MOODYS CORP /DE/, 10-Q filed on 8/2/2019
Quarterly Report
v3.19.2
Document - Document and Entity Information - $ / shares
shares in Millions
6 Months Ended
Jun. 30, 2019
Dec. 31, 2018
Cover [Abstract]    
Document Type 10-Q  
Entity Registrant Name MOODYS CORP /DE/  
Entity Central Index Key 0001059556  
Entity Shell Company false  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Document Period End Date Jun. 30, 2019  
Document Fiscal Period Focus Q2  
Entity Address, Address Line One 7 World Trade Center  
Entity Address, Address Line Two 250 Greenwich Street  
Entity Address City Or Town New York  
Entity Address, State Or Province NY  
Entity Address Postal Zip Code 10007  
Phone Fax Number Description Registrant’s telephone number, including area code:  
City Area Code (212)  
Local Phone Number 553-0300  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Trading Symbol MCO  
Entity Common Stock Shares Outstanding 189.2  
Common Stock Par Or Stated Value Per Share $ 0.01 $ 0.01
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Security Exchange Name NYSE  
Entity File Number 1-14037  
Entity Incorporation State Country Code DE  
Entity Tax Identification Number 13-3998945  
Document Quarterly Report true  
Document Transition Report false  
Security 12b Title Common Stock  
Entity Ex Transition Period false  
v3.19.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)        
Revenues $ 1,213.6 $ 1,175.1 $ 2,355.7 $ 2,301.8
Expenses        
Operating 339.9 320.2 681.6 635.1
Selling, general and administrative 274.7 270.5 556.2 541.6
Restructuring 53.8   59.3  
Depreciation and amortization 51.0 48.4 101.3 97.5
Acquisition-Related Expenses 2.0 2.0 3.4 2.8
Long-lived asset impairment pursuant to the divestiture of MAKS 8.7   8.7  
Total expenses 730.1 641.1 1,410.5 1,277.0
Operating Income 483.5 534.0 945.2 1,024.8
Non-operating (expense) income, net        
Interest expense, net (50.6) (53.4) (103.1) (104.1)
Other non-operating income, net 0.4 14.9 2.7 15.9
Total non-operating (expense) income, net (50.2) (38.5) (100.4) (88.2)
Income before provisions for income taxes 433.3 495.5 844.8 936.6
Provision for income taxes 121.3 117.6 159.2 181.9
Net income 312.0 377.9 685.6 754.7
Less: Net income attributable to noncontrolling interests 1.7 1.7 2.4 5.6
Net income attributable to Moody's $ 310.3 $ 376.2 $ 683.2 $ 749.1
Earnings per share attributable to Moody's common shareholders        
Basic $ 1.64 $ 1.96 $ 3.60 $ 3.91
Diluted $ 1.62 $ 1.94 $ 3.56 $ 3.85
Weighted average number of shares outstanding        
Basic 189.4 191.9 189.9 191.6
Diluted 191.3 194.4 192.1 194.5
v3.19.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)        
Net income $ 312.0 $ 377.9 $ 685.6 $ 754.7
Foreign currency translation:        
Foreign currency translation adjustments - Pre Tax 41.6 (286.9) 14.9 (150.8)
Foreign currency translation adjustments - Net of Tax 41.6 (286.9) 14.9 (150.8)
Net gains (losses) on net investment hedges - Pre Tax (37.0) 36.6 (6.6) 22.1
Net gains (losses) on net investment hedges, Tax 7.8 (9.2) 0.9 (5.6)
Net gains (losses) on net investment hedges, Net of Tax (29.2) 27.4 (5.7) 16.5
Cash flow hedges:        
Net realized and unrealized gain (loss) on cash flow hedges - Pre Tax       1.9
Net realized and unrealized gain (loss) on cash flow hedges - Tax       (0.4)
Net realized and unrealized gain (loss) on cash flow hedges - Net of Tax       1.5
Reclassification of losses included in net income - Pre Tax 0.1 (0.1) 0.1 (0.2)
Reclassification of losses included in net income - Tax    
Reclassification of losses included in net income- Net of Tax 0.1 (0.1) 0.1 (0.2)
Pension and Other Retirement Benefits:        
Amortization of actuarial losses and prior service costs included in net income - Pre Tax 0.8 1.0 1.6 2.4
