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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
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For the quarterly period ended March 31, 2023
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
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13-3998945
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(State of Incorporation) |
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(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 |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.01 per share |
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MCO |
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New York Stock Exchange |
1.75% Senior Notes Due 2027 |
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MCO 27 |
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New York Stock Exchange |
0.950% Senior Notes Due 2030 |
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MCO 30 |
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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 |
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Accelerated filer
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Non-accelerated filer |
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Smaller reporting company
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Emerging growth company
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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
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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, 2023 |
183.5 million |
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MOODY’S CORPORATION
INDEX TO FORM 10-Q |
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GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to
identify frequently used terms in this report:
|
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TERM
|
DEFINITION
|
|
|
|
|
Acquisition-Related Intangible Amortization Expense
|
Amortization of definite-lived intangible assets acquired by the
Company from all business combination transactions
|
|
|
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(L)
|
Accumulated other comprehensive income/loss; a separate component
of shareholders’ equity
|
ARR
|
Annualized Recurring Revenue; a supplemental performance metric to
provide additional insight on the estimated value of MA's recurring
revenue contracts at a given point in time, excluding the impact of
FX and contracts related to acquisitions
|
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, Republic of South
Korea, Malaysia, Singapore, Sri Lanka and Thailand
|
ASR
|
Accelerated Share Repurchase
|
ASU
|
The FASB Accounting Standards Update to the ASC. 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
|
BitSight |
A provider that helps global market participants understand cyber
risk through ratings, analytics, and performance management
tools |
Board
|
The board of directors of the Company
|
BPS
|
Basis points
|
|
|
|
|
|
|
CCXI |
China Cheng Xin International Credit Rating Co. Ltd.; China’s first
and largest domestic credit rating agency approved by the People’s
Bank of China; currently Moody’s owns 30% of CCXI |
CDP |
Carbon Disclosure Project; an international nonprofit organization
that helps companies, cities, states and regions manage their
environmental impact through a global disclosure
system
|
CFG
|
Corporate finance group; an LOB of MIS
|
|
|
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
|
|
|
|
|
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 2021 Facility
|
|
|
|
|
Data and Information (D&I) |
LOB within MA which provides vast data sets on companies and
securities via data feeds and data applications
products
|
|
|
Decision Solutions (DS) |
LOB within MA that provides software and workflow tools for
specific use cases (banking, insurance, KYC/KYS, CRE and structured
finance solutions). This LOB utilizes components from the Data
& Information and Research & Insights LOBs to provide
integrated risk solutions
|
|
|
EMEA
|
Represents countries within Europe, the Middle East and
Africa
|
EPS
|
Earnings per share
|
|
|
ESG
|
Environmental, Social, and Governance
|
|
|
|
|
|
|
|
|
|
|
TERM
|
DEFINITION
|
ESTR |
Euro Short-Term Rate |
ETR
|
Effective tax rate
|
EU
|
European Union
|
|
|
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
|
|
|
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
|
GDP |
Gross domestic product |
GRI |
Global Reporting Initiative; an international independent standards
organization that helps organizations understand and disclose their
impact on climate change, human rights and corruption |
ICRA
|
ICRA Limited; a provider of credit ratings and research in
India |
ISSB |
International Sustainability Standards Board |
|
|
|
|
|
|
|
|
|
|
|
|
kompany |
360kompany AG (kompany); a Vienna, Austria-based platform for
business verification and Know Your Customer (KYC) technology
solutions, acquired by the Company in February 2022 |
|
|
KYC |
Know-your-customer |
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 - Decision
Solutions; Research and Insights; and Data and
Information
|
|
|
MAKS
|
Moody’s Analytics Knowledge Services; formerly known as Copal Amba;
provided offshore research and analytic services to the global
financial and corporate sectors; business was divested in the
fourth quarter of 2019 and was formerly a reporting unit within the
MA reportable segment |
|
|
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 financial instruments pricing services in the
Asia-Pacific region, ICRA non-ratings revenue, and revenue from
professional services. These businesses are components of MIS; MIS
Other is an LOB of MIS
|
Moody’s
|
Moody’s Corporation and its subsidiaries; MCO; the
Company
|
MSS |
Moody's Shared Services; primarily consists of information
technology and support staff such as finance, human resources and
legal that support both MA and MIS |
|
|
|
|
Net Income
|
Net income attributable to Moody’s Corporation, which excludes net
income from consolidated noncontrolling interests belonging to the
minority interest holder
|
|
|
|
|
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
|
|
|
|
|
|
|
TERM
|
DEFINITION
|
NRSRO
|
Nationally Recognized Statistical Rating Organization, which is a
credit rating agency registered with the SEC
|
|
|
|
|
|
|
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
|
|
|
|
|
PPIF
|
Public, project and infrastructure finance; an LOB of
MIS
|
|
|
|
|
|
|
|
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|
|
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|
|
Recurring Revenue
|
For MA, represents subscription-based revenue and software
maintenance 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
|
|
|
|
|
|
|
|
|
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
|
Research and Insights (R&I) |
LOB within MA that
provides models, scores, expert insights and commentary. This LOB
includes credit research; credit models and analytics; and
economics data and models
|
|
|
|
|
RMBS
|
Residential mortgage-backed securities; an asset class within
SFG
|
|
|
RMS |
A global provider of climate and natural disaster risk modeling and
analytics; acquired by the Company in September 2021 |
SaaS |
Software-as-a-Service
|
|
|
SEC
|
U.S. Securities and Exchange Commission
|
|
|
SFG
|
Structured finance group; an LOB of MIS
|
SG&A
|
Selling, general and administrative expenses
|
SOFR |
Secured Overnight Financing Rate |
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.
|
TCFD |
Task Force on Climate-Related Financial Disclosures |
Total Debt
|
All indebtedness of the Company as reflected on the consolidated
balance sheets
|
Transaction Revenue
|
For MA, represents perpetual software license fees and revenue from
software implementation services, risk management advisory
projects, and training and certification services. For MIS
(excluding MIS Other), represents the initial rating of a new debt
issuance as well as other one-time fees. For MIS Other, represents
revenue from professional services.
|
U.K.
|
United Kingdom
|
U.S.
