ANNUAL REPORT
2021
Raymond W. McDaniel, Jr.
Letter from the Chairman of the Board
Throughout 2021, the global pandemic continued
to impact Moody’s employees, customers, stockholders
and communities. Despite this challenge, Moody’s again
achieved considerable success, and I am impressed with the
ways in which the Company has sustained and, in many
areas, enhanced its contribution to financial market efficiency,
transparency and fairness.
As the pandemic has highlighted the demand for
understanding of the complex and interconnected risks facing
markets, businesses and economies, Moody’s has stepped up
to the challenge through its strategy of offering an integrated
and holistic perspective on risk for customers.
Important elements of this strategy in 2021 were the many
investments made in new and evolving risk segments,
including: cyber risk, Know Your Customer (KYC); Commercial
Real Estate; Environmental, Social and Governance (ESG),
and other high-growth adjacencies. Product development work
and acquisitions complemented and enhanced investments
in Moody’s core credit ratings and research offerings, data
and analytic capabilities, and will help ensure the continued
relevance and value of these offerings to customers.
The acquisition of RMS established Moody’s as a leader
in insurance and data analytics and brought valuable new
expertise in modeling extreme weather and climate risk, as well
as other catastrophes. These capabilities are already helping
customers better identify, measure and manage a wider range
of risks leading to better outcomes.
As the pace of digitization and automation continues, so has
the prevalence of cyber risk. Managing this risk is critical to
informing key strategic decisions – from security initiatives
to capital allocation – given that its reach extends across
supply chains. To help address the emerging cyber risk
segment, in 2021 Moody’s invested and partnered with
BitSight, a pioneer in cybersecurity ratings and analytics.
In the expanding area of sustainability, COP26 highlighted the
importance of stakeholder requests for transparent corporate
disclosures that capture both the short- and long-term impacts
of physical risk and energy transition risk across industries and
business operations. Governments and others are increasingly
using climate analytics to better inform climate mitigation
and adaptation measures, and stakeholders are seeking ways
to better understand the progress and impact of corporate
1
MOODY’S 2021 ANNUAL REPORT
de-carbonization commitments. In this spirit, Moody’s
accelerated its own net-zero commitments to 2040,
advanced its science-based targets, and published its
inaugural Stakeholder Sustainability Report.
Moody’s has continued to strengthen the firm’s culture
of inclusion, built on respect, diversity and openness.
The Company is proud to have met its Supplier Diversity
Initiative pledge to increase the representation of women-
owned businesses in its supply chain, and of the commitment
made in 2021 to materially increase the population of women,
and U.S. Black and Hispanic / Latino leaders across the
company by 2025. Moody’s continues to garner recognition for
its diversity, equity and inclusion achievements, including from
the Human Rights Campaign Foundation, Bloomberg Gender
Equality Index and Working Mother.
I would like to acknowledge the many contributions of my
fellow board members, and welcome Zig Serafin, CEO
of Qualtrics, to the Moody’s board. Zig brings a wealth
of experience to the board, strengthening the Company’s
focus on innovation and enhancing operational and
technological skillsets.
I am grateful to Rob Fauber for his leadership since becoming
President and Chief Executive Officer of Moody’s Corporation
in January 2021. Rob’s deep knowledge of the business and
customers’ needs has been invaluable in navigating through
the rapidly changing global landscape.
I am confident that Moody’s ongoing evolution as a global
integrated risk assessment business will continue to position
the Company at the forefront of helping customers to operate
with speed and sophistication in an increasingly complex
and interconnected world. This, combined with Moody’s
experienced leadership and its talented and diverse workforce,
will enable continued generation of enduring value
for stockholders and other important stakeholders.
Raymond W. McDaniel, Jr.
Chairman of the Board
Robert Fauber
Letter from the President & Chief Executive Officer
Looking back on my first year as CEO, I am enormously proud
of the tremendous dedication and resilience of our employees
as we delivered for our stakeholders through yet another year
of the pandemic. As I observed last year, our customers seek
solutions to help them identify, measure and manage a wider
range of interconnected risks. To address these risks, they need
to go beyond data into context—and beyond context into
meaning. Moody’s seeks to be a compass for our customers
by leveraging our rich history and diverse expertise to provide
a holistic view of risk and opportunity.
In 2021, we set out three strategic priorities that are critical
to meeting this need: sharpening our understanding of our
customers’ needs, investing with intent to grow and scale,
and collaborating, modernizing and innovating. Over the
course of the year, we have executed on those priorities,
investing in capabilities to better serve a broader range of
customers and accelerating our ambition to be the leading
global provider of integrated perspectives on risk.
ACCELERATING OUR STRATEGY
Once again, our employees powered through the pandemic,
working together to support each other and our customers
with passion and commitment. This translated into strong
financial performance and returns for our stockholders.
While 2021 was a year of challenges, it was also full
of opportunities to invest and deliver for our customers.
The markets looked to Moody’s for our expertise and insights
in navigating evolving credit conditions, and many
organizations sought our help in making better, more informed
decisions in financing, screening, lending, insuring and
investing. We invested approximately $150 million organically
in technology, data, and product development in addition
to pursuing acquisitions that enhance our capabilities and
will accelerate our speed to market in areas ranging from
environmental, social and governance (ESG) and climate risk
to financial crime, commercial real estate (CRE) and supply
chain risk.
In 2021, we rated over $6 trillion of issuance and served
more than 1,100 issuers who accessed the markets for the first
time. We held over 13,000 customer engagement meetings,
a 12% increase over 2020. In addition to serving international
credit markets, we expanded our support for domestic markets
and began offering local credit ratings in Brazil as part of
the ongoing expansion of our Moody’s Local business across
3
MOODY’S 2021 ANNUAL REPORT
Latin America. I am very proud that our expertise and focus
on supporting credit markets was recognized by Institutional
Investor as Best Credit Rating Agency for the tenth
consecutive year.
We also significantly expanded the ways we are helping
markets better understand ESG issues, including the risks and
opportunities around climate change. We assigned nearly
1,800 ESG Credit Impact Scores to help investors understand
the impact of ESG factors on credit risk, as well as new Carbon
Transition Assessments for nearly 400 issuers across the most
exposed sectors. We launched Moody’s ESG Score Predictor,
which provides ESG estimates, carbon emissions footprint,
and transition and physical risk factors for over 140 million
companies, supporting customers’ needs around sustainable
sourcing and supply chains. Ahead of COP26, we launched the
Moody’s on Climate Campaign which generated close to 10
million content impressions, illustrating the market’s strong
interest in Moody’s ESG insights. In September, we closed on
our acquisition of RMS, a leading risk analytics business serving
the global insurance industry. This enables us both to provide
a more comprehensive suite of offerings to our life, property
and casualty (P&C) and reinsurance customers and to leverage
RMS’ world-class models and expertise in weather, climate
and disaster risk in providing risk solutions beyond insurance.
We advanced our screening and onboarding offerings, aided
by several key acquisitions. We are helping our customers
digitize and automate the Know Your Customer (KYC) process,
providing a streamlined workflow with proprietary company,
ownership, and people data. We also launched the next
generation of Supply Chain Catalyst, offering our customers
an enterprise-wide view of critical supply chain relationships,
including factors such as financial health, sustainability and
reputational risk.
In response to intense need for interconnected CRE data and
analytics to support lending and investing workflows, we
accelerated the development of our SaaS workflow solution
for CRE lenders and our portfolio monitoring solution for CRE
investors. We also advanced the transition of our banking and
insurance solutions to SaaS, deepening and streamlining the
ways we support many mid-sized financial institutions. And,
as our customers increasingly seek to understand and quantify
the risk of a cyber attack in their organizations and across their
supply chains, we made a $250 million investment in BitSight,
a leading provider of cyber security risk ratings.
All of these initiatives translated into impressive financial
performance and continued strong returns for our
stockholders. Moody’s surpassed $6 billion in revenue for
the first time and garnered recognition as a Fortune 500
company. We achieved revenue growth of 16% and adjusted
diluted EPS growth of 21%, our second consecutive year of
over 20% growth amidst the pandemic. Moody’s Investors
Service (MIS) revenue grew 16% on the strength of buoyant
issuance markets and our comprehensive coverage of global
debt markets. Moody’s Analytics (MA) revenue grew 16%,
supported by 9% organic revenue growth, as well as several
acquisitions. These impressive results are the product of
the many investments we have made in our people and our
offerings and speak to the value that customers place on our
expertise and solutions.
COMMITMENT TO SUSTAINABILITY
At Moody’s, we believe we play an important role in supporting
a sustainable future, and that means we must support our
people, our communities and our environment. In 2021,
we published our inaugural Sustainability Report (available
at about.moodys.io/sustainability-reports) highlighting our
commitments, initiatives, and achievements.
Our greatest asset is our people. We continue to advance our
commitment to a diverse and inclusive work environment
because we believe that a workforce with an array of
backgrounds and experiences greatly contributes to the quality
of our opinions, products and services. In 2021, we published
multi-year goals for the diversity of our workforce, supported
by a range of initiatives and programs that foster inclusion. This
includes our Business Resource Groups, which count more than
half of our employees as members, and our work to empower
our leaders, managers and individual employees in reinforcing
an inclusive culture. We are proud that Moody’s continues to
be recognized for our leadership in this area, including a perfect
score on the Human Rights Campaign Foundation’s Corporate
Equality Index for the eleventh year in a row, our third
consecutive year in the Bloomberg Gender-Equality Index,
inclusion in the prestigious Civic 50 honor roll, and being
named one of America’s Most Loved Workplaces by Newsweek.
We see our role as a corporate citizen to help build a world
where more people have access to opportunity and where
everyone has the resources to grow and thrive. In 2021, we
contributed to this goal through our many Corporate Social
Responsibility (CSR) initiatives, the work of the Moody’s
Foundation, and by encouraging employee volunteerism.
Highlights of our 2021 CSR program include the introduction
of paid time off for employees to volunteer and meaningful
support in the form of a $16 million contribution to the
Moody’s Foundation.
Our commitment to environmental sustainability includes
accelerating our net zero emissions target by ten years, from
2050 to 2040, consistently engaging in the ongoing global
dialogue around ESG and climate disclosures, and executing on
our public decarbonization plan. We are proud that our efforts
led to recognition as a 2021 Global Compact LEAD company
and an ‘A List’ score from CDP, recognizing Moody’s as one of
a small number of high-performing companies that are leading
actions to cut emissions, mitigate climate risks and develop the
low-carbon economy.
INTO THE FUTURE
I am excited about our future and the many ways we will meet
our customers’ evolving needs as we help them to decode
risk and unlock opportunity. By investing in our business and
acquiring new capabilities, we are enhancing the ways we
serve our customers and our ability to reach new markets.
We are focused on providing a world-class experience for
our customers, anchored around their sense of value, to
help expand our relationships with them as we meet their
needs. I am confident that we will realize the benefits of our
investments as we provide differentiated integrated solutions
that accelerate our growth. And, we will ensure that Moody’s is
a place where the best talent wants to come and stay through
investments in our people and our culture.
Above all, we are inspired to help uncover meaning amid
uncertainty so individuals and organizations can thrive, which
drives our ambition to be the leading provider of global
integrated perspectives on risk. I offer my sincere thanks to our
employees, stockholders and customers for their support,
and I look forward to a prosperous and successful year ahead.
Robert Fauber
President & Chief Executive Officer
MOODY’S 2021 ANNUAL REPORT
4
Moody’s Corporation
DIRECTORS
Raymond W. McDaniel, Jr.(4*)
Chairman of the Board of Directors
Moody’s Corporation
Jorge A. Bermudez(1,2,3)
Retired Chief Risk Officer
Citigroup, Inc.
Thérèse Esperdy(1,2,3)
Retired Global Chairman of Financial
Institutions Group
JPMorgan Chase & Co.
Robert Fauber(4)
President & Chief Executive Offiff cer
Moody’s Corporation
Vincent A. Forlenza(1,2*,3,4 )
Lead Independent Director
Moody’s Corporation
Retired Chief Executive Offiff cer
Becton Dickinson
Kathryn M. Hill(1,2,3*,4 )
Retired Senior Vice President
Cisco Systems Inc.
Lloyd Howell Jr.(1,2,3)
Executive Vice President,
Chief Financial Officer and Treasurer
Booz Allen Hamilton
Leslie F. Seidman(1*,2,3,4)
Former Chairman
Financial Accounting Standards Board
Zig Serafin(1,2,3)
Chief Executive Offiff cer
Qualtrics International Inc.
Bruce Van Saun(1,2,3)
Chairman & Chief Executive Officer
Citizens Financial Group, Inc.
5
MOODY’S 2021 ANNUAL REPORT
Caroline Sullivan
Senior Vice President &
Corporate Controller
Christine Elliott
Head of Global
Corporate Affairs
Tameka Alsop
Chief of Staff
David Hogan
Vice President, Treasurer
Scott Kapusta
Vice President, Global Tax
Helene Gurian
Chief Compliance Officer
Shivani Kak
Head of Investor Relations
SENIOR MANAGEMENT
Robert Fauber
President & Chief Executive Officer
Mark Kaye
Chief Financial Officer
Stephen Tulenko
President, Moody’s Analytics
Michael West
President, Moody’s Investors Service
John J. Goggins
Executive Vice President &
General Counsel
Mona Breed
Senior Vice President,
Chief Information Officer
Maral Kazanjian
Chief People Officer
Scott Kenney
Senior Vice President,
Risk Management &
Chief Audit Executive
David Platt
Senior Vice President,
Chief Strategy Officer
BOARD COMMITTEES
1 Audit
2 Governance & Nominating
3 Compensation & Human Resources
4 Executive
* Committee Chairman
Corporate Secretary
Elizabeth M. McCarroll
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 STATTT ES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARKMM
ONE)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
.
COMMISSION FILE NUMBER 1-14037
MOODY’S CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATTT E OF INCORPORATAA ION)
13-3998945
(I.R.S. EMPLOYER IDENTIFICATION
AA
NO.)
7 World Trade Center at 250 Greenwich Street, New York, New York 10007
(ADDRESS OF PRINCIPALPP
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
TRADING SYMBOL(S)
NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $0.01 per share
1.75% Senior Notes Due 2027
0.950% Senior Notes Due 2030
MCO
MCO 27
MCO 30
New York Stock Exchange
New York Stock Exchange
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 ☑ 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 ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or forff
to such filing
requirements for the past 90 days. Yes ☑ No ☐
such shorter period that the registrant was required to file such reports), and (2) has been subject
b
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). YesYY ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☑ Accelerated Filer ☐ Non-accelerated Filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☑
of its internal
ff
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of Moody’s Corporation Common Stock held by nonaffiliates*
the New York Stock Exchange on such date) was approximately $68 billion.
ff
on June 30, 2021 (based upon its closing transaction price on
As of January 31, 2022, 185.2 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 26, 2022,
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
ff
and directors of the Registrant without conceding that all such persons are “affiliates”
ff
of the
Registrant for purposes of federal securities laws.
* Auditor Name: KPMG LLP
Auditor Location: New York, NY
Auditor Firm ID:
185
MOODY'S 2021 10-K
1
MOODY’S CORPORATION
INDEX TO FORM 10-K
AA
Glossary of Terms and Abbreviations
PART I.
Item 1.
BUSINESS
Background
The Company
Human Capital
Climate
Moody’s Strategy
Prospects for Growth
Competition
Regulation
Intellectual Property
Available Information
Executive Officers
ff
of the Registrant
Item 1A.
RISK FACTORS
Item 1B.
UNRESOLVED STAFF COMMENTS
Item 2.
Item 3.
Item 4.
Item 5.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II.
Moody’s Purchases of Equity Securities
Common Stock Information
Equity Compensation Plan Information
Performance Graph
Item 7.
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
Recently Issued Accounting Pronouncements
Contingencies
Forward-Looking Statements
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
Item 9.
FINANCIAL STATEMENTS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Page(s)
4-10
11
11
11-14
14-18
18
19-20
21-23
23
23-24
24-25
25
25-26
27-37
38
38
38
38
39
39
39
39
40
41
41
41-46
46
46-59
60-61
61-66
66
66
66-67
67
68-129
130
2 MOODY'S 2021 10-K
Item 9A.
CONTROLS AND PROCEDURES
Item 9B.
OTHER INFORMATION
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III.
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11.
EXECUTIVE COMPENSATION
Item 12.
Item 13.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV.
INDEX TO EXHIBITS
Item 16.
FORM 10-K SUMMARY
SIGNATURES
Page(s)
130
130
130
131
131
131
131
131
132
132-135
135
136
MOODY'S 2021 10-K
3
The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:
TERM
DEFINITION
GLOSSARY OF TERMS AND ABBREVIATIONS
Acquire Media (AM)
An aggregator and distributor of curated real-time news, multimedia, data, and alerts; acquired by the
Company on October 21, 2020
Acquisition-Related
Amortization
Amortization of definite-lived intangible assets acquired by the Company from all business
combination transactions
Acquisition-Related
Expenses
Consists of expenses incurred over a multi-year period to complete and integrate the acquisition of
Bureau van Dijk
Adjusted Diluted EPS
Diluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP
Financial Measures”
Adjusted Net Income
Net Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP
Financial Measures”
Adjusted Operating
Income
Operating income excluding the impact of certain items as detailed in the section entitled "Non-GAAP
Financial Measures"
Adjusted Operating
Margin
Adjusted Operating Income divided by revenue
Americas
AML
AOCI(L)
ASC
Represents countries within North and South America, excluding the U.S.
Anti-money laundering
Accumulated other comprehensive income (loss); a separate component of shareholders’ equity
The FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1,
2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative
GAAP for SEC registrants
Asia-Pacific
Represents Australia and countries in Asia including but not limited to: China, India, Indonesia,
Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand
ASR
ASU
B&H
Board
BPS
Brexit
Accelerated Share Repurchase
The FASB Accounting Standards Update to the ASC. It also provides background information for
accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not
considered authoritative until codified into the ASC
Barrie & Hibbert Limited, an acquisition completed in December 2011; part of the MA segment, a
leading provider of risk management modeling tools for insurance companies worldwide
The board of directors of the Company
Basis points
The withdrawal of the United Kingdom from the European Union
Bureau van Dijk
Bureau van Dijk Electronic Publishing, B.V.; a global provider of business intelligence and company
information; acquired by the Company on August 10, 2017 via the acquisition of Yellow Maple I B.V.,
an indirect parent of Bureau van Dijk; part of the RD&A LOB
A provider of cybersecurity ratings, analytics, and performance management tools; Moody's acquired
a minority investment in BitSight in 2021
A provider of commercial real estate (CRE) solutions for brokers; acquired by the Company on
December 30, 2020
China Cheng Xin International Credit Rating Co. Ltd.; China’s first and largest domestic credit rating
agency approved by the People’s Bank of China; the Company acquired a 49% interest in 2006;
currently Moody’s owns 30% of CCXI
A not-for-profit charity that runs the global disclosure system for investors, companies, cities, states
and regions to manage their environmental impacts
BitSight
Catylist
CCXI
CDP
4 MOODY'S 2021 10-K
TERM
CFG
CLO
CMBS
COLI
DEFINITION
Corporate finance group; an LOB of MIS
Collateralized loan obligation
Commercial mortgage-backed securities; an asset class within SFG
Corporate-Owned Life Insurance
Commission
European Commission
Common Stock
The Company’s common stock
Company
Content
Cortera
COVID-19
CP
CP Notes
CP Program
CRAs
CRE
DBPPs
Moody’s Corporation and its subsidiaries; MCO; Moody’s
Prior to the second quarter of 2021, was a reporting unit within the MA segment that offered
subscription-based research, data and analytical products, including credit ratings produced by MIS,
credit research, quantitative credit scores and other analytical tools, economic research and
forecasts
ff
A provider of North American credit data and workflow solutions; acquired by the Company in March
2021
An outbreak of a novel strain of coronavirus resulting in an international public health crisis and a
global pandemic
Commercial Paper
Unsecured commercial paper issued under the CP Program
A program entered into on August 3, 2016 allowing the Company to privately place CP up to a
maximum of $1 billion for which the maturity may not exceed 397 days from the date of issue, and
which is backstopped by the 2021 Facility.
Credit rating agencies
Commercial Real Estate
Defined benefit pension plans
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act
EBITDA
EEO-1
Earnings before interest, taxes, depreciation and amortization
Data filing required by the U.S. Equal Employment Opportunity Commission that requires all private
sector employers with 100 or more employees, and federal contractors with 50 or more employees
meeting certain criteria, to submit demographic workforce data, including data by race/ethnicity, sex
and job categories
EMEA
Represents countries within Europe, the Middle East and Africa
EPS
ERS
ESA
ESG
ESMA
ESPP
ETR
EU
EUR
EURIBOR
Eurozone
Earnings per share
Enterprise Risk Solutions; an LOB within MA, which offers
well as related risk management advisory engagements services
ff
risk management software solutions as
Economics and Structured Analytics; part of the RD&A line of business within MA
Environmental, Social and Governance
European Securities and Markets Authority
Employee stock purchase plan
Effective
ff
tax rate
European Union
Euros
The Euro Interbank Offered
ff
Rate
Monetary union of the EU member states which have adopted the euro as their common currency
MOODY'S 2021 10-K
5
TERM
DEFINITION
Excess Tax Benefits
The difference
ff
share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP
between the tax benefit realized at exercise of an option or delivery of a restricted
Exchange Act
The Securities Exchange Act of 1934, as amended
External Revenue
Revenue excluding any intersegment amounts
FASB
Fermat
FIG
Financial Accounting Standards Board
Fermat International; an acquisition completed in October 2008; part of the MA segment; a provider
of risk and performance management software to the global banking industry
Financial institutions group; an LOB of MIS
Four Twenty Seven
A provider of data, intelligence, and analysis related to physical climate risks; acquired by the
Company in July 2019
Free Cash Flow
Net cash provided by operating activities less cash paid for capital additions
FTSE
FX
GAAP
GBP
GDP
GDPR
ICRA
INR
IRS
KIS
Financial Times Stock Exchange
Foreign exchange
U.S. Generally Accepted Accounting Principles
British pounds
Gross domestic product
European Union’s General Data Protection Regulation
ICRA Limited; a provider of credit ratings and research in India.
Indian National Rupee
Internal Revenue Service
Korea Investors Service, Inc.; a Korean rating agency and consolidated subsidiary of the Company
KIS Pricing
KIS Research
Korea Investors Service Pricing, Inc.; a Korean provider of fixed income securities pricing and
consolidated subsidiary of the Company
Korea Investors Service Research; a Korean provider of financial research and consolidated
subsidiary of the Company
Korea
KYC
LIBOR
LOB
MA
Republic of South Korea
Know-your-customer
London Interbank Offered
ff
Rate
Line of business
Moody’s Analytics—a reportable segment of MCO; a global provider of: i) data and information; ii)
research and insights; and iii) decision solutions, which help companies make better and faster
decisions; consists of two LOBs—RD&A and ERS
Make Whole Amount
The prepayment penalty amount relating to certain Senior Notes, which is a premium based on the
excess, if any, of the discounted value of the remaining scheduled payments over the prepaid
principal
MAKS
MALS
Moody’s Analytics Knowledge Services; formerly known as Copal Amba; provided offshore
and analytic services to the global financial and corporate sectors; business was divested in the
fourth quarter of 2019 and was formerly part of the PS LOB and a reporting unit within the MA
reportable segment.
ff
research
Moody’s Analytics Learning Solutions; prior to the second quarter of 2021, was a reporting unit within
the MA segment that offered
and certification services
on-line and classroom-based training services as well as credentialing
ff
MCO
Moody’s; Moody’s Corporation and its subsidiaries; the Company
6 MOODY'S 2021 10-K
TERM
MD&A
MIS
MIS Other
DEFINITION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Moody’s Investors Service—a reportable segment of MCO; consists of five LOBs—SFG, CFG, FIG,
PPIF and MIS Other
Consists of non-ratings revenue from ICRA, KIS Pricing and KIS Research revenue as well as
revenue from providing ESG research, data and assessments. These businesses are components of
MIS; MIS Other is an LOB of MIS
Moody’s
Moody’s Corporation and its subsidiaries; MCO; the Company
Moody's Local
A ratings platform focused on providing credit rating services in local capital markets
MSS
AA
NAV
Net Income
New Credit Losses
Accounting Standard
Moody's Shared Services; primarily consists of information technology and support staff sff uch as
finance, human resources and legal that support both MIS and MA.
N
et asset value
Net income attributable to Moody’s Corporation, which excludes net income from consolidated
noncontrolling interests belonging to the minority interest holder
Updates to the ASC pursuant to ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments”. This new accounting guidance
requires the use of an “expected credit loss” impairment model for most financial assets reported at
amortized cost, which requires entities to estimate expected credit losses over the lifetime of the
instrument.
TT
New Lease Accounting
Standard
Updates to the ASC pursuant to ASU No. 2016-02, “Leases (ASC Topic 842)”. This new accounting
guidance requires lessees to recognize a right-of-use asset and lease liability on the balance sheet
for all leases with terms of more than 12 months. Recognition, measurement and presentation of
expenses and cash flows depend on classification as either a finance or operating lease
NM
Non-GAAP
NRSRO
OCI
Operating segment
Percentage change is not meaningful
A financial measure not in accordance with GAAP; these measures, when read in conjunction with
the Company’s reported results, can provide useful supplemental information for investors analyzing
period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’
operating results and to provide greater transparency to investors of supplemental information used
by management in its financial and operational decision making
Nationally Recognized Statistical Rating Organization, which is a credit rating agency registered with
the SEC.
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
Term defined in the ASC relating to segment reporting; the ASC defines an operating segment as a
component of a business entity that has each of the three following characteristics: i) the component
engages in business activities from which it may recognize revenue and incur expenses; ii) the
operating results of the component are regularly reviewed by the entity’s chief operating decision
maker; and iii) discrete financial information about the component is available.
Other Retirement Plans The U.S. retirement healthcare and U.S. retirement life insurance plans
PassFort
PCS
PPIF
A U.K. SaaS-based workflow platform for identity verification, customer onboarding, and risk
analysis; acquired by the Company on November 30, 2021.
Post-Contract Customer Support
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
MOODY'S 2021 10-K
7
TERM
PS
RealXData
RD&A
DEFINITION
ff
ff
LOB within MA which consisted of MAKS and MALS that provided
analytical and research services as well as learning solutions and certification programs.
Professional Services, a former
offshore
Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which
previous to 2020 was reported in the PS LOB, is now reported as part of the RD&A LOB. Prior
periods have not been reclassified as the amounts were not material.
A provider of CRE lease-level portfolio management with benchmarking and rent forecasting
capabilities; acquired by the Company in September 2021
Research, Data and Analytics; an LOB within MA that offers:
analytical products, including credit ratings produced by MIS; credit research; quantitative credit
scores and other analytical tools; economic research and forecasts; business intelligence and
company information products; commercial real estate data and analytical tools; and on-line and
classroom-based training services as well as credentialing and certification services
subscription based research, data and
ff
Recurring Revenue
For MIS, represents recurring monitoring fees of a rated debt obligation and/or entities that issue
such obligations, as well as revenue from programs such as commercial paper, medium-term notes
and shelf registrations. For MIS Other represents subscription-based revenue. For MA, represents
subscription-based revenue and software maintenance revenue
Reform Act
Credit Rating Agency Reform Act of 2006
Regulatory Data
Corporation (RDC)
A provider of anti-money laundering (AML) and know-your-customer (KYC) data and due diligence
services; the Company acquired RDC in February 2020
REIT
Real Estate Investment Trust
Reis, Inc. (Reis)
A provider of U.S. commercial real estate (CRE) data; acquired by the Company in October 2018;
part of the RD&A LOB and prior to the second quarter of 2021 a reporting unit within the MA
reportable segment.
Reporting unit
The level at which Moody’s evaluates its goodwill for impairment under U.S. GAAP; defined as an
operating segment or one level below an operating segment
Retirement Plans
Moody’s funded and unfunded pension plans, the healthcare plans and life insurance plans
Revenue Accounting
Standard
Updates to the ASC pursuant to ASU No. 2014-09, “Revenue from Contracts with Customers (ASC
Topic 606)”. This accounting guidance significantly changed the accounting framework under U.S.
GAAP relating to revenue recognition and to the accounting for the deferral of incremental costs of
obtaining or fulfilling a contract with a customer
RMBS
RMS
ROU Asset
SaaS
SEC
Residential mortgage-backed securities; an asset class within SFG
A global provider of climate and natural disaster risk modeling and analytics; acquired by the
Company in September 2021
Assets recorded pursuant to the New Lease Accounting Standard which represent the Company’s
right to use an underlying asset for the term of a lease
Software-as-a-Service
U.S. Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
Structured finance group; an LOB of MIS
Selling, general and administrative expenses
Secured Overnight Financing Rate
Standalone selling price
Time-and-Material
The “TaxTT Cuts and Jobs Act” enacted into U.S. law on December 22, 2017, which significantly
amends the tax code in the U.S.
Task Force on Climate-Related Financial Disclosures
SFG
SG&A
SOFR
SSP
T&M
Tax Act
TCFD
8 MOODY'S 2021 10-K
TERM
Total Debt
Transaction Revenue
DEFINITION
All indebtedness of the Company as reflected on the consolidated balance sheets
For MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS
Other, represents revenue from professional services as well as data services, research and
analytical engagements. For MA, represents perpetual software license fees and revenue from
software implementation services, risk management advisory projects, training and certification
services, and research and analytical engagements
U.K.
U.S.
USD
UTPs
United Kingdom
United States
U.S. dollar
Uncertain tax positions
Vigeo Eiris (VE)
A provider of ESG research, data and assessments; acquired by the Company in April 2019
VisibleRisk
A cyber risk ratings joint venture created by Moody’s and Team8, a global venture group
WACC
Weighted Average Cost of Capital
ZM Financial Systems
(ZMFS)
A provider of risk and financial management software for the U.S. banking sector; acquired by the
Company in December 2020
2018 Restructuring
Program
Restructuring program approved by the chief executive officer
of Moody’s on October 26, 2018. This
program included relocation of certain functions from high-cost to lower-cost jurisdictions, a reduction
including from acquisitions and pursuant to a review of the business criticality of certain
of staff,ff
positions, and the rationalization and exit of certain real estate leases due to consolidation of various
business activities.
ff
2020 MA Strategic
Reorganization
Restructuring Program
Restructuring program approved by the chief executive officer
relating to a strategic reorganization in the MA reportable segment.
ff
of Moody’s on December 22, 2020,
2020 Real Estate
Rationalization
Restructuring Program
Restructuring program approved by the chief executive officer
of Moody’s on July 29, 2020, primarily
in response to the COVID-19 pandemic which revolves around the rationalization and exit of certain
real estate leases.
ff
2012 Senior Notes Due
2022
Principal amount of $500 million, 4.50% senior unsecured notes due in September 2022, but early
repaid by the Company in 2021
2013 Senior Notes Due
2024
2014 Senior Notes Due
2044
2015 Senior Notes Due
2027
2017 Senior Notes Due
2023
2017 Senior Notes Due
2028
2018 Facility
2018 Senior Notes Due
2029
2018 Senior Notes Due
2048
2019 Senior Notes Due
2030
Principal amount of $500 million, 4.875% senior unsecured notes due in February 2024
Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044
Principal amount of €500 million, 1.75% senior unsecured notes due in March 2027
Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023
Principal amount of $500 million, 3.25% senior unsecured notes due January 15, 2028
Five-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; backstops CP
issued under the CP Program. The 2021 Facility replaces the Company's $1 billion 2018 Credit
Facility.
Principal amount of $400 million, 4.25% senior unsecured notes due February 1, 2029
Principal amount of $400 million, 4.875% senior unsecured notes due December 17, 2048
Principal amount of €750 million, 0.950% senior unsecured notes due February 25, 2030
MOODY'S 2021 10-K
9
TERM
DEFINITION
2020 Senior Notes Due
2025
2020 Senior Notes Due
2050
2020 Senior Notes Due
2060
2021 Facility
2021 Senior Notes Due
2031
2021 Senior Notes Due
2041
2021 Senior Notes Due
2061
Principal amount of $700 million, 3.75% senior unsecured notes due March 24, 2025
Principal amount of $300 million, 3.25% senior unsecured notes due May 20, 2050
Principal amount of $500 million, 2.55% senior unsecured notes due August 18, 2060
Five-year unsecured revolving credit facility, with capacity to borrow up to $1.25 billion; backstops CP
issued under the CP Program.
Principal amount of $600 million, 2.00% senior unsecured notes due August 19, 2031
Principal amount of $600 million, 2.75% senior unsecured notes due August 19, 2041
Principal amount of $500 million, 3.10% senior unsecured notes due November 15, 2061
7WTC
The Company’s corporate headquarters located at 7 World Trade Center in New York, NY
10 MOODY'S 2021 10-K
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
Corporation, a Delaware corporation, and its subsidiaries. The Company’s executive offices
at 250 Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300.
are located at 7 World Trade Center
ff
THE COMPANY
Company Overview
integrated risk assessment firm that empowers organizations and investors to make better decisions.
Moody’s is a global
Moody’s reports in two segments: MIS and MA. Financial
information and operating results of these segments, including
revenue, expenses and Adjusted Operating Income, are included in Part II, Item 8. Financial Statements of this annual report and
are herein incorporated by reference.
Independent provider of credit
rating opinions and related
information for over 100 years
Global integrated risk
assessment firm providing
credit rating opinions,
analytical solutions and
insights that empower
organizations to make better,
faster decisions
Provider of financial intelligence
and analytical tools supporting
customers’ growth, efficiency
and risk management objectives
ff
Moody's has evolved over the last 15 years as our customers' needs have changed and we expanded our capabilities
2007 - 2016
Expanded beyond ratings agency
•
•
•
Established Moody’s Analytics
Built the ERS business (e.g., Fermat, B&H)
Expanded ratings to China (i.e., CCXI)
2017 - 2021
Built out substantial data and analytics capabilities
•
•
•
Complemented ERS business with private company information (i.e., BvD)
Accelerated capability expansion (e.g., company database, CRE data, ESG data)
Invested in insurance data and analytics capabilities, including weather and disaster modeling
(i.e., RMS)
2022 and Beyond
Positioned to serve a wide range of risk assessment markets
•
•
Competitive differentiator: integration of data and analytics combined with expertise and
technology enablement
Further investment in data and analytics capabilities such as private company, CRE and ESG to
serve high growth risk assessment use cases (e.g., KYC and compliance)
Moody's Investors Service Overview
Moody's Investors Service (MIS) publishes credit ratings and provides assessment services on a wide range of debt obligations,
programs and facilities, and the entities that issue such obligations in markets worldwide, including various corporate, financial
institution and governmental obligations, and structured finance securities. A rating from MIS enables issuers to create timely, go-
to-market debt strategies with the ability to capture wider investor focus and deeper liquidity options.
MOODY'S 2021 10-K
11
The Benefits of a Moody's Rating
Investors seek Moody's opinions and particularly
ll
value the knowledge of its analysts and the depth of Moody's research
Access to capital
Transparency, credit
comparison and market
stability
• Moody’s opinions on credit
are used by institutional
investors throughout the
world, making an issuer’s
debt potentially more
attractive to a wide range of
buyers.
• Signals a willingness by
issuers to be transparent
and provides issuers with
an independent
assessment against which
to compare
creditworthiness.
• A Moody’s rating may
• Moody’s ratings and
facilitate access to both
domestic and international
debt capital.
research reports may help
to maintain investor
confidence, especially
during periods of market
stress.
Planning and budgeting
Analytical capabilities
• May help issuers when
formulating internal capital
plans and funding
strategies.
• Among ratings advisors,
Moody’s has a strong
position and is well-
recognized for the depth
and breadth of its analytical
capabilities.
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. Ratings are disseminated via press releases to the public primarily through a variety of
electronic media, including the internet and real-time information systems widely used by securities traders and investors.
35,000+
Rated Organizations and Structured Deals
MIS by the Numbers
5,300+
Rated Non-Financial
Corporates
3,500+
Rated Financial
Institutions
15,500+
Rated Public Finance
Issuers
445
Rated Sub-Sovereigns
1,000+
Rated Infrastructure &
Project Finance Issuers
49
Rated Supranational
Institutions
$73 trillion
Total rated debt
outstanding
9,000+
Rated Structured
Finance Deals
145
Rated Sovereigns
190
Rating Methodologies
MIS also earns revenue from certain non-ratings-related operations, which primarily consist of financial instruments pricing
services in the Asia-Pacific region, revenue from ESG research, data and assessments and revenue from ICRA's non-ratings
operations. The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS
segment.
12 MOODY'S 2021 10-K
Moody's Analytics Overview
Moody's Analytics (MA) is a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which
help companies make better and faster decisions. MA leverages its industry expertise across multiple risks such as credit,
market, financial crime, supply chain, catastrophe and climate to deliver integrated risk assessment solutions that enable
business leaders to identify, measure and manage the implications of interrelated risks and opportunities. MA’sAA proprietary data,
research and analytics combined with cloud-based software tools deliver solutions to meet customer needs as they arise. MA’sAA
subscription businesses provide a significant base of recurring revenue to mitigate cyclical changes in debt issuance volumes
that may result in volatility in MIS’s revenues.
Curated Data Combined with Analytics are the Foundation of MA's Integrated Risk Assessment Strategy
Domain Expertise
Curated Data
Best in Class Analytics
Proprietary data
assets allow
companies to
inform and
perform many
critical business
activities with
trust and
confidence
Transparency
Efficiency
ff
Convenience
14,900 +
Total MA customers
ç
Better Decisions
è
MA Customers by the Numbers
MA's approach to
deepening available
data sets and ability
to combine with
research, analytic
tools and software is
driving a more
integrated
understanding of
risks and
opportunities
Benchmarks
Analytics
Insights
1,800+
Asset Managers
2,300+
Commercial Banks
3,600+
Corporations
900+
Insurance Companies
165
Countries where MA
customers operate
5,300+
Government & Other
Entities
29,000+
Customer users
accessed the Moody's
research website in
2021
200+
Securities Dealers and
Investment Banks
800+
Real Estate Entities
244,000+
Individuals accessed the
Moody's research
website
MOODY'S 2021 10-K
13
Sustainability
Moody’s manages its business with the goal of delivering value to all of its stakeholders, including its customers, employees,
Moody’s advances sustainability by considering
business partners, local communities and stockholders. As part of this effort,
environmental, social, and governance (“ESG”) factors throughout its operations and products and services. The Company uses
its expertise and assets to make a positive difference
through technology tools, research and analytical services that help other
organizations and the investor community better understand the links between sustainability considerations and the global
markets. Moody’s efforts
to promote sustainability-related thought leadership, assessments and data to market participants
include adhering to the policies of recognized sustainability organizations that develop standards or frameworks and/or evaluate
and assess performance, including: the Global Reporting Initiative; Sustainability Accounting Standards Board; and the World
Economic Forum’s Stakeholder Capitalism metrics. Moody's also issues an annual report on Stakeholder Sustainability and on
how the Company has implemented the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations.
Moody’s sustainability-related achievements in 2021 included the following:
ff
ff
ff
–
–
Established three goals to increase representation of women and employees of racial and ethnic underrepresented
groups; published our EEO-1 data;
Accelerated our net-zero commitment to 2040, a decade earlier than the Paris Agreement goal;
– Received an ‘A’ sAA core from CDP on climate action for the second consecutive year; and
–
Became a founding
ff
for Net Zero (GFANZ)
FF
member of the Net Zero Financial Services Provider Alliance, part of the Glasgow Financial Alliance
and joined the Taskforce on Nature-related Financial Disclosures (TNFD).
The Board oversees sustainability matters, with assistance from the Audit, Governance & Nominating and Compensation &
Human Resources Committees, as part of its oversight of management and the Company’s overall strategy. The Board also
oversees Moody’s policies for assessing and managing our exposure to risk, including climate-related risks such as business
continuity disruption or reputational and credibility concerns stemming from incorporation of climate-related risks into the credit
methodologies and credit ratings of MIS.
Three Pillars of Moody's Sustainability Strategy
Better Business
Better Lives
Better solutions
For Moody's operations and value
chain
Strive to embed responsible,
sustainable decision-making in
everything Moody's does.
For Moody's people and communities
For market transformation
Aim to create a forward-thinking,
inclusive culture across Moody's people
and communities.
Build/develop products to help our
customers identify risks and
opportunities and provide meaningful
performance measurements and
insights
CAPITAL
Moody’s purpose is to bring clarity, knowledge and fairness to an interconnected world. The Company’s success in achieving its
purpose is only possible through the collective contributions of its global employee population whose members possess the
unique combination of skills, professional experience and diversity of backgrounds needed to advance the Company’s business
and contribute to the communities in which it operates. Moody’s believes that it is essential to: i) create a workplace where its
employees feel valued and inspired; ii) provide an environment that fosters a culture of independence, inclusion and intellectual
leadership; and iii) support peer collaboration and professional growth.
As a global integrated risk assessment firm, attracting, supporting and retaining skilled talent is essential to the Company’s
success. Moody’s addresses these goals by:
–
–
–
–
–
championing diversity, equity and inclusion among employees;
seeking to provide market-competitive compensation and benefits and rewarding employees for their contributions to
the Company’s strategic and operational goals;
offering wellness programs;
supporting employee learning, development and skills enhancement; and
advancing employee engagement.
