Moody's Financial Metrics 2007

www.moodys.
com
Moodys
Special Comment
Corporate Finance
December 2007
Table of Contents:
Summary
1
I Data and Methodology
3
II Metrics by Rating Category Aggregated
3
Across All Industries
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
10
Expense
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
20
Metric
Appendix B Definition of Credit Ratios
31
Appendix C Definition of Industry
32
Aggregates
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
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.
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)
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.
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,
Oil & Gas, and
Healthcare & Pharmaceuticals.
December 2007 Special Comment Moodys Corporate Finance - Moody's Financial MetricsTM Key Ratios by Rating and Industry for Global Non-Financial Corporations
Special Comment
Industries with consistently weaker-than-average metrics for Baa issuers include:

o
Aerospace & Defense,
Media, and
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
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
CAPEX / Depreciation, EBITA / Interest Expense and FFO / Debt monotonically increase with ratings,
as expected. Debt / Book Capitalization and Debt / EBITDA monotonically decrease.
Revenue Volatility is greater for Aaa issuers, which of course is a small sample, and is not strictly
increasing across speculative-grade ratings.
See, for example, The Distribution of Common Financial Ratios by Rating and Industry for North American Non-Financial Corporations, Moodys Special
Comment, July 2006.
Please see Moodys Senior Ratings Algorithm & Estimated Senior Ratings, July 2005 for a discussion of estimated senior unsecured ratings.
Special Comment
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
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
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
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
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
Special Comment
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
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
Special Comment
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
Oil & Gas
A
Manufacturing
Consumer Products
Baa
Chemicals
Ba
Aerospace & Defense
Services
Media
Automotive
B
Caa-C
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.
Special Comment
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
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.
Special Comment
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
Special Comment
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
Special Comment
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
10
Special Comment
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
11
Special Comment
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
12
Special Comment
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
13
Special Comment
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
14
Special Comment
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
15
Special Comment
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
16
Special Comment
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.
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.
17
Special Comment
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
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
99.3
99.5
99.6
98.7
98.8
99.3
Exhibit 14: Summary of Standardized Baa Metrics
18
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
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
99.3
99.2
98.9
98.8
98.5
100.1
100.8
Special Comment
Exhibit 15: Correlation of Median Baa Metrics to
Revenue Volatility
Metric
EBITA/Average AT
Correlation
-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
19
Special Comment
Appendix A Detailed Distributions by Credit Metric

Exhibit A-1: Median EBITA / Average Assets
Aaa
Aa
Baa
Aggregate
15.3%
15.6%
12.5%
10.1%
9.6%
7.3%
2.0%
35
176
354
436
442
56
10.8%
8.9%
10.7%
7.1%
Aerospace & Defense

Automotive
12.0%
1
Manufacturing
10
9.2%
7.9%
5.3%
6.6%
2.6%
1
15
20
11.2%
9.6%
10.3%
8.2%
17
20
20
21
12.9%
19.7%
12.9%
10.2%
8.8%
7.4%
3.0%
26
55
86
104
14
10.0%
6.5%
13.7%
11.5%
12.3%
9.2%
-6.5%
17
48
46
41
4.9%
12.4%
8.3%
7.7%
7.2%
-6.0%
1
Metals & Mining
25
35
36
17.2%
18.8%
20.4%
7.0%
-11.5%
14
21
14
25.8%
19.7%
19.5%
13.0%
11.1%
8.1%
7.3%
14
57
64
38
24.1%
19.5%
17.3%
14.2%
10.9%
7.3%
1.9%
15
13
28
30
12.1%
11.4%
9.3%
8.0%
7.5%
3.5%
12
26
37
35
12.9%
8.5%
10.2%
8.5%
5.9%

Services
15
24
30
15.7%
11.5%
11.0%
9.3%
6.5%
1.5%
35
45
45
46
17.7%
7.5%
10.0%
9.4%
7.7%
6.3%
15
11
24
Technology &
Telecommunications
Caa-C
Media
Oil & Gas
18.9%
Chemicals
Consumer Products
11.2%
Ba

Note: A companion spreadsheet is available at www.MoodysFM.com
20
Special Comment
Exhibit A-2: Median EBITA / Interest Expense

Aaa
Aa
Aggregate
17.0
13.7
8.2
5.1
3.4
1.5
0.3
35
176
354
436
442
56
6.4
4.1
3.7
1.9
10
12.5
5.1
1.5
1.4
0.5
1
Aerospace & Defense