Amortization of actuarial losses and prior service costs included in net income - Tax (0.2) (0.3) (0.4) (0.7)
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 0.6 0.7 1.2 1.7
Net actuarial losses and prior service costs - Pre Tax (2.8) 1.6 (1.7) 1.6
Net actuarial losses and prior service costs - Tax 0.7 (0.4) 0.4 (0.4)
Net actuarial losses and prior service costs - Net of Tax (2.1) 1.2 (1.3) 1.2
Total other comprehensive (loss) income - Pre Tax 2.7 (247.8) 8.3 (123.0)
Total other comprehensive (loss)income - Tax 8.3 (9.9) 0.9 (7.1)
Total other comprehensive (loss) income - Net of Tax 11.0 (257.7) 9.2 (130.1)
Comprehensive income 323.0 120.2 694.8 624.6
Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interest 3.4 (3.2) 11.6 5.7
Comprehensive income attributable to Moody's $ 319.6 $ 123.4 $ 683.2 $ 618.9
v3.19.2
CONSOLIDATED BALANCE SHEETS - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 1,195,900,000 $ 1,685,000,000.0
Short-term investments 119,500,000 132,500,000
Accounts receivable, net of allowances of $36.9 in 2018 and $36.6 in 2017 1,245,300,000 1,287,100,000
Other current assets 335,800,000 282,300,000
Assets held for sale 258,100,000  
Total current assets 3,154,600,000 3,386,900,000
Property and equipment, net of accumulated depreciation of $767.9 in 2018 and $706.0 in 2017 300,400,000 320,400,000
Operating lease right-of-use assets 476,800,000  
Goodwill 3,664,900,000 3,781,300,000
Intangible assets, net 1,486,000,000.0 1,566,100,000
Deferred tax assets, net 191,400,000 197,200,000
Other assets 317,500,000 274,300,000
Total assets 9,591,600,000 9,526,200,000
Current liabilities:    
Accounts payable and accrued liabilities 588,700,000 695,200,000
Current portion of operating lease liabilities 89,100,000  
Commercial paper 129,900,000  
Current portion of long-term debt   449,900,000
Deferred revenue 952,300,000 953,400,000
Liabilities held for sale 79,900,000  
Total current liabilities 1,839,900,000 2,098,500,000
Non-current portion of deferred revenue 118,500,000 122,300,000
Long-term debt 5,258,000,000.0 5,226,100,000
Deferred tax liabilities, net 348,600,000 351,700,000
Uncertain tax positions 450,200,000 494,600,000
Operating lease liabilities 510,200,000  
Other liabilities 491,500,000 576,500,000
Total liabilities 9,016,900,000 8,869,700,000
Contingencies (Note 19)
Shareholders' (deficit) equity    
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding
Common stock 3,400,000 3,400,000
Capital surplus 574,500,000 600,900,000
Retained earnings 9,107,700,000 8,594,400,000
Treasury stock, at cost; 151,293,579 and 151,932,157 shares of common stock at September 30, 2018 and December 31, 2017, respectively (8,886,700,000) (8,312,500,000)
Accumulated other comprehensive loss (446,100,000) (426,300,000)
Total Moody's shareholders' deficit 352,800,000 459,900,000
Noncontrolling interests 221,900,000 196,600,000
Total shareholders' deficit 574,700,000 656,500,000
Total liabilities and shareholders' (deficit) equity 9,591,600,000 9,526,200,000
Series common stock    
Shareholders' (deficit) equity    
Common stock
v3.19.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Accounts receivable, allowances $ 44.8 $ 43.5
Property and equipment, accumulated depreciation $ 797.0 $ 790.2
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 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 153,740,656 151,598,695
Series common stock    
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 10,000,000 10,000,000
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities    
Net income $ 685.6 $ 754.7
Reconciliation of net income to net cash provided by operating activities:    
Depreciation and amortization 101.3 97.5
Stock-based compensation expense 69.9 69.5
Deferred income taxes (3.0) (12.1)
ROU Asset impairment & other non-cash restructuring charge 28.9  