14 MOODY'S 2021 10-K
Diversity, Equity and Inclusion
Moody's believes it is imperative to be visible champions of diversity, equity and inclusion because differing
perspectives help to enrich the Company’s offerings to its many stakeholders and improve performance. The key objectives for
which the Company focuses with respect to these items include:
thoughts and
ff
–
–
incorporating diversity, equity and inclusion into Moody’s business strategy;
establishing leadership accountability with respect to diversity, including through executive compensation programs;
– working to increase diverse representation (e.g., women and ethnic groups);
–
–
–
–
–
continuing to advance women and ethnically diverse employees in leadership roles;
enhancing employee training in diversity, equity and inclusion matters;
promoting equal employment opportunities in all aspects of employment;
designing the Company’s compensation practices to provide equal pay for equal work; and
incorporating market standards, role, experience and performance into compensation decisions.
The executive leadership team’s focus
ff
on these items is vital to attract, support and retain its skilled talent.
Moody’s has numerous diversity programs and eight active business resource groups (“BRGs”) including:
–
EnAble BRG: advocates for an inclusive, accessible and stigma-free workplace in which employees with disabilities are
valued for their talents and have the opportunity to advance and thrive professionally
– Generational BRG: seeks to leverage the insights and experiences of our multi-generational workforce in order to
cultivate an inclusive work environment that fosters greater connectedness, supports the development of all
generational groups and delivers business value to the firm
–
Inclusion BRG: supports all areas of diversity and inclusion combining Moody's BRG chapters. Inclusion creates
opportunities for all employees regardless of officeff
size to engage with a BRG
– Minds BRG: seeks to foster a culture at Moody’s where all employees are empowered to discuss and manage their
mental health
– Multicultural BRG: seeks to leverage diverse talent by promoting recruitment, professional development and
networking opportunities for all ethnically diverse employees at Moody's
–
–
Pride BRG: advocates for a work environment that respects, welcomes and supports lesbian, gay, bisexual and
transgender professionals, enabling them to perform to their fullest potential and contribute to the greater goals of the
Company
Veterans BRG: recognizes and supports veterans, active-duty military personnel and military families both at Moody's
and in our communities
– Women's BRG: seeks to enhance the recruitment, retention, and professional development of female professionals by
implementing programs that foster greater interaction among peers as well as the broader community, while acting as a
collective voice for raising women's issues to senior management and enhancing the employment brand
The BRGs represent 44 chapters and more than 6,600 memberships globally as of December 31, 2021. An employee can hold
membership in multiple BRGs in a single region.
The Company’s diversity programs include its TIDE program (Talent
Planning and Exposure & Expansion), which is a high potential employee diversity initiative aimed at elevating women and
ethnically diverse employees into leadership positions.
Aspirations & Alignment, Insights, Development & Career
TT
The Company provides and periodically updates information on its BRGs and other diversity, inclusion and equity programs in its
various sustainability and stakeholder reports and on its Diversity & Inclusion microsite. See moodys.com/sustainability and
moodys.com/diversity for these items. The content of those websites is not incorporated by reference herein.
MOODY'S 2021 10-K
15
The charts below present additional information regarding the diversity of the Company's workforce as of December 31, 2021.
The percentage for people of color ("POC") includes those who identified as Asian, Hispanic, Black, American Indian/Alaskan
Native, Hawaiian/Other Pacific Island or two or more races. Officers
ff
executives, senior managers, mid-level managers, and first-level managers. The following data is based on Company records
and may involve estimates or assumptions.
and Managers are calculated using the job categories:
Total Workforce: Gender
U.S. Workforce: Ethnicity
41%
59%
6%
45%
49%
Male
Female
White
POC
Not Disclosed
Total Officers and Managers: Gender (1)
U.S. Officers and Managers: Ethnicity
36%
64%
4%
43%
53%
Male
Female
White
POC
Not Disclosed
(1) Total officers
companies for which this data was not available)
ff
and managers by gender represents approximately 90% of employees (excludes certain non-wholly-owned subsidiaries and newly acquired
Compensation
Moody’s compensation programs are designed to foster and maintain a strong, capable, experienced and motivated global
workforce. An important element of the Company’s compensation philosophy is aligning compensation to local market standards
so that Moody's can attract and retain the highly-skilled talent needed to thrive. The Company’s compensation packages include
market-competitive salaries, annual bonuses and equity grants for certain employees.
Benefits and Wellness Programs
ff
resources for physical and mental health that promote preventive care, awareness and support a healthy lifestyle.
With respect to benefits, the Company views investments in benefits as an investment in its people. Moody’s is committed to
providing competitive benefits programs designed to care for all employees and their families. The Company’s comprehensive
programs offer
The Company also promotes financial wellness and provides for flexible work arrangements, which support the Company’s
to create a work atmosphere in which people feel valued and inspired to give their best. Beyond delivering health, welfare,
efforts
retirement benefits, and paid vacation and sick days, Moody’s extends other benefits to support its employees and their families.
To provide competitive benefits, the Company periodically adjusts the nature and extent of benefits, such as parental leave,
workplace flexibility and educational support.
ff
16 MOODY'S 2021 10-K
Employee Population
As of December 31, 2021 and 2020, the number of Moody’s employees was as follows:
Global Headcount
2021
2020
December 31,
Change
%
MIS
MA
MSS
U.S.
Non-U.S.
Total
U.S.
Non-U.S.
Total
U.S.
Non-U.S.
Total
Total MCO
U.S.
Non-U.S.
Total
1,459
3,836
5,295
2,647
3,882
6,529
728
908
1,636
4,834
8,626
13,460
1,518
3,533
5,051
2,012
2,996
5,008
704
724
1,428
4,234
7,253
11,487
(4)%
9 %
5 %
32 %
30 %
30 %
3 %
25 %
15 %
14 %
19 %
17 %
The MIS employee population primarily consists of credit analysts, data and operations analysts, credit strategy and
methodology professionals, software engineers, sales and sales operations, and international strategy teams.
MA’sAA employee population primarily consists of software engineers, data and operation analysts, advisory and implementation
teams and economists, as well as sales and sales support professionals.
The MSS employee population primarily consists of information technology professionals and other professional support staffff
such as finance, human resources and legal that support both MIS and MA.
Management monitors employee turnover rates as presented in the chart below:
Voluntary Turnover
Involuntary Turnover
16%
14%
13%
10%
8%
7%
7%
7%
11%
3%
2%
2%
4%
4%
4%
3%
MIS
MA
MSS
Total MCO
MIS
MA
MSS
Total MCO
2021
2020
2021
2020
The increase in the Company's voluntary turnover rates in 2021 compared to 2020 are likely due to the effects
of COVID-19 on
the labor market. Additionally, MSS involuntary turnover figures in 2020 in the chart above includes employees who separated
functions. A majority of these employees were
pursuant to a third-party outsourcing arrangement relating to certain back-officeff
hired by the third-party outsourcing provider.
ff
MOODY'S 2021 10-K
17
Employee Engagement, Learning and Development
As a result of the COVID-19 pandemic, the Company enhanced its digital communications with its employees beginning in 2020.
These enhanced communications have allowed senior management to continue to interact with employees regarding evolving
priorities and its focus on the health, safety and well-being of Moody’s employees during this challenging time.
Learning & Development is one element of Moody’s talent management framework, which includes talent acquisition,
performance management, total rewards, succession planning and leadership development. Each of these areas supports the
Company’s business strategy and Moody’s culture as a diverse, equitable and inclusive place to work. Moody's views learning
and education as an investment in its people that aligns their professional goals and interests with the success of the Company,
and helps to retain talent over the longer-term. A number of training programs are available, including leadership development,
professional skills development, technical skills, as well as compliance training.
CLIMATE CHANGE
Climate change is a defining issue of our time, and while Moody’s operations have a limited direct environmental impact and we
are not considered a major emitter of greenhouse gas (GHG) emissions, we do nonetheless have an important role to play in
demonstrating proactive corporate responsibility, setting industry standards and demonstrating best practices when it comes to
climate change mitigation. As such, the Company is taking steps to advance climate action by publishing its TCFD report on an
annual basis, issuing its decarbonization plan with science-based targets and a comprehensive roadmap and accelerating its
commitment to achieve net-zero emissions across its operations and value chain by 2040.
Moody’s Decarbonization Plan outlines tangible strategies for realizing its climate ambitions, including the procurement of 100%
of renewable electricity in the Company’s office spaces and optimizing efficiencies
in its operations through a “Workplace of the
Future” program. The Decarbonization Plan was subject to a vote at Moody’s 2021 Annual Meeting of Stockholders with 93% of
votes in favor of the proposal, which underscored that climate considerations and action are now an integral part of the
Company’s business strategy, governance, and corporate performance. The costs associated with the implementation of the
Decarbonization Plan are not expected to be material.
ff
Furthermore, Moody’s has invested in acquisitions that expand its climate capabilities further, including RMS, Four Twenty Seven
and Vigeo Eiris. To integrate these capabilities into our existing offerings,
Moody’s is enhancing its technology infrastructure to
ff
provide our analysts and researchers with streamlined access to consistent and high-quality ESG and climate insights. These
enhancements will allow Moody’s to seamlessly integrate climate considerations into our products and solutions for the benefit of
our customers and the capital markets at large.
18 MOODY'S 2021 10-K
MOODY’S STRATEGY
Moody’s corporate mission is to provide trusted insights and standards that help decision-makers act with confidence. Moody’s
will continue to invest with intent to defend and enhance its core businesses and expand into strategic adjacencies and new
geographies.
Vision
Objective
Growth Strategy
To promote progress through better decisions
Deliver global integrated risk assessment platform and solutions
Invest with intent to grow and scale
Invest with intent to grow and
strengthen our core business
with a foundation
of credibility,
transparency, technology, data
and analytics
ff
Invest in integrated solutions
to allow customers to manage
multiple risks, bringing the
best of Moody's capabilities
Invest to successfully scale in
priority growth markets with
highly differentiated
ff
products and
services
Execution Priorities
How we will get it done
Investment in high growth markets
Sharpen focus on
customers
Develop our people and
culture
Collaborate, modernize and
innovate
Moody’s invests in initiatives to implement the Company’s strategy, including internally led organic development and targeted
acquisitions. Illustrative examples include:
Enhancements to
ratings quality and
product extensions
Investments that
extend ownership and
participation in joint
ventures and strategic
alliances
Expansion in emerging
markets
New products,
services, content and
technology capabilities
to meet customer
demands
Selective bolt-on
acquisitions that
accelerate the ability to
scale and grow
Moody’s businesses
MOODY'S 2021 10-K
19
During 2021, Moody’s continued to invest in and acquire complementary businesses as further described below:
Date
Business
Company
Stake
Strategic Commentary
November 2021
KYC
PassFort
100% A U.K. SaaS-based workflow platform for identity
verification, customer onboarding, and risk analysis. The
integration of PassFort’s platform into Moody’s suite of
KYC and compliance offerings
workflow solution, allowing customers to incorporate
Moody’s data, including credit, cyber, ESG, and climate
analytics, directly into their proprietary processes.
will create a more holistic
ff
November 2021
KYC
Bogard AB
100% A provider of data and information on politically exposed
October 2021
Cyber
BitSight
persons (PEPs) in the Nordic region. The acquisition
advances Moody’s ability to help customers perform KYC
screening and research to address financial crime.
Minority A provider of cybersecurity ratings, analytics, and
performance management tools. In 2021, BitSight
acquired VisibleRisk, a cyber risk ratings joint venture
created by Moody’s and Team8, a global venture group.
The investment enhances BitSight’s offerings and
capabilities, to create a comprehensive, integrated,
industry-leading cybersecurity risk platform. Moody’s will
leverage BitSight’s extensive cyber risk data and
research across its growing suite of integrated risk
assessment product offerings.
ff
September 2021
Insurance
Risk
Management
Solutions (RMS)
100% A global provider of climate and natural disaster risk
modeling and analytics. The acquisition expands
Moody’s insurance data and analytics business and
accelerates the development of the Company’s global
integrated risk capabilities to address the next generation
of risk assessment.
September 2021 Commercial Real
RealXData
100% A provider of CRE lease-level portfolio management with
Estate
benchmarking and rent forecasting capabilities. The
acquisition advances Moody's ability to help customers
manage their real estate portfolio, analyze performance,
and define a strategy in one platform.
March 2021
KYC
Cortera
100% A provider of North American credit data and workflow
solutions. The acquisition enhances Moody’s integrated
risk assessment capabilities and significantly extends its
coverage in the small and medium enterprise segment.
Cortera augments Moody’s extensive Orbis database of
private company information and enhances its know-
your-customer, commercial lending, and supply chain
solutions.
20 MOODY'S 2021 10-K
PROSPECTS FOR GROWTH
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
Expansion of
market for
integrated data
and analytics
solutions
Business
investment
spending,
including mergers
and acquisitions
In an environment of increasing financial complexity and heightened attention to credit analysis and risk management, Moody’s
is well positioned to benefit from continued growth in global fixed-income market activity and more widespread use of credit
ratings, research and related analytical products. 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.
Moreover, pricing opportunities aligned with customer value creation and advances in information technology present growth
opportunities for Moody’s.
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 governmental actions.
Environmental, Social and Governance Data and Solutions
ESG data and solutions are expected to play an increasingly important role across both MIS and MA as market participants seek
trusted insights and standards to make better decisions.
ESG Integrated Across All Platforms
Credit Impact
Risk Quantification
ESG Domain
ESG Classification ESG Credit Impact
Scores
Real Estate
Solutions
Risk Analytics &
Reporting
ESG
Measures
Climate
Solutions
Index
Solutions
Credit Ratings &
Research
Heat Maps
Lending Solutions
and Tools
Catastrophe
Models
SME
Solutions
Sustainable
Finance
MOODY'S 2021 10-K
21
Impact of Technology
The pace of change in technology and communication over the past two decades makes information about investment
alternatives and risk management solutions widely available. This increase in the availability of information and solutions
promotes the ongoing integration and expansion of financial markets worldwide, giving market participants access to a wider
range of both established and newer capital markets as well as data and solutions to manage risk. 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 and solutions.
MIS Prospects for Growth
Strong secular trends should continue to provide long-term growth opportunities in MIS. Key growth drivers include:
•
•
•
•
•
Debt market issuance driven by global GDP growth;
Continued onboarding of first time rating mandates;
Developing a comprehensive sustainable finance offering,
assessment of net zero and sustainable growth, which is supported by data and research offerings
evolving needs;
including credit impact scores, second party opinions,
ff
ff
to meet the market’s
Growth in domestic capital markets through investments in Moody’s Local and affiliates
ff
in key markets; and
Bank disintermediation and the expansion of private credit.
In addition to the factors noted above, growth in global fixed income markets in a given year is dependent on many
macroeconomic and capital market factors including:
Interest
rates
Business
investment
spending
Corporate
refinancing
needs
Merger and
acquisition
activity
Issuer
financial
health
Consumer
borrowing
levels
Securitization
activity
Expansion
of ratings
coverage
Expansion
into
emerging
markets
Rating fees paid by debt issuers account for most of the revenue of MIS. Therefore, a substantial portion 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 also be affected
ff
by factors such as:
•
•
Performance and prospects for growth of the major world economies;
Fiscal and monetary policies pursued by their governments; and
• Whether issuers request MIS ratings to aid investors in making 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 deposit ratings, 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. MIS’s global coverage positions it well to serve the needs of the global fixed income markets.
While already common in U.S. and Western European 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 issuer use of global debt capital markets offer
advantages in capacity and efficiency
compared to traditional banking systems and that the trend of increased disintermediation
will continue. Further, disintermediation has continued because of the historically 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.
ff
ff
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.
22 MOODY'S 2021 10-K
MA Prospects for Growth
As an integrated risk assessment business, MA helps customers build resilience by providing tools to measure the financial
implications of risk and capitalize on related opportunities. Growth in MA is likely to be driven by expansion across customer
sectors fostered by broadening MA's data and analytics solutions to meet an expanded set of customer use cases.
MA’sAA business growth is influenced by a number of factors, including:
Growth from
data and
analytics in
adjacent
markets,
including KYC,
CRE and ESG
Expansion of
data sets and
delivery options
establishing a
gateway that
supports
multiple
stakeholders
Alignment of
product strategy
to develop and
deliver
integrated risk
solutions
Enhancement of
architecture for
engineering and
data
strategies (e.g.,
SaaS, API, data
infrastructure,
operational
resilience and IT
controls)
Geographic
expansion of
actuarial and
asset
management
solutions and
continued
investment in
predictive
analytics
franchise
Expanded sales
capacity to drive
new initiatives
and continue to
deliver on
targets
Enhancement of
customer
engagement and
innovation
through
understanding
the
customers' view
on value
Moody’s expects that MA products and services that improve efficiencies,
provide business insights, and enable compliance with
financial regulation, including AML, KYC, and accounting standards, will continue to be in demand from institutions worldwide. To
respond to other sources of demand and drive growth, MA is actively investing in new products, enhanced data sets and
improved delivery services (e.g., software-as-a-service). These efforts
deepen relationships with existing customers and drive new customer acquisition.
should support broader distribution of MA’sAA capabilities,
ff
ff
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. There are also some rating markets, based on industry,
geography and/or instrument type, in which Moody’s has made investments and obtained market positions superior to its
competitors, while in other markets, the reverse is true.
ff
MA competes broadly in the financial information industry against various diversified competitors. MA’sAA main competitors within
RD&A are providers of fixed income analytics, valuations, economic data and research as well as a host of financial training and
education firms. In ERS, MA faces competition from both large software providers and various other vendors as well as in-house
solutions.
REGULATION
ff
ff
ff
by MA and its affiliates
and many of the issuers and/or securities that MIS and the affiliates
are subject to regulation in a number of countries. MA also derives a significant
MIS, certain of the Company's credit rating affiliates
subject to extensive regulation in the U.S., EU and in other countries (including by state and local authorities). In addition, some
of the services offered
amount of its sales from banks and other financial services providers who are subject to regulatory oversight and who are
required to pass through certain regulatory requirements to key suppliers such as MA. Existing and proposed laws and
regulations can impact the Company’s operations, products and the markets in which the Company operates. Additional laws
and regulations 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 Company’s operations, including the issuance of credit
ratings, and may negatively impact the Company’s profitability and ability to compete, or result in changes in the demand for the
Company's products and services, in the manner in which the Company's products and services are utilized and in the manner in
which the Company operates.
rate, are
ff
The regulatory landscape continues to evolve. In the U.S., CRAs are subject to extensive regulation primarily pursuant to the
Reform Act and the Dodd-Frank Act. The Reform Act added Section 15E to the Exchange Act and provided the SEC with the
authority to establish a registration and oversight program for CRAs registered as NRSROs. The Dodd-Frank Act added
additional provisions to Section 15E. The transitions of the Presidential administration, Congress and SEC, in the U.S., as with
any such government transition, could bring potential changes in the laws affecting
existing legislation, regulation or directives by government authorities.
CRAs and/or the enforcement of any new or
ff
MOODY'S 2021 10-K
23
In the EU, the CRA industry is registered and supervised through a pan-EU regulatory framework. ESMA has direct supervisory
responsibility for registered CRAs throughout the EU. MIS’s EU CRA subsidiaries are registered and are subject to formal
regulation and periodic inspection. From time to time, ESMA publishes interpretive guidance, or thematic reports regarding
various aspects of the CRA regulation and, annually, sets out its work program for the forthcoming year. In July 2021, the
Commission announced further measures in respect of its sustainable finance strategy. These include further assessments in
respect of both CRAs and sustainability ratings and research, which might lead to legislative action.
On December 31, 2020, the MIS U.K. registered CRA ceased to be registered with and regulated by ESMA and became subject
in both the U.K. and
to regulation by the U.K. Financial Conduct Authority (FCA). Regulatory arrangements also came into effect
the EU to allow credit ratings to be available for regulatory use in both the EU and the U.K. MIS has put arrangements in place to
endorse its U.K. credit ratings into the EU and its EU credit ratings into the U.K. The U.K. Government is considering bringing
ESG data and ratings firms within the scope of FCA authorization and regulation.
ff
ff
in both the EU and the U.S. (as well as many other countries), periodically
In light of the regulations that have gone into effect
and as a matter of course pursuant to their enabling legislation, regulatory authorities have, and will continue to, publish reports
that describe their oversight activities. In addition, other legislation, regulation and/or interpretation of existing regulation relating
to the Company’s operations, including credit rating, ancillary and research services has been or 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 CRAs. If enacted, any such legislation and regulation could
change the competitive landscape in which the Company operates. The legal status of CRAs has been addressed by courts in
various jurisdictions 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 the Company.
INTELLECTUAL PROPERTY
Moody’s and its affiliates
ff
own and control a variety of intellectual property, including but not limited to:
Proprietary information
Publications
Databases
Trademarks
Research
Software tools and
applications
Domain names
Models and
methodologies
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 relating to its
businesses, including those containing the term “Moody’s”, are of material importance to the Company.
The Company, primarily through MA and its subsidiaries, 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. In addition, the Company licenses certain databases, software applications, assessments, research
and other publications and services relating to ESG and climate risks that contain intellectual property to its customers. These
licenses are provided pursuant to standard agreements containing customary restrictions and intellectual property protections.
In addition, Moody’s licenses from third parties certain technology, data and other intellectual property rights. Specifically,
Moody’s obtains licenses from third parties to use financial information (such as market and index data, financial statement data,
research data, default data, and security identifiers) as well as software development tools and libraries. In addition, certain of
the Company’s subsidiaries obtain from third party information providers certain financial, credit risk, compliance, management,
ownership, news and/or other data worldwide, which are distributed through certain of Moody's information products. The
Company obtains such technology and intellectual property rights from generally available commercial sources. The Company
also utilizes generally available open source software and libraries for internal use and subject to appropriately permissive open
source licenses, to carry out routine functions in certain of the Company’s software products. Most of such technology and
intellectual property is available from a variety of sources. Although certain financial information (particularly security identifiers,
certain pricing or index data, and certain company financial data in selected geographic markets) is available 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.
24 MOODY'S 2021 10-K
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 affiliates.
(including granted, allowed and pending patents). None of the Company's intellectual property is subject to a specific expiration
date, except to the extent that the patents and the copyright in items that the Company creates (such as credit reports, research,
software, and other written opinions) expire pursuant to relevant law.
The Company owns seventy-five patents
ff
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 and technological safeguards for protection. Moody’s also pursues
instances of third-party infringement of its intellectual property in order to protect the Company’s rights.
AVAILABLE INFORMATION
Moody’s investor relations internet website is https://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 https://www.sec.gov/.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Name, Age, Position and Biographical Data
Robert Fauber, 51
President and Chief Executive Officer
ff
since
Mr. Fauber has served as the Company’s President and Chief Executive Officer
January 2021. Mr. Fauber joined the Board of Directors in October 2020 and he currently
serves on the Executive Committee of the Board of Directors. Prior to serving as CEO, Mr.
Fauber served as Chief Operating Officer
President of Moody’s Investors Service, Inc. from June 2016 to October 2019, as Senior
Vice President—Corporate & Commercial Development of Moody’s Corporation from April
2014 to May 2016, and was Head of the MIS Commercial Group from January 2013 to May
2016. From April 2009 through April 2014, he served as Senior Vice President—Corporate
Development of Moody’s Corporation. Mr. Fauber servedr
Development from September 2005 to April 2009. Prior to joining Moody’s, Mr. Fauber
served in several roles at Citigroup and its investment banking subsidiary.
from November 2019 to December 2020, as
as Vice President—Corporate
ff
John J. Goggins, 61
Executive Vice President and General Counsel
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.
Mark Kaye, 42
Executive Vice President and Chief Financial
ii Officer
Mr. Kaye has served as the Company’s Executive Vice President—Chief Financial Officer
since April 2021 and as Senior Vice President—Chief Financial Officer
April 2021. Prior to joining the Company, Mr. Kaye was Senior Vice President and Head of
Financial Planning and Analysis at Massachusetts Mutual Life Insurance Company
(MassMutual) since February 2016, and Chief Financial Officer
July 2015. Prior to that, Mr. Kaye served as Chief Financial Officer
ff
President, Retirement Solutions, at Voya Financial from 2011 to 2015. Mr. Kaye previously
held various senior financial and risk reporting positions at ING U.S. and ING Group, and
was in the investment banking division of Credit Suisse First Boston.
of MassMutual U.S. since
and Senior Vice
from August 2018 to
ff
ff
ff
MOODY'S 2021 10-K
25
Name, Age, Position and Biographical Data
Caroline Sullivan, 53
Senior Vice President and Corporate Controller
Ms. Sullivan has served as the Company’s Senior Vice President and Corporate Controller
since December 2018. Prior to joining the Company, Ms. Sullivan served in several roles at
Bank of America from 2011 to 2018, where her last position held was Managing Director and
Global Banking Controller. Prior to that role, Ms. Sullivan supported the Global Wealth &
Investment Management business from 2015 to 2017 in a variety of positions including
Controller. Ms. Sullivan, a CPA, previously held various senior positions at several banks
and a major accounting firm, and is a member of the Board of Directors of Financial
Executives International.
Stephen Tulenko, 54
President, Moody’s Analytics
Mr. Tulenko has served as President of Moody’s Analytics since November 2019. Mr.
Tulenko served as Executive Director of Enterprise Risk Solutions from 2013 to October
2019 and as Executive Director of Global Sales, Customer Service and Marketing from 2008
to 2013. Prior to the formation of Moody’s Analytics, he held various sales, product
development and product strategy roles at Moody’s Investors Service, Inc. Mr. Tulenko
joined Moody’s in 1990.
Michael West, 53
President, Moody’s Investors Service
Mr. West has served as President of Moody’s Investors Service, Inc. since November 2019.
Mr. West served as Managing Director—Head of MIS Ratings and Research from June
2016 to October 2019. Previously, Mr. West served as Managing Director—Head of Global
Structured Finance from February 2014 to May 2016 and Managing Director—Head of
Global Corporate Finance from January 2010 to January 2014. Earlier in his career, he was
also responsible for the research strategy for the ratings businesses and before that led
Corporate Finance for the EMEA Region, European Corporates and the EMEA leveraged
finance business. Prior to joining Moody’s in 1998, Mr. West worked at Bank of America and
HSBC in various credit roles.
26 MOODY'S 2021 10-K
ITEM 1A.
RISK FACTORS
Please carefully consider the following discussion of significant factors, events and uncertainties that make an investment in the
Company’s securities risky and provide important information for the understanding of the “forward-looking” statements
discussed in Item 7 of this Form 10-K and elsewhere. These risk factors should be read in conjunction with the other information
in this annual report on Form 10-K.
The events and consequences discussed in these risk factors could, in circumstances the Company may not be able to
accurately predict, recognize, or control, have a material adverse effect
results (including components of the Company’s financial results such as sales and profits), cash flows and stock price. These
risk factors do not identify all risks that Moody’s faces. The Company could also be affected
by factors, events, or uncertainties
that are not presently known to the Company or that the Company currently does not consider to present significant risks. In
addition to the effects
Item 7 of this Form 10-K and in the risk factors below, additional or unforeseen effects
global economic climate may give rise to or amplify many of these risks discussed below.
of the COVID-19 pandemic and resulting global disruptions on our business and operations discussed in
on Moody’s business, financial condition, operating
from the COVID-19 pandemic and the
ff
ff
ff
ff
A. Legal and Regulatory Risks
g
g
y
Moody’s Faces Risks Related to U.S. Laws and Regulations Affecting the Credit Rating Industry and Moody’s
Customers.
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 Dodd-Frank Act. These regulations are complex, continually evolving and have tended to
become more stringent over time. Additionally, potential changes in Congress may increase the uncertainty with regard to
potential changes in these laws and regulations and the enforcement of any new or existing legislation or directives by
government authorities. See “Regulation” in Part I, Item 1 of this annual report on Form 10-K for more information. The current
laws and regulations:
–
seek to encourage, and may result in, increased competition among CRAs 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 the SEC with direct jurisdiction over CRAs that seek NRSRO status, and grant authority to the SEC to inspect
the operations of CRAs; and
provide for enhanced oversight standards and specialized pleading standards, which may result in increases in the
number of legal proceedings claiming liability for losses suffered
defense costs.
by investors on rated securities and aggregate legal
ff
If these laws and regulations, and any future rulemaking or court rulings, reduce demand for credit ratings or increase costs,
Moody’s may be unable to pass such costs through to customers. In addition, there may be uncertainty over the scope,
interpretation and administration of such laws and regulations. The Company’s compliance and efforts
fines, penalties or other sanctions can result in significant expenses. Legal proceedings that are increasingly lengthy can result in
uncertainty over and exposure to liability.
to mitigate the risk of
ff
to accurately assess the future impact of legislative and regulatory requirements on Moody’s business and its
It is difficult
ff
MIS’s communications with issuers as part of the
customers’ businesses. For example, new laws and regulations may affect
rating assignment process, alter the manner in which MIS’s credit 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 credit ratings and alter the
economics of the credit ratings business, including by restricting or mandating business models for CRAs. Further, speculation
concerning the impact of legislative and regulatory initiatives and the increased uncertainty over potential liability and adverse
Moody’s stock price. Although these legislative and regulatory initiatives
legal or judicial determinations may negatively affect
apply to CRAs and credit markets generally, they may affect
increases the costs and legal risk associated with the issuance of credit ratings and can have a material adverse effect
Moody’s operations, profitability and competitiveness, the demand for credit ratings and the manner in which such ratings are
utilized.
Moody’s in a disproportionate manner. Each of these developments
on
ff
ff
ff
ff
ff
MOODY'S 2021 10-K
27
of the Comptroller of the Currency, the Federal Deposit
In addition, MA derives a significant amount of its sales from banks and other financial services providers who are subject to
regulatory oversight. U.S. banking regulators, including the Officeff
Insurance Corporation, the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Board, as
well as many state agencies, have issued guidance to insured depository institutions and other providers of financial services on
assessing and managing risks associated with third-party relationships, which include all business arrangements between a
financial services provider and another entity, by contract or otherwise, and generally requires banks and financial services
providers to exercise comprehensive oversight throughout each phase of a bank or financial service provider’s business
arrangement with third-party service providers, and instructs banks and financial service providers to adopt risk management
processes commensurate with the level of risk and complexity of their third-party relationships. In light of this, MA’sAA existing or
potential bank and financial services customers subject to this guidance have sought to and may further revise their third-party
risk management policies and processes and the terms on which they do business with MA. This can result in delayed or
reduced sales to such customers, adversely affect
with such customers and/or result in MA assuming greater financial and legal risk under service agreements with such
customers.
MA’sAA relationship with such customers, increase the costs of doing business
ff
Moody’s Faces Risks Related to Financial Reforms Outside the U.S. Affecting the Credit Rating Industry and Moody’s
Customers.
In addition to the extensive and evolving U.S. laws and regulations governing the industry, foreign
measures to regulate CRAs and the markets for credit ratings. In particular, the EU has adopted a common regulatory framework
for CRAs operating in the EU and continues to monitor the credit rating industry and analyze approaches that may strengthen
existing regulation. Credit ratings emanating from outside the EU are subject to ESMA’sAA oversight if they are endorsed into the
EU. Additionally, other foreign jurisdictions have recently taken measures to increase regulation of CRAs and markets for credit
ratings. See “Regulation” in Part 1, Item 1 of this annual report on Form 10-K for more information.
jurisdictions have taken
ff
The EU and other jurisdictions, as discussed further below, adopt legislation and engage in rulemaking on an ongoing basis that
significantly impacts operations and the markets for the Company's products and services. Future laws and regulations could
extend to products and services not currently regulated. These regulations could: (i) affect
rated, (ii) expand supervisory remits to include credit ratings issued outside the home jurisdiction and used forf
purposes, (iii) increase the level of competition in the market for credit ratings, (iv) establish criteria for credit ratings or limit the
entities authorized to provide credit ratings, (v) restrict the collection, use, accuracy, correction and sharing of personal
information by CRAs, or (vi) regulate pricing (for example to require that fees that are based on costs and are non-discriminatory)
on products and services provided by MA such as those products that incorporate credit ratings and research originated by MIS.
Future regulations could also affect
ff
Moody’s ESG Solutions Group).
products and services the Company offers
in the ESG sector (including those offered
the need for debt securities to be
regulatory
by
ff
ff
ff
Additionally, as of the date of the filing of this annual report on Form 10-K, there remains uncertainty regarding the future impact
that Brexit will have on the credit rating industry within the U.K., the EU and other jurisdictions. Following the Brexit
implementation period that ended December 31, 2020 the MIS U.K. registered CRA ceased to be registered with and regulated
by ESMA and became subject to regulation by the U.K. Financial Conduct Authority. Regulatory arrangements put in place in
both the U.K. and the EU allow credit ratings to be available for regulatory use in both the EU and the U.K. after the end of the
Brexit-implementation period. MIS has put arrangements in place to endorse its U.K. credit ratings into the EU and its EU credit
ratings into the U.K. On December 31, 2020, the U.K. also onshored CRA Regulation, with certain necessary modifications, into
U.K. domestic law (the “U.K. CRA Regulation”). The U.K. CRA Regulation contains requirements for the registration, regulation
and supervision of CRAs based in the U.K. It also sets out the circumstances in which U.K. financial institutions can use credit
ratings for regulatory purposes, as well as specific obligations for issuers, originators and sponsors relating to structured finance
instruments. It is unclear how the EU CRA Regulation and the U.K. CRA Regulation will differ
over time.
ff
Both of Moody’s segments face risks related to financial reforms outside the U.S. affecting
the credit rating industry and Moody’s
customers. MIS is a registered entity and is therefore subject to formal regulation and periodic or other inspections in the EU and
other foreign jurisdictions, such as, but not limited to, Hong Kong and China, where it operates through registered subsidiaries.
For example:
ff
–
In the EU and the U.K., applicable rules include procedural requirements with respect to credit ratings of sovereign
issuers, liability for intentional or grossly negligent failure to abide by applicable regulations, mandatory rotation
requirements of CRAs hired by issuers of securities for credit ratings of resecuritizations, and restrictions on CRAs or
their shareholders if certain ownership thresholds are crossed. Additional procedural and substantive requirements
include conditions for the issuance of credit ratings, rules regarding the organization of CRAs, restrictions on activities
deemed to create a conflict of interest, including fees that are based on costs and are non-discriminatory, and special
requirements for credit ratings of structured finance instruments.
28 MOODY'S 2021 10-K
–
–
–
In Hong Kong, applicable rules include liability for the intentional or negligent dissemination of false and misleading
information and procedural requirements for the notification of certain matters to regulators. In addition, MIS Hong Kong
is subject to a code of conduct applicable to CRAs that imposes procedural and substantive requirements on the
preparation and issuance of credit ratings, restrictions on activities deemed to create a conflict of interest including the
disclosure of its compensation arrangements with rated entities and special requirements for credit ratings of structured
finance instruments. A failure to comply with these procedural and substantive requirements also exposes MIS Hong
Kong to the risk of regulatory enforcement action which could result in financial penalties or, in serious cases, affect
ability to conduct credit rating activities in Hong Kong.
its
ff
In China, while MIS is not a licensed CRA, it does issue global credit ratings from offices
Chinese issuers. In addition, the Company holds a 30% investment in a CRA licensed in China. China has laws
applicable to domestic CRAs as well as foreign investment in such entities and entities in general (including national
security review). Such laws are broadly crafted and the implementation and interpretation of such laws are subject to
ff
the broad discretion of Chinese regulators, which could affect
our ability to conduct business in China.
outside of China regarding
ff
In addition, U.S. economic sanctions have increasingly targeted Chinese persons. In response, China issued a blocking
statute that establishes a framework for limiting the effect
typically create conflicts of law. An entity that is subject to conflicting laws in multiple jurisdictions may need to determine
a means to comply with such laws. Such conflicts could eventually affect
laws.
of foreign sanctions on Chinese persons. Blocking statutes
the ability of entities to adhere to applicable
ff
ff
With respect to MA, regulators in Europe and other foreign markets in which MA is active have issued guidance similar to that
issued in the U.S. relating to financial institutions’ assessment and management of risks associated with third-party relationships.
In light of this, MA’sAA existing or potential bank and financial services customers subject to this guidance have sought and may
further revise their third-party risk management policies and processes and the terms on which they do business with MA. This
can result in delayed or reduced sales to such customers, adversely affect
MA’sAA relationship with such customers, increase the
costs of doing business with such customers and/or result in MA assuming greater financial and legal risk under service
agreements with such customers.
ff
the credit rating industry and
Although Moody’s will monitor developments related to financial reforms outside the U.S. affecting
Moody’s customers, 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. For example, compliance with the EU,
U.K. and other foreign regulations may increase costs of operations and could have a significant negative effect
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 addition, exposure to increased liability under the EU, U.K. regulations and regulations of other
foreign jurisdictions may further increase costs and legal risks associated with the issuance of credit ratings and materially and
adversely impact Moody’s results of operations. Financial reforms in the EU, U.K. and other foreign jurisdictions may have a
material adverse effect
on Moody’s business, operating results and financial condition.
on Moody’s
ff
ff
ff
ff
The Company Faces Exposure to Litigation and Government Regulatory Proceedings, Investigations and Inquiries
Related to Rating Opinions and Other Business Practices.
ff
economic times, turbulent markets or otherwise, the number of
losses they face in their portfolios. For instance, Moody’s faced numerous class
Moody’s faces exposure to litigation and government and regulatory proceedings, investigations and inquiries related to MIS’s
ratings actions, as well as other business practices and products within both MIS and MA. If the market value of credit-dependent
instruments declines or defaults, whether as a result of difficult
investigations and legal proceedings that Moody’s faces could increase significantly. Parties who invest in securities rated by MIS
may pursue claims against MIS or Moody’s forff
action lawsuits and other litigation, government investigations and inquiries concerning events linked to the U.S. subprime
residential mortgage sector and broader deterioration in the credit markets during the financial crisis of 2007-2008. Evolving
expectations on ESG disclosures and reporting could also result in new regulatory actions at a corporate and business unit level.
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 to addressing other business issues, and any of these proceedings,
investigations or inquiries could ultimately result in adverse judgments, damages, fines, penalties or activity restrictions. Risks
relating to legal proceedings are 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, when 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.
MOODY'S 2021 10-K
29
Additionally, as litigation or the process to resolve pending matters progresses, Moody’s will continue to review the latest
information available and may change its accounting estimates, which could require Moody’s to record or increase liabilities in
the consolidated financial statements in future periods. See Note 21 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 subject to judgments, settlements, fines,
penalties or other adverse results that have a material adverse effect
on its business, operating results and financial condition.
ff
The Company Is Exposed to Risks Related to Its Compliance and Risk Management Programs.
Moody’s operates in a number of countries, and as a result the Company is required to comply with and quickly adapt to
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, antitrust and securities trading laws, is largely dependent on its establishment and
maintenance of compliance, review and reporting systems, as well as its ability to attract and retain qualified compliance and risk
management personnel. Moody’s policies and procedures to identify, evaluate and manage the Company’s risks, including risks
resulting from acquisitions, 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 Company takes to prevent and detect this
activity may not be effective
are not effective,
ff
penalties, regulatory sanctions, injunctive relief, exclusion from certain markets or other penalties, and may suffer
reputation, financial condition and operating results.
the Company may be subject to criminal and civil liability, the suspension of the Company’s employees, fines,
in all cases. If Moody’s employees violate its policies or if the Company’s risk management methods
harm to its
ff
ff
ff
Moody’s Faces Risks Related to Protecting Its Intellectual Property Rights.
