moody's financial metrics 2007

www.moodys.com

Corporate FinanceMoodys

Special Comment

Table of Contents: Summary 1

I Data and Methodology 3 II Metrics by Rating Category Aggregated Across All Industries 3 III Industry Study 5 III.1 EBITA / Average Assets 6 III.2 EBITA / Interest Expense 7 III.3 EBITA Margin 8 III.4 Operating Margin 9 III.5 (FFO + Interest Expense) / Interest Expense 10 III.6 FFO / Debt 11 III.7 Retained Cash Flow / Net Debt 12 III.8 Debt / EBITDA 13 III.9 Debt / Book Capitalization 14 III.10 CAPEX / Depreciation 15 III.11 Revenue Volatility 16 IV Discussion 17 Appendix A Detailed Distributions by Credit Metric 20 Appendix B Definition of Credit Ratios 31 Appendix C Definition of Industry Aggregates 32 References 34 Moodys Related Research 34

Analyst Contacts:

New York 1.212.553.1653

0 Jennifer Tennant Associate Analyst

0 Albert Metz VP - Senior Credit Officer

0 Richard Cantor Managing Director

December 2007

Moody's Financial MetricsTM Key Ratios by Rating and Industry for Global Non-Financial Corporations: December 2007 Summary

This paper outlines key financial ratios across industries for each broad rating category for global non-financial non-utility corporations. The global category includes EMEA, Asia and the Americas and the ratios are based on the most recent fiscal year-end data. In addition to presenting these ratios by each rating and industry combination, we also focus on the Baa-rated issuers to deepen our analysis.

The underlying data are taken from Moodys Financial Metrics, a data and analytics platform that provides as-reported and adjusted financial data, ratios, models and interactive rating methodologies. The adjustments are described in detail in Moodys Approach to Global Standard Adjustments in the Analysis of Financial Statements for Non-Financial Corporations Parts I, II and III.

A companion spreadsheet containing the data presented in this report is available on the Moodys Financial Metrics homepage, www.MoodysFM.com. (Click here to view file)

This Credit Analysis provides an in-depth discussion of credit rating(s) for Moody's Financial Metrics Key Ratios by Rating and Industry for Global Non-Financial Corporations and should be read in conjunction with Moodys most recent Credit Opinion and rating information available on Moody's website.

2 December 2007 Special Comment Moodys Corporate Finance - Moody's Financial MetricsTM Key Ratios by Rating and Industry for Global Non-Financial Corporations

Special Comment Moodys Corporate Finance

Moody's Financial Metrics Key Ratios by Rating and Industry for Global Non-Financial Corporations

The metrics presented are:

EBITA / Average Assets

EBITA / Interest Expense

EBITA Margin

(FFO + Interest Expense) / Interest Expense

FFO / Debt

RCF / Debt

Debt / EBITDA

Debt / Book Capitalization

Operating Margin

CAPEX / Depreciation Expense

Revenue Volatility

These eleven ratios provide a useful and foundational set of metrics for comparative analysis, with broad applications both across regions and, pertinent to this study, across industries. Combinations of these ratios, sometimes further modified by non-public data, are used in our rating methodologies in conjunction with industry-specific measures and subjective judgments. The definitions of the ratios are presented in Appendix B.

We stress however that this report is not intended to describe Moody's rating process. Ratio analysis is but one part of Moody's analytical process. Qualitative and forward-looking considerations are also important. Interested readers are referred to Moody's rating methodologies for detailed discussions of our analytical approach and core ratios for each industry. When Moody's does analyze financial ratios, it uses a multivariate approach. As a result, a simple monotonic relationship between ratings and any single ratio should not generally be expected at the industry level.

Section I of the report describes details of the data and methodology. Section II presents a brief review of the distribution of these metrics in the aggregate by rating category - that is, without regard to industry classification. Results for all Baa rated issuers by industry are presented in Section III, with subsections devoted to each of the eleven metrics. Section IV contains some brief discussion and analysis.

Each exhibit in Appendix A focuses on a single financial metric and shows how its median values vary across industries and across rating categories. Definitions of the ratios are provided in Appendix B, while descriptions of the industry aggregates are presented in Appendix C.

Our analysis shows the following:

In the aggregate, there exists a strong monotonic relationship between these metrics and ratings at least from Aa to Caa-C.

o Revenue Volatility is essentially monotonic in the direction expected, with the notable exception of Aaa issuers which have relatively high volatility. We note that this is based on a total sample size of 5 issuers, and may be nothing more than a numerical artifact. This small sample affects virtually all of the metrics.

o Similarly, the median Operating Margin, EBITA Margin, EBITA / Average Assets, (FFO + Interest Expense) / Interest Expense are somewhat lower for Aaa than Aa issuers; this may again be an artifact of the very small Aaa sample.

Industries with consistently better-than-average metrics for Baa rated issuers include:

o Metals & Mining,

o Oil & Gas, and

o Healthcare & Pharmaceuticals.