Long-lived asset impairment pursuant to the divestiture of MAKS 8.7  
Changes in assets and liabilities:    
Accounts receivable 30.4 17.8
Other current assets (58.2) (10.2)
Other assets (28.6) (14.3)
Lease obligations (3.8)  
Accounts payable and accrued liabilities (95.9) (163.2)
Unrecognized tax benefits and other non-current tax liabilities (15.4) (33.6)
Deferred revenue (8.1) 55.3
Other liabilities 42.7 15.9
Net cash provided by (used in) operating activities 754.5 777.3
Cash flows from investing activities    
Capital additions (38.7) (37.9)
Purchases of investments (69.9) (92.2)
Sales and maturities of short-term investments 92.5 79.1
Cash received upon diposal of a subsidiary, net of cash transferred to purchaser   5.7
Cash paid for acquisitions, net of cash acquired and equity investments (36.7)  
Net cash used in investing activities (52.8) (45.3)
Cash flows from financing activities    
Issuance of notes   299.6
Repayments of notes (450.0) (450.0)
Issuance of commercial paper 942.4 359.4
Repayments of commercial paper (815.0) (399.4)
Proceeds from stock-based compensation plans 28.8 36.9
Repurchase of shares related to stock-based compensation (74.9) (61.5)
Treasury shares (615.2) (81.0)
Dividends (189.0) (168.6)
Dividends to noncontrolling interests (0.8) (1.3)
Payment for noncontrolling interest (12.3)  
Debt issuance costs, extinguishment costs and related fees   (1.7)
Net cash provided (used in) by financing activities (1,186.0) (467.6)
Less: Reclassification of cash to assets held-for-sale (8.0)  
Effect of exchange rate changes on cash and cash equivalents 3.2 (21.4)
Net increase (decrease) in cash and cash equivalents (489.1) 243.0
Cash and cash equivalents, beginning of the period 1,685.0 1,071.5
Cash and cash equivalents, end of the period $ 1,195.9 $ 1,314.5
v3.19.2
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Additional Paid In Capital
Retained Earnings [Member]
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Total Moody's Shareholders' Equity (Deficit)
Noncontrolling Interests
Beginning Balance (in shares) at Dec. 31, 2017   342.9     (151.9)      
Beginning Balance at Dec. 31, 2017 $ (114.9) $ 3.4 $ 528.6 $ 7,465.4 $ (8,152.9) $ (172.2) $ (327.7) $ 212.8
Net income 754.7     749.1     749.1 5.6
Dividends (169.7)     (168.3)     (168.3) (1.4)
Stock-based compensation 69.5   69.5       69.5  
Shares issued for stock-based compensation plans, net (24.5)   (59.5)   $ 35.0   (24.5)  
Stock Issued During Period Shares Share Based Compensation         1.4      
Treasury shares repurchased, shares         (0.5)      
Treasury shares repurchased (81.0)       $ (81.0)   (81.0)  
Foreign currency translation adjustments - Net of Tax (134.3)         (134.5) (134.5) 0.2
Net actuarial losses and prior service costs - Net of Tax 1.2         1.2 1.2  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 1.7         1.7 1.7  
Net realized and unrealized gain on cash flow hedges (net of tax of $1.1 million) 1.3         1.3 1.3  
Ending Balance (in shares) at Jun. 30, 2018   342.9     (151.0)      
Ending Balance at Jun. 30, 2018 460.1 $ 3.4 538.6 8,204.6 $ (8,198.9) (304.8) 242.9 217.2
Beginning Balance (in shares) at Mar. 31, 2018   342.9     (151.0)      
Beginning Balance at Mar. 31, 2018 420.0 $ 3.4 506.6 7,913.0 $ (8,171.4) (51.9) 199.7 220.3
Net income 377.9     376.2     376.2 1.7
Dividends (84.6)     (84.6)     (84.6)  
Stock-based compensation 34.3   34.3       34.3  
Shares issued for stock-based compensation plans, net 7.8   (2.3)   $ 10.1   7.8  
Stock Issued During Period Shares Share Based Compensation         0.2      
Treasury shares repurchased, shares         (0.2)      
Treasury shares repurchased (37.6)       $ (37.6)   (37.6)  
Foreign currency translation adjustments - Net of Tax (259.5)         (254.7) (254.7) (4.8)
