-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
LBjr2vGM5GT4M6WKypis3dDwrxTf6xIZuVeSpq4VVXAP0bKP4lMDys96fY+KeZJX
l7GQ1VXzS7hycvELiCnfBg==
<SEC-DOCUMENT>0000950123-01-002310.txt : 20010316
<SEC-HEADER>0000950123-01-002310.hdr.sgml : 20010316
ACCESSION NUMBER: 0000950123-01-002310
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010315
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MOODYS CORP /DE/
CENTRAL INDEX KEY: 0001059556
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320]
IRS NUMBER: 133998945
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-14037
FILM NUMBER: 1569483
BUSINESS ADDRESS:
STREET 1: 99 CHURCH AVE
CITY: NEW YORK
STATE: NY
ZIP: 10007
BUSINESS PHONE: 2125530300
MAIL ADDRESS:
STREET 1: 99 CHURCH AVE
CITY: NEW YORK
STATE: NY
ZIP: 10007
FORMER COMPANY:
FORMER CONFORMED NAME: DUN & BRADSTREET CORP /DE/
DATE OF NAME CHANGE: 19980728
FORMER COMPANY:
FORMER CONFORMED NAME: NEW DUN & BRADSTREET CORP
DATE OF NAME CHANGE: 19980728
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>y46068e10-k405.txt
<DESCRIPTION>MOODYS CORPORATION
<TEXT>
<PAGE> 1
MOODYS CORP /DE/ - 10-K405
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
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)
<TABLE>
<S> <C>
DELAWARE 13-3998945
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
99 CHURCH STREET, NEW YORK, NEW YORK 10007
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 553-0300.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of January 31, 2001, 159,863,281 shares of Common Stock of Moody's
Corporation were outstanding and the aggregate market value of such Common Stock
held by nonaffiliates* (based upon its closing transaction price on the
Composite Tape on such date) was approximately $4,454 million.
-1-
<PAGE> 2
MOODYS CORP /DE/ - 10-K405
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for use in
connection with its annual meeting of shareholders scheduled to be held on April
23, 2001, are incorporated by reference into Part III of this Form 10-K.
The Index to Exhibits is located on Pages 50-53 of this Form 10-K
* Calculated by excluding all shares held by executive officers and directors of
the Registrant without conceding that all such persons are "affiliates" of the
Registrant for purposes of federal securities laws.
PART I
ITEM 1. BUSINESS
As used in this report, except where the context indicates otherwise,
the term "Company" or "Moody's" refers to Moody's Corporation and its wholly
owned subsidiaries. The Company's executive offices are located at 99 Church
Street, New York, NY 10007 and its telephone number is (212) 553-0300.
Prior to September 30, 2000, the Company was known as The Dun &
Bradstreet Corporation ("Old D&B"). On September 8, 2000, the Board of Directors
of Old D&B approved a plan to separate into two publicly traded companies - the
Company and The New D&B Corporation ("New D&B"). On September 30, 2000, Old D&B
distributed to its shareholders all of the outstanding shares of New D&B common
stock (the "2000 Distribution"). In connection with the Distribution, Old D&B
changed its name to Moody's Corporation.
New D&B is the accounting successor to Old D&B, which was incorporated
under the laws of the State of Delaware on April 8, 1998. Old D&B began
operating as an independent publicly-owned corporation on July 1, 1998 as a
result of its June 30, 1998 spin-off (the "1998 Distribution") from the
corporation now known as "R.H. Donnelley Corporation" and previously known as
"The Dun & Bradstreet Corporation" ("Donnelley"). Old D&B became the accounting
successor to Donnelley at the time of the 1998 Distribution.
Prior to the 1998 Distribution, Donnelley was the parent holding
company for subsidiaries then engaged in the businesses currently conducted by
New D&B, Moody's and Donnelley. Prior to November 1, 1996, it also was the
parent holding company of subsidiaries conducting business under the names
Cognizant Corporation ("Cognizant") and ACNielsen Corporation ("ACNielsen"). On
that date Donnelley effected a spin-off of the capital stock of Cognizant and
ACNielsen to its stockholders (the "1996 Distribution"). Cognizant subsequently
changed its name to Nielsen Media Research, Inc. in connection with its 1998
spin-off of the capital stock of IMS Health Incorporated ("IMS Health").
The corporate and financial characteristics of Moody's have developed,
in part, as a result of the 1996, 1998 and 2000 Distributions and Moody's
relationships with the other parties to those transactions. The terms of the
transactions are briefly outlined below.
1996 DISTRIBUTION
For purposes of effecting the 1996 Distribution and governing certain
of the continuing relationships among Donnelley, Cognizant and ACNielsen
thereafter, the three companies entered into various agreements, including a
Distribution Agreement (the "1996 Distribution Agreement"), a Tax Allocation
Agreement (the "1996 Tax Allocation Agreement"), an Employee Benefits Agreement
(the "1996 Employee Benefits Agreement") and an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement"). The following
-2-
<PAGE> 3
MOODYS CORP /DE/ - 10-K405
descriptions summarize some of the material terms of such agreements but are
qualified by reference to the texts of such agreements, which are filed as
exhibits to this Form 10-K.
The 1996 Distribution Agreement provided for, among other things,
assumptions of liabilities and cross indemnities designed generally to allocate
to Donnelley, effective as of November 1, 1996, financial responsibility for all
liabilities of the companies, except for certain liabilities arising out of or
in connection with the businesses that became part of Cognizant or ACNielsen as
a result of the 1996 Distribution. Similarly, the 1996 Distribution Agreement
provided for the allocation generally to Donnelley of the financial
responsibility for the liabilities arising out of or in connection with
then-former businesses, including those formerly conducted by or associated with
Cognizant or ACNielsen, with certain exceptions such as described in Note 14
(Contingencies) in Part II, Item 8 on pages 44-46 of this Form 10-K.
The 1996 Tax Allocation Agreement generally allocated financial
responsibility to Donnelley for the entire consolidated tax liability for the
tax years that Cognizant and ACNielsen were included in Donnelley's consolidated
Federal income tax return. For periods prior to November 1, 1996, Donnelley also
is generally liable for state and local income taxes. The 1996 Tax Allocation
Agreement allocated liability to Donnelley, Cognizant and ACNielsen for their
respective shares of other state and local taxes, as well as any foreign taxes
attributable to periods prior to November 1, 1996.
The 1996 Employee Benefits Agreement generally allocated responsibility
among the companies for benefits accrued for their current and former employees
as of November 1, 1996.
Pursuant to the Indemnity and Joint Defense Agreement, Donnelley, Cognizant
and ACNielsen agreed: (i) to certain arrangements allocating potential
liabilities arising out of the legal action filed by Information Resources, Inc.
("IRI") on July 29, 1996 and (ii) to conduct a joint defense of such action. See
Note 14 (Contingencies) in Part II, Item 8 on pages 44-46 of this Form 10-K for
additional information with respect to this agreement.
Pursuant to the terms of the 1996 Distribution Agreement, as a condition to
the 1998 Distribution, Old D&B undertook to be jointly and severally liable with
Donnelley to Cognizant and ACNielsen for any liabilities arising under the 1996
Distribution Agreement and related agreements. Pursuant to the 1998 Distribution
Agreement, as between Donnelley and Old D&B, all liabilities and rights of
Donnelley under the 1996 Distribution Agreement and related agreements became
liabilities and rights of Old D&B, and Old D&B agreed to indemnify Donnelley
against any such liabilities.
Pursuant to the terms of the 1996 Distribution Agreement, as a condition to
Cognizant's spin-off of IMS Health, IMS Health undertook to be jointly and
severally liable with Cognizant to Donnelley and ACNielsen for any liabilities
arising under the 1996 Distribution Agreement and related agreements.
Donnelley's rights under this undertaking were assigned to Old D&B in connection
with the 1998 Distribution.
1998 DISTRIBUTION
For purposes of effecting the 1998 Distribution and of governing certain of
the continuing relationships between Old D&B and Donnelley thereafter, the two
companies entered into various agreements, including a Distribution Agreement
(the "1998 Distribution Agreement"), a Tax Allocation Agreement (the "1998 Tax
Allocation Agreement") and an Employee Benefits Agreement (the "1998 Employee
Benefits Agreement"). The following descriptions summarize some of the material
terms of such agreements. These descriptions are qualified by reference to the
texts of such agreements, which are filed as exhibits to this Form 10-K.
The 1998 Distribution Agreement provided for, among other things, certain
corporate transactions required to effect the 1998 Distribution and other
arrangements between Donnelley and Old D&B subsequent to the 1998 Distribution.
In general, pursuant to the terms of the 1998 Distribution Agreement, all assets
of Donnelley as of June 30, 1998, other than those relating to the business to
be conducted by it thereafter, became assets of Old D&B. The 1998 Distribution
Agreement also provided for assumptions of liabilities and cross indemnities
designed generally to allocate to Old D&B, effective as of June 30, 1998,
financial responsibility for substantially all liabilities of
-3-
<PAGE> 4
MOODYS CORP /DE/ - 10-K405
Donnelley, excluding liabilities primarily relating to the business to be
conducted by Donnelley thereafter and certain indebtedness incurred in
connection with the 1998 Distribution. The 1998 Distribution Agreement provided
for the allocation generally to Old D&B of the financial responsibility for the
liabilities arising out of or in connection with former business operations,
other than those relating to the business to be conducted by Donnelley following
the 1998 Distribution.
Under the 1998 Tax Allocation Agreement, Old D&B generally assumed
liability for all income taxes of the companies and their subsidiaries
attributable to periods prior to the 1998 Distribution, provided that in the
case of any separate company state or local income taxes, Donnelley and Old D&B
remained responsible for their own liabilities arising from any audit
adjustment.
The 1998 Employee Benefits Agreement generally allocated responsibility
between Donnelley and Old D&B for benefits accrued for their current and former
employees as of June 30, 1998.
2000 DISTRIBUTION
For purposes of effecting the 2000 Distribution and of governing certain of
the continuing relationships between Moody's and New D&B thereafter, the two
companies entered into various agreements, including a Distribution Agreement
(the "2000 Distribution Agreement"), a Tax Allocation Agreement (the "2000 Tax
Allocation Agreement") and an Employee Benefits Agreement (the "2000 Employee
Benefits Agreement").
The material terms of such agreements are described below. These
descriptions are qualified by reference to the texts of such agreements, which
are filed as exhibits to this Form 10-K.
The 2000 Distribution Agreement provided for, among other things, certain
corporate transactions required to effect the 2000 Distribution and other
arrangements between Moody's and New D&B subsequent to the 2000 Distribution. In
particular, the 2000 Distribution Agreement defined the assets and liabilities
that were allocated to and assumed by New D&B and those that remained with
Moody's. The 2000 Distribution Agreement also defines what constitutes the "D&B
Business" and what constitutes the "Moody's Business."
Pursuant to the 2000 Distribution Agreement, Moody's transferred or
caused to be transferred all its right, title and interest in the assets
comprising the D&B Business to New D&B, and New D&B transferred or caused to be
transferred all its right, title and interest in the assets comprising the
Moody's Business to Moody's. All assets were transferred without any
representation or warranty. In general, pursuant to the terms of the 2000
Distribution Agreement, all assets that relate primarily to the D&B Business
were allocated to New D&B, all assets that relate primarily to the Moody's
Business were allocated to Moody's, and all remaining assets (other than cash,
which was allocated along with indebtedness as described below) were allocated
equally between New D&B and Moody's. The 2000 Distribution Agreement also
provided for assumptions of liabilities and cross- indemnities designed to
allocate generally, effective as of September 30, 2000, financial responsibility
for: (i) all liabilities arising out of or in connection with the businesses
conducted by New D&B to New D&B, (ii) all liabilities arising out of or in
connection with the businesses conducted by Moody's to Moody's, and (iii)
substantially all other liabilities as of September 30, 2000 equally between New
D&B and Moody's. The liabilities that were allocated equally include contingent
and other liabilities relating to former businesses and certain prior business
transactions, which consist primarily of potential liabilities of Old D&B
arising from the legal action initiated by IRI and potential tax liabilities of
Old D&B that may arise with respect to reviews by tax authorities of global tax
planning initiatives, both of which are described in Note 14 (Contingencies) in
Part II, Item 8 on pages 44-46 of this Form 10-K.
Pursuant to the terms of the 1998 Distribution Agreement, as a
condition to the 2000 Distribution, New D&B undertook to be jointly and
severally liable with Moody's to Donnelley for any liabilities arising under the
1998 Distribution Agreement and related agreements. The 2000 Distribution
Agreement generally allocates financial responsibility for such liabilities
equally between New D&B and Moody's, except that any such liabilities that
relate primarily to the D&B Business will be New D&B liabilities and any such
liabilities that relate primarily to the Moody's Business will be Moody's
liabilities. Among other things, New D&B and Moody's agreed that, as between
themselves,
-4-
<PAGE> 5
MOODYS CORP /DE/ - 10-K405
they will each be responsible for 50% of any payments to be made in respect of
the IRI action under the 1998 Distribution Agreement, including any legal fees
and expenses related thereto.
In connection with the 2000 Distribution, New D&B assumed a portion of the
indebtedness of Old D&B and received a portion of the cash of Old D&B in amounts
such that, at the time of the 2000 Distribution and before giving effect to the
agreement discussed below and certain other factors, the net indebtedness of New
D&B approximated the net indebtedness of Moody's. Substantially all unexercised
Old D&B stock options were adjusted as of the date of the 2000 Distribution to
comprise options to purchase Moody's common stock and separately exercisable
options to purchase New D&B common stock. In light of, among other things, the
numbers of optionees employed by New D&B and Moody's, respectively, this
adjustment resulted in a substantially greater number of outstanding options to
purchase Moody's common stock than would have been the case if options were
adjusted so as to become solely options to purchase common stock of the
optionee's employer. Due to this fact and the fact that, consistent with past
practice, each of New D&B and Moody's was expected to maintain a stock purchase
program designed to offset the increased number of shares otherwise attributable
to option exercises, New D&B agreed to adjust the net indebtedness of the two
companies to compensate Moody's for the disproportionate amount of its estimated
future cash costs in this regard. The exact amount of the adjustment was
determined on a formula basis and was dependent on a variety of factors,
including the respective trading prices of Moody's common stock and New D&B
common stock at the time of the Distribution.
The 2000 Distribution Agreement includes provisions governing the
administration of certain insurance programs and the procedures for making
claims. The 2000 Distribution Agreement also allocates the right to proceeds,
and the obligation to incur deductibles, under certain insurance policies.
The 2000 Distribution Agreement provides that Moody's and New D&B will
comply with and otherwise not take action inconsistent with each representation
and statement made to the Internal Revenue Service (the "IRS") in connection
with Old D&B's requests for ruling letters as to certain tax aspects of the 2000
Distribution and certain internal restructuring transactions. Each of Moody's
and New D&B agreed, among other things, to maintain its status as a company
engaged in the active conduct of a trade or business, as defined in Section
355(b) of the Internal Revenue Code, to continue to own stock of certain
operating subsidiaries constituting control (within the meaning of Section
368(c) of the Internal Revenue Code) of such operating subsidiaries and to
maintain at least 90% of the fair market value of its assets in the form of
stock and securities of certain operating subsidiaries, in each case until the
second anniversary of the 2000 Distribution. Moody's does not expect this
limitation to inhibit its financing or other activities or its ability to
respond to unanticipated developments. Under the 2000 Distribution Agreement,
each of Moody's and New D&B agreed that, until two years after the 2000
Distribution, it will not: (i) merge or consolidate with another corporation,
(ii) liquidate or partially liquidate, (iii) sell or transfer all or
substantially all of its assets, (iv) redeem or repurchase its stock (except in
certain limited circumstances), or (v) take any other action that would result
in one or more persons acquiring a 50% or greater interest in Moody's or New
D&B, as the case may be, unless, prior to taking such action, it obtains a
written opinion of a law firm reasonably acceptable to Moody's or New D&B, as
the case may be, or a supplemental ruling from the IRS that such action will not
affect the tax-free treatment of the 2000 Distribution. As a result of the
representations in the requests for ruling letters and the covenants in the 2000
Distribution Agreement, the acquisition of control of Moody's prior to the
second anniversary of the 2000 Distribution may be more difficult or less likely
to occur because of the potential substantial liabilities associated with a
breach of such representations or covenants. The 2000 Distribution Agreement
requires any party thereto that takes or fails to take any action which
contributes to a determination that the 2000 Distribution is not tax-free to
Moody's or any of its affiliates, New D&B or any of its affiliates or their
respective stockholders to indemnify the other party and its stockholders
against any taxes arising therefrom. The 2000 Distribution Agreement also
includes similar indemnification provisions with respect to actions taken that
affect the tax treatment of certain internal restructuring transactions.
Under the 2000 Distribution Agreement, each of Moody's and New D&B agreed
to provide to the other party, subject to certain conditions, access to certain
corporate records and information and to provide certain transitional services
on such terms as
-5-
<PAGE> 6
MOODYS CORP /DE/ - 10-K405
were set forth in a data services agreement, a shared transaction services
agreement, an insurance and risk management services agreement and a transition
services agreement between such parties. Moody's and New D&B also entered into
an intellectual property assignment providing for the allocation of rights under
patents, copyrights, software, technology, trade secrets and certain other
intellectual property owned by Moody's and New D&B and their respective
subsidiaries as of September 30, 2000. The texts of each of the foregoing
agreements are filed as exhibits to this Form 10-K.
The 2000 Distribution Agreement also provided generally that costs or
expenses in connection with the 2000 Distribution incurred on or prior to
September 30, 2000 will be borne equally by New D&B and Moody's. Except as set
forth in the Distribution Agreement or any related agreement, each party is
required to bear its own costs and expenses incurred after September 30, 2000.
Pursuant to the 2000 Tax Allocation Agreement, Moody's and New D&B will
each pay 50% of any taxes, or receive 50% of any refunds of taxes, shown as due
on any consolidated or combined U.S. federal, state, local or foreign income or
franchise tax return for taxable periods beginning prior to September 30, 2000
(including the current taxable period to the extent such taxes, refunds or
credits are attributable to the portion of such taxable period up to and
including September 30, 2000). Any subsequent adjustment of such taxes will be
allocated to New D&B if such adjustment relates to the businesses conducted by
New D&B, to Moody's if such adjustment relates to the businesses conducted by
Moody's, and otherwise allocated equally between New D&B and Moody's. All taxes
other than consolidated or combined U.S. federal, state, local or foreign income
and franchise taxes will be the responsibility of New D&B if they are
attributable to the D&B Business, and the responsibility of Moody's if they are
attributable to the Moody's Business. For taxable periods beginning on or after
September 30, 2000 (and the portion of the current taxable period beginning
after September 30, 2000), New D&B and Moody's will each be responsible for
their own taxes.
The 2000 Employee Benefits Agreement generally allocates responsibility for
certain employee benefits matters on and after October 1, 2000. Under the 2000
Employee Benefits Agreement, Moody's adopted a new defined benefit pension plan
for its employees, and New D&B assumed and became the sponsor of the
pre-existing plan for the benefit of New D&B's employees and, in general, former
employees who terminated employment on or prior to September 30, 2000, who were
not Moody's employees immediately after September 30, 2000. Assets and
liabilities of the pre-existing pension plan that were attributable to Moody's
employees are to be transferred to the new Moody's plan, along with an amount of
surplus under the pre-existing pension plan, such that the total value of the
amount to be transferred to the new Moody's plan equaled $88 million as of
September 30, 2000. In accordance with the 2000 Employee Benefits Agreement,
Moody's bears the investment risk and the plan and retiree expenses with respect
to such assets as of October 1, 2000. This transfer is to be made in accordance
with Section 414(l) of the Internal Revenue Code.
In addition, Moody's adopted a new savings plan for its employees, and New
D&B assumed and became the sponsor of the pre-existing savings plan for the
benefit of New D&B's employees and former employees who terminated employment on
or prior to September 30, 2000. Unless otherwise elected by Moody's employees,
the account balances of Moody's employees were transferred to the new Moody's
plan.
Generally, New D&B assumed and became the sponsor of the pre-existing
nonqualified supplemental pension plans for the benefit of persons who, prior to
September 30, 2000, were participants thereunder. However, with respect to
Moody's employees, New D&B generally retained only those liabilities that were
vested prior to September 30, 2000. Moody's has guaranteed payment of the
benefits under these plans to its employees in the event that New D&B is unable
to satisfy its obligations. New D&B assumed liabilities relating to the account
balances as of September 30, 2000 of retired directors and New D&B directors,
and Moody's assumed liabilities relating to the account balances as of September
30, 2000 with respect to Moody's directors.
The 2000 Employee Benefits Agreement also provides that Moody's will
continue to sponsor its welfare plans for its employees. As of October 1, 2000,
New D&B became the sponsor of welfare plans for the benefit of its employees and
former employees who terminated employment on or prior to September 30, 2000.
Moody's is responsible for providing retiree welfare benefits, where applicable,
to its employees, and New D&B is
-6-
<PAGE> 7
MOODYS CORP /DE/ - 10-K405
responsible for providing retiree welfare benefits, where applicable, to its
employees and eligible former employees who terminated employment on or prior to
September 30, 2000.
Moody's and New D&B generally retained the severance liabilities of their
respective employees who terminated employment prior to September 30, 2000.
With respect to equity-based plans, the 2000 Employee Benefits Agreement
generally provided that outstanding Old D&B equity-based awards (e.g., options,
restricted stock, phantom units) as of September 30, 2000, were adjusted to
comprise comparable equity-based grants in Moody's common stock and New D&B
common stock. The adjustments were intended to preserve, as closely as possible,
the economic value of the pre-2000 Distribution grants.
Except as otherwise provided in the 2000 Employee Benefits Agreement, as of
September 30, 2000, Moody's employees generally ceased participation in existing
Old D&B employee benefit plans, and Moody's will generally recognize, among
other things, its employees' past service under their respective Old D&B
employee benefit plans. Except as specifically provided therein, nothing in the
2000 Employee Benefits Agreement restricts Moody's or New D&B's ability to amend
or terminate any of their respective employee benefit plans after September 30,
2000.
THE COMPANY
Moody's is a leading global credit rating, research and risk analysis
firm in terms of market position, revenue, income and a number of other relevant
statistical standards. Moody's publishes credit opinions, research and ratings
on fixed-income securities, issuers of securities and other credit obligations.
Moody's credit ratings and research help investors analyze the credit risks
associated with fixed-income securities. Ratings and research from reliable
third parties also create efficiencies in markets for fixed-income and other
obligations, such as insurance and derivatives, by providing reliable, credible
and independent assessments of credit risk. Moody's global and increasingly
diverse services are designed to increase market liquidity and efficiency and
may reduce transaction costs.