|
United States
|
USD
|
U.S. dollar
|
UTPs
|
Uncertain tax positions
|
|
|
WEF |
World Economic Forum; an independent international organization for
public-private cooperation that engages the foremost political,
business, cultural and other leaders of society to shape global,
regional and industry agendas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 - 2023 Geolocation Restructuring Program |
Restructuring program approved by the chief executive officer of
Moody’s on June 30, 2022 relating to the Company's post-COVID-19
geolocation strategy
|
2013 Senior Notes due 2024
|
Principal amount of $500 million, 4.875% senior unsecured notes due
in February 2024
|
2014 Senior Notes due 2044
|
Principal amount of $600 million, 5.25% senior unsecured notes due
in July 2044
|
2015 Senior Notes due 2027
|
Principal amount of €500 million, 1.75% senior unsecured notes due
in March 2027
|
|
|
2017 Senior Notes due 2028
|
Principal amount of $500 million, 3.250% senior unsecured notes due
January 15, 2028
|
2018 Senior Notes due 2029
|
Principal amount of $400 million, 4.25% senior unsecured notes due
February 1, 2029
|
2018 Senior Notes due 2048
|
Principal amount of $400 million, 4.875% senior unsecured notes due
December 17, 2048
|
2019 Senior Notes due 2030 |
Principal amount of €750 million, 0.950% senior unsecured notes due
February 25, 2030 |
2020 Senior Notes due 2025 |
Principal amount of $700 million, 3.75% senior unsecured notes due
March 24, 2025 |
2020 Senior Notes due 2050 |
Principal amount of $300 million, 3.25% senior unsecured notes due
May 20, 2050 |
2020 Senior Notes due 2060 |
Principal amount of $500 million, 2.55% senior unsecured notes due
August 18, 2060 |
|
|
|
|
|
|
TERM
|
DEFINITION
|
2021 Facility |
Five-year unsecured revolving credit facility, with capacity to
borrow up to $1.25 billion; backstops CP issued under the CP
Program |
2021 Senior Notes due 2031 |
Principal amount of $600 million, 2.00% senior unsecured notes due
August 19, 2031 |
2021 Senior Notes due 2041 |
Principal amount of $600 million, 2.75% senior unsecured notes due
August 19, 2041 |
2021 Senior Notes due 2061 |
Principal amount of $500 million, 3.10% senior unsecured notes due
November 15, 2061 |
2022 Senior Notes due 2052 |
Principal amount of $500 million, 3.75% senior unsecured notes due
February 25, 2052 |
2022 Senior Notes due 2032 |
Principal amount of $500 million, 4.25% senior unsecured notes due
January 15, 2032 |
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,
|
|
|
|
2023 |
|
2022 |
|
|
|
|
Revenue |
$ |
1,470 |
|
|
$ |
1,522 |
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Operating |
428 |
|
|
417 |
|
|
|
|
|
Selling, general, and administrative |
386 |
|
|
371 |
|
|
|
|
|
Depreciation and amortization |
88 |
|
|
78 |
|
|
|
|
|
Restructuring |
14 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
916 |
|
|
866 |
|
|
|
|
|
Operating income |
554 |
|
|
656 |
|
|
|
|
|
Non-operating (expense) income, net |
|
|
|
|
|
|
|
Interest expense, net |
(48) |
|
|
(53) |
|
|
|
|
|
Other non-operating income (expense), net |
— |
|
|
6 |
|
|
|
|
|
Total non-operating (expense) income, net |
(48) |
|
|
(47) |
|
|
|
|
|
Income before provision for income taxes |
506 |
|
|
609 |
|
|
|
|
|
Provision for income taxes |
5 |
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Moody's |
$ |
501 |
|
|
$ |
498 |
|
|
|
|
|
Earnings per share attributable to Moody's common
shareholders |
|
|
|
|
|
|
|
Basic |
$ |
2.73 |
|
|
$ |
2.69 |
|
|
|
|
|
Diluted |
$ |
2.72 |
|
|
$ |
2.68 |
|
|
|
|
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
Basic |
183.3 |
|
|
185.1 |
|
|
|
|
|
Diluted |
184.1 |
|
|
186.1 |
|
|
|
|
|
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, 2023 |
|
Three Months Ended
March 31, 2022 |
|
|
|
Pre-tax
amounts |
|
Tax
amounts |
|
After-tax
amounts |
|
Pre-tax
amounts |
|
Tax
amounts |
|
After-tax
amounts |
Net Income |
|
|
|
|
$ |
501 |
|
|
|
|
|
|
$ |
498 |
|
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments, net |
$ |
109 |
|
|
$ |
(2) |
|
|
107 |
|
|
$ |
(108) |
|
|
$ |
1 |
|
|
(107) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (losses) gains on net investment hedges |
(76) |
|
|
19 |
|
|
(57) |
|
|
64 |
|
|
(17) |
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of losses included in net income |
1 |
|
|
— |
|
|
1 |
|
|
1 |
|
|
— |
|
|
1 |
|
Pension and Other Retirement Benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial losses and prior service costs |
— |
|
|
— |
|
|
— |
|
|
(3) |
|
|
1 |
|
|
(2) |
|
Total other comprehensive income (loss) |
$ |
34 |
|
|
$ |
17 |
|
|
$ |
51 |
|
|
$ |
(46) |
|
|
$ |
(15) |
|
|
$ |
(61) |
|
Comprehensive income |
|
|
|
|
552 |
|
|
|
|
|
|
437 |
|
Less: comprehensive loss attributable to noncontrolling
interests |
|
|
|
|
(3) |
|
|
|
|
|
|
— |
|
Comprehensive Income Attributable to Moody's |
|
|
|
|
$ |
555 |
|
|
|
|
|
|
$ |
437 |
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MOODY’S CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in millions, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
2,119 |
|
|
$ |
1,769 |
|
Short-term investments |
78 |
|
|
90 |
|
Accounts receivable, net of allowance for credit losses of $38 in
2023 and $40 in 2022
|
1,712 |
|
|
1,652 |
|
Other current assets |
517 |
|
|
583 |
|
|
|
|
|
Total current assets |
4,426 |
|
|
4,094 |
|
Property and equipment, net of accumulated depreciation of $1,153
in 2023 and $1,123 in 2022
|
525 |
|
|
502 |
|
Operating lease right-of-use assets |
332 |
|
|
346 |
|
Goodwill |
5,892 |
|
|
5,839 |
|
