Moodys Earnings 2018-12-31

MCO 10K Annual Report

Balance Sheet	Income Statement	Cash Flow

10-K 1 d679514d10k.htm FORM 10-K Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

☐ 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		13-3998945
(STATE OF INCORPORATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

7 World Trade Center at 250 Greenwich Street, NEW YORK, NEW YORK 10007

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 553-0300.

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


TITLE OF EACH CLASS		NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.01 PER SHARE		NEW YORK STOCK EXCHANGE
1.75% SENIOR NOTES DUE 2027		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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 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* on June 30, 2018 (based upon its closing transaction price on the New York Stock Exchange on such date) was approximately $32.7 billion.

As of January 31, 2019, 191.0 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 16, 2019, are incorporated by reference into Part III of this Form 10-K.

The Index to Exhibits is included as Part IV, Item 15(3) of this Form 10-K.

*	Calculated by excluding all shares held by executive officers and directors of the Registrant without conceding that all such persons are “affiliates” of the Registrant for purposes of federal securities laws.


		MOODY’S 2018 10-K

MOODY’S CORPORATION

INDEX TO FORM 10-K


		Page(s)

	Glossary of Terms and Abbreviations		4-9

PART I.

Item 1.	BUSINESS		10

	Background		10

	The Company		10

	Prospects for Growth		10-12

	Competition		12

	Moody’s Strategy		12-13

	Regulation		13-14

	Intellectual Property		14-15

	Employees		15

	Available Information		15

	Executive Officers of the Registrant		15-16

Item 1A.	RISK FACTORS		17-25

Item 1B.	UNRESOLVED STAFF COMMENTS		25

Item 2.	PROPERTIES		25

Item 3.	LEGAL PROCEEDINGS		25

Item 4.	MINE SAFETY DISCLOSURES		25

PART II.

Item 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		26

	Moody’s Purchases of Equity Securities		26

	Common Stock Information		26

	Equity Compensation Plan Information		27

	Performance Graph		28

Item 6.	SELECTED FINANCIAL DATA		29-30

Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		31

	The Company		31

	Critical Accounting Estimates		31-37

	Reportable Segments		37-38

	Results of Operations		38-49

	Market Risk		49-50

	Liquidity and Capital Resources		50-57

	Recently Issued Accounting Pronouncements		57

	Contingencies		57

	Forward-Looking Statements		57-58

Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK		58

Item 8.	FINANCIAL STATEMENTS		59-127

Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		128

Item 9A.	CONTROLS AND PROCEDURES		128

Item 9B.	OTHER INFORMATION		128


2		MOODY’S 2018 10-K


		Page(s)

	PART III.

Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATION GOVERNANCE		129

Item 11.	EXECUTIVE COMPENSATION		129

Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		129

Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		129

Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		129

	PART IV.

Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		130

INDEX TO EXHIBITS			130-134

Item 16.	FORM 10-K SUMMARY		134

SIGNATURES			135


Exhibits filed Herewith

10.22		Supplemental Executive Disability Benefit Plan of Moody’s Corporation, effective as of January 1, 2019

21		SUBSIDIARIES OF THE REGISTRANT

23.1		CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.DEF		XBRL Definitions Linkbase Document

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101. CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


		MOODY’S 2018 10-K			3

GLOSSARY OF TERMS AND ABBREVIATIONS

The following terms, abbreviations and acronyms are used to identify frequently used terms in this report:


TERM		DEFINITION

Acquisition-Related Amortization		Amortization of definite-lived intangible assets acquired by the Company from all business combination transactions

Acquisition-Related Expenses		Consists of expenses incurred to complete and integrate the acquisition of Bureau van Dijk for which the integration will be a multi-year effort

Adjusted Diluted EPS		Diluted EPS excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”

Adjusted Net Income		Net Income excluding the impact of certain items as detailed in the section entitled “Non-GAAP Financial Measures”

Adjusted Operating Income		Operating income excluding depreciation and amortization

Adjusted Operating Margin		Adjusted Operating Income divided by revenue

AI		Artificial Intelligence

Americas		Represents countries within North and South America, excluding the U.S.

AOCI		Accumulated other comprehensive income (loss); a separate component of shareholders’ equity (deficit)

AR		Accounts receivable

ASC		The FASB Accounting Standards Codification; the sole source of authoritative GAAP as of July 1, 2009 except for rules and interpretive releases of the SEC, which are also sources of authoritative GAAP for SEC registrants

ASC 605		The U.S. GAAP authoritative guidance for revenue accounting prior to the adoption of ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606).

Asia-Pacific		Represents Australia and countries in Asia including but not limited to: China, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka and Thailand

ASR		Accelerated Share Repurchase

ASU		The FASB Accounting Standards Update to the ASC. It also provides background information for accounting guidance and the bases for conclusions on the changes in the ASC. ASUs are not considered authoritative until codified into the ASC

Basel III		A global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. Basel III was developed in a response to the deficiencies in financial regulation revealed by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage

Board		The board of directors of the Company

BPS		Basis points

Bureau van Dijk		Bureau van Dijk Electronic Publishing, B.V.; a global provider of business intelligence and company information; acquired by the Company on August 10, 2017 via the acquisition of Yellow Maple I B.V., an indirect parent of Bureau van Dijk.

CCAR		Comprehensive Capital Analysis and Review; annual review by the Federal Reserve in the U.S. to ensure that financial institutions have sufficient capital in times of economic and financial stress and that they have robust, forward-looking capital-planning processes that account for their unique risks.

CCXI		China Cheng Xin International Credit Rating Co. Ltd.; China’s first and largest domestic credit rating agency approved by the People’s Bank of China; the Company acquired a 49% interest in 2006; currently Moody’s owns 30% of CCXI.


4		MOODY’S 2018 10-K


TERM		DEFINITION

CCXI Gain		In the first quarter of 2017 CCXI, as part of a strategic business realignment, issued additional capital to its majority shareholder in exchange for a ratings business wholly-owned by the majority shareholder and which has the right to rate a different class of debt instrument in the Chinese market. The capital issuance by CCXI in exchange for this ratings business diluted Moody’s ownership interest in CCXI to 30% of a larger business and resulted in a $59.7 million non-cash, non-taxable gain.

CFG		Corporate finance group; an LOB of MIS

CLO		Collateralized loan obligation

CMBS		Commercial mortgage-backed securities; part of the CREF asset class within SFG

Commission		European Commission

Common Stock		The Company’s common stock

Company		Moody’s Corporation and its subsidiaries; MCO; Moody’s

Content		A reporting unit within the MA segment that offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools

Council		Council of the European Union

CP		Commercial Paper

CP Notes		Unsecured commercial paper issued under the CP Program

CP Program		A program entered into on August 3, 2016 allowing the Company to privately place CP up to a maximum of $1 billion for which the maturity may not exceed 397 days from the date of issue and which is backstopped by the 2018 Facility.

CRAs		Credit rating agencies

CREF		Commercial real estate finance which includes REITs, commercial real estate CDOs and mortgage-backed securities; part of SFG

D&A		Depreciation and amortization

D&B		Dun & Bradstreet

DBPPs		Defined benefit pension plans

EBITDA		Earnings before interest, taxes, depreciation and amortization

EMEA		Represents countries within Europe, the Middle East and Africa

EPS		Earnings per share

ERS		Enterprise Risk Solutions; an LOB within MA, which offers risk management software solutions as well as related risk management advisory engagements services

ESA		Economics and Structured Analytics; part of the RD&A line of business within MA

ESG		Environmental, Social and Governance

ESMA		European Securities and Markets Authority

ETR		Effective tax rate

EU		European Union

EUR		Euros

EURIBOR		The Euro Interbank Offered Rate

Eurozone		Monetary union of the EU member states which have adopted the euro as their common currency

Excess Tax Benefits		The difference between the tax benefit realized at exercise of an option or delivery of a restricted share and the tax benefit recorded at the time the option or restricted share is expensed under GAAP


		MOODY’S 2018 10-K			5


TERM		DEFINITION

Exchange Act		The Securities Exchange Act of 1934, as amended

External Revenue		Revenue excluding any intersegment amounts

FASB		Financial Accounting Standards Board

FIG		Financial institutions group; an LOB of MIS

Financial Reform Act		Dodd-Frank Wall Street Reform and Consumer Protection Act

Free Cash Flow		Net cash provided by operating activities less cash paid for capital additions

FSTC		Financial Services Training and Certifications; now referred to as MALS

FTSE		Financial Times Stock Exchange

FX		Foreign exchange

GAAP		U.S. Generally Accepted Accounting Principles

GBP		British pounds

ICRA		ICRA Limited; a leading provider of credit ratings and research in India. The Company previously held 28.5% equity ownership and in June 2014, increased that ownership stake to just over 50% through the acquisition of additional shares

ICRA Gain		Gain relating to the ICRA Acquisition; U.S. GAAP requires the remeasurement to fair value of the previously held non-controlling shares upon obtaining a controlling interest in a step-acquisition. This remeasurement of the Company’s equity investment in ICRA to fair value resulted in a pre-tax gain of $102.8 million ($78.5 million after tax) in the second quarter of 2014

ICR Chile		A leading provider of domestic credit ratings in Chile

IASB		International Accounting Standards Board

IFRS		International Financial Reporting Standards

IRS		Internal Revenue Service

IT		Information technology

KIS		Korea Investors Service, Inc.; a leading Korean rating agency and consolidated subsidiary of the Company

KIS Pricing		Korea Investors Service Pricing, Inc.; a leading Korean provider of fixed income securities pricing and consolidated subsidiary of the Company

KIS Research		Korea Investors Service Research; a Korean provider of financial research and consolidated subsidiary of the Company

Korea		Republic of South Korea

Legacy Tax Matters		Exposures to certain potential tax liabilities assumed in connection with the Company’s spin-off from Dun & Bradstreet in 2000

LIBOR		London Interbank Offered Rate

LOB		Line of business

M&A		Mergers and acquisitions

MA		Moody’s Analytics—a reportable segment of MCO; provides a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets; consists of three LOBs—RD&A, ERS and PS

Make Whole Amount		The prepayment penalty amount relating to the Series 2007-1 Notes, 2010 Senior Notes, 2012 Senior Notes, 2013 Senior Notes, 2014 Senior Notes (5-year), 2014 Senior Notes (30-year), 2015 Senior Notes, 2017 Senior Notes and 2018 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


6		MOODY’S 2018 10-K


TERM		DEFINITION

MAKS		Moody’s Analytics Knowledge Services; formerly known as Copal Amba; provides offshore research and analytic services to the global financial and corporate sectors; part of the PS LOB and a reporting unit within the MA reportable segment

MALS		Moody’s Analytics Learning Solutions; a reporting unit within the MA segment that includes on-line and classroom-based training services as well as credentialing and certification services; formerly known as FSTC

MCO		Moody’s; Moody’s Corporation and its subsidiaries; the Company

MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations

MIS		Moody’s Investors Service—a reportable segment of MCO; consists of five LOBs—SFG, CFG, FIG, PPIF and MIS Other

MIS Other		Consists of non-ratings revenue from ICRA, KIS Pricing and KIS Research. These businesses are components of MIS; MIS Other is an LOB of MIS

Moody’s		Moody’s Corporation and its subsidiaries; MCO; the Company

Net Income		Net income attributable to Moody’s Corporation, which excludes net income from consolidated noncontrolling interests belonging to the minority interest holder

New D&B		The New D&B Corporation—comprises the D&B business after September 30, 2000

New Revenue Accounting Standard		Updates to the ASC pursuant to ASU No. 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)”. This new accounting guidance significantly changes the accounting framework under U.S. GAAP relating to revenue recognition and to the accounting for the deferral of incremental costs of obtaining or fulfilling a contract with a customer

N/A		Not applicable

NM		Percentage change is not meaningful

Non-GAAP		A financial measure not in accordance with GAAP; these measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and to provide greater transparency to investors of supplemental information used by management in its financial and operational decision making

NRSRO		Nationally Recognized Statistical Rating Organization, which is a credit rating agency registered with the SEC.

OCI		Other comprehensive income (loss); includes gains and losses on cash flow and net investment hedges, unrealized gains and losses on available for sale securities (in periods prior to January 1, 2018), certain gains and losses relating to pension and other retirement benefit obligations and foreign currency translation adjustments

Omega Performance		A leading provider of online credit training, acquired by the Company in August 2018

Operating segment		Term defined in the ASC relating to segment reporting; the ASC defines an operating segment as a component of a business entity that has each of the three following characteristics: i) the component engages in business activities from which it may recognize revenue and incur expenses; ii) the operating results of the component are regularly reviewed by the entity’s chief operating decision maker; and iii) discrete financial information about the component is available.

