ANNUAL
REPORT
2014
Financial Highlights
Amounts in millions except per share data
2014
2013
2012
2011
2010
OPERATIONS
U.S. GAAP Measures
Revenue
Operating Income
Operating Margin
Net Income Attributable to Moody’s
Diluted EPS
Non-GAAP Measures*
Adjusted Operating Income
Adjusted Operating Margin
Non-GAAP Diluted EPS
Free Cash Flow
BALANCE SHEET
Total Assets
Long-Term Debt
EQUITY TRANSACTIONS
Cost of Share Repurchases
Dividends Paid to Common Shareholders
Weighted Average Shares Outstanding, Diluted
$
$
$
$
$
$
$
$
$
$
$
3,334.3
1,439.1
43.2%
988.7
4.61
1,534.7
46.0%
4.21
944.0
4,669.0
2,547.3
1,220.5
236.0
214.7
$
$
$
$
$
$
$
$
$
$
$
2,972.5
1,234.6
41.5%
804.5
3.60
1,328.0
44.7%
3.65
884.5
4,395.1
2,101.8
893.1
197.3
223.5
$
$
$
$
$
$
$
$
$
$
$
2,730.3
1,077.4
39.5%
690.0
3.05
1,183.1
43.3%
2.99
778.1
3,960.9
1,607.4
196.5
143.0
226.6
$
$
$
$
$
$
$
$
$
$
$
2,280.7
888.4
39.0%
571.4
2.49
967.6
42.4%
2.46
735.6
2,876.1
1,172.5
333.8
121.0
229.4
$
$
$
$
$
$
$
$
$
$
$
2,032.0
772.8
38.0%
507.8
2.15
839.2
41.3%
2.13
574.3
2,540.3
1,228.3
223.6
98.6
236.6
*Refer to “Non-GAAP Financial Measures” in Item 7 of Moody’s 2014 Form 10-K for a discussion of the Company’s non-GAAP financial measures.
MOODY’S INVESTORS SERVICE
Revenue by Business Line
$ in millions
$0
$500
$1,000 $1,500 $2,000
2014 Revenue Mix
Total Revenue: $2,265.8
$ in millions
2014
2013
2012
2011
2010
Corporate Finance
Structured Finance
Financial Institutions
Public, Project and Infrastructure Finance
MIS Other
Moody’s Investors Service is a leading global provider
of credit ratings, research and risk analysis.
For investors, Moody’s Investors Service (MIS) provides independent, globally
comparable, transparent and industry-leading analysis of credit risk. For issuers,
MIS’s ratings may provide tangible financing benefits, broaden access to global
capital markets, and help inform the formulation of internal capital plans and
funding strategies.
MIS’s ratings and analysis track debt covering more than 120 countries and
approximately 11,000 corporate issuers, 21,000 public finance issuers and 72,000
structured finance obligations. MIS’s ratings provide an independent standard
for measuring credit risk that is comparable across geographies, asset classes and
over time.
MIS continues to invest in our core developed markets, with a number of initiatives
designed to strengthen our franchise and address growth opportunities. We are also
expanding our presence in developing markets. Most notably, in 2014 we pursued
investments in resources and enhanced our capabilities in China and other Asian
countries, and we recently increased our ownership stake to a controlling interest in
ICRA, a leading Indian credit rating agency.
MIS has extensive plans in place to enhance the experience of prospective and
existing issuers, and we have begun the journey to transform and strengthen our
operational models and technology platforms. These efforts will be a focus for
MIS over the next few years.
MIS’s ratings and in-depth research services provide a sound basis for understanding
and managing financial risk in the context of today’s — and tomorrow’s — market
realities. Our commitment and expertise contribute to transparent and integrated
financial markets.
Recurring
Revenue
39%
Transaction
Revenue
61%
United States
Revenue
59%
International
Revenue
41%
9%
2014 Moody’s
Investors Service
revenue growth
$1 billion+
Corporate Finance
revenue for the
first time
MOODY’S ANALYTICS
Revenue by Business Line
$ in millions
2014 Revenue Mix
Total Revenue: $1,068.5
$ in millions
$0
$200
$400
$600
$800
$1,000
2014
2013
2012
2011
2010
Research, Data and Analytics
Enterprise Risk Solutions
Professional Services
Recurring
Revenue
73%
Transaction
Revenue
27%
United States
Revenue
44%
International
Revenue
56%
19%
2014 Moody’s Analytics
revenue growth
$1 billion+
Moody’s Analytics
revenue for the
first time
Moody’s Analytics supports the risk management
efforts of financial institutions worldwide.
Banks, insurance companies, asset managers and securities dealers that are engaged
in increasingly complex, dynamic and competitive financial markets require analytical
insight, tools and resources to measure, manage and control risk. Moody’s Analytics’
(MA) product portfolio provides research and data, models and software tools, as well
as analytical depth and specialized expertise that address precisely these needs for
our customers. With customers in approximately 130 countries around the world, MA
serves institutions of all sizes and at all levels of sophistication.
We’ve built an organization and a market position that will enable us to sustain our
momentum in 2015 and beyond. On the product development front, we have made
great strides in building even more compelling solutions to critical problems our
customers face. We’ve expanded the range of research, data and analytical tools that
we offer, while enhancing our delivery mechanisms to make it easier for customers
to find, use and rely on MA’s content. Our software solutions have become more
powerful, more reliable and more relevant to a wider range of customer needs.
Our training and certification programs remain the industry standard for financial
institutions around the world.
Organizationally, we’ve broadened our product portfolio with the acquisitions of
WebEquity Solutions and Lewtan Technologies. We consolidated MA’s marketing
efforts to ensure the MA brand is positioned effectively, with greater coherence and
consistency. This will better support our extensive market outreach efforts as we
engage more customers in more markets worldwide and deliver first-class client
service through multiple channels.
The impact of our value proposition is clear from the market feedback we
receive: MA is an important and reliable partner for our customer
organizations globally.
$1 billion+
MOODY’S CORPORATION
2014 Revenue Mix
Total Revenue: $3,334.3
$ in millions
MIS
Revenue
68%
MA
Revenue
32%
Recurring
Revenue
50%
Transaction
Revenue
50%
United States
Revenue
54%
International
Revenue
46%
Moody’s Corporation 2014 Financial Highlights
+12%
$3.3 billion
revenue
+17%
$1.4 billion
operating income
+15%
$4.21
non-GAAP EPS*
+7%
$944 million
free cash flow*
+20%
$236 million
dividends paid
+37%
$1.2 billion
share repurchases
*Refer to “Non-GAAP Financial Measures” in Item 7 of Moody’s 2014 Form 10-K for a discussion of the Company’s non-GAAP financial measures.
With over 100 years of experience,
Moody’s is well-positioned to drive
growth in this period of increased
emphasis on risk assessment and
risk management.
Again in 2014, Moody’s was recognized
globally by customers, investors and the
markets for the quality of our credit analysis
at Moody’s Investors Service and the
versatility and effectiveness of the financial
risk solutions we provide through Moody’s
Analytics. We received more than a dozen
prestigious awards reflecting the combined
efforts of our employees to serve as an
authoritative source on issues and events
affecting markets.
2014 was also a strong year for Moody’s
financial and stock price performance. We
achieved 12% revenue growth, margin
improvement and 15% non-GAAP EPS
growth.* In addition, our stock price
outperformed the overall market, with a
total return of 24% compared to 14% for
the S&P 500. Over the last five years,
Moody’s annualized total return has been
over twice that of the S&P 500 — 31% vs.
15%, respectively.
Our ongoing commitment to shareholders
is to deploy our capital prudently with a
focus on growth and shareholder return. In
2014, we strengthened our franchise in India
by securing a majority ownership position
in ICRA, a leading Indian credit rating
agency, and by completing the acquisition
of the remaining shares of Copal Amba, a
leading provider of offshore research and
analytics services to the global financial and
corporate sectors. In addition, we enhanced
Moody’s Analytics’ product portfolio with
the acquisitions of WebEquity Solutions,
a leading provider of cloud-based loan
origination solutions for financial institutions,
and Lewtan Technologies, a leading provider
of analytical tools and data for the global
structured finance market.
We also continued our disciplined approach
to capital allocation. Given our strong cash
flow and healthy balance sheet, we were
able to return a total of $1.4 billion to
shareholders. This was achieved through a
combination of share repurchases totaling
$1.2 billion, which reduced our shares
outstanding by 4%, and dividend payments
totaling $236 million. We also announced a
21% increase in our quarterly dividend from
$0.28 to $0.34 per share.
Moody’s Board of Directors sets high
standards for the Company’s employees,
officers and directors. As part of this
responsibility, we are actively focused on
ensuring the Company maintains the
highest levels of performance in the areas
of regulatory integrity, operational efficiency
and organizational agility, accountability
and transparency.
As we look forward, our continuing strategy
and focus is to defend and enhance our core
business while investing in market segments
and geographies that allow us to broaden
the value we provide to customers and grow
our business accordingly. Underpinning these
efforts is the hard work of all our employees
around the world. I would like to take this
opportunity to thank them for their ongoing
commitment to our performance.
In 2014, Robert Glauber, a director since
1998, retired from Moody’s Board of
Directors. On behalf of my fellow directors,
I would like to thank Bob for his many years
of service to Moody’s and wish him well in
his future endeavors.
I would also like to extend my gratitude
to our shareholders, who entrust us to
serve as their fiduciaries and to oversee the
management of the Company’s business.
We thank you for your support.
Henry A. McKinnell, Jr., Ph.D.
Chairman of the Board
*Refer to “Non-GAAP Financial Measures” in Item 7 of Moody’s 2014 Form 10-K for a discussion of the
Company’s non-GAAP financial measures.
Letter from the Chairman
of the Board
Henry A. McKinnell, Jr., Ph.D.
24%
2014 total return
for MCO stock
1
MOODY’S 2014 ANNUAL REPORT
Moody’s success in 2014 was
notably broad-based, with
strong contributions coming from
almost all lines of business
and geographies.
Moody’s Investors Service (MIS) benefited
from market conditions that continued to
feature low borrowing costs and strong
investor demand for Moody’s-rated bonds
and bank loans. Moody’s Analytics (MA)
capitalized on the growing imperative
among financial institutions and regulators
worldwide to identify, assess and expertly
manage financial risk. Both business
segments and Moody’s Corporation overall
reached record levels of revenue for the third
consecutive year.
Global financial markets experienced many
changes and not a few surprises in 2014.
The strengthening of the U.S. economy was
generally anticipated, but growth coupled
with persistently low interest rates was
not. Challenging conditions in Europe and
Japan contributed to fears of deflation. The
slowing of China’s growth, the sharp decline
in energy prices and multiple geopolitical
concerns further contributed to unusual
market conditions. Despite the uncertainty
accompanying these conditions, Moody’s
prospered in 2014 and executed on a variety
of opportunities that position the Company
for continued growth in 2015 and beyond.
Moody’s growth was also supported by
several acquisitions and investments.
MIS secured a majority equity ownership
stake in ICRA, a leading Indian credit
rating agency, enhancing Moody’s presence
and participation in the domestic Indian
bond market and in developing regional
bond markets in South Asia.
MA added WebEquity Solutions to its
Enterprise Risk Solutions (ERS) business and
Lewtan Technologies to its Research, Data
and Analytics (RD&A) business within RD&A’s
Structured Analytics & Valuations (SAV)
unit. WebEquity specializes in risk analytics
for small and mid-sized U.S. banks, and
complements ERS’ existing presence among
large financial institutions. Lewtan provides
complementary structured finance data
and analytical tools and broadens SAV’s
coverage in both the U.S. and Europe.
Finally, MA integrated the operations of Amba
Investment Services with Copal Partners
(to create Copal Amba) and purchased the
one-third stake in Copal Amba that remained
outstanding from Moody’s original investment
in 2011. In doing so, MA emerged as a leading
provider of knowledge process outsourcing.
Revenue in 2014 of $3.3 billion grew 12%
from 2013. Operating income was $1.4
billion, up 17%. Moody’s operating margin
increased 170 basis points to 43.2%.
Continuing the Company’s strong earnings
trajectory of the previous year, GAAP EPS
of $4.61 was up 28% from $3.60 in 2013.
Non-GAAP EPS of $4.21 was up 15% from
$3.65 in 2013.*
Geographically, revenue for Moody’s U.S.
business grew 12% versus 2013, while
Moody’s international business increased
by 13% and constituted 46% of the
Company’s total revenue. Recurring
revenue accounted for 50% of total
Moody’s revenue and grew 12%
over 2013.
Every global line of business once again
achieved revenue growth in 2014. Given
the diversification of our businesses,
Moody’s continues to demonstrate solid
financial performance in a variety of
operating environments.
Letter from the President
& Chief Executive Officer
Raymond W. McDaniel, Jr.
15%
2014 non-GAAP
EPS growth*
*Refer to “Non-GAAP Financial Measures” in Item 7 of Moody’s 2014 Form 10-K for a discussion of the
Company’s non-GAAP financial measures.
*Refer to “Non-GAAP Financial Measures” in Item 7 of Moody’s 2014 Form 10-K for a discussion of the
Company’s non-GAAP financial measures.
MOODY’S 2014 ANNUAL REPORT
2
Moody’s Investors Service
MIS revenue increased by 9% to $2.3 billion
in 2014, with mid-single to low-double
digit growth across the four ratings lines of
business. Corporate Finance revenue rose 11%
to $1.1 billion, driven by strong investment
grade issuance, robust corporate M&A
activity, European bank loan refinancing
and Yankee debt placements, as well as
new rating mandates which increased the
number of monitored credits. Structured
Finance revenue grew 12% to $427 million
on increased issuance of collateralized loan
obligations. Financial Institutions revenue
increased 5%, to $355 million, and featured
strong growth in ratings from Asia. Public,
Project and Infrastructure Finance revenue
also rose 5% to $357 million, reflecting
growth in U.S. infrastructure finance.
In addition to strong financial performance
in 2014, MIS also received positive market
feedback and significant industry recognition.
MIS was named “#1 U.S. Credit Rating Agency”
for the third consecutive year in a poll
conducted by the publisher of Institutional
Investor. MIS also received regional awards,
including in polls conducted by publishers
FinanceAsia and AsiaMoney, where MIS was
named “Most Influential Credit Rating
Agency” for the second consecutive year and
“#1 Asia Credit Rating Agency” for the third
consecutive year, respectively. Additionally,
for the first time, MIS was named “Australia’s
Rating Agency of the Year.” Finally, Moody’s
fixed-income investor satisfaction scores rose
again, reflecting broad support for Moody’s
research and ratings enhancement initiatives.
In 2014, we continued to pursue a number
of opportunities to grow and expand the
MIS business in both mature and developing
markets. We also expanded our efforts
to deliver a better end-to-end business
experience for issuers and investors. To
achieve this, we implemented new processes
within our commercial organization to make
the entire engagement process with our
customers more transparent and user-friendly.
From an analytical perspective, we continually
strive to improve the predictive nature of our
ratings and the effectiveness of our analytics.
Important milestones in 2014 included our
revised approach to rating banks and the
introduction of a new methodology for U.S.
residential mortgage-backed securities.
Successful Execution of Recent Transactions
» One of three leading India-based
domestic rating agencies
» Moody’s increased its ownership
stake in ICRA from 28.5% to over
50.0% in June 2014
» A cloud-based lending platform that
provides loan origination, credit analysis
and loan management functionality to
~750 financial institutions
» Moody’s acquired WebEquity Solutions
in July 2014
Copal Amba
» Provides outsourced research and
analytical services to the global
financial and corporate sectors
» Moody’s purchased the remaining
outstanding shares of Copal Amba
in December 2014
» Provides analytical tools and data
to issuers, investors and underwriters
to administer, monitor and value
securitized transactions
» Moody’s acquired Lewtan Technologies
in October 2014
3
MOODY’S 2014 ANNUAL REPORT
Lastly, our ratings business maintained its
high standards by driving a culture of constant
improvement in its operational infrastructure.
To better serve investors, issuers and the
markets, we are developing ways to enhance
our operating model that preserve the quality
of our industry-leading research and ratings
while improving operating efficiency. This
multi-year transformation is now underway,
supported by a significant investment in new
technology-based solutions. This will be a
key focus for MIS and will allow us to create a
more scalable and flexible infrastructure.
In 2015, MIS’s core objective remains
delivering increased value through
high-quality research and rating products
and a globally consistent service
experience. Success will strengthen our
core franchise, grow and expand our market
presence and geographic footprint, and
foster a culture of continuous improvement
in our operational infrastructure. Moreover,
as we grow and expand our market
presence and geographic footprint, we
will remain engaged in a healthy dialogue
with our supervisory community, built
on the understanding that ratings are
most meaningful and useful to market
participants when they provide an
independent view for measuring credit
risk that is comparable across geographies,
asset classes and over time.
Moody’s Analytics
In 2014, MA exceeded $1 billion in revenue
for the first time in its history. With all
units reporting double-digit growth, MA’s
total revenue increased 19% over the prior
year. While acquisitions contributed to
our strong results, MA achieved organic
revenue growth of 13%, reflecting the
relevance of our product offerings, the
strength of our market position and the
effectiveness of our execution.
Within MA, ERS revenue grew 25% to
nearly $330 million. RD&A generated
10% growth — virtually all organic — while
Professional Services saw 42% growth,
largely the result of acquisitions.
The robust performance of the ERS
business underscores the heightened
regulatory and internal risk management
awareness surrounding global financial
institutions. Unlike cyclical market
conditions, this appears to be a structural
shift in business and oversight practices,
with solutions taking the form of more
elaborate risk systems and compliance
reporting mechanisms. This shift has been
Moody’s Executive Leadership
FROM LEFT TO RIGHT
Richard Cantor
Chief Risk Officer
Linda S. Huber
Executive Vice President & Chief Financial Officer
Blair L. Worrall
Senior Vice President, Ratings Delivery & Data
Raymond W. McDaniel, Jr.
President & Chief Executive Officer
John J. Goggins
Executive Vice President & General Counsel
Michel Madelain
President & Chief Operating Officer, Moody’s Investors Service
Mark Almeida
President, Moody’s Analytics
Robert Fauber
Senior Vice President, Corporate & Commercial Development
Lisa S. Westlake
Senior Vice President & Chief Human Resources Officer
a clear driver of MA’s ERS business in recent
years, and still shows signs of acceleration
rather than abatement.
RD&A’s strong growth in 2014 was driven by
robust demand for our economic forecasts,
quantitative risk scores and credit models
for various asset classes. In parallel, the
expansion of investors’ risk appetite, together
with still-fresh memories of the recent
financial crisis, are driving demand among
bond market participants for the credit
insights of MIS, and stimulating further
growth in RD&A research sales. In this
dynamic environment, MA’s development
of new products to complement content
produced by MIS allows us to address
our customers’ needs for supplemental
information about asset classes that are
growing and evolving.
MA’s Professional Services offerings include
financial training and certification services
leveraging MA’s institutional knowledge
and enabling our customers to enhance
their technical knowledge and professional
capabilities. We also provide outsourced
research and analytics delivered via our Copal
Amba business. By combining Amba’s solid
position in providing analytical support to
securities dealers with Copal’s status as the
leading analytics partner for investment
banks, Moody’s outsourcing solution enables
a wide range of financial firms to deliver
top-quality work with fast turnaround — a
cost-effective means of improving our
customers’ ability to win business in highly
competitive and dynamic capital markets.
customers as they navigate a challenging
and ever-evolving landscape.
Our 2014 results validate our belief that as
the analytical demands of financial market
participants continue to expand and evolve,
our customers will become increasingly
reliant on MA for timely, market-leading
solutions to critical problems.
In terms of market recognition, MA was
named a “Top 10” company for the sixth
consecutive year in RiskTech100’s annual
risk technology firm rankings. Additional
awards for MA included recognition in
multiple categories of AsiaRisk Technology’s
rankings, including “Top Overall Vendor,”
and receipt of the Lawrence R. Klein award
by Moody’s economist John Lonski for
economic-forecasting accuracy. Our strong
results and market recognition reinforce our
conviction that MA’s focus on supporting
the risk management efforts of financial
institutions worldwide is enabling us to build
a leading position in a market that represents
a compelling business opportunity with solid
growth prospects.
We believe demand for our solutions will
remain robust for an extended period, and
we are confident in our ability to continue
to deliver solid growth and improving
profitability. We anticipate building on our
strong position and further establishing
MA as the category leader in assisting our
Looking Ahead
As we look forward, Moody’s is fulfilling an
increasingly important role as a standards
provider for credit analysis, insight and risk
solutions. All of Moody’s businesses are
distinctively positioned to assist borrowers,
lenders and investors in the efficient
allocation and management of risk capital.
It is the combination of closely tracking how
markets are evolving, effectively executing
around that evolution, and focusing on areas
that demand trusted standards that guides
Moody’s priorities.
I have spoken previously about the
disintermediation of financial assets
from banks into the bond market. This
disintermediation story is a multi-decade
driver of Moody’s business and is largely
responsible for the nearly 2,000 new
global rating relationships that Moody’s
has developed since the beginning of
2013. Historically, disintermediation has
been spurred by economic growth slowly
outstripping banking systems’ capacity to
meet capital demands. More recently, added
regulation such as capital adequacy rules and
stress-testing protocols has pressured the
profitability, availability and competitiveness
of bank loans vis-à-vis bonds. Corporations
and other entities react by identifying bond
markets as alternative or additional sources
MOODY’S 2014 ANNUAL REPORT
4
Moody’s 2014 Awards
Moody’s received more than a dozen prestigious awards
from industry journals around the world in 2014. Spanning
both Moody’s Investors Service and Moody’s Analytics, this
recognition helps expand Moody’s position as a leader in
the global capital markets and reflects the hard work and
contributions of all our employees.
Moody’s Investors Service Awards
#1 US Credit
Rating Agency:
2012, 2013, 2014
#1 Asia Credit
Rating Agency:
2012, 2013, 2014
Most Influential
Credit Rating Agency:
2013, 2014
#1 US Municipal
Research Team in Smith’s
All-Star Voting: 2014
Australia’s Rating
Agency of the Year:
2014
Moody’s Analytics Awards
TECH
FIN
R A N K I N G S
I D C F i n a n c i a l I n s i g h t s
Best Solvency II &
Best Data
Management
Solutions
Recognized as a
Top Solution
Provider
Top Risk Management
Regulatory / Economic
Capital Calculation
#1 Regulatory
Capital Calculation
& Management and
#1 Asset & Liability
Management
TECHNOLOGY RANKINGS
2014
#1 Basel III
Compliance and #1
Economic & Regulatory
Capital Calculation
Solutions
Financial Risk
Management Software
of the Year
#1 in
Organizational
Strength
Recognized as a
Top Solution
Provider
In Conclusion
Moody’s global network of employees has
grown substantially this year. In addition
to those who have come on board through
our normal hiring, I am pleased to welcome
new colleagues from our acquisitions of
WebEquity and Lewtan, as well as from our
investment in majority control of
ICRA. While last year I expressed sincere
thanks for the outstanding efforts of our
more than 8,000 employees, this year I
enthusiastically thank nearly 10,000
skilled professionals and dedicated
support staff.
Moody’s values of integrity, independence,
inclusion, insight and intellectual
leadership remain the foundation of our
culture. Respect for people and asking
them to share their ideas and perspectives
every day they come to work is the
foundation of who we are and what we
do. The opinions, ideas and perspectives
of every single employee matter at
Moody’s. We encourage diversity in
our synthesis of differing opinions and
points of view just as we applaud the
diversity of backgrounds and cultures
that our employees, new and old,
proudly represent.
Finally, I offer a heartfelt thank you to
Robert Glauber, who retired from
Moody’s Board of Directors in 2014
after over 15 years of dedicated service.
Bob’s rich experience with financial
markets and his insights as a former
policymaker and from academia
were invaluable to Moody’s. His
contributions will continue as positive
influences on Moody’s business for years
to come.
As always, I applaud our employees for
their many contributions, and our
shareholders for their steadfast support.
Our mission and responsibility remains
unchanged: to be the leading global authority
serving risk-sensitive financial markets.
Raymond W. McDaniel, Jr.
President & Chief Executive Officer
of capital and liquidity. Despite that, most of
the world remains highly “banked” and still in
the early stages of migrating from loan-based
to bond-based debt financing. MIS’s ratings
and research help create the credit vocabulary
and market standards that support this
evolution of capital markets as deep, liquid
sources of financing.
Changes in the financial institutions sector
also drive MA’s business. For example,
financial institutions are being asked to
meet more rigorous regulatory reporting
and stress-testing obligations. Scores
of new rules and regulations related to
risk measurement, risk management and
reporting are being implemented over the
next five years. The banking system leads
this process, but it is one that is likely to
have increasing impact in areas such as
insurance and asset management in the
years to come. Banks and other institutions
that began by looking for “answers” are
evolving to search for “processes” that can
satisfy internal and, importantly, external
oversight. This quest aligns closely with the
software products and related services being
developed by MA’s ERS business. It also
heightens the demand for MA’s data
and analytics services.
Finally, changes in regulation have raised
costs and curtailed various bank business
activities, which adds pressure to control
expenses for many institutions. High-quality
offshore research and related support
operations, such as those offered by our
Copal Amba business, meet those needs.
Financial institutions can continue to offer
robust research and analysis, but from an
offshore platform that brings the benefits
of a highly skilled and scaled labor force.
This expansion of our relevance to external
customers is accompanied by plans to
broaden Moody’s use of the Copal Amba
platform to drive efficiency in our internal
operations. Over the longer term, we
expect the outsourcing business to be an
important driver of revenue, and also to
provide a platform for increasing the
Corporation’s overall profitability.
The fundamental drivers of Moody’s
business are powerful and enduring.
Cyclical conditions will inevitably affect
short-term performance, but embedded
in those cycles is the drum-beat of structural
change. As we look ahead, Moody’s focus is
on this structural evolution, which guides how
we seek to interact with customers, how we
prioritize product development, and why we
stress superior execution in order to realize
the resulting long-term opportunities.
MOODY’S 2014 ANNUAL REPORT
6
Moody’s Corporation
DIRECTORS
Henry A. McKinnell, Jr., Ph.D.(1,2,3)
Chairman of the Board of Directors
Moody’s Corporation
Raymond W. McDaniel, Jr.(3)
President & Chief Executive Officer
Moody’s Corporation
Basil L. Anderson(1*,2,3)
Retired Vice Chairman
Staples, Inc.
Jorge A. Bermudez(1,2,3)
Retired Chief Risk Officer
Citigroup, Inc.
Darrell Duffie, Ph.D.(1,2,3*)
Dean Witter Distinguished
Professor of Finance
Stanford University Graduate
School of Business
Kathryn M. Hill(1,2,3)
Retired Senior Vice President
Cisco Systems Inc.
Ewald Kist(1,2,3)
Retired Chairman
ING Groep N.V. (ING Group)
Leslie F. Seidman(1,2,3)
Former Chairman
Financial Accounting Standards Board
John K. Wulff(1,2*,3)
Retired Chairman
Hercules Incorporated
EXECUTIVE OFFICERS
Raymond W. McDaniel, Jr.
President & Chief Executive Officer
Arthur N. Skelskie
Corporate Services
Chief Risk Officer
Richard Cantor
Executive Vice Presidents
John J. Goggins
General Counsel
Linda S. Huber
Chief Financial Officer
Senior Vice Presidents
Robert Fauber
Corporate & Commercial Development
Jeffrey R. Hare
Corporate Planning & Treasurer
Joseph (Jay) McCabe
Corporate Controller
Tony Stoupas
Chief Information Officer
Lisa S. Westlake
Chief Human Resources Officer
Blair L. Worrall
Ratings Delivery & Data
Vice Presidents
Thomas Fezza
Global Tax
Salli Schwartz
Investor Relations
BOARD COMMITTEES
1 Audit
2 Governance & Compensation
3 MIS
* Committee Chairman
7
MOODY’S 2014 ANNUAL REPORT
Chief Regulatory & Compliance Officer
Michael Kanef
Corporate Secretary
Jane B. Clark
Stockholders and other stakeholders may
communicate with the Board, or with a
specific director or directors, by writing to:
c/o Corporate Secretary
Moody’s Corporation
7 World Trade Center
250 Greenwich Street
New York, NY 10007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
.
OR
COMMISSION FILE NUMBER 1-14037
MOODY’S CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF INCORPORATION)
13-3998945
(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:
TITLE OF EACH CLASS
COMMON STOCK, PAR VALUE $.01 PER SHARE
NAME OF EACH EXCHANGE ON WHICH REGISTERED
NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í
Indicate by check mark whether the Registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes Í No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. ‘
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (see definition of “accelerated
filer and large accelerated filer” in Exchange Act Rule 12b-2).
Large Accelerated Filer Í Accelerated Filer ‘ Non-accelerated Filer ‘ Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í
The aggregate market value of Moody’s Corporation Common Stock held by nonaffiliates* on June 30, 2014 (based upon its closing transaction price on
the Composite Tape on such date) was approximately $18.3 billion.
As of January 31, 2015, 202.7 million shares of Common Stock of Moody’s Corporation were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for use in connection with its annual meeting of stockholders scheduled to be held on April 14,
2015, are incorporated by reference into Part III of this Form 10-K.
The Index to Exhibits is included as Part IV, Item 15(3) of this Form 10-K.
* Calculated by excluding all shares held by executive officers and directors of the Registrant without conceding that all such persons are “affiliates” of the
Registrant for purposes of federal securities laws.
MOODY’S 2014 10K
1
MOODY’S CORPORATION
INDEX TO FORM 10-K
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
PART I.
Glossary of Terms and Abbreviations
BUSINESS
Background
The Company
Prospects for Growth
Competition
Moody’s Strategy
Regulation
Intellectual Property
Employees
Available Information
Executive Officers of the Registrant
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Moody’s Purchase of Equity Securities
Common Stock Information and Dividends
Equity Compensation Plan Information
Performance Graph
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company
Critical Accounting Estimates
Reportable Segments
Results of Operations
Market Risk
Liquidity and Capital Resources
2015 Outlook
Recently Issued Accounting Pronouncements
Contingencies
Forward-Looking Statements
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
Item 9.
Item 9A.
Item 9B.
FINANCIAL STATEMENTS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
2
MOODY’S 2014 10K
Page(s)
4-9
10
10
10
10-12
12
12-13
13-14
14
14
15
15-16
17-22
22
22
23
23
24
24
25
25
26
27
28
28
28-35
35-36
36-46
47
48-53
53
54
54
54-55
55
56-109
110
110
110
Page(s)
111
111
111
111
111
112
113
114-117
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATION GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV.
SIGNATURES
INDEX TO EXHIBITS
Exhibits
filed Herewith
10.15
10.26
10.30
10.33
12
21
23.1
31.1
31.2
32.1
32.2
101.DEF
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
2004 Moody’s Corporation Covered Employee Cash Incentive Plan (as amended February 10, 2015)
Profit Participation Plan of Moody’s Corporation (amended and restated January 1, 2014)
Third Amendment to the Moody’s Corporation Career Transition Plan
Second Amendment to the Moody’s Corporation Cafeteria Plan (effective January 1, 2008)
Statement of Computation of Ratios of Earnings to Fixed Charges
SUBSIDIARIES OF THE REGISTRANT
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
XBRL Definitions Linkbase Document
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Labels Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
MOODY’S 2014 10K
3
GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:
Term
Definition
Adjusted Operating
Income
Adjusted Operating
Margin
Amba
Americas
AOCI
ASC
Operating income excluding restructuring, depreciation and amortization and a goodwill impairment charge
Adjusted Operating Income divided by revenue
Amba Investment Services; a provider of investment research and quantitative analytics for global financial
institutions; a subsidiary of the Company acquired 100% of Amba in December 2013.
Represents countries within North and South America, excluding the U.S.
Accumulated other comprehensive income (loss); a separate component of shareholders’ equity (deficit);
includes accumulated gains & losses on cash flow and net investment hedges, certain gains and losses relating
to pension and other retirement benefits obligations and foreign currency translation adjustments.
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 author-
itative GAAP for SEC registrants
Asia-Pacific
Represents countries in Asia also including but not limited to: Australia and its proximate islands, China, India,
Indonesia, Japan, Korea, Malaysia, Singapore and Thailand
ASU
Basel II
Basel III
Board
Bps
The FASB Accounting Standards Updates to the ASC. It also provides background information for accounting
guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until
codified into the ASC
Capital adequacy framework published in June 2004 by the Basel Committee on Banking Supervision
A new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel
Committee on Banking Supervision. Basel III was developed in a response to the deficiencies in financial regu-
lation revealed by the global financial crisis. Basel III strengthens bank capital requirements and introduces
new regulatory requirements on bank liquidity and bank leverage.
The board of directors of the Company
Basis points
Canary Wharf Lease
Operating lease agreement entered into on February 6, 2008 for office space in London, England, occupied by
the Company in the second half of 2009
CFG
CLO
CMBS
Corporate finance group; an LOB of MIS
Collateralized loan obligation
Commercial mortgage-backed securities; part of CREF
Commission
European Commission
Common Stock
The Company’s common stock
Company
Copal
Copal Amba
Council
COSO
4
MOODY’S 2014 10K
Moody’s Corporation and its subsidiaries; MCO; Moody’s
Copal Partners; an acquisition completed in November 2011; part of the MA segment; leading provider of
outsourced research and analytical services to institutional investors
Operating segment created in January 2014 that consists of all operations from Copal as well as the oper-
ations of Amba. The Copal Amba operating segment provides outsourced research and analytical services to
the global financial and corporate sectors
Council of the European Union
Committee of Sponsoring Organizations of the Treadway Commission
Term
CP
CRAs
CRA1
CRA2
CRA3
CREF
Definition
Commercial paper
Credit rating agencies
Regulation (EC) No 1060/2009 of the European Parliament and of the Council, establishing an oversight
regime for the CRA industry in the EU
Regulation (EC) No 513/2011 of the European Parliament and of the Council, which transferred direct super-
visory responsibility of the registered CRA industry in the EU to ESMA
Regulation (EC) No 462/2013 of the European Parliament and of the Council, which updated the regulatory
regimes imposing additional procedural requirements on CRAs
Commercial real estate finance which includes REITs, commercial real estate collateralized debt obligations
and CMBS; part of SFG
CreditView
CSI
Research product offered by MA that provides credit professionals a comprehensive, consolidated and stream-
lined view of credit information
CSI Global Education, Inc.; an acquisition completed in November 2010; part of the MA segment; a provider of
financial learning, credentials, and certification in Canada
D&B Business
Old D&B’s Dun & Bradstreet operating company
DBPPs
DCF
Defined benefit pension plans
Discounted cash flow; a fair value calculation methodology whereby future projected cash flows are dis-
counted back to their present value
Debt/EBITDA
Ratio of Total Debt to EBITDA
Directors’ Plan
The 1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan
Distribution Date
September 30, 2000; the date which Old D&B separated into two publicly traded companies – Moody’s Corpo-
ration and New D&B
EBITDA
Earnings before interest, taxes, depreciation and amortization
ECB
EMEA
EPS
ERS
ESMA
ESP
ESPP
ETR
EU
EUR
European Ratings
Platform
Excess Tax Benefit
European Central Bank
Represents countries within Europe, the Middle East and Africa
Earnings per share
The enterprise risk solutions LOB within MA; offers risk management software products as well as software
implementation services and related risk management advisory engagements
European Securities and Market Authority
Estimated Selling Price; estimate of selling price, as defined in the ASC, at which the vendor would transact if
the deliverable were sold by the vendor regularly on a stand-alone basis
The 1999 Moody’s Corporation Employee Stock Purchase Plan
Effective tax rate
European Union
Euros
Central credit ratings website administered by ESMA
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 that the option or restricted share is expensed under GAAP
Exchange Act
The Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
MOODY’S 2014 10K
5
Term
FIG
Fitch
Definition
Financial institutions group; an LOB of MIS
Fitch Ratings, a part of the Fitch Group
Financial Reform Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
Free Cash Flow
Net cash provided by operating activities less cash paid for capital additions
FSTC
FX
GAAP
GBP
GDP
ICRA
ICRA Gain
Financial Services Training and Certifications; a reporting unit within the MA segment that includes on-line
and classroom-based training services and CSI
Foreign exchange
U.S. Generally Accepted Accounting Principles
British pounds
Gross domestic product
ICRA Limited; a leading provider of credit ratings and research in India. The Company previously held 28.5%
equity ownership and in June 2014, increased that ownership stake to 50.06% through the acquisition of
additional shares
Gain relating to the step-acquisition of ICRA; U.S. GAAP requires the remeasurement to fair value of the pre-
viously held non-controlling shares upon obtaining a controlling interest in a step-acquisition. This
remeasurement of the Company’s equity investment in ICRA to fair value resulted in a pre-tax gain of $102.8
million ($78.5 million after tax) in the second quarter of 2014
Intellectual Property
The Company’s intellectual property, including but not limited to proprietary information, trademarks,
research, software tools and applications, models and methodologies, databases, domain names, and other
proprietary materials
IRS
IT
KIS
KIS Pricing
Internal Revenue Service
Information technology
Korea Investors Service, Inc.; a leading Korean rating agency and consolidated subsidiary of the Company
Korea Investors Service Pricing, Inc.; a Korean provider of fixed income securities pricing and consolidated sub-
sidiary of the Company
Korea
Republic of South Korea
Legacy Tax Matter(s)
Exposures to certain potential tax liabilities assumed in connection with the 2000 Distribution
Lewtan
LIBOR
LOB
Lewtan Technologies; a leading provider of analytical tools and data for the global structured finance market;
an acquisition completed in October 2014
London Interbank Offered Rate
Line of Business
6
MOODY’S 2014 10K
Term
MA
Definition
Moody’s Analytics – a reportable segment of MCO formed in January 2008 which provides a wide range of
products and services that support financial analysis and risk management activities of institutional partic-
ipants in global financial markets
M&A
Mergers and acquisitions
Make Whole Amount
The prepayment penalty relating to the Series 2005-1 Notes and Series 2007-1 Notes; a premium based on
the excess, if any, of the discounted value of the remaining scheduled payments over the prepaid principal
MCO
MD&A
MIS
MIS Other
Moody’s
Net Income
Moody’s Corporation and its subsidiaries; the Company; Moody’s
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Moody’s Investors Service – a reportable segment of MCO
Consists of non-ratings revenue from ICRA, KIS Pricing and KIS Research. These businesses are managed by
MIS; an LOB of MIS
Moody’s Corporation and its subsidiaries; MCO; the Company
Earnings attributable to Moody’s Corporation, which excludes the portion of net income from consolidated
entities attributable to non-controlling shareholders
New D&B
The New D&B Corporation – which comprises the D&B business after September 30, 2000
NM
NRSRO
OCI
Old D&B
Not-meaningful percentage change (over 400%)
Nationally Recognized Statistical Rating Organization
Other comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, certain
gains and losses relating to pension and other retirement benefit obligations and foreign currency translation
adjustments.
The former Dun and Bradstreet Company which distributed New D&B shares on September 30, 2000, and was
renamed Moody’s Corporation
Other Retirement Plans The U.S. retirement healthcare and U.S. retirement life insurance plans
PPIF
Public, project and infrastructure finance; an LOB of MIS
Profit Participation Plan Defined contribution profit participation plan that covers substantially all U.S. employees of the Company
PPP
PS
Profit Participation Plan
Professional Services; an LOB of MA
Redeemable
Noncontrolling Interest
Represents minority shareholders’ interest in entities which are controlled but not wholly-owned by Moody’s
and for which Moody’s obligation to redeem the minority shareholders’ interest is represented by a put/call
relationship
Reform Act
Credit Rating Agency Reform Act of 2006
REITs
Real estate investment trusts
Relationship Revenue
In MIS, excluding MIS Other, relationship revenue represents the recurring monitoring of a rated debt obliga-
tion and/or entities that issue such obligations, as well as revenue from programs such as commercial paper,
medium-term notes and shelf registrations. In MIS Other, relationship revenue represents subscription-based
revenue. For MA, relationship revenue represents subscription-based revenue and maintenance revenue
Reorganization
Retirement Plans
The Company’s business reorganization announced in August 2007 which resulted in two new reportable
segments (MIS and MA) beginning in January 2008
Moody’s funded and unfunded U.S. pension plans, the U.S. post-retirement healthcare plans and the U.S. post-
retirement life insurance plans
RMBS
Residential mortgage-backed securities; part of SFG
MOODY’S 2014 10K
7
Term
S&P
SEC
Definition
Standard & Poor’s, a division of McGraw-Hill Financial, Inc.
Securities and Exchange Commission
Securities Act
Securities Act of 1933
Series 2005-1 Notes
Principal amount of $300 million, 4.98% senior unsecured notes; notes were paid in 2014
Series 2007-1 Notes
Principal amount of $300 million, 6.06% senior unsecured notes due in September 2017 pursuant to the 2007
Agreement
SFG
SG&A
SIV
Stock Plans
Total Debt
TPE
Structured finance group; an LOB of MIS
Selling, general and administrative expenses
Structured Investment Vehicle
The Old D&B’s 1998 Key Employees’ Stock Incentive Plan and the Restated 2001 Moody’s Corporation Key
Employees’ Stock Incentive Plan
Current and long-term portion of debt as reflected on the consolidated balance sheets, excluding current
accounts payable and accrued liabilities incurred in the ordinary course of business
Third party evidence, as defined in the ASC, used to determine selling price based on a vendor’s or any com-
petitor’s largely interchangeable products or services in standalone sales transactions to similarly situated
customers
Transaction Revenue
For MIS, excluding MIS Other, revenue representing the initial rating of a new debt issuance as well as other
one-time fees. In MIS Other, transaction revenue represents revenue from professional services and out-
sourcing engagements. For MA, transaction revenue represents software license fees and revenue from risk
management advisory projects, training and certification services, and knowledge outsourcing engagements
U.K.
U.S.
USD
UTBs
UTPs
VSOE
WACC
WebEquity
United Kingdom
United States
U.S. dollar
Unrecognized tax benefits
Uncertain tax positions
Vendor specific objective evidence; evidence, as defined in the ASC, of selling price limited to either of the
following: the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold
separately, the price established by management having the relevant authority
Weighted average cost of capital
WebEquity Solutions LLC; a leading provider of cloud-based loan origination solutions for financial institutions.
The Company acquired WebEquity on July 17, 2014
1998 Plan
Old D&B’s 1998 Key Employees’ Stock Incentive Plan
2000 Distribution
2000 Distribution
Agreement
The distribution by Old D&B to its shareholders of all of the outstanding shares of New D&B common stock
on September 30, 2000
Agreement governing certain ongoing relationships between the Company and New D&B after the 2000 Dis-
tribution including the sharing of any liabilities for the payment of taxes, penalties and interest resulting from
unfavorable IRS determinations on certain tax matters and certain other potential tax liabilities
2001 Plan
The Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan
2005 Agreement
Note purchase agreement dated September 30, 2005 relating to the Series 2005-1 Notes
8
MOODY’S 2014 10K
Term
Definition
2007 Agreement
Note purchase agreement dated September 7, 2007 relating to the Series 2007-1 Notes
2007 Facility
Revolving credit facility of $1 billion entered into on September 28, 2007, expiring in 2012
2008 Term Loan
Five-year $150.0 million senior unsecured term loan entered into by the Company on May 7, 2008
2010 Indenture
Supplemental indenture and related agreements dated August 19, 2010, relating to the 2010 Senior Notes
2010 Senior Notes
Principal amount of $500.0 million, 5.50% senior unsecured notes due in September 2020 pursuant to the
2010 Indenture
2012 Facility
Revolving credit facility of $1 billion entered into on April 18, 2012, maturing in 2017
2012 Indenture
Supplemental indenture and related agreements dated August 18, 2012, relating to the 2012 Senior Notes
2012 Senior Notes
Principal amount of $500 million, 4.50% senior unsecured notes due in September 2022 pursuant to the 2012
Indenture
2013 Indenture
Supplemental indenture and related agreements dated August 12, 2013, relating to the 2013 Senior Notes
2013 Senior Notes
Principal amount of $500 million, 4.875% senior unsecured notes due in February 2024 pursuant to the 2013
Indenture
2014 Indenture
Supplemental indenture and related agreements dated July 16, 2014, relating to the 2014 Senior Notes
2014 Senior Notes
(5-Year)
2014 Senior Notes
(30-Year)
Principal amount of $450 million, 2.75% senior unsecured notes due in July 2019
Principal amount of $300 million, 5.25% senior unsecured notes due in July 2044
7WTC
The Company’s corporate headquarters located at 7 World Trade Center
7WTC Lease
Operating lease agreement entered into on October 20, 2006
MOODY’S 2014 10K
9
PART I
ITEM 1. BUSINESS
BACKGROUND
As used in this report, except where the context indicates otherwise, the terms “Moody’s” or the “Company” refer to Moody’s Corpo-
ration, a Delaware corporation, and its subsidiaries. The Company’s executive offices are located at 7 World Trade Center at 250
Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300.
THE COMPANY
Moody’s is a provider of (i) credit ratings, (ii) credit, capital markets and economic related research, data and analytical tools,
(iii) software solutions and related risk management services, (iv) quantitative credit risk measures, financial services training and
certification services and (v) outsourced research and analytical services to financial institution customers. Moody’s reports in two
reportable segments: MIS and MA. Financial information and operating results of these segments, including revenue, expenses and
operating income, are included in Part II, Item 8. Financial Statements of this annual report, and are herein incorporated by reference.
MIS publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide, includ-
ing various corporate and governmental obligations, structured finance securities and commercial paper programs. Ratings revenue is
derived from the originators and issuers of such transactions who use MIS ratings to support the distribution of their debt issues to
investors. MIS provides ratings in more than 120 countries. Ratings are disseminated via press releases to the public through a variety of
print and electronic media, including the Internet and real-time information systems widely used by securities traders and investors. As
of December 31, 2014, MIS had ratings relationships with approximately 11,000 corporate issuers and approximately 21,000 public
finance issuers. Additionally, the Company has rated and currently monitors ratings on approximately 72,000 structured finance obliga-
tions (representing approximately 12,000 transactions). The aforementioned amounts relating to the number of issuers and trans-
actions represent issuers or transactions that had an active rating at any point during the year ended December 31, 2014. Additionally,
MIS earns revenue from certain non-ratings-related operations which consist primarily of the distribution of research and fixed income
pricing services in the Asia-Pacific region and from ICRA non-ratings services. The revenue from these operations is included in the MIS
Other LOB and is not material to the results of the MIS segment.
The MA segment develops a wide range of products and services that support financial analysis and risk management activities of
institutional participants in global financial markets. Within its Research, Data and Analytics business, MA distributes research and data
developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies, commentary on
topical credit related events and also provides economic research and credit data and analytical tools such as quantitative credit risk
scores. Within its Enterprise Risk Solutions business, MA provides software solutions as well as related risk management services. Within
its Professional Services business it provides outsourced research and analytical services along with financial training and certification
programs. MA customers represent more than 4,700 institutions worldwide operating in approximately 130 countries. During 2014
Moody’s research web site was accessed by over 245,000 individuals including 33,000 client users.
