four-year period. Additionally, the Company granted approximately 0.4 million shares of restricted stock that contain a condition whereby the number of shares that ultimately vest are based on the achievement of certain non-market based performance metrics of the Company over a three-year period. The weighted average grant date fair value of these awards was $28.67 per share.
The following weighted average assumptions were used in determining the fair value for options granted in 2011:

Expected dividend yield	  	 	1.53	% 	
Expected stock volatility	  	 	41	% 	
Risk-free interest rate	  	 	3.34	% 	
Expected holding period	  	 	7.6 yrs	  	
Grant date fair value	  	$	12.45	  	
Unrecognized compensation expense at June 30, 2011 was $28.5 million and $58.1 million for stock options and nonvested restricted stock, respectively, which is expected to be recognized over a weighted average period of 1.5 years and 1.8 years, respectively. Additionally, there was $15.6 million of unrecognized compensation expense relating to the aforementioned non-market based performance awards which is expected to be recognized over a weighted average period of 1.1 years.
The following tables summarize information relating to stock option exercises and restricted stock vesting:

 	  	Six Months Ended
June 30,	 	
   	  	2011	 	  	2010	 	
Stock option exercises:	  				  				
Proceeds from stock option exercises	  	$	39.6	  	  	$	17.5	  	
Aggregate intrinsic value	  	$	19.3	  	  	$	9.1	  	
Tax benefit realized upon exercise	  	$	7.7	  	  	$	3.7	  	
		
 	  	Six Months Ended
June 30,	 	
   	  	2011	 	  	2010	 	
Restricted stock vesting:	  				  				
Fair value of shares vested	  	$	18.8	  	  	$	12.4	  	
Tax benefit realized upon vesting	  	$	7.0	  	  	$	4.6	  	
NOTE 3. INCOME TAXES
Moody’s effective tax rate was 27.8% and 31.1% for the three months ended June 30, 2011 and 2010, respectively and 30.4% and 34.2% for the six months ended June 30, 2011 and 2010, respectively. The decrease was primarily due to a higher proportion of taxable income generated internationally in lower tax jurisdictions, lower U.S. state income taxes and a beneficial adjustment in UTBs in 2011 resulting from a foreign tax ruling, partially offset by a smaller benefit in 2011 for Legacy Tax Matters.
The Company classifies interest related to UTBs in interest (expense) income, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating expenses. The Company had an overall
 
12

Table of Contents
decrease in its UTBs of $5.8 million ($7.7 million net of federal tax benefit) during the second quarter of 2011 and an overall increase in its UTBs during the first six months of 2011 of $6.4 million ($1.7 million, net of federal tax benefit).
Prepaid taxes of $17.9 million and $82.3 million at June 30, 2011 and December 31, 2010, respectively, are included in other current assets in the consolidated balance sheets.
Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. Moody’s U.S. federal tax returns filed for the years 2007 through 2009 remain subject to examination by the IRS. The Company’s tax filings in New York State for the years 2004 through 2007 are currently under examination. The income tax returns for 2008 and 2009 remain open to examination for both New York State and New York City. Tax filings in the U.K. for 2006 are currently under examination by the U.K. taxing authorities and for 2007 through 2009 remain open to examination.
For ongoing audits, it is possible the balance of UTBs could decrease in the next twelve months as a result of the settlement of these audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax authorities which could necessitate increases to the balance of UTBs. As the Company is unable to predict the timing or outcome of these audits, it is therefore unable to estimate the amount of changes to the balance of UTBs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years by tax jurisdiction in accordance with  the applicable provisions of topic 740 of the ASC regarding UTBs. 
NOTE 4. WEIGHTED AVERAGE SHARES OUTSTANDING
Below is a reconciliation of basic to diluted shares outstanding:

 	  	Three Months Ended
June 30,	 	  	Six Months Ended
June 30,	 	
 	  	2011	 	  	2010	 	  	2011	 	  	2010	 	
Basic	  	 	228.2	  	  	 	235.3	  	  	 	228.6	  	  	 	236.1	  	
Dilutive effect of shares issuable under stock-based compensation plans	  	 	3.3	  	  	 	1.2	  	  	 	2.8	  	  	 	1.7	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Diluted	  	 	231.5	  	  	 	236.5	  	  	 	231.4	  	  	 	237.8	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Anti-dilutive options to purchase common shares and restricted stock excluded from the table above	  	 	9.4	  	  	 	16.6	  	  	 	11.6	  	  	 	16.5	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of June 30, 2011 and 2010. These assumed proceeds include Excess Tax Benefits and any unrecognized compensation of the awards.
NOTE 5. SHORT-TERM INVESTMENTS
Short-term investments are securities with maturities greater than 90 days at the time of purchase that are available for operations in the next twelve months. The short-term investments, primarily consisting of certificates of deposit, are classified as held-to-maturity and therefore are carried at cost. The remaining contractual maturities of the short-term investments were one month to six months as of both June 30, 2011 and December 31, 2010. Interest and dividends are recorded into income when earned.
 
13

Table of Contents
NOTE 6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.
Interest Rate Swaps
In the fourth quarter of 2010, the Company entered into interest rate swaps with a total notional amount of $300 million to convert the fixed interest rate on the Series 2005-1 Notes to a floating interest rate based on the 3-month LIBOR. The purpose of this hedge was to mitigate the risk associated with changes in the fair value of the Series 2005-1 Notes, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is reported in other assets at June 30, 2011 and in other liabilities at December 31, 2010 in the Company’s consolidated balance sheets with a corresponding adjustment to the carrying value of the Series 2005-1 Notes. The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest income (expense), net in the Company’s consolidated statement of operations. The net interest income recognized in interest income (expense), net within the Company’s consolidated statement of operations on these swaps was $1.0 million and $2.1 million in the three months and six months ended June 30, 2011, respectively.
In May 2008, the Company entered into interest rate swaps with a total notional amount of $150 million to protect against fluctuations in the LIBOR-based variable interest rate on the 2008 Term Loan, further described in Note 11. These interest rate swaps are designated as cash flow hedges. Accordingly, changes in the fair value of these swaps are recorded to other comprehensive income or loss, to the extent that the hedge is effective, and such amounts are reclassified to earnings in the same period during which the hedged transaction affects income. The fair value of the swaps is reported in other liabilities in the Company’s consolidated balance sheets at June 30, 2011 and December 31, 2010.
Foreign Exchange Forwards and Options
The Company engaged in hedging activities to protect against FX risks from forecasted billings and related revenue denominated in the euro and the GBP. FX options and forward exchange contracts were utilized to hedge exposures related to changes in FX rates. As of June 30, 2011 and December 31, 2010, these FX options and forward exchange contracts have matured and all realized gains and losses have been reclassified from AOCI into earnings. These FX options and forward exchange contracts were designated as cash flow hedges.
The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denominated in currencies other than the entity’s functional currency. These forward contracts are not designated as hedging instruments under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immediately in other non-operating (expense) income, net in the Company’s consolidated statements of operations along with the FX gain or loss recognized on the assets and liabilities denominated in a currency other than the entity’s functional currency. These contracts have expiration dates at various times through November 2011. The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:

 	  	June 30,
2011	 	  	December 31,
2010	 	
Notional amount of Currency Pair:	  				  				
Contracts to purchase USD with euros	  	$	10.8	  	  	$	11.7	  	
Contracts to sell USD for euros	  	$	52.8	  	  	$	55.5	  	
Contracts to purchase USD with GBP	  	$	1.6	  	  	$	—  	  	
Contracts to sell USD for GBP	  	$	17.5	  	  	$	20.7	  	
Contracts to purchase USD with other foreign currencies	  	$	5.2	  	  	$	5.4	  	
Contracts to sell USD for other foreign currencies	  	$	8.1	  	  	$	19.5	  	
Contracts to purchase euros with other foreign currencies	  	€	10.6	  	  	€	10.5	  	
Contracts to purchase euros with GBP	  	€	1.1	  	  	€	—  	  	
Contracts to sell euros for GBP	  	€	19.3	  	  	€	14.0	  	
 
14

Table of Contents
The net gains (losses) on these instruments recognized in other non-operating income (expense), net in the Company’s consolidated statements of operations was ($0.7) million and ($5.1) million in the three months ended June 30, 2011 and 2010, respectively, and $2.5 million and ($10.0) million in the six months ended June 30, 2011 and 2010, respectively.
The tables below show the classification between assets and liabilities on the Company’s consolidated balance sheets of the fair value of derivative instruments as well as information on the gains/(losses) on those instruments:

 	  	Fair Value of Derivative Instruments	 	
 	  	Asset	 	  	Liability	 	
 	  	June 30,
2011	 	  	December 31,
2010	 	  	June 30,
2011	 	  	December 31,
2010	 	
Derivatives designated as accounting hedges:	  				  				  				  				
Interest rate swaps	  	$	3.4	  	  	$	—  	  	  	$	7.0	  	  	$	12.2	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total derivatives designated as accounting hedges	  	 	3.4	  	  	 	—  	  	  	 	7.0	  	  	 	12.2	  	
Derivatives not designated as accounting hedges:	  				  				  				  				
FX forwards on certain assets and liabilities	  	 	1.4	  	  	 	2.0	  	  	 	0.9	  	  	 	0.7	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	4.8	  	  	$	2.0	  	  	$	7.9	  	  	$	12.9	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The fair value for the interest rate swaps is included in other assets and other liabilities in the consolidated balance sheets at June 30, 2011 and in other liabilities at December 31, 2010. The fair value of the FX forwards is included in other current assets and account payable and accrued liabilities as of June 30, 2011 and December 31, 2010. All of the above derivative instruments are valued using Level 2 inputs as defined in Topic 820 of the ASC. A Level 2 input is an input other than a quoted market price that is observable for the asset or liability, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. In determining the fair value of the derivative contracts in the table above, the Company utilizes industry standard valuation models when active market quotes are not available. Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it has derivative contracts. The Company has established strict counterparty credit guidelines and only enters into transactions with financial institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.

Derivatives in
Cash Flow
Hedging
Relationships	  	Amount of Gain/(Loss)
Recognized in AOCI on
Derivative (Effective  Portion)	 	 	Location of Gain/(Loss)
Reclassified from
AOCI into  Income
(Effective Portion)	 	  	Amount of Gain/(Loss)
Reclassified from AOCI into
Income (Effective Portion)	 	 	Location of Gain/(Loss)
Recognized in Income
on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)	  	Gain/(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)	 	
 	  	Three Months Ended
June 30,	 	 	 	 	  	Three Months Ended
June  30,	 	 	 	  	Three Months Ended June 30,	 	
 	  	2011	 	 	2010	 	 	 	 	  	2011	 	 	2010	 	 	 	  	2011	 	  	2010	 	
FX options	  	$	—  	  	 	$	0.4	  	 	 	Revenue	  	  	$	—  	  	 	$	(0.3	) 	 	Revenue	  	$	—  	  	  	$	(0.2	) 	
Interest rate swaps	  	 	(0.4	)	 	 	(1.3	) 	 	 	Interest Expense	  	  	 	(0.6	) 	 	 	(0.8	) 	 	N/A	  	 	—  	 	  	 	—  	 	
	  	 	 	 	 	 	 	 	 				  	 	 	 	 	 	 	 	 		  	 	 	 	  	 	 	 	
Total	  	$	(0.4	) 	 	$	(0.9	) 	 				  	$	(0.6	) 	 	$	(1.1	) 	 		  	$	—  	  	  	$	(0.2	) 	

 	  	Six Months Ended June 30,	 	 	 	 	  	Six Months Ended June 30,	 	 	 	  	Six Months Ended June 30,	 	
 	  	2011	 	 	2010	 	 	 	 	  	2011	 	 	2010	 	 	 	  	2011	 	  	2010	 	
FX options	  	$	—  	  	 	$	0.5	  	 	 	Revenue	  	  	$	(0.2	) 	 	$	(0.5	) 	 	Revenue	  	$	—  	  	  	$	(0.2	) 	
Interest rate swaps	  	 	(0.4	) 	 	 	(2.5	) 	 	 	Interest Expense	  	  	 	(1.3	) 	 	 	(1.6	) 	 	N/A	  	 	—  	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	 				  	 	 	 	 	 	 	 	 		  	 	 	 	  	 	 	 	
Total	  	$	(0.4	) 	 	$	(2.0	) 	 				  	$	(1.5	) 	 	$	(2.1	) 	 		  	$	—  	  	  	$	(0.2	) 	

15

Table of Contents
All gains and losses on derivatives designated as cash flow hedges are initially recognized through AOCI. Realized gains and losses reported in AOCI are reclassified into earnings (into revenue for FX options and into interest (expense) income, net for the interest rate swaps) as the underlying transaction is recognized.
The cumulative amount of unrecognized hedge losses recorded in AOCI is as follows:

 	  	Unrecognized Losses, net of tax	 	
 	  	June 30,
2011	 	 	December 31,
2010	 	
FX options	  	$	—  	  	 	$	(0.2	) 	
Interest rate swaps	  	 	(4.5	) 	 	 	(5.4	) 	
	  	 	 	 	 	 	 	 	
Total	  	$	(4.5	) 	 	$	(5.6	) 	
	  	 	 	 	 	 	 	 	
NOTE 7. ACQUISITIONS
CSI Global Education, Inc.
On November 18, 2010, a subsidiary of the Company acquired CSI Global Education, Inc., a provider of financial learning, credentials, and certification in Canada. CSI will operate within MA, strengthening the Company’s capabilities for delivering credit and other financial training programs to financial institutions worldwide and bolsters Moody’s efforts to serve as an essential resource to financial market participants.
This acquisition was accounted for using the purchase method of accounting whereby the purchase price is allocated first to the net assets of the acquired entity based on the fair value of its net assets. Any excess of the purchase price over the fair value of the net assets acquired is recorded to goodwill. 
The aggregate purchase price was $151.4 million in net cash payments to the sellers. There is a 2.5 million Canadian dollar contingent cash payment which is dependent upon the achievement of a certain contractual milestone by January 2016. The Company has recognized the fair value of the contingent payment of $2.0 million as a long-term liability at the acquisition date using a discounted cash flow methodology which assumes that the entire 2.5 million Canadian dollar payment will be made by January 2016. This methodology is based on significant inputs that are not observable in the market, which ASC 820 refers to as Level 3 inputs. Subsequent fair value changes, which will be measured quarterly, up to the ultimate amount paid, will be recognized in earnings. The change in fair value of the contingent payment in the first six months of 2011 was de minimis. The purchase price was funded with cash on hand.
The near term impact to operations and cash flow from this acquisition is not expected to be material to the Company’s consolidated financial statements.
 
16

Table of Contents
Korea Investors Service Pricing
On May 6, 2011, a subsidiary of the Company acquired a 16% additional direct equity investment in KIS Pricing from a shareholder with a non-controlling interest in the entity. The acquisition adds to the Company’s existing indirect ownership of KIS Pricing through its controlling equity stake in Korea Investors Service (KIS). The aggregate purchase price was not material and  the near term impact to operations and cash flow is not expected to be material. KIS Pricing is part of the MA segment.
NOTE 8. GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS
The following table summarizes the activity in goodwill for the periods indicated:

 	  	Six Months Ended
June 30, 2011	 	  	Year ended
December 31, 2010	 	
 	  	MIS	 	  	MA	 	  	Consolidated	 	  	MIS	 	  	MA	 	  	Consolidated	 	
Beginning Balance	  	$	11.4	  	  	$	454.1	  	  	$	465.5	  	  	$	11.1	  	  	$	338.1	  	  	$	349.2	  	
Additions/adjustments	  	 	—  	  	  	 	2.7	  	  	 	2.7	  	  	 	—  	  	  	 	104.6	  	  	 	104.6	  	
FX translation	  	 	0.6	  	  	 	1.6	  	  	 	2.2	  	  	 	0.3	  	  	 	11.4	  	  	 	11.7	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Ending balance	  	$	12.0	  	  	$	458.4	  	  	$	470.4	  	  	$	11.4	  	  	$	454.1	  	  	$	465.5	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The 2011 additions/adjustments for the MA segment in the table above relate to an immaterial acquisition by a subsidiary of the Company. The 2010 additions/adjustments for the MA segment in the table above relate to the acquisition of CSI in November 2010, more fully discussed in Note 7, above.
Acquired intangible assets and related amortization consisted of:

 	  	June 30,
2011	 	 	December 31,
2010	 	
Customer relationships	  	$	148.9	  	 	$	145.1	  	
Accumulated amortization	  	 	(54.0	) 	 	 	(49.2	) 	
	  	 	 	 	 	 	 	 	
Net customer relationships	  	 	94.9	  	 	 	95.9	  	
	  	 	 	 	 	 	 	 	
Trade secrets	  	 	31.6	  	 	 	31.4	  	
Accumulated amortization	  	 	(12.2	) 	 	 	(10.9	) 	
	  	 	 	 	 	 	 	 	
Net trade secrets	  	 	19.4	  	 	 	20.5	  	
	  	 	 	 	 	 	 	 	
Software	  	 	58.8	  	 	 	54.8	  	
Accumulated amortization	  	 	(24.2	) 	 	 	(20.3	) 	
	  	 	 	 	 	 	 	 	
Net software	  	 	34.6	  	 	 	34.5	  	
	  	 	 	 	 	 	 	 	
Other	  	 	39.0	  	 	 	37.5	  	
Accumulated amortization	  	 	(21.1	) 	 	 	(19.6	) 	
	  	 	 	 	 	 	 	 	
Net other	  	 	17.9	  	 	 	17.9	  	
	  	 	 	 	 	 	 	 	
Total acquired intangible assets, net	  	$	166.8	  	 	$	168.8	  	
	  	 	 	 	 	 	 	 	
Other intangible assets primarily consist of databases, trade names and covenants not to compete.
 
17

Table of Contents
Amortization expense relating to acquired intangible assets is as follows:

 	  	Three Months Ended
June 30,	 	  	Six Months Ended
June 30,	 	
 	  	2011	 	  	2010	 	  	2011	 	  	2010	 	
Amortization Expense	  	$	4.8	  	  	$	3.9	  	  	$	9.6	  	  	$	7.9	  	
Estimated future amortization expense for acquired intangible assets subject to amortization is as follows:

Year Ending December 31,	  	 	 	
2011 (after June 30,)	  	$	9.7	  	
2012	  	 	18.9	  	
2013	  	 	18.8	  	
2014	  	 	15.3	  	
2015	  	 	14.2	  	
Thereafter	  	 	89.9	  	
Intangible assets are reviewed for impairment whenever circumstances indicate that the carrying amount may not be recoverable. If the estimated undiscounted future cash flows are lower than the carrying amount of the related asset, a loss is recognized for the difference between the carrying amount and the estimated fair value of the asset. Goodwill is tested for impairment annually as of November 30th, or more frequently if circumstances indicate the assets may be impaired. For the three and six months ended June 30, 2011 and 2010, there were no impairments to goodwill or intangible  assets.
NOTE 9 . DETAIL OF CERTAIN BALANCE SHEET CAPTIONS
The following tables contain additional detail related to certain balance sheet captions:

 	  	    June 30,    
2011	 	  	December 31,
2010	 	
Other current assets:	  				  				
Prepaid taxes	  	$	  17.9	  	  	$	82.3	  	
Prepaid expenses	  	 	33.0	  	  	 	39.8	  	
Other	  	 	5.8	  	  	 	5.8	  	
	  	 	 	 	  	 	 	 	
Total other current assets	  	$	56.7	  	  	$	127.9	  	

 	  	June 30, 2011	 	  	December 31,
2010	 	
Other assets:	  				  				
Investments in joint ventures	  	$	34.7	  	  	$	30.8	  	
Deposits for real-estate leases	  	 	11.8	  	  	 	11.4	  	
Other	  	 	11.5	  	  	 	13.6	  	
	  	 	 	 	  	 	 	 	
Total other assets	  	$	58.0	  	  	$	55.8	  	

18

Table of Contents

 	  	     June 30,     
2011	 	  	December 31,
2010	 	
Accounts payable and accrued liabilities:	  				  				
Salaries and benefits	  	$	59.0	  	  	$	69.6	  	
Incentive compensation	  	 	67.8	  	  	 	116.8	  	
Profit sharing contribution	  	 	1.6	  	  	 	12.6	  	
Customer credits, advanced payments and advanced billings	  	 	19.8	  	  	 	15.3	  	
Dividends	  	 	1.9	  	  	 	27.9	  	
Professional service fees	  	 	51.9	  	  	 	50.6	  	
Interest accrued on debt	  	 	14.9	  	  	 	17.6	  	
Accounts payable	  	 	8.6	  	  	 	14.3	  	
Income taxes	  	 	12.3	  	  	 	26.9	  	
Restructuring	  	 	0.5	  	  	 	0.7	  	
Pension and other post retirement employee benefits	  	 	9.5	  	  	 	9.5	  	
Other	  	 	54.3	  	  	 	52.6	  	
	  	 	 	 	  	 	 	 	