Other Retirement Plans		The U.S. retirement healthcare and U.S. retirement life insurance plans

PCS		Post-Contract Customer Support

PPIF		Public, project and infrastructure finance; an LOB of MIS

Profit Participation Plan		Defined contribution profit participation plan that covers substantially all U.S. employees of the Company

PS		Professional Services, an LOB within MA consisting of MAKS and MALS that provides offshore analytical and research services as well as learning solutions and certification programs

Purchase Price Hedge		Foreign currency collars and forward contracts entered into by the Company to economically hedge the Bureau van Dijk euro denominated purchase price


		MOODY’S 2018 10-K			7


TERM		DEFINITION

Purchase Price Hedge Gain		Gain on foreign currency collars and forward contracts to economically hedge the Bureau van Dijk euro denominated purchase price

RD&A		Research, Data and Analytics; an LOB within MA that offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools

Reform Act		Credit Rating Agency Reform Act of 2006

REIT		Real Estate Investment Trust

Reis, Inc. (Reis)		A leading provider of U.S. commercial real estate (CRE) data; acquired by the Company in October 2018.

Relationship Revenue		For MIS, represents recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations. For MIS Other represents subscription-based revenue. For MA, represents subscription-based revenue and software maintenance revenue

Reporting unit		The level at which Moody’s evaluates its goodwill for impairment under U.S. GAAP; defined as an operating segment or one level below an operating segment

SaaS		Software-as-a-Service

SCDM		SCDM Financial, a leading provider of analytical tools for participants in securitization markets. Moody’s acquired SCDM’s structured finance data and analytics business in February 2017

SEC		U.S. Securities and Exchange Commission

Securities Act		Securities Act of 1933, as amended

Series 2007-1 Notes		Principal amount of $300 million, 6.06% senior unsecured notes due in September 2017 pursuant to the 2007 Agreement; prepaid in March 2017

Settlement Charge		Charge of $863.8 million recorded in the fourth quarter of 2016 related to an agreement entered into on January 13, 2017 with the U.S. Department of Justice and the attorneys general of 21 U.S. states and the District of Columbia to resolve pending and potential civil claims related to credit ratings that MIS assigned to certain structured finance instruments in the financial crisis era

SFG		Structured finance group; an LOB of MIS

SG&A		Selling, general and administrative expenses

SSP		Standalone selling price

T&M		Time-and-Material

Tax Act		The “Tax Cuts and Jobs Act” enacted into U.S. law on December 22, 2017, which significantly amends the tax code in the U.S.

Total Debt		All indebtedness of the Company as reflected on the consolidated balance sheets

Transaction Revenue		For MIS, represents the initial rating of a new debt issuance as well as other one-time fees. For MIS Other, represents revenue from professional services as well as data services, research and analytical engagements. For MA, represents perpetual software license fees and revenue from software implementation services, risk management advisory projects, training and certification services, and research and analytical engagements

U.K.		United Kingdom

U.S.		United States

USD		U.S. dollar

UTPs		Uncertain tax positions

VSOE		Vendor specific objective evidence; as defined in the ASC, evidence of selling price limited to either of the following: the price charged for a deliverable when it is sold separately, or for a deliverable not yet being sold separately, the price established by management having the relevant authority


8		MOODY’S 2018 10-K


TERM		DEFINITION

WACC		Weighted Average Cost of Capital

2007 Agreement		Note purchase agreement dated September 7, 2007, relating to the Series 2007-1 Notes

2010 Indenture		Supplemental indenture and related agreements dated August 19, 2010, relating to the 2010 Senior Notes

2010 Senior Notes		Principal amount of $500 million, 5.50% senior unsecured notes due in September 2020 pursuant to the 2010 Indenture

2012 Indenture		Supplemental indenture and related agreements dated August 18, 2012, relating to the 2012 Senior Notes

2012 Senior Notes		Principal amount of $500 million, 4.50% senior unsecured notes due in September 2022 pursuant to the 2012 Indenture

2013 Indenture		Supplemental indenture and related agreements dated August 12, 2013, relating to the 2013 Senior Notes

2013 Senior Notes		Principal amount of the $500 million, 4.875% senior unsecured notes due in February 2024 pursuant to the 2013 Indenture

2014 Indenture		Supplemental indenture and related agreements dated July 16, 2014, relating to the 2014 Senior Notes

2014 Senior Notes (5-Year)		Principal amount of $450 million, 2.75% senior unsecured notes due in July 2019

2014 Senior Notes (30-Year)		Principal amount of $600 million, 5.25% senior unsecured notes due in July 2044

2015 Facility		Five-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; backstops CP issued under the CP Program

2015 Indenture		Supplemental indenture and related agreements dated March 9, 2015, relating to the 2015 Senior Notes

2015 Senior Notes		Principal amount of €500 million, 1.75% senior unsecured notes issued March 9, 2015; repaid in 2018

2017 Bridge Credit Facility		Bridge Credit Agreement entered into in May 2017 pursuant to the definitive agreement to acquire Bureau van Dijk; this facility was terminated in June 2017 upon issuance of the 2017 Private Placement Notes Due 2023 and 2028

2017 Floating Rate Senior Notes		Principal amount of $300 million, floating rate senior unsecured notes due in September 2018

2017 Indenture		Collectively the Supplemental indenture and related agreements dated March 2, 2017, relating to the 2017 Floating Rate Senior Notes and 2017 Notes Due 2023 and 2028, and the supplemental indenture and related agreements dated June 12, 2017, relating to the 2017 Notes Due 2023 and 2028

2017 Senior Notes Due 2023		Principal amount of $500 million, 2.625% senior unsecured notes due January 15, 2023

2017 Senior Notes Due 2028		Principal amount of $500 million, 3.25% senior unsecured notes due January 15, 2028

2017 Senior Notes Due 2021		Principal amount of $500 million, 2.75% senior unsecured notes due in December 2021

2017 Term Loan		$500 million, three-year term loan facility entered into on June 6, 2017 for which the Company drew down $500 million on August 8, 2017 to fund the acquisition of Bureau van Dijk; amounts under the 2017 Term Loan were repaid in 2018

2018 Facility		Five-year unsecured revolving credit facility, with capacity to borrow up to $1 billion; replaced the 2015 Facility; backstops CP issued under the CP Program

2018 Senior Notes		Principal amount of $300 million, 3.25% senior unsecured notes due June 7, 2021

2018 Senior Notes (10-year)		Principal amount of $400 million, 4.25% senior unsecured notes due February 1, 2029

2018 Senior Notes (30-year)		Principal amount of $400 million, 4.875% senior unsecured notes due December 17, 2048

7WTC		The Company’s corporate headquarters located at 7 World Trade Center in New York, NY


		MOODY’S 2018 10-K			9

PART I

ITEM 1. BUSINESS

BACKGROUND

As used in this report, except where the context indicates otherwise, the terms “Moody’s” or the “Company” refer to Moody’s Corporation, a Delaware corporation, and its subsidiaries. The Company’s executive offices are located at 7 World Trade Center at 250 Greenwich Street, New York, NY 10007 and its telephone number is (212) 553-0300.

THE COMPANY

Moody’s is a provider of (i) credit ratings; (ii) credit, capital markets and economic research, data and analytical tools; (iii) software solutions that support financial risk management activities; (iv) quantitatively derived credit scores; (v) learning solutions and certification services; (vi) offshore financial research and analytical services; and (vii) company information and business intelligence products. Moody’s reports in two reportable segments: MIS and MA. Financial information and operating results of these segments, including revenue, expenses and operating income, are included in Part II, Item 8. Financial Statements of this annual report, and are herein incorporated by reference.

MIS publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide, including various corporate and governmental obligations, structured finance securities and commercial paper programs. Ratings revenue is derived from the originators and issuers of such transactions who use MIS ratings to support the distribution of their debt issues to investors. MIS provides ratings in more than 130 countries. Ratings are disseminated via press releases to the public through a variety of print and electronic media, including the internet and real-time information systems widely used by securities traders and investors. As of December 31, 2018, MIS had the following ratings relationships:

Approximately 4,800 rated non-financial corporate issuers;

Approximately 4,100 rated financial institutions issuers;

Approximately 17,600 rated public finance issuers (including sovereign, sub-sovereign and supranational issuers);

Approximately 9,600 rated structured finance transactions; and

Approximately 1,000 rated infrastructure and project finance issuers.

Additionally, MIS earns revenue from certain non-ratings-related operations, which primarily consist of financial instruments pricing services in the Asia-Pacific region as well as revenue from ICRA non-rating operations. The revenue from these operations is included in the MIS Other LOB and is not material to the results of the MIS segment.

The MA segment develops a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets. Within its RD&A business, MA offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools. Within its ERS business, MA provides software solutions as well as related risk management services. The PS business provides offshore analytical and research services along with learning solutions and certification programs. MA customers represent more than 11,100 institutions worldwide operating in over 150 countries. During 2018, Moody’s research website was accessed by over 281,000 individuals including 38,000 customer users.

PROSPECTS FOR GROWTH

Over recent decades, global fixed-income markets have grown significantly both in terms of the amount and types of securities or other obligations outstanding. Beginning in mid-2007, there was a severe market disruption and associated financial crisis both in the devel-


10		MOODY’S 2018 10-K

oped and emerging markets resulting in a global decline in debt issuance activity for some significant asset classes and weak economic performance in advanced economies. Since this financial crisis, many markets and economies have recovered and Moody’s believes 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; and

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 a 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.

Strong secular trends should continue to provide long-term growth opportunities. For MIS, key growth drivers include debt market issuance driven by global GDP growth, continued disintermediation of fixed-income markets in both developed and emerging economies driving issuance and demand for new ratings products and services. Growth in MA is likely to be driven by deeper and broader penetration of the customer base as data demands, regulatory compliance and other analytical requirements drive demand for MA’s products and expertise. Moreover, pricing opportunities aligned with customer value creation and advances in information technology present growth opportunities for Moody’s.

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 profits, consumer borrowing levels and securitization activity. 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 be affected by factors such as the performance and prospects for growth of the major world economies, the fiscal and monetary policies pursued by their governments, and the decisions of issuers to request MIS ratings to aid investors in their investment decisions. However, annual fee arrangements with frequent debt issuers, annual debt monitoring fees and annual fees from commercial paper and medium-term note programs, bank 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. Furthermore, the strong growth seen in the issuance of structured finance securities from the mid-1990’s reversed dramatically in 2008 due to market turmoil, with continued declines seen in 2009 and 2010, before stabilizing in 2011 with Moody’s experiencing revenue growth in this market beginning in 2012. Despite significant declines from peak market issuance levels, Moody’s believes that structured finance securities will continue to play a role in global fixed-income markets and provide opportunities for long-term revenue growth.

The pace of change in technology and communication over the past two decades makes information about investment alternatives widely available throughout the world and facilitates issuers’ ability to place securities outside their national markets and similarly investors’ ability to obtain information about securities issued outside their national markets. Technology also allows issuers and investors the ability to more readily obtain information about new financing techniques and new types of securities that they may wish to purchase or sell, which in the absence of the appropriate technology might not be readily or easily obtainable. This availability of information promotes the ongoing integration and expansion of financial markets worldwide, giving issuers and investors access to a wider range of both established and newer capital markets. As technology provides broader access to worldwide markets, it also results in a greater need for credible, globally comparable opinions about credit risk, data, analytics and related services. Additionally, information technology also provides opportunities to further build a global platform to support Moody’s continued expansion in developing markets.

An ongoing trend in the world’s capital markets is the disintermediation of financial systems. Issuers increasingly raise capital in the global public capital markets, in addition to, or in substitution for, traditional financial intermediaries. Moreover, financial intermediaries have sold assets in the global public capital markets, in addition to, or instead of, retaining those assets. Moody’s believes that 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.


		MOODY’S 2018 10-K			11

Moody’s also observes disintermediation in key emerging markets where economic growth may outpace internal banking system capacity. Thus, disintermediation is expected to continue over the longer-term, with Moody’s targeting investment and resources to those markets where disintermediation and bond issuance is expected to remain robust.

In the aftermath of the global financial crisis, banking, insurance and capital markets authorities promulgated a wide range of new regulations to restore stability and confidence in financial institutions under their oversight. Programs such as Basel III, Solvency II, and CCAR — among many others — prompted banks, insurers, securities dealers, and asset managers to invest in more robust risk management practices and systems. Many of these investments drew on expertise and tools offered by MA, resulting in strong revenue growth in the post-crisis period. As banking and capital markets continue to stabilize, and with financial institutions better capitalized, regulatory-driven demand for MA products has moderated. Nonetheless, we expect that MA products and services that enable compliance with financial regulation and accounting standards will continue to be adopted by institutions worldwide, prompted by periodic revisions to regulatory frameworks such as the Basel capital adequacy protocols. Moreover, having responded to regulatory imperatives, financial institutions are increasingly seeking to leverage investments in regulatory compliance systems to gain business insights and front-office efficiencies; MA is well positioned to realize revenue growth by assisting in these efforts to apply back-office analytics in support of front-line business decisions. Finally, in order to respond to other sources of demand and drive growth, MA is actively investing in new products, including enhanced data sets and improved delivery methods (e.g., software-as-a-service). These efforts should support broader distribution of MA’s capabilities, deepen relationships with existing customers and facilitate more new customer acquisition.