Founded in 1900, Moody's employs approximately 1,500 employees
worldwide. Moody's maintains offices in 15 countries and has expanded into
developing markets through joint ventures or affiliation agreements with local
rating agencies. Moody's provides ratings and credit research on governmental
and commercial entities in over 100 countries. Moody's customers include a wide
range of corporate and governmental issuers of securities as well as investors,
depositors, creditors, investment banks, commercial banks, and other financial
intermediaries. Moody's is not dependent on a single customer or a few
customers, such that a loss of any one would have a material adverse effect on
its business.
Moody's publishes rating opinions and research on a broad range of
credit obligations. These include various corporate and governmental
obligations, structured finance securities and commercial paper programs issued
in domestic and international markets. Moody's also assigns ratings to issuers
of securities, insurance company obligations, bank loans, derivative products,
bank deposits and other bank debt, and managed funds. At the end of 2000,
Moody's had provided credit ratings and analysis on over $30 trillion in debt,
covering over 85,000 securities, with 4,200 corporate relationships which
includes corporate issuances, including industrial corporations, financial
institutions, governmental entities and structured finance issuers and more than
68,000 public finance obligations. Ratings are disseminated to the public
through a variety of print and electronic media, including real-time systems
widely used by securities traders and investors.
Closely integrated with its ratings services, Moody's provides research
services that are utilized by institutional investors and other credit
professionals. Clients of these services represent more than 2,800 institutions
and include over 15,000 users globally. Moody's offers more than 100 research
products, through which clients obtain analysis of individual borrowers,
industry and market sectors and commentary on the credit implications of topical
events. Organized according to industry and market segment, these research
services cover investment grade and speculative grade corporate bonds, the
global banking sector, municipal bonds, and mortgage- and asset-backed
securities, in cross-border and domestic markets worldwide. While research is
delivered
-7-
<PAGE> 8
MOODYS CORP /DE/ - 10-K405
through a number of channels, the majority of clients use Moody's proprietary
web site in order to have access to the complete research database in a
real-time environment.
Moody's Risk Management Services, Inc., a wholly owned subsidiary of
Moody's ("Moody's Risk Management Services"), develops and distributes credit
risk assessment software used by banks and other financial institutions in their
portfolio management, commercial lending and other activities. Moody's Risk
Management Services also provides modeling tools, analytics, credit education
materials, seminars, computer-based lending simulations and other products and
services that have enabled it to develop continuing relationships with its
clients. In January 2000, Moody's Risk Management Services acquired a financial
products software company, which provides credit risk assessment software to
financial institutions.
PROSPECTS FOR GROWTH
Over the past decade, global public fixed-income markets have
significantly increased in outstanding principal amount. Moody's believes that
global credit markets will continue to increase in size and scope. In addition,
the securities being issued in the global fixed-income markets are becoming more
complex. Moody's expects that these trends will increase the long-term demand
for its high-quality, independent credit opinions.
The size of the world capital markets is increasing because, in
general, the global political and economic climate has promoted economic growth
and more productive capital investment and market structures. Moody's believes
that the outlook is generally favorable for the continued growth of the world
capital markets, particularly in Europe as a consequence of the economic and
monetary union contemplated by the Treaty on European Union.
Technology, such as the Internet, makes information about investment
alternatives easily available throughout the world. This technology facilitates
issuers' ability to place securities outside their national market and
investors' capacity to obtain information about securities issued outside their
national markets. Issuers and investors are also more readily able to obtain
information about new financing techniques and new types of securities that they
may wish to purchase or sell, many of which may be unfamiliar to them. This
availability of information promotes worldwide financial markets and a more
acute need for credible and globally comparable ratings. As a result, a number
of new capital markets have emerged. In addition, more issuers and investors are
accessing traditional capital markets.
Another trend that is increasing the size of the world capital markets
is the ongoing disintermediation of financial systems. Issuers are increasingly
financing in the global public capital markets, rather than through traditional
financial intermediaries. Moreover, financial intermediaries are selling assets
in the global public capital markets, in addition to or instead of retaining
those assets. Structured finance securities markets for many types of assets
have developed in many countries and are contributing to these trends.
The complexity of capital market instruments is also growing.
Consequently, assessing the credit risk of such instruments becomes even more of
a challenge for financial intermediaries and asset managers. In the credit
markets, reliable third-party ratings represent an increasingly viable
alternative to traditional in-house research as the geographic scope and
complexity of financial markets grow.
Rating fees paid by issuers account for most of Moody's revenue.
Therefore, a substantial portion of Moody's revenues are dependent upon the
volume and number of debt securities issued in the global capital markets.
Moody's is therefore affected by the performance of, and the prospects for, the
major world economies and by the fiscal and monetary policies pursued by their
governments. However, annual fee arrangements with frequent debt issuers and
annual fees from commercial paper and medium-term note programs, bank and
insurance company financial strength ratings, mutual fund ratings and other
areas are less dependent on, or independent of, the volume or number of debt
securities issued in the global capital markets.
Moody's operations are also subject to various politically related
risks inherent in carrying on business internationally. Such risks include
currency fluctuations and possible nationalization, expropriation, price
controls, changes in the availability of
-8-
<PAGE> 9
MOODYS CORP /DE/ - 10-K405
data from public sector sources, limits on providing information across borders
or other restrictive governmental actions. Management believes that the risks of
nationalization or expropriation are reduced because its basic service is the
creation and dissemination of information, rather than the production of
products that require manufacturing facilities or the use of natural resources.
COMPETITION
Moody's competes with other credit rating agencies and with investment
banks and brokerage firms that offer credit opinions, research and risk analysis
services. Institutional investors also have in-house credit research
capabilities. Moody's most direct competitor in the global credit rating
business is Standard and Poor's Credit Market Services ("S&P"), a division of
The McGraw-Hill Companies, Inc. There are some rating markets, based on
industry, geography and/or instrument type, in which Moody's has made
investments and obtained market positions superior to S&P's. In other markets
the reverse is true.
Another rating agency competitor of Moody's is Fitch, a wholly owned
subsidiary of Fimalac S.A. Fitch includes the former businesses of Duff &
Phelps, Fitch IBCA and Thomson BankWatch, which were recently combined in merger
transactions or acquisitions. Although Moody's and S&P are each larger than
Fitch, competition is expected to increase - particularly in Europe - from the
combinations. One or more significant rating agencies also may emerge in Europe
over the next few years in response to the growth in the European capital
markets and development of the European Monetary Union ("EMU"). In addition,
local providers in non-U.S. jurisdictions or comparable competitors that may
emerge in the future may receive support from local governments and other
institutions.
Over the last decade, additional rating agencies have been established,
primarily in emerging markets and as a result of local capital market
regulation. Regulators worldwide have recognized that credit ratings can further
regulatory objectives for the development of public fixed-income securities
markets. The result of such regulatory activity has been the creation of several
primarily national ratings agencies in various countries. Certain of these
regulatory efforts may have the unintended effect of producing less credible
ratings over time. Attempts to standardize ratings systems or criteria may make
all rating systems and agencies appear undifferentiated, obscuring variations in
the quality of the ratings providers. In addition, since Moody's believes that
some of its most significant challenges and opportunities will arise outside the
United States, it will have to compete with rating agencies that may have a
stronger local presence or a longer operating history in those markets. These
local providers or comparable competitors that may emerge in the future may
receive support from local government and other institutions.
Regulators of financial institutions are attempting to improve their
approach to supervision. They are shifting away from rule-based systems that
address only specific risk components and from institution-specific protections
towards other supervisory methods. The regulators' evolving approach includes
their making qualitative judgments about the sophistication of each financial
institution's risk management processes and systems, in terms of both market and
credit risk. Although such regulatory trends present opportunities for the use
of Moody's ratings, they may also result in additional competition for Moody's
or regulatory involvement in Moody's practices.
Credit rating agencies such as Moody's also compete with other means of
managing credit risk, such as credit insurance and credit derivatives.
Competitors that develop quantitative methodologies for assessing credit risk
also may pose a competitive threat to Moody's.
MOODY'S STRATEGY
Moody's intends to focus on the following opportunities:
Expansion in Financial Centers. Moody's services its customers through
its global network of offices and business affiliations. Moody's currently
maintains full-service rating and marketing operations in global financial
centers such as Frankfurt, Hong Kong, London, Paris, and Tokyo. Moody's expects
that its global network will position it to benefit from the expansion in
worldwide capital markets and thereby increase revenue. Moody's also expects
that the accelerated growth of its ratings and research activities
-9-
<PAGE> 10
MOODYS CORP /DE/ - 10-K405
as a consequence of financial market integration under EMU will continue.
Moody's expects to continue its expansion into developing markets either
directly or through joint ventures, affiliations or other means.
New Rating Products. Moody's is pursuing numerous initiatives that
expand credit ratings from securities markets to other sectors with credit risk
exposures. Moody's has a committed effort to extend its credit opinion franchise
to the global bank counterparty universe through emerging market ratings,
including bank financial strength ratings. Insurance financial strength ratings
in the property and casualty, reinsurance, and life insurance markets represent
additional growth opportunities. Moody's has also introduced issuer ratings for
corporations not active in the debt markets and a Rating Assessment Service for
issuers interested in a definitive Moody's rating opinion about hypothetical or
potential financial developments related to such issuer. As the loan and capital
markets converge, Moody's expects to continue to expand its rating coverage of
bank loans and project finance loans and securities. Moody's has also introduced
equity mutual fund indices and fund analyzers for institutional fund managers as
well as rating products, which help investors understand mutual fund management
quality.
Internet-Enhanced Products and Services. Moody's is expanding its use
of the Internet and other electronic media to enhance every aspect of client
service. Moody's Website provides clients with instant access to ratings data
and credit analysis. Internet delivery also enables Moody's to provide services
to more individuals within a client organization than paper-based products and
to offer higher- value services because customers do not need to handle
paper-based reports. Moody's expects that access to these sophisticated
applications will increase client use of Moody's services. Moody's expects to
continue to invest in electronic media to capitalize on these and other
opportunities.
Additional Opportunities in Securitization. The repackaging of
financial assets has had a profound effect on the fixed-income markets. New
patterns of securitization are expected to emerge in the next decade. Although
the bulk of assets securitized in the past five years have been consumer assets
owned by banks, commercial assets - principally commercial mortgages, term
receivables and corporate loans - are now increasingly being securitized.
Securitization concepts are rapidly evolving into a strategic corporate finance
tool in Europe and Asia and from ongoing global development of non-traditional
financial instruments, such as derivatives, future flow securities, hybrids,
credit-linked bonds and catastrophe bonds.
New Credit Risk Management Services. Moody's will continue to provide
banks and other financial institutions with credit risk management services.
Moody's believes that there will be increased demand for such services because
of recent proposals by international bank regulatory authorities to recognize
banks' internal credit risk management systems for the purposes of determining
regulatory capital.
Expansion of Credit Research Products. Moody's will continue to expand
its research products by producing and acquiring additional products through
internal development and arrangements with others.
REGULATION
Moody's is registered as an investment adviser under the Investment
Advisers Act of 1940. Moody's has been designated as a Nationally Recognized
Statistical Rating Organization ("NRSRO") by the SEC. The SEC first applied the
NRSRO designation in 1975 to agencies whose credit ratings could be used to
determine net capital requirements for broker-dealers. Congress (in certain
mortgage-related legislation), the SEC (in its regulations under the Securities
Act, the Exchange Act and the Investment Company Act of 1940) and other
governmental and private bodies have used the ratings of NRSROs to distinguish
between, among other things, "investment grade" and "non-investment grade
securities".
In December 1997, the SEC proposed regulations that would define the
criteria for designation as an NRSRO. The proposal states that the SEC would
require rating agencies to have each of the following attributes before it will
grant NRSRO status:
- - national recognition, which means that the rating agency is recognized as
an issuer of credible and reliable ratings by the predominant users of
securities ratings in the United States,
-10-
<PAGE> 11
MOODYS CORP /DE/ - 10-K405
- - adequate staffing, financial resources and organizational structure to
ensure that it can issue credible and reliable ratings of the debt of
issuers, including the ability to operate independently of economic
pressures or control by companies it rates and a sufficient number of staff
members qualified in terms of education and experience to evaluate an
issuer's credit thoroughly and completely,
- - use of systematic ratings procedures that are designed to ensure credible
and accurate ratings,
- - extent of contacts with the management of issuers, including access to
senior level management of issuers,
- - internal procedures to prevent misuse of non-public information and
compliance with such procedures, and
- - registration with the SEC as an investment adviser under the Investment
Advisers Act of 1940.
Moody's does not believe that this proposal, if adopted, would have a
material adverse effect on its operations or financial position.
Moody's is also subject to regulation in certain non-U.S. jurisdictions
in which it operates. In certain countries, governments may provide financial or
other support to local-based rating agencies. In addition, governments may from
time to time establish official rating agencies or credit ratings criteria or
procedures for evaluating local issuers.
The Basle Committee on Banking Supervision is preparing a new capital
adequacy framework to replace the framework adopted in 1998. Under this
framework as now proposed, ratings assigned by a credit rating agency would be
used by certain banks to determine the risk weights for many of their exposures.
The Basle Committee's proposal would institutionalize the role of rating
agencies in the credit assessment of internationally active financial
institutions and subject rating agencies to a broader range of oversight.
Because the content of the proposal is not yet finalized, Moody's cannot predict
at this time the final form of any such regulation. However, Moody's does not
believe that this proposal, if adopted in its present form, would materially
affect its financial position, its results of operations or the manner in which
it conducts its business.
Other legislation and regulation relating to credit rating and research
services has been considered from time to time by local, national and
multinational bodies and is likely to be considered in the future. If enacted,
any such legislation and regulation could significantly change the competitive
landscape in which Moody's operates. Management of Moody's cannot predict
whether these or any other proposals will be enacted or the ultimate impact on
the competitive position, financial position or results of operations of
Moody's.
INTELLECTUAL PROPERTY
Moody's owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights, patents and other intellectual
property rights that, in the aggregate, are of material importance to Moody's
business. Management of Moody's believes that each of the "Moody's" name and
related names, marks and logos are of material importance to Moody's. Moody's is
licensed to use certain technology and other intellectual property rights owned
and controlled by others, and, similarly, other companies are licensed to use
certain technology and other intellectual property rights owned and controlled
by Moody's. Moody's considers its trademarks, service marks, databases, software
and other intellectual property to be proprietary, and Moody's relies on a
combination of copyright, trademark, trade secret, patent, non-disclosure and
contract safeguards for protection.
The names of Moody's products and services referred to herein are
trademarks, service marks or registered trademarks or service marks owned by or
licensed to Moody's or one or more of its subsidiaries.
-11-
<PAGE> 12
MOODYS CORP /DE/ - 10-K405
EMPLOYEES
As of December 31, 2000, the number of full-time equivalent employees
of Moody's was approximately 1,500.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name, Age and Position Biographical Data
<S> <C>
John Rutherfurd, Jr., 61 Mr. Rutherfurd has served as the Company's President and
President and Chief Executive Officer Chief Executive Officer since October 1, 2000 and has been
a member of the Board of Directors since May 30, 2000. Mr.
Rutherfurd has served as President of Moody's Investors Service,
Inc. since January 1998. Prior thereto, Mr. Rutherfurd was the
Chief Administrative Officer of Moody's Investors Service, Inc.,
from 1996 until January 1998. Mr. Rutherfurd also served as
Managing Director of Moody's Holdings from 1995 until 1996, and
served as President of Interactive Data Corporation ("IDC") a
wholly owned subsidiary of Old D&B, from 1985 to 1989 and from
1990 until IDC was sold by Old D&B in September 1995.
Jeanne M. Dering, 45 Ms. Dering has served as the Company's Senior Vice President and
Senior Vice President and Chief Financial Officer Chief Financial Officer since October 1, 2000. Ms. Dering joined
Moody's Investors Service, Inc., in 1997 as Managing Director,
Finance Officer, and became Chief Financial Officer of Moody's
Investors Service, Inc., in 1998. Prior to joining, she spent
over 10 years at Old D&B in a number of financial management
positions, including Director of Budgets & Financial Analysis and
Director of Financial Planning - Acquisitions and New Business
Development.
John J. Goggins, 40 Mr. Goggins has served as the Company's Senior Vice President
Senior Vice President and General Counsel and General Counsel since October 1, 2000. Mr. Goggins joined
Moody's Investors Service, Inc., in February 1999 from Dow Jones
& Company, where he served as counsel for three years and was
responsible for securities, acquisitions and general corporate
matters. Prior to Dow Jones, he was an associate at Cadwalader,
Wickersham, & Taft from 1985 to
</TABLE>
-12-
<PAGE> 13
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C>
1995, where he specialized in mergers and acquisitions.
Andrew E. Kimball, 50 Mr. Kimball has served as the Company's Senior Vice President,
Senior Vice President, Risk Management Services Moody's Risk Management Services, Inc., since October 1, 2000.
Mr. Kimball has also served as Managing Director, Moody's Risk
Management Services, Inc. a wholly owned subsidiary of Moody's
Investors Service, Inc. since 1999. Mr. Kimball joined Moody's
Investors Service, Inc. in 1987 as a Senior Analyst in the
Structured Finance Group. He was named associate director in
Structured Finance in 1988 and then, in 1990, Associate Director
of the Speculative Grade Ratings Group of Moody's Investors
Service, Inc. In 1994, he became Managing Director, Corporate
Ratings Services and Systems Development of Moody's Investors
Service. He was named Managing Director Information Management of
Moody's Investors Service, Inc. in 1997 and Chief Information
Officer of Moody's Investors Service, Inc. in 1998.
Raymond W. McDaniel, 43 Mr. McDaniel has served as the Company's Senior Vice President,
Senior Vice President, Global Ratings & Research Global Ratings & Research, since October 1, 2000. Mr. McDaniel
has also served as Senior Managing Director, Global Ratings and
Research, of Moody's Investors Service, Inc., since November
2000, and prior thereto, served as Managing Director,
International, of Moody's Investors Service, Inc., since 1996.
Mr. McDaniel also served as Managing Director, Europe, from 1993
until 1996 and Associate Director in Moody's Structured Finance
Group from 1989 until 1993. He also served as Senior Analyst in
Moody's Investors Service, Inc. Mortgage Securitization Group
between 1988 and 1989.
Donald E. Noe, 46 Mr. Noe has served as the Company's Senior Vice President,
Senior Vice President, Global Ratings & Research Global Ratings & Research, since October 1, 2000. Mr. Noe has
also served as Senior Managing Director, Global Ratings and
</TABLE>
-13-
<PAGE> 14
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C>
Research, of Moody's Investors Service, Inc., since November
2000, and prior thereto, served as Managing Director, Credit
Ratings & Analysis, of Moody's Investors Service, Inc., since
1996. Mr. Noe also served as the Managing Director, Structured
Finance, of Moody's Investors Service, Inc., from 1994 until
1996. Mr. Noe also served as Vice President and Director of
International of Moody's Investors Service, Inc., from 1988 until
1994, and served as Vice President of Moody's Investors Service,
Inc. Financial Institutions Group between 1986 and 1989.
Debra Perry, 49 Ms. Perry has served as the Company's Senior Vice President and Chief
Senior Vice President and Chief Administrative Officer Administrative Officer since October 1, 2000. Ms. Perry has also
served as Chief Administrative Officer of Moody's Investors
Service, Inc., since 1999. Prior thereto, she was the Group
Managing Director of the Finance, Securities and Insurance Group
of Moody's Investors Service, Inc., from 1996 until 1999. Ms.
Perry also served as Associate Director of the Finance and
Securities Team of Moody's Investors Service, Inc., between 1993
and 1996, and as Vice President - Senior Analyst in Moody's
Financial Institutions Group between 1992 and 1993.
Kennneth J. Pinkes, 52 Mr. Pinkes has served as the Company's Senior Vice President
Senior Vice President and Chief Credit Officer and Chief Credit Officer, since October 1, 2000. Mr. Pinkes has
also served as Chief Credit Officer, Credit Ratings & Analysis,
of Moody's Investors Service, Inc., since 1996. Prior thereto, he
was the Vice President and Director of Financial Institutions and
Sovereigns of Moody's Investors Service, Inc. from 1985 until
1996. Mr. Pinkes also served as Vice President and Director of
Industrials of Moody's Investors Service, Inc., from 1981 until
1985, and served as Assistant Vice President and Associate
Director of Moody's Commercial Paper Group between 1979 and 1981.
</TABLE>
-14-
<PAGE> 15
MOODYS CORP /DE/ - 10-K405
ITEM 2. PROPERTIES
The executive offices of Moody's are located at 99 Church Street, New York,
New York, in a 297,000-square-foot property owned by Moody's. Moody's operations
are also conducted from 4 other offices located throughout the U.S. (all of
which are leased) and 14 non-U.S. office locations (all of which are leased).
These other properties are geographically distributed to meet sales and
operating requirements worldwide. These properties are generally considered to
be both suitable and adequate to meet current operating requirements, and
virtually all space is being utilized.
ITEM 3. LEGAL PROCEEDINGS
Moody's is involved in legal proceedings, claims and litigation arising
in the ordinary course of business. In the opinion of management, although the
outcome of such matters cannot be predicted with certainty, the ultimate
liability of Moody's in connection with such matters will not have a material
adverse effect on Moody's financial position, results of operations or cash
flows.
In addition to the matters referred to above, on July 29, 1996, IRI
filed a complaint in the United States District Court for the Southern District
of New York, naming as defendants Donnelley, ACNielsen and IMS Health. At the
time of the filing of the complaint, each of the other defendants was a
subsidiary of Donnelley.
The complaint alleges various violations of United States antitrust
laws, including purported violations of Sections 1 and 2 of the Sherman Act
arising from tying arrangements, agreements with retailers and other customers,
predatory pricing practices and other matters alleged by IRI. In addition to the
foregoing claims, the complaint alleges a claim of tortious interference with a
contract and a claim of tortious interference with a prospective business
relationship. These claims relate to the acquisition by defendants of Survey
Research Group Limited ("SRG"). IRI alleges SRG violated an alleged agreement
with IRI when it agreed to be acquired by the defendants and that the defendants
induced SRG to breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount
IRI has asked to be trebled under antitrust laws. IRI also seeks punitive
damages in an unspecified amount.
On October 15, 1996, defendants moved for an order dismissing all
claims in the complaint. On May 6, 1997, the United States District Court for
the Southern District of New York issued a decision dismissing IRI's claim of
attempted monopolization in the United States, with leave to replead within 60
days. The Court denied defendants' motion with respect to the remaining claims
in the complaint. On June 3, 1997, the defendants filed an answer denying the
material allegations in IRI's complaint, and ACNielsen filed a counterclaim
alleging that IRI had made false and misleading statements about its services
and commercial activities. On July 7, 1997, IRI filed an Amended and Restated
Complaint repleading its alleged claim of monopolization in the United States
and realleging its other claims. By notice of motion dated August 18, 1997,
defendants moved for an order dismissing the amended claim. On December 1, 1997,
the Court denied the motion. On December 22, 1999, defendants filed a motion for
partial summary judgment seeking to dismiss IRI's non-U.S. antitrust claims. On
July 12, 2000, the Court granted the motion dismissing claims of injury suffered
from activities in foreign markets where IRI operates through subsidiaries or
companies owned by joint ventures or "relationships" with local companies.