The Company operated as part of “Old D&B” until September 30, 2000, when Old D&B separated into two publicly traded companies –
Moody’s Corporation and New D&B. At that time, Old D&B distributed to its shareholders shares of New D&B stock. New D&B com-
prised the business of Old D&B’s Dun & Bradstreet operating company. The remaining business of Old D&B consisted solely of the
business of providing ratings and related research and credit risk management services and was renamed Moody’s Corporation. For
purposes of governing certain ongoing relationships between the Company and New D&B after the 2000 Distribution, the Company
and New D&B entered into various agreements including a distribution agreement, tax allocation agreement and employee benefits
agreement.
PROSPECTS FOR GROWTH
Over recent decades, global fixed-income markets have grown significantly both in terms of the amount and the types of securities or
other obligations outstanding. Beginning in mid-2007, there was a severe market disruption and associated financial crisis both in the
10
MOODY’S 2014 10K
developed and emerging markets resulting in a global decline in issuance activity for some significant asset classes and weak economic
performance in advanced economies. Since this financial crisis, many markets and economies have recovered and Moody’s believes that
the overall long-term outlook remains favorable for continued growth of the global fixed-income market and related financial
information market, which includes information such as credit opinions, research, data, analytics, risk management tools and related
services.
Moody’s growth is influenced by a number of trends that impact financial information markets including:
» Health of the world’s major economies;
» Debt capital markets activity;
» Disintermediation of credit markets;
» Fiscal and monetary policy of governments;
» Changing regulatory requirements; and
» Business investment spending.
Moody’s is well positioned to benefit from a continued growth in global fixed-income market activity and a more informed use of credit
ratings as well as research and related analytical products in an environment with heightened attention to credit risk analysis and
management. Moody’s expects that these developments will support continued long-term demand for high-quality, independent credit
opinions, research, data, analytics, risk management tools and related services.
Strong secular trends should continue to provide long-term growth opportunities. Moody’s key growth drivers include debt market issu-
ance driven by global GDP growth, continued disintermediation of fixed-income markets in both developed and emerging economies
that drives issuance and demand for new products and services, growth in MA driven by further penetration into MA’s client base and
expansion of bank and insurance risk regulatory requirements, pricing opportunities aligned with value and advances in information
technology.
Growth in global fixed income markets in a given year is dependent on many macroeconomic and capital market factors including inter-
est rates, business investment spending, corporate refinancing needs, merger and acquisition activity, issuer profits, consumer borrowing
levels and securitization activity. Rating fees paid by debt issuers account for most of the revenue of MIS. Therefore, a substantial por-
tion of MIS’s revenue is dependent upon the dollar-equivalent volume and number of ratable debt securities issued in the global capital
markets. MIS’s results can be affected by factors such as the performance and prospects for growth of the major world economies, the
fiscal and monetary policies pursued by their governments and the decisions of issuers to request MIS ratings to aid investors in their
investment decisions. However, annual fee arrangements with frequent debt issuers, annual debt monitoring fees and annual fees from
commercial paper and medium-term note programs, bank and insurance company financial strength ratings, mutual fund ratings, and
other areas partially mitigate MIS’s dependence on the volume or number of new debt securities issued in the global fixed-income
markets. Furthermore, the strong growth seen in the issuance of structured finance securities from the mid-1990’s reversed dramati-
cally in 2008 due to market turmoil, with continued declines seen in 2009 and 2010, before stabilizing in 2011 with Moody’s experienc-
ing revenue growth in this market beginning in 2012. Despite significant declines from peak market issuance levels, Moody’s believes
that structured finance securities will continue to play a role in global fixed-income markets and provide opportunities for longer term
revenue growth. Moody’s will continue to monitor this market and adapt to meet the changing needs of its participants.
The pace of change in technology and communication over the past two decades makes information about investment alternatives
widely available throughout the world and facilitates issuers’ ability to place securities outside their national markets and investors’
capacity to obtain information about securities issued outside their national markets. Technology also allows issuers and investors the
ability to more readily obtain information about new financing techniques and new types of securities that they may wish to purchase
or sell, which in the absence of the appropriate technology may not be readily or easily obtainable. This availability of information
promotes the ongoing integration and expansion of financial markets worldwide giving issuers and investors access to a wider range of
established and newer capital markets. As technology provides broader access to worldwide markets, it also results in a greater need for
credible, globally comparable opinions about credit risk, data, analytics and related services. Additionally, information technology also
provides opportunities to further build a global platform to support Moody’s continued expansion in developing markets.
An ongoing trend in the world’s capital markets is the disintermediation of financial systems. Issuers increasingly raise capital in the
global public capital markets, in addition to, or in substitution for, traditional financial intermediaries. Moreover, financial intermediaries
have sold assets in the global public capital markets, in addition to, or instead of, retaining those assets. Moody’s believes that debt
capital markets offer advantages in capacity and efficiency compared to the traditional banking systems and that the trend of increased
disintermediation will continue. Further, disintermediation has continued because of the ongoing low interest rate environment and
bank deleveraging, which has encouraged a number of corporations and other entities to seek alternative funding in the bond markets.
MOODY’S 2014 10K
11
Moody’s also observes disintermediation in key emerging markets where economic growth may outpace internal banking system
capacity. Thus, disintermediation is expected to continue over the longer-term, with Moody’s targeting investment and resources to
those markets where disintermediation and bond issuance is expected to remain robust.
In response to the credit market disruptions beginning in mid-2007 and, ongoing volatility in the global capital markets, and new regu-
latory requirements, financial institutions are investing in people, processes and systems to enhance risk management and compliance
functions. Regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, Basel II, Basel III, Solvency II and oth-
ers may stimulate demand for MA products. Financial institutions are also investing in advanced qualitative and quantitative tools and
services to support their management of complex balance sheets and diverse portfolios as well as operating costs. MA offers a suite of
risk management products and services to address these needs, including but not limited to risk management software, economic
analysis, training and professional services.
Legislative bodies and regulators in the U.S., Europe and other jurisdictions continue to conduct regulatory reviews of CRAs, which may
result in, for example, an increased number of competitors, changes to the business model or restrictions on certain business activities
of MIS, removal of references to ratings in certain regulations, or increased costs of doing business for MIS. Therefore, in order to
broaden the potential for expansion of non-ratings services, Moody’s reorganized in January 2008 into two distinct businesses: MIS,
consisting primarily of the ratings business, and MA, which conducts activities including the sale of credit research produced by MIS and
the production and sale of other economic and credit-related products and services. The reorganization broadens the opportunities for
expansion by MA into activities that may have otherwise been restricted for MIS, due to the potential for conflicts of interest with the
ratings business. At present, Moody’s is unable to assess the nature and effect that any regulatory changes may have on future growth
opportunities.
Moody’s operations are subject to various risks, as more fully described in Part I, Item 1A “Risk Factors,” inherent in conducting business
on a global basis. Such risks include currency fluctuations and possible nationalization, expropriation, exchange and price controls,
changes in the availability of data from public sector sources, limits on providing information across borders and other restrictive gov-
ernmental actions.
COMPETITION
MIS competes with other CRAs and with investment banks and brokerage firms that offer credit opinions and research. Many users of
MIS’s ratings also have in-house credit research capabilities. MIS’s largest competitor in the global credit rating business is Standard &
Poor’s Ratings Services (S&P), a division of McGraw Hill Financial. There are some rating markets, based on industry, geography and/or
instrument type, in which Moody’s has made investments and obtained market positions superior to S&P, while in other markets, the
reverse is true.
In addition to S&P, MIS’s competitors include Fitch Ratings, Dominion Bond Rating Service, A.M. Best Company, Japan Credit Rating
Agency Ltd., Kroll Bond Rating Agency Inc., Morningstar Inc. and Egan-Jones Ratings Company. In Europe, examples of competitors
include Euler Hermes Rating, Feri EuroRating Services AG, Creditreform Rating AG, ICAP Group and Companhia Portuguesa de Rating.
There are additional competitors in other regions and countries, for example, in China, where Moody’s operates through a joint venture.
These competitors include China Lianhe Credit Rating Co Ltd., Shanghai Brilliance Credit Rating & Investors Service Co Ltd., Dagong
Global Credit Rating Co Ltd. and Pengyuan Credit Rating Co Ltd.
MA competes broadly in the financial information industry against diversified competitors such as Thomson Reuters, Bloomberg, S&P
Capital IQ, Fitch Solutions, Dun & Bradstreet, IBM, Wolters Kluwer, Sungard, SAS, Fiserv, MSCI and Markit Group among others. MA’s
main competitors within RD&A include S&P Capital IQ, CreditSights, Thomson Reuters, Intex, IHS Global Insight, BlackRock Solutions,
FactSet and other providers of fixed income analytics, valuations, economic data and research. In ERS, MA faces competition from both
large software providers such as IBM Algorithmics, SunGard, SAS, Oracle, Misys, Oliver Wyman, Verisk and various other vendors and
in-house solutions. Within Professional Services, MA competes with Omega Performance, DC Gardner, and a host of financial training
and education firms, and with Evalueserve, CRISIL Global Research & Analytics, and other providers of outsourced research and pro-
fessional services, respectively.
MOODY’S STRATEGY
Moody’s corporate strategy is to be the world’s most respected authority serving financial risk-sensitive markets. The key aspects to
implement this strategy are to:
» Defend and enhance the core ratings and research business of MIS;
» Build MA’s position as a leading provider of risk management solutions to financial institutions; and
» Invest in strategic growth opportunities.
12
MOODY’S 2014 10K
Moody’s will make investments to defend and enhance its core businesses in an attempt to position the Company to fully capture
market opportunities resulting from global debt capital market expansion and increased business investment spending. Moody’s will
also make strategic investments to achieve scale in attractive financial information markets, move into attractive product and service
adjacencies where the Company can leverage its brand, extend its thought leadership and expand its geographic presence in high
growth emerging markets.
To broaden the Company’s potential, MA provides a wide range of products and services to enable financial institutions to better
manage risk. As such, MA adds to the Company’s value proposition in three ways. First, MA’s subscription businesses provide a sig-
nificant base of recurring revenue to offset cyclicality in ratings issuance volumes that may result in volatility to MIS’s revenues. Sec-
ond, MA products and services, such as financial training and professional services on research and risk management best practices,
provide opportunities for entry into emerging markets before debt capital markets fully develop and thus present long-term growth
opportunities for the ratings business. Finally, MA’s integrated risk management software platform embeds Moody’s solutions deep into
the technology infrastructure of banks and insurance companies worldwide.
Moody’s invests in initiatives to implement the Company’s strategy, including internally-led organic development and targeted acquis-
itions. Example initiatives include:
» Enhancements to ratings quality and product extensions;
» Investments that extend ownership and participation in joint ventures and strategic alliances;
» Headcount growth to meet customer demand for new products and services;
» Selective, bolt-on acquisitions that accelerate the ability to scale and grow Moody’s businesses; and
» Expansion in emerging markets.
During 2014, Moody’s completed several strategic transactions in MIS and MA. In June, Moody’s secured majority control of ICRA Ltd.,
which is a leading provider of credit ratings and research in India, increasing its ownership position from 28.5% to just over 50.0%. In
December, Moody’s completed the acquisition of the remaining outstanding interest of Copal Amba (formed through the acquisitions
of Copal Partners in 2011 and Amba Investment Services in 2013) and now owns 100% of the company.
Moody’s also made two acquisitions in MA to enhance and expand its product and service offerings to enable financial institutions to
better manage risk. In July, Moody’s acquired WebEquity Solutions, LLC, which is a leading provider of cloud-based loan origination
solutions for financial institutions. The WebEquity acquisition strengthens MA’s position as a leader in loan origination software and
bolsters its suite of award-winning risk management products for banks, insurance companies and corporations. In October, Moody’s
acquired Lewtan Technologies, which is a leading provider of analytical tools and data for the global structured finance market. Lewtan
provides solutions to issuers, investors, underwriters and others to administer, monitor and value securitized transactions.
REGULATION
MIS and many of the securities that it rates are subject to extensive regulation in both the U.S. and in other countries (including by
state and local authorities). Thus, existing and proposed laws and regulations can impact the Company’s operations and the markets for
securities that it rates. Additional laws and regulations have been adopted but not yet implemented or have been proposed or are being
considered. Each of the existing, adopted, proposed and potential laws and regulations can increase the costs and legal risk associated
with the issuance of credit ratings and may negatively impact Moody’s operations or profitability, the Company’s ability to compete, or
result in changes in the demand for credit ratings, in the manner in which ratings are utilized and in the manner in which Moody’s
operates.
The regulatory landscape has changed rapidly in recent years, and continues to evolve. In the EU, the CRA industry is registered and
supervised through a pan-European regulatory framework. The European Securities and Markets Authority has direct supervisory
responsibility for the registered CRA industry throughout the EU. MIS is a registered entity and is therefore subject to formal regulation
and periodic inspection. Applicable rules include procedural requirements with respect to ratings of sovereign issuers, liability for inten-
tional or grossly negligent failure to abide by applicable regulations, mandatory rotation requirements of CRAs hired by issuers of secu-
rities for ratings of resecuritizations, restrictions on CRAs or their shareholders if certain ownership thresholds are crossed, and
additional procedural and substantive requirements on the pricing of services.
On January 6, 2015, two additional rules (generally referred to as “Regulatory Technical Standards” or “RTSs”) of direct relevance to the
CRA industry were published in the Official Journal of the European Union: (i) CRAs’ reporting requirements to ESMA on their fees; and
(ii) the types of information that CRAs are to provide about certain ratings (those that were paid for by issuers) for publication on a
central website administered by ESMA (the European Ratings Platform). The RTSs were the final pieces of the rulemaking requirements
MOODY’S 2014 10K
13
that CRA3 imposed on ESMA and the EU’s legislative tripartite (the European Commission, the European Parliament and the Council of
the European Union). Separately, CRA3 also requires that ESMA and / or the European Commission produce several reports on the
industry’s structure and the use of ratings. These reports are expected to be published by year end 2015.
In the U.S., CRAs are subject to extensive regulation primarily pursuant to the Reform Act and the Financial Reform Act. The SEC is
required by these legislative acts to publish two annual reports to Congress on NRSROs. The Financial Reform Act requires the SEC to
examine each NRSRO once a year and issue an annual report summarizing the examination findings, among other requirements. The
annual report required by the Reform Act details the SEC’s views on the state of competition, transparency and conflicts of interests
among NRSROs, among other requirements.
The SEC voted in August 2014 to adopt its final rules for NRSROs as required by the Financial Reform Act. The final rules differ from
earlier proposals by including additional measures regarding: (i) sales and marketing activities; and (ii) the design and enforcement of
internal controls for the rating process. The Company has made and continues to make substantial IT and other investments. Con-
sequently, the Company will be in a position to implement the relevant compliance obligations by the set deadlines, generally ranging
from 60 days to 9 months following the September 15, 2014 publication of the final rules in the Federal Register.
In light of the regulations that have gone into effect in both the EU and the U.S. (as well as many other countries), from time to time
and as a matter of course pursuant to their enabling legislation these regulatory authorities have and will continue to publish reports
that describe their oversight activities over the industry. In addition, other legislation and regulation relating to credit rating and
research services is being considered by local, national and multinational bodies and this type of activity is likely to continue in the
future. Finally, in certain countries, governments may provide financial or other support to locally-based rating agencies. For example,
governments may from time to time establish official rating agencies or credit ratings criteria or procedures for evaluating local issuers.
If enacted, any such legislation and regulation could change the competitive landscape in which MIS operates. The legal status of rating
agencies has been addressed by courts in various decisions and is likely to be considered and addressed in legal proceedings from time
to time in the future. Management of the Company cannot predict whether these or any other proposals will be enacted, the outcome
of any pending or possible future legal proceedings, or regulatory or legislative actions, or the ultimate impact of any such matters on
the competitive position, financial position or results of operations of Moody’s.
INTELLECTUAL PROPERTY
Moody’s and its affiliates own and control a variety of intellectual property, including but not limited to proprietary information, trade-
marks, research, software tools and applications, models and methodologies, databases, domain names, and other proprietary materials
that, in the aggregate, are of material importance to Moody’s business. Management of Moody’s believes that each of the trademarks
and related corporate names, marks and logos containing the term “Moody’s” are of material importance to the Company.
The Company, primarily through MA, licenses certain of its databases, software applications, credit risk models, training courses in
credit risk and capital markets, research and other publications and services that contain Intellectual Property to its customers. These
licenses are provided pursuant to standard fee-bearing agreements containing customary restrictions and intellectual property pro-
tections.
In addition, Moody’s licenses certain technology and other intellectual property rights owned and controlled by others. Specifically,
Moody’s licenses financial information (such as market and index data, financial statement data, third party research, default data, and
security identifiers) as well as software development tools and libraries. The Company obtains such technology and intellectual prop-
erty rights from generally available commercial sources. Most of such technology and intellectual property is available from a variety of
sources. Although certain financial information (particularly security identifiers and certain pricing or index data) is available only from
a limited number of sources, Moody’s does not believe it is dependent on any one data source for a material aspect of its business.
The Company considers its Intellectual Property to be proprietary, and Moody’s relies on a combination of copyright, trademark, trade
secret, patent, non-disclosure and other contractual safeguards for protection. Moody’s also pursues instances of third-party infringe-
ment of its Intellectual Property in order to protect the Company’s rights. The Company owns two patents. None of the Intellectual
Property is subject to a specific expiration date, except to the extent that the patents and the copyright in items that the Company
authors (such as credit reports, research, software, and other written opinions) expire pursuant to relevant law.
The names of Moody’s products and services referred to herein are trademarks, service marks or registered trademarks or service marks
owned by or licensed to Moody’s or one or more of its subsidiaries.
EMPLOYEES
As of December 31, 2014 the number of full-time equivalent employees of Moody’s was approximately 9,900.
14
MOODY’S 2014 10K
AVAILABLE INFORMATION
Moody’s investor relations Internet website is http://ir.moodys.com/. Under the “SEC Filings” tab at this website, the Company makes
available free of charge its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports as soon as reasonably practicable after they are filed with, or furnished to, the SEC.
The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and other information statements that the
Company files electronically with the SEC. The SEC’s internet site is http://www.sec.gov/.
Executive Officers of the Registrant
Name, Age and Position
Biographical Data
Mark E. Almeida, 55
President, Moody’s Analytics
Richard Cantor, 57
Chief Risk Officer
Robert Fauber, 44
Senior Vice President,
Corporate and Commercial
Development
John J. Goggins, 54
Executive Vice President
and General Counsel
Linda S. Huber, 56
Executive Vice President
and Chief Financial Officer
Mr. Almeida has served as President of Moody’s Analytics since January 2008. Prior to this position,
Mr. Almeida was Senior Vice President of Moody’s Corporation from August 2007 to January 2008,
Senior Managing Director of the Investor Services Group (ISG) at Moody’s Investors Service, Inc.
from December 2004 to January 2008 and was Group Managing Director of ISG from June 2000 to
December 2004. Mr. Almeida joined Moody’s Investors Service, Inc. in April 1988 and has held a
variety of positions with the company in both the U.S. and overseas.
Mr. Cantor has served as Chief Risk Officer of Moody’s Corporation since December 2008 and as
Chief Credit Officer of Moody’s Investors Service, Inc. since November 2008. From July 2008 to
November 2008, Mr. Cantor served as Acting Chief Credit Officer. Prior thereto, Mr. Cantor was
Managing Director of Moody’s Credit Policy Research Group from June 2001 to July 2008, after serv-
ing as Senior Vice President in the Financial Guarantors Rating Group. Mr. Cantor joined Moody’s in
1997 from the Federal Reserve Bank of New York, where he served as Assistant Vice President in the
Research Group and was Staff Director at the Discount Window. Prior to the Federal Reserve, Mr.
Cantor taught Economics at UCLA and Ohio State and has taught on an adjunct basis at the busi-
ness schools of Columbia University and New York University.
Mr. Fauber has served as Senior Vice President—Corporate & Commercial Development since April
2014 and has been Head of the MIS Commercial Group since January 2013. From April 2009
through April 2014 he served as Senior Vice President—Corporate Development of Moody’s Corpo-
ration. Mr. Fauber served as Vice President-Corporate Development from September 2005 to April
2009. Prior to joining Moody’s, Mr. Fauber served in several roles at Citigroup from 1999 to 2005,
including most recently, Director of Planning and Business Development for Citigroup’s Alternative
Investments division. Prior to that, Mr. Fauber worked as a Director in Corporate Strategy & Business
Development for Citigroup and a Vice President and Associate in the Financial Sponsor and Telecom
investment banking groups at the firm’s Salomon Smith Barney subsidiary. From 1992-1996,
Mr. Fauber worked at NationsBank (now Bank of America), working in the middle market commer-
cial banking group and also ran the firm’s Global Finance college recruiting program in 1997.
Mr. Goggins has served as the Company’s Executive Vice President and General Counsel since April
2011 and the Company’s Senior Vice President and General Counsel from October 2000 until April
2011. Mr. Goggins joined Moody’s Investors Service, Inc. in February 1999 as Vice President and
Associate General Counsel. Prior thereto, he served as counsel at Dow Jones & Company from 1995
to 1999, where he was responsible for securities, acquisitions and general corporate matters. Prior to
Dow Jones, he was an associate at Cadwalader, Wickersham & Taft from 1985 to 1995, where he
specialized in mergers and acquisitions.
Ms. Huber has served as the Company’s Executive Vice President and Chief Financial Officer since
May 2005. Prior thereto, she served as Executive Vice President and Chief Financial Officer at U.S.
Trust Company, a subsidiary of Charles Schwab & Company, Inc., from 2003 to 2005. Prior to U.S.
Trust, she was Managing Director at Freeman & Co. from 1998 through 2002. She served PepsiCo as
Vice President of Corporate Strategy and Development from 1997 until 1998 and as Vice President
and Assistant Treasurer from 1994 until 1997. She served as Vice President in the Energy Investment
Banking Group at Bankers Trust Company from 1991 until 1994 and as an Associate in the Energy
Group at First Boston Corporation from 1986 through 1990. She also held the rank of Captain in the
U.S. Army where she served from 1980 to 1984.
MOODY’S 2014 10K
15
Name, Age and Position
Biographical Data
Michel Madelain, 59
President and
Chief Operating Officer,
Moody’s Investors Service
Joseph (Jay) McCabe, 64
Senior Vice President,
Corporate Controller
Raymond W. McDaniel, Jr., 57
President and
Chief Executive Officer
Lisa S. Westlake, 53
Senior Vice President and
Chief Human Resource Officer
Blair L. Worrall, 58
Senior Vice President,
Ratings Delivery and Data
Mr. Madelain has served as President of Moody’s Investors Service Inc. since November 2010 and as
Chief Operating Officer since May 2008. Prior to this, Mr. Madelain served as Executive Vice Presi-
dent, Fundamental Ratings from September 2007 to May 2008, with responsibility for all Global
Fundamental Ratings, including Corporate Finance, Financial Institutions, Public Finance and Infra-
structure Finance. He managed the Financial Institutions group from March 2007 until September
2007. Mr. Madelain served as Group Managing Director, EMEA Corporate Ratings from November
2000 to March 2007 and prior thereto held several Managing Director positions in the U.S. and U.K.
Fundamental Rating Groups. Prior to joining Moody’s in 1994, Mr. Madelain served as a Partner of
Ernst & Young, Auditing Practice. Mr. Madelain is qualified as a Chartered Accountant in France.
Mr. McCabe has served as the Company’s Senior Vice President—Corporate Controller since
December 2005. Mr. McCabe joined Moody’s in July 2004 as Vice President and Corporate Con-
troller. Before joining the Company, he served as Vice President—Corporate Controller at PPL
Corporation, an energy and utility holding company, from 1994 to 2003. Prior to PPL Corporation,
he served Deloitte & Touche as Partner from 1984 to 1993 and as a member of the firm’s audit
practice from 1973 to 1984.
Mr. McDaniel has served as the President and Chief Executive Officer of the Company since April
2012, and served as the Chairman and Chief Executive Officer from April 2005 until April 2012. He
currently serves on the MIS Committee of the Board of Directors. Mr. McDaniel served as the
Company’s President from October 2004 until April 2005 and the Company’s Chief Operating Offi-
cer from January 2004 until April 2005. He has served as Chairman and Chief Executive Officer of
Moody’s Investors Service, Inc., a subsidiary of the Company, since October 2007 and held the addi-
tional title of President from November 2001 to August 2007 and December 2008 to November
2010. Mr. McDaniel served as the Company’s Executive Vice President from April 2003 to January
2004, and as Senior Vice President, Global Ratings and Research from November 2000 until April
2003. He served as Senior Managing Director, Global Ratings and Research, of Moody’s Investors
Service from November 2000 until November 2001 and as Managing Director, International from
1996 to November 2000. Mr. McDaniel currently is a Director of John Wiley & Sons, Inc. and is a
member of the Board of Trustees of Muhlenberg College.
Ms. Westlake has served as the Company’s Senior Vice President and Chief Human Resources Offi-
cer since November 2008. Prior to this position, Ms. Westlake served as Vice President—Investor
Relations from December 2006 to November 2008 and Managing Director—Finance from Sep-
tember 2004 to December 2006. Prior to joining the Company, Ms. Westlake was a senior con-
sultant with the Schiff Consulting Group from 2003 to 2004. From 1996 to 2003 Ms. Westlake
worked at American Express Company where she held several different positions such as Vice Presi-
dent and Chief Financial Officer for the OPEN Small Business Network, Vice President and Chief
Financial Officer for Establishment Services and Vice President and Chief Financial Officer for Rela-
tionship Services. From 1989 to 1995 Ms. Westlake held a range of financial management positions
at Dun & Bradstreet Corporation and its subsidiary at the time, IMS International. From 1984 to
1987 Ms. Westlake served at Lehman Brothers in both the investment banking and municipal trading
areas.
Mr. Worrall has served as Senior Vice President—Ratings Delivery and Data since February 2013 and
Head of MIS Ratings Transaction Services since January 2014. Mr. Worrall served as Senior Vice
President—Internal Audit from April 2011 to February 2013 and as Vice President—Internal Audit
from September 2007 to April 2011. He served as the Controller for MIS from November 2004 until
September 2007. Prior to joining the Company, Mr. Worrall was Vice President, Accounting for RCN
Corporation from 2002 to 2004 and held various finance positions at Dow Jones & Company, Inc.
from 1979 to 2001.
16
MOODY’S 2014 10K
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this annual report on Form 10-K should be carefully considered. The risks
and uncertainties described below are not the only ones the Company faces. Additional risks and uncertainties not presently known to
the Company or that the Company’s management currently deems minor or insignificant also may impair its business operations. If any
of the following risks occur, Moody’s business, financial condition, operating results and cash flows could be materially and adversely
affected. These risk factors should be read in conjunction with the other information in this annual report on Form 10-K.
U.S. Laws and Regulations Affecting the Credit Rating Industry are Rapidly Evolving and May Negatively Impact the Nature and
Economics of the Company’s Business
Moody’s operates in a highly regulated industry and is subject to extensive regulation by federal, state and local authorities in the U.S.,
including the Reform Act and the Financial Reform Act. These regulations are complex, continually evolving and have tended to become
more stringent over time. See “Regulation” in Part 1, Item 1 of this annual report on Form 10-K for more information. These laws and
regulations:
» seek to encourage, and may result in, increased competition among rating agencies and in the credit rating business;
» may result in alternatives to credit ratings or changes in the pricing of credit ratings;
» restrict the use of information in the development or maintenance of credit ratings;
» increase regulatory oversight of the credit markets and CRA operations;
» provide for direct jurisdiction of the SEC over CRAs that seek NRSRO status, and grant authority to the SEC to inspect the operations
of CRAs; and
» authorize the adoption of enhanced oversight standards and new pleading standards, which may result in increases in the number of
legal proceedings claiming liability for losses suffered by investors on rated securities and aggregate legal defense costs.
These laws and regulations, and any future rulemaking or court rulings, could result in reduced demand for credit ratings and increased
costs, which Moody’s may be unable to pass through to customers. In addition, there may be uncertainty over the scope, interpretation
and administration of such laws and regulations. The Company may be required to incur significant expenses in order to ensure com-
pliance and mitigate the risk of fines, penalties or other sanctions. Legal proceedings could become increasingly lengthy and there may
be uncertainty over and exposure to liability. It is difficult to accurately assess the future impact of legislative and regulatory require-
ments on Moody’s business and its customers’ businesses, and they may affect MIS’s communications with issuers as part of the rating
assignment process, alter the manner in which MIS’s ratings are developed, assigned and communicated, affect the manner in which
MIS or its customers or users of credit ratings operate, impact the demand for MIS’s ratings and alter the economics of the credit rat-
ings business, including by restricting or mandating business models for rating agencies. Further, speculation concerning the impact of
legislative and regulatory initiatives and the increased uncertainty over potential liability and adverse legal or judicial determinations
may affect Moody’s stock price. Although these recent and pending legislative and regulatory initiatives apply to rating agencies and
credit markets generally, they may affect Moody’s in a disproportionate manner. Each of these developments increase the costs and
legal risk associated with the issuance of credit ratings and may have a material adverse effect on Moody’s operations, profitability and
competitiveness, the demand for credit ratings and the manner in which such ratings are utilized.
Financial Reforms Outside the U.S. Affecting the Credit Rating Industry May Negatively Impact the Nature and Economics of the
Company’s Business
In addition to the extensive and evolving U.S. laws and regulations governing the industry, foreign jurisdictions have taken measures to
increase regulation of rating agencies and the markets for ratings. In particular, the EU has adopted a new regulatory framework for
rating agencies operating in the EU, and introduced a common EU regulatory approach to oversight of CRAs. The EU has established
conditions for the issuance of credit ratings, rules on the organization and conduct of CRAs—including restrictions on certain activities
deemed to create a conflict of interest—and special requirements for the rating of structured finance instruments. ESMA has direct
supervisory authority for CRAs in the EU.
MIS is a registered entity and is therefore subject to formal regulation and periodic inspection. Applicable rules include procedural
requirements with respect to ratings of sovereign issuers, liability for intentional or grossly negligent failure to abide by applicable regu-
lations, mandatory rotation requirements of CRAs hired by issuers of securities for ratings of resecuritizations, restrictions on CRAs or
their shareholders if certain ownership thresholds are crossed, and additional procedural and substantive requirements on the pricing of
services.
On January 6, 2015, two additional rules (generally referred to as “Regulatory Technical Standards” or “RTSs”) of direct relevance to the
CRA industry were published in the Official Journal of the European Union: (i) CRAs’ reporting requirements to ESMA on their fees; and
MOODY’S 2014 10K
17
(ii) the types of information that CRAs are to provide about certain ratings (those that were paid for by issuers) for publication on a
central website administered by ESMA (the European Ratings Platform). Separately, CRA3 also requires that ESMA and / or the Euro-
pean Commission produce several reports on the industry’s structure and the use of ratings. These reports are expected to be published
by year end 2015.
EU financial reforms could have a significant negative effect on Moody’s operations, profitability or ability to compete, or the markets
for its products and services, including in ways that Moody’s presently is unable to predict. In particular, exposure to increased liability
under the EU regulations may further increase costs and legal risks associated with the issuance of credit ratings and materially and
adversely impact Moody’s results of operations. In addition, compliance with the amended EU regulations may increase costs of oper-
ations.
Further, Moody’s believes there is still potential for additional rulemaking by the EU and other jurisdictions that can significantly impact
operations or the markets for Moody’s products and services, such as regulations affecting the need for debt securities to be rated,
establishing criteria for credit ratings or limiting the entities authorized to provide credit ratings. Moody’s cannot predict the extent of
such future laws and regulations, and the effect that they will have on Moody’s business or the potential for increased exposure to
liability could be significant. Financial reforms in the EU and other foreign jurisdictions may have a material adverse effect on Moody’s
business, operating results and financial condition.
The Company Faces Exposure to Litigation Related to Rating Opinions and Other Business Practices
Moody’s faces exposure to litigation related to MIS’s ratings actions, as well as other business practices. As a result of difficult economic
times and turbulent markets in recent years, the market value of credit-dependent instruments has declined and defaults have
increased. This development has led to a significant increase in the number of legal proceedings that Moody’s is facing, including class
actions and other litigation, government investigations and inquiries concerning events in the U.S. subprime residential mortgage sector
and the credit markets more broadly. Legal proceedings impose additional expenses on the Company and require the attention of
senior management to an extent that may significantly reduce their ability to devote time addressing other business issues. Risks relat-
ing to legal proceedings may be heightened in foreign jurisdictions that lack the legal protections or liability standards comparable to
those that exist in the U.S. In addition, new laws and regulations have been and may continue to be enacted that establish lower
liability standards, shift the burden of proof or relax pleading requirements, thereby increasing the risk of successful litigations in the
U.S. and in foreign jurisdictions. These litigation risks are often difficult to assess or quantify. Moody’s may not have adequate insurance
or reserves to cover these risks, and the existence and magnitude of these risks often remains unknown for substantial periods of time.
Furthermore, to the extent that Moody’s is unable to achieve dismissals at an early stage and litigation matters proceed to trial, the
aggregate legal defense costs incurred by Moody’s increase substantially, as does the risk of an adverse outcome. See Note 18 to the
consolidated financial statements for more information regarding ongoing investigations and civil litigation that the Company currently
faces. Due to the number of these proceedings and the significant amount of damages sought, there is a risk that Moody’s will be sub-
ject to judgments, settlements, fines, penalties or other adverse results that could have a material adverse effect on its business, operat-
ing results and financial condition.
The Company is Exposed to Legal, Economic and Regulatory Risks of Operating in Multiple Jurisdictions
Moody’s conducts operations in various countries outside the U.S. and derives a significant portion of its revenue from foreign sources.
Changes in the economic condition of the various foreign economies in which the Company operates may have an impact on the
Company’s business. For example, economic uncertainty in the Eurozone or elsewhere could affect the number of securities offerings
undertaken within those particular areas. In addition, operations abroad expose Moody’s to a number of legal, economic and regulatory
risks such as:
» restrictions on the ability to convert local currency into USD;
» exposure to exchange rate movements between foreign currencies and USD;
» the costs of repatriating cash held by entities outside the U.S.;
» U.S. laws affecting overseas operations including domestic and foreign export and import restrictions, tariffs and other trade barriers;
» differing legal or civil liability, compliance and regulatory standards;
» current and future regulations relating to the imposition of mandatory rotation requirements on CRAs hired by issuers of securities;
» uncertain and evolving laws and regulations applicable to the financial services industries;
» economic, political and geopolitical market conditions;
» the possibility of nationalization, expropriation, price controls and other restrictive governmental actions;
» competition with local rating agencies that have greater familiarity, longer operating histories and/or support from local
governments or other institutions;
18
MOODY’S 2014 10K
» reduced protection for intellectual property rights;
» longer payment cycles and possible problems in collecting receivables;
» differing accounting principles and standards;
» difficulties and delays in translating documentation into foreign languages; and
» potentially adverse tax consequences.
Additionally, Moody’s is subject to complex U.S. and foreign laws and regulations, such as the Foreign Corrupt Practices Act, the U.K.
Bribery Act and other anti-bribery and anti-corruption laws. Although the Company has implemented internal controls, policies and
procedures and employee training and compliance programs to deter prohibited practices, such measures may not be effective in pre-
venting employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regu-
lations. Any determination that the Company has violated anti-bribery or anti-corruption laws could have a material adverse effect on
Moody’s financial condition. Compliance with international and U.S. laws and regulations that apply to the Company’s international
operations increases the cost of doing business in foreign jurisdictions. Violations of such laws and regulations may result in fines and
penalties, criminal sanctions, administrative remedies, restrictions on business conduct and could have a material adverse effect on
Moody’s reputation, its ability to attract and retain employees, its business, operating results and financial condition.
Moody’s Operations and Infrastructure May Malfunction or Fail
Moody’s ability to conduct business may be materially and adversely impacted by a disruption in the infrastructure that supports its
businesses and the communities in which Moody’s is located, including New York City, the location of Moody’s headquarters, major
cities worldwide in which Moody’s has offices, and locations in China used for data and development work. This may include a dis-
ruption involving physical or technological infrastructure, including the Company’s electronic delivery systems, data center facilities and
the Internet, used by the Company or third parties with or through whom Moody’s conducts business, whether due to human error,
natural disasters, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political
unrest, war or otherwise. Moody’s efforts to secure and plan for potential disruptions of its major operating systems may not be
successful. The Company relies on third-party providers to provide certain essential services. While the Company believes that such
providers are reliable, the Company has limited control over the performance of such providers. To the extent any of the Company’s
third-party providers ceases to provide these services in an efficient, cost-effective manner or fail to adequately expand its services to
meet the Company’s needs and the needs of the Company’s customers, the Company could experience lower revenues and higher
costs. The Company also does not have fully redundant systems for most of its smaller office locations and low-risk systems, and its
disaster recovery plan does not include restoration of non-essential services. If a disruption occurs in one of Moody’s locations or sys-
tems and its personnel in those locations or those who rely on such systems are unable to utilize other systems or communicate with
or travel to other locations, such persons’ ability to service and interact with Moody’s clients and customers may suffer. The Company
cannot predict with certainty all of the adverse effects that could result from the Company’s failure, or the failure of a third party, to
efficiently address and resolve these delays and interruptions. A disruption to Moody’s operations or infrastructure may have a material
adverse effect on its business, operating results and financial condition.
The Company is Exposed to Risks Related to Cybersecurity and Protection of Confidential Information
The Company’s operations rely on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types
of information relating to its business operations and confidential and sensitive information about its clients in the Company’s com-
puter systems and networks and those of its third party vendors. The cyber risks the Company’s faces range from cyber-attacks com-
mon to most industries, to more advanced threats that target the Company because of its prominence in the global marketplace, or
due to its ratings of sovereign debt. Breaches of Moody’s or Moody’s vendors’ technology and systems, whether from circumvention of
security systems, denial-of-service attacks or other cyber-attacks, hacking, computer viruses or malware, employee error, malfeasance,
social engineering, physical breaches or other actions, may result in manipulation or corruption of sensitive data, material interruptions
or malfunctions in the Company’s or such vendors’ web sites, applications, data processing, or disruption of other business operations,
or may compromise the confidentiality and integrity of material information held by the Company (including information about
Moody’s business or customers), as well as sensitive personally identifiable information (“PII”), the disclosure of which could lead to
identity theft. Measures that Moody’s takes to avoid or mitigate material incidents can be expensive, and may be insufficient, circum-
vented, or may become obsolete. Any material breaches of cybersecurity could cause the Company to experience reputational harm,
loss of customers, regulatory actions, sanctions or other statutory penalties, litigation, liability for failure to safeguard the Company’s
clients’ information or financial losses that are either not insured against or not fully covered through any insurance maintained by the
Company. Any of the foregoing may have a material adverse effect on Moody’s business, operating results or financial condition.
Changes in the Volume of Debt Securities Issued in Domestic and/or Global Capital Markets and Changes in Interest Rates and Other
Volatility in the Financial Markets May Negatively Impact the Nature and Economics of the Company’s Business
Moody’s business is impacted by general economic conditions and volatility in the U.S. and world financial markets. Furthermore,
issuers of debt securities may elect to issue securities without ratings or securities which are rated or evaluated by non-traditional
MOODY’S 2014 10K
19
parties such as financial advisors, rather than traditional CRAs, such as MIS. A majority of Moody’s credit-rating-based revenue is
transaction-based, and therefore it is especially dependent on the number and dollar volume of debt securities issued in the capital
markets. Accordingly, any market volatility or conditions that either reduce investor demand for debt securities or issuers’ willingness or
ability to issue such securities could reduce the number and dollar-equivalent volume of debt issuances for which Moody’s provides
ratings services and thereby have an adverse effect on the fees derived from the issuance of ratings. Therefore, no assurance can be
given as to the amount of revenues that may be derived from Moody’s ratings services.
Credit market disruptions and economic slowdown and uncertainty have in the past negatively impacted the volume of debt securities
issued in global capital markets and the demand for credit ratings. Economic and government factors such as a long-term continuation
of difficult economic conditions and a worsening of the sovereign debt crisis in Europe may have an adverse impact on the Company’s
business. Future debt issuances could be negatively affected by a sharp increase in long-term interest rates or factors which cause
instability or volatility in the global capital markets, such as significant regulatory, political or economic events, the use of alternative
sources of credit, including financial institutions and government sources, and defaults of significant issuers and other market and
economic factors. Changes in the markets for such securities and in the role and regulation of rating agencies may materially and
adversely affect the Company.
Moody’s initiatives to reduce costs to counteract a decline in its business may not be sufficient and cost reductions may be difficult or
impossible to obtain in the short term, due in part to rent, technology, compliance and other fixed costs associated with some of the
Company’s operations as well as the need to monitor outstanding ratings. Further, cost-reduction initiatives, including those under-
taken to date, could make it difficult for the Company to rapidly expand operations in order to accommodate any unexpected increase
in the demand for ratings. Volatility in the financial markets, including changes in the volumes of debt securities and changes in interest
rates, may have a material adverse effect on the business, operating results and financial condition.
The Company Faces Increased Pricing Pressure from Competitors and/or Customers
There is price competition in the credit rating, research, credit risk management markets, outsourced research and analytical services
and financial training and certification services. Competition for customers and market share has spurred more aggressive tactics by
some competitors in areas such as pricing and services, as well as increased competition from non-NRSROs that evaluate debt risk for
issuers or investors. At the same time, the current challenging business environment and the consolidation of customers, particularly
those involved in structured finance products, and other factors affecting demand may enhance the market power of competitors and
result in reductions in the size of the Company’s customer base. Tepid economic growth is also intensifying the competitive pressures
as to pricing. While Moody’s seeks to compete primarily on the basis of the quality of its products and services, it may lose market
share if its pricing is not sufficiently competitive with its current and future competitors. In addition, the Reform Act was designed to
encourage competition among rating agencies. The formation of additional NRSROs may increase pricing and competitive pressures.
Any inability of Moody’s to compete successfully with respect to the pricing of its products and services could have a material adverse
impact on its business, operating results and financial condition.
The Company is Exposed to Reputation and Credibility Concerns
Moody’s reputation and the strength of its brand are key competitive strengths. To the extent that the rating agency business as a
whole or Moody’s, relative to its competitors, suffers a loss in credibility, Moody’s business could be significantly impacted. Factors that
may have already affected credibility and could potentially continue to have an impact in this regard include the appearance of a con-
flict of interest, the performance of securities relative to the rating assigned to such securities, the timing and nature of changes in rat-
ings, a major compliance failure, negative perceptions or publicity and increased criticism by users of ratings, regulators and legislative
bodies, including as to the ratings process and its implementation with respect to one or more securities. Operational errors, whether
by Moody’s or a Moody’s competitor, could also harm the reputation of the Company or the credit rating industry. Damage to reputa-
tion and credibility could have a material adverse impact on Moody’s business, operating results and financial condition.
The Introduction of Competing Products or Technologies by Other Companies May Negatively Impact the Nature and Economics of
the Company’s Business
The markets for credit ratings, research, credit risk management services, outsourced research and analytical services and financial train-
ing and certification services are highly competitive and characterized by rapid technological change, changes in client demands and
evolving industry standards. The ability to develop and successfully launch and maintain innovative products and technologies that
anticipate customers’ changing requirements and utilize emerging technological trends is a key factor in maintaining market share.
Moody’s competitors include both established companies with significant financial resources, brand recognition, market experience and
technological expertise, and smaller companies which may be better poised to quickly adopt new or emerging technologies or respond
to customer requirements. Competitors may develop quantitative methodologies or related services for assessing credit risk that cus-
tomers and market participants may deem preferable, more cost-effective or more valuable than the credit risk assessment methods
currently employed by Moody’s, or may position, price or market their products in manners that differ from those utilized by Moody’s.
Moody’s also competes indirectly against consulting firms and other information providers; these indirect competitors could choose to
20
MOODY’S 2014 10K
compete directly with us in the future. In addition, customers or others may develop alternative, proprietary systems for assessing
credit risk. Such developments could affect demand for Moody’s products and services and its growth prospects. Further, the increased
availability in recent years of free or relatively inexpensive Internet information may reduce the demand for Moody’s products and serv-
ices. Moody’s growth prospects also could be adversely affected by Moody’s failure to make necessary or optimal capital infrastructure
expenditures and improvements and the inability of its information technologies to provide adequate capacity and capabilities to meet
increased demands of producing quality ratings and research products at levels achieved by competitors. Any inability of Moody to
compete successfully may have a material adverse effect on its business, operating results and financial condition.
The Company Has a Significant Amount of Intangible Assets
At December 31, 2014, Moody’s had $1,021.1 million of goodwill and $345.5 million of intangible assets on its balance sheet. Approx-
imately 71% of these intangibles reside in the MA business and are allocated to the four reporting units within MA: RD&A; ERS; Finan-
cial Services Training and Certifications; and Copal Amba. The remaining 29% of these intangibles reside in MIS and primarily relate to
ICRA. Failure to achieve business objectives and financial projections in any of these reporting units could result in an asset impairment
charge, which would result in a non-cash charge to operating expenses. Goodwill and intangible assets with indefinite lives are tested
for impairment on an annual basis and also when events or changes in circumstances indicate that impairment may have occurred.
Determining whether an impairment of goodwill exists can be difficult as a result of increased uncertainty and current market dynam-
ics, and requires significant management estimates and judgment. In addition, the potential for goodwill impairment is increased during
periods of economic uncertainty. An asset impairment charge could have a material adverse effect on Moody’s business, operating
results and financial condition.
Possible Loss of Key Employees and Related Compensation Cost Pressures May Negatively Impact the Company
Moody’s success depends upon its ability to recruit, retain and motivate highly skilled, experienced financial analysts and other pro-
fessionals. Competition for skilled individuals in the financial services industry is intense, and Moody’s ability to attract high quality
employees could be impaired if it is unable to offer competitive compensation and other incentives or if the regulatory environment
mandates restrictions on or disclosures about individual employees that would not be necessary in competing analytical industries. As
greater focus has been placed on executive compensation at public companies, in the future, Moody’s may be required to alter its
compensation practices in ways that could adversely affect its ability to attract and retain talented employees. Investment banks,
investors and competitors may seek to attract analyst talent by providing more favorable working conditions or offering significantly
more attractive compensation packages than Moody’s. Moody’s also may not be able to identify and hire the appropriate qualified
employees in some markets outside the U.S. with the required experience or skills to perform sophisticated credit analysis. There is a
risk that even if the Company invests significant resources in attempting to attract, train and retain qualified personnel, it will not suc-
ceed in its efforts, and its business could be harmed.
Moody’s is highly dependent on the continued services of Raymond W. McDaniel, Jr., the President and Chief Executive Officer, and
other senior officers and key employees. The loss of the services of skilled personnel for any reason and Moody’s inability to replace
them with suitable candidates quickly or at all, as well as any negative market perception resulting from such loss, could have a
material adverse effect on Moody’s business, operating results and financial condition.
Moody’s Acquisitions and Other Strategic Transactions May Not Produce Anticipated Results
Moody’s has made and expects to continue to make acquisitions or enter into other strategic transactions to strengthen its business
and grow the Company. Such transactions present significant challenges and risks. The market for acquisition targets and other strate-
gic transactions is highly competitive, especially in light of industry consolidation, which may affect Moody’s ability to complete such
transactions. If Moody’s is unsuccessful in completing such transactions or if such opportunities for expansion do not arise, its business,
operating results and financial condition could be materially adversely affected.