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
. Businesses the Company
acquires also involve intellectual property portfolios, which increase the challenges the Company faces in protecting its strategic
advantage. In addition, the Company’s operating results can be adversely affected
technological protections for intellectual property and proprietary rights in some jurisdictions and markets. The lack of strong
legal and technological intellectual property protections in foreign jurisdictions in which we operate may increase our vulnerability
and may pose risks to our business. From time to time, laws are passed that require publication of certain information, in some
cases at no cost, that the Company considers to be its intellectual property and that it currently sells or licenses for a fee, which
could result in lost revenue.
the Company’s ability to compete effectively
by inadequate or changing legal and
ff
ff
ff
Unauthorized third parties may also try to obtain and use technology or other information that the Company regards as
proprietary. It is also possible that Moody’s competitors or other entities could obtain patents related to the types of products and
services that Moody’s offers, and attempt to require Moody’s to stop developing or marketing the products or services, to modify
or redesign the products or services to avoid infringing, or to obtain licenses from the holders of the patents in order to continue
developing and marketing the products and services. Even if Moody’s attempts to assert or 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’s ability to establish, maintain and protect its intellectual property and proprietary rights against
theft, misappropriation or infringement could be materially and adversely affected
and/or changing proprietary
rights and intellectual property legal protections in some jurisdictions and markets. These risks, and the cost, time and resources
needed to address them, may increase as the Company’s business grows and its profile rises in countries with intellectual
property regimes that are less protective than the rules and regulations applied in the United States.
ff
by insufficient
ff
Moody’s Faces Risks Related to Tax Matters, Including Changes in Tax Rates or Tax Rules.
ff
ff
tax rate is determined based on the taxable income and applicable tax rates in the various jurisdictions in
by changes in the composition of earnings in countries
tax rates or other factors, including by increased earnings in jurisdictions where Moody’s faces higher tax
As a global company, Moody’s is subject to taxation in the United States and various other countries and jurisdictions. As a
result, our effective
which the Company operates. Moody’s future tax rates could be affected
or states with differing
rates, losses incurred in jurisdictions for which Moody’s is not able to realize the related tax benefit, or changes in foreign
currency exchange rates. Changes in the tax, accounting and other laws, treaties, regulations, policies and administrative
practices, or changes to their interpretation or enforcement, including changes applicable to multinational corporations such as
the Base Erosion Profit Shifting initiative being led by the Organization for Economic Co-operation and Development, which
requires companies to disclose more information to tax authorities on operations around the world, and the European Union’s
state aid rulings, could have a material adverse effect
on the Company’s effective tax rate, results of operations and financial
condition and may lead to greater audit scrutiny of profits earned in various countries.
ff
ff
30 MOODY'S 2021 10-K
For example, the Tax Act made significant changes to the U.S. federal tax laws. Many aspects of the legislation remain uncertain
or unclear. As additional regulatory guidance is issued interpreting or clarifying the Tax Act or if the tax accounting rules are
modified, there may be adjustments or changes to the Company’s determination of its mandatory one-time deemed repatriation
tax liability (“transition tax”) on previously untaxed accumulated earnings of foreign subsidiaries recorded in 2017. Additional
regulatory guidance may also affect
have a material adverse effect
Tax Act may impact the volume of debt securities issued as discussed in the Risk Factor, Changes in the Volume of Debt
Securities Issued in Domestic and/or Global Capital Markets, Asset Levels and Flows into Investment Levels and Changes in
Interest Rates and Other Volatility in the Financial
Business.
ff
on Moody’s business, results of operations, cash flows and financial condition. Furthermore, the
ii Markets Can Negatively Impact the Nature and Economics of the Company’s
tax rates and tax assets and liabilities, which could
the Company’s expected future effective
ff
ff
In addition, Moody’s is subject to regular examination of its income tax returns by the Internal Revenue Service and other tax
authorities around the world, and the Company is experiencing increased scrutiny as its business grows globally. Moody’s
regularly assesses the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the
adequacy of its provision forff
could materially and adversely affect
reasonable, there can be no assurance that any final determination will not be materially different
its income tax provisions, accruals and unrecognized tax benefits, which could materially and adversely affect
business, operating results, cash flows and financial condition.
income taxes, including unrecognized tax benefits; however, developments in an audit or litigation
the Company. Although the Company believes its tax estimates and accruals are
than the treatment reflected in
the Company’s
ff
ff
ff
g
B. Risks Relating to our Business
The Company is Exposed to Legal, Economic, Operational 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 have an impact
on the Company’s business. For example, economic uncertainty in the Eurozone or elsewhere, including, but not limited to, in
Latin America or China, affects
addressed elsewhere in this section, operations abroad expose Moody’s to a number of legal, economic and regulatory risks
such as:
undertaken within those particular areas. In addition to the risks
the number of securities offerings
ff
ff
–
–
exposure to exchange rate movements between foreign currencies and USD;
restrictions on the ability to convert local currency into USD and the costs, including the tax impact, of repatriating cash
held by entities outside the U.S.;
– U.S. laws affecting
ff
overseas operations, including domestic and foreign export and import restrictions, tariffsff and other
trade barriers and restrictions, such as those related to the U.S.’s relationship with China and embargoes and sanctions
laws with respect to Russia and Venezuela;
VV
–
–
–
–
–
–
–
–
–
–
–
–
ff
differing
Brexit;
and potentially conflicting legal or civil liability, compliance and regulatory standards, including as a result of
uncertainty about the future relationship between the U.K. and the EU;
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, including those applicable to the financial services industries, such as the
European Union’s implementation of the Markets in Financial Instruments Directive II, MiFID II, in January 2018, and to
the protection of intellectual property;
the transition away from benchmark reference rates based on market participant judgments, such as LIBOR and
EURIBOR, to rates based on observable transactions, such as the Secured Overnight Financing Rate (SOFR);
uncertainty regarding the future relationship between the U.S. and China, which may result in further restrictions or
actions by the U.S. government with respect to doing business in China and/or by the Chinese government with respect
to business conducted by foreign entities in China;
economic, political and geopolitical market conditions, including the effect
customer retention;
ff
of these conditions on customers and
the possibility of nationalization, expropriation, price controls and other restrictive governmental actions;
competition with CRAs that have greater familiarity, longer operating histories and/or support from local governments or
other institutions;
uncertainties in obtaining data and creating products and services relevant to particular geographic markets;
reduced protection for intellectual property rights;
longer payment cycles and possible problems in collecting receivables;
MOODY'S 2021 10-K
31
–
–
–
–
–
differing
ff
accounting principles and standards;
ff
difficulties
result of Brexit;
in staffingff
and managing foreign operations, including potential relocation and/or restaffingff
of employees as a
difficulties
ff
and delays in translating documentation into foreign languages;
potentially adverse tax consequences; and
complexities of compliance with employment laws and new data and cybersecurity rules in numerous jurisdictions.
Additionally, Moody’s is subject to complex U.S., foreign and other local laws and regulations that are applicable to its operations
abroad, such as laws and regulations governing economic and trade sanctions, tariffs,
including the Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010 and other similar local laws. The internal
controls, policies and procedures and employee training and compliance programs to deter prohibited practices the Company
has implemented may not be effective
internal policies or from material violations of applicable laws and regulations. Any determination or allegations, even if
unfounded, that the Company has violated sanctions, anti-bribery or anti-corruption laws could have a material adverse effect
Moody’s business, operating results and 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 severe fines and penalties, criminal sanctions, administrative remedies, and restrictions on
business conduct and could have a material adverse effect
business, operating results and financial condition.
in preventing employees, contractors or agents from violating or circumventing such
on Moody’s reputation, its ability to attract and retain employees, its
embargoes, and anticorruption laws
on
ff
ff
ff
ff
Moody’s Operations are Exposed to Risks from Infrastructure Malfunctions or Failures.
ff
and locations in China used for certain Moody’s work. This may include a
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 YorkYY
City, the location of Moody’s headquarters,
major cities worldwide in which Moody’s has offices,
disruption involving physical or technological infrastructure (whether or not controlled by the Company), including the Company’s
electronic delivery systems, data center facilities, or the Internet, used by the Company or third parties with or through whom
Moody’s conducts business. Many of the Company’s products and services are delivered electronically and the Company’s
customers depend on the Company’s ability to receive, store, process, transmit and otherwise rapidly handle very substantial
quantities of data and transactions on computer-based networks. Some of Moody’s operations require complex processes and
the Company’s extensive controls to reduce the risk of error inherent in our operations cannot eliminate such risk completely. The
Company’s customers also depend on the continued capacity, reliability and security of the Company’s telecommunications, data
centers, networks and other electronic delivery systems, including its websites and connections to the Internet. The Company’s
employees also depend on these systems for internal use. Any significant failure, compromise, cyber-breach, interruption or a
significant slowdown of operations of the Company’s infrastructure, whether due to human error, capacity constraints, hardware
failure or defect, weather (including climate change), natural disasters, fire, power loss, telecommunication failures, break-ins,
sabotage, intentional acts of vandalism, acts of terrorism, political unrest, pandemic (including the COVID-19 pandemic), war or
otherwise, may impair the Company’s ability to deliver its products and services.
ff
to secure and plan for potential disruptions of its major operating systems may not be successful. The Company
Moody’s efforts
relies on third-party providers, including, increasingly, cloud-based service 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,
manner or
fails to adequately expand its services to meet the Company’s needs and the needs of the Company’s customers (including as a
result of the COVID-19 pandemic), the Company could experience lower revenues and higher costs. Additionally, although the
Company maintains processes to prevent, detect and recover from a disruption, the Company also does not have fully redundant
systems for most of its smaller officeff
of non-essential services. If a disruption occurs in one of Moody’s locations or systems 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 customers will suffer
adverse effects
delays and interruptions. A disruption to Moody’s operations or infrastructure may have a material adverse effect
reputation, business, operating results and financial condition.
that could result from the Company’s failure, or the failure of a third party, to efficiently address and resolve these
locations and low-risk systems, and its disaster recovery plan does not include restoration
. The Company cannot predict with certainty all of the
ff
cost-effective
on its
ff
ff
ff
ff
32 MOODY'S 2021 10-K
Changes in the Volume of Debt Securities Issued in Domestic and/or Global Capital Markets, Asset Levels and Flows
into Investment Levels and Changes in Interest Rates and Other Volatility in the Financial Markets Can 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
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. Market disruptions and economic slowdown and uncertainty have in the past, and may in the future, negatively
impact the volume of debt securities issued in global capital markets and the demand for credit ratings. Changes to U.S. tax laws
and policy can negatively affect
the volume of debt securities issued in the U.S. For example, the Tax Act limits deductibility on
interest payments and significantly reduces the tax cost associated with the repatriation of cash held outside the U.S., both of
which could negatively affect
the volume of debt securities issued. Conditions that reduce issuers’ ability or willingness to issue
debt securities, such as market volatility, declining growth, currency devaluations or other adverse economic trends, reduce the
number and dollar-equivalent volume of debt issuances for which Moody’s provides ratings services and thereby adversely affect
the fees Moody’s earns in its ratings business.
ff
ff
ff
Economic and government factors such as the scaling back, wind-down or termination of COVID-19 economic stimulus and
economic conditions, and current uncertainty in various other jurisdictions,
support programs, a long-term continuation of difficult
may have an adverse impact on the Company’s business. Future debt issuances also could be negatively affected
by increases
in interest rates, the withdrawal of COVID-19 economic stimulus, inflationary pressures, widening credit spreads, regulatory and
political developments, growth in the use of alternative sources of credit, and defaults by significant issuers. Declines or other
the Company’s business, operating results and
changes in the markets for debt securities may materially and adversely affect
financial condition.
ff
ff
ff
ff
or impossible to obtain in the short term, due in part to rent, technology, compliance and other fixed costs associated with
Moody’s initiatives to reduce costs to counteract a decline in its business may not be sufficient
difficult
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
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
and financial condition, which the Company may not be able to successfully offset
for the Company to rapidly expand operations in order to
on the business, operating results
and cost reductions may be
with cost reductions.
ff
ff
ff
ff
The Company Faces Increased Pricing Pressure from Competitors and/or Customers.
ff
ff
There is price competition in the credit rating, research, and credit risk management markets, as well as in the market for
by MA. Moody’s faces competition globally from other CRAs and
research, business intelligence and analytical services offered
credit opinions in research, as well as from in-house research operations.
from investment banks and brokerage firms that offer
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, a challenging business environment and consolidation among both competitors and customers, particularly those involved
in structured finance products and commercial real estate, and other factors affecting
demand may enhance the market power of
competitors and reduce the Company’s customer base. Weak economic growth intensifies competitive pricing pressures and can
result in customers’ use of free or lower-cost information that is available from alternative sources or their development of
alternative, proprietary systems for assessing credit risk that replace the products currently purchased from Moody’s. While
Moody’s seeks to compete primarily on the basis of the quality of its products and services, it can lose market share when its
pricing is not sufficiently
The formation of additional NRSROs may increase pricing and competitive pressures. Furthermore, in some of the countries in
which Moody’s operates, governments may provide financial or other support to local rating agencies. Any inability of Moody’s to
compete successfully with respect to the pricing of its products and services will have a material adverse impact on its business,
operating results and financial condition.
competitive. In addition, the Reform Act was designed to encourage competition among rating agencies.
ff
ff
The Company Is Exposed to Reputation and Credibility Concerns.
ff
ff
a loss in credibility, Moody’s business will be significantly impacted. Factors
credibility and could potentially continue to have an impact in this regard include the appearance
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
that may have already affected
of a conflict of interest, the performance of securities relative to the rating assigned to such securities, the timing and nature of
changes in ratings, 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, including as to the Company’s recent ESG initiatives, and
its implementation with respect to one or more securities and intentional, poor representation of our products and services by our
partners or agents, manipulation of our products and services by third parties, or unintentional misrepresentations of Moody’s
products and services in advertising materials, public relations information, social media or other external communications.
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 reputation and credibility could have a material adverse impact on Moody’s business, operating
results and financial condition, as well as on the Company’s ability to find suitable candidates for acquisition.
MOODY'S 2021 10-K
33
The Introduction of Competing Products, Technologies or Services by Other Companies Can Negatively Impact the
Nature and Economics of the Company’s Business.
ff
manner is a key factor in maintaining market share. Moody’s
The markets for credit ratings, research, credit risk management services, business intelligence and analytical services are
highly competitive and characterized by rapid technological change, changes in customer and investor demands, and evolving
regulatory requirements, industry standards and market preferences. The ability to develop and successfully launch and maintain
innovative products, technologies and services that anticipate customers’ and investors’ changing requirements and utilize
emerging technological trends in a timely and cost-effective
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 forff
risk that customers 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 technology and information providers,
some of whom are also suppliers to Moody’s; these indirect competitors could in the future choose to compete directly with
Moody’s, cease doing business with Moody’s or change the terms under which they do business with Moody’s in a way that
could negatively impact our business. In addition, customers or others may develop alternative, proprietary systems for
assessing credit risk. Such developments could affect
Further, the increased availability in recent years of free or relatively inexpensive internet information may reduce the demand for
Moody’s products and services. Moody’s growth prospects also could be adversely affected
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’s to compete successfully may have a material adverse effect
business, operating results and financial condition.
demand for Moody’s products and services and its growth prospects.
by Moody’s failure to make
assessing credit
on its
ff
ff
ff
ff
ff
Moody’s Is Exposed to Risks Related to Loss of Skilled Employees and Related Compensation Cost Pressures.
ff
ff
ff
competitive compensation and other incentives or if the regulatory
Moody’s success depends upon its ability to recruit, retain and motivate highly skilled, experienced financial analysts and other
professionals. 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
environment mandates restrictions on or disclosures about individual employees that would not be necessary in competing
industries. Rising expenses including wage inflation could adversely affect
Moody’s ability to attract and retain high-quality
employees. 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 adversely affect
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
respond to evolving perceptions and goals of those in our workforce or whom we
credit analysis. We could also fail to effectively
might seek to hire, including in response to changes brought on by the COVID-19 pandemic, with respect to flexible working or
other matters. Additionally, relocation and/or restaffingff
our ability to attract and
retain talent for our European operations. There is a risk that even when the Company invests significant resources in attempting
to attract, train and retain qualified personnel, it will not succeed in its efforts,
employee expectations in areas such as environmental, social matters and corporate governance (ESG) have been rapidly
evolving and increasing. A failure to adequately meet employee expectations may result in an inability to attract and retain
talented employees.
its ability to attract and retain talented employees.
of employees due to Brexit could adversely affect
and its business could be harmed. Further,
ff
ff
ff
ff
ff
, and other
Moody’s is highly dependent on the continued services of Robert Fauber, the President and Chief Executive Officer
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.
ff
ff
Moody’s Acquisitions, Dispositions and Other Strategic Transactions or Investments May Not Produce Anticipated
Results Exposing the Company to Future Srr
Property and Equipment.
ignificant Impairment Charges Relating to Its Gtt
oodwill, Intangible Assets or
Moody’s regularly evaluates and enters into acquisitions, dispositions or other strategic transactions and investments to
strengthen its business and grow the Company. For example, Moody’s acquired Bureau van Dijk in 2017, Reis in 2018,
Regulatory DataCorp (RDC) in 2020, and RMS in September 2021. Such transactions and investments present significant
challenges and risks. The Company faces intense competition for acquisition targets, especially in light of industry consolidation,
which may affect
significant investments in technology, including software for internal use, which can be expensive, time-intensive and complex to
develop and implement.
Moody’s ability to complete such transactions on favorable terms or at all. Additionally, the Company makes
ff
34 MOODY'S 2021 10-K
ff
any anticipated benefits from such transactions. Any
The anticipated growth, synergies and other strategic objectives of the RMS acquisition, as well as other completed transactions,
may not be fully realized, and a variety of factors may adversely affect
strategic transaction involves 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; scrutiny from
competition and antitrust authorities; failure to retain key personnel of the acquired business; future developments that impair the
value of purchased goodwill or intangible assets; diversion of management’s focus
implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that
prior to the acquisition lacked such controls, procedures and policies; disputes or litigation arising out of acquisitions or
dispositions; challenges retaining the customers of the acquired business; coordination of product, sales, marketing and program
and systems management functions; integration of employees from the acquired business into Moody’s organization; integration
of the acquired business’s accounting, information technology, human resources, legal and other administrative systems with
Moody’s; risks that acquired systems expose us to cybersecurity risks; and for foreign transactions, additional risks related to the
integration of operations across different
with specific countries. The anticipated benefits from an acquisition or other strategic transaction or investment may not be
realized fully, or may take longer to realize than expected. As a result, the failure of acquisitions, dispositions and other strategic
transactions and investments to perform as expected may have a material adverse effect
on Moody’s business, operating results
and financial condition.
cultures and languages, and the economic, political, and regulatory risks associated
from other business operations; failure to
ff
ff
ff
ff
At December 31, 2021, Moody’s had $5,999 million of goodwill and $2,467 million of intangible assets on its balance sheet.
Approximately 94% of the goodwill and intangible assets reside in the MA business, including those related to Bureau van Dijk
and RMS, and are allocated to the two reporting units within MA. The remaining 6% of goodwill and intangible assets 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 a significant asset impairment charge, which would result in a non-cash charge to operating expenses. Goodwill
and intangible assets 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 especially difficult in periods of
market or economic uncertainty and turmoil, 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.
ff
The global COVID-19 pandemic may have a material adverse impact on our operations and financial performance, and
is having a material adverse impact on the operations and financial performance of many of our customers. It is difficult
to predict the extent to which the pandemic and related impacts will adversely impact our business operations,
financial performance, results of operations, financial position and the achievement of our strategic objectives.
ff
to predict, the pandemic’s impact on our operations and financial performance, as well as its
Our operations and financial performance could be negatively impacted by the continued effects
has caused, and is expected to continue to cause, the global slowdown of economic activity and significant volatility and
disruption in financial markets. Because the severity, magnitude and duration of the pandemic and its economic consequences
continue to be uncertain and difficult
impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult
to predict.
Further, the ultimate impact of the pandemic on our operations and financial performance as well as the performance of our
customers, depends on many factors that are not within our control, including, but not limited, to: governmental, business and
individuals’ actions (including restrictions on travel and workforce pressures); actions taken in response on global and regional
economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic
uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth;
uncertainty presented by approved vaccines, corresponding rollout and unanticipated consequences of such vaccines; and the
pace of recovery when the pandemic subsides.
of the COVID-19 pandemic that
ff
ff
The COVID-19 pandemic has subjected our operations and financial performance to a number of risks, including, but not limited
to, those discussed below:
–
The global credit market disruptions and economic stimulus measures led to robust U.S. investment grade and U.S.
speculative grade issuance that may not continue as government programs are scaled back.
– We continue to publish research and issue credit ratings in accordance with our public credit rating methodologies in a
highly uncertain, changing environment. Given these unprecedented events, and our prior experience during periods of
volatility and economic uncertainty, it is likely that our ratings and research will be challenged and scrutinized around the
globe and result in future government and regulatory proceedings, investigations, inquiries and litigation.
–
–
ff
to accurately capture the impact of the COVID-19 pandemic within its analytical models across different
Likewise, MA continues to offer
difficult
business sectors and geographies. Any failure of MA’sAA models to sufficiently
MA's reputation, brand and credibility and could result in customer dissatisfaction and/or contract cancellations.
quantitative analytics in a highly uncertain, rapidly changing environment where it is
account for COVID-19 impacts may impact
ff
ff
ff
Illness, travel restrictions or workforce disruptions could result in reduced sales opportunities for both MIS and MA. The
COVID-19 pandemic may decrease demand forff
the financial intelligence and analytical tools MA provides.
MOODY'S 2021 10-K
35
– Our customers are being impacted and will be impacted by the COVID-19 pandemic to differing
ff
degrees. As a result,
we may face pricing pressure on our products, delayed renewals for certain subscription based products, and
challenges to new sales which would in turn reduce revenue, ultimately impacting our results of operations.
–
The COVID-19 pandemic has increased volatility in the capital markets. The Company might not be able to continue to
access preferred sources of liquidity when we would like, and our borrowing costs could increase.
– While we have transitioned to a hybrid work environment combining remote and in-officeff
ff
maintaining such a state for an extended period of time may have a material adverse effect
ability to meet the needs of our customers and may expose us to both operational and security risks. In addition,
maintaining an infrastructure that supports a prolonged remote working environment may limit information technology
resources available for other projects.
work, all employees globally,
on our productivity, our
–
As the COVID-19 pandemic continues to affect the global economy, it may have the effect
other risks, such as those surrounding cybersecurity, described in our risk factors in this Form 10-K. Further, the
COVID-19 pandemic may also affect
that we currently do not expect to present significant risks to our operations or financial results.
our operating and financial results in a manner that is not presently known to us or
of heightening many of the
ff
ff
C. Technology Risks
gy
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 customers and
employees in the Company’s computer systems and networks, and in those of its third party vendors. Unauthorized disclosure of
this information could cause our customers to lose faith in our ability to protect their confidential information and therefore cause
customers to cease doing business with us. The risks the Company faces range from cyber-attacks common 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 [some of which may be carried out by state-sponsored actors], hacking,
“phishing” attacks, computer viruses, ransomware, or malware, employee or insider 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 or systems, 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, employees 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, detect, mitigate or recover from material
incidents can be expensive, and may be insufficient,
Additionally, the Company may
be exposed to additional threats as the Company migrates its data from legacy systems to cloud-based solutions, and increased
dependence on third parties to store cloud-based data subjects the Company to further cyber risks. Further, as a result of the
COVID-19 pandemic, many of our employees are working remotely, which magnifies the importance of the integrity of our remote
access security measures and may expose the Company to additional cyber risks.
circumvented, or may become ineffective.
ff
ff
ff
ff
ff
on the Company's operating results, there can be no assurance of a similar result in the future. Because the
The Company has invested and continues to invest in risk management and information security measures in order to protect its
systems and data, including employee training, disaster plans, and technical defenses. The cost and operational consequences
of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome
increasingly intense, complex, and sophisticated global cyber threats. Despite the Company’s best efforts,
it is not fully insulated
from, and has in the past experienced, security threats and system disruptions. Although past incidents have not had a material
adverse effect
methods used for these systems cyberattacks are rapidly changing, the Company, despite significant focus and investment, may
be unable to anticipate/deploy sufficient
protections against such incidents. Further, the extent of a particular security incident
and the steps needed to investigate may not be immediately clear, and it may take a significant amount of time before such an
investigation can be completed and full and reliable information about the incident, including the extent of the harm and how best
to remediate it, is known. Recent well-publicized security breaches at other companies have led to enhanced government and
regulatory scrutiny of the measures taken by companies to protect against cyber-attacks, and may in the future result in
heightened cybersecurity compliance requirements, including additional regulatory expectations for oversight of vendors and
service providers. Cybersecurity incidents, including the accidental loss, inadvertent disclosure or unapproved dissemination of
proprietary information or sensitive or confidential data, could cause reputational harm, loss of customers and revenue, fines,
regulatory actions and scrutiny, sanctions or other statutory penalties, litigation, liability for failure to safeguard the Company’s
customers’ information, or financial losses that are either not insured against or not fully covered through any insurance
maintained by the Company. In addition, disclosure or media reports of actual or perceived security vulnerabilities to the
Company’s systems or those of the Company’s third parties, even if no breach has been attempted or occurred, could lead to
reputational harm, loss of customers and revenue, or increased regulatory actions oversight and scrutiny.
Any of the foregoing may have a material adverse effect
ff
on Moody’s business, operating results and financial condition.
36 MOODY'S 2021 10-K
The Company Is Exposed to Risks Related to Protection of Confidential Information
To conduct its operations, the Company regularly moves data across national borders, and consequently is subject to a variety of
continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection
and data security [such as the Federal Trade Commission Act in the United States, the General Data Protection Regulation
(“GDPR”) in the European Union, the Cyber Security Law in China and various other international, federal, state and local laws
and regulations]. The scope of the laws that may be applicable to Moody’s is often uncertain and may be conflicting, particularly
with respect to foreign laws. For example, GDPR, which became effective
in May 2018, greatly increased the jurisdictional reach
of European Union privacy law and added a broad array of requirements for processing personal data, including the public
disclosure of significant data breaches. Failure to comply with GDPR requirements could result in penalties of up to 4% of annual
worldwide revenue. Additionally, other countries have enacted or are enacting data localization laws that require data to stay
within their borders. Further, laws such as the California Consumer Privacy Act, enacted in January 2020, require among other
things, covered companies to provide new disclosures to consumers, and affords
consumers new abilities to opt-out of certain
sales of personal information. The effects
jurisdictions are significant, however, and may require us to modify our data processing practices and policies and to incur
additional costs and expenses. All of these evolving compliance and operational requirements have required changes to certain
business practices, thereby increasing costs, requiring significant management time and attention, and subjecting the Company
to negative publicity, as well as remedies that may harm its business, including fines, modified demands or orders, the cessation
of existing business practices, and exposure to litigation, regulatory actions, sanctions or other statutory penalties.
nd other similar data privacy laws in other
of non-compliance with the CCPA aPP
ff
ff
ff
The Company Is Dependent on the Use of Third-Party Software, Data, Hosted Solutions, Data Centers, Cloud and
Network Infrastructure (Together, “Third Party Technology”),
gg
Service Offerings, Could Have a Material Adverse Effect on the Company’s Business, Financial Condition
Operations.
and Any Reduction in Third-Party Product Quality or
dd
or Results of
Moody’s relies on Third Party Technology in connection with its product development and offerings
Company depends on the ability of Third Party Technology providers to deliver and support reliable products, enhance their
ff
current products, develop new products on a timely and cost-effective
products and respond to emerging industry standards and other technological changes. The Third Party Technology Moody’s
uses can become obsolete or restrictive, incompatible with future versions of the Company’s products, fail to be comprehensive
or accurate, unavailable or fail to operate effectively
could be adversely affected
(including as a result of the COVID-19 pandemic), and Moody’s business
basis, provide data necessary to develop and maintain its
when the Company is unable to timely or effectively
replace such Third Party Technology.
and operations. The
ff
ff
ff
ff
ff
the Company cannot ensure that such third parties will permit Moody’s use in the
The Company also monitors its use of Third Party Technology to comply with applicable license and other contractual
requirements. Despite the Company’s efforts,
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
enhancements to Third Party Technology are substantial. In the ordinary course, our third-parties, including our vendors, are
subject to various forms of cyber attacks. To date, such attacks have not resulted in a material adverse impact to our business
operations, but there can be no guarantee we will not experience such an impact. Some of these third-party suppliers are also
Moody’s competitors, increasing the risks noted above. When any of these risks materialize, they could have a material adverse
effect
on the Company’s business, financial condition or results of operations.
to incorporate
ff
ff
MOODY'S 2021 10-K
37
ITEM 1B.
UNRESOLVEDLL
STAFFTT
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
approximately 797,537 square feet of leased space. As of December 31, 2021, Moody’s operations were conducted from 35 U.S.
offices
operating and sales requirements worldwide. These properties are generally considered to be both suitable and adequate to
meet current operating requirements.
locations, all of which are leased. These properties are geographically distributed to meet
and 107 non-U.S. officeff
ff
ITEM 3.
LEGAL PROCEEDINGS
For information regarding legal proceedings, see Part II, Item 8 –“Financial Statements”, Note 21 “Contingencies” in this Form
10-K.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
38 MOODY'S 2021 10-K
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RYY ELATEDAA
ISSUER PURCHASES OF EQUITY SECURITIES
SHAREHOLDER MATTERS
AA
AND
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, 2021:
Period
October 1- 31
November 1- 30
December 1- 31
Total
Total Number of
Shares Purchased (1)
Average Price
Paid per Share
Purchased as Part or
Total Number of Shares
f Publicly
Announced Program
Approximate Dollar
Value of Shares That May Yet Be
Purchased Under The Program (2)
1,400
236,692
78,013
316,105
$
$
$
$
—
389.93
389.35
389.78
—
235,647
77,330
312,977
$1,203 million
$1,111 million
$1,081 million
(1)
(2)
Includes surrender to the Company of 1,400; 1,045 and 683 shares of common stock in October, November and December, respectively, to
satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.
Amounts shown are as of the last day of each of the months. On December 16, 2019, the Board authorized $1 billion in share repurchase
authority and on February 9, 2021, the Board approved an additional $1 billion in share repurchase authority. At December 31, 2021, there
was approximately $1,081 million of remaining authority. Additionally, on February 7, 2022, the Board of Directors approved an additional
$750 million of share repurchase authority. There is no established expiration date for the remaining authorizations.
During the fourth quarter of 2021, Moody’s issued 0.1 million shares under employee stock-based compensation plans.
COMMON STOCK INFORMATION
The Company’s common stock trades on the New York Stock Exchange under the symbol “MCO”. The number of registered
shareholders of record at January 31, 2022 was 1,628. A substantially greater number of the Company’s common stock is held
by beneficial holders whose shares of record are held by banks, brokers and other financial institutions.
EQUITY COMPENSATION PLAN INFORMATION
The table below sets forth, as of December 31, 2021, certain information regarding the Company’s equity compensation plans.
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not
approved by security holders
Total
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
3,115,970 (1) $
—
3,115,970
$
$
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))
(b)
166.16
—
166.16
(c)
17,171,937 (3)
—
17,171,937
(1)
(2)
(3)
Includes 2,246,154 options and unvested restricted shares outstanding under the Company's 2001 Key Employees' Stock Incentive Plan,
140,906 options and unvested restricted shares outstanding under the Risk Management Solutions, Inc. 2015 Equity Incentive Plan and
5,904 unvested restricted shares outstanding under the 1998 Non-Employee Directors' Stock Incentive Plan. This number also includes a
maximum of 723,006 performa
maximum number of shares issuable pursuant to perforr
performance shares granted in 2019, 2020 and 2021. Assuming payout at target, the number of shares to be issued upon the vesting of
outstanding performance share awards is 361,503.
nce shares outstanding under the Company's 2001 Key Employees' Stock Incentive Plan, which is the
rmance share awards assuming the maximum payout of 200% of the target award for
rr
Does not reflect unvested restricted shares or performance share awards included in column (a) because these awards have no exercise
price.
Includes 13,283,557 shares available forff
issuance as under the 2001 Stock Incentive Plan, of which all may be issued as options and
7,320,392 may be issued as restricted stock, performance shares or other stock-based awards under the 2001 Stock Incentive Plan,
423,884 shares available for issuance as options, shares of restricted stock or performance shares under the Risk Management Solutions,
Inc. 2015 Equity Incentive Plan; 880,119 shares available for issuance as options, shares of restricted stock or performance shares under
the 1998 Directors Plan; and 2,584,377 shares available forff
may be made under the 1998 Stock Incentive Plan, which expired by its terms in June 2008.
issuance under the Company’s Employee Stock Purchase Plan. No new grants
MOODY'S 2021 10-K
39
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return of the Company to the performance of Standard & Poor’s
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, 2016. The comparison also assumes the reinvestment of dividends, if any. The total return for the common stock
was 335% during the performance period as compared with a total return during the same period of 133% and 110% for the S&P
500 Composite Index and the Russell 3000 Financial Services Index, respectively.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Moody’s Corporation, the S&P 500 Index
and the Russell 3000 Financial Services Index
Moody’s Corporation
S&P 500 Composite Index
Russell 3000—Financial Services Index
$500
$450
$400
$350
$300
$250
$200
$150
$100
12/16
12/17
12/18
12/19
12/20
12/21
2016
2017
2018
2019
2020
2021
Year Ended December 31,
Moody’s Corporation
$ 100.00
$ 158.51
$ 152.01
$ 260.32
$ 320.91
$ 435.06
S&P 500 Composite Index
$ 100.00
$ 121.83
$ 116.49
$ 153.17
$ 181.35
$ 233.41
Russell 3000—Financial Services Index $ 100.00
$ 119.95
$ 109.93
$ 146.12
$ 155.77
$ 209.63
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.
40 MOODY'S 2021 10-K
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
LL
OF FINANCIAL CONDITION AND RESULTSLL OF OPERATIONS
AA
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 Management’s Discussion and Analysis of Financial Condition and Results of Operations contains Forward-Looking
Statements. See “Forward-Looking Statements” commencing on page 66 and Item 1A. “Risk Factors” commencing on page 27
for a discussion of uncertainties, risks and other factors associated with these statements.
THE COMPANY
Moody’s is a global
Moody’s reports in two segments: MIS and MA.
integrated risk assessment firm that empowers organizations and investors to make better decisions.
MIS publishes credit ratings and provides assessment services on a wide range of debt obligations, programs and facilities, and
the entities that issue such obligations in markets worldwide, including various corporate, financial institution and governmental
obligations, and structured finance securities.
MA is a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which help companies
make better and faster decisions. MA leverages its industry expertise across multiple risks such as credit, market, financial crime,
supply chain, catastrophe and climate to deliver integrated risk assessment solutions that enable business leaders to identify,
measure and manage the implications of interrelated risks and opportunities.
COVID-19
The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. The Company
continues to monitor regional developments relating to the COVID-19 pandemic to inform decisions on the reopening of its
offices
most of its offices
and its business travel policies. As of the date of the filing of this annual report on Form 10-K, the Company has reopened
for employees to access on a voluntary basis.
ff
ff
The COVID-19 pandemic has not had a material adverse impact on the Company's reported results to date and is currently not
expected to have a material adverse impact on its near-term outlook. However, Moody's is unable to predict the longer-term
impact that the pandemic may have on its business, future results of operations, financial position or cash flows due to numerous
uncertainties. Refer to Item 1A. “Risk Factors” for further disclosure relating to the risks of the COVID-19 pandemic on the
Company's business.
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 accounting principles generally accepted in the United
States. The preparation of these financial statements requires Moody’s to make estimates and judgments that affect
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 evaluates its
critical accounting estimates. Actual results may differ
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.
from these estimates under different
assumptions or conditions. The
reported
ff
ff
ff
Goodwill and Other Acquired Intangible Assets
On July 31st of each year, Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating
segment (i.e., MIS and MA), or one level below an operating segment (i.e., a component of an operating segment).
Prior to the second quarter of 2021, MA's reporting unit structure consisted of five reporting units (Content, ERS, MALS, Bureau
van Dijk and Reis). Pursuant to a strategic reorganization in the MA segment which was completed in the second quarter of
2021, MA's reporting unit structure has been reorganized into two reporting units. MA’sAA two new reporting units generally consist
of: i) businesses offering
solutions. This reorganization did not result in a change to the Company's reportable segments.
data and data-driven analytical solutions; and ii) risk-management software, workflow and CRE
ff
The Company performed qualitative assessments of the reporting units impacted by the reorganization immediately before and
after the reorganization became effective.
more likely than not that the fair value of any reporting unit was less than its carrying amount.
These qualitative assessments resulted in the Company determining that it was not
ff
Subsequent to the aforementioned reorganization of the MA reporting units, the Company now has four reporting units: two
within the Company’s ratings business (one for the ICRA business and one that encompasses all of Moody’s other ratings
operations) and two reporting units within MA consisting of businesses that offer:
ii) risk-management software, workflow and CRE solutions.
i) data and data-driven analytical solutions; and
ff
MOODY'S 2021 10-K
41
The RMS business was acquired on September 15, 2021 and $1,266 million of goodwill was assigned to the MA reporting unit
consisting of risk-management software, workflow and CRE solutions, $90 million was assigned to the MIS reporting unit, and
$20 million was assigned to the MA reporting unit consisting of businesses offering
data and data-driven analytical solutions. In
addition, the Company acquired PassFort on November 30, 2021 and $138 million of goodwill was assigned to the reporting unit
consisting of businesses offering
completed after the Company's annual impairment assessment date of July 31, 2021, goodwill acquired in these transactions
was not subject to the Company's impairment assessment described below.
data and data-driven analytical solutions. As the acquisitions of these businesses were
ff
ff
The Company evaluates the recoverability of goodwill using a two-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 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 quantitatively 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 will record a
goodwill impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value. 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, realignments or if there are indicators of potential impairment. 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.
Annual goodwill impairment assessment performed at July 31,
g
p
p
y
, 2021
At July 31, 2021, the Company performed quantitative assessments for each of the four reporting units. These quantitative
assessments were performed to provide new baseline valuations under the aforementioned new reporting unit structure. These
quantitative assessments resulted in fair values that significantly exceeded carrying value for all reporting units.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions, which are more fully
described below. 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.
Other assets and liabilities, including applicable corporate assets, are allocated to the extent they are related to the operation of
respective reporting units.
Matters concerning the ICRA reporting unit
ICRA has reported various matters relating to: (i) an adjudication order and fine imposed (and subsequently enhanced) by the
Securities and Exchange Board of India (SEBI) in connection with credit ratings assigned to one of ICRA’sAA customers and the
customer’s subsidiaries, which are being appealed by ICRA; (ii) the completion of internal examinations regarding various
anonymous complaints, and actions taken by ICRA’sAA board based on the examinations’ findings; and (iii) a separate internal
examination of certain allegations against two former senior ICRA officials.
An unfavorable resolution of the aforementioned
matters may negatively impact ICRA’sAA future operating results, which could result in an impairment of goodwill and amortizable
intangible assets in future quarters.
ff
Methodologies and significant estimates utilized in determining the fair value of reporting units:
The following is a discussion regarding the Company’s methodology forff
determining the fair value of its reporting units, excluding
ICRA, at July 31, 2021. As ICRA is a publicly traded company in India, the Company was able to observe its fair value based on
its market capitalization.
The fair value of each reporting unit, excluding ICRA, was estimated using a discounted cash flow methodology and comparable
public company and precedent transaction multiples. The discounted cash flow analysis requires significant estimates, including
projections of future operating results and cash flows of each reporting unit that are based on internal budgets and strategic
of external factors and
plans, expected long-term growth rates, terminal values, weighted average cost of capital and the effects
market conditions. Changes in these estimates and assumptions could materially affect
the estimated fair value of each reporting
unit that 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.
ff
ff
The sensitivity analyses on the future cash flows and WACC assumptions are described below. These key assumptions utilized
in the discounted cash flow valuation methodology require significant management judgment:
–
p
- The projections forff
Future cash flow assumptions
experience and assumptions regarding future growth and profitability of each reporting unit. These projections are consistent
with the Company’s operating budget and strategic plan. Cash flows for the five years subsequent to the date of the
quantitative goodwill impairment test were utilized in the determination of the fair value of each reporting unit. The growth
rates assumed a gradual increase in revenue based on 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
future cash flows utilized in the models are derived from historical
42 MOODY'S 2021 10-K
analysis of the revenue growth rates was performed on all reporting units. For each reporting unit analyzed, a 10% reduction
in the revenue growth rates used would not have resulted in its carrying value exceeding its estimated fair value.
– WACCWW
- 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
and 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 8.0% to 8.5% as of July 31, 2021. Differences
primarily due to distinct risks and uncertainties regarding the cash flows of the different
of the WACC was performed on all reporting units as of July 31, 2021 for each reporting unit. For all 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.
in the WACC used between reporting units is
reporting units. A sensitivity analysis
ff
ff
Long-lived assets
Long-lived assets, which consist primarily of amortizable intangible assets, operating lease ROU assets and property and
equipment, are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable.
Under the first step of the recoverability assessment, Moody's compares the estimated undiscounted future cash flows
attributable to the asset or asset group to its carrying value. If the undiscounted future cash flows are greater than the carrying
value, no further assessment is required. If the undiscounted future cash flows are less than the carrying value, Moody's
proceeds with step two of the assessment. Under step two of this assessment, Moody's is required to determine the fair value of
the asset or asset group and recognize an impairment loss if the carrying amount exceeds its fair value. In performing this
assessment, Moody's must include assumptions that market participants would use in their estimates of fair value, including the
estimated future cash flows and discount rate. Moody's must apply judgment in developing estimated future cash flows and in
the determination of market participant assumptions.
Income Taxes
by the amounts charged for services provided and expenses incurred as well as other tax matters such as
The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company’s tax assets and liabilities
are affected
ff
intercompany transactions. 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
purposes and the amounts that are recognized for income tax purposes.
between the amounts of assets and liabilities that are recognized for financial reporting
of temporary differences
ff
ff
The Company is subject to tax audits in various jurisdictions. The Company regularly assesses the likely outcomes of such
audits in order to determine the appropriateness of liabilities for UTPs. The Company classifies 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 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
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 financial condition.
settlement with a taxing authority. As the determination of liabilities related to UTPs and
ff
Revenue Recognition and Costs to Obtain a Contract with a Customer
Revenue is recognized when control of promised goods or services is transferred to the customer, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods or services.