Discovery in this case is ongoing.
In November 1996, Donnelley completed the 1996 Distribution. On October
28, 1996, in connection with the 1996 Distribution, Cognizant, ACNielsen and
Donnelley entered into the Indemnity and Joint Defense Agreement. See Note 14
(Contingencies) in Part II, Item 8 on pages 44-46 of this Form 10-K for
additional information with respect to this agreement.
-15-
<PAGE> 16
MOODYS CORP /DE/ - 10-K405
In June 1998, Donnelley completed the 1998 Distribution. In connection with
the 1998 Distribution, Old D&B and Donnelley entered into an agreement whereby
Old D&B has assumed all potential liabilities of Donnelley arising from the IRI
action and agreed to indemnify Donnelley in connection with such potential
liabilities.
During 1998, Cognizant separated into two new companies, IMS Health
and Nielsen Media Research. IMS Health and Nielsen Media Research are each
jointly and severally liable for all Cognizant liabilities under the
Indemnity and Joint Defense Agreement.
Under the terms of the 1996 Distribution Agreement, as a condition to the
1998 Distribution, Old D&B undertook to be jointly and severally liable with
Donnelley to Cognizant and ACNielsen. Under the terms of the 1998 Distribution
Agreement, as a condition to the 2000 Distribution, New D&B undertook to be
jointly and severally liable with Moody's for Old D&B's obligations to Donnelley
under the 1998 Distribution Agreement, including any liabilities relating to the
IRI action. However, under the 2000 Distribution Agreement, as between
themselves, each of New D&B and Moody's has agreed to be responsible for 50% of
any payments to be made in respect of the IRI action under the 1998 Distribution
Agreement or otherwise, including any legal fees or expenses related thereto.
Management is unable to predict at this time the final outcome of the IRI
action or whether the resolution of such matter could materially affect Moody's
results of operations, cash flows or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report on
Form 10-K, no matter was submitted to a vote of Security Holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Information in response to this Item is set forth under the captions
"Common Stock Information" and "Dividends" in Part II, Item 7 on Pages 25-26 of
this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The Company's selected consolidated financial data should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations", the Moody's Corporation consolidated
financial statements and notes thereto, and other financial information included
elsewhere in this Form 10-K. Certain of the selected financial data is derived
from the unaudited consolidated financial statements of Moody's. In the opinion
of management, these financial statements include all necessary adjustments for
a fair presentation of such data in conformity with generally accepted
accounting principles. The Company's consolidated financial statements are
presented as if the Company were a separate entity for all periods presented.
The financial data included herein may not necessarily reflect the results of
operations and financial position of Moody's in the future or what they would
have been had it been a separate entity.
Through September 30, 2000, Moody's expenses included allocations of
costs from Old D&B for employee benefits, centralized services and other
corporate overhead. Expenses related to these services have been allocated to
Moody's based on utilization of specific services or, where such an estimate
could not be determined, based on Moody's revenue in proportion to Old D&B's
total revenue. Although Moody's management believes these allocations are
reasonable, such allocated costs are not necessarily indicative of the actual
costs that would have been incurred if Moody's had performed or obtained these
services as a separate entity. The allocations included in expenses in the
consolidated
-16-
<PAGE> 17
MOODYS CORP /DE/ - 10-K405
statements of operations were $13.3 million, $17.2 million, $16.4 million, $15.8
million and $16.9 million in 2000, 1999, 1998, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(unaudited)
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS(1)
Revenue $602.3 $564.2 $513.9 $457.4 $385.3
Expenses 313.8 293.8 288.4 267.4 252.0
------ ------ ------ ------ ------
Operating income 288.5 270.4 225.5 190.0 133.3
Non-operating (expense) income, net (2) (4.5) 8.5 12.4 0.2 (0.3)
------ ------ ------ ------ ------
Income before provision for income taxes 284.0 278.9 237.9 190.2 133.0
Provision for income taxes 125.5 123.3 95.9 64.0 56.0
------ ------ ------ ------ ------
Income before cumulative effect of
accounting change 158.5 155.6 142.0 126.2 77.0
Cumulative effect of accounting change,
net of income tax benefit (3) - - - (20.3) -
------ ------ ------ ------ ------
Net income $158.5 $155.6 $142.0 $105.9 $77.0
------ ------ ------ ------ ------
EARNINGS PER SHARE
Basic $0.98 $0.96 $0.84 $0.62 $0.45
Diluted $0.97 $0.95 $0.83 $0.61 $0.45
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 161.7 162.3 169.5 170.8 170.0
Diluted 163.0 164.3 171.7 172.6 171.6
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(unaudited) (unaudited)
(AMOUNTS IN MILLIONS)
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Total assets $398.3 $274.8 $296.2 $266.5 $271.8
Long-term debt 300.0 - - - -
Shareholders' equity (282.5) (223.1) (192.6) (152.9) (83.9)
</TABLE>
(1) The results of operations above includes the following amounts related
to the Financial Information Services ("FIS") business that was sold in
July 1998: revenue of $18.4 million, $34.3 million and $35.6 million in
1998, 1997 and 1996, respectively, and operating income of $4.2
million, $5.8 million and $6.7 million in 1998, 1997 and 1996,
respectively.
Included in non-operating (expense) income, net are pre-tax gains on
the sale of FIS of $9.2 million in 1999 and $12.6 million in 1998.
(2) Non-operating (expense) income, net in 2000 includes $5.8 million of
interest expense of which $5.6 million relates to the $300 million of
notes payable outstanding at December 31, 2000. This amount was
partially offset by $2.2 million of interest income on invested cash.
(3) Represents the impact of a change in revenue recognition policies
whereby the Company began recognizing certain revenues over the service
period, instead of as previously recognized, at the time of billing.
-17-
<PAGE> 18
MOODYS CORP/DE/ - 10-K405
ITEM 7. 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
consolidated financial statements and notes thereto included elsewhere in this
Form 10-K.
THE COMPANY
Except where otherwise indicated, the terms "Moody's" or "the Company"
refer to Moody's Corporation and its wholly owned subsidiaries. The Company is a
leading global credit rating, research and risk analysis firm in terms of market
position, revenue, income and a number of other relevant statistical standards.
The Company publishes rating opinions on a broad range of credit obligations.
These include various corporate and governmental obligations, structured finance
securities and commercial paper programs, issued in domestic and international
markets. Moody's also assigns ratings to issuers of securities, insurance
company obligations, bank loans, derivative products, bank deposits and other
bank debt and managed funds.
Closely integrated with its ratings services, Moody's provides research
services that are utilized by institutional investors and other credit
professionals. Organized according to industry and market segment, these
research services cover investment grade and speculative grade corporate bonds,
the global banking sector, municipal bonds, and mortgage- and asset-backed
securities, in cross-border and domestic markets worldwide.
Moody's Risk Management Services, Inc., a wholly owned subsidiary of
Moody's ("Moody's Risk Management Services"), develops and distributes credit
risk assessment software used by banks and other financial institutions in their
portfolio management, commercial lending and other activities. Moody's Risk
Management Services also provides modeling tools, analytics, credit education
materials, seminars, computer-based lending simulations and other products and
services.
FACTORS AFFECTING COMPARABILITY
On September 30, 2000 (the "Distribution Date"), The Dun & Bradstreet
Corporation ("Old D&B") separated into two independent, publicly traded
companies - Moody's Corporation and The New D&B Corporation ("New D&B"). The
separation was accomplished through a tax-free distribution to the shareholders
of Old D&B of all of the shares of common stock of a newly formed, wholly owned
subsidiary, New D&B, which comprised the business of Old D&B's Dun & Bradstreet
operating company ("the D&B Business"). The remaining business of Old D&B
consisted solely of the business of providing ratings and related research and
risk management services ("the Moody's Business") and was renamed "Moody's
Corporation". Old D&B's common stock became Moody's common stock, and shares of
common stock of Old D&B represent a continuing interest in the Moody's Business.
The financial statements of Moody's have been restated to reflect the
recapitalization described above.
In general, pursuant to the terms of the Distribution Agreement entered
into at the Distribution Date, all of the assets and liabilities of the D&B
Business were allocated to New D&B and all of the assets and liabilities of the
Moody's Business were allocated to Moody's. The net indebtedness of Old D&B at
the Distribution Date was allocated equally between the parties, before giving
effect to certain adjustments.
The consolidated financial statements of Moody's Corporation reflect
the financial position, results of operations, and cash flows of Moody's as if
it were a separate entity for all periods presented. The financial statements
include allocations of certain Old D&B corporate headquarters assets and
liabilities that were transferred from Old D&B at the Distribution Date, as well
as allocations of certain expenses for employee benefits, centralized services
and corporate overhead (see Note 1 to the consolidated financial statements).
The expense allocations were based on utilization of specific services or, where
such an estimate could not be determined, based on Moody's revenue in proportion
to Old D&B's total revenue. Management believes that these allocations are
reasonable. However, the costs of these services and benefits charged to
-18-
<PAGE> 19
MOODYS CORP/DE/ - 10-K405
Moody's are not necessarily indicative of the costs that would have been
incurred if Moody's had performed or obtained these services as a separate
entity.
OPERATING SEGMENTS
Moody's operates primarily in one reportable business segment: ratings,
which accounts for approximately 86% of the Company's total revenue. The ratings
segment is composed of four ratings groups: corporate finance, structured
finance, financial institutions and sovereigns, and public finance. Given the
dominance of the ratings segment to Moody's overall results, the Company does
not separately measure and report operating income for the ratings business.
Rather, revenue is the predominant measure utilized by senior management for
assessing performance and for the allocation of resources, and operating income
is evaluated for Moody's as a whole. Moody's also reports revenue separately for
two geographic areas: U.S. and international.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999
Moody's revenue was $602.3 million in 2000, an increase of $38.1
million or 6.8% from $564.2 million in 1999. The increase reflected modest
growth in ratings revenue, with strong gains in global structured finance
ratings, partially offset by the impact of declines in several sectors of the
U.S. market. Other revenue reflected strong growth over 1999 in Moody's Risk
Management Services, primarily related to the acquisition of a financial
software products company in January 2000. It also reflected double-digit growth
in research products revenue, driven by international expansion, new product
introductions, and growth in demand for products delivered via the Internet.
Moody's ratings revenue was $519.6 million in 2000, an increase of 3.5%
from $502.2 million in 1999. Strong growth in global structured finance and
international corporate finance was partially offset by the effects of a decline
in securities issuance in the U.S. capital markets.
Structured finance ratings revenue of $199.2 million in 2000 grew 15.5%
over 1999 revenue of $172.4 million. The increase in 2000 revenue was
principally the result of strong growth in the asset-backed and derivatives
markets in the U.S., Europe and Japan. Moody's revenue from ratings of credit
derivatives grew by 12% in 2000, as the number of collateralized debt
obligations that Moody's rated increased by 14%.
Revenue from corporate ratings was $162.7 million in 2000 compared with
$165.5 million in 1999, a decline of 1.7%. Revenue from high yield ratings
declined in 2000, as the number of issues during the year was 55% lower than in
1999. This revenue decline was substantially offset by revenue from new European
issuers and double-digit growth in bank loan ratings.
Revenue from financial institution and sovereign ratings was $111.6
million in 2000, an increase of 6.5% over $104.8 million in 1999. Growth in 2000
reflected 21% volume growth in international bond and medium-term note issuance,
somewhat offset by negative effects from a decline in U.S. debt issuance and
U.S. industry consolidation in this sector.
Public finance ratings revenue declined 22.5% to $46.1 million in 2000,
from $59.5 million in 1999. The decrease was principally the result of a 16%
decline in the number of U.S. municipal bonds issued in 2000 compared to 1999.
Other revenue increased 33.4% to $82.7 million in 2000, reflecting
double-digit growth in research products revenue due to strong demand for
products delivered via the Internet and increased international sales. In
addition, revenue for Moody's Risk Management Services more than doubled
compared to 1999, primarily due to the acquisition of a financial software
products company in January 2000.
Revenue in the United States was $428.9 million in 2000, an increase of
1.3% over $423.4 million in 1999. Ratings revenue declined 1% in 2000 compared
to the prior year, as the effects of lower issuance levels in the core corporate
and public finance sectors were substantially offset by strong growth in
asset-backed finance, credit derivatives
-19-
<PAGE> 20
MOODYS CORP/DE/ - 10-K405
and bank loan ratings. Double-digit revenue growth was achieved in risk
management services and research products.
Moody's international revenue was $173.4 million in 2000 versus $140.8
million in 1999, an increase of 23.2%. This performance was principally driven
by strong growth in ratings of international structured finance securities,
particularly in Europe and Japan, and an increased number of European corporate
issuers. Strong growth was achieved in international research products revenue,
reflecting new products and geographic expansion, and in risk management
services revenue.
2000 operating expenses of $189.6 million grew 3.3% from $183.6 million
in 1999. The increase reflected higher compensation and related expenses due to
an increase in the number of analysts, particularly in Europe and in worldwide
structured finance. This growth was partially offset by cost containment efforts
in light of low revenue growth in the U.S and lower production and delivery
costs due to conversion of research products to Internet delivery. Selling,
general and administrative expenses of $107.6 million in 2000 were up 10.7%
compared to $97.2 million in 1999. This increase was principally due to higher
compensation and related costs to support international business expansion,
increased corporate overhead costs resulting from becoming a separate public
company and higher sales related costs in the Risk Management Services business.
Depreciation and amortization expense increased from $13.0 million in 1999 to
$16.6 million in 2000. This increase principally reflected amortization of
goodwill and other intangible assets related to the previously-mentioned
acquisition.
Moody's operating income of $288.5 million in 2000 was up 6.7% from
$270.4 million in 1999. Non-operating expense of $4.5 million in 2000
principally reflected interest expense related to Moody's private debt placement
that was completed in the fourth quarter, offset in part by interest income on
invested cash. Non-operating income of $8.5 million in 1999 principally
reflected a $9.2 million gain related to the 1998 sale of the Company's
Financial Information Services business ("FIS").
Moody's effective tax rate was 44.2% for both 2000 and 1999.
Reported net income was $158.5 million in 2000 compared with $155.6
million in 1999, an increase of 1.9%. Basic and diluted earnings per share for
2000 were $0.98 and $0.97, respectively, compared to $0.96 and $0.95,
respectively, in 1999. Excluding the 1999 gain related to the sale of FIS, and
including interest expense on the private debt placement for both periods (but
excluding any interest income), diluted earnings per share would have been $0.91
in 2000 compared with $0.84 in 1999, an increase of 8.3%.
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Moody's revenue was $564.2 million in 1999, an increase of 9.8% from
$513.9 million in 1998. Revenue in 1998 included $18.4 million related to FIS,
which was sold in July 1998. Excluding FIS, Moody's 1999 revenue grew 13.9% from
$495.5 million in 1998. The strong revenue performance reflected double-digit
growth in ratings revenue, fueled by continued expansion of European capital
markets and growth in several sectors of the U.S. market. Moody's 1999 revenue
also reflected double-digit growth in research products, driven by international
expansion and new product introductions.
Moody's ratings revenue was $502.2 million in 1999, an increase of
13.7% from $441.5 million in 1998. This growth was principally driven by ratings
of corporate bonds, structured products and commercial paper. International
ratings revenue growth was especially strong, as the introduction of the euro
and a significant increase in merger-related financing drove significant growth
in European capital markets. These revenue gains were partially offset by the
effects of volume declines in the U.S. high yield and municipal markets,
compared to strong performance in these markets in 1998.
Structured finance ratings revenue of $172.4 million in 1999 grew 20.6%
over 1998 revenue of $143.0 million. The increase in 1999 revenue was
principally the result of strong growth in the asset-backed and derivatives
markets in the U.S., Europe and Japan. Moody's revenue from ratings of credit
derivatives grew by more than 40% in 1999, as U.S. issuance volumes surged to
record levels.
-20-
<PAGE> 21
MOODYS CORP/DE/ - 10-K405
Revenue from corporate ratings was $165.5 million in 1999 compared with
$143.6 million in 1998, an increase of 15.3%. The revenue growth was principally
driven by strong international issuance volumes. Bank loan ratings activity
expanded significantly in 1999 as Moody's rated more than $300 billion of new
loans, an increase of 50% over 1998. Revenue from high yield ratings declined in
1999, as issuance during the year was approximately 32% lower than 1998's record
level.
Revenue from financial institution and sovereign ratings was $104.8
million in 1999, an increase of 16.3% over $90.1 million in 1998. The increase
principally reflected higher debt issuance in and expanded coverage of the
global banking sector.
Public finance ratings revenue declined 8.2% to $59.5 million in 1999
from $64.8 million in 1998. The decrease was principally the result of lower
municipal debt issuance in 1999 following 1998's near-record level.
Revenue in the United States was $423.4 million in 1999, an increase of
2.5% over $413.0 million in 1998. Excluding the 1998 revenue of FIS, United
States revenue increased 7.1% in 1999, from $395.3 million in 1998. This
increase was principally the result of gains in structured finance, commercial
paper and bank loan ratings, partially offset by the effects of volume declines
in the high yield and municipal markets.
Moody's international revenue was $140.8 million in 1999 versus $100.9
million in 1998, an increase of 39.5%. Excluding the 1998 revenue of FIS,
international revenue increased 40.5% in 1999 from $100.2 million in 1998. This
performance was principally driven by growth in European capital markets, where
the introduction of the euro and a significant increase in merger-related
financing drove strong debt issuance. Strong growth was also achieved in ratings
of international asset-backed securities, particularly in Europe and Japan.
1999 operating expenses of $183.6 million grew $6.3 million, or 3.6%,
from $177.3 million in 1998. Excluding 1998 operating expense of $8.5 million
related to FIS, 1999 operating expense increased by $14.8 million, or 8.8%. The
increase principally reflected higher compensation and related expenses due to
an increase in the number of analysts, particularly in Europe and the structured
finance business. Selling, general and administrative expenses of $97.2 million
in 1999 were up $1.5 million compared to $95.7 million in 1998. Excluding $4.6
million of 1998 selling, general and administrative expenses related to FIS,
1999 expense grew by $6.1 million, or 6.7%. This increase was principally due to
higher compensation and related costs. Depreciation and amortization expense was
$13.0 million in 1999, a decrease of $2.4 million from 1998. Excluding FIS
depreciation and amortization expense of $1.1 million in 1998, the 1999 expense
declined by $1.3 million. This reflected lower levels of capital spending in
1998 and 1999 versus prior years, partly as a result of declining technology
costs.
Moody's operating income of $270.4 million in 1999 was up 19.9% from
$225.5 million in 1998. Excluding 1998 operating income related to FIS of $4.2
million, 1999 operating income grew 22.2% from $221.3 million in 1998.
Non-operating income, net was $8.5 million in 1999 and $12.4 million in
1998. Non-operating income included pre-tax gains related to the sale of FIS of
$9.2 million in 1999 and $12.6 million in 1998.
Moody's effective tax rate was 44.2% for 1999, compared with an
effective tax rate of 40.3% in 1998. This increase resulted from an increase in
the percentage of Moody's income allocable to states with high income tax rates
and refinements of certain estimates.
As a result of the foregoing, Moody's reported net income of $155.6
million in 1999 versus $142.0 million in 1998, an increase of 9.6%. Basic and
diluted earnings per share in 1999 were $0.96 and $0.95, respectively, compared
with basic and diluted earnings per share of $0.84 and $0.83, respectively, in
1998. Moody's net income included after-tax gains related to the sale of FIS of
$5.1 million ($0.03 per basic and diluted share) in 1999 and $7.5 million ($0.04
per basic and diluted share) in 1998. Excluding these gains, Moody's 1999 net
income increased 11.9% over 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
-21-
<PAGE> 22
MOODYS CORP/DE/ - 10-K405
Moody's reported revenue of $513.9 million in 1998 was up 12.4%
compared with $457.4 million in 1997. Excluding FIS revenue of $18.4 million in
1998 and $34.3 million in 1997, Moody's revenue of $495.5 million in 1998 grew
17.1% from $423.1 million in 1997. This increase was principally due to strong
ratings revenue growth in corporate and municipal bonds, structured finance and
commercial paper. Revenue from research products also achieved double-digit
growth in 1998, driven by new products and continued international expansion.
Moody's ratings revenue was $441.5 million in 1998, an increase of
16.2% compared with $379.9 million in 1997. The increase was principally driven
by growth in issuance of corporate and municipal bonds, structured products and
commercial paper.
Revenue from corporate ratings was $143.6 million in 1998, up 12.5%
from $127.7 million in 1997. High yield bond issuance in 1998 reached a record
high for the second consecutive year, growing approximately 23% over 1997.
Investment grade issuance volumes also increased in 1998, in part the result of
a favorable interest rate environment.
Structured finance ratings revenue was $143.0 million in 1998 and
$104.1 million in 1997, an increase of 37.4%. This increase was principally the
result of strength in the mortgage-backed and credit derivatives markets in the
United States and Europe. Issuance of commercial mortgage-backed securities
increased by approximately 75% to $80 billion in 1998. In addition, the number
of ratings of credit derivatives rose 73% over the prior year.
Revenue from financial institutions and sovereign ratings of $90.1
million in 1998 was flat compared to 1997. Revenue growth was negatively
affected by consolidations in the financial services industry.
Public finance ratings revenue increased 11.7% to $64.8 million in
1998, compared with $58.0 million in 1997. This increase was principally the
result of near-record U.S. municipal bond issuance in 1998, as lower interest
rates fueled an increase of more than 50% in refinancings.
Revenue in the United States increased by 9.2% to $413.0 million in
1998, compared with $378.3 million in 1997. Excluding FIS revenue of $17.7
million in 1998 and $33.0 million in 1997, United States revenue of $395.3
million in 1998 grew 14.5% compared with $345.3 million in 1997. This increase
resulted principally from growth in ratings of corporate and municipal bonds,
structured products and commercial paper.
International revenue was $100.9 million in 1998 and $79.1 million in
1997, an increase of 27.6%. Excluding FIS revenue of $0.7 million in 1998 and
$1.3 million in 1997, international revenue of $100.2 million in 1998 grew 28.8%
compared with $77.8 million in 1997. The strong growth reflected gains in
European corporate bonds, broader coverage of banks in Europe and Asia, and
record international structured finance issuance volumes. Research products
revenue also showed strong double-digit growth, driven by new products and
customers.
