MOODYS CORP /DE/, 10-Q filed on 4/29/2021
Quarterly Report
v3.21.1
Cover Page
shares in Millions
3 Months Ended
Mar. 31, 2021
shares
Entity Information [Line Items]  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Mar. 31, 2021
Document Transition Report false
Entity File Number 1-14037
Entity Registrant Name Moody’s Corporation
Entity Incorporation, State or Country Code DE
Entity Tax Identification Number 13-3998945
Entity Address, Address Line One 7 World Trade Center at 250 Greenwich Street
Entity Address, City or Town New York
Entity Address, State or Province NY
Entity Address, Postal Zip Code 10007
City Area Code (212)
Local Phone Number 553-0300
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Large Accelerated Filer
Entity Small Business false
Entity Emerging Growth Company false
Entity Shell Company false
Entity Common Stock, Shares Outstanding (in shares) 187.2
Entity Central Index Key 0001059556
Document Fiscal Period Focus Q1
Amendment Flag false
Current Fiscal Year End Date --12-31
Document Fiscal Year Focus 2021
Common Stock, par value $0.01 per share  
Entity Information [Line Items]  
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol MCO
Security Exchange Name NYSE
1.75% Senior Notes Due 2027  
Entity Information [Line Items]  
Title of 12(b) Security 1.75% Senior Notes Due 2027
Trading Symbol MCO 27
Security Exchange Name NYSE
0.950% Senior Notes Due 2030  
Entity Information [Line Items]  
Title of 12(b) Security 0.950% Senior Notes Due 2030
Trading Symbol MCO 30
Security Exchange Name NYSE
v3.21.1
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Revenue $ 1,600 $ 1,290
Expenses    
Operating 393 340
Selling, general and administrative 293 301
Depreciation and amortization 59 49
Restructuring 2 (1)
Loss pursuant to the divestiture of MAKS 0 9
Total expenses 747 698
Operating income 853 592
Non-operating (expense) income, net    
Interest expense, net (7) (40)
Other non-operating income, net 16 12
Total non-operating (expense) income, net 9 (28)
Income before provisions for income taxes 862 564
Provision for income taxes 126 77
Net income 736 487
Less: Net income (loss) attributable to noncontrolling interests 0 (1)
Net income attributable to Moody's $ 736 $ 488
Earnings per share attributable to Moody's common shareholders    
Basic (in usd per share) $ 3.93 $ 2.60
Diluted (in usd per share) $ 3.90 $ 2.57
Weighted average number of shares outstanding    
Basic (in shares) 187.2 187.5
Diluted (in shares) 188.6 189.6
v3.21.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement of Comprehensive Income [Abstract]    
Net Income $ 736 $ 487
Other Comprehensive Income (loss):    
Foreign currency translation adjustment - Pre Tax (147) (175)
Foreign currency translation adjustments - Tax 6 5
Foreign currency translation adjustments - Net of Tax (141) (170)
Net gains (losses) on net investment hedges - Pre Tax 175 119
Net gains (losses) on net investment hedges, Tax (42) (30)
Net gains (losses) on net investment hedges, Net of Tax 133 89
Net investment hedges - reclassification of gains included in net income - Pre Tax (1) 0
Net investment hedges - reclassification of gains included in net income - Tax 0 0
Net investment hedges - reclassification of gains included in net income - Net of Tax (1) 0
Cash Flow Hedges:    
Net realized and unrealized (losses) gains on cash flow hedges - Pre Tax 0 (48)
Net realized and unrealized (losses) gains on cash flow hedges - Tax 0 12
Net realized and unrealized (losses) gains on cash flow hedges - Net of Tax 0 (36)
Reclassification of losses (gains) included in net income - Pre Tax 1 1
Reclassification of losses (gains) included in net income - Tax 0 0
Reclassification of losses (gains) included in net income - Net of Tax 1 1
Pension and Other Retirement Benefits:    
Amortization of actuarial losses and prior service costs included in net income - Pre Tax 3 2
Amortization of actuarial losses and prior service costs included in net income - Tax (1) (1)
Amortization of actuarial losses and prior service costs included in net income - Net of Tax 2 1
Net actuarial (losses) gains and prior service costs - Pre Tax 0 (1)
Net actuarial (losses) gains and prior service costs - Tax 0 0
Net actuarial (losses) gains and prior service costs - Net of Tax 0 (1)
Total other comprehensive income (loss) - Pre Tax 31 (102)
Total other comprehensive income (loss) - Tax (37) (14)
Total other comprehensive income (loss) - Net of Tax (6) (116)