Legislative bodies and regulators in the U.S., Europe and other jurisdictions continue to conduct regulatory reviews of CRAs, which may result in, for example, an increased number of competitors, changes to the business model or restrictions on certain business activities of MIS, removal of references to ratings in certain regulations, or increased costs of doing business for MIS. At present, Moody’s is unable to assess the nature and effect that any regulatory changes may have on future growth opportunities.

Moody’s operations are subject to various risks, as more fully described in Part I, Item 1A “Risk Factors,” inherent in conducting business on a global basis. Such risks include currency fluctuations and possible nationalization, expropriation, exchange and price controls, changes in the availability of data from public sector sources, limits on providing information across borders and other restrictive governmental actions.

COMPETITION

MIS competes with other CRAs and with investment banks and brokerage firms that offer credit opinions and research. Many users of MIS’s ratings also have in-house credit research capabilities. MIS’s largest competitor in the global credit rating business is S&P Global Ratings (S&P), a division of S&P Global. There are some rating markets, based on industry, geography and/or instrument type, in which Moody’s has made investments and obtained market positions superior to S&P, while in other markets, the reverse is true.

In addition to S&P, MIS’s competitors in the U.S. include Fitch Ratings, Dominion Bond Rating Service (DBRS), A.M. Best Company, Kroll Bond Rating Agency Inc., and Morningstar Inc. In Europe, there are approximately 45 companies currently registered with ESMA, which include both purely domestic European CRAs and International CRAs such as S&P, Fitch and DBRS. There are additional competitors in other regions and countries, some of which are global entities and compete across regions and asset classes, while others focus on particular asset classes and regions.

MA competes broadly in the financial information industry against diversified competitors such as Refinitiv, Bloomberg, S&P Global Market Intelligence, Fitch Solutions, D&B, IBM, Wolters Kluwer, Fidelity National Information Services, SAS, Fiserv, MSCI and IHS Markit among others. MA’s main competitors within RD&A include S&P Global Market Intelligence, CreditSights, Refinitiv, Intex, IHS Markit, BlackRock Solutions, FactSet and other providers of fixed income analytics, valuations, economic data and research. In ERS, MA faces competition from both large software providers such as IBM Algorithmics, Fidelity National Information Services, SAS, Oracle, Misys, Oliver Wyman, Verisk Analytics and various other vendors and in-house solutions. Within Professional Services, MA competes with a host of financial training and education firms and providers of offshore research and analytical services such as Evalueserve and CRISIL Global Research & Analytics.

MOODY’S STRATEGY

Moody’s corporate mission is to be the world’s most respected authority serving financial risk-sensitive markets. The key aspects to implement this strategy are to:

Defend and enhance the core ratings and research business of MIS;


12		MOODY’S 2018 10-K

Build MA’s position as a leading provider of data, analytics and risk management solutions to financial institutions, corporations, and governmental authorities; and

Invest in strategic growth opportunities.

Moody’s will make investments to defend and enhance its core businesses in an attempt to position the Company to fully capture market opportunities resulting from global debt capital market expansion and increased business investment spending. Moody’s will also make strategic investments to achieve scale in attractive financial information markets, move into attractive product and service adjacencies where the Company can leverage its brand, extend its thought leadership and expand its geographic presence in high growth emerging markets.

To broaden the Company’s potential, MA provides a wide range of products and services to enable financial institutions, corporations and governmental authorities to better manage risk. As such, MA adds to the Company’s value proposition in three ways. First, MA’s subscription businesses provide a significant base of recurring revenue to offset cyclicality in ratings issuance volumes that may result in volatility in MIS’s revenues. Second, MA products and services, such as financial training and professional services on research and risk management best practices, provide opportunities for entry into emerging markets before banking systems and debt capital markets fully develop and thus present long-term growth opportunities for the ratings business. Finally, MA’s integrated risk management software platform embeds Moody’s solutions deep into the technology infrastructure of banks and insurance companies worldwide.

Moody’s invests in initiatives to implement the Company’s strategy, including internally led organic development and targeted acquisitions. Example initiatives include:

Enhancements to ratings quality and product extensions;

Investments that extend ownership and participation in joint ventures and strategic alliances;

New products, services, content (e.g., non-credit risk assessments such as ESG and cybersecurity risk), and technology capabilities to meet customer demands;

Selective bolt-on acquisitions that accelerate the ability to scale and grow Moody’s businesses; and

Expansion in emerging markets.

During 2018, Moody’s continued to invest in and acquire complementary businesses in MIS and MA. In May 2018, Moody’s acquired a minority stake in QuantCube Technology, an innovative provider of real-time, AI-based predictive analytics for corporate customers, financial institutions and investment managers. The investment complements a series of initiatives across the company to harness innovative and emerging technologies. In August 2018, Moody’s acquired Omega Performance, a leading provider of online credit training. The acquisition adds to MA’s suite of industry-leading learning solutions and reinforces MA as a market standard in credit proficiency for financial institutions worldwide. In October 2018, Moody’s invested in Team8 Partners II, L.P., the second vehicle raised by Team8, a leading think tank and company creation platform specializing in cybersecurity and data resilience. The investment builds on Moody’s investments and initiatives in cybersecurity and emerging technologies. Also in October 2018, Moody’s completed the acquisition of Reis, Inc., a leading provider of U.S. commercial real estate (CRE) data. The acquisition further expands MA’s network of data and analytics providers in the CRE space, including investments in start-ups that apply innovative approaches and new technologies to source data and deliver tools to the market. In November 2018, Moody’s announced it had entered an agreement to acquire a minority stake in ICR Chile, a leading provider of domestic credit ratings in Chile. The transaction adds to Moody’s growing presence across Latin America.

REGULATION

MIS and many of the securities that it rates are subject to extensive regulation in both the U.S. and in other countries (including by state and local authorities). Thus, existing and proposed laws and regulations can impact the Company’s operations and the markets for securities that it rates. Additional laws and regulations have been adopted but not yet implemented or have been proposed or are being considered. Each of the existing, adopted, proposed and potential laws and regulations can increase the costs and legal risk associated with the issuance of credit ratings and may negatively impact Moody’s operations or profitability, the Company’s ability to compete, or result in changes in the demand for credit ratings, in the manner in which ratings are utilized and in the manner in which Moody’s operates.

The regulatory landscape has changed rapidly in recent years, and continues to evolve. In the EU, the CRA industry is registered and supervised through a pan-European regulatory framework. The European Securities and Markets Authority (ESMA) has direct supervisory responsibility for the registered CRA industry throughout the EU. MIS is a registered entity and is subject to formal regulation and periodic inspection. Applicable rules include procedural requirements with respect to ratings of sovereign issuers, liability for intentional


		MOODY’S 2018 10-K			13

or grossly negligent failure to abide by applicable regulations, mandatory rotation requirements of CRAs hired by issuers of securities for ratings of resecuritizations, restrictions on CRAs or their shareholders if certain ownership thresholds are crossed, reporting requirements to ESMA regarding fees, and additional procedural and substantive requirements on the pricing of services. In 2016, the Commission published a report concluding that no new European legislation was needed for the industry at that time, but that it would continue to monitor the credit rating industry and analyze approaches that may strengthen existing regulation. In addition, from time to time, ESMA publishes interpretive guidance, or thematic reports regarding various aspects of the regulation. Two such reports were published in the first half of 2018. The first report provided further guidance from ESMA regarding the endorsement mechanism that CRAs will need to employ for those ratings that are produced outside of the EU but are used inside the EU by EU-regulated entities. The second report discussed ESMA’s observations on CRA’s fee practices. Further, in March 2018, ESMA published a consultation report seeking feedback on the extent to which EU regulation should be applied to CRAs operating outside of the EU to make their ratings eligible for regulatory use in the EU. In July 2018, ESMA published its final guidance on the applicability of EU regulation to endorsed ratings, with an effective date of January 1, 2019. In the final guidance, ESMA indicated that as long as the underlying principles of the EU rules were adhered to, ESMA did not expect that the EU’s CRA rules would need to be exported to non-EU jurisdictions for endorsement purposes.

Separately, on June 23, 2016, the U.K. voted through a referendum to exit the EU. The U.K. officially launched the exit process by submitting its Article 50 letter to the EU, informing it of the U.K.’s intention to exit. The submission of this letter started the clock on the negotiation of the terms of exit, which originally was expected to take up to two years, but may take longer.

The longer-term impacts of the decision to leave the EU on the overall regulatory framework for the U.K. will depend, in part, on the relationship that the U.K. negotiates with the EU in the future. In the interim, however, the U.K.’s markets regulator (the Financial Conduct Authority) has indicated that all EU financial regulations will stay in place and that firms must continue to abide by their existing obligations. As a consequence, at this point in time, there is no change to the regulatory framework under which MIS operates and ESMA remains MIS’s regulator both in the EU and in the U.K.

In the U.S., CRAs are subject to extensive regulation primarily pursuant to the Reform Act and the Financial Reform Act. The SEC is required by these legislative acts to publish two annual reports to Congress on NRSROs. The Financial Reform Act requires the SEC to examine each NRSRO once a year and issue an annual report summarizing the examination findings, among other requirements. The annual report required by the Reform Act details the SEC’s views on the state of competition, transparency and conflicts of interests among NRSROs, among other requirements. The SEC voted in August 2014 to adopt its final rules for NRSROs as required by the Financial Reform Act. The Company has made and continues to make substantial IT and other investments, and has implemented the relevant compliance obligations.

In light of the regulations that have gone into effect in both the EU and the U.S. (as well as many other countries), periodically and as a matter of course pursuant to their enabling legislation, these regulatory authorities have and will continue to publish reports that describe their oversight activities over the industry. In addition, other legislation and/or interpretation of existing regulation relating to credit rating and research services is being considered by local, national and multinational bodies and this type of activity is likely to continue in the future. Finally, in certain countries, governments may provide financial or other support to locally-based rating agencies. For example, governments may from time to time establish official rating agencies or credit ratings criteria or procedures for evaluating local issuers. If enacted, any such legislation and regulation could change the competitive landscape in which MIS operates. The legal status of rating agencies has been addressed by courts in various decisions and is likely to be considered and addressed in legal proceedings from time to time in the future. Management of the Company cannot predict whether these or any other proposals will be enacted, the outcome of any pending or possible future legal proceedings, or regulatory or legislative actions, or the ultimate impact of any such matters on the competitive position, financial position or results of operations of Moody’s.

INTELLECTUAL PROPERTY

Moody’s and its affiliates own and control a variety of intellectual property, including but not limited to proprietary information, trademarks, research, software tools and applications, models and methodologies, databases, domain names, and other proprietary materials that, in the aggregate, are of material importance to Moody’s business. Management of Moody’s believes that each of the trademarks and related corporate names, marks and logos containing the term “Moody’s” are of material importance to the Company.

The Company, primarily through MA (including its Bureau van Dijk business), licenses certain of its databases, software applications, credit risk models, training courses in credit risk and capital markets, research and other publications and services that contain intellectual property to its customers. These licenses are provided pursuant to standard fee-bearing agreements containing customary restrictions and intellectual property 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,


14		MOODY’S 2018 10-K

default data, and security identifiers) as well as software development tools and libraries. In addition, the Company’s Bureau van Dijk business obtains from third party information providers certain financial, credit risk, compliance, management, ownership and other data on companies worldwide, which Bureau van Dijk distributes through its company 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 also, 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 sourced by Bureau van Dijk) 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.

The names of Moody’s products and services referred to herein are trademarks, service marks or registered trademarks or service marks owned by or licensed to Moody’s or one or more of its subsidiaries. The Company owns two patents. None of the Intellectual Property is subject to a specific expiration date, except to the extent that the patents and the copyright in items that the Company authors (such as credit reports, research, software, and other written opinions) expire pursuant to relevant law.

The Company considers its Intellectual Property to be proprietary, and Moody’s relies on a combination of copyright, trademark, trade secret, patent, non-disclosure and other contractual safeguards for protection. Moody’s also pursues instances of third-party infringement of its Intellectual Property in order to protect the Company’s rights.

EMPLOYEES

As of December 31, 2018 the number of full-time equivalent employees of Moody’s was approximately 13,000.