Intangible assets, net |
2,177 |
|
|
2,210 |
|
Deferred tax assets, net |
268 |
|
|
266 |
|
Other assets |
1,099 |
|
|
1,092 |
|
Total assets |
$ |
14,719 |
|
|
$ |
14,349 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
Current liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
805 |
|
|
$ |
1,011 |
|
Current portion of operating lease liabilities |
106 |
|
|
106 |
|
|
|
|
|
Current portion of long-term debt |
499 |
|
|
— |
|
Deferred revenue |
1,578 |
|
|
1,258 |
|
|
|
|
|
Total current liabilities |
2,988 |
|
|
2,375 |
|
Non-current portion of deferred revenue |
70 |
|
|
75 |
|
Long-term debt |
6,963 |
|
|
7,389 |
|
Deferred tax liabilities, net |
476 |
|
|
457 |
|
Uncertain tax positions |
205 |
|
|
322 |
|
Operating lease liabilities |
349 |
|
|
368 |
|
Other liabilities |
610 |
|
|
674 |
|
Total liabilities |
11,661 |
|
|
11,660 |
|
Contingencies (Note 16)
|
|
|
|
Shareholders' equity: |
|
|
|
Preferred stock, par value $0.01 per share; 10,000,000 shares
authorized; no shares issued and outstanding
|
— |
|
|
— |
|
Series common stock, par value $0.01 per share; 10,000,000 shares
authorized; no shares issued and outstanding
|
— |
|
|
— |
|
Common stock, par value $0.01 per share; 1,000,000,000 shares
authorized; 342,902,272 shares issued at March 31, 2023 and
December 31, 2022, respectively
|
3 |
|
|
3 |
|
Capital surplus |
1,068 |
|
|
1,054 |
|
Retained earnings |
13,979 |
|
|
13,618 |
|
Treasury stock, at cost; 159,404,478 and 159,702,362 shares of
common stock at March 31, 2023 and December 31, 2022,
respectively
|
(11,570) |
|
|
(11,513) |
|
Accumulated other comprehensive loss |
(589) |
|
|
(643) |
|
Total Moody's shareholders' equity |
2,891 |
|
|
2,519 |
|
Noncontrolling interests |
167 |
|
|
170 |
|
Total shareholders' equity |
3,058 |
|
|
2,689 |
|
Total liabilities, noncontrolling interests, and shareholders'
equity |
$ |
14,719 |
|
|
$ |
14,349 |
|
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, |
|
2023 |
|
2022 |
Cash flows from operating activities |
|
Net income |
$ |
501 |
|
|
$ |
498 |
|
Reconciliation of net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
88 |
|
|
78 |
|
Stock-based compensation |
47 |
|
|
46 |
|
Deferred income taxes |
— |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
(51) |
|
|
(117) |
|
Other current assets |
74 |
|
|
(11) |
|
|
|
|
|
Other assets |
(21) |
|
|
(21) |
|
Lease obligations |
(5) |
|
|
(2) |
|
|
|
|
|
Accounts payable and accrued liabilities |
(178) |
|
|
(296) |
|
Deferred revenue |
296 |
|
|
290 |
|
Uncertain tax positions |
(119) |
|
|
(18) |
|
Other liabilities |
(24) |
|
|
(7) |
|
Net cash provided by operating activities |
608 |
|
|
470 |
|
Cash flows from investing activities |
Capital additions |
(73) |
|
|
(59) |
|
Purchases of investments |
(45) |
|
|
(46) |
|
Sales and maturities of investments |
55 |
|
|
27 |
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
— |
|
|
(83) |
|
|
|
|
|
Net cash used in investing activities |
(63) |
|
|
(161) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock-based compensation plans |
11 |
|
|
8 |
|
Treasury shares |
(41) |
|
|
(560) |
|
Cash paid for ASR contract relating to shares retained by
counterparty until final settlement |
— |
|
|
(98) |
|
Repurchase of shares related to stock-based
compensation |
(45) |
|
|
(58) |
|
Dividends |
(141) |
|
|
(130) |
|
|
|
|
|
Issuance of notes |
— |
|
|
491 |
|
|
|
|
|
Debt issuance costs and related fees |
— |
|
|
(5) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
(216) |
|
|
(352) |
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
21 |
|
|
(18) |
|
Increase (decrease) in cash and cash equivalents |
350 |
|
|
(61) |
|
Cash and cash equivalents, beginning of period |
1,769 |
|
|
1,811 |
|
Cash and cash equivalents, end of period |
$ |
2,119 |
|
|
$ |
1,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2021
|
342.9 |
|
|
$ |
3 |
|
|
$ |
885 |
|
|
$ |
12,762 |
|
|
(157.3) |
|
|
$ |
(10,513) |
|
|
$ |
(410) |
|
|
$ |
2,727 |
|
|
$ |
189 |
|
|
$ |
2,916 |
|
Net income |
|
|
|
|
|
|
498 |
|
|
|
|
|
|
|
|
498 |
|
|
— |
|
|
498 |
|
Dividends ($0.70 per share)
|
|
|
|
|
|
|
(128) |
|
|
|
|
|
|
|
|
(128) |
|
|
(1) |
|
|
(129) |
|
Stock-based compensation |
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
46 |
|
Shares issued for stock-based compensation plans at average cost,
net |
|
|
|
|
(42) |
|
|
|
|
0.5 |
|
|
(32) |
|
|
|
|
(74) |
|
|
|
|
(74) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as consideration to acquire
kompany(1)
|
|
|
|
|
35 |
|
|
|
|
0.1 |
|
|
9 |
|
|
|
|
44 |
|
|
|
|
44 |
|
Treasury shares repurchased |
|
|
|
|
|
|
|
|
(1.7) |
|
|
(560) |
|
|
|
|
(560) |
|
|
|
|
(560) |
|
Accelerated Share Repurchase pending final settlement |
|
|
|
|
(98) |
|
|
|
|
|
|
|
|
|
|
(98) |
|
|
|
|
(98) |
|
Currency translation adjustment, net of net investment hedge
activity (net of tax of $16 million)
|
|
|
|
|
|
|
|
|
|
|
|
|
(60) |
|
|
(60) |
|
|
— |
|
|
(60) |
|
Net actuarial gains and prior service costs (net of tax of $1
million)
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
(2) |
|
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain on cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
|
|
|
|
1 |
|
Balance at March 31, 2022
|
342.9 |
|
|
$ |
3 |
|
|
$ |
826 |
|
|
$ |
13,132 |
|
|
(158.4) |
|
|
$ |
(11,096) |
|
|
$ |
(471) |
|
|
$ |
2,394 |
|
|
$ |
188 |
|
|
$ |
2,582 |
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
(1)
Represents a non-cash investing activity relating to the issuance
of common stock to fund a portion of the purchase price for
kompany.