If such transactions are completed, the anticipated growth, synergies and other strategic objectives of such transactions may not be
fully realized, and a variety of factors may adversely affect any anticipated benefits from such transactions. Any strategic transaction
can involve a number of risks, including unanticipated challenges regarding integration of operations, technologies and new employees;
the existence of liabilities or contingencies not disclosed to or otherwise known by the Company prior to closing a transaction;
unexpected regulatory and operating difficulties and expenditures; failure to retain key personnel of the acquired business; diverting
management’s focus from other business operations; and failing to implement or remediate controls, procedures and policies appro-
priate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies. The
anticipated benefits from an acquisition or other strategic transaction may not be realized fully, or may take longer to realize than
expected. As a result, the failure of acquisitions and other strategic transactions to perform as expected may have a material adverse
effect on Moody’s business, operating results and financial condition.
The Trading Price of Moody’s Stock Could be Affected by Third Party Actions
Ownership of Moody’s stock is highly concentrated with a significant portion of shares held by a few institutional stockholders. Due to
this concentrated stockholder base, the trading price of Moody’s stock could be affected considerably by actions of significant
MOODY’S 2014 10K
21
stockholders to increase or decrease their positions in Moody’s stock. As a result, the actions of these institutional stockholders could
create high stock volatility.
The Company’s Compliance and Risk Management Programs Might Not be Effective and May Result in Outcomes That Could
Adversely Affect the Company’s Reputation, Financial Condition and Operating Results.
Moody’s operates in a number of countries, and as a result the Company is required to comply with numerous international and U.S.
federal, state and local laws and regulations. The Company’s ability to comply with applicable laws and regulations, including anti-
corruption laws, is largely dependent on its establishment and maintenance of compliance, review and reporting systems. Moody’s
policies and procedures to identify, evaluate and manage the Company’s risks may not be fully effective, and Moody’s employees [or
agents] may engage in misconduct, fraud or other errors. It is not always possible to deter such errors, and the precautions the Com-
pany takes to prevent and detect this activity may not be effective in all cases. If Moody’s employees violate its policies or if the
Company’s risk management methods are not effective, the Company could be subject to regulatory sanctions and suffer harm to the
Company’s reputation, financial condition and operating results.
Legal Protections for the Company’s Intellectual Property Rights may not be Sufficient or Available to Protect the Company’s
Competitive Advantages.
Moody’s considers many aspects of its products and services to be proprietary. Failure to protect the Company’s intellectual property
adequately could harm its reputation and affect the Company’s ability to compete effectively. In addition, the Company’s operating
results may be adversely affected by inadequate or changing legal and technological protections for intellectual property and propri-
etary rights in some jurisdictions and markets. On January 6, 2015, a rule with direct relevance to the CRA industry was published in the
Official Journal of the European Union regarding the types of information that CRAs are to provide about certain ratings (those that
were paid for by issuers) for publication on a central website administered by ESMA (the European Ratings Platform). This rule directly
relates to the Company’s intellectual property as it would require that the Company provide proprietary information at no cost that the
Company currently sells, which could result in lost revenue.
Additionally, despite the Company’s efforts to protect its intellectual property rights, unauthorized third parties may try to obtain and
use technology or other information that the Company regards as proprietary. Even if Moody’s attempts to protect its intellectual
property rights through litigation, it may require considerable cost, time and resources to do so, and there is no guarantee that the
Company will be successful.
The Company is Dependent on the Use of Third-Party Software, Data, Hosted Solutions, Data Centers, and Network Infrastructure
(Together, “Third Party Technology”), and Any Reduction in Third-Party Product Quality or Service Offerings, Could Have a Material
Adverse Effect on the Company’s Business, Financial Condition or Results of Operations.
Moody’s relies on Third Party Technology in connection with its product development and offerings. The Company depends on the abil-
ity of Third Party Technology providers to deliver and support reliable products, enhance their current products, develop new products
on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. The Third Party
Technology Moody’s uses may become obsolete, incompatible with future versions of the Company’s products, unavailable or fail to
operate effectively, and Moody’s business could be adversely affected if the Company is unable to timely or effectively replace such
Third Party Technology. The Company also monitors its use of Third Party Technology to comply with applicable license and other
contractual requirements. Despite the Company’s efforts, the Company cannot assure that such third parties will permit Moody’s use in
the future, resulting in increased Third Party Technology acquisition costs and loss of rights. In addition, the Company’s operating costs
could increase if license or other usage fees for Third Party Technology increase or the efforts to incorporate enhancements to Third
Party Technology are substantial. Some of these third-party suppliers are also Moody’s competitors, increasing the risks noted above. If
any of these risks materialize, they could have a material adverse effect on the Company’s business, financial condition or results of
operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Moody’s corporate headquarters is located at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, with approx-
imately 797,537 square feet of leased space. As of December 31, 2014, Moody’s operations were conducted from 21 U.S. offices and
76 non-U.S. office locations, all of which are leased. These properties are geographically distributed to meet operating and sales
requirements worldwide. These properties are generally considered to be both suitable and adequate to meet current operating
requirements.
22
MOODY’S 2014 10K
ITEM 3.
LEGAL PROCEEDINGS
For information regarding legal proceedings, see Part II, Item 8 – “Financial Statements”, Note 18 “Contingencies” in this Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
MOODY’S 2014 10K
23
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Information in response to this Item is set forth under the captions below.
MOODY’S PURCHASES OF EQUITY SECURITIES
For the three months ended December 31, 2014
Period
October 1 – 31
November 1 – 30
December 1 – 31
Total
Total Number
of Shares Purchased(1)
Average Price
Paid per Share
1,777,716
1,110,097
1,672,753
4,560,566
$
$
$
$
93.41
99.91
97.58
96.52
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
Approximate Dollar
Value of Shares That May
yet be Purchased Under
the Program(2)
$
$
$
1,777,716
1,109,805
1,672,621
4,560,142
837.7 million
726.8 million
1,563.5 million
(1)
Includes the surrender to the Company of 292 shares and 132 shares of common stock in November and December, respectively, to satisfy tax withholding
obligations in connection with the vesting of restricted stock issued to employees.
(2) As of the last day of each of the months. On December 16, 2014, the Board authorized a $1 billion share repurchase program which will commence following
the completion of the existing program. There is no established expiration date for the remaining authorization.
During the fourth quarter of 2014, Moody’s issued 0.3 million shares under employee stock-based compensation plans.
24
MOODY’S 2014 10K
COMMON STOCK INFORMATION AND DIVIDENDS
The Company’s common stock trades on the New York Stock Exchange under the symbol “MCO”. The table below indicates the high
and low sales price of the Company’s common stock and the dividends declared and paid for the periods shown. The number of regis-
tered shareholders of record at January 31, 2015 was 2,394. A substantially greater number of the Company’s common stock is held by
beneficial holders whose shares are held of record by banks, brokers and other financial institutions.
2014:
First quarter
Second quarter
Third quarter
Fourth quarter
Year ended December 31, 2014
2013:
First quarter
Second quarter
Third quarter
Fourth quarter
Year Ended December 31, 2013
Price Per Share
Dividends Per Share
High
Low
Declared
$
$
$
$
$
$
$
$
85.70
89.08
96.14
102.24
55.58
69.70
71.74
79.15
$
$
$
$
$
$
$
$
72.57
74.36
86.50
88.25
40.67
51.31
59.69
66.91
$
$
$
$
— $
0.28
0.28
0.62
1.18
$
— $
0.20
0.25
0.53
0.98
$
Paid
0.28
0.28
0.28
0.28
1.12
0.20
0.20
0.25
0.25
0.90
On December 16, 2014, the Board of the Company approved the declaration of a quarterly dividend of $0.34 per share of Moody’s
common stock, payable on March 10, 2015 to shareholders of record at the close of business on February 20, 2015. The continued
payment of dividends at the rate noted above, or at all, is subject to the discretion of the Board.
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth, as of December 31, 2014, certain information regarding the Company’s equity compensation plans.
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights(2)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (excluding
Securities Reflected in
Column (a)
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
10,432,616(1) $
— $
10,432,616
$
(b)
46.00
—
46.00
(c)
24,407,013(3)
—
24,407,013
(1)
Includes 8,260,530 options and unvested restricted shares outstanding under the Company’s 2001 Key Employees’ Stock Incentive Plan, 437,581 options and
unvested restricted shares outstanding under the Company’s 1998 Key Employees’ Stock Incentive Plan, and 15,212 unvested restricted shares outstanding
under the 1998 Non-Employee Directors’ Stock Incentive Plan. This number also includes a maximum of 1,719,293 performance shares outstanding under
the Company’s 2001 Key Employees’ Stock Incentive Plan, which is the maximum number of shares issuable pursuant to performance share awards assuming
the maximum payout at 225% of the target award for performance shares granted in 2012, 2013 and 2014. Assuming payout at target, the number of shares
to be issued upon the vesting of outstanding performance share awards is 764,130.
(2) Does not reflect unvested restricted shares or performance share awards included in column (a) because these awards have no exercise price.
(3)
Includes 20,482,399 shares available for issuance as under the 2001 Stock Incentive Plan, of which all may be issued as options and 12,997,143 may be
issued as restricted stock, performance shares or other stock-based awards under the 2001 Stock Incentive Plan and 958,173 shares available for issuance as
options, shares of restricted stock or performance shares under the 1998 Directors Plan, and 2,966,441 shares available for issuance under the Company’s
Employee Stock Purchase Plan. No new grants may be made under the 1998 Stock Incentive Plan, which expired by its terms in June 2008.
MOODY’S 2014 10K
25
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return of the Company to the performance of Standard & Poor’s Stock
500 Composite Index and the Russell 3000 Financial Services Index. Both of the aforementioned indexes are easily accessible to the
Company’s shareholders in newspapers, the internet and other readily available sources for purposes of the following graph.
The comparison assumes that $100.00 was invested in the Company’s common stock and in each of the foregoing indices on
December 31, 2009. The comparison also assumes the reinvestment of dividends, if any. The total return for the common stock was
286% during the performance period as compared with a total return during the same period of 93% for the Russell 3000 Financial
Services Index and 105% for the S&P 500 Composite Index.
Comparison of Cumulative Total Return
Moody’s Corporation, Russell 3000 Financial Services Index and S&P 500 Composite Index
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Moody’s, the S&P 500 Index
and the Russell 3000 Financial Services Index
Moody’s Corporation
S&P 500
Russell 3000 Financial Services
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
12/09
12/10
12/11
12/12
12/13
12/14
Moody’s Corporation
S&P 500 Composite Index
Russell 3000—Financial Services Index
$
$
$
2009
100.00
100.00
100.00
$
$
$
2010
100.77
115.06
112.59
$
$
$
2011
129.95
117.49
99.18
$
$
$
2012
197.33
136.30
125.54
$
$
$
2013
312.21
180.44
168.80
$
$
$
2014
386.10
205.14
192.51
Year Ended December 31,
The comparisons in the graph above are provided in response to disclosure requirements of the SEC and are not intended to forecast or
be indicative of future performance of the Company’s common stock.
26
MOODY’S 2014 10K
ITEM 6.
SELECTED FINANCIAL DATA
The Company’s selected consolidated financial data should be read in conjunction with Item 7. “MD&A” and the Moody’s Corporation
consolidated financial statements and notes thereto.
amounts in millions, except per share data
2014
2013
2012
2011
2010
Year Ended December 31,
Results of operations
Revenue
Operating and SG&A expenses
Depreciation and amortization
Goodwill impairment
Restructuring
Operating income
Non-operating income (expense), net (1)
Income before provision for income taxes
Provision for income taxes
Net income (2)
Less: Net income attributable to noncontrolling interests
$3,334.3
1,799.6
95.6
—
—
1,439.1
21.9
1,461.0
455.0
1,006.0
17.3
$2,972.5
1,644.5
93.4
—
—
$2,730.3
1,547.2
93.5
12.2
—
$2,280.7
1,313.1
79.2
—
—
$2,032.0
1,192.8
66.3
—
0.1
1,234.6
(65.3)
1,169.3
353.4
815.9
11.4
1,077.4
(53.4)
1,024.0
324.3
699.7
9.7
888.4
(48.6)
839.8
261.8
578.0
6.6
772.8
(58.4)
714.4
201.0
513.4
5.6
Net income attributable to Moody’s (2)
$ 988.7
$ 804.5
$ 690.0
$ 571.4
$ 507.8
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
Dividends declared per share
Operating margin
Balance sheet data
Total assets
Long-term debt
Total shareholders’ equity (deficit)
$
$
$
4.69
4.61
210.7
214.7
1.18
43.2%
$
$
$
3.67
3.60
219.4
223.5
0.98
41.5%
$
$
$
3.09
3.05
223.2
226.6
0.68
39.5%
$
$
$
2.52
2.49
226.3
229.4
0.58
39.0%
$
$
$
2.16
2.15
235.0
236.6
0.43
38.0%
December 31,
2014
2013
2012
2011
2010
$4,669.0
$2,547.3
42.9
$
$4,395.1
$2,101.8
$ 347.9
$3,960.9
$1,607.4
$ 396.6
$2,876.1
$1,172.5
$ (158.4)
$2,540.3
$1,228.3
$ (298.4)
NON-GAAP FINANCIAL MEASURES (3)
Year Ended December 31,
2014
2013
2012
2011
2010
Adjusted Operating Income
Adjusted Operating Margin
Non-GAAP diluted EPS attributable to Moody’s common shareholders
Free cash flow
$1,534.7
$1,328.0
$1,183.1
$ 967.6
$ 839.2
46.0%
4.21
$
$ 944.0
44.7%
3.65
$
$ 884.5
43.3%
2.99
$
$ 778.1
42.4%
2.46
$
$ 735.6
41.3%
2.13
$
$ 574.3
(1) The 2014, 2013, 2012, 2011 and 2010 amounts include benefits of $7.1 million, $22.8 million, $17.2 million, $10.1 million, and $2.5 million, respectively,
related to the favorable resolution of certain Legacy Tax Matters. The 2014 amount also includes the ICRA Gain of $102.8 million.
(2) The 2014, 2013, 2012, 2011 and 2010 amounts include benefits of $6.8 million, $21.3 million, $12.8 million, $7.0 million and $4.6 million, respectively,
related to the resolution of certain Legacy Tax Matters. Also, the 2014 amount includes the ICRA Gain of $78.5 million and the 2013 amount includes a
litigation settlement charge which is more fully discussed in Note 18 to the consolidated financial statements.
(3) Refer to “Non-GAAP measures” in Item 7 of this Form 10K for a discussion of the Company’s non-GAAP financial measures
MOODY’S 2014 10K
27
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation
consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K.
This MD&A contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 54 and Item 1A. “Risk
Factors” commencing on page 17 for a discussion of uncertainties, risks and other factors associated with these statements.
THE COMPANY
Moody’s is a provider of (i) credit ratings, (ii) credit and economic related research, data and analytical tools, (iii) software solutions and
related risk management services, (iv) quantitative credit risk measures, financial services training and certification services and
(v) outsourced research and analytical services to institutional customers. Moody’s has two reportable segments: MIS and MA.
MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in
markets worldwide. Revenue is primarily derived from the originators and issuers of such transactions who use MIS ratings in the dis-
tribution of their debt issues to investors. Additionally, MIS earns revenue from certain non-ratings-related operations which consist
primarily of the distribution of research and fixed income pricing services in the Asia-Pacific region and from ICRA non-ratings services.
The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment.
The MA segment develops a wide range of products and services that primarily support financial analysis and risk management activ-
ities of institutional participants in global financial markets. Within its RD&A business, MA distributes research and data developed by
MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies and commentary on topical credit-
related events. The RD&A business also produces economic research as well as data and analytical tools such as quantitative credit risk
scores. Within its ERS business, MA provides software solutions as well as related risk management services. The PS business provides
outsourced research and analytical services and financial training and certification programs.
CRITICAL ACCOUNTING ESTIMATES
Moody’s discussion and analysis of its financial condition and results of operations are based on the Company’s consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires Moody’s to make
estimates and judgments that affect reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities
at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical
experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s eval-
uates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, goodwill and intangible
assets, pension and other retirement benefits, UTPs and stock-based compensation. Actual results may differ from these estimates under
different assumptions or conditions. The following accounting estimates are considered critical because they are particularly dependent
on management’s judgment about matters that are uncertain at the time the accounting estimates are made and changes to those
estimates could have a material impact on the Company’s consolidated results of operations or financial condition.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or the services have been provided and
accepted by the customer when applicable, fees are determinable and the collection of resulting receivables is considered probable.
Pursuant to the guidance of ASC Topic 605, when a sales arrangement contains multiple deliverables, the Company allocates revenue
to each deliverable based on its relative selling price which is determined based on its vendor specific objective evidence if available,
third party evidence if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.
The Company’s products and services will generally qualify as separate units of accounting under ASC Topic 605. The Company eval-
uates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. A deliverable constitutes a
separate unit of accounting when it has stand-alone value to the customers and if the arrangement includes a customer refund or
return right relative to the delivered item, the delivery and performance of the undelivered item is considered probable and sub-
stantially in the Company’s control. In instances where the aforementioned criteria are not met, the delivered item is combined with
the undelivered items and revenue recognition is determined as one single unit.
The Company determines whether its selling price in a multi-element transaction meets the VSOE criteria by using the price charged
for a deliverable when sold separately. In instances where the Company is not able to establish VSOE for all deliverables in a multiple
28
MOODY’S 2014 10K
element arrangement, which may be due to the Company infrequently selling each element separately, not selling products within a
reasonably narrow price range, or only having a limited sales history, the Company attempts to establish TPE for deliverables. The
Company determines whether TPE exists by evaluating largely similar and interchangeable competitor products or services in stand-
alone sales to similarly situated customers. However, due to the difficulty in obtaining third party pricing, possible differences in the
Company’s market strategy from that of its peers and the potential that products and services offered by the Company may contain a
significant level of differentiation and/or customization such that the comparable pricing of products with similar functionality cannot
be obtained, the Company generally is unable to reliably determine TPE. Based on the selling price hierarchy established by ASU
2009-13, when the Company is unable to establish selling price using VSOE or TPE, the Company will establish an ESP. ESP is the price
at which the Company would transact a sale if the product or service were sold on a stand-alone basis. The Company establishes its
best estimate of ESP considering internal factors relevant to its pricing practices such as costs and margin objectives, standalone sales
prices of similar products, percentage of the fee charged for a primary product or service relative to a related product or service, and
customer segment and geography. Additional consideration is also given to market conditions such as competitor pricing strategies and
market trend. The Company reviews its determination of VSOE, TPE and ESP on an annual basis or more frequently as needed.
In the MIS segment, revenue attributed to initial ratings of issued securities is recognized when the rating is issued. Revenue attributed
to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed, generally one
year. In the case of commercial mortgage-backed securities, structured credit, international residential mortgage-backed and asset-
backed securities, issuers can elect to pay the monitoring fees upfront. These fees are deferred and recognized over the future monitor-
ing periods based on the expected lives of the rated securities, which was approximately 28 years on a weighted average basis at
December 31, 2014. At December 31, 2014, 2013 and 2012, deferred revenue related to these securities was approximately
$107 million, $97 million and $82 million, respectively.
Multiple element revenue arrangements in the MIS segment are generally comprised of an initial rating and the related monitoring serv-
ice. In instances where monitoring fees are not charged for the first year monitoring effort, fees are allocated to the initial rating and
monitoring services based on the relative selling price of each service to the total arrangement fees. The Company generally uses ESP in
determining the selling price for its initial ratings as the Company rarely sells initial ratings separately without providing related
monitoring services and thus is unable to establish VSOE or TPE for initial ratings.
MIS estimates revenue for ratings of commercial paper for which, in addition to a fixed annual monitoring fee, issuers are billed quar-
terly based on amounts outstanding. Revenue is accrued each quarter based on estimated amounts outstanding and is billed when
actual data is available. The estimate is determined based on the issuers’ most recent reported quarterly data. At December 31, 2014,
2013 and 2012, accounts receivable included approximately $22 million, $21 million and $22 million, respectively, related to accrued
commercial paper revenue. Historically, MIS has not had material differences between the estimated revenue and the actual billings.
Furthermore, for certain annual monitoring services, fees are not invoiced until the end of the monitoring period, however, revenue is
recognized ratably over the monitoring period.
In the MA segment, products and services offered by the Company include software licenses and related maintenance, subscriptions,
and professional services. Revenue from subscription based products, such as research and data subscriptions and certain software-
based credit risk management subscription products, is recognized ratably over the related subscription period, which is principally one
year. Revenue from sale of perpetual licenses of credit processing software is generally recognized at the time the product master or
first copy is delivered or transferred to and accepted by the customer. Software maintenance revenue is recognized ratably over the
annual maintenance period. Revenue from professional services rendered is generally recognized as the services are performed. If
uncertainty exists regarding customer acceptance of the product or service, revenue is not recognized until acceptance occurs. A large
portion of annual research and data subscriptions as well as annual software maintenance is invoiced in November, December and
January of each year.
Products and services offered within the MA segment are sold either stand-alone or together in various combinations. In instances
where a multiple element arrangement includes software and non-software deliverables, revenue is allocated to the non-software
deliverables and to the software deliverables, as a group, using the relative selling prices of each of the deliverables in the arrangement
based on the aforementioned selling price hierarchy. Revenue is recognized for each element based upon the conditions for revenue
recognition previously described.
If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables
as a group is allocated to each software deliverable using VSOE. In the instances where the Company is not able to determine VSOE for
all of the deliverables of an arrangement, the Company allocates the revenue to the undelivered elements equal to its VSOE and the
residual revenue to the delivered elements. If the Company is unable to determine VSOE for an undelivered element, the Company
defers all revenue allocated to the software deliverables until the Company has delivered all of the elements or when VSOE has been
determined for the undelivered elements. In cases where software implementation services are considered essential and VSOE of fair
value exists for post-contract customer support (“PCS”), once the delivery criteria have been met on the standard software, license and
MOODY’S 2014 10K
29
service revenue is recognized on a percentage-of-completion basis as implementation services are performed, while PCS is recognized
over the coverage period. If VSOE of fair value does not exist for PCS, once the delivery criteria have been met on the standard soft-
ware, service revenue is recognized on a zero profit margin basis until essential services are complete, at which point total remaining
arrangement revenue is then spread ratably over the remaining PCS coverage period.
Accounts Receivable Allowance
Moody’s records an allowance for estimated future adjustments to customer billings as a reduction of revenue, based on historical
experience and current conditions. Such amounts are reflected as additions to the accounts receivable allowance. Additionally, esti-
mates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance.
Actual billing adjustments and uncollectible account write-offs are charged against the allowance. Moody’s evaluates its accounts
receivable allowance by reviewing and assessing historical collection and adjustment experience and the current aging status of
customer accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic per-
spective, in evaluating the need for allowances. Based on its analysis, Moody’s adjusts its allowance as considered appropriate in the
circumstances. This process involves a high degree of judgment and estimation and could involve significant dollar amounts. Accord-
ingly, Moody’s results of operations can be affected by adjustments to the allowance. Management believes that the allowance for
uncollectible accounts receivable is adequate to cover anticipated adjustments and write-offs under current conditions. However, sig-
nificant changes in any of the above factors, or actual write-offs or adjustments that differ from the estimated amounts could impact
the Company’s consolidated results of operations.
Contingencies
Accounting for contingencies, including those matters described in Note 18 to the consolidated financial statements, is highly sub-
jective and requires the use of judgments and estimates in assessing their magnitude and likely outcome. In many cases, the outcomes
of such matters will be determined by third parties, including governmental or judicial bodies. The provisions made in the consolidated
financial statements, as well as the related disclosures, represent management’s best estimates of the then current status of such mat-
ters and their potential outcome based on a review of the facts and in consultation with outside legal counsel where deemed appro-
priate. The Company regularly reviews contingencies and as new information becomes available may, in the future, adjust its associated
liabilities.
For claims, litigation and proceedings and governmental investigations and inquiries not related to income taxes, where it is both prob-
able that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the con-
solidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range
of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than
another amount within the range. In other instances, because of uncertainties related to the probable outcome and/or the amount or
range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes
available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predict-
ing the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters and con-
tingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the
matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or
the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on
how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process
to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to
predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or
indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties
regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.
The Company’s wholly-owned insurance subsidiary insures the Company against certain risks including but not limited to deductibles
for worker’s compensation, employment practices litigation, employee medical claims and terrorism, for which the claims are not
material to the Company. In addition, for claim years 2008 and 2009, the insurance subsidiary insured the Company for defense costs
related to professional liability claims. For matters insured by the Company’s insurance subsidiary, Moody’s records liabilities based on
the estimated total claims expected to be paid and total projected costs to defend a claim through its anticipated conclusion. The
Company determines liabilities based on an assessment of management’s best estimate of claims to be paid and legal defense costs as
well as actuarially determined estimates. The Cheyne SIV and Rhinebridge SIV matters, more fully discussed in Note 18 to the con-
solidated financial statements, were both cases from the 2008/2009 claims period, and accordingly the defense cost for these matters
were insured by the Company’s insurance subsidiary. Defense costs for matters not self-insured by the Company’s wholly-owned
insurance subsidiary are expensed as services are provided.
For income tax matters, the Company employs the prescribed methodology of Topic 740 of the ASC which requires a company to first
determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained
30
MOODY’S 2014 10K
based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowl-
edge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the
largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
Goodwill and Other Acquired Intangible Assets
On July 31 of each year, Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment or
one level below an operating segment.
At July 31, 2014, the Company had six primary reporting units: two within the Company’s ratings business (one for the newly acquired
ICRA business and one that encompasses all of Moody’s other ratings operations) and four reporting units within MA: RD&A, ERS, FSTC
and Copal Amba. The RD&A reporting unit encompasses the distribution of investor-oriented research and data developed by MIS as
part of its ratings process, in-depth research on major debt issuers, industry studies, economic research and commentary on topical
events and credit analytic tools. The ERS reporting unit provides products and services that support the credit risk management and
regulatory compliance activities of financial institutions, primarily delivered via software that is licensed or sold on a subscription basis.
The FSTC reporting unit consists of the portion of the MA business that offers both credit training as well as other professional
development training and implementation services. The Copal Amba reporting unit provides outsourced research and analytical serv-
ices. In July 2014, a subsidiary of the Company acquired WebEquity Solutions, LLC, a leading provider of cloud-based loan origination
solutions for financial institutions. WebEquity Solutions operates as part of the ERS reporting unit. In October 2014, the Company
acquired Lewtan Technologies, a leading provider of analytical tools and data for the global structured finance market. Lewtan operates
as part of the RD&A reporting unit.
The Company evaluates the recoverability of goodwill using a three-step impairment test approach at the reporting unit level. In the
first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its
carrying amount. If a determination is made that, based on the qualitative factors, that an impairment does not exist, the Company is
not required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more
likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be
determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of
the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair
value of the reporting unit is less than the carrying value, the Company must perform a third step of the impairment test to determine
the implied fair value of the reporting unit’s goodwill. The implied fair value of the goodwill is determined based on the difference
between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the
implied fair value of the goodwill is less than its carrying value, the difference is recognized as an impairment charge. For the reporting
units where the Company is consistently able to conclude that no impairment exists using only a qualitative approach, the Company’s
accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every three years.
At July 31, 2013, the Company performed the second step of the goodwill impairment test on all reporting units, which resulted in no
impairment of goodwill.
At July 31, 2014 the Company performed quantitative assessments of the FSTC and Copal Amba reporting units and qualitative assess-
ments for all remaining reporting units. The qualitative analyses resulted in the Company determining that it was not more likely than
not that the fair value of these reporting units was less than their carrying amounts. The most significant factors in these qualitative
assessments were an assessment of actual to projected results and a comparison of projected results in the prior year compared to
current year projection for each reporting unit. Additionally, the weighted average cost of capital (WACC) is assessed as well as the
impact of various macroeconomic conditions and factors specific to the reporting unit that could impact future cash flows. No assess-
ment was performed on the ICRA reporting unit due to the proximity of the acquisition date to the goodwill impairment assessment
date. Accordingly, the carrying value of ICRA’s net assets acquired approximates fair value at July 31, 2014.
At July 31, 2014, the Company performed a quantitative analysis on the FSTC reporting unit due to the small amount of excess of fair
value over net assets in the prior year and slower than anticipated growth in projected cash flows than was utilized in the quantitative
assessment performed at July 31, 2013. This slower than anticipated growth in cash flows reflects various investment initiatives in the
medium term for this business. The Company also performed a quantitative assessment on the Copal Amba reporting unit due to the
acquisition of the Amba business subsequent to the July 31 impairment test dates so as to establish a base-line fair value. Both of these
quantitative assessments resulted in no impairment to goodwill at July 31, 2014.
Determining the fair value of a reporting unit or an indefinite-lived acquired intangible asset involves the use of significant estimates
and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected
future cash flows, risk-adjusted discount rates, future economic and market conditions, and appropriate comparable market metrics.
The Company bases its fair value estimates on reasonable assumptions. However, as these estimates and assumptions are unpredictable
and inherently uncertain, actual future results may differ from these estimates. In addition, the Company also makes certain judgments
and assumptions in allocating shared assets and liabilities to determine the carrying values for each of its reporting units.
MOODY’S 2014 10K
31
Other assets and liabilities, including applicable corporate assets, are allocated to the extent they are related to the operation of
respective reporting units.
Sensitivity Analyses and Key Assumptions for Deriving the Fair Value of a Reporting Unit
The following table identifies the amount of goodwill allocated to each reporting unit as of December 31, 2014 as well as the amount
by which the net assets of each reporting unit would exceed the fair value under Step 2 of the goodwill impairment test as prescribed in
ASC Topic 350, assuming hypothetical reductions in their fair values as of the date of the last quantitative goodwill impairment
assessment for all reporting units. For the FSTC and Copal Amba reporting units, the fair value was calculated as of July 31, 2014. For all
remaining reporting units excluding ERS, the fair value was calculated as of July 31, 2013, as there have been no qualitative factors that
have resulted in the Company deeming it necessary to perform a quantitative assessment subsequent to this date. For ERS, the
WebEquity price was added to the prior year fair value as the WebEquity purchase price approximated its fair value as of July 31, 2014
due to the proximity of the acquisition to the goodwill impairment assessment date.
MIS
RD&A
ERS
FSTC
Copal Amba
ICRA
Totals
Sensitivity Analysis
Deficit Caused by a Hypothetical Reduction to Fair Value
Goodwill
10%
20%
30%
$
$
46.7
185.1
286.2
94.4
156.7
252.0
— $
—
—
(8.6)
—
*
— $
—
(21.9)
(26.2)
—
*
— $
—
(83.7)
(43.9)
—
*
40%
—
—
(145.4)
(61.5)
—
*
$
1,021.1
$
(8.6)
$
(48.1)
$
(127.6)
$
(206.9)
* ICRA was excluded from the sensitivity analysis in the table above as it was acquired in June 2014. Due to the proximity of the acquisition date to the annual
goodwill assessment date, the purchase price of the net assets acquired approximates its fair value at July 31, 2014.
As can be seen from the table above, the reporting unit most at risk for potential impairment is the FSTC reporting unit and failure to
meet its financial projections could result in further goodwill impairment (there was a goodwill impairment charge of $12.2 million for
this reporting unit in the fourth quarter of 2012). This business is, in part, sensitive to the staffing levels and profitability of the global
financial services industry, particularly in Canada and EMEA.
Based on the July 31, 2013 valuation, the ERS reporting unit also carried some risk of potential impairment. Management of the ERS
reporting unit continues to focus on expanding market penetration as well as enhancing the scalability of its products and services. This
will reduce margins in the near term but is anticipated that it will enhance margins in the medium to long-term.
There could be a future goodwill impairment charge if FSTC fails or ERS significantly fails to meet its current financial plans.
Methodologies and significant estimates utilized in determining of the fair value of reporting units:
The following is a discussion regarding the Company’s methodology for determining the fair value of its reporting units as of the date of
each reporting unit’s last quantitative test (July 31, 2014 for FSTC and Copal Amba; July 31, 2013 for the remaining reporting units
excluding ICRA). ICRA has not yet been subject to a full quantitative impairment analysis due to the proximity of the acquisition of this
entity to the annual goodwill impairment assessment date.
The fair value of each reporting unit was estimated using a discounted cash flow methodology and comparable public company and
precedent transaction multiples. The DCF analysis requires significant estimates, including projections of future operating results and
cash flows of each reporting unit, which is based on internal budgets and strategic plans, expected long-term growth rates, terminal
values, weighted average cost of capital and the effects of external factors and market conditions. Changes in these estimates and
assumptions could materially affect the estimated fair value of each reporting unit which could result in an impairment charge to
reduce the carrying value of goodwill, which could be material to the Company’s financial position and results of operations. Moody’s
allocates newly acquired goodwill to reporting units based on the reporting unit expected to benefit from the acquisition. The Company
evaluates its reporting units on an annual basis, or more frequently if there are changes in the reporting structure of the Company due
to acquisitions or realignments.
32
MOODY’S 2014 10K
The sensitivity analyses on the future cash flows and WACC assumptions described below are as of the date of last quantitative assess-
ment for each reporting unit. The following discusses the key assumptions utilized in the discounted cash flow valuation methodology
which requires significant management judgment:
» Future cash flow assumptions: The projections for future cash flows utilized in the models are derived from historical experience and
assumptions regarding future growth and profitability of each reporting unit. These projections are consistent with the Company’s
operating and strategic plan. Cash flows for the five years subsequent to the date of the quantitative goodwill impairment analysis
were utilized in the determination of the fair value of each reporting unit. The growth rates assumed a gradual increase in revenue
from financial service customers based on a continued improvement in the global economy and capital markets, new customer
acquisition and new products. Beyond five years a terminal value was determined using a perpetuity growth rate based on inflation
and real GDP growth rates. A sensitivity analysis of the growth rates was performed on all reporting units. For all reporting units, a
10% decrease in the growth rates used would not have resulted in the carrying value of the reporting unit exceeding its respective
estimated fair value.
» WACC: The WACC is the rate used to discount each reporting unit’s estimated future cash flows. The WACC is calculated based on
the proportionate weighting of the cost of debt and equity. The cost of equity is based on a risk-free interest rate, an equity risk
factor which is derived from public companies similar to the reporting unit and which captures the perceived risks and uncertainties
associated with the reporting unit’s cash flows. The cost of debt component is calculated as the weighted average cost associated
with all of the Company’s outstanding borrowings as of the date of the impairment test and was immaterial to the computation of
the WACC. The cost of debt and equity is weighted based on the debt to market capitalization ratio of publicly traded companies
with similarities to the reporting unit being tested. The WACC for all reporting units ranged from 10% to 11.5% as of the date of the
last quantitative assessment for each reporting unit. Differences in the WACC used between reporting units is primarily due to
distinct risks and uncertainties regarding the cash flows of the different reporting units. A sensitivity analysis of the WACC was
performed on all reporting units as of the date of the last quantitative goodwill assessment for each reporting unit. For the FSTC
reporting unit, an increase in the WACC of one percentage point would have resulted in the carrying value of the reporting unit
exceeding its estimated fair value by approximately $2 million. For the remaining reporting units, an increase in the WACC of one
percentage point would not result in the carrying value of the reporting unit exceeding its fair value.
Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. There were no such events or changes during 2014 that would indicate that the carrying amount of
amortizable intangible assets in any of the Company’s reporting units may not be recoverable. This determination was made based on
continued growth, consistent with operating and strategic plans for the reporting unit where the intangible asset resides. Additionally,
there were no events or circumstances during 2014 that would indicate the need for an adjustment of the remaining useful lives of
these amortizable intangible assets.
Pension and Other Retirement Benefits
The expenses, assets and liabilities that Moody’s reports for its Retirement Plans are dependent on many assumptions concerning the
outcome of future events and circumstances. These assumptions include the following:
» future compensation increases, based on the Company’s long-term actual experience and future outlook;
» long-term return on pension plan assets, based on historical portfolio results and the expected future average annual return for each
major asset class within the plan’s portfolio (which is principally comprised of equity and fixed-income investments);
» future healthcare cost trends, based on historical market data, near-term outlooks and assessments of likely long-term trends; and
» discount rates, based on current yields on high-grade corporate long-term bonds.
The discount rates selected to measure the present value of the Company’s benefit obligation for its Retirement Plans as of
December 31, 2014 were derived using a cash flow matching method whereby the Company compares each plan’s projected payment
obligations by year with the corresponding yield on the Citibank pension discount curve. The cash flows by plan are then discounted
back to present value to determine the discount rate applicable to each plan.
Moody’s major assumptions vary by plan and assumptions used are set forth in Note 12 to the consolidated financial statements. In
determining these assumptions, the Company consults with outside actuaries and other advisors as deemed appropriate. While the
Company believes that the assumptions used in its calculations are reasonable, differences in actual experience or changes in assump-
tions could have a significant effect on the expenses, assets and liabilities related to the Company’s Retirement Plans. Additionally, the
Company has updated its mortality assumption by adopting the newly released RP-2014 mortality tables and accompanying mortality
improvement scale MP-2014 to reflect the latest information regarding future mortality expectations by the Society of Actuaries.
MOODY’S 2014 10K
33
When actual plan experience differs from the assumptions used, actuarial gains or losses arise. Excluding differences between the
expected long-term rate of return assumption and actual experience on plan assets, the Company amortizes, as a component of annual
pension expense, total outstanding gains or losses over the estimated average future working lifetime of active plan participants to the
extent that the gain/loss exceeds 10% of the greater of the beginning-of-year projected benefit obligation or the market-related value
of plan assets. For Moody’s Retirement Plans, the total actuarial losses as of December 31, 2014 that have not been recognized in
annual expense are $176.9 million, and Moody’s expects to recognize a net periodic expense of $13.9 million in 2015 related to the
amortization of actuarial losses.
For Moody’s funded U.S. pension plan, the differences between the expected long-term rate of return assumption and actual experience
could also affect the net periodic pension expense. As permitted under ASC Topic 715, the Company spreads the impact of asset
experience over a five-year period for purposes of calculating the market-related value of assets that is used in determining the
expected return on assets’ component of annual expense and in calculating the total unrecognized gain or loss subject to amortization.
As of December 31, 2014, the Company has an unrecognized asset gain of $5.4 million, of which $0.8 million will be recognized in the
market-related value of assets that is used to calculate the expected return on assets’ component of 2016 expense.
The table below shows the estimated effect that a one percentage-point decrease in each of these assumptions will have on Moody’s
2015 operating income. These effects have been calculated using the Company’s current projections of 2015 expenses, assets and
liabilities related to Moody’s Retirement Plans, which could change as updated data becomes available.
Weighted Average Discount Rates*
Weighted Average Assumed Compensation Growth Rate
Assumed Long-Term Rate of Return on Pension Assets
Assumption Used for 2015
Estimated Impact on
2015 Operating Income
(Decrease)/Increase
3.78%/3.65% $
3.76% $
5.80% $
(13.4)
2.4
(2.5)
* Weighted average discount rates of 3.78% and 3.65% for pension plans and Other Retirement Plans, respectively.
A one percentage-point increase in assumed healthcare cost trend rates will not affect 2015 projected expenses. Based on current pro-
jections, the Company estimates that expenses related to Retirement Plans will be $43.7 million in 2015 compared with $30.6 million
in 2014. The expected expense increase in 2015 reflects the effects of higher benefit obligations primarily due to lower discount rate
assumptions, higher amortization of actuarial losses, and a lower assumed long term rate of return on pension assets.
Stock-Based Compensation
The Company records compensation expense for all share-based payment award transactions granted to employees based on the fair
value of the equity instrument at the time of grant. This includes stock options and restricted stock. The fair value of each stock option
award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions and estimates that the
Company believes are reasonable. Some of the assumptions and estimates, such as share price volatility and expected option holding
period, are based in part on Moody’s experience during the period since becoming a public company. The use of different assumptions
and estimates in the Black-Scholes option pricing model could produce materially different estimated fair values for option awards and
related expense.
An increase in the following assumptions would have had the following estimated effect on operating income in 2014 (dollars in millions):
Assumption Used for 2010-2014
employee stock options
Increase in Assumption
Estimated impact on
Operating Income in 2014
Increase/(Decrease)
Average Expected Dividend Yield
Average Expected Share Price Volatility
Expected Option Holding Period
1.3% - 2.1%
39.8% - 48.7%
5.6 - 7.6 years
0.1% $
5% $
$
1.0 year
0.3
(2.0)
(1.0)
Income Taxes
The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company’s tax assets and liabilities are
affected by the amounts charged for services provided and expenses incurred as well as other tax matters such as intercompany trans-
actions. The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore,
income tax expense is based on reported income before income taxes, and deferred income taxes reflect the effect of temporary differ-
ences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are
recognized for income tax purposes.
The Company is subject to tax audits in various jurisdictions which involve Legacy Tax and other tax matters. The Company regularly
assesses the likely outcomes of such audits in order to determine the appropriateness of liabilities for UTPs. The Company classifies
34
MOODY’S 2014 10K
interest related to income taxes as a component of interest expense in the Company’s consolidated financial statements and associated
penalties, if any, as part of other non-operating expenses.
For UTPs, ASC Topic 740 requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than
fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing author-
ities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not
threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon
effective settlement with a taxing authority. As the determination of liabilities related to UTPs and associated interest and penalties
requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the
outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or finan-
cial condition.
For certain of its non-U.S. subsidiaries, the Company has deemed the undistributed earnings relating to these subsidiaries to be indef-
initely reinvested within its foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely
reinvested earnings. It is not practicable to determine the amount of deferred taxes that might be required to be provided if such earn-
ings were distributed in the future due to complexities in the tax laws and in the hypothetical calculations that would have to be made.
Other Estimates
In addition, there are other accounting estimates within Moody’s consolidated financial statements, including recoverability of deferred
tax assets, anticipated dividend distributions from non-U.S. subsidiaries and valuation of investments in affiliates. Management believes
the current assumptions and other considerations used to estimate amounts reflected in Moody’s consolidated financial statements are
appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected
in Moody’s consolidated financial statements, the resulting changes could have a material adverse effect on Moody’s consolidated
results of operations or financial condition.
See Note 2 to the consolidated financial statements for further information on significant accounting policies that impact Moody’s.
REPORTABLE SEGMENTS
The Company is organized into two reportable segments at December 31, 2014: MIS and MA.
The MIS segment is comprised primarily of all of the Company’s ratings operations. The MIS segment consists of five lines of business –
CFG, SFG, FIG, PPIF and MIS Other. The ratings LOBs generate revenue principally from fees for the assignment and ongoing monitoring
of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB consists of
certain non-ratings operations managed by MIS which consists of non-rating revenue from ICRA as well as certain research and fixed
income pricing service operations in the Asia-Pacific region.
The MA segment develops a wide range of products and services that support financial analysis and risk management activities of
institutional participants in global financial markets. The MA segment consists of three lines of business – RD&A, ERS and PS.
In December 2013, a subsidiary of the Company acquired Amba, a provider of investment research and quantitative analytics for global
financial institutions. Amba is part of the MA reportable segment and its revenue is included in the PS LOB. In June 2014, a subsidiary of
the Company acquired a controlling stake in ICRA, a leading provider of credit ratings and research in India. ICRA is part of the MIS
reportable segment and its ratings revenue is included in the respective ratings LOBs of MIS while its non-ratings revenue is included in
the MIS Other LOB. In July 2014, a subsidiary of the Company acquired WebEquity, a leading provider of cloud-based loan origination
solutions for financial institutions. WebEquity is part of the MA reporting segment and its revenue is included in the ERS LOB. In
October 2014, the Company acquired Lewtan, a leading provider of analytical tools and data for the global structured finance market.
Lewtan is part of the MA reportable segment and its revenue is included in the RD&A LOB.
Pursuant to the acquisition of ICRA, the Company realigned certain components of its reportable segments in the fourth quarter of
2014. This realignment resulted in the creation of the MIS Other LOB which now consists of non-ratings revenue from ICRA as well as
certain research and fixed income pricing revenue in the Asia-Pacific region which was previously reported in the RD&A LOB of MA.
These businesses are all managed by MIS and the expenses from these operations will be included in the MIS reportable segment. All
prior period results for both MIS and MA have been restated to reflect this realignment and the impact of the realignment was not sig-
nificant to MIS’s or MA’s previously reported results.
The following is a discussion of the results of operations of the Company and its reportable segments. Total MIS revenue and total MA
expenses include the intersegment royalty revenue for MIS and expense charged to MA for the rights to use and distribute content,
data and products developed by MIS. The royalty rate charged by MIS approximates the fair value of the aforementioned content, data
and products developed by MIS. Total MA revenue and total MIS expenses include intersegment fees charged to MIS from MA for the
MOODY’S 2014 10K
35
use of certain MA products and services in MIS’s ratings process. These fees charged by MA are generally equal to the costs incurred by
MA to provide these products and services. Overhead charges and corporate expenses which exclusively benefit one segment are fully
charged to that segment. Additionally, overhead costs and corporate expenses of the Company which benefit both segments are gen-
erally allocated to each segment based on a revenue-split methodology. Overhead expenses include costs such as rent and occupancy,
information technology and support staff such as finance, human resources and information technology.
RESULTS OF OPERATIONS
Year ended December 31, 2014 compared with year ended December 31, 2013
Executive Summary
» Moody’s revenue in 2014 totaled $3,334.3 million, an increase of $361.8 million compared to 2013 and reflected growth in both MIS
and MA.
» Total expenses increased $157.3 million compared to the prior year reflecting higher compensation costs of approximately
$155 million primarily relating to headcount growth (both organic and from acquisitions) and annual compensation increases
coupled with higher incentive compensation reflecting higher achievement against full-year targeted results in 2014 compared to
2013. Non-compensation expenses were flat compared to 2013 with higher rent and occupancy costs, higher costs related to the
Company’s investment in IT infrastructure and higher variable costs correlated with business growth being offset by a litigation
settlement charge in the prior year.
» Operating income of $1,439.1 million increased $204.5 million compared to 2013 and resulted in an operating margin of 43.2%,
compared to 41.5% in the prior year. Adjusted Operating Income of $1,534.7 million in 2014 increased $206.7 million compared to
2013, resulting in an Adjusted Operating Margin of 46.0% compared to 44.7% in the prior year period. Both the operating margin
and Adjusted Operating Margin in 2013 included the aforementioned litigation settlement charge.
» Non-operating income (expense), net was $21.9 million compared to net expense of ($65.3) million in 2013. The change reflects the
$102.8 million ICRA Gain and FX gains relating to the strengthening of the U.S. dollar to the euro and British pound partially offset
by higher interest expense reflecting additional long-term debt issued by the Company in 2014.
» The ETR increased 90bps compared to 2013 primarily due to a greater legacy tax settlement in 2013, as well as a tax benefit in 2013
related to retroactive tax legislation.
» Diluted EPS of $4.61 in 2014, which included $0.37 for the ICRA Gain as well as a $0.03 benefit from a Legacy Tax Matter, increased
$1.01 over 2013, which included a $0.14 charge related to the aforementioned litigation settlement and a $0.09 benefit from a
Legacy Tax Matter. Excluding the ICRA Gain and litigation settlement charge in 2014 and 2013, respectively, and the benefit from
the Legacy Tax Matters in both years, Non-GAAP Diluted EPS in 2014 of $4.21 was $0.56 higher than 2013 Non-GAAP Diluted EPS
of $3.65.
