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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2020
Or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-14037
____________________
Moody’s Corporation
(Exact name of registrant as specified in its charter)
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Delaware | | | 13-3998945 |
(State of Incorporation) | | | (I.R.S. Employer Identification No.) |
7 World Trade Center at 250 Greenwich Street, New York, New York 10007
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code:
(212) 553-0300
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | | MCO | | New York Stock Exchange |
1.75% Senior Notes Due 2027 | | MCO 27 | | New York Stock Exchange |
0.950% Senior Notes Due 2030 | | MCO 30 | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months, or for such shorter period that the registrant was required to submit such files. Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer | ☑ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
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Shares Outstanding at March 31, 2020 |
187.5 million |
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| MOODY’S CORPORATION INDEX TO FORM 10-Q | |
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| Exhibits Filed Herewith | |
31.1 | | Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | | Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | | Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | | Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Definitions Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |
GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:
| | | | | |
TERM | DEFINITION |
ABS Suite | Business acquired by the Company in October 2019 which includes a software platform used by issuers and trustees for administration of asset-backed and mortgage-backed securities programs |
Acquisition-Related Amortization | Amortization of definite-lived intangible assets acquired by the Company from all business combination transactions |
Acquisition-Related Expenses | Consists 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 EPS | Diluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures” |
Adjusted Net Income | Net Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures” |
Adjusted Operating Income | Operating income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures” |
Adjusted Operating Margin | Adjusted Operating Income divided by revenue |
Americas | Represents countries within North and South America, excluding the U.S. |
AOCI | Accumulated other comprehensive income (loss); a separate component of shareholders’ equity |
ASC | The 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 |
Asia-Pacific | Represents Australia and countries in Asia including but not limited to: China, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand |
ASR | Accelerated Share Repurchase |
ASU | The 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 |
Board | The board of directors of the Company |
BPS | Basis points |
Bureau van Dijk | Bureau 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 |
| |
CFG | Corporate finance group; an LOB of MIS |
CLO | Collateralized loan obligation |
CMBS | Commercial mortgage-backed securities; an asset class within SFG |
COLI | Corporate-Owned Life Insurance |
Common Stock | The Company’s common stock |
Company | Moody’s Corporation and its subsidiaries; MCO; Moody’s |
Content | A 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 |
COVID-19 | An outbreak of a novel strain of coronavirus resulting in an international public health crisis and a global pandemic |
CP | Commercial Paper |
CP Program | A 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 |
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TERM | DEFINITION |
CRAs | Credit rating agencies |
DBPP | Defined benefit pension plans |
Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act |
EMEA | Represents countries within Europe, the Middle East and Africa |
EPS | Earnings per share |
ERS | The Enterprise Risk Solutions LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services |
ESG | Environmental, Social, and Governance |
ESMA | European Securities and Markets Authority |
ETR | Effective tax rate |
EU | European Union |
EUR | Euros |
EURIBOR | The Euro Interbank Offered Rate |
Excess Tax Benefits | The 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 Act | The Securities Exchange Act of 1934, as amended |
External Revenue | Revenue excluding any intersegment amounts |
FASB | Financial Accounting Standards Board |
FIG | Financial institutions group; an LOB of MIS |
Four Twenty Seven | A provider of data, intelligence, and analysis related to physical climate risks; acquired by the Company in July 2019 |
Free Cash Flow | Net cash provided by operating activities less cash paid for capital additions |
FX | Foreign exchange |
GAAP | U.S. Generally Accepted Accounting Principles |
GBP | British pounds |
ICRA | ICRA Limited; a provider of credit ratings and research in India. ICRA is a public company with its shares listed on the Bombay Stock Exchange and the National Stock Exchange of India. The Company previously held 28.5% equity ownership and in June 2014, increased that ownership stake to over 50% through the acquisition of additional shares |