Industries with consistently weaker-than-average metrics for Baa issuers include:

o Aerospace & Defense,

o Media, and

o Retail & Distribution.

The evidence suggests that more intrinsically risky industries are required to achieve better credit ratios to obtain a given rating. Put simply, those industries with more volatile revenues tend to be the same as those with otherwise better credit metrics. This result is consistent with prior research.1

I Data and Methodology

Financial data for this study are taken from the most recently available fiscal year-end filings through Moody's Financial Metrics. The metrics that we study include measures of coverage, leverage, cash flow-to-debt, profitability and revenue stability. Please consult Appendix B and the references for a detailed discussion and definitions.

All the issuers in the sample are rated by Moody's. The reported ratings refer specifically to the issuer's senior unsecured rating or, in the absence of such a rating, its estimated senior unsecured rating as of August 1, 2007.2 If a baseline credit assessment (BCA) exists for the issuer, it is used in place of the senior unsecured rating. Government-Related Issuers (GRIs) are excluded from the sample.

Industry classifications are based on proprietary Moody's sector assignments. For descriptions, please see Appendix C.

II Metrics by Rating Category Aggregated Across All Industries

In this section we examine some of the properties of these metrics in the aggregate, that is, without regard to industrial classification. In all cases, the statistics we report are medians. We consider the distribution of these metrics by broad rating category.

Exhibit 1 summarizes our findings. We make the following observations:

Five metrics are strictly monotonic with ratings:

o CAPEX / Depreciation, EBITA / Interest Expense and FFO / Debt monotonically increase with ratings, as expected. Debt / Book Capitalization and Debt / EBITDA monotonically decrease.

Most metrics are very nearly monotonic with ratings:

o Median Operating Margin, EBITA Margin, EBITA / Average Assets, (FFO + Interest Expense) / Interest Expense, are each less for Aaa than Aa issuers, though this may be an artifact of the small Aaa sample. Otherwise, these metrics behave as expected. RCF / Net Debt is higher for A than Aa but otherwise is monotonic.

Only one metric has a weak relationship to ratings:

o Revenue Volatility is greater for Aaa issuers, which of course is a small sample, and is not strictly increasing across speculative-grade ratings.

1 See, for example, The Distribution of Common Financial Ratios by Rating and Industry for North American Non-Financial Corporations, Moodys Special

Comment, July 2006. 2 Please see Moodys Senior Ratings Algorithm & Estimated Senior Ratings, July 2005 for a discussion of estimated senior unsecured ratings.




Exhibit 1: Aggregate Metrics by Rating Category

EBITA/

Average AT Operating

Margin EBITA Margin

EBITA/ IntExp

(FFO + IntExp)/ IntExp

Aaa 15.3% 14.9% 14.8% 17.0 15.5

Aa 15.6% 17.0% 17.5% 13.7 15.5

A 12.5% 13.8% 15.2% 8.2 9.6

Baa 10.1% 12.6% 13.9% 5.1 6.6

Ba 9.6% 12.2% 13.4% 3.4 4.7

B 7.3% 8.5% 9.4% 1.5 2.6

Caa-C 2.0% 1.6% 2.4% 0.3 1.5

Exhibit 1: Aggregate Metrics by Rating Category

Debt/

EBITDA Debt/

BookCap FFO/ Debt

RCF/ NetDebt

CAPEX/ DepExp Rev Vol

Aaa 0.9 22.7% 117.3% 96.3% 1.6 5.6

Aa 1.0 32.5% 68.4% 38.4% 1.4 4.4

A 1.7 39.1% 43.8% 38.7% 1.3 5.5

Baa 2.4 44.8% 29.2% 27.7% 1.2 7.2

Ba 3.3 53.5% 21.8% 20.0% 1.2 10.7

B 5.0 70.2% 12.0% 11.7% 1.1 9.2

Caa-C 6.3 92.5% 4.3% 4.6% 0.9 11.1

Source: Moody's Financial Metrics




III Industry Study

In this section, we study these financial metrics by industry. We compare ratios for Baa-rated issuers only. We do this not only to make the presentation tractable, but also because not all industries are represented in all rating categories. For instance, only six industries are represented in the Aaa category, and only ten in the Aa. The Baa category is the best represented investment-grade rating category.

Exhibit 2 lists the industries covered in this report and the number of Baa rated issuers in each. For descriptions of these industry classifications, please see Appendix C.

Exhibit 2: Industry Coverage Industry Count of Baa Issuers

Aerospace & Defense 6

Automotive 15

Chemicals 20

Consumer Products 55

Manufacturing 48

Media 25

Metals & Mining 14

Oil & Gas 57

Healthcare & Pharmaceuticals 13

Retail & Distribution 26

Services 15

Technology & Telecommunications 45

Transportation Services 15





III.1 EBITA / Average Assets

Exhibit 3 sorts the industries by their median Baa EBITA / Average Assets ratio. The complete distribution is presented in Appendix A. The median aggregate ratios at different rating categories are highlighted for comparison.