Comprehensive income 730 371
Less: comprehensive income (loss) attributable to noncontrolling interests 2 (2)
Comprehensive Income Attributable to Moody's $ 728 $ 373
v3.21.1
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 2,769 $ 2,597
Short-term investments 96 99
Accounts receivable, net of allowance for credit losses of $31 in 2021 and $34 in 2020 1,497 1,430
Other current assets 333 383
Total current assets 4,695 4,509
Property and equipment, net of accumulated depreciation of $946 in 2021 and $928 in 2020 269 278
Operating lease right-of-use assets 375 393
Goodwill 4,566 4,556
Intangible assets, net 1,810 1,824
Deferred tax assets, net 240 334
Other assets 545 515
Total assets 12,500 12,409
Current liabilities:    
Accounts payable and accrued liabilities 828 1,039
Current portion of operating lease liabilities 94 94
Deferred revenue 1,232 1,089
Total current liabilities 2,154 2,222
Non-current portion of deferred revenue 96 98
Long-term debt 6,340 6,422
Deferred tax liabilities, net 404 404
Uncertain tax positions 402 483
Operating lease liabilities 406 427
Other liabilities 473 590
Total liabilities 10,275 10,646
Contingencies
Shareholders' equity:    
Preferred stock, par value $0.01 per share; 10,000,000 shares authorized; no shares issued and outstanding 0 0
Common stock 3 3
Capital surplus 739 735
Retained earnings 11,632 11,011
Treasury stock, at cost; 155,737,071 and 155,808,563 shares of common stock at March 31, 2021 and December 31, 2020 (9,904) (9,748)
Accumulated other comprehensive loss (440) (432)
Total Moody's shareholders' equity 2,030 1,569
Noncontrolling interests 195 194
Total shareholders' equity 2,225 1,763
Total liabilities, noncontrolling interests and shareholders' equity 12,500 12,409
Series Common Stock    
Shareholders' equity:    
Common stock $ 0 $ 0
v3.21.1
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
Accounts receivable, allowances $ 31 $ 34
Accumulated depreciation, property and equipment $ 946 $ 928
Preferred stock, par value (in usd per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock, shares issued (in shares) 342,902,272 342,902,272
Treasury stock, shares (in shares) 155,737,071 155,808,563
Series Common Stock    
Common stock, par value (in usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 10,000,000 10,000,000
Common stock, shares issued (in shares) 0 0
Common stock, shares outstanding (in shares) 0 0
v3.21.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities    
Net Income $ 736 $ 487
Reconciliation of net income to net cash provided by operating activities:    
Depreciation and amortization 59 49
Stock-based compensation 45 37
Deferred income taxes 44 57
Loss pursuant to the divestiture of MAKS 0 9
Changes in assets and liabilities:    
Accounts receivable (71) (7)
Other current assets 67 (38)
Other assets (30) 2
Accounts payable and accrued liabilities (206) (198)
Deferred revenue 146 64
Unrecognized tax benefits and other non-current tax liabilities (78) (18)
Other liabilities (36) (99)
Net cash provided by operating activities 676 345
Cash flows from investing activities    
Capital additions (14) (21)
Purchases of investments (65) (78)
Sales and maturities of investments 45 23
Cash paid for acquisitions, net of cash acquired (138) (696)
Receipts from settlements of net investment hedges 1 0
Payments for settlements of net investment hedges (23) 0
Net cash used in investing activities (194) (772)
Cash flows from financing activities    
Issuance of notes 0 700
Issuance of commercial paper 0 789
Repayment of commercial paper 0 (305)
Proceeds from stock-based compensation plans 9 16
Repurchase of shares related to stock-based compensation (51) (71)
Treasury shares (132) (253)
Dividends (116) (105)
Debt issuance costs, extinguishment costs and related fees 0 (6)
Net cash (used in) provided by financing activities (290) 765
Effect of exchange rate changes on cash and cash equivalents (20) (29)
Increase in cash and cash equivalents 172 309
Cash and cash equivalents, beginning of period 2,597 1,832
Cash and cash equivalents, end of period $ 2,769 $ 2,141
v3.21.1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Loss
Total Moody's Shareholders' Equity
Non- Controlling Interests
Cumulative Effect, Period of Adoption, Adjustment
Cumulative Effect, Period of Adoption, Adjustment
Retained Earnings
Cumulative Effect, Period of Adoption, Adjustment
Total Moody's Shareholders' Equity