Total accounts payable and accrued liabilities	  	$	302.1	  	  	$	414.4	  	

 	  	June 30,
2011	 	  	December 31,
2010	 	
Other liabilities:	  				  				
Pension and other post retirement employee benefits	  	$	132.2	  	  	$	132.8	  	
Deferred rent-non-current portion	  	 	107.1	  	  	 	100.4	  	
Interest accrued on UTPs	  	 	39.8	  	  	 	33.7	  	
Legacy and other tax matters	  	 	50.4	  	  	 	57.3	  	
Other	  	 	33.5	  	  	 	38.1	  	
	  	 	 	 	  	 	 	 	
Total other liabilities	  	$	363.0	  	  	$	362.3	  	
	  	 	 	 	  	 	 	 	
NOTE 10. PENSION AND OTHER POST-RETIRMENT BENEFITS
Moody’s maintains funded and unfunded noncontributory Defined Benefit Pension Plans. The U.S. DBPPs provide defined benefits using a cash balance formula based on years of service and career average salary for its employees or final average pay for selected executives. The Company also provides certain healthcare and life insurance benefits for retired U.S. employees. The post-retirement healthcare plans are contributory with participants’ contributions adjusted annually; the life insurance plans are noncontributory. Moody’s funded and unfunded U.S. pension plans, the U.S. post-retirement healthcare plans and the U.S. post-retirement life insurance plans are collectively referred to herein as the Post-Retirement Plans.
Effective January 1, 2008, the Company no longer offers DBPPs to U.S. employees hired or rehired on or after January 1, 2008. New U.S. employees will instead receive a retirement contribution of similar benefit value under the Company’s Profit Participation Plan. Current participants of the Company’s DBPPs continue to accrue benefits based on existing plan formulas.
The components of net periodic benefit expense related to the Post-Retirement Plans are as follows:

 	  	Three Months Ended June 30,	 	
 	  	Pension Plans	 	 	Other Post-Retirement Plans	 	
 	  	2011	 	 	2010	 	 	2011	 	  	2010	 	
Components of net periodic expense	  				 				 				  				
Service cost	  	$	3.9	  	 	$	3.3	  	 	$	0.3	  	  	$	0.2	  	
Interest cost	  	 	3.4	  	 	 	2.9	  	 	 	0.2	  	  	 	0.2	  	
Expected return on plan assets	  	 	(3.0	) 	 	 	(2.6	) 	 	 	—  	  	  	 	—  	  	
Amortization of net actuarial loss from earlier periods	  	 	1.4	  	 	 	0.6	  	 	 	0.1	  	  	 	—  	  	
Amortization of net prior service costs from earlier periods	  	 	0.1	  	 	 	0.1	  	 	 	—  	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Net periodic expense	  	$	5.8	  	 	$	4.3	  	 	$	0.6	  	  	$	0.4	  	

 	  	Six Months Ended June 30,	 	
 	  	Pension Plans	 	 	Other Post-Retirement Plans	 	
 	  	2011	 	 	2010	 	 	2011	 	  	2010	 	
Components of net periodic expense	  				 				 				  				
Service cost	  	$	7.6	  	 	$	6.8	  	 	$	0.6	  	  	$	0.4	  	
Interest cost	  	 	6.6	  	 	 	6.0	  	 	 	0.4	  	  	 	0.4	  	
Expected return on plan assets	  	 	(6.0	) 	 	 	(5.3	) 	 	 	—  	  	  	 	—  	  	
Amortization of net actuarial loss from earlier periods	  	 	2.5	  	 	 	1.4	  	 	 	0.1	  	  	 	—  	  	
Amortization of net prior service costs from earlier periods	  	 	0.3	  	 	 	0.3	  	 	 	—  	  	  	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Net periodic expense	  	$	11.0	  	 	$	9.2	  	 	$	1.1	  	  	$	0.8	  	

19

Table of Contents
In March 2010, the Patient Protection and Affordable Care Act (the “Act”) and the related reconciliation measure, which modifies certain provisions of the Act, were signed into law. The Act repeals the current rule permitting deduction of the portion of the drug coverage expense that is offset by the Medicare Part D subsidy. This provision of the Act is effective for taxable years beginning after December 31, 2010 and the reconciliation measure delays the aforementioned repeal of the drug coverage expense reduction by two years to December 31, 2012. The Company has accounted for the enactment of the two laws in the first quarter of 2010, for which the impact to the Company’s income tax expense and net income was immaterial.
The Company contributed $13.6 million to its U.S. funded pension plan and made payments of $2.5 million related to its unfunded U.S. DBPPs and $0.3 million to its U.S. other post-retirement plans, respectively during the six months ended June 30, 2011. The Company presently anticipates making additional payments of $8.9 million related to its unfunded U.S. DBPPs and $0.4 million to its U.S. other post-retirement plans during the  remainder of 2011.
NOTE 11. INDEBTEDNESS
The following table summarizes total indebtedness:

 	  	June 30,
2011	 	 	December 31,
2010	 	
2007 Facility	  	$	—  	  	 	$	—  	  	
Commercial paper	  	 	—  	  	 	 	—  	  	
Notes Payable:	  				 				
Series 2005-1 Notes, due 2015, including fair value of interest rate swap of $3.4 million at 2011 and $(3.7) million at 2010	  	 	303.4	  	 	 	296.3	  	
Series 2007-1 Notes due 2017	  	 	300.0	  	 	 	300.0	  	
2010 Senior Notes, due 2020, net of unamortized discount of $2.9 million and $3.0 million in 2011 and 2010, respectively	  	 	497.1	  	 	 	497.0	  	
2008 Term Loan, various payments through 2013	  	 	142.5	  	 	 	146.3	  	
	  	 	 	 	 	 	 	 	
Total debt	  	 	1,243.0	  	 	 	1,239.6	  	
Current portion	  	 	(15.0	) 	 	 	(11.3	) 	
	  	 	 	 	 	 	 	 	
Total long-term debt	  	$	1,228.0	  	 	$	1,228.3	  	

20

Table of Contents
2007 Facility
On September 28, 2007, the Company entered into a $1.0 billion five-year senior, unsecured revolving credit facility, expiring in September 2012. The 2007 Facility will serve, in part, to support the Company’s CP Program described below. Interest on borrowings is payable at rates that are based on LIBOR plus a premium that can range from 16.0 to 40.0 basis points of the outstanding borrowing amount depending on the Debt/EBITDA ratio. The Company also pays quarterly facility fees, regardless of borrowing activity under the 2007 Facility. The quarterly fees for the 2007 Facility can range from 4.0 to 10.0 basis points per annum of the facility amount, depending on the Company’s Debt/EBITDA ratio. The Company also pays a utilization fee of 5.0 basis points on borrowings outstanding when the aggregate amount outstanding exceeds 50% of the total facility. The 2007 Facility contains certain covenants that, among other things, restrict the ability of the Company and certain of its subsidiaries, without the approval of the lenders, to engage in mergers, consolidations, asset sales, transactions with affiliates and sale-leaseback transactions or to incur liens, as defined in the related agreement. The 2007 Facility also contains financial covenants that, among other things, require the Company to maintain a Debt/EBITDA ratio of not more than 4.0 to 1.0 at the end of any fiscal quarter.
Commercial Paper
On October 3, 2007, the Company entered into a private placement commercial paper program under which the Company may issue CP notes up to a maximum amount of $1.0 billion. Amounts available under the CP Program may be re-borrowed. The CP Program is supported by the Company’s 2007 Facility. The maturities of the CP Notes will vary, but may not exceed 397 days from the date of issue. The CP Notes are sold at a discount from par or, alternatively, sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The rates of interest will depend on whether the CP Notes will be a fixed or floating rate. The interest on a floating rate may be based on the following: (a) certificate of deposit rate; (b) commercial paper rate; (c) federal funds rate; (d) LIBOR; (e) prime rate; (f) Treasury rate; or (g) such other base rate as may be specified in a supplement to the private placement agreement. The CP Program contains certain events of default including, among other things: non-payment of principal, interest or fees; entrance into any form of moratorium; and bankruptcy and insolvency events, subject in certain instances to cure periods.
Notes Payable
On August 19, 2010, the Company issued $500 million aggregate principal amount of unsecured notes in a public offering. The 2010 Senior Notes bear interest at a fixed rate of 5.50% and mature on September 1, 2020. Interest on the 2010 Senior Notes will be due semi-annually on September 1 and March 1 of each year, commencing March 1, 2011. The Company may prepay the 2010 Senior Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a Make-Whole Amount. Additionally, at the option of the holders of the notes, the Company may be required to purchase all or a portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the Indenture, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Indenture contains covenants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create liens and enter into sale and leaseback transactions. In addition, the Indenture contains a covenant that limits the ability of the Company to consolidate or merge with another entity or to sell all or substantially all of its assets to another entity. The Indenture contains customary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries fail to pay the principal of any indebtedness (as defined in the Indenture) when due at maturity in an aggregate amount of $50 million or more, or a default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’ indebtedness in an aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default under the Indenture, the notes may become immediately due and payable either automatically or by the vote of the holders of more than 25% of the aggregate principal amount of all of the notes then outstanding.
 
21

Table of Contents
On September 7, 2007, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal amount of its 6.06% Series 2007-1 Senior Unsecured Notes due 2017 pursuant to the 2007 Agreement. The Series 2007-1 Notes have a ten-year term and bear interest at an annual rate of 6.06%, payable semi-annually on March 7 and September 7. Under the terms of the 2007 Agreement, the Company may, from time to time within five years, in its sole discretion, issue additional series of senior notes in an aggregate principal amount of up to $500.0 million pursuant to one or more supplements to the 2007 Agreement. The Company may prepay the Series 2007-1 Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a Make Whole Amount. The 2007 Agreement contains covenants that limit the ability of the Company, and certain of its subsidiaries to, among other things: enter into transactions with affiliates, dispose of assets, incur or create liens, enter into any sale-leaseback transactions, or merge with any other corporation or convey, transfer or lease substantially all of its assets. The Company must also not permit its Debt/EBITDA ratio to exceed 4.0 to 1.0 at the end of any fiscal quarter.
On September 30, 2005, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal amount of its Series 2005-1 Senior Unsecured Notes due 2015 pursuant to the 2005 Agreement. The Series 2005-1 Notes have a ten-year term and bear interest at an annual rate of 4.98%, payable semi-annually on March 30 and September 30. Proceeds from the sale of the Series 2005-1 Notes were used to refinance $300.0 million aggregate principal amount of the Company’s outstanding 7.61% senior notes which matured on September 30, 2005. In the event that Moody’s pays all, or part, of the Series 2005-1 Notes in advance of their maturity, such prepayment will be subject to a Make Whole Amount. The Series 2005-1 Notes are subject to certain covenants that, among other things, restrict the ability of the Company and certain of its subsidiaries, without the approval of the lenders, to engage in mergers, consolidations, asset sales, transactions with affiliates and sale-leaseback transactions or to incur liens, as defined in the related agreements.
2008 Term Loan
On May 7, 2008, Moody’s entered into a five-year, $150.0 million senior unsecured term loan with several lenders. Proceeds from the loan were used to pay off a portion of the CP outstanding. Interest on borrowings under the 2008 Term Loan is payable quarterly at rates that are based on LIBOR plus a margin that can range from 125 basis points to 175 basis points depending on the Company’s Debt/EBITDA ratio. The outstanding borrowings shall amortize beginning in 2010 in accordance with the schedule of payments set forth in the 2008 Term Loan outlined in the table below.
The 2008 Term Loan contains restrictive covenants that, among other things, restrict the ability of the Company to engage or to permit its subsidiaries to engage in mergers, consolidations, asset sales, transactions with affiliates and sale-leaseback transactions or to incur, or permit its subsidiaries to incur, liens, in each case, subject to certain exceptions and limitations. The 2008 Term Loan also limits the amount of debt that subsidiaries of the Company may incur. In addition, the 2008 Term Loan contains a financial covenant that requires the Company to maintain a Debt/EBITDA ratio of not more than 4.0 to 1.0 at the end of any fiscal quarter.
The principal payments due on the Company’s long-term borrowings for each of the next five years are presented in the table below:

Year Ended December 31,	  	2008 Term Loan	 	  	Series 2005-1 Notes	 	  	Total	 	
2011 (after June 30,)	  	$	7.5	  	  	$	—  	  	  	$	7.5	  	
2012	  	 	71.2	  	  	 	—  	  	  	 	71.2	  	
2013	  	 	63.8	  	  	 	—  	  	  	 	63.8	  	
2014	  	 	—  	  	  	 	—  	  	  	 	—  	  	
2015	  	 	—  	  	  	 	300.0	  	  	 	300.0	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	142.5	  	  	$	300.0	  	  	$	442.5	  	

22

Table of Contents
In the fourth quarter of 2010, the Company entered into interest rate swaps with a total notional amount of $300 million which converted the fixed rate of interest on the Series 2005-1 Notes to a floating LIBOR-based interest rate. Also, on May 7, 2008, the Company entered into interest rate swaps with a total notional amount of $150 million to protect against fluctuations in the LIBOR-based variable interest rate on the 2008 Term Loan. Both of these interest rate swaps are more fully discussed in Note 6 above.
At June 30, 2011, the Company was in compliance with all covenants contained within all of the debt agreements. In addition to the covenants described above, the 2007 Facility, the 2005 Agreement, the 2007 Agreement, the 2010 Senior Notes and the 2008 Term Loan contain cross default provisions. These provisions state that default under one of the aforementioned debt instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of June 30, 2011, there were no such cross defaults.
Interest (expense) income, net
The following table summarizes the components of interest as presented in the consolidated statements of operations:

 	  	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	  	2011	 	 	2010	 	 	2011	 	 	2010	 	
Expense on borrowings	  	$	(16.3	) 	 	$	(10.6	) 	 	$	(32.7	) 	 	$	(21.4	) 	
Income	  	 	1.3	  	 	 	0.5	  	 	 	2.3	  	 	 	1.1	  	
Expense on UTBs and other tax related liabilities	  	 	(3.4	) 	 	 	(1.6	) 	 	 	(7.0	) 	 	 	(5.1	) 	
Capitalized	  	 	0.6	  	 	 	0.2	  	 	 	1.4	  	 	 	0.6	  	
Legacy Tax (a)	  	 	3.7	  	 	 	2.5	  	 	 	3.7	  	 	 	2.5	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest expense, net	  	$	(14.1	) 	 	$	(9.0	) 	 	$	(32.3	) 	 	$	(22.3	) 	

(a)	The 2011 amounts represent a reversal of $2.8 million of accrued interest expense relating to the favorable resolution of a Legacy Tax Matter and $0.9 million of interest income related to a pre-spinoff tax year. The 2010 amounts represent interest income related to the favorable settlement of Legacy Tax Matters.	
The Company’s long-term debt, including the current portion, is recorded at cost except for the Series 2005-1 Notes which are carried at cost adjusted for the fair value of an interest rate swap used to hedge the fair value of the note. The fair value and carrying value of the Company’s long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 	  	June 30, 2011	 	  	December 31, 2010	 	
 	  	Carrying
Amount	 	  	Estimated Fair
Value	 	  	Carrying
Amount	 	  	Estimated Fair
Value	 	
Series 2005-1 Notes	  	$	303.4	  	  	$	323.6	  	  	$	296.3	  	  	$	310.6	  	
Series 2007-1 Notes	  	 	300.0	  	  	 	338.6	  	  	 	300.0	  	  	 	321.3	  	
2010 Senior Notes	  	 	497.1	  	  	 	530.9	  	  	 	497.0	  	  	 	492.1	  	
2008 Term Loan	  	 	142.5	  	  	 	142.5	  	  	 	146.3	  	  	 	146.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	1,243.0	  	  	$	1,335.6	  	  	$	1,239.6	  	  	$	1,270.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The fair value of the Company’s 2010 Senior Notes is based on quoted market prices. The fair value of the remaining long-term debt, which is not publicly traded, is estimated using discounted cash flows with inputs based on prevailing interest rates available to the Company for borrowings with similar maturities.
 
23

Table of Contents
NOTE 12 CONTINGENCIES
From time to time, Moody’s is involved in legal and tax proceedings, governmental investigations, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.
Following the events in the U.S. subprime residential mortgage sector and the credit markets more broadly over the last several years, MIS and other credit rating agencies are the subject of intense scrutiny, increased regulation, ongoing investigation, and civil litigation. Legislative, regulatory and enforcement entities around the world are considering additional legislation, regulation and enforcement actions, including with respect to MIS’s compliance with newly imposed regulatory standards. Moody’s has received subpoenas and inquiries from states attorneys general and other governmental authorities and is responding to such investigations and inquiries.
In addition, the Company is facing litigation from market participants relating to the performance of MIS rated securities. Although Moody’s in the normal course experiences such litigation, the volume and cost of defending such litigation has significantly increased following the events in the U.S. subprime residential mortgage sector and the credit markets more broadly over the last several years.
On June 27, 2008, the Brockton Contributory Retirement System, a purported shareholder of the Company’s securities, filed a purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York. The plaintiff asserts various causes of action relating to the named defendants’ oversight of MIS’s ratings of RMBS and constant-proportion debt obligations, and their participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. The plaintiff seeks compensatory damages, restitution, disgorgement of profits and other equitable relief. On July 2, 2008, Thomas R. Flynn, a purported shareholder of the Company’s securities, filed a similar purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York, asserting similar claims and seeking the same relief. The cases have been consolidated and plaintiffs filed an amended consolidated complaint in November 2008. The Company removed the consolidated action to the United States District Court for the Southern District of New York in December 2008. In January 2009, the plaintiffs moved to remand the case to the Supreme Court of the State of New York, which the Company opposed. On February 23, 2010, the court issued an opinion remanding the case to the Supreme Court of New York. On October 30, 2008, the Louisiana Municipal Police Employees Retirement System, a purported shareholder of the Company’s securities, also filed a shareholder derivative complaint on behalf of the Company against its directors and certain officers, and the Company as a nominal defendant, in the U.S. District Court for the Southern District of New York. This complaint also asserts various causes of action relating to the Company’s ratings of RMBS, CDO and constant-proportion debt obligations, and named defendants’ participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. On December 9, 2008, Rena Nadoff, a purported shareholder of the Company, filed a shareholder derivative complaint on behalf of the Company against its directors and its CEO, and the Company as a nominal defendant, in the Supreme Court of the State of New York. The complaint asserts a claim for breach of fiduciary duty in connection with alleged overrating of asset-backed securities and underrating of municipal securities. On October 20, 2009, the Company moved to dismiss or stay the action in favor of related federal litigation. On January 26, 2010, the court entered a stipulation and order, submitted jointly by the parties, staying the Nadoff litigation pending coordination and prosecution of similar claims in the above and below described federal derivative actions. On July 6, 2009, W. A. Sokolowski, a purported shareholder of the Company, filed a purported shareholder derivative complaint on behalf of the Company against its directors and current and former officers, and the Company as a nominal defendant, in the United States District Court for the Southern District of New York.
 
24

Table of Contents
The complaint asserts claims relating to alleged mismanagement of the Company’s processes for rating structured finance transactions, alleged insider trading and causing the Company to buy back its own stock at artificially inflated prices.
Two purported class action complaints have been filed by purported purchasers of the Company’s securities against the Company and certain of its senior officers, asserting claims under the federal securities laws. The first was filed by Raphael Nach in the U.S. District Court for the Northern District of Illinois on July 19, 2007. The second was filed by Teamsters Local 282 Pension Trust Fund in the U.S. District Court for the Southern District of New York on September 26, 2007. Both actions have been consolidated into a single proceeding entitled In re Moody’s Corporation Securities Litigation in the U.S. District Court for the Southern District of New York. On June 27, 2008, a consolidated amended complaint was filed, purportedly on behalf of all purchasers of the Company’s securities during the period February 3, 2006 through October 24, 2007. Plaintiffs allege that the defendants issued false and/or misleading statements concerning the Company’s business conduct, business prospects, business conditions and financial results relating primarily to MIS’s ratings of structured finance products including RMBS, CDO and constant-proportion debt obligations. The plaintiffs seek an unspecified amount of compensatory damages and their reasonable costs and expenses incurred in connection with the case. The Company moved for dismissal of the consolidated amended complaint in September 2008. On February 23, 2009, the court issued an opinion dismissing certain claims and sustaining others. On January 22, 2010, plaintiffs moved to certify a class of individuals who purchased Moody’s Corporation common stock between February 3, 2006 and October 24, 2007, which the Company opposed. On March 31, 2011, the court issued an opinion denying plaintiffs’ motion to certify the proposed class. On April 14, 2011, plaintiffs filed a petition in the United States Court of Appeals for the Second Circuit seeking discretionary permission to appeal the decision. The Company filed its response to the petition on April 25, 2011. On July 20, 2011, the Second Circuit issued an order denying plaintiffs’ petition for leave to appeal.
For claims, litigation and proceedings not related to income taxes, where it is both probable that a liability is expected to be incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate. In other instances, because of uncertainties related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, enforcement and similar matters and contingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve the pending matters referred to above progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the inherent uncertainties involved in these matters, the large or indeterminate damages sought in some of them and the novel theories of law asserted, an estimate of the range of possible losses cannot be made at this time. For income tax matters, the Company employs the prescribed methodology of Topic 740 of the ASC which requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
Legacy Tax Matters
Moody’s continues to have exposure to potential liabilities arising from Legacy Tax Matters. As of June 30, 2011, Moody’s has recorded liabilities for Legacy Tax Matters totaling $52.4 million. This includes liabilities and accrued interest due to New D&B arising from the 2000 Distribution Agreement. It is possible that the ultimate liability for Legacy Tax Matters could be greater than the liabilities recorded by the Company, which could result in additional charges that may be material to Moody’s future reported results, financial position and cash flows.
 