Net actuarial losses and prior service costs - Net of Tax 1.2         1.2 1.2  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 0.7         0.7 0.7  
Net realized and unrealized gain on cash flow hedges (net of tax of $1.1 million) (0.1)         (0.1) (0.1)  
Ending Balance (in shares) at Jun. 30, 2018   342.9     (151.0)      
Ending Balance at Jun. 30, 2018 460.1 $ 3.4 538.6 8,204.6 $ (8,198.9) (304.8) 242.9 217.2
Adoption of new ASU | New Revenue Accounting Standard [Member] (156.1)     (156.1)     (156.1)  
Adoption of new ASU | Financial Instruments - Overall (ASU 2016-01) [Member]       (2.3)   2.3    
Beginning Balance (in shares) at Dec. 31, 2018   342.9     (151.6)      
Beginning Balance at Dec. 31, 2018 656.5 $ 3.4 600.9 8,594.4 $ (8,312.5) (426.3) 459.9 196.6
Net income 685.6     683.2     683.2 2.4
Dividends (190.5)     (189.7)     (189.7) (0.8)
Stock-based compensation 70.1   70.1       70.1  
Shares issued for stock-based compensation plans, net (46.1)   (71.4)   $ 25.3   (46.1)  
Stock Issued During Period Shares Share Based Compensation         1.3      
Purchase of noncontrolling interest (12.3)   (9.4)       (9.4) (2.9)
Non-controlling interest resulting from majority acquisition of Vigeo Eiris 17.4             17.4
Treasury shares repurchased, shares         (3.4)      
Treasury shares repurchased (615.2) $ (15.7)     $ (599.5)   (615.2)  
Foreign currency translation adjustments - Net of Tax 9.2             9.2
Net actuarial losses and prior service costs - Net of Tax (1.3)         (1.3) (1.3)  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 1.2         1.2 1.2  
Net realized and unrealized gain on cash flow hedges (net of tax of $1.1 million) 0.1         0.1 0.1  
Ending Balance (in shares) at Jun. 30, 2019   342.9     (153.7)      
Ending Balance at Jun. 30, 2019 574.7 $ 3.4 574.5 9,107.7 $ (8,886.7) (446.1) 352.8 221.9
Beginning Balance (in shares) at Mar. 31, 2019   342.9     (153.3)      
Beginning Balance at Mar. 31, 2019 325.0 $ 3.4 435.7 8,893.6 $ (8,754.0) (455.5) 123.2 201.8
Net income 312.0     310.3     310.3 1.7
Dividends (96.8)     (96.2)     (96.2) (0.6)
Stock-based compensation 34.3   34.3       34.3  
Shares issued for stock-based compensation plans, net 13.5   (5.1)   $ 18.6   13.5  
Stock Issued During Period Shares Share Based Compensation         0.3      
Non-controlling interest resulting from majority acquisition of Vigeo Eiris 17.4             17.4
Treasury shares repurchased, shares         (0.7)      
Treasury shares repurchased (41.7)   109.6   $ (151.3)   (41.7)  
Foreign currency translation adjustments - Net of Tax 12.4         10.8 10.8 1.6
Net actuarial losses and prior service costs - Net of Tax (2.1)         (2.1) (2.1)  
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 0.6         0.6 0.6  
Net realized and unrealized gain on cash flow hedges (net of tax of $1.1 million) 0.1         0.1 0.1  
Ending Balance (in shares) at Jun. 30, 2019   342.9     (153.7)      
Ending Balance at Jun. 30, 2019 $ 574.7 $ 3.4 $ 574.5 9,107.7 $ (8,886.7) (446.1) $ 352.8 $ 221.9
Adoption of new ASU | Accounting Standards Update 2018-02 [Member]       $ (19.8)   $ 19.8    
v3.19.2
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement Of Stockholders Equity [Abstract]        
Dividends declared per share attributable to Moody's common shareholders $ 0.50 $ 0.44 $ 1.00 $ 0.88
Currency translation adjustment, tax $ (7.8) $ 9.2 $ (0.9) $ 5.6
Net actuarial losses and prior service costs - Tax (0.7) 0.4 (0.4) 0.4
Amortization of actuarial losses and prior service costs included in net income - Tax $ 0.2 $ 0.3 $ 0.4 0.7
Net unrealized gain on cash flow hedges, tax       $ 0.4
v3.19.2
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
6 Months Ended
Jun. 30, 2019
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.