Beginning Balance (in shares) at Dec. 31, 2019   342.9     155.2            
Beginning Balance at Dec. 31, 2019 $ 831 $ 3 $ 642 $ 9,656 $ (9,250) $ (439) $ 612 $ 219 $ (2) $ (2) $ (2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income 487     488     488 (1)      
Dividends (101)     (101)     (101) 0      
Stock-based compensation 37   37       37        
Shares issued for stock-based compensation plans at average cost, net (in shares)         0.9            
Shares issued for stock-based compensation plans at average cost, net (84)   (63)   $ (21)   (84)        
Treasury shares repurchased (in shares)         (1.1)            
Treasury shares repurchased (253)       $ (253)   (253)        
Currency translation adjustment, net of net investment hedge activity (net of tax) (81)         (80) (80) (1)      
Net actuarial gains and prior service cost (1)         (1) (1)        
Amortization of prior service costs and actuarial losses 1         1 1        
Net realized and unrealized gain (loss) on cash flow hedges (net of tax) (35)         (35) (35)        
Ending Balance (in shares) at Mar. 31, 2020   342.9     155.4            
Ending Balance at Mar. 31, 2020 799 $ 3 616 10,041 $ (9,524) (554) 582 217      
Beginning Balance (in shares) at Dec. 31, 2020   342.9     155.8            
Beginning Balance at Dec. 31, 2020 1,763 $ 3 735 11,011 $ (9,748) (432) 1,569 194      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                      
Net income 736     736     736 0      
Dividends (116)     (115)     (115) (1)      
Stock-based compensation 45   45       45        
Shares issued for stock-based compensation plans at average cost, net (in shares)         0.6            
Shares issued for stock-based compensation plans at average cost, net (65)   (41)   $ (24)   (65)        
Treasury shares repurchased (in shares)         (0.5)            
Treasury shares repurchased (132)       $ (132)   (132)        
Currency translation adjustment, net of net investment hedge activity (net of tax) (9)         (11) (11) 2      
Net actuarial gains and prior service cost 0                    
Amortization of prior service costs and actuarial losses 2         2 2        
Net realized and unrealized gain (loss) on cash flow hedges (net of tax) 1         1 1        
Ending Balance (in shares) at Mar. 31, 2021   342.9     155.7            
Ending Balance at Mar. 31, 2021 $ 2,225 $ 3 $ 739 $ 11,632 $ (9,904) $ (440) $ 2,030 $ 195      
v3.21.1
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement of Stockholders' Equity [Abstract]    
Dividends (in USD per share) $ 0.62 $ 0.56
Currency translation adjustment, net of net investment hedge activity, tax expense (benefit) $ 36 $ 25
Amortization of prior service costs and actuarial losses, tax expense (benefit) $ 1 1
Net realized and unrealized gain on cash flow hedges, tax expense (benefit)   $ 12
v3.21.1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Moody’s is a global integrated risk assessment firm that empowers organizations and investors to make better decisions. Moody’s reports in two reportable segments: MIS and MA.
MIS publishes credit ratings and provides assessment services 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, revenue from providing ESG research, data and assessments and 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 is a global provider of data and analytic solutions which help companies make better and faster decisions. MA’s analytic models, industry insights, software tools and proprietary data assets allow companies to inform and perform many critical business activities with trust and confidence. MA’s approach to aggregating, broadening and deepening available data, research, analytic tools and software solutions fosters a more integrated and efficient delivery to MA's customers resulting in better decisions around risks and opportunities.
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 2020 annual report on Form 10-K filed with the SEC on February 22, 2021. 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, 2021, the Company adopted ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments”. This ASU clarifies and improves guidance related to the recently issued standards updates on credit losses, hedging, and recognition and measurement of financial instruments. The Company adopted this ASU prospectively and it did not have a material impact on the Company's current financial statements.