The discussion below outlines areas of the Company’s revenue recognition process that require significant management
judgment and estimates. Refer to Note 2 of the consolidated financial statements for a comprehensive discussion regarding the
Company’s accounting policies relating to the recognition of revenue and costs to obtain a contract with a customer.
Allocating consideration to performance obligations:
g
p
g
Management judgment is required in the determination of the SSP, wP hich is utilized to allocate the transaction price to each
distinct performance obligation at contract inception when the contract includes multiple distinct performance obligations.
In the MIS segment, the SSP for both ratings and monitoring services is generally based upon directly observable selling prices
where the rating or monitoring service is sold separately.
MOODY'S 2021 10-K
43
In the MA segment, for performance obligations where an observable price exists, such as PCS, the observable price is utilized.
If an observable price does not currently exist, the Company will utilize management’s best estimate of SSP for that good or
service using estimation methods that maximize the use of observable data points.
The SSP in both segments is usually apportioned along the lines of class of customer, nature of product/services, and other
attributes related to those products and services. Once SSP is determined for each performance obligation, the transaction price,
including any discount, is allocated based on the relative SSP of the separate performance obligations.
Costs to Obtain a Contract with a Customer:
Costs incurred to obtain customer contracts, such as sales commissions, are deferred and recorded within other current assets
and other assets when such costs are determined to be incremental to obtaining a contract, would not have been incurred
otherwise and the Company expects to recover those costs. These costs are amortized to expense on a systematic basis
consistent with the transfer of products or services to the customer for which the asset relates. Depending on the line of business
to which the contract relates, this amortization period may be based upon the average economic life of the products sold or
average period for which services are provided, inclusive of anticipated contract renewals.
Contingencies
Accounting for contingencies, including those matters described in Note 21 to the consolidated financial statements, is highly
subjective 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 current
status of such matters and their potential outcome based on a review of the facts and in consultation with outside legal counsel
where deemed appropriate. 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, the Company
records liabilities in the consolidated financial statements when it is both probable that a liability has been incurred and the
amount of loss can be reasonably estimated 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 instances when a loss is reasonably possible but uncertainties exist
related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the
contingency if material. As additional information becomes available, the Company adjusts its assessments and estimates of
such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to SEC rules and other pending
matters as it may determine to be appropriate.
ff
of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative
In view of the inherent difficulty
investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek
large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company
often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters.
The Company also may be unable to 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,
disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable
developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ
those estimates.
if any, on its operations and financial condition and to accrue for and
from
ff
ff
Accounts Receivable Allowances
On January 1, 2020, the Company adopted ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic
of Credit Losses on Financial Instruments” as more fully described in Note 1 to the consolidated financial statements. As the
Company's accounts receivable are short-term in nature, the adoption of this ASU did not have a material impact to the
Company's allowance for bad debts or its policies and procedures for determining the allowance.
TT
326): Measurement
In order to determine an estimate of expected credit losses, receivables are segmented based on similar risk characteristics
including historical credit loss patterns and industry or class of customers to calculate reserve rates. The Company uses an
aging method for developing its allowance for credit losses by which receivable balances are grouped based on aging category.
A reserve rate is calculated for each aging category, which is generally based on historical information, and is adjusted, when
necessary, forff
future. The Company also considers customer specific information (e.g., bankruptcy or financial difficulty)
expected credit losses, as well as the economic environment of the customers, both from an industry and geographic
perspective, in evaluating the need for allowances. Expected credit losses are reflected as additions to the accounts receivable
allowance. Actual uncollectible account write-offsff are recorded against the allowance.
current conditions (e.g., macroeconomic or industry related) and reasonable and supportable forecasts about the
when estimating its
ff
The impact on operating income relating to a one percentage point change in the Company's reserve rates would be
approximately $18 million.
44 MOODY'S 2021 10-K
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 significant assumptions include the following:
–
–
future compensation increases based on the Company’s long-term actual experience and future outlook;
long-term expected 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 portfolff
investments); and
io (which is principally comprised of equity and fixed-income
–
discount rates based on current yields on high-grade corporate long-term bonds.
The discount rates used to measure the present value of the Company’s benefit obligation for its Retirement Plans as of
December 31, 2021 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 FTSE 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 15 to the consolidated financial statements.
In determining these assumptions, the Company consults with third-party actuaries and other advisors as deemed appropriate.
While the Company believes that the assumptions used in its calculations are reasonable, differences
changes in assumptions could have a significant effect
ff
Retirement Plans. Additionally, the Company has updated its mortality assumption by adopting the newly released mortality
improvement scale MP-2021 to accompany the Pri2012 mortality tables to reflect the latest information regarding future mortality
expectations by the Society of Actuaries.
on the expenses, assets and liabilities related to the Company’s
in actual experience or
ff
ff
from the assumptions used, actuarial gains or losses arise. Excluding differences
When actual plan experience differs
the expected long-term rate of return assumption and actual returns on plan assets, the Company amortizes, as a component of
annual pension expense, total outstanding actuarial 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, 2021
that have not been recognized in annual expense are $65 million, and Moody’s expects to recognize a net periodic expense of
$4 million in 2022 related to the amortization of actuarial losses.
between
ff
ff
ff
For Moody’s funded U.S. pension plan, the differences
returns could also affect
impact of asset returns over a five-year period forf
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, 2021, the Company has an unrecognized asset gain of $44 million, of which
$13 million will be recognized in the market-related value of assets that is used to calculate the expected return on assets
component of 2022 expense.
the net periodic pension expense. As permitted under ASC Topic 715, the Company amortizes the
purposes of calculating the market-related value of assets that is used in
between the expected long-term rate of return assumption and actual
The table below shows the estimated effect
Moody’s 2022 income before provision for income taxes. These effects
projections of 2022 expenses, assets and liabilities related to Moody’s Retirement Plans, which could change as updated data
becomes available.
that a one percentage-point decrease in each of these assumptions will have on
have been calculated using the Company’s current
ff
ff
(dollars in millions)
Weighted Average Discount Rates (1)
Weighted Average Assumed Compensation Growth Rate
Assumed Long-TermTT
Rate of Return on Pension Assets
Assumptions Used for
2022
Estimated Impact on 2022
Income before Provision
for Income Taxes
(Decrease)/Increase
2.60%/2.65% $
3.63 % $
5.05 % $
(10)
1
(5)
(1) Weighted average discount rates of 2.60% and 2.65% for pension plans and Other Retirement Plans, respectively.
Based on current projections, the Company estimates that expenses related to Retirement Plans will be approximately
$13 million in 2022, a decrease compared to the $31 million recognized in 2021.
Leases
The Company’s operating leases do not provide an implicit interest rate. Accordingly, the Company must estimate the secured
incremental borrowing rate attributable to the currency in which the lease is denominated in the derivation of operating lease
liabilities and related operating lease ROU Assets. This secured incremental borrowing rate is based on the information available
at the lease commencement date and is utilized in the determination of the present value of lease payments.
MOODY'S 2021 10-K
45
In addition, certain of Moody’s leases have the option to extend the lease beyond the initial term or terminate the lease prior to
the end of the term. For these leases, Moody’s may be required to exercise significant judgment to determine when that option is
reasonably certain of being exercised, which will impact the lease term and determination of the lease liability and corresponding
ROU Asset.
Investments in Non-consolidated Affiliates
Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis. These
investments are written down to fair value if there is evidence of a loss in value that is other-than-temporary.
For equity investments without a readily determinable fair value for which the Company does not have significant influence,
Moody's generally elects to measure these investments at cost, less impairment, adjusted for subsequent observable price
changes as of the date that an observable transaction takes place.
The Company performs an assessment on a quarterly basis to determine if there are indicators of impairment for its investments
in non-consolidated affiliates.
records an impairment if the carrying value of the investment exceeds its fair value.
If there are indicators of impairment, the Company estimates the investment’s fair value and
ff
In situations where estimation of fair value is required for investments in non-consolidated affiliates,
the Company considers
various factors, including: recent observable investee equity transactions, comparable public company/precedent transaction
multiples and discounted cash flow models. The estimation of fair value for these investments may involve significant judgment.
ff
Other Estimates
In addition to the critical accounting estimates described above, there are other accounting estimates within Moody’s
consolidated financial statements. 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.
ff
ff
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, 2021: MIS and MA, which are more fully described in
the section entitled “The Company” above and in Note 22 to the consolidated financial statements.
RESULTS OF OPERATIONS
This section of this Form 10-K generally discusses year ended December 31, 2021 and 2020 financial results and year-to-year
comparisons between these years. Discussions related to the year ended December 31, 2019 financial results and year-to-year
comparisons between the years ended December 31, 2020 and 2019 that are not included in this Form 10-K can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Impact of acquisitions/divestitures on comparative results
– Moody’s completed the following acquisitions, which impact the Company's year-over-year comparative results:
– Regulatory DataCorp on February 13, 2020;
–
–
Acquire Media on October 21, 2020;
ZM Financial Systems on December 7, 2020;
– Catylist on December 30, 2020;
– Cortera on March 19, 2021;
– RMS on September 15, 2021; and
– RealXData on September 17, 2021.
– Refer to the section entitled "Non-GAAP Financial Measures" of this MD&A for the definitions of how the Company
determines certain organic growth measures used in this MD&A that exclude the impact of acquisition activity.
46 MOODY'S 2021 10-K
Year ended December 31, 2021 compared with year ended December 31, 2020
Executive Summaryy
The following table provides an executive summary of key operating results for the year ended December 31, 2021. Following
this executive summary is a more detailed discussion of the Company’s operating results as well as a discussion of the operating
results of the Company’s reportable segments.
Year Ended December 31,
Financial measure:
2021
2020
% Change
Favorable /
(Unfavorable)
Insight and Key Drivers of Change Compared to Prior Year
Moody's total revenue
$ 6,218
$ 5,371
16 % — reflects strong growth in both segments
MIS External Revenue $ 3,812
$ 3,292
16 % — strong growth mainly driven by leveraged finance issuance
as issuers refinanced existing debt and funded M&A activity;
and
— increased CLO and CMBS activity amid favorable market
conditions
MA External Revenue
$ 2,406
$ 2,079
16 % — strong growth in KYC and compliance solutions, as well as
research and data feeds;
— inorganic growth from acquisitions;
— ongoing recurring revenue growth in ERS from
subscription-based sales to banking, insurance and asset
management customers; and
— favorable changes in FX translation rates; partially offset by:
— a decline in ERS transaction-based revenue reflecting MA's
strategic shift to higher margin SaaS-based products, which
produce recurring revenue
$ 3,117
$ 2,704
(15 %) — Approximately seven percentage points of the growth
Total operating and
SG&A expenses
Total non-operating
(expense) income, net
$
(89)
$
(159)
Operating Margin
Adjusted Operating
Margin
45.7 %
49.9 %
44.5 %
49.7 %
reflects inorganic expenses from acquisitions, including $22
million in acquisition-related costs for RMS; and
— Approximately five percentage points of the growth reflects
higher incentive compensation, stock-based compensation,
and commissions aligned with operating performance.
44% — a $45 million benefit related to the reversal of tax-related
interest accruals pursuant to the resolution of uncertain tax
positions; and
— a $36 million non-cash gain relating to the exchange of the
Company's minority investment in VisibleRisk for shares of
BitSight
120BPS — margin expansion reflects strong revenue growth outpacing
20BPS
operating expense growth
ETR
19.6 %
20.3 %
70BPS — higher benefits of approximately $36 million from the
resolution of UTPs in 2021; partially offset by
— lower Excess Tax Benefits in 2021
Diluted EPS
$ 11.78
$
9.39
25 % — increase reflects strong operating income/Adjusted
Adjusted Diluted EPS
$ 12.29
$ 10.15
21 %
Operating Income growth as described above and includes
$0.54/share and $0.20/share in benefits related to the
resolution of uncertain tax positions (and related interest) in
2021 and 2020, respectively.
MOODY'S 2021 10-K
47
Moody’s Corporation
Revenue:
United States
Non-U.S.:
EMEA
Asia-Pacific
Americas
Total Non-U.S.
Total
Expenses:
Operating
SG&A
Restructuring
Depreciation and amortization
Loss pursuant to the divestiture of MAKS
Total
Operating income
Adjusted Operating Income (1)
Interest expense, net
Other non-operating income, net
Non-operating (expense) income, net
Net income attributable to Moody’s
Diluted weighted average shares outstanding
Diluted EPS attributable to Moody’s common shareholders
Adjusted Diluted EPS (1)
Operating margin
Adjusted Operating Margin (1)
Effective
tax rate
ff
Year Ended December 31,
2021
2020
% Change
Favorable
(Unfavorable)
$
3,416
$
2,955
1,866
596
340
2,802
6,218
1,637
1,480
—
257
—
3,374
2,844
3,101
(171)
82
(89)
2,214
187.9
11.78
12.29
$
$
$
$
$
$
1,545
571
300
2,416
5,371
1,475
1,229
50
220
9
2,983
2,388
2,667
(205)
46
(159)
1,778
189.3
9.39
10.15
45.7 %
49.9 %
19.6 %
44.5 %
49.7 %
20.3 %
16%
21%
4%
13%
16%
16%
(11%)
(20%)
100%
(17%)
100%
(13%)
19%
16%
17%
78%
44%
25%
1%
25%
21%
(1)
Adjusted Operating Income, Adjusted Operating Margin and Adjusted 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.
GLOBAL REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
55%
45%
45%
55%
55%
56%
45%
44%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
48 MOODY'S 2021 10-K
Global revenue ⇑ $847 million
U.S. Revenue ⇑ $461 million
Non-U.S. Revenue ⇑ $386 million
The increase in global revenue reflected growth in both reportable segments. Refer to the section entitled “Segment Results” of
this MD&A for a more fulsome discussion of the Company’s segment revenue.
Operating Expense ⇑ $162 million
SG&A Expense ⇑ $251 million
$1,637
$1,475
$1,480
$1,229
Compensation
Non-compensation
Compensation
Non-compensation
2021
2020
-
-------------------------------------
2021
2020
-----------
Compensation expenses increased $126 million reflecting: Compensation expenses increased $133 million
reflecting:
— higher incentive and stock-based compensation accruals
— higher incentive and stock-based compensation accruals
aligned with financial and operating performance;
aligned with financial and operating performance;
— inorganic growth from acquisitions; and
— inorganic growth from acquisitions; and
— hiring and salary increases
— hiring and salary increases
Non-compensation expenses increased $36 million
reflecting:
Non-compensation expenses increased $118 million
reflecting:
— higher costs relating to strategic initiatives to support
— higher costs relating to strategic initiatives to support
business growth coupled with enhancements to technology
infrastructure to enable automation, innovation and
efficiency;
and
ff
business growth coupled with enhancements to technology
infrastructure to enable automation, innovation and
efficiency;
and
ff
— operational costs associated with recent acquisitions
— costs associated with recent acquisitions, including $22
million in RMS acquisition-related costs
Other Expenses
The restructuring charge of $50 million in 2020 primarily relates to:
–
–
the non-cash impairment of certain leased real estate assets (ROU Assets and leasehold improvements) pursuant to
the rationalization of certain real estate in response to the COVID-19 pandemic; and
severance costs associated with a strategic realignment in the MA segment.
Further detail on the Company's restructuring programs are more fully discussed in Note 11 to the consolidated financial
statements.
The 2020 amount includes a $9 million loss pursuant to the divestiture of MAKS relating to customary post-closing completion
adjustments pursuant to the sale of the business in the fourth quarter of 2019.
Operating margin 45.7%, up 120 BPS
Adjusted Operating Margin 49.9%, up 20 BPS
Operating margin and Adjusted Operating Margin expansion reflects strong revenue growth outpacing growth in total operating
expenses.
MOODY'S 2021 10-K
49
Interest Expense, net ⇓ $34 million
Other non-operating income ⇑ $36 million
The decrease in expense is primarily due to:
The increase in income is primarily due to:
— approximately $40 million higher benefit in 2021 related to
the reversal of tax-related interest accruals pursuant to
the resolution of uncertain tax positions;
— a $36 million non-cash gain relating to the exchange of the
Company's minority investment in VisibleRisk for shares of
BitSight; and
— a decrease of $11 million in prepayment penalties on the
early repayment of long-term debt;
partially offset by
— higher income of $18 million in 2021 on certain of the
Company's investments in non-consolidated affiliates;
ff
partially offset by
— a $15 million lower benefit from cross currency swaps
(more fully discussed in Note 7 to the consolidated
financial statements).
— a $13 million benefit in 2020 relating to statute of limitations
lapses on certain indemnification obligations relating to the
MAKS divestiture; and
— a $13 million loss on a forff ward
rr
portion of the GBP denominated RMS purchase price.
contract used to hedge a
ETR ⇓ 70BPS
The 2021 and 2020 ETR include $70 million and $34 million, respectively, in tax benefits relating to the resolution of uncertain tax
positions. The aforementioned benefit to the 2021 ETR was diluted by higher income before provision for income taxes
compared to the prior year. Additionally, there was a $29 million decrease in Excess Tax Benefits in 2021 compared to the prior
year.
Diluted EPS ⇑ $2.39
Adjusted Diluted EPS ⇑ $2.14
Diluted EPS in 2021 of $11.78 increased $2.39 compared to
2020, mainly due to higher operating income. Diluted EPS in
2021 and 2020 also include $0.54/share and $0.20/share,
respectively, in benefits related to the aforementioned
resolution of uncertain tax positions (and related interest).
Adjusted Diluted EPS of $12.29 in 2021 increased $2.14
compared to 2020 (refer to the section entitled “Non-GAAP
Financial Measures” of this MD&A for items excluded in the
derivation of Adjusted Diluted EPS) mainly due to higher
Adjusted Operating Income. Adjusted Diluted EPS in 2021 and
2020 includes $0.54/share and $0.20/share, respectively, in
benefits related to the aforementioned resolution of uncertain
tax positions (and related interest). Refer to the section
entitled “Non-GAAP Financial Measures” of this MD&A for
items excluded in the derivation of Adjusted Diluted EPS.
50 MOODY'S 2021 10-K
Segment Results
Moody’s Investors Service
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
r Ended December 31,
2021
2020
% Change
Favorable
(Unfavorable)
Revenue:
Corporate finance (CFG)
Financial institutions (FIG)
Public, project and infrastructure finance (PPIF)
Structured finance (SFG)
Total ratings revenue
MIS Other
Total external revenue
Intersegment royalty
Total
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Total operating and SG&A
Adjusted Operating Income
Adjusted Operating Margin
Restructuring
Depreciation and amortization
$
2,087
$
1,857
602
521
560
3,770
42
3,812
165
3,977
1,496
7
1,503
2,474
$
530
496
362
3,245
47
3,292
148
3,440
1,380
7
1,387
2,053
62.2 %
59.7 %
(1)
72
19
70
$
12%
14%
5%
55%
16%
(11%)
16%
11%
16%
(8%)
—%
(8%)
21%
105%
(3%)
The following chart presents changes in rated issuance volumes compared to 2020. To the extent that changes in rated issuance
volumes had a material impact to MIS's revenue compared to the prior year, those impacts are discussed below.
Changes in Rated Issuance Volumes
Total MIS Rated Issuance
9%
Structured Finance
Leveraged Loans
Financial Institutions
High Yield Bonds
Public, Project and
Infrastructure Finance
(20)%
Investment Grade
(36)%
13%
12%
123%
104%
MOODY'S 2021 10-K
51
MOODY'S INVESTORS SERVICE REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
39%
31%
37%
34%
61%
69%
63%
66%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
MIS: Global revenue ⇑ $520 million
U.S. Revenue ⇑ $276 million
Non-U.S. Revenue ⇑ $244 million
–
–
The increase in global MIS revenue reflected strong growth across all ratings LOBs.
Transaction revenue grew $458 million compared to the same period in the prior year.
CFG REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
34%
66%
23%
30%
25%
77%
70%
75%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
CFG: Global revenue ⇑ $230 million
U.S. Revenue ⇑ $93 million
Non-U.S. Revenue ⇑ $137 million
Global CFG revenue for the years ended December 31, 2021 and 2020 was comprised as follows:
$2,087
$631
$606
$411
$439
2021
$1,857
$582
$287
$352
$636
2020
Bank loans
High-yield
Investment-grade
(1) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs
such as commercial paper, medium term notes, and ICRA corporate finance revenue.
52 MOODY'S 2021 10-K
The increase in CFG revenue of 12% reflected growth both in the U.S. (7%) and internationally (24%), which resulted in a $199
million increase in transaction revenue.
The most notable drivers of this increase were:
–
strong growth in bank loan and speculative-grade bond activity in the U.S. and EMEA as issuers refinanced existing
debt in light of favorable market conditions and funded M&A activity;
partially offset by:
–
lower investment grade rated issuance volumes following very strong issuance volumes in the prior year when issuers
were bolstering their balance sheets in light of uncertainties relating to the COVID-19 crisis.
FIG REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
48%
52%
53%
47%
47%
53%
50%
50%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
FIG: Global revenue ⇑ $72 million
U.S. Revenue ⇑ $39 million Non-U.S. Revenue ⇑ $33 million
Global FIG revenue for the years ended December 31, 2021 and 2020 was comprised as follows:
$602
$36
$145
$411
2021
$530
$28
$137
$355
2020
Other accounts (FIG)
Managed investments
Insurance
Banking
The increase in FIG revenue of 14% reflected growth both in the U.S. (16%) and internationally (12%) which resulted in a $55
million increase in transaction revenue compared to the prior year.
The most notable driver of the increase was higher banking revenue in the U.S. and EMEA reflecting both the benefit of
favorable changes in product mix and pricing increases coupled with opportunistic issuer activity in light of favorable market
conditions.
MOODY'S 2021 10-K
53
PPIF REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
42%
58%
32%
37%
32%
68%
63%
68%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
PPIF: Global revenue ⇑ $25 million
U.S. Revenue ⇓ $7 million
Non-U.S. Revenue ⇑ $32 million
Global PPIF revenue for the years ended December 31, 2021 and 2020 was comprised as follows:
$521
$277
$244
2021
$496
$246
$250
2020
Project and infrastructure
Public finance / sovereign
Transaction revenue increased $17 million compared to the same period in the prior year.
The 5% increase in PPIF revenue reflected growth internationally (17%) partially offset
growth was driven by:
ff
be a slight decline in the U.S. (2%). The
–
higher project and infrastructure finance revenue which benefitted from favorable changes in product mix and pricing
increases;
partially offset
ff
by:
–
a decline in U.S. public finance revenue, as issuance volumes fell given higher issuer liquidity following strong issuance
in the prior year and from the infusion of federal funding related to the COVID-19 crisis.
54 MOODY'S 2021 10-K
SFG REVENUE
2021----------------------------------------------------------------------------------------------------------------------2020
__________________________________________________________________________________________________________________________________________________________
35%
35%
65%
65%
41%
59%
48%
52%
U.S.
Non-U.S.
Transaction
Recurring
U.S.
Non-U.S.
Transaction
Recurring
SFG: Global revenue ⇑ $198 million
U.S. Revenue ⇑ $150 million
Non-U.S. Revenue ⇑ $48 million
Global SFG revenue for the years ended December 31, 2021 and 2020 was comprised as follows:
$560
$215
$102
$123
$118
2021
$362
$105
$61
$96
$98
2020
Structured credit
CMBS
RMBS
Asset-backed securities
The increase in SFG revenue of 55% reflected growth both in the U.S. (70%) and internationally (32%). Transaction revenue
increased $187 million. The most notable drivers of the growth in SFG revenue were:
–
an increase in CLO refinancing and securitization activity as a result of:
–
–
favorable market conditions for this asset class in the U.S. and EMEA;
higher issuance to complete deals prior to the expected market transition from LIBOR
–
an increase in U.S. CMBS activity reflecting a narrowing of credit spreads forff
prior year period when securitization activity for retail and hotel properties was adversely impacted by the COVID-19
crisis.
this asset class compared to a challenging
Foreign currency translation favorably impacted SFG revenue by two percentage points.
MOODY'S 2021 10-K
55
MIS: Operating and SG&A Expense ⇑ $116 million
$1,496
$1,104
$392
2021
$1,380
$1,011
$369
2020
Compensation
Non-compensation
The growth reflects a $93 million and $23 million increase in compensation and non-compensation expenses, respectively. The
most notable drivers of these increases are as follows:
Compensation costs
Non-compensation costs
The increase is primarily due to:
The increase is primarily due to:
— higher incentive and stock-based compensation
accruals aligned with financial and operating
performance
— higher costs to support the Company’s initiative to
enhance technology infrastructure to enable automation,
innovation and efficiency as well as to support business
growth;
partially offset by:
— lower estimates for credit losses primarily reflecting an
increase in reserves in 2020 resulting from the
anticipated impact of the COVID-19 crisis
Other Expenses
The restructuring charge in 2020 relates to the Company's restructuring programs as more fully discussed in Note 11 to the
consolidated financial statements.
MIS: Adjusted Operating Margin 62.2% ⇑ 250BPS
MIS Adjusted Operating Margin increased reflecting strong revenue growth partially offset
expenses.
ff
by growth in operating and SG&A
56 MOODY'S 2021 10-K
Moody’s Analytics
The table below provides a summary of revenue and operating results, followed by further insight and commentary:
Year Ended December 31,
2021
2020
% Change
Favorable
(Unfavorable)
Revenue:
Research, data and analytics (RD&A)
Enterprise risk solutions (ERS)
Total external revenue
Intersegment revenue
Total MA Revenue
Expenses:
Operating and SG&A (external)
Operating and SG&A (intersegment)
Total operating and SG&A
Adjusted Operating Income
Adjusted Operating Margin
Restructuring
Depreciation and amortization
Loss pursuant to the divestiture of MAKS
MOODY'S ANALYTICS REVENUE
$
$
1,745
661
2,406
7
2,413
1,621
165
1,786
627
$
$
1,514
565
2,079
7
2,086
1,324
148
1,472
614
26.0 %
29.4 %
1
185
—
31
150
9
15%
17%
16%
—%
16%
(22%)
(11%)
(21%)
2%
97%
(23%)
100%
__________________________________________________________________________________________________________________________________________________________
2021----------------------------------------------------------------------------------------------------------------------2020
45%
55%
7%
93%
43%
57%
9%
91%
U.S.
Non-U.S.
Recurring
Transaction
U.S.
Non-U.S.
Recurring
Transaction
MA: Global revenue ⇑ $327 million
U.S. Revenue ⇑ $185 million
Non-U.S. Revenue ⇑ $142 million
The 16% increase in global MA revenue reflects strong growth both in the U.S. (21%) and internationally (12%).
–
Foreign currency translation favorably impacted MA revenue by two percentage points.
– Organic revenue growth was 9%.
MOODY'S 2021 10-K
57
RD&A REVENUE
__________________________________________________________________________________________________________________________________________________________
2021----------------------------------------------------------------------------------------------------------------------2020
43%
57%
U.S.
Non-U.S.
5%
95%
Recurring
Transaction
44%
56%
5%
95%
U.S.
Non-U.S.
Recurring
Transaction
RD&A: Global revenue ⇑ $231 million
U.S. Revenue ⇑ $90 million
Non-U.S. Revenue ⇑ $141 million
Global RD&A revenue grew 15% compared to 2020 reflecting growth in the U.S. (13%) and internationally (17%). The most
notable drivers of the growth include:
–
–
–
strong demand for KYC and compliance solutions reflecting increased customer and supplier risk data usage;
strong renewals and new sales related to credit research and data feeds; and
inorganic revenue growth from acquisitions.
Foreign currency translation favorably impacted RD&A revenue by two percentage points.
Organic revenue growth for RD&A was 12%.
ERS REVENUE
__________________________________________________________________________________________________________________________________________________________
2021----------------------------------------------------------------------------------------------------------------------2020
48%
52%
12%
39%
21%
88%
61%
79%
U.S.
Non-U.S.
Recurring
Transaction
U.S.
Non-U.S.
Recurring
Transaction
ERS: Global revenue ⇑ $96 million
U.S. Revenue ⇑ $95 million
Non-U.S. Revenue ⇑ $1 million
Global ERS revenue increased 17% compared to 2020, mainly from growth in the U.S. (43%). Recurring revenue grew 30%
compared to 2020. Transaction revenue declined by 32% compared to 2020.
58 MOODY'S 2021 10-K
The most notable drivers of the growth reflected:
–
–
inorganic revenue growth from the acquisitions of RMS and ZMFS;
growth in subscription-based revenue, most notably for actuarial modeling tools in support of certain international
accounting standards relating to insurance contracts and demand from asset managers for risk management solutions;
and
–
favorable foreign currency translation which impacted revenue by two percentage points.
partially offset by:
–
lower non-recurring software and services revenue due to a de-emphasizing of these lower margin offerings.
ff
Organic total revenue and organic recurring revenue for ERS grew 1% and 11%, respectively. Organic transaction revenue
declined 38%.
MA: Operating and SG&A Expense ⇑ $297 million
$1,621
$1,031
$590
2021
$1,324
$864
$460
2020
Compensation
Non-compensation
The increase in operating and SG&A expenses compared to 2020 reflected growth in both compensation and non-compensation
costs of $167 million and $130 million, respectively. The most notable drivers of this growth were:
Compensation costs
Non-compensation costs
— salary increases and inorganic expense growth from
— accelerated spending relating to strategic initiatives to
acquisitions;
— higher incentive compensation accruals aligned with
financial and operating performance; and
support business growth coupled with enhancements to
technology infrastructure to enable automation,
innovation and efficiency; and
— unfavorable changes in FX translation rates
— costs associated with recent acquisitions, including $22
million in RMS acquisition-related costs
Other Expenses
The restructuring charge in 2020 relates to the Company's restructuring programs as more fully discussed in Note 11 to the
consolidated financial statements.
The $9 million loss pursuant to the divestiture of MAKS in 2020 is related to a customary post-closing completion adjustment
pursuant to the sale of the business in the fourth quarter of 2019.
MA: Adjusted Operating Margin 26.0% ⇓ 340BPS
The Adjusted Operating Margin contraction for MA reflects operating expense growth outpacing RD&A and ERS revenue growth.
MOODY'S 2021 10-K
59
MARKET RISK
Foreign exchange risk:
g
g
rr
Moody’s maintains a presence in more than 40 countries. In 2021, approximately 42% of the Company’s revenue and
approximately 38% of the Company expenses were denominated 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,
2021, approximately 52% of Moody’s assets were located outside the U.S., making the Company susceptible to fluctuations in
of translating assets and liabilities of non-U.S. operations with non-U.S. functional currencies to the U.S.
FX rates. The effects
dollar are charged or credited to OCI.
ff
The effects
of revaluing assets and liabilities that are denominated in currencies other than a subsidiary’s functional currency are
ff
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
denominated in currencies other than a subsidiary’s functional currency. The following table shows the impact to the fair value of
the forward contracts if currencies being purchased were to weaken by 10%:
Foreign Currency Forwards (1)
Sell
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
U.S. dollar
British pound
Buy
British pound
Canadian dollar
Euro
Japanese yen
Singapore dollar
Indian Rupee
Russian Ruble
U.S. dollar
Impact on fair value of contract
$12 million unfavorable impact
$11 million unfavorable impact
$36 million unfavorable impact
$2 million unfavorable impact
$6 million unfavorable impact
$1 million unfavorable impact
$1 million unfavorable impact
$21 million unfavorable impact
$90 million unfavorable impact
(1)
Refer to Note 7 to the consolidated financial statements in Item 8 of this Form 10-K for further detail on the forwf
ard contracts.
The change in fair value of the foreign exchange forward contracts would be offset
underlying assets and liabilities denominated in currencies other than a subsidiary’s functional currency.
by FX revaluation gains or losses on
ff
Derivatives and non-derivatives designated as net investment hedges:
g
g
The Company designates derivative instruments and foreign currency-denominated debt as hedges of foreign currency risk of
net investments in certain foreign subsidiaries (net investment hedges) under ASC Topic 815, Derivatives and Hedging.
Cross-currency swaps
As of December 31, 2021, the Company had the following derivative instruments designated as hedges of euro denominated net
investments in subsidiaries:
– Cross-currency swaps to exchange an aggregate amount of €909 million with corresponding euro fixed interest rates for
an aggregate amount of $1,050 million with corresponding USD fixed interest rates.
– Cross-currency swaps to exchange an aggregate amount of €1,179 million with corresponding interest based on the
floating 3-month EURIBOR for an aggregate amount of $1,350 million with corresponding interest based on the floating
3-month U.S. LIBOR.
If the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $237 million unfavorable impact to
the fair value of the cross-currency swaps recognized in OCI, which would be offset
the Company’s euro net investment in foreign subsidiaries.
by favorable currency translation gains on
ff
Euro-denominated debt
As of December 31, 2021, the Company has designated €500 million of the 2015 Senior Notes and €750 million of the 2019
Senior Notes as a net investment hedge to mitigate FX exposure relating to euro denominated net investments in subsidiaries. If
the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $142 million unfavorable adjustment
to OCI related to these net investment hedges. This adjustment would be offset
Company’s euro net investment in subsidiaries.
by favorable translation adjustments on the
ff
60 MOODY'S 2021 10-K
Interest rate and credit risk:
Interest rate swaps designated as a fair value hedge:
g
g
p
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 a 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 interest rate on certain of its long-term debt to a floating interest rate based on the 3-
month and 6-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 100 BPS in the LIBOR-based swap rate would result in an approximate $69 million change to the fair value of the
swap, which would be offset
by the change in fair value of the hedged item.
ff
Additional information on these interest rate swaps is disclosed in Note 7 to the consolidated financial statements located in Item
8 of this Form 10-K.
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 various money market deposit accounts and certificates of deposit and by limiting the amount it can invest
with any single issuer. Short-term investments primarily consist of certificates of deposit.
LIQUIDITY AND CAPITAL RESOURCES
Moody's remains committed to using its strong cash flow to create value for shareholders by both investing in the Company's
employees and growing the business through targeted organic initiatives and inorganic acquisitions aligned with strategic
priorities. Additional excess capital is returned to the Company’s shareholders via a combination of dividends and share
repurchases.
Cash Flow
The Company is currently financing its operations, capital expenditures, acquisitions and share repurchases from operating and
financing cash flows.
The following is a summary of the changes in the Company’s cash flows followed by a brief discussion of these changes:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Free Cash Flow (1)
Year Ended December 31,
2021
2,005
(2,619)
(122)
1,866
$
$
$
$
2020
2,146
(1,077)
(351)
2,043
$
$
$
$
$
$
$
$
$ Change
Favorable
(unfavorable)
(141)
(1,542)
229
(177)
(1)
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 expenditures. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for further information on this financial
measure.
Net cash provided by operating activities
Net cash flows from operating activities decreased $141 million compared to the prior year reflecting:
–
–
higher cash paid for income taxes of $418 million, which includes amounts pursuant to the settlement of UTPs; and
various changes in working capital, most notably from higher accounts receivable balances at December 31, 2021
resulting from the Company's strong performance in the fourth quarter of 2021;
partially offset by:
–
–
–
an increase in net income compared to the same period in the prior year reflecting the Company's strong performance
in 2021 (see section entitled “Results of Operations” for further discussion);
a $99 million contribution to the Company's funded pension plan in 2020 that did not recur in 2021; and
a $68 million payment made in conjunction with the settlement of a treasury lock interest rate forward contract in 2020
that did not recur in 2021.
Net cash used in investing activities
The $1,542 million increase in cash flows used in investing activities compared to 2020 primarily reflects:
–
an increase in cash paid for acquisitions of $1,282 million (refer to Note 9 to the consolidated financial statements for further
discussion on the Company's M&A activity); and
MOODY'S 2021 10-K
61
–
$250 million of cash paid for a minority investment in BitSight (refer to Note 13 to the consolidated financial statements for
further discussion on the Company's investments in non-consolidated affiliates).
ff
Net cash used in financing activities
The $229 million decrease in cash used in financing activities was primarily attributed to:
–
the net issuance of $1.2 billion in long-term debt during 2021 compared to a net issuance of $691 million during 2020;
partially offset by:
–
an increase in cash paid for treasury share repurchases of $247 million compared to the prior year.
Cash and cash equivalents and short-term investments
The Company’s aggregate cash and cash equivalents and short-term investments of $1.9 billion at December 31, 2021 included
approximately $1.5 billion located outside of the U.S. Approximately 26% of the Company’s aggregate cash and cash equivalents
and short-term investments is denominated in euros and British pounds. The Company manages both its U.S. and non-U.S.
liquidity in all regions to effectively meet its operating needs.
cash flow to maintain sufficient
ff
As a result of the Tax Act, all previously net undistributed foreign earnings have now been subject to U.S. tax. The Company
continues to evaluate which entities it will indefinitely reinvest earnings outside the U.S. The Company has provided deferred
taxes for those entities whose earnings are not considered indefinitely reinvested. Accordingly, the Company has commenced
repatriating a portion of its non-U.S. cash in these subsidiaries and will continue to repatriate certain of its offshore
manner that addresses compliance with local statutory requirements, sufficient
may be relevant in certain jurisdictions. Notwithstanding the Tax Act, which generally eliminated federal income tax on future
cash repatriation to the U.S., cash repatriation may be subject to state and local taxes or withholding or similar taxes.
ff
working capital and any other factors that
cash in a
offshore
ff
ff
Material Cash Requirements
q
The Company's material cash requirements consist of the following contractual and other obligations:
Arrangements
Financing Arrangements
g
Indebtedness
At December 31, 2021, Moody’s had $7.4 billion of outstanding debt and approximately $1 billion of additional capacity available
under the Company’s CP program, which is backstopped by the $1.25 billion 2021 Facility.
The repayment schedule forff
the Company’s borrowings outstanding at December 31, 2021 is as follows:
$700
$500 $500
$568
$500
$400
$853
$600
$600
$600
$400
$300
$500 $500
$—
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
//
2041
//
2044
//
2048
//
2050
//
2060 2061
USD Fixed
EUR Fixed
Future interest payments and fees associated with the Company's debt and credit facility are expected to be $3.3 billion, of which
approximately $212 million is expected to be paid over the next twelve months. For additional information on the Company's
outstanding debt, CP program and 2021 Facility, refer to Note 18 to the consolidated financial statements.
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.
Purchase Obligations
Purchase obligations generally include multi-year agreements with vendors to purchase goods or services and mainly include
data center/cloud hosting fees and fees for information technology licensing and maintenance. As of December 31, 2021, these
purchase obligations totaled $233 million, of which $133 million is expected to be paid in the next twelve months.
62 MOODY'S 2021 10-K
Leases
The Company has operating lease obligations of $560 million at December 31, 2021, primarily related to real estate leases, of
which approximately $120 million in payments are expected over the next twelve months. For more information on the
Company's operating leases, refer to Note 20 to the consolidated financial statements.
Pension and Other Retirement Plan Obligations
The Company does not anticipate making significant contributions to its funded pension plan in the next twelve months. This plan
investments to fund future benefit obligations. Payments
ff
is overfunded at December 31, 2021, and accordingly holds sufficient
for the Company's unfunded plans are not expected to be material in either the short or long-term. For further information on the
Company's pension and other retirement plan obligations, refer to Note 15 to the consolidated financial statements.
Dividends and share repurchases
On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock,
payable March 18, 2022 to shareholders of record at the close of business on February 25, 2022. The continued payment of
dividends at this rate, or at all, is subject to the discretion of the Board.
On December 16, 2019, the Board authorized $1 billion in share repurchase authority and on February 9, 2021, the Board
approved an additional $1 billion in share repurchase authority. At December 31, 2021, the Company had approximately
$1,081 million of remaining authority. Additionally, on February 7, 2022, the Board of Directors approved an additional $750
million of share repurchase authority. There is no established expiration date for the remaining authorizations.
y
Sources of Funding to Satisfy Material Cash Requirements
q
g
The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive
operating cash flow in 2022. 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 as described above.
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 financial measures.” Management believes that such adjusted 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 perforr
investors of supplemental information used by management in its financial and operational decision-making. These adjusted
measures, as defined by the Company, are not necessarily comparable to similarly defined measures of other companies.
Furthermore, these adjusted measures should not be viewed in isolation or used as a substitute for other GAAP measures in
rr mance or cash flows of the Company. Below are brief descriptions of the Company’s adjusted
assessing the operating perfor
financial measures accompanied by a reconciliation of the adjusted measure to its most directly comparable GAAP measure.
rmance, facilitate comparisons to competitors’ operating results and provide greater transparency to
Adjusted Operating Income and Adjusted Operating Margin:
The Company presents Adjusted Operating Income and Adjusted Operating Margin because management deems these metrics
to be useful measures to provide additional perspective on Moody's operating performance. Adjusted Operating Income excludes
the impact of: i) depreciation and amortization; ii) restructuring charges/adjustments; and iii) a loss pursuant to the divestiture of
MAKS. Depreciation and amortization are excluded because companies utilize productive assets of different
different
methods of acquiring and depreciating productive assets. Restructuring charges are excluded as the frequency and
magnitude of these charges may vary widely across periods and companies. The loss pursuant to the divestiture of MAKS is
excluded as the frequency and magnitude of divestiture activity may vary widely from period to period and across companies.
ages and use
ff
ff
Management believes that the exclusion of the aforementioned items, as detailed in the reconciliation below, allows for an
additional perspective on the Company’s operating results from period to period and across companies. The Company defines
Adjusted Operating Margin as Adjusted Operating Income divided by revenue.