AVAILABLE INFORMATION

Moody’s investor relations internet website is http://ir.moodys.com/. Under the “SEC Filings” tab at this website, the Company makes available free of charge its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and other information statements that the Company files electronically with the SEC. The SEC’s internet site is http://www.sec.gov/.

EXECUTIVE OFFICERS OF THE REGISTRANT


Name, Age and Position		Biographical Data

Mark E. Almeida, 59 President, Moody’s Analytics		Mr. Almeida has served as President of Moody’s Analytics since January 2008. Prior to this position, Mr. Almeida was Senior Vice President of Moody’s Corporation from August 2007 to January 2008, Senior Managing Director of the Investor Services Group (ISG) at Moody’s Investors Service, Inc. from December 2004 to January 2008 and was Group Managing Director of ISG from June 2000 to December 2004. Mr. Almeida joined Moody’s Investors Service, Inc. in April 1988 and has held a variety of positions with the company in both the U.S. and overseas.

Richard Cantor, 61 Chief Risk Officer		Mr. Cantor has served as the Company’s Chief Risk Officer since December 2008 and as Chief Credit Officer of Moody’s Investors Service, Inc. since November 2008. From July 2008 to November 2008, Mr. Cantor served as Acting Chief Credit Officer. Prior thereto, Mr. Cantor was Managing Director of Moody’s Credit Policy Research Group from June 2001 to July 2008, after serving as Senior Vice President in the Financial Guarantors Rating Group. Mr. Cantor joined Moody’s in 1997 from the Federal Reserve Bank of New York, where he served as Assistant Vice President in the Research Group and was Staff Director at the Discount Window. Prior to the Federal Reserve, Mr. Cantor taught Economics at UCLA and Ohio State and has taught on an adjunct basis at the business schools of Columbia University and New York University.


		MOODY’S 2018 10-K			15


Name, Age and Position		Biographical Data

Robert Fauber, 48 President, Moody’s Investors Service		Mr. Fauber has served as President—Moody’s Investors Service, Inc. since June 1, 2016. He served as Senior Vice President—Corporate & Commercial Development of Moody’s Corporation from April 2014 to May 31, 2016 and was Head of the MIS Commercial Group from January 2013 to May 31, 2016. From April 2009 through April 2014, he served as Senior Vice President—Corporate Development of Moody’s Corporation. Mr. Fauber served as Vice President—Corporate Development from September 2005 to April 2009. Prior to joining Moody’s, Mr. Fauber served in several roles at Citigroup and its investment banking subsidiary Salomon Smith Barney from 1999 to 2005. From 1992 to 1996, Mr. Fauber worked at NationsBank (now Bank of America) in the middle market commercial banking group.

John J. Goggins, 58 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.

Melanie Hughes, 56 Senior Vice President and Chief Human Resources Officer		Ms. Hughes has served as the Company’s Senior Vice President—Chief Human Resources Officer since September 2017. Prior to joining the Company, Ms. Hughes was Chief Human Resource Officer and Executive Vice President, Human Resources at American Eagle Outfitters from July 2016 to September 2017 and served as Executive Vice President, Human Resources at Tribune Media from May 2013 to June 2016. She has held several senior management roles for many different companies such as Coach, Gilt Group, DoubleClick and UBS Warburg.

Mark Kaye, 39 Senior Vice President and Chief Financial Officer		Mr. Kaye has served as the Company’s Senior Vice President—Chief Financial Officer since August 2018. 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 of MassMutual U.S. since July 2015. Prior to that, Mr. Kaye served as Chief Financial Officer and Senior Vice 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.

Raymond W. McDaniel, Jr., 61 President and Chief Executive Officer		Mr. McDaniel has served as the Company’s President and Chief Executive Officer since April 2012, and served as the Chairman and Chief Executive Officer from April 2005 until April 2012. He currently serves on the Executive Committee of the Board of Directors. Mr. McDaniel served as the Company’s President from October 2004 until April 2005 and the Company’s Chief Operating Officer from January 2004 until April 2005. He has served as Chief Executive Officer of Moody’s Investors Service, Inc. since October 2007. He held the additional titles of President from November 2001 to August 2007 and December 2008 to November 2010 and Chairman from October 2007 until June 2015. Mr. McDaniel served as the Company’s Executive Vice President from April 2003 to January 2004, and as Senior Vice President, Global Ratings and Research from November 2000 until April 2003. He served as Senior Managing Director, Global Ratings and Research, of Moody’s Investors Service from November 2000 until November 2001 and as Managing Director, International from 1996 to November 2000. Mr. McDaniel currently is a director of John Wiley & Sons, Inc. and a member of the Board of Trustees of Muhlenberg College.

Caroline Sullivan, 50 Senior Vice President and Corporate Controller		Ms. Sullivan has served as the Company’s Senior Vice President—Corporate Controller since December 2018. Prior to joining the Company, Ms. Sullivan served in several roles at Bank of America, 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 and was Chief Financial Officer for the Latin America region from 2014 to 2015. From 2011 to 2013, she served as the Legal Entity Controller for the bank’s main broker dealer and other Merrill Lynch entities. Ms. Sullivan previously held various senior positions at several banks and a major accounting firm, and is a member of the American Institute of Certified Public Accountants.


16		MOODY’S 2018 10-K

ITEM 1A. RISK FACTORS

The following risk factors and other information included in this annual report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company’s management currently deems minor or insignificant also may impair its business operations. If any of the following risks occur, Moody’s business, financial condition, operating results and cash flows could be materially and adversely affected. These risk factors should be read in conjunction with the other information in this annual report on Form 10-K.

U.S. Laws and Regulations Affecting the Credit Rating Industry and Moody’s Customers May Negatively Impact the Nature and Economics of the Company’s Business.

Moody’s operates in a highly regulated industry and is subject to extensive regulation by federal, state and local authorities in the U.S., including the Reform Act and the Financial Reform Act. These regulations are complex, continually evolving and have tended to become more stringent over time. See “Regulation” in Part 1, Item 1 of this annual report on Form 10-K for more information. These laws and regulations:

seek to encourage, and may result in, increased competition among rating agencies and in the credit rating business;

may result in alternatives to credit ratings or changes in the pricing of credit ratings;

restrict the use of information in the development or maintenance of credit ratings;

increase regulatory oversight of the credit markets and CRA operations;

provide for direct jurisdiction of the SEC over CRAs that seek NRSRO status, and grant authority to the SEC to inspect the operations of CRAs; and

authorize the adoption of enhanced oversight standards and new pleading standards, which may result in increases in the number of legal proceedings claiming liability for losses suffered by investors on rated securities and aggregate legal defense costs.

These laws and regulations, and any future rulemaking or court rulings, could result in reduced demand for credit ratings and increased costs, which Moody’s may be unable to pass through to customers. In addition, there may be uncertainty over the scope, interpretation and administration of such laws and regulations. The Company may be required to incur significant expenses in order to ensure compliance and mitigate the risk of fines, penalties or other sanctions. Legal proceedings could become increasingly lengthy and there may be uncertainty over and exposure to liability. It is difficult to accurately assess the future impact of legislative and regulatory requirements on Moody’s business and its customers’ businesses. For example, new laws and regulations may affect MIS’s communications with issuers as part of the rating assignment process, alter the manner in which MIS’s ratings are developed, assigned and communicated, affect the manner in which MIS or its customers or users of credit ratings operate, impact the demand for MIS’s ratings and alter the economics of the credit ratings business, including by restricting or mandating business models for rating agencies. Further, speculation concerning the impact of legislative and regulatory initiatives and the increased uncertainty over potential liability and adverse legal or judicial determinations may negatively affect Moody’s stock price. Although these legislative and regulatory initiatives apply to rating agencies and credit markets generally, they may affect Moody’s in a disproportionate manner. Each of these developments increase the costs and legal risk associated with the issuance of credit ratings and may have a material adverse effect on Moody’s operations, profitability and competitiveness, the demand for credit ratings and the manner in which such ratings are utilized.

In addition, MA derives a significant amount of its sales in the ERS and Professional Services segments from banks and other financial services providers who are subject to regulatory oversight. U.S. banking regulators, including the Office of the Comptroller of the Currency, the Federal Deposit 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’s existing or potential bank and financial services customers subject to this guidance may continue to revise their third-party risk management policies and processes and the terms on which they do business with MA, which may delay or reduce sales to such customers, adversely affect MA’s 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.

Financial Reforms Outside the U.S. Affecting the Credit Rating Industry and Moody’s Customers May Negatively Impact the Nature and Economics of the Company’s Business.

In addition to the extensive and evolving U.S. laws and regulations governing the industry, foreign jurisdictions have taken measures to increase regulation of rating agencies and the markets for ratings. In particular, the EU has adopted a common regulatory framework


		MOODY’S 2018 10-K			17

for rating agencies operating in the EU. As a result, ESMA has direct supervisory authority for CRAs in the EU and has the power to take enforcement action against non-compliant CRAs, including through the issuance of public notices, withdrawal of registration and, in some cases, the imposition of fines. Although the Commission published a report in 2016 concluding that no new European legislation was needed for the industry at that time, the report also stated that it would continue to monitor the credit rating industry and analyze approaches that may strengthen existing regulation. For example, in 2018, ESMA published final guidance on the applicability of EU regulation to endorsed ratings which became effective on January 1, 2019. See “Regulation” in Part 1, Item 1 of this annual report on Form 10-K for more information.

MIS is a registered entity and is therefore subject to formal regulation and periodic inspection in the EU. Applicable rules include procedural requirements with respect to 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 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 the rating of structured finance instruments. Compliance with the EU regulations may increase costs of operations and could have a significant negative effect on Moody’s operations, profitability or ability to compete, or the markets for its products and services, including in ways that Moody’s presently is unable to predict. In addition, exposure to increased liability under the EU regulations may further increase costs and legal risks associated with the issuance of credit ratings and materially and adversely impact Moody’s results of operations.

In addition, 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. Such guidelines include the Committee of European Banking Supervisors Guidelines on Outsourcing and the European Banking Authority Recommendations on Outsourcing to Cloud Providers (each of which is expected to be superseded by the European Banking Authority’s Guidelines on Outsourcing, currently under development and expected to be issued in early 2019). In light of this, MA’s existing or potential bank and financial services customers subject to this guidance may continue to revise their third-party risk management policies and processes and the terms on which they do business with MA, which may delay or reduce sales to such customers, adversely affect MA’s 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.

The EU and other jurisdictions engage in rulemaking on an ongoing basis that could significantly impact operations or the markets for Moody’s products and services, including regulations extending to products and services not currently regulated and regulations affecting the need for debt securities to be rated, expansion of supervisory remit to include non-EU ratings used for regulatory purposes, increasing the level of competition in the market for credit ratings, establishing criteria for credit ratings or limiting the entities authorized to provide credit ratings, and laws and regulations related to collection, use, accuracy, correction and sharing of personal information by CRAs. Additionally, as of the date of the filing of this annual report on Form 10-K, there remains uncertainty regarding the impact that Brexit will have on the credit rating industry within the U.K., the EU and other jurisdictions. Although Moody’s will monitor these developments, Moody’s cannot predict the extent of such future laws and regulations, and the effect that they will have on Moody’s business or the potential for increased exposure to liability could be significant. Financial reforms in the EU and other foreign jurisdictions may have a material adverse effect on Moody’s business, operating results and financial condition.

The Company Faces Exposure to Litigation and Government Regulatory Proceedings, Investigations and Inquiries Related to Rating Opinions and Other Business Practices.

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. If the market value of credit-dependent instruments declines or defaults, whether as a result of difficult economic times, turbulent markets or otherwise, the number of 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 for losses they face in their portfolios. Moody’s has faced numerous class 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. Legal proceedings impose additional expenses on the Company and require the attention of senior management to an extent that may significantly reduce their ability to devote time addressing other business issues, 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 may be heightened in foreign jurisdictions that lack the legal protections or liability standards comparable to those that exist in the U.S. In addition, new laws and regulations have been and may continue to be enacted that establish lower liability standards, shift the burden of proof or relax pleading requirements, thereby increasing the risk of successful litigations in the U.S. and in foreign jurisdictions. These litigation risks are often difficult to assess or quantify. Moody’s may not have adequate insurance or reserves to cover these risks, and the existence and magnitude of these risks often remains unknown for substantial periods of time. Furthermore, to the extent that Moody’s is unable to achieve dismissals at an early stage and litigation matters proceed to trial, the aggregate legal defense costs incurred by Moody’s increase substantially, as does the risk of an adverse outcome.


18		MOODY’S 2018 10-K

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 liabilities in the consolidated financial statements in future periods. See Note 20 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 could have a material adverse effect on its business, operating results and financial condition.

