SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2018

NOTE 17 SEGMENT INFORMATION

The Company is organized into two operating segments: MIS and MA and accordingly, the Company reports in two reportable segments: MIS and MA.

The MIS segment consists of five LOBs. The CFG, SFG, FIG and PPIF LOBs 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 MIS Other LOB primarily consists of financial instruments pricing services in the Asia-Pacific region as well as ICRA non-ratings revenue.

The MA segment 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 LOBs - RD&A, ERS and PS.

In August 2017, a subsidiary of the Company acquired Yellow Maple I B.V., an indirect parent of Bureau van Dijk. Bureau van Dijk is part of the MA reportable segment and its revenue is included in the RD&A LOB. Refer to Note 8 for further discussion on the acquisition.

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. The royalty rate charged by MIS approximates the fair value of the aforementioned content, data and products and is generally based on comparable market transactions. 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. These fees charged by MA are generally equal to the costs incurred by MA to produce these products and services. Additionally, overhead costs and corporate expenses of the Company that exclusively benefit only one segment are fully charged to that segment. Overhead costs and corporate expenses of the Company that benefit both segments are allocated to each segment based on a revenue-split methodology. Accordingly, a reportable segment’s share of these costs will increase as its proportion of revenue relative to Moody’s total revenue increases. Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and information technology. “Eliminations” in the table below represent intersegment revenue/expense. Moody’s does not report the Company’s assets by reportable segment, as this metric is not used by the chief operating decision maker to allocate resources to the segments. Consequently, it is not practical to show assets by reportable segment.

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. Refer to Note 3 for further details on the components of the Company’s revenue.

		Three Months Ended March 31,
		2018								2017
		MIS		MA		Eliminations		Consolidated		MIS		MA		Eliminations		Consolidated*
Revenue		$	749.7	$	411.8	$	(34.8)	$	1,126.7	$	694.2	$	310.7	$	(29.7)	$	975.2
Operating, SG&A^*			310.4		310.4		(34.8)		586.0		286.2		239.5		(29.7)		496.0
	Adjusted Operating Income*		439.3		101.4		-		540.7		408.0		71.2		-		479.2

	Less: Depreciation and amortization		16.8		32.3		-		49.1		18.9		13.6		-		32.5
	Acquisition-Related Expenses		-		0.8		-		0.8		-		-		-		-
Operating income*		$	422.5	$	68.3	$	-	$	490.8	$	389.1	$	57.6	$	-	$	446.7

*Pursuant to the adoption of a new accounting standard relating to pension accounting as more fully discussed in Note 1, only the service cost component of net periodic pension expense will be classified within operating and SG&A expenses with the remaining components being classified as non-operating expenses. Prior period segment results have been restated to reflect this reclassification. Accordingly, operating and SG&A expenses for MIS and MA were reduced by $2.1 million and $1.2 million, respectively, for the three months ended March 31, 2017.

CONSOLIDATED REVENUE INFORMATION BY GEOGRAPHIC AREA

		Three Months Ended March 31,
		2018		2017
Revenue:
U.S.		$	597.7	$	577.8
International:
	EMEA		347.3		236.3
	Asia-Pacific		120.2		99.4
	Americas		61.5		61.7
	Total International		529.0		397.4
Total		$	1,126.7	$	975.2