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, 2022 |
342.9 |
|
|
$ |
3 |
|
|
$ |
1,054 |
|
|
$ |
13,618 |
|
|
(159.7) |
|
|
$ |
(11,513) |
|
|
$ |
(643) |
|
|
$ |
2,519 |
|
|
$ |
170 |
|
|
$ |
2,689 |
|
Net income |
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
|
501 |
|
|
— |
|
|
501 |
|
Dividends ($0.77 per share)
|
|
|
|
|
|
|
(140) |
|
|
|
|
|
|
|
|
(140) |
|
|
— |
|
|
(140) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
47 |
|
|
|
|
47 |
|
Shares issued for stock-based compensation plans at average cost,
net |
|
|
|
|
(33) |
|
|
|
|
0.4 |
|
|
(15) |
|
|
|
|
(48) |
|
|
|
|
(48) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury shares repurchased |
|
|
|
|
— |
|
|
|
|
(0.1) |
|
|
(42) |
|
|
|
|
(42) |
|
|
|
|
(42) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment, net of net investment hedge
activity (net of tax of $17 million)
|
|
|
|
|
|
|
|
|
|
|
|
|
53 |
|
|
53 |
|
|
(3) |
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain on cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
|
|
|
|
1 |
|
Balance at March 31, 2023 |
342.9 |
|
|
$ |
3 |
|
|
$ |
1,068 |
|
|
$ |
13,979 |
|
|
(159.4) |
|
|
$ |
(11,570) |
|
|
$ |
(589) |
|
|
$ |
2,891 |
|
|
$ |
167 |
|
|
$ |
3,058 |
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MOODY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(tabular dollar and share amounts in millions, except per share
data)
NOTE 1. 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: MA and MIS.
MA is a global provider of: i) data and information; ii) research
and insights; and iii) decision solutions, which help companies
make better and faster decisions. MA leverages its industry
expertise across multiple risks such as credit, market, financial
crime, supply chain, catastrophe and climate to deliver integrated
risk assessment solutions that enable business leaders to identify,
measure and manage the implications of interrelated risks and
opportunities.
MIS publishes credit ratings and provides assessment services on a
wide range of debt obligations, programs and facilities, and the
entities that issue such obligations in markets worldwide,
including various corporate, financial institution and governmental
obligations, and structured finance securities.
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 2022 annual report on Form 10-K
filed with the SEC on February 15, 2023. 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 in 2023
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 (codified into ASC Topic 848 "Reference Rate
Reform"). 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. In December 2022, the FASB issued ASU
2022-06, "Reference Rate Reform—Deferral of the Sunset Date of
Topic 848," which deferred the sunset date of Topic 848 to December
31, 2024. These ASU's were effective upon issuance and the
amendments may be applied prospectively through December 31, 2024
as the transition from LIBOR is completed.
During the first quarter of 2023, the Company modified the
contractual terms of certain of its interest rate swaps designated
as fair value hedges and cross-currency swaps designated as net
investment hedges. These modifications replaced the previous
LIBOR/EURIBOR-based reference rates included in the swap agreements
to SOFR/ESTR-based rates. Pursuant to the modification of the
contractual terms of these instruments, the Company utilized the
optional expedients set forth in ASC Topic 848 relating to
derivative instruments used in hedging relationships. The aggregate
notional amounts of these swaps is disclosed in Note
8.
NOTE 2. REVENUES
Revenue by Category
The following table presents the Company’s revenues disaggregated
by LOB:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2023 |
|
2022 |
|
|
|
|
MA: |
|
|
|
|
|
|
|
Decision Solutions |
$ |
354 |
|
|
$ |
334 |
|
|
|
|
|
Research and Insights |
195 |
|
|
183 |
|
|
|
|
|
Data and Information |
188 |
|
|
178 |
|
|
|
|
|
Total external revenue |
737 |
|
|
695 |
|
|
|
|
|
Intersegment revenue |
3 |
|
|
2 |
|
|
|
|
|
Total MA |
740 |
|
|
697 |
|
|
|
|
|
MIS: |
|
|
|
|
|
|
|
Corporate Finance (CFG) |
|
|
|
|
|
|
|
Investment-grade |
115 |
|
|
114 |
|
|
|
|
|
High-yield |
32 |
|
|
39 |
|
|
|
|
|
Bank loans |
59 |
|
|
113 |
|
|
|
|
|
Other accounts
(1)
|
150 |
|
|
151 |
|
|
|
|
|
Total CFG |
356 |
|
|
417 |
|
|
|
|
|
Structured Finance (SFG) |
|
|
|
|
|
|
|
Asset-backed securities |
27 |
|
|
32 |
|
|
|
|
|
RMBS |
25 |
|
|
35 |
|
|
|
|
|
CMBS |
14 |
|
|
38 |
|
|
|
|
|
Structured credit |
32 |
|
|
39 |
|
|
|
|
|
Other accounts |
1 |
|
|
— |
|
|
|
|
|
Total SFG |
99 |
|
|
144 |
|
|
|
|
|
Financial Institutions (FIG) |
|
|
|
|
|
|
|
Banking |
100 |
|
|
89 |
|
|
|
|
|
Insurance |
33 |
|
|
34 |
|
|
|
|
|
Managed investments |
6 |
|
|
5 |
|
|
|
|
|
Other accounts |
3 |
|
|
3 |
|
|
|
|
|
Total FIG |
142 |
|
|
131 |
|