Automotive
26.2
1
Chemicals
Consumer Products
Manufacturing
24.3
Baa
Ba
15
20
11.5
7.1
4.9
3.0
1.7
Caa-C
17
20
20
21
9.3
11.2
7.6
4.5
2.6
1.3
0.5
26
55
86
104
14
6.1
8.0
9.4
6.2
5.1
1.9
-0.8
17
48
46
41
10.2
7.7
3.9
2.3
1.3
-0.9
25
35
36
17.6
9.7
10.0
1.8
-1.9
Media
Metals & Mining
17.5
14
21
14
14.2
8.4
4.3
2.2
1.8
Oil & Gas
24.5
1
14
57
64
38
38.3
20.9
16.4
7.4
3.8
1.6
0.8
15
13
28
30
7.7
6.6
4.7
3.6
1.6
0.7
12
26
37
35
6.6
4.7
3.7
1.5
0.5
15
24
30
6.4
4.0
3.6
1.6
0.3
7

Services
Technology &
Telecommunications
21
80.1
2
35
45
45
46
9.5
3.4
3.9
4.3
2.6
1.3
15
11
24
Special Comment
Exhibit A-3: Median EBITA Margin

Aaa
Aa
Baa
Aggregate
14.8%
17.5%
15.2%
13.9%
13.4%
9.4%
2.4%
35
176
354
436
442
56
11.6%
10.6%
10.8%
7.2%
10
7.3%
7.6%
4.3%
5.3%
2.1%
1
Aerospace & Defense

Automotive
10.3%
1
Chemicals
Consumer Products
Manufacturing
7.5%
15
20
14.9%
12.6%
10.3%
10.4%
7.5%
Caa-C
17
20
20
21
13.8%
17.6%
14.6%
12.1%
11.0%
8.1%
2.7%
26
55
86
104
14
14.4%
17.5%
12.6%
12.3%
9.9%
10.5%
-2.6%
17
48
46
41
5.6%
23.5%
19.4%
21.0%
18.8%
-13.6%
25
35
36
18.5%
28.8%
21.2%
7.1%
-6.4%
Media
Metals & Mining
15.2%
14
21
14
24.3%
21.4%
29.0%
14.9%
15.8%
Oil & Gas
20.2%
1
14
57
64
38
28.9%
34.7%
24.4%
18.9%
14.7%
10.5%
3.1%
15
13
28
30
6.5%
7.4%
6.7%
6.7%
6.8%
3.2%
12
26
37
35
25.9%
12.7%
19.5%
13.7%
11.2%
15
24
30
19.0%
18.2%
17.2%
10.3%
2.6%
7

Services
Technology &
Telecommunications
22
Ba
18.8%
2
35
45
45
46
15.3%
21.1%
26.6%
21.3%
25.3%
9.5%
15
11
24
Special Comment
Exhibit A-4: Median Operating Margin

Aaa
Aa
Baa
Aggregate
14.9%
17.0%
13.8%
12.6%
12.2%
8.5%
1.6%
35
176
354
436
442
56
10.3%
8.6%
9.5%
6.0%
10
7.0%
6.2%
4.4%
4.8%
1.9%
1
Aerospace & Defense

Automotive
9.5%
1
Chemicals
Consumer Products
Manufacturing
7.9%
15
20
12.8%
10.0%
8.8%
8.3%
7.1%
Caa-C
17
20
20
21
12.7%
17.7%
13.3%
11.2%
9.5%
7.3%
2.0%
26
55
86
104
14
15.0%
17.4%
12.5%
11.2%
9.1%
9.4%
-2.2%
17
48
46
41
4.6%
20.3%
15.5%
19.1%
16.8%
-22.6%
25
35
36
19.5%
27.6%
20.4%
6.3%
-6.5%
Media
Metals & Mining
12.4%
14
21
14
19.2%
20.4%
27.3%
13.8%
14.0%
Oil & Gas
16.9%
1
14
57
64
38
26.1%
25.5%
20.7%
15.3%
13.2%
10.9%
2.6%
15
13
28
30
6.4%
7.1%
6.3%
6.3%
6.1%
2.0%
12
26
37
35
20.3%
11.8%
15.7%
10.3%
5.2%
15
24
30
16.6%
16.7%
12.3%
5.8%
1.8%
7