Operating income
Adjustments:
Restructuring
Depreciation and amortization
Loss pursuant to the divestiture of MAKS
Adjusted Operating Income
Operating margin
Adjusted Operating Margin
$
$
Year ended December 31,
2021
2020
2,844
$
2,388
—
257
—
50
220
9
3,101
$
2,667
45.7 %
49.9 %
44.5 %
49.7 %
MOODY'S 2021 10-K
63
Adjusted Net Income and Adjusted Diluted EPS attributable to Moody’sd
common shareholders:
The Company presents Adjusted Net Income and Adjusted Diluted EPS because management deems these metrics to be useful
measures to provide additional perspective on Moody's operating performance. Adjusted Net Income and Adjusted Diluted EPS
exclude the impact of: i) amortization of acquired intangible assets; ii) restructuring charges/adjustments; iii) a non-cash gain
relating to the Company’s minority investment in BitSight; and iv) a loss pursuant to the divestiture of MAKS.
ff
ff
ages and have different
methods of acquiring and amortizing intangible assets. These intangible assets were recorded
The Company excludes the impact of amortization of acquired intangible assets as companies utilize intangible assets with
different
as part of acquisition accounting and contribute to revenue generation. The amortization of intangible assets related to
acquisitions will recur in future periods until such intangible assets have been fully amortized. Furthermore, the timing and
magnitude of business combination transactions are not predictable and the purchase price allocated to amortizable intangible
assets and the related amortization period are unique to each acquisition and can vary significantly from period to period and
across companies. Restructuring charges, the non-cash gain relating to the Company's minority interest in BitSight and the loss
pursuant to the divestiture of MAKS are excluded as the frequency and magnitude of these items may vary widely across periods
and companies.
The Company excludes the aforementioned items to provide additional perspective when comparing net income and diluted EPS
from period to period and across companies as the frequency and magnitude of similar transactions may vary widely across
periods.
Amounts in millions
Net income attributable to Moody’s common shareholders
Pre-TaxTT Acquisition-Related Intangible Amortization Expenses
Tax on Acquisition-Related Intangible Amortization Expenses
Net Acquisition-Related Intangible Amortization Expenses
Pre-TaxTT Restructuring
Tax on Restructuring
Net Restructuring
Pre-TaxTT
gain relating to minority investment in BitSight
Tax on gain relating to minority investment in BitSight
Net gain relating to minority investment in BitSight
Loss pursuant to the divestiture of MAKS
$
$
$
158
(36)
—
—
(36)
9
Year ended December 31,
2021
$
2,214
2020
$
1,778
124
(28)
50
(12)
—
—
$
$
$
122
—
(27)
—
96
38
—
9
Adjusted Net Income
$
2,309
$
1,921
Below is a reconciliation of this measure to its most directly comparable U.S. GAAP amount:
Diluted earnings per share attributable to Moody’s common
shareholders
Pre-TaxTT Acquisition-Related Intangible Amortization Expenses
Tax on Acquisition-Related Intangible Amortization Expenses
Net Acquisition-Related Intangible Amortization Expenses
Pre-TaxTT Restructuring
Tax on Restructuring
Net Restructuring
Pre-TaxTT
gain relating to minority investment in BitSight
Tax on gain relating to minority investment in BitSight
Net gain relating to minority investment in BitSight
Loss pursuant to the divestiture of MAKS
Year ended December 31,
2021
2020
$
11.78
$
9.39
$
$
$
0.66
(0.15)
0.26
(0.06)
—
—
0.65
—
(0.14)
—
0.51
0.20
—
0.05
$
$
0.84
(0.19)
—
—
$
(0.19)
0.05
Adjusted Diluted EPS
$
12.29
$
10.15
Note: the tax impacts in the table above were calculated using tax rates in effect
ff
in the jurisdiction forf which the item relates.
64 MOODY'S 2021 10-K
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 acquisitions and share repurchases. Management deems capital expenditures essential to the Company’s
product and service innovations and 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 used in financing activities
Organic
rr
Revenue:
Year ended December 31,
2021
2,005
(139)
1,866
(2,619)
(122)
$
$
$
$
2020
2,146
(103)
2,043
(1,077)
(351)
$
$
$
$
The Company presents the organic revenue and organic revenue growth (including organic recurring revenue and organic
recurring revenue growth for the MA segment) because management deems these metrics to be useful measures which provide
additional perspective in assessing the revenue growth excluding the inorganic revenue impacts from certain acquisition activity.
The following table details the periods excluded from each acquisition to determine organic revenue.
Acquisition
Acquisition Date
Period excluded to determine organic revenue growth
Regulatory DataCorp
February 13, 2020
Acquire Media
October 21, 2020
ZM Financial Systems
December 7, 2020
Catylist
Cortera
RMS
RealXData
December 30, 2020
March 19, 2021
September 15, 2021
September 17, 2021
January 1, 2021 - February 12, 2021
January 1, 2021 - October 20, 2021
January 1, 2021 - December 6, 2021
January 1, 2021 - December 29, 2021
March 19, 2021 - December 31, 2021
September 15, 2021 - December 31, 2021
September 17, 2021 - December 31, 2021
Below is a reconciliation of MA's reported revenue and growth rates to its organic revenue and organic growth rates:
Amounts in millions
MA revenue
Inorganic revenue from acquisitions
Organic MA revenue
RD&A revenue
Inorganic revenue from acquisitions
Organic RD&A revenue
ERS revenue
Inorganic revenue from acquisitions
Organic ERS revenue
ERS recurring revenue
Inorganic recurring revenue from acquisitions
Organic ERS recurring revenue
ERS transaction revenue
Inorganic transaction revenue from acquisitions
Organic ERS transaction revenue
Year Ended December 31,
2021
2020
Change
$
$
$
$
$
$
$
$
$
$
2,406
(136)
2,270
1,745
(46)
1,699
661
(90)
571
582
(84)
498
79
(6)
73
$
$
$
$
$
$
$
$
$
$
2,079
—
2,079
1,514
—
1,514
565
—
565
448
—
448
117
—
117
$
$
$
$
$
$
$
$
$
$
327
(136)
191
231
(46)
185
96
(90)
6
134
(84)
50
(38)
(6)
(44)
Growth
16%
9%
15%
12%
17%
1%
30%
11%
(32%)
(38%)
MOODY'S 2021 10-K
65
Amounts in millions
MA recurring revenue
Inorganic recurring revenue from acquisitions
Organic MA recurring revenue
Recently Issued Accounting Pronouncements
Year Ended December 31,
2021
2020
Change
$
$
2,236
(130)
2,106
$
$
1,882
—
1,882
$
$
354
(130)
224
Growth
19%
12%
Refer to Note 2 to the consolidated financial statements located in Part II, Item 8 on this Form 10-K for a discussion on the
impact to the Company relating to recently issued accounting pronouncements.
CONTINGENCIES
Legal proceedings in which the Company is involved also may impact Moody’s liquidity or operating results. No assurance can
be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information
regarding legal proceedings, see Part II, Item 8 – “Financial Statements”, Note 21 “Contingencies” in this Form 10-K.
Forward-Looking Statements
ff materially from those contemplated, expressed, projected, anticipated or implied in the
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 business and operations of the Company 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
forward-looking statements. Those statements appear at various places throughout this annual report on Form 10-K, including in
the sections entitled “Contingencies” under Item 7, “MD&A”, commencing on page 41 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 or otherwise convey the prospective nature of events or outcomes generally
indicative of forward-looking statements. Stockholders and investors are cautioned not to place undue reliance on these forward-
looking statements. The forward-looking statements 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 subsequent developments, changed expectations or otherwise, except as
required by applicable law or regulation. 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
ff
differ
, perhaps materially, from those indicated by these forward-looking statements.
ff
ff
ff
ff
ff
and possible
the volume of debt and other
the volume of debt and other
ff
credit markets, international trade and economic policy,
tax agreements and trade barriers; concerns in the marketplace affecting
market perceptions of the integrity or utility of independent credit agency ratings; the introduction of
Those factors, risks and uncertainties include, but are not limited to the impact of COVID-19 on volatility in the U.S. and world
financial markets, on general economic conditions and GDP in the U.S. and worldwide, and on Moody’s own operations and
personnel; future worldwide credit market disruptions or economic slowdowns, which could affect
securities issued in domestic and/or global capital markets; other matters that could affect
securities issued in domestic and/or global capital markets, including regulation, credit quality concerns, changes in interest
rates, inflation and other volatility in the financial markets such as that due to Brexit and uncertainty as companies transition
away from LIBOR; the level of merger and acquisition activity in the U.S. and abroad; the uncertain effectiveness
collateral consequences of U.S. and foreign government actions affecting
including those related to tariffs,
otherwise affecting
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 forff
state and local legislation and regulations; the potential for increased competition and regulation in the EU and other foreign
jurisdictions; exposure to litigation related to our rating opinions, as well as any other litigation, government and regulatory
proceedings, investigations and inquiries to which Moody’s may be subject from time to time; provisions in U.S. 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
requirements on the pricing of services and the expansion of supervisory remit to include non-EU ratings used for regulatory
purposes; the possible loss of key employees; failures or malfunctions of our operations and infrastructure; any vulnerabilities to
cyber threats or other cybersecurity concerns; the outcome of any review by controlling tax authorities of Moody’s global tax
planning initiatives; exposure to potential criminal sanctions or civil remedies if Moody’s fails to comply with foreign and U.S. laws
and regulations that are applicable in the jurisdictions in which Moody’s operates, including data protection and privacy laws,
sanctions laws, anti-corruption laws, and local laws prohibiting corrupt payments to government officials;
acquisitions or other business combinations and the ability of Moody’s to successfully integrate acquired businesses; 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. Other factors, risks and uncertainties relating to our acquisition of RMS
could cause our actual results to differ
risks relating to the integration of RMS’s operations, products and employees into Moody’s and the possibility that anticipated
, perhaps materially, from those indicated by these forward-looking statements, including
the impact of mergers,
our credibility or
new U.S.,
ff
ff
ff
66 MOODY'S 2021 10-K
ff
on the business of RMS or its prospects, including,
synergies and other benefits of the acquisition will not be realized in the amounts anticipated or will not be realized within the
expected timeframe; risks that the acquisition could have an adverse effect
without limitation, on relationships with vendors, suppliers or customers; claims made, from time to time, by vendors, suppliers or
on
customers; changes in the U.S., Europe (primarily the U.K.), Japan, India or global marketplaces that have an adverse effect
the business of RMS. These factors, risks and uncertainties as well as other risks and uncertainties that could cause Moody’s
actual results to differ
ff materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking
statements are currently, or in the future could be, amplified by the COVID-19 outbreak, and are described in greater detail under
“Risk Factors” in Part I, Item 1A of Moody’s annual report on Form 10-K for the year ended December 31, 2021, and in other
filings made by Moody’s 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 Moody’s actual results to differ
materially from those contemplated, expressed, projected, anticipated or implied in the forward-looking statements, which could
have a material and adverse effect
on Moody’s business, results of operations and financial condition. New factors may emerge
from time to time, and it is not possible for Moody’s to predict new factors, nor can Moody’s assess the potential effect
new factors on it. Forward-looking and other statements in this document may also address our corporate responsibility
progress, plans, and goals (including sustainability and environmental matters), and the inclusion of such statements is not an
indication that these contents are necessarily material to investors or required to be disclosed in the Company’s filings with the
Securities and Exchange Commission. In addition, historical, current, and forward-looking sustainability-related statements may
be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve,
and assumptions that are subject
to change in the future.
of any
b
ff
ff
ff
ff
ITEM 7A.
QUANTITATTT IVE AND QUALITATTT IVE 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 60 of this annual report
on Form 10-K.
MOODY'S 2021 10-K
67
ITEM 8.
FINANCIAL STATTT EMENTS
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
Notes to Consolidated Financial Statements
Page(s)
69
70-71
72
73
74
75
76-78
79-129
Schedules are omitted as not required or inapplicable or because the required information is provided in the consolidated
financial statements, including the notes thereto.
68 MOODY'S 2021 10-K
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
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 reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
of internal control over financial reporting. As defined by the SEC in Rules
ff
ff
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 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 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.
ff
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
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
to the risk that controls may become inadequate
b
ff
Management of the Company evaluated and assessed the design and operational effectiveness
control over financial reporting as of December 31, 2021 based on criteria established in the Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
of the Company’s internal
ff
Our assessment of and conclusion on the effectiveness
did not include the internal controls of RMS, which was acquired during our fiscal year ended December 31, 2021 and will be
of our internal control over financial reporting for the fiscal
included in our assessment of and conclusion on the effectiveness
year ending December 31, 2022. The total assets (excluding acquired goodwill and intangible assets which are included within
the scope of this assessment) and revenues of RMS represent approximately $333 million and $81 million, respectively, of the
corresponding amounts in our consolidated financial statements for the fiscal year ended December 31, 2021.
of our internal control over financial reporting as of December 31, 2021
ff
ff
Based on the assessment performed, management has concluded that Moody’s maintained effective
financial reporting as of December 31, 2021.
ff
internal control over
ff
The effectiveness
independent registered public accounting firm, as stated in their accompanying report which expresses an unqualified opinion on
the effectiveness
of our internal control over financial reporting as of December 31, 2021 has been audited by KPMG LLP, aP n
of Moody's internal control over financial reporting as of December 31, 2021.
ff
/s/ ROBERT FAUBFF
ER
Robert Fauber
President and Chief Executive Officer
/s/ MARK KAYEAA
Mark Kaye
Executive Vice President and Chief Financial
ii Officer
February 18, 2022
MOODY'S 2021 10-K
69
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Moody’s Corporation:
Opinions on the Consolidated Financial Statements and Internal Control over Financial
ii Reporting
We have audited the accompanying consolidated balance sheets of Moody’s Corporation and subsidiaries (the Company) as of
December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the
consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control – Integrated Frameworkww
Sponsoring Organizations of the Treadway Commission.
(2013) issued by the Committee of
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in
the three-year period ended December 31, 2021 in conformity with U.S. generally accepted accounting principles. Also in our
opinion, the Company maintained, in all material respects, effective
2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
internal control over financial reporting as of December 31,
ff
The Company acquired RMS during 2021, and management excluded from its assessment of the effectiveness
Company’s internal control over financial reporting as of December 31, 2021, RMS’s internal control over financial reporting
associated with total assets of $333 million and total revenues of $81 million included in the consolidated financial statements of
the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the
Company also excluded an evaluation of the internal control over financial reporting of RMS.
of the
ff
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
ff
over financial reporting, and for its assessment of the effectiveness
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on
the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
of internal control over financial reporting, included in the
internal control
ff
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective
respects.
internal control over financial reporting was maintained in all material
ff
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. 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
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.
of internal control based on the
ff
Definition and Limitations of Internal Control Over Financial Reporting
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 maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (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 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
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
to the risk that controls may become inadequate
b
ff
70 MOODY'S 2021 10-K
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Carrying value of goodwill
As discussed in Note 10 to the consolidated financial statements, the goodwill balance as of December 31, 2021 was
$5,999 million. The Company evaluates its reporting units for impairment on an annual basis, or more frequently if there
are changes in the reporting structure of the Company or indicators of potential impairment. The Company has four
primary reporting units as of December 31, 2021: two within the Company’s Moody’s Investors Service segment and
two within the Moody’s Analytics segment.
We identified the assessment of the carrying value of goodwill in the reporting units within the Moody’s Analytics
segment as a critical audit matter due to the significant degree of judgment required in evaluating assumptions about
revenue growth rates and the discount rates used to measure the reporting unit fair values.
ff
of certain internal controls over the Company’s goodwill impairment process,
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness
including controls related to revenue growth rates and the discount rates used to measure the reporting unit fair values.
We evaluated management’s judgments relating to the assumed revenue growth rates by comparing the Company’s
revenue growth rates to the Company’s underlying business strategies and growth plans. We evaluated management’s
judgments relating to the Company’s discount rates by comparing them to appropriate benchmark interest rates. We
also performed sensitivity analyses to assess the impact of alternative assumptions on management’s impairment
conclusion. We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability
to accurately forecast. We involved valuation professionals with specialized skills and knowledge, who assisted in
assessing the significant assumptions used to develop the discount rates, including the relevance and reliability of the
information used.
Gross uncertain tax positions
As discussed in Note 17 to the consolidated financial statements, the Company has recorded uncertain tax positions
(UTPs), excluding associated interest, of $388 million as of December 31, 2021. The Company determines whether it is
more-likely-than-not that a tax position will be sustained based on its technical merits as of the reporting date. A tax
position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit
ff
that is greater than fifty percent likely to be realized upon effective
settlement with a taxing authority.
We identified the assessment of the Company’s gross UTPs as a critical audit matter because complex judgment was
required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of the tax
positions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness
of internal controls over the Company’s tax process, including those related to
the timely identification of UTPs, the assessment of new information related to previously identified UTPs, and the
measurement of UTPs. We involved valuation professionals with specialized skills and knowledge, who assisted in
assessing transfer pricing studies for compliance with applicable laws and regulations. Additionally, we involved tax
professionals with specialized skills and knowledge, who assisted in:
ff
•
•
•
•
evaluating the Company’s interpretation of tax laws and judgments about the administrative practices of tax
authorities
inspecting settlement documents with applicable taxing authorities
assessing the expiration of statutes of limitations
performing an assessment of the Company’s tax positions and comparing the results to the Company’s
assessment.
In addition, we evaluated the Company’s ability to accurately estimate its gross UTPs by comparing historical gross
UTPs to actual results upon conclusion of tax audits or expiration of the statute of limitations.
/ //s/
GKPMG LLP
We have served as the CCompa yny’s auditor since 2008.
New York, New Yo krk
February 18, 2022
y
MOODY'S 2021 10-K
71
2019
4,829
1,387
1,167
60
200
3
14
2,831
1,998
(208)
20
(188)
1,810
381
1,429
7
1,422
7.51
7.42
189.3
191.6
Year Ended December 31,
2021
2020
$
6,218
$
5,371
$
1,637
1,480
—
257
—
—
3,374
2,844
(171)
82
(89)
2,755
541
2,214
—
2,214
11.88
11.78
186.4
187.9
$
$
$
1,475
1,229
50
220
—
9
2,983
2,388
(205)
46
(159)
2,229
452
1,777
(1)
1,778
9.48
9.39
187.6
189.3
$
$
$
MOODY’S CORPORATION
AA
CONSOLIDATEDAA
(Amounts in millions, except per share data)
STATTT EMENTS OF OPERATIONS
AA
Revenue
Expenses
Operating
Selling, general and administrative
Restructuring
Depreciation and amortization
Acquisition-Related Expenses
Loss pursuant to the divestiture of MAKS
Total expenses
Operating income
Non-operating (expense) income, net
Interest expense, net
Other non-operating income, net
Non-operating (expense) income, net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net (loss) 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.
72 MOODY'S 2021 10-K
MOODY’S CORPORATION
AA
CONSOLIDATEDAA
(Amounts in millions)
STATTT EMENTS OF COMPREHENSIVE INCOME
Net Income
Other Comprehensive Income
(Loss):
Foreign Currency
Adjustments:
Foreign currency
translation adjustments,
net
Foreign currency
translation adjustments -
reclassification of losses
included in net income
Net gains (losses) on net
investment hedges
Net investment hedges -
reclassification of gains
included in net income
Cash Flow Hedges:
Net losses on cash flow
hedges
Reclassification of losses
included in net income
Pension and Other
Retirement Benefits:
Amortization of actuarial
losses/prior service costs
and settlement charge
included in net income
Net actuarial gains
(losses) and prior service
costs
Total Other Comprehensive
Income (Loss)
Comprehensive Income
Less: comprehensive
(loss) income attributable
to noncontrolling interests
Comprehensive Income
Attributable to Moody’s
Year Ended December 31, 2021
Pre-tax
amounts
Tax
amounts
After-tax
amounts
Year Ended December 31, 2020
Pre-tax
amounts
Tax
amounts
After-tax
amounts
Year Ended December 31, 2019
Pre-tax
amounts
Tax
amounts
After-tax
amounts
$ 2,214
$
1,777
$
1,429
$
(303) $
11
$
(292) $
361
$
(13) $
348
$
(22) $
(1) $
(23)
—
319
(2)
—
2
19
73
—
—
—
(77)
242
(364)
(1)
(1)
1
—
—
(5)
(18)
(68)
3
8
—
2
14
55
—
(9)
1
—
—
32
26
(2)
—
—
—
91
—
17
(1)
(2)
—
(273)
32
35
(1)
(3)
—
—
(51)
2
6
3
(1)
2
(42)
10
(32)
(32)
8
(24)
$
108
$
(88) $
20
$
(103) $
102
$
(1) $
13
$
(2) $
11
2,234
(2)
1,776
(8)
1,440
11
$ 2,236
$
1,784
$
1,429
The accompanying notes are an integral part of the consolidated financial statements.
MOODY'S 2021 10-K
73
MOODY’S CORPORATION
AA
CONSOLIDATEDAA
(Amounts in millions, except share and per share data)
BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances forff
credit losses of $32 in 2021 and $34 in 2020
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Deferred tax assets, net
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Current portion of operating lease liabilities
Deferred revenue
Total current liabilities
Non-current portion of deferred revenue
Long-term debt
Deferred tax liabilities, net
Uncertain tax positions
Operating lease liabilities
Other liabilities
Total liabilities
Contingencies (Note 21)
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, 2021 and December 31, 2020, respectively.
Capital surplus
Retained earnings
Treasury stock, at cost; 157,262,484 and 155,808,563 shares of common stock at December 31, 2021
and December 31, 2020, respectively
Accumulated other comprehensive loss
Total Moody’s shareholders’ equity
Noncontrolling interests
Total shareholders’ equity
December 31,
2021
2020
$
1,811
$
91
1,720
389
4,011
347
438
5,999
2,467
384
1,034
2,597
99
1,430
383
4,509
278
393
4,556
1,824
334
515
$
$
14,680
$
12,409
1,142
$
105
1,249
2,496
86
7,413
488
388
455
438
1,039
94
1,089
2,222
98
6,422
404
483
427
590
11,764
10,646
—
—
3
885
12,762
(10,513)
(410)
2,727
189
2,916
—
—
3
735
11,011
(9,748)
(432)
1,569
194
1,763
Total liabilities and shareholders’ equity
$
14,680
$
12,409
The accompanying notes are an integral part of the consolidated financial statements.
74 MOODY'S 2021 10-K
MOODY’S CORPORATION
AA
CONSOLIDATEDAA
(Amounts in millions)
STATTT EMENTS OF CASH FLOWS
Cash flows from operating activities
Net income
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Deferred income taxes
Prepayment penalty relating to early redemption of debt
Non-cash gain related to minority interest in BitSight
Settlement of treasury rate lock
ROU asset impairment & other non-cash restructuring/impairment charges
Loss pursuant to the divestiture of MAKS
Changes in assets and liabilities:
Accounts receivable
Other current assets
Other assets
Lease obligations
Accounts payable and accrued liabilities
Deferred revenue
Unrecognized tax positions and other non-current tax liabilities
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital additions
Purchases of investments
Sales and maturities of investments
Cash received upon disposal of a business, net of cash transferred to purchaser
Cash paid forf
acquisitions, net of cash acquired
Receipts from settlements of net investment hedges
Payments for settlements of net investment hedges
Net cash (used in) provided by investing activities
Cash flows from financing activities
Issuance of notes
Repayment of notes
Issuance of commercial paper
Repayment of commercial paper
Proceeds from stock-based compensation plans
Repurchase of shares related to stock-based compensation
Treasury shares
Dividends
Dividends to noncontrolling interests
Payment for noncontrolling interest
Debt issuance costs, extinguishment costs and related fees
Net cash used in financing activities
Effeff ct of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
The accompanying notes are an integral part of the consolidated financial statements.
Year Ended December 31,
2021
2020
2019
$
2,214
$
1,777
$
1,429
257
175
(218)
13
(36)
—
—
—
(257)
(12)
(26)
(11)
80
65
(184)
(55)
2,005
(139)
(437)
147
—
(2,179)
37
(48)
(2,619)
1,672
(500)
—
—
38
(83)
(750)
(463)
(5)
—
(31)
(122)
(50)
(786)
220
154
(44)
24
—
(68)
36
9
31
(38)
(49)
(10)
247
(29)
(12)
(102)
2,146
(103)
(181)
104
—
(897)
2
(2)
(1,077)
1,491
(800)
789
(792)
51
(104)
(503)
(420)
(1)
(23)
(39)
(351)
47
765
$
2,597
1,811
$
1,832
2,597
$
200
136
(38)
12
—
—
38
14
(134)
(88)
(69)
(16)
65
76
8
42
1,675
(69)
(138)
174
226
(162)
12
(7)
36
824
(950)
1,317
(1,320)
45
(77)
(991)
(378)
(3)
(12)
(18)
(1,563)
(1)
147
1,685
1,832
MOODY'S 2021 10-K
75
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7
MOODY’S CORPORATION
NOTES TO CONSOLIDATEDAA
(tabular dollar and share amounts in millions, except per share data)
AA
FINANCIAL STATTT EMENTS
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Moody’s is a global
Moody’s reports in two reportable segments: MIS and MA.
integrated risk assessment firm that empowers organizations and investors to make better decisions.
MIS publishes credit ratings and provides assessment services on a wide range of debt obligations, programs and facilities, and
the entities that issue such obligations in markets worldwide, including various corporate, financial institution and governmental
obligations, and structured finance securities.
MA is a global provider of: i) data and information; ii) research and insights; and iii) decision solutions, which help companies
make better and faster decisions. MA leverages its industry expertise across multiple risks such as credit, market, financial crime,
supply chain, catastrophe and climate to deliver integrated risk assessment solutions that enable business leaders to identify,
measure and manage the implications of interrelated risks and opportunities.
Adoption of New Accounting Standards
On January 1, 2020, the Company adopted ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic
of Credit Losses on Financial Instruments.” The Company has implemented policies and procedures in compliance with the
“expected credit loss” impairment model, which included: (1) refinement of the grouping of receivables with similar risk
characteristics; and (2) processes to identify information that can be used to develop reasonable and supportable forecasts of
factors that could affect
the collectability of the reported amount of the receivable. As the Company's accounts receivable are
short-term in nature, the adoption of this ASU did not have a material impact to the Company's allowance for bad debts or its
policies and procedures for determining the allowance. Refer to Note 2 forff
its reserves for expected credit losses. The Company recorded a $2 million cumulative-effect
increase its allowance for credit losses upon adoption.
further information on how the Company determines
adjustment to retained earnings to
326): Measurement
TT
ff
ff
On January 1, 2020, the Company adopted ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software
(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a
Service Contract.” This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting
arrangements) to be capitalized under the same provisions of authoritative guidance for internal-use software, and amortized
over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain
to be exercised by the customer or for which the exercise is controlled by the service provider. The Company is now required to
present the amortization of capitalized implementation costs in the same line item in the statement of operations as the fees
associated with the hosting service (i.e. operating and SG&A expense) and classify the related payments in the statement of
cash flows in the same manner as payments made for fees associated with the hosting service (i.e. cash flows from operating
activities). This ASU also requires capitalization of implementation costs in the balance sheet to be consistent with the location of
prepayment of fees for the hosting element (i.e. within other current assets or other assets). The Company adopted this ASU
prospectively to all implementation costs incurred after the date of adoption and it did not have a material impact on the
Company's current financial statements. The future impact to the Company's financial statements will relate to the
aforementioned classification of these capitalized costs and related amortization.
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of
the original guidance, ASU No. 2020-04, "Facilitation of the Effects
of Reference Rate Reform on Financial Reporting" ("ASU No.
2020-04"), issued in March 2020. ASU No. 2020-04 provides temporary optional expedients and exceptions to the U.S. GAAP
guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market
transition from the London Interbank Offered
rates to alternative reference rates. Both
ASU's were effective
upon issuance, and the Company may elect to apply the amendments prospectively through December 31,
2022 as the transition from LIBOR is completed. Refer to Recently Issued Accounting Pronouncements in Note 2 forf
information.
Rate (LIBOR) and other interbank offered
further
ff
ff
ff
ff
On December 31, 2020, the Company adopted ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans
—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”. This
ASU eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and
other postretirement plans. The Company is also now required to present a narrative description of significant gains or losses in
the benefit obligation over the past year. The Company adopted this ASU retrospectively for all periods presented with the new
required disclosures presented in Note 15.
On January 1, 2021, the Company adopted ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—
Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments.” This ASU clarifies and improves
guidance related to the recently issued standards updates on credit losses, hedging, and recognition and measurement of
financial instruments. The Company adopted this ASU prospectively and it did not have a material impact on the Company's
financial statements.
MOODY'S 2021 10-K
79
On January 1, 2021, the Company adopted ASU No. 2019-12, "Income Taxes (Topic
Taxes." This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the general principles in Topic
740, Income Taxes, and clarifies certain aspects of the existing guidance to promote consistency among reporting entities. Most
amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a
retrospective or modified retrospective basis. The Company adopted this ASU prospectively and it did not have a material impact
on the Company's current financial statements.
740): Simplifying the Accounting for Income
TT
COVID-19
The COVID-19 pandemic has not had a material adverse impact on the Company's reported results to date and is currently not
expected to have a material adverse impact on its near-term outlook. However, Moody's is unable to predict the longer-term
impact that the pandemic may have on its business, future results of operations, financial position or cash flows due to numerous
uncertainties.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
ff
of all intercompany transactions have been eliminated. Investments in companies for which the Company has significant
The consolidated financial statements include those of Moody’s Corporation and its majority- and wholly-owned subsidiaries. The
effects
influence 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. Equity investments without a readily determinable
fair value for which the Company does not have significant influence are accounted for under the ASC 321 measurement
alternative; these investments are recorded at initial cost, less impairment, adjusted upward or downward for any observable
price changes in similar investments. 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 an 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 deposit accounts as well as 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 12 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.
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 equipment in the consolidated balance sheets, relate to the Company’s financial, website 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.
The Company also capitalizes implementation costs incurred in cloud computing arrangements (i.e., hosting arrangements) and
depreciates the costs over the non-cancellable term of the cloud computing arrangements plus any option renewal periods that
are reasonably certain to be exercised or forff which the exercise is controlled by the service provider. The Company classifies the
amortization of capitalized implementation costs in the same line item in the statement of operations as the fees associated with
the hosting service (i.e., operating and SG&A expense) and classifies the related payments in the statement of cash flows in the
same manner as payments made for fees associated with the hosting service (i.e. cash flows from operating activities). In
addition, the capitalization of implementation costs is reflected in the balance sheet consistent with the location of prepayment of
fees for the hosting element (i.e., within other current assets or other assets).
Goodwill and Other Acquired Intangible Assets
Moody’s evaluates its goodwill for impairment at the reporting unit level, defined as an operating segment (i.e., MIS and MA), or
one level below an operating segment (i.e., a component of an operating segment), annually as of July 31 or more frequently if
impairment indicators arise in accordance with ASC Topic 350.
80 MOODY'S 2021 10-K
The Company evaluates the recoverability of goodwill using a two-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 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 quantitatively 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 will record a
goodwill impairment charge forff
the amount by which the carrying value exceeds the reporting unit’s fair value.
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, reporting unit realignments or if there are indicators of potential impairment. 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. 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 four reporting units: two within the Company’s ratings
business (one for the ICRA business and one that encompasses all of Moody’s other ratings operations) and two reporting units
within MA consisting of businesses that offer:
workflow and CRE solutions.
i) data and data-driven analytical solutions; and ii) risk-management software,
ff
Impairment of long-lived assets and definite-lived intangible assets
Long-lived assets (including ROU Assets) and amortizable intangible assets are reviewed for recoverability whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
Under the first step of the recoverability assessment, the Company compares the estimated undiscounted future cash flows
attributable to the asset or asset group to their carrying value. If the undiscounted future cash flows are greater than the carrying
value, no further assessment is required. If the undiscounted future cash flows are less than the carrying value, Moody's
proceeds with step two of the assessment. Under step two of this assessment, Moody's is required to determine the fair value of
the asset or asset group (reduced by the estimated cost to sell the asset for assets or disposal groups classified as held-for-sale)
and recognize an impairment loss if the carrying amount exceeds its fair value.
Stock-Based Compensation
The Company records compensation expense over the requisite service period 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.
Derivative Instruments and Hedging Activities
Based on the Company’s risk management policy, 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 on a
gross basis. The changes in the value of derivatives that qualify as fair value hedges are recorded in the same income statement
line item in earnings in which the corresponding adjustment to the carrying value of the hedged item is presented. The entire
change in the fair value of derivatives that qualify as cash flow hedges is recorded to OCI and such amounts are reclassified
from AOCI(L) to the same income statement line in earnings in the same period or periods during which the hedged transaction
for net investment hedges using the spot-method. The entire change in
affects
the fair value of derivatives that qualify as net investment hedges is initially recorded to OCI. Those changes in fair value
attributable to components included in the assessment of hedge effectiveness
currency translation adjustment component of OCI and remain in AOCI(L) until the period in which the hedged item affects
earnings. Those changes in fair value attributable to components excluded from the assessment of hedge effectiveness
investment hedge are recorded to OCI and amortized to earnings using a systematic and rational method over the duration of the
hedge. 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.
income. The Company assesses effectiveness
in a net investment hedge are recorded in the
in a net
TT
ff
ff
ff
ff
ff
MOODY'S 2021 10-K
81
Revenue Recognition and Costs to Obtain or Fulfill a Contract with a Customer
Revenue recognition:
Revenue is recognized when control of promised goods or services is transferred to the customer, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods or services.
When contracts with customers contain multiple performance obligations, the Company accounts for individual performance
obligations separately if they are distinct. The transaction price is allocated to each distinct performance obligation on a relative
SSP basis. The Company determines the SSP by using the price charged for a deliverable when sold separately or uses
management’s best estimate of SSP for goods or services not sold separately using estimation techniques that maximize
observable data points, including: internal factors relevant to its pricing practices such as costs and margin objectives;
standalone sales prices of similar products; pricing policies; percentage of the fee charged forff
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 trends.
a primary product or service
Sales, usage-based, value added and other taxes are excluded from revenues.
MIS Revenue
In the MIS segment, revenue arrangements with multiple elements are generally comprised of two distinct performance
obligations, a rating and the related monitoring service. Revenue attributed to ratings of issued securities is generally recognized
when the rating is delivered to the issuer. 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 certain structured finance products,
primarily CMBS, issuers can elect to pay all of the annual monitoring fees upfront. These fees are deferred and recognized over
the future monitoring periods based on the expected lives of the rated securities.
MIS arrangements generally have standard contractual terms for which the stated payments are due at conclusion of the ratings
process for ratings and either upfront or in arrears for monitoring services; and are signed by customers either on a per issue
basis or at the beginning of the relationship with the customer. In situations when customer fees for an arrangement may be
variable, the Company estimates the variable consideration at inception using the expected value method based on analysis of
similar contracts in the same line of business, which is constrained based on the Company’s assessment of the realization of the
adjustment amount.
The Company allocates the transaction price within arrangements that include multiple performance obligations based upon the
relative SSP of each service. The SSP for both rating and monitoring services is generally based upon observable selling prices
where the rating or monitoring service is sold separately to similar customers.
MA Revenue
by the Company include hosted research and data subscriptions, installed and
In the MA segment, products and services offered
hosted software subscriptions, perpetual installed software licenses and related maintenance, or PCS, and professional services.
Subscription and PCS contracts are generally invoiced in advance of the contractual coverage period, which is principally one
year, but can range from 3-5 years; while perpetual software licenses are generally invoiced upon delivery and professional
services are invoiced as those services are provided. Payment terms and conditions vary by contract type, but primarily include a
requirement of payment within 30 to 60 days.
ff
Revenue from research, data and other hosted subscriptions is recognized ratably over the related subscription period as MA's
performance obligation to provide access to these products is progressively fulfilled over the stated term of the contract. A large
portion of these services are invoiced in the months of November, December and January.
Revenue from the sale of a software license, when considered distinct from the related software implementation services, is
generally recognized at the time the product master or first copy is delivered or transferred to the customer. PCS is generally
recognized ratably over the contractual period commencing when the software license is fully delivered. Revenue from installed
software subscriptions, which includes PCS, is bifurcated into a software license performance obligation and a PCS performance
obligation, which follow the patterns of recognition described above.
For implementation services and other service projects within the ERS and ESA businesses for which fees are fixed, the
Company determined progress towards completion is most accurately measured on a percentage-of-completion basis (input
method) as this approach utilizes the most directly observable data points and is therefore used to recognize the related
revenue. For implementation services where price varies based on time expended, a time-based measure of progress towards
completion of the performance obligation is utilized.
Revenue from professional services rendered is generally recognized as the services are performed over time.
ff
within the MA segment are sold either stand-alone or together in various combinations. In
Products and services offered
instances where an arrangement contains multiple performance obligations, the Company accounts for the individual
performance obligations separately if they are considered distinct. Revenue is generally allocated to all performance obligations
based upon the relative SSP at contract inception. For certain performance obligations, judgment is required to determine the
revenue recognition noted above.
SSP. Revenue is recognized for each performance obligation based upon the conditions forff
82 MOODY'S 2021 10-K
In the MA segment, customers usually pay a fixed fee for the products and services based on signed contracts. However,
accounting for variable consideration is applied mainly for:
based services.
i) estimates for cancellation rights and price concessions and ii) T&M
ff
The Company estimates the variable consideration associated with cancellation rights and price concessions based on the
expected amount to be provided to customers and reduces the amount of revenue to be recognized. T&M based contracts
represent about half of MA’s service projects within the ERS and ESA businesses. The Company provides agreed upon services
at a contracted daily or hourly rate. The commitment represents a series of goods and services that are substantially the same
and have the same pattern of transfer to the customer. As such, if T&M services are sold with other MA products, the Company
allocates the variable consideration entirely to the T&M performance obligation if the services are sold at standard pricing or at a
similar discount level compared to other performance obligations in the same revenue contract. If these criteria are not met, the
Company estimates variable consideration for each performance obligation upfront. Each form of variable consideration is
included in the transaction price only to the extent that it is probable that a significant reversal of any incremental revenue will not
occur.
Costs to Obtain or Fulfill a Contract with a Customer:
Costs to obtain a contract with a customer
Costs incurred to obtain customer contracts, such as sales commissions, are deferred and recorded within other current assets
and other assets when such costs are determined to be incremental to obtaining a contract, would not have been incurred
otherwise and the Company expects to recover those costs. These costs are amortized to expense on a systematic basis
consistent with the transfer of the products or services to the customer. Depending on the line of business to which the contract
relates, this may be based upon the average economic life of the products sold or average period for which services are
provided, inclusive of anticipated contract renewals. Determining the estimated economic life of the products sold requires
judgment with respect to anticipated future technological changes. Costs to obtain customer contracts are only incurred in the
MA segment.
Cost to fulfill a contract with a customer
Costs incurred to fulfill customer contracts, are deferred and recorded within other current assets and other assets when such
costs relate directly to a contract, generate or enhance resources of the Company that will be used in satisfying performance
obligations in the future and the Company expects to recover those costs.
The Company capitalizes work-in-process costs for in-progress MIS ratings, which is recognized consistent with the rendering of
the related services to the customers, as ratings are issued.
In addition, within the MA segment, the Company capitalizes royalty costs related to third-party information data providers
associated with hosted company information and business intelligence products. These costs are amortized to expense
consistent with the recognition pattern of the related revenue over time.
Accounts Receivable Allowances
In order to determine an estimate of expected credit losses, receivables are segmented based on similar risk characteristics
including historical credit loss patterns and industry or class of customers to calculate reserve rates. The Company uses an
aging method for developing its allowance for credit losses by which receivable balances are stratified based on aging category.
A reserve rate is calculated for each aging category which is generally based on historical information, and is adjusted, when
necessary, forff
future. The Company also considers customer specific information (e.g., bankruptcy or financial difficulty)
expected credit losses, as well as the economic environment of the customers, both from an industry and geographic
perspective, in evaluating the need for allowances. Expected credit losses are reflected as additions to the accounts receivable
allowance. Actual uncollectible account write-offsff are recorded against the allowance.
current conditions (e.g., macroeconomic or industry related) and reasonable and supportable forecasts about the
when estimating its
ff
Leases
The Company has operating leases, of which substantially all relate to the lease of officeff
are classified as finance leases are not material to the consolidated financial statements.
space. The Company’s leases which
The Company determines if an arrangement meets the definition of a lease at contract inception. The Company recognizes in its
consolidated balance sheet a lease liability and an ROU Asset for all leases with a lease term greater than 12 months. In
determining the length of the lease term, the Company utilizes judgment in assessing the likelihood of whether it is reasonably
certain that it will exercise an option to extend or early-terminate a lease, if such options are provided in the lease agreement.