Exhibit 3: Median Baa EBITA / Average Assets

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Metals & Mining

Aa

Aaa

Healthcare & Pharmaceuticals

Oil & Gas

A

Manufacturing

Technology & Telecommunications

Consumer Products

Baa

Chemicals

Ba

Transportation Services

Retail & Distribution

Aerospace & Defense

Services

Media

Automotive

B

Caa-C

Source: Moody's Financial Metrics From Exhibit 3 we see that for Baa rated issuers, median EBITA / Average Assets is highest for the Metals & Mining, Oil & Gas, and Healthcare & Pharmaceuticals industries, with Metals & Mining exceeding that of the aggregate Aa rated issuer set. At the other extreme, the median Baa ratio is lowest for the Automotive industry, ranking just above the aggregate B rated issuer set.

While this ratio is strictly increasing across ratings in the aggregate up to Aa, that is true for only five industries.




III.2 EBITA / Interest Expense

Exhibit 4 presents median Baa EBITA / Interest Expense ratios by industry. Again, detailed distributions are reported in the Appendix. Aggregate ratios are monotonic, and that holds true for nine industries, making it the single most predictive metric we study.

Exhibit 4: Median Baa EBITA / Interest Expense

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0

Aaa

Aa

Metals & Mining

Oil & Gas

A


Manufacturing

Automotive

Baa

Chemicals

Services


Consumer Products


Aerospace & Defense


Media

Ba

B

Caa-C

Source: Moody's Financial Metrics Metals & Mining and Oil & Gas have the largest metrics, exceeding that of the aggregate A cohort. Technology & Telecommunications and Media have the lowest median EBITA / Interest Expense Ratio, falling slightly above the aggregate Ba issuer pool.




III.3 EBITA Margin

Median Baa EBITA Margins are presented in Exhibit 5. This metric is strictly monotonic up to Aa in the aggregate and two industries.

This metric is highest for the Oil & Gas, Metals & Mining and Transportation Services industries, and lowest for the Retail & Distribution and Automotive sectors.

Exhibit 5: Median Baa EBITA Margin

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Metals & Mining

Oil & Gas


Media



Aa

A

Aaa

Baa

Ba

Services

Manufacturing

Consumer Products

Aerospace & Defense

Chemicals

B

Automotive


Caa-C





III.4 Operating Margin

Median Baa Operating Margins are presented in Exhibit 6. This metric is strictly monotonic up to Aa in the aggregate, and for three industries.

Just as was the case with median EBITA Margins, the Oil & Gas, Metals & Mining and Transportation industries have the greatest median Baa Operating Margins. Automotive and Retail & Distribution are on the lower end.

Exhibit 6: Median Baa Operating Margin

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Metals & Mining


Oil & Gas

Aa


Media


Aaa

A

Baa

Ba

Services

Manufacturing

Consumer Products

Chemicals

Aerospace & Defense

B


Automotive

Caa-C





III.5 (FFO + Interest Expense) / Interest Expense

Exhibit 7 presents the median Baa (FFO + Interest Expense) / Interest Expense ratios by industry. In the aggregate, this metric increases monotonically with ratings up to Aa. That holds true for nine industries as well.

The Metals & Mining industry has median ratios that exceed the A aggregate. On the other hand, the Media industry has median metrics just above that of the aggregate Ba cohort.

Exhibit 7: Median Baa (FFO + Interest Expense) / Interest Expense

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0

Aa

Aaa

Metals & Mining

A

Oil & Gas



Automotive

Manufacturing

Baa

Chemicals

Services


Consumer Products


Aerospace & Defense

Media

Ba

B

Caa-C





III.6 FFO / Debt

Median Baa FFO / Debt ratios are presented in Exhibit 8. In the aggregate, this metric increases monotonically with ratings. That continues to hold true for six industries.

The Metals & Mining industry has median ratios exceeding that of the aggregate A cohort. The Media sector has the lowest median FFO / Debt ratio, less than that of the aggregate Ba issuer pool.

Exhibit 8: Median Baa FFO / Debt

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%

Aaa

Aa

Metals & Mining

A

Oil & Gas



Services

Manufacturing

Baa

Chemicals


Aerospace & Defense

Consumer Products

Automotive


Ba

Media

B

Caa-C





III.7 Retained Cash Flow / Net Debt

Median Baa RCF / Net Debt ratios are presented in Exhibit 9. This metric doesn't monotonically increase with ratings in the aggregate but does within five industry sectors.

Metals & Mining and Healthcare & Pharmaceuticals have median ratios in excess of the aggregate Aa pool. The Media industry has RCF / Net Debt ratios below the aggregate Ba set.

Exhibit 9: Median Baa RCF / Net Debt

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%

Aaa

Metals & Mining


A

Aa

Oil & Gas


Manufacturing

Services

Aerospace & Defense

Chemicals

Automotive

Baa



Consumer Products

Ba

Media

B

Caa-C





III.8 Debt / EBITDA

Median Baa Debt / EBITDA is presented in Exhibit 10. In the aggregate this metric is monotonically decreasing with ratings, as expected, and that continues to hold true for six industry sectors.