Services
Technology &
Telecommunications
23
Ba
16.6%
2
35
45
45
46
14.8%
20.5%
25.8%
20.5%
21.0%
8.3%
15
11
24
Special Comment
Exhibit A-5: Median (FFO + Interest Expense) / Interest Expense

Aaa
Aa
Aggregate
15.5
15.5
9.6
6.6
4.7
2.6
1.5
35
176
354
436
442
56
7.4
5.3
5.0
2.9
10
14.6
7.3
3.3
2.2
1.7
1
Aerospace & Defense

Automotive
34.5
1
Chemicals
Consumer Products
Manufacturing
31.8
Baa
Ba
15
20
10.0
8.7
6.4
3.6
2.4
Caa-C
17
20
20
21
9.1
13.3
9.2
5.6
3.7
2.2
1.5
26
55
86
104
14
11.1
10.4
10.4
7.2
5.5
2.6
1.0
17
48
46
41
15.5
8.6
5.0
2.8
2.1
0.5
25
35
36
17.8
10.1
9.8
5.6
0.5
Media
Metals & Mining
16.9
14
21
14
13.3
9.0
6.2
4.1
4.5
Oil & Gas
20.0
1
14
57
64
38
32.6
17.7
14.6
8.7
6.2
3.7
3.2
15
13
28
30
8.4
7.7
5.8
5.1
2.6
2.1
12
26
37
35
8.1
6.3
4.6
2.7
1.7
15
24
30
10.2
7.6
5.3
3.1
1.5
7

Services
Technology &
Telecommunications
24
102.9
2
35
45
45
46
9.0
4.7
5.3
5.4
4.4
2.7
15
11
24
Special Comment
Exhibit A-6: Median FFO / Debt

Aaa
Aa
Baa
Aggregate
117.3%
68.4%
43.8%
29.2%
21.8%
12.0%
4.3%
35
176
354
436
442
56
44.1%
27.4%
24.9%
12.5%
10
49.6%
24.6%
12.4%
11.0%
6.8%
1
Aerospace & Defense

Automotive
158.4%
1
Chemicals
Consumer Products
Manufacturing
505.2%
15
20
48.6%
38.8%
27.7%
19.7%
13.1%
Caa-C
17
20
20
21
43.4%
39.2%
35.6%
25.3%
17.1%
10.1%
4.0%
26
55
86
104
14
112.3%
26.0%
45.1%
30.2%
29.2%
14.1%
-0.3%
17
48
46
41
31.5%
43.1%
21.4%
12.6%
8.7%
-4.4%
25
35
36
108.8%
61.6%
62.4%
28.6%
-5.3%
Media
Metals & Mining
82.8%
14
21
14
56.6%
43.0%
30.4%
18.6%
27.3%
Oil & Gas
126.6%
1
14
57
64
38
122.3%
94.9%
65.7%
39.8%
27.7%
16.6%
13.7%
15
13
28
30
30.2%
30.8%
23.3%
21.7%
10.5%
7.4%
12
26
37
35
34.6%
31.1%
22.6%
12.6%
6.5%
15
24
30
57.2%
40.5%
32.2%
16.1%
4.3%
7

Services
Technology &
Telecommunications
25
Ba
200.6%
2
35
45
45
46
45.4%
12.7%
20.5%
27.5%
15.3%
10.8%
15
11
24
Special Comment
Exhibit A-7: Median Retained Cash Flow / Net Debt

Aaa
Aa
Baa
Aggregate
96.3%
38.4%
38.7%
27.7%
20.0%
11.7%
4.6%
35
176
354
436
442
56
66.7%
31.0%
27.1%
12.9%
10
36.9%
28.0%
16.5%
11.7%
7.2%
1
Aerospace & Defense

Automotive
3959.4%
1
Chemicals
Consumer Products
Manufacturing
-123.5%
15
20
41.6%
32.7%
30.9%
18.7%
12.0%
Caa-C
17
20
20
21
51.9%
38.0%
31.0%
21.1%
16.4%
8.8%
4.0%
26
55
86
104
14
80.5%
12.9%
46.6%
32.7%
30.4%
11.0%
-0.3%
17
48
46
41
45.2%
44.1%
19.0%
11.6%
6.8%
-4.8%
25
35
36
138.1%
50.8%
34.6%
18.7%
-5.9%
Media
Metals & Mining
97.3%
14
21
14
69.4%
37.6%
26.8%
16.5%
28.8%
Oil & Gas
271.9%
1
14
57
64
38
112.0%
60.6%
77.8%
40.9%
19.3%
15.3%
15.7%
15
13
28
30
29.8%
34.3%
21.5%
21.6%
10.1%
7.4%
12
26
37
35
24.3%
31.3%
21.4%
11.4%
7.0%
15
24
30
36.8%
34.2%
31.5%
17.6%
3.5%
7