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 may have an impact on the Company’s business. For example, economic uncertainty in the Eurozone or elsewhere, including in Latin America, could affect the number of securities offerings undertaken within those particular areas. In addition, operations abroad expose Moody’s to a number of legal, economic and regulatory risks such as:

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 overseas operations, including domestic and foreign export and import restrictions, tariffs and other trade barriers and restrictions, such as those related to the U.S.’s relationship with China;

differing and potentially conflicting legal or civil liability, compliance and regulatory standards, including as a result of the U.K.’s referendum vote to withdraw from the EU, Brexit;

an extension or delay of the U.K.’s withdrawal from the EU, or the U.K. leaving the EU with no agreement in place (“hard Brexit”);

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 LIBOR to the Secured Overnight Financing Rate, SOFR, as a benchmark reference for short-term interests;

economic, political and geopolitical market conditions;

the possibility of nationalization, expropriation, price controls and other restrictive governmental actions;

competition with local rating agencies that have greater familiarity, longer operating histories and/or support from local governments or other institutions;

uncertainties of 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;

differing accounting principles and standards;

difficulties in staffing and managing foreign operations, including the expected relocation and/or restaffing of employees due to Brexit;

difficulties and delays in translating documentation into foreign languages; and

potentially adverse tax consequences.

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 the Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010 and other anti-bribery and anti-corruption laws. Although the Company has implemented internal controls, policies and procedures and employee training and compliance programs to deter prohibited practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regulations. Any determination that the Company has violated anti-bribery or anti-corruption laws could have a material adverse effect on 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, restrictions on business conduct and could have a material adverse effect on Moody’s reputation, its ability to attract and retain employees, its business, operating results and financial condition.


		MOODY’S 2018 10-K			19

Moody’s Operations and Infrastructure May Malfunction or Fail.

Moody’s ability to conduct business may be materially and adversely impacted by a disruption in the infrastructure that supports its businesses and the communities in which Moody’s is located, including New York City, the location of Moody’s headquarters, major cities worldwide in which Moody’s has offices, and locations in China used for certain Moody’s back office work. This may include a 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, although the Company has instituted extensive controls to reduce the risk of error inherent in our operations, such risk cannot be completely eliminated. 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, natural disasters, fire, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political unrest, war or otherwise, may impair the Company’s ability to deliver its products and services.

Moody’s efforts to secure and plan for potential disruptions of its major operating systems may not be successful. The Company relies on third-party providers to provide certain essential services. While the Company believes that such providers are reliable, the Company has limited control over the performance of such providers. To the extent any of the Company’s third-party providers ceases to provide these services in an efficient, cost-effective manner or fails to adequately expand its services to meet the Company’s needs and the needs of the Company’s customers, the Company could experience lower revenues and higher costs. 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 office locations and low-risk systems, and its disaster recovery plan does not include restoration of non-essential services. If a disruption occurs in one of Moody’s locations or 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 may suffer. The Company cannot predict with certainty all of the adverse effects that could result from the Company’s failure, or the failure of a third party, to efficiently address and resolve these delays and interruptions. A disruption to Moody’s operations or infrastructure may have a material adverse effect on its reputation, business, operating results and financial condition.

The Company is Exposed to Risks Related to Cybersecurity and Protection of Confidential Information.

The Company’s operations rely on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types of information relating to its business operations and confidential and sensitive information about its customers and employees in the Company’s computer systems and networks, and in those of its third party vendors. The cyber 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, 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, 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, circumvented, or may become ineffective. 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. 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, the European Union’s General Data Protection Regulation (“GDPR”), which became effective on May 25, 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, California recently enacted legislation, the California Consumer Privacy Act (“CCPA”), that will, among other things, require covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information, when it goes into effect on January 1, 2020. Legislators have stated that they intend to propose amendments to the CCPA before it goes into effect, and it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted. The effects of the CCPA potentially are significant, however, and may require us to modify our data processing practices and policies and to incur substantial costs and expenses. All of these evolving


20		MOODY’S 2018 10-K

compliance and operational requirements have required changes to certain business practices, thereby increasing costs, may result in negative publicity or increased operating costs, require significant management time and attention, and subject the Company to remedies that may harm its business, including fines or demands or orders that we modify or cease existing business practices, and expose it to litigation, regulatory actions, sanctions or other statutory penalties.

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 data breaches and system disruptions. 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 requirements, including additional regulatory expectations for oversight of vendors and service providers. Any material breaches of cybersecurity, including the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data, or media reports of 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 cause the Company to experience 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. Any of the foregoing may have a material adverse effect on Moody’s business, operating results and financial condition.

The Company is Dependent on the Use of Third-Party Software, Data, Hosted Solutions, Data Centers, Cloud and Network Infrastructure (Together, “Third Party Technology”), and Any Reduction in Third-Party Product Quality or Service Offerings, Could Have a Material Adverse Effect on the Company’s Business, Financial Condition or Results of Operations.

Moody’s relies on Third Party Technology in connection with its product development and offerings and operations. The Company depends on the ability of Third Party Technology providers to deliver and support reliable products, enhance their current products, develop new products on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. The Third Party Technology Moody’s uses may become obsolete, incompatible with future versions of the Company’s products, unavailable or fail to operate effectively, and Moody’s business could be adversely affected if the Company is unable to timely or effectively replace such Third Party Technology. The Company also monitors its use of Third Party Technology to comply with applicable license and other contractual requirements. Despite the Company’s efforts, the Company cannot ensure that such third parties will permit Moody’s use in the future, resulting in increased Third Party Technology acquisition costs and loss of rights. In addition, the Company’s operating costs could increase if license or other usage fees for Third Party Technology increase or the efforts to incorporate enhancements to Third Party Technology are substantial. Some of these third-party suppliers are also Moody’s competitors, increasing the risks noted above. If any of these risks materialize, they could have a material adverse effect on the Company’s business, financial condition or results of operations.

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 May Negatively Impact the Nature and Economics of the Company’s Business.

Moody’s business is impacted by general economic conditions and volatility in the U.S. and world financial markets. Furthermore, issuers of debt securities may elect to issue securities without ratings or securities which are rated or evaluated by non-traditional 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 impacted the volume of debt securities issued in global capital markets and the demand for credit ratings. The Tax Act, in addition to other changes to U.S. tax laws and policy, could negatively affect the volume of debt securities issued in the U.S. For example, the Tax Act limits deductibility on interest payments and significantly reduce 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.

Economic and government factors such as a long-term continuation of difficult economic conditions, a re-emergence of the sovereign debt crisis in Europe, the ultimate Brexit outcome and current uncertainty in various other jurisdictions, may have an adverse impact on the Company’s business. Future debt issuances also could be negatively affected by increases in interest rates, widening credit spreads, regulatory and political developments, growth in the use of alternative sources of credit, and defaults by significant issuers. Declines or other changes in the markets for debt securities may materially and adversely affect the Company’s business, operating results and financial condition.


		MOODY’S 2018 10-K			21

Moody’s initiatives to reduce costs to counteract a decline in its business may not be sufficient and cost reductions may be difficult or impossible to obtain in the short term, due in part to rent, technology, compliance and other fixed costs associated with some of the Company’s operations as well as the need to monitor outstanding ratings. Further, cost-reduction initiatives, including those under-taken to date, could make it difficult for the Company to rapidly expand operations in order to accommodate any unexpected increase in the demand for ratings. Volatility in the financial markets, including changes in the volumes of debt securities and changes in interest rates, may have a material adverse effect on the business, operating results and financial condition, which the Company may not be able to successfully offset with cost reductions.

The Company Faces Increased Pricing Pressure from Competitors and/or Customers.

There is price competition in the credit rating, research, credit risk management markets, research and analytical services and financial training and certification services. Moody’s faces competition globally from other CRAs and from investment banks and brokerage firms that offer credit opinions in research, as well as from in-house research operations. 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 customers, particularly those involved in structured finance products, 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 may lose market share if its pricing is not sufficiently competitive. In addition, the Reform Act was designed to encourage competition among rating agencies. 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 could have a material adverse impact on its business, operating results and financial condition.

The Company is Exposed to Reputation and Credibility Concerns.

Moody’s reputation and the strength of its brand are key competitive strengths. To the extent that the rating agency business as a whole or Moody’s, relative to its competitors, suffers a loss in credibility, Moody’s business could be significantly impacted. Factors that may have already affected credibility and could potentially continue to have an impact in this regard include the appearance of a 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 and its implementation with respect to one or more securities and intentional 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.

The Introduction of Competing Products or Technologies by Other Companies May Negatively Impact the Nature and Economics of the Company’s Business.

The markets for credit ratings, research, credit risk management services, research and analytical services and financial training and certification services are highly competitive and characterized by rapid technological change, changes in customer demands, and evolving regulatory requirements, industry standards and market preferences. The ability to develop and successfully launch and maintain innovative products and technologies that anticipate customers’ changing requirements and utilize emerging technological trends in a timely and cost-effective manner is a key factor in maintaining market share. Moody’s competitors include both established companies with significant financial resources, brand recognition, market experience and technological expertise, and smaller companies which may be better poised to quickly adopt new or emerging technologies or respond to customer requirements. Competitors may develop quantitative methodologies or related services for assessing credit risk that 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; 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 it does 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 demand for Moody’s products and services and its growth prospects. Further, the increased availability in recent years of free or relatively inexpensive internet information may reduce the demand for Moody’s products and services. Moody’s growth prospects also could be adversely affected by Moody’s failure to make necessary or optimal capital infrastructure expenditures and improvements and the inability of its information technologies to provide adequate capacity and capabilities to meet increased demands of producing quality ratings and research products at levels achieved by competitors. Any inability of Moody to compete successfully may have a material adverse effect on its business, operating results and financial condition.


22		MOODY’S 2018 10-K

Possible Loss of Key Employees and Related Compensation Cost Pressures May Negatively Impact the Company.

Moody’s success depends upon its ability to recruit, retain and motivate highly skilled, experienced financial analysts and other 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 competitive compensation and other incentives or if the regulatory environment mandates restrictions on or disclosures about individual employees that would not be necessary in competing industries. As greater focus has been placed on executive compensation at public companies, in the future, Moody’s may be required to alter its compensation practices in ways that could adversely affect its ability to attract and retain talented employees. Investment banks, investors and competitors may seek to attract analyst talent by providing more favorable working conditions or offering significantly more attractive compensation packages than Moody’s. Moody’s also may not be able to identify and hire the appropriate qualified employees in some markets outside the U.S. with the required experience or skills to perform sophisticated credit analysis. Additionally, relocation and/or restaffing of employees due to Brexit could adversely affect our ability to attract and retain talent for our European operations. There is a risk that even if the Company invests significant resources in attempting to attract, train and retain qualified personnel, it will not succeed in its efforts, and its business could be harmed.

Moody’s is highly dependent on the continued services of Raymond W. McDaniel, Jr., the President and Chief Executive Officer, and other senior officers and key employees. The loss of the services of skilled personnel for any reason and Moody’s inability to replace them with suitable candidates quickly or at all, as well as any negative market perception resulting from such loss, could have a material adverse effect on Moody’s business, operating results and financial condition.

Moody’s Acquisitions, Dispositions and Other Strategic Transactions or Internal Technology Investments May Not Produce Anticipated Results Exposing the Company to Future Significant Impairment Charges Relating to its Goodwill, Intangible Assets or Property and Equipment.

Moody’s has entered into and expects to continue to enter into acquisition, disposition or other strategic transactions and expects to make various investments to strengthen its business and grow the Company. Such transactions as well as internal technology investments present significant challenges and risks. The market for acquisition targets, dispositions and other strategic transactions is highly competitive, especially in light of industry consolidation, which may affect Moody’s ability to complete such transactions and complete such transactions on favorable terms. If Moody’s is unsuccessful in completing such transactions on favorable terms or if opportunities for expansion do not arise, its business, operating results and financial condition could be materially adversely affected. Additionally, the Company makes significant investments in technology including software developed for internal-use which is time-intensive and complex to implement. Such investments may not be successful or may not result in the anticipated benefits resulting in asset write-offs.

In August 2017, Moody’s acquired Bureau van Dijk for $3,542.0 million. The anticipated growth, synergies and other strategic objectives of the Bureau van Dijk acquisition, as well as other completed transactions, may not be fully realized, and a variety of factors may adversely affect any anticipated benefits from such transactions. Any strategic transaction can involve a number of risks, including unanticipated challenges regarding integration of operations, technologies and new employees; the existence of liabilities or contingencies not disclosed to or otherwise known by the Company prior to closing a transaction; unexpected regulatory and operating difficulties and expenditures; 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 from other business operations; failure to 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; 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; and for foreign transactions, additional risks related to the integration of operations across different cultures and languages, and the economic, political, and regulatory risks associated with specific countries. The anticipated benefits from an acquisition or other strategic transaction may not be realized fully, or may take longer to realize than expected. As a result, the failure of acquisitions, dispositions and other strategic transactions to perform as expected may have a material adverse effect on Moody’s business, operating results and financial condition.

