MOODYS CORP /DE/, 10-K filed on 2/25/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
shares in Millions, $ in Billions
12 Months Ended
Dec. 31, 2018
Jun. 30, 2018
Document Information [Line Items]    
Document Type 10-K  
Amendment Flag false  
Document Period End Date Dec. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus FY  
Trading Symbol MCO  
Entity Registrant Name MOODYS CORP /DE/  
Entity Central Index Key 0001059556  
Current Fiscal Year End Date --12-31  
Entity Well-known Seasoned Issuer Yes  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding 191.3  
Entity Public Float   $ 32.7
Entity Small Business false  
Emerging Growth Company false  
Entity Shell Company false  
v3.10.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Millions, $ in Millions
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]                      
Revenues $ 1,060.1 $ 1,080.8 $ 1,175.1 $ 1,126.7 $ 1,165.5 $ 1,062.9 $ 1,000.5 $ 975.2 $ 4,442.7 $ 4,204.1 $ 3,604.2
Expenses                      
Operating                 1,245.5 1,216.6 1,019.6
Selling, general and administrative                 1,080.1 985.9 931.2
Restructuring 48.7               48.7   12.0
Depreciation and amortization                 191.9 158.3 126.7
Acquisition-Related expenses                 8.3 22.5  
Settlement charge                     863.8
Total expenses                 2,574.5 2,383.3 2,953.3
Operating income 376.6 466.8 534.0 490.8 465.5 448.5 460.1 446.7 1,868.2 1,820.8 650.9
Non-operating (expense) income, net                      
Interest expense, net                 (216.0) (208.5) (157.3)
Other non-operating income, net                 18.8 3.7 64.4
Purchase price hedge gain                   111.1  
CCXI gains                   59.7  
Total non-operating income (expense), net                 (197.2) (34.0) (92.9)
Income before provision for income taxes                 1,671.0 1,786.8 558.0
Provision for income taxes                 351.6 779.1 282.2
Net income                 1,319.4 1,007.7 275.8
Less: Net income attributable to noncontrolling interests                 9.8 7.1 9.2
Net income attributable to Moody's $ 250.3 $ 310.2 $ 376.2 $ 372.9 $ 25.5 $ 317.3 $ 312.2 $ 345.6 $ 1,309.6 $ 1,000.6 $ 266.6
Earnings per share                      
Basic $ 1.31 $ 1.62 $ 1.96 $ 1.95 $ 0.13 $ 1.66 $ 1.63 $ 1.81 $ 6.84 $ 5.24 $ 1.38
Diluted $ 1.29 $ 1.59 $ 1.94 $ 1.92 $ 0.13 $ 1.63 $ 1.61 $ 1.78 $ 6.74 $ 5.15 $ 1.36
Weighted average shares outstanding                      
Basic                 191.6 191.1 192.7
Diluted                 194.4 194.2 195.4
v3.10.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Derivative Instruments Gain Loss [Line Items]      
Net income $ 1,319.4 $ 1,007.7 $ 275.8
Foreign currency adjustments:      
Foreign currency translation adjustment - Pre Tax (274.0) 166.2 (22.2)
Foreign currency translation adjustment - Tax (7.2) 23.1 (5.4)
Foreign currency translation adjustments - Net of Tax (281.2) 189.3 (27.6)
Foreign currency translation adjustments - reclassification of (gains) losses included in net income - Pre Tax 0.2   (36.6)
Foreign currency translation adjustments - reclassification of (gains) losses included in net income - Net of Tax 0.2   (36.6)
Cash flow hedges:      
Net realized and unrealized gains on cash flow hedges - Net of Tax 33.3 (30.1) (5.1)
Reclassification of (gains) losses included in net income - Pre Tax (0.4) (11.5) 6.0
Reclassification of (gains) losses included in net income - Tax 0.2 4.8 (2.3)
Reclassification of (gains) losses included in net income - Net of Tax (0.2) (6.7) 3.7
Available for sale securities:      
Net unrealized gains on available for sale securities - Pre Tax   2.0 2.6
Net unrealized gains on available for sale securities - Net of Tax   2.0 2.6
Reclassification of gains included in net income - Pre Tax   (3.5)  
Reclassification of gains included in net income - Net of Tax   (3.5)  
Pension and Other Retirement Benefits:      
Amortization of actuarial losses and prior service costs included in net income - Pre Tax 5.6 8.7 9.7
Amortization of actuarial losses and prior service costs included in net income - Tax (1.4) (3.3) (3.7)
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 4.2 5.4 6.0
Net actuarial gain arising during period - Pre Tax 5.7 20.9 0.3
Net actuarial gains and prior service costs - Tax (1.5) (8.3) (0.1)
Net actuarial gains and prior service costs - Net of Tax 4.2 12.6 0.2
Total other comprehensive income (loss) - Pre Tax (263.8) 192.4 (41.6)
Total other comprehensive income (loss) - Tax (9.6) 12.6 (11.0)
Total other comprehensive income (loss) - Net of Tax (273.4) 205.0 (52.6)
Comprehensive income (loss) 1,046.0 1,212.7 223.2
Less: comprehensive income (loss) attributable to noncontrolling interests and noncontrolling interest (11.8) 19.4 (18.0)
Comprehensive income attributable to Moody's 1,057.8 1,193.3 241.2
Cash Flow Hedging [Member]      
Cash flow hedges:      
Net realized and unrealized gains on cash flow hedges - Pre Tax (0.9) 9.6 (1.4)
Net realized and unrealized gains on cash flow hedges - Tax 0.3 (3.7) 0.5
Net realized and unrealized gains on cash flow hedges - Net of Tax (0.6) 5.9 (0.9)
Reclassification of (gains) losses included in net income - Net of Tax $ (0.2) $ (6.7) $ 3.7
v3.10.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 1,685.0 $ 1,071.5
Short-term investments 132.5 111.8
Accounts receivable, net of allowances of $43.5 in 2018 and $36.6 in 2017 1,287.1 1,147.2
Other current assets 282.3 250.1
Total current assets 3,386.9 2,580.6
Property and equipment, net 320.4 325.1
Goodwill 3,781.3 3,753.2
Intangible assets, net 1,566.1 1,631.6
Deferred tax assets, net 197.2 143.8
Other assets 274.3 159.9
Total assets 9,526.2 8,594.2
Current liabilities:    
Accounts payable and accrued liabilities 695.2 750.3
Commercial Paper   129.9
Current portion of long term debt 449.9 299.5
Deferred revenue 953.4 883.6
Total current liabilities 2,098.5 2,063.3
Non-current portion of deferred revenue 122.3 140.0
Long-term debt 5,226.1 5,111.1
Deferred tax liabilities, net 351.7 341.6
Unrecognized tax benefits 494.6 389.1
Other liabilities 576.5 664.0
Total liabilities 8,869.7 8,709.1
Contingencies (Note 20)
Shareholders' (deficit) equity:    
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding
Common stock 3.4 3.4
Capital surplus 600.9 528.6
Retained earnings 8,594.4 7,465.4