|
|
|
|
Public, Project and Infrastructure Finance (PPIF) |
Public finance / sovereign |
52 |
|
|
58 |
|
|
|
|
|
Project and infrastructure |
77 |
|
|
65 |
|
|
|
|
|
Total PPIF |
129 |
|
|
123 |
|
|
|
|
|
Total ratings revenue |
726 |
|
|
815 |
|
|
|
|
|
MIS Other |
7 |
|
|
12 |
|
|
|
|
|
Total external revenue |
733 |
|
|
827 |
|
|
|
|
|
Intersegment revenue |
45 |
|
|
43 |
|
|
|
|
|
Total MIS |
778 |
|
|
870 |
|
|
|
|
|
Eliminations |
(48) |
|
|
(45) |
|
|
|
|
|
Total MCO |
$ |
1,470 |
|
|
$ |
1,522 |
|
|
|
|
|
(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, 2023 |
|
Three Months Ended March 31, 2022 |
|
U.S. |
|
Non-U.S |
|
Total |
|
U.S. |
|
Non-U.S |
|
Total |
MA: |
Decision Solutions |
$ |
152 |
|
|
$ |
202 |
|
|
$ |
354 |
|
|
$ |
147 |
|
|
$ |
187 |
|
|
$ |
334 |
|
Research and Insights |
105 |
|
|
90 |
|
|
195 |
|
|
103 |
|
|
80 |
|
|
183 |
|
Data and Information |
67 |
|
|
121 |
|
|
188 |
|
|
60 |
|
|
118 |
|
|
178 |
|
Total MA |
324 |
|
|
413 |
|
|
737 |
|
|
310 |
|
|
385 |
|
|
695 |
|
MIS: |
Corporate Finance |
246 |
|
|
110 |
|
|
356 |
|
|
275 |
|
|
142 |
|
|
417 |
|
Structured Finance |
61 |
|
|
38 |
|
|
99 |
|
|
97 |
|
|
47 |
|
|
144 |
|
Financial Institutions |
63 |
|
|
79 |
|
|
142 |
|
|
65 |
|
|
66 |
|
|
131 |
|
Public, Project and Infrastructure Finance |
76 |
|
|
53 |
|
|
129 |
|
|
75 |
|
|
48 |
|
|
123 |
|
Total ratings revenue |
446 |
|
|
280 |
|
|
726 |
|
|
512 |
|
|
303 |
|
|
815 |
|
MIS Other |
— |
|
|
7 |
|
|
7 |
|
|
1 |
|
|
11 |
|
|
12 |
|
Total MIS |
446 |
|
|
287 |
|
|
733 |
|
|
513 |
|
|
314 |
|
|
827 |
|
Total MCO |
$ |
770 |
|
|
$ |
700 |
|
|
$ |
1,470 |
|
|
$ |
823 |
|
|
$ |
699 |
|
|
$ |
1,522 |
|
|
|
|
|
|
|
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The
following table presents the Company’s reportable segment revenues
disaggregated by segment and geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2023 |
|
2022 |
|
|
|
|
MA: |
|
|
|
|
|
|
|
U.S. |
$ |
324 |
|
|
$ |
310 |
|
|
|
|
|
Non-U.S.: |
|
|
|
|
|
|
|
EMEA |
278 |
|
|
264 |
|
|
|
|
|
Asia-Pacific |
80 |
|
|
67 |
|
|
|
|
|
Americas |
55 |
|
|
54 |
|
|
|
|
|
Total Non-U.S. |
413 |
|
|
385 |
|
|
|
|
|
Total MA |
737 |
|
|
695 |
|
|
|
|
|
MIS: |
|
U.S. |
446 |
|
|
513 |
|
|
|
|
|
Non-U.S.: |
|
|
|
|
|
|
|
EMEA |
173 |
|
|
193 |
|
|
|
|
|
Asia-Pacific |
71 |
|
|
74 |
|
|
|
|
|
Americas |
43 |
|
|
47 |
|
|
|
|
|
Total Non-U.S. |
287 |
|
|
314 |
|
|
|
|
|
Total MIS |
733 |
|
|
827 |
|
|
|
|
|
Total MCO |
$ |
1,470 |
|
|
$ |
1,522 |
|
|
|
|
|
The following tables summarize the split between Transaction
Revenue and Recurring Revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2023 |
|
2022 |
|
Transaction |
|
Recurring |
|
Total |
|
Transaction |
|
Recurring |
|
Total |
Decision Solutions |
$ |
43 |
|
|
$ |
311 |
|
|
$ |
354 |
|
|
$ |
43 |
|
|
$ |
291 |
|
|
$ |
334 |
|
|
12 |
% |
|
88 |
% |
|
100 |
% |
|
13 |
% |
|
87 |
% |
|
100 |
% |
Research and Insights |
$ |
2 |
|
|
$ |
193 |
|
|
$ |
195 |
|
|
$ |
1 |
|
|
$ |
182 |
|
|
$ |
183 |
|
|
1 |
% |
|
99 |
% |
|
100 |
% |
|
1 |
% |
|
99 |
% |
|
100 |
% |
Data and Information |
$ |
— |
|
|
$ |
188 |
|
|
$ |
188 |
|
|
$ |
— |
|
|
$ |
178 |
|
|
$ |
178 |
|
|
— |
% |
|
100 |
% |
|
100 |
% |
|
— |
% |
|
100 |
% |
|
100 |
% |
Total MA |
$ |
45 |
|
(1)
|
$ |
692 |
|
|
$ |
737 |
|
|
$ |
44 |
|
|
$ |
651 |
|
|
$ |
695 |
|
|
6 |
% |
|
94 |
% |
|
100 |
% |
|
6 |
% |
|
94 |
% |
|
100 |
% |
Corporate Finance |
$ |
230 |
|
|
$ |
126 |
|
|
$ |
356 |
|
|
$ |
293 |
|
|
$ |
124 |
|
|
$ |
417 |
|
|
65 |
% |
|
35 |
% |
|
100 |
% |
|
70 |
% |
|
30 |
% |
|
100 |
% |
Structured Finance |
$ |
45 |
|
|
$ |
54 |
|
|
$ |
99 |
|
|
$ |
93 |
|
|
$ |
51 |
|
|
$ |
144 |
|
|
45 |
% |
|
55 |
% |
|
100 |
% |
|
65 |
% |
|
35 |
% |
|
100 |
% |
Financial Institutions |
$ |
70 |
|
|
$ |
72 |
|
|
$ |
142 |
|
|
$ |
61 |
|
|
$ |
70 |
|
|
$ |
131 |
|
|
49 |
% |
|
51 |
% |
|
100 |
% |
|
47 |
% |
|
53 |
% |
|
100 |
% |
Public, Project and Infrastructure Finance |
$ |
86 |
|
|
$ |
43 |
|
|
$ |
129 |
|
|
$ |
79 |
|
|
$ |
44 |
|
|
$ |
123 |
|
|
67 |
% |
|
33 |
% |
|
100 |
% |
|
64 |
% |
|
36 |
% |
|
100 |
% |
MIS Other |
$ |
— |
|
|
$ |
7 |
|
|
$ |
7 |
|
|
$ |
3 |
|
|
$ |
9 |
|
|
$ |
12 |
|
|
— |
% |
|
100 |
% |
|
100 |
% |
|
25 |
% |
|
75 |
% |
|
100 |
% |
Total MIS |
$ |
431 |
|
|
$ |
302 |
|
|
$ |
733 |
|
|
$ |
529 |
|
|
$ |
298 |
|
|
$ |
827 |
|
|
59 |
% |
|
41 |
% |
|
100 |
% |
|
64 |
% |
|
36 |
% |
|
100 |
% |
Total Moody's Corporation |
$ |
476 |
|
|
$ |
994 |
|
|
$ |
1,470 |
|
|
$ |
573 |
|
|
$ |
949 |
|
|
$ |
1,522 |
|
|
32 |
% |
|
68 |
% |
|
100 |
% |
|
38 |
% |
|
62 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Revenue from software implementation services and risk management
advisory projects, while classified by management as transactional
revenue, is recognized over time under U.S. GAAP (please also refer
to the following table).