Operating expenses of $177.3 million were 12.2% higher than $158.0
million in 1997. Excluding FIS in both years, operating expenses of $168.8
million in 1998 were 18.5% higher than $142.5 million in 1997. The expense
growth primarily reflected higher compensation expenses due to an increase in
the number of rating analysts and increased expenses for travel and outside
professional services, all to support revenue growth. Selling, general and
administrative expenses of $95.7 million in 1998 were $2.5 million higher than
$93.2 million in 1997. Excluding FIS in both years, selling, general and
administrative expenses of $91.1 million in 1998 were $8.3 million, or 10.0%,
higher than $82.8 million in 1997. The increase principally reflected higher
compensation costs, staffing growth in support functions, and costs related to
new customer support systems. Depreciation and amortization expense of $15.4
million in 1998 was $0.8 million lower than $16.2 million in 1997. Excluding FIS
in both years, 1998 depreciation and amortization expense of $14.3 million was
$0.7 million higher than $13.6 million in 1997.
Operating income was $225.5 million in 1998 compared to $190.0 million
in 1997, an increase of 18.7%. Excluding the results of FIS, operating income
was $221.3 million in 1998 and $184.2 million in 1997, an increase of 20.1%.
-22-
<PAGE> 23
MOODYS CORP/DE/ - 10-K405
Moody's reported non-operating income of $12.4 million in 1998 and $0.2
million in 1997. 1998 non-operating income included a pre-tax gain of $12.6
million on the sale of FIS.
Moody's effective tax rate was 40.3% for 1998, compared with an
effective tax rate of 33.7% in 1997. This increase resulted from a number of
factors, including an increase in the percentage of Moody's income allocable to
states with high income tax rates and refinements of certain estimates.
As a result of the foregoing, Moody's reported net income of $142.0
million in 1998 and $105.9 million in 1997, an increase of 34.1%. Earnings per
share were $0.84 basic and $0.83 diluted for 1998, compared to $0.62 basic and
$0.61 diluted in 1997. 1998 results included the $7.5 million after-tax gain on
the sale of FIS ($0.04 per basic and diluted share). 1997 results included a
one-time, non-cash charge of $20.3 million after-tax ($0.12 per basic and
diluted share) for the cumulative effect of an accounting change related to
revenue recognition.
MARKET RISK
Moody's maintains operations in 14 countries outside of the United
States, and approximately 25% of its expenses are incurred in currencies other
than the U.S. dollar. Over 90% of Moody's revenues for the year ended December
31, 2000 were billed and collected in U.S. dollars. As such, the Company is
exposed to market risk from changes in foreign exchange rates.
As of December 31, 2000, approximately 11% of Moody's assets were
located outside the U.S. Of Moody's aggregate cash and cash equivalents of
$119.1 million at December 31, 2000, approximately $26 million was located
outside the United States (with $18 million in England), making the Company
susceptible to fluctuations in foreign exchange rates. Changes in the value of
these currencies relative to the U.S. dollar are charged or credited to the
cumulative translation adjustment in shareholders' equity.
The Company also invests in short-term certificates of deposit and
commercial paper. Market risk associated with these investments is considered
insignificant.
The Company has not engaged in foreign currency hedging transactions
nor does the Company have any derivative financial instruments. However, going
forward, the Company will assess the need to enter into hedging transactions to
limit its risk due to fluctuations in exchange rates.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $67.6 million, $197.7
million, and $167.6 million for the years ended December 31, 2000, 1999, and
1998, respectively. The decrease in 2000 compared to 1999 was primarily due to a
payment of approximately $175 million, representing Moody's 50% share, in
connection with an amended tax return filed by Old D&B on May 12, 2000. In
addition, payments in 2000 for incentive compensation were higher than in 1999.
The increase in accounts receivable in 2000 reflected strong growth in fourth
quarter billings. The 1999 increase compared to 1998 principally reflected the
net income growth discussed above. In addition, faster collections of
receivables due in part to new systems and processes resulted in a reduction in
accounts receivable at December 31, 1999 compared with December 31, 1998,
despite a significant increase in revenue for the year.
Net cash (used in) provided by investing activities was ($33.6)
million, ($12.0) million and $13.1 million for the years ended December 31,
2000, 1999 and 1998, respectively. The increase in cash used from 1999 to 2000
was principally due to the acquisition of a financial software products Company
in January 2000 for $17.4 million, as well as increased spending on computer
equipment and software development. The 1998 figure included proceeds of $26.5
million from the sale of FIS. Capital expenditures were $14.4 million in 2000,
$12.9 million in 1999 and $12.4 million in 1998. Capital expenditures
principally include investments in purchasing, developing, and upgrading
computer hardware, software and systems, and in improvements to owned and leased
office facilities. Currently, Moody's has no material commitments for capital
expenditures.
Net cash provided by (used in) financing activities was $81.6 million,
($186.4) million and ($182.0) million for the years ended December 31, 2000,
1999 and 1998,
-23-
<PAGE> 24
MOODYS CORP/DE/ - 10-K405
respectively. The 1999 and 1998 amounts represent net distributions to Old D&B
in each year. The 2000 amount includes the proceeds from the private debt
placement that was completed in the fourth quarter and from employee stock
plans, partially offset by share repurchases, dividend payments and
distributions made to Old D&B through the Distribution Date.
Pursuant to the Distribution Agreement, Moody's was allocated $195.5
million of debt at September 30, 2000. Moody's funded this debt with borrowings
under a $160 million unsecured bank revolving credit facility and a bank bridge
line of credit. On October 3, 2000 the Company issued $300 million of notes in a
private placement. The private placement notes have a five-year term and bear
interest at an annual rate of 7.61%, payable semi-annually. The cash proceeds
from the private placement were used in part to repay the outstanding balance on
the revolving credit facility and to repay the bridge line of credit.
The revolving credit facility, which was undrawn as of December 31,
2000, consists of an $80 million 5-year facility and an $80 million 364-day
facility. Interest rates on borrowings under the facility are based on
prevailing short-term rates at the time of such borrowings.
Moody's existing balances of cash, cash generated from operations and
debt capacity are expected to be sufficient to fund Moody's operating needs,
service debt and pay dividends, over the next year.
SHARE REPURCHASE PROGRAM
In October 2000, the Board of Directors of Moody's Corporation
authorized a share repurchase program of up to $250 million of Moody's common
stock. The program includes both special share repurchases and systematic
repurchases of Moody's common stock to offset the dilutive effect of share
issuances under the Company's employee benefit arrangements. During the fourth
quarter of 2000, the Company repurchased 2.8 million shares of its common stock
pursuant to this program, at a total cost of approximately $71.8 million.
CONTINGENCIES
Moody's is involved in legal proceedings of a nature considered normal
to its business. In the opinion of management, although the outcome of such
legal proceedings cannot be predicted with certainty, the ultimate liability of
Moody's in connection with such legal proceedings will not have a material
effect on Moody's results of operations, cash flows or financial position.
In addition, Moody's has certain other contingencies discussed below.
Tax Matters
Pursuant to the Distribution Agreement, New D&B and Moody's have agreed
to each be financially responsible for 50% of any potential liabilities that may
arise with respect to the reviews described below, to the extent such potential
liabilities are not directly attributable to their respective business
operations.
Old D&B and its predecessors entered into global tax planning
initiatives in the normal course of business, principally through tax-free
restructurings of both their foreign and domestic operations. These initiatives
are subject to normal review by tax authorities. It is possible that additional
liabilities may be proposed by tax authorities as a result of these reviews and
that some of the reviews could be resolved unfavorably. At this time, Moody's
management is unable to predict the extent of such reviews, the outcome thereof
or whether the resolution of these matters could materially affect Moody's
results of operations, cash flows or financial position.
The IRS has completed its review of the utilization of certain capital
losses generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its
audit process, issued a formal assessment with respect to the utilization of
these capital losses and Old D&B responded by filing a petition for a refund in
the U.S. District Court on September 21, 2000, after the payments described
below were made.
-24-
<PAGE> 25
MOODYS CORP/DE/ - 10-K405
On May 12, 2000, an amended tax return was filed for the 1989 and 1990
tax periods, which reflects $561.6 million of tax and interest due. Old D&B paid
the IRS approximately $349.3 million of this amount on May 12, 2000. IMS Health
has informed Old D&B that it paid to the IRS approximately $212.3 million on May
17, 2000. The payments were made to the IRS to stop further interest from
accruing. Notwithstanding the filing and payment, New D&B is contesting the
IRS's formal assessment and would also contest the assessment of amounts, if
any, in excess of the amounts paid. Moody's had previously accrued its
anticipated share of the probable liability arising from the utilization of
these capital losses. See Note 14 to the consolidated financial statements,
Contingencies, for additional information.
Information Resources, Inc.
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint
in the United States District Court for the Southern District of New York,
naming as defendants the corporation then known as "The Dun & Bradstreet
Corporation" and, as discussed below, now known as "R.H. Donnelley
Corporation"("Donnelley"), A.C. Nielsen Company (a subsidiary of ACNielsen
Corporation) and IMS International, Inc. (a subsidiary of the company then known
as Cognizant Corporation). At the time of the filing of the complaint, each of
the other defendants was a wholly owned subsidiary of Donnelley.
The complaint alleges various violations of United States antitrust
laws, including purported violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount
IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages of
an unspecified amount.
Under the terms of the Distribution Agreement, as a condition to the
Distribution, New D&B undertook to be jointly and severally liable with Moody's
for Old D&B's obligations to Donnelley under the distribution agreement pursuant
to which the 1998 Distribution was effected, including any liabilities arising
under the Indemnity and Joint Defense Agreement. However, as between themselves,
each of New D&B and Moody's will be responsible for 50% of any payments to be
made with respect to the IRI action pursuant to such 1998 distribution
agreement, including legal fees or expenses related thereto.
Management is unable to predict at this time the final outcome of the
IRI action or whether the resolution of this matter could materially affect
Moody's results of operations, cash flows or financial position. As such, no
amount in respect of this matter has been accrued in the financial statements of
the Company. See Note 14, to the consolidated financial statements,
Contingencies, for additional information.
DIVIDENDS
Moody's, as a subsidiary of Old D&B, did not pay dividends directly to
Old D&B shareholders. The payment and level of cash dividends by Moody's since
the Distribution and going forward will be subject to the discretion of the
Moody's Board of Directors. In the fourth quarter of 2000, the Company paid a
quarterly dividend of 4.5 cents per share of Moody's common stock. In December
2000, the Company's Board of Directors declared a first quarter 2001 dividend of
4.5 cents per share, payable on March 10, 2001 to shareholders of record on
February 26, 2001.
COMMON STOCK INFORMATION
As described above in "Item 1 - Business - The Distribution", the
Distribution was completed on September 30, 2000. Accordingly, as of October 3,
2000 the Company's common stock began trading on the New York Stock Exchange
under the symbol "MCO". The table
-25-
<PAGE> 26
MOODYS CORP/DE/ - 10-K405
below indicates the high and low sales price of the Company's common stock and
the dividends paid for the period from October 3, 2000 (the start of regular way
trading of Moody's common stock) through December 31, 2000. The number of
registered shareholders of record at January 31, 2001 was 8,332.
<TABLE>
<CAPTION>
PRICE PER SHARE
--------------- DIVIDENDS PAID
HIGH LOW PER SHARE
------ ----- --------------
<S> <C> <C> <C>
Period from October 3, 2000
Through December 31, 2000.................... $ 28.88 $ 22.63 $0.045
</TABLE>
FORWARD LOOKING STATEMENTS
Certain statements contained in this Form 10-K are forward-looking
statements and are based on future expectations, plans and prospects for Moody's
business and operations that involve a number of risks and uncertainties. The
forward-looking statements are made as of the date of this Form 10-K, and
management disclaims any duty to update or revise such statements on a
going-forward basis, whether as a result of subsequent developments, changed
expectations or otherwise. In connection with the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, the Company is identifying
certain factors that could cause actual results to differ, perhaps materially,
from those indicated by these forward-looking statements. Those factors include,
but are not limited to, changes in the volume of debt securities issued in
domestic and/or global capital markets; changes in interest rates and other
volatility in the financial markets; possible loss of market share through
competition; introduction of competing products or technologies by other
companies; pricing pressures from competitors and/or customers; the potential
emergence of government-sponsored credit rating agencies; proposed U.S.,
foreign, state and local legislation and regulations, including those relating
to nationally recognized statistical rating organizations; the possible loss of
key employees to investment or commercial banks or elsewhere and related
compensation cost pressures; the outcome of any review by controlling tax
authorities of the Company's global tax planning initiatives; the uncertainty
regarding market acceptance and revenue generating opportunities for Web-based
research products; and other risk factors as discussed in The New D&B
Corporation Form 10 (Amendment No. 2) filed on September 11, 2000 with the
Securities and Exchange Commission and in other filings made by the Company from
time to time with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information in response to this Item is set forth under the caption
"Market Risk" in Part II, Item 7 on Page 23 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Report of Independent Accountants........................... 27
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2000 and
1999...................................................... 29
For the years ended December 31, 2000, 1999 and 1998:
Consolidated Statements of Operations..................... 28
Consolidated Statements of Cash Flows..................... 30
Consolidated Statements of Shareholders' Equity........... 31
Notes to Consolidated Financial Statements................ 32-48
</TABLE>
-26-
<PAGE> 27
MOODYS CORP/DE/ - 10-K405
Schedules are omitted as not required or inapplicable or because the
required information is provided in the consolidated financial statements,
including the notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the Board of Directors of Moody's Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of Moody's
Corporation and its subsidiaries at December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 5, 2001
-27-
<PAGE> 28
MOODYS CORP/DE/ - 10-K405
MOODY'S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in millions, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Revenue $ 602.3 $ 564.2 $ 513.9
Expenses
Operating expenses 189.6 183.6 177.3
Selling, general and administrative expenses 107.6 97.2 95.7
Depreciation and amortization 16.6 13.0 15.4
---------------- ---------------- ----------------
Operating income 288.5 270.4 225.5
---------------- ---------------- ----------------
Gain on sale of business -- 9.2 12.6
Interest expense, net (3.6) -- --
Other non-operating expense, net (0.9) (0.7) (0.2)
---------------- ---------------- ----------------
Non-operating (expense) income, net (4.5) 8.5 12.4
---------------- ---------------- ----------------
Income before provision for income taxes 284.0 278.9 237.9
Provision for income taxes 125.5 123.3 95.9
---------------- ---------------- ----------------
Net income $ 158.5 $ 155.6 $ 142.0
================ ================ ================
Earnings per share
Basic $ 0.98 $ 0.96 $ 0.84
---------------- ---------------- ----------------
Diluted $ 0.97 $ 0.95 $ 0.83
---------------- ---------------- ----------------
Weighted average shares outstanding
Basic 161.7 162.3 169.5
---------------- ---------------- ----------------
Diluted 163.0 164.3 171.7
---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-28-
<PAGE> 29
MOODYS CORP/DE/ - 10-K405
MOODY'S CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in millions, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
2000 1999
---- ----
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents $ 119.1 $ 3.4
Accounts receivable, net of allowances of $24.4 in 2000 and $24.5 in 1999 101.0 84.4
Other current assets 57.5 84.9
----------- -----------
Total Current Assets 277.6 172.7
Property and equipment, net 43.4 43.3
Prepaid pension costs 53.8 49.7
Intangibles assets, net 13.7 2.2
Other assets 9.8 6.9
------------ ------------
Total Assets $ 398.3 $ 274.8
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 135.4 $ 275.1
Deferred revenue 117.7 100.4
------------ ------------
Total Current Liabilities 253.1 375.5
Notes Payable 300.0 -
Other liabilities 127.7 122.4
------------ ------------
Total Liabilities 680.8 497.9
------------ ------------
Commitments and contingencies (Notes 13 and 14)
Shareholders' Equity
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; 400,000,000 shares authorized;
171,451,136 shares issued and outstanding at December 31, 2000
and 1999 1.7 1.7
Capital surplus 7.9 -
Accumulated deficit (223.2) (222.4)
Treasury stock, at cost, 11,040,266 and 10,627,327 shares of common stock
at December 31, 2000 and 1999, respectively (67.0) -
Cumulative translation adjustment (1.9) (2.4)
------------ ------------
Total Shareholders' Equity (282.5) (223.1)
------------ ------------
Total Liabilities and Shareholders' Equity $ 398.3 $ 274.8
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-29-
<PAGE> 30
MOODYS CORP/DE/ - 10-K405
MOODY'S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $158.5 $155.6 $142.0
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 16.6 13.0 15.4
Deferred income taxes (2.3) 7.3 (6.8)
Loss on disposal of property and equipment 0.3 - 0.3
Gain on sale of business - (9.2) (12.6)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (14.6) 13.7 (4.0)
Decrease (increase) in other current assets 28.3 (4.6) (28.5)
Increase in prepaid pension costs (4.1) (1.9) (1.5)
Decrease (increase) in other assets 0.9 (2.0) (0.4)
(Decrease)increase in accounts payable and accrued liabilities (138.6) 20.7 56.8
Increase in deferred revenue 16.2 14.3 20.9
Increase (decrease) in other liabilities 6.4 (9.2) (14.0)
-------------- --------------- --------------
Net cash provided by operating activities 67.6 197.7 167.6
-------------- --------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment (12.3) (11.4) (11.3)
Net additions to computer software (2.1) (1.5) (1.1)
Acquisition of business (17.4) - (1.5)
Proceeds from sale of business - - 26.5
Other (1.8) 0.9 0.5
-------------- --------------- --------------
Net cash (used in) provided by investing activities (33.6) (12.0) 13.1
-------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes 300.0 - -
Net proceeds from stock plans 12.7 - -
Cost of treasury shares repurchased (71.8) - -
Payment of dividends (7.2) - -
Net distributions to Old D&B (152.1) (186.4) (182.0)
-------------- --------------- --------------
Net cash provided by (used in) financing activities 81.6 (186.4) (182.0)
-------------- --------------- --------------
Effect of exchange rate changes on cash 0.1 0.1 0.1
-------------- --------------- --------------
Increase (decrease) in cash and cash equivalents 115.7 (0.6) (1.2)
Cash and cash equivalents, beginning of year 3.4 4.0 5.2
-------------- --------------- --------------
Cash and cash equivalents, end of year $119.1 $ 3.4 $ 4.0
============== =============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-30-
<PAGE> 31
MOODYS CORP/DE/ - 10-K405
MOODY'S CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(amounts in millions)
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
COMMON STOCK SURPLUS DEFICIT
-------------------------------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 171.5 $ 1.7 $ -- $ (151.6)
Net income 142.0
Currency translation adjustment
Net change in Old D&B treasury stock
Net distributions to Old D&B (182.0)
-------------------------------------------------------
Comprehensive income
BALANCE AT DECEMBER 31, 1998 171.5 1.7 -- (191.6)
-------------------------------------------------------
Net income 155.6
Currency translation adjustment
Net change in Old D&B treasury stock
Net distributions to Old D&B (186.4)
-------------------------------------------------------
Comprehensive income
BALANCE AT DECEMBER 31, 1999 171.5 1.7 -- (222.4)
-------------------------------------------------------
Net income 158.5
Dividends paid (7.2)
Net proceeds from stock plans 12.7
Net change in Old D&B treasury stock
prior to the Distribution Date
Net treasury stock activity after
the Distribution Date (4.8)
Currency translation adjustment
Net distributions to Old D&B (152.1)
-------------------------------------------------------
Comprehensive income
BALANCE AT DECEMBER 31, 2000 171.5 $ 1.7 $ 7.9 $ (223.2)
=======================================================
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
TRANSLATION SHAREHOLDERS' COMPREHENSIVE
ADJUSTMENT TREASURY STOCK EQUITY INCOME
------------------------------------------------------------------
SHARES AMOUNT
------ ------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 $ (3.0) (17.8) $ -- $ (152.9)
Net income 142.0 $ 142.0
Currency translation adjustment 0.3 0.3 0.3
Net change in Old D&B treasury stock 11.4 -- --
Net distributions to Old D&B (182.0)
-----------------------------------------------------------------
Comprehensive income 142.3
------------
BALANCE AT DECEMBER 31, 1998 (2.7) (6.4) -- (192.6)
-------------------------------------------------
Net income 155.6 155.6
Currency translation adjustment 0.3 0.3 0.3
Net change in Old D&B treasury stock (4.2) -- --
Net distributions to Old D&B (186.4)
----------------------------------------------------------------
Comprehensive income 155.9
------------
BALANCE AT DECEMBER 31, 1999 (2.4) (10.6) -- (223.1)
-------------------------------------------------
Net income 158.5 158.5
Dividends paid (7.2)
Net proceeds from stock plans 12.7
Net change in Old D&B treasury stock
prior to the Distribution Date 1.6 -- --
Net treasury stock activity after
the Distribution Date (2.0) (67.0) (71.8)
Currency translation adjustment 0.5 0.5 0.5
Net distributions to Old D&B (152.1)
--------------------------------------------------------------
Comprehensive income $ 159.0
============
BALANCE AT DECEMBER 31, 2000 $ (1.9) (11.0) $ (67.0) $ (282.5)
=================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-31-
<PAGE> 32
MOODYS CORP/DE/ - 10-K405
MOODY'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA
NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Moody's Corporation ("Moody's" or "the Company"), a global credit
rating, research and risk analysis firm, publishes credit opinions, research and
ratings on fixed-income securities, issuers of securities and other credit
obligations. The Company publishes rating opinions on a broad range of credit
obligations issued in domestic and international markets, including various
corporate and governmental obligations, structured finance securities and
commercial paper programs. The Company also publishes investor-oriented credit
research including in-depth research on major issuers, industry studies, special
comments and credit opinion handbooks. Moody's Risk Management Services develops
and distributes credit risk assessment software used by banks and other
financial institutions in their portfolio management, commercial lending and
other activities. It also provides modeling tools, analytics, credit education
materials, seminars, computer-based lending simulations and other products and
services.
The Company operated as part of The Dun & Bradstreet Corporation ("Old
D&B") until September 30, 2000 (the "Distribution Date"), when Old D&B separated
into two publicly traded companies - Moody's Corporation and The New D&B
Corporation ("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 D&B Business"). The remaining business of Old
D&B consisted solely of the business of providing ratings and related research
and risk management services ("the Moody's Business") and was renamed "Moody's
Corporation". The method by which Old D&B distributed its shares is hereinafter
referred to as "the Distribution".
For purposes of governing certain ongoing relationships between the
Company and New D&B after the 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, Employee Benefits Agreement,
Shared Transaction Services Agreement, Insurance and Risk Management Services
Agreement, Data Services Agreement and Transition Services Agreement.
Pursuant to the terms of the Distribution Agreement, the Company
retained all of the assets and liabilities related to the Moody's Business and
New D&B retained all of the assets and liabilities related to the D&B Business.
Prior to the Distribution Date, Old D&B provided certain centralized services to
the Company, the cost of which was allocated to the Company. Management believes
these allocations were reasonable; however, the costs of these services are not
necessarily indicative of the costs that would have been incurred if the Company
had performed or provided these services as a separate entity. These
allocations, included in the consolidated statements of operations, were $13.3
million, $17.2 million and $16.4 million for 2000, 1999 and 1998, respectively.
