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Moody's Corp. (NYSE:MCO)

Q1 2012 Earnings Call

April 26, 2012 11:30 am ET

Executives

Salli Schwartz - Global Head, IR

Ray McDaniel - Chairman & CEO

Linda Huber - EVP & CFO

Analysts

Peter Appert- Piper Jaffray

Craig Huber - Huber Research Partners

Doug Arthur - Evercore

Jennifer Huang - UBS

Operator

Good day and welcome ladies and gentlemen to the Moody’s Corporation first quarter 2012 earnings conference call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for question-and-answers following the presentation. I would now like to turn the conference over to Salli Schwartz, Global Head of Investor Relations. Please go ahead.

Salli Schwartz

Thank you. Good morning, everyone, and thanks for joining us on this teleconference to discuss Moody’s first quarter results for 2012. I am Salli Schwartz, Global Head of Investor Relations.

Moody’s released its results for the first quarter 2012 this morning. The earnings press release and a presentation to accompany this teleconference are both available on our website at ir.moodys.com. Ray McDaniel, President and Chief Executive Officer of Moody’s Corporation will lead this morning’s conference call. Also making prepared remarks on the call this morning is Linda Huber, Chief Financial Officer of Moody’s Corporation.

Before we begin, I call your attention to the Safe Harbor language, which can be found towards the end of our earnings release. Today’s remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the Act, I also direct your attention to the management’s discussion and analysis sections and the risk factors discussed in our annual report on Form 10-K for the year ended December 31, 2011 and in other SEC filings made by the company which are available on our website and on the Securities and Exchange Commission’s website. These, together with the Safe Harbor statements, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements.

I would also like to point out that members of the media may be on the call this morning in a listen-only mode. I’ll now turn the call over to Ray McDaniel.

Ray McDaniel

Thank you, Salli. Good morning and thank you to everyone for joining today’s call. I’ll begin by summarizing Moody’s first quarter 2012 results. Linda will follow with additional financial detail and operating highlights and I’ll then speak to recent regulatory developments and finish with comments on our outlook for 2012. After our prepared remarks, we’ll be happy to respond to your questions.

First quarter revenue of $647 million increased 12% over the prior year period primarily reflecting increased corporate and public project and infrastructure debt issuance as well as continued solid performance from Moody’s Analytics. All reporting units of both Moody’s Investor Service and Moody’s Analytics grew in the first quarter of 2012 compared to the prior year period.

Operating income for the first quarter was $269 million, an 8% increased from the prior-year period. Diluted earnings per share for the quarter of $0.76 increased 13% year-over-year. While the level of issuance activity was strong in first quarter, we remain cautious about market conditions for the remainder of the year. As a result we are reaffirming our 2012 EPS guidance of $2.62 to $2.72, but now expect to be toward the upper end of the range.

I will now turn the call over to Linda to provide further commentary on our results and other updates.

Linda Huber

Thanks, Ray. I’ll begin with revenue at the company level. As Ray mentioned, Moody’s total revenue for the quarter increased 12% to $647 million. The US first quarter revenue increased 14% to $344 million while revenue outside the US grew 10% to $303 million and represented 47% of Moody’s total revenue, down slightly from the 48% in the year-ago period. Recurring revenue of $330 million represented 51% of the total, essentially flat to the prior year period.

Now looking at each of our businesses starting with Moody’s Investor Service, revenue for the quarter was $453 million, a 10% increase year-over-year. Foreign currency translation unfavorably impacted Moody’s Investor Service revenue by $4 million. US revenue for MIS increased 13% over the prior year period, while revenue outside the US increased 6% and represented 43% of total ratings revenue.

Global corporate finance revenue in the first quarter increased 10% from the year-ago period to $201 million. Revenue grew 8% in the US while outside the US revenue increased 15% year-over-year. The growth in global corporate finance revenue reflected stronger investment grade and solid speculative grade bond issuance activity.

Global structured finance revenue for the first quarter was $94 million, 5% above the prior-year period. In the US revenue increased 15% year-over-year primarily due to strength asset backed securities and commercial real estate. Most other areas of the US structured finance market remained weak. International structured finance revenue was down 2% reflecting weaker issuance volumes in European asset-backed securities in the first quarter of 2012 as well as demand in the first quarter of 2011 for ratings of outstanding securitization placed with the European Government sponsored facility.