The following table presents the timing of revenue
recognition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023
|
|
|
|
Three Months Ended March 31, 2022 |
|
MA |
|
MIS |
|
Total |
|
|
|
|
|
|
|
MA |
|
MIS |
|
Total |
Revenue recognized at a point in time |
$ |
27 |
|
|
$ |
431 |
|
|
$ |
458 |
|
|
|
|
|
|
|
|
$ |
41 |
|
|
$ |
529 |
|
|
$ |
570 |
|
Revenue recognized over time |
710 |
|
|
302 |
|
|
1,012 |
|
|
|
|
|
|
|
|
654 |
|
|
298 |
|
|
952 |
|
Total |
$ |
737 |
|
|
$ |
733 |
|
|
$ |
1,470 |
|
|
|
|
|
|
|
|
$ |
695 |
|
|
$ |
827 |
|
|
$ |
1,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unbilled receivables, deferred revenue and remaining performance
obligations
Unbilled receivables
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. In addition, 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.
The following table presents the Company's unbilled receivables,
which are included within accounts receivable, net, at
March 31, 2023 and December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2023
|
|
As of December 31, 2022
|
|
MA |
|
MIS |
|
MA |
|
MIS |
Unbilled Receivables |
$ |
114 |
|
|
$ |
439 |
|
|
$ |
148 |
|
|
$ |
385 |
|
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, 2023 and 2022 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023 |
|
Three Months Ended March 31, 2022 |
|
MA |
|
MIS |
|
Total |
|
MA |
|
MIS |
|
Total |
Balance at December 31, |
$ |
1,055 |
|
|
$ |
278 |
|
|
$ |
1,333 |
|
|
$ |
1,039 |
|
|
$ |
296 |
|
|
$ |
1,335 |
|
Changes in deferred revenue |
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized that was included in the deferred revenue
balance at the beginning of the period |
(471) |
|
|
(98) |
|
|
(569) |
|
|
(431) |
|
|
(95) |
|
|
(526) |
|
Increases due to amounts billable excluding amounts recognized as
revenue during the period |
688 |
|
|
179 |
|
|
867 |
|
|
636 |
|
|
178 |
|
|
814 |
|
Increases due to acquisitions during the period |
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
Effect of exchange rate changes |
16 |
|
|
1 |
|
|
17 |
|
|
(11) |
|
|
(2) |
|
|
(13) |
|
Total changes in deferred revenue |
233 |
|
|
82 |
|
|
315 |
|
|
195 |
|
|
81 |
|
|
276 |
|
Balance at March 31,
|
$ |
1,288 |
|
|
$ |
360 |
|
|
$ |
1,648 |
|
|
$ |
1,234 |
|
|
$ |
377 |
|
|
$ |
1,611 |
|
Deferred revenue - current |
$ |
1,287 |
|
|
$ |
291 |
|
|
$ |
1,578 |
|
|
$ |
1,231 |
|
|
$ |
294 |
|
|
$ |
1,525 |
|
Deferred revenue - non-current |
$ |
1 |
|
|
$ |
69 |
|
|
$ |
70 |
|
|
$ |
3 |
|
|
$ |
83 |
|
|
$ |
86 |
|
The increase in deferred revenue during both the three months ended
March 31, 2023 and 2022 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 MA segment include both
amounts recorded as deferred revenue on the balance sheet as of
March 31, 2023 as well as amounts not yet invoiced to
customers as of March 31, 2023, largely reflecting future
revenue related to signed multi-year arrangements for hosted and
installed subscription-based products. As of March 31, 2023,
the aggregate amount of the transaction price allocated to
remaining performance obligations was approximately $3.3 billion.
The Company expects to recognize into revenue approximately 65% of
this balance within one year, approximately 25% of this balance
between
one to two years and the remaining amount
thereafter.
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, 2023, the aggregate amount of the
transaction price allocated to remaining performance obligations
was approximately $98 million. The Company expects to recognize
into revenue approximately 25% 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.
NOTE 3. 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,
|
|
|
|
2023 |
|
2022 |
|
|
|
|
Stock-based compensation cost |
$ |
47 |
|
|
$ |
46 |
|
|
|
|
|
Tax benefit |
$ |
10 |
|
|
$ |
11 |
|
|
|
|
|
During the first three months of 2023, the Company granted 0.1
million employee stock options, which had a weighted average grant
date fair value of $94.67 per share. The Company also granted 0.6
million shares of restricted stock in the first three months of
2023, which had a weighted average grant date fair value of $295.53
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 $286.04 per share.
The following weighted average assumptions were used in determining
the fair value using the Black-Scholes option-pricing model for
options granted in 2023:
|
|
|
|
|
|
Expected
dividend yield |
1.04 |
% |
Expected stock volatility |
29 |
% |
Risk-free interest rate |
4.18 |
% |
Expected holding period |
5.8 years |
Unrecognized stock-based compensation expense at March 31,
2023 was $20 million and $354 million for stock options and
unvested restricted stock, respectively, which is expected to be
recognized over a weighted average period of 2.2 years and 2.8
years, respectively. Additionally, there was $43 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 2.4
years.
The following table summarizes information relating to stock option
exercises and restricted stock vesting:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
2023 |
|
2022
|
Exercise of stock options: |
|
|
|
Proceeds from stock option exercises |
$ |
7 |
|
|
$ |
3 |
|
Aggregate intrinsic value |
$ |
15 |
|
|
$ |
4 |
|
Tax benefit realized upon exercise |
$ |
4 |
|
|
$ |
1 |
|
Number of shares exercised
(1)
|
0.1 |
|
|
— |
|
Vesting of restricted stock: |
|
|
|
Fair value of shares vested |
$ |
140 |
|
|
$ |
166 |
|
Tax benefit realized upon vesting |
$ |
33 |
|
|
$ |
39 |
|
Number of shares vested |
0.5 |
|
|
0.5 |
|
Vesting of performance-based restricted stock: |
|
|
|
Fair value of shares vested |
$ |
24 |
|
|
$ |
50 |
|
Tax benefit realized upon vesting |
$ |
3 |
|
|
$ |
7 |
|
Number of shares vested |
0.1 |
|
|
0.2 |
|
(1)
The number of options exercised in 2022 was approximately 20
thousand.
NOTE 4. INCOME TAXES
Moody’s effective tax rate (ETR) was 1.0% and 18.2% for the three
months ended March 31, 2023 and 2022, respectively. The 17.2%
decrease in the ETR for the three months ended March 31, 2023
compared to the same period in the prior year was primarily due to
tax benefits recognized in the first quarter of 2023, which reflect
the resolutions of uncertain tax positions in various U.S. and
non-U.S. tax jurisdictions. The Company’s first quarter 2023
provision for income taxes differs from the tax computed by
applying its estimated annual effective tax rate to the pre-tax
earnings primarily due to the following items recognized in 2023:
i) net reductions in UTPs of $117 million related to the
resolutions of UTPs; and ii) excess tax benefits from stock-based
compensation of $6 million.