25

Table of Contents
The following summary of the relationships among Moody’s, New D&B and their predecessor entities is important in understanding the Company’s exposure to the Legacy Tax Matters.
In November 1996, The Dun & Bradstreet Corporation separated into three separate public companies: The Dun & Bradstreet Corporation, ACNielsen Corporation and Cognizant Corporation. In June 1998, The Dun & Bradstreet Corporation separated into two separate public companies: Old D&B and R.H. Donnelley Corporation. During 1998, Cognizant separated into two separate public companies: IMS Health Incorporated and Nielsen Media Research, Inc. In September 2000, Old D&B separated into two separate public companies: New D&B and Moody’s.
Old D&B and its predecessors entered into global tax planning initiatives in the normal course of business. These initiatives are subject to normal review by tax authorities. Old D&B and its predecessors also entered into a series of agreements covering the sharing of any liabilities for payment of taxes, penalties and interest resulting from unfavorable IRS determinations on certain tax matters, and certain other potential tax liabilities, all as described in such agreements. Further, in connection with the 2000 Distribution and pursuant to the terms of the 2000 Distribution Agreement, New D&B and Moody’s have agreed on the financial responsibility for any potential liabilities related to these Legacy Tax Matters.
At the time of the 2000 Distribution, New D&B paid Moody’s $55.0 million for 50% of certain anticipated future tax benefits through 2012. In the event that these tax benefits are not claimed or otherwise not realized by New D&B, or there is an IRS audit of New D&B impacting these tax benefits, Moody’s would be required to repay to New D&B an amount equal to the discounted value of its share of the related future tax benefits as well as its share of any tax liability incurred by New D&B. In June 2011, the statute of limitations for New D&B relating to the 2004 tax year expired. As a result, in the second quarter of 2011, Moody’s recorded a reduction of accrued interest expense of $2.8 million ($1.7 million, net of tax) and an increase in other non-operating income of $6.4 million, relating to amounts due to New D&B. As of June 30, 2011, Moody’s liability with respect to this matter totaled $50.4 million.
Additionally, in April 2011, Moody’s received a refund of $0.9 million ($0.6 million, net of tax) for interest assessed relating to pre-spinoff tax years. Coupled with the $6.4 million noted above (and related interest of $1.7 million), net legacy tax benefits were $8.7 million in the three and six months ended June 30, 2011, of which $7 million was deemed unusual in nature.
In 2005, settlement agreements were executed with the IRS with respect to certain Legacy Tax Matters related to the years 1989-1990 and 1993-1996. With respect to these settlements, Moody’s and New D&B believed that IMS Health and NMR did not pay their full share of the liability to the IRS under the terms of the applicable separation agreements between the parties. Moody’s and New D&B subsequently paid these amounts to the IRS and commenced arbitration proceedings against IMS Health and NMR to resolve this dispute. Pursuant to these arbitration proceedings, the Company received $10.8 million ($6.5 million as a reduction of interest expense and $4.3 million as a reduction of tax expense) in 2009. The aforementioned settlement payment resulted in net income benefits of $8.2 million in 2009. The Company continues to carry a $2 million liability for this matter.
In 2006, New D&B and Moody’s each deposited $39.8 million with the IRS in order to stop the accrual of statutory interest on potential tax deficiencies with respect to the 1997 through 2002 tax years. In 2007, New D&B and Moody’s requested a return of that deposit. The IRS applied a portion of the deposit in satisfaction of an assessed deficiency and returned the balance to the Company. Moody’s subsequently pursued a refund for a portion of the outstanding amount. In May 2010, the IRS refunded $5.2 million to the Company for the 1997 tax year, which included interest of approximately $2.5 million resulting in an after-tax benefit of $4.6 million.
 
26

Table of Contents
NOTE 13. COMPREHENSIVE INCOME AND NONCONTROLLING INTERESTS
The components of total comprehensive income, net of tax, are as follows:

 	  	Three Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	Shareholders’
of Moody’s
Corporation	 	 	Noncontrolling
Interests	 	  	Total	 	 	Shareholders’
of Moody’s
Corporation	 	 	Noncontrolling
Interests	 	 	Total	 	
Net income	  	$	189.0	  	 	$	1.7	  	  	$	190.7	  	 	$	121.0	  	 	$	1.6	  	 	$	122.6	  	
Net realized and unrealized gain/(loss) on cash flow hedges (net of tax of $0.3 million and $0.1 million in 2011 and 2010, respectively)	  	 	0.4	  	 	 	—  	  	  	 	0.4	  	 	 	0.3	  	 	 	—  	  	 	 	0.3	  	
FX translation (net of tax of nil and $11.8 million in 2011 and 2010, respectively)	  	 	12.9	  	 	 	0.4	  	  	 	13.3	  	 	 	(2.5	) 	 	 	(0.7	) 	 	 	(3.2	) 	
Net actuarial gains and prior service costs (net of tax of $2.4 million and $2.9 million in 2011 and 2010, respectively)	  	 	(3.3	) 	 	 	—  	  	  	 	(3.3	) 	 	 	4.1	  	 	 	—  	  	 	 	4.1	  	
Amortization and recognition of actuarial losses and prior service costs (net of tax of $1.7 million and $0.3 million in 2011 and 2010, respectively)	  	 	0.9	  	 	 	—  	  	  	 	0.9	  	 	 	0.5	  	 	 	—  	  	 	 	0.5	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	  	$	199.9	  	 	$	2.1	  	  	$	202.0	  	 	$	123.4	  	 	$	0.9	  	 	$	124.3	  	

 	  	Six Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	Shareholders’
of Moody’s
Corporation	 	 	Noncontrolling
Interests	 	  	Total	 	 	Shareholders’
of Moody’s
Corporation	 	 	Noncontrolling
Interests	 	 	Total	 	
Net income	  	$	344.5	  	 	$	3.3	  	  	$	347.8	  	 	$	234.4	  	 	$	2.9	  	 	$	237.3	  	
Net realized and unrealized gain/(loss) on cash flow hedges (net of tax of $0.7 million and $0.2 million in 2011 and 2010, respectively)	  	 	1.1	  	 	 	—  	  	  	 	1.1	  	 	 	0.3	  	 	 	—  	  	 	 	0.3	  	
FX translation (net of tax of nil and $8.6 million in 2011 and 2010, respectively)	  	 	35.4	  	 	 	0.8	  	  	 	36.2	  	 	 	(47.3	) 	 	 	(0.4	) 	 	 	(47.7	) 	
Net actuarial gains and prior service costs (net of tax of $2.4 million and $2.9 million in 2011 and 2010, respectively)	  	 	(3.3	) 	 	 	—  	  	  	 	(3.3	) 	 	 	4.1	  	 	 	—  	  	 	 	4.1	  	
Amortization and recognition of actuarial losses and prior service costs (net of tax of $1.2 million and $1.0 million in 2011 and 2010, respectively)	  	 	1.7	  	 	 	—  	  	  	 	1.7	  	 	 	0.8	  	 	 	—  	  	 	 	0.8	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	  	$	379.4	  	 	$	4.1	  	  	$	383.5	  	 	$	192.3	  	 	$	2.5	  	 	$	194.8	  	

27

Table of Contents
The following table summarizes the activity in the Company’s noncontrolling interests:

 	  	Six Months Ended
June  30,	 	
 	  	2011	 	 	2010	 	
Beginning Balance	  	$	11.2	  	 	$	10.1	  	
Net income attributable to noncontrolling interest	  	 	3.3	  	 	 	2.9	  	
Dividends declared to noncontrolling interest	  	 	(4.8	) 	 	 	(4.4	) 	
Purchase of KIS Pricing shares from noncontrolling interest	  	 	(1.0	) 	 	 	—  	  	
FX translation	  	 	0.8	  	 	 	(0.4	) 	
	  	 	 	 	 	 	 	 	
Ending Balance	  	 
 	 
$9.5	 
  	 	$	8.2	  	
	  	 	 	 	 	 	 	 	
NOTE 14. SEGMENT INFORMATION
The Company operates in two reportable segments: MIS and MA.
Revenue for MIS and expenses for MA include an intersegment royalty charged to MA for the rights to use and distribute content, data and products developed by MIS. Also, revenue for MA and expenses for MIS include an intersegment license fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. Overhead charges and corporate expenses which exclusively benefit only one segment, are fully charged to that segment. Additionally, overhead costs and corporate expenses of the Company which benefit both segments are allocated to each segment based on a revenue-split methodology. Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resource, information technology and legal. Beginning on January 1, 2011, the Company refined its methodology for allocating the aforementioned overhead and corporate costs to its segments. The refined methodology is reflected in the segment results for the three and six months ended June 30, 2011 and accordingly, the segment results for the three and six months ended June 30, 2010 have been reclassified to conform to the new presentation. “Eliminations” in the table below represent intersegment royalty/license revenue/expense.
Below is financial information by segment, MIS and MA revenue by line of business and consolidated revenue information by geographic area, each of which is for the three and six month periods ended June 30, 2011 and 2010, and total assets by segment as of June 30, 2011 and December 31, 2010.
Financial Information by Segment

 	  	Three Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	MIS	 	 	MA	 	  	Eliminations	 	 	Consolidated	 	 	MIS	 	  	MA	 	  	Eliminations	 	 	Consolidated	 	
Revenue	  	$	454.2	  	 	$	169.8	  	  	$	(18.8	) 	 	$	605.2	  	 	$	344.1	  	  	$	151.6	  	  	$	(17.9	) 	 	$	477.8	  	
Expenses:	  				 				  				 				 				  				  				 				
Operating, SG&A	  	 	204.1	  	 	 	128.1	  	  	 	(18.8	) 	 	 	313.4	  	 	 	180.3	  	  	 	109.4	  	  	 	(17.9	) 	 	 	271.8	  	
Restructuring	  	 	(0.1	) 	 	 	—  	  	  	 	—  	  	 	 	(0.1	) 	 	 	0.2	  	  	 	0.1	  	  	 	—  	  	 	 	0.3	  	
Depreciation and amortization	  	 	12.3	  	 	 	9.5	  	  	 	—  	  	 	 	21.8	  	 	 	7.8	  	  	 	7.4	  	  	 	—  	  	 	 	15.2	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total	  	 	216.3	  	 	 	137.6	  	  	 	(18.8	) 	 	 	335.1	  	 	 	188.3	  	  	 	116.9	  	  	 	(17.9	) 	 	 	287.3	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Operating income	  	$	237.9	  	 	$	32.2	  	  	$	—  	  	 	$	270.1	  	 	$	155.8	  	  	$	34.7	  	  	$	—  	  	 	$	190.5	  	

28

Table of Contents

 	  	Six Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	MIS	 	 	MA	 	  	Eliminations	 	 	Consolidated	 	 	MIS	 	 	MA	 	 	Eliminations	 	 	Consolidated	 	
Revenue	  	$	882.8	  	 	$	336.9	  	  	$	(37.4	) 	 	$	1,182.3	  	 	$	694.9	  	 	$	295.0	  	 	$	(35.5	) 	 	$	954.4	  	
Expenses:	  				 				  				 				 				 				 				 				
Operating, SG&A	  	 	404.2	  	 	 	255.9	  	  	 	(37.4	) 	 	 	622.7	  	 	 	357.7	  	 	 	214.3	  	 	 	(35.5	) 	 	 	536.5	  	
Restructuring	  	 	(0.1	) 	 	 	—  	  	  	 	—  	  	 	 	(0.1	) 	 	 	(0.3	) 	 	 	(0.1	) 	 	 	—  	  	 	 	(0.4	) 	
Depreciation and amortization	  	 	21.0	  	 	 	18.5	  	  	 	—  	  	 	 	39.5	  	 	 	16.0	  	 	 	15.0	  	 	 	—  	  	 	 	31.0	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	425.1	  	 	 	274.4	  	  	 	(37.4	) 	 	 	662.1	  	 	 	373.4	  	 	 	229.2	  	 	 	(35.5	) 	 	 	567.1	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	  	$	457.7	  	 	$	62.5	  	  	$	—  	  	 	$	520.2	  	 	$	321.5	  	 	$	65.8	  	 	$	—  	  	 	$	387.3	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
MIS and MA Revenue by Line of Business
The table below presents revenue by LOB within each reportable segment:

 	  	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	  	2011	 	 	2010	 	 	2011	 	 	2010	 	
MIS:	  				 				 				 				
Corporate finance (CFG)	  	$	200.1	  	 	$	127.9	  	 	$	381.9	  	 	$	254.3	  	
Structured finance (SFG)	  	 	86.3	  	 	 	73.1	  	 	 	175.7	  	 	 	144.6	  	
Financial institutions (FIG)	  	 	79.1	  	 	 	63.2	  	 	 	156.0	  	 	 	139.4	  	
Public, project and infrastructure finance (PPIF)	  	 	72.5	  	 	 	64.4	  	 	 	137.0	  	 	 	125.8	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total external revenue	  	 	438.0	  	 	 	328.6	  	 	 	850.6	  	 	 	664.1	  	
Intersegment royalty	  	 	16.2	  	 	 	15.5	  	 	 	32.2	  	 	 	30.8	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	454.2	  	 	 	344.1	  	 	 	882.8	  	 	 	694.9	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
MA:	  				 				 				 				
Research, data and analytics (RD&A)	  	 	111.0	  	 	 	105.2	  	 	 	220.6	  	 	 	209.8	  	
Risk management software (RMS)	  	 	40.0	  	 	 	39.2	  	 	 	79.6	  	 	 	72.5	  	
Professional services	  	 	16.2	  	 	 	4.8	  	 	 	31.5	  	 	 	8.0	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total external revenue	  	 	167.2	  	 	 	149.2	  	 	 	331.7	  	 	 	290.3	  	
Intersegment license fee	  	 	2.6	  	 	 	2.4	  	 	 	5.2	  	 	 	4.7	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	  	 	169.8	  	 	 	151.6	  	 	 	336.9	  	 	 	295.0	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Eliminations	  	 	(18.8	) 	 	 	(17.9	) 	 	 	(37.4	) 	 	 	(35.5	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total MCO	  	$	605.2	  	 	$	477.8	  	 	$	1,182.3	  	 	$	954.4	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated Revenue Information by Geographic Area:

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2011	 	  	2010	 	  	2011	 	  	2010	 	
United States	  	$	315.0	  	  	$	261.5	  	  	$	616.4	  	  	$	516.1	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
International:	  				  				  				  				
EMEA	  	 	185.7	  	  	 	144.9	  	  	 	369.0	  	  	 	298.4	  	
Other	  	 	104.5	  	  	 	71.4	  	  	 	196.9	  	  	 	139.9	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total International	  	 	290.2	  	  	 	216.3	  	  	 	565.9	  	  	 	438.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	605.2	  	  	$	477.8	  	  	$	1,182.3	  	  	$	954.4	  	

29

Table of Contents

Total Assets by Segment:	 	
 	  	June 30, 2011	 	  	December 31, 2010	 	
 	  	MIS	 	  	MA	 	  	Corporate
Assets (a)	 	  	Consolidated	 	  	MIS	 	  	MA	 	  	Corporate
Assets (a)	 	  	Consolidated	 	
Total Assets	  	$	888.5	  	  	 	827.0	  	  	 	1,029.1	  	  	$	2,744.6	  	  	$	639.0	  	  	 	910.0	  	  	 	991.3	  	  	$	2,540.3	  	

(a)	Represents common assets that are shared between each segment or utilized by the corporate entity. Such assets primarily include cash and cash equivalents, short-term investments, unallocated property and equipment and deferred taxes.	
NOTE 15. RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements”. The new standard requires disclosure regarding transfers in and out of Level 1 and Level 2 classifications within the fair value hierarchy as well as requiring further detail of activity within the Level 3 category of the fair value hierarchy. The new standard also requires disclosures regarding the fair value for each class of assets and liabilities, which is a subset of assets or liabilities within a line item in a company’s balance sheet. Additionally, the standard will require further disclosures surrounding inputs and valuation techniques used in fair value measurements. The new disclosures and clarifications of existing disclosures set forth in this ASU are effective for interim and annual reporting periods beginning after December 15, 2009, except for the additional disclosures regarding Level 3 fair value measurements, for which the effective date is for fiscal years and interim periods within those years beginning after December 15, 2010. The Company has fully adopted all provisions of this ASU as of January 1, 2011 and the implementation did not have a material impact on the Company’s consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations”. The objective of this ASU is to address diversity in practice regarding proforma disclosures for revenue and earnings of the acquired entity. The amendments in this ASU specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this ASU also expand the supplemental pro forma disclosures under ASC Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this ASU are effective for fiscal years beginning on or after December 15, 2010. The Company will conform to the disclosure requirements set forth in this ASU for any future material business combinations.
In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The objective of this ASU is to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in this ASU change the wording used to describe current requirements in U.S. GAAP for measuring fair value and for financial statement disclosure about fair value measurements. Some of the amendments in the ASU clarify the FASB’s intent or change a particular principle or requirement pertaining to the application of existing fair value measurement requirements or for disclosing information about fair value measurements. The amendments in this ASU are required to be applied prospectively and are effective for fiscal years beginning after December 15, 2011 and early adoption is not permitted. The Company is currently evaluating the potential impact, if any, of the implementation of this ASU on its consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company intends to conform to the new presentation required in this ASU beginning with its Form 10Q for the three months ended March 31, 2012.
 
30

Table of Contents
NOTE 16. SUBSEQUENT EVENT
On July 11, 2011, the Board approved the declaration of a quarterly dividend of $0.14 per share of Moody’s common stock, payable on September 10, 2011 to shareholders of record at the close of business on August 20, 2011.
 
31

Table of Contents

 Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation condensed consolidated financial statements and notes thereto included elsewhere in this quarterly report on Form 10-Q.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 63 for a discussion of uncertainties, risks and other factors associated with these statements.
 The Company
Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analytical tools, (iii) risk management software and (iv) quantitative credit risk measures, credit portfolio management solutions, training and financial credentialing and certification services. Moody’s operates in two reportable segments: MIS and MA.
MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide. Revenue is derived from the originators and issuers of such transactions who use MIS ratings in the distribution of their debt issues to investors.
The MA segment develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. Within its RD&A business, MA distributes investor-oriented research and data developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies and commentary on topical credit related events. The RD&A business also produces and provides economic research and credit data and analytical tools such as quantitative credit risk scores. Within its RMS business, MA provides both economic and regulatory capital risk management software solutions. Within its professional services business it provides quantitative credit risk measures, credit portfolio management solutions, training and financial credentialing services.
 Critical Accounting Estimates
Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, restructuring, goodwill and acquired intangible assets, pension and other post-retirement benefits, stock-based compensation, and income taxes. Actual results may differ from these estimates under different assumptions or conditions. Item 7, MD&A, in the Company’s annual report on Form 10-K for the year ended December 31, 2010, includes descriptions of some of the judgments that Moody’s makes in applying its accounting estimates in these areas. Since the date of the annual report on Form 10-K, there have been no material changes to the Company’s critical accounting estimates.
 
32

Table of Contents
 Operating Segments
The Company reports in two reportable segments: MIS and MA. The MIS segment is comprised of all of the Company’s ratings activities. All of Moody’s other non-rating commercial activities are included in the MA segment.
The MIS segment consists of four lines of business – corporate finance, structured finance, financial institutions and public, project and infrastructure finance – that generate revenue principally from fees for the assignment and monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide.
The MA segment consists of three lines of business – research, data and analytics; risk management software; and professional services – that develop a wide range of products and services that support the risk management activities of institutional participants in global financial markets. Within its research, data and analytics business, MA distributes investor-oriented research and data developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies and commentary on topical credit related events. RD&A also produces and provides economic research and credit data and analytical tools such as quantitative credit risk scores. Within its risk management software business, MA provides both economic and regulatory capital risk management software and implementation services. Within its professional services business it provides quantitative credit risk measures, credit portfolio management solutions, training and financial credentialing services.
The following is a discussion of the results of operations of the Company and these segments, including the intersegment royalty revenue for MIS and expense incurred by MA for the rights to use and distribute content, data and products developed by MIS. The discussion also includes intersegment license revenue charged to MIS from MA for the use of certain MA products and services in MIS’s ratings process. Overhead charges and corporate expenses which exclusively benefit only one segment, are fully charged to that segment. Additionally, overhead costs and corporate expenses of the Company which benefit both segments are allocated to each segment based on a revenue-split methodology. Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources, information technology and legal. Beginning on January 1, 2011, the Company refined its methodology for allocating the aforementioned overhead and corporate costs to its segments. The refined methodology is reflected in the segment results for the three and six months ended June 30, 2011 and accordingly, the segment results for the same periods in 2010 have been reclassified to conform to the new presentation.
Certain prior year amounts have been reclassified to conform to the current presentation.
 Results of Operations
Three Months Ended June 30, 2011 compared with Three Months Ended June 30, 2010
Executive Summary
Moody’s revenue for the second quarter of 2011 totaled $605.2 million, an increase of $127.4 million compared to the same period in 2010. Excluding the favorable impact from changes in FX translation rates, revenue in the second quarter of 2011 increased $112.0 million compared to 2010. Total expenses were $335.1 million, an increase of $47.8 million compared to the second quarter of 2010 of which approximately $11 million of the increase was due to unfavorable changes in FX translation rates. Operating income of $270.1 million in the second quarter of 2011 increased $79.6 million compared to the same period in the prior year. Diluted EPS of $0.82 for the second quarter of 2011, which included a $0.06 favorable impact relating to a foreign tax ruling and a $0.03 benefit related to favorable resolutions of Legacy Tax Matters, increased $0.31 over the prior year period. Excluding the impact relating to favorable resolutions of Legacy Tax Matters in the second quarter of 2011, diluted EPS of $0.79 increased $0.30, or 61%, from $0.49 in 2010, which excludes a prior year favorable impact of $0.02 related to the resolution of a Legacy Tax Matter.
 
