Item 1. Financial Statements
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in millions, except per share data)
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| 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 | | | — | | | | | |
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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 | | | | | |
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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)
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| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
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| 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) | |
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Net (losses) gains on net investment hedges | (76) | | | 19 | | | (57) | | | 64 | | | (17) | | | 47 | |
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Cash Flow Hedges: | | | | | | | | | | | |
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Reclassification of losses included in net income | 1 | | | — | | | 1 | | | 1 | | | — | | | 1 | |
Pension and Other Retirement Benefits: | | | | | | | | | | | |
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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 | |
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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 | |
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Current portion of long-term debt | 499 | | | — | |
Deferred revenue | 1,578 | | | 1,258 | |
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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 | |
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Changes in assets and liabilities: | | | |
Accounts receivable | (51) | | | (117) | |
Other current assets | 74 | | | (11) | |
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Other assets | (21) | | | (21) | |
Lease obligations | (5) | | | (2) | |
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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 | |
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Cash paid for acquisitions, net of cash acquired | — | | | (83) | |
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Net cash used in investing activities | (63) | | | (161) | |
Cash flows from financing activities | | | |
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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) | |
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Issuance of notes | — | | | 491 | |
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Debt issuance costs and related fees | — | | | (5) | |
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Net cash used in financing activities | (216) | | | (352) | |
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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 | |
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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)
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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) | |
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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) | |
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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)
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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) | |
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Stock-based compensation | | | | | 47 | | | | | | | | | | | 47 | | | | | 47 | |
Shares issued for stock-based compensation plans at average cost, net | | | | | (33) | | | | | 0.4 | | | (15) | | | | | (48) | | | | | (48) | |
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Treasury shares repurchased | | | | | — | | | | | (0.1) | | | (42) | | | | | (42) | | | | | (42) | |
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Currency translation adjustment, net of net investment hedge activity (net of tax of $17 million) | | | | | | | | | | | | | 53 | | | 53 | | | (3) | | | 50 | |
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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:
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| 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.
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| 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 |
Assets: | | | | | | |
Derivatives designated as accounting hedges: | | | | | | |
| | | | | | |
Cross-currency swaps designated as net investment hedges | | Other assets | | $ | 12 | | | $ | 27 | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivatives not designated as accounting hedges: | | | | | | |
FX forwards on certain assets and liabilities | | Other current assets | | 4 | | | 19 | |
Total assets | | | | $ | 16 | | | $ | 46 | |
Liabilities: | | | | | | |
Derivatives designated as accounting hedges: | | | | | | |
| | | | | | |
| | | | | | |
Cross-currency swaps designated as net investment hedges | | Other liabilities | | $ | 115 | | | $ | 78 | |
Interest rate swaps designated as fair value hedges | | Other liabilities | | 192 | | | 239 | |
Total derivatives designated as accounting hedges | | | | 307 | | | 317 | |
Non-derivatives designated as accounting hedges: | | | | | | |
Long-term debt designated as net investment hedge | | Long-term debt | | 1,358 | | | 1,334 | |
Derivatives not designated as accounting hedges: | | | | | | |
FX forwards on certain assets and liabilities | | Accounts payable and accrued liabilities | | 1 | | | 2 | |
Total liabilities | | | | $ | |