IRS | Internal Revenue Service |
IT | Information technology |
| |
KIS Pricing | Korea Investors Service Pricing, Inc; a Korean provider of fixed income securities pricing and consolidated subsidiary of the Company |
KIS Research | Korea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company |
Korea | Republic of South Korea |
LIBOR | London Interbank Offered Rate |
LOB | Line of business |
MA | Moody’s Analytics - a reportable segment of MCO which 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 |
MAKS | Moody’s Analytics Knowledge Services; formerly known as Copal Amba; provides offshore research and analytic services to the global financial and corporate sectors; business was divested in the fourth quarter of 2019 and was formerly part of the PS LOB and a reporting unit within the MA reportable segment |
MALS | Moody’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 |
| | | | | |
TERM | DEFINITION |
MCO | Moody’s Corporation and its subsidiaries; the Company; Moody’s |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
MIS | Moody’s Investors Service - a reportable segment of MCO; consists of five LOBs - SFG, CFG, FIG, PPIF and MIS Other |
MIS Other | Consists of non-ratings revenue from ICRA, KIS Pricing, KIS Research and revenue from providing ESG research, data and assessments. These businesses are components of MIS; MIS Other is an LOB of MIS |
Moody’s | Moody’s Corporation and its subsidiaries; MCO; the Company |
Net Income | Net income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder |
New Credit Losses Accounting Standard | Updates to the ASC pursuant to ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This new accounting guidance requires the use of an “expected credit loss” impairment model for most financial assets reported at amortized cost, which will require entities to estimate expected credit losses over the lifetime of the instrument. |
New Internal Use Software Accounting Standard | Updates to the ASC pursuant to ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”. This new accounting guidance requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software. |
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 |
NM | Percentage change is not meaningful |
Non-GAAP | A 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 |
NRSRO | Nationally Recognized Statistical Rating Organization, which is a credit rating agency registered with the SEC. |
OCI | Other 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 |
Operating segment | Term 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 Plan | The U.S. retirement healthcare and U.S. retirement life insurance plans |
PPIF | Public, project and infrastructure finance; an LOB of MIS |
Profit Participation Plan | Defined contribution profit participation plan that covers substantially all U.S. employees of the Company |
| | | | | |
TERM | DEFINITION |
PS | Professional 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. Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB, will now be reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material. |
RD&A | 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 |
Redeemable Non-controlling Interest | Represents minority shareholders' interest in entities which are controlled but not wholly-owned by Moody's and for which Moody's obligation to redeem the minority shareholders' interest is represented by a put/call relationship |
Reform Act | Credit Rating Agency Reform Act of 2006 |
Regulatory DataCorp Inc. (RDC) | A global leader in risk and compliance intelligence; the Company acquired RDC in February 2020 |
Reis, Inc. (Reis) | A provider of U.S. commercial real estate data; acquired by the Company in October 2018 |
Relationship Revenue | For 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 unit | The 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 |
Retirement Plans | Moody’s funded and unfunded pension plans, the healthcare plans and life insurance plans |
RiskFirst | A company providing risk analytic solutions for the asset management and pension fund communities; acquired by the Company in July 2019 |
RMBS | Residential mortgage-backed securities; an asset class within SFG |
SEC | U.S. Securities and Exchange Commission |
| |
SFG | Structured finance group; an LOB of MIS |
SG&A | Selling, general and administrative expenses |
Tax Act | The “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 Debt | All indebtedness of the Company as reflected on the consolidated balance sheets |
Transaction Revenue | For 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 |
USD | U.S. dollar |
UTPs | Uncertain tax positions |
Vigeo Eiris | A provider of in ESG research, data and assessments; acquired by the Company on April 12, 2019 |
2012 Senior Notes | Principal amount of $500 million, 4.50% senior unsecured notes due in September 2022 |
2013 Senior Notes | Principal amount of the $500 million, 4.875% senior unsecured notes due in February 2024 |
2014 Senior Notes (30-Year) | Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044 |