33

Table of Contents
Moody’s Corporation
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Three Months Ended June 30,	 	 	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	 	2010	 	 			
Revenue:	  				 				 				
United States	  	$	315.0	  	 	$	261.5	  	 	 	20	% 	
	  	 	 	 	 	 	 	 	 				
International:	  				 				 				
EMEA	  	 	185.7	  	 	 	144.9	  	 	 	28	% 	
Other	  	 	104.5	  	 	 	71.4	  	 	 	46	% 	
	  	 	 	 	 	 	 	 	 				
Total International	  	 	290.2	  	 	 	216.3	  	 	 	34	% 	
	  	 	 	 	 	 	 	 	 				
Total	  	 	605.2	  	 	 	477.8	  	 	 	27	% 	
	  	 	 	 	 	 	 	 	 				
Expenses:	  				 				 				
Operating	  	 	170.5	  	 	 	134.3	  	 	 	(27	%) 	
SG&A	  	 	142.9	  	 	 	137.5	  	 	 	(4	%) 	
Restructuring	  	 	(0.1	) 	 	 	0.3	  	 	 	133	% 	
Depreciation and amortization	  	 	21.8	  	 	 	15.2	  	 	 	(43	%) 	
	  	 	 	 	 	 	 	 	 				
Total	  	 	335.1	  	 	 	287.3	  	 	 	(17	%) 	
	  	 	 	 	 	 	 	 	 				
Operating income	  	$	270.1	  	 	$	190.5	  	 	 	42	% 	
	  	 	 	 	 	 	 	 	 				
Interest (expense) income, net	  	$	(14.1	) 	 	$	(9.0	) 	 	 	(57	%) 	
Other non-operating (expense) income, net	  	$	8.2	  	 	$	(3.6	) 	 	 	328	% 	
Net income attributable to Moody’s	  	$	189.0	  	 	$	121.0	  	 	 	56	% 	
Global revenue of $605.2 million in the second quarter of 2011 increased $127.4 million compared to the same period in 2010 reflecting good growth in both segments. The increase in ratings revenue compared to the second quarter of 2010 reflects growth across all ratings LOBs, most notably from within CFG. The growth in MA revenue reflects higher revenue in the professional services and RD&A LOBs and includes revenue from CSI which was acquired in the fourth quarter of 2010. Transaction revenue accounted for 49% of global MCO revenue in the second quarter of 2011, compared to 41% in the same period of the prior year. Transaction revenue in the MIS segment 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 the MA segment, relationship revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in MA represents software license fees and revenue from the professional services line of business which offers credit risk management advisory and training services, which are typically sold on a per-engagement basis.
U.S. revenue increased $53.5 million over 2010, primarily reflecting higher corporate finance rated issuance volumes in the second quarter of 2011. This growth was primarily due to strong rated issuance volumes for high-yield corporate debt and bank loans as well as investment-grade corporate debt, compared to the prior year period. Also contributing to the growth over the prior year was higher CREF issuance within SFG and infrastructure finance rated issuance volumes within PPIF.
Non-U.S. revenue increased $73.9 million over 2010, reflecting growth in all LOBs within both segments. The increase in non-U.S. ratings revenue primarily reflects growth in rated issuance for speculative-grade and investment-grade corporate debt as well as banking-related issuance across all non-U.S. regions. Additionally, there was growth across most asset classes within SFG, particularly in the EMEA region. The increase in non-U.S. MA revenue reflects growth across all LOBs, most notably in professional services, which is primarily attributed to the acquisition of CSI in
 
34

Table of Contents
the fourth quarter of 2010 coupled with strong growth in the base business. Changes in FX translation rates had an approximate $15 million favorable impact on non-U.S. revenue for the quarter ended June 30, 2011.
The table below shows Moody’s global staffing by geographic area:

 	  	June 30,	 	  	%
Change	 	
 	  	2011	 	  	2010	 	  	 	 	
United States	  	 	2,349	  	  	 	2,223	  	  	 	6	% 	
International	  	 	2,200	  	  	 	1,921	  	  	 	15	% 	
	  	 	 	 	  	 	 	 	  				
Total	  	 	4,549	  	  	 	4,144	  	  	 	10	% 	
	  	 	 	 	  	 	 	 	  				
Operating expenses were $170.5 million in the second quarter of 2011, an increase of $36.2 million from the same period in 2010 and reflected both higher compensation and non-compensation costs. Compensation costs increased approximately $27 million from the prior year reflecting higher salaries and related employee benefits which has resulted from increases in headcount in both the MIS and MA segments coupled with annual merit increases. Additionally, there was approximately $11 million higher incentive compensation resulting from increased headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. Non-compensation costs have increased approximately $9 million over the second quarter of 2010 reflecting higher costs resulting from the Company’s ongoing investments in technology infrastructure as well as higher travel-related costs which are correlated with continued improving business conditions in both segments.
SG&A expenses of $142.9 million in the second quarter of 2011 increased $5.4 million from the same period in 2010. Compensation costs increased approximately $17 million primarily due to higher salaries and related employee benefits which reflects annual merit increases and headcount growth in sales personnel within MA as well as in support areas such as compliance and IT. Additionally there was approximately $5 million higher incentive compensation costs compared to 2010 reflecting increased headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. Non-compensation expenses decreased approximately $12 million over the prior year primarily reflecting lower legal and litigation-related costs.
Depreciation and amortization of $21.8 million in the second quarter of 2011 increased $6.6 million from the same period in 2010 and reflected higher amortization for software developed or obtained for internal use coupled with higher amortization related to intangible assets capitalized during the fourth quarter 2010 acquisition of CSI.
Operating income of $270.1 million increased $79.6 million from the same period in 2010, reflecting the 27% increase in revenue exceeding the 17% increase in operating expenses. Changes in FX translation rates had an approximate $5 million favorable impact on operating income in the three months ended June 30, 2011.
Interest (expense) income, net for the three months ended June 30, 2011 was ($14.1) million, a $5.1 million increase in expense compared to the same period in 2010. This increase is primarily due to higher expense on borrowings reflecting interest on the $500 million 2010 Senior Notes issued in the third quarter of 2010 partially offset by lower interest expense on the $300 million Series 2005-1 Notes resulting from benefits on interest rate swaps entered into in the fourth quarter of 2010 to convert the fixed rate of interest on the notes to a floating LIBOR-based rate. Additionally, there were benefits of $3.7 million and $2.5 million in the three months ended June 30, 2011 and 2010, respectively, related to the favorable resolution of Legacy Tax Matters. The benefit in 2011 consists of a $2.8 million reversal of interest expense related to a matter for which the statute of limitations had lapsed and $0.9 million in interest income received for the settlement of a matter for a tax year preceding the 2000 Distribution. The benefit in 2010 reflects interest income received for the favorable settlement of Legacy Tax Matters.
 
35

Table of Contents
Other non-operating (expense) income, net of $8.2 million in the three months ended June 30, 2011 increased $11.8 million compared to the same period in 2010. The increase in income reflects a $6.4 million reversal of reserves in the second quarter of 2011 for the lapse of a statute of limitations relating to a Legacy Tax Matter. Additionally, there were FX gains of approximately $1 million in the three months ended June 30, 2011 compared to FX losses of approximately $4 million in the prior year period. The losses in the prior year period primarily reflected the weakening of the euro to the British pound.
Moody’s ETR was 27.8% in the second quarter of 2011, down from 31.1% in 2010. The decrease was primarily due to a higher proportion of taxable income generated internationally in lower tax jurisdictions, lower U.S. state income taxes and a beneficial adjustment in UTBs in 2011 resulting from a foreign tax ruling, partially offset by a smaller tax benefit in 2011 for Legacy Tax Matters.
Net Income for the three months ended June 30, 2011, which reflected a benefit of $14.7 million relating to the aforementioned foreign tax ruling, or $0.06 per diluted share, was $189.0 million, or $0.82 per diluted share, and increased $68.0 million or $0.31 per diluted share, compared to the same period in 2010. The increase in EPS over the prior year reflects higher Net Income coupled with fewer diluted shares outstanding compared to the second quarter of 2010. Excluding net benefits from the favorable resolution of Legacy Tax Matters in both periods as well as minor restructuring-related adjustments in both periods, Net Income increased $65.3 million, or 56%, to $181.9 million, resulting in a $0.30, or 61%, increase in diluted EPS compared to the prior year.
Segment Results
Moody’s Investors Service
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Three Months Ended June 30,	 	  	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	 	2010	 	  			
Revenue:	  				 				  				
Corporate finance (CFG)	  	$	200.1	  	 	$	127.9	  	  	 	56	% 	
Structured finance (SFG)	  	 	86.3	  	 	 	73.1	  	  	 	18	% 	
Financial institutions (FIG)	  	 	79.1	  	 	 	63.2	  	  	 	25	% 	
Public, project and infrastructure finance (PPIF)	  	 	72.5	  	 	 	64.4	  	  	 	13	% 	
	  	 	 	 	 	 	 	 	  				
Total external revenue	  	 	438.0	  	 	 	328.6	  	  	 	33	% 	
Intersegment royalty	  	 	16.2	  	 	 	15.5	  	  	 	5	% 	
	  	 	 	 	 	 	 	 	  				
Total MIS Revenue	  	 	454.2	  	 	 	344.1	  	  	 	32	% 	
				
Expenses:	  				 				  				
Operating and SG&A (including intersegment expenses)	  	 	204.1	  	 	 	180.3	  	  	 	(13	%) 	
Restructuring	  	 	(0.1	) 	 	 	0.2	  	  	 	150	% 	
Depreciation and amortization	  	 	12.3	  	 	 	7.8	  	  	 	(58	%) 	
	  	 	 	 	 	 	 	 	  				
Total	  	 	216.3	  	 	 	188.3	  	  	 	(15	%) 	
	  	 	 	 	 	 	 	 	  				
Operating income	  	$	237.9	  	 	$	155.8	  	  	 	53	% 	

36

Table of Contents
The following is a discussion of external MIS revenue and operating expenses:
Global MIS revenue of $438.0 million for the three months ended June 30, 2011, increased $109.4 million compared to a challenging period in 2010, reflecting growth in all ratings LOBs despite continuing uncertainties in the EU sovereign debt markets and more recently, uncertainty in the U.S. Federal government debt markets that developed over the later part of the second quarter of 2011. The most notable growth reflected higher rated issuance volumes for high-yield corporate debt and bank loans as well as investment-grade corporate debt. Additionally, there was growth across most asset classes within SFG compared to challenging conditions in the securitization markets in the prior year as well as stronger banking and insurance-related issuance within FIG and U.S. infrastructure finance issuance within PPIF. Furthermore, the revenue growth over the second quarter of 2010 relates to certain pricing increases reflecting the Company’s enhanced commitment to monitoring and surveillance functions. Transaction revenue for MIS in the three months ended June 30, 2011 was 61% of total revenue compared to 54% in 2010, with the increase primarily reflecting the aforementioned growth in rated issuance in the CFG and SFG LOBs.
In the U.S., revenue was $245.0 million in the second quarter of 2011, an increase of $50.5 million, or 26% compared to the same period in 2010. The increase was primarily due to strong rated issuance volumes for bank loans as well as investment-grade and high-yield corporate debt. Additionally, there were higher rated issuance volumes in the REIT and CMBS asset classes within SFG as well as higher infrastructure finance rated issuance compared to the second quarter of 2010.
Non-U.S. revenue was $193.0 million in the second quarter of 2011 and increased $58.9 million, or 44% compared to the same period in the prior year. The increase reflects strong growth in high-yield and investment-grade corporate debt and banking-related issuance across most regions coupled with growth in the EMEA region in rated issuance volumes across most asset classes within SFG. Changes in FX translation rates had an approximate $15 million favorable impact on non-U.S. MIS revenue in the second quarter of 2011.
Global CFG revenue of $200.1 million in the second quarter of 2011 increased $72.2 million from the same period in 2010, primarily reflecting strong growth in rated issuance volumes for high-yield corporate bonds and bank loans as well as strong growth in investment-grade corporate debt issuance and price increases. Transaction revenue represented 76% of total CFG revenue in the second quarter of 2011, compared to 70% in the prior year period. In the U.S., revenue in the second quarter of 2011 was $123.8 million, $37.2 million higher than the same period in 2010. The increase is primarily due to growth in rated issuance for high-yield corporate debt and bank loans reflecting increased investor confidence in the high-yield market, which resulted in lower credit spreads for these securities coupled with the current low interest rate environment. Additionally, the growth over the second quarter of 2010 reflected higher investment-grade corporate debt issuance relating to issuers taking advantage of the current low interest rate environment to refinance existing borrowings. Internationally, revenue of $76.3 million in the second quarter of 2011 increased $35.0 million compared to the same period in 2010, driven by rated issuance growth in high-yield and investment-grade corporate debt throughout most non-U.S. regions reflecting the aforementioned increased investor confidence in the high-yield markets which has resulted in narrowing credit spreads. Favorable changes in FX translation rates had an approximate $6 million impact on international CFG revenue in the second quarter of 2011.
Global SFG revenue of $86.3 million in the second quarter of 2011 increased $13.2 million compared to the same period in 2010, reflecting growth in most asset classes internationally which resulted in transaction revenue increasing to 51% of total SFG revenue in the second quarter of 2011 compared to 40% in the prior year period. In the U.S., revenue of $39.6 million increased $3.1 million compared to the second quarter of 2010, reflecting strong growth in REIT and CMBS rated issuance volumes due to the current low interest rate environment and narrow credit spreads for these asset classes. Non-U.S. revenue in the second quarter of 2011 of $46.7 million increased $10.1 million compared to the same period in the prior year, primarily reflecting growth across most asset classes within the EMEA region, most notably in the consumer ABS, RMBS and covered bond sectors. The increase in ABS and RMBS rated issuance volumes reflects growth compared to a challenging prior year period in the EMEA securitization markets. The increase in rated issuance for covered bonds in the EMEA region reflects increased investor demand for this asset class. Favorable changes in FX translation rates had an approximate $5 million impact on international SFG revenue in the second quarter of 2011.
 
37

Table of Contents
Global FIG revenue of $79.1 million in the second quarter of 2011 increased $15.9 million compared to the same period in 2010 with growth in banking and insurance-related revenue. Transaction revenue was 38% of total FIG revenue in the quarter ended June 30, 2011, compared to 32% in same period in 2010. In the U.S., revenue of $32.9 million in the second quarter of 2011 increased $6.9 million compared to the prior year. The increase primarily reflects higher insurance and banking issuance volumes which reflect issuers taking advantage of the current low interest rate environment as well as price increases. Outside the U.S., revenue in the second quarter of 2011 was $46.2 million, or $9.0 million higher than in the prior year, and was primarily due to good growth in banking revenue across all non-U.S. regions reflecting issuers opportunistically coming to market in the current low interest rate environment as well as price increases. Favorable changes in FX translation rates had an approximate $3 million impact on international FIG revenue in the second quarter of 2011.
Global PPIF revenue was $72.5 million in the second quarter of 2011, an increase of $8.1 million compared to the same period in 2010, primarily reflecting increases in infrastructure finance revenue resulting from higher rated issuance in the U.S. and pricing increases being partially offset by declines in U.S. public finance issuance. Revenue generated from new transactions was 59% of total PPIF revenue in the second quarter of 2011, compared to 58% in the prior year period. In the U.S., revenue for the three months ended June 30, 2011 of $48.7 million increased $3.3 million over the prior year primarily due to higher infrastructure finance rated issuance resulting from the current low interest rate environment being partially offset by declines in public finance rated issuance. The decrease in U.S. public finance rated issuance volumes reflects declines in state and local government spending and the expiration of the Build America Bond Program in the fourth quarter of 2010 which was implemented in the U.S. as part of the American Recovery and Reinvestment Act of 2009. Outside the U.S., PPIF revenue increased 25% compared to the second quarter of 2010 due to growth in infrastructure finance revenue across all regions reflecting issuers taking advantage of the favorable credit market conditions to refinance existing debt and fund capital expenditure needs as well as price increases. Favorable changes in FX translation rates had an approximate $2 million impact on international PPIF revenue in the second quarter of 2011.
Operating and SG&A expenses in the second quarter of 2011 increased $23.8 million compared to the same period in 2010 and reflected an increase in compensation costs of approximately $32 million, partially offset by decreases in non-compensation expenses of approximately $9 million. The increase in compensation costs reflects higher salaries and related employee benefits resulting from annual merit increases, modest headcount growth in the ratings LOBs as well as in support areas such as IT for which the costs are allocated to each segment based on a revenue-split methodology. Additionally, there was higher incentive compensation due to an increase in headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. The decrease in non-compensation expenses primarily reflects lower legal and litigation-related costs.
Operating income in the second quarter of 2011 of $237.9 million, which includes intersegment royalty revenue and intersegment license expense, increased $82.1 million from the same period in 2010 and reflects the 32% increase in total MIS revenue outpacing the 15% increase in total operating expenses.
 
38

Table of Contents
Moody’s Analytics
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Three Months Ended June 30,	 	  	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	  	2010	 	  			
Revenue:	  				  				  				
Research, data and analytics (RD&A)	  	$	111.0	  	  	$	105.2	  	  	 	6	% 	
Risk management software (RMS)	  	 	40.0	  	  	 	39.2	  	  	 	2	% 	
Professional services	  	 	16.2	  	  	 	4.8	  	  	 	238	% 	
	  	 	 	 	  	 	 	 	  				
Total external revenue	  	 	167.2	  	  	 	149.2	  	  	 	12	% 	
	  	 	 	 	  	 	 	 	  				
Intersegment license fees	  	 	2.6	  	  	 	2.4	  	  	 	8	% 	
	  	 	 	 	  	 	 	 	  				
Total MA Revenue	  	 	169.8	  	  	 	151.6	  	  	 	12	% 	
				
Expenses:	  				  				  				
Operating and SG&A (including intersegment expenses)	  	 	128.1	  	  	 	109.4	  	  	 	(17	%) 	
Restructuring	  	 	—  	  	  	 	0.1	  	  	 	100	% 	
Depreciation and amortization	  	 	9.5	  	  	 	7.4	  	  	 	(28	%) 	
	  	 	 	 	  	 	 	 	  				
Total	  	 	137.6	  	  	 	116.9	  	  	 	(18	%) 	
	  	 	 	 	  	 	 	 	  				
Operating income	  	$	32.2	  	  	$	34.7	  	  	 	(7	%) 	
	  	 	 	 	  	 	 	 	  				
The following is a discussion of external MA revenue and operating expenses:
Global MA revenue increased $18.0 million compared to the second quarter of 2010, with over 83% of the growth generated internationally, and reflected revenue from CSI which was acquired in the fourth quarter of 2010. Recurring revenue comprised 84% of total MA revenue in the second quarter of 2011 compared to 88% in the same period of the prior year.
In the U.S., revenue of $70.0 million in the second quarter of 2011 increased $3.0 million, primarily reflecting growth in RD&A. International revenue of $97.2 million for the three months ended June 30, 2011 was $15.0 million higher than the same period in 2010, and reflected growth across all LOBs, most notably in professional services which includes revenue from the CSI acquisition completed in the fourth quarter of 2010.
Global RD&A revenue, which comprised over 66% of MA revenue in both the second quarter ended June 30, 2011 and 2010, increased $5.8 million over the prior year. The increase reflects greater demand for products that support analysis for investment and commercial credit applications and also the gradual stabilization among capital markets customers as disruption from the global financial crisis recedes. Global RMS revenue in the second quarter of 2011 increased $0.8 million over the same period in 2010, due to the final delivery and client acceptance of software licenses and implementations. Revenue from professional services increased $11.4 million compared to the second quarter of 2010 with the acquisition of CSI in the fourth quarter of 2010 reflecting approximately 90% of the growth as well as strong growth in the base business. Revenue in the RMS and professional services LOBs are subject to quarterly volatility resulting from the variable nature of project timing and the concentration of revenue in a relatively small number of engagements.
Operating and SG&A expenses in the second quarter of 2011, which include the intersegment royalty for the right to use and distribute content, data and products developed by MIS, increased $18.7 million compared to the same period in 2010 reflecting both higher compensation and non-compensation costs of approximately $13 million and $5 million, respectively. The increase in compensation costs reflects higher salaries and related employee benefits reflecting annual merit increases coupled with an increase in headcount which included the acquisition of CSI in the fourth quarter of 2010 as well as increases to support business growth. Additionally, the increase in compensation costs reflects higher incentive compensation due to the aforementioned increase in
 