On January 1, 2021, the Company adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic 740, Income Taxes, and clarifies certain aspects of the existing guidance to promote consistency among reporting entities. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted this ASU prospectively and it did not have a material impact on the Company's current financial statements.
Recently Issued Accounting Standards
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of the original guidance, ASU No. 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU No. 2020-04"), issued in March 2020. ASU No. 2020-04 provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. Both ASU's were effective upon issuance, and the Company may elect to apply the amendments prospectively through December 31, 2022 as the transition from LIBOR is completed.
COVID-19
The COVID-19 pandemic has not had a material adverse impact on the Company's reported results to date and is currently not expected to have a material adverse impact on its near-term outlook. However, Moody's is unable to predict the longer-term impact that the pandemic may have on its business, future results of operations, financial position or cash flows due to numerous uncertainties.
v3.21.1
REVENUES
3 Months Ended
Mar. 31, 2021
Revenue from Contract with Customer [Abstract]  
REVENUES REVENUES
Revenue by Category
The following table presents the Company’s revenues disaggregated by LOB:
Three Months Ended
March 31,
20212020
MIS:
Corporate finance (CFG)
Investment-grade$134 $144 
High-yield141 75 
Bank loans180 89 
Other accounts (1)
150 145 
Total CFG605 453 
Financial institutions (FIG)
Banking109 86 
Insurance43 30 
Managed investments8 
Other accounts2 
Total FIG162 125 
Public, project and infrastructure finance (PPIF)
Public finance / sovereign67 57 
Project and infrastructure76 52 
Total PPIF143 109 
Structured finance (SFG)
Asset-backed securities26 22 
RMBS27 27 
CMBS24 17 
Structured credit38 29 
Other accounts1 
Total SFG116 96 
Total ratings revenue1,026 783 
MIS Other10 11 
Total external revenue1,036 794 
Intersegment revenue40 37 
Total MIS1,076 831 
MA:
Research, data and analytics (RD&A) 419 358 
Enterprise risk solutions (ERS)
145 138 
Total external revenue564 496 
Intersegment revenue2 
Total MA566 498 
Eliminations(42)(39)
Total MCO$1,600 $1,290 
(1) 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.
The following table presents the Company’s revenues disaggregated by LOB and geographic area:

Three Months Ended March 31, 2021Three Months Ended March 31, 2020
U.S.Non-U.STotalU.S.Non-U.STotal
MIS:
Corporate finance (CFG)
$414 $191 $605 $314 $139 $453 
Financial institutions (FIG)86 76 162 60 65 125 
Public, project and infrastructure finance (PPIF)78 65 143 68 41 109 
Structured finance (SFG) 68 48 116 61 35 96 
Total ratings revenue646 380 1,026 503 280 783 
MIS Other1 9 10 — 11 11 
Total MIS647 389 1,036 503 291 794 
MA:
Research, data and analytics (RD&A) 183 236 419 158 200 358 
Enterprise risk solutions (ERS)
55 90 145 53 85 138 
Total MA238 326 564 211 285 496 
Total MCO$885 $715 $1,600 $714 $576 $1,290 

The following table presents the Company’s reportable segment revenues disaggregated by segment and geographic region:
Three Months Ended
March 31,
20212020
MIS:
U.S.$647 $503 
Non-U.S.:
EMEA248 171 
Asia-Pacific97 81 
Americas44 39 
Total Non-U.S.389 291 
Total MIS1,036 794 
MA:
U.S.238 211 
Non-U.S.:
EMEA230 192 
Asia-Pacific59 55 
Americas37 38 
Total Non-U.S.326 285 
Total MA564 496 
Total MCO$1,600 $1,290 
The following tables summarize the split between transaction and relationship revenue. In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while relationship revenue represents the 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. In MIS Other, transaction revenue represents revenue from professional services and relationship revenue represents subscription-based revenues. In the MA segment, relationship revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in MA represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, and training and certification services.