Global financial institutions revenue of $79 million increased 2% from the same quarter of 2011. US revenue was essentially flat as compared to the first quarter of 2011 while non-US revenue grew 4%. Global revenue for the public project and infrastructure business rose 23% year-over-year to $79 million. Revenue was up 37% in the US reflecting strength in both public finance and project finance.

Non-US revenue increased 4% primarily due to gains in the infrastructure sector in Latin America and Asia. And turning now to Moody’s Analytics. Global revenue for Moody’s Analytics of $194 million was up 18% from the first quarter of 2011. The impact of foreign currency translation was negligible. US revenue grew by 19% year over year to $85 million. Non-US revenue increased by 17% to $109 million and represented 56% of total Moody’s Analytics revenue.

Globally revenue from research data and analytics of $120 million increased 9% from the prior-year period due primarily to increased sales of credit research and related data and represented 62% of the total MA revenue. Revenue from enterprise risk solutions formerly known as risk management software of $48 million grew 11% from last year driven by the December 2011 acquisition of Barrie & Hibbert.

Due to the variable nature of the project timing, enterprise risk solution revenue remains subject to quarterly volatility. Professional services revenue more than doubled to $27 million reflecting both the acquisition of the majority stake in Copal Partners in November 2011 and growth in our existing training and education business. Turning now to expenses. Moody’s first quarter expenses were $378 million, an increase of 16% compared to the first quarter of 2011. Incremental compensation expense which accounted for over half of the growth was primarily driven by additional headcount in the operating businesses and from the acquisition. Other incremental expenses were largely composed of non-compensation expenses related to the acquisitions including purchased price amortization and IT related costs.

The impact of foreign currency translation on first quarter expenses was negligible. Moody's reported operating margin for the quarter was 41.6%, down from 43.3% from the first quarter of 2011. Our effective tax rate for the quarter was 32.1% compared with 33.2% for the prior-year period. Decrease in the effective tax rate was primarily due to benefits derived from international tax initiatives and tax audit settlement partially offset by miscellaneous discrete items.

Now I will provide an update on capital allocation. During the first quarter of 2012, Moody's did not repurchase any shares, but did issue 2.6 million shares under employee stock based compensation plans. Outstanding shares as of March 31, 2012 totaled $225 million representing a 1% decline from a year ago. As of quarter end, Moody's had 900 million of share repurchase authority remaining under its current programs and as we have previously noted, we still expect to repurchase approximately 200 million of Moody's shares over the course of 2012, subject to available cash flow, market conditions and other ongoing capital allocation provision.

As of March 31, Moody's had $1.2 billion of outstanding debt and $1 billion of additional debt capacity available under our revolving credit facility. Additionally on April 18, 2012 we renewed our $1 billion credit facility for another five-year term. Cash and cash equivalents were $815 million, an increase of $95 million from a year earlier. Approximately 80% of our cash holdings are maintained outside the US. We remain committed to using our strong cash flow to create value for shareholders while maintaining sufficient liquidity. And with that I will turn the call back over to Ray.

Ray McDaniel

Thanks, Linda. I will continue with an update on regulatory developments. Starting in the US, regulatory authorities are moving forward on implementing the various parts of the Dodd-Frank Act. Following the SEC’s summer 2011 common deadline for rule proposals relevant to NRSROs, the SEC revised its timetable and is expected to adopt final rules by year-end 2012.

Within the same time, the SEC is also is expected to publish its feasibility study on establishing an alternative system for allocating rating assignments for structured finance products, otherwise known as the Franken Amendment.

Turing to Europe, Moody’s was registered in the European Union in late October 2011, and as I have indicated on previous calls, the transfer of oversight of registered credit rating agencies to the European Securities and Markets Authority or ESMA, became effective in July 2011. Our European operations are therefore under the full examination and oversight authority of ESMA and ESMA published its first inspection report in March. ESMA report had not identified any breaches of the current regulation by Moody’s.

As discussed on previous calls in November 2011, the European Commission release new regulatory reform proposals for the rating agency industry known as CRA 3 that seek to address among other ideas, the use of ratings and regulation, business models, competition, rotation of rating agencies and liability.

If implemented as currently constructed, the Commission suggested measures are likely to have significant negative implications for Europe’s credit markets.

Consequently, the debate on CRA 3 which began in the European Parliament and European Council of Finance Ministers in mid-January has involved the growing number of market participants. The focus on the debate has been on the potential negative impact of CRA 3 on the broader European economy and the ability of European insurers to access funds. Because of the tone of the debate thus far, it is possible that during the coming months, the Commission’s proposals will be amended.