39

Table of Contents
headcount. Also, there were higher commissions reflecting growth in sales. The increase in non-compensation costs reflects expenses related to CSI which was acquired in the fourth quarter of 2010 as well as increases in certain variable costs, such as T&E, that are correlated with business growth.
Operating income of $32.2 million in the second quarter of 2011, which includes the intersegment royalty expense, decreased $2.5 million compared to the same period in 2010, reflecting the 18% increase in operating expenses slightly exceeding the total revenue growth of 12 percent.
Six Months Ended June 30, 2011 compared with Six Months Ended June 30, 2010
Executive Summary
Moody’s revenue for the six months ended June 30, 2011 totaled $1,182.3 million, an increase of $227.9 million compared to the same period in 2010. Excluding the favorable impact from changes in FX translation rates, revenue in the six months ended June 30, 2011 increased $212.3 million compared to 2010. Total expenses were $662.1 million, an increase of $95.0 million compared to the first six months of 2010 of which approximately $16 million of the increase was due to unfavorable changes in FX translation rates. Operating income of $520.2 million in the first six months of 2011 increased $132.9 million compared to the same period in the prior year. Diluted EPS of $1.49 for the six months ended June 30, 2011, which included a $0.06 favorable impact relating to a foreign tax ruling and a $0.03 benefit related to favorable resolutions of Legacy Tax Matters, increased $0.50 over the prior year period. Excluding the $0.03 favorable impact relating to the resolution of Legacy Tax Matters in 2011, diluted EPS of $1.46 increased $0.49, or 51%, from $0.97 in 2010, which excludes a prior year favorable impact of $0.02 related to the resolution of a Legacy Tax Matter.
Moody’s Corporation
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Six Months Ended June 30,	 	 	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	 	2010	 	 			
Revenue:	  				 				 				
United States	  	$	616.4	  	 	$	516.1	  	 	 	19	% 	
	  	 	 	 	 	 	 	 	 				
International:	  				 				 				
EMEA	  	 	369.0	  	 	 	298.4	  	 	 	24	% 	
Other	  	 	196.9	  	 	 	139.9	  	 	 	41	% 	
	  	 	 	 	 	 	 	 	 				
Total International	  	 	565.9	  	 	 	438.3	  	 	 	29	% 	
	  	 	 	 	 	 	 	 	 				
Total	  	 	1,182.3	  	 	 	954.4	  	 	 	24	% 	
	  	 	 	 	 	 	 	 	 				
Expenses:	  				 				 				
Operating	  	 	331.3	  	 	 	270.2	  	 	 	(23	%) 	
SG&A	  	 	291.4	  	 	 	266.3	  	 	 	(9	%) 	
Restructuring	  	 	(0.1	) 	 	 	(0.4	) 	 	 	(75	%) 	
Depreciation and amortization	  	 	39.5	  	 	 	31.0	  	 	 	(27	%) 	
	  	 	 	 	 	 	 	 	 				
Total	  	 	662.1	  	 	 	567.1	  	 	 	(17	%) 	
	  	 	 	 	 	 	 	 	 				
Operating income	  	$	520.2	  	 	$	387.3	  	 	 	34	% 	
	  	 	 	 	 	 	 	 	 				
Interest (expense) income, net	  	$	(32.3	) 	 	$	(22.3	) 	 	 	(45	%) 	
Other non-operating (expense) income, net	  	$	11.5	  	 	$	(4.6	) 	 	 	350	% 	
Net income attributable to Moody’s	  	$	344.5	  	 	$	234.4	  	 	 	47	% 	
 
40

Table of Contents
Global revenue of $1,182.3 million in the six months ended June 30, 2011 increased $227.9 million compared to the same period in 2010 reflecting good growth in both segments. The increase in ratings revenue compared to the first six months of 2010 reflects growth across all ratings LOBs, most notably from within CFG. The growth in MA reflects higher revenue across all LOBs, most notably in professional services and RD&A and includes revenue from CSI which was acquired in the fourth quarter of 2010. Transaction revenue accounted for 49% of global MCO revenue in the six months ended June 30, 2011, compared to 41% in the same period of the prior year.
U.S. revenue increased $100.3 million over 2010, primarily reflecting growth in corporate finance primarily due to strong rated issuance volumes for high-yield corporate debt and bank loans as well as investment-grade corporate debt compared to the prior year period. Also contributing to the growth in U.S. ratings revenue over the prior year was higher rated issuance volumes in CREF within SFG and infrastructure finance within PPIF. The aforementioned growth in ratings revenue was partially offset by declines in U.S. public finance rated issuance. Additionally, the increase over the six months ended June 30, 2010 reflects growth in the RD&A and RMS LOBs within MA.
Non-U.S. revenue increased $127.6 million over 2010, reflecting growth in all LOBs within both segments. The most notable growth in non-U.S. ratings revenue resulted from higher rated issuance volumes in the EMEA region for high-yield and investment-grade corporate debt as well as from most asset classes within EMEA and Asia SFG. Additionally, the growth over 2010 reflects higher banking-related issuance across all non-U.S. regions. The increase in non-U.S. MA revenue reflects growth across all LOBs, most notably in professional services, where over 80% of the growth for this LOB is attributed to the acquisition of CSI in the fourth quarter of 2010 coupled with strong growth in the base business. Changes in FX translation rates had an approximate $15 million favorable impact on non-U.S. revenue for the six months ended June 30, 2011.
Operating expenses were $331.3 million in the first six months of 2011, an increase of $61.1 million from the same period in 2010 and reflected both higher compensation and non-compensation costs. Compensation costs increased approximately $46 million from the prior year reflecting higher salaries and related employee benefits which has resulted from increases in headcount in both the MIS and MA segments coupled with annual merit increases. Additionally, there was approximately $17 million higher incentive compensation resulting from increased headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. Non-compensation costs have increased approximately $15 million over the same period in 2010 reflecting higher costs resulting from the Company’s ongoing investments in technology infrastructure as well as higher travel-related costs which are correlated with continued improving business conditions in both segments.
SG&A expenses of $291.4 million in the first six months of 2011 increased $25.1 million from the same period in 2010. Compensation costs increased approximately $33 million primarily due to higher salaries and related employee benefits which reflects annual merit increases and headcount growth in sales personnel within MA as well as in support areas such as compliance and IT. Additionally there was approximately $8 million higher incentive compensation costs compared to 2010 reflecting increased headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. Non-compensation expenses decreased approximately $8 million over the prior year primarily reflecting lower legal and litigation-related costs partially offset by higher professional service costs relating to ongoing investments in technology infrastructure.
Depreciation and amortization of $39.5 million in the six months ended June 30, 2011 increased $8.5 million from the same period in 2010 and reflected higher amortization for software developed or obtained for internal use coupled with higher amortization related to intangible assets capitalized during the fourth quarter 2010 acquisition of CSI.
Operating income of $520.2 million was up $132.9 million from the same period in 2010, reflecting the 24% increase in revenue exceeding the 17% increase in operating expenses. Changes in FX translation rates had an immaterial impact on operating income in the six months ended June 30, 2011.
 
41

Table of Contents
Interest (expense) income, net for the six months ended June 30, 2011 was ($32.3) million, a $10.0 million increase in expense compared to the same period in 2010. This increase is primarily due to higher expense on borrowings reflecting interest on the $500 million 2010 Senior Notes issued in the third quarter of 2010 partially offset by lower interest expense on the $300 million Series 2005-1 Notes resulting from benefits on interest rate swaps entered into in the fourth quarter of 2010 to convert the fixed rate of interest on the notes to a floating LIBOR-based rate. Additionally, there were benefits of $3.7 million and $2.5 million, in the six months ended June 30, 2011 and 2010, respectively, related to the favorable resolution of Legacy Tax Matters. The benefit in 2011 consists of a $2.8 million reversal of interest expense related to a matter for which the statute of limitations had lapsed coupled with $0.9 million in interest income received for the settlement of a matter for a tax year that preceded the 2000 Distribution. The benefit in 2010 reflects interest income received for the favorable settlement of Legacy Tax Matters.
Other non-operating (expense) income, net of $11.5 million in the first half of 2011 increased $16.1 million compared to the same period in 2010. The increase in income reflects a $6.4 million reversal of reserves in the first half of 2011 for the lapse of a statute of limitations relating to a Legacy Tax Matter. Additionally, there were FX gains of approximately $3 million in the first half of 2011 compared to FX losses of approximately $5 million in the prior year period. The gains in 2011 primarily reflect the strengthening of the euro to the British pound over the first six months of 2011. The losses in the prior year period primarily reflected the weakening of the euro to the British pound.
Moody’s ETR was 30.4% in the first half of 2011, down from 34.2% in 2010. The decrease was primarily due to a higher proportion of taxable income generated internationally in lower tax jurisdictions, lower U.S. state income taxes and a beneficial adjustment in UTBs in 2011 resulting from a foreign tax ruling, partially offset by a smaller tax benefit in 2011 for Legacy Tax Matters.
Net Income for the first half of 2011, which reflected a benefit of approximately $13 million benefit related to the aforementioned foreign tax ruling, or $0.06 per diluted share, was $344.5 million, or $1.49 per diluted share, and increased $110.1 million or $0.50 per diluted share, compared to the same period in 2010. The increase in EPS over the prior year reflects higher Net Income coupled with fewer diluted shares outstanding compared to the first half of 2010. Excluding net benefits from the favorable resolution of Legacy Tax Matters in both periods as well as minor restructuring-related adjustments in both periods, Net Income increased $107.9 million, or 47%, to $337.4 million, resulting in a $0.49, or 51%, increase in diluted EPS compared to the prior year.
 
42

Table of Contents
Segment Results
Moody’s Investors Service
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Six Months Ended June 30,	 	 	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	 	2010	 	 			
Revenue:	  				 				 				
Corporate finance (CFG)	  	$	381.9	  	 	$	254.3	  	 	 	50	% 	
Structured finance (SFG)	  	 	175.7	  	 	 	144.6	  	 	 	22	% 	
Financial institutions (FIG)	  	 	156.0	  	 	 	139.4	  	 	 	12	% 	
Public, project and infrastructure finance (PPIF)	  	 	137.0	  	 	 	125.8	  	 	 	9	% 	
	  	 	 	 	 	 	 	 	 				
Total external revenue	  	 	850.6	  	 	 	664.1	  	 	 	28	% 	
Intersegment royalty	  	 	32.2	  	 	 	30.8	  	 	 	5	% 	
	  	 	 	 	 	 	 	 	 				
Total MIS Revenue	  	 	882.8	  	 	 	694.9	  	 	 	27	% 	
				
Expenses:	  				 				 				
Operating and SG&A (including intersegment expenses)	  	 	404.2	  	 	 	357.7	  	 	 	(13	%) 	
Restructuring	  	 	(0.1	) 	 	 	(0.3	) 	 	 	(67	%) 	
Depreciation and amortization	  	 	21.0	  	 	 	16.0	  	 	 	(31	%) 	
	  	 	 	 	 	 	 	 	 				
Total	  	 	425.1	  	 	 	373.4	  	 	 	(14	%) 	
	  	 	 	 	 	 	 	 	 				
Operating income	  	$	457.7	  	 	$	321.5	  	 	 	42	% 	
	  	 	 	 	 	 	 	 	 				
The following is a discussion of external MIS revenue and operating expenses:
Global MIS revenue of $850.6 million for the six months ended June 30, 2011, increased $186.5 million compared to a challenging period in 2010, reflecting growth in all ratings LOBs despite continuing uncertainties in the EU sovereign debt markets and more recently, uncertainty in the U.S. Federal government debt markets that developed over the later part of the second quarter of 2011. The most notable growth reflected higher rated issuance for high-yield corporate debt and bank loans as well as investment-grade corporate debt. Additionally, there was growth across most asset classes within SFG compared to challenging conditions in the securitization markets in the prior year as well as stronger banking and insurance-related issuance within FIG and infrastructure finance revenue within PPIF. Furthermore, the revenue growth over 2010 relates to certain pricing increases that reflect the Company’s enhanced commitment to monitoring and surveillance functions. Transaction revenue for MIS in the six months ended June 30, 2011 was 62% of total revenue compared to 54% in 2010, with the increase primarily reflecting the aforementioned growth in rated issuance in the CFG and SFG LOBs.
In the U.S., revenue was $475.0 million in the first half of 2011, an increase of $91.3 million, or 24% compared to the same period in 2010. The increase was primarily due to strong rated issuance volumes for high-yield corporate debt and bank loans as well as growth in rated issuance for investment-grade corporate debt. Additionally, there were higher rated issuance volumes in the REIT and CMBS asset classes within SFG as well as higher infrastructure finance revenue compared to the first half of 2010. These increases were partially offset by declines in rated issuance for U.S. public finance.
Non-U.S. revenue was $375.6 million in the first half of 2011, an increase of $95.2 million, or 34% compared to the same period in the prior year. The increase reflects strong growth in high-yield and investment-grade corporate debt and banking and insurance-related issuance coupled with growth in rated issuance volumes in the EMEA region across most asset classes within SFG. Changes in FX translation rates had an approximate $16 million favorable impact on non-U.S. MIS revenue in first half 2011.

43

Table of Contents
Global CFG revenue of $381.9 million in the first half of 2011 increased $127.6 million from the same period in 2010, primarily reflecting strong growth in rated issuance volumes for high-yield corporate bonds and bank loans as well as good growth in investment-grade corporate debt issuance and price increases. Transaction revenue represented 76% of total CFG revenue in the six months ended June 30, 2011, compared to 70% in the prior year period. In the U.S., revenue in the first half of 2011 was $244.5 million, $78.3 million higher than the same period in 2010. The increase is primarily due to growth in rated issuance for high-yield corporate debt and bank loans reflecting increased investor confidence in the high-yield markets, which resulted lower credit spreads for these securities coupled with the current low interest rate environment. Additionally, the growth over 2010 reflected higher investment-grade corporate debt issuance relating to issuers taking advantage of the current low interest rate environment to refinance existing borrowings. Also, the increases in both investment-grade and speculative-grade corporate debt reflect an increase in issuance to fund merger and acquisition-related activity. Internationally, revenue of $137.4 million in the first half of 2011 increased $49.3 million compared to the same period in 2010, driven by rated issuance growth in high-yield and investment-grade corporate debt in the EMEA and Asia regions reflecting the aforementioned narrowing credit spreads and increased investor confidence in the high-yield markets. The growth in non-U.S. revenue over the prior year period also reflects higher Corporate Family Ratings and Indicative Ratings. Favorable changes in FX translation rates had an approximate $6 million impact on international CFG revenue in the first half of 2011.
Global SFG revenue of $175.7 million in the first half of 2011 increased $31.1 million compared to the same period in 2010, primarily reflecting growth in most asset classes internationally, resulting in transaction revenue increasing to 52% of total SFG revenue in the first half of 2011 compared to 40% in the prior year period. In the U.S., revenue of $80.6 million increased $7.3 million compared to the first half of 2010, reflecting good growth in REIT and CMBS rated issuance volumes due to the current low interest rate environment and narrow credit spreads for these asset classes. Non-U.S. revenue in the six months ended June 30, 2011 of $95.1 million increased $23.8 million compared to the same period in the prior year, primarily reflecting growth across most asset classes within the EMEA region, most notably in the ABS, RMBS and covered bonds sectors. The increases in ABS and RMBS reflect issuers coming to market ahead of regulatory changes implemented by the ECB in March 2011 which required two ratings for asset-backed securities that may be used as collateral in Eurosystem credit operations. Favorable changes in FX translation rates had an approximate $5 million impact on international SFG revenue in the first half of 2011.
Global FIG revenue of $156.0 million in the first half of 2011 increased $16.6 million compared to the same period in 2010, reflecting growth in banking and insurance-related revenue across all regions coupled with the aforementioned price increases. Transaction revenue was 41% of total FIG revenue in the first half of 2011, compared to 38% in same period in 2010. In the U.S., revenue of $64.3 million in the first half of 2011 increased $6.4 million compared to the prior year. The increase primarily reflects higher banking and insurance issuance volumes which reflect issuers taking advantage of the current low interest rate environment as well as price increases. Outside the U.S., revenue in the first half of 2011 was $91.7 million, or $10.2 million higher than in the prior year, and was primarily due to good growth in banking revenue across all non-U.S. regions reflecting issuers opportunistically coming to market in the current low interest rate environment as well as price increases. Favorable changes in FX translation rates had an approximate $3 million impact on international FIG revenue in the first half of 2011.
Global PPIF revenue was $137.0 million in the first half of 2011, an increase of $11.2 million compared to the same period in 2010, primarily reflecting increases in infrastructure finance revenue across all regions resulting from higher rated issuance in the U.S. and pricing increases being partially offset by declines in U.S. public finance issuance. Revenue generated from new transactions was 57% of total PPIF revenue in the first half of 2011, compared to 56% in the prior year period. In the U.S., revenue for the six months ended June 30, 2011 of $85.6 million was consistent with the prior year primarily due to higher infrastructure finance rated issuance resulting from issuers opportunistically coming to market in the current low interest rate environment being offset by declines in public finance rated issuance. The decrease in rated issuance volumes for U.S.
 
44

Table of Contents
public finance reflect declines in state and local government spending and the expiration of the Build America Bond Program in the fourth quarter of 2010 which was implemented in the U.S. as part of the American Recovery and Reinvestment Act of 2009. Outside the U.S., PPIF revenue increased 30% compared to the first half of 2010 due to growth in infrastructure finance revenue across all non-U.S. regions reflecting issuers taking advantage of the favorable credit market conditions to refinance existing debt and fund capital expenditure needs as well as price increases. Favorable changes in FX translation rates had an approximate $2 million impact on international PPIF revenue in the first half of 2011.
Operating and SG&A expenses in the first half of 2011 increased $46.5 million compared to the same period in 2010 and reflected increases in compensation costs of approximately $51 million partially offset by lower non-compensation expenses of approximately $5 million. The increase in compensation costs reflects higher salaries and related employee benefits resulting from annual merit increases, modest headcount growth in the ratings LOBs as well as in support areas such as IT for which the costs are allocated to each segment based on a revenue-split methodology. Additionally, there was higher incentive compensation due to an increase in headcount and greater projected achievement against full-year 2011 targeted results through the second quarter of 2011 compared to the projected achievement against full-year targets in the prior year period. The decrease in non-compensation expenses primarily reflects lower legal and litigation-related costs compared to the prior year partially offset by higher T&E due to improving business conditions as well as higher costs resulting from the Company’s continued investment in improving IT infrastructure.
Operating income in the second quarter of 2011 of $457.7 million, which includes intersegment royalty revenue and intersegment license expense, increased $136.2 million from the same period in 2010 and reflects the 27% increase in total MIS revenue outpacing the 14% increase in total  operating expenses.
Moody’s Analytics
The table below provides a summary of revenue and operating results, followed by further insight and commentary:

 	  	Six Months Ended June 30,	 	 	% Change
Favorable
(Unfavorable)	 	
 	  	2011	 	  	2010	 	 			
Revenue:	  				  				 				
Research, data and analytics (RD&A)	  	$	220.6	  	  	$	209.8	  	 	 	5	% 	
Risk management software (RMS)	  	 	79.6	  	  	 	72.5	  	 	 	10	% 	
Professional services	  	 	31.5	  	  	 	8.0	  	 	 	294	% 	
	  	 	 	 	  	 	 	 	 				
Total external revenue	  	 	331.7	  	  	 	290.3	  	 	 	14	% 	
	  	 	 	 	  	 	 	 	 				
Intersegment license fees	  	 	5.2	  	  	 	4.7	  	 	 	11	% 	
	  	 	 	 	  	 	 	 	 				
Total MA Revenue	  	 	336.9	  	  	 	295.0	  	 	 	14	% 	
				
Expenses:	  				  				 				
Operating and SG&A (including intersegment expenses)	  	 	255.9	  	  	 	214.3	  	 	 	(19	%) 	
Restructuring	  	 	—  	  	  	 	(0.1	) 	 	 	(100	%) 	
Depreciation and amortization	  	 	18.5	  	  	 	15.0	  	 	 	(23	%) 	
	  	 	 	 	  	 	 	 	 				
Total	  	 	274.4	  	  	 	229.2	  	 	 	(20	%) 	
	  	 	 	 	  	 	 	 	 				
Operating income	  	$	62.5	  	  	$	65.8	  	 	 	(5	%) 	
	  	 	 	 	  	 	 	 	 				
The following is a discussion of external MA revenue and operating expenses:
Global MA revenue increased $41.4 million compared to the first half of 2010, with over 78% of the growth generated internationally, and reflected revenue from CSI which was acquired in the fourth quarter of 2010. Recurring revenue comprised 83% of total MA revenue in the first half of 2011 compared to 90% in the same period of the prior year.
 