Services
Technology &
Telecommunications
26
Ba
100.0%
2
35
45
45
46
35.8%
12.1%
19.1%
26.1%
17.3%
11.9%
15
11
24
Special Comment
Exhibit A-8: Median Debt / EBITDA

Aaa
Aa
Aggregate
0.9
1.0
1.7
2.4
3.3
5.0
6.3
35
176
354
436
442
56
1.8
3.0
3.0
4.9
10
1.4
2.8
4.8
5.1
6.0
1
Aerospace & Defense

Automotive
0.5
1
Chemicals
Consumer Products
Manufacturing
0.2
Baa
Ba
15
20
1.2
1.9
2.4
3.1
4.5
Caa-C
17
20
20
21
1.6
1.7
2.0
2.6
3.9
5.7
7.5
26
55
86
104
14
1.2
2.6
1.6
2.2
2.8
4.4
-5.6
17
48
46
41
2.2
1.8
3.3
5.1
5.9
-1.2
25
35
36
0.8
1.4
1.1
3.2
4.8
Media
Metals & Mining
0.7
14
21
14
1.4
1.7
2.3
3.8
3.0
Oil & Gas
0.5
1
14
57
64
38
0.6
0.8
1.1
1.9
3.1
5.1
6.1
15
13
28
30
2.5
2.6
3.1
3.3
5.7
7.4
12
26
37
35
2.1
2.4
3.1
5.1
7.3
15
24
30
1.5
2.1
2.3
4.4
9.6
7

Services
Technology &
Telecommunications
27
0.4
2
35
45
45
46
1.5
5.2
3.4
2.6
4.7
5.8
15
11
24
Special Comment
Exhibit A-9: Median Debt / Book Capitalization

Aaa
Aa
Baa
Aggregate
22.7%
32.5%
39.1%
44.8%
53.5%
70.2%
92.5%
35
176
354
436
442
56
40.4%
53.5%
49.4%
57.5%
10
34.4%
46.3%
59.5%
77.7%
78.1%
1
Aerospace & Defense

Automotive
12.7%
1
Chemicals
Consumer Products
Manufacturing
4.1%
15
20
38.5%
44.7%
44.3%
63.4%
76.9%
Caa-C
17
20
20
21
32.3%
27.9%
48.2%
46.7%
59.4%
74.8%
93.1%
26
55
86
104
14
24.5%
42.9%
38.2%
44.3%
45.4%
62.5%
102.3%
17
48
46
41
29.7%
30.3%
42.1%
59.1%
70.9%
150.7%
25
35
36
20.5%
30.2%
33.1%
46.6%
102.7%
Media
Metals & Mining
25.9%
14
21
14
47.7%
39.9%
45.0%
55.4%
51.4%
Oil & Gas
20.1%
1
14
57
64
38
20.9%
30.9%
32.9%
43.4%
45.9%
61.1%
71.0%
15
13
28
30
44.7%
46.7%
56.2%
63.0%
76.0%
94.9%
12
26
37
35
41.7%
43.0%
55.7%
64.8%
77.7%
15
24
30
33.3%
48.2%
49.8%
66.1%
95.7%
7

Services
Technology &
Telecommunications
28
Ba
12.3%
2
35
45
45
46
47.2%
75.1%
59.7%
55.2%
66.3%
80.3%
15
11
24
Special Comment
Exhibit A-10: Median CAPEX / Depreciation

Aaa
Aa
Aggregate
1.6
1.4
1.3
1.2
1.2
1.1
0.9
35
176
354
436
442
56
1.2
1.3
1.1
1.2
10
1.3
1.1
1.1
1.0
0.6
1
Aerospace & Defense