Note that the Oil & Gas and Metals & Mining industries have the lowest median ratios, all below the A aggregate. On the other hand, the Media sector has the greatest Debt / EBITDA ratio, exceeding the Ba aggregate.

Exhibit 10: Median Baa Debt / EBITDA

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Aaa

Aa

Metals & Mining

Oil & Gas

A



Manufacturing

Services

Baa

Chemicals

Consumer Products


Automotive

Aerospace & Defense


Ba

Media

B

Caa-C





III.9 Debt / Book Capitalization

Median Baa Debt / Book Capitalization is presented in Exhibit 11. This decreases with ratings in the aggregate, but only for six industry groups.

The ordering of industries closely tracks that given by Debt / EBITDA ratios. The sectors with the least Debt / Book Cap metrics are Metals & Mining and Oil & Gas. The Retail & Distribution and Transportation Services industries have the greatest Debt / Book Cap ratio, exceeding the Ba aggregate.

Exhibit 11: Median Baa Debt / Book Capitalization

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Aaa

Metals & Mining

Aa

A

Oil & Gas

Media

Services


Manufacturing

Chemicals

Baa

Automotive

Consumer Products


Ba

Aerospace & Defense



B

Caa-C





III.10 CAPEX / Depreciation

Exhibit 12 presents median CAPEX / Depreciation ratios for Baa rated issuers. This metric increases across ratings in the aggregate, but does so for just two industries: Automotive and Services.

Oil & Gas and Transportation Services are among the strongest industry sectors, while Automotive and Technology & Telecommunications are among the weakest.

Exhibit 12: Median Baa CAPEX / Depreciation

0.0 0.5 1.0 1.5 2.0 2.5

Oil & Gas


Aaa

Metals & Mining

Aa


A

Aerospace & Defense

Baa

Services


Consumer Products

Manufacturing

Ba

Chemicals

Media

Automotive


B

Caa-C





III.11 Revenue Volatility

Exhibit 13 presents median revenue volatility metrics for Baa rated issuers by industry. As discussed, this metric does not correlate well with ratings in the aggregate. No industry exhibits the expected monotonic relationship between ratings and volatility.

The Healthcare & Pharmaceuticals industry has the least volatile revenues among Baa rated issuers. Other leading sectors include Retail & Distribution and Transportation Services, all with revenues less volatile than the A-rated aggregate. On the other hand, revenue volatility for several industries exceeds that of the C-rated aggregate. These include Metals & Mining and Oil & Gas.

Exhibit 13: Median Baa Revenue Volatility

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0

Metals & Mining

Oil & Gas

Caa-C

Ba

B

Chemicals

Baa

Aerospace & Defense


Consumer Products

Media

Services

Automotive

Manufacturing

Aaa

A



Aa






IV Discussion

Exhibit 14 summarizes the results presented above. For each metric, we report its standardized (mean 100, standard deviation 1) value and sort the industries by their average score.3 The Oil & Gas, Metals & Mining and Healthcare & Pharmaceutical industries have the highest average score, while the Aerospace & Defense, Media and Retail & Distribution sectors have the lowest.

What are we to make of these results? Recall that these results are conditioned on ratings: Baa-rated issuers in the Oil & Gas industry generally have stronger (sometimes substantially stronger) metrics than do Baa rated issuers in the Retail & Distribution industry.

One interpretation is that observing different values is evidence of different methods or standards in assigning ratings: we observe better metrics in Oil & Gas than Retail & Distribution because we hold the former to a higher standard than we do the latter, perhaps because one industry is intrinsically riskier than the other. Consistent with previous research, we find evidence to suggest that this is true.

Using "revenue volatility" as a proxy for intrinsic risk, the hypothesis is that we should observe better credit ratios associated with greater volatility within a rating category. In other words, we should observe a negative correlation between the standardized credit ratios and standardized revenue volatility.

Exhibit 15 reports the correlation of the standardized values of each metric to revenue volatility. As expected, we obtain negative correlations for all metrics. The most significant correlations are with Debt / Book Capitalization (-0.76), FFO / Debt (-.76) and EBITA / Interest Expense (-0.73).

While purely suggestive, the results indicate that industries with more volatile revenues are required to achieve stronger credit metrics in order to obtain the Baa rating.

3 The average is taken with respect to all metrics except revenue volatility. Adjustments are made for those metrics (e.g. Debt / EBITDA) for which greater

values are less desirable.