Treasury stock, at cost; 151,598,695 and 151,932,157 shares of common stock at December 31, 2018 and December 31, 2017, respectively (8,312.5) (8,152.9)
Accumulated other comprehensive loss (426.3) (172.2)
Total Moody's shareholders' (deficit) 459.9 (327.7)
Noncontrolling interests 196.6 212.8
Total shareholders' (deficit) equity 656.5 (114.9)
Total liabilities, noncontrolling interest and shareholders' (deficit) equity $ 9,526.2 $ 8,594.2
v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
Accounts receivable, allowances $ 43.5 $ 36.6
Preferred stock, par value $ 0.01  
Preferred stock, shares authorized 10,000,000  
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 1,000,000,000 1,000,000,000
Common stock, shares issued 342,902,272 342,902,272
Treasury stock, shares 151,598,695 151,932,157
Series common stock    
Common stock, par value $ 0.01  
Common stock, shares authorized 10,000,000  
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities      
Net income $ 1,319.4 $ 1,007.7 $ 275.8
Reconciliation of net income to net cash provided by operating activities:      
Depreciation and amortization 191.9 158.3 126.7
Stock-based compensation expense 130.3 122.9 98.1
CCXI gains   (59.7)  
Purchase price hedge gain   (111.1)  
FX gain relating to liquidation/sale of subsidiaries     (36.6)
Deferred income taxes (98.9) 88.3 (153.1)
Legacy tax matters     (1.6)
Changes in assets and liabilities:      
Accounts receivable (136.1) (148.1) (104.8)
Other current assets (8.4) (70.3) 37.0
Other assets (16.6) 12.1 6.6
Accounts payable and accrued liabilities (134.0) (638.4) 902.4
Restructuring liability 41.9 (5.9) 6.3
Deferred revenue 138.9 72.9 74.9
Uncertain tax positions and other non-current tax liabilities 58.6 63.0 2.2
Other liabilities (25.9) 262.9 25.3
Net cash provided by operating activities 1,461.1 754.6 1,259.2
Cash flows from investing activities      
Capital additions (90.4) (90.6) (115.2)
Purchases of investments (193.0) (170.1) (379.9)
Sales and maturities of investments 160.6 238.5 699.5
Receipts from purchase price hedge   111.1  
Cash paid for acquisitions and investment in affiliates, net of cash acquired (289.3) (3,511.0) (80.8)
Receipts from settlement of net investment hedges   2.1 3.8
Payments for settlements of net investment hedges     (26.9)
Cash received upon diposal of a subsidiary, net of cash transferred to purchaser 5.7   1.5
Net cash provided by (used in) investing activities (406.4) (3,420.0) 102.0
Cash flows from financing activities      
Issuance of notes 1,089.9 2,291.9  
Repayment of notes (800.0) (300.0)  
Issuance of commercial paper 988.7 1,837.1  
Repayments of commercial paper (1,120.0) (1,707.2)  
Proceeds from stock-based compensation plans 46.9 55.6 77.8
Repurchase of shares related to stock-based compensation (62.2) (48.8) (44.4)
Treasury shares (202.6) (199.7) (738.8)
Dividends (337.2) (290.4) (285.1)
Dividends to noncontrolling interests (4.4) (3.2) (6.7)
Payment for noncontrolling interest   (8.5) (45.4)
Contingent consideration     (0.2)
Debt issuance costs, extinguishment costs and related fees (10.6) (26.7) (0.1)
Net cash used in financing activities (411.5) 1,600.1 (1,042.9)
Effect of exchange rate changes on cash and cash equivalents (29.7) 85.3 (24.2)
Increase (decrease) in cash and cash equivalents 613.5 (980.0) 294.1
Cash and cash equivalents, beginning of period 1,071.5 2,051.5 1,757.4
Cash and cash equivalents, end of period $ 1,685.0 $ 1,071.5 $ 2,051.5
v3.10.0.1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Total Moody's Shareholders' Equity (Deficit)
Non-Controlling Interests
Beginning Balance (in shares) at Dec. 31, 2015   342.9     (146.8)      
Beginning Balance at Dec. 31, 2015 $ (333.0) $ 3.4 $ 451.3 $ 6,709.0 $ (7,389.2) $ (339.5) $ (565.0) $ 232.0
Net income 275.8     266.6     266.6 9.2
Dividends (293.4)     (286.7)     (286.7) (6.7)
Stock-based compensation 98.4   98.4       98.4  
Shares issued for stock-based compensation plans, net 33.4   (65.0)   $ 98.4   33.4  
Shares issued for stock-based compensation plans, net (in shares)         2.3      
Net excess tax benefit upon settlement of stock-based compensation awards 32.0   32.0       32.0  
Purchase of noncontrolling interest (49.1)   (39.5)       (39.5) (9.6)
Treasury shares repurchased, shares         (7.7)      
Treasury shares repurchased (738.8)       $ (738.8)   (738.8)  
Currency translation adjustment (64.2)         (34.2) (34.2) (30.0)
Net actuarial losses and prior service costs - Net of Tax 0.2         0.2 0.2  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 6.0         6.0 6.0  
Unrealized Gains On Available For Sale Securities 2.6         (0.2) (0.2) 2.8
Net unrealized gain on cash flow hedges 2.8         2.8 2.8  
Ending Balance (in shares) at Dec. 31, 2016   342.9     (152.2)      
Ending Balance at Dec. 31, 2016 (1,027.3) $ 3.4 477.2 6,688.9 $ (8,029.6) (364.9) (1,225.0) 197.7
Adoption of new ASU | Accounting Standards Update 2016-16 [Member] (4.6)     (4.6)     (4.6)  
Net income 1,007.7     1,000.6     1,000.6 7.1
Dividends (222.8)     (219.5)     (219.5) (3.3)
Stock-based compensation 123.2   123.2       123.2  
Shares issued for stock-based compensation plans, net 9.3   (67.1)   $ 76.4   9.3  
Shares issued for stock-based compensation plans, net (in shares)         1.9      
Purchase of noncontrolling interest (5.7)   (4.7)       (4.7) (1.0)
Treasury shares repurchased, shares         (1.6)      
Treasury shares repurchased (199.7)       $ (199.7)   (199.7)  
Currency translation adjustment 189.3         176.3 176.3 13.0
Net actuarial losses and prior service costs - Net of Tax 12.6         12.6 12.6  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 5.4         5.4 5.4  
Unrealized Gains On Available For Sale Securities (1.5)         (0.8) (0.8)  
Net unrealized gain on cash flow hedges (0.8)         (0.8) (0.8) (0.7)
Ending Balance (in shares) at Dec. 31, 2017   342.9     (151.9)      
Ending Balance at Dec. 31, 2017 (114.9) $ 3.4 528.6 7,465.4 $ (8,152.9) (172.2) (327.7) 212.8
Adoption of new ASU | Accounting Standards Update 2014-09 [Member] 156.1     156.1     (156.1)  
Adoption of new ASU | Accounting Standards Update 2016-01 [Member]       2.3   (2.3)    
Net income 1,319.4     1,309.6     1,309.6 9.8
Dividends (343.4)     (339.0)     (339.0) (4.4)
Stock-based compensation 130.7   130.7       130.7  