2015 Senior Notes | Principal amount of €500 million, 1.75% senior unsecured notes due in March 2027 |
2017 Senior Notes Due 2023 | Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023 |
2017 Senior Notes Due 2028 | Principal amount of $500 million, 3.250% senior unsecured notes due January 15, 2028 |
| | | | | |
TERM | DEFINITION |
2017 Senior Notes Due 2021 | Principal amount of $500 million, 2.75% senior unsecured notes due in December 2021 |
2018 Facility | Five-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; backstops CP issued under the CP Program |
2018 Senior Notes | Principal 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 |
2019 Senior Notes | Principal amount of €750 million, 0.950% senior unsecured notes due February 25, 2030 |
2020 Senior Notes | Principal amount of $700 million, 3.75% senior unsecured notes due March 24, 2025 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in millions, except per share data)
| | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, | | |
| | | | | 2020 | | 2019 |
Revenue | | | | | $ | 1,290 | | | $ | 1,142 | |
Expenses | | | | | | | |
Operating | | | | | 340 | | | 342 | |
Selling, general and administrative | | | | | 301 | | | 281 | |
Restructuring | | | | | (1) | | | 6 | |
Depreciation and amortization | | | | | 49 | | | 50 | |
Acquisition-Related Expenses | | | | | — | | | 1 | |
Loss pursuant to the divestiture of MAKS | | | | | 9 | | | — | |
Total expenses | | | | | 698 | | | 680 | |
Operating income | | | | | 592 | | | 462 | |
Non-operating (expense) income, net | | | | | | | |
Interest expense, net | | | | | (40) | |
| (52) | |
Other non-operating income, net | | | | | 12 | |
| 2 | |
Total non-operating expense, net | | | | | (28) | | | (50) | |
Income before provisions for income taxes | | | | | 564 | | | 412 | |
Provision for income taxes | | | | | 77 | | | 38 | |
Net income | | | | | 487 | | | 374 | |
Less: Net (loss) income attributable to noncontrolling interests | | | | | (1) | | | 1 | |
Net income attributable to Moody's | | | | | $ | 488 | | | $ | 373 | |
Earnings per share attributable to Moody's common shareholders | | | | | | | |
Basic | | | | | $ | 2.60 | |
| $ | 1.96 | |
Diluted | | | | | $ | 2.57 | |
| $ | 1.93 | |
Weighted average number of shares outstanding | | | | | | | |
Basic | | | | | 187.5 | |
| 190.4 | |
Diluted | | | | | 189.6 | |
| 192.8 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Amounts in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | |
| 2020 | | | | | | 2019 | | | | |
| Pre-tax amounts | | Tax amounts | | After-tax amounts | | Pre-tax amounts | | Tax amounts | | After-tax amounts |
Net Income | | | | | $ | 487 | | | | | | | $ | 374 | |
Other Comprehensive Income (loss): | | | | | | | | | | | |
Foreign Currency Adjustments: | | | | | | | | | | | |
Foreign currency translation adjustments, net | $ | (175) | | | $ | 5 | | | (170) | | | $ | (27) | | | $ | — | | | (27) | |
Net gains on net investment hedges | 119 | | | (30) | | | 89 | | | 30 | | | (7) | | | 23 | |
| | | | | | | | | | | |
Cash Flow Hedges: | | | | | | | | | | | |
Net realized and unrealized (losses) gains on cash flow hedges | (48) | | | 12 | | | (36) | | | — | | | — | | | — | |
Reclassification of losses included in net income | 1 | | | — | | | 1 | | | — | | | — | | | — | |
Pension and Other Retirement Benefits: | | | | | | | | | | | |
Amortization of actuarial losses and prior service costs included in net income | 2 | | | (1) | | | 1 | | | 1 | | | (1) | | | — | |
Net actuarial (losses) gains and prior service costs | (1) | | | — | | | (1) | | | 1 | | | — | | | 1 | |
Total other comprehensive (loss) income | (102) | | | (14) | | | (116) | | | 5 | | | (8) | | | (3) | |
Comprehensive income | | | | | 371 | | | | | | | 371 | |
Less: comprehensive (loss) income attributable to noncontrolling interests | | | | | (2) | | | | | | | 8 | |
Comprehensive Income Attributable to Moody's | | | | | $ | 373 | | | | | | | $ | 363 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
MOODY’S CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in millions, except per share data)
| | | | | | | | | | | |
| March 31, 2020 | | December 31, 2019 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 2,141 | | | $ | 1,832 | |
Short-term investments | 90 | | | 98 | |
Accounts receivable, net of allowance for credit losses of $42 in 2020 and $20 in 2019 | 1,413 | | | 1,419 | |
Other current assets | 350 | | | 330 | |
| | | |
Total current assets | 3,994 | | | 3,679 | |
Property and equipment, net of accumulated depreciation of $853 in 2020 and $839 in 2019 | 285 | | | 292 | |
Operating lease right-of-use assets | 437 | | | 456 | |
Goodwill | 4,122 | | | 3,722 | |
Intangible assets, net | 1,709 | | | 1,498 | |
Deferred tax assets, net | 165 | | | 229 | |
Other assets | 594 | | | 389 | |
Total assets | $ | 11,306 | | | $ | 10,265 | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 664 | | | $ | 773 | |
Current portion of operating lease liabilities | 89 | | | 89 | |
Commercial paper | 485 | | | — | |
| | | |
Deferred revenue | 1,113 | | | 1,050 | |
| | | |
Total current liabilities | 2,351 | | | 1,912 | |
Non-current portion of deferred revenue | 109 | | | 112 | |
Long-term debt | 6,303 | | | 5,581 | |