36
MOODY’S 2014 10K
Moody’s Corporation
Revenue:
United States
International:
EMEA
Asia-Pacific
Americas
Total International
Total
Expenses:
Operating
SG&A
Depreciation and amortization
Total
Operating income
Adjusted Operating Income (1)
Interest income (expense), net
Other non-operating income (expense), net
ICRA Gain
Net income attributable to Moody’s
Diluted EPS attributable to Moody’s common
shareholders
Non-GAAP EPS attributable to Moody’s common
shareholders
Operating margin
Adjusted Operating Margin (1)
$
$
$
$
$
$
$
$
Year ended December 31,
2014
2013
% Change Favorable
(Unfavorable)
$
1,814.5
$
1,626.5
952.8
338.3
228.7
1,519.8
3,334.3
930.3
869.3
95.6
1,895.2
1,439.1
1,534.7
(116.8)
35.9
102.8
988.7
4.61
4.21
43.2%
46.0%
$
$
$
$
$
$
$
$
862.8
286.1
197.1
1,346.0
2,972.5
822.4
822.1
93.4
1,737.9
1,234.6
1,328.0
(91.8)
26.5
—
804.5
3.60
3.65
41.5%
44.7%
12%
10%
18%
16%
13%
12%
(13%)
(6%)
(2%)
(9%)
17%
16%
(27%)
35%
NM
23%
28%
15%
(1)
Adjusted Operating Income, Adjusted Operating Margin and Non-GAAP EPS attributable to Moody’s common shareholders are non-GAAP financial
measures. Refer to the section entitled “Non-GAAP Financial Measures” of this Management Discussion and Analysis for further information regarding these
measures.
The table below shows Moody’s global staffing by geographic area:
United States
International
Total
December 31,
2014
3,138
6,746*
9,884
2013
2,847
5,517
8,364
% Change
10%
22%
18%
* Total as of December 31, 2014 includes approximately 1,300 staff from the acquisitions of ICRA, Lewtan and WebEquity of which a significant portion are
located in low cost jurisdictions.
Global revenue of $3,334.3 million in 2014 increased $361.8 million compared to 2013 reflecting growth in both MIS and MA. The
primary drivers of the increase in MIS revenue reflect changes in the mix of fee type, new fee initiatives and certain pricing increases,
primarily in the U.S., coupled with growth in rated issuance volumes for CLOs, investment-grade corporate debt and bank loans. Also
contributing to the growth were higher monitoring fees. The growth in MA reflects higher revenue across all LOBs. The growth in RD&A
resulted from increases in credit research, licensing of ratings data and economic analysis and data while the growth in PS reflected
revenue from the fourth quarter 2013 acquisition of Amba as well as growth from the Copal and FSTC businesses. The increase in ERS
was driven by growth across nearly all product offerings, most notably in the asset-liability and capital solutions, credit origination,
MOODY’S 2014 10K
37
insurance and stress-testing verticals. Additionally, ERS revenue benefitted from the acquisition of WebEquity Solutions in July 2014.
Transaction revenue accounted for 50% of global MCO revenue in both 2014 and 2013.
U.S. revenue of $1,814.5 million in 2014 increased $188.0 million over the prior year, reflecting changes in the mix of fee type, new fee
initiatives and certain pricing increases within MIS as well as growth in rated issuance volumes for investment-grade corporate debt and
CLOs. Also contributing to the growth were higher monitoring fees in MIS and growth across all LOBs within MA. These increases were
partially offset by declines in high-yield corporate debt rated issuance volumes as well as declines in MIS banking-related revenue which
is primarily due to an unfavorable shift in issuance mix.
Non-U.S. revenue increased $173.8 million compared to 2013, reflecting growth across all regions in both reportable segments. The
growth in the MIS segment reflected changes in the mix of fee type, new fee initiatives and certain pricing increases as well as higher
bank loan rated issuance volumes in EMEA. Additionally, higher banking-related rated issuance volumes in Asia-Pacific and higher mon-
itoring fees in all regions contributed to the MIS growth. Additionally, the non-U.S. growth within MA reflected increases in all LOBs
across all regions.
Operating expenses were $930.3 million in 2014 and increased $107.9 million from 2013 primarily due to an approximate $92 million
increase in compensation costs reflecting higher salaries and related employee benefits resulting from the impact of annual compensa-
tion increases and growth in headcount due to incremental hires and the acquisitions of Amba, WebEquity, ICRA and Lewtan. Also con-
tributing to the increase in compensation expenses were higher incentive compensation costs reflecting greater achievement against full-
year targeted results compared to the prior year. Additionally, non-compensation expenses increased approximately $16 million primarily
reflecting costs associated with the aforementioned acquisitions as well as higher costs to support investments in IT infrastructure.
SG&A expenses of $869.3 million in 2014 increased $47.2 million compared to the prior year period reflecting higher compensation
and non-compensation expenses partially offset by the first quarter 2013 litigation settlement charge relating to two matters regarding
structured finance transactions rated by MIS, as more fully discussed in Note 18 to the consolidated financial statements. The growth
in compensation costs of approximately $63 million was primarily due to higher salaries and related employee benefits resulting from
annual compensation increases, headcount growth in MIS and MA as well as in overhead support areas coupled with higher headcount
from acquisitions. Also contributing to the increase in compensation expenses were higher incentive compensation costs reflecting
greater achievement against full-year targeted results compared to the prior year coupled with headcount growth. Additionally, there
were higher rent and occupancy costs of approximately $13 million reflecting additional floors leased at the Company’s 7WTC head-
quarters coupled with various other real estate expansion projects worldwide as well as higher costs to support investments in the
Company’s IT infrastructure. Also, incremental non-compensation expenses from acquisitions contributed to the expense growth.
Operating income of $1,439.1 million increased $204.5 million from 2013. Adjusted Operating Income was $1,534.7 million in 2014
and increased $206.7 million compared to 2013. Operating margin increased 170 bps compared to 2013. Adjusted Operating Margin in
2014 of 46.0% increased 130 bps compared to the prior year. The increase in operating margin and Adjusted Operating Margin is pri-
marily due to the aforementioned litigation settlement charge in 2013 which negatively impacted the prior year margins.
Interest income (expense), net in 2014 was ($116.8) million, a $25.0 million increase in net expense compared to 2013. This increase is
primarily due to approximately $26 million in higher interest expense resulting from the issuance of the 2013 Senior Notes in August
2013 as well as the issuance of the 2014 Senior Notes (5-Year) and 2014 Senior Notes (30-Year) in July 2014. Also, the increase in
interest expense included approximately $11 million in net costs (net of a gain on the settlement of an interest rate swap) relating to
the early repayment of the Series 2005-1 Notes.
Other non-operating income (expense), net was $35.9 million in 2014, a $9.4 million increase in income compared to 2013. The
increase reflects FX gains of $20.3 million in 2014 which is primarily due to strengthening of the U.S. dollar relative to the euro and
British pound for certain U.S. dollar denominated assets held in international jurisdictions. This increase was partially offset by an
approximate $13 million higher benefit from the resolution of Legacy Tax Matters in 2013 compared to 2014.
The $102.8 million ICRA Gain related to a fair value remeasurement of the Company’s previously held equity investment in ICRA which
occurred in connection with Moody’s acquiring a controlling stake in ICRA on June 26, 2014.
The Company’s ETR was 31.1% in 2014, up from 30.2% in 2013. The increase was primarily due to a greater legacy tax settlement in
2013 as well as a tax benefit in 2013 related to retroactive tax legislation.
Net Income in 2014, which included $78.5 million for the ICRA Gain as well as a $6.4 million benefit related to the aforementioned
Legacy Tax Matter, was $988.7 million, or $4.61 per diluted share. This is an increase of $184.2 million, or $1.01 per diluted share,
compared to 2013, which included a $0.14 charge related to the settlement of certain legal matters and a $0.09 benefit related to the
resolution of a Legacy Tax Matter.
38
MOODY’S 2014 10K
Excluding the $0.37 ICRA Gain in 2014, the litigation settlement charge in 2013 and benefits from Legacy Tax Matters in both years,
Non-GAAP Diluted EPS of $4.21 in 2014 was $0.56 higher than Non-GAAP Diluted EPS of $3.65 in the prior year.
SEGMENT RESULTS
Moody’s Investors Service
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
Year ended December 31,
Revenue:
Corporate finance (CFG)
Structured finance (SFG)
Financial institutions (FIG)
Public, project and infrastructure finance (PPIF)
$
Total ratings revenue
MIS Other
Total external revenue
Intersegment royalty
Total MIS Revenue
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Adjusted Operating Income
Depreciation and amortization
$
2014
1,109.3
426.5
354.7
357.3
2,247.8
18.0
2,265.8
87.6
2,353.4
1,062.9
13.3
1,277.2
49.4
Operating income
$
1,227.8
$
2013
996.8
382.5
338.8
341.3
2,059.4
12.2
2,071.6
78.6
2,150.2
1,021.6
12.4
1,116.2
46.7
1,069.5
% Change Favorable
(Unfavorable)
11%
12%
5%
5%
9%
48%
9%
11%
9%
(4%)
(7%)
14%
(6%)
15%
Adjusted Operating Margin
Operating margin
54.3%
52.2%
51.9%
49.7%
The following is a discussion of external MIS revenue and operating expenses:
Global MIS revenue of $2,265.8 million in 2014 increased $194.2 million compared to 2013 with the most notable drivers reflecting
benefits from changes in the mix of fee type, new fee initiatives and certain pricing increases as well as higher rated issuance volumes
for investment-grade corporate debt and CLOs. The growth over 2013 also reflects higher monitoring fees across all regions. These
increases were partially offset by declines in rated issuance volumes in high-yield corporate debt as well as banking-related revenue in
the U.S. Transaction revenue for MIS was 61% in 2014, down slightly from 62% in the prior year.
In the U.S., revenue was $1,341.0 million in 2014, an increase of $124.3 million compared to 2013 reflecting changes in the mix of fee
type, new fee initiatives and certain pricing increases coupled with growth in rated issuance volumes for investment-grade corporate
debt and CLOs. Additionally, higher monitoring fees contributed to the revenue growth. These increases were partially offset by
unfavorable issuance mix in the banking sector and lower rated issuance volumes for speculative-grade corporate debt.
Non-U.S. revenue was $924.8 million in 2014, an increase of $69.9 million compared to 2013. The growth reflects higher bank loan and
structured credit revenue in EMEA and Asia-Pacific and higher banking-related issuance volumes in Asia-Pacific. Also contributing to the
growth were changes in the mix of fee type, new fee initiatives and certain pricing increases, as well as higher monitoring fees across all
regions resulting from an expanding base of monitored instruments. Partially offsetting these increases were declines in investment-
grade corporate debt, ABS, covered bond and infrastructure finance revenue in the EMEA region.
Global CFG revenue of $1,109.3 million in 2014 increased $112.5 million from 2013 reflecting higher U.S. investment-grade rated issu-
ance volumes coupled with changes in the mix of fee type, new fee initiatives and certain pricing increases, primarily in the U.S. The
growth in U.S. investment grade revenue reflects increases in rated issuance volumes, most notably in the fourth quarter of 2014,
reflecting issuance related to M&A activity and a shift of investor demand towards high-grade instruments due to falling oil prices and
geopolitical and global macroeconomic growth uncertainties. Monitoring and program fee revenue also contributed to the revenue
MOODY’S 2014 10K
39
growth in all regions due to an expanding base of monitored instruments. Additionally, there were higher rated issuance volumes for
bank loans in EMEA reflecting issuers taking advantage of favorable market conditions as well as higher bank loan revenue in the U.S.
reflecting a favorable shift in issuance mix. Partially offsetting these increases was a decline in high-yield corporate debt issuance in the
U.S. reflecting investor demand shifting to investment-grade securities as well as declines in investment-grade revenue in EMEA com-
pared to robust refinancing issuance volumes in the prior year. Transaction revenue represented 70% of total CFG revenue in 2014,
compared to 73% in the prior year period. In the U.S., revenue in 2014 was $687.3 million, or $74.1 million higher than the prior year.
Internationally, revenue of $422.0 million in the 2014 increased $38.4 million compared to the prior year.
Global SFG revenue of $426.5 million in 2014 increased $44.0 million compared to 2013 primarily due to higher rated issuance vol-
umes for CLOs in the U.S. and EMEA resulting from growing liquidity demand coupled with increased investor demand reflecting solid
performance and low underlying defaults in this asset class. Also contributing to the growth was an increase in CREF revenue which
reflected higher average fees on CMBS deals and higher monitoring revenue as well as the favorable impact of changes in the mix of fee
type, new fee initiatives and certain pricing increases. Partially offsetting these increases were declines in ABS and covered bond issu-
ance in EMEA reflecting banks in the region utilizing the unsecured financing market and declines in automobile loans and credit card
securitization in the region. Transaction revenue was 62% of total SFG revenue in 2014 compared to 60% in the prior year. In the U.S.,
revenue of $282.9 million increased $38.2 million compared to 2013. Non-U.S. revenue in 2014 of $143.6 million increased
$5.8 million compared to the prior year.
Global FIG revenue of $354.7 million in 2014 was $15.9 million higher compared to 2013 due to changes in the mix of fee type, new
fee initiatives and pricing increases as well as higher banking-related issuance in the Asia-Pacific region. Partially offsetting these
increases was a decline in U.S. banking revenue which reflected an unfavorable shift in issuance mix. Transaction revenue was 35% of
total FIG revenue in both 2014 and 2013. In the U.S., revenue was $141.2 million, or down $2.2 million compared to the prior year.
Internationally, revenue was $213.5 million in 2014, or $18.1 million higher compared to 2013.
Global PPIF revenue was $357.3 million in 2014 and increased $16.0 million compared to 2013. The growth reflects changes in the mix
of fee type, new fee initiatives and pricing increases partially offset by lower U.S. public finance refunding volumes in the first three
quarters of 2014 due to higher benchmark interest rates. Transaction revenue was 58% of total PPIF revenue in 2014 compared to 60%
in the prior year. In the U.S., revenue in 2014 was $226.2 million and increased $10.8 million compared to 2013. Outside the U.S., PPIF
revenue increased $5.2 million compared to 2013.
Operating and SG&A expenses in 2014 increased $41.3 million compared to 2013 primarily reflecting higher compensation costs of
approximately $70 million resulting from annual compensation increases, headcount growth in the ratings LOBs and from the acquis-
ition of ICRA as well as in support areas such as IT, finance and human resources for which the costs are allocated to each segment
based on a revenue-split methodology. Also, there were higher non-compensation costs in 2014 to support the Company’s IT systems
and infrastructure as well as higher rent and occupancy costs of approximately $9 million for additional leased floors at 7WTC coupled
with various other global real estate expansion projects. Furthermore, the increase in non-compensation expenses reflected the con-
solidation of the results of operations for ICRA in the fourth quarter of 2014. These increases were partially offset by a litigation
settlement charge in 2013 regarding two structured finance transactions rated by MIS as more fully discussed in Note 18 to the con-
solidated financial statements.
Adjusted Operating Income and operating income in 2014 were $1,277.2 million and $1,227.8 million, respectively, and increased
$161.0 million and $158.3 million, respectively, compared to 2013. Adjusted Operating Margin and operating margin were 54.3% and
52.2%, respectively, or 240 bps and 250 bps higher than the prior year, respectively. The increase in both margins compared to the prior
year is primarily due to the aforementioned litigation settlement charge in 2013. Adjusted Operating Income and operating income
both include intersegment revenue and expense.
40
MOODY’S 2014 10K
Moody’s Analytics
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
Year ended December 31,
Revenue:
Research, data and analytics (RD&A)
Enterprise risk solutions (ERS)
Professional services (PS)
$
Total external revenue
Intersegment revenue
Total MA Revenue
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Adjusted Operating Income
Depreciation and amortization
Operating income
Adjusted Operating Margin
Operating margin
$
2014
571.8
328.5
168.2
1,068.5
13.3
1,081.8
736.7
87.6
257.5
46.2
2013
519.8
262.5
118.6
900.9
12.4
913.3
622.9
78.6
211.8
46.7
165.1
% Change Favorable
(Unfavorable)
10%
25%
42%
19%
7%
18%
(18%)
(11%)
22%
1%
28%
$
211.3
$
23.8%
19.5%
23.2%
18.1%
The following is a discussion of external MA revenue and operating expenses:
Global MA revenue increased $167.6 million compared to 2013, with growth across all LOBs. Recurring revenue comprised 73% and
77% of total MA revenue in 2014 and 2013, respectively.
In the U.S., revenue of $473.5 million in 2014 increased $63.7 million, and reflected growth across all LOBs. International revenue of
$595.0 million in 2014 was $103.9 million higher than in 2013.
Global RD&A revenue, which comprised 54% and 58% of total external MA revenue in 2014 and 2013, respectively, increased $52.0 million
over the prior year period. The growth, which was most notable in the U.S. and EMEA, was primarily due to increases in credit research,
licensing of ratings data and economic analysis and data. Additionally, the growth reflected general market price increases, the favorable
impact of changes in FX translation rates and revenue from the acquisition of Lewtan in the fourth quarter of 2014. In the U.S., revenue of
$306.8 million increased $25.0 million compared to 2013. Internationally, revenue increased $27.0 million compared to the prior year.
Global ERS revenue in 2014 increased $66.0 million over 2013, primarily due to growth across nearly all product offerings, most notably
in the asset-liability and capital solutions, credit origination, insurance and stress testing verticals. The revenue growth also reflects the
acquisition of WebEquity in the third quarter of 2014. Revenue in ERS is subject to quarterly volatility resulting from the variable nature
of project timing and the concentration of software implementation and license revenue in a relatively small number of engagements.
In the U.S., revenue of $110.1 million increased $13.7 million compared to 2013. Internationally, revenue of $218.4 million increased
$52.3 million compared to the prior year.
Revenue from PS increased $49.6 million compared to 2013 with approximately 84% of the growth reflecting revenue from the acquis-
ition of Amba in the fourth quarter of 2013. In addition to the acquisition of Amba, the growth reflects further penetration into the
market for outsourced research and analytical services as well as growth in the FSTC business. In the U.S., revenue of $56.6 million
increased $25.0 million compared to 2013. Internationally, revenue increased $24.6 million compared to the prior year.
Operating and SG&A expenses in 2014 increased $113.8 million compared to 2013. The expense growth reflects an approximate $85 million
increase in compensation costs primarily due to higher headcount to support business growth as well as higher headcount in support areas,
for which the costs are allocated to each segment based on a revenue- split methodology. Headcount from the acquisitions of Amba,
WebEquity and Lewtan as well as annual merit increases also contributed to the compensation expense growth. The growth in compensation
costs also reflects higher incentive compensation due to higher achievement against full-year targeted results compared to the prior year.
Non-compensation expenses increased approximately $29 million due to higher consulting costs for continued investment in IT infra-
structure as well as costs related to ERS product development and project delivery. Furthermore, there was an increase in rent and occupancy
costs of approximately $6 million reflecting additional floors at 7WTC as well as various other real estate expansion projects worldwide. Also,
the expense growth reflected additional non-compensation costs related to the acquisitions of Amba, WebEquity and Lewtan. These
increases were partially offset by approximately $6 million in lower contingent consideration costs relating to the Copal acquisition.
MOODY’S 2014 10K
41
Adjusted Operating Income was $257.5 million in 2014 and increased $45.7 million compared to the same period in 2013. Operating
income of $211.3 million in 2014 increased $46.2 million compared to the same period in 2013. Adjusted Operating Margin in 2014
was 23.8%, up 60 bps from 2013. Operating margin was 19.5% in 2014, up 140 bps from the prior year. Adjusted operating income
and operating income both include intersegment revenue and expense.
Year ended December 31, 2013 compared with year ended December 31, 2012
Executive Summary
» Moody’s revenue in 2013 totaled $2,972.5 million, an increase of $242.2 million compared to 2012 and reflected good growth in
both reportable segments, most notably in the high-yield and bank loan sectors of CFG within MIS and within all LOBs within MA.
» Total expenses, which included the settlement of the Abu Dhabi and Rhinebridge litigation matters more fully discussed in Note 18
to the consolidated financial statements, increased $85.0 million compared to the prior year which included a $12.2 million goodwill
impairment charge relating to the Company’s FSTC reporting unit within MA. The increase in expenses also reflected higher salaries
and benefit costs of $56.2 million primarily relating to headcount growth and annual compensation increases. These increases were
partially offset by lower incentive compensation costs of $30.3 million.
» Operating income of $1,234.6 million increased $157.2 million compared to 2012 and resulted in an operating margin of 41.5% in
2013, compared to 39.5% in the prior year. Adjusted Operating Income of $1,328.0 million in 2013 increased $144.9 million
compared to 2012 resulting in an Adjusted Operating Margin of 44.7% compared to 43.3% in the prior year period.
» Diluted EPS of $3.60 in 2013, which includes a $0.14 charge in the first quarter related to the aforementioned settlement of two
litigation matters and a $0.09 benefit from a Legacy Tax Matter in the fourth quarter of 2013, increased $0.55 over the prior year
period, which included a $0.06 benefit relating to a Legacy Tax Matter. Excluding the litigation settlement in the first quarter of 2013
and the benefits from Legacy Tax Matters in both years, Non-GAAP Diluted EPS was $3.65, or $0.66 higher than $2.99 in 2012.
Moody’s Corporation
Revenue:
United States
International:
EMEA
Asia-Pacific
Americas
Total International
Total
Expenses:
Operating
SG&A
Goodwill impairment charge
Depreciation and amortization
Total
Operating income
Adjusted Operating Income (1)
Interest income (expense), net
Other non-operating income (expense), net
Net income attributable to Moody’s
Diluted EPS attributable to Moody’s common
shareholders
Non-GAAP Diluted EPS attributable to Moody’s
common shareholders
Operating margin
Adjusted Operating Margin (1)
$
$
$
$
$
$
$
Year Ended December 31,
2013
2012
% Change Favorable
(Unfavorable)
$
1,626.5
$
1,472.4
862.8
286.1
197.1
1,346.0
2,972.5
822.4
822.1
—
93.4
1,737.9
1,234.6
1,328.0
(91.8)
26.5
804.5
3.60
3.65
41.5%
44.7%
$
$
$
$
$
$
$
800.2
266.5
191.2
1,257.9
2,730.3
795.0
752.2
12.2
93.5
1,652.9
1,077.4
1,183.1
(63.8)
10.4
690.0
3.05
2.99
39.5%
43.3%
10%
8%
7%
3%
7%
9%
(3%)
(9%)
100%
—
(5%)
15%
12%
(44%)
155%
17%
18%
22%
(1) Adjusted Operating Income, Adjusted Operating Margin and Non-GAAP Diluted EPS attributable to Moody’s common shareholders are non-GAAP financial measures.
Refer to the section entitled “Non-GAAP Financial Measures” of this Management Discussion and Analysis for further information regarding these measures.
42
MOODY’S 2014 10K
The table below shows Moody’s global staffing by geographic area:
United States
International
Total
December 31,
2013
2,847
5,517 *
8,364
2012
2,609
4,149
6,758
% Change
9%
33%
24%
* Total as of December 31, 2013 includes 971 staff from the fourth quarter 2013 acquisition of Amba, of which a significant portion are based in low cost
jurisdictions.
Global revenue of $2,972.5 million in 2013 increased $242.2 million compared to 2012 reflecting good growth in both reportable
segments. The increase in ratings revenue reflects benefits from changes in the mix of fee type, new fee initiatives and certain pricing
increases, primarily in the U.S., coupled with higher global rated issuance volumes for high-yield corporate debt and bank loans. The
growth in MA reflects higher revenue across all LOBs, most notably in RD&A, which benefited from solid demand for data and analytic
products, and in ERS which was driven by the completion of certain software implementations. Transaction revenue accounted for 50%
of global MCO revenue in both 2013 and 2012.
U.S. revenue of $1,626.5 million increased $154.1 million over 2012, reflecting growth across all ratings LOBs, most notably in CFG and
SFG, coupled with growth in all LOBs within MA.
Non-U.S. revenue increased $88.1 million compared to 2012, reflecting higher CFG revenue in all regions coupled with increases in MA
revenue within the EMEA and Asia-Pacific regions. These increases were partially offset by declines in all asset classes in SFG within the
EMEA region.
Operating expenses were $822.4 million in 2013, an increase of $27.4 million from 2012 and reflected growth in both compensation
and non-compensation costs. The increase in compensation costs of approximately $11 million reflects higher salaries and related
employee benefits of approximately $30 million primarily resulting from increases in headcount as well as the impact of annual com-
pensation increases. These increases were partially offset by lower incentive compensation of approximately $21 million due to lower
achievement against full-year targeted results in 2013 compared to 2012. The growth in non-compensation expenses of approximately
$17 million is primarily due to an increase in costs relating to ongoing IT initiatives coupled with higher variable costs correlated with
business growth.
SG&A expenses of $822.1 million in 2013 increased $69.9 million from 2012 with the primary driver of the expense growth reflecting
the settlement of the Abu Dhabi and Rhinebridge litigation matters more fully discussed in Note 18 to the consolidated financial
statements. The remaining increase in SG&A expenses reflects growth in compensation costs of approximately $18 million primarily
due to higher salaries and related employee benefits of approximately $26 million resulting from annual compensation increases and
headcount growth in sales personnel within MA as well as in overhead support areas. The growth in salaries and related employee bene-
fits was partially offset by lower incentive compensation of approximately $10 million due to lower achievement against full-year tar-
geted results in 2013 compared to 2012. Additionally, there was a decline in non-compensation expenses (excluding the
aforementioned settlement for litigation matters) which primarily reflected lower legal defense costs in 2013 following the first quarter
litigation settlement. These declines were partially offset by higher costs for ongoing IT initiatives coupled with higher contingent con-
sideration costs of approximately $7 million relating to the acquisition of Copal.
Operating income of $1,234.6 million increased $157.2 million from 2012. Adjusted Operating Income was $1,328.0 million in 2013
and increased $144.9 million compared to 2012. Operating margin and Adjusted Operating Margin of 41.5% and 44.7%, respectively,
increased 200bps and 140bps, respectively, compared to the prior year. The increased margins reflected good revenue growth in both
reportable segments outpacing operating expense growth.
Interest income (expense), net in 2013 was ($91.8) million, a $28.0 million increase in expense compared to 2012. This increase is due
to higher interest on borrowings reflecting the issuance of the 2012 Senior Notes and the 2013 Senior Notes in August 2012 and 2013,
respectively, partially offset by lower interest expense due to the final repayment of the 2008 Term Loan in May 2013. Also, the
increase in expense reflects an approximate $7 million reversal of interest on UTPs in 2012 related to the settlement of state and local
tax audits.
Other non-operating income (expense), net was $26.5 million in 2013, a $16.1 million increase in income compared to 2012 and
reflected approximately $6 million in FX losses in 2012 compared to immaterial gains in 2013. The FX losses in 2012 primarily related
to the decline of the euro relative to the British pound in the prior year. Also contributing to the increase in income was a higher Legacy
Tax benefit in 2013 compared to 2012 ($19.2 million in 2013 compared to $12.8 million in 2012).
MOODY’S 2014 10K
43
The Company’s ETR was 30.2% in 2013, down from 31.7% in 2012. The decrease was primarily due to U.S. tax legislation enacted in
early 2013 which retroactively extended certain tax benefits to the 2012 tax year and prospectively extended these benefits to the
2013 tax year as well as tax benefits on the aforementioned litigation settlement charge.
Net Income in 2013 was $804.5 million, or $3.60 per diluted share, and included a $0.14 charge related to the aforementioned liti-
gation settlement in the first quarter of 2013 as well as a $0.09 benefit relating to the resolution of a Legacy Tax Matter. This is an
increase of $114.5 million, or $0.55 per diluted share, compared to 2012, which included a $0.06 benefit relating to a Legacy Tax Mat-
ter. Excluding the charge for the litigation settlement in 2013 and the Legacy Tax benefits in both years, Non-GAAP Diluted EPS of
$3.65 in 2013 was $0.66 higher than in the same period of the prior year.
SEGMENT RESULTS
Moody’s Investors Service
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
Year Ended December 31,
Revenue:
Corporate finance (CFG)
Structured finance (SFG)
Financial institutions(FIG)
Public, project and infrastructure finance (PPIF)
$
Total ratings revenue
MIS Other
Total external revenue
Intersegment royalty
Total MIS Revenue
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Adjusted Operating Income
Depreciation and amortization
$
2013
996.8
382.5
338.8
341.3
2,059.4
12.2
2,071.6
78.6
2,150.2
1,021.6
12.4
1,116.2
46.7
Operating income
$
1,069.5
$
Adjusted Operating Margin
Operating margin
51.9%
49.7%
The following is a discussion of external MIS revenue and operating expenses:
% Change Favorable
(Unfavorable)
16%
—
4%
6%
9%
16%
9%
10%
9%
(6%)
(4%)
12%
(5%)
13%
2012
857.6
381.0
325.5
322.7
1,886.8
10.5
1,897.3
71.5
1,968.8
964.4
11.9
992.5
44.4
948.1
50.4%
48.2%
Global MIS revenue of $2,071.6 million in 2013 increased $174.3 million compared to 2012, reflecting growth in all ratings LOBs exclud-
ing SFG, which was flat compared to the prior year. The drivers of the growth include changes in the mix of fee type, new fee initiatives
and certain pricing increases, primarily in the U.S. and an increase in rated issuance volumes for speculative-grade corporate debt and
bank loans, particularly in the first half of 2013, coupled with higher U.S. CMBS and REIT issuance. These increases were partially offset by
declines across all asset classes within SFG in EMEA. Transaction revenue for MIS was 62% of total MIS revenue in both 2013 and 2012.
In the U.S., revenue was $1,216.7 million in 2013, an increase of $103.9 million, or 9% compared to 2012 reflecting changes in the mix
of fee type, new fee initiatives and certain pricing increases as well as strong growth in rated issuance volumes for bank loans, CMBS,
REITs and CLOs. Higher revenue from monitoring fees in CFG also contributed to the growth.
Non-U.S. revenue was $854.9 million in 2013, an increase of $70.4 million compared to 2012 reflecting changes in the mix of fee type,
new fee initiatives and certain pricing increases as well as higher revenue from rating high-yield corporate debt and bank loans across
all regions. Partially offsetting these increases were declines in rated issuance volumes across most asset classes in SFG within the EMEA
region.
Global CFG revenue of $996.8 million in 2013 increased $139.2 million from 2012 reflecting changes in the mix of fee type, new fee
initiatives and certain pricing increases, primarily in the U.S. as well as growth in rated issuance volumes for high-yield corporate debt
44
MOODY’S 2014 10K
and bank loans, particularly in the first half of 2013. The increase in high-yield corporate debt and bank loans largely reflected issuers
taking advantage of the overall low interest rate environment to issue new debt as well as to refinance existing borrowings combined
with increased investor appetite for higher-yielding fixed income securities. Monitoring and program fee revenue also increased due to
growth in the number of outstanding rated issuances. Transaction revenue represented 73% of total CFG revenue in 2013, compared to
74% in 2012. In the U.S., revenue in 2013 was $613.2 million, or $51.4 million higher than 2012. Internationally, revenue of $383.6
million in 2013 increased $87.8 million compared to 2012.
Global SFG revenue of $382.5 million in 2013 was flat compared to 2012 reflecting an increase in rated issuance volumes for CMBS,
REITs and CLOs in the U.S. coupled with the favorable impact of changes in the mix of fee type, new fee initiatives and certain pricing
increases. These increases were offset by declines across all asset classes in EMEA. Transaction revenue was 60% of total SFG revenue in
2013 compared to 58% in 2012. In the U.S., revenue of $244.7 million increased $37.3 million compared to the same period in 2012,
reflecting the aforementioned growth in CLO, CMBS and REIT rated issuance volumes due to favorable market conditions. Non-U.S.
revenue in 2013 of $137.8 million decreased $35.8 million compared to 2012 reflecting declines across all asset classes in the EMEA
region, most notably in RMBS and ABS. The decline in EMEA RMBS and ABS was primarily due to depressed issuance levels reflecting
banks use of unsecured financing in preference to securitized funding conduits, coupled with their balance sheets being well funded
from the ECB and other government sponsored funding programs (e.g. the ECB’s long-term refinancing operation).
Global FIG revenue of $338.8 million in 2013 was $13.3 million higher compared to 2012 due to benefits from changes in the mix of
fee type, new fee initiatives and pricing increases as well as growth in banking-related revenue in the U.S. The growth in banking-related
revenue reflects higher issuance volumes from specialty finance, financial leasing and securities holding companies due to favorable
market conditions. Additionally, the increase reflected higher insurance revenue, most notably in EMEA, primarily reflecting issuers
opportunistically refinancing debt amidst favorable interest rate conditions coupled with issuance to fund M&A activity in the sector,
particularly in the first half of 2013. Transaction revenue was 35% of total FIG revenue in 2013 compared to 37% in the same period in
2012. In the U.S. and internationally, revenue was $143.4 million and $195.4 million, respectively, in 2013, or 6% and 3% higher,
respectively, compared to 2012.
Global PPIF revenue was $341.3 million in 2013, an increase of $18.6 million compared to 2012, reflecting benefits from changes in the
mix of fee type, new fee initiatives and pricing increases as well as increases in U.S. project and infrastructure finance rated issuance
volumes. Partially offsetting these increases was a decline in U.S. public finance issuance reflecting lower municipal bond refunding
volumes due to higher borrowing costs associated with increases in benchmark interest rates for U.S. Treasury Bonds beginning in May
2013. Transaction revenue was 60% and 61% of total PPIF revenue in 2013 and 2012, respectively. In the U.S., revenue in 2013 was
$215.4 million and increased $6.8 million compared to 2012. Outside the U.S., PPIF revenue increased $11.8 million compared to 2012.
Operating and SG&A expenses in 2013 increased $57.2 million compared to 2012 primarily due to growth in non-compensation costs
of approximately $56 million, for which the primary driver was the settlement of the Abu Dhabi and Rhinebridge litigation matters
more fully discussed in Note 18 to the consolidated financial statements. Compensation costs were flat compared to the prior year
reflecting higher salaries and related employee benefits costs of approximately $31 million resulting from annual compensation
increases, headcount growth in the ratings LOBs as well as in support areas such as IT, finance and human resources for which the costs
are allocated to each segment based on a revenue-split methodology. This increase was offset by an approximate $32 million decline in
incentive compensation which was primarily due to lower achievement against full-year targeted results in 2013 compared to 2012.
Adjusted Operating Income in 2013, which includes the aforementioned litigation settlement charge was $1,116.2 million, an increase
of $123.7 million compared to 2012. Operating income in 2013 of $1,069.5 million increased $121.4 million from 2012. Adjusted
Operating Margin and operating margin were 51.9% and 49.7%, respectively, or both 150bps higher than 2012 and both include inter-
segment revenue and expense.
MOODY’S 2014 10K
45
Moody’s Analytics
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
Year Ended December 31,
Revenue:
Research, data and analytics (RD&A)
Enterprise risk solutions (ERS)
Professional services (PS)
$
Total external revenue
Intersegment revenue
Total MA Revenue
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Adjusted Operating Income
Depreciation and amortization
Goodwill impairment charge
$
2013
519.8
262.5
118.6
900.9
12.4
913.3
622.9
78.6
211.8
46.7
—
Operating income
$
165.1
$
2012
482.7
242.6
107.7
833.0
11.9
844.9
582.8
71.5
190.6
49.1
12.2
129.3
% Change Favorable
(Unfavorable)
8%
8%
10%
8%
4%
8%
(7%)
(10%)
11%
5%
100%
28%
Adjusted Operating Margin
Operating margin
23.2%
18.1%
22.6%
15.3%
The following is a discussion of external MA revenue and operating expenses:
Global MA revenue increased $67.9 million compared to 2012, with good growth across all LOBs. Recurring revenue comprised 77% of
total MA revenue in both 2013 and 2012.
In the U.S., revenue of $409.8 million in 2013 increased $50.2 million, and reflected growth across all three LOBs. International revenue
of $491.1 million in 2013 was $17.7 million higher than in 2012.
Global RD&A revenue, which comprised 58% of total external MA revenue in both 2013 and 2012, increased $37.1 million over the
prior year period. The growth was primarily due to increased sales of the CreditView product and solid growth from other data and
analytic products as well as general market price increases.
Global ERS revenue in 2013 increased $19.9 million over 2012, primarily due to revenue from the sale and implementation of regu-
latory and compliance software to various financial institutions. This growth is primarily due to demand for solutions to comply with an
increasingly complex regulatory environment in the banking industry. Revenue in ERS is subject to quarterly volatility resulting from the
variable nature of project timing and the concentration of revenue in a relatively small number of engagements.
Revenue from PS, which included approximately $2 million in revenue from the acquisition of Amba, increased $10.9 million compared
to 2012, reflecting growth in revenue from Copal being partially offset by softness in the FSTC reporting unit. This growth in revenue
from Copal reflects further penetration into the market for outsourced research and analytical services.
Operating and SG&A expenses in 2013 increased $40.1 million compared to 2012 reflecting both higher compensation and non-
compensation costs of approximately $27 million and $13 million, respectively. The increase in compensation costs reflects higher
headcount to support business growth coupled with annual compensation increases as well as higher headcount in support areas for
which the costs are allocated to each segment based on a revenue-split methodology. The increase in non-compensation expenses is
primarily due to higher contingent consideration costs of approximately $7 million relating to the acquisition of Copal and higher pro-
fessional service fees of approximately $7 million related to product delivery.
Adjusted Operating Income was $211.8 million in 2013 and increased $21.2 million compared to the same period in 2012. Operating
income of $165.1 million in 2013, increased $35.8 million compared to the same period in 2012, which included a $12.2 million good-
will impairment charge. Adjusted Operating Margin for 2013 was 23.2%, compared to 22.6% in 2012. Operating margin was 18.1%, or
280bps higher compared to the prior year, with the higher margin in 2013 reflecting the absence of the aforementioned goodwill
impairment charge and good revenue growth outpacing expense growth. Adjusted Operating Income and operating income both
include intersegment revenue and expense.
46
MOODY’S 2014 10K
MARKET RISK
Foreign exchange risk:
Moody’s maintains a presence in 32 countries outside the U.S. In 2014, approximately 49% and 62% of the Company’s revenue and
expenses, respectively, were reported in functional currencies other than the U.S. dollar, principally in the British pound and the euro. As
such, the Company is exposed to market risk from changes in FX rates. As of December 31, 2014, approximately 62% of Moody’s assets
were located outside the U.S. making the Company susceptible to fluctuations in FX rates. The effects of translating assets and
liabilities of non-U.S. operations with non-U.S. functional currencies to the U.S. dollar are charged or credited to AOCI in the con-
solidated statements of shareholders’ equity (deficit).
The effects of revaluing assets and liabilities that are denominated in currencies other than a subsidiary’s functional currency are
charged to other non-operating income (expense), net in the Company’s consolidated statements of operations. Accordingly, the
Company enters into foreign exchange forwards to partially mitigate the change in fair value on certain assets and liabilities denomi-
nated in currencies other than a subsidiary’s functional currency. If the euro were to weaken 10% relative U.S. dollar, there would be an
approximate $4 million unfavorable impact to the fair value of the forward contracts. If the British pound were to weaken 10% relative
to the euro, there would be an approximate $3 million unfavorable impact to the fair value of the forward contracts. Additionally, if
other foreign currencies in the Company’s foreign exchange forward portfolio were to devalue 10% compared to the euro, there would
be an approximate $4 million favorable impact to the fair value of the forward contracts. The change in fair value of the foreign
exchange forward contracts would be offset by FX revaluation gains or losses in future earnings on underlying assets and liabilities
denominated in currencies other than a subsidiary’s functional currency. Additional information on the Company’s forward contracts
can be found in Note 5 to the consolidated financial statements located in Item 8 of this Form 10K.
Additionally, the Company enters into foreign currency forward contracts to hedge the exposure related to non-U.S. dollar net invest-
ments in certain foreign subsidiaries against adverse changes in foreign exchange rates. Any change in the fair value of these hedges
that is the result of ineffectiveness would be recognized immediately in other non-operating (expense) income in the Company’s con-
solidated statements of operations. For the year ended December 31, 2014, all gains and losses on these derivatives designated as net
investment hedges were recognized in OCI. If all foreign currencies in the Company’s foreign exchange forward portfolio designated as
net investment hedges were to appreciate 10% compared to the U.S. dollar, there would be an approximate $26 million unfavorable
impact to the foreign currency forwards recorded as an adjustment to OCI. This adjustment would partially offset the currency trans-
lation adjustment component of AOCI. Additional information on the Company’s forward contracts designated as net investment
hedges can be found in Note 5 to the consolidated financial statements located in Item 8 of this Form 10K.
Moody’s aggregate cash and cash equivalents and short-term investments of $1,677.6 million at December 31, 2014 consisted of
$1,250.6 million located outside the U.S. Approximately 47% of the Company’s aggregate cash and cash equivalents and short term
investments at December 31, 2014 were held in currencies other than USD. As such, a decrease in the value of foreign currencies
against the U.S. dollar, particularly the euro and GBP, could reduce the reported amount of USD cash and cash equivalents and short-
term investments.
Credit and Interest rate risk:
The Company’s interest rate risk management objectives are to reduce the funding cost and volatility to the Company and to alter the
interest rate exposure to the desired risk profile. Moody’s uses interest rate swaps as deemed necessary to assist in accomplishing these
objectives.
The Company is exposed to interest rate risk on its various outstanding fixed rate debt for which the fair value of the outstanding fixed
rate debt fluctuates based on changes in interest rates. The Company has entered into interest rate swaps to convert the fixed rate of
interest on certain of its borrowings to a floating rate based on the 3-month LIBOR. These swaps are adjusted to fair market value
based on prevailing interest rates at the end of each reporting period and fluctuations are recorded as a reduction or addition to the
carrying value of the borrowing, while net interest payments are recorded as interest expense/income in the Company’s consolidated
statement of operations. A hypothetical change of 100bps in the LIBOR-based swap rate would result in an approximate $24 million
change to the fair value of these interest rate swaps. Additional information on these interest rate swaps is disclosed in Note 5 to the
consolidated financial statements located in Item 8 of this Form 10K.
Moody’s cash equivalents consist of investments in high-quality investment-grade securities within and outside the U.S. with maturities
of three months or less when purchased. The Company manages its credit risk exposure by allocating its cash equivalents among vari-
ous money market mutual funds, money market deposit accounts, certificates of deposit and issuers of high-grade commercial paper
and by limiting the amount it can invest with any single issuer. Short-term investments primarily consist of certificates of deposit.
MOODY’S 2014 10K
47
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
The Company is currently financing its operations, capital expenditures and share repurchases from operating and financing cash flow.
The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes:
Year Ended December 31,
Year Ended December 31,
2014
2013
$ Change
Favorable
(unfavorable)
2013
2012
$ Change
Favorable
(unfavorable)
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Free Cash Flow*
1,018.6 $
$
(564.9) $
$
$ (1,064.5) $
944.0 $
$
926.8 $
(261.9) $
(498.8) $
884.5 $
91.8 $
(303.0) $
(565.7) $
59.5 $
926.8 $
(261.9) $
(498.8) $
884.5 $
823.1 $
(50.2) $
202.6 $
778.1 $
103.7
(211.7)
(701.4)
106.4
*
Free Cash Flow is a non-GAAP measure and is defined by the Company as net cash provided by operating activities minus cash paid for capital additions.
Refer to the section “Non-GAAP Financial Measures” of this MD&A for further information on this financial measure.
Net cash provided by operating activities
Year ended December 31, 2014 compared to the year ended December 31, 2013:
The following changes in non-cash items impacted cash provided by operating activities in 2014 compared to 2013, relative to net
income:
» a $57.1 million increase in deferred income taxes primarily due to an increase in deferred tax liabilities relating to the ICRA Gain;
» a $102.8 million decrease related to the non-cash ICRA Gain in 2014;
In addition to the non-cash items discussed above and an increase in net income of $190.1 million, the change in net cash flows pro-
vided by operating activities also reflected:
» an approximate $71 million increase primarily relating to higher incentive compensation payouts in 2013 compared to 2014 which
reflected greater achievement against full-year targeted results in 2012 compared to achievement in 2013;
partially offset by:
» an approximate $40 million decrease due to the timing of income tax payments;
» a $31.3 million decrease in cash flow from changes in accounts receivable balances primarily reflecting an increase in accounts
receivable balances in 2014 compared to 2013. The increase in accounts receivable balances primarily reflects growth in both MIS
and MA revenue. Approximately 29% and 26% of the Company’s accounts receivable balance at December 31, 2014 and 2013,
respectively, represents unbilled receivables which primarily reflect certain annual fees in MIS which are invoiced in arrears;
» a $27.7 million decrease relating to changes in deferred revenue balances which includes the impact of timing of revenue recognition
for certain projects within ERS.
Year ended December 31, 2013 compared to the year ended December 31, 2012:
The following changes in non-cash items impacted cash provided by operating activities in 2013 compared to 2012, relative to net income:
» A $63.3 million decrease in deferred income taxes primarily due to the utilization of deferred tax assets relating to the settlement of
UTPs in the first quarter of 2012;
» a $12.2 million goodwill impairment charge in 2012 related to the FSTC reporting unit within MA.
In addition to the non-cash items discussed above and an increase in net income of $116.2 million, the change in net cash flows pro-
vided by operating activities also reflected:
» Payments of approximately $121 million in the first quarter of 2012, reflecting the settlement of state and local tax audits;
» a $61.2 million increase in cash flow from changes in accounts receivable balances primarily reflecting a larger increase in accounts
receivable balances in 2012 compared to 2013. The increase in 2012 reflected lower accounts receivable balances at December 31,
2011 resulting from declines in corporate finance issuance in the fourth quarter of 2011. Approximately 26% and 23% of the
Company’s accounts receivable balance at December 31, 2013 and 2012, respectively, represents unbilled receivables which
primarily reflect certain annual fees in MIS which are invoiced in arrears;
» a $45.2 million increase in cash flows from changes in deferred revenue balances primarily reflecting overall growth in both segments;
48
MOODY’S 2014 10K
Partially offset by:
» an approximate $100 million decrease relating to higher incentive compensation payouts (including profit sharing and related payroll
taxes) in 2013 compared to 2012 reflecting higher achievement against full-year targeted results in 2012 compared to achievement
in the prior year period;
» an approximate $45 million decrease in cash flows relating to the timing of income tax payments primarily resulting from IRS relief
due to Hurricane Sandy which allowed for the delay of fourth quarter 2012 estimated tax payments to the first quarter of 2013;
» a $23.1 million decrease relating to greater excess tax benefits from stock-based compensation plans primarily due to a higher
intrinsic value of awards exercised in 2013 resulting from a higher Moody’s stock price.