ROU Assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. ROU Assets and lease liabilities are recognized at the
lease commencement date based on the present value of lease payments over the lease term. As substantially all of the
Company’s leases do not provide an implicit interest rate, the Company uses its estimated secured incremental borrowing rates
at the lease commencement date in determining the present value of lease payments. These secured incremental borrowing
rates are attributable to the currency in which the lease is denominated.
MOODY'S 2021 10-K
83
At commencement, the Company’s initial measurement of the ROU Asset is calculated as the present value of the remaining
lease payments (i.e., lease liability), with additive adjustments reflecting: initial direct costs (e.g., broker commissions) and
prepaid lease payments (if any); and reduced by any lease incentives provided by the lessor if: (i) received before lease
commencement or (ii) receipt of the lease incentive is contingent upon future events for which the occurrence is both probable
and within the Company’s control.
Lease expense for minimum operating lease payments is recognized on a straight-line basis over the lease term. This straight-
line lease expense represents a single lease cost which is comprised of both an interest accretion component relating to the
lease liability and amortization of the ROU Assets. The Company records this single lease cost in operating and SG&A
expenses. However, in situations where an operating lease ROU Asset has been impaired, the subsequent amortization of the
ROU Asset is then recorded on a straight-line basis over the remaining lease term and is combined with accretion expense on
the lease liability to result in single operating lease cost (which subsequent to impairment will no longer follow a straight-line
recognition pattern).
The Company has lease agreements which include lease and non-lease components. For the Company’s office space leases,
the lease components (e.g., fixed rent payments) and non-lease components (e.g., fixed common-area maintenance costs) are
combined and accounted for as a single lease component.
Variable lease payments (e.g. variable common-area-maintenance costs) are only included in the initial measurement of the
lease liability to the extent those payments depend on an index or a rate. Variable lease payments not included in the lease
liability are recognized in net income in the period in which the obligation for those payments is incurred.
Contingencies
Moody’s is involved in legal and tax proceedings, governmental, regulatory and legislative 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 inquiries not related to income taxes, the Company
records liabilities in the consolidated financial statements when it is both probable that a liability has been incurred and the
amount of loss can be reasonably estimated 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 instances when a loss is reasonably possible but uncertainties exist
related to the probable outcome and/or the amount or range of loss, management does not record a liability but discloses the
contingency if material. As additional information becomes available, the Company adjusts its assessments and estimates of
such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to SEC rules and other pending
matters as it may determine to be appropriate.
ff
of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative
In view of the inherent difficulty
investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek
large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company
often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters.
The Company also may be unable to 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,
disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable
developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ
those estimates.
if any, on its operations and financial condition and to accrue for and
from
ff
ff
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.
Selling, General and Administrative Expenses
SG&A expenses include such items as compensation and benefits for corporate officers
expenses related to sales. They also include items such as officeff
losses from sales and disposals of assets. SG&A expenses are charged to income as incurred.
ff
rent, business insurance, professional fees and gains and
and staff aff nd compensation and other
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 exchange rates for the year. For these foreign operations, currency translation adjustments are recorded to other
comprehensive income.
84 MOODY'S 2021 10-K
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 gains and
losses and net prior service costs related to pension and other retirement plans; and gains and losses on derivative instruments
designated as net investment hedges or cash flow hedges. Comprehensive income items, including cumulative translation
adjustments of entities that are less-than-wholly-owned subsidiaries, will be reclassified to noncontrolling interests and thereby,
adjusting accumulated other comprehensive income proportionately in accordance with the percentage of ownership interest of
the non-controlling shareholder.
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
differences
that are recognized for income tax purposes.
between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts
of temporary
ff
ff
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.
ff
On December 22, 2017, the Tax Act was signed into law, resulting in all previously undistributed foreign earnings being subject to
U.S. tax. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested.
Fair Value of Financial Instruments
The Company’s financial instruments include cash, cash equivalents, trade receivables and payables, and certain short-term
investments consisting primarily of certificates of deposit and money market deposits, all of which are short-term in nature and,
accordingly, approximate fair value.
The Company also invests in mutual funds, which are accounted for as equity securities with readily determinable fair values
under ASC Topic 321. The Company measures these investments at fair value with both realized gains and losses and
unrealized holding gains and losses for these investments included in net income.
Also, the Company uses derivative instruments to manage certain financial exposures that occur in the normal course of
business. These derivative instruments are carried at fair value in the Company’s consolidated balance sheets.
Fair value is defined by the ASC 820 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
categorized 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
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;
for the asset or liability, either directly or
rr
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.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk principally consist of cash and cash
equivalents, short-term investments, trade receivables and derivatives.
The Company manages its credit risk exposure by allocating its cash equivalents among various money market deposit accounts
and certificates of deposits. Short-term investments primarily consist of certificates of deposit as of December 31, 2021 and
2020. 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 receivable at December 31, 2021 or 2020.
MOODY'S 2021 10-K
85
Earnings per Share of Common Stock
Basic shares outstanding is calculated based on the weighted average number of shares of common stock outstanding during
to all potentially dilutive common shares, assuming
the reporting period. Diluted shares outstanding is calculated giving effect
that such shares were outstanding and dilutive during the reporting period.
ff
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 concerning the outcome of future events and circumstances. These assumptions represent the Company’s best
estimates and may vary by plan. The differences
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 component 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.
between the assumptions for the expected long-term rate of return on plan
ff
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 comprehensive income during the period the changes occur.
Use of Estimates
ff
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
estimates.
from those
ff
Recently Issued Accounting Pronouncements
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform - Scope,” which clarified the scope and application of
of Reference Rate Reform on Financial Reporting" ("ASU No.
the original guidance, ASU No. 2020-04, "Facilitation of the Effects
2020-04"), issued in March 2020 (codified into ASC Topic 848 "Reference Rate Reform"). ASU No. 2020-04 provides temporary
optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the
financial reporting burdens related to the expected market transition from the London Interbank Offered
interbank offered
apply the amendments prospectively through December 31, 2022 as the transition from LIBOR is completed.
Rate (LIBOR) and other
upon issuance, and the Company may elect to
rates to alternative reference rates. Both ASU's were effective
ff
ff
ff
ff
As of December 31, 2021, the Company has interest rate swaps designated as fair value hedges and cross currency swaps
designated as net investment hedges referencing three-month or six-month USD LIBOR with aggregate notional amounts as
disclosed in Note 6. For derivative instruments that will be outstanding at the transition date, the Company intends to modify the
contractual terms of the instruments to replace LIBOR with another reference rate, such as SOFR. Pursuant to the modification
of the contractual terms of these instruments, the Company intends to utilize the various optional expedients set forth in ASC
Topic 848 relating to derivative instruments used in hedging relationships.
In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic
Contract Liabilities from Contracts with Customers" ("ASU No. 2021-08"). ASU No. 2021-08 will require companies to apply the
definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e.,
deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, aP n
acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and
contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result
in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the
acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective
2022, with early adoption permitted. The Company intends to early adopt this ASU effective
for fiscal years beginning after December 15,
ff
805): Accounting for Contract Assets and
January 1, 2022.
TT
ff
86 MOODY'S 2021 10-K
NOTE 3
REVENUES
Revenue by Category
The following table presents the Company’s revenues disaggregated by LOB:
MIS:
Corporate finance (CFG)
Investment-grade
High-yield
Bank loans
Other accounts (CFG) (1)
Total CFG
Financial institutions (FIG)
Banking
Insurance
Managed investments
Other accounts (FIG)
Total FIG
Public, project and infrastructure finance (PPIF)
Public finance / sovereign
Project and infrastructure
Total PPIF
Structured finance (SFG)
Asset-backed securities
RMBS
CMBS
Structured credit
Other accounts (SFG)
Total SFG
Total ratings revenue
MIS Other
Total external revenue
Intersegment royalty
Total MIS
MA:
Research, data and analytics (RD&A)
Enterprise risk solutions (ERS)
Professional services (PS)(2)
Total external revenue
Intersegment revenue
Total MA
Eliminations
Total MCO
Year Ended December 31,
2021
2020
2019
$
$
439
411
606
631
$
636
352
287
582
379
258
313
547
2,087
1,857
1,497
411
145
36
10
602
244
277
521
118
123
102
215
2
560
3,770
42
3,812
165
3,977
1,745
661
—
2,406
7
2,413
(172)
355
137
28
10
530
250
246
496
98
96
61
105
2
362
3,245
47
3,292
148
3,440
1,514
565
—
2,079
7
2,086
(155)
$
6,218
$
5,371
$
320
119
25
12
476
222
224
446
99
95
81
148
4
427
2,846
29
2,875
134
3,009
1,273
522
159
1,954
9
1,963
(143)
4,829
(1) Other includes: recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations as well as fees from programs
such as commercial paper, medium term notes, and ICRA corporate finance revenue.
(2)
Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB,
is now reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material.
MOODY'S 2021 10-K
87
The following table presents the Company’s revenues disaggregated by LOB and geographic area:
Year Ended December 31, 2021
Year Ended December 31, 2020
Year Ended December 31, 2019
U.S.
Non-U.S.
Total
U.S.
Non-U.S.
Total
U.S.
Non-U.S.
Total
MIS:
Corporate finance
$ 1,384
$
Financial institutions
Public, project and
infrastructure finance
Structured finance
289
304
364
703
313
217
196
$ 2,087
$ 1,291
$
602
521
560
250
311
214
566
280
185
148
$ 1,857
$
530
496
362
$
968
200
282
270
529
276
164
157
$ 1,497
476
446
427
Total ratings
revenue
MIS Other
Total MIS
MA:
Research, data and
analytics
Enterprise risk
solutions
Professional services
(PS)(1)
Total MA
Total MCO
2,341
1,429
3,770
2,066
1,179
3,245
1,720
1,126
2,846
3
39
42
2
45
47
1
28
29
2,344
1,468
3,812
2,068
1,224
3,292
1,721
1,154
2,875
758
314
—
987
347
—
1,745
661
—
1,072
1,334
2,406
668
219
—
887
846
346
—
1,514
565
—
1,192
2,079
558
201
64
823
715
321
95
1,131
1,273
522
159
1,954
$ 3,416
$ 2,802
$ 6,218
$ 2,955
$ 2,416
$ 5,371
$ 2,544
$ 2,285
$ 4,829
(1)
Subsequent to the divestiture of MAKS in 2019, revenue from the MALS reporting unit, which previous to 2020 was reported in the PS LOB,
is now reported as part of the RD&A LOB. Prior periods have not been reclassified as the amounts were not material.
The following table presents the Company's reportable segment revenues disaggregated by segment and geographic region:
Year Ended December 31,
2021
2020
2019
$
2,344
$
2,068
$
1,721
930
357
181
1,468
3,812
1,072
936
239
159
1,334
2,406
6,218
$
727
345
152
1,224
3,292
887
818
226
148
1,192
2,079
5,371
$
686
320
148
1,154
2,875
823
760
231
140
1,131
1,954
4,829
$
MIS:
U.S.
Non-U.S.:
EMEA
Asia-Pacific
Americas
Total Non-U.S.
Total MIS
MA:
U.S.
Non-U.S.:
EMEA
Asia-Pacific
Americas
Total Non-U.S.
Total MA
Total MCO
88 MOODY'S 2021 10-K
The following tables summarize the split between transaction and recurring revenue. In the MIS segment, excluding MIS Other,
transaction revenue represents the initial rating of a new debt issuance as well as other one-time fees while recurring revenue
represents the recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue
from programs such as commercial paper, medium-term notes and shelf registrations. In MIS Other, transaction revenue
represents revenue from professional services and recurring revenue represents subscription-based revenues. In the MA
segment, recurring revenue represents subscription-based revenues and software maintenance revenue. Transaction revenue in
MA represents perpetual software license fees and revenue from software implementation services, risk management advisory
projects, and training and certification services.
Year Ended December 31,
2021
2020
2019
Transaction
Recurring
Total
Transaction
Recurring
Total
Transaction
Recurring
Total
Corporate Finance
$ 1,600
Financial Institutions
$
320
77 %
Public, Project and
Infrastructure Finance $
Structured Finance
MIS Other
$
$
53 %
354
68 %
362
65 %
4
10 %
$
$
$
$
$
487
$2,087
$ 1,401
23 %
100 %
75 %
282
$ 602
$
265
47 %
100 %
50 %
167
$ 521
32 %
100 %
198
$ 560
35 %
100 %
38
$
42
90 %
100 %
$
$
$
337
68 %
175
48 %
4
9 %
$
$
$
$
$
456
$1,857
$ 1,057
25 %
100 %
71 %
265
$ 530
$
212
50 %
100 %
45 %
159
$ 496
32 %
100 %
187
$ 362
52 %
100 %
43
$
47
91 %
100 %
$
$
$
292
65 %
246
58 %
2
7 %
$
$
$
$
$
440
$1,497
29 %
100 %
264
$ 476
55 %
100 %
154
$ 446
35 %
100 %
181
$ 427
42 %
100 %
27
$
29
93 %
100 %
Total MIS
$ 2,640
$ 1,172
$3,812
$ 2,182
$ 1,110
$3,292
$ 1,809
$ 1,066
$2,875
69 %
31 %
100 %
66 %
34 %
100 %
63 %
37 %
100 %
Research, data and
analytics
Enterprise risk
solutions
Professional
services(1)
$
$
91
$ 1,654
$1,745
$
80
$ 1,434
$1,514
$
16
$ 1,257
$1,273
5 %
95 %
100 %
5 %
95 %
100 %
1 %
99 %
100 %
79
$
582
$ 661
$
117
$
448
$ 565
$
118
$
404
$ 522
12 %
88 %
100 %
21 %
79 %
100 %
23 %
77 %
100 %
$ — $
—
$ —
$ — $
— $ — $
159
$
—
$ 159
— %
— %
— %
— %
— %
— %
100 %
— %
100 %
Total MA
$
170
$ 2,236
$2,406
$
197
$ 1,882
$2,079
$
293
$ 1,661
$1,954
7 %
93 %
100 %
9 %
91 %
100 %
15 %
85 %
100 %
Total Moody’s
Corporation
$ 2,810
$ 3,408
$6,218
$ 2,379
$ 2,992
$5,371
$ 2,102
$ 2,727
$4,829
45 %
55 %
100 %
44 %
56 %
100 %
44 %
56 %
100 %
(1)
Subsequent to the divestiture of MAKS in 2019, the RD&A LOB now includes revenue from MALS beginning in the first quarter of 2020.
MALS revenue was previously reported as part of the PS LOB and prior year revenue by LOB has not been reclassified as the amounts
were not material.
MOODY'S 2021 10-K
89
The following table presents the timing of revenue recognition:
Year Ended December 31, 2021
Year Ended December 31, 2020
Year Ended December 31, 2019
MIS
MA
Total
MIS
MA
Total
MIS
MA
Total
Revenue
recognized at a
point in time
Revenue
recognized over
time
$
2,640
$
101
$
2,741
$
2,182
$
121
$
2,303 $
1,809 $
132 $
1,941
1,172
2,305
3,477
1,110
1,958
3,068
1,066
1,822
2,888
Total
$
3,812
$
2,406
$
6,218
$
3,292
$
2,079
$
5,371 $
2,875 $
1,954 $
4,829
Unbilled Receivables, Deferred Revenue and Remaining Performance Obligations
rr
Unbilled receivables
At December 31, 2021 and December 31, 2020, accounts receivable included approximately $386 million and $361 million,
respectively, of unbilled receivables related to the MIS segment. Certain MIS arrangements contain contractual terms whereby
the customers are billed in arrears for annual monitoring services and rating fees, requiring revenue to be accrued as an unbilled
receivable as such services are provided.
In addition, for certain MA arrangements, the timing of when the Company has the unconditional right to consideration and
recognizes revenue occurs prior to invoicing the customer. Consequently, at December 31, 2021 and December 31,
2020, accounts receivable included approximately $152 million and $98 million, respectively, of unbilled receivables related to
the MA segment. The increase in unbilled receivables is driven by organic growth and the integration of recent acquisitions.
Deferred revenue
The Company recognizes deferred revenue when a contract requires a customer to pay consideration to the Company in
advance of when revenue is recognized. This deferred revenue is relieved when the Company satisfies the related performance
obligation and revenue is recognized.
Significant changes in the deferred revenue balances during the year ended December 31, 2021 are as follows:
Balance at December 31, 2020
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue
balance at the beginning of the period
Increases due to amounts billable excluding amounts recognized as
revenue during the period
Increases due to acquisitions during the period
ff
Effect
of exchange rate changes
Total changes in deferred revenue
Balance at December 31, 2021
Deferred revenue - current
Deferred revenue - noncurrent
Year Ended December 31, 2021
MIS
MA
Total
$
313
$
874
$
1,187
(220)
(810)
(1,030)
207
—
(4)
(17)
296
214
82
$
$
$
884
94
(3)
165
1,039
1,035
4
$
$
$
1,091
94
(7)
148
1,335
1,249
86
$
$
$
For the MA segment, for the year ended December 31, 2021, the increase in the deferred revenue balance was primarily due to
acquisitions (Cortera, RMS, and PassFort) and organic growth.
90 MOODY'S 2021 10-K
Significant changes in the deferred revenue balances during the year ended December 31, 2020 are as follows:
Balance at December 31, 2019
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue
balance at the beginning of the period
Increases due to amounts billable excluding amounts recognized as
revenue during the period
Increases due to acquisitions during the period
ff
Effect
of exchange rate changes
Total changes in deferred revenue
Balance at December 31, 2020
Deferred revenue—current
Deferred revenue—noncurrent
Year Ended December 31, 2020
MIS
MA
Total
$
322
$
840
$
1,162
(229)
(800)
(1,029)
215
—
5
(9)
313
216
97
$
$
$
792
24
18
34
874
873
1
$
$
$
1,007
24
23
25
1,187
1,089
98
$
$
$
For the MA segment, for the year ended December 31, 2020, the increase in the deferred revenue balance was primarily due to
acquisitions (RDC, Acquire Media, ZMFS, and Catylist) and changes in FX translation rates.
Significant changes in the deferred revenue balances during the year ended December 31, 2019 are as follows:
Balance at December 31, 2018
Changes in deferred revenue
Revenue recognized that was included in the deferred revenue
balance at the beginning of the period
Increases due to amounts billable excluding amounts recognized as
revenue during the period
Increases due to acquisitions during the period
ff
Effect
of exchange rate changes
Total changes in deferred revenue
Balance at December 31, 2019
Deferred revenue—current
Deferred revenue—noncurrent
Year Ended December 31, 2019
MIS
MA
Total
$
325
$
750
$
1,075
(209)
202
3
1
(3)
322
214
108
$
$
$
(714)
(923)
789
6
9
90
840
836
4
$
$
$
991
9
10
87
1,162
1,050
112
$
$
$
For the MA segment, for the year ended December 31, 2019, the increase in the deferred revenue balance was primarily due to
organic growth.
Remaining performance obligations
g p
g
Remaining performance obligations in the MIS segment largely reflect deferred revenue related to monitoring fees for certain
structured finance products, primarily CMBS, where the issuers can elect to pay the monitoring fees for the life of the security in
advance. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance
obligations was approximately $112 million. The Company expects to recognize into revenue approximately 20% of this balance
within one year, approximately 50% of this balance between one to five years and the remaining amount thereafter. With respect
to the remaining performance obligations for the MIS segment, the Company has applied a practical expedient set forth in ASC
Topic 606 permitting the omission of unsatisfied performance obligations relating to contracts with an original expected length of
one year or less.
Remaining performance obligations in the MA segment include both amounts recorded as deferred revenue on the balance
sheet as of December 31, 2021 as well as amounts not yet invoiced to customers as of December 31, 2021 largely reflecting
future revenue related to signed multi-year arrangements for hosted and installed subscription-based products. As of
December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was
approximately $3.0 billion. The Company expects to recognize into revenue approximately 65% of this balance within one year,
approximately 25% of this balance between one to two years and the remaining amount thereafter.
MOODY'S 2021 10-K
91
Costs to Obtain or Fulfill a Contract with a Customer
MA Costs to Obtain a Contrarr ct with a Customer
As of December 31,
2021
2020
Capitalized costs to obtain sales contracts
$
183 $
180
Year ended December 31,
2021
2020
2019
Amortization of capitalized costs to obtain sales contracts $
60 $
59 $
53
Amortization of costs incurred to obtain customer contracts is included within SG&A expenses in the consolidated statements of
operations. Costs incurred to obtain customer contracts are only in the MA segment.
MIS and MA Costs to Fulfill a Contracrr
t withww a Customer
Capitalized costs to fulfill sales contracts
$
14 $
44 $
58 $
12 $
35 $
47
As of December 31, 2021
As of December 31, 2020
MIS
MA
Total
MIS
MA
Total
Year Ended
December 31, 2021
Year Ended
December 31, 2020
Year Ended
December 31, 2019
MIS
MA
Total
MIS
MA
Total
MIS
MA
Total
Amortization of
capitalized costs to
fulfill sales
contracts
$
48 $
76 $
124 $
47 $
66 $
113 $
42 $
56 $
98
Amortization of costs to fulfill customer contracts is included within operating expenses in the consolidated statements of
operations.
NOTE 4
RECONCILIATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
Below is a reconciliation of basic to diluted shares outstanding:
Basic
Dilutive effect
ff
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,
2021
186.4
1.5
187.9
2020
187.6
1.7
189.3
2019
189.3
2.3
191.6
0.2
0.2
0.2
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, 2021,
2020 and 2019.
NOTE 5
ACCELERATED SHARE REPURCHASE PROGRAM
On February 20, 2019, the Company entered into an ASR agreement with a financial institution counterparty to repurchase
$500 million of its outstanding common stock. The Company paid $500 million to the counterparty and received an initial delivery
of 2.2 million shares of its common stock. Final settlement of the ASR agreement was completed on April 26, 2019 and the
Company received delivery of an additional 0.6 million shares of the Company’s common stock.
In total, the Company repurchased 2.8 million shares of the Company’s common stock during the term of the ASR Agreement,
based on the volume-weighted average price (net of discount) of $180.33/share over the duration of the program. The initial
share repurchase and final share settlement were recorded as a reduction to shareholders’ equity.
92 MOODY'S 2021 10-K
NOTE 6
CASH EQUIVALENTS AND INVESTMENTS
The table below provides additional information on the Company’s cash equivalents and investments:
Gross
Unrealized
Gains
Cost
As of December 31, 2021
Balance sheet location
Fair Value
Cash and cash
equivalents
Short-term
investments
Other
assets
Certificates of deposit and money
market deposit accounts (1)
Mutual funds
$
$
691
65
$
$
— $
8
$
691
73
$
$
584
$
— $
91
$
— $
16
73
Gross
Unrealized
Gains
Cost
As of December 31, 2020
Balance sheet location
Fair Value
Cash and cash
equivalents
Short-term
investments
Other assets
Certificates of deposit and money
market deposit accounts (1)
Mutual funds
$
$
1,430
54
$
$
— $
1,430
6
$
60
$
$
1,325
$
— $
99
$
— $
6
60
(1)
Consists of time deposits and money market deposit accounts. The remaining contractual maturities forff
as short-term investments were one to 12 months at December 31, 2021 and at December 31, 2020. The remaining contractual maturities
for the certificates of deposits classified in other assets are 13 to 29 months at December 31, 2021 and 13 to 23 months at December 31,
2020. Time deposits with a maturity of less than 90 days at time of purchase are classified as cash and cash equivalents.
the certificates of deposits classified
In addition, the Company invested in Corporate-Owned Life Insurance (COLI) in the first quarter of 2020. As of December 31,
2021 and December 31, 2020, the contract value of the COLI was $37 million and $17 million, respectively.
NOTE 7
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to global market risks, including risks from changes in FX rates and changes in interest rates.
Accordingly, the Company uses derivatives in certain instances to manage the aforementioned financial exposures that occur in
the normal course of business. The Company does not hold or issue derivatives for speculative purposes.
Derivatives and non-derivative instruments designated as accounting hedges:
Interest Rate Swaps Designated as Fair Value Hedges
The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating
interest rate based on the 3-month and 6-month LIBOR. The purpose of these hedges is to mitigate the risk associated with
changes in the fair value of the long-term debt, thus the Company has designated these swaps as fair value hedges. The fair
value of the swaps is adjusted quarterly with a corresponding adjustment to the carrying value of the debt. The changes in the
fair value of the swaps and the underlying hedged item generally offset
each period within interest expense, net in the Company’s consolidated statements of operations.
and the net cash settlements on the swaps are recorded
ff
The following table summarizes the Company’s interest rate swaps designated as fair value hedges:
Nature of Swap
Nature of Swap
2
021
2020
Notional Amount
As of December 31,
Hedged Item
2012 Senior Notes due 2022(1)
Pay Floating/Receive Fixed
2017 Senior Notes due 2023
Pay Floating/Receive Fixed
2017 Senior Notes due 2028
Pay Floating/Receive Fixed
2020 Senior Notes due 2025
2014 Senior Notes due 2044(2)
2018 Senior Notes due 2048(2)
Pay Floating/Receive Fixed
Pay Floating/Receive Fixed
Pay Floating/Receive Fixed
Total
$
$
$
$
$
$
$
— $
250
500
300
300
300
1,650
$
$
$
$
$
$
Floating Interest
Rate
330
250
500
300
3-month LIBOR
3-month LIBOR
3-month LIBOR
6-month LIBOR
— 3-month LIBOR
— 3-month LIBOR
1,380
(1) Terminated in conjunction with the repayment of the 2012 Senior Notes due 2022 in the fouf
rth quarter of 2021.
(2) Executed in the third quarter of 2021.
Refer to Note 18 for information on the cumulative amount of fair value hedging adjustments included in the carrying amount of
the above hedged items.
MOODY'S 2021 10-K
93
The following table summarizes the impact to the statements of operations of the Company’s interest rate swaps designated as
fair value hedges:
Total amounts of financial statement line item presented in the statements of
operations in which the effects of fair value hedges are recorded
Interest expense, net
Descriptions
Net interest settlements and accruals on
interest rate swaps
Location on Consolidated
Statements of Operations
Interest expense, net
Fair value changes on interest rate swaps
Interest expense, net
Fair value changes on hedged debt
Interest expense, net
$
$
$
$
Net Investment Hedges
Amount of Income (Expense)
Recognized in the Consolidated
Statements of Operations
Year Ended December 31,
2021
2020
2019
(171) $
(205) $
(208)
23
$
(60) $
60
$
19
47
$
$
(47) $
3
25
(25)
Debt designated as net investment hedges
g
g
The Company has designated €500 million of the 2015 Senior Notes Due 2027 and €750 million of the 2019 Senior Notes due
2030 as net investment hedges to mitigate FX exposure related to a portion of the Company’s euro net investment in certain
foreign subsidiaries against changes in euro/USD exchange rates. These hedges are designated as accounting hedges under
the applicable sections of ASC Topic 815 and will end upon the repayment of the notes in 2027 and 2030, respectively, unless
terminated early at the discretion of the Company.
Cross currency swaps designated as net investment hedges
g
g
p
y
The Company enters into cross-currency swaps to mitigate FX exposure related to a portion of the Company’s euro net
investment in certain foreign subsidiaries against changes in euro/USD exchange rates. The following table provides information
on the cross-currency swaps designated as net investment hedges under ASC Topic 815:
Nature of Swap
Pay Fixed/Receive Fixed
Pay Floating/Receive Floating
Total
Nature of Swap
Pay Fixed/Receive Fixed
Pay Floating/Receive Floating
Total
December 31, 2021
Pay
Weighted Average Interest Rate
2.16%
Based on 3-month EURIBOR
Notional
Amount
909
1,179
2,088
December 31, 2020
Pay
Notional
Amount
1,079
Weighted Average Interest Rate
1.43%
959
Based on 3-month EURIBOR
2,038
€
€
€
€
Notional
Amount
1,050
1,350
2,400
Notional
Amount
1,220
1,080
2,300
$
$
$
$
Receive
Weighted Average Interest Rate
4.45%
Based on 3-month USD LIBOR
Receive
Weighted Average Interest Rate
3.96%
Based on 3-month USD LIBOR
94 MOODY'S 2021 10-K
As of December 31, 2021, these hedges will expire and the notional amounts will be settled as follows unless terminated early at
the discretion of the Company:
Year Ending December 31,
2023
2024
2026
2027
2028
Total
€
€
€
€
€
€
442
443
450
246
507
2,088
Forward contracts designated as net investment hedges
g
g
The Company also entered into forward contracts to mitigate FX exposure related to a portion of the Company’s euro and GBP
net investment in certain foreign subsidiaries against changes in euro/USD and GBP/euro exchange rates. The following table
summarizes the notional amounts of the Company's outstanding forward contracts that were designated as net investment
hedges:
Notional amount of net investment hedges
Sell
Buy
Sell
Buy
Contract to sell EUR for USD
Contract to sell GBP for EUR
€
£
— $
— €
— €
— £
524
134
$
€
627
148
December 31, 2021
December 31, 2020
These forward contracts expired in August 2021.
Cash Flow Hedges
Interest Rate Forward Contracts
In January 2020, the Company entered into $300 million notional amount treasury rate locks with an average locked-in U.S. 30-
year Treasury rate of 2.0103%, which were designated as cash flow hedges and used to manage the Company’s interest rate
risk during the period prior to an anticipated issuance of 30-year debt. The treasury lock interest rate forward contracts matured
on April 30, 2020, resulting in a cumulative loss of $68 million, which was recognized in AOCL. The loss on the Treasury rate lock
will be reclassified from AOCL to earnings in the same period that the hedged transaction (i.e. interest payments on the 3.25%
2020 Senior Notes, due 2050) impacts earnings.
The following table provides information on the gains/(losses) on the Company’s net investment and cash flow hedges:
Amount of Gain/(Loss)
Recognized in AOCL on
Derivative, net of Tax
Amount of Gain/(Loss)
Reclassified from AOCL into
Income, net of tax
Gain/(Loss) Recognized in
Income on Derivative
(Amount Excluded from
Effectiveness Testing)
Derivative and Non-Derivative
Instruments in Net Investment
Hedging Relationships
Year Ended December 31,
Year Ended December 31,
Year Ended December 31,
2021
2020
2019
2021
2020
2019
2021
2020
2019
FX forward contracts
$
18
$
(14) $
4
Cross currency swaps
Long-term debt
143
81
(165)
(95)
29
(7) (1)
Total net investment hedges
$
242
$
(274) $
26
$
$
Derivatives in Cash Flow
Hedging Relationships
Interest rate contracts
Total cash flow hedges
—
—
(51)
(51)
Total
$
242
$
(325) $
—
—
26
1
—
—
1
(2)
(2)
$
$
— $
—
—
— $
(2)
(2)
$
(1) $
(2) $
2
—
—
2
—
—
2
$
$
$
— $
— $
35
—
35
—
—
35
$
$
50
—
50
—
—
50
$
$
—
52
—
52
—
—
52
(1)
Due to the Company's adoption of ASU 2018-02 during 2019, $3 million related to the tax effect of this net investment hedge was
reclassified to retained earnings.
MOODY'S 2021 10-K
95
The cumulative amount of net investment hedge and cash flow hedge gains (losses) remaining in AOCL is as follows:
Net invii esvv
tment hedges
d
FX forwards
Cross currency swaps
Long-term debt
Total net investment hedges
Cash flow hedges
Interest rate contracts
Cross-currency swap
Total cash flow hedges
Total net (loss) gain in AOCL
Derivatives not designated as accounting hedges:
Cumulative Gains/(Losses), net of tax
December 31, 2021
December 31, 2020
$
$
$
29
19
(27)
21
(49)
2
(47)
(26) $
12
(124)
(108)
(220)
(51)
2
(49)
(269)
Foreign exchange forff wards
g
g
rr
The Company also enters into foreign exchange forward contracts to mitigate the change in fair value on certain assets and
liabilities denominated in currencies other than a subsidiary’s functional currency. These forward contracts are not designated as
accounting hedges under the applicable sections of Topic 815 of the ASC. Accordingly, changes in the fair value of these
contracts are recognized immediately in other non-operating (expense) income, 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 April 2022.
The following table summarizes the notional amounts of the Company’s outstanding foreign exchange forwards:
Notional Amount of Currency Pair:
Contracts to sell USD for GBP
Contracts to sell USD for Japanese Yen
Contracts to sell USD for Canadian dollars
Contracts to sell USD for Singapore dollars
Contracts to sell USD for Euros
Contracts to sell Euros for GBP
Contracts to sell USD for Russian Ruble
Contracts to sell USD for Indian Rupee
Contracts to sell GBP for USD
$
$
$
$
$
€
$
$
£
December 31, 2021
Sell
Buy
December 31, 2020
Sell
Buy
126
22
120
67
364
£
¥
C$
S$
€
— £
₽
16
7
172
₹
$
92
2,500
150
90
315
$
$
$
$
$
— €
$
$
£
500
231
1,200
£
¥
C$
S$
€
£
₽
295
15
107
59
447
135
13
18
₹
— $
222
1,600
140
79
376
121
1,000
1,350
—
NOTE: € = Euro, £ = British pound, S$ = Singapore dollar, $ = U.S. dollar, ¥ = Japanese yen, C$ = Canadian dollar, ₽= Russian
Ruble, ₹= Indian Rupee
96 MOODY'S 2021 10-K
The following table summarizes the impact to the consolidated statements of operations relating to the net gain (loss) on the
Company’s derivatives which are not designated as hedging instruments:
Derivatives Not Designated as
Accounting Hedges
FX forwards
Foreign exchange forf wards
relating to RMS acquisition(1)
rr
Location on Statement of Operations
Other non-operating expense, net
Other non-operating income, net
$
$
Year Ended December 31,
2021
(27) $
2020
41
$
2019
(11)
(13) $
— $
—
(1) The Company entered into forward contracts to sell $1,675 million for €1,200 to hedge a portion of the GBP denominated RMS
purchase price. The contract was terminated on September 14, 2021 and resulted in a $13 million loss.
The table below shows the classification between assets and liabilities on the Company’s consolidated balance sheets for the fair
value of derivative instruments as well as the carrying value of its non-derivative debt instruments designated and qualifying as
net investment hedges:
Derivative and Non-derivative Instruments
Balance Sheet Location
December 31,
2021
December 31,
2020
Assets:
Derivatives designated as accounting hedges:
Cross-currency swaps designated as net investment hedges
Other assets
Interest rate swaps designated as fair value hedges
Other assets
Total derivatives designated as accounting hedges
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities
Other current assets
Total assets
Liabilities:
Derivatives designated as accounting hedges:
FX forwards designated as net investment hedges
Cross-currency swaps designated as net investment hedges
Accounts payable and
accrued liabilities
Accounts payable and
accrued liabilities
$
$
$
Cross-currency swaps designated as net investment hedges
Other liabilities
Interest rate swaps designated as fair value hedges
Other liabilities
Total derivatives designated as accounting hedges
Non-derivative instruments designated as accounting hedge:
$
53
13
66
1
67
$
— $
—
17
23
40
—
57
57
31
88
16
23
144
1
184
Long-term debt designated as net investment hedge
Long-term debt
1,421
1,530
Derivatives not designated as accounting hedges:
FX forwards on certain assets and liabilities
Total liabilities
Accounts payable and
accrued liabilities
12
$
1,473
$
2
1,716
MOODY'S 2021 10-K
97
NOTE 8
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of:
Officeff
and computer equipment (3 - 10 year estimated useful life)
Offiff ce furniture and fixtures (3 - 10 year estimated useful life)
Internal-use computer software (1 - 10 year estimated useful life)
Leasehold improvements and building (1 - 20 year estimated useful life)
Total property and equipment, at cost
Less: accumulated depreciation and amortization
Total property and equipment, net
$
$
December 31,
2021
300
$
52
771
234
1,357
(1,010)
347
$
2020
260
49
666
231
1,206
(928)
278
Depreciation and amortization expense related to the above assets was $99 million, $96 million, and $97 million for the years
ended December 31, 2021, 2020 and 2019, respectively.
NOTE 9
ACQUISITIONS AND DIVESTITURE
The following is a discussion of material acquisitions completed by the Company. The business combinations described below
are accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized
at fair value on the date of the transaction. Any excess of the purchase price over the fair value of the assets acquired and
liabilities assumed was recorded to goodwill. Goodwill typically results through expected synergies from combining operations of
an acquiree and an acquirer, anticipated new customer acquisition and products, as well as from intangible assets that do not
qualify for separate recognition.
With the exception of RMS, the Company has not presented pro forma combined results for these acquisitions because the
impact on previously reported statements of operations would not have been material.
PassFort
On November 30, 2021, the Company acquired 100% of PassFort, a U.K. SaaS-based workflow platform for identity verification,
customer onboarding, and risk analysis.
The table below details the total consideration relating to the acquisition:
Cash paid at closing
Additional consideration to be paid to sellers in 2022 (1)
Total consideration
$
$
157
1
158
(1) Represents additional consideration to be paid to the sellers folloff
wing finalization of customary post-closing completion adjustments.
Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed,
at the date of acquisition:
Cash
Accounts receivable
Intangible assets:
Product technology (5 year useful life)
Customer relationships (16 year useful life)
Trade name (4 year useful life)
Total intangible assets (9 year weighted average useful life)
Goodwill
Liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Deferred tax liabilities
Total liabilities
Net assets acquired
98 MOODY'S 2021 10-K
$
$
$
$
14
8
1
(7)
(1)
(6)
10
1
23
138
(14)
158
The Company has performed a preliminary valuation analysis of the fair market value of the assets and liabilities of the PassFort
business. The final purchase price allocation will be determined when the Company has completed and fully reviewed the
detailed valuations. The final allocation could differ
changes in allocations to acquired intangible assets as well as goodwill and other changes to assets and liabilities including
deferred tax liabilities. The estimated useful lives of acquired intangible assets are also preliminary.
ff materially from the preliminary allocation. The final allocation may include
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, value created by combining the
complementary risk assessment products of the Company and PassFort. The integration of PassFort’s platform into Moody’s
suite of KYC and compliance offerings
customers.
is expected to create a holistic workflow solution to benefit both new and existing Moody's
ff
Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes.
Transaction costs
Transaction costs directly related to the PassFort acquisition were not material.
RMS
On September 15, 2021, the Company acquired 100% of RMS, a global provider of climate and natural disaster risk modeling
and analytics. The cash payment was funded with new debt financing and a combination of U.S. and offshore
cash on hand. The
acquisition will expand Moody’s insurance data and analytics business and accelerate the development of the Company’s global
integrated risk capabilities to address the next generation of risk assessment.
ff
The table below details the total consideration relating to the acquisition:
Cash paid at closing
Replacement equity compensation awards
Total consideration
$
$
1,922
5
1,927
Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed,
at the date of acquisition:
Cash
Accounts receivable
Other current assets
Property and equipment
Operating lease right-of-use assets
Intangible assets:
Customer relationships (23 year useful life)
Product technology (7 year useful life)
Trade name (9 year useful life)
Total intangible assets (18 year weighted average useful life)
Goodwill
Deferred tax assets, net
Other assets
Liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Operating lease liabilities
Deferred tax liabilities, net
Uncertain tax positions
Other liabilities
Total liabilities
Net assets acquired
60
38
11
13
64
779
1,376
48
99
$
518
212
49
(92)
(89)
(68)
(214)
(96)
(2)
$
$
(561)
1,927
$
MOODY'S 2021 10-K
99
The Company has performed a preliminary valuation analysis of the fair market value of the assets and liabilities of the RMS
business. The final purchase price allocation will be determined when the Company has completed and fully reviewed all
information necessary to finalize the fair value of the acquired assets and liabilities, including deferred revenue. The final
allocation could differ
assets (including estimated useful lives of these assets), as well as goodwill and other changes to assets and liabilities including
reserves for UTPs and deferred tax liabilities.
ff materially from the preliminary allocation and may include changes in allocations to acquired intangible
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary
product portfolios of Moody's and RMS, which is expected to extend the Company's reach into new market segments. The
goodwill also includes the combined company's ability to accelerate technology innovations into new product adjacencies
(leveraging RMS's team of data scientists, modelers and software engineers) as well as combining RMS's products with Moody’s
core data and analytics offerings
to provide holistic integrated risk solutions.
ff
Goodwill, of which $1,286 million and $90 million has been assigned to the MA and MIS segments, respectively, is not deductible
foff r tax purposes. The amount of goodwill allocated to the MIS segment relates to the integration of certain of RMS's models/
processes into the Company's ESG solutions offerings.
ff
Other assets in the table above includes an indemnification asset of $95 million related to uncertain tax positions assumed in the
transaction, for which the Company expects to be indemnified by the sellers in the event of an unfavorable outcome.
Transaction costs
Transaction costs directly related to the RMS acquisition were $22 million and were recorded in SG&A expenses in the statement
of operations.