 

MA provides financial intelligence and analytical tools to assist businesses in making decisions. MA’s portfolio of solutions consists of specialized research, data, software, and professional services, which are assembled to support the financial analysis and risk management activities of institutional customers worldwide.

 

Following a strategic review of its business portfolio, the Company initiated a plan to sell MAKS and determined that all of the criteria had been met to classify the assets and liabilities of MAKS as held for sale as of June 30, 2019. On July 16, 2019, the Company entered into an agreement to sell the MAKS business to Equistone Partners Europe Limited, a European private equity firm. The operating results of MAKS will continue to be reported within the MA segment (and PS LOB) until the closing of the transaction, which is expected to occur in the second half of 2019.

 

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and related notes in the Company’s 2018 annual report on Form 10-K filed with the SEC on February 25, 2019. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

 

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

 

Adoption of New Accounting Standards

 

On January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842)” and has elected to apply the provisions of the New Lease Accounting Standard on the date of adoption with adjustments to the assets and liabilities on its opening balance sheet, with no cumulative-effect adjustment to the opening balance of retained earnings required. Accordingly, the Company did not restate prior year comparative periods for the impact of the New Lease Accounting Standard. The New Lease Accounting Standard requires lessees to recognize an ROU Asset and lease liability for all leases with terms of more than 12 months. The Company has elected the package of practical expedients permitted under the transition guidance within the New Lease Accounting Standard, which permits the Company not to reassess the following for any expired or existing contracts: i) whether any contracts contain leases; ii) lease classification (i.e. operating lease or finance/capital lease); and iii) initial direct costs.

 

The adoption of the New Lease Accounting Standard resulted in the recognition of an ROU Assets and lease liabilities of approximately $518 million and $622 million, respectively, at January 1, 2019, consisting primarily of operating leases relating to office space. Pursuant to this transition adjustment, the Company also recognized approximately $150 million and approximately $125 million in additional deferred tax assets and liabilities, respectively. Compared to previous guidance, the New Lease Accounting Standard does not significantly change the method by which a lessee should recognize, measure and present expenses and cash flows arising from a lease. Refer to Note 2 for a more fulsome description of the Company’s accounting policy relating to the New Lease Accounting Standard, which includes a discussion relating to the pattern of operating lease expense recognition (both prior to and subsequent to an impairment of a ROU Asset).

In the first quarter of 2019, the Company adopted ASU No. 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Under current GAAP, adjustments to deferred tax assets and liabilities related to a change in tax laws or rates are included in income from continuing operations, even in situations where the related items were originally recognized in OCI (commonly referred to as a “stranded tax effect”). The provisions of this ASU permit the reclassification of the stranded tax effect related to the Tax Act from AOCI to retained earnings. In the first quarter of 2019, the Company reclassified $19.8 million of tax benefits from AOCI to retained earnings relating to the aforementioned stranded tax effect of the Tax Act.

 

On January 1, 2019, the Company adopted ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to the currently permissible benchmark interest rates. This ASU provides the Company the ability to utilize the OIS rate based on SOFR as the benchmark interest rate on certain hedges of interest rate risk. The adoption of this ASU had no impact on the Company’s financial statements upon adoption.

 

Reclassification of Previously Reported Revenue by LOB

 

There were certain organizational/product realignments in both MIS and MA in the first quarter of 2019. Accordingly, in MIS, revenue from REITs, which was previously classified in the SFG LOB, is now classified in the CFG LOB. In MA, revenue relating to the Bureau van Dijk FACT product (a credit assessment and origination solution), which was previously classified in RD&A, is now classified in the ERS LOB. Accordingly, 2018 revenue by LOB was reclassified to conform with this new presentation, as follows:

MIS

 

As previously reported

 

Reclassification

 

As Reclassified

 

MA

 

As previously reported

 

Reclassification

 

As Reclassified

CFG

 

 

 

 

 

 

 

 

 

 

RD&A

 

 

 

 

 

 

 

 

 

 

Q1

 

$

377.7

 

$

11.9

 

$

389.6

 

 

Q1

 

$

269.2

 

$

(2.1)

 

$

267.1

 

Q2

 

 

377.6

 

 

13.4

 

 

391.0

 

 

Q2

 

 

279.9

 

 

(4.0)

 

 

275.9

 

Q3

 

 

296.1

 

 

11.2

 

 

307.3

 

 

Q3

 

 

282.6

 

 

(2.3)

 

 

280.3

 

Q4

 

 

282.7

 

 

8.6

 

 

291.3

 

 

Q4

 

 

302.4

 

 

(5.3)

 

 

297.1

Full year 2018

 

$

1,334.1

 

$

45.1

 

$

1,379.2

 

Full year 2018

 

$

1,134.1

 

$

(13.7)

 

$

1,120.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SFG

 

 

 

 

 

 

 

 

 

 

ERS

 

 

 

 

 

 

 

 

 

 

Q1

 

$

129.7

 

$

(11.9)

 

$

117.8

 

 

Q1

 

$

100.1

 

$

2.1

 

$

102.2

 

Q2

 

 

141.6

 

 

(13.4)

 

 

128.2

 

 

Q2

 

 

105.5

 

 

4.0

 

 

109.5

 

Q3

 

 

125.4

 

 

(11.2)

 

 

114.2

 

 

Q3

 

 

113.0

 

 

2.3

 

 

115.3

 

Q4

 

 

129.8

 

 

(8.6)

 

 

121.2

 

 

Q4

 

 

118.8

 

 

5.3

 

 

124.1

Full year 2018

 

$

526.5

 

$

(45.1)

 

$

481.4

 

Full year 2018

 

$

437.4

 

$

13.7

 

$

451.1

v3.19.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2019
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

On January 1, 2019, the Company adopted the New Lease Accounting Standard as more fully discussed in Note 1. Accordingly, the Company revised its lease accounting policy to reflect the provisions of the new standard, which is discussed below. All other significant accounting policies described in the Form 10-K for the year ended December 31, 2018 remain unchanged. Additionally, refer to Note 19 for additional disclosures relating to the Company’s lease obligations.