Net cash used in investing activities
Year ended December 31, 2014 compared to the year ended December 31, 2013:
The $303.0 million increase in cash flows used in investing activities compared to 2013 primarily reflects:
» an increase in capital additions of $32.3 million which reflects ongoing initiatives to enhance the Company’s IT infrastructure as well
as costs relating to the build-out of additional leased space at 7WTC;
» higher cash paid for acquisitions in 2014 of $189.0 million reflecting the Company’s purchase of a controlling interest in ICRA as well
as the purchase of WebEquity and Lewtan;
» higher net purchases of investments of $103.4 million reflecting the Company’s investment of excess non-U.S. cash balances.
Year ended December 31, 2013 compared to the year ended December 31, 2012:
The $211.7 million increase in cash flows used in investing activities compared to 2012 primarily reflects :
» A $169.7 million increase in cash used to purchase short-term investments with excess non-U.S. cash;
» cash paid, net of cash acquired, of $50.7 million relating to the acquisition of Amba in December 2013.
Net cash used in financing activities
Year ended December 31, 2014 compared to the year ended December 31, 2013:
The $565.7 million increase in cash used in financing activities was primarily attributed to:
» treasury shares repurchased of $1,220.5 million in 2014 compared to $893.1 million repurchased in the prior year period;
» cash paid of $183.8 million in 2014 to redeem the Company’s non-controlling interest in Copal Amba which resulted in Moody’s
owning 100% of this business;
» higher dividends paid to MCO shareholders of $38.7 million reflecting $1.12 per share paid in 2014 compared to $0.90 per share paid
in the prior year;
» a $38.0 million decrease in net proceeds from stock plans primarily reflecting a decrease in stock options exercised in 2014 compared
to the prior year;
partially offset by:
» higher excess tax benefits from stock-based compensation plans of $19.9 million due to due to a higher intrinsic value of awards
exercised in 2014 resulting from a higher Moody’s stock price.
Year ended December 31, 2013 compared to the year ended December 31, 2012:
The $701.4 million increase in cash used in financing activities was primarily attributed to:
» treasury shares repurchased of $893.1 million in 2013 compared to $196.5 million repurchased in the prior year period;
» higher dividends paid to MCO shareholders of $54.3 million reflecting $0.90 per share paid in 2013 compared to $0.64 per share paid
in the prior year;
Partially offset by:
» an increase in net proceeds from stock-based compensation plans of $19.3 million reflecting higher strike prices for options exercised
in 2013 compared to the prior year. These proceeds were partially offset by a greater number of shares repurchased from employees
to satisfy tax withholding obligations in connection with the vesting of restricted stock in March 2013;
» higher excess tax benefits from stock-based compensation plans of $23.1 million due to due to a higher intrinsic value of awards
exercised in 2013 resulting from a higher Moody’s stock price.
MOODY’S 2014 10K
49
Cash held in non-U.S. jurisdictions
The Company’s aggregate cash and cash equivalents and short-term investments of $1.7 billion at December 31, 2014 consisted of
approximately $1.3 billion located outside of the U.S., of which approximately 45% is denominated in euros and British pounds. Over
95% of the cash and short-term investments in the Company’s non-U.S. operations are held by entities whose undistributed earnings
are indefinitely reinvested in the Company’s foreign operations. Accordingly, the Company has not provided deferred income taxes on
these indefinitely reinvested earnings. A future distribution or change in assertion regarding reinvestment by the foreign subsidiaries
relating to these earnings could result in additional tax liability to the Company. It is not practicable to determine the amount of the
potential additional tax liability due to complexities in the tax laws and in the hypothetical calculations that would have to be made.
The Company manages both its U.S. and international cash flow to maintain sufficient liquidity in all regions to effectively meet its
operating needs.
Indebtedness
At December 31, 2014, Moody’s had $2.5 billion of outstanding debt and $1.0 billion of additional capacity available under the 2012
Facility. All significant terms of the Company’s indebtedness are more fully described in Note 15 to the consolidated financial state-
ments. At December 31, 2014, the Company was in compliance with all covenants contained within all of the debt agreements. The
2012 Facility, the 2007 Agreement, the 2010 Indenture, the 2012 Indenture, the 2013 Indenture, and the 2014 Indenture contain cross
default provisions. These provisions state that default under one of the aforementioned debt instruments could in turn permit lenders
under other debt instruments to declare borrowings outstanding under those instruments to be immediately due and payable. As of
December 31, 2014, there were no such cross defaults.
On July 16, 2014, the Company issued $450 million aggregate principal amount of unsecured notes in a public offering. The notes bear
interest at 2.75% and mature on July 15, 2019. Also on July 16, 2014, the Company issued $300 million aggregate principal amount of
unsecured notes in a public offering. The $300 million notes bear interest at 5.25% and mature on July 15, 2044. The Company used
the proceeds to retire the Series 2005-1 Notes and will use the remaining proceeds for general corporate purposes. The Company
entered into interest rate swaps with a total notional amount of $250 million to convert the fixed interest rate on a portion of the
$450 million unsecured notes to a floating interest rate based on the 3-month LIBOR. The purpose of this hedge was to mitigate the
risk associated with changes in the fair value of a portion of the $450 million unsecured notes.
The repayment schedule for the Company’s borrowings is as follows:
Year Ended December 31,
Series 2007-1
Notes
2010 Senior
Notes
2012 Senior
Notes
2013 Senior
Notes
2014 Senior
Notes
(5-Year)
2014 Senior
Notes
(30-Year)
2015
2016
2017
2018
2019
Thereafter
Total
$
— $
—
300.0
—
—
—
— $
—
—
—
—
500.0
— $
—
—
—
—
500.0
— $
—
—
—
—
500.0
— $
—
—
—
450.0
—
— $
—
—
—
—
300.0
$
300.0
$
500.0
$
500.0
$
500.0
$
450.0 $
300.0 $
2,550.0
Total
—
—
300.0
—
450.0
1,800.0
Management may consider pursuing additional long-term financing when it is appropriate in light of cash requirements for operations,
share repurchases and other strategic opportunities, which would result in higher financing costs.
Other Material Future Cash Requirements
The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating
cash flow for the next twelve months. Cash requirements for periods beyond the next twelve months will depend, among other things,
on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various
sources.
The Company remains committed to using its strong cash flow to create value for shareholders by investing in growing areas of the
business, reinvesting in ratings quality initiatives, making selective acquisitions, repurchasing stock and paying a dividend, all in manner
consistent with maintaining sufficient liquidity after giving effect to any additional indebtedness that may be incurred. In December
2014, the Board of Directors of the Company declared a quarterly dividend of $0.34 per share of Moody’s common stock, payable on
March 10, 2015 to shareholders of record at the close of business on February 20, 2015. The continued payment of dividends at this
rate, or at all, is subject to the discretion of the Board. On February 11, 2014, the Board approved $1.0 billion of share repurchase
authority which has a remaining repurchase authority of approximately $564 million at December 31, 2014. In December 2014, the
Board authorized an additional $1.0 billion of share repurchase authority which will be utilized following completion of the program
50
MOODY’S 2014 10K
authorized in February 2014. Full-year 2015 total share repurchases are expected to be approximately $1 billion, subject to available
cash, market conditions and other ongoing capital allocation decisions.
On February 6, 2008, the Company entered into an operating lease agreement to occupy six floors of an office tower located in the
Canary Wharf district of London, England. The Canary Wharf Lease has an initial term of 17.5-years with a total of 15 years of renewal
options. The total base rent of the Canary Wharf Lease over its initial 17.5-year term is approximately £134 million, and the Company
began making base rent payments in 2011. In addition to the base rent payments the Company will be obligated to pay certain
customary amounts for its share of operating expenses and tax obligations. The total remaining lease payments as of December 31,
2014 are approximately £100 million, of which approximately £10 million will be paid in the next twelve months. Payments under this
lease agreement are included in the contractual obligations table below.
On October 20, 2006, the Company entered into an operating lease agreement with 7 World Trade Center, LLC for 589,945 square-feet
of an office building located at 7WTC at 250 Greenwich Street, New York, New York, which is serving as Moody’s headquarters. The
7WTC Lease has an initial term of 21 years with a total of 20 years of renewal options. The total base rent of 7WTC Lease over its ini-
tial 21-year term is approximately $536 million including rent credits from the World Trade Center Rent Reduction Program promul-
gated by the Empire State Development Corporation. On March 28, 2007, the 7WTC lease agreement was amended for the Company
to lease an additional 78,568 square-feet at 7WTC. The additional base rent is approximately $106 million over a 20-year term. The
total remaining lease payments as of December 31, 2014, including the aforementioned rent credits, are approximately $449 million, of
which approximately $33 million will be paid during the next twelve months. Payments under this lease agreement are included in the
contractual obligations table below.
On October 21, 2013, the Company entered into a fourteen-year lease for three additional floors at its 7WTC headquarters. The total
remaining net commitment for this lease is approximately $63 million. The lease became effective in January 2014 and the net cash
outlay during the next twelve months will be immaterial. Payments under this lease agreement are included in the contractual obliga-
tions table below.
Off-Balance Sheet Arrangements
At December 31, 2014, Moody’s did not have any relationships with unconsolidated entities or financial partnerships, such as entities
often referred to as special purpose or variable interest entities where Moody’s is the primary beneficiary, which would have been
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such,
Moody’s is not exposed to any financing, liquidity, market or credit risk that could arise if it had engaged in such relationships.
Contractual Obligations
The following table presents payments due under the Company’s contractual obligations as of December 31, 2014:
Payments Due by Period
(in millions)
Total
Less Than 1 Year
1-3 Years
3-5 Years
Over 5 Years
Indebtedness (1)
Operating lease obligations
Purchase obligations
Contingent consideration related to acquisitions (2)
Pension and other retirement obligations (3)
$
$
3,637.3
837.5
106.3
2.1
141.2
$
107.9
93.4
58.9
—
15.7
$
514.6
159.2
47.4
2.1
16.1
$
626.4
137.6
—
—
44.1
2,388.4
447.3
—
—
65.3
Total (4)
$
4,724.4
$
275.9
$
739.4
$
808.1
$
2,901.0
(1) Reflects principal payments, related interest and applicable fees due on the Series 2007-1 Notes, the 2010 Senior Notes, the 2012 Senior Notes, the 2013
Senior Notes, the 2014 Senior Notes (5-year), the 2014 Senior Notes (30-year)and the 2012 Facility as described in Note 15 to the consolidated financial
statements
(2) The “1-3 years” category reflects a $2.1 million contingent cash payment related to the November 18, 2010 acquisition of CSI Global Education, Inc. The
cash payment is dependent upon the achievement of a certain contractual milestone by January 2016.
(3) Primarily reflects projected benefit payments for the next ten years relating to the Company’s U.S. unfunded Retirement Benefit Plans described in Note 12
to the condensed consolidated financial statements
(4) The table above does not include the Company’s net long-term tax liabilities of $228.6 million relating to UTP and Legacy Tax Matters, since the expected
cash outflow of such amounts by period cannot be reasonably estimated.
Non-GAAP Financial Measures:
In addition to its reported results, Moody’s has included in this MD&A certain adjusted results that the SEC defines as “non-GAAP finan-
cial measures.” Management believes that such non-GAAP financial 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 perform-
ance, facilitate comparisons to competitors’ operating results and can provide greater transparency to investors of supplemental
MOODY’S 2014 10K
51
information used by management in its financial and operational decision-making. These non-GAAP measures, as defined by the
Company, are not necessarily comparable to similarly defined measures of other companies. Furthermore, these non-GAAP measures
should not be viewed in isolation or used as a substitute for other GAAP measures in assessing the operating performance or cash flows
of the Company. Below are brief descriptions of the Company’s non-GAAP financial measures accompanied by a reconciliation of the
non-GAAP measure to its most directly comparable GAAP measure:
Adjusted Operating Income and Adjusted Operating Margin:
The Company presents Adjusted Operating Income because management deems this metric to be a useful measure of assessing the
operating performance of Moody’s, measuring the Company’s ability to service debt, fund capital expenditures, and expand its business.
Adjusted Operating Income excludes depreciation and amortization as well as goodwill impairment charges because companies utilize
productive assets of different ages and use different methods of acquiring productive assets including goodwill. Companies also have
different methods of depreciating and amortizing productive assets as well as different methods of valuing goodwill. Management
believes that the exclusion of certain items, detailed in the reconciliation below, allows for a more meaningful comparison of the
Company’s operating results from period to period and across companies. Below is a reconciliation of the Company’s operating income
and operating margin to Adjusted Operating Income and Adjusted Operating Margin:
Operating income
Adjustments:
Depreciation and amortization
Goodwill impairment charge
Restructuring
Year Ended December 31,
2014
2013
2012
2011
$
1,439.1
$
1,234.6
$
1,077.4
$
888.4
$
95.6
—
—
93.4
—
—
93.5
12.2
—
79.2
—
—
2010
772.8
66.3
—
0.1
Adjusted Operating Income
$
1,534.7
$
1,328.0
$
1,183.1
$
967.6
$
839.2
Operating Margin
Adjusted Operating Margin
43.2%
46.0%
41.5%
44.7%
39.5%
43.3%
39.0%
42.4%
38.0%
41.3%
Non-GAAP Diluted EPS
The Company presents this non-GAAP measure to exclude the impact of litigation settlements, Legacy Tax Matters and the ICRA Gain
to allow for a more meaningful comparison of Moody’s diluted earnings per share from period to period. The impact of litigation
settlement relates to the settlement of two legal matters in the first quarter of 2013 which are more fully discussed in Note 18 to the
consolidated financial statements. The Legacy Tax items are specific to the Company resulting from the 2000 Distribution. The ICRA
Gain resulted from the Company acquiring a controlling interest in ICRA in 2014. Below is a reconciliation of these measures to their
most directly comparable U.S. GAAP amount:
Year Ended December 31,
2014
2013
2012
2011
2010
Diluted EPS attributable to Moody’s common
shareholders—GAAP
Legacy Tax
ICRA Gain
Impact of litigation settlement
Diluted EPS attributable to Moody’s common
shareholders—Non-GAAP
$
$
4.61
(0.03)
(0.37)
—
$
3.60
(0.09)
—
0.14
$
3.05
(0.06)
—
—
$
2.49
(0.03)
—
—
2.15
(0.02)
—
—
$
4.21
$
3.65
$
2.99
$
2.46
$
2.13
Free Cash Flow:
The Company defines Free Cash Flow as net cash provided by operating activities minus payments for capital additions. Management
believes that Free Cash Flow is a useful metric in assessing the Company’s cash flows to service debt, pay dividends and to fund acquis-
itions and share repurchases. Management deems capital expenditures essential to the Company’s product and service innovations and
52
MOODY’S 2014 10K
maintenance of Moody’s operational capabilities. Accordingly, capital expenditures are deemed to be a recurring use of Moody’s cash
flow. Below is a reconciliation of the Company’s net cash flows from operating activities to Free Cash Flow:
Net cash provided by operating activities
Capital additions
Free Cash Flow
Net cash used in investing activities
Net cash provided by (used in) financing activities
2015 OUTLOOK
Year Ended December 31,
2014
1,018.6
(74.6)
944.0
(564.9)
(1,064.5)
$
$
$
$
$
$
$
$
2013
926.8
(42.3)
884.5
(261.9)
(498.8)
$
$
$
$
2012
823.1
(45.0)
778.1
(50.2)
202.6
$
$
$
$
2011
803.3
(67.7)
735.6
(267.6)
(417.7)
$
$
$
$
2010
653.3
(79.0)
574.3
(228.8)
(241.3)
Moody’s outlook for 2015 is based on assumptions about many macroeconomic and capital market factors, including interest rates,
foreign currency exchange rates, corporate profitability and business investment spending, merger and acquisition activity, consumer
borrowing and securitization, and the amount of debt issued. There is an important degree of uncertainty surrounding these assump-
tions, and, if actual conditions differ, Moody’s results for the year may differ materially from the current outlook. The Company’s guid-
ance assumes foreign currency translation at end-of-2014 exchange rates, with the exception of the British pound (£) and the euro (€)
which assume foreign currency translation of $1.51 to £1 and $1.15 to €1, respectively.
MOODY’S CORPORATION
Revenue
Operating Expenses
Depreciation & amortization
Operating Margin
Adjusted Operating Margin
Effective tax rate
GAAP EPS
Capital expenditures
Free Cash Flow
Share repurchases
Full-year 2015 Moody’s Corporation guidance
Guidance as of the filing of this Form 10K
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
Approximately $120 million
Approximately 43%
Approximately 46%
Approximately 32% - 33%
$4.55 to $4.65
Approximately $110 - $115 million
Approximately $1 billion
Approximately $1 billion (subject to available cash, market conditions and other ongoing capital allocation
decisions)
MIS
MIS global
MIS U.S.
MIS Non-U.S.
CFG
SFG
FIG
PPIF
MA
MA global
MA U.S.
MA Non-U.S.
RD&A
ERS
PS
Full-year 2015 revenue guidance
Guidance as of the filing of this Form 10K
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
growth in the mid-single-digit percent range
growth in the high-single-digit percent range
Guidance as of the filing of this Form 10K
growth in the mid-single-digit percent range
growth of approximately 10%
growth in the mid-single-digit percent range
growth in the high-single-digit percent range
growth in the mid-single-digit percent range
approximately flat
MOODY’S 2014 10K
53
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. This ASU outlines a comprehensive new
revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an
amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual and
interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is currently evaluating
its adoption options and the impact that adoption of this update will have on its consolidated financial statements. Currently, the
Company believes this ASU will have an impact on: i) the capitalization of certain contract implementation costs for its ERS business; ii)
the accounting for certain ratings monitoring fees received in advance of service being rendered; iii) the accounting for certain license
and maintenance revenue in MA; iv) the accounting for certain ERS revenue arrangements where VSOE is not available and v) the
accounting for contract acquisition costs.
In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a
Performance Target Could Be Achieved after the Requisite Service Period.” This ASU clarifies the current accounting guidance for enti-
ties that issue share-based payment awards that require a specific performance target be achieved for employees to become eligible to
vest in the awards, which may occur subsequent to a required service period. The current accounting guidance does not explicitly
address how to account for these types of awards. The ASU provides explicit guidance and clarifies that these types of performance
targets should be treated as performance conditions, and accordingly should not be reflected in the determination of the grant-date fair
value of the award. This ASU is effective for all annual periods and interim reporting periods beginning after December 15, 2015, with
early adoption permitted. The Company currently accounts for transactions involving stock-based compensation awards with perform-
ance conditions in accordance with the provisions set forth in this ASU. Accordingly, the adoption of this update will not have an
impact on the Company’s consolidated financial statements.
CONTINGENCIES
For information regarding legal proceedings, see Part II, Item 8 – “Financial Statements”, Note 18 “Contingencies” in this Form 10-K.
Forward-Looking Statements
Certain statements contained in this annual report on Form 10-K are forward-looking statements and are based on future expectations,
plans and prospects for the Company’s business and operations that involve a number of risks and uncertainties. Such statements
involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ
materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements. Those statements
appear at various places throughout this annual report on Form 10-K, including in the sections entitled “2015 Outlook” and
“Contingencies” under Item 7. “MD&A”, commencing on page 28 of this annual report on Form 10-K, under “Legal Proceedings” in Part
I, Item 3, of this Form 10-K, and elsewhere in the context of statements containing the words “believe”, “expect”, “anticipate”, “intend”,
“plan”, “will”, “predict”, “potential”, “continue”, “strategy”, “aspire”, “target”, “forecast”, “project”, “estimate”, “should”, “could”, “may”
and similar expressions or words and variations thereof relating to the Company’s views on future events, trends and contingencies.
Stockholders and investors are cautioned not to place undue reliance on these forward-looking statements. The forward-looking state-
ments and other information are made as of the date of this annual report on Form 10-K, and the Company undertakes no obligation
(nor does it intend) to publicly supplement, update or revise such statements on a going-forward basis, whether as a result of sub-
sequent developments, changed expectations or otherwise. In connection with the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, the Company is identifying examples of factors, risks and uncertainties that could cause actual results to
differ, perhaps materially, from those indicated by these forward-looking statements.
Those factors, risks and uncertainties include, but are not limited to, the current world-wide credit market disruptions and economic
slowdown, which is affecting and could continue to affect the volume of debt and other securities issued in domestic and/or global
capital markets; other matters that could affect the volume of debt and other securities issued in domestic and/or global capital mar-
kets, including credit quality concerns, changes in interest rates and other volatility in the financial markets; the level of merger and
acquisition activity in the U.S. and abroad; the uncertain effectiveness and possible collateral consequences of U.S. and foreign govern-
ment initiatives to respond to the current world-wide credit market disruptions and economic slowdown; concerns in the marketplace
affecting Moody’s credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings;
the introduction of competing products or technologies by other companies; pricing pressure from competitors and/or customers; the
level of success of new product development and global expansion; the impact of regulation as an NRSRO, the potential for new U.S.,
state and local legislation and regulations, including provisions in the Financial Reform Act and regulations resulting from that Act; the
potential for increased competition and regulation in the EU and other foreign jurisdictions; exposure to litigation related to Moody’s
rating opinions, as well as any other litigation to which the Company may be subject from time to time; provisions in the Financial
Reform Act legislation modifying the pleading standards, and EU regulations modifying the liability standards, applicable to credit rating
agencies in a manner adverse to credit rating agencies; provisions of EU regulations imposing additional procedural and substantive
54
MOODY’S 2014 10K
requirements on the pricing of services; the possible loss of key employees; failures or malfunctions of Moody’s operations and infra-
structure; any vulnerabilities to cyber threats or other cybersecurity concerns; the outcome of any review by controlling tax authorities
of the Company’s global tax planning initiatives; the outcome of those Legacy Tax Matters and legal contingencies that relate to the
Company, its predecessors and their affiliated companies for which Moody’s has assumed portions of the financial responsibility; the
impact of mergers, acquisitions or other business combinations and the ability of the Company to successfully integrate acquired busi-
nesses; currency and foreign exchange volatility; the level of future cash flows; the levels of capital investments; and a decline in the
demand for credit risk management tools by financial institutions. These factors, risks and uncertainties as well as other risks and
uncertainties that could cause Moody’s actual results to differ materially from those contemplated, expressed, projected, anticipated or
implied in the forward-looking statements are described in greater detail under “Risk Factors” in Part I, Item 1A of this annual report on
Form 10-K, and in other filings made by the Company from time to time with the SEC or in materials incorporated herein or therein.
Stockholders and investors are cautioned that the occurrence of any of these factors, risks and uncertainties may cause the Company’s
actual results to differ materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking state-
ments, which could have a material and adverse effect on the Company’s business, results of operations and financial condition. New
factors may emerge from time to time, and it is not possible for the Company to predict new factors, nor can the Company assess the
potential effect of any new factors on it.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information in response to this Item is set forth under the caption “Market Risk” in Part II, Item 7 on page 47 of this annual report on
Form 10-K.
MOODY’S 2014 10K
55
ITEM 8.
FINANCIAL STATEMENTS
Index to Financial Statements
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity (Deficit)
Notes to Consolidated Financial Statements
Page(s)
57
58
59
60
61
62
63-65
66-109
Schedules are omitted as not required or inapplicable or because the required information is provided in the consolidated financial
statements, including the notes thereto.
56
MOODY’S 2014 10K
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Moody’s Corporation is responsible for establishing and maintaining adequate internal control over financial reporting
and for the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by, or under the
supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial report-
ing and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Moody’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (2) provide reason-
able assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with author-
izations of Moody’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management of the Company has undertaken an assessment of the design and operational effectiveness of the Company’s internal
control over financial reporting as of December 31, 2014 based on criteria established in Internal Control – Integrated Framework
(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO framework is based
upon five integrated components of control: risk assessment, control activities, control environment, information and communications
and ongoing monitoring.
Based on the assessment performed, management has concluded that Moody’s maintained effective internal control over financial
reporting as of December 31, 2014.
The effectiveness of our internal control over financial reporting as of December 31, 2014 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
/s/ RAYMOND W. MCDANIEL, JR.
Raymond W. McDaniel, Jr.
President and Chief Executive Officer
/s/ LINDA S. HUBER
Linda S. Huber
Executive Vice President and Chief Financial Officer
February 25, 2015
MOODY’S 2014 10K
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Moody’s Corporation:
We have audited the accompanying consolidated balance sheets of Moody’s Corporation (the Company) as of December 31, 2014 and
2013, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 2014. We also have audited Moody’s Corporation’s internal control over
financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Moody’s Corporation’s management is responsible
for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the main-
tenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the com-
pany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding pre-
vention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Moody’s Corporation as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion,
Moody’s Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,
based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
/s/ KPMG LLP
New York, New York
February 25, 2015
58
MOODY’S 2014 10K
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in millions, except per share data)
Revenue
Expenses
Operating
Selling, general and administrative
Goodwill impairment charge
Depreciation and amortization
Total expenses
Operating income
Interest income (expense), net
Other non-operating income (expense), net
ICRA Gain
Non-operating income (expense), net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to Moody’s
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
$
$
$
Year Ended December 31,
2014
2013
2012
$
3,334.3
$
2,972.5
$
2,730.3
930.3
869.3
—
95.6
1,895.2
1,439.1
(116.8)
35.9
102.8
21.9
1,461.0
455.0
1,006.0
17.3
988.7
4.69
4.61
210.7
214.7
$
$
$
822.4
822.1
—
93.4
1,737.9
1,234.6
(91.8)
26.5
—
(65.3)
1,169.3
353.4
815.9
11.4
804.5
3.67
3.60
219.4
223.5
$
$
$
795.0
752.2
12.2
93.5
1,652.9
1,077.4
(63.8)
10.4
—
(53.4)
1,024.0
324.3
699.7
9.7
690.0
3.09
3.05
223.2
226.6
MOODY’S 2014 10K
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C
MOODY’S CORPORATION
CONSOLIDATED BALANCE SHEETS
(amounts in millions, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances of $29.4 in 2014 and $28.9 in 2013
Deferred tax assets, net
Other current assets
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Deferred tax assets, net
Other assets
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Deferred tax liabilities, net
Deferred revenue
Total current liabilities
Non-current portion of deferred revenue
Long-term debt
Deferred tax liabilities, net
Unrecognized tax benefits
Other liabilities
Total liabilities
Contingencies (Note 18)
Redeemable noncontrolling interest
Shareholders’ equity:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued and
outstanding
Series common stock, par value $.01 per share; 10,000,000 shares authorized; no shares issued
and outstanding
Common stock, par value $.01 per share; 1,000,000,000 shares authorized; 342,902,272 shares
issued at December 31, 2014 and December 31, 2013, respectively.
Capital surplus
Retained earnings
Treasury stock, at cost; 138,539,128 and 128,941,621 shares of common stock at December 31,
2014 and December 31, 2013, respectively
Accumulated other comprehensive loss
Total Moody’s shareholders’ (deficit) equity
Noncontrolling interests
Total shareholders’ equity
$
$
$
December 31,
2014
2013
$
1,219.5
458.1
792.4
43.9
172.5
2,686.4
302.3
1,021.1
345.5
167.8
145.9
4,669.0
$
$
557.6
17.5
624.6
1,199.7
132.2
2,547.3
95.7
220.3
430.9
4,626.1
—
—
—
3.4
383.9
6,044.3
(6,384.2)
(235.2)
(187.8)
230.7
42.9
1,919.5
186.8
694.2
53.9
114.4
2,968.8
278.7
665.2
221.6
148.7
112.1
4,395.1
538.9
4.0
598.4
1,141.3
109.2
2,101.8
59.1
195.6
360.2
3,967.2
80.0
—
—
3.4
405.8
5,302.1
(5,319.7)
(54.6)
337.0
10.9
347.9
Total liabilities, redeemable noncontrolling interest and shareholders’ equity
$
4,669.0
$
4,395.1
The accompanying notes are an integral part of the consolidated financial statements.
MOODY’S 2014 10K
61
MOODY’S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in millions)
Cash flows from operating activities
Net income
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Goodwill impairment charge
Deferred income taxes
Excess tax benefits from settlement of stock-based compensation awards
ICRA Gain
Legacy Tax Matters
Changes in assets and liabilities:
Accounts receivable
Other current assets
Other assets
Accounts payable and accrued liabilities
Deferred revenue
Unrecognized tax benefits
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital additions
Purchases of investments
Sales and maturities of investments
Cash paid for acquisitions and investment in affiliates, net of cash acquired
Payments for settlements of net investment hedges
Receipts from settlement of net investment hedges
Net cash used in investing activities
Cash flows from financing activities
Issuance of notes
Repayment of notes
Net proceeds from stock plans
Excess tax benefits from settlement of stock-based compensation awards
Cost of treasury shares repurchased
Payment of dividends
Payment of dividends to noncontrolling interests
Payment to redeem noncontrolling interest
Contingent consideration paid
Debt issuance costs and related fees
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Year Ended December 31,
2014
2013
2012
$
1,006.0
$
815.9
$
699.7
95.6
80.4
—
29.9
(58.7)
(102.8)
(6.4)
(98.3)
(41.0)
(1.7)
59.2
38.4
30.6
(12.6)
1,018.6
(74.6)
(406.3)
134.0
(239.7)
(0.5)
22.2
(564.9)
747.7
(300.0)
98.0
58.7
(1,220.5)
(236.0)
(11.8)
(183.8)
(10.3)
(6.5)
(1,064.5)
(89.2)
(700.0)
1,919.5
93.4
67.1
—
(27.2)
(38.8)
—
(19.2)
(67.0)
(21.7)
(0.7)
(2.9)
66.1
30.9
30.9
926.8
(42.3)
(225.9)
57.0
(50.7)
—
—
(261.9)
497.2
(63.8)
136.0
38.8
(893.1)
(197.3)
(12.2)
—
(0.3)
(4.1)
(498.8)
(2.0)
164.1
1,755.4
93.5
64.5
12.2
36.1
(15.7)
—
(12.8)
(128.2)
(14.1)
5.1
101.7
20.9
(49.2)
9.4
823.1
(45.0)
(56.2)
54.5
(3.5)
—
—
(50.2)
496.1
(71.3)
116.7
15.7
(196.5)
(143.0)
(8.3)
—
(0.5)
(6.3)
202.6
19.9
995.4
760.0
Cash and cash equivalents, end of period
$
1,219.5
$
1,919.5
$
1,755.4
The accompanying notes are an integral part of the consolidated financial statements
62
MOODY’S 2014 10K
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T
MOODY’S 2014 10K
65
MOODY’S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular dollar and share amounts in millions, except per share data)
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Moody’s is a provider of (i) credit ratings, (ii) credit, capital markets and economic research, data and analytical tools, (iii) software sol-
utions and related risk management services, (iv) quantitative credit risk measures, financial services training and certification services
and (v) outsourced research and analytical services to institutional customers. Moody’s has two reportable segments: MIS and MA.
MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in
markets worldwide. Revenue is primarily derived from the originators and issuers of such transactions who use MIS ratings in the dis-
tribution of their debt issues to investors. Additionally, MIS earns revenue from certain non-ratings-related operations which consist
primarily of the distribution of research and fixed income pricing services in the Asia-Pacific region and outsourced services. The rev-
enue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment.
The MA segment develops a wide range of products and services that support financial analysis and risk management activities of
institutional participants in global financial markets. Within its Research, Data and Analytics business, MA distributes research and data
developed by MIS as part of its ratings process, including in-depth research on major debt issuers, industry studies and commentary on
topical credit-related events. The RD&A business also produces economic research as well as data and analytical tools such as quantita-
tive credit risk scores. Within its Enterprise Risk Solutions business, MA provides software solutions as well as related risk management
services. The Professional Services business provides outsourced research and analytical services along with financial training and
certification programs.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include those of Moody’s Corporation and its majority- and wholly-owned subsidiaries. The
effects of all intercompany transactions have been eliminated. Investments in companies for which the Company has significant influ-
ence over operating and financial policies but not a controlling interest are accounted for on an equity basis whereby the Company
records its proportional share of the investment’s net income or loss as part of other non-operating income (expense), net and any
dividends received reduce the carrying amount of the investment. The Company applies the guidelines set forth in Topic 810 of the ASC
in assessing its interests in variable interest entities to decide whether to consolidate that entity. The Company has reviewed the
potential variable interest entities and determined that there are no consolidation requirements under Topic 810 of the ASC. The
Company consolidates its ICRA subsidiaries on a three month lag.
Cash and Cash Equivalents
Cash equivalents principally consist of investments in money market mutual funds and money market deposit accounts as well as high-
grade commercial paper and certificates of deposit with maturities of three months or less when purchased.
Short-term Investments
Short-term investments are securities with maturities greater than 90 days at the time of purchase that are available for operations in
the next twelve months. The Company’s short-term investments primarily consist of certificates of deposit and their cost approximates
fair value due to the short-term nature of the instruments. Interest and dividends on these investments are recorded into income when
earned.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives.
Expenditures for maintenance and repairs that do not extend the economic useful life of the related assets are charged to expense as
incurred.
Research and Development Costs
All research and development costs are expensed as incurred. These costs primarily reflect the development of credit processing soft-
ware and quantitative credit risk assessment products sold by the MA segment.
66
MOODY’S 2014 10K
Research and development costs were $37.9 million, $22.8 million and $16.1 million for the years ended December 31, 2014, 2013 and
2012, respectively, and are included in operating expenses within the Company’s consolidated statements of operations. These costs
generally consist of professional services provided by third parties and compensation costs of employees.
Costs for internally developed computer software that will be sold, leased or otherwise marketed are capitalized when technological
feasibility has been established. These costs primarily relate to the development or enhancement of products in the ERS business and
generally consist of professional services provided by third parties and compensation costs of employees that develop the software.
Judgment is required in determining when technological feasibility of a product is established and the Company believes that techno-
logical feasibility for its software products is reached after all high-risk development issues have been resolved through coding and test-
ing. Generally, this occurs shortly before the products are released to customers. Accordingly, costs for internally developed computer
software that will be sold, leased or otherwise marketed that were eligible for capitalization under Topic 985 of the ASC as well as the
related amortization expense related to such costs were immaterial for the years ended December 31, 2014, 2013 and 2012.
Computer Software Developed or Obtained for Internal Use
The Company capitalizes costs related to software developed or obtained for internal use. These assets, included in property and equip-
ment in the consolidated balance sheets, relate to the Company’s accounting, product delivery and other systems. Such costs generally
consist of direct costs for third-party license fees, professional services provided by third parties and employee compensation, in each
case incurred either during the application development stage or in connection with upgrades and enhancements that increase
functionality. Such costs are depreciated over their estimated useful lives on a straight-line basis. Costs incurred during the preliminary
project stage of development as well as maintenance costs are expensed as incurred.
Long-Lived Assets, Including Goodwill and Other Acquired Intangible Assets
Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment or one level below an operat-
ing segment, annually as of July 31 or more frequently if impairment indicators arise in accordance with ASC Topic 350.
The Company evaluates the recoverability of goodwill using a three-step impairment test approach at the reporting unit level. In the
first step, the Company assesses various qualitative factors to determine whether the fair value of a reporting unit may be less than its
carrying amount. If a determination is made that, based on the qualitative factors, an impairment does not exist, the Company is not
required to perform further testing. If the aforementioned qualitative assessment results in the Company concluding that it is more
likely than not that the fair value of a reporting unit may be less than its carrying amount, the fair value of the reporting unit will be
determined and compared to its carrying value including goodwill. If the fair value of the reporting unit exceeds the carrying value of
the net assets assigned to that unit, goodwill is not impaired and the Company is not required to perform further testing. If the fair
value of the reporting unit is less than the carrying value, the Company must perform a third step of the impairment test to determine
the implied fair value of the reporting unit’s goodwill. The implied fair value of the goodwill is determined based on the difference
between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the
implied fair value of the goodwill is less than its carrying value, the difference is recognized as an impairment charge. For the reporting
units where the Company is consistently able to conclude that an impairment does not exist using only a qualitative approach, the
Company’s accounting policy is to perform the second step of the aforementioned goodwill impairment assessment at least once every
three years. Goodwill is assigned to a reporting unit at the date when an acquisition is integrated into one of the established reporting
units, and is based on which reporting unit is expected to benefit from the synergies of the acquisition.
For purposes of assessing the recoverability of goodwill, the Company has six reporting units at December 31, 2014: two within the
Company’s ratings business (one for the newly acquired ICRA business and one that encompasses all of Moody’s other ratings oper-
ations) and four reporting units within MA: RD&A, ERS, Financial Services Training and Certifications and Copal Amba. The RD&A
reporting unit encompasses the distribution of investor-oriented research and data developed by MIS as part of its ratings process, in-
depth research on major debt issuers, industry studies, economic research and commentary on topical events and credit analytic tools.
The ERS reporting unit consists of credit risk management and compliance software that is sold on a license or subscription basis as well
as related advisory services for implementation and maintenance. The FSTC reporting unit consists of the portion of the MA business
that offers both credit training as well as other professional development training and certification services. The Copal Amba reporting
unit consists of outsourced research and analytical services.
Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Rent Expense
The Company records rent expense on a straight-line basis over the life of the lease. In cases where there is a free rent period or future
fixed rent escalations the Company will record a deferred rent liability. Additionally, the receipt of any lease incentives will be recorded
as a deferred rent liability which will be amortized over the lease term as a reduction of rent expense.
MOODY’S 2014 10K
67
Stock-Based Compensation
The Company records compensation expense for all share-based payment award transactions granted to employees based on the fair
value of the equity instrument at the time of grant. This includes shares issued under stock option and restricted stock plans. The
Company has also established a pool of additional paid-in capital related to the tax effects of employee share-based compensation,
which is available to absorb any recognized tax shortfalls.
Derivative Instruments and Hedging Activities
Based on the Company’s risk management policy, from time to time the Company may use derivative financial instruments to reduce
exposure to changes in foreign exchange rates and interest rates. The Company does not enter into derivative financial instruments for
speculative purposes. All derivative financial instruments are recorded on the balance sheet at their respective fair values. The changes
in the value of derivatives that qualify as fair value hedges are recorded with a corresponding adjustment to the carrying value of the
item being hedged. Changes in the derivative’s fair value that qualify as cash flow hedges are recorded to other comprehensive income
or loss, to the extent the hedge is effective, and such amounts are reclassified from accumulated other comprehensive income or loss
to earnings in the same period or periods during which the hedged transaction affects income. Changes in the derivative’s fair value
that qualify as net investment hedges are recorded to other comprehensive income or loss, to the extent the hedge is effective. Any
changes in the fair value of derivatives that the Company does not designate as hedging instruments under Topic 815 of the ASC are
recorded in the consolidated statements of operations in the period in which they occur.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or the services have been provided and
accepted by the customer when applicable, fees are determinable and the collection of resulting receivables is considered probable.
Pursuant to ASC Topic 605, when a sales arrangement contains multiple deliverables, the Company allocates revenue to each deliver-
able based on its relative selling price which is determined based on its vendor specific objective evidence if available, third party evi-
dence if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available.
The Company’s products and services will generally qualify as separate units of accounting under ASC Topic 605. The Company eval-
uates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. A deliverable constitutes a
separate unit of accounting when it has stand-alone value to the customers and if the arrangement includes a customer refund or
return right relative to the delivered item and the delivery and performance of the undelivered item is considered probable and sub-
stantially in the Company’s control. In instances where the aforementioned criteria are not met, the deliverable is combined with the
undelivered items and revenue recognition is determined as one single unit.
The Company determines whether its selling price in a multi-element transaction meets the VSOE criteria by using the price charged
for a deliverable when sold separately. In instances where the Company is not able to establish VSOE for all deliverables in a multiple
element arrangement, which may be due to the Company infrequently selling each element separately, not selling products within a
reasonably narrow price range, or only having a limited sales history, the Company attempts to establish TPE for deliverables. The
Company determines whether TPE exists by evaluating largely similar and interchangeable competitor products or services in stand-
alone sales to similarly situated customers. However, due to the difficulty in obtaining third party pricing, possible differences in its
market strategy from that of its peers and the potential that products and services offered by the Company may contain a significant
level of differentiation and/or customization such that the comparable pricing of products with similar functionality cannot be
obtained, the Company generally is unable to reliably determine TPE. Based on the selling price hierarchy established by ASC Topic 605,
when the Company is unable to establish selling price using VSOE or TPE, the Company will establish an ESP. ESP is the price at which
the Company would transact a sale if the product or service were sold on a stand-alone basis. The Company establishes its best esti-
mate of ESP considering internal factors relevant to is pricing practices such as costs and margin objectives, standalone sales prices of
similar products, percentage of the fee charged for a primary product or service relative to a related product or service, and customer
segment and geography. Additional consideration is also given to market conditions such as competitor pricing strategies and market
trend. The Company reviews its determination of VSOE, TPE and ESP on an annual basis or more frequently as needed.
In the MIS segment, revenue attributed to initial ratings of issued securities is recognized when the rating is issued. Revenue attributed
to monitoring of issuers or issued securities is recognized ratably over the period in which the monitoring is performed, generally one
year. In the case of commercial mortgage-backed securities, structured credit, international residential mortgage-backed and asset-
backed securities, issuers can elect to pay the monitoring fees upfront. These fees are deferred and recognized over the future monitor-
ing periods based on the expected lives of the rated securities, which was approximately 28 years on a weighted average basis at
December 31, 2014. At December 31, 2014, 2013 and 2012, deferred revenue related to these securities was approximately
$107 million, $97 million and $82 million.
Multiple element revenue arrangements in the MIS segment are generally comprised of an initial rating and the related monitoring serv-
ice. In instances where monitoring fees are not charged for the first year monitoring effort, fees are allocated to the initial rating and
68
MOODY’S 2014 10K
monitoring services based on the relative selling price of each service to the total arrangement fees. The Company generally uses ESP in
determining the selling price for its initial ratings as the Company rarely sells initial ratings separately without providing related
monitoring services and thus is unable to establish VSOE or TPE for initial ratings.
MIS estimates revenue for ratings of commercial paper for which, in addition to a fixed annual monitoring fee, issuers are billed quar-
terly based on amounts outstanding. Revenue is accrued each quarter based on estimated amounts outstanding and is billed when
actual data is available. The estimate is determined based on the issuers’ most recent reported quarterly data. At December 31, 2014,
2013 and 2012, accounts receivable included approximately $22 million, $21 million and $22 million, respectively, related to accrued
commercial paper revenue. Historically, MIS has not had material differences between the estimated revenue and the actual billings.
Furthermore, for certain annual monitoring services, fees are not invoiced until the end of the annual monitoring period and revenue is
accrued ratably over the monitoring period.
In the MA segment, products and services offered by the Company include software licenses and related maintenance, subscriptions,
and professional services. Revenue from subscription based products, such as research and data subscriptions and certain software-
based credit risk management subscription products, is recognized ratably over the related subscription period, which is principally one
year. Revenue from sale of perpetual licenses of credit processing software is generally recognized at the time the product master or
first copy is delivered or transferred to and accepted by the customer. If uncertainty exists regarding customer acceptance of the prod-
uct or service, revenue is not recognized until acceptance occurs. Software maintenance revenue is recognized ratably over the annual
maintenance period. Revenue from professional services rendered is generally recognized as the services are performed. A large portion
of annual research and data subscriptions and annual software maintenance are invoiced in the months of November, December and
January.
Products and services offered within the MA segment are sold either stand-alone or together in various combinations. In instances
where a multiple element arrangement includes software and non-software deliverables, revenue is allocated to the non-software
deliverables and to the software deliverables, as a group, using the relative selling prices of each of the deliverables in the arrangement
based on the aforementioned selling price hierarchy. Revenue is recognized for each element based upon the conditions for revenue
recognition noted above.
If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables
as a group is allocated to each software deliverable using VSOE. In the instances where the Company is not able to determine VSOE for
all of the deliverables of an arrangement, the Company allocates the revenue to the undelivered elements equal to its VSOE and the
residual revenue to the delivered elements. If the Company is unable to determine VSOE for an undelivered element, the Company
defers all revenue allocated to the software deliverables until the Company has delivered all of the elements or when VSOE has been
determined for the undelivered elements. In cases where software implementation services are considered essential and VSOE of fair
value exists for post-contract customer support (“PCS”), once the delivery criteria has been met on the standard software, license and
service revenue is recognized on a percentage-of-completion basis as implementation services are performed, while PCS is recognized
over the coverage period. If VSOE of fair value does not exist for PCS, once the delivery criteria has been met on the standard software,
service revenue is recognized on a zero profit margin basis until essential services are complete, at which point total remaining
arrangement revenue is then spread ratably over the remaining PCS coverage period.
Accounts Receivable Allowances
Moody’s records an allowance for estimated future adjustments to customer billings as a reduction of revenue, based on historical
experience and current conditions. Such amounts are reflected as additions to the accounts receivable allowance. Additionally, esti-
mates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance.
Actual billing adjustments and uncollectible account write-offs are recorded against the allowance. Moody’s evaluates its accounts
receivable allowance by reviewing and assessing historical collection and adjustment experience and the current status of customer
accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic perspective, in
evaluating the need for allowances. Based on its analysis, Moody’s adjusts its allowance as considered appropriate in the circumstances.
Contingencies
Moody’s is involved in legal and tax proceedings, governmental investigations and inquiries, claims and litigation that are incidental to
the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal
course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters
based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other
pending matters as it may determine to be appropriate.
For claims, litigation and proceedings and governmental investigations and inquires not related to income taxes, where it is both prob-
able that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the con-
solidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range
MOODY’S 2014 10K
69
of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than
another amount within the range. In other instances, because of uncertainties related to the probable outcome and/or the amount or
range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes
available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predict-
ing the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters , particularly
where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large
number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any reso-
lution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is
conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any
pending matters progresses, management will continue to review the latest information available and assess its ability to predict the
outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or
indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties
regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.
The Company’s wholly-owned insurance subsidiary insures the Company against certain risks including but not limited to deductibles
for worker’s compensation, employment practices litigation and employee medical claims and terrorism, for which the claims are not
material to the Company. In addition, for claim years 2008 and 2009, the insurance subsidiary insured the Company for defense costs
related to professional liability claims. For matters insured by the Company’s insurance subsidiary, Moody’s records liabilities based on
the estimated total claims expected to be paid and total projected costs to defend a claim through its anticipated conclusion. The
Company determines liabilities based on an assessment of management’s best estimate of claims to be paid and legal defense costs as
well as actuarially determined estimates. The Cheyne SIV and Rhinebridge SIV matters more fully discussed in Note 18 are both cases
from the 2008/2009 claims period, and accordingly defense costs for these matters are covered by the Company’s insurance subsidiary.
Defense costs for matters not self-insured by the Company’s wholly-owned insurance subsidiary are expensed as services are provided.
For income tax matters, the Company employs the prescribed methodology of Topic 740 of the ASC which requires a company to first
determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained
based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowl-
edge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the
largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
Operating Expenses
Operating expenses include costs associated with the development and production of the Company’s products and services and their
delivery to customers. These expenses principally include employee compensation and benefits and travel costs that are incurred in
connection with these activities. Operating expenses are charged to income as incurred, except for certain costs related to software
implementation services which are deferred until related revenue is recognized. Additionally, certain costs incurred to develop internal
use software are capitalized and depreciated over their estimated useful life.
Selling, General and Administrative Expenses
SG&A expenses include such items as compensation and benefits for corporate officers and staff and compensation and other expenses
related to sales of products. They also include items such as office rent, business insurance, professional fees and gains and losses from
sales and disposals of assets. SG&A expenses are charged to income as incurred, except for certain expenses incurred to develop
internal use software are capitalized and depreciated over their estimated useful life.