Three Months Ended March 31,
20212020
TransactionRelationshipTotalTransactionRelationshipTotal
Corporate Finance$487 $118 $605 $338 $115 $453 
80 %20 %100 %75 %25 %100 %
Financial Institutions$90 $72 $162 $60 $65 $125 
56 %44 %100 %48 %52 %100 %
Public, Project and Infrastructure Finance$100 $43 $143 $69 $40 $109 
70 %30 %100 %63 %37 %100 %
Structured Finance$66 $50 $116 $50 $46 $96 
57 %43 %100 %52 %48 %100 %
MIS Other$2 $8 $10 $$$11 
20 %80 %100 %18 %82 %100 %
Total MIS$745 $291 $1,036 $519 $275 $794 
72 %28 %100 %65 %35 %100 %
Research, data and analytics$20 $399 $419 $18 $340 $358 
5 %95 %100 %%95 %100 %
Enterprise risk solutions$23 $122 $145 $32 $106 $138 
16 %84 %100 %23 %77 %100 %
Total MA$43 
(1)
$521 $564 $50 
(1)
$446 $496 
8 %92 %100 %10 %90 %100 %
Total Moody's Corporation$788 $812 $1,600 $569 $721 $1,290 
49 %51 %100 %44 %56 %100 %
(1) Revenue from software implementation services and risk management advisory projects, while classified by management as transactional revenue, is recognized over time under the Revenue Accounting Standard (please also refer to the following table).
The following table presents the timing of revenue recognition:

Three Months Ended March 31, 2021Three Months Ended March 31, 2020
MISMATotalMISMATotal
Revenue recognized at a point in time$745 $29 $774 $519 $39 $558 
Revenue recognized over time291 535 826 275 457 732 
Total$1,036 $564 $1,600 $794 $496 $1,290 

Unbilled receivables, deferred revenue and remaining performance obligations
Unbilled receivables
At March 31, 2021 and December 31, 2020, accounts receivable, net included $452 million and $361 million, respectively, of unbilled receivables, net related to the MIS segment. Certain MIS arrangements contain contractual terms whereby the customers are billed in arrears for annual monitoring services, requiring revenue to be accrued as an unbilled receivable as such services are provided.
In addition, for certain MA arrangements, the timing of when the Company has the unconditional right to consideration and recognizes revenue occurs prior to invoicing the customer. Consequently, at March 31, 2021 and December 31, 2020, accounts receivable, net included $88 million and $98 million, respectively, of unbilled receivables, net related to the MA segment.
Deferred revenue
The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in advance of when revenue related to that contract is recognized. This deferred revenue is relieved when the Company satisfies the related performance obligation and revenue is recognized.
Significant changes in the deferred revenue balances during the three months ended March 31, 2021 and 2020 are as follows:

Three Months Ended March 31, 2021Three Months Ended March 31, 2020
MISMATotalMISMATotal
Balance at December 31,$313 $874 $1,187 $322 $840 $1,162 
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue balance at the beginning of the period(96)(386)(482)(99)(336)(435)
Increases due to amounts billable excluding amounts recognized as revenue during the period174 452 626 161 343 504 
Increases due to acquisitions during the period 4 4 — 20 20 
Effect of exchange rate changes(3)(4)(7)(5)(24)(29)
Total changes in deferred revenue75 66 141 57 60 
Balance at March 31,$388 $940 $1,328 $379 $843 $1,222 
Deferred revenue - current$295 $937 $1,232 $275 $838 1,113 
Deferred revenue - noncurrent$93 $3 $96 $104 $109 


The increase in deferred revenue during both the three months ended March 31, 2021 and 2020 is primarily due to the significant portion of contract renewals that occur during the first quarter within both segments.
Remaining performance obligations
Remaining performance obligations in the MIS segment largely reflect deferred revenue related to monitoring fees for certain structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in advance. As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $120 million. The Company expects to recognize into revenue approximately 20% of this balance within one year, approximately 50% of this balance between one to five years and the remaining amount thereafter. With respect to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC Topic 606 permitting the omission from the amounts stated above relating to unsatisfied performance obligations for contracts with an original expected length of one year or less.