The next stages of the legislative process include deliberation and potential amendments by both the European Parliament and the Council of European Finance Ministers. Parliament, Council and Commission must also confer and agree on final text. We expect this process to be completed by year-end and we will continue to consult with relevant authorities and market participants as of the impact of the specific proposals.

While new rules could entail various changes in our rating processes and operations and require us adapt our business. We will not abandon our fundamental objective to provide the highest quality, independent credit opinions, research and analysis.

We will also continue to advocate for globally consistent approaches that align with the G20 statements and directives. I will conclude this morning’s prepared remarks by discussing on full-year guidance.

Moody’s outlook for 2012 is based on assumption about many macroeconomic and capital market factors, including interest rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitization and the amount of debt issued. There is an important degree of uncertainty surrounding these assumptions and if actual conditions differ from these assumptions, Moody’s results for the year may differ materially from the current outlook.

Our guidance assumes foreign currency transition at end of quarter exchange rates. As I mentioned earlier, we are re-affirming our 2012 EPS guidance of $2.62 to $2.72 but now expect to be toward the upper end of the range. That we have re-affirmed our EPS guidance, certain components of 2012 guidance have been modified to reflect our current view of credit market condition.

For Moody’s overall, the company now expects full-year 2012 revenue to grow in the low double-digit percent range. Full-year 2012 expenses are also projected to increase in the low double digit percent range. Full-year 2012 operating margin is still projected to be approximately 39%, which included the full-year impact of our fourth quarter 2011 acquisitions. Effective tax rate is still projected to be approximately 33%.

As Linda mentioned earlier, we still expect approximately $200 million of share repurchase over the course of 2012 subject to available cash flow, market conditions and other on going capital allocation decisions.

For the global MIS business, revenue for full-year 2012 is now expected to increase in the mid-to-high single digit percent range. Within the U.S. MIS revenue is expected to increase in the low double-digit percentage range, while non-U.S. revenue is now expected to increase in the low single digit percentage range.

The finance revenue is now forecasted to grow in the low double digit percentage range. Revenue from each of the structured finance and financial institution is now projected to be flat to slightly up, while public project and infrastructure finances is now expected to increase in the mid-teens percent range.

For Moody’s analytics for full-year 2012, revenue is still expected to increase in the high-teens percent range both inside and outside the U.S. Revenue growth is still projected in mid-single digit percent range for our research, data and analytics and in the low 20% range for enterprise risk solutions, reflecting growth in the core business as well of December 2011 acquisition of Barrie & Hibbert. Professional services revenue is now projected to grow by approximately 80%, inclusive of the revenue from the late 2011 acquisition of a majority stake in Copal Partners and continued growth in our existing training and education businesses.

This concludes our prepared remarks and joining us for the question-and-answer session is Michel Madelain, President and Chief Operating Officer of Moody’s Investors Service and Mark Almeida, President of Moody’s analytics. We will be pleased to take any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) We will hear first from Peter Appert with Piper Jaffray.

Peter Appert- Piper Jaffray

So Linda, I was hoping you might give us a little more color on what's driving the rate of cost growth. And I ask this in the context of trying to understand why perhaps we’re not seeing a little bit more margin leverage in the ratings business given the strengthened revenues? And the last part of this question is has your thoughts evolved in terms of where you think margins can go in the ratings business over the next couple of years? Thank you.

Linda Huber

Sure Peter, let me try to tackle your question by comparing our margin this quarter which is 41.6% as compared to first quarter of last year which was 43.3%. So our margin is lower in the first quarter of 2012 by 170 basis points.

And as we noted in the script about half of that is acquisition related or 90 basis points. Of that, the purchase price amortization for the acquisitions was about half of the 90 basis points or 45. The other piece of that, 80 basis points was IT related costs. And we have a little bit of an anomalous situation here on the IT front as we’re getting ready for Dodd-Frank implementation. Because we are not building permanent systems, but rather making enhancements to our existing systems we have to expense those costs. So our expenses are running a little bit higher on the IT front than they might usually for this couple of quarters.

So if you want to think about that you might have certainly a 120 basis points or so that would normally go back to the margins that would not be doing so for the first quarter of this year.

Looking forward, I think in the longer term we do expect our margin to be back over 40, but I think we've got to get through this period of expense ramp relating to these regulatory changes we've talked about.