Shares issued for stock-based compensation plans, net (15.4)   (58.4)   $ 43.0   (15.4)  
Shares issued for stock-based compensation plans, net (in shares)         1.5      
Treasury shares repurchased, shares         (1.2)      
Treasury shares repurchased (202.6)       $ (202.6)   (202.6)  
Currency translation adjustment (281.0)         (259.4) (259.4) (21.6)
Net actuarial losses and prior service costs - Net of Tax 4.2         4.2 4.2  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 4.2         4.2 4.2  
Unrealized Gains On Available For Sale Securities (2.3)              
Unrealized Gains On Available For Sale Securities | Accounting Standards Update 2016-01 [Member] (2.3)              
Net unrealized gain on cash flow hedges (0.8)         (0.8) (0.8)  
Ending Balance (in shares) at Dec. 31, 2018   342.9     (151.6)      
Ending Balance at Dec. 31, 2018 $ 656.5 $ 3.4 $ 600.9 8,594.4 $ (8,312.5) $ (426.3) $ 459.9 $ 196.6
Adoption of new ASU | Accounting Standards Update 2014-09 [Member]       $ (156.0)        
v3.10.0.1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Parenthetical) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement Of Stockholders Equity [Abstract]      
Currency translation adjustment, tax $ 7.2 $ 23.1 $ 5.4
Net actuarial losses and prior service costs - Tax 1.5 8.3 0.1
Amortization of actuarial losses and prior service costs included in net income - Tax 1.4 3.3 3.7
Net unrealized gain on cash flow hedges, tax $ 0.5 $ 1.1 $ 1.8
v3.10.0.1
GLOSSARY OF TERMS AND ABBREVIATIONS
12 Months Ended
Dec. 31, 2018
Glossary of Terms and Abbreviations [Abstract]  
GLOSSARY OF TERMS AND ABBREVIATIONS
GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:
TERMDEFINITION
Acquisition-Related AmortizationAmortization of definite-lived intangible assets acquired by the Company from all business combination transactions
Acquisition-Related ExpensesConsists of expenses incurred to complete and integrate the acquisition of Bureau van Dijk for which the integration will be a multi-year effort
Adjusted Diluted EPSDiluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”
Adjusted Net IncomeNet Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”
Adjusted Operating Income Operating income excluding depreciation and amortization
Adjusted Operating MarginAdjusted Operating Income divided by revenue
AIArtificial Intelligence
AmericasRepresents countries within North and South America, excluding the U.S.
AOCIAccumulated other comprehensive income (loss); a separate component of shareholders’ equity (deficit)
ARAccounts receivable
ASCThe FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants
ASC 605The U.S. GAAP authoritative guidance for revenue accounting prior to the adoption of ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606).
Asia-PacificRepresents Australia and countries in Asia including but not limited to: China, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand
ASRAccelerated Share Repurchase
ASUThe FASB Accounting Standards Update to the ASC. It also provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC
Basel IIIA new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. Basel III was developed in a response to the deficiencies in financial regulation revealed by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage
BoardThe board of directors of the Company
BPSBasis points
Bureau van DijkBureau van Dijk Electronic Publishing, B.V.; a global provider of business intelligence and company information; acquired by the Company on August 10, 2017 via the acquisition of Yellow Maple I B.V., an indirect parent of Bureau van Dijk.
CCARComprehensive Capital Analysis and Review; annual review by the Federal Reserve in the U.S. to ensure that financial institutions have sufficient capital in times of economic and financial stress and that they have robust, forward-looking capital-planning processes that account for their unique risks.
CCXI China Cheng Xin International Credit Rating Co. Ltd.; China’s first and largest domestic credit rating agency approved by the People's Bank of China; the Company acquired a 49% interest in 2006; currently Moody’s owns 30% of CCXI.
CCXI GainIn the first quarter of 2017 CCXI, as part of a strategic business realignment, issued additional capital to its majority shareholder in exchange for a ratings business wholly-owned by the majority shareholder and which has the right to rate a different class of debt instrument in the Chinese market. The capital issuance by CCXI in exchange for this ratings business diluted Moody’s ownership interest in CCXI to 30% of a larger business and resulted in a $59.7 million non-cash, non-taxable gain. 
CFGCorporate finance group; an LOB of MIS 
CLOCollateralized loan obligation
CMBSCommercial mortgage-backed securities; part of the CREF asset class within SFG
CommissionEuropean Commission
Common StockThe Company’s common stock
CompanyMoody’s Corporation and its subsidiaries; MCO; Moody’s
ContentA reporting unit within the MA segment that offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools
CouncilCouncil of the European Union
CPCommercial Paper
CP NotesUnsecured commercial paper issued under the CP Program
CP ProgramA program entered into on August 3, 2016 allowing the Company to privately place CP up to a maximum of $1 billion for which the maturity may not exceed 397 days from the date of issue and which is backstopped by the 2018 Facility.
CRAsCredit rating agencies
CREFCommercial real estate finance which includes REITs, commercial real estate CDOs and mortgage-backed securities; part of SFG
D&ADepreciation and amortization
D&BDun & Bradstreet
DBPPsDefined benefit pension plans
EBITDAEarnings before interest, taxes, depreciation and amortization
EMEARepresents countries within Europe, the Middle East and Africa
EPSEarnings per share
ERSEnterprise Risk Solutions; an LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services
ESAEconomics and Structured Analytics; part of the RD&A line of business within MA
ESGEnvironmental, Social, and Governance
ESMAEuropean Securities and Markets Authority
ETREffective tax rate
EUEuropean Union
EUREuros
EURIBORThe Euro Interbank Offered Rate
EurozoneMonetary Union of the EU member states which have adopted the euro as their common currency
Excess Tax BenefitsThe difference between the tax benefit realized at exercise of an option or delivery of a restricted share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP
Exchange ActThe Securities Exchange Act of 1934, as amended
External RevenueRevenue excluding any intersegment amounts
FASBFinancial Accounting Standards Board
FIGFinancial institutions group; an LOB of MIS
Financial Reform ActDodd-Frank Wall Street Reform and Consumer Protection Act
Free Cash FlowNet cash provided by operating activities less cash paid for capital additions
FSTCFinancial Services Training and Certifications; now referred to as MALS
FTSEFinancial Times Stock Exchange
FXForeign exchange
GAAPU.S. Generally Accepted Accounting Principles
GBPBritish pounds
ICRAICRA Limited; a leading provider of credit ratings and research in India. The Company previously held 28.5% equity ownership and in June 2014, increased that ownership stake to just over 50% through the acquisition of additional shares
ICRA GainGain relating to the ICRA Acquisition; U.S. GAAP requires the remeasurement to fair value of the previously held non-controlling shares upon obtaining a controlling interest in a step-acquisition. This remeasurement of the Company’s equity investment in ICRA to fair value resulted in a pre-tax gain of $102.8 million ($78.5 million after tax) in the second quarter of 2014
ICR ChileA leading provider of domestic credit ratings in Chile
IASBInternational Accounting Standards Board
IFRSInternational Financial Reporting Standards
IRSInternal Revenue Service
ITInformation technology
KISKorea Investors Service, Inc; a leading Korean rating agency and consolidated subsidiary of the Company
KIS PricingKorea Investors Service Pricing, Inc; a leading Korean provider of fixed income securities pricing and consolidated subsidiary of the Company
KIS ResearchKorea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company
KoreaRepublic of South Korea
Legacy Tax MattersExposures to certain potential tax liabilities assumed in connection with the Company’s spin-off from Dun & Bradstreet in 2000
LIBORLondon Interbank Offered Rate
LOBLine of business
M&AMergers and acquisitions
MAMoody’s Analytics – a reportable segment of MCO; provides a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets; consists of three LOBs – RD&A, ERS and PS
Make Whole AmountThe prepayment penalty amount relating to the Series 2007-1 Notes, 2010 Senior Notes, 2012 Senior Notes, 2013 Senior Notes, 2014 Senior Notes (5-year), 2014 Senior Notes (30-year), 2015 Senior Notes, 2017 Senior Notes and 2018 Senior Notes, which is a premium based on the excess, if any, of the discounted value of the remaining scheduled payments over the prepaid principal
MAKSMoody’s Analytics Knowledge Services; formerly known as Copal Amba; provides offshore research and analytic services to the global financial and corporate sectors; part of the PS LOB and a reporting unit within the MA reportable segment
MALSMoody’s Analytics Learning Solutions; a reporting unit within the MA segment that includes on-line and classroom-based training services as well as credentialing and certification services; formerly known as FSTC
MCOMoody’s; Moody’s Corporation and its subsidiaries; the Company
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MISMoody’s Investors Service – a reportable segment of MCO; consists of five LOBs – SFG, CFG, FIG, PPIF and MIS Other
MIS OtherConsists of non-ratings revenue from ICRA, KIS Pricing and KIS Research. These businesses are components of MIS; MIS Other is an LOB of MIS
Moody’sMoody’s Corporation and its subsidiaries; MCO; the Company
Net IncomeNet income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder
New D&BThe New D&B Corporation—comprises the D&B business after September 30, 2000
New Revenue Accounting Standard Updates to the ASC pursuant to ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)”. This new accounting guidance significantly changes the accounting framework under U.S. GAAP relating to revenue recognition and to the accounting for the deferral of incremental costs of obtaining or fulfilling a contract with a customer
N/ANot applicable
NMPercentage change is not meaningful
Non-GAAPA financial measure not in accordance with GAAP; these measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and to provide greater transparency to investors of supplemental information used by management in its financial and operational decision making
NRSRONationally Recognized Statistical Rating Organization, which is a credit rating agency registered with the SEC.
OCIOther comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, unrealized gains and losses on available for sale securities (in periods prior to January 1, 2018), certain gains and losses relating to pension and other retirement benefit obligations and foreign currency translation adjustments
Omega PerformanceA leading provider of online credit training, acquired by the Company in August 2018
Operating segmentTerm defined in the ASC relating to segment reporting; the ASC defines an operating segment as a component of a business entity that has each of the three following characteristics: i) the component engages in business activities from which it may recognize revenue and incur expenses; ii) the operating results of the component are regularly reviewed by the entity’s chief operating decision maker; and iii) discrete financial information about the component is available.
Other Retirement PlansThe U.S. retirement healthcare and U.S. retirement life insurance plans
PCSPost-Contract Customer Support
PPIFPublic, project and infrastructure finance; an LOB of MIS
Profit Participation PlanDefined contribution profit participation plan that covers substantially all U.S. employees of the Company
PSProfessional Services, an LOB within MA consisting of MAKS and MALS that provides offshore analytical and research services as well as learning solutions and certification programs
Purchase Price HedgeForeign currency collars and forward contracts entered into by the Company to economically hedge the Bureau van Dijk euro denominated purchase price
Purchase Price Hedge GainGain on foreign currency collars and forward contracts to economically hedge the Bureau van Dijk euro denominated purchase price
RD&AResearch, Data and Analytics; an LOB within MA that offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools
Reform ActCredit Rating Agency Reform Act of 2006
REITReal Estate Investment Trust