 

Leases

 

The Company has operating leases, of which substantially all relate to the lease of office space. The Company’s leases which are classified as finance leases are not material to the condensed consolidated financial statements.

 

The Company determines if an arrangement meets the definition of a lease at contract inception. The Company recognizes in its consolidated balance sheet a lease liability and an ROU Asset for all leases with a lease term greater than 12 months. In determining the length of the lease term, the Company utilizes judgment in assessing the likelihood of whether it is reasonably certain that it will exercise an option to extend or early-terminate a lease, if such options are provided in the lease agreement.

 

ROU Assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU Assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As substantially all of the Company’s leases do not provide an implicit interest rate, the Company uses its estimated secured incremental borrowing rates at the lease commencement date in determining the present value of lease payments. These secured incremental borrowing rates are attributable to the currency in which the lease is denominated.

 

At commencement, the Company’s initial measurement of the ROU Asset is calculated as the present value of the remaining lease payments (i.e., lease liability), with additive adjustments reflecting: initial direct costs (e.g., broker commissions) and prepaid lease payments (if any); and reduced by any lease incentives provided by the lessor if: (i) received before lease commencement or (ii) receipt of the lease incentive is contingent upon future events for which the occurrence is both probable and within the Company’s control.

 

Lease expense for minimum operating lease payments is recognized on a straight-line basis over the lease term. This straight-line lease expense represents a single lease cost which is comprised of both an interest accretion component relating to the lease liability and amortization of the ROU Assets. The Company records this single lease cost in operating and SG&A expenses. However, in situations where an operating lease ROU Asset has been impaired, the subsequent amortization of the ROU Asset is then recorded on a straight-line basis over the remaining lease term and is combined with accretion expense on the lease liability to result in single operating lease cost (which subsequent to impairment will no longer follow a straight-line recognition pattern).

 

The Company has lease agreements which include lease and non-lease components. For the Company’s office space leases, the lease components (e.g., fixed rent payments) and non-lease components (e.g., fixed common-area maintenance costs) are combined and accounted for as a single lease component.

 

Variable lease payments (e.g. variable common-area-maintenance costs) are only included in the initial measurement of the lease liability to the extent those payments depend on an index or a rate. Variable lease payments not included in the lease liability are recognized in net income in the period in which the obligation for those payments is incurred.

v3.19.2
REVENUES
6 Months Ended
Jun. 30, 2019
Revenues [Abstract]  
REVENUES

NOTE 3. REVENUES

 

Revenue by Category

 

The following table presents the Company’s revenues disaggregated by LOB:

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

MIS:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate finance (CFG) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment-grade

 

$

95.8

 

$

72.4

 

$

193.2

 

$

159.6

 

High-yield

 

 

68.2

 

 

58.7

 

 

125.5

 

 

116.6

 

Bank loans

 

 

83.5

 

 

121.3

 

 

156.1

 

 

231.4

 

Other accounts (2)

 

 

139.9

 

 

138.6

 

 

268.0

 

 

273.0

Total CFG

 

 

387.4

 

 

391.0

 

 

742.8

 

 

780.6

Structured finance (SFG) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed securities

 

 

25.6

 

 

27.9

 

 

48.8

 

 

56.1

 

RMBS

 

 

24.1

 

 

26.8

 

 

47.6

 

 

51.1

 

CMBS

 

 

20.4

 

 

18.2

 

 

38.1

 

 

39.5

 

Structured credit

 

 

41.0

 

 

54.5

 

 

76.2

 

 

97.9

 

Other accounts

 

 

1.0

 

 

0.8

 

 

2.1

 

 

1.4

Total SFG

 

 

112.1

 

 

128.2

 

 

212.8

 

 

246.0

Financial institutions (FIG)

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking

 

 

84.6

 

 

77.3

 

 

164.2

 

 

154.3

 

Insurance

 

 

28.1

 

 

32.9

 

 

57.1

 