Ray McDaniel

And Peter its Ray, just to add to that, while we are working our way and are fairly well through the Dodd-Frank process at this point and expect that that’s going to be finalized by the SEC this year, we do have the uncertainty around Europe and that’s going to be something we’re going to have to address as the CRA3 deliberation become more clear we hope over the next few months.

Peter Appert- Piper Jaffray

And Ray you think there are some specific cost implications potentially associated with that?

Ray McDaniel

It depends on what the final proposals are, but yes I think we have to assume that there are some cost implications associated with that legislation or legislative proposals.

Peter Appert- Piper Jaffray

And on the regulatory stuff, Ray I think and I am not sure if I heard this correctly, but I thought maybe in your prepared comments you are implying that you are feeling the Franken Amendment is in fact going to happen, am I putting that correctly?

Ray McDaniel

No, I think we’re just following the expected timetable for the SEC to produce its study and we don’t know their findings will be from that study.

Peter Appert- Piper Jaffray

And last thing Ray, any comments on the pipeline in terms of what you are seeing currently in terms of near-term trends and issuance? And then associated with that your revenue performance last several quarters has been very strong obviously and it looks like you maybe picking up some market share relative to other competitors. Can you comment on that please?

Ray McDaniel

Yeah, I would be happy to make some high level comments on pipeline and I think Linda has some information as well. The pipeline, and obviously the first quarter was a strong quarter particularly in the corporate and public project in infrastructure finance areas. We do believe that that has incorporated some pull-forwards, so issuance that we were expecting later in the year has been pulled into the early part of the year.

So for Moody’s Investor Service, I think at this point we now expect to see a stronger first half than second half of the year. For Moody’s Analytics, we would still expect to see a stronger second half than first half of the year.

That being said, most of the activity we’ve seen has been refinance and so we have not seen an active market particularly in the corporate area around mergers and acquisitions, base financing, share repurchase, business investment spending. And depending on how confidence evolves throughout this year, we may have a stronger second half than would be implied from a more purely refinance based environment.

Before turning this over to Linda on what the pipeline, it looks like the only other comment I would make here is that as we’ve seen over the last 18 months, we expect to see periods of optimism and pessimism really related to the macroeconomic condition and the European sovereign debt crisis. So the pipelines are going to be subject to whether those periods of optimism, pessimism are causing investors to move away from risk and so just expect some volatility in issuance, both positively and negatively.

Linda Huber

Peter, its Linda, let me give you some specifics and I want to speak first to the US high grade market and then I am going to speak to the high yield market. As you know we’ve just come off a gang-busters first quarter in which average monthly US high grade volume issuance was about $95 billion. Then we came into April and the April high grade volume is expected to be about $30 billion for the month.

If we look at recent trends, we would have expected $42 billion that would be the 10 year average for April. So April is running light. Last week we saw about $5 billion of issuance. This week we have seen $5 billion to $10 billion of issuance. So April’s saw quite a bit of softening coming off a very strong first quarter.

May, is calling for $70 billion to $ 80 billion of high grade issuance and we’re starting to see pipelines we build, but again we are concerned about the situation in Europe and any sort of week that auctions coming out of Europe can grow a range into the process pretty quickly.

2012 quoting from some of the banks here we’re still looking at $850 billion of issuance, that’s up 15% from last year, but as Ray said, we have seen some pull-forward so it’s going to be interesting to see what happens for the rest of the year.

And turning to high yield, a bit of a different story and this is actually quite interesting because the high yield pipeline is still reasonably strong. For second quarter of 2011, the entire leverage market, about $27 billion of pipeline, high yield financing is about $6 billion of that, leverage loans about $21 billion.

That’s the next highest after second quarter of last year where we saw $64 billion of pipeline. So high yield looks pretty good and if it all keeps coming that will be pretty helpful to us. But again, as Ray mentioned, we are very, very conscious about the risk on, risk off sort of phenomenon that we’ve been seeing.

Ray McDaniel

And with respect to your market share question Peter, I think it's as much a mix issue as anything else. Some areas in the market where Moody’s is particularly strong have been active such as the commercial real estate area in the US, but there are some other areas where our coverage has been weaker such as in European structured finance, where some of the rating actions that relate to sovereigns and how that impacts the structured portions of the structured market have not been helpful to share.

Operator

We will take our next question from Craig Huber with Huber Research Partners.

Craig Huber - Huber Research Partners

Linda, can you give us what the incentive compensation was in the quarter?

