SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2012

SEGMENT INFORMATION

NOTE 15. SEGMENT INFORMATION

The Company is organized into three operating segments: (i) MIS, (ii) MA and (iii) an immaterial operating segment that provides fixed income pricing services in the Asia Pacific region. This aforementioned immaterial operating segment has been aggregated with the MA operating segment based on the fact that it has similar economic characteristics to MA. Accordingly, 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 ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide.

The MA segment, which includes all of the Company’s non-rating commercial activities, develops a wide range of products and services that support the risk management activities of institutional participants in global financial markets. The MA segment consists of three lines of business – RD&A, enterprise risk solutions (formerly named risk management software) and professional services. Additionally, in the first quarter of 2012, a division within the PS LOB which provided various financial modeling services was transferred to the ERS LOB. Accordingly, the prior year revenue by LOB for MA has been reclassified to reflect the transfer of this division.

In the fourth quarter of 2011, subsidiaries of the Company acquired Copal and B&H. Copal is an outsourced research and consulting business. B&H is a provider of insurance risk management tools. B&H and Copal are part of the MA segment and their revenue is included in the ERS and PS LOB’s within MA, respectively.

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 fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. Additionally, overhead costs and corporate expenses of the Company which exclusively benefit only one segment, are fully charged to that segment. 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 and information technology. Beginning on January 1, 2012, the Company refined its methodology for allocating certain overhead departments to its segments to better align the costs allocated based on each segment’s usage of the overhead service. The refined methodology is reflected in the segment results for the three and nine months ended September 30, 2012 and accordingly, the segment results for the three and nine months ended September 30, 2011 have been reclassified to conform to the new presentation. “Eliminations” in the table below represent intersegment revenue/expense.

Financial Information by Segment

The table below shows revenue, Adjusted Operating Income and operating income by reportable segment. Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment.

	Three Months Ended September 30,
	2012									2011
	MIS		MA		Eliminations			Consolidated		MIS		MA		Eliminations			Consolidated
Revenue	$	491.3	$	218.1	$	(20.9	)	$	688.5	$	368.2	$	182.5	$	(19.4	)	$	531.3
Operating, SG&A		252.4		163.2		(20.9	)		394.7		200.5		134.9		(19.4	)		316.0
Adjusted Operating Income		238.9		54.9		—			293.8		167.7		47.6		—			215.3
Depreciation and amortization		11.0		13.1		—			24.1		9.9		9.1		—			19.0
Restructuring		—		—		—			—		0.2		—		—			0.2
Operating income	$	227.9	$	41.8	$	—		$	269.7	$	157.6	$	38.5	$	—		$	196.1
	Nine Months Ended September 30,
	2012									2011
	MIS		MA		Eliminations			Consolidated		MIS		MA		Eliminations			Consolidated
Revenue	$	1,419.8	$	617.7	$	(61.4	)	$	1,976.1	$	1,251.0	$	519.4	$	(56.8	)	$	1,713.6
Operating, SG&A		684.0		466.6		(61.4	)		1,089.2		606.1		389.4		(56.8	)		938.7
Adjusted Operating Income		735.8		151.1		—			886.9		644.9		130.0		—			774.9
Depreciation and amortization		32.9		36.8		—			69.7		31.0		27.5		—			58.5
Restructuring		—		—		—			—		0.1		—		—			0.1
Operating income	$	702.9	$	114.3	$	—		$	817.2	$	613.8	$	102.5	$	—		$	716.3

MIS and MA Revenue by Line of Business

The table below presents revenue by LOB within each reportable segment:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
MIS:
Corporate finance (CFG)	$	220.7		$	129.0		$	612.7		$	510.9
Structured finance (SFG)		93.1			82.0			278.1			257.7
Financial institutions (FIG)		82.7			72.1			239.3			228.1
Public, project and infrastructure finance (PPIF)		77.0			68.3			237.3			205.3
Total external revenue		473.5			351.4			1,367.4			1,202.0
Intersegment royalty		17.8			16.8			52.4			49.0
Total		491.3			368.2			1,419.8			1,251.0
MA:
Research, data and analytics (RD&A)		123.8			115.3			364.7			335.9
Enterprise risk solutions (ERS)		64.0			50.8			163.6			135.7
Professional services (PS)		27.2			13.8			80.4			40.0
Total external revenue		215.0			179.9			608.7			511.6
Intersegment revenue		3.1			2.6			9.0			7.8
Total		218.1			182.5			617.7			519.4
Eliminations		(20.9	)		(19.4	)		(61.4	)		(56.8	)
Total MCO	$	688.5		$	531.3		$	1,976.1		$	1,713.6

Consolidated Revenue Information by Geographic Area:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
United States	$	375.4	$	274.3	$	1,063.2	$	890.7
International:
EMEA		203.3		163.1		590.4		532.1
Other		109.8		93.9		322.5		290.8
Total International		313.1		257.0		912.9		822.9
Total	$	688.5	$	531.3	$	1,976.1	$	1,713.6

Total Assets by Segment:

	September 30, 2012								December 31, 2011
	MIS		MA		Corporate Assets (a)		Consolidated		MIS		MA		Corporate Assets (a)		Consolidated
Total Assets	$	912.6		1,262.2		1,487.5	$	3,662.3	$	725.9		1,289.7		860.5	$	2,876.1

(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.