 

61.2

 

Managed investments

 

 

9.5

 

 

7.2

 

 

13.5

 

 

12.9

 

Other accounts

 

 

3.0

 

 

3.2

 

 

6.2

 

 

6.5

Total FIG

 

 

125.2

 

 

120.6

 

 

241.0

 

 

234.9

Public, project and infrastructure finance (PPIF)

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance / sovereign

 

 

53.0

 

 

51.7

 

 

99.2

 

 

98.6

 

Project and infrastructure

 

 

55.6

 

 

56.4

 

 

102.1

 

 

102.7

Total PPIF

 

 

108.6

 

 

108.1

 

 

201.3

 

 

201.3

 

Total ratings revenue

 

 

733.3

 

 

747.9

 

 

1,397.9

 

 

1,462.8

MIS Other

 

 

5.1

 

 

4.4

 

 

10.6

 

 

9.4

 

Total external revenue

 

 

738.4

 

 

752.3

 

 

1,408.5

 

 

1,472.2

Intersegment royalty

 

 

33.0

 

 

30.6

 

 

65.3

 

 

60.4

 

Total MIS

 

 

771.4

 

 

782.9

 

 

1,473.8

 

 

1,532.6

MA:

 

 

 

 

 

 

 

 

 

 

 

 

Research, data and analytics (RD&A) (3)

 

 

315.3

 

 

275.9

 

 

623.0

 

 

543.0

Enterprise risk solutions (ERS) (3)

 

 

117.7

 

 

109.5

 

 

239.6

 

 

211.7

Professional services (PS)

 

 

42.2

 

 

37.4

 

 

84.6

 

 

74.9

 

Total external revenue

 

 

475.2

 

 

422.8

 

 

947.2

 

 

829.6

Intersegment revenue

 

 

2.2

 

 

2.4

 

 

4.6

 

 

7.4

 

Total MA

 

 

477.4

 

 

425.2

 

 

951.8

 

 

837.0

Eliminations

 

 

(35.2)

 

 

(33.0)

 

 

(69.9)

 

 

(67.8)

Total MCO

 

$

1,213.6

 

$

1,175.1

 

$

2,355.7

 

$

2,301.8

(1) Pursuant to certain organizational realignments in the first half of 2019, MIS now reports revenue from REITs, which was previously classified in the SFG LOB, as a component of the CFG LOB. The amounts reclassified were not material and prior year revenue by LOB has been reclassified to conform to this new presentation.

(2) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs such as commercial paper, medium term notes, and ICRA corporate finance revenue.

(3) Pursuant to organizational/product realignments in the first half of 2019, revenue relating to the Bureau van Dijk FACT product, a credit assessment and origination software solution, is now reported in the ERS LOB. This revenue was previously reported in the RD&A LOB. Prior year revenue by LOB has been reclassified to conform to this new presentation, and the amounts reclassified were not material.

The following table presents the Company’s revenues disaggregated by LOB and geographic area:

 

 

 

Three Months Ended June 30, 2019

 

Three Months Ended June 30, 2018

 

 

 

U.S.

 

Non-U.S.

 

Total

 

U.S.

 

Non-U.S.

 

Total

MIS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate finance (CFG) (1)

 

$

242.6

 

$

144.8

 

$

387.4

 

$

255.2

 

$

135.8

 

$

391.0

Structured finance (SFG) (1)

 

 

71.9

 

 

40.2

 

 

112.1

 

 

80.4

 

 

47.8

 

 

128.2

Financial institutions (FIG)

 

 

52.2

 

 

73.0

 

 

125.2

 

 

54.4

 

 

66.2

 

 

120.6

Public, project and infrastructure finance (PPIF)

 

 

69.4

 

 

39.2

 

 

108.6

 

 

61.1

 

 

47.0

 

 

108.1

 

Total ratings revenue

 

 

436.1

 

 

297.2

 

 

733.3

 

 

451.1

 

 

296.8

 

 

747.9

MIS Other

 

 

0.1

 

 

5.0

 

 

5.1

 

 

0.1

 

 

4.3

 

 

4.4

 

Total MIS

 

 

436.2

 

 

302.2

 

 

738.4

 

 

451.2

 

 

301.1

 

 

752.3

MA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research, data and analytics (RD&A) (2)

 

 

137.8

 

 

177.5

 

 

315.3

 

 

118.2

 

 

157.7

 

 

275.9

Enterprise risk solutions (ERS) (2)

 

 

46.1

 

 

71.6

 

 

117.7

 

 

42.6

 

 

66.9

 

 

109.5

Professional services (PS)

 

 

17.8

 

 

24.4

 

 

42.2

 

 

13.4

 

 

24.0

 

 

37.4

 

Total MA

 

 

201.7

 

 

273.5

 

 

475.2

 

 

174.2

 

 

248.6

 

 

422.8

Total MCO

 

$

637.9

 

$

575.7

 

$

1,213.6

 

$

625.4

 

$

549.7

 

$

1,175.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

Six Months Ended June 30, 2018

 

 

 

U.S.