Exhibit 14: Summary of Standardized Baa Metrics

Average

score EBITA/

Average AT EBITA/ IntExp

EBITA Margin

Operating Margin

(FFO + IntExp)/ IntExp

Metals & Mining 101.7 102.6 102.3 102.1 102.2 102.0

Oil & Gas 101.0 100.7 101.5 100.9 101.0 101.3

Healthcare & Pharmaceuticals 100.7 101.1 101.0 100.5 100.2 101.1

Technology & Telecommunications 100.1 100.1 99.2 100.4 100.4 100.4

Manufacturing 100.0 100.2 100.3 99.5 99.6 100.2

Transportation Services 99.9 99.5 99.3 100.9 101.1 99.1

Services 99.8 99.2 99.6 99.6 99.7 99.6

Chemicals 99.7 99.6 99.7 99.2 99.2 99.7

Consumer Products 99.5 99.8 99.5 99.5 99.6 99.2

Automotive 99.5 99.0 99.8 98.8 98.8 100.2

Media 99.5 99.2 99.1 100.6 100.3 98.8

Aerospace & Defense 99.4 99.4 99.2 99.3 99.2 99.0

Retail & Distribution 99.3 99.5 99.6 98.7 98.8 99.3


Exhibit 14: Summary of Standardized Baa Metrics

Average

score FFO/ Debt

RCF/ NetDebt

Debt /EBITDA

Debt/ BookCap

CAPEX/ DepExp

Rev Vol

Metals & Mining 101.7 102.6 102.3 101.9 102.2 100.7 97.4

Oil & Gas 101.0 100.9 100.7 101.3 100.8 102.7 98.5

Healthcare & Pharmaceuticals 100.7 100.7 101.1 100.9 100.3 99.6 101.0

Technology & Telecommunications 100.1 100.7 100.4 100.7 99.6 99.1 100.3

Manufacturing 100.0 99.8 100.2 100.4 100.2 99.5 100.4

Transportation Services 99.9 99.5 99.4 99.6 98.6 101.1 100.7

Services 99.8 99.9 100.0 100.0 100.4 99.7 100.3

Chemicals 99.7 99.6 100.0 100.0 100.2 99.4 99.6

Consumer Products 99.5 99.3 98.8 99.7 99.8 99.5 100.3

Automotive 99.5 99.3 99.6 99.3 99.9 99.3 100.3

Media 99.5 99.0 98.6 98.5 100.5 99.4 100.3

Aerospace & Defense 99.4 99.5 100.0 99.0 98.9 99.9 100.2

Retail & Distribution 99.3 99.2 98.9 98.8 98.5 100.1 100.8




Exhibit 15: Correlation of Median Baa Metrics to Revenue Volatility Metric Correlation

EBITA/Average AT -0.69

EBITA/IntExp -0.73

EBITA Margin -0.59

Operating Margin -0.64

(FFO + IntExp)/IntExp -0.65

FFO/Debt -0.76

RCF/NetDebt -0.65

Debt/EBITDA -0.65

Debt/BookCap -0.76

CAPEX/DepExp -0.53





Appendix A Detailed Distributions by Credit Metric

Exhibit A-1: Median EBITA / Average Assets

Aaa Aa A Baa Ba B Caa-C

Aggregate 15.3% 15.6% 12.5% 10.1% 9.6% 7.3% 2.0%

n 6 35 176 354 436 442 56

Aerospace & Defense 10.8% 8.9% 10.7% 7.1%

7 6 10 3

Automotive 12.0% 11.2% 9.2% 7.9% 5.3% 6.6% 2.6%

1 1 6 15 9 20 1

Chemicals 18.9% 11.2% 9.6% 10.3% 8.2%

1 17 20 20 21

Consumer Products 12.9% 19.7% 12.9% 10.2% 8.8% 7.4% 3.0%

1 6 26 55 86 104 14

Manufacturing 10.0% 6.5% 13.7% 11.5% 12.3% 9.2% -6.5%

1 5 17 48 46 41 7

Media 4.9% 12.4% 8.3% 7.7% 7.2% -6.0%

1 7 25 35 36 7

Metals & Mining 17.2% 18.8% 20.4% 7.0% -11.5%

5 14 21 14 3

Oil & Gas 25.8% 19.7% 19.5% 13.0% 11.1% 8.1% 7.3%

1 4 14 57 64 38 8

Healthcare & Pharmaceuticals 24.1% 19.5% 17.3% 14.2% 10.9% 7.3% 1.9%

1 8 15 13 28 30 2

Retail & Distribution 12.1% 11.4% 9.3% 8.0% 7.5% 3.5%

4 12 26 37 35 4

Services 12.9% 8.5% 10.2% 8.5% 5.9%

8 15 24 30 3


15.7% 11.5% 11.0% 9.3% 6.5% 1.5%

2 35 45 45 46 7

Transportation Services 17.7% 7.5% 10.0% 9.4% 7.7% 6.3%

1 3 7 15 11 24

Source: Moody's Financial Metrics Note: A companion spreadsheet is available at www.MoodysFM.com




Exhibit A-2: Median EBITA / Interest Expense Aaa Aa A Baa Ba B Caa-C

Aggregate 17.0 13.7 8.2 5.1 3.4 1.5 0.3

n 6 35 176 354 436 442 56

Aerospace & Defense 6.4 4.1 3.7 1.9

7 6 10 3

Automotive 26.2 24.3 12.5 5.1 1.5 1.4 0.5

1 1 6 15 9 20 1

Chemicals 11.5 7.1 4.9 3.0 1.7

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 6.1 8.0 9.4 6.2 5.1 1.9 -0.8