Linda Huber

Yeah. Hang on, just one second while we get that for you, Craig. Incentive compensation was $27.5 million, that was 11% of total compensation and total comp expenses for the first quarter are running about $250 million Craig.

Craig Huber - Huber Research Partners

Then also within the MIS, could you breakdown on percentage basis transaction versus non-transactions that typically ask you cross structured finance, corporate finance and PPIF?

Linda Huber

Okay, so for first quarter for corporate finance we are looking at 73% transaction and 27% relationship, so quite heavy on the transaction side for the first quarter given the way the markets have been running. Structured finance is 56% transaction and 44% relationships, financial institutions 38% transaction and 62% relationships and public projects and infrastructure 62% transactions and 38% relationship. So total MIS is 62 and 38. Moody’s Analytics of course runs sort in reserve of that 20% transaction and 80% relationships. So for the company as a whole first quarter 2012, 49% transaction and 51% relationships.

Craig Huber - Huber Research Partners

Another question, if you could breakdown on percentage basis, like within structured finance, ABS or MBS et cetera due to say for corporate finance (inaudible) and PPIF?

Linda Huber

Sure, just a second okay. In terms of corporate finance revenue, investment grade and again as we have said earlier in the call we’re looking at a total line of $200 million for corporate for the first quarter 2012. Investment grade was 22% of that or $44 million, high yield was 26% of that or $51 million, bank loans 17% at $34.7 million and other to 35% or $70 million.

Again the dramatic swing for us was the change in high-yield revenues for example the fourth quarter of 2011 which was only $15 million. So $36.5 million increase in high yield is obviously very helpful to us. Let me go on to structured and see if we can get those for you. So the total structured line was $94.3 million, asset backs 29% of that revenue or $27 million, RMBS was 25% at $23.3 million. Again that does include cover bonds, commercial real estate 26% or $24 million and derivative 21%, $19.6 million and we are seeing some good interest and good pipelines around CLOs which would be another of the bright spots in structured finance?

Craig Huber - Huber Research Partners

Can you do it for financial and PPIF if you would?

Linda Huber

Sure for saving, total line was $78.8 million, banking was $55.9 million of that or 71%. Insurance was $18.1 million or 23% and managed investments almost $5 million or 6% and for public project and infrastructure, public finance and sovereigns $39 million which was 50%, munis just about $5 million which was 6% and project infrastructure $35 million which was 44% of the PPIF revenue line. As we had noted earlier again nice pick up in the project and infrastructure line.

Craig Huber - Huber Research Partners

And then lastly if I could, I wonder if you could just update us on (inaudible) various losses out there, please? Thanks.

Ray McDaniel

Yeah, sure. In terms of just an overview in ratings related litigation, we still have 20 open cases in the US and a little over 30 cases have been closed, dismissed or withdrawn. Outside the US, we have about a dozen open cases and about a half dozen cases that have been closed. As far as probably the most notable litigations, the CalPERS case, we filed an appeal to the court’s decision on the anti-SLAPP statute in March. When that appeal will be argued or decided and in Abu Dhabi, we have filed, well first of all the discovery has been completed in Abu Dhabi and we filed a motion for some re-judgment in January, but again we don’t know when that will be argued or decided?

Operator

We will hear next from Doug Arthur with Evercore.

Doug Arthur - Evercore

Just a quick question on public finance in the quarter. Ray, do you think that's more of a one-off in the sense that last year the market was sort of paralyzed over bankruptcy concerns and so this is just sort of a snap back and then going forward, things will settle down or do you think with state finances improving, you could have a pretty good run here for the rest of the year, particularly in the US?

Ray McDaniel

We think public finance is showing and it is probably going to be a fairly study for the rest of the year. We did have a good first quarter, but we are not anticipating a big drop-off for full year.

Doug Arthur - Evercore

And project infrastructure is the general source of the strength?

Ray McDaniel

Now well project and infrastructure has been strong, but we have also seen an increase in issuance at the regional government level, below the state level.

Operator

(Operator Instructions) We will hear next from Jennifer Huang with UBS.

Jennifer Huang - UBS

I was wondering if you could follow up to Peter’s question on expenses, may be just for the rest of the year in terms of the guidance, how much of that do you think is driven by meeting investments into the Moody's and over there particularly enterprise service solutions business versus the credit rating business.