 

Non-U.S.

 

Total

 

U.S.

 

Non-U.S.

 

Total

MIS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate finance (CFG) (1)

 

$

485.2

 

$

257.6

 

$

742.8

 

$

512.5

 

$

268.1

 

$

780.6

Structured finance (SFG) (1)

 

 

134.1

 

 

78.7

 

 

212.8

 

 

154.4

 

 

91.6

 

 

246.0

Financial institutions (FIG)

 

 

98.2

 

 

142.8

 

 

241.0

 

 

102.9

 

 

132.0

 

 

234.9

Public, project and infrastructure finance (PPIF)

 

 

129.6

 

 

71.7

 

 

201.3

 

 

114.5

 

 

86.8

 

 

201.3

 

Total ratings revenue

 

 

847.1

 

 

550.8

 

 

1,397.9

 

 

884.3

 

 

578.5

 

 

1,462.8

MIS Other

 

 

0.3

 

 

10.3

 

 

10.6

 

 

0.3

 

 

9.1

 

 

9.4

 

Total MIS

 

 

847.4

 

 

561.1

 

 

1,408.5

 

 

884.6

 

 

587.6

 

 

1,472.2

MA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research, data and analytics (RD&A) (2)

 

 

272.6

 

 

350.4

 

 

623.0

 

 

230.8

 

 

312.2

 

 

543.0

Enterprise risk solutions (ERS) (2)

 

 

94.5

 

 

145.1

 

 

239.6

 

 

81.1

 

 

130.6

 

 

211.7

Professional services (PS)

 

 

35.5

 

 

49.1

 

 

84.6

 

 

26.6

 

 

48.3

 

 

74.9

 

Total MA

 

 

402.6

 

 

544.6

 

 

947.2

 

 

338.5

 

 

491.1

 

 

829.6

Total MCO

 

$

1,250.0

 

$

1,105.7

 

$

2,355.7

 

$

1,223.1

 

$

1,078.7

 

$

2,301.8

(1) Pursuant to certain organizational realignments in the first quarter of 2019, MIS now reports revenue from REITs, which was previously classified in the SFG LOB, as a component of the CFG LOB. The amounts reclassified were not material and prior year revenue by LOB has been reclassified to conform to this new presentation.

(2) Pursuant to organizational/product realignments in the first quarter of 2019, revenue relating to the Bureau van Dijk FACT product, a credit assessment and origination software solution, is now reported in the ERS LOB. This revenue was previously reported in the RD&A LOB. Prior year revenue by LOB has been reclassified to conform to this new presentation, and the amounts reclassified were not material.

The following table presents the Company’s reportable segment revenues disaggregated by segment and geographic region:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2019

 

2018

 

2019

 

2018

MIS:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

436.2

 

$

451.2

 

$

847.4

 

$

884.6

 

Non-U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

 

178.3

 

 

181.1

 

 

326.8

 

 

362.2

 

Asia-Pacific

 

 

83.9

 

 

79.6

 

 

162.8

 

 

152.2

 

Americas

 

 

40.0

 

 

40.4

 

 

71.5

 

 

73.2

 

Total Non-U.S.

 

 

302.2

 

 

301.1

 

 

561.1

 

 

587.6

 

Total MIS

 

 

738.4

 

 

752.3

 

 

1,408.5

 

 

1,472.2

MA:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

201.7

 

 

174.2

 

 

402.6

 

 

338.5

 

Non-U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

 

184.4

 

 

175.0

 

 

368.5

 

 

341.2

 

Asia-Pacific

 

 

56.9

 

 

44.1

 

 

110.2

 

 

91.7

 

Americas

 

 

32.2

 

 

29.5

 

 

65.9

 

 

58.2

 

Total Non-U.S.

 

 

273.5

 

 

248.6

 

 

544.6

 

 

491.1

 

Total MA

 

 

475.2

 

 

422.8

 

 

947.2

 

 

829.6

 

Total MCO

 

$

1,213.6

 

$

1,175.1

 

$