45

Table of Contents
In the U.S., revenue of $141.4 million in the first half of 2011 increased $9.0 million, primarily reflecting growth in RD&A and RMS. International revenue of $190.3 million for the six months ended June 30, 2011 was $32.4 million higher than the same period in 2010, and reflected growth across all LOBs, most notably in professional services which includes revenue from the CSI acquisition completed in the fourth quarter of 2010.
Global RD&A revenue, which comprised over 66% of MA revenue in both the six months ended June 30, 2011 and 2010, increased $10.8 million over the prior year. The increase reflects greater demand for products that support analysis for investment and commercial credit applications and also the gradual stabilization among capital markets customers as disruption from the global financial crisis recedes. Global RMS revenue in the first half of 2011 increased $7.1 million over the same period in 2010, due to the final delivery and client acceptance of software licenses and implementations. Revenue from the professional services LOB increased $23.5 million compared to the first half of 2010, with approximately 80% of the growth reflecting the acquisition of CSI in the fourth quarter of 2010 coupled with strong growth in the base business. Revenue in the RMS and professional services LOBs are subject to quarterly volatility resulting from the variable nature of project timing and the concentration of revenue in a relatively small number of engagements.
Operating and SG&A expenses in the first half of 2011, which include the intersegment royalty for the right to use and distribute content, data and products developed by MIS, increased $41.6 million compared to the same period in 2010 reflecting both higher compensation and non-compensation costs of approximately $28 million and $12 million, respectively. The increase in compensation costs reflects higher salaries and related employee benefits reflecting annual merit increases coupled with an increase in headcount relating to the acquisition of CSI in the fourth quarter of 2010 as well as to support business growth. Additionally, the increase in compensation costs reflects higher incentive compensation due to the aforementioned increase in headcount. Also, there was an increase in commissions reflecting stronger MA sales than in the prior period. The increase in non-compensation costs reflects expenses related to CSI which was acquired in the fourth quarter of 2010 as well as increases in certain variable costs, such as T&E, that are correlated with business growth.
Operating income of $62.5 million in the first half of 2011, which includes the intersegment royalty expense, decreased $3.3 million compared to the same period in 2010, reflecting the $45.2 million increase in operating expenses slightly exceeding the total revenue growth of $41.9 million.
 
46

Table of Contents
Non-GAAP Financial Measures:
In addition to its reported results, Moody’s has included in this MD&A certain adjusted results that the SEC 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 performance. These non-GAAP financial measures relate to minor adjustments made to both the Company’s 2007 and 2009 Restructuring Plans and Legacy Tax Matters, with the Legacy Tax Matters being further discussed in Note 12 to the Company’s condensed consolidated financial statements. The table below shows Moody’s consolidated results for each of the three and six months ended June 30, 2011 and 2010, adjusted to exclude the impact of the aforementioned items:

Amounts in millions, except per share amounts 	  	Three Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	As
Reported	 	 	Restructuring
(a)	 	 	Legacy
Tax (b)	 	 	Non-GAAP
Financial
Measures	 	 	As
Reported	 	 	Restructuring
(a)	 	 	Legacy
Tax (b)	 	 	Non-GAAP
Financial
Measures	 	
Total expenses	  	$	335.1	  	 	$	0.1	  	 	$	—  	  	 	$	335.2	  	 	$	287.3	  	 	$	(0.3	) 	 	$	—  	  	 	$	287.0	  	
Operating income	  	$	270.1	  	 	$	(0.1	) 	 	$	—  	  	 	$	270.0	  	 	$	190.5	  	 	$	0.3	  	 	$	—  	  	 	$	190.8	  	
Interest (expense), income net	  	$	(14.1	) 	 	$	—  	  	 	$	(0.9	) 	 	$	(15.0	) 	 	$	(9.0	) 	 	$	—  	  	 	$	(2.5	) 	 	$	(11.5	) 	
Other non-operating (expense), income, net	  	$	8.2	  	 	$	—  	  	 	$	(6.4	) 	 	$	1.8	  	 	$	(3.6	) 	 	$	—  	  	 	$	—  	  	 	$	(3.6	) 	
Provision for income taxes	  	$	73.5	  	 	$	—  	  	 	$	(0.3	) 	 	$	73.2	  	 	$	55.3	  	 	$	0.1	  	 	$	2.1	  	 	$	57.5	  	
Net income attributable to Moody’s Corporation	  	$	189.0	  	 	$	(0.1	) 	 	$	(7.0	) 	 	$	181.9	  	 	$	121.0	  	 	$	0.2	  	 	$	(4.6	) 	 	$	116.6	  	
						
Earnings per share attributable to Moody’s common shareholders	  	 				 				 				 				 				
Basic	  	$	0.83	  	 	$	—  	  	 	$	(0.03	) 	 	$	0.80	  	 	$	0.51	  	 	$	—  	  	 	$	(0.01	) 	 	$	0.50	  	
Diluted	  	$	0.82	  	 	$	—  	  	 	$	(0.03	) 	 	$	0.79	  	 	$	0.51	  	 	$	—  	  	 	$	(0.02	) 	 	$	0.49	  	
		
 	  	Six Months Ended June 30,	 	
 	  	2011	 	 	2010	 	
 	  	As
Reported	 	 	Restructuring
(a)	 	 	Legacy
Tax (b)	 	 	Non-GAAP
Financial
Measures	 	 	As
Reported	 	 	Restructuring
(a)	 	 	Legacy
Tax (b)	 	 	Non-GAAP
Financial
Measures	 	
Total expenses	  	$	662.1	  	 	$	0.1	  	 	$	—  	  	 	$	662.2	  	 	$	567.1	  	 	$	0.4	  	 	$	—  	  	 	$	567.5	  	
Operating income	  	$	520.2	  	 	$	(0.1	) 	 	$	—  	  	 	$	520.1	  	 	$	387.3	  	 	$	(0.4	) 	 	$	—  	  	 	$	386.9	  	
Interest (expense), income net	  	$	(32.3	) 	 	$	—  	  	 	$	(0.9	) 	 	$	(33.2	) 	 	$	(22.3	) 	 	$	—  	  	 	$	(2.5	) 	 	$	(24.8	) 	
Other non-operating (expense), income, net	  	$	11.5	  	 	$	—  	  	 	$	(6.4	) 	 	$	5.1	  	 	$	(4.6	) 	 	$	—  	  	 	$	—  	  	 	$	(4.6	) 	
Provision for income taxes	  	$	151.6	  	 	$	—  	  	 	$	(0.3	) 	 	$	151.3	  	 	$	123.1	  	 	$	(0.1	) 	 	$	2.1	  	 	$	125.1	  	
Net income attributable to Moody’s Corporation	  	$	344.5	  	 	$	(0.1	) 	 	$	(7.0	) 	 	$	337.4	  	 	$	234.4	  	 	$	(0.3	) 	 	$	(4.6	) 	 	$	229.5	  	
					
Earnings per share attributable to Moody’s common shareholders	  	 				 				 				 				
Basic	  	$	1.51	  	 	$	—  	  	 	$	(0.03	) 	 	$	1.48	  	 	$	0.99	  	 	$	—  	  	 	$	(0.02	) 	 	$	0.97	  	
Diluted	  	$	1.49	  	 	$	—  	  	 	$	(0.03	) 	 	$	1.46	  	 	$	0.99	  	 	$	—  	  	 	$	(0.02	) 	 	$	0.97	  	
 
(a)	To exclude minor adjustments related to both the 2009 and 2007 restructuring charges. Additionally, includes the tax impacts of the aforementioned adjustments.	
(b)	To exclude benefits related to the resolution of certain Legacy Tax Matters.	
 
47

Table of Contents
 Liquidity and Capital Resources
Cash Flow
The Company is currently financing its operations, capital expenditures and share repurchases from operating cash flow. The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes:

 	  	Six Months Ended
June 30,	 	 	$ Change
Favorable
(Unfavorable)	 	
 	  	2011	 	 	2010	 	 			
Net cash provided by operating activities	  	$	445.9	  	 	$	304.0	  	 	$	141.9	  	
Net cash used in investing activities	  	$	(40.4	) 	 	$	(33.3	) 	 	$	(7.1	) 	
Net cash used in financing activities	  	$	(153.1	) 	 	$	(223.8	) 	 	$	70.7	  	
Net cash provided by operating activities
The $141.9 million increase in net cash flows provided by operating activities resulted from an increase in net income of $110.5 million, which was further impacted by the following changes in assets and liabilities:
 
 	•	 	An approximate $49 million increase in cash flows reflecting lower prepaid tax balances in 2011 resulting from both a refund received from the Internal Revenue Service in 2011 for tax overpayments made in 2010 as well as the application of a portion of the aforementioned overpayments to 2011 quarterly estimated tax payments;	
 
 	•	 	An approximate $42 million increase in cash flows due to an approximate $36 million unfavorable change in net deferred tax assets during the first six months of 2010 compared to an approximate $6 million favorable change in the first six months of 2011;	
 
 	•	 	An approximate $30 million decrease in cash flows primarily reflecting higher incentive compensation payments made in 2011 compared to the prior year. The higher payouts in 2011 reflect greater achievement against targeted results in 2010 as compared to achievement against targets in 2009. Additionally, the decrease reflects a profit sharing contribution paid to eligible employees of the Company in 2011 which was based on the Company’s diluted EPS growth from 2009 to 2010. There was no such contribution made in 2010;	
 
 	•	 	A decrease in cash flow of approximately $16 million relating to contributions and payments made by the Company to its funded and unfunded U.S. DBPPs and its U.S. other post-retirement plans in 2011;	
 
 	•	 	A $34.6 million reduction in cash flow due to changes in year-to date accounts receivable balances from December 31, 2009 to June 30, 2010 compared to the same period in 2011. The higher accounts receivable balances in 2011 primarily reflect strong growth in rated issuance volumes within CFG compared to the prior year. Approximately 26% and 27% of the Company’s accounts receivable balance at June 30, 2011 and 2010, respectively, represent unbilled receivables which primarily reflect certain annual fees in MIS which are invoiced in arrears;	
 
 	•	 	The remaining increase in cash flows from operations of approximately $21 million is due to changes in various other assets and liabilities.	
Net cash used in investing activities
 
 	•	 	The cash paid for acquisitions in 2011 represents approximately $4 million for an immaterial acquisition within the MA segment as well as an approximate $3 million payment to a shareholder with a non-controlling interest to	
 
48

Table of Contents

 	acquire a 16% additional direct equity investment in KIS Pricing. The additional investment in KIS Pricing adds to the Company’s existing indirect ownership of this entity through its controlling stake in KIS.	
Net cash used in financing activities
The $70.7 million decrease in cash used in financing activities was attributed to:
 
 	•	 	An $87.2 million decrease in net repayments on short-term borrowings under the Company’s CP program. The Company had paid all outstanding CP Notes during 2010 and has no borrowings outstanding under the CP program or the revolving credit facility as of June 30, 2011;	
 
 	•	 	An increase of $20.8 million in net proceeds for stock-based compensation plans reflecting a higher volume of stock option exercises in 2011 compared to 2010;	
Partially offset by:
 
 	•	 	A $27.7 million increase in treasury shares repurchased compared to 2010;	
 
 	•	 	Higher dividends paid of $8.7 million due to an increase in the March 2011 payout reflecting an increase in the Company’s quarterly dividend from 10.5 cents to 11.5 cents per share of Moody’s common stock as well as an increase from 11.5 cents per share to 14 cents per share for the June 2011 payout.	
Cash held in non-U.S. jurisdictions
The Company’s aggregate cash and cash equivalents of $938.5 million at June 30, 2011 consisted of approximately $631 million located outside of the U.S. The cash held in the Company’s non-U.S. operations contains approximately $519 million in entities whose undistributed earnings are indefinitely reinvested in the Company’s foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely reinvested earnings. A future distribution or change in assertion regarding reinvestment by the foreign subsidiaries relating to these earnings could result in additional tax liability to the Company. It is not practicable to determine the amount of the potential additional tax liability due to complexities in the tax laws and in the hypothetical calculations that would have to be made. The Company manages both its U.S and international cash flow to maintain sufficient liquidity in all regions to effectively meet its operating needs.
Future Cash Requirements
The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating cash flow for the next twelve months. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources.
The Company remains committed to using its strong cash flow to create value for shareholders by investing in growing areas of the business, reinvesting in ratings quality initiatives, making selective acquisitions in related businesses, repurchasing stock and paying a dividend, all in the manner consistent with maintaining sufficient liquidity. In July of 2011, the Board of Directors of the Company declared a quarterly dividend of $0.14 per share of Moody’s common stock, payable on September 10, 2011 to shareholders of a record at the close of business on August 20, 2011. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board. Additionally, the Company expects to resume share repurchases in the second half of 2011 subject to available cash flow, market conditions and other capital allocation decisions. The Company did not repurchase shares in the second quarter of 2011 and repurchased $127.6 million of shares in the first quarter of 2011. As of June 30, 2011, Moody’s had $1.1 billion of share repurchase authority remaining under its current program, which does not have an established expiration.
 
49

Table of Contents
During the third quarter of 2010, the Company issued $500 million of 2010 Senior Notes due in September 2020, the proceeds of which were or will be used for general corporate purposes, including the redemption and repayment of short-term or long-term borrowings; working capital needs; capital expenditures; acquisitions of or investments in businesses or assets; and purchases of the Company’s common stock under its authorized stock repurchase program. At June 30, 2011, Moody’s had $1.2 billion of outstanding debt with $1.0 billion of additional capacity available. Principal payments on the 2008 Term Loan commenced in September 2010 and will continue through its maturity in accordance with the schedule of payments outlined in the “Indebtedness” section of this MD&A below.
On February 6, 2008, the Company entered into a 17.5 year operating lease agreement to occupy six floors of an office tower located in the Canary Wharf district of London, England. The total base rent of the Canary Wharf Lease over its 17.5-year term is approximately 134 million GBP, and the Company began making base rent payments in 2011. In addition to the base rent payments the Company will be obligated to pay certain customary amounts for its share of operating expenses and tax obligations. The total remaining lease payments as of June 30, 2011 are approximately 133 million GBP, of which approximately 6 million GBP will be paid in the next twelve months.
On October 20, 2006, the Company entered into an operating lease agreement with 7 World Trade Center, LLC for 589,945 square-feet of an office building located at 7WTC at 250 Greenwich Street, New York, New York, which is serving as Moody’s headquarters. The 7WTC Lease has an initial term of 21 years with a total of 20 years of renewal options. The total base rent of 7WTC Lease over its initial 21-year term is approximately $536 million including rent credits from the World Trade Center Rent Reduction Program promulgated by the Empire State Development Corporation. On March 28, 2007, the 7WTC lease agreement was amended for the Company to lease an additional 78,568 square-feet at 7WTC. The additional base rent is approximately $106 million over a 20-year term. The total remaining lease payments as of June 30, 2011, including the aforementioned rent credits, are approximately $545 million, of which approximately $27 million will be paid during the next twelve months.
During the year ended December 31, 2011, the Company anticipates making payments of $8.9 million related to its unfunded pension  plan and $0.4 million related to its other-post retirement plans.
Indebtedness
The following table summarizes total indebtedness:

 	  	June 30,
2011	 	 	December 31,
2010	 	
2007 Facility	  	$	—  	  	 	$	—  	  	
Commercial paper	  	 	—  	  	 	 	—  	  	
Notes Payable:	  				 				
Series 2005-1 Notes, due 2015, including fair value of interest rate swap of $3.4 million at 2011 and $(3.7) million at 2010	  	 	303.4	  	 	 	296.3	  	
Series 2007-1 Notes due 2017	  	 	300.0	  	 	 	300.0	  	
2010 Senior Notes, due 2020, net of unamortized discount of $2.9 million and $3.0 million in 2011 and 2010, respectively	  	 	497.1	  	 	 	497.0	  	
2008 Term Loan, various payments through 2013	  	 	142.5	  	 	 	146.3	  	

Total debt	  	 	1,243.0	  	 	 	1,239.6	  	
Current portion	  	 	(15.0	) 	 	 	(11.3	) 	

Total long-term debt	  	$	1,228.0	  	 	$	1,228.3	  	

50

Table of Contents
2007 Facility
On September 28, 2007, the Company entered into a $1.0 billion five-year senior, unsecured revolving credit facility, expiring in September 2012. The 2007 Facility will serve, in part, to support the Company’s CP Program described below. Interest on borrowings is payable at rates that are based on LIBOR plus a premium that can range from 16.0 to 40.0 basis points of the outstanding borrowing amount depending on the Debt/EBITDA ratio. The Company also pays quarterly facility fees, regardless of borrowing activity under the 2007 Facility. The quarterly fees for the 2007 Facility can range from 4.0 to 10.0 basis points per annum of the facility amount, depending on the Company’s Debt/EBITDA ratio. The Company also pays a utilization fee of 5.0 basis points on borrowings outstanding when the aggregate amount outstanding exceeds 50% of the total facility. The 2007 Facility contains certain covenants that, among other things, restrict the ability of the Company and certain of its subsidiaries, without the approval of the lenders, to engage in mergers, consolidations, and asset sales, transactions with affiliates and sale-leaseback transactions or to incur liens, as defined in the related agreement. The 2007 Facility also contains financial covenants that, among other things, require the Company to maintain a Debt/EBITDA ratio of not more than 4.0 to 1.0 at the end of any fiscal quarter.
Commercial Paper
On October 3, 2007, the Company entered into a private placement commercial paper program under which the Company may issue CP notes up to a maximum amount of $1.0 billion. Amounts available under the CP Program may be re-borrowed. The CP Program is supported by the Company’s 2007 Facility. The maturities of the CP Notes will vary, but may not exceed 397 days from the date of issue. The CP Notes are sold at a discount from par or, alternatively, sold at par and bear interest at rates that will vary based upon market conditions at the time of issuance. The rates of interest will depend on whether the CP Notes will be a fixed or floating rate. The interest on a floating rate may be based on the following: (a) certificate of deposit rate; (b) commercial paper rate; (c) federal funds rate; (d) LIBOR; (e) prime rate; (f) Treasury rate; or (g) such other base rate as may be specified in a supplement to the private placement agreement. The CP Program contains certain events of default including, among other things: non-payment of principal, interest or fees; entrance into any form of moratorium; and bankruptcy and insolvency events, subject in certain instances to cure periods.
Notes Payable
On August 19, 2010, the Company issued $500 million aggregate principal amount of unsecured notes in a public offering. The 2010 Senior Notes bear interest at a fixed rate of 5.50% and mature on September 1, 2020. Interest on the 2010 Senior Notes will be due semi-annually on September 1 and March 1 of each year, commencing March 1, 2011. The Company may prepay the 2010 Senior Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a Make-Whole Amount. Additionally, at the option of the holders of the notes, the Company may be required to purchase all or a portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the Indenture, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Indenture contains covenants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create liens and enter into sale and leaseback transactions. In addition, the Indenture contains a covenant that limits the ability of the Company to consolidate or merge with another entity or to sell all or substantially all of its assets to another entity. The Indenture contains customary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries fail to pay the principal of any indebtedness (as defined in the Indenture) when due at maturity in an aggregate amount of $50 million or more, or a default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’ indebtedness in an aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default under the Indenture, the notes may become immediately due and payable either automatically or by the vote of the holders of more than 25% of the aggregate principal amount of all of the notes then outstanding.
 