Reis, Inc. (Reis)A leading provider of U.S. commercial real estate (CRE) data; acquired by the Company in October 2018.
Relationship RevenueFor MIS, represents recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. For MIS Other represents subscription-based revenue. For MA, represents subscription-based revenue and software maintenance revenue
Reporting unitThe level at which Moody’s evaluates its goodwill for impairment under U.S. GAAP; defined as an operating segment or one level below an operating segment
SaaSSoftware-as-a-Service
SCDMSCDM Financial, a leading provider of analytical tools for participants in securitization markets. Moody’s acquired SCDM’s structured finance data and analytics business in February 2017
SECU.S. Securities and Exchange Commission
Securities ActSecurities Act of 1933, as amended
Series 2007-1 NotesPrincipal amount of $300 million, 6.06% senior unsecured notes due in September 2017 pursuant to the 2007 Agreement; prepaid in March 2017
Settlement ChargeCharge of $863.8 million recorded in the fourth quarter of 2016 related to an agreement entered into on January 13, 2017 with the U.S. Department of Justice and the attorneys general of 21 U.S. states and the District of Columbia to resolve pending and potential civil claims related to credit ratings that MIS assigned to certain structured finance instruments in the financial crisis era
SFGStructured finance group; an LOB of MIS
SG&ASelling, general and administrative expenses
SSPStandalone selling price
T&MTime-and-Material
Tax ActThe “Tax Cuts and Jobs Act” enacted into U.S. law on December 22, 2017, which significantly amends the tax code in the U.S.
Total DebtAll indebtedness of the Company as reflected on the consolidated balance sheets
Transaction RevenueFor MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS Other, represents revenue from professional services as well as data services, research and analytical engagements. For MA, represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, training and certification services, and research and analytical engagements
U.K.United Kingdom
U.S.United States
USDU.S. dollar
UTPsUncertain tax positions
VSOEVendor specific objective evidence; as defined in the ASC, evidence of selling price limited to either of the following: the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold separately, the price established by management having the relevant authority
WACCWeighted Average Cost of Capital
2007 AgreementNote purchase agreement dated September 7, 2007, relating to the Series 2007-1 Notes
2010 IndentureSupplemental indenture and related agreements dated August 19, 2010, relating to the 2010 Senior Notes
2010 Senior NotesPrincipal amount of $500 million, 5.50% senior unsecured notes due in September 2020 pursuant to the 2010 Indenture
2012 IndentureSupplemental indenture and related agreements dated August 18, 2012, relating to the 2012 Senior Notes
2012 Senior NotesPrincipal amount of $500 million, 4.50% senior unsecured notes due in September 2022 pursuant to the 2012 Indenture
2013 IndentureSupplemental indenture and related agreements dated August 12, 2013, relating to the 2013 Senior Notes
2013 Senior NotesPrincipal amount of the $500 million, 4.875% senior unsecured notes due in February 2024 pursuant to the 2013 Indenture
2014 IndentureSupplemental indenture and related agreements dated July 16, 2014, relating to the 2014 Senior Notes
2014 Senior Notes (5-Year)Principal amount of $450 million, 2.75% senior unsecured notes due in July 2019
2014 Senior Notes (30-Year)Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044
2015 FacilityFive-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; backstops CP issued under the CP Program
2015 IndentureSupplemental indenture and related agreements dated March 9, 2015, relating to the 2015 Senior Notes
2015 Senior NotesPrincipal amount of €500 million, 1.75% senior unsecured notes issued March 9, 2015; repaid in 2018
2017 Bridge Credit FacilityBridge Credit Agreement entered into in May 2017 pursuant to the definitive agreement to acquire Bureau van Dijk; this facility was terminated in June 2017 upon issuance of the 2017 Private Placement Notes Due 2023 and 2028
2017 Floating Rate Senior Notes Principal amount of $300 million, floating rate senior unsecured notes due in September 2018
2017 IndentureCollectively the Supplemental indenture and related agreements dated March 2, 2017, relating to the 2017 Floating Rate Senior Notes and 2017 Notes Due 2023 and 2028, and the supplemental indenture and related agreements dated June 12, 2017, relating to the 2017 Notes Due 2023 and 2028
2017 Senior Notes Due 2023Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023
2017 Senior Notes Due 2028Principal amount of $500 million, 3.25% senior unsecured notes due January 15, 2028
2017 Senior Notes Due 2021Principal amount of $500 million, 2.75% senior unsecured notes due in December 2021
2017 Term Loan$500 million, three-year term loan facility entered into on June 6, 2017 for which the Company drew down $500 million on August 8, 2017 to fund the acquisition of Bureau van Dijk; amounts under the 2017 Term Loan were repaid in 2018
2018 FacilityFive-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; replaced the 2015 Facility; backstops CP issued under the CP Program
2018 Senior NotesPrincipal amount of $300 million, 3.25% senior unsecured notes due June 7, 2021
2018 Senior Notes (10-year)Principal amount of $400 million, 4.25% senior unsecured notes due February 1, 2029
2018 Senior Notes (30-year)Principal amount of $400 million, 4.875% senior unsecured notes due December 17, 2048
7 WTCThe Company’s Corporate headquarters located at 7 World Trade Center in New York, NY
v3.10.0.1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
12 Months Ended
Dec. 31, 2018
Description of Business and Basis of Presentation [Abstract]  
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Moody’s is a provider of (i) credit ratings; (ii) credit, capital markets and economic research, data and analytical tools; (iii) software solutions that support financial risk management activities; (iv) quantitatively derived credit scores; (v) learning solutions and certification services; (vi) offshore financial research and analytical services; and (vii) company information and business intelligence products. Moody’s reports in two reportable segments: MIS and MA.

MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide. Revenue is primarily derived from the originators and issuers of such transactions who use MIS ratings in the distribution of their debt issues to investors. Additionally, MIS earns revenue from certain non-ratings-related operations which consist primarily of financial instrument pricing services in the Asia-Pacific region as well as revenue from ICRA’s non-ratings operations. The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment.

The MA segment develops a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets. Within its RD&A business, MA offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools. Within its ERS business, MA provides software solutions as well as related risk management services. The PS business provides offshore analytical and research services along with learning solutions and certification programs.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

Adoption of New Accounting Standards

In the first quarter of 2017, the Company adopted ASU No. 2016-16, “Accounting for Income Taxes (Topic 740): Intra-Entity Asset Transfers of Assets Other than Inventory.” Under previous guidance, the tax effects of intra-entity asset transfers (intercompany sales) were deferred until the transferred asset was sold to a third party or otherwise recovered through use. The new guidance eliminates the exception for all intra-entity sales of assets other than inventory. Upon adoption, a cumulative-effect adjustment is recorded in retained earnings as of the beginning of the period of adoption. The net impact upon adoption is a reduction to retained earnings of $4.6 million. The Company does not expect any material impact on its future operations as a result of the adoption of this guidance.

In the first quarter of 2017, the Company adopted ASU No. 2016-09 “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. As required by ASU No. 2016-09, Excess Tax Benefits or shortfalls recognized on stock-based compensation are reflected in the consolidated statement of operations as a component of the provision for income taxes on a prospective basis. Prior to the adoption of this ASU, Excess Tax Benefits and shortfalls were recorded to capital surplus within shareholders’ equity (deficit). The impact of this adoption was a $38.1 million and a $39.5 million benefit to the provision for income taxes for the years end December 31, 2018 and December 31, 2017 respectively.