At December 31, 2018, Moody’s had $3,781.3 million of goodwill and $1,566.1 million of intangible assets on its balance sheet, both of which increased significantly due to the acquisition of Bureau van Dijk in 2017. Approximately 94% of the goodwill and intangible assets reside in the MA business, including those related to Bureau van Dijk, and are allocated to the six reporting units within MA: Content; ERS; MALS; MAKS; Bureau van Dijk; and Reis. 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.


		MOODY’S 2018 10-K			23

The Company’s Compliance and Risk Management Programs May Not be Effective and May Result in Outcomes That Could Adversely Affect the Company’s Reputation, Financial Condition and Operating Results.

Moody’s operates in a number of countries, and as a result the Company is required to comply and quickly adapt with numerous international and U.S. federal, state and local laws and regulations. The Company’s ability to comply with applicable laws and regulations, including anti-corruption laws, is largely dependent on its establishment and maintenance of compliance, review and reporting systems, 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 in all cases. If Moody’s employees violate its policies or if the Company’s risk management methods are not effective, the Company could be subject to criminal and civil liability, the suspension of the Company’s employees, fines, penalties, regulatory sanctions, injunctive relief, exclusion from certain markets or other penalties, and may suffer harm to its reputation, financial condition and operating results.

Legal Protections for the Company’s Intellectual Property Rights may not be Sufficient or Available to Protect the Company’s Competitive Advantages.

Moody’s considers many aspects of its products and services to be proprietary. Failure to protect the Company’s intellectual property adequately could harm its reputation and affect the Company’s ability to compete effectively. 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 may be adversely affected by inadequate or changing legal and technological protections for intellectual property and proprietary rights in some jurisdictions and markets. On January 6, 2015, a rule with direct relevance to the CRA industry was published in the Official Journal of the European Union regarding the types of information that CRAs are to provide about certain ratings (those that were paid for by issuers) for publication on a central website administered by ESMA (the European Ratings Platform). This rule directly relates to the Company’s intellectual property as it requires that the Company provide proprietary information at no cost that the Company currently sells, which could result in lost revenue. ESMA launched the European Rating Platform for public use on December 1, 2016.

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 by insufficient 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.

Changes in Tax Rates or Tax Rules Could Affect Future Results.

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 tax rate is determined based on the pre-tax income and applicable tax rates in the various jurisdictions in which the Company operates. Moody’s future tax rates could be affected by changes in the composition of earnings in countries or states with differing tax rates or other factors, including by increased earnings in jurisdictions where Moody’s faces higher tax 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 conducted 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.

For example, the Tax Act made significant changes to the U.S. federal tax laws. Many aspects of the new legislation are currently uncertain or unclear and may not be clarified for some time. 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 the Company’s expected future effective tax rates and tax assets and liabilities, which could have a material adverse effect on Moody’s business, results of operations, cash flows and financial condition. Furthermore, the Tax Act may impact the volume of debt securities issued as discussed in the Risk Factor, Changes in the Volume of


24		MOODY’S 2018 10-K

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 May Negatively Impact the Nature and Economics of the Company’s Business.

In addition, Moody’s is subject to regular examination of its income tax returns by the Internal Revenue Service and other tax authorities, and the Company is experiencing increased scrutiny as its business grows. Moody’s regularly assesses the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of its provision for income taxes, including unrecognized tax benefits; however, developments in an audit or litigation could materially and adversely affect the Company. Although the Company believes its tax estimates and accruals are reasonable, there can be no assurance that any final determination will not be materially different than the treatment reflected in its historical income tax provisions, accruals and unrecognized tax benefits, which could materially and adversely affect the Company’s business, operating results, cash flows and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Moody’s corporate headquarters is located at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, with approximately 797,537 square feet of leased space. As of December 31, 2018, Moody’s operations were conducted from 21 U.S. offices and 105 non-U.S. office locations, all of which are leased. These properties are geographically distributed to meet operating and sales requirements worldwide. These properties are generally considered to be both suitable and adequate to meet current operating requirements.

ITEM 3. LEGAL PROCEEDINGS

For information regarding legal proceedings, see Part II, Item 8 –“Financial Statements”, Note 20 “Contingencies” in this Form 10-K.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


		MOODY’S 2018 10-K			25

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information in response to this Item is set forth under the captions below.

MOODY’S PURCHASES OF EQUITY SECURITIES

For the three months ended December 31, 2018:


Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program ⁽²⁾

October 1 – 31		140,682	$	159.08		140,235	$	1,357.4 million

November 1 – 30		127,843	$	149.80		127,488	$	1,338.3 million

December 1 – 31		94,524	$	149.03		93,920	$	1,324.3 million


Total		363,049	$	153.20		361,643

⁽¹⁾	Includes surrender to the Company of 447, 355 and 604 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.

⁽²⁾

As of the last day of each of the months. On December 15, 2015, the Board authorized a $1 billion share repurchase program, which at December 31, 2018 had approximately $324 million of remaining authority. On October 22, 2018, the Board approved an additional $1 billion for the share repurchase program, which may commence following the completion of the existing program. There is no established expiration date for the remaining authorization.

During the fourth quarter of 2018, Moody’s issued a net 57 thousand 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, 2019 was 1,902. 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.


26		MOODY’S 2018 10-K

EQUITY COMPENSATION PLAN INFORMATION

The table below sets forth, as of December 31, 2018, certain information regarding the Company’s equity compensation plans.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights			Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ⁽²⁾		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities Reflected in Column (a))
Plan Category	(a)			(b)		(c)

Equity compensation plans approved by security holders		5,446,379	⁽¹⁾	$	69.86		19,187,078	⁽³⁾

Equity compensation plans not approved by security holders		—		$	—		—


Total		5,446,379		$	69.86		19,187,078

⁽¹⁾

Includes 4,299,113 options and unvested restricted shares outstanding under the Company’s 2001 Key Employees’ Stock Incentive Plan and 9,145 unvested restricted shares outstanding under the 1998 Non-Employee Directors’ Stock Incentive Plan. This number also includes a maximum of 1,138,121 performance shares outstanding under the Company’s 2001 Key Employees’ Stock Incentive Plan, which is the maximum number of shares issuable pursuant to performance share awards assuming the maximum payout at 225% of the target award for performance shares granted in 2016 and 2017 and the maximum payout of 200% of the target award for performance shares granted in 2018. Assuming payout at target, the number of shares to be issued upon the vesting of outstanding performance share awards is 520,534.

⁽²⁾	Does not reflect unvested restricted shares or performance share awards included in column (a) because these awards have no exercise price.

⁽³⁾

Includes 15,500,780 shares available for issuance as under the 2001 Stock Incentive Plan, of which all may be issued as options and 9,183,720 may be issued as restricted stock, performance shares or other stock-based awards under the 2001 Stock Incentive Plan and 903,463 shares available for issuance as options, shares of restricted stock or performance shares under the 1998 Directors Plan, and 2,782,835 shares available for issuance under the Company’s Employee Stock Purchase Plan. No new grants may be made under the 1998 Stock Incentive Plan, which expired by its terms in June 2008.


		MOODY’S 2018 10-K			27

PERFORMANCE GRAPH

The following graph compares the total cumulative shareholder return of the Company to the performance of Standard & Poor’s Stock 500 Composite Index and the Russell 3000 Financial Services Index. Both of the aforementioned indexes are easily accessible to the Company’s shareholders in newspapers, the internet and other readily available sources for purposes of the following graph.

The comparison assumes that $100.00 was invested in the Company’s common stock and in each of the foregoing indices on December 31, 2013. The comparison also assumes the reinvestment of dividends, if any. The total return for the common stock was 90% during the performance period as compared with a total return during the same period of 101% for the Russell 3000 Financial Services Index and 50% for the S&P 500 Composite Index.

Comparison of Cumulative Total Return

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

Among Moody’s Corporation, the S&P 500 Index

and the Russell 3000 Financial Services Index

LOGO


	Year Ended December 31,

	2013		2014		2015		2016		2017		2018

Moody’s Corporation	$	100.00	$	123.67	$	131.20	$	125.17	$	198.42	$	190.28

S&P 500 Composite Index	$	100.00	$	113.69	$	115.26	$	129.05	$	157.22	$	150.33

Russell 3000—Financial Services Index	$	100.00	$	114.05	$	114.62	$	183.03	$	219.54	$	201.21

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.


28		MOODY’S 2018 10-K

ITEM 6. SELECTED FINANCIAL DATA

The Company’s selected consolidated financial data should be read in conjunction with Item 7. “MD&A” and the Moody’s Corporation consolidated financial statements and notes thereto.



	Year Ended December 31,

amounts in millions, except per share data	2018			2017			2016			2015			2014

Results of operations

Revenue	$	4,442.7		$	4,204.1		$	3,604.2		$	3,484.5		$	3,334.3

Expenses

Operating and SG&A Expenses⁽¹⁾		2,325.6			2,202.5			1,950.8			1,880.3			1,788.9

Restructuring		48.7			—			12.0			—			—

Depreciation and amortization		191.9			158.3			126.7			113.5			95.6

Acquisition-Related Expenses		8.3			22.5			—			—			—

Settlement Charge		—			—			863.8			—			—


Total Expenses		2,574.5			2,383.3			2,953.3			1,993.8			1,884.5


Operating income⁽²⁾		1,868.2			1,820.8			650.9			1,490.7			1,449.8

Non-operating (expense) income, net⁽³⁾⁽¹⁾		(197.2	)		(34.0	)		(92.9	)		(111.1	)		11.2


Income before provision for income taxes⁽²⁾		1,671.0			1,786.8			558.0			1,379.6			1,461.0

Provision for income taxes⁽⁴⁾		351.6			779.1			282.2			430.0			455.0


Net income⁽²⁾		1,319.4			1,007.7			275.8			949.6			1,006.0

Less: Net income attributable to noncontrolling interests		9.8			7.1			9.2			8.3			17.3


Net income attributable to Moody’s⁽²⁾⁽⁵⁾	$	1,309.6		$	1,000.6		$	266.6		$	941.3		$	988.7


Earnings per share

Basic⁽²⁾	$	6.84		$	5.24		$	1.38		$	4.70		$	4.69

Diluted⁽²⁾	$	6.74		$	5.15		$	1.36		$	4.63		$	4.61

Weighted average shares outstanding

Basic		191.6			191.1			192.7			200.1			210.7

Diluted		194.4			194.2			195.4			203.4			214.7

Dividends declared per share	$	1.76		$	1.14		$	1.49		$	1.39		$	1.18

Operating margin⁽²⁾		42.1	%		43.3	%		18.1	%		42.8	%		43.5	%

Operating Cash Flow⁽⁶⁾	$	1,461.1		$	754.6		$	1,259.2		$	1,198.1		$	1,077.3

	December 31,
	2018			2017			2016			2015			2014

Balance sheet data

Total assets	$	9,526.2		$	8,594.2		$	5,327.3		$	5,103.0		$	4,653.8

Long-term debt	$	5,226.1		$	5,111.1		$	3,063.0		$	3,380.6		$	2,532.1

Total shareholders’ equity (deficit)	$	656.5		$	(114.9	)	$	(1,027.3	)	$	(333.0	)	$	42.9

⁽¹⁾

Pursuant to the adoption of a new accounting standard relating to pension accounting as more fully discussed in Note 1, only the service cost component of net periodic expense is classified within operating and SG&A expenses with the remaining components being classified as non-operating (expenses) income. Prior period results have been restated to reflect this classification.

⁽²⁾	The significant decrease in 2016 is primarily driven by the 2016 $863.8 million Settlement Charge ($700.7 million, net of tax, or $3.59 per diluted share).

⁽³⁾

The 2017 amount includes a $111.1 million Purchase Price Hedge Gain as well as the $59.7 million CCXI Gain. The 2016 amount includes a $34.8 million FX gain relating to the substantial liquidation of a subsidiary. The 2015 and 2014 amounts include benefits of $7.1 million each, related to the favorable resolution of certain Legacy Tax Matters. The 2014 amount also includes the ICRA Gain of $102.8 million.

⁽⁴⁾

Provision for income taxes in the year ended December 31, 2018 includes a charge of $63.9 million relating to an increase in non-U.S. UTPs, partially offset by a $59.0 million benefit from potential realization of foreign tax credits and other adjustments to previous estimates relating to the Tax Act. Provision for income taxes in the year ended December 31, 2017 includes a net charge of $245.6 million related to the impact of U.S. tax reform and a statutory tax rate reduction in Belgium as more fully discussed in Note 16 to the consolidated financial statements in Item 8 of this Form 10-K.