Deferred tax liabilities, net | 424 | | | 357 | |
Uncertain tax positions | 448 | | | 477 | |
Operating lease liabilities | 463 | | | 485 | |
Other liabilities | 403 | | | 504 | |
Total liabilities | 10,501 | | | 9,428 | |
Contingencies (Note 18) | | — | | | — | |
Redeemable noncontrolling interest | 6 | | | 6 | |
Shareholders' equity: | | | |
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding | — | | | — | |
Series Common Stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and outstanding | — | | | — | |
Common stock, par value $.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares issued at March 31, 2020 and December 31, 2019, respectively. | 3 | | | 3 | |
Capital surplus | 616 | | | 642 | |
Retained earnings | 10,041 | | | 9,656 | |
Treasury stock, at cost; 155,386,192 and 155,215,143 shares of shares of common stock at March 31, 2020 and December 31, 2019 | (9,524) | | | (9,250) | |
Accumulated other comprehensive loss | (554) | | | (439) | |
Total Moody's shareholders' equity | 582 | | | 612 | |
Noncontrolling interests | 217 | | | 219 | |
Total shareholders' equity | 799 | | | 831 | |
Total liabilities, noncontrolling interests and shareholders' equity | $ | 11,306 | | | $ | 10,265 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in millions)
| | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2020 | | 2019 |
Cash flows from operating activities | | | |
Net income | $ | 487 | | | $ | 374 | |
Reconciliation of net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 49 | | | 50 | |
Stock-based compensation | 37 | | | 36 | |
Deferred income taxes | 57 | | | 14 | |
| | | |
Loss pursuant to the divestiture of MAKS | 9 | | | — | |
Changes in assets and liabilities: | | | |
Accounts receivable | (7) | | | (8) | |
Other current assets | (38) | | | (6) | |
Other assets | 2 | | | (14) | |
Restructuring liability | (12) | | | (3) | |
Accounts payable and accrued liabilities | (186) | | | (180) | |
Deferred revenue | 64 | | | 104 | |
Unrecognized tax benefits and other non-current tax liabilities | (18) | | | (22) | |
Other liabilities | (99) | | | 22 | |
Net cash provided by operating activities | 345 | | | 367 | |
Cash flows from investing activities | | | |
Capital additions | (21) | | | (20) | |
Purchases of investments | (78) | | | (38) | |
Sales and maturities of investments | 23 | | | 51 | |
| | | |
Cash paid for acquisitions, net of cash acquired | (696) | | | — | |
| | | |
Net cash used in investing activities | (772) | | | (7) | |
Cash flows from financing activities | | | |
Issuance of notes | 700 | | | — | |
Repayment of notes | — | | | (450) | |
Issuance of commercial paper | 789 | | | 402 | |
Repayment of commercial paper | (305) | | | (85) | |
Proceeds from stock-based compensation plans | 16 | | | 14 | |
Repurchase of shares related to stock-based compensation | (71) | | | (51) | |
Treasury shares | (253) | | | (448) | |
Dividends | (105) | | | (94) | |
Debt issuance costs | (6) | | | | — | |
Payment for noncontrolling interest | — | | | (12) | |
Cash paid for ASR contract relating to shares retained by Counterparty until final settlement | — | | | (125) | |
Net cash provided by (used in) financing activities | 765 | | | (849) | |
| | | |
Effect of exchange rate changes on cash and cash equivalents | (29) | | | 1 | |
Increase (decrease) in cash and cash equivalents | 309 | | | (488) | |
Cash and cash equivalents, beginning of period | 1,832 | | | 1,685 | |
Cash and cash equivalents, end of period | $ | 2,141 | | | $ | 1,197 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
MOODY'S CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Amounts in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shareholders of Moody's Corporation | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | Capital Surplus | | Retained Earnings | | Treasury Stock | | | | Accumulated Other Comprehensive Loss | | Total Moody's Shareholders' Equity | | Non- Controlling Interests | | Total Shareholders' Equity | | | |
| Shares | | Amount | | | | | | Shares | | Amount | | | | | | | | | | | |
Balance at December 31, 2018 | 342.9 | | | $ | 3 | | | $ | 601 | | | $ | 8,594 | | | (151.6) | | | $ | (8,313) | | | $ | (426) | | | $ | 459 | | | $ | 197 | | | $ | 656 | | | | |
Net income | | | | | | | 373 | | | | | | | | | 373 | | | 1 | | | 374 | | | | |
Dividends ($0.50 per share) | | | | | | | (94) | | | | | | | | | (94) | | | — | | | (94) | | | | |
Adoption of ASU 2018-02, relating to the Tax Act | | | | | | | 20 | | | | | | | (20) | | | — | | | | | | — | | | | |
Stock-based compensation | | | | | 36 | | | | | | | | | | | 36 | | | | | | 36 | | | | |
Shares issued for stock-based compensation plans at average cost, net | | | | | (67) | | | | | 1.0 | | | 7 | | | | | (60) | | | | | | (60) | | | | |
Purchase of noncontrolling interest | | | | | (9) | | | | | | | | | | | | | (9) | | | (3) | | | (12) | | | | |
Treasury shares repurchased | | | | | | | | | | (2.7) | | | (448) | | | | | (448) | | | | | | (448) | | | | |
Accelerated Share Repurchase pending final settlement | | | | | (125) | | | | | | | | | | | | | | (125) | | | | | | (125) | | | | |
Currency translation adjustment, net of net investment hedge activity (net of tax of $7 million) | | | | | | | | |