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
income (expense), net.
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
returns for 2019 through 2020 are currently under examination and
2021 remains open to examination. The Company’s New York City tax
returns for 2015 through 2019 are currently under examination. The
Company’s U.K. tax returns for 2017 through 2021 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
such 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 will 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 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 ASC Topic 740 regarding UTPs.
The following table shows the amount the Company paid for income
taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2023 |
|
2022 |
Income taxes paid |
$ |
66 |
|
|
$ |
70 |
|
In August 2022, the U.S. Congress passed the Inflation Reduction
Act, which included a corporate minimum tax on book earnings of
15%, an excise tax on corporate share repurchases of 1%, and
certain climate change and energy tax credit incentives. The
adoption of a corporate minimum tax of 15% is not expected to
impact Moody’s ETR. The excise tax of 1% on corporate share
buybacks will not have an impact on the Company’s ETR for
2023.
NOTE 5. RECONCILIATION OF WEIGHTED AVERAGE SHARES
OUTSTANDING
Below is a reconciliation of basic to diluted shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
Basic |
183.3 |
|
|
185.1 |
|
|
|
|
|
Dilutive effect of shares issuable under stock-based compensation
plans |
0.8 |
|
|
1.0 |
|
|
|
|
|
Diluted |
184.1 |
|
|
186.1 |
|
|
|
|
|
Anti-dilutive options to purchase common shares and restricted
stock as well as contingently issuable restricted stock which are
excluded from the table above |
0.7 |
|
|
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, 2023 and
2022.
NOTE 6. ACCELERATED SHARE REPURCHASE PROGRAM
On March 1, 2022, the Company entered into an ASR agreement with a
financial institution counterparty to repurchase $500 million
of its outstanding common stock. The Company paid $500 million
to the counterparty and received an initial delivery of
1.2 million shares of its common stock. Final settlement of
the ASR agreement was completed in April 2022 and the Company
received delivery of an additional 0.3 million shares of the
Company’s common stock.
In total, the Company repurchased 1.5 million shares of the
Company’s common stock during the term of the ASR Agreement, based
on the volume-weighted average price (net of discount) of $324.20
per share over the duration of the program. The initial share
repurchase and final share settlement were recorded as a reduction
to shareholders’ equity.
NOTE 7. CASH EQUIVALENTS AND INVESTMENTS
The table below provides additional information on the Company’s
cash equivalents and investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2023 |
|
|
|
|
|
|
|
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)
|
$ |
729 |
|
|
$ |
— |
|
|
$ |
729 |
|
|
$ |
645 |
|
|
$ |
78 |
|
|
$ |
6 |
|
Mutual funds |
$ |
80 |
|
|
$ |
3 |
|
|
$ |
83 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2022 |
|
|
|
|
|
|
|
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)
|
$ |
914 |
|
|
$ |
— |
|
|
$ |
914 |
|
|
$ |
808 |
|
|
$ |
90 |
|
|
$ |
16 |
|
Mutual funds |
$ |
71 |
|
|
$ |
— |
|
|
$ |
71 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
71 |
|
(1)
Consists of time deposits and money market deposit accounts. The
remaining contractual maturities for the certificates of deposits
classified as short-term investments are one month to 12 months at
both March 31, 2023 and December 31, 2022. The remaining
contractual maturities for the certificates of deposits classified
in other assets are 13 months to 21 months at March 31, 2023
and 13 months to 24 months at December 31, 2022. 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 invests in Corporate-Owned Life Insurance
(COLI). As of March 31, 2023 and December 31, 2022, the
contract value of the COLI was $44 million and $40 million,
respectively.
NOTE 8. 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 SOFR. 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 statements of operations.
The following table summarizes the Company’s interest rate swaps
designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2023
|
|
As of December 31, 2022
|
Hedged Item |
|
Nature of Swap |
|
Notional Amount |
|
Floating Interest Rate
(1)
|
|
Notional Amount |
|
Floating Interest Rate |
2017 Senior Notes due 2028 |
|
Pay Floating/Receive Fixed |
|
$ |
500 |
|
|
SOFR |
|
$ |
500 |
|
|
3-month LIBOR |
2020 Senior Notes due 2025 |
|
Pay Floating/Receive Fixed |
|
300 |
|
|
SOFR |
|
300 |
|
|
6-month LIBOR |
2014 Senior Notes due 2044 |
|
Pay Floating/Receive Fixed |
|
300 |
|
|
SOFR |
|
300 |
|
|
3-month LIBOR |
2018 Senior Notes due 2048 |
|
Pay Floating/Receive Fixed |
|
300 |
|
|
SOFR |
|
300 |
|
|
3-month LIBOR |
2018 Senior Notes due 2029 |
|
Pay Floating/Receive Fixed |
|
400 |
|
|
SOFR |
|
400 |
|
|
SOFR |
2022 Senior Notes due 2052 |
|
Pay Floating/Receive Fixed |
|
500 |
|
|
SOFR |
|
500 |
|
|
SOFR |
2022 Senior Notes due 2032 |
|
Pay Floating/Receive Fixed |
|
250 |
|
|
SOFR |
|
250 |
|
|
SOFR |
Total |
|
|
|
$ |
2,550 |
|
|
|
|
$ |
2,550 |
|
|
|
(1)
Contractual terms of instruments using the 3-month or 6-month LIBOR
at December 31, 2022 were modified to the SOFR reference rate
in the first quarter of 2023.