The consolidated financial statements reflect the financial position, results of
operations, and cash flows of the Company as if it were a separate entity for
all periods presented.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include those of Moody's
Corporation and its wholly owned subsidiaries. The effects of all intercompany
transactions have been eliminated. Investments for which the Company does not
have the ability to exercise significant influence over operating and financial
policies are carried at cost. Investments in companies over which the Company
has significant influence but not a controlling interest are carried on an
equity basis. At December 31, 2000 and 1999, investments carried at cost or on
an equity basis were not significant.
-32-
<PAGE> 33
MOODYS CORP/DE/ - 10-K405
CASH AND CASH EQUIVALENTS
Cash equivalents principally consist of certificates of deposit and
commercial paper with maturity periods of three months or less when purchased.
Interest income on cash and cash equivalents was $2.2 million for the year ended
December 31, 2000.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over
their estimated useful lives, using the straight-line method. Expenditures for
maintenance and repairs that do not extend the economic useful life of the
related assets are charged to expense as incurred. Gains and losses on disposals
of property and equipment are reflected in the consolidated statements of
operations.
COMPUTER SOFTWARE
Costs for the development of computer software that will be sold,
leased or otherwise marketed are capitalized when technological feasibility has
been established. Such costs, which are included in other assets on the
consolidated balance sheets, primarily relate to the development of credit risk
assessment software to be licensed to customers. These costs, which generally
consist of professional services provided by third parties and compensation
costs of employees that develop the software, are amortized on a straight-line
basis over a period of three years, and are reported at the lower of unamortized
cost or net realizable value.
The Company capitalizes costs related to software developed or obtained
for internal use in accordance with Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use". These
assets, included in property and equipment in the consolidated balance sheets,
relate to the Company's accounting, product delivery and other systems. Such
costs generally consist of the direct costs of third party license fees,
professional services provided by third parties and employee compensation, in
each case incurred either during the application stage or in connection with
upgrades and enhancements that increase functionality. Costs incurred during the
preliminary project stage of development as well as maintenance costs are
expensed as incurred.
LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the undiscounted expected future cash flows are lower than the
carrying amount of the asset, a loss is recognized for the difference between
the carrying amount and the fair value of the asset.
INTANGIBLE ASSETS
Goodwill of $8.5 million and $2.0 million at December 31, 2000 and
1999, respectively, net of accumulated amortization of $3.2 million and $1.7
million, respectively, represents the excess of the purchase price over the fair
value of identifiable net assets of acquired businesses and is being amortized
on a straight-line basis over seven to ten years. Other intangible assets, which
arose through acquisitions of businesses, of $5.2 million, net of accumulated
amortization of $0.9 million at December 31, 2000, are being amortized over
their estimated useful lives, generally five to seven years. The net amount of
other intangible assets was insignificant at December 31, 1999.
At each balance sheet date, the Company reviews the recoverability of
goodwill and intangible assets based on estimated undiscounted future cash flows
from operating activities compared with the carrying value, and recognizes any
impairment on the basis of such comparison. For the years ended December 31,
2000 and 1999, no impairments were recognized.
REVENUE RECOGNITION
-33-
<PAGE> 34
MOODYS CORP/DE/ - 10-K405
The Company recognizes ratings revenue as services are provided and
research products revenue over the subscription period, which is principally
over one year. Revenue from risk management software product sales is generally
recognized at the time the product is shipped to customers, as the Company's
obligations are complete. Amounts billed in advance of providing the related
products or services are credited to deferred revenue and reflected in revenue
when earned. The Company recognizes revenue in accordance with Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). As
such, revenue is recognized when an agreement exists, the services have been
provided and accepted by the customer, fees are determinable, and the collection
of resulting receivables is considered probable.
FOREIGN CURRENCY TRANSLATION
For all operations outside the United States where the Company has
designated the local currency as the functional currency, assets and liabilities
are translated into U.S. dollars using end of year exchange rates, and revenue
and expenses are translated using average exchange rates for the year. For these
operations, currency translation adjustments are accumulated in a separate
component of shareholders' equity. Realized transaction gains and losses are
recognized in other non-operating expense, net. Transaction losses were $0.9
million, $0.7 million and $0.2 million in 2000, 1999 and 1998, respectively.
COMPREHENSIVE INCOME
Comprehensive income represents the change in net assets of a business
enterprise during a period due to transactions and other events and
circumstances from non-owner sources. Comprehensive income includes net income
adjusted for the change in foreign currency translation adjustment. The required
disclosures have been included in the consolidated statements of shareholders'
equity. The net effect of income taxes on comprehensive income was not
significant.
INCOME TAXES
The Company accounts for income taxes under the liability method in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Prior to the Distribution, the Company was
included in the federal and certain state income tax returns of Old D&B. The
provision for income taxes for each of the years ended December 31, 2000, 1999
and 1998 has been calculated on a separate-company basis. Income taxes paid by
Old D&B on behalf of the Company through September 30, 2000 have been included
in the consolidated statements of shareholders' equity as net distributions to
Old D&B.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, cash equivalents and
trade receivables and payables, all of which are short-term in nature and,
accordingly, approximate fair value. At December 31, 2000, using prevailing
interest rates for debt with similar maturity dates, the fair value of the
Company's notes payable approximated the carrying value of $300 million. See
Note 10, Indebtedness.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents
and trade receivables.
Cash equivalents consist of investments in high quality investment
grade securities in the United States as well as outside the United States. By
policy, the Company limits the amount it can invest with any one issuer.
Credit is extended to customers based on an evaluation of their
financial condition. No customer accounted for 10% or more of accounts
receivable at December 31, 2000 or 1999.
EARNINGS PER SHARE OF COMMON STOCK
-34-
<PAGE> 35
MOODYS CORP/DE/ - 10-K405
In accordance with SFAS No. 128, "Earnings per Share", basic earnings
per share are calculated based on the weighted average number of shares of
common stock outstanding during the reporting period. Diluted earnings per share
are calculated giving effect to all potentially dilutive common shares, assuming
that such shares were outstanding during the reporting period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates. Estimates are used in, but not
limited to, accounts receivable allowances, employee benefit plans, taxes,
contingencies and depreciation and amortization rates for property and
equipment, goodwill, other intangible assets and computer software.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the
current year presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" ("FIN No. 44"). The
interpretation provides guidance for certain issues relating to stock
compensation involving employees that arose in applying APB Opinion No. 25.
Among other things, this interpretation clarifies (a) the definition of an
employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award and (d) the accounting for an exchange of stock
compensation awards in a business combination. The provisions of FIN No. 44 are
effective July 1, 2000, except for the provisions regarding modifications to
fixed stock options or awards that reduce the exercise price of an award, which
apply to modifications made after December 15, 1998. Provisions regarding
modifications to fixed stock options or awards to add reload features apply to
modifications made after January 12, 2000. The effect of adopting FIN No. 44 did
not have a material impact on the Company's financial statements.
In December 1999, the staff of the SEC issued SAB 101, which summarizes
the staff's interpretations of the application of generally accepted accounting
principles to revenue recognition. The staff provided this guidance due in part
to the large number of revenue recognition issues that it has encountered in
registrant filings. In June 2000, SAB 101B, "Amendment: Revenue Recognition in
Financial Statements", was issued, which deferred the effective date of SAB 101
until the fourth fiscal quarter of 2000. The effect of adopting SAB 101 did not
have a material impact on the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS
No.133, "Accounting for Derivative Instruments and Hedging Activities", which
was subsequently amended by SFAS No. 138. This statement establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
recognition of all derivatives as either assets or liabilities on the balance
sheet and measurement of those instruments at fair value. If certain conditions
are met, a derivative may be designated specifically as: (a) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment (a fair value hedge); (b) a hedge of the exposure
to variable cash flows of a forecasted transaction (a cash flow hedge); or (c) a
hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign currency denominated forecasted transaction. The provisions of SFAS No.
133 are effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. Moody's currently does not engage in any transactions that would
be impacted by the adoption of SFAS No. 133.
-35-
<PAGE> 36
MOODYS CORP/DE/ - 10-K405
NOTE 3 RECONCILIATION OF WEIGHTED AVERAGE SHARES
Below is a reconciliation of basic weighted average shares outstanding to
diluted weighted average shares outstanding:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Weighted average number of shares - Basic......................... 161.7 162.3 169.5
Dilutive effect of shares issuable under stock
option, restricted stock and performance share plans........... 1.3 2.0 2.2
---- ---- ----
Weighted average number of shares - Diluted....................... 163.0 164.3 171.7
===== ====== =====
</TABLE>
Options to purchase 8.0 million, 3.0 million and 3.4 million shares of
common stock were outstanding at December 31, 2000, 1999 and 1998, respectively,
but were not included in the computation of diluted earnings per share because
the options' exercise prices were greater than the average market price of the
Company's common stock.
NOTE 4 SALE OF BUSINESS
In July 1998, Moody's sold its Financial Information Services business
("FIS"), which was engaged in the publishing of historical financial
information. Moody's received $26.5 million at the sale date and recorded a
pre-tax gain of $12.6 million. During the third quarter of 1999, certain
agreements related to the sale of FIS expired or were completed. As a result,
estimated liabilities established at the time of the divestiture in connection
with these agreements, determined to be no longer required, were adjusted. These
adjustments resulted in a pre-tax gain of $9.2 million.
The consolidated statement of operations for the year ended December
31, 1998 includes revenue of $18.4 million and operating income of $4.2 million
related to the operation of the FIS business through the sale date.
NOTE 5 PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of:
<TABLE>
<CAPTION>
Useful Lives December 31,
------------
2000 1999
---- ----
<S> <C> <C> <C>
Land, building and building improvements.............. 7-40 yrs $ 24.1 $ 22.1
Office and computer equipment......................... 3-5 yrs 38.4 35.0
Office furniture and fixtures......................... 10 yrs 14.2 13.1
Internal-use computer software........................ 3-5 yrs 10.1 7.5
Leasehold improvements................................ * 28.6 27.9
---------------- ----------------
115.4 105.6
Less: accumulated depreciation and amortization....... (72.0) (62.3)
---------------- ----------------
$ 43.4 $ 43.3
=============== ================
</TABLE>
* shorter of the term of the lease or the estimated useful life of the
improvement
The consolidated statements of operations reflects depreciation and
amortization expense related to the assets above of $11.6 million, $11.4 million
and $13.4 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
NOTE 6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
-36-
<PAGE> 37
MOODYS CORP/DE/ - 10-K405
Accounts payable and accrued liabilities included the following significant
components:
<TABLE>
<CAPTION>
December 31,
2000 1999
---- ----
<S> <C> <C>
Accounts payable........................................... $ 3.4 $ 3.2
Accrued income taxes (see Notes 9 and 14).................. 16.5 174.0
Accrued compensation and benefits.......................... 68.9 71.9
Other...................................................... 46.6 26.0
------------- -------------
$ 135.4 $ 275.1
============= =============
</TABLE>
NOTE 7 PENSION AND POSTRETIREMENT BENEFITS
Prior to the Distribution, substantially all U.S. employees of the
Company were eligible to participate in Old D&B's defined benefit pension plans.
Old D&B also provided certain health-care and life insurance benefits for U.S.
retired employees of the Company. The Company accounted for its participation in
these plans as multi-employer plans. Accordingly, the Company recorded pension
and post-retirement benefit costs as allocated by Old D&B, through the
Distribution Date. The amounts of these allocations were insignificant for the
years ended December 31, 2000, 1999 and 1998.
Subsequent to the Distribution, Moody's assumed responsibility for
pension and postretirement benefits relating to its active employees.
Responsibility for the Company's retirees and vested terminated employees prior
to the Distribution will remain with New D&B. An allocation of assets and
liabilities related to active employees' benefits has been included in the
financial statements.
A summary of the activity related to the benefit plans for the period
from the Distribution Date through December 31, 2000, as well as the status of
the plans at December 31, 2000, is as follows:
<TABLE>
<CAPTION>
Other
Pension Postretirement
Plans Plans
------------- --------------
CHANGE IN BENEFIT OBLIGATION
<S> <C> <C>
Projected benefit obligation at October 1, 2000.............. $ (30.9) $ (3.2)
Service cost................................................. (1.1) (0.1)
Interest cost................................................ (0.6) --
Actuarial (gain) loss........................................ 1.4 (0.1)
------------ ------------
Projected benefit obligation at December 31, 2000 ........... $ (31.2) $ (3.4)
------------ ------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at October 1, 2000................. $ 88.0 $ --
Actual return on plan assets................................. (3.5) --
------------ -----------
Fair value of plan assets at December 31, 2000............... $ 84.5 $ --
------------ -----------
RECONCILIATION OF FUNDED STATUS TO TOTAL AMOUNT RECOGNIZED
Funded status of the plan.................................... $ 53.3 $ (3.4)
Unrecognized actuarial (gain)/loss........................... (3.0) 0.1
Prior service cost........................................... 0.7 --
----------- -----------
Net amount recognized........................................ $ 51.0 $ (3.3)
----------- -----------
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET
Prepaid pension cost......................................... $ 53.8 $ --
Pension and postretirement benefits liability................ (2.8) (3.3)
----------- -----------
Net amount recognized........................................ $ 51.0 $ (3.3)
</TABLE>
-37-
<PAGE> 38
MOODYS CORP /DE/ - 10-K405
COMPONENTS OF NET PERIODIC (INCOME) EXPENSE, FROM
OCTOBER 1, 2000 THROUGH DECEMBER 31, 2000
<TABLE>
<S> ............................... <C> <C>
Service cost ...................... $ 1.1 $ 0.1
Interest cost ..................... 0.6 --
Expected return on plan assets .... (2.1) --
------ ------
Net periodic (income) expense ... $ (0.4) $ 0.1
------ ------
</TABLE>
The following assumptions were used in determining the benefit obligation
and net periodic pension (income) expense for the period from the Distribution
Date through December 31, 2000:
<TABLE>
<CAPTION>
Other
Pension Postretirement
Plans Plans
------- --------------
<S> <C> <C>
Weighted average discount rate.......................... 7.50% 7.50%
Rate of increase in future compensation................. 3.91% --
Expected return on plan assets.......................... 9.75% --
</TABLE>
For postretirement benefit plan measurement purposes, a 6.5% annual
rate of increase in the per capita cost of covered healthcare benefits was
assumed for 2001. The rate was assumed to decrease gradually to 5.0% through
2021 and remain at that level thereafter. Assumed health care cost trend rates
have a significant effect on the amounts reported for the health care plans. A
one percentage point change in the assumed health care cost trend rates would
have the following effects:
<TABLE>
<CAPTION>
One Percentage- One Percentage-
Point Increase Point Decrease
--------------- ---------------
<S> <C> <C>
Effect on benefit obligation at end of period........ $0.3 $(0.3)
Effect on total service and interest costs........... -- --
</TABLE>
PROFIT PARTICIPATION PLAN
Moody's has a profit participation plan (the "Plan") covering
substantially all U.S. employees. The Plan provides for an employee salary
deferral contribution and Moody's contributions. Employees may contribute up to
16% of their pay. Moody's contributes an amount equal to 50% of employee
contributions, with Moody's contribution limited to 3% of the employee's pay.
Moody's also makes contributions to the plan if certain objectives are met,
based on the Company's financial performance. Prior to the Distribution,
employees of Moody's participated in the profit participation plan of Old D&B
and the Company accounted for its participation in that plan as a multi-employer
plan. Moody's recognized expense associated with these plans of $3.5 million,
$2.8 million and $2.6 million in 2000, 1999 and 1998, respectively.
NOTE 8 STOCK OPTIONS
Prior to the Distribution, certain employees of Moody's received grants
of Old D&B stock options under Old D&B's 1998 Key Employees' Stock Option Plan
(the "Plan"). At the Distribution Date, all unexercised Old D&B stock options
held by Moody's employees were converted into separately exercisable options to
acquire Moody's common stock, and separately exercisable options to acquire New
D&B common stock, such that each option had the same ratio of the exercise price
per option to the market value per share, the same aggregate difference between
market value and exercise price, and the same vesting provisions, option periods
and other terms and conditions applicable prior to the Distribution. Old D&B
stock options held by employees and retirees of Old D&B were converted in the
same manner. Immediately after the Distribution, the Plan was amended and
adopted by the Company.
-38-
<PAGE> 39
MOODYS CORP /DE/ - 10-K405
Under the Plan, 16,500,000 shares of the Company's common stock were
reserved for issuance. The Plan provides that options are exercisable not later
than ten years from the grant date. The vesting period for awards under the Plan
is determined by the Board of Directors at the date of the grant and generally
ranges from one to five years. Options may not be granted at less than the fair
market value of the Company's common stock at the date of grant. For incentive
stock options granted to a shareholder of more than 10% of the Company's
outstanding stock, the exercise price per share cannot be less than 110% of the
fair market value of the Company's common stock at the date of grant.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") requires that companies with
stock-based compensation plans either recognize compensation expense based on
the fair value of options granted or continue to apply Accounting Principles
Board Opinion No. 25 ("APB No. 25") and related interpretations and disclose pro
forma net income and earnings per share assuming that the fair value method had
been applied. Moody's has chosen to continue applying APB No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for the fixed stock option plans. Had compensation cost for
Moody's stock-option plans been determined based on the fair value at the grant
dates for awards under those plans, consistent with the method required by SFAS
No. 123, Moody's net income and pro forma earnings per share would have been
reduced to the pro forma amounts shown below:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net income:
As reported .......................... $ 158.5 $ 155.6 $ 142.0
Pro forma ............................ $ 151.8 $ 153.2 $ 139.8
Basic earnings per share of common stock:
As reported .......................... $ 0.98 $ 0.96 $ 0.84
Pro forma ............................ $ 0.94 $ 0.94 $ 0.82
Diluted earnings per share of common stock:
As reported .......................... $ 0.97 $ 0.95 $ 0.83
Pro forma ............................ $ 0.93 $ 0.93 $ 0.81
</TABLE>
The pro forma disclosures shown above are not representative of the
effects on net income and earnings per share in future years.
The pro forma net income and earnings per share amounts prior to the
September 30, 2000 Distribution relate to the fair value of the Old D&B options
held by Moody's employees. Pro forma amounts subsequent to the Distribution
relate to Moody's options held by Moody's employees and New D&B employees and
retirees, and reflect an increase in fair value due to changes in assumptions
for Moody's stock options. Post-distribution, such increase is reflected in
income immediately for vested options and spread over the remaining vesting
period for converted unvested options. 2000 pro forma net income above, includes
$2.4 million relating to New D&B employees and retirees.
The weighted average fair value of Moody's options granted after the
Distribution Date in 2000 was $8.20. The weighted average fair value of Old D&B
options granted prior to the Distribution Date in 2000, 1999 and 1998 was $8.66,
$8.78 and $7.13, respectively.
The fair value of stock options used to compute the pro forma net
income disclosures is the estimated present value at grant date using the
Black-Scholes option-pricing model, with the following weighted average
assumptions:
<TABLE>
<CAPTION>
After Conversion Prior to After Conversion Prior to
2000 at 2000 2000 1998 at 1998 1998
Distribution Distribution Distribution Distribution 1999 Distribution Distribution Distribution
- ------------ ------------ ------------ ------------ ---- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Expected dividend yield 0.72% 0.72% 2.40% 2.40% 2.75% 2.75% 3.3%
Expected stock volatility 25% 25% 30% 30% 20% 20% 20%
</TABLE>
-39-
<PAGE> 40
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Risk-free interest rate 5.94% 5.79% 6.69% 6.41% 5.38% 5.42% 5.53%
Expected holding period 4.5 yrs 3.0 yrs 5.0 yrs 5.0 yrs 6.0 yrs 2.3 yrs 4.5 yrs
</TABLE>
Changes in stock options for the three years ended December 31, 2000 are
summarized below:
<TABLE>
<CAPTION>
Weighted
Number Average
Price Outstanding Exercise Price
- ------ ----------- --------------
<S> <C> <C>
Options outstanding, December 31, 1997 3.5 $24.14
Exercised ........................ (0.1) 21.56
Surrendered or retired ........... (0.1) 24.39
------
Options outstanding, June 30, 1998 .... 3.3 24.29
======
Options converted, July 1, 1998 ....... 3.5 22.92
Granted .......................... 1.3 32.72
Exercised ........................ (0.2) 20.45
Surrendered or retired ........... (0.2) 26.55
------
Options outstanding, December 31, 1998 4.4 25.87
Granted .......................... 1.2 29.22
Exercised ........................ (0.4) 20.56
Surrendered or retired ........... (0.1) 30.63
------
Options outstanding, December 31, 1999 5.1 26.98
Granted .......................... 0.4 28.53
Exercised ........................ (0.2) 22.37
Surrendered or retired ........... (0.5) 29.40
------
Options outstanding, September 30, 2000 4.8 17.99
======
Options converted, October 1, 2000 .... 14.8 19.94
Granted .......................... 5.5 27.87
Exercised ........................ (0.6) 15.36
Surrendered or retired ........... (0.4) 23.13
------
Options outstanding, December 31, 2000 19.3 $22.30
======
</TABLE>
Option activity for the period from December 31, 1997 through September
30, 2000 reflects Old D&B options that were held by employees of Moody's. The
options converted at October 1, 2000 reflect the conversion of all Old D&B
options, including both those held by employees of Moody's and those held by
employees and retirees of New D&B, into separately exercisable options to
purchase common stock of Moody's as described above. At October 1, 2000, 4.8
million Moody's options were held by employees of Moody's and 10.0 million were
held by employees and retirees of New D&B. At December 31, 2000, 10.2 million
Moody's options were held by employees of Moody's and 9.1 million were held by
employees and retirees of New D&B.
The following table summarizes information about stock options
outstanding at December 31, 2000:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------- -------------------
Average
remaining Weighted Weighted
Number contractual average Number average
Range of Exercise Prices outstanding life in years exercise price exercisable exercise price
- ------------------------ ----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$13.63-$19.94 6.0 5.1 $16.30 5.4 $16.06
$21.42-$28.13 13.3 8.6 $25.00 1.5 $21.55
---- ---
Total 19.3 6.9
---- ---
</TABLE>
-40-
<PAGE> 41
MOODYS CORP /DE/ - 10-K405
Under the Plan, key employees of the Company may be granted shares of
common stock based on the achievement of two-year revenue growth goals or other
operating objectives. At the end of the performance period, Company performance
at target will yield the targeted amount of shares, whereas Company performance
above or below target will yield larger or smaller share awards, respectively.
As a result of the Distribution, a portion of the awards will be paid in cash.
The Company recorded compensation expense of $4.6 million, $11.5 million and
$5.0 million in 2000, 1999 and 1998, respectively, relating to such share
grants.