Redeemable Noncontrolling Interest
The Company records its redeemable noncontrolling interest at fair value on the date of the related business combination transaction.
The redeemable noncontrolling interest represents noncontrolling shareholders’ interest in entities which are controlled but not wholly-
owned by Moody’s and for which Moody’s obligation to redeem the minority shareholders’ interest is governed by a put/call relation-
ship. Subsequent to the initial measurement, the redeemable noncontrolling interest is recorded at the greater of its redemption value
or its carrying value at the end of each reporting period. If the redeemable noncontrolling interest is carried at its redemption value, the
difference between the redemption value and the carrying value would be adjusted through capital surplus at the end of each reporting
period. The Company also performs a quarterly assessment to determine if the aforementioned redemption value exceeds the fair value
of the redeemable noncontrolling interest. If the redemption value of the redeemable noncontrolling interest were to exceed its fair
value, the excess would reduce the net income attributable to Moody’s shareholders. The Company settled its redeemable non-
controlling interest in the fourth quarter of 2014 by exercising its call option to acquire the remaining share of Copal Amba that it did
not previously own.
Foreign Currency Translation
For all operations outside the U.S. where the Company has designated the local currency as the functional currency, assets and
liabilities are translated into U.S. dollars using end of year exchange rates, and revenue and expenses are translated using average
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MOODY’S 2014 10K
exchange rates for the year. For these foreign operations, currency translation adjustments are accumulated in a separate component
of shareholders’ equity.
Comprehensive Income
Comprehensive income represents the change in net assets of a business enterprise during a period due to transactions and other
events and circumstances from non-owner sources including foreign currency translation impacts, net actuarial losses and net prior
service costs related to pension and other retirement plans, gains and losses on derivative instruments and unrealized gains and losses
on securities designated as ‘available-for-sale’ under Topic 320 of the ASC.
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740. Therefore, income tax
expense is based on reported income before income taxes and deferred income taxes reflect the effect of temporary differences
between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized
for income tax purposes.
The Company classifies interest related to unrecognized tax benefits as a component of interest expense in its consolidated statements
of operations. Penalties are recognized in other non-operating expenses. For UTPs, the Company first determines whether it is more-
likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as
of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A
tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is
greater than fifty percent likely to be realized upon effective settlement with a taxing authority.
For certain of its non-U.S. subsidiaries, the Company has deemed the undistributed earnings relating to these subsidiaries to be indef-
initely reinvested within its foreign operations. Accordingly, the Company has not provided deferred income taxes on these indefinitely
reinvested earnings. It is not practicable to determine the amount of deferred taxes that might be required to be provided if such earn-
ings were distributed in the future due to complexities in the tax laws and in the hypothetical calculations that would have to be made.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, cash equivalents, trade receivables and payables, all of which are short-term in
nature and, accordingly, approximate fair value. Additionally, the Company invests in certain short-term investments consisting primar-
ily of certificates of deposit that are carried at cost, which approximates fair value due to their short-term maturities.
The Company also has certain investments in closed-ended and open-ended mutual funds in India which are designated as “available
for sale” under Topic 320 of the ASC. Accordingly, unrealized gains and losses on these investments are recorded to other compre-
hensive income and are reclassified out of accumulated other comprehensive income to the statement of operations when the invest-
ment matures or is sold using a specific identification method.
Also, the Company uses derivative instruments, as further described in Note 5, to manage certain financial exposures that occur in the
normal course of business. These derivative instruments are carried at fair value on the Company’s consolidated balance sheets.
The Company also is subject to contingent consideration obligations related to certain of its acquisitions as more fully discussed in
Note 9. These obligations are carried at their estimated fair value within the Company’s consolidated balance sheets.
Fair value is defined by the ASC as the price that would be received from selling an asset or paid to transfer a liability (i.e., an exit price)
in an orderly transaction between market participants at the measurement date. The determination of this fair value is based on the
principal or most advantageous market in which the Company could commence transactions and considers assumptions that market
participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. Also,
determination of fair value assumes that market participants will consider the highest and best use of the asset.
The ASC establishes a fair value hierarchy whereby the inputs contained in valuation techniques used to measure fair value are catego-
rized into three broad levels as follows:
Level 1: quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value
measurement;
Level 2: inputs other than quoted market prices described in Level 1 that are observable for the asset or liability, either directly or
indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities
in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities;
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of
the assets or liabilities.
MOODY’S 2014 10K
71
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk principally consist of cash and cash equiv-
alents, short-term investments, trade receivables and derivatives.
The Company manages its credit risk exposure by allocating its cash equivalents among various money market mutual funds, money
market deposit accounts, certificates of deposits and high- grade commercial paper. Short-term investments primarily consist of certifi-
cates of deposit as of December 31, 2014 and 2013. The Company manages its credit risk exposure on cash equivalents and short-term
investments by limiting the amount it can invest with any single entity. No customer accounted for 10% or more of accounts receiv-
able at December 31, 2014 or 2013.
Earnings per Share of Common Stock
Basic shares outstanding is calculated based on the weighted average number of shares of common stock outstanding during the report-
ing period. Diluted shares outstanding is calculated giving effect to all potentially dilutive common shares, assuming that such shares
were outstanding during the reporting period.
Pension and Other Retirement Benefits
Moody’s maintains various noncontributory DBPPs as well as other contributory and noncontributory retirement plans. The expense
and assets/liabilities that the Company reports for its pension and other retirement benefits are dependent on many assumptions con-
cerning the outcome of future events and circumstances. These assumptions represent the Company’s best estimates and may vary by
plan. The differences between the assumptions for the expected long-term rate of return on plan assets and actual experience is spread
over a five-year period to the market related value of plan assets which is used in determining the expected return on assets compo-
nent of annual pension expense. All other actuarial gains and losses are generally deferred and amortized over the estimated average
future working life of active plan participants.
The Company recognizes as an asset or liability in its consolidated balance sheet the funded status of its defined benefit retirement
plans, measured on a plan-by-plan basis. Changes in the funded status due to actuarial gains/losses are recorded as part of other com-
prehensive income during the period the changes occur.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Estimates are
used for, but not limited to, revenue recognition, accounts receivable allowances, income taxes, contingencies, valuation of long-lived
and intangible assets, goodwill, pension and other retirement benefits, stock-based compensation, and depreciable lives for property
and equipment and computer software.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. This ASU outlines a comprehensive new
revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an
amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU is effective for annual and
interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is currently evaluating
its adoption options and the impact that adoption of this update will have on its consolidated financial statements. Currently, the
Company believes this ASU will have an impact on: i) the capitalization of certain contract implementation costs for its ERS business; ii)
the accounting for certain ratings monitoring fees received in advance of the service being rendered; iii) the accounting for certain
license and maintenance revenue in MA; iv) the accounting for certain ERS revenue arrangements where VSOE is not available and v)
the accounting for contract acquisition costs.
In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a
Performance Target Could Be Achieved after the Requisite Service Period.” This ASU clarifies the current accounting guidance for enti-
ties that issue share-based payment awards that require a specific performance target be achieved for employees to become eligible to
vest in the awards, which may occur subsequent to a required service period. The current accounting guidance does not explicitly
address how to account for these types of awards. The ASU provides explicit guidance and clarifies that these types of performance
targets should be treated as performance conditions, and accordingly should not be reflected in the determination of the grant-date fair
value of the award. This ASU is effective for all annual periods and interim reporting periods beginning after December 15, 2015, with
early adoption permitted. The Company currently accounts for transactions involving stock-based compensation awards with perform-
ance conditions in accordance with the provisions set forth in this ASU. Accordingly, the adoption of this update will not have an
impact on the Company’s consolidated financial statements.
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MOODY’S 2014 10K
NOTE 3
RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
Below is a reconciliation of basic to diluted shares outstanding:
Basic
Dilutive effect of shares issuable under stock-based compensation plans
Diluted
Antidilutive options to purchase common shares and restricted stock as well as
contingently issuable restricted stock which are excluded from the table above
Year Ended December 31,
2014
210.7
4.0
214.7
0.7
2013
219.4
4.1
223.5
4.0
2012
223.2
3.4
226.6
7.5
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 December 31, 2014, 2013 and 2012.
These assumed proceeds include Excess Tax Benefits and any unrecognized compensation on the awards.
NOTE 4
CASH EQUIVALENTS AND INVESTMENTS
The table below provides additional information on the Company’s cash equivalents and investments:
Money market mutual funds
Certificates of deposit and money market deposit accounts (1)
Fixed maturity and open ended mutual funds (2)
As of December 31, 2014
Gross
Unrealized
Gains
Balance sheet location
Fair Value
Cash and cash
equivalents
Short-term
investments
Other
assets
$
$
$
— $ 149.7
— $ 842.5
48.0
$
0.9
$
$
$
149.7
380.1
$
$
— $
458.1
— $ —
$ 4.3
— $48.0
Cost
$149.7
$842.5
$ 47.1
As of December 31, 2013
Gross
Unrealized
Gains
Cost
Balance sheet location
Fair Value
Cash and cash
equivalents
Short-term
investments
Other
assets
Money market mutual funds
Certificates of deposit and money market deposit accounts (1)
$ 212.3
$ 911.8
$
$
— $ 212.3
— $ 911.8
$
$
212.3
725.0
$
$
— $ —
$ —
186.8
(1) Consists of time deposits and money market deposit accounts. The remaining contractual maturities for the certificates of deposits classified as short-term
investments were one month to ten months at December 31, 2014 and one month to nine months at December 31, 2013. Time deposits with a maturity of
less than 90 days at time of purchase are classified as cash and cash equivalents.
(2) Consists of investments in fixed maturity mutual funds and open-ended mutual funds held by ICRA. The remaining contractual maturities for the fixed
maturity instruments range from two months to 23 months at December 31, 2014.
The money market mutual funds as well as the fixed maturity and open ended mutual funds in the table above are deemed to be
“available for sale” under ASC Topic 320 and the fair value of these instruments is determined using Level 1 inputs which are more fully
described in Note 2.
The total proceeds received in the year ended December 31, 2014 for maturities of fixed maturity mutual funds was $10.7 million. The
gross realized gains on these maturities were immaterial.
NOTE 5
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.
MOODY’S 2014 10K
73
Interest Rate Swaps
In the fourth quarter of 2010, the Company entered into interest rate swaps with a total notional amount of $300 million to convert
the fixed interest rate on the Series 2005-1 Notes to a floating interest rate based on the 3-month LIBOR. The purpose of this hedge
was to mitigate the risk associated with changes in the fair value of the Series 2005-1 Notes, thus the Company designated these
swaps as fair value hedges. The fair value of the swaps was adjusted quarterly with a corresponding adjustment to the carrying value of
the Series 2005-1 Notes. The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash
settlements on the swaps were recorded each period within interest income (expense), net, in the Company’s consolidated statement
of operations. In August of 2014, the Company terminated the swaps on the Series 2005-1 Notes concurrent with the early retirement
of those notes as further described in Note 15. The termination of these swaps resulted in a gain of approximately $4 million in 2014
which is recorded in interest income (expense), net in the Company’s consolidated statement of operations.
In the second quarter of 2014, the Company entered into interest rate swaps with a total notional amount of $250 million to convert
the fixed interest rate on the 2010 Senior Notes to a floating interest rate based on the 3-month LIBOR. In the third quarter of 2014,
the Company entered into interest rate swaps with a total notional amount of $250 million to convert the fixed interest rate on the
remaining balance of the 2010 Senior Notes to a floating interest rate based on the 3-month LIBOR. The purpose of these hedges is to
mitigate the risk associated with changes in the fair value of the 2010 Senior Notes, 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 2010
Senior Notes. The changes in the fair value of the hedges and the underlying hedged item generally offset and the net cash settlements
on the swaps are recorded each period within interest income (expense), net, in the Company’s consolidated statement of operations.
In the third quarter of 2014, the Company entered into interest rate swaps with a total notional amount of $250 million to convert the
fixed interest rate on a portion of the 2014 Senior Notes (5-year) to a floating interest rate based on the 3-month LIBOR. The purpose
of this hedge was to mitigate the risk associated with changes in the fair value of a portion of the 2014 Senior Notes (5-year), 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 2014 Senior Notes (5-year). The changes in the fair value of the hedges and the underlying
hedged item generally offset and the net cash settlements on the swaps are recorded each period within interest income (expense), net,
in the Company’s consolidated statement of operations.
Foreign Exchange Forwards
The Company also enters into foreign exchange forwards to mitigate the change in fair value on certain assets and liabilities denomi-
nated in currencies other than the subsidiary’s functional currency. These forward contracts are not designated as hedging instruments
under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these contracts are recognized immedi-
ately 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 March 2015.
The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:
Notional amount of Currency Pair:
Contracts to purchase USD with euros
Contracts to sell USD for euros
Contracts to purchase USD with GBP
Contracts to purchase USD with other foreign currencies
Contracts to purchase euros with other foreign currencies
Contracts to purchase euros with GBP
Contracts to sell euros for GBP
December 31, 2014
December 31, 2013
$
$
$
$
€
€
€
38.5
51.1
0.2
1.2
34.0
25.0
38.2
$
$
$
$
€
€
€
14.2
53.2
—
—
13.1
22.1
—
Net Investment Hedges
The Company enters into foreign currency forward contracts to hedge the exposure related to non-U.S. dollar net investments in cer-
tain foreign subsidiaries against adverse changes in foreign exchange rates. These forward contracts are designated as hedging instru-
ments under the applicable sections of Topic 815 of the ASC. Hedge effectiveness is assessed based on the overall changes in the fair
value of the forward contracts on a pre-tax basis. For hedges that meet the effectiveness requirements, any change in fair value for the
hedge is recorded in OCI. Any change in the fair value of these hedges that is the result of ineffectiveness would be recognized immedi-
ately in other non-operating (expense) income in the Company’s consolidated statements of operations. These outstanding contracts
expire in March 2015 for contracts to sell euros for USD and in November 2015 for contracts to sell Japanese yen for USD.
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MOODY’S 2014 10K
The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forward contracts that are des-
ignated as net investment hedges:
Notional amount of Currency Pair:
Contracts to sell euros for USD
Contracts to sell Japanese yen for USD
December 31,
December 31,
2014
2013
€
¥
50.0
19,400
€
¥
50.0
19,700
The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair value
of the derivative instruments:
Fair Value of Derivative Instruments
Balance Sheet
Location
December 31,
2014
December 31,
2013
Assets:
Derivatives designated as accounting hedges:
Interest rate swaps
FX forwards on net investment in certain foreign subsidiaries
Other assets
Other current assets
Total derivatives designated as accounting hedges
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities
Other current assets
Total
Liabilities:
Derivatives designated as accounting hedges:
FX forwards on net investment in certain foreign subsidiaries
Accounts payable and accrued
liabilities
Total derivatives designated as accounting hedges
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities
Total
Accounts payable and accrued
liabilities
$
$
$
$
$
17.4
18.8
36.2
5.6
41.8
$
— $
—
2.1
2.1
$
10.3
9.3
19.6
0.9
20.5
1.0
1.0
0.7
1.7
The following table summarizes the net gain (loss) on the Company’s foreign exchange forwards which are not designated as hedging
instruments as well as the gain (loss) on the interest rate swaps designated as fair value hedges:
Amount of Gain (Loss)
Recognized in consolidated
statement of operations
Year Ended December 31,
2014
2013
2012
Derivatives designated as accounting hedges Location on Consolidated Statements of
Interest rate swaps
Derivatives not designated as accounting
hedges
Foreign exchange forwards
Operations
Interest income (expense), net
Other non-operating (expense) income
$
$
11.7 $
4.2 $
3.6
(2.0) $
2.1 $
0.9
MOODY’S 2014 10K
75
The following table provides information on annual gains (losses) on the Company’s net investment hedges:
Derivatives in Net Investment Hedging Relationships
FX forwards
Total
Amount of Gain/(Loss), net of tax,
Recognized in AOCI on
Derivative (Effective Portion)
2014
19.4
19.4
$
$
$
$
Year Ended December 31,
2013
3.7
3.7
$
$
2012
(2.2)
(2.2)
All gains and losses on derivatives designated as net investment hedges are recognized through OCI.
There were no gains or losses reclassified from AOCI to the statement of operations or any hedge ineffectiveness in the years ended
December 31, 2014, 2013 and 2012.
The cumulative amount of hedge gain (losses) recorded in AOCI relating to derivative instruments is as follows:
FX forwards on net investment hedges
NOTE 6
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of:
Office and computer equipment (3 – 10 year estimated useful life)
Office furniture and fixtures (3 – 10 year estimated useful life)
Internal-use computer software (3 – 10 year estimated useful life)
Leasehold improvements and building (3 – 20 year estimated useful life)
Total property and equipment, at cost
Less: accumulated depreciation and amortization
Total property and equipment, net
Gains (Losses), net of tax
December 31, 2014
December 31, 2013
20.9
$
1.5
December 31,
$
2014
152.5
43.8
336.8
220.7
753.8
(451.5)
302.3
$
2013
129.7
40.6
284.9
199.2
654.4
(375.7)
278.7
$
$
$
Depreciation and amortization expense related to the above assets was $67.2 million, $65.4 million, and $63.4 million for the years
ended December 31, 2014, 2013 and 2012, respectively.
NOTE 7
ACQUISITIONS
All of the acquisitions described below were accounted for using the acquisition method of accounting whereby assets acquired and
liabilities assumed were recognized at their acquisition date fair value. Any excess of the purchase price over the fair value of the assets
acquired and liabilities assumed was recorded to goodwill. For all of the acquisitions described below, the Company has not presented
proforma combined results for the acquisitions because the impact on previously reported statements of operations would not have
been material. Furthermore, for all acquisitions described below, the amount of revenue and expenses in the year of acquisition from
the acquisition date through the end of the year was not material. These acquisitions are discussed below in more detail.
Lewtan Technologies
On October 27, 2014, a subsidiary of the Company acquired 100% of Lewtan Technologies, a leading provider of analytical tools and
data for the global structured finance market. The acquisition of Lewtan will bolster MA’s Structured Analytics and Valuations (SAV)
business within its RD&A LOB, which provides an extensive data and analytics library for securitized assets. The aggregate purchase
price was not material and the near term impact to the Company’s operations and cash flows is not expected to be material. Lewtan
will operate in the RD&A LOB of MA and goodwill related to this acquisition was allocated to the RD&A reporting unit.
76
MOODY’S 2014 10K
WebEquity Solutions, LLC
On July 17, 2014, a subsidiary of the Company acquired 100% of WebEquity Solutions, LLC, a leading provider of cloud-based loan origi-
nation solutions for financial institutions. The cash payment to the sellers of $130.5 million was funded using Moody’s U.S. cash. This
acquisition will enhance MA’s risk management product portfolio.
The Company incurred approximately $2 million of costs directly related to this acquisition in 2014, which are recorded within selling,
general and administrative expenses in the Company’s consolidated statements of operations.
Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of the
acquisition:
Current assets
Property and equipment, net
Intangible assets:
Client relationships (18 year weighted average life)
Software (15 year weighted average life)
Trade name (4 year weighted average life)
Total intangible assets (17 year weighted average life)
Goodwill
Liabilities assumed
Net assets acquired
$
42.8
11.5
0.5
$
$
3.0
2.3
54.8
77.6
(7.2)
130.5
Current assets include acquired cash of $0.6 million. Additionally, current assets includes gross accounts receivable of $0.7 million, of
which an immaterial amount is not expected to be collectible. The acquired goodwill, which has been assigned to the MA segment, will
be deductible for tax.
As of the date of the acquisition, WebEquity is part of the ERS reporting unit.
ICRA Limited
On June 26, 2014, a subsidiary of the Company acquired 2,154,722 additional shares of ICRA Limited, a publicly traded company in
India, pursuant to a conditional open tender offer which was initiated in February 2014. ICRA is a leading provider of credit ratings and
research in India and will extend MIS’s reach in the growing domestic debt market in India as well as other emerging markets in the
region. The acquisition of the additional shares increased Moody’s ownership stake in ICRA from 28.5% to 50.06%, resulting in a con-
trolling interest in ICRA. Accordingly, the Company consolidates ICRA’s financial statements on a three month lag which resulted in
only one quarter of ICRA’s operating results included in the Company’s statement of operations in 2014.
Prior to the acquisition of the additional shares, Moody’s accounted for its investment in ICRA on an equity basis whereby the Com-
pany recorded its proportional share of the investment’s net income or loss as part of other non-operating income (expense), net. The
acquisition of the additional shares has resulted in the Company consolidating ICRA into its financial statements. As a result of this
consolidation and in accordance with ASC 805, the carrying value of the Company’s equity investment in ICRA was remeasured to fair
value as of the acquisition date resulting in a pre-tax gain of $102.8 million ($78.5 million after-tax) in 2014. The fair value of the
Company’s equity investment was based on ICRA’s quoted market price on the date of acquisition.
The Company incurred approximately $2 million of costs directly related to the acquisition of ICRA during 2014 which are recorded
within selling, general and administrative expenses in the Company’s consolidated statements of operations.
The table below details the total consideration relating to the ICRA step-acquisition:
Cash paid
Fair value of equity interest in ICRA prior to obtaining a controlling interest
Total consideration
$
$
86.0
124.9
210.9
The cash paid in the table above was funded by using Moody’s non-U.S. cash on hand.
MOODY’S 2014 10K
77
Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date of
acquisition:
Current assets
Property and equipment, net
Intangible assets:
Trade name (36 year weighted average life)
Client relationships (19 year weighted average life)
Other (17 year weighted average life) *
Total intangible assets (26 year weighted average life)
Goodwill
Other assets
Liabilities
Fair value of non-controlling interest assumed
Net assets acquired
$
46.8
33.8
18.3
$
$
25.4
15.1
98.9
296.7
56.3
(62.7)
(218.8)
210.9
*
Primarily consists of acquired technical know-how and ratings methodologies
Current assets include acquired cash of approximately $5 million. Additionally, current assets includes gross accounts receivable of
approximately $14 million, of which an immaterial amount is not expected to be collectible. Goodwill, which has been assigned to the
MIS segment, is not deductible for tax.
The fair value of the non-controlling interest was determined based on the quoted market price per share of ICRA on the date that the
Company acquired the controlling stake.
ICRA will operate as its own reporting unit for purposes of the Company’s annual goodwill impairment assessment.
Amba Investment Services
On December 10, 2013, Copal Partners Limited, a majority-owned subsidiary of the Company, acquired 100% of Amba Investment
Services, a provider of investment research and quantitative analytics for global financial institutions. Amba currently operates within
the PS LOB of MA and will bolster the research and analytical capabilities offered by MA through Copal, a majority of which was
acquired in December 2011. The table below details the total consideration transferred to the sellers of Amba:
Cash paid
Contingent consideration liability assumed
Total fair value of consideration transferred
$
$
67.3
4.3
71.6
The cash payment to the sellers was funded by using Moody’s non-U.S. cash on hand.
The purchase agreement contained a provision for a contingent cash payment to the sellers valued at $4.3 million at the acquisition
date which was dependent on Amba achieving certain revenue targets for the period from the acquisition date through March 31,
2014. The target was met and a $4.3 million payment was made to the sellers in the third quarter of 2014.
The Company incurred approximately $1 million of costs directly related to the acquisition of Amba during the year ended
December 31, 2013. These costs, which primarily consist of consulting and legal fees, are recorded within selling, general and admin-
istrative expenses in the Company’s consolidated statements of operations.
78
MOODY’S 2014 10K
Shown below is the purchase price allocation, which summarizes the fair value of the assets acquired and the liabilities assumed, at the
date of acquisition:
Current assets
Property and equipment, net
Intangible assets:
Trade name (7 year weighted average life)
Client relationships (12 year weighted average life)
Other (3 year weighted average life)
Total intangible assets (11 year weighted average life)
Goodwill
Indemnification asset
Other assets
Liabilities assumed
Net assets acquired
$
3.3
26.7
1.6
$
$
23.7
0.4
31.6
29.2
10.4
2.0
(25.7)
71.6
Current assets include acquired cash of approximately $16 million. Additionally, current assets includes gross accounts receivable of
approximately $6 million, of which an immaterial amount is not expected to be collectible. The acquired goodwill, which has been
assigned to the MA segment, will not be deductible for tax.
In connection with the acquisition, the Company assumed liabilities relating to certain UTPs. These UTPs are included in the liabilities
assumed in the table above. The sellers have contractually indemnified the Company against any potential payments that may have to
be made regarding these UTPs. Accordingly, the Company carries an indemnification asset on its consolidated balance sheet at
December 31, 2014.
As of the date of the acquisition, Amba was integrated with Copal to form the Copal Amba reporting unit.
NOTE 8
GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS
The following table summarizes the activity in goodwill:
Year Ended December 31, 2014
MIS
Gross
goodwill
Accumulated
Impairment
charge
Net
goodwill
Gross
goodwill
MA
Accumulated
Impairment
charge
Net
goodwill
Gross
goodwill
Consolidated
Accumulated
Impairment
charge
Net
goodwill
Balance at beginning of
year
Additions/adjustments
Foreign currency
translation adjustments
$
11.4 $
296.7
— $
—
11.4 $
296.7
666.0 $
101.1
(12.2)$
—
653.8 $
101.1
677.4 $
397.8
(12.2)$
—
665.2
397.8
(9.4)
—
(9.4)
(32.5)
—
(32.5)
(41.9)
—
—
—
(41.9)
Ending balance
$
298.7 $
— $
298.7 $
734.6 $
(12.2)$
722.4 $
1,033.3 $
(12.2)$
1,021.1
MOODY’S 2014 10K
79
Year Ended December 31, 2013
MIS
Gross
goodwill
Accumulated
Impairment
charge
Net
goodwill
Gross
goodwill
MA
Accumulated
Impairment
charge
Net
goodwill
Gross
goodwill
Consolidated
Accumulated
Impairment
charge
Net
goodwill
Balance at beginning of
year
Additions/adjustments
Foreign currency
translation adjustments
$
11.5 $
—
— $
—
11.5 $
—
637.8 $
34.5
(12.2)$
—
625.6 $
34.5
649.3 $
34.5
(12.2)$
—
637.1
34.5
(0.1)
—
(0.1)
(6.3)
—
(6.3)
(6.4)
—
(6.4)
Ending balance
$
11.4 $
— $
11.4 $
666.0 $
(12.2)$
653.8 $
677.4 $
(12.2)$
665.2
The 2014 additions/adjustments for the MIS segment in the table above relate to the ICRA acquisition in the second quarter of 2014.
The 2014 additions/adjustments for the MA segment relate to the acquisition WebEquity in the third quarter of 2014 and Lewtan in
the fourth quarter of 2014 as well as adjustments for Amba which was acquired in the fourth quarter of 2013. The 2013 additions/
adjustments for the MA segment relate to the acquisition of Amba.
The accumulated impairment charge in the table above reflects an impairment charge recognized in 2012 relating to the FSTC report-
ing unit within MA. This impairment charge reflected a contraction in spending for training and certification services for many
individuals and global financial institutions in 2012 due to macroeconomic uncertainties at the time. The fair value of the FSTC report-
ing unit utilized in this impairment assessment was estimated using a discounted cash flow methodology and comparable public com-
pany and precedent transaction multiples.
Acquired intangible assets consisted of:
$
December 31,
$
2014
310.4
(98.1)
212.3
30.6
(20.9)
9.7
79.8
(43.0)
36.8
76.5
(13.3)
63.2
44.8
(21.3)
23.5
$
345.5
$
2013
237.4
(86.6)
150.8
31.1
(18.5)
12.6
71.0
(38.8)
32.2
31.3
(11.7)
19.6
26.1
(19.7)
6.4
221.6
Customer relationships
Accumulated amortization
Net customer relationships
Trade secrets
Accumulated amortization
Net trade secrets
Software
Accumulated amortization
Net software
Trade names
Accumulated amortization
Net trade names
Other
Accumulated amortization
Net other
Total
80
MOODY’S 2014 10K
Other intangible assets primarily consist of databases, covenants not to compete and acquired ratings methodologies and models.
Amortization expense relating to intangible assets is as follows:
Amortization expense
$
28.4
$
28.0
$
Estimated future annual amortization expense for intangible assets subject to amortization is as follows:
Year Ended December 31,
2014
2013
2012
30.1
Year Ended December 31,
2015
2016
2017
2018
2019
Thereafter
$
33.5
31.7
28.1
22.4
19.5
210.3
Amortizable intangible assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. In conjunction with the assessment of goodwill impairment at July 31, 2012, the Company reviewed
the recoverability of certain customer lists within its FSTC reporting unit. This review resulted in an impairment of approximately
$1 million in the third quarter of 2012 which is recorded in depreciation and amortization expense in the consolidated statement of
operations. The fair value of these customer lists was determined using a discounted cash flow analysis. The Company again reviewed
the recoverability of these customer lists in the fourth quarter of 2012 in conjunction with the quantitative goodwill impairment test
performed at December 31, 2012 for the FSTC reporting unit. Based on this assessment, there was no further impairment of the
customer lists in the fourth quarter of 2012. For all intangible assets, there were no such events or changes during 2014 or 2013 that
would indicate that the carrying amount of amortizable intangible assets in any of the Company’s reporting units may not be recover-
able. Additionally, there were no events or circumstances during 2014 or 2013 that would indicate the need for an adjustment of the
remaining useful lives of these amortizable intangible assets.
NOTE 9
FAIR VALUE
The table below presents information about items, which are carried at fair value on a recurring basis at December 31, 2014 and 2013:
Description
Balance
Level 1
Level 2
Level 3
Fair Value Measurement as of December 31, 2014
Assets:
Liabilities:
Derivatives (a)
Money market
mutual funds
Fixed maturity and
open ended mutual
funds (b)
Total
Derivatives (a)
Contingent
consideration arising
from acquisitions (c)
Total
$
$
$
$
41.8
$
— $
41.8
$
149.7
149.7
48.0
48.0
—
—
239.5
$
197.7
$
41.8
$
2.1
$
— $
2.1
$
2.1
4.2
$
—
— $
—
2.1
$
—
—
—
—
—
2.1
2.1
MOODY’S 2014 10K
81
Assets:
Liabilities:
Description
Balance
Level 1
Level 2
Level 3
Fair Value Measurement as of December 31, 2013
Derivatives (a)
Money market
mutual funds
Total
Derivatives (a)
Contingent
consideration arising
from acquisitions (c)
Total
$
$
$
$
20.5
$
— $
20.5
$
212.3
212.3
—
232.8
$
212.3
$
20.5
$
1.7
$
— $
1.7
$
17.5
19.2
$
—
— $
—
1.7
$
—
—
—
—
17.5
17.5
(a) Represents interest rate swaps and FX forwards on certain assets and liabilities as well as on certain non-U.S. dollar net investments in certain foreign
subsidiaries more fully discussed in Note 5 to the financial statements
(b) Represents investments in fixed maturity mutual funds and open ended mutual funds held by ICRA. The remaining contractual maturities for the fixed
maturity instruments range from two months to 23 months
(c) Represents contingent consideration liabilities pursuant to the agreements for certain acquisitions
The following table summarizes the changes in the fair value of the Company’s Level 3 liabilities:
Balance as of January 1
Contingent consideration assumed in acquisition of Amba
Contingent consideration payments
Losses included in earnings
Foreign currency translation adjustments
Balance as of December 31
$
$
Changes in Contingent Consideration for Years Ended December 31,
$
2014
17.5
—
(16.5)
1.3
(0.2)
$
2013
9.0
4.3
(2.5)
6.9
(0.2)
2.1
$
17.5
$
2012
9.1
—
(0.5)
0.1
0.3
9.0
The losses included in earnings in the table above are recorded within SG&A expenses in the Company’s consolidated statements of
operations and relate to contingent consideration obligations related to the Copal Amba acquisition which were settled in 2014.
The $2.1 million of contingent consideration obligations as of December 31, 2014 is classified in other liabilities within the Company’s
consolidated balance sheet.
The following are descriptions of the methodologies utilized by the Company for determining the fair value of its derivative contracts,
fixed maturity and open-ended mutual funds, money market mutual funds and contingent consideration obligations:
Derivatives:
In determining the fair value of the derivative contracts in the table above, the Company utilizes industry standard valuation models.
Where applicable, these models project future cash flows and discount the future amounts to a present value using spot rates, forward
points, currency volatilities, interest rates as well as the risk of non-performance of the Company and the counterparties with whom it
has derivative contracts. The Company has strict counterparty credit guidelines and only enters into transactions with financial
institutions that adhere to these guidelines. Accordingly, the risk of counterparty default is deemed to be minimal.
Fixed maturity and open ended mutual funds:
The fixed maturity mutual funds and open ended mutual funds primarily represent exchange traded funds in India held by ICRA and are
classified as securities available-for-sale. Accordingly, any unrealized gains and losses are recognized through OCI until the instruments
mature or are sold.
Money market mutual funds:
The money market mutual funds represent publicly traded funds with a stable $1 net asset value.
82
MOODY’S 2014 10K
Contingent Consideration:
At December 31, 2014, the Company has a contingent consideration obligation related to the acquisition of CSI which is carried at
estimated fair value, and is based on certain financial and non-financial metrics set forth in the acquisition agreements. This obligation
is measured using Level 3 inputs as defined in the ASC. The Company has recorded the obligation for this contingent consideration
arrangement on the date of acquisition based on management’s best estimates of the achievement of the metrics and the value of the
obligation is adjusted quarterly.
The contingent consideration obligation for CSI is based on the achievement of a certain contractual milestone by January 2016. The
Company utilizes a discounted cash flow methodology to value this obligation. The future expected cash flow for this obligation is dis-
counted using an interest rate available to borrowers with similar credit risk profiles to that of the Company. The most significant
unobservable input involved in the measurement of this obligation is the probability that the milestone will be reached by January
2016. At December 31, 2014, the Company expects that this milestone will be reached by the aforementioned date.
For certain of the contingent consideration obligations relating to the acquisition of Copal, a portion of the contingent cash payments
were based on revenue and EBITDA growth for certain of the Copal entities. This growth was calculated by comparing revenue and
EBITDA in the year immediately prior to the exercise of the put/call option to acquire the remaining 33% ownership interest of Copal
Partners Limited, to revenue and EBITDA in Copal’s fiscal year ended March 31, 2011. Payments of $12.2 million under this arrange-
ment were made in the fourth quarter of 2014 pursuant to the Company exercising its call option to acquire the remaining shares of
Copal Amba. The Company had utilized discounted cash flow methodologies to value these obligations prior to their settlement in
2014. The expected future cash flows for these obligations were discounted using a risk-free interest rate plus a credit spread based on
the option adjusted spread of the Company’s publicly traded debt as of the valuation date plus sovereign and size risk premiums. The
most significant unobservable input involved in the measurement of these obligations were the projected future financial results of the
applicable Copal Amba entities. Other contingent cash payments were based on the achievement of revenue targets for Copal’s fiscal
year ended March 31, 2013 and a $2.5 million payment was made in 2013.
For the contingent consideration obligations relating to the acquisition of Amba, the payment was based on the acquired entity achiev-
ing a revenue target for its fiscal year ended March 31, 2014 which was met resulting in a $4.3 million payment in 2014.
NOTE 10
DETAIL OF CERTAIN BALANCE SHEET INFORMATION
The following tables contain additional detail related to certain balance sheet captions:
Other current assets:
Prepaid taxes
Prepaid expenses
Other
Total other current assets
Other assets:
Investments in joint ventures
Deposits for real-estate leases
Indemnification assets related to acquisitions
Fixed maturity and open-ended mutual funds
Other
Total other assets
December 31,
2014
65.4
59.9
47.2
$
172.5
$
December 31,
$
2014
21.6
11.3
23.5
48.0
41.5
145.9
$
2013
40.0
48.1
26.3
114.4
2013
37.5
10.3
27.0
—
37.3
112.1
$
$
$
$
MOODY’S 2014 10K
83
Accounts payable and accrued liabilities:
Salaries and benefits
Incentive compensation
Profit sharing contribution
Customer credits, advanced payments and advanced billings
Self-insurance reserves
Dividends
Professional service fees
Interest accrued on debt
Accounts payable
Income taxes (see Note 14)
Pension and other retirement employee benefits (see Note 12)
Other
Total accounts payable and accrued liabilities
Other liabilities:
Pension and other retirement employee benefits (see Note 12)
Deferred rent-non-current portion
Interest accrued on UTPs
Legacy and other tax matters
Other
Total other liabilities
December 31,
$
2014
86.5
155.2
9.3
17.0
21.5
75.0
47.0
45.0
19.4
16.1
5.1
60.5
557.6
$
December 31,
$
2014
244.8
104.2
20.8
8.6
52.5
430.9
$
2013
77.1
135.9
—
21.7
27.6
65.5
32.9
36.3
16.4
47.5
7.0
71.0
538.9
2013
164.0
106.3
18.0
15.4
56.5
360.2
$
$
$
$
Changes in the Company’s self-insurance reserves for claims insured by the Company’s wholly-owned insurance subsidiary, which pri-
marily relate to legal defense costs for claims from prior years, are as follows:
Balance January 1,
Accruals (reversals), net
Payments
Balance December 31,
Year Ended December 31,
2014
27.6
5.8
(11.9)
$
2013
55.8
(0.9)
(27.3)
$
21.5
$
27.6
$
$
$
2012
27.1
38.1
(9.4)
55.8
Redeemable Noncontrolling Interest:
In connection with the acquisition of Copal, the Company and the non-controlling shareholders entered into a put/call option agree-
ment whereby the Company had the option to purchase from the non-controlling shareholders and the non-controlling shareholders
had the option to sell to the Company the remaining 33% ownership interest of Copal Partners Limited based on a strike price to be
calculated on pre-determined formulas using a combination of revenue and EBITDA multiples when exercised. The value of the esti-
mated put/call option strike price on the date of acquisition was based on a Monte Carlo simulation model. This model contemplated
multiple scenarios which simulated certain of Copal’s revenue, EBITDA margins and equity values to estimate the present value of the
expected strike price of the option. In connection with the acquisition of Amba in December 2013, which was combined with Copal to
form the Copal Amba operating segment and reporting unit, the aforementioned revenue and EBITDA multiples set forth in the put/call
option agreement were modified to include the results of Amba. The option was subject to a minimum exercise price of $46 million.
There was no limit as to the maximum amount of the strike price on the put/call option.
In the fourth quarter of 2014, the Company exercised its call option to acquire the remaining interest of Copal Amba.
84
MOODY’S 2014 10K
The following table shows changes in the redeemable noncontrolling interest related to the acquisition of Copal Amba:
Balance January 1,
Net earnings
Dividends
Redemption of noncontrolling interest
Adjustment due to right of offset for UTPs (1)
Adjustment to redemption value (2)
FX translation
Balance December 31,
Year Ended December 31,
2014
2013
2012
Redeemable Noncontrolling Interest
$
$
$
80.0
9.3
(4.9)
(183.8)
—
99.4
—
$
72.3
5.8
(6.0)
—
—
7.9
—
— $
80.0
$
60.5
3.6
(3.6)
—
6.8
3.4
1.6
72.3
(1)
(2)
Relates to an adjustment for the right of offset pursuant to the Copal acquisition agreement whereby the amount due to the sellers under the put/call
arrangement was reduced by the amount of UTPs that the Company may be required to pay
The adjustment to the redemption value in the year ended December 31, 2014 reflects the aforementioned revisions to the revenue and EBITDA multiples
pursuant to the amendment of the put/call agreement which occurred contemporaneously with the acquisition of Amba coupled with growth in the Copal
Amba reporting unit. These adjustments are recorded with a corresponding reduction to capital surplus.
NOTE 11
COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table provides details about the reclassifications out of AOCI:
Losses on foreign translation adjustments
Liquidation of foreign subsidiary
Loss on foreign currency translation adjustment pursuant to
ICRA step-acquisition
Total losses on foreign translation adjustments
Losses on cash flow hedges
Interest rate swap derivative contracts
Income tax effect of item above
Losses on cash flow hedges
Gains on available for sale securities
Gain on sale of available for sale securities
Total gains on available for sale securities
Losses on pension and other retirement benefits
Amortization of actuarial losses and prior service costs
included in net income
Amortization of actuarial losses and prior service costs
included in net income
Total before income taxes
Income tax effect of item above
Total losses on pension and other retirement benefits
Total losses included in Net Income attributable to
reclassifications out of AOCI
Year Ended December 31,
2014
2013
Affected line in the
Consolidated Statements of
Operation
$
— $
Other non-operating income
(expense), net
(1.4)
(4.4)
(4.4)
—
—
—
0.1
0.1
(4.7)
(2.6)
(7.3)
2.8
(4.5)
— ICRA Gain
(1.4)
(1.2)
Interest income (expense), net
0.5
Provision for income taxes
(0.7)
—
—
Other non-operating income
(expense), net
(7.6) Operating expense
(4.3)
SG&A expense
(11.9)
4.9
(7.0)
Provision for income tax
$
(8.8)
$
(9.1)
MOODY’S 2014 10K
85
Total
(54.6)
(189.4)
8.8
(180.6)
(235.2)
Total
(82.1)
18.4
9.1
27.5
Changes in AOCI by component (net of tax) for the period ended December 31, 2014 and 2013:
Balance December 31, 2013
Other comprehensive income/(loss)
before reclassification
Amounts reclassified from AOCI
Other comprehensive income/(loss)
Balance December 31, 2014
$
$
Year Ended December 31, 2014
Gains/(losses) on
Net Investment
Hedges
Pension and Other
Retirement
Benefits
Foreign Currency
Translation
Adjustments
Gains on Available
for Sale Securities
1.5 $
(53.2) $
(2.9) $
— $
19.4
—
19.4
(56.7)
4.5
(52.2)
(153.1)
4.4
(148.7)
1.0
(0.1)
0.9
20.9 $
(105.4) $
(151.6) $
0.9 $
Year Ended December 31, 2013
Gains/(losses) on
Cash Flow and Net
Investment Hedges
Pension and Other
Retirement
Benefits
Foreign Currency
Translation
Adjustments
Gains on Available
for Sale Securities
Balance December 31, 2012
Other comprehensive income/(loss)
before reclassification
Amounts reclassified from AOCI
Other comprehensive income/(loss)
Balance December 31, 2013
$
$
(2.9) $
(90.1) $
10.9 $
— $
3.7
0.7
4.4
29.9
7.0
36.9
(15.2)
1.4
(13.8)
—
—
—
1.5 $
(53.2) $
(2.9) $
— $
(54.6)
NOTE 12
PENSION AND OTHER RETIREMENT BENEFITS
U.S. Plans
Moody’s maintains funded and unfunded noncontributory Defined Benefit Pension Plans. The U.S. plans provide defined benefits using a
cash balance formula based on years of service and career average salary or final average pay for selected executives. The Company
also provides certain healthcare and life insurance benefits for retired U.S. employees. The retirement healthcare plans are contributory;
the life insurance plans are noncontributory. Moody’s funded and unfunded U.S. pension plans, the U.S. retirement healthcare plans and
the U.S. retirement life insurance plans are collectively referred to herein as the “Retirement Plans”. The U.S. retirement healthcare
plans and the U.S. retirement life insurance plans are collectively referred to herein as the “Other Retirement Plans”. Effective at the
Distribution Date, Moody’s assumed responsibility for the pension and other retirement benefits relating to its active employees. New
D&B has assumed responsibility for the Company’s retirees and vested terminated employees as of the Distribution Date.
Through 2007, substantially all U.S. employees were eligible to participate in the Company’s DBPPs. Effective January 1, 2008, the
Company no longer offers DBPPs to U.S. employees hired or rehired on or after January 1, 2008 and new hires in the U.S. instead will
receive a retirement contribution in similar benefit value under the Company’s Profit Participation Plan. Current participants of the
Company’s Retirement Plans and Other Retirement Plans continue to accrue benefits based on existing plan benefit formulas.
86
MOODY’S 2014 10K
Following is a summary of changes in benefit obligations and fair value of plan assets for the Retirement Plans for the years ended
December 31:
Change in benefit obligation:
Benefit obligation, beginning of the period
$
Service cost
Interest cost
Plan participants’ contributions
Benefits paid
Actuarial gain (loss)
Assumption changes
Benefit obligation, end of the period
Change in plan assets:
Fair value of plan assets, beginning of the period
Actual return on plan assets
Benefits paid
Employer contributions
Plan participants’ contributions
Fair value of plan assets, end of the period
Pension Plans
Other Retirement Plans
2014
2013
2014
2013
$
(347.1)
(18.4)
(16.5)
—
6.4
(8.3)
(77.9)
(461.8)
204.6
12.9
(6.4)
37.3
—
248.4
$
(356.3)
(19.8)
(13.5)
—
5.3
(0.7)
37.9
(347.1)
167.6
23.0
(5.3)
19.3
—
204.6
$
(20.7)
(1.7)
(0.9)
(0.4)
0.6
(0.1)
(3.5)
(26.7)
—
—
(0.6)
0.2
0.4
—
(21.8)
(1.7)
(0.8)
(0.3)
0.6
1.0
2.3
(20.7)
—
—
(0.6)
0.3
0.3
—
Funded Status of the plans
(213.4)
(142.5)
(26.7)
(20.7)
Amounts recorded on the consolidated balance sheets:
Pension and retirement benefits liability — current
Pension and retirement benefits liability — non current
Net amount recognized
Accumulated benefit obligation, end of the period
(4.3)
(209.1)
(213.4)
(396.3)
$
$
$
$
(6.2)
(136.3)
(0.8)
(25.9)
(142.5)
$
(26.7)
$
(0.8)
(19.9)
(20.7)
(298.5)
The following information is for those pension plans with an accumulated benefit obligation in excess of plan assets:
Aggregate projected benefit obligation
Aggregate accumulated benefit obligation
Aggregate fair value of plan assets
December 31,
2014
461.8
396.3
248.4
$
$
$
2013
347.1
298.5
204.6
$
$
$
The following table summarizes the pre-tax net actuarial losses and prior service cost recognized in AOCI for the Company’s Retirement
Plans as of December 31:
Net actuarial losses
Net prior service costs
Total recognized in AOCI- pretax
Pension Plans
Other Retirement Plans
2014
$
(165.5)
(2.7)
2013
(84.6)
(3.3)
$
2014
(6.0)
—
$
(168.2)
$
(87.9)
$
(6.0)
$
$
$
2013
(2.4)
—
(2.4)
MOODY’S 2014 10K
87
The following table summarizes the estimated pre-tax net actuarial losses and prior service cost for the Company’s Retirement Plans
that will be amortized from AOCI and recognized as components of net periodic expense during the next fiscal year:
Net actuarial losses
Net prior service costs
Total to be recognized as components of net periodic expense
Pension Plans Other Retirement Plans
$
$
13.6
0.7
14.3
$
$
0.3
—
0.3
Net periodic benefit expenses recognized for the Retirement Plans for years ended December 31:
Pension Plans
Other Retirement Plans
2014
2013
2012
2014
2013
2012
Components of net periodic
expense
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss
from earlier periods
Amortization of net prior service
costs from earlier periods
$
$
18.4
16.5
(14.3)
$
19.8
13.5
(12.9)
$
18.9
13.1
(12.5)
6.6
0.7
10.8
0.6
9.1
0.7
$
1.7
0.9
—
—
—
Net periodic expense
$
27.9
$
31.8
$
29.3
$
2.6
$
1.7
0.8
—
0.3
—
2.8
$
$
1.5
0.7
—
0.3
—
2.5
The following table summarizes the pre-tax amounts recorded in OCI related to the Company’s Retirement Plans for the years ended
December 31:
Amortization of net actuarial losses
Amortization of prior service costs
Net actuarial gain (loss) arising during the period
Total recognized in OCI – pre-tax
ADDITIONAL INFORMATION:
Assumptions – Retirement Plans
Pension Plans
Other Retirement Plans
2014
6.6
0.7
(87.5)
$
2013
10.8
0.6
47.3
$
(80.2)
$
58.7
$
$
$
2014
2013
— $
—
(3.7)
(3.7)
$
0.3
—
3.3
3.6
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate
Rate of compensation increase
Pension Plans
Other Retirement Plans
2014
3.78%
3.76%
2013
4.71%
4.00%
2014
3.65%
—
Weighted-average assumptions used to determine net periodic benefit expense for years ended December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
88
MOODY’S 2014 10K
Pension Plans
Other Retirement Plans
2014
4.71%
6.80%
4.00%
2013
3.82%
7.30%
4.00%
2012
4.25%
7.85%
4.00%
2014
4.45%
—
—
2013
3.55%
—
—
2013
4.45%
—
2012
4.05%
—
—
The expected rate of return on plan assets represents the Company’s best estimate of the long-term return on plan assets and is
determined by using a building block approach, which generally weighs the underlying long-term expected rate of return for each major
asset class based on their respective allocation target within the plan portfolio, net of plan paid expenses. As the assumption reflects a
long-term time horizon, the plan performance in any one particular year does not, by itself, significantly influence the Company’s
evaluation. For 2014, the expected rate of return used in calculating the net periodic benefit costs was 6.80%. For 2015, the Company
reduced the expected rate of return assumption to 5.80% to reflect the Plan’s increased allocation to fixed income securities based on
the Company’s revised investment policy implemented in 2014 and to reflect the Company’s current view of long-term capital market
outlook. In addition, the Company has updated its mortality assumption by adopting the newly released RP-2014 mortality tables and
accompanying mortality improvement scale MP-2014 recently issued by the Society of Actuaries.