1 5 17 48 46 41 7

Media 10.2 7.7 3.9 2.3 1.3 -0.9

1 7 25 35 36 7

Metals & Mining 17.6 9.7 10.0 1.8 -1.9

5 14 21 14 3

Oil & Gas 24.5 17.5 14.2 8.4 4.3 2.2 1.8

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 6.6 4.7 3.7 1.5 0.5

8 15 24 30 3


80.1 6.4 4.0 3.6 1.6 0.3

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-3: Median EBITA Margin Aaa Aa A Baa Ba B Caa-C

Aggregate 14.8% 17.5% 15.2% 13.9% 13.4% 9.4% 2.4%

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 10.3% 7.5% 7.3% 7.6% 4.3% 5.3% 2.1%

1 1 6 15 9 20 1

Chemicals 14.9% 12.6% 10.3% 10.4% 7.5%

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 14.4% 17.5% 12.6% 12.3% 9.9% 10.5% -2.6%

1 5 17 48 46 41 7

Media 5.6% 23.5% 19.4% 21.0% 18.8% -13.6%

1 7 25 35 36 7

Metals & Mining 18.5% 28.8% 21.2% 7.1% -6.4%

5 14 21 14 3

Oil & Gas 20.2% 15.2% 24.3% 21.4% 29.0% 14.9% 15.8%

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 25.9% 12.7% 19.5% 13.7% 11.2%

8 15 24 30 3


18.8% 19.0% 18.2% 17.2% 10.3% 2.6%

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-4: Median Operating Margin Aaa Aa A Baa Ba B Caa-C

Aggregate 14.9% 17.0% 13.8% 12.6% 12.2% 8.5% 1.6%

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 9.5% 7.9% 7.0% 6.2% 4.4% 4.8% 1.9%

1 1 6 15 9 20 1

Chemicals 12.8% 10.0% 8.8% 8.3% 7.1%

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 15.0% 17.4% 12.5% 11.2% 9.1% 9.4% -2.2%

1 5 17 48 46 41 7

Media 4.6% 20.3% 15.5% 19.1% 16.8% -22.6%

1 7 25 35 36 7

Metals & Mining 19.5% 27.6% 20.4% 6.3% -6.5%

5 14 21 14 3

Oil & Gas 16.9% 12.4% 19.2% 20.4% 27.3% 13.8% 14.0%

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 20.3% 11.8% 15.7% 10.3% 5.2%

8 15 24 30 3


16.6% 16.6% 16.7% 12.3% 5.8% 1.8%

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-5: Median (FFO + Interest Expense) / Interest Expense Aaa Aa A Baa Ba B Caa-C

Aggregate 15.5 15.5 9.6 6.6 4.7 2.6 1.5

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 34.5 31.8 14.6 7.3 3.3 2.2 1.7

1 1 6 15 9 20 1

Chemicals 10.0 8.7 6.4 3.6 2.4

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 11.1 10.4 10.4 7.2 5.5 2.6 1.0

1 5 17 48 46 41 7

Media 15.5 8.6 5.0 2.8 2.1 0.5

1 7 25 35 36 7

Metals & Mining 17.8 10.1 9.8 5.6 0.5

5 14 21 14 3

Oil & Gas 20.0 16.9 13.3 9.0 6.2 4.1 4.5

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 8.1 6.3 4.6 2.7 1.7

8 15 24 30 3


102.9 10.2 7.6 5.3 3.1 1.5

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-6: Median FFO / Debt Aaa Aa A Baa Ba B Caa-C

Aggregate 117.3% 68.4% 43.8% 29.2% 21.8% 12.0% 4.3%

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 158.4% 505.2% 49.6% 24.6% 12.4% 11.0% 6.8%

1 1 6 15 9 20 1

Chemicals 48.6% 38.8% 27.7% 19.7% 13.1%

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 112.3% 26.0% 45.1% 30.2% 29.2% 14.1% -0.3%

1 5 17 48 46 41 7

Media 31.5% 43.1% 21.4% 12.6% 8.7% -4.4%

1 7 25 35 36 7

Metals & Mining 108.8% 61.6% 62.4% 28.6% -5.3%

5 14 21 14 3

Oil & Gas 126.6% 82.8% 56.6% 43.0% 30.4% 18.6% 27.3%

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 34.6% 31.1% 22.6% 12.6% 6.5%

8 15 24 30 3


200.6% 57.2% 40.5% 32.2% 16.1% 4.3%

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-7: Median Retained Cash Flow / Net Debt Aaa Aa A Baa Ba B Caa-C

Aggregate 96.3% 38.4% 38.7% 27.7% 20.0% 11.7% 4.6%

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 3959.4% -123.5% 36.9% 28.0% 16.5% 11.7% 7.2%