Remaining performance obligations in the MA segment include both amounts recorded as deferred revenue on the balance sheet as of March 31, 2021 as well as amounts not yet invoiced to customers as of March 31, 2021, largely reflecting future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $2.3 billion. The Company expects to recognize into revenue approximately 65% of this balance within one year, approximately 20% of this balance between one to two years and the remaining amount thereafter.
v3.21.1
STOCK-BASED COMPENSATION
3 Months Ended
Mar. 31, 2021
Share-based Payment Arrangement, Noncash Expense [Abstract]  
STOCK-BASED COMPENSATION STOCK-BASED COMPENSATION
Presented below is a summary of the stock-based compensation cost and associated tax benefit included in the accompanying consolidated statements of operations:
Three Months Ended
March 31,
20212020
Stock-based compensation cost$45 $37 
Tax benefit$11 $
During the first three months of 2021, the Company granted 0.1 million employee stock options, which had a weighted average grant date fair value of $67.40 per share based on the Black-Scholes option-pricing model. The Company also granted 0.5 million shares of restricted stock in the first three months of 2021, which had a weighted average grant date fair value of $276.86 per share. Both the employee stock options and restricted stock generally vest ratably over four years. Additionally, the Company granted 0.1 million shares of performance-based awards whereby the number of shares that ultimately vest are based on the achievement of certain non-market-based performance metrics of the Company over three years. The weighted average grant date fair value of these awards was $268.82 per share.
The following weighted average assumptions were used in determining the fair value for options granted in 2021:
Expected dividend yield0.90 %
Expected stock volatility28 %
Risk-free interest rate0.82 %
Expected holding period5.6 years
Unrecognized stock-based compensation expense at March 31, 2021 was $12 million and $265 million for stock options and unvested restricted stock, respectively, which is expected to be recognized over a weighted average period of 2.6 years and 2.7 years, respectively. Additionally, there was $41 million of unrecognized stock-based compensation expense relating to the aforementioned non-market-based performance-based awards, which is expected to be recognized over a weighted average period of 2.3 years.
The following tables summarize information relating to stock option exercises and restricted stock vesting:
Three Months Ended
March 31,
2021
2020
Exercise of stock options:
Proceeds from stock option exercises$6 $13 
Aggregate intrinsic value$9 $46 
Tax benefit realized upon exercise$2 $11 
Number of shares exercised0.1 0.2 
Vesting of restricted stock:
Fair value of shares vested$178 $191 
Tax benefit realized upon vesting$41 $44 
Number of shares vested0.6 0.8 
Vesting of performance-based restricted stock:
Fair value of shares vested$29 $70 
Tax benefit realized upon vesting$6 $17 
Number of shares vested0.1 0.3 
v3.21.1
INCOME TAXES
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Moody’s ETR was 14.6% and 13.7% for the three months ended March 31, 2021 and 2020, respectively. The increase in the ETR for the three months ended March 31, 2021 was primarily due to higher pretax income, which diluted the impact of the tax benefits discussed below that were recognized during the first quarter of 2021. The Company’s year to date tax expense differs from the tax computed by applying its estimated annual effective tax rate to the year-to-date pre-tax earnings primarily due to Excess Tax Benefits from stock compensation of $19 million and net reductions in UTPs of $61 million related to a settlement and a lapse of a statute of limitations.
The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating (expense) income, net. The Company had a decrease in its UTPs of $81 million ($71 million, net of federal tax) during the first quarter of 2021, which primarily related to the aforementioned resolution of uncertain tax positions. The Company also reversed $40 million in accrued interest in connection with these matters in the first quarter of 2021.
Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. The Company’s U.S. federal income tax return for 2019 remains open to examination and 2017 and 2018 are currently under examination. The Company’s New York City tax return for 2014 through 2017 are currently under examination. The Company’s U.K. tax return for 2012 is currently under examination and its returns for 2013 through 2019 remain open to examination.
For ongoing audits, it is possible the balance of UTPs could decrease in the next twelve months as a result of the settlement of these audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax authorities which could necessitate increases to the balance of UTPs. As the Company is unable to predict the timing or outcome of these audits, it is therefore unable to estimate the amount of changes to the balance of UTPs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years by tax jurisdiction in accordance with the applicable provisions of Topic 740 of the ASC regarding UTPs.