Assumed Healthcare Cost Trend Rates at December 31:
Healthcare cost trend rate assumed
for the following year
Ultimate rate to which the cost trend
rate is assumed to declines (ultimate
trend rate)
Year that the rate reaches the
ultimate trend rate
2014
2013
2012
Pre-age 65
Post-age 65
Pre-age 65
Post-age 65
Pre-age 65
Post-age 65
7.95%
7.05%
8.2%
7.3%
6.9%
7.9%
5.0%
5.0%
2028
2026
2028
2026
5.0%
2020
The assumed health cost trend rate reflects different expectations for the medical and prescribed medication components of health
care costs for pre and post-65 retirees. As the Company subsidies for retiree healthcare coverage are capped at the 2005 level, for the
majority of the retirement health plan participants, retiree contributions are assumed to increase at the same rate as the healthcare
cost trend rates. In 2013, the Company revised its trend rates to reflect current expectations of future health care inflation. A one
percentage-point increase or decrease in assumed healthcare cost trend rates would not have affected total service and interest cost
and would have a minimal impact on the retiree medical benefit obligation.
In 2012, the Company amended its retiree medical plan to modify its current design. Effective January 1, 2013, the newly implemented
plan design provides current retirees age 65 and older with the option over the next three years to either enroll in a new Health
Reimbursement Account (HRA) Program and receive a fixed amount annual subsidy or continue to stay in the current retiree medical
plan. All future retirees age 65 and older will have to participate in the new HRA Program. There is no change to pre-65 coverage. As
the new plan was designed to be cost neutral to the Company, the amendment of the plan had no significant impact to the plan.
Plan Assets
Moody’s investment objective for the assets in the funded pension plan is to earn total returns that will minimize future contribution
requirements over the long-term within a prudent level of risk. The Company works with its independent investment consultants to
determine asset allocation targets for its pension plan investment portfolio based on its assessment of business and financial conditions,
demographic and actuarial data, funding characteristics, and related risk factors. Other relevant factors, including historical and forward
looking views of inflation and capital market returns, are also considered. Risk management practices include monitoring plan asset
performance, diversification across asset classes and investment styles, and periodic rebalancing toward asset allocation targets. The
Company’s Asset Management Committee is responsible for overseeing the investment activities of the plan, which includes selecting
acceptable asset classes, defining allowable ranges of holdings by asset class and by individual investment managers, defining accept-
able securities within each asset class, and establishing investment performance expectations. Ongoing monitoring of the plan includes
reviews of investment performance and managers on a regular basis, annual liability measurements, and periodic asset/liability studies.
In 2014, the Company implemented a revised investment policy, which uses risk-controlled investment strategies by increasing the
plan’s asset allocation to fixed income securities and specifying ranges of acceptable target allocation by asset class based on different
levels of the plan’s accounting funded status. In addition, the investment policy also requires the investment grade fixed income asset
be rebalanced between shorter and longer duration bonds as the interest rate environment changes. This revised investment policy is
designed to help protect the plan’s funded status and to limit volatility of the Company’s contributions. Based on the revised policy, the
Company’s current target asset allocation is approximately 53% (range of 48% to 58%) in equity securities, 40% (range of 35% to
45%) in fixed income securities and 7% (range of 4% to 10% ) in other investments and the plan will use a combination of active and
passive investment strategies and different investment styles for its investment portfolios within each asset class. The plan’s equity
investments are diversified across U.S. and non-U.S. stocks of small, medium and large capitalization. The plan’s fixed income invest-
ments are diversified principally across U.S. and non-U.S. government and corporate bonds which are expected to help reduce plan
MOODY’S 2014 10K
89
exposure to interest rate variation and to better align assets with obligations. The plan also invests in other fixed income investments
such debts rated below investment grade, emerging market debt, and convertible securities. The plan’s other investment, which is made
through private real estate investment trust fund, is expected to provide additional diversification benefits and absolute return
enhancement to the plan assets. Prior to the implementation of the revised policy, the Company’s target asset allocation was approx-
imately, 60%, 33%, and 7% in equities, fixed income, and other investment, respectively.
Fair value of the assets in the Company’s funded pension plan by asset category at December 31, 2014 and 2013 are as follows:
Asset Category
Balance
Level 1
Level 2
Level 3
% of total
assets
Fair Value Measurement as of December 31, 2014
Cash and cash equivalent
$
Emerging markets equity fund
Common/collective trust funds — equity securities
Global large-cap
U.S. small and mid-cap
Total equity investments
Emerging markets bond fund
Common/collective trust funds — fixed income
securities
Intermediate-term investment grade U.S.
government/corporate bonds
U.S. Treasury Inflation-Protected Securities (TIPs)
Convertible securities
Private investment fund — high yield securities
Total fixed-income investments
Other investment- Common/collective trust
fund — private real estate fund
13.2
14.0
92.2
16.5
122.7
9.1
60.8
10.7
7.5
6.7
94.8
17.8
$
$
— $
13.2
$
14.0
$
—
—
—
14.0
9.1
—
—
—
—
9.1
—
92.2
16.5
108.7
60.8
10.7
7.5
6.7
85.7
17.8
Total Assets
$
248.5
$
23.1
$
225.4
$
—
—
—
—
—
—
—
—
—
—
—
—
5%
6%
37%
7%
50%
4%
24%
4%
3%
3%
38%
7%
100%
Asset Category
Balance
Level 1
Level 2
Level 3
% of total
assets
Fair Value Measurement as of December 31, 2013
Cash and cash equivalent
$
Emerging markets equity fund
Common/collective trust funds — equity securities
U.S. large-cap
U.S. small and mid-cap
International
Total equity investments
Common/collective trust funds — fixed income
securities
Long-term government/treasury bonds
Long-term investment grade corporate bonds
U.S. Treasury Inflation-Protected Securities (TIPs)
Emerging markets bonds
High yield bonds
Convertible securities
Total fixed-income investments
Other investment — Common/collective trust
fund — private real estate fund
0.4
14.6
44.5
15.3
58.2
132.6
13.7
15.4
8.7
5.8
6.1
6.3
56.0
15.6
$
$
— $
14.6
$
$
0.4
—
—
—
—
14.6
—
—
—
—
—
—
—
—
44.5
15.3
58.2
118.0
13.7
15.4
8.7
5.8
6.1
6.3
56.0
—
Total Assets
$
204.6
$
14.6
$
174.4
$
—
—
—
—
—
—
—
—
—
—
—
—
—
15.6
15.6
—
7%
22%
7%
29%
65%
7%
7%
4%
3%
3%
3%
27%
8%
100%
90
MOODY’S 2014 10K
Cash and cash equivalents are primarily comprised of investment in money market mutual funds. In determining fair value, Level 1
investments are valued based on quoted market prices in active markets. Investments in common/collective trust funds are valued
using the net asset value (NAV) per unit in each fund. The NAV is based on the value of the underlying investments owned by each
trust, minus its liabilities, and then divided by the number of shares outstanding. Common/collective trust funds are categorized in
Level 2 to the extent that they are readily redeemable at their NAV as of the measurement date or in the near feature or else they are
categorized in Level 3 of the fair value hierarchy.
The table below is a summary of changes in the fair value of the Plan’s Level 3 assets:
Real estate investment fund:
Balance as of December 31, 2013
Return on plan assets related to assets held as of December 31, 2014
Transfer (out), net
Purchases (sales), net
Balance as of December 31, 2014
$
$
15.6
1.6
(17.8)
0.6
—
Except for the Company’s U.S. funded pension plan, all of Moody’s Retirement Plans are unfunded and therefore have no plan assets.
Cash Flows
The Company contributed $33.7 million and $16.8 million to its U.S. funded pension plan during the years ended December 31, 2014
and 2013, respectively. The Company made payments of $3.6 million and $2.5 million related to its U.S. unfunded pension plan obliga-
tions during the years ended December 31, 2014 and 2013, respectively. The Company made payments of $0.6 million to its Other
Retirement Plans during both the years ended December 31, 2014 and 2013. The Company presently anticipates making contributions
of $9.0 million to its funded pension plan and anticipates making payments of $4.3 million related to its unfunded U.S. pension plans
and $0.8 million related to its Other Retirement Plans during the year ended December 31, 2015.
Estimated Future Benefits Payable
Estimated future benefits payments for the Retirement Plans are as follows at ended December 31, 2014:
Year Ending December 31,
2015
2016
2017
2018
2019
2020 – 2024
Pension Plans
Other Retirement
Plans
$
$
8.3
10.3
10.9
39.6
14.0
110.5
$
$
0.8
1.0
1.1
1.3
1.5
9.6
Defined Contribution Plans
Moody’s has a Profit Participation Plan covering substantially all U.S. employees. The Profit Participation Plan provides for an employee
salary deferral and the Company matches employee contributions, equal to 50% of employee contribution up to a maximum of 3% of
the employee’s pay. Moody’s also makes additional contributions to the Profit Participation Plan based on year-to-year growth in the
Company’s EPS. Effective January 1, 2008, all new hires are automatically enrolled in the Profit Participation Plan when they meet
eligibility requirements unless they decline participation. As the Company’s U.S. DBPPs are closed to new entrants effective January 1,
2008, all eligible new hires will instead receive a retirement contribution into the Profit Participation Plan in value similar to the pension
benefits. Additionally, effective January 1, 2008, the Company implemented a deferred compensation plan in the U.S., which is
unfunded and provides for employee deferral of compensation and Company matching contributions related to compensation in excess
of the IRS limitations on benefits and contributions under qualified retirement plans. Total expenses associated with U.S. defined con-
tribution plans were $26.8 million, $18.8 million and $24.5 million in 2014, 2013, and 2012, respectively.
Effective January 1, 2008, Moody’s has designated the Moody’s Stock Fund, an investment option under the Profit Participation Plan, as
an Employee Stock Ownership Plan and, as a result, participants in the Moody’s Stock Fund may receive dividends in cash or may
reinvest such dividends into the Moody’s Stock Fund. Moody’s paid approximately $0.6 million and $0.5 million in dividends during the
years ended December 31, 2014 and 2013, respectively, for the Company’s common shares held by the Moody’s Stock Fund. The
Company records the dividends as a reduction of retained earnings in the Consolidated Statements of Shareholders’ Equity (Deficit).
The Moody’s Stock Fund held approximately 490,000 and 520,000 shares of Moody’s common stock at December 31, 2014 and 2013,
respectively.
MOODY’S 2014 10K
91
International Plans
Certain of the Company’s international operations provide pension benefits to their employees. For defined contribution plans, com-
pany contributions are primarily determined as a percentage of employees’ eligible compensation. Moody’s also makes contributions to
non-U.S. employees under a profit sharing plan which is based on year-to-year growth in the Company’s diluted EPS. Expenses related
to these defined contribution plans for the years ended December 31, 2014, 2013 and 2012 were $30.6 million, $19.7 million and
$18.8 million, respectively.
For defined benefit plans, the Company maintains various unfunded DBPPs and retirement health benefit plan for certain of its non-U.S.
subsidiaries located in Germany, France and Canada. These unfunded DBPPs are generally based on each eligible employee’s years of
credited service and on compensation levels as specified in the plans. The DBPP in Germany was closed to new entrants in 2002. Total
defined benefit pension liabilities recorded related to non-U.S. pension plans was $9.8 million, $7.8 million and $7.2 million based on a
weighted average discount rate of 2.00%, 3.58% and 3.53% at December 31, 2014, 2013 and 2012, respectively. The pension liabilities
recorded as of December 31, 2014 represent the unfunded status of these pension plans and were recognized in the consolidated bal-
ance sheet as mostly non-current liabilities. Total pension expense recorded for the years ended December 31, 2014, 2013 and 2012
was approximately $0.6 million for each year. These amounts are not included in the tables above. As of December 31, 2014, the
amount of net actuarial losses included in AOCI related to non-U.S. pension plans was $1.8 million net of tax. The Company’s non-U.S.
other retirement benefit obligation was also immaterial as of December 31, 2014.
NOTE 13
STOCK-BASED COMPENSATION PLANS
Under the 1998 Plan, 33.0 million shares of the Company’s common stock have been reserved for issuance. The 2001 Plan, which is
shareholder approved, permits the granting of up to 50.6 million shares, of which not more than 14.0 million shares are available for
grants of awards other than stock options. The Stock Plans also provide for the granting of restricted stock. The Stock Plans provide that
options are exercisable not later than ten years from the grant date. The vesting period for awards under the Stock Plans is generally
determined by the Board at the date of the grant and has been four years except for employees who are at or near retirement eligi-
bility, as defined, for which vesting is between one and four years. Additionally, the vesting period is three years for certain
performance-based restricted stock that contain a condition whereby the number of shares that ultimately vest are based on the ach-
ievement of certain non-market based performance metrics of the Company. Options may not be granted at less than the fair market
value of the Company’s common stock at the date of grant.
The Company maintains the Directors’ Plan for its Board, which permits the granting of awards in the form of non-qualified stock
options, restricted stock or performance shares. The Directors’ Plan provides that options are exercisable not later than ten years from
the grant date. The vesting period is determined by the Board at the date of the grant and is generally one year for both options and
restricted stock. Under the Directors’ Plan, 1.7 million shares of common stock were reserved for issuance. Any director of the Company
who is not an employee of the Company or any of its subsidiaries as of the date that an award is granted is eligible to participate in the
Directors’ Plan.
Presented below is a summary of the stock-based compensation expense and associated tax benefit in the accompanying Consolidated
Statements of Operations:
Stock-based compensation expense
Tax benefit
Year Ended December 31,
2014
80.4
27.5
$
$
2013
67.1
24.7
$
$
2012
64.5
23.3
$
$
The fair value of each employee stock option award is estimated on the date of grant using the Black-Scholes option-pricing model that
uses the assumptions noted below. The expected dividend yield is derived from the annual dividend rate on the date of grant. The
expected stock volatility is based on an assessment of historical weekly stock prices of the Company as well as implied volatility from
Moody’s traded options. The risk-free interest rate is based on U.S. government zero coupon bonds with maturities similar to the
expected holding period. The expected holding period was determined by examining historical and projected post-vesting exercise
behavior activity.
92
MOODY’S 2014 10K
The following weighted average assumptions were used for options granted:
Expected dividend yield
Expected stock volatility
Risk-free interest rate
Expected holding period
Grant date fair value
Year Ended December 31,
2014
1.41%
41%
2.30%
2013
1.72%
43%
1.53%
2012
1.66%
44%
1.55%
7.2 years
31.53
$
7.2 years
17.58
$
7.4 years
15.19
$
A summary of option activity as of December 31, 2014 and changes during the year then ended is presented below:
Options
Outstanding, December 31, 2013
Granted
Exercised
Outstanding, December 31, 2014
Vested and expected to vest, December 31, 2014
Exercisable, December 31, 2014
Weighted
Average
Exercise Price
Per Share
Shares
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
8.9
0.3
(3.2)
6.0
5.9
5.0
$
$
$
$
45.00
79.57
46.40
46.00
45.84
44.79
4.2 yrs
4.1 yrs
3.4 yrs
$
$
$
299.5
295.6
252.6
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Moody’s closing
stock price on the last trading day of the year ended December 31, 2014 and the exercise prices, multiplied by the number of in-the-
money options) that would have been received by the option holders had all option holders exercised their options as of December 31,
2014. This amount varies based on the fair value of Moody’s stock. As of December 31, 2014 there was $7.4 million of total unrecog-
nized compensation expense related to options. The expense is expected to be recognized over a weighted average period of 1.4 years.
The following table summarizes information relating to stock option exercises:
Proceeds from stock option exercises
Aggregate intrinsic value
Tax benefit realized upon exercise
Year Ended December 31,
2014
145.5
122.3
43.2
$
$
$
2013
163.3
112.4
41.1
$
$
$
2012
127.4
61.3
23.4
$
$
$
A summary of the status of the Company’s nonvested restricted stock as of December 31, 2014 and changes during the year then
ended is presented below:
Nonvested Restricted Stock
Balance, December 31, 2013
Granted
Vested
Forfeited
Balance, December 31, 2014
Shares
Weighted Average Grant
Date Fair Value Per Share
$
3.1
0.9
(1.2)
(0.1)
2.7
$
39.30
79.69
36.19
50.45
53.98
As of December 31, 2014, there was $81.9 million of total unrecognized compensation expense related to nonvested restricted stock.
The expense is expected to be recognized over a weighted average period of 1.6 years.
MOODY’S 2014 10K
93
The following table summarizes information relating to the vesting of restricted stock awards:
Fair value of shares upon delivery
Tax benefit realized upon delivery
Year Ended December 31,
2014
92.4
31.2
$
$
2013
54.6
19.3
$
$
2012
37.8
13.4
$
$
A summary of the status of the Company’s performance-based restricted stock as of December 31, 2014 and changes during the year
then ended is presented below:
Performance-based restricted stock
Balance, December 31, 2013
Granted
Vested
Balance, December 31, 2014
Shares
Weighted Average Grant
Date Fair Value Per Share
1.2
0.2
(0.5)
0.9
$
$
$
$
31.17
76.35
28.76
46.09
2012
—
—
The following table summarizes information relating to the vesting of the Company’s performance-based restricted stock awards:
Fair value of shares upon delivery
Tax benefit realized upon delivery
Year Ended December 31,
2014
38.0
14.4
$
$
2013
25.5
9.7
$
$
$
$
As of December 31, 2014, there was $14.9 million of total unrecognized compensation expense related to this plan. The expense is
expected to be recognized over a weighted average period of 0.9 years.
The Company has a policy of issuing treasury stock to satisfy shares issued under stock-based compensation plans.
In addition, the Company also sponsors the ESPP. Under the ESPP, 6.0 million shares of common stock were reserved for issuance. The
ESPP allows eligible employees to purchase common stock of the Company on a monthly basis at a discount to the average of the high
and the low trading prices on the New York Stock Exchange on the last trading day of each month. This discount was 5% in 2014, 2013
and 2012 resulting in the ESPP qualifying for non-compensatory status under Topic 718 of the ASC. Accordingly, no compensation
expense was recognized for the ESPP in 2014, 2013, and 2012. The employee purchases are funded through after-tax payroll
deductions, which plan participants can elect from one percent to ten percent of compensation, subject to the annual federal limit.
94
MOODY’S 2014 10K
NOTE 14
INCOME TAXES
Components of the Company’s provision for income taxes are as follows:
Current:
Federal
State and Local
Non-U.S.
Total current
Deferred:
Federal
State and Local
Non-U.S.
Total deferred
$
Year Ended December 31,
2014
2013
2012
$
252.8
70.2
102.1
425.1
0.9
4.9
24.1
29.9
$
226.2
57.6
96.8
380.6
(13.1)
(5.6)
(8.5)
(27.2)
168.1
33.7
86.4
288.2
35.7
4.5
(4.1)
36.1
Total provision for income taxes
$
455.0
$
353.4
$
324.3
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate on income before provision for income taxes
is as follows:
U.S. statutory tax rate
State and local taxes, net of federal tax benefit
Benefit of foreign operations
Legacy tax items
Other
Effective tax rate
Income tax paid
Year Ended December 31,
2014
35.0%
3.6
(7.4)
(0.2)
0.1
31.1%
2013
35.0%
2.9
(6.4)
(0.6)
(0.7)
30.2%
2012
35.0%
2.4
(6.1)
(0.4)
0.8
31.7%
$
369.4
$
335.7(1) $
293.3(2)
(1)
(2)
Includes fourth quarter 2012 estimated federal tax payment made in 2013 due to IRS relief for companies affected by Hurricane Sandy
Includes approximately $92 million in payments for tax audit settlements in the first quarter of 2012
The source of income before provision for income taxes is as follows:
United States
International
Income before provision for income taxes
Year Ended December 31,
2014
912.6
548.4
1,461.0
$
$
$
$
2013
836.1
333.2
1,169.3
$
$
2012
694.2
329.8
1,024.0
MOODY’S 2014 10K
95
The components of deferred tax assets and liabilities are as follows:
December 31,
2014
2013
Deferred tax assets:
Current:
Account receivable allowances
Accrued compensation and benefits
Deferred revenue
Legal and professional fees
Restructuring
Uncertain tax positions
Other
Total current
Non-current:
Accumulated depreciation and amortization
Stock-based compensation
Benefit plans
Deferred rent and construction allowance
Deferred revenue
Foreign net operating loss (1)
Uncertain tax positions
Self-insured related reserves
Other
Total non-current
Total deferred tax assets
Deferred tax liabilities:
Current:
Compensation and benefits
Unrealized gain on net investment hedges
Other
Total Current
Non-current:
Accumulated depreciation and amortization of intangible assets and capitalized
software
Foreign earnings to be repatriated
Self-insured related income
Other liabilities
Total non-current
Total deferred tax liabilities
Net deferred tax asset
Valuation allowance
Total net deferred tax assets
$
$
7.7
14.6
6.7
10.4
2.3
—
3.5
45.2
0.9
62.3
108.7
30.5
34.2
7.5
38.3
14.9
5.6
302.9
348.1
(3.0)
(14.0)
(1.1)
(18.1)
(204.3)
(3.4)
(16.9)
(0.1)
(224.7)
(242.8)
105.3
(6.9)
$
98.4
$
8.2
12.8
7.3
10.9
3.5
7.5
0.7
50.9
2.6
73.7
78.9
30.4
33.4
10.6
26.8
20.4
4.3
281.1
332.0
—
—
—
—
(153.7)
(3.7)
(24.0)
(2.7)
(184.1)
(184.1)
147.9
(8.4)
139.5
(1)
Amounts are primarily set to expire beginning in 2018, if unused.
As of December 31, 2014, the Company had approximately $2,032.0 million of undistributed earnings of foreign subsidiaries that it
intends to indefinitely reinvest in foreign operations. The Company has not provided deferred income taxes on these indefinitely
reinvested earnings. It is not practicable to determine the amount of deferred taxes that might be required to be provided if such earn-
ings were distributed in the future, due to complexities in the tax laws and in the hypothetical calculations that would have to be made.
96
MOODY’S 2014 10K
The Company had valuation allowances of $6.9 million and $8.4 million at December 31, 2014 and 2013, respectively, related to for-
eign net operating losses for which realization is uncertain.
As of December 31, 2014 the Company had $220.3 million of UTPs of which $157.1 million represents the amount that, if recognized,
would impact the effective tax rate in future periods.
A reconciliation of the beginning and ending amount of UTPs is as follows:
Balance as of January 1
Additions for tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Lapse of statute of limitations
$
Year Ended December 31,
$
2014
195.6
52.5
8.7
(13.0)
(18.8)
(4.7)
$
2013
156.6
67.8
6.1
(10.1)
(21.4)
(3.4)
Balance as of December 31
$
220.3
$
195.6
$
2012
205.4
49.1
18.9
(20.6)
(91.5)
(4.7)
156.6
The Company classifies interest related to UTPs in interest expense in its consolidated statements of operations. Penalties, if incurred,
would be recognized in other non-operating expenses. During the years ended December 31, 2014 and 2013, the Company incurred a
net interest expense of $5.5 million and $7.6 million, respectively, related to UTPs. During 2012, the Company realized a net interest
benefit of $1.6 million related to UTPs. As of December 31, 2014 and 2013, the amount of accrued interest recorded in the Company’s
consolidated balance sheets related to UTPs was $20.8 million and $17.9 million, respectively.
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 the years 2008 through 2010 are under examination and its 2011 to
and 2013 returns remain open to examination. The Company’s New York State income tax returns for 2011 to 2013 remain open to
examination. The Company’s New York City income tax returns have been examined through 2012. The Company settled the U.K. tax
audit for tax years 2007 through 2011 during the first quarter of 2014. Tax filings in the U.K. remain open to examination for tax years
2012 through 2013.
For current ongoing audits related to open tax years, the Company estimates that it is possible that the balance of UTPs could decrease
in the next twelve months as a result of the effective settlement of these audits, which might involve the payment of additional taxes,
the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues might be raised by tax
authorities which might necessitate increases to the balance of UTPs. As the Company is unable to predict the timing of conclusion of
these audits, the Company is unable to estimate the amount of changes to the balance of UTPs at this time.
MOODY’S 2014 10K
97
NOTE 15
INDEBTEDNESS
The following table summarizes total indebtedness:
2012 Facility
Notes payable:
Series 2005-1 Notes due 2015, including fair value of interest rate swap of $10.3 million
at 2013
Series 2007-1 Notes due in 2017
2010 Senior Notes, due 2020, net of unamortized discount of $2.0 million and $2.2
million in 2014 and 2013, respectively, and includes a $5.8 million fair value adjustment
on an interest rate hedge in 2014
2012 Senior Notes, due 2022, net of unamortized discount of $3.1 million in 2014 and
$3.5 million in 2013
2013 Senior Notes, due 2024, net of unamortized discount of $2.5 million in 2014 and
$2.8 million in 2013
2014 Senior Notes (5-Year), due 2019, net of unamortized discount of $0.7 million in
2014 and includes a $1.4 million fair value adjustment on an interest rate hedge in 2014
2014 Senior Notes (30-Year), due 2044, net of unamortized discount of $1.6 million in 2014
December 31,
2014
— $
$
—
300.0
503.8
496.9
497.5
450.7
298.4
2013
—
310.3
300.0
497.8
496.5
497.2
—
—
Total long-term debt
$
2,547.3
$
2,101.8
2012 Facility
On April 18, 2012, the Company and certain of its subsidiaries entered into a $1 billion five-year senior, unsecured revolving credit
facility in an aggregate principal amount of $1 billion that expires in April 2017. The 2012 Facility replaced the $1 billion 2007 Facility
that was scheduled to expire in September 2012. The proceeds from the 2012 Facility will be used for general corporate purposes,
including, without limitation, share repurchases and acquisition financings. Interest on borrowings under the facility is payable at rates
that are based on LIBOR plus a premium that can range from 77.5 basis points to 120 basis points per annum of the outstanding
amount, depending on the Company’s Debt/EBITDA ratio. The Company also pays quarterly facility fees, regardless of borrowing activ-
ity under the 2012 Facility. These quarterly fees can range from 10 basis points of the facility amount to 17.5 basis points, depending
on the Company’s Debt/ EBITDA Ratio.
The 2012 Facility contains covenants that, among other things, restrict the ability of the Company and its subsidiaries, without the
approval of the lenders, to engage in mergers, consolidations, asset sales, transactions with affiliates and sale-leaseback transactions or
to incur liens, as set forth in the facility agreement. The 2012 Facility also contains a financial covenant that requires the Company to
maintain a Debt to EBITDA Ratio of not more than 4 to 1 at the end of any fiscal quarter. Upon the occurrence of certain financial or
economic events, significant corporate events or certain other events constituting an event of default under the 2012 Facility, all loans
outstanding under the facility (including accrued interest and fees payable thereunder) may be declared immediately due and payable
and all commitments under the facility may be terminated.
Notes Payable
On September 30, 2005, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal
amount of its Series 2005-1 Senior Unsecured Notes due 2015 pursuant to the 2005 Agreement. The Series 2005-1 Notes had a ten-
year term and bore interest at an annual rate of 4.98%, payable semi-annually on March 30 and September 30. Proceeds from the sale
of the Series 2005-1 Notes were used to refinance $300.0 million aggregate principal amount of the Company’s outstanding 7.61%
senior notes which matured on September 30, 2005. On August 7, 2014, the Company prepaid the Series 2005-1 Notes using proceeds
from the issuance of the 2014 Senior Notes (30-year) and the 2014 Senior Notes (5-year).
On September 7, 2007, the Company issued and sold through a private placement transaction, $300.0 million aggregate principal
amount of its 6.06% Series 2007-1 Senior Unsecured Notes due 2017 pursuant to the 2007 Agreement. The Series 2007-1 Notes have
a ten-year term and bear interest at an annual rate of 6.06%, payable semi-annually on March 7 and September 7. The Company may
prepay the Series 2007-1 Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus
accrued and unpaid interest and a Make Whole Amount. The 2007 Agreement contains covenants that limit the ability of the Com-
pany, and certain of its subsidiaries to, among other things: enter into transactions with affiliates, dispose of assets, incur or create liens,
enter into any sale-leaseback transactions, or merge with any other corporation or convey, transfer or lease substantially all of its
assets. The Company must also not permit its Debt/EBITDA ratio to exceed 4.0 to 1.0 at the end of any fiscal quarter.
98
MOODY’S 2014 10K
On August 19, 2010, the Company issued $500 million aggregate principal amount of senior unsecured notes in a public offering. The
2010 Senior Notes bear interest at a fixed rate of 5.50% and mature on September 1, 2020. Interest on the 2010 Senior Notes will be
due semi-annually on September 1 and March 1 of each year, commencing March 1, 2011. The Company may prepay the 2010 Senior
Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest
and a Make-Whole Amount. Additionally, at the option of the holders of the notes, the Company may be required to purchase all or a
portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the 2010 Indenture, at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The 2010 Indenture contains cove-
nants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create liens and enter into
sale and leaseback transactions. In addition, the 2010 Indenture contains a covenant that limits the ability of the Company to con-
solidate or merge with another entity or to sell all or substantially all of its assets to another entity. The 2010 Indenture contains cus-
tomary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries fail to pay the principal
of any indebtedness (as defined in the 2010 Indenture) when due at maturity in an aggregate amount of $50 million or more, or a
default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’ indebtedness in an
aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default under the 2010
Indenture, the notes may become immediately due and payable either automatically or by the vote of the holders of more than 25% of
the aggregate principal amount of all of the notes then outstanding.
On November 4, 2011, in connection with the acquisition of Copal, a subsidiary of the Company issued a $14.2 million non-interest
bearing note to the sellers which represented a portion of the consideration transferred to acquire the Copal entities. If a seller sub-
sequently transfers to the Company all of its shares, the Company must repay the seller its proportion of the principal on the later of
(i) the fourth anniversary date of the note or (ii) within a time frame set forth in the acquisition agreement relating to the resolution of
certain income tax uncertainties pertaining to the transaction. The Company has the right to offset payment of the note against certain
indemnification assets associated with UTPs related to the acquisition. Accordingly, the Company has offset the liability for this note
against the indemnification asset, thus no balance for this note is carried on the Company’s consolidated balance sheet at
December 31, 2014 and 2013. In the event that the Company would not be required to settle amounts related to the UTPs, the Com-
pany would be required to pay the sellers the principal in accordance with the note agreement. The Company may prepay the note in
accordance with certain terms set forth in the acquisition agreement.
On August 20, 2012, the Company issued $500 million aggregate principal amount of unsecured notes in a public offering. The 2012
Senior Notes bear interest at a fixed rate of 4.50% and mature on September 1, 2022. Interest on the 2012 Senior Notes will be due
semi-annually on September 1 and March 1 of each year, commencing March 1, 2013. The Company may prepay the 2012 Senior
Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest
and a Make-Whole Amount. Additionally, at the option of the holders of the notes, the Company may be required to purchase all or a
portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the 2012 Indenture, at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The 2012 Indenture contains cove-
nants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create liens and enter into
sale and leaseback transactions. In addition, the 2012 Indenture contains a covenant that limits the ability of the Company to con-
solidate or merge with another entity or to sell all or substantially all of its assets to another entity. The 2012 Indenture contains cus-
tomary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries fail to pay the principal
of any indebtedness (as defined in the 2012 Indenture) when due at maturity in an aggregate amount of $50 million or more, or a
default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’ indebtedness in an
aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default under the 2012
Indenture, the 2012 Senior notes may become immediately due and payable either automatically or by the vote of the holders of more
than 25% of the aggregate principal amount of all of the notes then outstanding.
On August 12, 2013, the Company issued $500 million aggregate principal amount of senior unsecured notes in a public offering. The
2013 Senior Notes bear interest at a fixed rate of 4.875% and mature on February 15, 2024. Interest on the 2013 Senior Notes will be
due semi-annually on February 15 and August 15 of each year, commencing February 15, 2014. The Company may prepay the 2013
Senior Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid
interest and a Make-Whole Amount. Notwithstanding the immediately preceding sentence, the Company may redeem the 2013 Senior
Notes, in whole or in part, at any time or from time to time on or after November 15, 2023 (three months prior to their maturity), at a
redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but
excluding the redemption date. Additionally, at the option of the holders of the notes, the Company may be required to purchase all or
MOODY’S 2014 10K
99
a portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the 2013 Indenture, at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The 2013 Indenture contains cove-
nants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create liens and enter into
sale and leaseback transactions. In addition, the 2013 Indenture contains a covenant that limits the ability of the Company to con-
solidate or merge with another entity or to sell all or substantially all of its assets to another entity. The 2013 Indenture contains cus-
tomary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries fail to pay the principal
of any indebtedness (as defined in the 2013 Indenture) when due at maturity in an aggregate amount of $50 million or more, or a
default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’ indebtedness in an
aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default under the 2013
Indenture, the 2013 Senior Notes may become immediately due and payable either automatically or by the vote of the holders of more
than 25% of the aggregate principal amount of all of the notes then outstanding.
On July 16, 2014, the Company issued $300 million aggregate principal amount of senior unsecured notes in a public offering. The
2014 Senior Notes (30-year) bear interest at a fixed rate of 5.25% and mature on July 15, 2044. Interest on the 2014 Senior Notes
(30-year) will be due semi-annually on January 15 and July 15 of each year, commencing January 15, 2015. The Company may prepay
the 2014 Senior Notes (30-year), in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid, plus
accrued and unpaid interest and a Make-Whole Amount. Additionally, at the option of the holders of the notes, the Company may be
required to purchase all or a portion of the notes upon occurrence of a “Change of Control Triggering Event,” as defined in the 2014
Indenture, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The 2014
Indenture contains covenants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur or create
liens and enter into sale and leaseback transactions. In addition, the 2014 Indenture contains a covenant that limits the ability of the
Company to consolidate or merge with another entity or to sell all or substantially all of its assets to another entity. The 2014
Indenture contains customary default provisions. In addition, an event of default will occur if the Company or certain of its subsidiaries
fail to pay the principal of any indebtedness (as defined in the 2014 Indenture) when due at maturity in an aggregate amount of
$50 million or more, or a default occurs that results in the acceleration of the maturity of the Company’s or certain of its subsidiaries’
indebtedness in an aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an event of default
under the 2014 Indenture, the 2014 Senior Notes (30-year) may become immediately due and payable either automatically or by the
vote of the holders of more than 25% of the aggregate principal amount of all of the notes then outstanding.
On July 16, 2014, the Company issued $450 million aggregate principal amount of senior unsecured notes in a public offering. The
2014 Senior Notes (5-year) bear interest at a fixed rate of 2.75% and mature July 15, 2019. Interest on the 2014 Senior Notes (5-year)
will be due semi-annually on January 15 and July 15 of each year, commencing January 15, 2015. The Company may prepay the 2014
Senior Notes (5-year), in whole or in part, at any time at a price prior to June 15, 2019, equal to 100% of the principal amount being
prepaid, plus accrued and unpaid interest and a Make-Whole Amount. Notwithstanding the immediately preceding sentence, the
Company may redeem the 2014 Senior Notes (5-year), in whole or in part, at any time or from time to time on or after June 15, 2019
(one month prior to their maturity), at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus
accrued and unpaid interest, if any, to, but excluding the redemption date. Additionally, at the option of the holders of the notes, the
Company may be required to purchase all or a portion of the notes upon occurrence of a “Change of Control Triggering Event,” as
defined in the 2014 Indenture, at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of
purchase. The 2014 Indenture contains covenants that limit the ability of the Company and certain of its subsidiaries to, among other
things, incur or create liens and enter into sale and leaseback transactions. In addition, the 2014 Indenture contains a covenant that
limits the ability of the Company to consolidate or merge with another entity or to sell all or substantially all of its assets to another
entity. The 2014 Indenture contains customary default provisions. In addition, an event of default will occur if the Company or certain
of its subsidiaries fail to pay the principal of any indebtedness (as defined in the 2014 Indenture) when due at maturity in an aggregate
amount of $50 million or more, or a default occurs that results in the acceleration of the maturity of the Company’s or certain of its
subsidiaries’ indebtedness in an aggregate amount of $50 million or more. Upon the occurrence and during the continuation of an
event of default under the 2014 Indenture, the 2014 Senior Notes (5-year) may become immediately due and payable either
automatically or by the vote of the holders of more than 25% of the aggregate principal amount of all of the notes then outstanding.
On August 7, 2014, the Company prepaid the Series 2005-1 Notes using proceeds from the issuance of the 2014 Senior Notes
(30-year) and the 2014 Senior Notes (5-year). The proceeds from the July 16, 2014 issuance will also be used for general corporate
purposes.
100
MOODY’S 2014 10K
The principal payments due on the Company’s long-term borrowings for each of the next five years are presented in the table below:
Year Ending December 31,
Series 2007-1
Notes
2010 Senior
Notes
2012 Senior
Notes
2013 Senior
Notes
2014 Senior
Notes
(5-year)
2014 Senior
Notes
(30-year)
$
— $
—
300.0
—
—
— $
—
—
—
—
500.0
— $
—
—
—
—
500.0
— $
—
—
—
—
500.0
— $
—
—
—
450.0
—
— $
—
—
—
—
300.0
$
300.0
$
500.0
$
500.0
$
500.0
$
450.0
$
300.0
$ 2,550.0
Total
—
—
300.0
—
450.0
1,800.0
2015
2016
2017
2018
2019
Thereafter
Total
The Company entered into interest rate swaps on the 2010 Senior Notes and the 2014 Senior Notes (5-year) which are more fully
discussed in Note 5.
At December 31, 2014, the Company was in compliance with all covenants contained within all of the debt agreements. In addition to
the covenants described above, the 2014 Indenture, the 2012 Facility, the 2007 Agreement, the 2013 Indenture, the 2012 Indenture
and the 2010 Indenture contain cross default provisions. These provisions state that default under one of the aforementioned debt
instruments could in turn permit lenders under other debt instruments to declare borrowings outstanding under those instruments to
be immediately due and payable. As of December 31, 2014, there are no such cross defaults.
INTEREST EXPENSE, NET
The following table summarizes the components of interest as presented in the consolidated statements of operations:
Income
Expense on borrowings (a)
Expense on UTPs and other tax related liabilities (b)
Legacy Tax (c)
Total
Interest paid (d)
Year Ended December 31,
2014
6.7
(118.4)
(5.8)
0.7
(116.8)
113.7
$
$
$
$
$
$
2013
5.5
(92.3)
(8.6)
3.6
(91.8)
81.9
$
$
$
2012
5.2
(73.8)
0.4
4.4
(63.8)
94.4
(a)
Includes approximately $11 million in 2014 in net costs related to the prepayment of the Series 2005-1 Notes.
(b)
Includes $2.0 million in 2014 relating to a reversal of an interest accrual relating to the favorable resolution of an international tax matter.
(c) Represents a reduction of accrued interest related to the favorable resolution of Legacy Tax Matters, further discussed in Note 18 to the consolidated
financial statements.
(d)
Interest paid includes payments of interest relating to the settlement of income tax audits in the first quarter of 2012 as well as net settlements on interest
rate swaps more fully discussed in Note 5.
MOODY’S 2014 10K
101
The Company’s long-term debt is recorded at its carrying amount, which represents the issuance amount plus or minus any issuance
premium or discount, except for the Series 2005-1 Notes, the 2010 Senior Notes, and the 2014 Senior Notes (5-Year) which are
recorded at the carrying amount adjusted for the fair value of an interest rate swap used to hedge the fair value of the note. The fair
value and carrying value of the Company’s long-term debt as of December 31, 2014 and December 31, 2013 are as follows:
Series 2005-1 Notes
Series 2007-1 Notes
2010 Senior Notes
2012 Senior Notes
2013 Senior Notes
2014 Senior Notes (5-Year)
2014 Senior Notes (30-Year)
Total
December 31, 2014
December 31, 2013
Carrying Amount
Estimated Fair
Value
Carrying Amount
Estimated Fair
Value
$
— $
— $
300.0
503.8
496.9
497.5
450.7
298.4
334.6
564.4
537.1
548.4
454.3
333.9
$
310.3
300.0
497.8
496.5
497.2
—
—
319.2
334.7
536.6
497.0
501.2
—
—
$
2,547.3
$
2,772.7
$
2,101.8
$
2,188.7
The fair value of the Company’s long-term debt is estimated using discounted cash flows based on prevailing interest rates available to
the Company for borrowings with similar maturities. Accordingly, the inputs used to estimate the fair value of the Company’s long-
term debt are classified as Level 2 inputs within the fair value hierarchy.
NOTE 16
CAPITAL STOCK
Authorized Capital Stock
The total number of shares of all classes of stock that the Company has authority to issue under its Restated Certificate of
Incorporation is 1.02 billion shares with a par value of $0.01, of which 1.0 billion are shares of common stock, 10.0 million are shares of
preferred stock and 10.0 million are shares of series common stock. The preferred stock and series common stock can be issued with
varying terms, as determined by the Board.
Share Repurchase Program
The Company implemented a systematic share repurchase program in the third quarter of 2005 through an SEC Rule 10b5-1 program.
Moody’s may also purchase opportunistically when conditions warrant. As a result, Moody’s share repurchase activity will continue to
vary from quarter to quarter. The table below summarizes the Company’s remaining authority under the various share repurchase pro-
grams as of December 31, 2014:
Date Authorized
February 12, 2013
February 11, 2014
December 16, 2014
Amount Authorized
Remaining Authority
$
$
$
1,000.0
1,000.0
1,000.0
$
$
$
—
563.5
1,000.0
During 2014, Moody’s repurchased 13.8 million shares of its common stock under its share repurchase program and issued 4.9 million
shares under employee stock-based compensation plans.
102
MOODY’S 2014 10K
Dividends
The Company’s cash dividends were:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Dividends Per Share
Year ended December 31,
2014
Declared
— $
0.28
0.28
0.62
2013
Declared
$
— $
0.20
0.25
0.53
Paid
0.28
0.28
0.28
0.28
2012
Declared
$
— $
0.16
0.16
0.36
Paid
0.20
0.20
0.25
0.25
1.18
$
1.12
$
0.98
$
0.90
$
0.68
$
$
$
Paid
0.16
0.16
0.16
0.16
0.64
On December 16, 2014, the Board of the Company approved the declaration of a quarterly dividend of $0.34 per share of Moody’s
common stock, payable on March 10, 2015 to shareholders of record at the close of business on February 20, 2015. The continued
payment of dividends at the rate noted above, or at all, is subject to the discretion of the Board.
NOTE 17
LEASE COMMITMENTS
Moody’s operates its business from various leased facilities, which are under operating leases that expire over the next 13 years.
Moody’s also leases certain computer and other equipment under operating leases that expire over the next four years. Rent expense,
including lease incentives, is amortized on a straight-line basis over the related lease term. Rent expense under operating leases for the
years ended December 31, 2014, 2013 and 2012 was $83.9 million, $74.2 million and $75.8 million, respectively.
The 21-year operating lease for the Company’s headquarters at 7WTC which commenced on October 20, 2006 contains a total of
20 years of renewal options. These renewal options apply to both the original lease as well as additional floors leased by the Company
beginning in 2014. Additionally, the 17.5 year operating lease for the Company’s London, England office which commenced on Febru-
ary 6, 2008 contains a total of 15 years of renewal options.
The minimum rent for operating leases that have remaining or original non-cancelable lease terms in excess of one year at
December 31, 2014 is as follows:
Year Ending December 31,
Operating Leases
2015
2016
2017
2018
2019
Thereafter
Total minimum lease payments
$
$
93.4
80.9
78.3
72.7
64.9
447.3
837.5
Future minimum operating lease payments have been reduced by future minimum sublease income of $3.7 million.
NOTE 18
CONTINGENCIES
Moody’s is involved in legal and tax proceedings, governmental investigations and inquiries, claims and litigation that are incidental to
the Company’s business, including claims based on ratings assigned by MIS. Moody’s is also subject to ongoing tax audits in the normal
course of business. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters
based upon the latest information available. Moody’s discloses material pending legal proceedings pursuant to SEC rules and other
pending matters as it may determine to be appropriate.
Following the global credit crisis of 2008, MIS and other credit rating agencies have been the subject of intense scrutiny, increased regu-
lation, ongoing inquiry and governmental investigations, and civil litigation. Legislative, regulatory and enforcement entities around the
world are considering additional legislation, regulation and enforcement actions, including with respect to MIS’s compliance with regu-
latory standards. Moody’s has received subpoenas and inquiries from states attorneys general and other domestic and foreign gov-
ernmental authorities and is responding to such investigations and inquiries.
In addition, the Company is facing litigation from market participants relating to the performance of MIS rated securities. Although
Moody’s in the normal course experiences such litigation, the volume and cost of defending such litigation has significantly increased
following the events in the U.S. subprime residential mortgage sector and global credit markets more broadly over the last several years.