Additionally, in accordance with this ASU, Excess Tax Benefits or shortfalls recognized on stock-based compensation are classified as operating cash flows in the consolidated statement of cash flows, and the Company has applied this provision on a retrospective basis. Under previous accounting guidance, the Excess Tax Benefits or shortfalls were shown as a reduction to operating activity and an increase to financing activity. Furthermore, the Company has elected to continue to estimate the number of stock-based awards expected to vest, rather than accounting for award forfeitures as they occur, to determine the amount of stock-based compensation cost recognized in each period. As a result of the change, net cash provided by operating activities was higher and net cash used in financing activities was lower by $38.1 million and $39.5 million for the years ended December 31, 2018 and December 31, 2017, respectively, than it would have been under the previous guidance. As a result of the change, net cash provided by operating activities was higher and net cash used in financing activities was lower by $38.1 million and $39.5 million for the years ended December 31, 2018 and December 31, 2017, respectively, than would have been reported under the previous guidance. The impact to the Company’s statement of cash flows for the year prior to the adoption of this provision of the ASU is set forth in the table below:

As Reported December 31, 2016ReclassificationDecember 31, 2016 As Adjusted
Net cash provided by operating activities$1,226.1$33.1$1,259.2
Net cash used in financing activities$(1,009.8)$(33.1)$(1,042.9)

On January 1, 2018, the Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)” using the modified retrospective approach, which Moody’s has elected to apply only to those contracts which were not completed as of January 1, 2018. Additionally, the Company has not retrospectively restated contract positions for contract modifications made prior to the adoption. ASU No. 2014-09 also includes updates related to the accounting for the deferral of incremental costs of obtaining or fulfilling a contract with a customer (“ASC Subtopic 340-40”). Hereunder, discussion of the provisions of ASC Topic 606 and ASC Subtopic 340-40 are both individually and collectively referred to as the “New Revenue Accounting Standard.” Results for reporting periods beginning on January 1, 2018 are presented under the guidance set forth in the New Revenue Accounting Standard, while prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance.

The most significant impacts to the Company’s financial statements from adopting the New Revenue Accounting Standard are primarily related to: i) the accounting for certain installed software subscription revenue in MA whereby the license rights within the arrangement are recognized at the inception of the contract based on SSP with the remainder recognized over the subscription period (compared to ASC Topic 605 whereby all installed software subscription revenue was previously recognized over the subscription period); ii) the accounting for certain ERS and ESA revenue arrangements where VSOE was not available under ASC Topic 605 now results in the acceleration of revenue recognition (compared to ASC Topic 605 whereby revenue was deferred due to lack of VSOE until all elements without VSOE had been delivered); iii) sales commissions incurred in the MA segment will be capitalized and amortized over an extended period which is generally based upon the average economic life of products/services sold and incorporates anticipated subscription renewals (compared to previous accounting guidance whereby capitalized sales commissions were amortized over the committed subscription period only); iv) the immediate expensing of software implementation project costs to fulfill a contract for its ERS and ESA businesses, which under previous accounting guidance were capitalized and expensed when related project revenue was recognized; v) the capitalization of work-in-process costs for in-progress MIS ratings at the end of each reporting period, which under ASC Topic 605 were expensed as incurred; vi) the timing of when revenue for certain MIS ratings products is recognized; and vii) the estimation of variable consideration at contract inception whereas under ASC Topic 605 companies were not required to consider the amount of consideration for which it expected to be entitled.

The table below provides detail relating to the adjustment to the Company’s retained earnings balance upon adoption of the New Revenue Accounting Standard:

Transition adjustment  Benefit to / (reduction of) January 1, 2018 Retained EarningsCorresponding Balance Sheet Line Item
Recognition of MA deferred revenue / increase in MA unbilled receivables (1)  $108 Deferred revenue, Non-current portion of deferred revenue, Accounts receivable, Other assets
Increase to capitalized MA sales commissions (2)  $78 Other current assets, Other assets, Accounts payable and accrued liabilities
Capitalization of work-in-process for in-progress ratings  $9 Other current assets
Net impact of all other adjustments  $4 Various
Net increase in tax liability on the above  ($43)Deferred tax liabilities, net
Total post-tax adjustment  $156
(1) Represents deferred revenue as of December 31, 2017 as well as amounts then unbilled that would have been recognized as revenue in 2017 or earlier if the New Revenue Accounting Standard was then in effect. These amounts will not be recognized as revenue in future statements of operations. Conversely, revenue will be recorded to the Company's statement of operations in 2018 under the New Revenue Accounting Standard, which otherwise would have been recognized in periods subsequent to 2018 if accounted for under ASC Topic 605.
(2) Represents sales commissions that would have been capitalized as of December 31, 2017 if the New Revenue Accounting Standard was then in effect, but had previously been expensed by the Company under the previous accounting guidance. These sales commissions, as well as sales commissions incurred in 2018 related to new sales and renewals, will be amortized to expense in the statements of operations beginning in 2018 over an extended period generally based upon the average economic life of the products sold or over the period in which implementation and advisory services will be provided.