		MOODY’S 2018 10-K			29

⁽⁵⁾

The 2018 amount includes: i) a $59.0 million ($0.30 per share) benefit related to the impact of U.S. tax reform, ii) a $63.9 million ($0.33 per share) charge related to an increase to non-U.S UTPs; and iii) $36.8 million ($0.19 per share) net restructuring charge. The 2017 amount includes: i) a $245.6 million ($1.27 per share) charge related to the impact of U.S. tax reform and a statutory tax rate reduction in Belgium; ii) a $72.3 million ($0.37 per share) Purchase Price Hedge Gain; and iii) the $59.7 million ($0.31 per share) CCXI Gain. The 2016 amount includes: i) a $700.7 million ($3.59 per share) Settlement Charge; ii) an $8.1 million ($0.04 per share) restructuring charge; and iii) a $34.8 million ($0.18 per share) FX gain relating to the substantial liquidation of a subsidiary. The 2015 and 2014 amounts include benefits of $6.4 million ($0.03 per share) each related to the resolution of certain Legacy Tax Matters. Also, the 2014 amount includes the ICRA Gain of $78.5 million ($0.37 per share).

⁽⁶⁾

The decline in operating cash flow in 2017 is primarily due to payments made relating to the Settlement Charge. Additionally, in the first quarter of 2017, the Company adopted ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting”. As required by ASU 2016-09, Excess Tax Benefits or shortfalls relating to employee stock-based compensation are reflected in operating cash flow and the Company has applied this provision on a retrospective basis. Under previous accounting guidance, Excess Tax Benefits or shortfalls were shown as a reduction to operating cash flow and an increase to financing cash flow.


30		MOODY’S 2018 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis of financial condition and results of operations should be read in conjunction with the Moody’s Corporation consolidated financial statements and notes thereto included elsewhere in this annual report on Form 10-K.

This MD&A contains Forward-Looking Statements. See “Forward-Looking Statements” commencing on page 57 and Item 1A. “Risk Factors” commencing on page 17 for a discussion of uncertainties, risks and other factors associated with these statements.

THE COMPANY

MIS, the credit rating agency, publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide. Revenue is primarily derived from the originators and issuers of such transactions who use MIS ratings in the distribution of their debt issues to investors. Additionally, MIS earns revenue from certain non-ratings-related operations, which consist primarily of financial instrument pricing services in the Asia-Pacific region as well as 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.

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 reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the reporting periods. These estimates are based on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, Moody’s evaluates its estimates, including those related to revenue recognition, accounts receivable allowances, contingencies, restructuring, goodwill and acquired intangible assets, pension and other retirement benefits, and income taxes. Actual results may differ from these estimates under different assumptions or conditions. The following accounting estimates are considered critical because they are particularly dependent on management’s judgment about matters that are uncertain at the time the accounting estimates are made and changes to those estimates could have a material impact on the Company’s consolidated results of operations or financial condition.

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).

The Company has eight primary 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 six reporting units within MA: Content, ERS, MALS (formerly FSTC), MAKS, Bureau van Dijk and Reis. The Content reporting unit offers subscription based research, data and analytical products, including credit ratings produced by MIS, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and credit analytical tools. The ERS reporting unit provides products and services that support the credit risk management and regulatory compliance activities of financial institutions and also provides advanced actuarial software for the life insurance industry. These products and services are primarily delivered via software that is licensed on a perpetual basis or sold on a subscription basis. The MALS reporting unit consists of the portion of the MA business that offers both credit training as well as other professional development training. The MAKS reporting unit provides offshore research and analytical services. The Bureau van Dijk reporting unit consists of the Bureau van Dijk business, which was acquired on August 10, 2017, and primarily provides business intelligence and company information products. The Reis reporting unit, consists of the newly acquired Reis business, and provides commercial real estate market information and analytical tools.


		MOODY’S 2018 10-K			31

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 in accordance with ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment”. 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.

At July 31, 2018, the Company performed quantitative assessments of the ERS, MALS, MAKS and ICRA reporting units and a qualitative assessment for the remaining reporting units. No quantitative assessment resulted in the carrying value of the reporting unit exceeding its fair value. Each qualitative analysis resulted in the Company determining that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount.

The Company quantitatively tested the ERS, MALS, MAKS and ICRA reporting units as of July 31, 2018 due to the factors outlined below:

ERS – this reporting unit was quantitatively assessed to update its valuation to reflect the current assumptions relating to the timing of a strategic shift in the business away from lower margin sales of highly customized software solutions to higher margin SaaS sales. This migration to SaaS sales is expected to contribute to a more stable and more profitable base of recurring revenue over the medium to long-term. In 2018, the Company revised its projections for ERS to reflect a faster deterioration of the lower margin sales of highly customized software solutions than was previously projected in 2017.

MALS and MAKS – these reporting units were quantitatively assessed at the discretion of the Company as they have historically been the reporting units with the lowest amount by which the fair value of a reporting unit exceeds its carrying value.

ICRA – this reporting unit was tested quantitatively due to it having a readily available fair value based on its stock price.

Determining the fair value of a reporting unit or an indefinite-lived acquired intangible asset (including its estimated useful life) involves the use of significant estimates and assumptions. These estimates and assumptions include projections of future operating results and cash flows of each reporting unit that are based on internal budgets and strategic plans, expected long-term growth rates, terminal values, weighted average cost of capital, the effects of external factors and market conditions as well as appropriate comparable market metrics. However, as these estimates and assumptions are unpredictable and inherently uncertain, actual future results may differ from these estimates and the time frame of such changes may be rapid. 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.


32		MOODY’S 2018 10-K

Sensitivity Analyses and Key Assumptions for Deriving the Fair Value of a Reporting Unit

The following table identifies the amount of goodwill allocated to each reporting unit as of December 31, 2018 and the amount by which the net assets of each reporting unit would exceed the fair value under Step 2 of the goodwill impairment test as prescribed in ASC Topic 350, assuming hypothetical reductions in their fair values as of the date of the last quantitative goodwill impairment assessment for each reporting unit (July 31, 2018 for ERS, MALS, MAKS and ICRA; July 31, 2016 for MIS and Content).


			Sensitivity Analysis

			Deficit Caused by a Hypothetical Reduction to Fair Value

	Goodwill		10%		20%		30%			40%

MIS	$	45.9	$	—	$	—	$	—		$	—

Content		342.9		—		—		—			—

ERS		609.1		—		—		(33.1	)		(169.2	)

MALS ⁽¹⁾		120.7		—		—		—			(2.9	)

MAKS		181.4		—		—		—			(21.6	)

ICRA		215.2		—		—		(1.2	)		(59.6	)

Bureau van Dijk ⁽²⁾		2,080.1		N/A		N/A		N/A			N/A

Reis ⁽³⁾		186.0		N/A		N/A		N/A			N/A


Totals	$	3,781.3	$	—	$	—	$	(34.3	)	$	(253.3	)

⁽¹⁾	Omega Performance was acquired subsequent to the Company’s annual goodwill impairment assessment as of July 31, 2018. Goodwill related to this acquisition is reported within the MALS reporting unit.

⁽²⁾	Bureau van Dijk was acquired in August 2017 and has not yet been subject to a quantitative goodwill assessment. The purchase price approximates the fair value of the reporting unit at July 31, 2018, and accordingly, Bureau van Dijk was not subject to the sensitivity analysis above.

⁽³⁾	Reis was acquired in October 2018, subsequent to the Company’s annual goodwill impairment assessment as of July 31, 2018. Due to the close proximity of the Reis acquisition to December 31, 2018, the purchase price approximates the fair value of the reporting unit.

Methodologies and significant estimates utilized in determining the fair value of reporting units:

The following is a discussion regarding the Company’s methodology for determining the fair value of its reporting units, excluding ICRA, as of the date of each reporting unit’s last quantitative assessment (July 31, 2018 for ERS, MALS, and MAKS and July 31, 2016 for MIS and Content). 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 plans, expected long-term growth rates, terminal values, weighted average cost of capital and the effects of external factors and market conditions. Changes in these estimates and assumptions could materially affect the estimated fair value of each reporting unit 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.

The sensitivity analyses on the future cash flows and WACC assumptions described below are as of each reporting unit’s last quantitative goodwill impairment assessment. The following discusses the key assumptions utilized in the discounted cash flow valuation methodology that requires significant management judgment:

Future cash flow assumptions —The projections for future cash flows utilized in the models are derived from historical experience and assumptions regarding future growth and profitability of each reporting unit. These projections are consistent with the Company’s operating budget and strategic plan. Cash flows for the five years subsequent to the date of the quantitative goodwill impairment analysis were utilized in the determination of the fair value of each reporting unit. The growth rates assumed a gradual increase in revenue based on a continued improvement in the global economy and capital markets, new customer acquisition and new products. Beyond five years, a terminal value was determined using a perpetuity growth rate based on inflation and real GDP growth rates. A sensitivity analysis of the revenue growth rates was performed on all reporting units. For each reporting unit analyzed, a 10% decrease in the revenue growth rates used would not have resulted in its carrying value exceeding its estimated fair value.

WACC —The WACC is the rate used to discount each reporting unit’s estimated future cash flows. The WACC is calculated based on the proportionate weighting of the cost of debt and equity. The cost of equity is based on a risk-free interest rate 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


		MOODY’S 2018 10-K			33

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 8.5% to 10.5% as of the date of the reporting unit’s most recent quantitative assessment. Differences in the WACC used between reporting units is primarily due to distinct risks and uncertainties regarding the cash flows of the different reporting units. A sensitivity analysis of the WACC was performed on all reporting units as of the date of the reporting unit’s last quantitative goodwill impairment assessment. For each reporting unit analyzed, an increase in the WACC of one percentage point would not result in its carrying value exceeding its fair value.

Income Taxes

The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company’s tax assets and liabilities are affected by the amounts charged for services provided and expenses incurred as well as other tax matters such as intercompany 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 of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.

The Company 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 settlement with a taxing authority. As the determination of liabilities related to UTPs and associated interest and penalties requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or financial condition.

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 reduces the statutory federal corporate income tax rate from 35% to 21%. Due to the complexities involved in applying the provisions of the Tax Act, in 2017 the Company recorded a provisional estimate of $247.3 million related to the transition tax in 2017. In 2018, the IRS issued notices clarifying certain aspects of the transition tax. As a result, the Company reduced its provision for the transition tax by $10.9 million. The IRS may issue additional regulations or notices in future periods to clarify or amend provisions of the Tax Act and such guidance could result in revisions in future periods to the amounts recorded for the existing provisions and interpretations of the Tax Act. In addition, in 2018 the Company recorded a deferred tax asset of $48.1 million related to potential foreign tax credits which could be realized if certain UTPs resulted in tax assessments. The transition tax liability reported on the Company’s 2017 tax return is payable over eight years starting in 2018 and will not accrue interest. Due to the reduction in U.S. corporate income tax rates beginning in 2018, a decrease of $56.2 million was recorded to net deferred tax assets in 2017. The above amounts may be impacted by a number of additional considerations, including but not limited to the issuance of regulations and the Company’s ongoing analysis of the new law.

Pursuant to the Tax Act being signed into law, all previously undistributed foreign earnings became subject to U.S. tax. In light of U.S tax reform, the Company has reassessed its capital allocation strategy, including reevaluating its global cash position and revising its plans for repatriating or reinvesting foreign earnings. The Company regularly evaluates in which entities it will indefinitely reinvest earnings outside the U.S. The Company has provided non-U.S. deferred taxes for those entities whose earnings are not considered indefinitely reinvested outside of the U.S.

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.


34		MOODY’S 2018 10-K

Determination of performance obligations:

When contracts with customers contain multiple performance obligations, the Company accounts for individual performance obligations separately if they are distinct.

In the Company’s MIS segment, revenue arrangements with multiple elements are generally comprised of two distinct performance obligations, initial rating fees and the related monitoring services. Revenue attributed to initial ratings of issued securities is generally recognized when the rating is delivered to the issuer, whereas revenue from monitoring related to MIS’s ratings is recognized ratably over the period in which the monitoring is performed.

In the MA segment, contracts with customers often include promises to transfer multiple products and services to a customer. When arrangements for software, content or SaaS licenses also include related implementation services, the Company may be required to exercise significant judgment in determining the level of integration and interdependency between the promise to grant the software license and the promise to deliver the related implementation services. This determination influences whether the software license is considered distinct and accounted for separately (with revenue generally being recognized at the time the product master or first copy is delivered or transferred to the customer), or not distinct and accounted for together with the implementation services (with revenue being recognized on a percentage-of-completion basis as implementation services are performed).