The following table shows the amount the Company paid for income taxes:
Three Months Ended March 31,
20212020
Income taxes paid $68 $29 
v3.21.1
WEIGHTED AVERAGE SHARES OUTSTANDING
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
WEIGHTED AVERAGE SHARES OUTSTANDING WEIGHTED AVERAGE SHARES OUTSTANDING
Below is a reconciliation of basic to diluted shares outstanding:
Three Months Ended March 31,
20212020
Basic187.2 187.5 
Dilutive effect of shares issuable under stock-based compensation plans1.4 2.1 
Diluted188.6 189.6 
Anti-dilutive options to purchase common shares and restricted stock as well as contingently issuable restricted stock which are excluded from the table above0.3 0.3 
The calculation of diluted EPS requires certain assumptions regarding the use of both cash proceeds and assumed proceeds that would be received upon the exercise of stock options and vesting of restricted stock outstanding as of March 31, 2021 and 2020.
v3.21.1
CASH EQUIVALENTS AND INVESTMENTS
3 Months Ended
Mar. 31, 2021
Cash and Cash Equivalents [Abstract]  
CASH EQUIVALENTS AND INVESTMENTS CASH EQUIVALENTS AND INVESTMENTS
The table below provides additional information on the Company’s cash equivalents and investments:
As of March 31, 2021
Balance sheet location
CostGains/(Losses)Fair ValueCash and cash equivalentsShort-term
investments
Other
assets
Certificates of deposit and money market deposit accounts (1)
$1,639 $ $1,639 $1,531 $96 $12 
Mutual funds$49 $6 $55 $ $ $55 

As of December 31, 2020
Balance sheet location

Cost
Gains/(Losses)
Fair Value
Cash and cash
equivalents
Short-term
investments
Other
assets
Certificates of deposit and money market deposit accounts (1)
$1,430 $— $1,430 $1,325 $99 $
Mutual funds$54 $$60 $— $— $60 
(1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities for the certificates of deposits classified as short-term investments were one month to 12 months at both March 31, 2021 and December 31, 2020. The remaining contractual maturities for the certificates of deposits classified in other assets are 13 months to 23 months at both March 31, 2021 and December 31, 2020. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.
In addition, the Company invested in Corporate-Owned Life Insurance (COLI) in the first quarter of 2020. As of March 31, 2021 and December 31, 2020, the contract value of the COLI was $33 million and $17 million, respectively.
v3.21.1
ACQUISITIONS
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
ACQUISITIONS ACQUISITIONS
The business combinations described below are accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized at fair value on the date of the transaction. Any excess of the purchase price over the fair value of the assets acquired and liabilities assumed was recorded to goodwill. Goodwill typically results through expected synergies from combining operations of an acquiree and an acquirer, anticipated new customer acquisition and products, as well as from intangible assets that do not qualify for separate recognition.
Cortera
On March 19, 2021, the Company acquired 100% of Cortera, a provider of North American credit data and workflow solutions.
The table below details the total consideration relating to the acquisition:
Cash paid at closing $138 
Additional consideration to be paid to sellers in 2021 (1)
Total consideration$139 
(1) Represents additional consideration to be paid to the sellers following finalization of customary post-closing completion adjustments.
Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:
Current assets$
Intangible assets:
Database (10 year useful life)
$38 
Customer relationships (18 year useful life)
Product technology (8 year useful life)
Trade name (5 year useful life)
Total intangible assets (11 year weighted average useful life)
57 
Goodwill95 
Other assets
Liabilities:
Accounts payable and accrued liabilities$(1)
Deferred revenue(4)
Deferred tax liabilities(15)
Other liabilities(2)
Total liabilities(22)
Net assets acquired$139 
The Company has performed a preliminary valuation analysis of the fair market value of assets and liabilities of the Cortera business. The final purchase price allocation will be determined when the Company has completed and fully reviewed the detailed valuations. The final allocation could differ materially from the preliminary allocation. The final allocation may include changes in allocations to acquired intangible assets as well as goodwill and other changes to assets and liabilities including reserves for UTPs and deferred tax liabilities. The estimated useful lives of acquired intangibles assets are also preliminary.
Current assets in the table above include acquired cash of $4 million and accounts receivable of approximately $2 million.
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary risk assessment products of the Company and Cortera, which is expected to extend the Company’s reach to new and evolving market segments as well as cost savings synergies, expected new customer acquisitions and products.
Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes.
At the date of the filing of this quarterly report on Form 10-Q, the Company has not completed the assignment of goodwill from this acquisition to its reporting units.
Transaction costs
Transaction costs directly related to the Cortera acquisition were not material.