NOTE 9 INCOME TAXES
Components of the Company's income tax provision are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current:
Federal .................. $ 81.7 $ 77.8 $ 66.1
State and local .......... 42.7 36.6 36.2
Non U.S. ................. 3.6 1.6 0.4
------- ------- -------
Total current ................. 128.0 116.0 102.7
------- ------- -------
Deferred:
Federal .................. (1.6) 4.8 (4.2)
State and local .......... (0.9) 2.6 (2.6)
Non U.S. ................. -- (0.1) --
------- ------- -------
Total deferred ................ (2.5) 7.3 (6.8)
------- ------- -------
Provision for income taxes $ 125.5 $ 123.3 $ 95.9
======= ======= =======
</TABLE>
A reconciliation of the U.S. federal statutory tax rate to the
Company's effective tax rate on income before provision for income taxes is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
U.S. statutory tax rate ......................... 35.0% 35.0% 35.0%
State and local taxes, net of federal tax benefit 9.5 9.2 9.3
Recognition of ordinary losses .................. -- -- (4.4)
Foreign operations .............................. (0.1) (0.1) (0.3)
Other ........................................... (0.2) 0.1 0.7
------ ------ ------
Effective tax rate ......................... 44.2% 44.2% 40.3%
====== ====== ======
</TABLE>
Income taxes paid prior to the Distribution were $188.6 million, $116.0
million and $113.3 million in 2000, 1999 and 1998, respectively, principally
through distributions to Old D&B. Income taxes paid in 2000 subsequent to the
Distribution were $17.4 million.
The components of deferred tax amounts are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
2000 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Current:
Allowances ...................... $ 11.5 $ 13.1
Accrued compensation and benefits 4.1 4.2
Other accrued liabilities ....... 3.7 0.9
Other ........................... 0.1 0.3
------- -------
Total current ....................... 19.4 18.5
Non-current:
Depreciation and amortization ... 3.8 2.3
</TABLE>
-41-
<PAGE> 42
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C> <C>
Accrued compensation and benefits 3.4 3.3
Other accrued liabilities ....... 5.3 2.6
------- -------
Total non-current ............... 12.5 8.2
------- -------
Total deferred tax assets ................ 31.9 26.7
------- -------
Deferred tax liabilities, non-current:
Pension plans ................... (24.5) (22.5)
Amortization .................... (1.5) (0.8)
Other ........................... (0.5) --
------- -------
Total deferred tax liabilities ...... (26.5) (23.3)
------- -------
Net deferred tax asset .............. $ 5.4 $ 3.4
======= =======
</TABLE>
Included in other current assets are prepaid taxes of $28.5 million and
$62.0 million and current deferred tax assets of $19.4 million and $18.5 million
at December 31, 2000 and 1999, respectively. Non-current deferred tax
liabilities of $26.5 million and $23.3 million at December 31, 2000 and 1999,
respectively, are reported net of non-current deferred tax assets of $12.5
million and $8.2 million at December 31, 2000 and 1999, respectively and are
included in other liabilities. Management has determined, based on the Company's
history of prior and current levels of operating earnings, that no valuation
allowance for deferred tax assets should be provided as of December 31, 2000 and
1999.
At December 31, 2000, undistributed earnings of non-U.S. subsidiaries
aggregated $29.8 million. Deferred tax liabilities have not been recognized for
these undistributed earnings because it is management's intention to reinvest
such undistributed earnings outside the U.S. If all undistributed earnings were
remitted to the U.S., the amount of incremental U.S. Federal and foreign income
taxes payable, net of foreign tax credits, would be $1.6 million.
NOTE 10 INDEBTEDNESS
Pursuant to the Distribution Agreement, Moody's was allocated $195.5
million of debt at September 30, 2000. Moody's funded this debt with borrowings
under a $160 million unsecured bank revolving credit facility and a bank bridge
line of credit.
On October 3, 2000 the Company issued $300 million of notes payable
(the "Notes") in a private placement. The Notes have a five-year term and bear
interest at an annual rate of 7.61%, payable semi-annually. No interest had been
paid as of December 31, 2000. Accrued interest on the Notes at December 31, 2000
was $5.6 million. The cash proceeds from the Notes were used in part to repay
the outstanding balance on the revolving credit facility and to repay the bridge
line of credit.
The revolving credit facility (the "Facility"), which was undrawn as of
December 31, 2000, consists of an $80 million 5-year facility, which expires in
September 2005 and an $80 million 364-day facility, which expires in September
2001. Interest on outstanding borrowings is payable monthly at rates of interest
that are based on prevailing short-term interest rates at the time of such
borrowings. Interest paid under the Facility for the year ended December 31,
2000 was $0.1 million.
The Notes and the Facility contain covenants that, among other things,
restrict the ability of the Company and its subsidiaries, without the approval
of the lenders, to engage in mergers, consolidations, asset sales and
sale-leaseback transactions or to incur liens, and require the Company to
maintain certain financial ratios.
NOTE 11 ACQUISITION
On January 27, 2000, the Company acquired the net assets of a financial
software products company for $17.4 million in cash. The acquisition was
accounted for using the purchase method of accounting for business combinations
from the date of acquisition. The purchase price was allocated based on
estimated fair values at the date of acquisition, which resulted in acquired
goodwill and other intangibles, including customer relationships and covenants
not to compete, and capitalized software
-42-
<PAGE> 43
MOODYS CORP /DE/ - 10-K405
aggregating $16.6 million. These amounts are being amortized on a straight-line
basis over three to seven years.
NOTE 12 CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock that the Company has
authority to issue under its Restated Certificate of Incorporation is
420,000,000 shares with a par value of $.01, of which 400,000,000 shares
represent shares of common stock, 10,000,000 shares represent shares of
preferred stock and 10,000,000 shares represent shares of series common stock.
The preferred stock and series common stock can be issued with varying terms, as
determined by the Board of Directors.
RIGHTS AGREEMENT
The Company has a Rights Agreement designed to protect shareholders of
the Company in the event of unsolicited offers to acquire the Company and
coercive takeover tactics which, in the opinion of the Board of Directors, could
impair its ability to represent shareholder interests. Under the Rights
Agreement, each share of common stock has a right that trades with the stock
until the right becomes exercisable. Each right entitles the registered holder
to purchase 1/1000 of a share of a series A junior participating preferred
stock, par value $.01 per share, at a price of $100 per 1/1000 of a share,
subject to adjustment. The rights will generally not be exercisable until a
person or group ("Acquiring Person") acquires beneficial ownership of, or
commences a tender offer or exchange offer that would result in such person or
group having beneficial ownership of, 15% or more of the outstanding common
stock.
In the event that any person or group becomes an Acquiring Person, each
right will thereafter entitle its holder (other than the Acquiring Person) to
receive, upon exercise and payment, shares of stock having a market value equal
to two times the exercise price in the form of the Company's common stock or,
where appropriate, the Acquiring Person's common stock. The Company may redeem
the rights, which expire in June 2008, for $.01 per right, under certain
circumstances.
SHARE REPURCHASE PROGRAM
On October 18, 2000, the Board of Directors of the Company authorized a
share repurchase program of up to $250 million of Moody's common stock. The
program includes both special share repurchases and systematic repurchases of
common stock to offset the dilutive effect of share issuances under the
Company's employee benefit arrangements. Through December 31, 2000 the total
number of shares repurchased under the program was 2.8 million, at a total cost
of $71.8 million.
DIVIDENDS
In the fourth quarter of 2000, the Company paid a quarterly dividend of
4.5 cents per share of Moody's common stock. In December 2000, the Company's
Board of Directors declared a first quarter 2001 dividend of 4.5 cents per
share, payable on March 10, 2001 to shareholders of record on February 26, 2001.
NOTE 13 LEASE COMMITMENTS
Moody's has leased facilities, which are under operating leases that
expire over the next ten years. Moody's also leases certain computer and other
equipment under operating leases that expire over the next four years. Rent
expense under operating leases for the years ended December 31, 2000, 1999 and
1998 was $7.1 million, $5.6 million, and $5.5 million, respectively. Rent
expense for 2000, 1999 and 1998 is net of sublease rental income of $1.0
million, $1.0 million and $0.4 million, respectively, related to a facility
utilized by FIS, which was sold in July 1998.
The approximate minimum rent for operating leases that have remaining
noncancelable lease terms in excess of one year at December 31, 2000, net of
sublease
-43-
<PAGE> 44
MOODY'S CORP /DE/ - 10-K405
rental commitments of $1.0 million and $0.6 million in 2001 and 2002,
respectively, are as follows:
Year Ended December 31,
<TABLE>
<S> <C>
2001 ................................................................ $ 6.5
2002 ................................................................ 6.4
2003 ................................................................ 6.0
2004 ................................................................ 5.1
2005 ................................................................ 3.7
Thereafter ................................................................ 5.3
-----
Total minimum lease payments ......................................... $33.0
=====
</TABLE>
NOTE 14 CONTINGENCIES
Moody's is involved in legal proceedings, claims and litigation arising
in the ordinary course of business. Although the outcome of such matters cannot
be predicted with certainty, in the opinion of management, the ultimate
liability of the Company in connection with such matters will not have a
material effect on the Company's financial position, results of operations or
cash flows.
In addition, Moody's has certain other contingencies discussed below.
Information Resources, Inc.
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint
in the United States District Court for the Southern District of New York,
naming as defendants the corporation then known as "The Dun & Bradstreet
Corporation" and, as discussed below, now known as "R.H. Donnelley
Corporation"("Donnelley"), A.C. Nielsen Company (a subsidiary of ACNielsen
Corporation) and IMS International, Inc. (a subsidiary of the company then known
as Cognizant Corporation). At the time of the filing of the complaint, each of
the other defendants was a wholly owned subsidiary of Donnelley.
The complaint alleges various violations of United States antitrust
laws, including purported violations of Sections 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount
IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages of
an unspecified amount.
On October 15, 1996, defendants moved for an order dismissing all
claims in the complaint. On May 6, 1997, the United States District Court for
the Southern District of New York issued a decision dismissing IRI's claim of
attempting monopolization in the United States, with leave to replead within 60
days. The Court denied the defendants' motion with respect to the remaining
claims in the complaint. In June 1997, the defendants filed an answer denying
the material allegations in IRI's complaint, and A.C. Nielsen Company filed a
counterclaim alleging that IRI had made false and misleading statements about
its services and commercial activities. On July 7, 1997, IRI filed an amended
and restated complaint repleading its alleged claim of monopolization in the
United States and realleging its other claims. By notice of motion dated August
18, 1997, the defendants moved for an order dismissing the amended claim. On
December 1, 1997, the court denied the motion. On December 22, 1999, defendants
filed a motion for partial summary judgement seeking to dismiss IRI's non-U.S.
antitrust claims. On July 12, 2000, the court granted the motion dismissing
claims of injury suffered from the activities in foreign markets where IRI
operates through subsidiaries or companies owned by joint ventures or
"relationships" with local companies. Discovery in this case is ongoing.
-44-
<PAGE> 45
MOODYS CORP /DE/ - 10-K405
In November 1996, Donnelley completed a distribution to its
shareholders (the "1996 Distribution") of the capital stock of ACNielsen
Corporation ("ACNielsen") and Cognizant Corporation ("Cognizant"). On October
28, 1996, in connection with the 1996 Distribution, Cognizant, ACNielsen and
Donnelley entered into an Indemnity and Joint Defense Agreement (the "Indemnity
and Joint Defense Agreement") pursuant to which they have agreed (i) to certain
arrangements allocating potential liabilities ("IRI Liabilities") that may arise
out of or in connection with the IRI action and (ii) to conduct a joint defense
of such action. In particular, the Indemnity and Joint Defense Agreement
provides that ACNielsen will assume exclusive liability for IRI Liabilities up
to a maximum amount to be calculated at such time such liabilities, if any,
become payable (the "ACN Maximum Amount"), and that Donnelley and Cognizant will
share liability equally for any amounts in excess of the ACN Maximum Amount. The
ACN Maximum Amount will be determined by an investment banking firm as the
maximum amount that ACNielsen is able to pay after giving effect to (i) any plan
submitted by such investment bank that is designed to maximize the claims-paying
ability of ACNielsen without impairing the investment banking firm's ability to
deliver a viability opinion (but which will not require any action requiring
shareholder approval), and (ii) payment of related fees and expenses. For these
purposes, financial viability means the ability of ACNielsen, after giving
effect to such plan, the payment of related fees and expenses and the payment of
the ACN Maximum Amount, to pay its debts as they become due and to finance the
current and anticipated operating and capital requirements of its business, as
reconstituted by such plan, for two years from the date any such plan is
expected to be implemented. On February 19, 2001, ACNielsen announced that it
had merged with VNU N.V. Pursuant to the Indemnity and Joint Defense Agreement,
VNU is to be included with ACNielsen for purposes of determining the ACN Maximum
Amount, and VNU must assume ACNielsen's liabilities under that agreement.
In June 1998, Donnelley completed a distribution to its shareholders
(the "1998 Distribution") of the capital stock of Old D&B and changed its name
to R.H. Donnelley Corporation. In connection with the 1998 Distribution, Old D&B
and Donnelley entered into an agreement whereby Old D&B has assumed all
potential liabilities of Donnelley arising from the IRI action and agreed to
indemnify Donnelley in connection with such potential liabilities.
During 1998, Cognizant separated into two companies, IMS Health
Incorporated ("IMS Health") and Nielsen Media Research, Inc. ("NMR"). IMS Health
and NMR are each jointly and severally liable for all Cognizant liabilities
under the Indemnity and Joint Defense Agreement.
Under the terms of the Distribution Agreement, as a condition to the
Distribution, New D&B undertook to be jointly and severally liable with Moody's
for Old D&B's obligations to Donnelley under the distribution agreement pursuant
to which the 1998 Distribution was effected, including any liabilities arising
under the Indemnity and Joint Defense Agreement. However, as between themselves,
each of New D&B and Moody's will be responsible for 50% of any payments to be
made with respect to the IRI action pursuant to such 1998 distribution
agreement, including legal fees or expenses related thereto.
Management is unable to predict at this time the final outcome of the
IRI action or whether the resolution of this matter could materially affect
Moody's results of operations, cash flows or financial position. As such, no
amount in respect of this matter has been accrued in the financial statements of
the Company.
Tax Matters
Pursuant to the Distribution Agreement, New D&B and Moody's have agreed
to each be financially responsible for 50% of any potential liabilities that may
arise with respect to the reviews described below, to the extent such potential
liabilities are not directly attributable to their respective business
operations.
Old D&B and its predecessors entered into global tax planning
initiatives in the normal course of business, principally through tax-free
restructurings of both their foreign and domestic operations. These initiatives
are subject to normal review by tax authorities. It is possible that additional
liabilities may be proposed by tax authorities as a result of these reviews and
that some of the reviews could be resolved unfavorably. At this time, Moody's
management is unable to predict the extent of such
-45-
<PAGE> 46
MOODYS CORP /DE/ - 10-K405
reviews, the outcome thereof or whether the resolution of these matters could
materially affect Moody's results of operations, cash flows or financial
position.
The IRS has completed its review of the utilization of certain capital
losses generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its
audit process, issued a formal assessment with respect to the utilization of
these capital losses and Old D&B responded by filing a petition for a refund in
the U.S. District Court on September 21, 2000, after the payments described
below were made.
On May 12, 2000, an amended tax return was filed for the 1989 and 1990
tax periods, which reflected $561.6 million of tax and interest due. Old D&B
paid the IRS approximately $349.3 million of this amount on May 12, 2000. IMS
Health informed Old D&B that it paid to the IRS approximately $212.3 million on
May 17, 2000. The payments were made to the IRS to stop further interest from
accruing. Notwithstanding the filing and payment, New D&B is contesting the
IRS's formal assessment and would also contest the assessment of amounts, if
any, in excess of the amounts paid. Moody's had previously accrued its
anticipated share of the probable liability arising from the utilization of
these capital losses.
NOTE 15 SEGMENT INFORMATION
The Company reports segment information in accordance with SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." In
accordance with SFAS No. 131, operating segments are defined as components of an
enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company operates primarily
in one reportable business segment: ratings, which accounts for approximately
86% of the Company's total revenue. Revenue related to research products and
risk management services business has been aggregated as "Other" for reporting
purposes. Given the dominance of the ratings segment to Moody's overall results,
the Company does not separately measure and report operating income for the
ratings business. Rather, revenue is the predominant measure utilized by senior
management for assessing performance and for the allocation of resources, and
operating income is evaluated for the Company as a whole. In addition, assets
are not allocated on a segment basis and are considered on a total company basis
only.
The ratings segment comprises four major rating groups, each of which
has similar economic and financial characteristics. They are corporate finance
ratings, structured finance ratings, financial institutions and sovereign
ratings and public finance ratings.
Revenue included in "Other" consists of research products revenue,
generated from the sale of investor-oriented credit research, and risk
management services revenue, generated from the sale of credit risk assessment
software and related products and services. Also included in "Other" for 1998
are revenues related to the FIS business of $18.4 million, which was divested in
July 1998.
The accounting principles underlying the revenue information reported
for each segment are consistent with those described in the summary of
significant accounting policies in Note 1. There are no intersegment sales and
no single customer accounted for 10% or more of total revenue.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Revenue:
Ratings
Structured finance ratings ................. $ 199.2 $ 172.4 $ 143.0
Corporate finance ratings .................. 162.7 165.5 143.6
Financial institutions and sovereign ratings 111.6 104.8 90.1
Public finance ratings ..................... 46.1 59.5 64.8
------- ------- -------
Total ratings revenue ...................... 519.6 502.2 441.5
------- ------- -------
Other ............................................ 82.7 62.0 72.4
------- ------- -------
Total revenue .............................. $ 602.3 $ 564.2 $ 513.9
======= ======= =======
Total expenses ...................................... $ 313.8 $ 293.8 $ 288.4
</TABLE>
-46-
<PAGE> 47
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C> <C> <C>
Gain on sale of business ............................ -- 9.2 12.6
Other non-operating expense, net .................... (4.5) (0.7) (0.2)
------- ------- -------
Income before provision for income taxes ............ $ 284.0 $ 278.9 $ 237.9
======= ======= =======
</TABLE>
Revenue and long-lived asset information by geographic area as of and for the
year ended December 31 is summarized below:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Revenue:
United States .. $ 428.9 $ 423.4 $ 413.0
International .. 173.4 140.8 100.9
------- ------- -------
Total .......... $ 602.3 $ 564.2 $ 513.9
======= ======= =======
Long-lived assets:
United States .. $ 53.4 $ 41.7 $ 43.4
International .. 8.4 6.6 5.6
------- ------- -------
Total .......... $ 61.8 $ 48.3 $ 49.0
======= ======= =======
</TABLE>
International revenue is determined based on the country of domicile of
the customer.
NOTE 16 VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to End
of the Year Revenue Write-offs of the Year
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowances:
Year ended December 31, 1998........... ($22.8) ($35.7) $37.8 ($20.7)
Year ended December 31, 1999........... (20.7) (40.3) 36.5 (24.5)
Year ended December 31, 2000........... (24.5) (29.3) 29.4 (24.4)
</TABLE>
Allowances primarily represent adjustments to customer billings that are
estimated when the related revenue is recognized.
NOTE 17 QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------
March 31 June 30 September 30 December 31 Year
-------- ------- ------------ ----------- ----
<S> <C> <C> <C> <C> <C>
2000
Revenue............................... $139.3 $149.4 $152.5 $161.1 $602.3
Operating income...................... 63.8 74.8 72.9 77.0 288.5
Net income............................ 35.9 41.7 40.5 40.4 158.5
Basic earnings per share.............. $ 0.22 $ 0.26 $ 0.25 $ 0.25 $ 0.98
Diluted earnings per share............ $ 0.22 $ 0.26 $ 0.25 $ 0.25 $ 0.97
1999
Revenue............................... $137.1 $147.4 $139.3 $140.4 $564.2
Operating income...................... 63.0 71.9 66.6 68.9 270.4
Net income............................ 35.2 40.0 42.2 38.2 155.6
Basic earnings per share.............. $ 0.22 $ 0.25 $ 0.26 $ 0.24 $ 0.96
Diluted earnings per share............ $ 0.21 $ 0.24 $ 0.26 $ 0.24 $ 0.95
</TABLE>
Basic and diluted earnings per share are computed independently for
each of the periods presented. The number of weighted average shares outstanding
changes as common
-47-
<PAGE> 48
MOODYS CORP /DE/ - 10-K405
shares are issued for employee benefit arrangements and other purposes or as
shares are repurchased. Accordingly, the sum of the quarterly earnings per share
data may not agree to the total for the year.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the information relating to the executive officers of the
Company set forth in Part I of this Form 10-K, the information called for by
Items 10-13 is contained in the Company's definitive proxy statement for use in
connection with its annual meeting of shareholders scheduled to be held on April
23, 2001, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements.
See Index to Financial Statements, Item 8 on Page 26 of this Form
10-K.
(2) Financial Statement Schedules.
None.
(3) Exhibits.
See Index to Exhibits on Pages 50-53 of this Form 10-K.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed by the Company on October 4,
2000, on which information was reported under Items 5 and 7 and which
incorporated by reference certain pro forma financial statements included in the
Information Statement relating to the spin-off described above in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Factors Affecting Comparability" on page 18.
A Current Report on Form 8-K was filed by the Company on November 7,
2000 on which information was reported under Items 5 and 7.
-48-
<PAGE> 49
MOODYS CORP /DE/ - 10-K405
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
By: /s/ John Rutherfurd, Jr.
------------------------------------
John Rutherfurd, Jr.
President and Chief Executive Officer
Date: March 15, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<S> <C>
/s/ John Rutherfurd, Jr. /s/ Clifford Alexander
- ------------------------------------------- -------------------------------------------
John Rutherfurd, Jr. Director, President Clifford Alexander, Chairman of
and Chief Executive Officer the Board of Directors
(principal executive officer)
/s/ Jeanne Dering /s/ Charles R. Bruschi
- ------------------------------------------- -------------------------------------------
Jeanne Dering, Senior Vice President and Charles R. Bruschi
Chief Financial Officer Vice President and Corporate Controller
(principal financial officer) (principal accounting officer)
/s/ Hall Adams /s/ Robert R. Glauber
- ------------------------------------------- -------------------------------------------
Hall Adams, Jr., Director Robert R. Glauber, Director
/s/ Mary Johnston Evans /s/ Henry A. McKinnell
- ------------------------------------------- -------------------------------------------
Mary Johnston Evans, Director Henry A. McKinnell, Jr., Director
</TABLE>
Date: March 15, 2001
-49-
<PAGE> 50
MOODYS CORP /DE/ - 10-K405
INDEX TO EXHIBITS
REGULATION
S-K
EXHIBIT
NUMBER
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, and as further amended
effective October 1, 2000 (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).
.2 Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2 of the Registrant's Registration Statement on
Form 10, file number 1-14037, filed June 18, 1998).