1 1 6 15 9 20 1

Chemicals 41.6% 32.7% 30.9% 18.7% 12.0%

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 80.5% 12.9% 46.6% 32.7% 30.4% 11.0% -0.3%

1 5 17 48 46 41 7

Media 45.2% 44.1% 19.0% 11.6% 6.8% -4.8%

1 7 25 35 36 7

Metals & Mining 138.1% 50.8% 34.6% 18.7% -5.9%

5 14 21 14 3

Oil & Gas 271.9% 97.3% 69.4% 37.6% 26.8% 16.5% 28.8%

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 24.3% 31.3% 21.4% 11.4% 7.0%

8 15 24 30 3


100.0% 36.8% 34.2% 31.5% 17.6% 3.5%

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-8: Median Debt / EBITDA Aaa Aa A Baa Ba B Caa-C

Aggregate 0.9 1.0 1.7 2.4 3.3 5.0 6.3

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 0.5 0.2 1.4 2.8 4.8 5.1 6.0

1 1 6 15 9 20 1

Chemicals 1.2 1.9 2.4 3.1 4.5

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 1.2 2.6 1.6 2.2 2.8 4.4 -5.6

1 5 17 48 46 41 7

Media 2.2 1.8 3.3 5.1 5.9 -1.2

1 7 25 35 36 7

Metals & Mining 0.8 1.4 1.1 3.2 4.8

5 14 21 14 3

Oil & Gas 0.5 0.7 1.4 1.7 2.3 3.8 3.0

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 2.1 2.4 3.1 5.1 7.3

8 15 24 30 3


0.4 1.5 2.1 2.3 4.4 9.6

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-9: Median Debt / Book Capitalization Aaa Aa A Baa Ba B Caa-C

Aggregate 22.7% 32.5% 39.1% 44.8% 53.5% 70.2% 92.5%

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 12.7% 4.1% 34.4% 46.3% 59.5% 77.7% 78.1%

1 1 6 15 9 20 1

Chemicals 38.5% 44.7% 44.3% 63.4% 76.9%

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 24.5% 42.9% 38.2% 44.3% 45.4% 62.5% 102.3%

1 5 17 48 46 41 7

Media 29.7% 30.3% 42.1% 59.1% 70.9% 150.7%

1 7 25 35 36 7

Metals & Mining 20.5% 30.2% 33.1% 46.6% 102.7%

5 14 21 14 3

Oil & Gas 20.1% 25.9% 47.7% 39.9% 45.0% 55.4% 51.4%

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 41.7% 43.0% 55.7% 64.8% 77.7%

8 15 24 30 3


12.3% 33.3% 48.2% 49.8% 66.1% 95.7%

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-10: Median CAPEX / Depreciation Aaa Aa A Baa Ba B Caa-C

Aggregate 1.6 1.4 1.3 1.2 1.2 1.1 0.9

n 6 35 176 354 436 442 56


7 6 10 3

Automotive 2.0 1.6 1.3 1.1 1.1 1.0 0.6

1 1 6 15 9 20 1

Chemicals 1.0 1.3 1.2 1.0 0.8

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 1.3 1.6 1.3 1.2 1.1 1.2 0.8

1 5 17 48 46 41 7

Media 1.2 1.0 1.1 1.1 0.9 0.9

1 7 25 35 36 7

Metals & Mining 2.0 1.5 2.0 1.2 0.9

5 14 21 14 3

Oil & Gas 1.1 1.7 1.8 2.1 1.8 1.5 2.7

1 4 14 57 64 38 8


1 8 15 13 28 30 2


4 12 26 37 35 4

Services 1.9 1.2 1.1 1.1 0.8

8 15 24 30 3


1.6 1.2 1.1 1.1 1.1 0.7

2 35 45 45 46 7


1 3 7 15 11 24




Exhibit A-11: Median Revenue Volatility Aaa Aa A Baa Ba B Caa-C

Aggregate 5.6 4.4 5.5 7.2 10.7 9.2 11.1

n 5 35 176 354 436 442 56


7 6 10 3

Automotive 5.6 1.1 7.3 6.4 6.8 10.1 4.5

1 1 6 15 9 20 1

Chemicals 4.8 5.0 8.9 11.7 7.4

1 17 20 20 21


1 6 26 55 86 104 14

Manufacturing 7.6 6.2 7.8 6.1 8.1 10.2 11.4

1 5 17 48 46 41 7

Media 4.9 3.6 6.5 4.3 6.0 10.8

1 7 25 35 36 7

Metals & Mining 13.2 17.4 17.0 22.5 4.3

5 14 21 14 3

Oil & Gas 9.3 7.8 6.4 13.2 17.2 19.7 25.1

1 4 14 57 64 38 8

Healthcare & Pharmaceuticals 3.8 5.1 3.8 8.6 11.3 16.0

8 15 13 28 30 2


4 12 26 37 35 4

Services 8.7 6.5 8.1 5.7 8.6

8 15 24 30 3


7.8 6.5 6.6 12.7 14.0 18.0

2 35 45 45 46 7


1 3 7 15 11 24




Appendix B Definition of Credit Ratios

Below we define the ratios presented in this study. Please note that these definitions are applied to adjusted financial numbers. For a detailed discussion of Moody's global adjustments, please consult the references.