Refer to Note 14 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 statements 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 recorded |
|
Amount of income/(loss) recognized in the consolidated statements
of operations |
|
Three Months Ended March 31,
|
|
|
2023 |
|
2022 |
|
Interest expense, net |
|
$ |
(48) |
|
|
$ |
(53) |
|
|
|
|
|
|
|
|
|
|
Descriptions |
|
Location on Consolidated Statements of Operations |
|
|
|
|
|
Net interest settlements and accruals on interest rate
swaps |
|
Interest expense, net
|
|
$ |
(18) |
|
|
$ |
6 |
|
|
Fair value changes on interest rate swaps |
|
Interest expense, net |
|
$ |
46 |
|
|
$ |
(85) |
|
|
Fair value changes on hedged debt |
|
Interest expense, net |
|
$ |
(46) |
|
|
$ |
85 |
|
|
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, 2023 |
|
|
Pay |
|
Receive |
Nature of Swap |
|
Notional Amount |
|
Weighted Average Interest Rate |
|
Notional Amount |
|
Weighted Average Interest Rate |
Pay Fixed/Receive Fixed |
|
€ |
765 |
|
|
3.67% |
|
$ |
800 |
|
|
5.25% |
Pay Floating/Receive Floating |
|
2,138 |
|
|
Based on ESTR |
|
2,250 |
|
|
Based on SOFR |
Total |
|
€ |
2,903 |
|
|
|
|
$ |
3,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
Pay |
|
Receive |
Nature of Swap |
|
Notional Amount |
|
Weighted Average Interest Rate |
|
Notional Amount |
|
Weighted Average Interest Rate |
Pay Fixed/Receive Fixed |
|
€ |
765 |
|
|
3.67% |
|
$ |
800 |
|
|
5.25% |
Pay Floating/Receive Floating |
|
450 |
|
|
Based on 3-month EURIBOR |
|
500 |
|
|
Based on 3-month USD LIBOR |
Pay Floating/Receive Floating |
|
1,688 |
|
|
Based on ESTR |
|
1,750 |
|
|
Based on SOFR |
Total |
|
€ |
2,903 |
|
|
|
|
$ |
3,050 |
|
|
|
As of March 31, 2023 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, |
|
|
|
|
|
2026 |
|
€ |
450 |
|
2027 |
|
€ |
531 |
|
2028 |
|
€ |
588 |
|
2029 |
|
€ |
373 |
|
2031 |
|
€ |
481 |
|
2032 |
|
€ |
480 |
|
Total |
|
€ |
2,903 |
|
The following tables provide information on the gains/(losses) on
the Company’s net investment and cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and Non-Derivative Instruments in Net Investment Hedging
Relationships |
|
Amount of Gain/(Loss) Recognized in AOCL on Derivative, net of
Tax |
|
Amount of Loss Reclassified from AOCL into Income, net of
Tax |
|
Gain Recognized in Income on Derivative (Amount Excluded from
Effectiveness Testing) |
|
Three Months Ended
March 31,
|
|
Three Months Ended
March 31,
|
|
Three Months Ended
March 31,
|
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps |
|
$ |
(39) |
|
|
$ |
24 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16 |
|
|
$ |
10 |
|
Long-term debt |
|
(18) |
|
|
23 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total net investment hedges |
|
$ |
(57) |
|
|
$ |
47 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16 |
|
|
$ |
10 |
|
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1) |
|
|
$ |
(1) |
|
|
$ |
— |
|
|
$ |
— |
|
Total cash flow hedges |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1) |
|
|
$ |
(1) |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
(57) |
|
|
$ |
47 |
|
|
$ |
(1) |
|
|
$ |
(1) |
|
|
$ |
16 |
|
|
$ |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cumulative amount of net investment hedge and cash flow hedge
gains (losses) remaining in AOCL is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Gains/(Losses), net of tax |
|
March 31, 2023 |
|
December 31, 2022 |
Net investment hedges
|
|
|
|
Cross currency swaps |
$ |
79 |
|
|
$ |
118 |
|
FX forwards |
29 |
|
|
29 |
|
Long-term debt |
20 |
|
|
38 |
|
Total net investment hedges |
$ |
128 |
|
|
$ |
185 |
|
Cash flow hedges |
|
|
|
Interest rate contracts |
$ |
(46) |
|
|
$ |
(47) |
|
Cross currency swaps |
2 |
|
|
2 |
|
Total cash flow hedges |
(44) |
|
|
(45) |
|
Total net gain in AOCL |
$ |
84 |
|
|
$ |
140 |
|
Derivatives not designated as accounting hedges:
Foreign exchange forwards
The Company also enters into foreign exchange forward contracts to
mitigate the change in fair value on certain assets and liabilities
denominated in currencies other than a subsidiary’s functional
currency. These forward contracts are not designated as accounting
hedges under the applicable sections of ASC Topic 815. Accordingly,
changes in the fair value of these contracts are recognized
immediately in other non-operating income (expense), net in the
Company’s consolidated statements of operations along with the FX
gain or loss recognized on the assets and liabilities denominated
in a currency other than the subsidiary’s functional currency.
These contracts have expiration dates at various times through May
2023.
The following table summarizes the notional amounts of the
Company’s outstanding foreign exchange forwards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
Notional amount of currency pair: |
Sell |
|
Buy |
|
Sell |
|
Buy |
Contracts to sell USD for GBP |
$ |
295 |
|
|
£ |
241 |
|
|
$ |
170 |
|
|
£ |
146 |
|
Contracts to sell USD for Japanese yen |
$ |
15 |
|
|
¥ |
2,000 |
|
|
$ |
24 |
|
|
¥ |
3,500 |
|
Contracts to sell USD for Canadian dollars |
$ |
78 |
|
|
C$ |
105 |
|
|
$ |
87 |
|
|
C$ |
120 |
|
Contracts to sell USD for Singapore dollars |
$ |
52 |
|
|
S$ |
70 |
|
|
$ |
50 |
|
|
S$ |
70 |
|
Contracts to sell USD for euros |
$ |
160 |
|
|
€ |
148 |
|
|
$ |
116 |
|
|
€ |
115 |
|
|
|
|
|
|
|
|
|
|
|
Contracts to sell USD for Indian rupee |
$ |
23 |
|
|
₹ |
1,900 |
|
|
$ |
19 |
|
|
₹ |
1,600 |
|
|
|
|
|
|
|
|
|
|
|
Contracts to sell euros for USD |
€ |
25 |
|
|
$ |
27 |
|
|
€ |
85 |
|
|
$ |
89 |
|
NOTE: € = euro, £ = British pound, $ = U.S. dollar, ¥ = Japanese
yen, C$ = Canadian dollar, S$= Singapore dollars, ₹= Indian
rupee
The following table summarizes the impact to the consolidated
statements of operations relating to the net losses on the
Company’s derivatives which are not designated as hedging
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as accounting hedges |
|
Location on Consolidated Statements of Operations |
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2023 |
|
2022 |
|
|
FX forwards |
|
Other non-operating income, net |
|
|
$ |
5 |
|
|
$ |
(19) |
|
|
|
The table below shows the classification between assets and
liabilities on the Company’s consolidated balance sheets for the
fair value of the derivative instrument as well as the carrying
value of its non-derivative debt instruments designated and
qualifying as net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative and Non-Derivative Instruments |
|
|
Balance Sheet Location |
|
March 31, 2023 |
|
December 31, 2022 |
|