Automotive
2.0
1
Chemicals
Consumer Products
Manufacturing
1.6
Baa
Ba
15
20
1.0
1.3
1.2
1.0
0.8
Caa-C
17
20
20
21
1.7
1.3
1.2
1.2
1.1
1.1
1.0
26
55
86
104
14
1.3
1.6
1.3
1.2
1.1
1.2
0.8
17
48
46
41
1.2
1.0
1.1
1.1
0.9
0.9
25
35
36
2.0
1.5
2.0
1.2
0.9
Media
Metals & Mining
1.7
14
21
14
1.8
2.1
1.8
1.5
2.7
Oil & Gas
1.1
1
14
57
64
38
1.5
1.1
1.3
1.2
1.4
1.2
1.3
15
13
28
30
1.6
1.7
1.3
1.1
1.0
0.8
12
26
37
35
1.9
1.2
1.1
1.1
0.8
15
24
30
1.2
1.1
1.1
1.1
0.7
7

Services
Technology &
Telecommunications
29
1.6
2
35
45
45
46
1.8
1.4
2.5
1.6
1.5
1.1
15
11
24
Special Comment
Exhibit A-11: Median Revenue Volatility

Aaa
Aa
Aggregate
5.6
4.4
5.5
7.2
10.7
9.2
11.1
35
176
354
436
442
56
4.5
6.8
8.3
7.6
10
7.3
6.4
6.8
10.1
4.5
1
Aerospace & Defense

Automotive
5.6
1
Chemicals
Consumer Products
Manufacturing
1.1
15
20
5.0
8.9
11.7
7.4
Caa-C
17
20
20
21
1.7
3.6
6.6
10.2
8.3
9.3
26
55
86
104
14
7.6
6.2
7.8
6.1
8.1
10.2
11.4
17
48
46
41
4.9
3.6
6.5
4.3
6.0
10.8
25
35
36
13.2
17.4
17.0
22.5
4.3
9.3
1

7.8
Technology &
Telecommunications
14
21
14
6.4
13.2
17.2
19.7
25.1
14
57
64
38
3.8
5.1
3.8
8.6
11.3
16.0
15
13
28
30
1.1
3.9
4.7
5.4
5.9
5.4
12
26
37
35
8.7
6.5
8.1
5.7
8.6
15
24
30
6.5
6.6
12.7
14.0
18.0
7
Services
30
Ba
4.8
Metals & Mining
Baa
3.7
Media
Oil & Gas
7.8
2
35
45
45
46
3.6
5.1
5.5
5.0
15.9
7.3
15
11
24
Special Comment
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
31
Special Comment
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 (nonpackaging) 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.
32
Special Comment
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.
33
Special Comment
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 NonFinancial 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.
34
Special Comment
Author(s)
Production Associate
Jennifer Tennant
Charles Ornegri
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Moody&#39;s Financial Metrics 2007

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Moody&#39;s Financial Metrics 2007

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This Credit Analysis provides an in-depth

Moody's Financial MetricsTM

Moodys Corporate Finance

EBITA / Average Assets

EBITA / Interest Expense

(FFO + Interest Expense) / Interest Expense

Debt / Book Capitalization

CAPEX / Depreciation Expense

Metals & Mining,

Oil & Gas, and

Healthcare & Pharmaceuticals.

Moodys Corporate Finance

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

Aerospace & Defense,

Retail & Distribution.

I Data and Methodology

II Metrics by Rating Category Aggregated Across

Five metrics are strictly monotonic with ratings:

Most metrics are very nearly monotonic with ratings:

Only one metric has a weak relationship to ratings:

Moodys Corporate Finance

Exhibit 1: Aggregate Metrics by Rating Category

Source: Moody's Financial Metrics

Moodys Corporate Finance

III Industry Study

Exhibit 2: Industry Coverage

Count of Baa Issuers

Aerospace & Defense

Metals & Mining

Oil & Gas

Healthcare & Pharmaceuticals

Retail & Distribution

Technology & Telecommunications

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.1 EBITA / Average Assets

Exhibit 3: Median Baa EBITA / Average Assets

Metals & Mining

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.2 EBITA / Interest Expense

Exhibit 4: Median Baa EBITA / Interest Expense

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.3 EBITA Margin

Exhibit 5: Median Baa EBITA Margin

Metals & Mining

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.4 Operating Margin

Exhibit 6: Median Baa Operating Margin

Metals & Mining

Source: Moody's Financial Metrics

Moodys Corporate Finance

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

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

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.6 FFO / Debt

Exhibit 8: Median Baa FFO / Debt

Source: Moody's Financial Metrics

Moodys Corporate Finance

III.7 Retained Cash Flow / Net Debt

Moody's Financial Metrics 2007

Moody's Financial Metrics 2007