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
.1 Specimen Common Stock certificate (incorporated by reference to Exhibit
4.1 to the Report on Form 8-K of the Registrant, file number 1-14037,
filed October 4, 2000).
.2 Amended and Restated Rights Agreement between the Registrant and
EquiServe Trust Company, N.A., dated as of September 27, 2000
(incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of
the Registrant, file number 1-14037, filed September 29, 2000).
.3 Five-Year Credit Agreement, dated as of September 11, 2000, among the
Registrant, certain subsidiaries of the Registrant, the lenders party
thereto, The Chase Manhattan Bank, as administrative agent, Citibank,
N.A., as syndication agent, and The Bank of New York, as documentation
agent (incorporated by reference to Exhibit 4.2 to the Report on Form
8-K of the Registrant, file number 1-14037, filed October 4, 2000).
.4 364-Day Credit Agreement, dated as of September 11, 2000, among the
Registrant, certain subsidiaries of the Registrant, the lenders party
thereto, The Chase Manhattan Bank, as administrative agent, Citibank,
N.A., as syndication agent, and The Bank of New York, as documentation
agent (incorporated by reference to Exhibit 4.3 to the Report on Form
8-K of the Registrant, file number 1-14037, filed October 4, 2000).
10 MATERIAL CONTRACTS
.1 Distribution Agreement, dated as of September 30, 2000, between the
Registrant and The Dun & Bradstreet Corporation (f.k.a. The New D&B
Corporation) (incorporated by reference to Exhibit 10.1 to the Report
on Form 8-K of the Registrant, file number 1-14037, filed October 4,
2000).
-50-
<PAGE> 51
MOODYS CORP /DE/ - 10-K405
.2 Tax Allocation Agreement, dated as of September 30, 2000, between the
Registrant and The Dun & Bradstreet Corporation (f.k.a. The New D&B
Corporation) (incorporated by reference to Exhibit 10.2 to the Report
on Form 8-K of the Registrant, file number 1-14037, filed October 4,
2000).
.3 Employee Benefits Agreement, dated as of September 30, 2000, between
the Registrant and The Dun & Bradstreet Corporation (f.k.a. The New D&B
Corporation) (incorporated by reference to Exhibit 10.3 to the Report
on Form 8-K of the Registrant, file number 1-14037, filed October 4,
2000).
.4 Intellectual Property Assignments, dated as of September 1, 2000,
between the Registrant and The Dun & Bradstreet Corporation (f.k.a. The
New D&B Corporation) (incorporated by reference to Exhibit 10.4 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed
October 4, 2000).
.5 Shared Transaction Services Agreement, dated as of September 30, 2000,
between the Registrant and The Dun & Bradstreet Corporation (f.k.a. The
New D&B Corporation) (incorporated by reference to Exhibit 10.5 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed
October 4, 2000).
.6 Data Services Agreement, dated as of September 30, 2000, between the
Registrant and The Dun & Bradstreet Corporation (f.k.a. The New D&B
Corporation) (incorporated by reference to Exhibit 10.6 to the Report
on Form 8-K of the Registrant, file number 1-14037, filed October 4,
2000).
.7 Transition Services Agreement, dated as of September 30, 2000, between
the Registrant and The Dun & Bradstreet Corporation (f.k.a. The New D&B
Corporation) (incorporated by reference to Exhibit 10.7 to the Report
on Form 8-K of the Registrant, file number 1-14037, filed October 4,
2000).
.8 Insurance and Risk Management Services Agreement, dated as of September
30, 2000, between the Registrant and The Dun & Bradstreet Corporation
(f.k.a. The New D&B Corporation) (incorporated by reference to Exhibit
10.8 to the Report on Form 8-K of the Registrant, file number 1-14037,
filed October 4, 2000).
.9 Pension Benefit Equalization Plan of Moody's Corporation (incorporated
by reference to Exhibit 10.9 to Registrant's Quarterly Report on Form
10-Q, file number 1-14037, filed November 14, 2000).
.10 Supplemental Executive Benefit Plan of Moody's Corporation
(incorporated by reference to Exhibit 10.10 to Registrant's Quarterly
Report on Form 10-Q, file number 1-14037, filed November 14, 2000).
.11 Profit Participation Benefit Equalization Plan of Moody's Corporation
(incorporated by reference to Exhibit 10.11 to Registrant's Quarterly
Report on Form 10-Q, file number 1-14037, filed November 14, 2000).
.12 The Moody's Corporation Nonfunded Deferred Compensation Plan for
Non-Employee Directors (incorporated by reference to Exhibit 10.12 to
Registrant's Quarterly Report on Form 10-Q, file number 1-14037, filed
November 14, 2000).
.13 1998 Moody's Corporation Replacement Plan for Certain Non-Employee
Directors Holding Dun & Bradstreet Corporation
-51-
<PAGE> 52
MOODYS CORP /DE/ - 10-K405
Equity-Based Awards (incorporated by reference to Exhibit 10.13 to
Registrant's Quarterly Report on Form 10-Q, file number 1-14037, filed
November 14, 2000).
.14 1998 Moody's Corporation Replacement Plan for Certain Employees Holding
Dun & Bradstreet Corporation Equity-Based Awards (incorporated by
reference to Exhibit 10.14 to Registrant's Quarterly Report on Form
10-Q, file number 1-14037, filed November 14, 2000).
.15 1998 Moody's Corporation Non-Employee Directors' Stock Incentive Plan
(incorporated by reference to Exhibit 10.15 to Registrant's Quarterly
Report on Form 10-Q, file number 1-14037, filed November 14, 2000).
.16 1998 Moody's Corporation Key Employees' Stock Incentive Plan
(incorporated by reference to Exhibit 10.16 to Registrant's Quarterly
Report on Form 10-Q, file number 1-14037, filed November 14, 2000).
.17+* Moody's Corporation Career Transition Plan
.18 Distribution Agreement, dated as of June 30, 1998, between R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation) and the
Registrant (f.k.a. The New Dun & Bradstreet Corporation) (incorporated
by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form
10-Q, filed August 14, 1998).
.19 Tax Allocation Agreement, dated as of June 30, 1998, between R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation) and the
Registrant (f.k.a. The New Dun & Bradstreet Corporation) (incorporated
by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q, filed August 14, 1998).
.20 Employee Benefits Agreement, dated as of June 30, 1998, between R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation) and the
Registrant (f.k.a. The New Dun & Bradstreet Corporation) (incorporated
by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form
10-Q, filed August 14, 1998).
.20 Distribution Agreement, dated as of October 28, 1996, among R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation),
Cognizant Corporation and ACNielsen Corporation (incorporated by
reference to Exhibit 10(x) to the Annual Report on Form 10-K of R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation) for the
year ended December 31, 1996, file number 1-7155, filed March 27,
1997).
.21 Tax Allocation Agreement, dated as of October 28, 1996, among R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation),
Cognizant Corporation and ACNielsen Corporation (incorporated by
reference to Exhibit 10(y) to the Annual Report on Form 10-K of R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation) for the
year ended December 31, 1996, file number 1-7155, filed March 27,
1997).
.22 Employee Benefits Agreement, dated as of October 28, 1996, among R.H.
Donnelley Corporation (f.k.a. The Dun & Bradstreet Corporation),
Cognizant Corporation and ACNielsen Corporation (incorporated by
reference to Exhibit 10(z) to the Annual Report on Form 10-K of R.H.
Donnelley Corporation
-52-
<PAGE> 53
MOODYS CORP /DE/ - 10-K405
(f.k.a. The Dun & Bradstreet Corporation) for the year ended December
31, 1996, file number 1-7155, filed March 27, 1997).
.23 Indemnity and Joint Defense Agreement, dated as of October 28, 1996,
among R.H. Donnelley Corporation (f.k.a. The Dun & Bradstreet
Corporation), Cognizant Corporation and ACNielsen Corporation
(incorporated by reference to Exhibit 10(aa) to the Annual Report on
Form 10-K of R.H. Donnelley Corporation (f.k.a. The Dun & Bradstreet
Corporation) for the year ended December 31, 1996, file number 1-7155,
filed March 27, 1997).
21* SUBSIDIARIES OF THE REGISTRANT List of Active Subsidiaries as of
January 31, 2001.
23* CONSENTS OF EXPERTS AND COUNSEL Consent of PricewaterhouseCoopers LLP.
- ---------------
* Filed herewith
+ Represents a management contract or compensatory plan
-53-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>2
<FILENAME>y46068ex10-17.txt
<DESCRIPTION>CORPORATIN CAREER TRANSITION PLAN
<TEXT>
<PAGE> 1
MOODYS CORP /DE/ - 10-K405
EX 10.17
1
CAREER TRANSITION PLAN
EXHIBIT 10.17
MOODY'S CORPORATION CAREER TRANSITION PLAN
(AS IN EFFECT AS OF OCTOBER 1, 2000 WITH
CERTAIN EARLIER EFFECTIVE DATES)
MOODY'S CORPORATION (the "Company") wishes to define those
circumstances under which it will provide assistance to an Eligible Employee in
the event of his or her Eligible Termination (as such terms are defined herein).
Accordingly, the Company hereby establishes Moody's Corporation Career
Transition Plan (the "Plan").
SECTION 1 - DEFINITIONS
1.1 "Cause" shall mean (a) willful malfeasance or willful
misconduct by the Eligible Employee in connection with his or her employment,
(b) continuing failure to perform such duties as are requested by any employee
to whom the Eligible Employee reports or the Participating Company's board of
directors, (c) failure by the Eligible Employee to observe material policies of
the Participating Company applicable to the Eligible Employee or (d) the
commission by an Eligible Employee of (i) any felony or (ii) any misdemeanor
involving moral turpitude.
1.2 "Committee" shall mean the Compensation and Benefits Committee of the Board
of Directors of the Company.
1.3 "Eligible Employee" shall mean a full-time salaried
employee or regular part-time salaried employee of any Participating Company who
is:
-54-
<PAGE> 2
MOODYS CORP /DE/ - 10-K405
(a) on the United States payroll of a Participating Company
and earning a Salary of less than $100,000 at the time of an Eligible
Termination, in which case Schedule A hereto shall apply; or
(b) on the United States payroll of a Participating Company
and earning a Salary equal to or greater than $100,000 at the time of an
Eligible Termination, in which case Schedule B hereto shall apply.
1.4 "Eligible Termination" shall mean (a) an involuntary
termination of employment with a Participating Company by reason of a reduction
in force program, job elimination or unsatisfactory performance in the execution
of an Eligible Employee's duties or (b) a resignation mutually agreed to in
writing by the Participating Company and the Eligible Employee. Notwithstanding
the foregoing, an Eligible Termination shall not include (w) a unilateral
resignation, (x) a termination by a Participating Company for Cause, (y) a
termination as a result of a sale (whether in whole or in part, of stock or
assets), merger or other combination, spinoff, reorganization or liquidation,
dissolution or other winding up or other similar transaction involving a
Participating Company; or (z) any termination where an offer of employment is
made to the Eligible Employee of a comparable position at a Participating
Company concurrently with his or her Eligible Termination.
1.5 "Participating Company" shall mean the Company or any
other affiliated entity more than 50% of the voting interests of which are
owned, directly or indirectly, by the Company and which has elected to
participate in the Plan by action of its board of directors.
1.6 "Salary" shall mean an Eligible Employee's annual base
salary at the time his or her employment terminates.
1.7 "Severance and Release Agreement" shall mean an agreement
signed by the Eligible Employee substantially in the form attached hereto as
Exhibit 1. Notwithstanding the foregoing, a Participating Company may, by action
of its chief human resources officer or chief legal counsel, modify the form of
Severance and Release Agreement to be signed by any Eligible Employee in a
manner approved by the Committee (or its delegee).
1.8 "Years of Service" shall mean one-twelfth (1/12th) of an
Eligible Employee's total number of full months of regular employment (whether
full-time or part-time) with a Participating Company (beginning with his or her
initial date of hire*); provided that such number of Years of Service shall be
rounded up to the next whole number. (*If following the initial date of hire,
the employee terminated employment with the Company and at a later date became
re-employed by the Company, years of service will be calculated using the
initial date of hire and deducting the time during which the employee was not
employed by the Company.)
SECTION 2 - SEVERANCE BENEFITS
2.1 Subject to the provisions of this Section 2, in the event
of an Eligible Termination, an Eligible Employee shall be entitled to receive
from the Participating Company the benefits set forth on Schedule A or B hereto,
as applicable.
2.2 The grant of severance benefits pursuant to Section 2.1
hereof is conditioned upon an Eligible Employee's signing a Severance and
Release Agreement and the expiration of any revocation period set forth therein.
2.3 Notwithstanding any other provision contained herein, the
Chief Executive Officer of the Company may, at any time, take such action as
such officer, in such officer's sole discretion, deems appropriate to reduce or
increase by any amount the benefits otherwise payable to an Eligible Employee
pursuant to the applicable Schedule or otherwise modify the terms and conditions
applicable to an Eligible
-55-
<PAGE> 3
MOODYS CORP /DE/ - 10-K405
Employee under this Plan. Benefits granted hereunder may not exceed an amount
nor be paid over a period which would cause the Plan to be other than a "welfare
benefit plan" under section 3 (1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
2.4 In the event a Participating Company, in its sole
discretion, grants an Eligible Employee a period of inactive employee status,
then, in such event, any amounts paid to such Eligible Employee during any such
period shall offset the benefits payable under this Plan. For this purpose, a
period of inactive employee status shall mean the period beginning on the date
such status commences (of which the Eligible Employee shall be notified) and
ending on the date of such Eligible Employee's termination of employment.
SECTION 3 - AMENDMENT AND TERMINATION
3.1 The Company reserves the right to terminate the Plan on
behalf of any or all Participating Companies at any time and without any further
obligation by action of its board of directors or such other person or persons
to whom the board properly delegates such authority. Any other Participating
Company may cease participation in the Plan by action of its board of directors
or such other person or persons to whom such board properly delegates such
authority.
3.2 The Company shall have the right to modify or amend the
terms of the Plan at any time, or from time to time, to any extent that it may
deem advisable by action of its board of directors, the Committee or such other
person or persons to whom the board or the Committee properly delegates such
authority.
3.3 All modifications of or amendments to the Plan shall be in
writing.
SECTION 4 - ADMINISTRATION OF THE PLAN
4.1 The Board of Directors and the Compensation and Benefits
Committee shall be the named fiduciaries (the "Named Fiduciaries") who severally
and not jointly shall have authority to control and manage the operation and
administration of the Plan and to manage and control its assets. The
Compensation and Benefits Committee shall consist of not less than three (3) nor
more than seven (7) members, as may be appointed by the Board of Directors from
time to time. Any member of the Compensation and Benefits Committee may resign
at will by notice to the Board of Directors or be removed at any time (with or
without cause) by the Board of Directors.
4.2 The Named Fiduciaries may from time to time allocate
fiduciary responsibilities among themselves and may designate persons other than
Named Fiduciaries to carry out fiduciary responsibilities under the Plan, and
such persons shall be deemed to be fiduciaries under the Plan with respect to
such delegated responsibilities. Fiduciaries may employ one or more persons to
render advice with regard to any responsibility such fiduciary has under the
Plan.
4.3 The Named Fiduciaries (and their delegees) shall have the
exclusive right to interpret any and all of the provisions of the Plan and to
determine any questions arising thereunder or in connection with the
administration of the Plan. Any decision or action by the Named Fiduciaries (and
their delegees) shall be conclusive and binding upon all Employees, Members and
Beneficiaries. In all instances the Named Fiduciaries (and their delegees) shall
have complete discretionary authority to determine eligibility for participation
and benefits under the Plan, and to construe and interpret all provisions of the
Plan and all documents relating thereto including, without limitation, all
disputed and uncertain terms. All deference permitted by law shall be given to
such constructions, interpretations and determinations
4.4 Any action to be taken by the Named Fiduciaries shall be
taken by a majority of its members either at a meeting or by written instrument
approved by such majority in the absence of a meeting.
-56-
<PAGE> 4
MOODYS CORP /DE/ - 10-K405
A written resolution or memorandum signed by one Committee member and the
secretary of the Compensation and Benefits Committee shall be sufficient
evidence to any person of any action taken pursuant to the Plan.
4.5 Any person, corporation or other entity may serve in more
than one fiduciary capacity under the Plan.
4.6 The Company shall indemnify any individual who is a
director, officer or employee of a Participating Company, or his or her heirs
and legal representatives, against all liability and reasonable expense,
including counsel fees, amounts paid in settlement and amounts of judgments,
fines or penalties, incurred or imposed upon him or her in connection with any
claim, action, suit or proceeding, whether civil, criminal, administrative or
investigative, in connection with his or her duties with respect to the Plan,
provided that any act or omission giving rise to such claim, action, suit or
proceeding does not constitute willful misconduct or is not performed or omitted
in bad faith.
SECTION 5 - MISCELLANEOUS
5.1 Neither the establishment of the Plan nor any action of a
Participating Company, the Committee, or any fiduciary shall be held or
construed to confer upon any person any legal right to continue employment with
a Participating Company. Each Participating Company expressly reserves the right
to discharge any employee whenever the interest of such Participating Company,
in its sole judgment, may so require, without any liability on the part of such
Participating Company, the Committee, or any fiduciary.
5.2 Benefits payable under the Plan shall be paid out of the
general assets of a Participating Company. No Participating Company need fund
the benefits payable under this Plan; however, nothing in this Section 5.2 shall
be interpreted as precluding any Participating Company from funding or setting
aside amounts in anticipation of paying such benefits. Any benefits payable to
an Eligible Employee under this Plan shall represent an unsecured claim by such
Eligible Employee against the general assets of the Participating Company that
employed such Eligible Employee.
5.3 A Participating Company shall deduct from the amount of
any severance benefits payable hereunder the amount required by law to be
withheld for the payment of any taxes and any other amounts properly to be
withheld.
5.4 Benefits payable under the Plan shall not be subject to
assignment, alienation, transfer, pledge, encumbrance, commutation or
anticipation by the Eligible Employee. Any attempt to assign, alienate,
transfer, pledge, encumber, commute or anticipate Plan benefits shall be void.
5.5 The Committee shall, in its sole discretion, convert all
references to dollar amounts in the Plan to foreign currency of the country in
which a Participating Company is located or the Eligible Employee is employed.
5.6 This Plan shall be interpreted and applied in accordance
with the laws of the State of New York, except to the extent superseded by
applicable federal law.
5.7 This Plan will be of no force or effect to the extent
superseded by foreign law.
5.8 This Plan supersedes any and all prior severance
arrangements, policies, plans or practices of the Company and of any
Participating Company (whether written or unwritten). Notwithstanding the
preceding sentence, the Plan does not affect the severance provisions of any
written individual employment contracts or written agreements between an
Eligible Employee and a Participating Company. Benefits payable under the Plan
shall be offset by any other severance or termination payment made by a
Participating Company including, but not limited to, amounts paid pursuant to
any agreement or law.
-57-
<PAGE> 5
MOODYS CORP /DE/ - 10-K405
SCHEDULE A
This Schedule A is applicable to Eligible Employees covered by
Section 1.3 (a) of the Plan. An Eligible Employee entitled to benefits hereunder
shall, subject to Section 2 of the Plan, receive the following:
1. Salary Continuation
If the Eligible Employee incurs an Eligible Termination for
any reason other than unsatisfactory performance, he or she shall receive the
higher of (i) four weeks of Salary continuation or (ii) 1.5 weeks of Salary
continuation for each Year of Service. If the Eligible Employee incurs an
Eligible Termination by reason of unsatisfactory performance, he or she shall
receive the higher of (i) two weeks of Salary continuation or (ii) one week of
Salary continuation for each Year of Service. In any event, such amounts shall
be payable at the times the Eligible Employee's Salary would have been paid if
employment had not terminated, over a period equal to the number of weeks of
Salary continuation (the "Salary Continuation Period"). The maximum amount of
Salary continuation hereunder shall be 52 weeks. All Salary continuation
payments shall cease upon reemployment by a Participating Company.
2. Welfare Benefit Continuation
Medical, dental and life insurance benefits shall be provided
throughout the Salary Continuation Period at the levels in effect for the
Eligible Employee immediately prior to termination of employment but in no event
greater than the levels in effect for active employees generally during the
Salary Continuation Period, provided that the Eligible Employee shall pay the
employee portion of any required premium payments at the level in effect for
employees generally of the Participating Company for such benefits. For purposes
of determining an Eligible Employee's entitlement to continuation coverage as
required by Title I, Subtitle B, Part 6 of ERISA, such employee's 18-month or
other period of coverage shall commence on his or her termination of employment.
3. Annual Bonus Payment
Subject to the provisions of this paragraph 3, a cash bonus
for the calendar year of termination may be paid in the event the Eligible
Employee was employed by a Participating Company for at least six full months
during such year and the Eligible Employee participated in an annual bonus plan
(the "Annual Incentive Plan") immediately prior to termination of employment. In
such event, the Eligible Employee shall receive a bonus in an amount equal to
the actual bonus which would have been payable under the Annual Incentive Plan
had such employee remained employed through the end of the year of such
termination multiplied by a fraction the numerator of which is the number of
full months of employment during the calendar year of termination and the
denominator of which is 12. Such bonus shall be payable at the time otherwise
payable under the Annual Incentive Plan had employment not terminated.
Notwithstanding the foregoing, no amount shall be paid under this paragraph in
the event the Eligible Employee incurred an Eligible Termination by reason of
unsatisfactory performance. The foregoing provisions of this paragraph 3 shall
be appropriately modified in the case of any plan not on a calendar year basis.
4. Long-Term Awards
Cash payments shall be made to an Eligible Employee as set
forth in this paragraph in respect of "Performance-Based Awards" as such term is
defined in the 1998 Moody's Corporation Key Employees' Stock Incentive Plan
(formerly known as the 1998 Dun & Bradstreet Key Employees' Stock Incentive
Plan) (the "Stock Incentive Plan") otherwise payable under the Stock Incentive
Plan had the Eligible Employee remained employed through the end of the
applicable performance period in the event the Eligible
-58-
<PAGE> 6
MOODYS CORP /DE/ - 10-K405
Employee was employed by a Participating Company for at least half the
applicable performance period. In such event, cash payments shall be made to an
Eligible Employee in amounts equal to the value of the Performance Based Awards,
as earned, otherwise payable under the Stock Incentive Plan had the employee
remained employed through the end of the applicable performance period
multiplied by a fraction the numerator of which is the number of full months of
employment with a Participating Company from the beginning of the performance
period to termination of employment, and the denominator of which is the number
of full months in the performance period. Such payments shall be made at the
times the Performance Based Awards in respect of which such payments are made
would otherwise be payable under the Stock Incentive Plan had employment not
terminated. Notwithstanding the foregoing, no amount shall be paid under this
paragraph in the event the Eligible Employee incurred an Eligible Termination by
reason of unsatisfactory performance. Nothing contained herein shall reduce any
amounts otherwise required to be paid under the Stock Incentive Plan except to
the extent such amounts are paid hereunder.