RDC
On February 13, 2020, the Company acquired 100% of RDC, a provider of anti-money laundering and know-your-customer data and due diligence services.
The table below details the total consideration relating to the acquisition:
Cash paid at closing $700 
Additional consideration paid to sellers in 2020 (1)
Total consideration$702 
(1) Represents additional consideration paid to the sellers following finalization of customary post-closing completion adjustments.
Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of acquisition:
Current assets$24 
Intangible assets:
Customer relationships (25 year useful life)
$174 
Database (10 year useful life)
86 
Product technology (4 year useful life)
17 
Trade name (3 year useful life)
Total intangible assets (19 year weighted average life)
280 
Goodwill494 
Other assets
Liabilities:
Accounts payable and accrued liabilities$(5)
Deferred revenue(20)
Deferred tax liabilities(71)
Other liabilities(2)
Total liabilities(98)
Net assets acquired$702 
Current assets in the table above include acquired cash of $6 million and accounts receivable of approximately $14 million.
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary product portfolios of the Company and RDC, which is expected to extend the Company’s reach to new and evolving market segments as well as cost savings synergies, expected new customer acquisitions and products.
Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes.
RDC is a component of the Bureau van Dijk reporting unit for purposes of the Company’s annual goodwill impairment assessment.
Transaction costs
Transaction costs directly related to the RDC acquisition were not material.
v3.21.1
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
3 Months Ended
Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates. Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for speculative purposes.
Derivatives and non-derivative instruments designated as accounting hedges:
Fair Value Hedges
Interest Rate Swaps
The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR and 6-month LIBOR. The purpose of these hedges is to mitigate the risk associated with changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the fair value of the swaps and the underlying hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest expense, net in the Company’s consolidated statement of operations.
The following table summarizes the Company’s interest rate swaps designated as fair value hedges:
Notional Amount
Hedged ItemNature of SwapAs of March 31,
2021
As of December 31,
2020
Floating Interest Rate
2012 Senior Notes due 2022Pay Floating/Receive Fixed$330 $330 3-month USD LIBOR
2017 Senior Notes due 2023Pay Floating/Receive Fixed$250 $250 3-month USD LIBOR
2017 Senior Notes due 2028Pay Floating/Receive Fixed$500 $500 3-month USD LIBOR
2020 Senior Notes due 2025Pay Floating/Receive Fixed$300 $300 6-month USD LIBOR
Total$1,380 $1,380 

Refer to Note 15 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of the above hedged items.
The following table summarizes the impact to the statement of operations of the Company’s interest rate swaps designated as fair value hedges:
Total amounts of financial statement line item presented in the statements of operations in which the effects of fair value hedges are recordedAmount of income/(loss) recognized in the consolidated statements of operations
Three Months Ended March 31,
20212020
Interest expense, net$(7)$(40)

Descriptions
Location on Consolidated Statements of Operations
Net interest settlements and accruals on interest rate swaps
Interest expense, net
$5 $
Fair value changes on interest rate swapsInterest expense, net$(24)$58 
Fair value changes on hedged debtInterest expense, net$24 $(58)

Net investment hedges
Debt designated as net investment hedges
The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due 2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless terminated early at the discretion of the Company.
Cross currency swaps designated as net investment hedges
The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information on the cross-currency swaps designated as net investment hedges under ASC Topic 815:
March 31, 2021
PayReceive
Nature of SwapNotional AmountWeighted Average Interest RateNotional AmountWeighted Average Interest Rate
Pay Fixed/Receive Fixed1,079 1.43%$1,220 3.96%
Pay Floating/Receive Floating959 Based on 3-month EURIBOR1,080 Based on 3-month USD LIBOR
Total2,038 $2,300 
December 31, 2020
PayReceive
Nature of SwapNotional AmountWeighted Average Interest RateNotional AmountWeighted Average Interest Rate
Pay Fixed/Receive Fixed1,079 1.43%$1,220 3.96%
Pay Floating/Receive Floating959 Based on 3-month EURIBOR1,080 Based on 3-month USD LIBOR
Total2,038 $2,300 
As of March 31, 2021 these hedges will expire and the notional amounts will be settled as follows unless terminated early at the discretion of the Company:
Years Ending December 31,
2021 (After March 31,)265 
2022438 
2023442 
2024443 
2026450