MOODY’S 2014 10K
103
On August 25, 2008, Abu Dhabi Commercial Bank filed a purported class action in the United States District Court for the Southern
District of New York asserting numerous common-law causes of action against two subsidiaries of the Company, another rating
agency, and Morgan Stanley & Co. The action related to securities issued by a structured investment vehicle called Cheyne Finance (the
“Cheyne SIV”) and sought, among other things, compensatory and punitive damages. The central allegation against the rating agency
defendants was that the credit ratings assigned to the securities issued by the Cheyne SIV were false and misleading. In early proceed-
ings, the court dismissed all claims against the rating agency defendants except those for fraud and aiding and abetting fraud. In June
2010, the court denied plaintiff’s motion for class certification, and additional plaintiffs were subsequently added to the complaint. In
January 2012, the rating agency defendants moved for summary judgment with respect to the fraud and aiding and abetting fraud
claims. Also in January 2012, in light of new New York state case law, the court permitted the plaintiffs to file an amended complaint
that reasserted previously dismissed claims against all defendants for breach of fiduciary duty, negligence, negligent misrepresentation,
and related aiding and abetting claims. In May 2012, the court, ruling on the rating agency defendants’ motion to dismiss, dismissed all
of the reasserted claims except for the negligent misrepresentation claim, and on September 19, 2012, after further proceedings, the
court also dismissed the negligent misrepresentation claim. On August 17, 2012, the court ruled on the rating agencies’ motion for
summary judgment on the plaintiffs’ remaining claims for fraud and aiding and abetting fraud. The court dismissed, in whole or in part,
the fraud claims of four plaintiffs as against Moody’s but allowed the fraud claims to proceed with respect to certain claims of one of
those plaintiffs and the claims of the remaining 11 plaintiffs. The court also dismissed all claims against Moody’s for aiding and abetting
fraud. Three of the plaintiffs whose claims were dismissed filed motions for reconsideration, and on November 7, 2012, the court
granted two of these motions, reinstating the claims of two plaintiffs that were previously dismissed. On February 1, 2013, the court
dismissed the claims of one additional plaintiff on jurisdictional grounds. Trial on the remaining fraud claims against the rating agencies,
and on claims against Morgan Stanley for aiding and abetting fraud and for negligent misrepresentation, was scheduled for May 2013.
On April 24, 2013, pursuant to confidential settlement agreements, the 14 plaintiffs with claims that had been ordered to trial stipu-
lated to the voluntary dismissal, with prejudice, of these claims as against all defendants, and the Court so ordered that stipulation on
April 26, 2013. The settlement did not cover certain claims of two plaintiffs, Commonwealth of Pennsylvania Public School Employees’
Retirement System (“PSERS”) and Commerzbank AG (“Commerzbank”), that were previously dismissed by the Court. On May 23, 2013,
these two plaintiffs filed a Notice of Appeal to the Second Circuit, seeking reversal of the dismissal of their claims and also seeking
reversal of the trial court’s denial of class certification. According to pleadings filed by plaintiffs in earlier proceedings, PSERS and
Commerzbank AG seek, respectively, $5.75 million and $69.6 million in compensatory damages in connection with the two claims at
issue on the appeal. In October 2014, the Second Circuit affirmed the denial of class certification and the dismissal of PSERS’ claim but
reversed a ruling of the trial court that had excluded certain evidence relevant to Commerzbank’s principal argument on appeal. The
Second Circuit did not reverse the dismissal of Commerzbank’s claim but instead certified a legal question concerning Commerzbank’s
argument to the New York Court of Appeals. The New York Court of Appeals subsequently agreed to hear the certified question and set
a briefing schedule. After the New York Court of Appeals has ruled on the certified question, the case will be returned to the Second
Circuit for a final decision on Commerzbank’s appeal.
On July 9, 2009, the California Public Employees’ Retirement System (“CalPERS”) filed an action in the Superior Court of California in
San Francisco (the “Superior Court”) asserting two common-law causes of action, negligent misrepresentation and negligent interfer-
ence with prospective economic advantage. The complaint named as defendants the Company, MIS, The McGraw-Hill Companies,
Fitch, Inc., and various subsidiaries of Fitch, Inc. (CalPERS subsequently released the Fitch entities from the case). The action relates to
the plaintiff’s purchase of securities issued by three structured investment vehicles (“SIVs”) known as Cheyne Finance, Sigma Finance,
and Stanfield Victoria Funding. The plaintiff’s complaint seeks unspecified compensatory damages arising from alleged losses in con-
nection with investments that purportedly totaled approximately $1.3 billion; in subsequent court filings, the plaintiff claimed to have
suffered “unrealized losses” of approximately $779 million. The central allegation against the defendants is that the credit ratings
assigned to the securities issued by the SIVs were inaccurate and that the methodologies used by the rating agencies had no reasonable
basis. In August 2009, the defendants removed the action to federal court, but the case was remanded to state court in November
2009 based on a finding that CalPERS is an “arm of the State.” In April 2010, in response to a motion by the defendants, the Superior
Court dismissed the claim for negligent interference with prospective economic advantage but declined to dismiss the claim for negli-
gent misrepresentation. In October 2010, the defendants filed a special motion to dismiss the remaining negligent misrepresentation
claim under California’s “anti-SLAPP” statute, which limits the maintenance of lawsuits based on speech on matters of public interest.
In January 2012, the Superior Court denied the anti-SLAPP motion, ruling that, although the ratings qualify as protected speech activity
under California law, the plaintiff had provided sufficient evidence in support of its claims to proceed. The defendants appealed this
decision to the California Court of Appeal, which affirmed the Superior Court’s rulings in May 2014, and in September 2014, the
Supreme Court of California declined to review the Court of Appeal’s decision. The action has been returned to the Superior Court, and
discovery has begun. In February 2015, CalPERS announced that it had reached a settlement with S&P, in which S&P agreed to pay
CalPERS $125 million.
104
MOODY’S 2014 10K
On February 11, 2015, the Superior Court of Connecticut in Waterbury denied MIS’s motion to dismiss in a case brought by plaintiffs
Pursuit Partners, LLC and Pursuit Investment Management, LLC. In November 2008, the plaintiffs had filed an amended complaint add-
ing the Company as a defendant to an existing action, which was then pending in the Superior Court of Connecticut in Stamford
against UBS AG, UBS Securities LLC, and a UBS employee (collectively, “UBS”). The Company was served in January 2009, and in
October 2011, the Company’s rating agency subsidiary, MIS, was substituted for the Company as a defendant. The action arises out of
UBS’s sale of five collateralized debt obligations (“CDOs”) to the plaintiffs, who purchased them on the secondary market in 2007 on
behalf of two investment funds under their management. With respect to UBS, the plaintiffs allege, among other things, that UBS made
material misrepresentations and omissions in pre-sale communications with the plaintiffs. With respect to MIS, the plaintiffs allege,
among other things, that, prior to the plaintiffs’ purchases, MIS provided UBS with non-public information about potential downgrades
of the ratings of the CDOs while maintaining inappropriate investment-grade ratings on the CDOs. As to all defendants, plaintiffs seek
compensatory damages for alleged investment losses of approximately $44 million, as well as, among other things, attorney’s fees,
costs, interest, and punitive damages. Plaintiffs’ initial complaint against the Company asserted claims for fraud, violation of the Con-
necticut Uniform Securities Act (“CUSA”), aiding and abetting fraud and civil theft by UBS, negligent/reckless conduct, unjust enrich-
ment, and civil conspiracy. In March 2012, the court granted MIS’s motion to strike the claim for unjust enrichment but denied MIS’s
motion to strike the other claims. In June 2012, after the close of discovery, MIS moved to dismiss all claims against it for lack of stand-
ing and also moved for summary judgment. In October 2012, the court granted the motion to dismiss, but in July 2014, the court
granted the plaintiffs’ motion for reconsideration and reinstated the action. In October 2014, MIS filed a new motion to dismiss on
jurisdictional grounds, which was denied on February 11, 2015. The court has not formally set a trial date but has advised the parties to
be prepared for trial to begin in or about late August 2015. The motion for summary judgment, originally filed by MIS in June 2012, is
still pending. If MIS does not prevail on the motion for summary judgment, the court has scheduled a trial to begin in August 2015.
For claims, litigation and proceedings and governmental investigations and inquires not related to income taxes, where it is both prob-
able that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the con-
solidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range
of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than
another amount within the range. In other instances, because of uncertainties related to the probable outcome and/or the amount or
range of loss, management does not record a liability but discloses the contingency if significant. As additional information becomes
available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predict-
ing the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters and con-
tingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the
matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or
the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on
how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process
to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to
predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or
indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties
regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.
Legacy Tax Matters
Moody’s continues to have exposure to potential liabilities arising from Legacy Tax Matters. As of December 31, 2014, Moody’s has
recorded liabilities for Legacy Tax Matters totaling $10.9 million. This includes liabilities and accrued interest due to New D&B arising
from the 2000 Distribution Agreement. It is possible that the ultimate liability for Legacy Tax Matters could be greater than the
liabilities recorded by the Company, which could result in additional charges that may be material to Moody’s future reported results,
financial position and cash flows.
In the third quarter of 2014, a statute of limitations lapsed, resulting in a $6.4 million reduction of Legacy Tax liabilities and a $0.7 mil-
lion reduction of related accrued interest expense.
NOTE 19
SEGMENT INFORMATION
The Company is organized into three operating segments: (i) MIS, (ii) MA and (iii) Copal Amba. The Copal Amba operating segment has
been aggregated with the MA operating segment based on the fact that it has similar economic characteristics to MA. Accordingly, the
Company reports in two reportable segments: MIS and MA.
In January 2014, the Company revised its operating segments to create the new Copal Amba operating segment. The new operating
segment consists of all operations from Copal and the operations of Amba which was acquired in December 2013. The Copal Amba
operating segment provides offshore research and analytic services to the global financial and corporate sectors. The Company has
MOODY’S 2014 10K
105
determined that the Copal Amba and MA operating segments have similar economic characteristics as set forth in ASC 280. As such,
Copal Amba has been combined with MA to form the MA reportable segment and Copal Amba’s revenue is reported in the PS LOB.
In the fourth quarter of 2014, pursuant to the acquisition of ICRA, Moody’s realigned certain components of its reportable segments to
better align with the current management structure of the Company. The effect of this realignment was to combine non-ratings ICRA
operations with certain immaterial research and fixed income pricing operations in the Asia-Pacific region that were previously reported
in the RD&A LOB of MA. All of these operations are managed by MIS and their revenue is now reported in the new MIS Other LOB. All
operating expenses from these operations are reported in the MIS reportable segment. The impact of this realignment did not have a
significant impact on previously reported results for the reportable segments and all prior year comparative periods have been restated
to reflect this realignment.
The MIS segment now consists of five lines of business. The corporate finance, structured finance, financial institutions and public, proj-
ect and infrastructure finance LOBs generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings
on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB primarily consists of the dis-
tribution of research and fixed income pricing services in the Asia-Pacific region as well as ICRA non-ratings revenue.
The MA segment develops a wide range of products and services that support the risk management activities of institutional partic-
ipants in global financial markets. The MA segment consists of three lines of business – RD&A, ERS and PS.
In December 2013, a subsidiary of the Company acquired Amba, a provider of investment research and quantitative analytics for global
financial institutions. Amba is part of the MA reportable segment and its revenue in included in the PS LOB. In June 2014, a subsidiary
of the Company acquired ICRA Limited, a leading provider of credit ratings and research in India. ICRA is part of the MIS reportable
segment and its revenue is included in the respective MIS LOBs. In July 2014, a subsidiary of the Company acquired WebEquity, a lead-
ing provider of cloud-based loan origination solutions for financial institutions. WebEquity is part of the MA reportable segment and its
revenue is included in the ERS LOB. In October 2014, the Company acquired Lewtan, a leading provider of analytical tools and data for
the global structured finance market. Lewtan is part of the MA reportable segment and its revenue is included in the RD&A LOB.
Revenue for MIS and expenses for MA include an intersegment royalty charged to MA for the rights to use and distribute content, data
and products developed by MIS. The royalty rate charged by MIS approximates the fair value of the aforementioned content, data and
products and is generally based on comparable market transactions. Also, revenue for MA and expenses for MIS include an intersegment
fee charged to MIS from MA for certain MA products and services utilized in MIS’s ratings process. These fees charged by MA are gen-
erally equal to the costs incurred by MA to produce these products and services. Additionally, overhead costs and corporate expenses of
the Company which exclusively benefit only one segment, are fully charged to that segment. Overhead costs and corporate expenses of
the Company which benefit both segments are allocated to each segment based on a revenue-split methodology. Overhead expenses
include costs such as rent and occupancy, information technology and support staff such as finance, human resources and information
technology. “Eliminations” in the table below represent intersegment revenue/expense.
Moody’s does not report the Company’s assets by reportable segment as this metric is not used by the chief operating decision maker
to allocate resources to the segments. Consequently, it is not practical to show assets by reportable segment.
FINANCIAL INFORMATION BY SEGMENT:
The table below shows revenue, Adjusted Operating Income and operating income by reportable segment. Adjusted Operating Income
is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment.
Year Ended December 31,
2014
2013
MIS
MA
Eliminations
Consolidated
MIS
MA
Eliminations
Consolidated
Revenue
Operating, SG&A
$2,353.4
1,076.2
$1,081.8
824.3
$
(100.9) $
(100.9)
3,334.3
1,799.6
$2,150.2
1,034.0
$913.3
701.5
$
$
(91.0)
(91.0)
Adjusted Operating Income
1,277.2
257.5
Depreciation and
amortization
49.4
46.2
—
—
1,534.7
1,116.2
211.8
95.6
46.7
46.7
—
—
2,972.5
1,644.5
1,328.0
93.4
Operating income
$1,227.8
$ 211.3
$
— $
1,439.1
$1,069.5
$165.1
$
— $
1,234.6
106
MOODY’S 2014 10K
Revenue
Operating, SG&A
Adjusted Operating Income
Depreciation and amortization
Goodwill impairment charge
Year Ended December 31,
2012
$
$
MIS
1,968.8
976.3
992.5
44.4
—
MA
Eliminations
Consolidated
844.9
654.3
190.6
49.1
12.2
$
$
(83.4)
(83.4)
—
—
—
2,730.3
1,547.2
1,183.1
93.5
12.2
Operating income
$
948.1
$
129.3
$
— $
1,077.4
MIS AND MA REVENUE BY LINE OF BUSINESS
The tables below present revenue by LOB:
MIS:
Corporate finance (CFG)
Structured finance (SFG)
Financial institutions (FIG)
Public, project and infrastructure finance (PPIF)
$
Total ratings revenue
MIS Other
Total external revenue
Intersegment royalty
Total
MA:
Research, data and analytics (RD&A)
Enterprise risk solutions (ERS)
Professional services (PS)
Total external revenue
Intersegment revenue
Total
Eliminations
Total MCO
Year Ended December 31,
2014
2013
2012
$
1,109.3
426.5
354.7
357.3
2,247.8
18.0
2,265.8
87.6
2,353.4
571.8
328.5
168.2
1,068.5
13.3
1,081.8
(100.9)
$
996.8
382.5
338.8
341.3
2,059.4
12.2
2,071.6
78.6
2,150.2
519.8
262.5
118.6
900.9
12.4
913.3
(91.0)
857.6
381.0
325.5
322.7
1,886.8
10.5
1,897.3
71.5
1,968.8
482.7
242.6
107.7
833.0
11.9
844.9
(83.4)
$
3,334.3
$
2,972.5
$
2,730.3
MOODY’S 2014 10K
107
CONSOLIDATED REVENUE AND LONG-LIVED ASSETS INFORMATION BY GEOGRAPHIC AREA
Revenue:
U.S.
International:
EMEA
Asia-Pacific
Americas
Total International
Total
Long-lived assets at December 31:
United States
International
Total
Year Ended December 31,
2014
2013
2012
$
1,814.5
$
1,626.5
$
1,472.4
952.8
338.3
228.7
1,519.8
3,334.3
657.6
1,011.3
1,668.9
$
$
$
862.8
286.1
197.1
1,346.0
2,972.5
552.3
613.2
1,165.5
$
$
$
800.2
266.5
191.2
1,257.9
2,730.3
498.4
672.3
1,170.7
$
$
$
NOTE 20
VALUATION AND QUALIFYING ACCOUNTS
Accounts receivable allowances primarily represent adjustments to customer billings that are estimated when the related revenue is
recognized and also represents an estimate for uncollectible accounts. The valuation allowance on deferred tax assets relates to foreign
net operating losses for which realization is uncertain. Below is a summary of activity for both allowances:
Year Ended December 31,
2014
Accounts receivable allowance
Deferred tax assets – valuation allowance
2013
Accounts receivable allowance
Deferred tax assets – valuation allowance
2012
Accounts receivable allowance
Deferred tax assets – valuation allowance
Balance at Beginning
of the Year
Additions
Write-offs and
Adjustments
Balance at End of
the Year
$
$
$
$
$
$
(28.9) $
(8.4) $
(29.1)
(15.2)
(28.0)
(13.9)
$
$
$
$
(54.9) $
(0.1) $
(44.5)
(0.1)
(44.3)
(3.1)
$
$
$
$
54.4
1.6
44.7
6.9
43.2
1.8
$
$
$
$
$
$
(29.4)
(6.9)
(28.9)
(8.4)
(29.1)
(15.2)
NOTE 21 OTHER NON-OPERATING INCOME (EXPENSE), NET
The following table summarizes the components of other non-operating income (expense), net as presented in the consolidated state-
ments of operations:
FX gain(loss) (a)
Legacy Tax (b)
Joint venture income
Other
Total
Year Ended December 31,
2014
20.3
6.4
9.6
(0.4)
2013
$
— $
19.2
8.8
(1.5)
35.9
$
26.5
$
$
$
2012
(5.9)
12.8
4.8
(1.3)
10.4
(a) The FX gain in 2014 reflects the strengthening of the U.S. dollar to the euro and GBP for certain U.S. dollar denominated assets held by the Company’s
international subsidiaries.
(b) The 2014 amount relate to the expiration of a statute of limitations for a Legacy Tax Matter. The 2013 amount represents a reversal relating to favorable
resolution of a Legacy Tax Matter for the 2007-2009 tax years. The 2012 amount represents a reversal of a liability relating to the favorable resolution of a
Legacy Tax Matter for the 2005 and 2006 tax years.
108
MOODY’S 2014 10K
NOTE 22
RELATED PARTY TRANSACTIONS
Moody’s Corporation made grants of $4 million, $8 million and $10 million to The Moody’s Foundation during the years ended
December 31, 2014, 2013 and 2012, respectively. The Foundation carries out philanthropic activities primarily in the areas of education
and health and human services. Certain members of Moody’s senior management are on the board of the Foundation.
NOTE 23 QUARTERLY FINANCIAL DATA (UNAUDITED)
(amounts in millions, except EPS)
March 31
June 30
September 30
December 31
Three Months Ended
2014
Revenue
Operating Income
Net income attributable to Moody’s
EPS:
Basic
Diluted
2013
Revenue
Operating income
Net income attributable to Moody’s
EPS:
Basic
Diluted
$
$
$
$
$
$
$
$
$
$
767.2
333.0
218.0
1.02
1.00
731.8
280.4
188.4
0.84
0.83
$
$
$
$
$
$
$
$
$
$
873.5
411.7
319.2
1.51
1.48
756.0
350.8
225.5
1.01
1.00
$
$
$
$
$
$
$
$
$
$
816.1
349.7
215.2
1.02
1.00
705.5
291.5
183.9
0.84
0.83
$
$
$
$
$
$
$
$
$
$
877.5
344.7
236.3
1.14
1.12
779.2
311.9
206.7
0.96
0.94
Basic and diluted EPS are computed for each of the periods presented. The number of weighted average shares outstanding changes as
common shares are issued pursuant to employee stock-based compensation plans and for other purposes or as shares are repurchased.
Therefore, the sum of basic and diluted EPS for each of the four quarters may not equal the full year basic and diluted EPS.
Additionally, the quarterly financial data includes the ICRA Gain in the three months ended June 30, 2014. There were benefits of
$6.4 million and $21.3 million to net income related to the resolution of Legacy Tax Matters for the three months ended September 30,
2014 and December 31, 2013, respectively. There was a $0.14 share charge in the first quarter of 2013 related to the settlement of liti-
gation matters more fully discussed in Note 18.
MOODY’S 2014 10K
109
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the
participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effec-
tiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange
Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the times periods specified in the communication to the Company’s management, including the
Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes In Internal Control Over Financial Reporting
Information in response to this Item is set forth under the caption “Management’s Report on Internal Control Over Financial Reporting”,
in Part II, Item 8 of this annual report on Form 10-K.
In addition, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined
that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect, these internal controls over financial reporting during the period covered by this report.
ITEM 9B. OTHER INFORMATION
Not applicable.
110
MOODY’S 2014 10K
PART III
Except for the information relating to the executive officers of the Company set forth in Part I of this annual report on Form 10-K, the
information called for by Items 10-13 is contained in the Company’s definitive proxy statement for use in connection with its annual
meeting of stockholders scheduled to be held on April 14, 2015, and is incorporated herein by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee has established a policy setting forth the requirements for the pre-approval of audit and permissible non-audit
services to be provided by the Company’s independent registered public accounting firm. Under the policy, the Audit Committee pre-
approves the annual audit engagement terms and fees, as well as any other audit services and specified categories of non-audit serv-
ices, subject to certain pre-approved fee levels. In addition, pursuant to the policy, the Audit Committee authorized its chair to pre-
approve other audit and permissible non-audit services in 2014 up to $50,000 per engagement and a maximum of $250,000 per year.
The policy requires that the Audit Committee chair report any pre-approval decisions to the full Audit Committee at its next scheduled
meeting. For the year ended December 31, 2014, the Audit Committee approved all of the services provided by the Company’s
independent registered public accounting firm, which are described below.
AUDIT FEES
The aggregate fees for professional services rendered for (i) the integrated audit of the Company’s annual financial statements for the
years ended December 31, 2014 and 2013, (ii) the review of the financial statements included in the Company’s Reports on
Forms 10-Q and 8-K, and (iii) statutory audits of subsidiaries, were approximately $3.0 million and $2.8 million in 2014 and 2013,
respectively. These fees included amounts accrued but not billed of $2.2 million and $1.9 million in the years ended December 31, 2014
and 2013, respectively.
AUDIT-RELATED FEES
The aggregate fees billed for audit-related services rendered to the Company were approximately $0.1 million in both of the years
ended December 31, 2014 and 2013. Such services included employee benefit plan audits.
TAX FEES
The aggregate fees billed for professional services rendered for tax services rendered by the auditors for the years ended December 31,
2014 and 2013 were approximately $0 and $0, respectively.
ALL OTHER FEES
The aggregate fees billed for all other services rendered to the Company by KPMG LLP for the years ended December 31, 2014 and
2013 were approximately $0 and $0, respectively.
MOODY’S 2014 10K
111
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT.
(1) Financial Statements.
See Index to Financial Statements on page 56, in Part II. Item 8 of this Form 10-K.
(2) Financial Statement Schedules.
None.
(3) Exhibits.
See Index to Exhibits on pages 114-117 of this Form 10-K.
112
MOODY’S 2014 10K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
MOODY’S CORPORATION
(Registrant)
By: /s/ RAYMOND W. MCDANIEL, JR.
Raymond W. McDaniel, Jr.
President and Chief Executive Officer
Date: February 25, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date indicated.
/s/ RAYMOND W. MCDANIEL, JR.
/s/ KATHRYN M. HILL
Raymond W. McDaniel, Jr.,
President and Chief Executive Officer
(principal executive officer)
/s/ LINDA S. HUBER
Linda S. Huber,
Executive Vice President and Chief Financial Officer
(principal financial officer)
/s/ JOSEPH MCCABE
Joseph McCabe,
Senior Vice President – Corporate
Controller (principal accounting officer)
/s/ BASIL L. ANDERSON
Basil L. Anderson,
Director
/s/ JORGE A. BERMUDEZ
Jorge A. Bermudez,
Director
/s/ DARRELL DUFFIE
Darrell Duffie,
Director
Kathryn M. Hill,
Director
/s/ EWALD KIST
Ewald Kist,
Director
/s/ HENRY A. MCKINNELL, JR.
Henry A. McKinnell, Jr. Ph.D.,
Chairman
/s/ LESLIE F. SEIDMAN
Leslie F. Seidman,
Director
/s/ JOHN K. WULFF
John K. Wulff,
Director
Date: February 25, 2015
MOODY’S 2014 10K
113
INDEX TO EXHIBITS
S-K EXHIBIT NUMBER
3
4
Articles Of Incorporation And By-laws
.1
.2
Restated Certificate of Incorporation of the Registrant, effective April 17, 2013 (incorporated by reference
to Exhibit 3.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 22, 2013).
Amended and Restated By-laws of Moody’s Corporation, effective April 17, 2013 (incorporated by refer-
ence to Exhibit 3.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 22, 2013).
Instruments Defining The Rights Of Security Holders, Including Indentures
.1
.3
.4
.5
.6
.7
.8
.9
Specimen Common Stock certificate (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K
of the Registrant, file number 1-14037, filed October 4, 2000)
Note Purchase Agreement, dated as of September 7, 2007, by and among Moody’s Corporation and the
note purchasers party thereto, including the form of the 6.06% Series 2007-1 Senior Unsecured Note due
2017 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed September 13, 2007)
Five-Year Credit Agreement dated as of April 18, 2012, among Moody’s Corporation, the Borrowing Sub-
sidiaries Party Hereto, the Lenders Party Thereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
Bank of America, N.A. and Citibank, N.A. as Co-Syndication Agents, and RBS Citizens, N.A. and The Bank of
Tokyo-Mitsubishi UFJ, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 4.1 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed April 24, 2012)
Five-Year Credit Agreement, dated as of May 7, 2008, with JPMorgan Chase Bank, N.A., as administrative
agent, Bank of China and Fifth Third Bank, as co-syndication agents, Barclays Commercial Bank, as doc-
umentation agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Commerce Bank, N.A., as co-agents, J.P.
Morgan Securities, Inc., as lead arranger and bookrunner, and the lenders party thereto (incorporated by
reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed
May 8, 2008)
Indenture, dated as of August 19, 2010, between Moody’s Corporation and Wells Fargo, National Associa-
tion, as trustee (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file
number 1-14037, filed August 19, 2010)
Supplemental Indenture, dated as of August 19, 2010, between Moody’s Corporation and Wells Fargo,
National Association, as trustee, including the form of the 5.50% Senior Notes due 2020 (incorporated by
reference to Exhibit 4.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August 19,
2010)
Second Supplemental Indenture, dated as of August 20, 2012, between Moody’s Corporation and Wells
Fargo, National Association, as trustee, including the form of the 4.50% Senior Notes due 2022
(incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed August 20, 2012)
Third Supplemental Indenture, dated as of August 12, 2013, between Moody’s Corporation and Wells
Fargo, National Association, as trustee, including the form of the 4.875% Senior Notes due 2023
(incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed August 20, 2013)
10
Material Contracts
.1
.2
.3†
Distribution Agreement, dated as of September 30, 2000, between the Registrant and The Dun & Brad-
street Corporation (f.k.a. The New D&B Corporation) (incorporated by reference to Exhibit 10.1 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed October 4, 2000)
Tax Allocation Agreement, dated as of September 30, 2000, between the Registrant and The Dun & Brad-
street Corporation (f.k.a. The New D&B Corporation) (incorporated by reference to Exhibit 10.2 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed October 4, 2000)
The Moody’s Corporation Nonfunded Deferred Compensation Plan for Non-Employee Directors (as
amended December 16, 2008) (incorporated by reference to Exhibit 10.6 to the Registrant’s Annual Report
on Form 10-K, file number 1-14037, filed February 27, 2009)
114
MOODY’S 2014 10K
S-K EXHIBIT NUMBER
10
.4†
.5†
.6
.7†
.8
.9†
.10
.11
.12
.13†
.14†
1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (Adopted September 8, 2000;
Amended and Restated as of December 11, 2012) (incorporated by reference to Exhibit 10.2 to the Regis-
trant’s Annual Report on Form 8-K, file number 1-14037, filed April 22, 2013)
1998 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to Exhibit
10.16 to the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed November 14, 2000)
Distribution Agreement, dated as of June 30, 1998, between R.H. Donnelley Corporation (f.k.a. The Dun &
Bradstreet Corporation) and the Registrant (f.k.a. The New Dun & Bradstreet Corporation) (incorporated by
reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed
August 14, 1998)
Moody’s Corporation Deferred Compensation Plan, effective as of January 1, 2008 (incorporated by refer-
ence to Exhibit 10.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed October 26,
2007)
Form of Separation Agreement and General Release used by the Registrant with its Career Transition Plan.
(incorporated by reference to Exhibit 99.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed November 20, 2007)
Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (as amended,
December 11, 2012) (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of the Regis-
trant, file number 1-14037, filed April 22, 2013)
Tax Allocation Agreement, dated as of June 30, 1998, between R.H. Donnelley Corporation (f.k.a. The
Dun & Bradstreet Corporation) and the Registrant (f.k.a. The New Dun & Bradstreet Corporation)
(incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q, file number
1-14037, filed August 14, 1998)
Distribution Agreement, dated as of October 28, 1996, among R.H. Donnelley Corporation (f.k.a. The
Dun & Bradstreet Corporation), Cognizant Corporation and ACNielsen Corporation (incorporated by refer-
ence to Exhibit 10(x) to R.H. Donnelley Corporation’s (f.k.a. The Dun & Bradstreet Corporation) Annual
Report on Form 10-K, file number 1-7155, filed March 27, 1997)
Tax Allocation Agreement, dated as of October 28, 1996, among R.H. Donnelley Corporation (f.k.a. The
Dun & Bradstreet Corporation), Cognizant Corporation and ACNielsen Corporation (incorporated by refer-
ence to Exhibit 10(y) to R.H. Donnelley Corporation’s (f.k.a. The Dun & Bradstreet Corporation) Annual
Report on Form 10-K, file number 1-7155, filed March 27, 1997)
Form of Employee Non-Qualified Stock Option and Restricted Stock Grant Agreement for the Amended
and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference
to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed
November 3, 2004)
Form of Non-Employee Director Restricted Stock Grant Agreement for the 1998 Moody’s Corporation
Non-Employee Directors’ Stock Incentive Plan (as amended on April 23, 2001) (incorporated by reference
to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed
November 3, 2004)
.15†*
2004 Moody’s Corporation Covered Employee Cash Incentive Plan (as amended on February 10, 2015)
.16†
.17†
.18
.19
Description of Bonus Terms under the 2004 Moody’s Corporation Covered Employee Cash Incentive Plan
(as amended, December 15, 2009) (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
Report on Form 10-Q, file number 1-14037, filed November 3, 2004)
Director Compensation Arrangements (incorporated by reference to Exhibit 10.1 to the Registrant’s Quar-
terly Report on Form 10-Q, file number 1-14037, filed May 2, 2006)
Agreement of Lease, dated September 7, 2006, between Moody’s Corporation and 7 World Trade Center,
LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, file
number 1-14037, filed November 2, 2006)
Agreement for Lease, dated February 6, 2008, among CWCB Properties (DS7) Limited, CWCB Properties
(DS7) Limited and CW Leasing DS7F Limited, Canary Wharf Holdings Limited, Moody’s Investors Service
Limited, and Moody’s Corporation (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of
the Registrant, file number 1-14037, filed February 12, 2008)
MOODY’S 2014 10K
115
S-K EXHIBIT NUMBER
10
12*
21*
23
31
116
MOODY’S 2014 10K
.20
.21
.22
.23†
.24†
.25†
Agreement for Lease, dated February 6, 2008, among Canary Wharf (Car Parks) Limited, Canary Wharf
Holdings Limited, Canary Wharf Management Limited, Moody’s Investors Service Limited, and Moody’s
Corporation (incorporated by reference to Exhibit 10.2 to the Report on Form 8-K of the Registrant, file
number 1-14037, filed February 12, 2008)
Storage Agreement for Lease dated February 6, 2008 among Canary Wharf (Car Parks) Limited, Canary
Wharf Holdings Limited, Canary Wharf Management Limited, Moody’s Investors Service Limited, and
Moody’s Corporation (incorporated by reference to Exhibit 10.2 to the Report on Form 8-K of the Regis-
trant file number 1-14037, filed February 12, 2008)
Moody’s Corporation 1999 Employee Stock Purchase Plan (as amended and restated December 15, 2008)
(formerly, The Dun & Bradstreet Corporation 1999 Employee Stock Purchase Plan) (incorporated by refer-
ence to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed Febru-
ary 27, 2009)
Supplemental Executive Benefit Plan of Moody’s Corporation, amended and restated as of January 1, 2008
(incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February, 29, 2008)
Pension Benefit Equalization Plan of Moody’s Corporation, amended and restated as of January 1, 2008
(incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February, 29, 2008)
Moody’s Corporation Retirement Account, amended and restated as of December 18, 2013 (incorporated
by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
February 27, 2014)
.26†*
Profit Participation Plan of Moody’s Corporation (amended and restated as of January 1, 2014)
.27†
.28†
.29†
Moody’s Corporation Career Transition Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s
Quarterly Report on Form 10-Q, file number 1-14037, filed May 8, 2008)
First Amendment to the Moody’s Corporation Career Transition Plan (incorporated by reference to Exhibit
10.42 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 26, 2013)
Second Amendment to the Moody’s Career Transition Plan (incorporated by reference to Exhibit 10.2 to
the Registrant’s Quarterly Report on Form 10-Q, file number 1-14037, filed July 31, 2014)
.30†*
Third Amendment to the Moody’s Career Transition Plan.
.31†
.32†
Moody’s Corporation Cafeteria Plan, effective January 1, 2008 (incorporated by reference to Exhibit 10.46
to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 27, 2009)
First Amendment to the Moody’s Corporation Cafeteria Plan (incorporated by reference to Exhibit 10.3 to
the Registrant’s Quarterly Report on form 10-Q, file number 1-14037, filed July 31, 2014)
.33†*
Second Amendment to the Moody’s Corporation Cafeteria Plan
.34†
.35†
.36†
Separation Agreement and general release between the Company and Brian M. Clarkson, dated May 7,
2008 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, file
number 1-14037, filed August 4, 2008)
Moody’s Corporation Change in Control Severance Plan (incorporated by reference to Exhibit 10.1 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed December 20, 2010)
Form of Performance Share Award Letter for the Amended and Restated 2001 Moody’s Corporation Key
Employees’ Stock Incentive Plan (incorporated by reference to Exhibit 10.48 to the Registrant’s Annual
Report on Form 10-K, file number 1-14037, filed February 28, 2011)
Statement of Computation of Ratios of Earnings to Fixed Charges
SUBSIDIARIES OF THE REGISTRANT List of Active Subsidiaries as of December 31, 2014
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
.1*
Consent of KPMG LLP
CERTIFICATIONS 302 OF THE SARBANES-OXLEY ACT OF 2002
.1*
.2*
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
S-K EXHIBIT NUMBER
32
CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
.1*
.2*
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be consid-
ered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under
the Securities Act of 1933 or the Securities Exchange Act of 1934)
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002. (The Company has furnished this certification and does not intend for it to be consid-
ered filed under the Securities Exchange Act of 1934 or incorporated by reference into future filings under
the Securities Act of 1933 or the Securities Exchange Act of 1934)
101
101
101
101
101
101
DEF*
XBRL Definitions Linkbase Document
INS*
XBRL Instance Document
SCH*
XBRL Taxonomy Extension Schema Document
CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
LAB*
XBRL Taxonomy Extension Labels Linkbase Document
PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith
† Management contract of compensatory plan or arrangement
MOODY’S 2014 10K
117
EXHIBIT 21
SUBSIDIARIES OF MOODY’S CORPORATION
The following is a list of active, majority owned subsidiaries of Moody’s Corporation as of December 31, 2014.
U.S. Entities
Amba Research USA Inc.
BPA Technologies, Inc.
Copal Partners (US) Inc.
CSI Global Education, US, Inc.
Exevo Inc.
Foundation for Fiduciary Studies, Inc.
ICRA Global Capital, Inc.
ICRA Sapphire, Inc.
Lewtan Technologies, Inc.
MIS Asset Holdings, Inc.
MIS Quality Management Corp.
Moody’s Advisors Inc.
Moody’s Analytics, Inc.
Moody’s Analytics Solutions, LLC
Moody’s Assurance Company, Inc.
Moody’s Assureco, Inc.
Moody’s Capital Markets Research, Inc.
Moody’s Credit Assessment Holdings, LLC
Moody’s Credit Assessment Inc.
Moody’s Holdings LLC
Moody’s International LLC
Moody’s Investors Service, Inc.
Moody’s Overseas Holdings, Inc.
Moody’s Risk Services Corp.
Moody’s Shared Services, Inc.
The Moody’s Foundation
Non U.S. Entities
Administración de Calificadoras S.A.
Amba Investment Services Limited
Amba Holdings Inc.
Amba Research Costa Rica SA
Amba Research HongKong Limited
Amba Research (India) Private Limited
Amba Research Lanka (Private) Limited
Amba Research Singapore Pte. Ltd.
Amba Research UK Limited
BPA Technologies Pvt. Ltd.
Copal Business Consulting (Beijing) Co Ltd
Copal Market Research Ltd.
Copal Partners (HK) Limited
Copal Partners Ltd.
Copal Partners (UK) Ltd.
Copal Research India Private Limited
Copal Research Ltd.
ENB Consulting (Asia) Limited
118
MOODY’S 2014 10K
Delaware
California
Delaware
Delaware
Delaware
Delaware
California
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
Mexico
British Virgin Islands
Mauritius
Costa Rica
Hong Kong
India
Sri Lanka
Singapore
United Kingdom
India
China
Mauritius
Hong Kong
Jersey
United Kingdom
India
Mauritius
Hong Kong
Exevo India Private Limited
Exevo Research Private Ltd.
Fermat Finance SPRL
Fermat GmbH
Fermat International SA
Fermat Limited
Fermat Spzoo
ICRA Lanka Limited
ICRA Limited
ICRA Management Consulting Services Limited
ICRA Online Limited
ICRA Techno Analytics Limited
Korea Investors Service, Inc.
Lewtan Australia Pty. Ltd.
Lewtan Technologies, Ltd.
Midroog Ltd.
Moody’s America Latina Ltda.
Moody’s Analytics Australia Pty Ltd
Moody’s Analytics Canada Inc.
Moody’s Analytics Czech Republic s.r.o.
Moody’s Analytics (DIFC) Limited
Moody’s Analytics Deutschland GmbH
Moody’s Analytics do Brasil Ltda.
Moody’s Analytics Global Education (Canada) Inc.
Moody’s Analytics Holdings (UK) Ltd.
Moody’s Analytics Hong Kong Limited
Moody’s Analytics International Licensing GmbH
Moody’s Analytics Ireland Ltd.
Moody’s Analytics Japan K.K.
Moody’s Analytics Korea Co., Ltd.
Moody’s Analytics SAS
Moody’s Analytics Singapore Pte. Ltd.
Moody’s Analytics Technical Services (Hong Kong) Ltd.
Moody’s Analytics Technical Services (UK) Limited
Moody’s Analytics (Thailand) Co. Ltd.
Moody’s Analytics UK Ltd.
Moody’s Asia-Pacific Group (Singapore) Pte. Ltd.
Moody’s Asia Pacific Limited
Moody’s Canada, Inc.
Moody’s Canada LP
Moody’s China (B.V.I.) Limited
Moody’s Company Hong Kong Limited
Moody’s Credit Assessment India Private Limited
Moody’s de Mexico S.A. de C.V.
Moody’s Deutschland GmbH
Moody’s Eastern Europe LLC
Moody’s EMEA Holdings Limited
Moody’s Finance Company Limited
Moody’s France S.A.S.
Moody’s Group Australia Pty Ltd
Moody’s Group Cyprus Ltd.
Moody’s Group Deutschland GmbH
Moody’s Group Finance Ltd.
Moody’s Group France SAS
Moody’s Group (Holdings) Limited
India
Singapore
Belgium
Germany
Belgium
Hong Kong
Poland
Sri Lanka
India
India
India
India
South Korea
Australia
United Kingdom
Israel
Brazil
Australia
Canada
Czech Republic
Dubai International Finance Centre
Germany
Brazil
Canada
United Kingdom
Hong Kong
Switzerland
Ireland
Japan
Korea
France
Singapore
Hong Kong
United Kingdom
Thailand
United Kingdom
Singapore
Hong Kong
Canada
Canada
British Virgin Islands
Hong Kong
India
Mexico
Germany
Russia
United Kingdom
United Kingdom
France
Australia
Cyprus
Germany
United Kingdom
France
United Kingdom
MOODY’S 2014 10K
119
Moody’s Group Japan G.K.
Moody’s Group UK Ltd.
Moody’s Holdings (BVI) Ltd.
Moody’s Holdings Ltd.
Moody’s Indonesia (BVI) Limited
Moody’s Information Consulting (Shenzhen) Co., Ltd.
Moody’s Interfax Rating Agency Ltd.
Moody’s International (UK) Limited
Moody’s Investment Company India Private Limited
Moody’s Investors Service (Beijing), Ltd.
Moody’s Investors Service (BVI) Ltd.
Moody’s Investors Service Cyprus Ltd.
Moody’s Investors Service EMEA Limited
Moody’s Investors Service Espana, S.A.
Moody’s Investors Service Hong Kong Limited
Moody’s Investors Service (Korea) Inc.
Moody’s Investors Service Ltd.
Moody’s Investors Service Middle East Limited
Moody’s Investors Service India Private Limited
Moody’s Investors Service Pty Limited
Moody’s Investors Service Singapore Pte. Ltd.
Moody’s Investors Service South Africa (Pty.) Ltd.
Moody’s Israel Holdings, Inc.
Moody’s Italia S.r.l.
Moody’s (Japan) K.K.
Moody’s Latin America Agente de Calificacion de Riesgo SA
Moody’s Latin America Holding Corp.
Moody’s Mauritius Holdings Limited.
Moody’s Servicios Latino-America SA de CV
Moody’s Shared Services India Private Limited
Moody’s Shared Services UK Limited
Moody’s SF Japan K.K.
Moody’s Singapore Pte Ltd
Moody’s South Africa (BVI) Ltd.
Moody’s (UK) Limited
Pragati Development Consulting Services Ltd.
PT Moody’s Indonesia
Japan
United Kingdom
British Virgin Islands
United Kingdom
British Virgin Islands
China
Russia
United Kingdom
India
China
British Virgin Islands
Cyprus
United Kingdom
Spain
Hong Kong
Korea
United Kingdom
Dubai International Finance Centre
India
Australia
Singapore
South Africa
British Virgin Islands
Italy
Japan
Argentina
British Virgin Islands
Mauritius
Mexico
India
United Kingdom
Japan
Singapore
British Virgin Islands
United Kingdom
India
Indonesia
120
MOODY’S 2014 10K
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Moody’s Corporation:
We consent to the incorporation by reference in the registration statements on Forms S-3 and S-8 (No. 333-168453, No. 333-190259,
No. 333-170727, No. 333-170753, No. 333-145127, No. 333-126564, No. 333-103496, No. 333-47848, No. 333-81121, No. 333-
68555, No. 333-64653, No. 333-60737, No. 333-57915, No. 333-57267, No. 333-192333, No. 333-192334) of Moody’s Corporation
of our report dated February 25, 2015, with respect to the consolidated balance sheets of Moody’s Corporation as of December 31,
2014 and 2013, and the related consolidated statements of operations, shareholders’ equity (deficit), comprehensive income and cash
flows, for each of the years in the three-year period ended December 31, 2014 and the effectiveness of internal control over financial
reporting as of December 31, 2014, which report appears in the December 31, 2014 annual report on Form 10-K of Moody’s
Corporation.
/s/ KPMG LLP
New York, New York
February 25, 2015
MOODY’S 2014 10K
121
EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Raymond W. McDaniel, Jr., President and Chief Executive Officer of Moody’s Corporation, certify that:
1.
I have reviewed this annual report on Form 10-K of Moody’s Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
/s/ RAYMOND W. MCDANIEL, JR.
Raymond W. McDaniel, Jr.
President and Chief Executive Officer
February 25, 2015
122
MOODY’S 2014 10K
EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Linda S. Huber, Executive Vice President and Chief Financial Officer of Moody’s Corporation, certify that:
1.
I have reviewed this annual report on Form 10-K of Moody’s Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the periods covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
/s/ LINDA S. HUBER
Linda S. Huber
Executive Vice President and Chief Financial Officer
February 25, 2015
MOODY’S 2014 10K
123
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Moody’s Corporation on Form 10-K for the year ended December 31, 2014 as filed with the SEC
on the date hereof (the “Report”), I, Raymond W. McDaniel, Jr., President and Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ RAYMOND W. MCDANIEL, JR.
Raymond W. McDaniel, Jr.
President and Chief Executive Officer
February 25, 2015
124
MOODY’S 2014 10K
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Moody’s Corporation on Form 10-K for the year ended December 31, 2014 as filed with the SEC
on the date hereof (the “Report”), I, Linda S. Huber, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ LINDA S. HUBER
Linda S. Huber
Executive Vice President and Chief Financial Officer
February 25, 2015
MOODY’S 2014 10K
125
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Moody’s Corporate Information
CORPORATE OFFICE
7 World Trade Center
250 Greenwich Street
New York, NY 10007
+1.212.553.0300
moodys.com
TRANSFER AGENT, REGISTRAR
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
U.S.: +1.800.937.5449
Outside the U.S.: +1.718.921.8124
Hearing impaired: +1.866.703.9077
Online Shareholder Account Information
amstock.com
info@amstock.com
INDEPENDENT ACCOUNTANTS
KPMG LLP
345 Park Avenue
New York, NY 10154
CORPORATE GOVERNANCE
The Company has filed its annual report on Form
10-K for the year ended December 31, 2014 with
the Securities and Exchange Commission.
The Form 10-K, along with other Moody’s SEC
filings and corporate governance documents, are
available, without charge, upon request to the
Investor Relations Department at the Corporate
Office or on ir.moodys.com.
The Company has submitted to the New York
Stock Exchange the Chief Executive Officer’s
certification that he is unaware of any violation by
the Company of the NYSE’s corporate governance
listing standards. The Company has filed with the
SEC the Chief Executive Officer and Chief Financial
Officer certifications as exhibits to the most
recently filed Form 10-K, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
COMMON STOCK INFORMATION
The Company’s common stock trades on
the New York Stock Exchange under the
symbol “MCO”.
INVESTOR RELATIONS
+1.212.553.4857
ir@moodys.com
ir.moodys.com
MOODY’S ENVIRONMENTAL POLICY
Moody’s Corporation is committed to doing our part to protect and care for the environments
in which we live and work including compliance with the letter and spirit of all relevant
environmental legislation.
This commitment is demonstrated by the continuous development and implementation of practical
and effective corporate policies and programs that support the more efficient use of natural resources
and reduce the impact of our businesses on the environment. These programs and policies include
reducing and eliminating waste, where feasible, through re-use, recovery and recycling.
Using various channels, the policy is available for public review and is communicated to employees
to increase their awareness of environmental concerns and to further encourage them to minimize
the impact they have on the environment.
All paper in this report is certified to the
Forest Stewardship Council® (FSC®)
standards. The 10-K of this report is
printed on 100% recycled paper.
Moody’s Corporation
7 World Trade Center
250 Greenwich Street
New York, NY 10007