EBITA / Average Assets

EBITA / Average of Current and Previous Year Assets



EBITA Margin

EBITA / Net Revenue

(FFO + Interest Expense) / Interest Expense

(Funds From Operations + Interest Expense) / Interest Expense

FFO / Debt

Funds From Operations / (Short-Term Debt + Long-Term Debt)

RCF / Debt

(FFO - Preferred Dividends - Common Dividends - Minority Dividends) / (Short-Term Debt + Long-Term Debt)

Debt / EBITDA

(Short-Term Debt + Long-Term Debt) / EBITDA

Debt / Book Capitalization

(Short-Term Debt + Long-Term Debt) / (Short-Term Debt + Long-Term Debt + Deferred Taxes + Minority Interest + Book Equity)

Operating Margin

Operating Profit / Net Revenue



Revenue Volatility

Standard Deviation of Trailing Five Years of Net Revenue Growth




Appendix C Definition of Industry Aggregates

In this report we study the distribution of financial ratios across 13 industry aggregates. These aggregates are based on proprietary Moody's coding of broad and specific industry categories. They may generally be described as follows:

Aerospace & Defense

Aircraft, aerospace and defense equipment and parts manufacturers.

Automotive

Commercial and passenger automotive and parts manufacturers.

Chemicals

Agricultural, commodity and specialty chemicals producers.

Consumer Products

Packaged food and beverage, household and personal care products, apparel and shoes, textiles and durable consumer products. Casinos, lodging, restaurants and general amusements. Pulp and (non-packaging) paper, wood products, agriculture, protein and tobacco processors. Paper, glass, metal and plastic packaging.

Healthcare and Pharmaceuticals

Hospitals, long-term care facilities, outpatient facilities, medical device manufacturers and medical service providers. General and specialty pharmaceuticals.

Manufacturing

Heavy machinery, building materials, (low technology) component equipment, (non-consumer) finished products, and transportation equipment manufacturers. Commercial and residential construction, homebuilding.

Media

Book and newspaper publishing, broadcast and subscription radio and television, and diversified media.

Metals & Mining

Coal and metal mining, aluminum and steel production and recycling.

Oil & Gas

Oil & gas exploration and production, refining and marketing, and integrated oil companies. (Non-utility) electricity production, merchant energy, oil service and pipeline operators, environmental services and waste management.


Grocery stores, drug stores, department stores, general and specialty merchandise retailers, and various wholesale distributors.

Services

Business services, consumer services, technology services, and defense services.




Technology and Telecommunications

Computer hardware, software, component equipment, consumer electronics, semiconductor and contract manufacturers. Wireless, wireline, towers, satellite equipment and services, equipment manufacturers and integrated telecommunications companies.


Equipment leasing, airlines, air freight, railroad and maritime shipping, commuter transportation.




References

Hamilton, D. (2005), "Moody's Senior Ratings Algorithm & Estimated Senior Ratings," Moody's Global Credit Research, July 2005.

Moodys Related Research

Tennant, J. (2007), "Moody's Financial MetricsTM Key Ratios by Rating and Industry for European, Middle Eastern and African Non-Financial Corporations: December 2007," Moody's Special Comment, December 2007 (106387)

Metz, A. (2007), "Moody's Financial MetricsTM Key Ratios by Rating and Industry for North American Non-Financial Corporations: October 2007," Moody's Special Comment, October 2007 (105312)

Metz, A. (2006), "The Distribution of Common Financial Ratios by Rating and Industry for North American Non-Financial Corporations: July 2006," Moody's Special Comment, July 2006 (98551)

Stumpp, P., de Bodard, E., Lau, C. and C.M. Hu (2006), "Moody's Approach to Global Standard Adjustments in the Analysis of Financial Statements for Non-Financial Corporations - Part I," Moody's Rating Methodology, February 2006 (96760)

de Bodard, E., Lau, C., C.M. Hu and P. Stumpp (2006), "Moody's Approach to Global Standard Adjustments in the Analysis of Financial Statements for Non-Financial Corporations - Part II," Moody's Rating Methodology, February 2006 (96729)

Stumpp, P., de Bodard, E., Lau, C., Otsuki, E. and S. Tanimoto (2006), "Moody's Approach to Global Standard Adjustments in the Analysis of Financial Statements for Non-Financial Corporations - Part III," Moody's Rating Methodology, September 2006 (98842)

"Moody's Basic Definitions for Credit Statistics," User's Guide, June 2007 (78480)

www.MoodysFM.com

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.




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Author(s) Production Associate Jennifer Tennant

Charles Ornegri

moody's financial metrics 2007

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