51

Table of Contents
On September 7, 2007, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal amount of its 6.06% Series 2007-1 Senior Unsecured Notes due 2017 pursuant to the 2007 Agreement. The Series 2007-1 Notes have a ten-year term and bear interest at an annual rate of 6.06%, payable semi-annually on March 7 and September 7. Under the terms of the 2007 Agreement, the Company may, from time to time within five years, in its sole discretion, issue additional series of senior notes in an aggregate principal amount of up to $500.0 million pursuant to one or more supplements to the 2007 Agreement. The Company may prepay the Series 2007-1 Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a Make Whole Amount. The 2007 Agreement contains covenants that limit the ability of the Company, and certain of its subsidiaries to, among other things: enter into transactions with affiliates, dispose of assets, incur or create liens, enter into any sale-leaseback transactions, or merge with any other corporation or convey, transfer or lease substantially all of its assets. The Company must also not permit its Debt/EBITDA ratio to exceed 4.0 to 1.0 at the end of any fiscal quarter.
On September 30, 2005, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal amount of its Series 2005-1 Senior Unsecured Notes due 2015 pursuant to the 2005 Agreement. The Series 2005-1 Notes have a ten-year term and bear interest at an annual rate of 4.98%, payable semi-annually on March 30 and September 30. Proceeds from the sale of the Series 2005-1 Notes were used to refinance $300.0 million aggregate principal amount of the Company’s outstanding 7.61% senior notes which matured on September 30, 2005. In the event that Moody’s pays all, or part, of the Series 2005-1 Notes in advance of their maturity, such prepayment will be subject to a Make Whole Amount. The Series 2005-1 Notes are subject to certain covenants that, among other things, restrict the ability of the Company and certain of its subsidiaries, without the approval of the lenders, to engage in mergers, consolidations, and asset sales, transactions with affiliates and sale-leaseback transactions or to incur liens, as defined in the related agreements.
2008 Term Loan
On May 7, 2008, Moody’s entered into a five-year, $150.0 million senior unsecured term loan with several lenders. Proceeds from the loan were used to pay off a portion of the CP outstanding. Interest on borrowings under the 2008 Term Loan is payable quarterly at rates that are based on LIBOR plus a margin that can range from 125 basis points to 175 basis points depending on the Company’s Debt/EBITDA ratio. The outstanding borrowings shall amortize beginning in 2010 in accordance with the schedule of payments set forth in the 2008 Term Loan outlined in the table below.
The 2008 Term Loan contains restrictive covenants that, among other things, restrict the ability of the Company to engage or to permit its subsidiaries to engage in mergers, consolidations, asset sales, transactions with affiliates and sale-leaseback transactions or to incur, or permit its subsidiaries to incur, liens, in each case, subject to certain exceptions and limitations. The 2008 Term Loan also limits the amount of debt that subsidiaries of the Company may incur. In addition, the 2008 Term Loan contains a financial covenant that requires the Company to maintain a Debt/EBITDA ratio of not more than 4.0 to 1.0 at the end of any fiscal quarter.
The principal payments due on the Company’s long-term borrowings for each of the next five years are presented in the table below:

Year Ended December 31,	  	2008 Term Loan	 	  	Series 2005-1 Notes	 	  	Total	 	
2011 (after June 30,)	  	$	7.5	  	  	$	—  	  	  	$	7.5	  	
2012	  	 	71.2	  	  	 	—  	  	  	 	71.2	  	
2013	  	 	63.8	  	  	 	—  	  	  	 	63.8	  	
2014	  	 	—  	  	  	 	—  	  	  	 	—  	  	
2015	  	 	—  	  	  	 	300.0	  	  	 	300.0	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	142.5	  	  	$	300.0	  	  	$	442.5	  	

52

Table of Contents
In the fourth quarter of 2010, the Company entered into interest rate swaps with a total notional amount of $300 million which converted the fixed rate of interest on the Series 2005-1 Notes to a floating LIBOR-based interest rate. Also, on May 7, 2008, the Company entered into interest rate swaps with a total notional amount of $150 million to protect against fluctuations in the LIBOR-based variable interest rate on the 2008 Term Loan. Both of these interest rate swaps are more fully discussed in Note 6 to the condensed consolidated financial statements.
At June 30, 2011, the Company was in compliance with all covenants contained within all of the debt agreements. In addition to the covenants described above, the 2007 Facility, the 2005 Agreement, the 2007 Agreement, the 2010 Senior Notes and the 2008 Term Loan contain cross default provisions. These provisions state that default under one of the aforementioned debt instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of June 30, 2011, there were no such cross defaults.
Interest (expense) income, net
The following table summarizes the components of interest as presented in the consolidated statements of operations:

 	  	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	  	2011	 	 	2010	 	 	2011	 	 	2010	 	
Expense on borrowings	  	$	(16.3	) 	 	$	(10.6	) 	 	$	(32.7	) 	 	$	(21.4	) 	
Income	  	 	1.3	  	 	 	0.5	  	 	 	2.3	  	 	 	1.1	  	
Expense on UTBs and other tax related liabilities	  	 	(3.4	) 	 	 	(1.6	) 	 	 	(7.0	) 	 	 	(5.1	) 	
Capitalized	  	 	0.6	  	 	 	0.2	  	 	 	1.4	  	 	 	0.6	  	
Legacy Tax (a)	  	 	3.7	  	 	 	2.5	  	 	 	3.7	  	 	 	2.5	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest expense, net	  	$	(14.1	) 	 	$	(9.0	) 	 	$	(32.3	) 	 	$	(22.3	) 	

(a)	The amounts in both years represent interest income related to the favorable settlement of Legacy Tax Matters, as further discussed in Note 12 to the condensed consolidated financial statements.	
The Company’s long-term debt, including the current portion, is recorded at cost except for the Series 2005-1 Notes which are carried at cost adjusted for the fair value of an interest rate swap used to hedge the fair value of the note. The fair value and carrying value of the Company’s long-term debt as of June 30, 2011 and December 31, 2010 is as follows:

 	  	June 30, 2011	 	  	December 31, 2010	 	
 	  	Carrying
Amount	 	  	Estimated Fair
Value	 	  	Carrying
Amount	 	  	Estimated Fair
Value	 	
Series 2005-1 Notes	  	$	303.4	  	  	$	323.6	  	  	$	296.3	  	  	$	310.6	  	
Series 2007-1 Notes	  	 	300.0	  	  	 	338.6	  	  	 	300.0	  	  	 	321.3	  	
2010 Senior Notes	  	 	497.1	  	  	 	530.9	  	  	 	497.0	  	  	 	492.1	  	
2008 Term Loan	  	 	142.5	  	  	 	142.5	  	  	 	146.3	  	  	 	146.3	  	

Total	  	$	1,243.0	  	  	$	1,335.6	  	  	$	1,239.6	  	  	$	1,270.3	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The fair value of the Company’s 2010 Senior Notes is based on quoted market prices. The fair value of the remaining long-term debt, which is not publicly traded, is estimated using discounted cash flows with inputs based on prevailing interest rates available to the Company for borrowings with similar maturities.
 
53

Table of Contents
Management may consider pursuing additional long-term financing when it is appropriate in light of case requirements for operations, share repurchases and other strategic opportunities, which would result in higher financing costs.
Off-Balance Sheet Arrangements
At June 30, 2011, Moody’s did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as special purpose of variable interest entities where Moody’s is the primary beneficiary, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, Moody’s is not exposed to any  financing, liquidity market or credit risk that could arise if it had engaged in such relationships.
Contractual Obligations
The following table presents payments due under the Company’s contractual obligations as of June 30, 2011:

 	  	 	 	  	Payments Due by Period	 	
(in millions)	  	Total	 	  	Less Than 1
Year	 	  	1 - 3 Years	 	  	3 - 5 Years	 	  	Over 5 Years	 	
Indebtedness (1)	  	$	1,679.1	  	  	$	77.3	  	  	$	243.3	  	  	$	407.4	  	  	$	951.1	  	
Operating lease obligations (2)	  	 	868.6	  	  	 	66.7	  	  	 	132.3	  	  	 	107.3	  	  	 	562.3	  	
Purchase obligations	  	 	114.4	  	  	 	45.3	  	  	 	55.2	  	  	 	13.9	  	  	 	—  	  	
Acquisition costs (3)	  	 	2.6	  	  	 	—  	  	  	 	—  	  	  	 	2.6	  	  	 	—  	  	
Pension obligations (4)	  	 	73.0	  	  	 	9.6	  	  	 	6.4	  	  	 	8.5	  	  	 	48.5	  	

Total (5)	  	$	2,737.7	  	  	$	198.9	  	  	$	437.2	  	  	$	539.7	  	  	$	1,561.9	  	

(1)	Reflects principal payments, related interest and applicable fees due on the 2008 Term Loan, the Series 2005-1 Notes, the Series 2007-1 Notes, the 2010 Senior Notes, and the 2007 Facility, as described in Note 11 to the condensed consolidated financial statements.	
(2)	Primarily reflects real estate operating leases.	
(3)	Reflects a $2.6 million contingent cash payment related to the November 18, 2010 acquisition of CSI Global Education, Inc. The cash payment is dependent upon the achievement of a certain contractual milestone by January 2016 as discussed in Note 7 to the condensed consolidated financial statements.	
(4)	Reflects projected benefit payments for the next ten years relating to the Company’s U.S. unfunded Post-Retirement Benefit Plans described in Note 10 to the condensed consolidated financial statements.	
(5)	The table above does not include the Company’s net long-term tax liabilities of $237.6 million relating to UTP and Legacy Tax Matters, since the expected cash outflow of such amounts be period cannot be reasonably estimated.	
Dividends
On July 11, 2011, the Board approved the declaration of a quarterly dividend of $0.14 per share of Moody’s common stock, payable on September 10, 2011 to shareholders of record at the close of business on August 20, 2011.
 2011 Outlook
Moody’s outlook for 2011 is based on assumptions about many macroeconomic and capital market factors, including interest rates, corporate profitability and business investment spending, merger and acquisition activity, and consumer borrowing and securitization. There is an important degree of uncertainty surrounding these assumptions and, if actual conditions differ from these assumptions, Moody’s results for the year may differ materially from the current outlook.
 
54

Table of Contents
Moody’s is revising its guidance for the full year 2011 to reflect stronger than expected second quarter performance, partially offset by expectations for more challenging debt issuance conditions in the U.S. and Europe as compared to the first half of the year. Moody’s guidance assumes foreign currency translation at end-of-quarter exchange rates.
For Moody’s overall, the Company now expects full year 2011 revenue to grow in the low-teens percent range. Revenue expectations for certain areas have changed based on conditions specific to those businesses and geographies. Full year 2011 expenses are now projected to increase in the low-double-digit percent range. Full year 2011 operating margin is still projected to be between 38% and 40%, reflecting our expectation that strong first half performance will be offset by planned expense increases and lower revenue in the second half of 2011 compared to the first half. The effective tax rate is now expected to be approximately 33 percent. Share repurchase is expected to resume in the second half of 2011, subject to available cash flow and other capital allocation decisions. The Company now expects diluted earnings per share for full year 2011 in the range of $2.38 to $2.48.
For the global MIS business, revenue for full year 2011 is now expected to increase in the low-teens percent range. Within the U.S., MIS revenue is now expected to increase in the high single-digit percent range, while non-U.S. revenue is now projected to grow in the low-twenties percent range. Corporate finance revenue is now forecast to increase in the mid-twenties percent range. Revenue from structured finance and financial institutions are each now forecast to increase in the high-single-digit percent range, while public, project and infrastructure finance revenue is now expected to be about flat with the prior year.
For Moody’s Analytics, full year 2011 revenue is now expected to increase in the low-double-digit percent range. Revenue growth is still projected in the mid-single-digit percent range for research, data and analytics and in the low- to mid-single-digit percent range for risk management software. Professional services revenue is still projected to more than double, primarily reflecting revenue from the late 2010 acquisition of CSI Global Education and very strong performance in the risk management advisory business. MA revenue is now expected to increase in the low-double-digit percent range in the U.S., and is still expected to grow in the low-double-digit percent range outside the U.S.
 Recently Issued Accounting Pronouncements
In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements”. The new standard requires disclosure regarding transfers in and out of Level 1 and Level 2 classifications within the fair value hierarchy as well as requiring further detail of activity within the Level 3 category of the fair value hierarchy. The new standard also requires disclosures regarding the fair value for each class of assets and liabilities, which is a subset of assets or liabilities within a line item in a company’s balance sheet. Additionally, the standard will require further disclosures surrounding inputs and valuation techniques used in fair value measurements. The new disclosures and clarifications of existing disclosures set forth in this ASU are effective for interim and annual reporting periods beginning after December 15, 2009, except for the additional disclosures regarding Level 3 fair value measurements, for which the effective date is for fiscal years and interim periods within those years beginning after December 15, 2010. The Company has fully adopted all provisions of this ASU as of January 1, 2011 and the implementation did not have a material impact on the Company’s consolidated financial statements.
In December 2010, the FASB issued ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations”. The objective of this ASU is to address diversity in practice regarding proforma disclosures for revenue and earnings of the acquired entity. The amendments in this ASU specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this ASU also expand the supplemental pro forma disclosures under ASC Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this ASU are effective for fiscal years beginning on or after December 15, 2010. The Company will conform to the disclosure requirements set forth in this ASU for any future material business combinations.
 
55

Table of Contents
In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The objective of this ASU is to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments in this ASU change the wording used to describe current requirements in U.S. GAAP for measuring fair value and for financial statement disclosure about fair value measurements. Some of the amendments in the ASU clarify the FASB’s intent or change a particular principle or requirement pertaining to the application of existing fair value measurement requirements or for disclosing information about fair value measurements. The amendments in this ASU are required to be applied prospectively and are effective for fiscal years beginning after December 15, 2011 and early adoption is not permitted. The Company is currently evaluating the potential impact, if any, of the implementation of this ASU on its consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company intends to conform to the new presentation required in this ASU beginning with its Form 10Q for the three months ended March  31, 2012.
 Contingencies
From time to time, Moody’s is involved in legal and tax proceedings, governmental investigations, claims and litigation that are incidental to the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other pending matters as it may determine to be appropriate.
Following the events in the U.S. subprime residential mortgage sector and the credit markets more broadly over the last several years, MIS and other credit rating agencies are the subject of intense scrutiny, increased regulation, ongoing investigation, and civil litigation. Legislative, regulatory and enforcement entities around the world are considering additional legislation, regulation and enforcement actions, including with respect to MIS’s compliance with newly imposed regulatory standards. Moody’s has received subpoenas and inquiries from states attorneys general and other governmental authorities and is responding to such investigations and inquiries.
In addition, the Company is facing litigation from market participants relating to the performance of MIS rated securities. Although Moody’s in the normal course experiences such litigation, the volume and cost of defending such litigation has significantly increased following the events in the U.S. subprime residential mortgage sector and the credit markets more broadly over the last several years.
On June 27, 2008, the Brockton Contributory Retirement System, a purported shareholder of the Company’s securities, filed a purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York. The plaintiff asserts various causes of action relating to the named defendants’ oversight of MIS’s ratings of RMBS and constant-proportion debt obligations, and their participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. The plaintiff seeks compensatory damages, restitution, disgorgement of profits and other equitable relief. On July 2, 2008, Thomas R. Flynn, a purported shareholder of the Company’s securities, filed a similar purported shareholder derivative complaint on behalf of the Company against its directors and certain senior officers, and the Company as nominal defendant, in the Supreme Court of the State of New York, County of New York, asserting similar claims and seeking the same relief. The cases have been consolidated and plaintiffs filed an amended consolidated
 
56

Table of Contents
complaint in November 2008. The Company removed the consolidated action to the United States District Court for the Southern District of New York in December 2008. In January 2009, the plaintiffs moved to remand the case to the Supreme Court of the State of New York, which the Company opposed. On February 23, 2010, the court issued an opinion remanding the case to the Supreme Court of New York. On October 30, 2008, the Louisiana Municipal Police Employees Retirement System, a purported shareholder of the Company’s securities, also filed a shareholder derivative complaint on behalf of the Company against its directors and certain officers, and the Company as a nominal defendant, in the U.S. District Court for the Southern District of New York. This complaint also asserts various causes of action relating to the Company’s ratings of RMBS, CDO and constant-proportion debt obligations, and named defendants’ participation in the alleged public dissemination of false and misleading information about MIS’s ratings practices and/or a failure to implement internal procedures and controls to prevent the alleged wrongdoing. On December 9, 2008, Rena Nadoff, a purported shareholder of the Company, filed a shareholder derivative complaint on behalf of the Company against its directors and its CEO, and the Company as a nominal defendant, in the Supreme Court of the State of New York. The complaint asserts a claim for breach of fiduciary duty in connection with alleged overrating of asset-backed securities and underrating of municipal securities. On October 20, 2009, the Company moved to dismiss or stay the action in favor of related federal litigation. On January 26, 2010, the court entered a stipulation and order, submitted jointly by the parties, staying the Nadoff litigation pending coordination and prosecution of similar claims in the above and below described federal derivative actions. On July 6, 2009, W. A. Sokolowski, a purported shareholder of the Company, filed a purported shareholder derivative complaint on behalf of the Company against its directors and current and former officers, and the Company as a nominal defendant, in the United States District Court for the Southern District of New York. The complaint asserts claims relating to alleged mismanagement of the Company’s processes for rating structured finance transactions, alleged insider trading and causing the Company to buy back its own stock at artificially inflated prices.
Two purported class action complaints have been filed by purported purchasers of the Company’s securities against the Company and certain of its senior officers, asserting claims under the federal securities laws. The first was filed by Raphael Nach in the U.S. District Court for the Northern District of Illinois on July 19, 2007. The second was filed by Teamsters Local 282 Pension Trust Fund in the U.S. District Court for the Southern District of New York on September 26, 2007. Both actions have been consolidated into a single proceeding entitled In re Moody’s Corporation Securities Litigation in the U.S. District Court for the Southern District of New York. On June 27, 2008, a consolidated amended complaint was filed, purportedly on behalf of all purchasers of the Company’s securities during the period February 3, 2006 through October 24, 2007. Plaintiffs allege that the defendants issued false and/or misleading statements concerning the Company’s business conduct, business prospects, business conditions and financial results relating primarily to MIS’s ratings of structured finance products including RMBS, CDO and constant-proportion debt obligations. The plaintiffs seek an unspecified amount of compensatory damages and their reasonable costs and expenses incurred in connection with the case. The Company moved for dismissal of the consolidated amended complaint in September 2008. On February 23, 2009, the court issued an opinion dismissing certain claims and sustaining others. On January 22, 2010, plaintiffs moved to certify a class of individuals who purchased Moody’s Corporation common stock between February 3, 2006 and October 24, 2007, which the Company opposed. On March 31, 2011, the court issued an opinion denying plaintiffs’ motion to certify the proposed class. On April 14, 2011, plaintiffs filed a petition in the United States Court of Appeals for the Second Circuit seeking discretionary permission to appeal the decision. The Company filed its response to the petition on April 25, 2011. On July 20, 2011, the Second Circuit issued an order denying plaintiffs’ petition for leave to appeal.
For claims, litigation and proceedings not related to income taxes, where it is both probable that a liability is expected to be incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate. In other instances, because of uncertainties related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, enforcement and similar matters and contingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of
 
57

Table of Contents
such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve the pending matters referred to above progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the inherent uncertainties involved in these matters, the large or indeterminate damages sought in some of them and the novel theories of law asserted, an estimate of the range of possible losses cannot be made at this time. For income tax matters, the Company employs the prescribed methodology of Topic 740 of the ASC which requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
Legacy Tax Matters
Moody’s continues to have exposure to potential liabilities arising from Legacy Tax Matters. As of June 30, 2011, Moody’s has recorded liabilities for Legacy Tax Matters totaling $52.4 million. This includes liabilities and accrued interest due to New D&B arising from the 2000 Distribution Agreement. It is possible that the ultimate liability for Legacy Tax Matters could be greater than the liabilities recorded by the Company, which could result in additional charges that may be material to Moody’s future reported results, financial position and cash flows.
The following summary of the relationships among Moody’s, New D&B and their predecessor entities is important in understanding the Company’s exposure to the Legacy Tax Matters.
In November 1996, The Dun & Bradstreet Corporation separated into three separate public companies: The Dun & Bradstreet Corporation, ACNielsen Corporation and Cognizant Corporation. In June 1998, The Dun & Bradstreet Corporation separated into two separate public companies: Old D&B and R.H. Donnelley Corporation. During 1998, Cognizant separated into two separate public companies: IMS Health Incorporated and Nielsen Media Research, Inc. In September 2000, Old D&B separated into two separate public companies: New D&B and Moody’s.
Old D&B and its predecessors entered into global tax planning initiatives in the normal course of business. These initiatives are subject to normal review by tax authorities. Old D&B and its predecessors also entered into a series of agreements covering the sharing of any liabilities for payment of taxes, penalties and interest resulting from unfavorable IRS determinations on certain tax matters, and certain other potential tax liabilities, all as described in such agreements. Further, in connection with the 2000 Distribution and pursuant to the terms of the 2000 Distribution Agreement, New D&B and Moody’s have agreed on the financial responsibility for any potential liabilities related to these Legacy Tax Matters.
At the time of the 2000 Distribution, New D&B paid Moody’s $55.0 million for 50% of certain anticipated future tax benefits through 2012. In the event that these tax benefits are not claimed or otherwise not realized by New D&B, or there is an IRS audit of New D&B impacting these tax benefits, Moody’s would be required to repay to New D&B an amount equal to the discounted value of its share of the related future tax benefits as well as its share of any tax liability incurred by New D&B. In June 2011, the statute of limitations for New D&B relating to the 2004 tax year expired. As a result, in the second quarter of 2011, Moody’s recorded a reduction of accrued interest expense of $2.8 million ($1.7 million, net of tax) and an increase in other non-operating income of $6.4 million, relating to amounts due to New D&B. As of June 30, 2011, Moody’s liability with respect to this matter totaled $50.4 million.
Additionally, in April 2011, Moody’s received a refund of $0.9 million ($0.6 million, net of tax) for interest assessed related to pre-spinoff tax years. Coupled with the $6.4 million noted above (and related interest of $1.7 million), net legacy tax benefits were $8.7 million in the three and six months ended June 30, 2011, of which $7 million was deemed unusual in nature.
 