Supplementary Unaudited Pro Forma Information
pp
y
Supplemental information on an unaudited pro forma basis is presented below for the twelve months ended December 31, 2021
and 2020 as if the acquisition of RMS occurred on January 1, 2020. The pro forma financial information is presented for
comparative purposes only, based on certain estimates and assumptions, which the Company believes to be reasonable but not
necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been
completed at January 1, 2020. The unaudited pro forma information includes amortization of acquired intangible assets, based
on the preliminary purchase price allocation and an estimate of useful lives reflected above, and incremental financing costs
resulting from the acquisition, net of income tax, which was estimated using the weighted average statutory tax rates in effect
the jurisdiction for which the pro forma adjustment relates.
in
ff
Unaudited
Pro forma Revenue
Pro forma Net Income attributable to Moody's
Year Ended December 31,
2021
2020
$
$
6,463 $
2,244 $
5,667
1,666
The unaudited pro forma results do not include any anticipated cost savings or other effects
Accordingly, the pro forma results above are not necessarily indicative of the results that would have been reported if the
acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.
The RMS results included in the above have been converted to U.S. GAAP from IFRS as issued by the IASB and have been
for the periods presented. The RMS amounts in the pro forma results include an addition to
translated to USD at rates in effect
revenue of approximately $18 million and a reduction to revenue of approximately $22 million relating to a fair value adjustment
to deferred revenue required as part of acquisition accounting for the years ended December 31, 2021 and 2020, respectively.
of the planned integration of RMS.
ff
ff
Cortera
On March 19, 2021, the Company acquired 100% of Cortera, a provider of North American credit data and workflow solutions.
The table below details the total consideration relating to the acquisition:
Cash paid at closing
Additional consideration paid to sellers in 2021 (1)
Total consideration
$
$
138
1
139
(1) Represents additional consideration paid to the sellers following finalization of customary post-closing completion adjustments.
Shown below is the preliminary purchase price allocation, which summarizes the fair value of the assets and liabilities assumed,
at the date of acquisition:
100 MOODY'S 2021 10-K
assets
Intangible assets:
Database (10 year useful life)
Customer relationships (18 year useful life)
Product technology (8 year useful life)
Trade name (5 year useful life)
Total intangible assets (11 year weighted average useful life)
Goodwill(1)
Deferred tax assets(1)
Other assets
Liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Deferred tax liabilities
Other liabilities
Total liabilities
Net assets acquired
$
$
38
9
9
1
(1)
(4)
(15)
(2)
$
7
57
79
16
2
$
(22)
139
(1) During the third quarter of 2021, the Company received further information, that existed as of the acquisition date, with respect to Cortera’s
deferred taxes. Accordingly, the Company recorded a measurement period adjustment of $16 million to its preliminary estimate for deferred tax
assets.
Current assets in the table above include acquired cash of $4 million and accounts receivable of approximately $2 million.
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary
risk assessment products of the Company and Cortera, which is expected to extend the Company’s reach to new and evolving
market segments as well as cost savings synergies, expected new customer acquisitions and products.
Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes.
Transaction costs
Transaction costs directly related to the Cortera acquisition were not material.
RDC
On February 13, 2020, the Company acquired 100% of RDC, a provider of anti-money laundering and know-your-customer data
and due diligence services.
The table below details the total consideration relating to the acquisition:
Cash paid at closing
Additional consideration paid to sellers in 2020 (1)
Total consideration
$
$
700
2
702
(1) Represents additional consideration paid to the sellers following finalization of customary post-closing completion adjustments.
Shown below is the purchase price allocation, which summarizes the fair value of the assets and liabilities assumed, at the date
of acquisition:
MOODY'S 2021 10-K
101
in millions)
Current assets
Intangible assets:
Customer relationships (25 year useful life)
Database (10 year useful life)
Product technology (4 year useful life)
Trade name (3 year useful life)
Total intangible assets (19 year weighted average life)
Goodwill
Other assets
Liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Deferred tax liabilities
Other liabilities
Total liabilities
Net assets acquired
$
$
174
86
17
3
(5)
(20)
(71)
(2)
$
24
280
494
2
$
(98)
702
Current assets in the table above include acquired cash of $6 million. Additionally, current assets include accounts receivable of
approximately $14 million.
Goodwill
The goodwill recognized as a result of this acquisition includes, among other things, the value of combining the complementary
product portfolios of the Company and RDC, which is expected to extend the Company’s reach to new and evolving market
segments as well as cost savings synergies, expected new customer acquisitions and products.
Goodwill, which has been assigned to the MA segment, is not deductible for tax purposes.
Transaction costs
Transaction costs directly related to the RDC acquisition were not material.
Other Acquisitions
During the fourth quarter of 2020, the Company acquired three additional businesses within the MA reportable segment, which
were not individually material, but are material in aggregate, to Moody's consolidated financial statements:
–
–
–
In December 2020, the Company acquired 100% of Catylist, Inc., a provider of commercial real estate solutions forff
Catylist revenue is reported in the RD&A LOB.
brokers.
In December 2020, the Company acquired 100% of ZM Financial Systems, a provider of financial management software for
the U.S. banking sector. ZMFS revenue is reported in the ERS LOB.
In October 2020, the Company acquired 100% of Acquire Media, an aggregator and distributor of curated real-time news,
multimedia, data, and alerts. AM revenue is reported in the RD&A LOB.
The aggregate consideration transferred for the aforementioned acquisitions of $205 million was funded by cash on hand.
102 MOODY'S 2021 10-K
The following table summarizes the aggregate fair value of the assets acquired and liabilities assumed as of the respective
closing dates for each acquisition.
(Amounts in millions)
Current assets
Intangible assets:
Customer relationships (18 year useful life)
Product technology (8 year useful life)
Database (10 year useful life)
Trade name (14 year useful life)
Total intangible assets (14 year weighted average life)
Goodwill
Other assets
Liabilities:
Current liabilities
Long-term liabilities
Total liabilities
Net assets acquired
Divestiture
$
5
$
$
47
23
8
4
(8)
(8)
$
82
131
3
(16)
205
On November 8, 2019, the Company completed the sale of MAKS to Equistone Partners Europe Limited (Equistone), a
European private equity firm for $227 million in net cash proceeds.
This divestiture resulted in a loss of $23 million ($9 million in 2020 and $14 million in 2019), which included $32 million of
currency translation losses reclassified from AOCL to the statements of operations. Additionally, in connection with this
divestiture, the Company has recorded certain indemnification provisions. These provisions totaled $33 million as of both
December 31, 2021 and December 31, 2020. These amounts are included in other liabilities at December 31, 2021 and 2020 in
the consolidated balance sheets of the Company.
NOTE 10
GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS
The following table summarizes the activity in goodwill:
Year Ended December 31, 2021
MIS
Accumulated
impairment
charge
Gross
goodwill
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 (1)
Foreign
currency
translation
adjustments
Ending
Balance
$
311
$
— $
311
$
4,257
$
(12) $
4,245
$
4,568
$
(12) $
4,556
90
(5)
—
—
90
1,525
—
1,525
1,615
—
1,615
(5)
(167)
—
(167)
(172)
—
(172)
$
396
$
— $
396
$
5,615
$
(12) $
5,603
$
6,011
$
(12) $
5,999
MOODY'S 2021 10-K
103
Year Ended December 31, 2020
MIS
Accumulated
impairment
charge
Gross
goodwill
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
(2)
Foreign
currency
translation
adjustments
Ending
balance
$
315
$
— $
315
$
3,419
$
(12) $
3,407
$
3,734
$
(12) $
3,722
(2)
(2)
—
—
(2)
628
(2)
210
—
—
628
626
210
208
—
—
626
208
$
311
$
— $
311
$
4,257
$
(12) $
4,245
$
4,568
$
(12) $
4,556
(1) The 2021 additions/adjustments for the MA segment in the table above relate to the acquisitions of Cortera, RMS, RealXData, Bogard, and
PassFort. The 2021 additions/adjustments for the MIS segment relate to certain revenue synergies from the RMS acquisition that are expected
to benefit the ESG solutions group within the MIS Other LOB.
(2) The 2020 additions/adjustments for the MA segment in the table above relate to the acquisitions of RDC, AM, ZMFS, and Catylist.
Acquired intangible assets and related accumulated amortization consisted of:
Customer relationships
Accumulated amortization
Net customer relationships
Software/product technology
Accumulated amortization
Net software/product technology
Database
Accumulated amortization
Net database
Trade names
Accumulated amortization
Net trade names
Other (1)
Accumulated amortization
Net other
Total
December 31,
2021
2020
$
2,101
$
(381)
1,720
663
(219)
444
179
(46)
133
207
(47)
160
54
(44)
10
1,623
(313)
1,310
441
(177)
264
144
(29)
115
161
(38)
123
55
(43)
12
$
2,467
$
1,824
(1) Other intangible assets primarily consist of trade secrets, covenants not to compete, and acquired ratings methodologies and models.
Amortization expense relating to acquired intangible assets is as follows:
Amortization expense
Year Ended December 31,
2020
2019
2021
$
158
$
124
$
103
104 MOODY'S 2021 10-K
Estimated future annual amortization expense for intangible assets subject to amortization is as follows:
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total estimated future amortization
Matters concerning the ICRA reporting unit
$
$
191
189
185
180
177
1,545
2,467
ICRA has reported various matters relating to: (i) an adjudication order and fine imposed (and subsequently enhanced) by the
Securities and Exchange Board of India (SEBI) in connection with credit ratings assigned to one of ICRA’sAA customers and the
customer’s subsidiaries, which are being appealed by ICRA; (ii) the completion of internal examinations regarding various
anonymous complaints, and actions taken by ICRA’sAA board based on the examinations’ findings; and (iii) a separate internal
examination of certain allegations against two former senior ICRA officials.
An unfavorable resolution of the aforementioned
matters may negatively impact ICRA’sAA future operating results, which could result in an impairment of goodwill and amortizable
intangible assets in future quarters.
ff
NOTE 11
RESTRUCTURING
On December 22, 2020, the chief executive officer
Reorganization Restructuring Program”) that the Company estimates will result in annualized savings of $20 million per year.
This program relates to a strategic reorganization in the MA reportable segment consisting of severance and related costs
primarily determined under the Company’s existing severance plans. The 2020 MA Strategic Reorganization Restructuring
Program resulted in a total of $20 million in pre-tax charges and was substantially completed in the first half of 2021. Cash
outlays associated with this program are expected to be $20 million, which will be paid through 2022.
of Moody’s approved a restructuring program (the “2020 MA Strategic
ff
ff
On July 29, 2020, the chief executive officer
Restructuring Program”) primarily in response to the COVID-19 pandemic which revolved around the rationalization and exit of
certain real estate leases. The exit from certain leased officeff
space began in the third quarter of 2020 and was substantially
completed at December 31, 2020. The 2020 Real Estate Rationalization Restructuring Program primarily reflected non-cash
charges related to the impairment of operating lease right-of-use assets and leasehold improvements. The 2020 Restructuring
Program is expected to result in an estimated annualized savings of approximately $5 to $6 million a year.
of Moody’s approved a restructuring program (the “2020 Real Estate Rationalization
ff
On October 26, 2018, the chief executive officer
of Moody’s approved a restructuring program (the “2018 Restructuring
Program”) that the Company estimates will result in annualized savings of approximately $60 million per year. The 2018
Restructuring Program, the scope of which was expanded in the second quarter of 2019, was substantially completed at
December 31, 2020. The 2018 Restructuring Program included relocation of certain functions from high-cost to lower-cost
jurisdictions, a reduction of staff,ff
positions, and the rationalization and exit of certain real estate due to consolidation of various business activities. The exit from
certain leased officeff
space began in the fourth quarter of 2018 and resulted in approximately $50 million of the charges to either
terminate or sublease the affected
real estate leases. The 2018 Restructuring Program also included $55 million of personnel-
related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s
existing severance plans. Cash outlays associated with the employee termination cost component of the 2018 Restructuring
Program were $55 million.
including from acquisitions and pursuant to a review of the business criticality of certain
ff
Total expenses included in the accompanying consolidated statements of operations relating to the Company's restructuring
programs are as follows:
2018 Restructuring Program
2020 Real Estate Rationalization Restructuring Program
2020 MA Strategic Reorganization Restructuring Program
Total Restructuring
Year Ended December 31,
2021
2020
(2) $
(4) $
—
2
— $
36
18
50
$
2019
60
—
—
60
$
$
MOODY'S 2021 10-K
105
Cumulative expense incurred through December 31, 2021 Employee Termination Costs Contract Termination Costs
2018 Restructuring Program
55
$
48
$
2020 Real Estate Rationalization Restructuring Program:
2020 MA Strategic Reorganization Restructuring Program:
$
$
— $
20
$
36
—
The restructuring liability for the aforementioned plans was not material at December 31, 2021, December 31, 2020, and
December 31, 2019.
NOTE 12
FAIR VALUE
The table below presents information about items which are carried at fair value on a recurring basis at December 31, 2021 and
2020:
Assets:
Liabilities:
Assets:
Liabilities:
Description
Derivatives (1)
Mutual funds
Total
Derivatives (1)
Total
Description
Derivatives (1)
Mutual funds
Total
Derivatives (1)
Total
ir value Measurement as of December 31, 2021
Balance
Level 1
Level 2
$
67
73
140
$
52
52
$
$
— $
73
73
$
— $
— $
67
—
67
52
52
Fair Value Measurement as of December 31, 2020
Balance
Level 1
Level 2
$
88
60
148
$
186
186
$
$
— $
60
60
$
— $
— $
88
—
88
186
186
$
$
$
$
$
$
$
$
(1)
Represents FX forwards on certain assets and liabilities as well as interest rate swaps and cross-currency swaps as more fully described in
Note 7 to the consolidated financial statements.
The following are descriptions of the methodologies utilized by the Company to estimate the fair value of its derivative contracts
and mutual funds:
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 established 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.
Mutual funds:
The mutual funds in the table above are deemed to be equity securities with readily determinable fair values with changes in the
fair value recognized through net income under ASC Topic 321. The fair value of these instruments is determined using Level 1
inputs as defined in the ASC Topic 820.
106 MOODY'S 2021 10-K
NOTE 13.
OTHER BALANCE SHEET INFORMATION
The following tables contain additional detail related to certain balance sheet captions:
Other current assets:
Prepaid taxes
Prepaid expenses
Capitalized costs to obtain and fulfill sales contracts
Foreign exchange forf wards
rr
on certain assets and liabilities
Other
Total other current assets
Other assets:
Investments in non-consolidated affiliates
ff
Deposits for real-estate leases
Indemnification assets related to acquisitions
Mutual funds and fixed deposits
Company owned life insurance (at contract value)
Costs to obtain sales contracts
Derivative instruments designated as accounting hedges
Pension and other retirement employee benefits
Other
Total other assets
Accounts payable and accrued liabilities:
Salaries and benefits
Incentive compensation
Customer credits, advanced payments and advanced billings
Dividends
Professional service fees
Interest accrued on debt
Accounts payable
Income taxes
Pension and other retirement employee benefits
Accrued royalties
Foreign exchange forf wards
rr
on certain assets and liabilities
Restructuring liability
Derivative instruments designated as accounting hedges
Other
$
$
$
$
$
Total accounts payable and accrued liabilities
$
1,142
$
December 31,
2021
2020
112
$
99
103
1
74
94
91
93
31
74
389
$
383
December 31,
2021
2020
443
$
14
106
89
37
138
66
77
64
1,034
$
135
19
15
66
17
134
57
21
51
515
December 31,
2021
2020
$
211
324
100
6
75
85
47
115
7
36
12
4
—
120
197
226
42
11
53
82
39
128
45
19
2
18
39
138
1,039
MOODY'S 2021 10-K
107
December 31,
2021
2020
Other liabilities:
Pension and other retirement employee benefits
$
235
$
Interest accrued on UTPs
MAKS indemnification provisions
Income tax liability – non-current portion
Derivative instruments designated as accounting hedges
Other
Total other liabilities
59
33
23
40
48
$
438
$
244
113
33
18
145
37
590
The following table provides additional detail regarding Moody's investments in non-consolidated affiliates,
other assets in the consolidated balance sheets:
ff
as included within
Investments in non-consolidated affiliates:
Equity method investments (1)
Investments measured using the measurement alternative (2)
Other
Total investments in non-consolidated affiliates
ff
December 31,
2021
2020
$
$
$
121
318
4
443
$
118
16
1
135
(1)
(2)
Equity securities in which the Company has significant influence over the investee but does not have a controlling financial interest in
accordance with ASC Topic 323
Equity securities without readily determinable fair value for which the Company has elected to apply the measurement alternative in
accordance with ASC Topic 321, which is more fully discussed in Note 2.
Moody's holds various investments accounted for under the equity method, the most significant of which is the Company's
minority investment in CCXI. Moody's also holds various investments measured using the measurement alternative, the most
significant of which is the Company's minority interest in BitSight.
Refer to Note 24 for disclosure on earnings from non-consolidated affiliates,
net.
ff
which is included within other non-operating income,
108 MOODY'S 2021 10-K
NOTE 14
COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table provides details about the reclassifications out of AOCL:
Year Ended December 31,
2021
2020
2019
Location in the consolidated
statements of operations
Currency translation adjustment
losses
Sale of foreign subsidiaries
$
— $
— $
(32) Loss pursuant to the divestiture of MAKS
Total currency translation
adjustment losses
Losses on cash flow hedges
Interest rate contract
Income tax effect
ff
of item above
Total net losses on cash flow
hedges
Gains on net investment hedges
Cross currency swaps
FX forwards
Total before income taxes
Income tax effect
ff
of item above
Total net gains on net investment
hedges
Pension and other retirement
benefits
Amortization of actuarial losses and
prior service costs included in net
income
Accelerated recognition of loss due
to settlement
Total before income taxes
Income tax effect
ff
of item above
Total pension and other retirement
benefits
Total net losses included in Net
Income attributable to
reclassifications out of AOCL
—
(2)
—
(2)
—
2
2
(1)
1
(11)
(8)
(19)
5
(14)
—
(3)
1
(2)
1
—
1
—
1
(6)
(2)
(8)
2
(6)
(32)
— Other non-operating income, net
— Provision for income taxes
—
— Other non-operating income, net
3 Other non-operating income, net
3
(1) Provision for income taxes
2
(3) Other non-operating income, net
— Other non-operating income, net
(3)
1 Provision for income taxes
(2)
$
(15) $
(7) $
(32)
The following table shows changes in AOCL by component (net of tax):
Year Ended December 31, 2021
Pension and
Other
Retirement
Benefits
Gains / (Losses)
on Cash Flow
Hedges
Foreign Currency
Translation
Adjustments
Net
Investment
Hedges
Total
Balance December 31, 2020
$
(118) $
(49) $
(45) $
(220) $
(432)
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from AOCL
Other comprehensive income/(loss)
Balance December 31, 2021
55
14
69
—
2
2
(290)
—
(290)
242
(1)
241
7
15
22
$
(49) $
(47) $
(335) $
21
$
(410)
MOODY'S 2021 10-K
109
Year Ended December 31, 2020
Pension and
Other
Retirement
Benefits
Gains / (Losses)
on Cash Flow
Hedges
Foreign Currency
Translation
Adjustments
Net
Investment
Hedges
Total
Balance December 31, 2019
$
(92) $
— $
(401) $
54 $
(439)
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from AOCL
Other comprehensive income/(loss)
Balance December 31, 2020
(32)
6
(26)
(51)
2
(49)
356
—
356
(273)
(1)
(274)
—
7
7
$
(118) $
(49) $
(45) $
(220) $
(432)
Year Ended December 31, 2019
Pension and
Other
Retirement
Benefits
Gains / (Losses)
on Cash Flow
Hedges
Foreign Currency
Translation
Adjustments
Net
Investment
Hedges
Total
Balance December 31, 2018
$
Adoption of ASU 2018-02
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from AOCL
Other comprehensive income/(loss)
Balance December 31, 2019
(53) $
(17)
(24)
2
(39)
— $
(406) $
33 $
(426)
—
—
—
—
—
(27)
32
5
(3)
26
(2)
21
(20)
(25)
32
(13)
$
(92) $
— $
(401) $
54 $
(439)
NOTE 15
PENSION AND OTHER RETIREMENT BENEFITS
U.S. Plans
Moody’s maintains funded and unfunded noncontributory Defined Benefit Pension Plans ("DBPPs"). The DBPPs 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”.
Through 2007, substantially all U.S. employees were eligible to participate in the Company’s DBPPs. Effective
the Company no longer offers
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.
January 1, 2008,
DBPPs to U.S. employees hired or rehired on or after January 1, 2008 and new hires in the U.S.
ff
ff
110 MOODY'S 2021 10-K
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:
Pension Plans
Other Retirement Plans
2021
2020
2021
2020
Change in benefit obligation:
Benefit obligation, beginning of the period
Service cost
Interest cost
Plan participants’ contributions
Benefits paid
Actuarial (loss) gain
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
Funded Status of the plans
Amounts recorded on the consolidated balance sheets:
Pension and retirement benefits asset – non current
Pension and retirement benefits liability – current
Pension and retirement benefits liability – non current
Net amount recognized
Accumulated benefit obligation, end of the period
$
$
$
$
$
$
$
$
(663) $
(19)
(14)
—
68
(6)
64
(570) $
$
528
34
(68)
50
—
544
$
(26) $
$
74
(5)
(95)
(26) $
(524) $
(589) $
(17)
(17)
—
22
6
(68)
(663) $
$
395
45
(22)
110
—
$
528
(135) $
$
21
(44)
(112)
(135) $
(601)
(48) $
(4)
(1)
(1)
2
(3)
7
(48) $
— $
—
(2)
1
1
— $
(48) $
— $
(1)
(47)
(48) $
(42)
(3)
(1)
(1)
2
2
(5)
(48)
—
—
(2)
1
1
—
(48)
—
(1)
(47)
(48)
The net decrease in the pension benefit obligation from assumption changes and actuarial losses in 2021 primarily resulted from
increases to the discount rates and changes to certain actuarial assumptions, including increased rates of retirement at younger
ages. The net increase in the benefit obligation in 2020 primarily resulted from reductions in discount rates, partially offset
decrease related to lower cash balance conversion interest rates.
by a
ff
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
December 31,
2021
101
86
$
$
2020
156
138
$
$
The following table summarizes the pre-tax net actuarial losses and prior service costs recognized in AOCL for the Company’s
Retirement Plans as of December 31:
Net actuarial losses
Net prior service credits
Total recognized in AOCL – pretax
Pension Plans
Other Retirement Plans
2021
(61) $
3
(58) $
2020
(144) $
3
(141) $
2021
(4) $
—
(4) $
2020
(8)
—
(8)
$
$
MOODY'S 2021 10-K
111
Net periodic benefit expenses recognized forff
the Retirement Plans for years ended December 31:
Pension Plans
Other Retirement Plans
2021
2020
2019
2021
2020
2019
Components of net periodic
expense
Service cost
$
Interest cost
Expected return on plan assets
Amortization of net actuarial
loss and prior service credits
from earlier periods
Loss on settlement of pension
obligations
$
19
14
(27)
$
17
17
(20)
11
8
7
2
Net periodic expense
$
25
$
23
$
$
17
21
(20)
4
—
22
$
4
1
—
1
—
6
$
$
3
1
—
—
—
4
$
$
3
1
—
—
—
4
The following table summarizes the pre-tax amounts recorded in OCI related to the Company’s Retirement Plans for the years
ended December 31:
Pension Plans
Other Retirement Plans
2021
2020
2019
2021
2020
2019
Amortization of net actuarial losses
and prior service credit
Settlement loss
Net actuarial (loss)/gain arising
during the period
Total recognized in OCI – pre-tax
$
ADDITIONAL INFORMATION:
Assumptions—Retirement Plans
$
11
$
8
65
84
$
$
7
2
(37)
(28) $
$
4
—
(24)
(20) $
1
—
4
5
$
$
— $
—
(3)
(3) $
—
—
(6)
(6)
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate
Rate of compensation increase
Pension Plans
Other Retirement Plans
2021
2.60 %
3.63 %
2020
2.24 %
3.62 %
2021
2.65 %
—
2020
2.30 %
—
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
Cash balance plan interest
crediting rate
Pension Plans
Other Retirement Plans
2021
2.24 %
5.45 %
3.62 %
2020
3.04 %
4.45 %
3.64 %
2019
4.07 %
5.65 %
3.69 %
4.50 %
4.50 %
4.50 %
2021
2.30 %
2020
3.05 %
2019
4.10 %
—
—
—
—
—
—
—
—
—
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 2021, the expected rate of return used in calculating the net periodic benefit costs was
5.45%. For 2022, the Company’s expected rate of return assumption is 5.05% 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 mortality
improvement scale MP-2021 to accompany the Pri2012 mortality tables to reflect the latest information regarding future mortality
expectations by the Society of Actuaries.
112 MOODY'S 2021 10-K
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 acceptable 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.
The Company’s investment policy 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 assets be
rebalanced between shorter and longer duration bonds as the interest rate environment changes. This investment policy is
designed to help protect the plan’s funded status and to limit volatility of the Company’s contributions. Based on the policy, the
Company’s current target asset allocation is approximately 33% (range of 28% to 38%) in equity securities, 62% (range of 57%
to 67%) in fixed income securities and 5% (range of 2% to 8%) 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 investments are diversified principally across U.S. and non-U.S. government and corporate bonds, which are expected to
help reduce plan exposure to interest rate variation and to better align assets with obligations. The plan also invests in other fixed
income investments such as debts rated below investment grade, emerging market debt, and convertible securities. The plan’s
other investment, which is made through a private real estate debt fund, is expected to provide additional diversification benefits
and absolute return enhancement to the plan assets.
ff
ff
Fair value of the assets in the Company’s funded pension plan by asset category at December 31, 2021 and 2020 are as follows:
Fair Value Measurement as of December 31, 2021
Balance
Level 1
Level 2
$
4
$
— $
4
$
Asset Category
Cash and cash equivalent
Common/collective trust funds—equity
securities
U.S. large-cap
U.S. small and mid-cap
Emerging markets
Total equity investments
Emerging markets bond fund
Common/collective trust funds—fixed income
securities
Intermediate-term investment grade U.S.
government/ corporate bonds
Mutual funds
U.S. Treasury Inflation-Protected Securities (TIPs)
Convertible securities
Private investment fund—high yield securities
Total fixed-income investments
Other investment—private real estate fund
135
23
27
185
30
245
24
17
14
330
25
Total Assets
$
544
$
—
—
—
—
—
—
24
17
—
41
—
41
135
23
27
185
—
245
—
—
—
245
—
$
434
$
Measured using
NAV practical
expedient (1)
—
—
—
—
—
30
—
—
—
14
44
25
69
% of total
assets
1 %
25 %
4 %
5 %
34 %
6 %
45 %
4 %
3 %
3 %
61 %
4 %
100 %
MOODY'S 2021 10-K
113
Asset Category
Cash and cash equivalent
Common/collective trust funds—equity
securities
U.S. large-cap
U.S. small and mid-cap
Emerging markets
Total equity investments
Emerging markets bond fund
Common/collective trust funds—fixed income
securities
Intermediate-term investment grade U.S.
government/ corporate bonds
Mutual funds
U.S. Treasury Inflation-Protected Securities
(TIPs)
Convertible securities
Private investment fund—high yield securities
Total fixed-income investments
Other investment—private real estate debt fund
143
28
32
203
32
214
23
16
12
297
24
Fair Value Measurement as of December 31, 2020
Balance
Level 1
Level 2
$
4
$
— $
4
$
Measured using
NAV practical
expedient (1)
—
—
—
—
—
32
—
—
—
12
44
24
68
% of total
assets
1 %
27 %
5 %
6 %
38 %
6 %
41 %
4 %
3 %
2 %
56 %
5 %
100 %
—
—
—
—
—
—
23
16
—
39
—
39
143
28
32
203
—
214
—
—
—
214
—
$
421
$
Total Assets
$
528
$
(1)
Investments are measured using the net asset value per share (or its equivalent) practical expedient and have not been categorized in the
fair value hierarchy. The fair value amounts presented in the table are intended to permit a reconciliation of the fair value hierarchy to the
value of the total plan assets.
Cash and cash equivalents are primarily comprised of investments 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 NAV pAA
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 considered to have a readily determinable fair value. Investments for which fair value is
estimated by using the NAV pAA
er unit in each fund. The NAV iAA s based on the value of the underlying investments owned by each
er share (or its equivalent) as a practical expedient are not categorized in the fair value hierarchy.
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 did not contribute to its U.S. funded pension plan during 2021, but contributed $99 million to this plan during the
year ended December 31, 2020. The Company made payments of $50 million and $11 million related to its U.S. unfunded
pension plan obligations during the years ended December 31, 2021 and 2020, respectively. The Company currently does not
anticipate making a contribution to its funded pension plan in 2022, and does not anticipate making payments related to its
unfunded U.S. pension plans and other Retirement Plans during the year ended December 31, 2022 that would be material to
the Company's financial statements.
Estimated Future Benefits Payable
Estimated future benefits payments for the Retirement Plans are as follows as of year ended December 31, 2021:
Year Ending December 31,
2022
2023
2024
2025
2026
2027 - 2031
114 MOODY'S 2021 10-K
$
Pension Plans
21
23
32
26
30
157
$
Other Retirement
Plans
1
2
2
2
2
15
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. 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
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 contribution plans were $54 million, $44 million and $43 million in
the years ended December 31, 2021, 2020, and 2019, respectively.
January 1, 2008, all eligible new hires will instead receive a retirement contribution into the Profit
ff
ff
January 1, 2008, Moody’s has designated the Moody’s Stock Fund, an investment option under the Profit Participation
Effective
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 $1 million during each of the
years ended December 31, 2021, 2020 and 2019, respectively, forff
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 328,500 and 360,600 shares of Moody’s common stock at
December 31, 2021 and 2020, respectively.
the Company’s common shares held by the Moody’s Stock
Non-U.S. Plans
Certain of the Company’s non-U.S. operations provide pension benefits to their employees. The non-U.S. defined benefit
pension plans are immaterial. For defined contribution plans, company contributions are primarily determined as a percentage of
employees’ eligible compensation. Expenses related to these defined contribution plans for the years ended December 31, 2021,
2020 and 2019 were $32 million, $29 million and $25 million, respectively.
NOTE 16
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 eligibility, 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 achievement 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 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.
On September 15, 2021, the Company acquired RMS, which is discussed in more detail in Note 9. As part of the acquisition, the
Company registered the RMS 2014 Equity Award Plan and the RMS 2015 Equity Incentive Plan (collectively, "RMS Plans") as
part of the purchase agreement to acquire RMS. Under the RMS Plans, 1.2 million shares of the Company’s common stock have
been reserved for issuance. The RMS Plans provide that options are exercisable not later than ten years from the grant date.
The vesting period is generally determined by the Board at the date of the grant and is four years for both options and restricted
stock granted during 2021.
As a result of the acquisition, certain RMS employees' unvested equity awards (employee stock options and restricted stock) with
an acquisition-date fair value of $33 million were converted into equity awards of the Company based on an exchange ratio as
defined in the purchase agreement. The portion of the fair value of the replacement awards related to services provided prior to
the acquisition was $5 million and was accounted for as consideration transferred (See Note 9). The remaining portion of the
replacement awards of $28 million, which is associated with a future service requirement, will be recognized as compensation
expense over the remaining vesting period.
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,
2021
2020
2019
$
$
175
42
$
$
154
30
$
$
136
29
MOODY'S 2021 10-K
115
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.
The following weighted average assumptions were used for options granted (excluding the aforementioned RMS replacement
awards):
Expected dividend yield
Expected stock volatility
Risk-free interest rate
Expected holding period -in years
Year Ended December 31,
2021
0.89 %
28 %
0.82 %
5.6
2020
0.80 %
23 %
1.43 %
5.7
2019
1.14 %
24 %
2.56 %
6.2
Due to the RMS replacement option awards being heavily in-the-money at the acquisition date, the Company utilized a binomial
valuation approach to determine the fair value of the options, which approximated the intrinsic value of the replaced awards at
the acquisition date.
The following represents the fair value of the options at grant date, including RMS replacement option awards:
Weighted average grant date fair value per share (including RMS
replacement option awards)
$
121.14
$
60.66
$
43.29
Year Ended December 31,
2021
2020
2019
A summary of option activity as of December 31, 2021 and changes during the year then ended is presented below:
Options
Outstanding, December 31, 2020
Granted (including RMS replacement awards)
Exercised
Outstanding, December 31, 2021
Vested and expected to vest, December 31, 2021
Exercisable, December 31, 2021
Shares
1.0
0.2
$
$
(0.2) $
1.0
1.0
0.6
$
$
$
Weighted Average
Exercise Price Per
Share
Weighted Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
132.80
249.99
101.03
166.16
165.26
119.88
5.8 years $
5.7 years $
4.4 years $
224
221
159
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
closing stock price on the last trading day of the year ended December 31, 2021 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, 2021. This amount varies based on the fair value of Moody’s stock. As of December 31, 2021, there
was $22 million of total unrecognized compensation expense related to options. The expense is expected to be recognized over
a weighted average period of 2.2 years.
between Moody’s
ff
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,
2021
24
55
13
$
$
$
2020
39
132
32
$
$
$
2019
36
114
27
$
$
$
116 MOODY'S 2021 10-K
A summary of nonvested restricted stock activity for the year ended December 31, 2021 is presented below:
Nonvested Restricted Stock
Balance, December 31, 2020
Granted (including RMS replacement awards)
Vested
Forfeited
Balance, December 31, 2021
Shares
Weighted Average Grant
Date Fair Value Per Share
1.5
0.7
$
$
(0.7) $
(0.1) $
1.4
$
201.30
296.84
177.96
242.12
253.85
As of December 31, 2021, there was $209 million of total unrecognized compensation expense related to nonvested restricted
stock. The expense is expected to be recognized over a weighted average period of 2.6 years.
The following table summarizes information relating to the vesting of restricted stock awards:
Fair value of shares vested
Tax benefit realized upon vesting
Year Ended December 31,
2021
194
46
$
$
2020
202
46
$
$
2019
156
36
$
$
A summary of performance-based restricted stock activity for the year ended December 31, 2021 is presented below:
Performance-based restricted stock
Balance, December 31, 2020
Granted
Vested
Balance, December 31, 2021
Shares
Weighted Average Grant
Date Fair Value Per Share
0.3
0.2
$
$
(0.1) $
0.4
$
197.19
329.71
162.06
266.89
The following table summarizes information relating to the vesting of the Company’s perforr
rmance-based restricted stock awards:
Fair value of shares vested
Tax benefit realized upon vesting
Year Ended December 31,
2021
28
7
$
$
2020
70
17
$
$
2019
47
11
$
$
As of December 31, 2021, there was $63 million of total unrecognized compensation expense related to this plan. The expense
is expected to be recognized over a weighted average period of 2.1 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, 6P million shares of common stock were reserved for
issuance. The ESPP permits 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 2021, 2020, and 2019 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 2021, 2020, and 2019. 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.
MOODY'S 2021 10-K
117
NOTE 17
INCOME TAXES
Components of the Company’s income tax provision are as follows:
Current:
Federal
State and Local
Non-U.S.
Total current
Deferred:
Federal
State and Local
Non-U.S.
Total deferred
Total provision for income taxes
Year Ended December 31,
2021
2020
2019
$
$
404
106
249
759
(172)
(45)
(1)
(218)
541
$
$
213
68
215
496
6
—
(50)
(44)
452
$
$
179
59
181
419
(19)
(3)
(16)
(38)
381
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
Other
Effective
ff
tax rate
Income tax paid
The source of income before provision for income taxes is as follows:
U.S.
Non-U.S.
Income before provision forf
income taxes
Year Ended December 31,
2021
2020
21.0 %
1.5 %
(1.5)%
(1.4)%
19.6 %
21.0 %
2.3 %
(1.5)%
(1.5)%
20.3 %
932
$
514
$
Year Ended December 31,
2021
2020
1,563
$
1,349
$
1,192
880
2,755
$
2,229
$
2019
21.0 %
2.2 %
(0.1)%
(2.1)%
21.0 %
458
2019
1,039
771
1,810
$
$
$
118 MOODY'S 2021 10-K
The components of deferred tax assets and liabilities are as follows:
December 31,
2021
2020
Deferred tax assets:
Account receivable allowances
Accumulated depreciation and amortization
Stock-based compensation
Accrued compensation and benefits
Capitalized costs
Operating lease liabilities
Deferred revenue
Net operating loss
Restructuring
Uncertain tax positions
Self-insured related reserves
Loss on net investment hedges - OCI
Other
Total deferred tax assets
Deferred tax liabilities:
Accumulated depreciation and amortization of intangible assets and capitalized software
ROU Assets
Capital Gains
Self-insured related income
Revenue Accounting Standard - ASC 606
Deferred tax on unremitted foreign earnings
Gain on net investment hedges - OCI
Other
Total deferred tax liabilities
Net deferred tax liabilities
Valuation allowance
Total net deferred tax liabilities
$
8
$
10
50
101
33
134
252
33
1
86
10
11
16
745
(659)
(102)
(31)
(10)
(7)
(12)
(4)
(6)
(831)
(86)
(18)
$
(104) $
9
2
42
99
39
122
30
17
3
98
10
93
10
574
(468)
(90)
(23)
(10)
(10)
(16)
(8)
(4)
(629)
(55)
(15)
(70)
On December 22, 2017, the Tax Act was signed into law, which resulted in significant changes to U.S. corporate tax laws. The
Tax Act includes a mandatory one-time deemed repatriation tax (“transition tax”) on previously untaxed accumulated earnings of
foreign subsidiaries and beginning in 2018 reduces the statutory federal corporate income tax rate from 35% to 21%. Due to the
complexities of the Tax Act, the SEC issued guidance requiring that companies provide a reasonable estimate of the impact of
the Tax Act to the extent such reasonable estimate has been determined. Accordingly, as of December 31, 2017, the Company
recorded a provisional estimate for the transition tax of $247 million. In September, 2018, the Company filed its 2017 federal
income tax return and revised its determination of the transition tax to $236 million, a reduction of $11 million from the estimate at
December 31, 2017. The revised determination of transition tax may be impacted by a number of additional considerations,
including but not limited to the issuance of additional regulations.
As a result of the Tax Act, all previously net undistributed foreign earnings have now been subject to U.S. tax. The Company
regularly evaluates which entities it will indefinitely reinvest earnings. The Company has provided deferred taxes for those
entities whose earnings are not considered indefinitely reinvested.
The Company’s annual tax expense for the year ended December 31, 2021 includes Excess Tax Benefits from stock
compensation of $31 million, benefits from the resolution of certain UTPs of $70 million and other net decreases to tax positions
of $25 million.
The Company had valuation allowances of $18 million and $15 million at December 31, 2021 and 2020, respectively, related to
foreign net operating losses for which realization is uncertain.
As of December 31, 2021, the Company had $388 million of UTPs of which $353 million represents the amount that, if
recognized, would impact the effective
uncertain tax positions. The increase in 2020 was primarily due to the additional reserves established for non-U.S. tax
exposures.
tax rate in future periods. The decrease in 2021 resulted primarily from the resolutions of
ff
MOODY'S 2021 10-K
119
A reconciliation of the beginning and ending amount of UTPs is as follows:
ff
tax positions related to the current year
Balance as of January 1
Additions forff
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Lapse of statute of limitations
Reclassification to indemnification liability related to MAKS divestiture
Balance as of December 31
$
$
$
$
Year Ended December 31,
2021
483
102
18
—
(134)
(81)
—
388
2020
477
37
17
(2)
(5)
(41)
—
483
$
$
2019
495
35
22
(2)
(1)
(44)
(28)
477
The Company classifies interest related to UTPs in interest expense in its consolidated statements of operations. Penalties are
recognized in other non-operating expenses. During the year ended December 31, 2021 the Company accrued net interest
income of $21 million related to UTPs. During the years ended December 31, 2020 and 2019 the Company incurred net interest
expense of $34 million and $28 million, respectively, related to UTPs. As of December 31, 2021, 2020 and 2019 the amount of
accrued interest recorded in the Company’s consolidated balance sheets related to UTPs was $59 million, $113 million and
$82 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 2017 through 2019 are currently under examination and
2020 remains open to examination. The Company’s New York State tax returns for 2017 through 2018 are currently under
examination and New York City tax returns for 2014 through 2017 are currently under examination. After the resolution of a tax
audit for 2012, certain of the Company’s U.K. subsidiaries’ returns from 2012 to 2020 remain open to examination.