5. Death
Upon the death of an Eligible Employee during the Salary
Continuation Period, the benefits described in paragraphs 1, 3 and 4 of this
Schedule shall continue to be paid to his or her estate, as applicable, at the
time or times otherwise provided for herein.
6. Cash Equivalency Payment
The Eligible Employee shall receive, as soon as practicable
following the date of termination, an amount in cash equal to the fair market
value on such date of termination of the number of shares of restricted Company
common stock then held by such employee. For purposes of this paragraph 6, the
fair market value of the Company common stock shall equal the closing price of
such stock on the New York Stock Exchange composite tape on the date of
termination, or if such date is not a trading day, on the trading day
immediately prior thereto. Notwithstanding the foregoing, no amounts shall be
paid under this paragraph in the event the Eligible Employee incurred an
Eligible Termination by reason of unsatisfactory performance.
7. Other Benefits
The Eligible Employee shall be entitled to such group
outplacement services during the Salary Continuation Period as shall be provided
by the Participating Company.
8. No Further Grants, Etc.
Following an Eligible Employee's termination of employment, no
further grants, awards, contributions, accruals or continued participation
(except as otherwise provided for herein) shall be made to or on behalf of such
employee under any plan or program maintained by a Participating Company
including, but not limited to, any Annual Incentive Plan, the Stock Incentive
Plan or any qualified or nonqualified retirement, profit sharing, stock option
or restricted stock plan of a Participating Company. Any unvested or unexercised
options, unvested restricted stock and all other benefits under any plan or
program maintained by a Participating Company (including, but not limited to,
any Annual Incentive Plan, the Stock Incentive Plan or any qualified or
nonqualified retirement, profit sharing, stock option or restricted stock plan)
which are held or accrued by an Eligible Employee at the time of his or her
termination of employment, shall be treated in accordance with the terms of such
plans and programs under which such options, restricted stock or other benefits
were granted or accrued.
-59-
<PAGE> 7
MOODYS CORP /DE/ - 10-K405
SCHEDULE B
This Schedule B is applicable to Eligible Employees covered by
Section 1.3 (b) of the Plan, provided, however that an Eligible Employee who
incurs an Eligible Termination for any reason other than unsatisfactory
performance with more than 17 Years of Service, may elect to have Schedule A
apply in its entirety in lieu of this Schedule B. An Eligible Employee entitled
to benefits hereunder shall, subject to Section 2 of the Plan, receive the
following:
1. Salary Continuation
(a) If the Eligible Employee incurs an Eligible Termination
for any reason other than unsatisfactory performance and his or her
Salary at the time employment terminates is equal to or greater than
$100,000 but less than $150,000, the Eligible Employee shall receive 26
weeks of Salary continuation. If an Eligible Employee incurs an
Eligible Termination by reason of unsatisfactory performance and his or
her Salary at the time employment terminates is equal to or greater
than $100,000 but less than $150,000, the Eligible Employee shall
receive 13 weeks of Salary continuation.
(b) If the Eligible Employee incurs an Eligible Termination
for any reason other than unsatisfactory performance and his or her
Salary at the time employment terminates is between $150,000 and
$200,000 inclusive, the Eligible Employee shall receive 39 weeks of
Salary continuation. If an Eligible Employee incurs an Eligible
Termination by reason of unsatisfactory performance and his or her
Salary at the time employment terminates is between $150,000 and
$200,000 inclusive, the Eligible Employee shall receive 20 weeks of
Salary continuation.
(c) If the Eligible Employee incurs an Eligible Termination
for any reason other than unsatisfactory performance and his or her
Salary at the time employment terminates is greater than $200,000, the
Eligible Employee shall receive 52 weeks of Salary continuation. If an
Eligible Employee incurs an Eligible Termination by reason of
unsatisfactory performance and his or her Salary at the time employment
terminates is greater than $200,000, the Eligible Employee shall
receive 26 weeks of Salary continuation.
The amounts set forth in this paragraph 1 shall be payable at
the times the Eligible Employee's Salary would have been paid if employment had
not terminated, over a period equal to the number of weeks of Salary
continuation (the "Salary Continuation Period"). In the event the Eligible
Employee performs services for an entity other than a Participating Company
during the Salary Continuation Period, such employee shall notify the
Participating Company on or prior to the commencement thereof. For purposes of
this Schedule B, to "perform services" shall mean employment or services as a
full-time employee, consultant, owner, partner, associate, agent or otherwise on
behalf of any person, principal, partnership, firm or corporation (other than a
Participating Company). All Salary continuation payments shall cease upon
re-employment by a Participating Company.
2. Welfare Benefit Continuation
Medical, dental and life insurance benefits shall be provided
throughout the Salary Continuation Period at the levels in effect for the
Eligible Employee immediately prior to termination of employment but in no event
greater than the levels in effect for active employees generally during the
Salary Continuation Period, provided that the Eligible Employee shall pay the
employee portion of any required premium payments at the level in effect for
employees generally of the Participating Company for such benefits. For purposes
of determining an Eligible Employee's entitlement to continuation coverage as
required by Title I, Subtitle B, Part 6 of ERISA, such employee's 18-month or
other period of coverage shall commence on his or her termination of employment.
-60-
<PAGE> 8
MOODYS CORP /DE/ - 10-K405
3. Annual Bonus Payment
Subject to the provisions of this paragraph 3, a cash bonus
for the calendar year of termination may be paid in the event the Eligible
Employee was employed by a Participating Company for at least six full months
during such year and the Eligible Employee participated in an annual bonus plan
(the "Annual Incentive Plan") immediately prior to termination of employment. In
such event, the Eligible Employee shall receive a bonus in an amount equal to
the actual bonus which would have been payable under the Annual Incentive Plan
had such employee remained employed through the end of the year of such
termination multiplied by a fraction the numerator of which is the number of
full months of employment during the calendar year of termination and the
denominator of which is 12. Such bonus shall be payable at the time otherwise
payable under the Annual Incentive Plan had employment not terminated.
Notwithstanding the foregoing, no amount shall be paid under this paragraph in
the event the Eligible Employee incurred an Eligible Termination by reason of
unsatisfactory performance. The foregoing provisions of this paragraph 3 shall
be appropriately modified in the case of any plan not on a calendar year basis.
4. Long-Term Awards
Cash payments shall be made to an Eligible Employee as set
forth in this paragraph in respect of "Performance-Based Awards" as such term is
defined in the 1998 Moody's Corporation Key Employees' Stock Incentive Plan
(formerly known as the 1998 Dun & Bradstreet Key Employees' Stock Incentive
Plan) (the "Stock Incentive Plan") otherwise payable under the Stock Incentive
Plan had the Eligible Employee remained employed through the end of the
applicable performance period in the event the Eligible Employee was employed by
a Participating Company for at least half the applicable performance period. In
such event, cash payments shall be made to an Eligible Employee in amounts equal
to the value of the Performance Based Awards, as earned, otherwise payable under
the Stock Incentive Plan had the employee remained employed through the end of
the applicable performance period multiplied by a fraction the numerator of
which is the number of full months of employment with a Participating Company
from the beginning of the performance period to termination of employment, and
the denominator of which is the number of full months in the performance period.
Such payments shall be made at the times the Performance Based Awards in respect
of which such payments are made would otherwise be payable under the Stock
Incentive Plan had employment not terminated. Notwithstanding the foregoing, no
amount shall be paid under this paragraph in the event the Eligible Employee
incurred an Eligible Termination by reason of unsatisfactory performance.
Nothing contained herein shall reduce any amounts otherwise required to be paid
under the Stock Incentive Plan except to the extent such amounts are paid
hereunder.
5. Death
Upon the death of an Eligible Employee during the Salary
Continuation Period, the benefits described in paragraphs 1, 3 and 4 of this
Schedule shall continue to be paid to his or her estate, as applicable, at the
time or times otherwise provided for herein.
6. Cash Equivalency Payment
The Eligible Employee shall receive, as soon as practicable
following the date of termination, an amount in cash equal to the fair market
value on such date of termination of the number of shares of restricted Company
common stock then held by such employee. For purposes of this paragraph 6, the
fair market value of the Company common stock shall equal the closing price of
such stock on the New York Stock Exchange composite tape on the date of
termination, or if such date is not a trading day, on the trading day
immediately prior thereto. Notwithstanding the foregoing, no amounts shall be
paid under this paragraph in the event the Eligible Employee incurred an
Eligible Termination by reason of unsatisfactory performance.
-61-
<PAGE> 9
MOODYS CORP /DE/ - 10-K405
7. Other Benefits
The Eligible Employee shall be entitled to such individual
outplacement services during the Salary Continuation Period as shall be provided
by the Participating Company. During the Salary Continuation Period, financial
planning/counseling shall be afforded to the Eligible Employee to the same
extent afforded immediately prior to termination of employment in the event the
Eligible Employee incurred an Eligible Termination other than by reason of
unsatisfactory performance.
8. No Further Grants, Etc.
Following an Eligible Employee's termination of employment, no
further grants, awards, contributions, accruals or continued participation
(except as otherwise provided for herein) shall be made to or on behalf of such
employee under any plan or program maintained by a Participating Company
including, but not limited to, any Annual Incentive Plan, the Stock Incentive
Plan or any qualified or nonqualified retirement, profit sharing, stock option
or restricted stock plan of a Participating Company. Any unvested or unexercised
options, unvested restricted stock and all other benefits under any plan or
program maintained by a Participating Company (including, but not limited to,
any Annual Incentive Plan, the Stock Incentive Plan or any qualified or
nonqualified retirement, profit sharing, stock option or restricted stock plan)
which are held or accrued by an Eligible Employee at the time of his or her
termination of employment shall be treated in accordance with the terms of such
plans and programs under which such options, restricted stock or other benefits
were granted or accrued.
EXHIBIT 1
SEVERANCE AGREEMENT AND RELEASE
THIS SEVERANCE AGREEMENT AND RELEASE, made by and between [NAME OF
EMPLOYEE] (hereinafter referred to as "Employee"), and Moody's Corporation
(hereinafter deemed to include its worldwide subsidiaries and affiliates and
referred to the "Company").
In consideration of the mutual covenants and promises hereinafter
provided and of the actions taken pursuant thereto, the parties agree as
follows:
1. (a) Employee's employment with the Company, and Employee's membership
on any committees, is terminated effective on the date specified in Appendix A
(the "Termination Date"), and Employee agrees not to apply for or seek
re-employment with the Company after that date. Employee agrees to continue
working through the Termination Date, unless released from employment earlier by
the Company, and Employee will continue to receive Employee's regular salary and
benefits through the Termination Date.
(b) Effective as of the Termination Date, Employee will incur an
"Eligible Termination" under the Moody's Corporation Career Transition Plan (the
"Plan"), a summary plan description of which Employee hereby acknowledges
receipt, and subject to the terms and conditions of such Plan, will be eligible
for the benefits set forth therein, provided that Employee re-executes this
Agreement on or after the Termination Date. A summary of the benefits for which
Employee is eligible under the Plan is set forth in Appendix A.
(c) Employee acknowledges that the severance benefits set forth
in the Plan include compensation and/or benefits in addition to what Employee
would otherwise be entitled to receive.
2. During the period of salary continuation, as set forth in Appendix A
(the "Salary Continuation Period"), Employee will be reasonably available to
consult on matters, and will continue to cooperate fully
-62-
<PAGE> 10
MOODYS CORP /DE/ - 10-K405
with respect to any claim, litigation or investigation relating to the Company
(including investigations which relate directly or indirectly to Employee's
activities at the Company) by providing truthful and complete information. No
reimbursement for expenses incurred by Employee after the Termination Date shall
be made to Employee unless authorized in advance by the Company.
3 (a) Employee agrees that through the last day of salary continuation,
as set forth in Appendix A (the "Last Day of Salary Continuation"), Employee
will not become a stockholder (unless such stock is listed on a national
securities exchange or traded on a daily basis in the over-the-counter market
and the Employee's ownership interest is not in excess of 2% of the company
whose shares are being purchased), employee, officer, director or consultant of
or to a corporation, or a member or an employee of or a consultant to a
partnership or any other business or firm, which competes with any of the
businesses owned or operated by the Company; nor if Employee becomes associated
with a company, partnership or individual which company, partnership or
individual acts as a consultant to businesses in competition with the Company
will Employee provide services to such competing businesses.
(b) The restrictions contained in this Paragraph 3 shall apply
whether or not Employee accepts any form of compensation from such competing
entity or consultant. Employee also agrees that until the Last Day of Salary
Continuation, Employee will not recruit or solicit any customers of the Company
to become customers of any business entity which competes with any of the
businesses owned or operated by the Company. In addition, Employee agrees that
until the Last Day of Salary Continuation neither Employee nor any company or
entity Employee controls or manages, shall recruit or solicit any employee of
the Company to become an employee of any business entity.
(c) If Employee performs services for an entity other than the
Company at any time prior to the Last Day of Salary Continuation (whether or not
such entity is in competition with the Company), Employee shall notify the
Company on or prior to the commencement thereof. To "perform services" shall
mean employment or services as an employee, consultant, owner, partner,
associate, agent or otherwise on behalf of any person, principal, partnership,
firm or corporation.
4. (a) Employee agrees that Employee will not directly or indirectly
disclose any proprietary or confidential information, records, data, formulae,
specifications and other trade secrets owned by the Company, whether oral or
written, to any person or use any such information, except pursuant to court
order (in which case Employee will first provide the Company with written notice
of such). All records, files, drawings, documents, models, disks, equipment and
the like relating to the businesses of the Company shall remain the sole
property of the Company and shall not be removed from the premises of the
Company. Employee further agrees to return to the Company any property of the
Company which Employee may have, no matter where located, and not to keep any
copies or portions thereof.
(b) Employee shall keep the terms of this Agreement
confidential. Employee agrees not at any time to talk about, write about,
discuss or otherwise publicize the terms or existence of this Agreement to
anyone other than Employee's legal, tax or other financial advisors or immediate
family members, except in response to a subpoena, court directive or otherwise
as required by law. Employee shall not disparage, denigrate or defame the
Company or any other affiliated entity, or any of their business products or
services and shall not make any written or oral statement, news release or other
announcement relating to Employee's employment by the Company or relating to the
Company, its subsidiaries, customers or personnel, which is designed to
embarrass or criticize any of the foregoing.
(c) Because of the difficulties in determining damages to the
Company in the event that Employee breaches the terms of paragraph 4(b),
Employee shall pay the Company $______ if Employee fails to comply.
5. Employee agrees that in the event of any breach of the covenants
contained in Paragraphs 3 and 4, in addition to any remedies that may be
available to the Company, the obligations of the Company to
-63-
<PAGE> 11
MOODYS CORP /DE/ - 10-K405
make any payments otherwise required to be made to Employee under the Plan shall
immediately cease, without notice, and the Company shall be entitled to recover
from Employee all such payments previously made to Employee pursuant to the Plan
or this Agreement. The parties further agree that any such breach would cause
injury to the Company which cannot reasonably or adequately be quantified and
that such relief does not constitute in any way a penalty or a forfeiture.
6. (a) In exchange for the benefits under the Plan set forth in Appendix
A and promised to Employee in this Agreement, and as a material inducement for
that promise, Employee hereby WAIVES, RELEASES and FOREVER DISCHARGES the
Company and/or related persons from any and all claims, rights and liabilities
of every kind, whether or not Employee now knows them to exist, which Employee
ever had or may have arising out of Employee's employment with the Company or
termination of that employment. This WAIVER and RELEASE includes, but is not
limited to, any claim for unlawful discrimination under Title VII of the Civil
Rights Act of 1964, as amended, the Americans with Disabilities Act of 1990, 42
U.S.C. Section 1981, the Worker Adjustment and Retraining Notification Act, and
the Family and Medical Leave Act of 1993, and any violation of any other
federal, state or local constitution, statute, rule, regulation or ordinance, or
for breach of contract, wrongful discharge, tort or other civil wrong. To the
fullest extent permitted by law, Employee PROMISES NOT TO SUE or bring any
charges, complaints or lawsuits related to the claims Employee is waiving by
this Agreement against the Company and/or related persons in the future,
individually or as a member of a class, and Employee will immediately withdraw
with prejudice any such charges, complaints and lawsuits that Employee began
before signing this Agreement.
(b) If Employee violates this Agreement by bringing or
maintaining any charges, claims, grievances, or lawsuits contrary to this
Paragraph 6, Employee will pay all costs and expenses of the Company and/or
related persons in defending against such charges, claims, grievances or
lawsuits brought by Employee or on Employee's behalf, including reasonable
attorney's fees, and will be required to give back, at the Company's sole
discretion, the value of anything paid by the Company in exchange for this
Agreement.
(c) As referred to in this Agreement, "the Company and/or
related persons" includes the Company, its past and present parents,
subsidiaries, affiliates and divisions, their respective successors and assigns,
and all of their respective past and present directors, officers,
representatives, agents, employees, attorneys, agents and trustees or
administrators of any Company plan, whether as individuals or in their official
capacity, and the respective heirs and personal representatives of any of them.
(d) This WAIVER, RELEASE and PROMISE NOT TO SUE is binding on
Employee, Employee's heirs, legal representatives and assigns.
7. This Agreement does not constitute an admission of any unlawful
discriminatory acts or liability of any kind by the Company and/or related
persons, or anyone acting under their supervision or on their behalf. This
Agreement may not be used or introduced as evidence in any legal proceeding,
except to enforce its terms.
8. Employee acknowledges that in deciding to sign this Agreement Employee
has not relied on any promises or commitments, whether spoken or in writing,
made to Employee by any Company representative, except for what is expressly
stated in this Agreement. This Agreement constitutes the entire understanding
and agreement between Employee and the Company, and replaces and cancels all
previous agreements and commitments, whether spoken or written, in connection
with the matters described.
9. If one or more terms of this Agreement shall be ruled by a court to be
void or unenforceable, the Company may choose to cancel any or all of the
remaining terms of this Agreement and get back from Employee (or Employee's
successors or assigns) the value of anything paid by the Company in exchange for
this Agreement. Terms of this Agreement that are not canceled (if any) shall
continue in full force and effect.
-64-
<PAGE> 12
MOODYS CORP /DE/ - 10-K405
10. This Agreement shall be construed, governed by and enforced in
accordance with the laws of the State of New York without regard to its
conflicts of law principles. Any action arising out of or relating to this
Agreement may, at the election of the Company, be brought and prosecuted only in
that State, and in the event of such election, Employee consents to the
jurisdiction and venue of any courts of or in such jurisdiction and waives trial
by jury.
11. This Agreement cannot be changed or modified except by written
agreement signed by both Employee and an authorized Company representative.
PLEASE READ the following declaration and sign this Agreement only if
it is true:
I ACKNOWLEDGE THAT I HAVE CAREFULLY READ AND CONSIDERED THIS
AGREEMENT; THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO REVIEW
THIS AGREEMENT WITH LEGAL OR OTHER ADVISORS OF MY CHOICE; THAT
I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I RELEASE LEGAL
CLAIMS AND WAIVE CERTAIN RIGHTS; AND THAT I FREELY AND
VOLUNTARILY CONSENT TO ALL TERMS OF THIS AGREEMENT WITH FULL
UNDERSTANDING OF WHAT THEY MEAN.
IN WITNESS WHEREOF, Employee and the Company, by its duly
authorized agent, have hereunder executed this Agreement.
[NAME OF EMPLOYEE] MOODY'S CORPORATION
----------------------------- ----------------------------------
----------------------------- ----------------------------------
Date signed by [NAME OF EMPLOYEE] Date signed by Moody's Corporation
APPENDIX A
SUMMARY OF BENEFIT ENTITLEMENTS
UNDER MOODY'S CORPORATION
CAREER TRANSITION PLAN
FOR
[NAME OF EMPLOYEE]
Employment with Company Since:
Termination Date:
Salary Continuation Period:
Position Terminated:
-65-
<PAGE> 13
MOODYS CORP /DE/ - 10-K405
Date of Birth:
Salary Continuation:
Last Day of Salary Continuation:
Welfare Benefit Continuation:
Unused Vacation:
Outplacement Services:
THE DESCRIPTION OF BENEFITS CONTAINED IN THIS APPENDIX A IS ONLY A SUMMARY AND
IS SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN AND THIS AGREEMENT. REFER TO
YOUR SUMMARY PLAN DESCRIPTION FOR MORE DETAIL.
-66-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>3
<FILENAME>y46068ex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE> 1
MOODYS CORP /DE/ - 10-K405
EX-21
2
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21
LIST OF ACTIVE SUBSIDIARIES AS OF JANUARY 31, 2001
<TABLE>
<CAPTION>
Jurisdiction
COMPANY NAME of
Creation
<S> <C>
MOODY'S INVESTORS SERVICE PTY. LIMITED Australia
MOODY'S AMERICA LATINA LTDA. Brazil
MOODY'S (CANADA) INC. Canada
MOODY'S INTERBANK CREDIT SERVICE LIMITED Cyprus
MOODY'S INVESTORS SERVICE, INC. Delaware
MOODY'S HOLDINGS, INC. Delaware
MOODY'S OVERSEAS HOLDINGS, INC. Delaware
MOODY'S RISK MANAGEMENT SERVICES, INC. Delaware
MOODY'S INVESTORS SERVICE LTD. England
MOODY'S HOLDINGS (UK) LIMITED England
MOODY'S RISK MANAGEMENT SERVICES LTD. England
</TABLE>
-67-
<PAGE> 2
MOODYS CORP /DE/ - 10-K405
<TABLE>
<S> <C>
MOODY'S FRANCE SA France
MOODY'S DEUTSCHLAND GMBH Germany
MOODY'S ASIA PACIFIC LIMITED Hong Kong
MOODY'S MAURITIUS HOLDINGS LIMITED India
MOODY'S RISK MANAGEMENT SERVICES, LTD. Ireland
MOODY'S ITALIA S.R.L. Italy
MOODY'S JAPAN KABUSHIKI KAISHA Japan
MOODY'S DE MEXICO S.A. DE C.V. Mexico
MOODY'S HOLDINGS B.V. Netherlands
MOODY'S INVESTORS SERVICE ESPANA, S.A. Spain
MOODY'S SINGAPORE PTE. LTD. Singapore
</TABLE>
-68-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>y46068ex23.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP
<TEXT>
<PAGE> 1
MOODYS CORP /DE/ - 10-K405
EX-23
3
CONSENT OF EXPERTS
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-57267, 333-57915, 333-60737, 333-64653,
333-68555, 333-81121 and 333-47848) of Moody's Corporation (formerly known as
The Dun & Bradstreet Corporation) of our report dated February 5, 2001
relating to the consolidated financial statements, which appears in this Form
10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
New York, New York
March 15, 2001
-69-
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----