58

Table of Contents
In 2005, settlement agreements were executed with the IRS with respect to certain Legacy Tax Matters related to the years 1989-1990 and 1993-1996. With respect to these settlements, Moody’s and New D&B believed that IMS Health and NMR did not pay their full share of the liability to the IRS under the terms of the applicable separation agreements between the parties. Moody’s and New D&B subsequently paid these amounts to the IRS and commenced arbitration proceedings against IMS Health and NMR to resolve this dispute. Pursuant to these arbitration proceedings, the Company received $10.8 million ($6.5 million as a reduction of interest expense and $4.3 million as a reduction of tax expense) in 2009. The aforementioned settlement payment resulted in net income benefits of $8.2 million in 2009. The Company continues to carry a $2 million liability for this matter.
In 2006, New D&B and Moody’s each deposited $39.8 million with the IRS in order to stop the accrual of statutory interest on potential tax deficiencies with respect to the 1997 through 2002 tax years. In 2007, New D&B and Moody’s requested a return of that deposit. The IRS applied a portion of the deposit in satisfaction of an assessed deficiency and returned the balance to the Company. Moody’s subsequently pursued a refund for a portion of the outstanding amount. In May 2010, the IRS refunded $5.2 million to the Company for the 1997 tax year, which included interest of approximately $2.5 million resulting in an after-tax benefit of $4.6 million.
 Regulation
In the U.S., since 1975, MIS has been designated as an NRSRO by the SEC. The SEC first applied the NRSRO designation in that year to CRAs whose credit ratings could be used by broker-dealers for purposes of determining their net capital requirements.
In September 2006, the Credit Rating Agency Reform Act of 2006 was enacted, which created a voluntary registration process for rating agencies wishing to be designated as NRSROs. The Reform Act provides the SEC with authority to oversee NRSROs, while prohibiting the SEC from regulating the substance of credit ratings or the procedures and methodologies by which any NRSRO determines credit ratings. In June 2007, the SEC published its first set of rules implementing the Reform Act. These rules address the NRSRO application and registration process, as well as oversight rules related to recordkeeping, financial reporting, prevention of misuse of material non-public information, conflicts of interest, and prohibited acts and practices. In February 2009, the SEC published a second set of rules applicable to NRSROs, the majority of which provide requirements for managing conflicts of interest, enhancing record keeping requirements, and improving transparency of ratings performance and methodologies. In November 2009, the SEC published a third set of final rules for NRSROs. These rules, which came into force in June 2010, require additional disclosure of rating histories and prohibit NRSROs from rating structured finance products unless the issuer makes the same information accessible to all NRSROs that it provides to an NRSRO hired to determine the rating. In 2009, the SEC also determined to eliminate references to NRSRO ratings in certain regulations, retain some references and seek additional comments on other references. The SEC’s rule-making in this area is ongoing, and in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act), the Company expects the SEC to continue to eliminate regulatory references to NRSRO ratings.
MIS has been registered as an NRSRO with the SEC under the Exchange Act as of September 2007, and as of that time MIS has been subject to the SEC’s oversight rules. As required by the rules, MIS has made its Form NRSRO Initial Application, its Annual Certification of Form NRSRO, and any associated updates publicly available by posting them on the Regulatory Affairs page of the Company’s website.
The Financial Reform Act was signed into law on July 21, 2010. The subtitle of the Financial Reform Act that addresses the credit rating agency industry is Title IX, Subtitle C. This subtitle seeks, among other things, to enhance transparency and accountability in the CRA industry, and to reduce the regulatory reliance on credit ratings. The majority of the provisions of Subtitle C of Title IX of the Financial Reform Act seek to regulate the activities of those CRAs that are registered under the SEC’s regulatory framework for NRSROs. Therefore, these provisions will apply to any CRAs in MIS’s corporate family that fall under the NRSRO regime.
 
59

Table of Contents
Provisions of the Financial Reform Act applicable to NRSROs include, among others:
 
 	•	 	heightened compliance standards, including the adoption of enhanced corporate governance and conflicts of interest policies and procedures, implementation of professional standards for credit analysts and periodic compliance examinations;	
 
 	•	 	increased public disclosures, including disclosure of the ratings process and methodology, factors relied upon in formulating ratings, results of third-party due diligence and accuracy of prior ratings;	
 
 	•	 	replacement of references to credit ratings in certain federal laws with broader references to the “credit-worthiness” of a security;	
 
 	•	 	a mandate that the SEC study the feasibility of establishing a system in which a utility or a self-regulatory organization assigns NRSROs to assign the first credit ratings of structured finance products to address so-called “rating-shopping” by issuers and underwriters of structured financial products; and	
 
 	•	 	rescission of Rule 436(g) under the Securities Act of 1933, which provided NRSROs with an exemption from expert liability under the Securities Act for ratings information included in registration statements. On July 20, 2011, the House Financial Services Committee passed H.R. 1539, which if enacted into law would reinstate Rule 436(g). For this bill to become enacted, however, it would need to be passed by the full House of Representatives and Senate and be signed into law by the President.	
Certain of the above mentioned provisions were effective immediately. These include provisions that potentially impact CRAs’ liability environment. The enhanced regulatory regime for CRAs will increase the costs associated with the operation of a CRA and increase the legal risk associated with the issuance of credit ratings. Moreover, it is possible that the number of legal proceedings, especially as related to future ratings, may increase materially, and the potential exposure of CRAs thereunder may also increase. It is possible that implementing changes to the Company’s operations to address the changed liability environment may result in lower revenues and/or increased expenses and may significantly change the manner in which the Company conducts its credit rating business.
The majority of the provisions in the Financial Reform Act as it pertains to CRAs are to be implemented through rule-making by the SEC and other regulatory authorities. The SEC has updated the published schedule for its rule-making activity over the coming year, and it appears that the majority of the rule-making as it pertains to the CRA industry will be conducted and completed by December 2011. In implementing this schedule, the SEC published a number of proposed rules on the removal of ratings from regulation. It further published proposed rules for NRSROs on May 18th and the deadline for comments is August 8th. This set of proposed rules, once finalized, will implement, for the most part, the Financial Reform Act for the CRA industry. In addition, the SEC has published a request for comment (as required by the Financial Reform Act) to assist it in conducting a study of the feasibility of establishing a system for assigning NRSROs to determine credit ratings for structured finance products. The deadline for comments is September 13, 2011.
One provision that the SEC has already implemented, in accordance with the mandated time-line under the Financial Reform Act, is the elimination of the specific exemption from Regulation Fair Disclosure for information provided by issuers to CRAs, for the purpose of developing a rating. In addition, in January 2011, the SEC adopted a rule, which will come into effect on September 26, 2011, requiring NRSROs to disclose information about the representations and warranties of the structured finance securities they rate. Finally, pursuant to the Financial Reform Act, the SEC has recently published its study reviewing the use of credit ratings in its regulations. On July 26, 2011, the SEC adopted rules that remove references to credit ratings in certain rules, forms and communications made by issuers under securities laws.
 
60

Table of Contents
The bank regulators also have rule making activities in progress, and in October 2010 they closed a comment period requesting views from market participants on alternatives to credit ratings that could be incorporated into banking supervision. MIS and MA both provided comments, and these can be found on the Company’s website.
Finally, as part of the ongoing debate surrounding the financial crisis, in 2010 MIS participated in hearings held by the Senate’s Permanent Subcommittee on Investigations, which is part of the Senate’s Homeland Security and Governmental Affairs Committee, and the Financial Crisis Inquiry Commission. Both the PSI and the FCIC published reports on April 13, 2011 and January 27, 2011, respectively.
Internationally, several regulatory developments have occurred:
The G-8 and the G-20—In November 2008, the Heads of State of the G-20 reached agreement on a wide-ranging set of proposals to better regulate financial systems. Among other things, the G-20 committed to implement oversight of the CRAs, consistent with the strengthened International Organization of Securities Commissions’ Code of Conduct (“IOSCO Code”) (see below) and agreed that, in the medium term, the countries should implement a registration system for CRAs. The G-20 also committed to formulate their regulations and other measures in a consistent manner and recommended that IOSCO review CRAs’ adoption of the standards and mechanisms for monitoring compliance. On April 2, 2009, the G-20 Heads of State meeting was held in London, where the G-20 provided a six-part action plan to address the financial crisis: (1) to restore confidence, growth, and jobs; (2) to repair the financial system to restore lending; (3) to strengthen financial regulation and rebuild trust; (4) to fund and reform international financial institutions to overcome the current crisis and prevent future ones; (5) to promote global trade and investment and reject protectionism; and (6) to build an inclusive, green, and sustainable recovery. The G-20’s plan also contains a number of provisions that are specific to CRAs. In particular, the G-20 member states agreed to extend regulatory oversight to and require registration of CRAs in order to ensure that they adhere to the international code of good practice. On July 10, 2009, the G-8 restated its commitment to implement the G-20’s statement.
In September 2009, the G-20 met in Pittsburgh and developed a progress report on actions to promote global financial regulatory reform. With respect to CRAs, the G-20 acknowledged that stronger oversight regimes for CRAs have been developed in the EU, the U.S. and Japan, and recognized that the development of good practices for due diligence by asset managers investing in structured finance products will result in reduced reliance on credit ratings. The G-20 also expressed concern about the creation of globally inconsistent regulations.
On October 23, 2010, the G-20 Finance Ministers and Central Bank Governors met in Seoul, Korea in preparation for the November 2010 meeting of the G-20 Heads of State. Broadly, the Finance Ministers and Central Bank Governors have agreed to continue to work in cooperation with one another. In advance of this meeting, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) published a report and a statement, respectively with the FSB publishing a more detailed report on October 27, 2010. As pertaining to CRAs, both institutions advocate that governments reduce their reliance on credit ratings in regulation. While both entities acknowledge that the process will take time, they believe that the mechanistic use of ratings by governments should over time be discontinued.
IOSCO—In December 2004, the Technical Committee of IOSCO published its Code of Conduct Fundamentals for CRAs. In May 2008, IOSCO published the revised IOSCO Code. The changes made to the IOSCO Code broadly address greater transparency of methodologies and processes by CRAs. In July 2008, IOSCO also announced that it will monitor the CRAs implementation of the IOSCO Code changes and it will explore the means by which IOSCO members might work together to verify the proper and complete disclosure by CRAs of information required by the IOSCO Code.
On March 12, 2009, IOSCO published its second review of the CRAs implementation of the IOSCO Code. The report noted that seven out of the 21 CRAs reviewed had implemented the IOSCO Code in their own codes of conduct. In particular, MIS was found to have substantially implemented the 2008 revisions to the IOSCO Code. In addition, IOSCO announced the establishment of a new standing committee that will address global issues regarding the CRA industry.
 
61

Table of Contents
MIS has revised its Code of Professional Conduct (fashioned on the IOSCO Code) on several occasions to reflect the changes made to the IOSCO Code and the broader changes in the regulatory environment for CRAs. Beginning in 2006, MIS has annually published a report that describes its implementation of its Code. The MIS Code and implementation reports can be found on the Company’s website.
EU—In April 2009, the European Parliament voted and passed a new regulation (“EU Regulation”) that establishes an oversight regime for the CRA industry in the European Union. The framework for the EU Regulation requires the registration, formal regulation and periodic inspection of CRAs operating in the EU. The EU Regulation also sets out specific requirements for the use of ratings that are produced outside of the EU and used for regulatory purposes in the EU. Among these is a requirement for the relevant competent authority in the EU and the competent authority of the non-EU jurisdiction where that rating has been produced to enter into a cooperation agreement containing provisions related to the exchange of information and the coordination of supervisory activities. MIS has applied for registration under the EU regime. However because we have not yet been formally registered, at this time it is too early to give a more precise assessment of the impact of the EU Regulation on MIS. The Company expects that there will be increases in our operational and compliance costs on a one-time and recurring basis. In addition, the European Securities and Market Authority (ESMA) was established in January 2011, and has direct supervisory responsibility for registered CRAs in the EU as of July 2011. The regulatory framework of the CRA industry continues to be discussed in the European Union. In late 2010, the European Commission published a consultation document on the need for additional measures to supervise the CRA industry and the European Parliament has concluded its debates and modifications on an “Own-Initiative Report” on the topic, although the report has not yet been published. MIS’s response to the Commission’s consultation document can be found on the Company’s website. We expect the Commission to publish its official proposal on further regulation during 2011. Among the issues being debated are the issuer-pay business model, use of ratings in regulation, sovereign ratings, competition and CRAs’ liability environment. It is expected that in the near future the European Commission will publish a proposal for additional regulation that will consider some or all of these topics. Finally, on July 20 th , the European Commission published its preliminary proposal on bank capital, which seeks to implement Basel III (see below). The proposal focuses on three elements: provision on sanctions, effective corporate governance and provisions preventing the overreliance on external credit ratings.
The Basel Committee—In June 2004, the Basel Committee on Banking Supervision published a bank capital adequacy framework, called Basel II, to replace its initial 1988 framework. Under Basel II, ratings assigned by recognized CRAs or external credit assessment institutions, can be used by banks in determining credit risk weights for many of their institutional credit exposures. Recognized ECAIs could be subject to a broader range of oversight. National authorities have begun the ECAI recognition process. MIS has been recognized as an ECAI in several jurisdictions and the recognition process is ongoing in many others. As a result of the current state of the financial markets, the banking authorities of the Basel Committee have been reconsidering the overall framework. Work on the new framework, Basel III, substantially has been completed. It is being implemented in stages, which began in 2010 and are expected to conclude in 2018. Basel III continues to use credit ratings as a tool in bank supervision.
Other legislation and regulation relating to credit rating and research services is being considered by local, national and multinational bodies and this type of activity is likely to continue in the future. In addition, in certain countries, governments may provide financial or other support to locally-based rating agencies. For example, governments may from time to time establish official CRAs or credit ratings criteria or procedures for evaluating local issuers. If enacted, any such legislation and regulation could change the competitive landscape in which MIS operates. The legal status of rating agencies has been addressed by courts in various decisions and is likely to be considered and addressed in legal proceedings from time to time in the future. Management cannot predict whether these or any other proposals will be enacted, the outcome of any pending or possible future legal proceedings or regulatory or legislative actions, or the ultimate impact of any such matters on the competitive position, financial position or results of operations of Moody’s.
 
62

Table of Contents
 Forward-Looking Statements
Certain statements contained in this quarterly report on Form 10-Q are forward-looking statements and are based on future expectations, plans and prospects for the Company’s business and operations that involve a number of risks and uncertainties. Such statements involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements. Those statements appear at various places throughout this quarterly report on Form 10-Q, including in the sections entitled “Outlook” and “Contingencies” under Item 2. “MD&A”, commencing on page 32 of this quarterly report on Form 10-Q, under “Legal Proceedings” in Part II, Item 1, of this Form 10-Q, and elsewhere in the context of statements containing the words “believe”, “expect”, “anticipate”, “intend”, “plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may” and similar expressions or words and variations thereof relating to the Company’s views on future events, trends and contingencies. Stockholders and investors are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements and other information are made as of the date of this quarterly report on Form 10-Q, and the Company undertakes no obligation (nor does it intend) to publicly 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, the current world-wide credit market disruptions and economic slowdown, which is affecting and could continue to 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 credit quality concerns, changes in interest rates and other volatility in the financial markets; the uncertain effectiveness and possible collateral consequences of U.S. and foreign government initiatives to respond to the economic slowdown; concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent agency ratings; the introduction of competing products or technologies by other companies; pricing pressure from competitors and/or customers; the impact of regulation as an NRSRO, the potential for new U.S., state and local legislation and regulations, including provisions in the recently enacted Financial Reform Act and anticipated regulations resulting from that law; the potential for increased competition and regulation in foreign jurisdictions; exposure to litigation related to our rating opinions, as well as any other litigation to which the Company may be subject from time to time; provisions in the Financial Reform Act legislation modifying the pleading and liability standards applicable to credit rating agencies in a manner adverse to rating agencies; the possible loss of key employees; failures or malfunctions of our operations and infrastructure; the outcome of any review by controlling tax authorities of the Company’s global tax planning initiatives; the outcome of those Legacy Tax Matters and legal contingencies that relate to the Company, its predecessors and their affiliated companies for which Moody’s has assumed portions of the financial responsibility; the ability of the Company to successfully integrate acquired businesses; and a decline in the demand for credit risk management tools by financial institutions. 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, elsewhere in this Form 10-Q 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.
 
63

Table of Contents

 Item 3.	Quantitative and Qualitative Disclosures about Market Risk	
There was no material change in the Company’s exposure to market risk since December 31, 2010. For a discussion of the Company’s exposure to market risk, refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk”, contained in the Company’s annual report on Form 10-K for the year ended December 31, 2010.
 
 Item 4.	Controls and Procedures	
Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the times periods specified in the communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In addition, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonable likely to materially affect, these internal controls over financial reporting during the period covered by the report.
 
64

Table of Contents
 PART II. OTHER INFORMATION
 
 Item 1.	Legal Proceedings	
See the discussion of legal matters under Part I, Item 2. “MD&A – Contingencies”, commencing on page 56 of this quarterly report on Form 10-Q, which is incorporated into this Item 1 by reference.
 
 Item 1A.	Risk Factors	
There have been no material changes since December 31, 2010 to the significant risk factors and uncertainties known to the Company that, if they were to occur, could materially adversely affect the Company’s business, financial condition, operating results and/or cash flow. For a discussion of the Company’s risk factors, refer to Item 1A. “Risk Factors”, contained in the Company’s annual report on Form 10-K for the year ended December 31, 2010.
 
 Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	

MOODY’S PURCHASES OF EQUITY SECURITIES	  	
For the Three Months Ended June 30, 2011	  	
					
Period	  	Total Number of Shares
Purchased (1)	 	  	Average Price
Paid per Share	 	  	Total Number of Shares
Purchased as Part of
Publicly Announced
Program	 	  	Approximate Dollar Value of
Shares That May Yet be
Purchased  Under the
Program (2)	 	
April 1 - 30	  	 	624	  	  	$	—  	  	  	 	—  	  	  	$	 	  	  	 	1,080.0 million	  	
May 1 - 31	  	 	568	  	  	$	—  	  	  	 	—  	  	  	$	 	  	  	 	1,080.0 million	  	
June 1 - 30	  	 	—  	  	  	$	—  	  	  	 	—  	  	  	$	 	  	  	 	1,080.0 million	  	
	  	 	 	 	  				  	 	 	 	  				  				
Total	  	 	1,192	  	  	$	—  	  	  	 	—  	  	  				  				

(1)	Includes the surrender to the Company of 624 shares of common stock in April and 568 shares of common stock in May to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees	
(2)	As of the last day of each of the months. On July 30, 2007, the Company’s Board authorized a $2.0 billion share repurchase program which the Company began utilizing in January 2008 upon completion of the June 2006 authorization. There is no established expiration date for the remaining authorization.	
During the second quarter of 2011, Moody’s did not repurchase any of its common stock, and issued 0.9 million shares under employee stock-based compensation plans.
 
 Item 5.	Other Information	
At Moody’s Corporation’s annual meeting of stockholders held on April 19, 2011, Moody’s stockholders voted on an advisory proposal concerning the frequency of future advisory votes on executive compensation. As reported in the Company’s Current Report on Form 8-K dated April 25, 2011, at the meeting, stockholders cast the highest number of votes for an annual frequency instead of a biennial or triennial frequency. After consideration of this vote and other factors, the Company’s Board of Directors has determined to hold an annual advisory vote on executive compensation. The Board may in the future decide to conduct advisory votes on a different frequency and may vary its practice based on factors such as discussions with stockholders.
 
65

Table of Contents

 Item 6.	Exhibits	

Exhibit
No.	 	Description	
		
3	 	ARTICLES OF INCORPORATION AND BY-LAWS	
		
      .1	 	Restated Certificate of Incorporation of the Registrant dated June 15, 1998, as amended effective June 30, 1998, as amended effective October 1, 2000, and as further amended effective April 26, 2005 (incorporated by reference to Exhibit 3.1 to the Report on Form 8-K of the Registrant file number 1-14037, filed October 4, 2000, and Exhibit 3.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 27, 2005).	
		
      .2	 	Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3 of the Report on Form 8-K of the Registrant, file number 14-14037, filed February 25, 2008).	
		
31	 	CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002	
		
      .1*	 	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
		
      .2*	 	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
		
32	 	CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002	
		
      .1*	 	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934.)	
		
      .2*	 	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be considered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934.)	
		
101.DEF**	 	XBRL Definitions Linkbase Document	
		
101.INS**	 	XBRL Instance Document	
		
101.SCH**	 	XBRL Taxonomy Extension Schema Document	
		
101.CAL**	 	XBRL Taxonomy Extension Calculation Linkbase Document	
		
101.LAB**	 	XBRL Taxonomy Extension Labels Linkbase Document	
		
101.PRE**	 	XBRL Taxonomy Extension Presentation Linkbase Document	

*	Filed herewith.	
**	Furnished with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011	
 
66

Table of Contents
 SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	 		 		 	MOODY’S CORPORATION	
				
	 		 	By:	 	/ S / L INDA S. H UBER	
	 		 		 	Linda S. Huber	
	 		 		 	Executive Vice President and Chief Financial Officer
(principal financial officer)	
				
Date: August 2, 2011	 		 		 		
				
	 		 	By:	 	/ S / J OSEPH M C C ABE	
	 		 		 	Joseph McCabe	
	 		 		 	Senior Vice President and Corporate Controller
(principal accounting officer)	
 
67

Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Raymond W. McDaniel, Jr., Chairman and Chief Executive Officer of Moody’s Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Moody’s Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/ S /    R AYMOND W. M C D ANIEL , J R .        	
Raymond W. McDaniel, Jr.	
Chairman and Chief Executive Officer	
August 2, 2011

Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Linda S. Huber, Executive Vice President and Chief Financial Officer of Moody’s Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Moody’s Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/ S /    L INDA S. H UBER        	
Linda S. Huber	
Executive Vice President and Chief Financial Officer	
August 2, 2011

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Moody’s Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond W. McDaniel, Jr., Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/ S /    R AYMOND W. M C D ANIEL , J R .        	
Raymond W. McDaniel, Jr.	
Chairman and Chief Executive Officer	
August 2, 2011

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Moody’s Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Linda S. Huber, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/ S /    L INDA S. H UBER        	
Linda S. Huber	
Executive Vice President and Chief Financial Officer	
August 2, 2011