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
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.
settlement of these audits, which might involve the payment of
ff
120 MOODY'S 2021 10-K
NOTE 18
INDEBTEDNESS
The Company’s debt is recorded at its carrying amount, which represents the issuance amount plus or minus any issuance
premium or discount, except for certain debt as depicted in the table below, 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 following table summarizes total indebtedness:
December 31, 2021
Principal
Amount
Fair Value of
Interest Rate
Swaps(1)
Unamortized
(Discount)
Premium
Unamortized
Debt Issuance
Costs
Carrying
Value
Notes Payable:
4.875% 2013 Senior Notes, due 2024
$
5.25% 2014 Senior Notes, due 2044
1.75% 2015 Senior Notes, due 2027
2.625% 2017 Senior Notes, due 2023
3.25% 2017 Senior Notes, due 2028
4.25% 2018 Senior Notes, due 2029
4.875% 2018 Senior Notes, due 2048
0.950% 2019 Senior Notes, due 2030
3.75% 2020 Senior Notes, due 2025
3.25% 2020 Senior Notes, due 2050
2.55% 2020 Senior Notes, due 2060
2.00% 2021 Senior Notes, due 2031
2.75% 2021 Senior Notes, due 2041
3.10% 2021 Senior Notes, due 2061
500
600
568
500
500
400
400
853
700
300
500
600
600
500
$
— $
(1) $
(1) $
(7)
—
5
8
—
(7)
—
(9)
—
—
—
—
—
3
—
—
(3)
(2)
(6)
(2)
(1)
(4)
(4)
(8)
(13)
(7)
(5)
(2)
(1)
(2)
(2)
(4)
(5)
(4)
(3)
(5)
(5)
(6)
(5)
498
591
566
504
503
396
383
846
686
293
491
587
581
488
Total long-term debt
$
7,521
$
(10) $
(48) $
(50) $
7,413
December 31, 2020
Principal
Amount
Fair Value of
Interest Rate
Swaps (1)
Unamortized
(Discount)
Premium
Unamortized
Debt Issuance
Costs
Carrying
Value
Notes Payable:
4.50% 2012 Senior Notes, due 2022
$
4.875% 2013 Senior Notes, due 2024
5.25% 2014 Senior Notes, due 2044
1.75% 2015 Senior Notes due 2027
2.625% 2017 Senior Notes, due 2023
3.25% 2017 Senior Notes, due 2028
4.25% 2018 Senior Notes, due 2029
4.875% 2018 Senior Notes, due 2048
0.950% 2019 Senior Notes, due 2030
3.75% 2020 Senior Notes, due 2025
3.25% 2020 Senior Notes, due 2050
2.55% 2020 Senior Notes, due 2060
$
500
500
600
612
500
500
400
400
918
700
300
500
Total long-term debt
$
6,430
$
14
—
—
—
12
31
—
—
—
(1)
—
—
56
$
(1) $
(1) $
(1)
3
—
—
(4)
(3)
(6)
(3)
(1)
(4)
(4)
(1)
(5)
(2)
(2)
(3)
(3)
(4)
(6)
(5)
(3)
(5)
512
498
598
610
510
524
394
390
909
693
293
491
$
(24) $
(40) $
6,422
(1)
The fair value of interest rate swaps in the table above represents the cumulative amount of fair value hedging adjustments included in the
carrying amount of the hedged debt.
MOODY'S 2021 10-K
121
Credit Facility
On December 17, 2021, the Company entered into a five-year senior, unsecured revolving credit facility with the capacity to
borrow up to $1.25 billion, which expires December 2026. The 2021 Facility replaces the Company’s $1 billion 2018 Credit
Facility that was scheduled to mature in November 2023. Further information on the key terms of these credit facilities is below.
The following summarizes information relating to the Company's revolving credit facilities:
Issue Date
Capacity
Maturity
Drawn
Undrawn
Drawn
Undrawn
December 31, 2021
December 31, 2020
2018 Credit Facility November 14, 2018
2021 Credit Facility December 17, 2021
2018 Credit Facility
November 13, 2023
(Terminated
TT
2021)
in
1,000
1,250 December 17, 2026
$
$
$
$
— $
— $
— $
1,000
— $
1,250
$
— $
—
Interest on borrowings under the 2018 Credit Facility ranged from 0 BPS to 22.5 BPS per annum for Alternate Base Rate loans
(as defined in the 2018 Facility agreement) or payable at rates based on the London InterBank Offered
premium that ranged from 80.5 BPS to 122.5 BPS depending on the Company’s index debt ratings, as set forth in the 2018
Facility agreement. The Company also paid quarterly facility fees, regardless of borrowing activity under the facility. The quarterly
fees for the 2018 Facility ranged from 7 BPS of the facility amount to 15 BPS, depending on the Company’s index debt ratings.
The 2018 Facility contained certain customary covenants including a financial covenant that required the Company to maintain a
total debt to EBITDA ratio of (i) not more than 4 to 1 at the end of any fiscal quarter or (ii) not more than 4.5 to 1 as of the end of
the first three consecutive quarters immediately following any acquisition with consideration in excess of $500 million, subject to
certain conditions as set forth in the 2018 Facility agreement.
Rate (“LIBOR”) plus a
ff
2021 Credit Facility
Interest on borrowings under the 2021 Credit Facility is payable at rates that are based on an adjusted term SOFR Rate plus a
premium that can range from 80.5 basis points to 122.5 basis points, depending on the Company’s index debt ratings, as set
forth in the 2021 Facility Agreement. The Company also has the option to choose other rates, such as those based on adjusted
Daily Simple SOFR or an alternate base rate as set forth in the 2021 Facility Agreement. The Company also pays quarterly
facility fees, regardless of borrowing activity under the Facility. The quarterly fees for the 2021 Facility can range from 7 basis
points of the 2021 Credit Facility amount to 15 basis points, depending on the Company’s index debt ratings. The facility fees for
the 2021 Credit Facility are subject to sustainability-based pricing adjustments based on the Company’s annual performance with
respect to certain spending with vendors who have committed to and publicly announced the setting of science-based targets to
reduce greenhouse gas emissions. The 2021 Facility contains a financial covenant that requires the Company to maintain a total
debt to EBITDA Ratio of (i) not more than 4 to 1 at the end of any fiscal quarter or (ii) not more than 4.5 to 1 as of the end of the
first three consecutive quarters immediately following any acquisition with consideration in excess of $500 million, subject
certain conditions as set forth in the 2021 Facility.
to
b
Commercial Paper
On August 3, 2016, the Company entered into a private placement commercial paper program under which the Company may
issue CP notes up to a maximum amount of $1.0 billion. Borrowings under the CP Program are backstopped by the 2021 Facility.
Amounts under the CP Program may be re-borrowed. The maturity of the CP Notes will vary, but may not exceed 397 days from
the date of issue. The CP Notes are sold at a discount from par, or alternatively, sold at par and bear interest at rates that will
vary based upon market conditions. The rates of interest will depend on whether the CP Notes will be a fixed or floating rate. The
interest on a floating rate may be based on the following: (a) certificate of deposit rate; (b) commercial paper rate; (c) the federal
funds rate; (d) the LIBOR; (e) prime rate; (f) Treasury rate; or (g) such other base rate as may be specified in a supplement to the
private placement agreement. The CP Program contains certain events of default including, among other things: non-payment of
principal, interest or fees; entrance into any form of moratorium; and bankruptcy and insolvency events, subject in certain
instances to cure periods. As of December 31, 2021, the Company has no CP borrowings outstanding.
Notes Payable
The Company may prepay certain of its senior notes, in whole or in part, but may incur a Make-Whole Amount penalty.
During 2021, the Company issued the 2021 Senior Notes due 2031, the 2021 Senior Notes due 2041, and the 2021 Senior
Notes due 2061. The key terms of these debt issuances are set forth in the table above.
Additionally, in 2021, the Company fully repaid $500 million of the 2012 Senior Notes due 2022 (along with a Make-Whole
Amount of approximately $13 million). The Company also recognized in interest expense, net, an $8 million benefit relating to
carrying value adjustments pursuant to the early termination of interest rate swaps designated as fair value hedges that were
associated with the 2012 Senior Notes due 2022.
122 MOODY'S 2021 10-K
At December 31, 2021, the Company was in compliance with all covenants contained within all of the debt agreements. All of the
debt agreements contain cross default provisions which 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, 2021, there were no such cross defaults.
The repayment schedule forff
the Company’s borrowings is as follows:
Year
Ending
December
31,
2013
Senior
Notes
due
2024
2014
Senior
Notes
due
2044
2015
Senior
Notes
due
2027
2017
Senior
Notes
due
2023
2017
Senior
Notes
due
2028
2018
Senior
Notes
due
2029
2018
Senior
Notes
due
2048
2019
Senior
Notes
due
2030
2020
Senior
Notes
due
2025
2020
Senior
Notes
due
2050
2020
Senior
Notes
due
2060
2021
Senior
Notes
due
2031
2021
Senior
Notes
due
2041
2021
Senior
Notes
due
2061
Total
2022
2023
2024
2025
2026
Thereafter
$ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —
—
500
—
—
—
—
—
—
—
—
—
—
—
600
568
500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500
400
400
853
—
—
700
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $ 500
— $ 500
— $ 700
— $ —
300
500
600
600
500
5,821
Total
$ 500
$ 600
$ 568
$ 500
$ 500
$ 400
$ 400
$ 853
$ 700
$ 300
$ 500
$ 600
$ 600
$ 500
$7,521
Interest expense, net
The following table summarizes the components of interest as presented in the consolidated statements of operations:
Expense on borrowings
Expense on UTPs and other tax related liabilities(1)
Net periodic pension costs—interest component
Income
Capitalized
Total
Interest paid (2)
Year Ended December 31,
2021
(185) $
2020
(163) $
21
(16)
9
—
(34)
(19)
11
—
(171) $
162
$
(205) $
132
$
2019
(176)
(28)
(22)
17
1
(208)
167
$
$
$
(1)
(2)
The amount for the year ended December 31, 2021 includes a $45 million benefit relating to the reversal of tax-related interest accruals
pursuant to the resolution of tax matters.
Interest paid includes net settlements on interest rate swaps more fully discussed in Note 7.
The fair value and carrying value of the Company’s debt as of December 31, 2021 and 2020 are as follows:
December 31, 2021
December 31, 2020
Carrying Amount
Estimated Fair
Value
rr
Carrying
Amount
Estimated Fair
Value
4.50% 2012 Senior Notes, due 2022
$
— $
— $
4.875% 2013 Senior Notes, due 2024
5.25% 2014 Senior Notes, due 2044
1.75% 2015 Senior Notes, due 2027
2.625% 2017 Senior Notes, due 2023
3.25% 2017 Senior Notes, due 2028
4.25% 2018 Senior Notes, due 2029
4.875% 2018 Senior Notes, due 2048
0.950% 2019 Senior Notes, due 2030
3.75% 2020 Senior Notes, due 2025
3.25% 2020 Senior Notes, due 2050
2.55% 2020 Senior Notes, due 2060
2.00% 2021 Senior Notes, due 2031
2.75% 2021 Senior Notes, due 2041
3.10% 2021 Senior Notes, due 2061
498
591
566
504
503
396
383
846
686
293
491
587
581
488
538
805
607
509
539
451
526
866
750
311
432
581
579
488
$
512
498
598
610
510
524
394
390
909
693
293
491
—
—
—
530
562
828
674
522
561
480
544
974
785
329
467
—
—
—
Total
$
7,413
$
7,982
$
6,422
$
7,256
MOODY'S 2021 10-K
123
The fair value of the Company’s debt is estimated based on quoted market prices for similar instruments. 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 19
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 its share
repurchase program as of December 31, 2021:
Date Authorized
February 9, 2021
December 16, 2019
Total Remaining Authority at December 31, 2021
Amount Authorized
1,000
1,000
$
$
Remaining Authority
1,000
81
1,081
$
$
$
Additionally, on February 7, 2022, the Board of Directors approved an additional $750 million of share repurchase authority.
During 2021, Moody’s repurchased 2.2 million shares of its common stock under its share repurchase program and issued a net
0.8 million shares under employee stock-based compensation plans. The net amount includes shares withheld for employee
payroll taxes.
Dividends
The Company’s cash dividends were:
Dividends Per Share
Year ended December 31,
First quarter
Second quarter
Third quarter
Fourth quarter
Total
$
$
2021
2020
2019
Declared
Paid
Declared
Paid
Declared
0.62
$
0.62
$
0.56
$
0.56
$
0.50
$
0.62
0.62
0.62
0.62
0.62
0.62
0.56
0.56
0.56
0.56
0.56
0.56
0.50
0.50
0.50
2.48
$
2.48
$
2.24
$
2.24
$
2.00
$
Paid
0.50
0.50
0.50
0.50
2.00
On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share of Moody’s common stock,
payable on March 18, 2022 to shareholders of record at the close of business on February 25, 2022. The continued payment of
dividends at the rate noted above, or at all, is subject to the discretion of the Board.
124 MOODY'S 2021 10-K
NOTE 20
LEASE COMMITMENTS
The Company has operating leases, substantially all of which relate to the lease of officeff
classified as finance leases are not material to the consolidated financial statements. Certain of the Company's leases include
options to renew, with renewal terms that can extend the lease from one to 20 years at the Company's discretion.
space. The Company's leases
The following table presents the components of the Company’s lease cost:
Operating lease cost
Sublease income
Variable lease cost
Total lease cost
Year Ended December 31,
2021
2020
2019
$
$
98
$
(6)
19
111
$
96 $
(5)
19
110 $
97
(2)
17
112
The following tables present other information related to the Company’s operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities
Year Ended December 31,
2021
2020
2019
$
$
113
137
$
$
108 $
36 $
106
41
Year Ended December 31,
2021
2020
2019
Weighted-average remaining lease term (in years)
Weighted-average discount rate applied to operating leases
5.6
3.1 %
6.0
3.6
%
6.8
3
.6 %
The following table presents a maturity analysis of the future minimum lease payments included within the Company’s operating
lease liabilities at December 31, 2021:
Year Ending December 31,
Operating Leases
2022
2023
2024
2025
2026
Thereafter
Total lease payments (undiscounted)
Less: Interest
Present value of lease liabilities:
Lease liabilities - current
Lease liabilities - noncurrent
$
$
$
$
121
118
109
93
74
95
610
50
560
105
455
MOODY'S 2021 10-K
125
NOTE 21
CONTINGENCIES
Given the nature of the Company's activities, Moody’s and its subsidiaries are subject to legal and tax proceedings,
governmental, regulatory and legislative investigations, subpoenas and other inquiries, and claims and litigation by governmental
and private parties that are based on ratings assigned by MIS or that are otherwise incidental to the Company’s business.
Moody’s and MIS also are subject to periodic reviews, inspections, examinations and investigations by regulators in the U.S. and
other jurisdictions, any of which may result in claims, legal proceedings, assessments, fines, penalties or restrictions on business
activities. Moody’s also is subject to ongoing tax audits as addressed in Note 17 to the consolidated financial statements.
Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the
latest information available. For claims, litigation and proceedings and governmental investigations and inquiries not related to
income taxes, the Company records liabilities in the consolidated financial statements when it is both probable that a liability has
been incurred and the amount of loss can be reasonably estimated 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 instances when a loss is reasonably
possible but uncertainties exist related to the probable outcome and/or the amount or range of loss, management does not
record a liability but discloses the contingency if material. As additional information becomes available, the Company adjusts its
assessments and estimates of such matters accordingly. Moody’s also discloses material pending legal proceedings pursuant to
SEC rules and other pending matters as it may determine to be appropriate.
ff
of assessing the potential outcome of legal proceedings, governmental, regulatory and legislative
In view of the inherent difficulty
investigations and inquiries, claims and litigation and similar matters and contingencies, particularly when the claimants seek
large or indeterminate damages or assert novel legal theories or the matters involve a large number of parties, the Company
often cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters.
The Company also may be unable to 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,
disclose such matters as and when required. However, because such matters are inherently unpredictable and unfavorable
developments or resolutions can occur, the ultimate outcome of such matters, including the amount of any loss, may differ
those estimates.
if any, on its operations and financial condition and to accrue for and
from
ff
ff
NOTE 22
SEGMENT INFORMATION
The Company is organized into two operating segments: MIS and MA and accordingly, the Company reports in two reportable
segments: MIS and MA.
The MIS segment consists of five LOBs. The CFG, SFG, FIG and PPIF 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 financial instruments pricing services in the Asia-Pacific region, ICRA non-
ratings revenue and revenue from providing ESG research, data and assessments.
The MA segment develops a wide range of products and services that support the risk management activities of institutional
participants in global financial markets. The MA segment consists of two LOBs - RD&A and ERS.
Revenue for MIS and expenses for MA include intersegment fees charged to MA for the rights to use and distribute content, data
and products developed by MIS. Additionally, revenue for MA and expenses forff MIS include an intersegment fee charged to MIS
from MA for certain MA products and services utilized in MIS’s ratings process. These intersegment fees are generally based on
the market value of the products and services being transferred between the segments.
Overhead expenses include costs such as rent and occupancy, information technology and support staff sff uch as finance, human
resources and legal. Such costs and corporate expenses that exclusively benefit one segment are fully charged to that segment.
For overhead costs and corporate expenses that benefit both segments, costs are allocated to each segment based on the
segment’s share of full-year 2019 actual revenue which comprises a “Baseline Pool” that will remain fixed over time. In
subsequent periods, incremental overhead costs (or reductions thereof) will be allocated to each segment based on the
prevailing shares of total revenue represented by each segment.
“Eliminations” in the following table 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.
126 MOODY'S 2021 10-K
Financial Information by Segment
The table below shows revenue and Adjusted 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. Refer to
Note 3 forff
further details on the components of the Company’s revenue.
Year Ended December 31,
2021
2020
MIS
MA
Eliminations Consolidated
MIS
MA
Eliminations Consolidated
Revenue
Operating, SG&A
Adjusted Operating
Income
Depreciation and
amortization
Restructuring
Loss pursuant to
the divestiture of
MAKS
Operating Income
$
3,977
$
2,413
$
(172) $
6,218
$
3,440
$
2,086
$
(155) $
1,503
1,786
(172)
3,117
1,387
1,472
(155)
2,474
627
72
(1)
—
185
1
—
—
—
—
—
3,101
2,053
614
257
—
—
70
19
—
150
31
9
—
—
—
—
5,371
2,704
2,667
220
50
9
Revenue
Operating, SG&A
Adjusted Operating Income
Depreciation and amortization
Restructuring
Acquisition-Related Expenses
Loss pursuant to the divestiture of MAKS
Captive insurance company settlement
Operating income
$
2,844
$
2,388
Year Ended December 31, 2019
MIS
MA
Eliminations
Consolidated
$
3,009
$
1,963
$
1,264
1,745
71
31
—
—
10
1,417
546
129
29
3
14
6
(143) $
(143)
—
—
—
—
—
—
4,829
2,538
2,291
200
60
3
14
16
$
1,998
The cumulative restructuring charges related to the 2018 Restructuring Program for the MIS and MA reportable segments are
$60 million and $43 million, respectively. The cumulative restructuring charges related to the 2020 Restructuring Program for the
MIS and MA reportable segments were $21 million and $15 million, respectively. The cumulative restructuring charge for the MA
reportable segment related to the 2020 MA Strategic Reorganization Restructuring Program is $20 million. The restructuring
programs are more fully discussed in Note 11.
MOODY'S 2021 10-K
127
CONSOLIDATED REVENUE AND LONG-LIVED ASSETS INFORMATION BY GEOGRAPHIC AREA
Revenue:
U.S.
Non-U.S.:
EMEA
Asia-Pacific
Americas
Total Non-U.S.
Total
Long-lived assets at December 31:
U.S.
Non-U.S.
Total
Year Ended December 31,
2021
2020
2019
$
3,416
$
2,955
$
2,544
1,866
596
340
2,802
1,545
571
300
2,416
6,218
$
5,371
$
4,449
$
2,162
$
4,802
4,889
9,251
$
7,051
$
1,446
551
288
2,285
4,829
1,290
4,678
5,968
$
$
$
NOTE 23
VALUATION AND QUALIFYING ACCOUNTS
Accounts receivable allowances represent estimates for uncollectible accounts. The valuation allowance on deferred tax assets
relates to foreign net operating tax losses for which realization is uncertain. Below is a summary of activity:
Year Ended December 31,
2021
Balance at
Beginning
of the Year
Adoption of New
Expected Credit
Losses Accounting
Standard
Charged to
costs and
expenses
Deductions (1)
Balance
at End of
the Year
Allowances for credit losses
Deferred tax assets—valuation allowance
2020
Allowances for credit losses
Deferred tax assets—valuation allowance
2019
Allowances for credit losses
Deferred tax assets—valuation allowance
$
$
$
$
$
$
(34) $
(15) $
(20) $
(9) $
(20) $
(5) $
— $
— $
(2) $
— $
— $
— $
(13) $
(4) $
(26) $
(6) $
(10) $
(4) $
15
1
$
$
14
$
— $
10
$
— $
(32)
(18)
(34)
(15)
(20)
(9)
(1)
Reflects write-off off
f uncollectible accounts receivable or expiration of foreign net operating tax losses.
NOTE 24
OTHER NON-OPERATING INCOME, NET
The following table summarizes the components of other non-operating income, net as presented in the consolidated statements
of operations:
FX (loss) gain
Purchase price hedge loss(1)
Net periodic pension costs—other components(2)
ff
Income from investments in non-consolidated affiliates
(3)
Other
Total
Year Ended December 31,
2021
(1) $
(13)
9
60
27
82
$
2020
2
$
—
13
6
25
46
$
2019
(18)
—
18
13
7
20
$
$
(1)
(2)
(3)
Reflects a loss on a forf war
rr
d contract to hedge a portion of the RMS British pound-denominated purchase price.
The amount for the year ended December 31, 2021 includes an $8 million loss related to a settlement of pension obligations.
The amount for the year ended December 31, 2021 includes a $36 million non-cash gain relating to the exchange of Moody’s minority
investment in VisibleRisk (accounted for under the equity method) forff
shares of BitSight, a cybersecurity ratings company.
128 MOODY'S 2021 10-K
NOTE 25
SUBSEQUENT EVENT
On February 7, 2022, the Board approved the declaration of a quarterly dividend of $0.70 per share for Moody’s common stock,
payable March 18, 2022 to shareholders of record at the close of business on February 25, 2022.
MOODY'S 2021 10-K
129
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
TT
ON ACCOUNTING AND FINANCIAL
ITEM 9.
DISCLOSURE
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
ff
ff
have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective
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
, of
the effectiveness
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
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 time periods specified in the communication to
the Company’s management, including the Company’s Chief Executive Officer
allow timely decisions regarding required disclosure. During the fiscal year ended December 31, 2021, the Company acquired
RMS and management has excluded this acquired business from its assessment of the effectiveness
procedures as of the Evaluation Date. The total assets (excluding acquired goodwill and intangible assets which are included
within the scope of this assessment) and revenues of RMS represent $333 million and $81 million, respectively, of the
corresponding amounts in the Company's consolidated financial statements for the fiscal year ended December 31, 2021.
and Chief Financial Officer
and Chief Financial Officer
of disclosure controls and
, as appropriate to
to
ff
ff
ff
ff
ff
ff
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.
ff
ff
, has determined that there were no changes in the Company’s internal control over financial reporting that have materially
Except as described below, the Company’s management, including the Company’s Chief Executive Officer
Officer
affected,
these internal controls over financial reporting during the three months
ended December 31, 2021. Although a significant portion of the Company's workforce has been working remotely due to the
COVID-19 pandemic, Moody's has not experienced any material impact to its internal controls over financial reporting.
or are reasonably likely to materially affect,
and Chief Financial
ff
ff
During the fiscal year ended December 31, 2021, the Company acquired RMS and is in the process of integrating the acquired
entity into the Company’s financial reporting processes and procedures and internal controls over financial reporting.
ITEM 9B.
OTHER INFORMATION
AA
Not applicable.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PAA
REVENT INSPECTIONS
Not applicable.
130 MOODY'S 2021 10-K
PART III
Except for the information relating to the executive officers
the information called for by Items 10-14 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 26, 2022, and is incorporated herein by reference.
of the Company set forth in Part I of this annual report on Form 10-K,
ff
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEAA GOVERNANCE
Information required by this Item 10 is included under the heading “Information about our Executive Officers”
this Form 10‑K, as well as under the headings “Item 1–Election of Directors,” “Corporate Governance–Codes of Business
Conduct and Ethics,” and “The Audit Committee,” in the 2022 Proxy Statement and is incorporated by reference.
ff
in Part I, Item 1 of
ITEM 11
EXECUTIVE COMPENSATION
AA
Information required by this Item 11 is included under the headings “Compensation Discussion and Analysis,” “Summary
Compensation Table,” “Grants of Plan-Based Awards Table for 2021,” “Outstanding Equity Awards at Fiscal Year-End Table for
2021,” “Option Exercises and Stock Vested Table for 2021,” “Pension Benefits Table for 2021,” “Non-Qualified Deferred
Compensation Table,” “Potential Payments Upon Termination
of Compensation Practices to Risk Management” “CEO Pay Ratio,” and “Report of the Compensation & Human Resources
Committee” in the 2022 Proxy Statement and is incorporated by reference.
or Change in Control,” “Compensation of Directors,” “Relationship
TT
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDAA
STOCKHOLDER MATTERS
AA
Information required by this Item 12 is included under the heading “Equity Compensation Plan Information” in Part II, Item 5 of
this Form 10-K, as well as under the heading “Security Ownership of Certain Beneficial Owners and Management” in the 2022
Proxy Statement and is incorporated by reference.
ITEM 13
CERTAIN RELATIONSHIPS
AA
AND RELATEDAA
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item 13 is included under the headings “Corporate Governance –Director Independence” and
“Certain Relationships and Related Transactions” in the 2022 Proxy Statement and is incorporated by reference.
ITEM 14
PRINCIPALPP
ACCOUNTING FEES AND SERVICES
RR
Information required by this Item 14 is included under the headings “Item 2–Ratification of Appointment of Independent
Registered Public Accountants–Principal Accounting Fees and Services” and “The Audit Committee” in the 2022 Proxy
Statement and is incorporated by reference.
MOODY'S 2021 10-K
131
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATTT EMENT SCHEDULES
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT.
(1) Financial Statements.
See Index to Financial Statements on page 68, in Part II. Item 8 of this Form 10-K.
(2) Financial Statement Schedules.
None.
(3) Exhibits.
INDEX TO EXHIBITS
S-K EXHIBIT NUMBER
2
3
4
132 MOODY'S 2021 10-K
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
.1.1#
.1.2
Purchase Agreement, dated as of August 5, 2021, among Moody’s Analytics, Inc., Daily Mail and General
Trust plc, DMG Atlantic Ltd, and DMG US Investments, Inc. (incorporated by reference to Exhibit 2.1 to
the Report on Form 8-K of the Registrant, file number 1-14037, filed August 6, 2021)
Amendment No.1 to Purchase Agreement, dated as of September 15, 2021, among Moody’s Analytics,
Inc., Daily Mail and General Trust plc, DMG Atlantic Ltd, and DMG US Investments, Inc. (incorporated by
reference to Exhibit 2.2 to the Report on Form 8-K of the Registrant, file number 1-14037, filed
September 15, 2021)
Articles of Incorporation and By-laws
.1
.2
Restated Certificate of Incorporation of the Registrant, effective
to Exhibit 3.3 to the Report on Form 8-K of the Registrant, file number 1-14037, filed April 27, 2020)
April 22, 2020 (incorporated by reference
ff
Amended and Restated By-laws of Moody’s Corporation, effective December 14, 2020 (incorporated by
reference to Exhibit 3.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed December
18, 2020)
Instruments Defining the Rights of Security Holders, Including Indentures
.1
.2
.3.1
.3.2
.3.3
.3.4
.3.5.1
.3.5.2
.3.6
Description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K, file
number 1-14037, filed February 22, 2021)
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)
Indenture, dated as of August 19, 2010, between Moody’s Corporation and Wells Fargo, National
Association, 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)
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 2024
(incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed August 12, 2013)
Fourth Supplemental Indenture, dated July 16, 2014, between the Company and Wells Fargo Bank,
National Association, as trustee, including the form of 5.250% Senior Notes due 2044 (incorporated by
reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed July 16,
2014)
Fifth Supplemental Indenture, dated March 9, 2015, between the Company, Wells Fargo Bank, National
Association, as trustee and Elavon Financial Services Limited, UK Branch as paying agent and transfer
agent and Elavon Financial Services Limited as registrar, including the form or 1.75% Senior Notes due
2027 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number
1-14037, filed March 10, 2015)
Agency Agreement, dated March 9, 2015, between the Company, Wells Fargo Bank, National
Association, as trustee and Elavon Financial Services Limited, UK Branch as paying agent and transfer
agent and Elavon Financial Services Limited as registrar ((incorporated by reference to Exhibit 4.3 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed March 10, 2015)
Seventh Supplemental Indenture, dated as of June 12, 2017, between Moody’s Corporation and Wells
Fargo, National Association, as trustee, including the form of 2.625% Senior Notes due 2023 and the
form of 3.250% Senior Notes due 2028 (incorporated by reference to Exhibit 4.3 to the Report on Form 8-
K of the Registrant, file number 1-14037, filed June 12, 2017)
.3.7
.3.8.1
.3.8.2
.3.9
.3.10
.3.11
.3.12
.3.13
Ninth Supplemental Indenture, dated as of December 17, 2018, between the Company and Wells Fargo
Bank, National Association, as trustee, including the form of 4.250% Senior Note due 2029 and the form
of 4.875% Senior Note due 2048 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of
the Registrant, file number 1-14037, filed December 21, 2018)
Tenth Supplemental Indenture, dated as of November 25, 2019, between the Company, Wells Fargo
Bank, National Association, as trustee, Elavon Financial Services Limited, UK Branch as paying agent
and U.S. Bank National Association as registrar and transfer agent, including the form of 0.950% Senior
Note due 2030 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file
number 1-14037, filed November 25, 2019)
Agency Agreement, dated November 25, 2019, between the Company, Wells Fargo Bank, National
Association, as trustee, Elavon Financial Services Limited, UK Branch as paying agent and U.S. Bank
National Association as registrar and transfer agent. (incorporated by reference to Exhibit 4.3 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed November 25, 2019)
Eleventh Supplement Indenture, dated as of March 24, 2020, between the Company and Wells Fargo
Bank, National Association, as trustee, including the form of 3.750% Senior Note due 2025 (incorporated
by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed March
25, 2020)
Twelfthff Supplemental Indenture, dated as of May 20, 2020, between the Company and Wells Fargo
Bank, National Association, as trustee, including the form of 3.250% Senior Note due 2050 (incorporated
by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed May
20, 2020)
Thirteenth Supplemental Indenture, dated as of August 18, 2020, between the Company and Wells Fargo
Bank, National Association, as trustee, including the form of 2.550% Senior Note due 2060 (incorporated
by reference to Exhibit 4.1 to the Report on Form 8-K of the Registrant, file number 1-14037, filed August
18, 2020)
Fourteenth Supplemental Indenture, dated as of August 19, 2021, between the Company and Wells
Fargo Bank, National Association, as trustee, including the form of 2.000% Senior Note due 2031 and the
form of 2.750% Senior Notes due 2041 (incorporated by reference to Exhibit 4.1 to the Report on Form 8-
K of the Registrant, file number 1-14037, filed August 19, 2021)
Fifteenth Supplemental Indenture, dated as of November 29, 2021, between the Company and
Computershare Trust Company, N.A. as successor to Wells Fargo Bank, National Association, as trustee,
including the form of 3.100% Senior Note due 2061 (incorporated by reference to Exhibit 4.1 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed November 29, 2021
10
Material Contracts
.1.1†
.1.2†
.2†
.3.1†
.3.2.1†
.3.2.2†
.3.3.1†
.3.3.2†
1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (Adopted September 8, 2000;
Amended and Restated as of December 11, 2012, October 20, 2015, December 14, 2015 and December
18, 2017) (incorporated by reference to Exhibit 10.2.1 to the Registrant’s Annual Report on Form 10-K,
file number 1-14037, filed February 27, 2018)
Form of Non-Employee Director Restricted Stock Unit Grant Agreement (for awards after 2017) forff
1998 Moody’s Corporation Non-Employee Directors’ Stock Incentive Plan (Adopted September 8, 2000;
Amended and Restated as of December 11, 2012, October 20, 2015, December 14, 2015 and December
18, 2017) (incorporated by reference to Exhibit 10.2.3 to the Registrant’s Annual Report on Form 10-K,
file number 1-14037, filed February 27, 2018)
the
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 reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
March 2, 2009)
Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (as amended
and restated as of January 1, 2021) (incorporated by reference to Exhibit 10.5 to the Registrant’s
Quarterly Report on Form 10-Q, file number 1-14037, filed October 29, 2021)
Form of Employee Non-Qualified Stock Option Grant Agreement (for awards granted between 2017 and
2019) forff
(incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February 24, 2017)
the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan
Form of Employee Non-Qualified Stock Option Grant Agreement (for awards granted in 2020 or later) for
the Amended and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan
(incorporated by reference to Exhibit 10.3.3.2 to the Registrant’s Annual Report on Form 10-K, file
number 1-14037, filed February 24, 2020)
Form of Performance Share Award Letter (for awards granted between 2018 and 2019) for the Amended
and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by
reference to Exhibit 10.4.6 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
February 27, 2018)
Form of Performance Share Award Letter (for awards granted in 2020 or later) for the Amended and
Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to
Exhibit 10.3.4.3 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24,
2020)
MOODY'S 2021 10-K
133
.3.4.1†
.3.4.2†
Form of Restricted Stock Unit Grant Agreement (for awards granted prior to 2020) forff
the Amended and
Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by reference to
Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 24,
2017)
Form of Restricted Stock Unit Grant Agreement (for awards granted in 2020 or later) for the Amended
and Restated 2001 Moody’s Corporation Key Employees’ Stock Incentive Plan (incorporated by
reference to Exhibit 10.3.5.2 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
February 24, 2020)
.4†
.5†
.6†
.7†
.8.1†
.8.2†
.8.3†
.9†
.10.1†
.10.2†*
.11.1†
.11.2†*
.12†*
.13.1†*
.14†
.15†
.16†
.17
.18†
.19
.20
.21.1
2004 Moody’s Corporation Covered Employee Cash Incentive Plan (as amended on February 10, 2015)
(incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February 26, 2015)
Moody’s Corporation Deferred Compensation Plan (amended and restated effective as of January 1,
2020) (incorporated by reference to Exhibit 10.5 the Registrant’s Annual Report on Form 10-K, file
number 1-14037, filed February 22, 2021)
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 Cafeteria Plan, effeff ctive 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 March 2, 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)
Second Amendment to the Moody’s Corporation Cafeteria Plan (incorporated by reference to Exhibit
10.33 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed February 26, 2015)
Moody’s Corporation Change in Control Severance Plan (as amended December 18, 2017) (incorporated
by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
February 27, 2018)
Moody’s Corporation Retirement Account (amended and restated as of January 1, 2021) (incorporated by
reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, file number 1-14037, filed
February 22, 2021)
First Amendment to the Moody’s Corporation Retirement Account (effective
ff
January 1, 2021)
Profit Participation Plan of Moody’s Corporation (amended and restated as of January 1, 2020)
(incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February 22, 2021)
First Amendment to the Profit Participation Plan of Moody’s Corporation (effective
ff
January 1, 2020)
The Moody’s Corporation Nonfunded Deferred Compensation Plan forff Non-Employee Directors (as
amended December 16, 2008, October 15, 2015 and December 19, 2016)
Amended and Restated Moody’s Corporation Career Transition Plan (amended and restated as of
November 8, 2021)
Supplemental Executive Disability Benefit Plan of Moody’s Corporation, effective as of January 1, 2019
(incorporated by reference to Exhibit 10.22 to Registrant’s Annual Report on Form 10-K, file number
1-14037, filed February 25, 2019)
Risk Management Solutions, Inc. 2014 Equity Award Plan (incorporated by reference to Exhibit 99.1 to
the Registration Statement on Form S-8 of the Registrant, file number 333-259539, filed September 15,
2021)
Risk Management Solutions, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 99.2 to
the Registration Statement on Form S-8 of the Registrant, file number 333-259539, filed September 15,
2021)
Form Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of
the Registrant, file number 1-14037, filed December 22, 2017)
Employment Offeff
(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Registrant, file
number 1-14037, filed on October 31, 2018)
r Letter between Moody’s Corporation and Mark Kaye, dated July 18, 2018
Settlement Agreement dated January 13, 2017 between (1) Moody’s Corporation, Moody’s Investors
Service, Inc. and Moody’s Analytics, Inc., and (2) the United States, acting through the United States
Department of Justice and the United States Attorney’s Office for the District of New Jersey, along with
various States and the District of Columbia, acting through their respective Attorneys General
(incorporated by reference to the Report on Form 8-K of the Registrant, file number 1-14037, filed
January 17, 2017)
Form Commercial Paper Dealer Agreement between Moody’s Corporation, as Issuer, and the Dealer
party thereto (incorporated by reference to Exhibit 10.1 to the Report on Form 8-K of the Registrant, file
number 1-14037, filed August 3, 2016)
Tax Matters Agreement, dated as of August 5, 2021, among Moody’s Analytics, Inc., Daily Mail and
General Trust plc and DMG Atlantic Ltd. (incorporated by reference to Exhibit 10.1 to the Report on Form
8-K of the Registrant, file number 1-14037, filed August 6, 2021)
134 MOODY'S 2021 10-K
21*
23
31
32
.21.2
.22
Amendment No.1 to Tax Matters Agreement, dated as of September 15, 2021, among Moody’s Analytics,
Inc., Daily Mail and General Trust plc and DMG Atlantic Ltd. (incorporated by reference to Exhibit 10.2 to
the Report on Form 8-K of the Registrant, file number 1-14037, filed September 15, 2021)
Credit Agreement, dated as of December 17, 2021, among Moody’s Corporation, the borrowing
subsidiaries party thereto, the lenders and issuing banks party thereto, JPMorgan Chase Bank, N.A., as
administrative agent, and the other agents party thereto (incorporated by reference to Exhibit 4.1 to the
Report on Form 8-K of the Registrant, file number 1-14037, filed December 20, 2021).
Subsidiaries of the Registrant List of Active Subsidiaries as of December 31, 2021
Consent of Independent Registered Public Accounting Firm
.1*
Consent of KPMG LLP
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
.1*
.2*
Chief Executive Officer
ff
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
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
considered 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
considered 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
Inline XBRL
.INS*
.SCH*
.CAL*
.DEF*
.LAB*
.PRE*
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Definitions Linkbase Document
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
______
__
____
___
____ ____
The cover page from this Annual Report on Form 10-K (formatted in Inline XBRL and contained in Exhibit
101)
*
†
#
Filed herewith
Management contract of compensatory plan or arrangement
Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Moody’s hereby undertakes to furnish
supplemental copies of any of the omitted exhibits and schedules upon request by the Securities and Exchange Commission.
ITEM 16
None.
FORM 10-K SUMMARYRR
MOODY'S 2021 10-K
135
AA
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
AA
(Registrant)
By: /s/ ROBERT FAUBER
FF
Robert Fauber
President and Chief Executive Officer
Date: February 18, 2022
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/ ROBERT FAUBER
Robert Fauber,
President and Chief Executive Officer
(principal executive officer)
/s/ KATHRYN M. HILL
Kathryn M. Hill,
Director
/s/ MARK KAYE
Mark Kaye,
/s/ LLOYD W. HOWELL, JR.
Lloyd W. Howell, Jr.,
Executive Vice President and Chief Financial
ii Officer
Director
(principal financial officer)
/s/ CAROLINE SULLIVAN
Caroline Sullivan,
/s/ RAYMOND W. MCDANIEL, JR.
Raymond W. McDaniel, Jr.,
Senior Vice President and Corporate Controller
Chairman
(principal accounting officer)
/s/ JORGE A. BERMUDEZ
Jorge A. Bermudez,
Director
/s/ THÉRÈSE ESPERDY
Thérèse Esperdy,
Director
/s/ VINCENT A. FORLENZA
Vincent A. Forlenza,
Lead Independent Director
136 MOODY'S 2021 10-K
/s/ LESLIE F. SEIDMAN
Leslie F. Seidman,
Director
/s/ ZIG SERAFIN
Zig Serafin,
Director
/s/ BRUCE VAN SAUN
Bruce Van Saun,
Director
Date: February 18, 2022
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.: +1.866.714.7299
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, 2021 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.
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, where
feasible, the reduction and elimination of waste through re-use, recovery and
recycling. As part of these efforts, Moody’s is committed to reducing its global
operations’ contribution to climate change. Our environmental programs are
structured to minimize the impact on our greenhouse gas emissions to the
extent possible.
Moody’s Corporation recognizes that our environmental impacts are limited
and include greenhouse gas emissions (from energy used in buildings and for
transport), water use and waste (from office operations). Nonetheless, we are
committed to minimizing the impact of our operations and services on the
environment by:
» Complying with the letter and spirit of all relevant environmental legislation
» Establishing applicable corporate environmental goals and objectives which
will be reviewed and revised as necessary on an ongoing basis
» Minimizing the environmental risks to our employees and the communities
in which we operate
» Using various communications channels to ensure that our employees are
aware of environmental concerns and the impact of their activities on the
environment, and to encourage them to minimize these impacts
» Adopting a purchasing program that takes into consideration the
environmental practices of potential suppliers and contractors
» Seeking to reduce internal and client-facing travel whenever practical
» Where possible, consider “green” building choices or, at a minimum,
those that provide the efficient use of energy and materials when selecting
new office locations
» Reducing, and where possible eliminating, waste through re-use, recovery
and recycling by participating in building-wide conservation efforts for
water and energy conservation
» Tracking and reporting the results our efforts annually in our Corporate
Social Responsibility Report
» Responding to CDP Climate Change questionnaire annually
» Ensuring that our 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
Our 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.
All paper in this report is certified to the
Forest Stewardship Council® (FSC®)
standards. The 10-K of this report is
printed on paper that contains
recycled fiber.