The table below presents the cumulative effect of the changes made to the Company’s consolidated balance sheet at January 1, 2018 for the adoption of the New Revenue Accounting Standard:

As Reported December 31, 2017Adjustment Due to New Revenue Accounting StandardBalance at January 1, 2018
ASSETS
Current assets:
Cash and cash equivalents$1,071.5$-$1,071.5
Short-term investments111.8-111.8
Accounts receivable, net of allowances1,147.216.81,164.0
Other current assets250.132.9283.0
Total current assets2,580.649.72,630.3
Property and equipment, net325.1-325.1
Goodwill3,753.2-3,753.2
Intangible assets, net1,631.6-1,631.6
Deferred tax assets, net143.8-143.8
Other assets159.971.3231.2
Total assets$8,594.2$121.0$8,715.2
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' (DEFICIT)/EQUITY
Current liabilities:
Accounts payable and accrued liabilities$750.3$(0.8)$749.5
Commercial paper129.9-129.9
Current portion of long-term debt299.5-299.5
Deferred revenue883.6(69.3)814.3
Total current liabilities2,063.3(70.1)1,993.2
Non-current portion of deferred revenue140.0(8.0)132.0
Long-term debt5,111.1-5,111.1
Deferred tax liabilities, net341.642.7384.3
Unrecognized tax benefits389.1-389.1
Other liabilities664.00.3664.3
Total liabilities8,709.1(35.1)8,674.0
Shareholders' (deficit) equity:
Common stock3.4-3.4
Capital surplus528.6-528.6
Retained earnings7,465.4156.17,621.5
Treasury stock(8,152.9)-(8,152.9)
Accumulated other comprehensive loss(172.2)-(172.2)
Total Moody's shareholders' (deficit) equity(327.7)156.1(171.6)
Noncontrolling interests212.8-212.8
Total shareholders' (deficit) equity(114.9)156.141.2
Total liabilities, noncontrolling interests and shareholders' (deficit) equity$8,594.2$121.0$8,715.2

The below table presents the impacts on the Company’s statement of operations for the current reporting period from applying the provisions of the New Revenue Accounting Standard compared to the accounting standard in effect before the change:

Year Ended December 31, 2018
As ReportedUnder previous accounting guidance Effect ofChangeHigher/(Lower)
Revenue$4,442.7$4,429.3$13.4
Expenses
Operating1,245.51,247.0(1.5)
Selling, general and administrative1,080.11,088.9(8.8)
Restructuring48.748.7-
Depreciation and amortization191.9191.9-
Acquisition-Related Expenses8.38.3-
Total expenses2,574.52,584.8(10.3)
Operating income1,868.21,844.523.7
Non-operating (expense) income, net
Interest expense, net(216.0)(216.0)-
Other non-operating income, net18.818.8-
Total non-operating (expense) income, net(197.2)(197.2)-
Income before provision for income taxes1,671.01,647.323.7
Provision for income taxes351.6346.74.9
Net income1,319.41,300.618.8
Less: Net income attributable to noncontrolling interests9.89.8-
Net income attributable to Moody's$1,309.6$1,290.8$18.8
Earnings per share
Basic$6.84$6.74$0.10
Diluted$6.74$6.64$0.10
Weighted average shares outstanding
Basic191.6191.6
Diluted194.4194.4

The below table presents the impacts on the Company’s consolidated balance sheet at the end of the current reporting period from applying the provisions of the New Revenue Accounting Standard compared to the accounting standard in effect before the change:

As Reported December 31, 2018Under previous accounting guidance December 31, 2018Effect of Change Higher/(Lower)
ASSETS
Current assets:
Cash and cash equivalents$1,685.0$1,685.0$-
Short-term investments132.5132.5-
Accounts receivable, net of allowances1,287.11,243.243.9
Other current assets282.3282.00.3
Total current assets:3,386.93,342.744.2
Property and equipment, net320.4320.4-
Goodwill3,781.33,781.3-
Intangible assets, net1,566.11,566.1-
Deferred tax assets, net197.2197.2-
Other assets274.3191.482.9
Total assets$9,526.2$9,399.1$127.1
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities$695.2$694.5$0.7
Current portion of long-term debt449.9449.9-
Deferred revenue 953.41,012.7(59.3)
Total current liabilities2,098.52,157.1(58.6)
Non-current portion of deferred revenue122.3127.7(5.4)
Long-term debt5,226.15,226.1-
Deferred tax liabilities, net351.7333.018.7
Unrecognized tax benefits494.6494.6-
Other liabilities576.5576.40.1
Total liabilities8,869.78,914.9(45.2)
Shareholders' equity:
Common stock3.43.4-
Capital surplus600.9600.9-
Retained earnings8,594.48,422.1172.3
Treasury stock(8,312.5)(8,312.5)-
Accumulated other comprehensive loss(426.3)(426.3)-
Total Moody's shareholders' equity459.9287.6172.3
Noncontrolling interests196.6196.6-
Total shareholders' equity656.5484.2172.3
Total liabilities, noncontrolling interests and shareholders' equity$9,526.2$9,399.1$127.1

The below table presents the impacts on various line items within the operating cash flow within the Company’s statement of cash flows for the current reporting period from applying the provisions of the New Revenue Accounting Standard compared to the accounting standard in effect before the change.

Year Ended December 31, 2018
As ReportedUnder previous accounting guidance Effect of Change
Cash flows from operating activities
Net income$1,319.4$1,300.6$18.8
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization191.9191.9-
Stock-based compensation 130.3130.3-
Deferred income taxes(98.9)(76.7)(22.2)
Changes in assets and liabilities:
Accounts receivable(136.1)(109.0)(27.1)
Other current assets(8.4)(41.0)32.6
Other assets(16.6)(5.0)(11.6)
Accounts payable and accrued liabilities(134.0)(132.9)