Linda Huber

Sure Jen I will take a shot at that. As we said before, we expect our expenses to ramp up by about $40 million over the course of the year. And we will continue to expect that to happen and the ramp maybe a little bit deeper in the second and third quarters than some of the analysts have noted, so just something to look at in terms of the quarter-by-quarter spread on that.

And so there are a number of things we are doing in terms of our investments and more than half of the growth in those expenses are due to headcount growth and those are in the revenue area as we noted, for the rating agency its corporate finance, public projects and infrastructure and for Moody’s Analytics in enterprise with solutions and sales.

So the expense growth that we are projecting about half of it is headcount growth to drive the revenue lines in those growing businesses. About $7 million is acquisition related costs, some of that is the amortization of the intangibles. We mentioned this on the last quarter call. We said this would be something that we would be working, that would take our expenses.

And then lastly as I mentioned to Peter, we are seeing a bit of a bump up in the expense side of our IT budget, running a little bit more heavily towards expense ramp and capitalization as we get things ready for Dodd-Frank so that would explain the majority of the cost ramp coming in 2012. Does that help you?

Jennifer Huang - UBS

Yeah, and maybe just a quick follow-up on the headcount growth, and maybe if you could provide some color; to what extent you can or in terms of the employees maybe switch from, allow them to switch from one area of credit rating to another. So for example from pay structure finance to public to the PIP area or is that possible at all?

Linda Huber

Ray will answer that part and then I’ll talk more generally about headcount additions. Go ahead.

Ray McDaniel

Yeah, there is some ability to move our professional staff between areas in MIS, but I would note that all lines of business are growing and so that does provide a constraint in terms of at least the financial ability to make the moves as opposed to for just developmental purposes.

And the other thing I would just note is that a good portion of the headcount increase obviously is related to the acquisitions that we did make. So we have increase in headcount for the existing businesses that are themselves growing, but then as well from the acquisitions.

Linda Huber

Yeah, let me just give you some quick details. This first quarter ‘12 first quarter ‘11 we’ve added about 430 people in the existing businesses; about 200 of those Moody’s Analytics, again to put sales effort, the Enterprise Risk Solutions business and some of the other things you’ll note that the top-line growth in Moody’s Analytics has been quite stellar and we do need people to support that.

In the rating agency, we’ve added a 156 people; we’re supporting the higher volumes particularly as I said in corporate and PPIF, we’ve not added heads in structured finance. We have added few people as we get ready for Dodd-Frank and some of the regulatory functions.

For Shared Services we have about 70 headcount and some of those folks are compliance, business support initiatives and we recruiting. So we’re cautious to add people on the revenue driving side and we think that we’re seeing on the top-line reflects that we’ve invested pretty well in order to have that happen.

Operator

(Operator Instructions) We will take a question from Peter Appert with Piper Jaffray.

Peter Appert- Piper Jaffray

So Linda, I was just wondering specifically if there is any reason you chose not to buyback stock in the first quarter?

Linda Huber

Sure Peter. As, I think we said we had $815 million of total cash at the end of the quarter; 80% it is offshore and a lot of that is permanently reinvested offshore. We do that because it’s brought down our tax rate nicely from above 40% a bunch of years ago to, we are guiding to 33% for this year. We have made real progress on the tax line which helps the shareholders quite a bit.

Perhaps the other side of that is we have about a $180 million in cash in the US here, and the first quarter, as you heard from (inaudible) earlier in week are seasonally heavy cash out flow quarter. We have bonuses to pay, we have taxes to pay and we have dividends to pay. So it’s something more than the available cash and we are looking to get back into the market as Ray said to do 200 million of repurchases for the rest of the year.

Operator

We will take a follow-up question from Craig Huber with Huber Research Partners.

Craig Huber - Huber Research Partner

Yes. I am back for the MIS for the second term, you guys are up internationally 6% during the quarter, can you break a point how Asia did there versus how Europe did, please?

Ray McDaniel

Yeah, we can talk generally about Europe versus other international. I won’t be able to give you a detail break-out within Asia, but Europe for the first quarter overall was down about 4% and other international was up about 30% so the overall was up about 6% for MIS outside the US.

Operator

There are no further questions at this time.

Ray McDaniel

Okay. I just like to thank everyone for joining us and we will talk to you after the second quarter. Thank you.

Operator

This concludes Moody’s First Quarter Earnings Call. As a reminder, a replay of this call will be available after 03:30 PM Eastern Time on Moody’s Investor Relations website. Thank you. You may now disconnect.

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