Allocating consideration to performance obligations:

Management judgment is also required in the determination of the SSP, which is utilized to allocate the consideration from a contract with a customer to each distinct performance obligation.

In the MIS segment, the Company allocates the transaction price within arrangements that include multiple elements based upon the relative SSP of each service at contract inception. The SSP for monitoring fees in these arrangements is generally based upon directly observable selling prices where the monitoring service is sold separately. The Company generally utilizes management’s best estimate of SSP for initial rating fees and considers all available data points. MIS generally provides initial ratings only in transactions with customers that include monitoring services related to the rating.

In the MA segment, revenue is generally allocated to all performance obligations based upon the relative SSP at contract inception. 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 consistent with the recognition pattern of the related revenue over time. 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. Determining the estimated economic life of the products sold requires judgment with respect to anticipated future technological changes/product enhancements.

Contingencies

Accounting for contingencies, including those matters described in Note 20 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, where it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated, the Company records liabilities in the consolidated financial statements and periodically adjusts these as appropriate. When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued unless some higher amount within the range is a better estimate than another amount within the range. In other instances, where a loss is reasonably possible, management does not record a liability because of uncertainties related to the probable outcome and/or the amount or range of loss, but discloses the contingency if material.


		MOODY’S 2018 10-K			35

As additional information becomes available, the Company adjusts its assessments and estimates of such matters accordingly. In view of the inherent difficulty of predicting the outcome of litigation, regulatory, governmental investigations and inquiries, enforcement and similar matters and contingencies, particularly where the claimants seek large or indeterminate damages or where the parties assert novel legal theories or the matters involve a large number of parties, the Company cannot predict what the eventual outcome of the pending matters will be or the timing of any resolution of such matters. The Company also cannot predict the impact (if any) that any such matters may have on how its business is conducted, on its competitive position or on its financial position, results of operations or cash flows. As the process to resolve any pending matters progresses, management will continue to review the latest information available and assess its ability to predict the outcome of such matters and the effects, if any, on its operations and financial condition. However, in light of the large or indeterminate damages sought in some of them, the absence of similar court rulings on the theories of law asserted and uncertainties regarding apportionment of any potential damages, an estimate of the range of possible losses cannot be made at this time.

The Company’s wholly-owned insurance subsidiary insures the Company against certain risks including, but not limited to, deductibles for worker’s compensation, employment practices litigation, employee medical claims and terrorism, for which the claims are not material to the Company. In addition, for claim years 2008 and 2009, the insurance subsidiary insured the Company for defense costs related to professional liability claims. For matters insured by the Company’s insurance subsidiary, Moody’s records liabilities based on the estimated total claims expected to be paid and total projected costs to defend a claim through its anticipated conclusion. The Company determines liabilities based on an assessment of management’s best estimate of claims to be paid and legal defense costs as well as actuarially determined estimates. Defense costs for matters not self-insured by the Company’s wholly-owned insurance subsidiary are expensed as services are provided.

Accounts Receivable Allowances and Contract Assets

Moody’s records variable consideration in respect of estimated future adjustments to customer billings as an adjustment to revenue, using the expected value method based on analysis of similar contracts in the same line of business. Such amounts are reflected as additions to the accounts receivable allowance, or to contract assets. Additionally, estimates of uncollectible accounts are recorded as bad debt expense and are reflected as additions to the accounts receivable allowance. Actual billing adjustments are recorded against the allowance, or contract asset, depending on the nature of the adjustment. Actual uncollectible account write-offs are recorded against the allowance. Moody’s evaluates its accounts receivable allowance by reviewing and assessing historical collection and adjustment experience and the current status of customer accounts. Moody’s also considers the economic environment of the customers, both from an industry and geographic perspective, in evaluating the need for allowances. Based on its analysis, Moody’s adjusts its allowance as considered appropriate in the circumstances. This process involves a high degree of judgment and estimation and could involve significant dollar amounts. Accordingly, Moody’s results of operations can be affected by adjustments to the allowance. Management believes that the allowance is adequate to cover anticipated adjustments and write-offs under current conditions. However, significant changes in any of the above factors, or actual write-offs or adjustments that differ from the estimated amounts, could impact the Company’s consolidated results of operations.

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 portfolio (which is principally comprised of equity and fixed-income investments); and

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, 2018 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 14 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 in actual experience or changes in assumptions could have a significant effect on the expenses, assets and liabilities related to the Company’s Retirement Plans. Additionally, the Company has updated its mortality assumption by adopting the newly released mortality improvement scale MP-2018 to accompany the RP-2014 mortality tables to reflect the latest information regarding future mortality expectations by the Society of Actuaries.

When actual plan experience differs from the assumptions used, actuarial gains or losses arise. Excluding differences between the expected long-term rate of return assumption and actual returns on plan assets, the Company amortizes, as a component of annual


36		MOODY’S 2018 10-K

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, 2018 that have not been recognized in annual expense are $83.5 million, and Moody’s expects to recognize a net periodic expense of $3.6 million in 2019 related to the amortization of actuarial losses.

For Moody’s funded U.S. pension plan, the differences between the expected long-term rate of return assumption and actual returns could also affect the net periodic pension expense. As permitted under ASC Topic 715, the Company amortizes the impact of asset returns over a five-year period for purposes of calculating the market-related value of assets that is used in determining the expected return on assets’ component of annual expense and in calculating the total unrecognized gain or loss subject to amortization. As of December 31, 2018, the Company has an unrecognized asset loss of $12.5 million, of which $4.3 million will be recognized in the market-related value of assets that is used to calculate the expected return on assets’ component of 2020 expense.

The table below shows the estimated effect that a one percentage-point decrease in each of these assumptions will have on Moody’s 2019 income before provision for income taxes. These effects have been calculated using the Company’s current projections of 2019 expenses, assets and liabilities related to Moody’s Retirement Plans, which could change as updated data becomes available.


(dollars in millions)	Assumption Used for 2019		Estimated Impact on 2019 Income before Provision for Income Taxes (Decrease)/Increase

Weighted Average Discount Rates ⁽¹⁾		4.07%/4.10%	$	(8.2	)

Weighted Average Assumed Compensation Growth Rate		3.69%	$	1.4

Assumed Long-Term Rate of Return on Pension Assets		5.65%	$	(3.6	)

⁽¹⁾	Weighted average discount rates of 4.07% and 4.10% for pension plans and Other Retirement Plans, respectively.

A one percentage-point increase in assumed healthcare cost trend rates will not affect 2019 projected expenses. Based on current projections, the Company estimates that expenses related to Retirement Plans will be approximately $24 million in 2019, a decrease compared to the $30.7 million recognized in 2018.

Restructuring

The Company has engaged, and may continue to engage, in restructuring actions, which require management to utilize significant estimates related to expenses for severance and other employee benefit costs, contract termination costs and asset impairments. If the actual amounts differ from these estimates, the amount of the restructuring charge could be impacted. For a full description of Moody’s restructuring actions, refer to Note 10 to the consolidated financial statements.

Other Estimates

In addition, there are other accounting estimates within Moody’s consolidated financial statements, including recoverability of deferred tax assets, valuation of investments in affiliates and the estimated lives of amortizable intangible assets. Management believes the current assumptions and other considerations used to estimate amounts reflected in Moody’s consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in Moody’s consolidated financial statements, the resulting changes could have a material adverse effect on Moody’s consolidated results of operations or financial condition.

See Note 2 to the consolidated financial statements for further information on significant accounting policies that impact Moody’s.

REPORTABLE SEGMENTS

The Company is organized into two reportable segments at December 31, 2018: MIS and MA.

The MIS segment is comprised primarily of all of the Company’s ratings operations consisting of five LOBs – CFG, SFG, FIG, PPIF and MIS Other. The ratings LOBs generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide. The MIS Other LOB consists of certain non-ratings operations managed by MIS, which consists of non-rating revenue from ICRA and fixed income pricing service operations in the Asia-Pacific region.

The MA segment develops a wide range of products and services that support financial analysis and risk management activities of institutional participants in global financial markets as well as serving as provider of business intelligence and company information. The MA segment consists of three lines of business – RD&A, ERS and PS. The results of operations for MA for the year ended December 31, 2018 include the financial results from Omega Performance and Reis, which were acquired in August 2018 and October 2018, respectively. Revenue for the PS LOB includes financial results from Omega Performance and revenue for RD&A LOB includes financial results from Reis.


		MOODY’S 2018 10-K			37

The following is a discussion of the results of operations of the Company and its reportable segments. Total MIS revenue and total MA expenses include the intersegment royalty revenue for MIS and expense charged to MA for the rights to use and distribute content, data and products developed by MIS. The royalty rate charged by MIS approximates the fair value of the aforementioned content, data and products developed by MIS. Total MA revenue and total MIS expenses include intersegment fees charged to MIS from MA for the use of certain MA products and services in MIS’s ratings process. These fees charged by MA are generally equal to the costs incurred by MA to provide these products and services. Overhead charges and corporate expenses that exclusively benefit one segment are fully charged to that segment. Additionally, overhead costs and corporate expenses of the Company that benefit both segments are generally allocated to each segment based on a revenue-split methodology. Overhead expenses include costs such as rent and occupancy, information technology and support staff such as finance, human resources and legal.

RESULTS OF OPERATIONS

Year ended December 31, 2018 compared with year ended December 31, 2017

Executive Summary

Moody’s completed the acquisition of Bureau van Dijk on August 10, 2017. Moody’s results of operations include Bureau van Dijk’s operating results beginning as of August 11, 2017. Additionally, Moody’s completed the acquisitions of Omega Performance and Reis on August 16, 2018 and October 15, 2018, respectively. In the discussion below, reference to inorganic revenue growth refers to Bureau van Dijk’s operating results from January 1, 2018 through and including August 10, 2018 as well as Reis and Omega Performance revenue from their respective acquisitions dates through December 31, 2018.

Moody’s revenue in 2018 totaled $4,442.7 million, an increase of $238.6 million, or 6%, compared to 2017, reflecting growth in MA being partially offset by declines in MIS.

MIS external revenue was 2% lower compared to the prior year reflecting:

lower non-financial corporate and infrastructure rated issuance volumes reflecting the confluence of unfavorable market factors, with the impact most notable in the fourth quarter of 2018;

a decline in U.S. public finance issuance resulting from certain provisions of the Tax Act;

partially offset by:

benefits from a favorable product mix and pricing increases;

an increase in new ratings mandates; and

demand for floating rate instruments (most notably in the first half of 2018), which resulted in strong CLO formation.

MA external revenue grew 21% compared to the prior year primarily reflecting:

approximately $202 million of inorganic revenue growth from the acquisitions of Bureau van Dijk, Reis and Omega, or approximately 14 percentage points of the growth; and

strong growth in the credit research and rating data feeds product lines within RD&A.

Total operating and SG&A expenses increased $123.1 million, or 6% compared to 2017, with the most notable driver being approximately $120 million of inorganic expense growth from the aforementioned acquisitions.

The restructuring charge in 2018 relates to a restructuring program approved in the fourth quarter of 2018, which is more fully discussed in Note 10 to the consolidated financial statements.

D&A increased $33.6 million primarily due to amortization of intangible assets acquired as part of the Bureau van Dijk acquisition.

Operating income of $1,868.2 million in 2018 increased $47.4 million compared to 2017 and resulted in an operating margin of 42.1%, compared to 43.3% in the prior year. Adjusted Operating Income of $2,117.1 million in 2018 increased $115.5 million compared to 2017, resulting in an Adjusted Operating Margin of 47.7% compared to 47.6% in the prior year.

The change in total non-operating (expense) income, net compared to the prior year is primarily due to the $59.7 million CCXI Gain and $111.1 million Purchase Price Hedge Gain in 2017.

The ETR in 2018 was 21.0%, down from 43.6% for the prior-year period. The ETR in 2018 benefitted from the impact of an enacted lower corporate tax rate in the U.S. pursuant to the Tax Act and lower non-U.S. effective tax rates. The ETR in 2017 included a net charge of approximately $246 million related to the impacts of tax reform in the U.S. and Belgium partially offset by the non-taxable CCXI Gain.


38		MOODY’S 2018 10-K

Diluted EPS and Adjusted Diluted EPS in 2018 of $6.74 and $7.39, respectively, increased 31%, and 22%, respectively, compared to 2017, with approximately 10 percentage points of the growth due to the favorable impact of the Tax Act on the ETR. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS.

Moody’s Corporation


	Year Ended December 31,						% Change Favorable (Unfavorable)
	2018			2017			% Change Favorable (Unfavorable)

Revenue:

United States	$	2,329.6		$	2,348.4			(1	%)


Non-U.S.:

EMEA		1,377.0			1,131.7			22	%

Asia-Pacific		493.2			471.4			5	%

Americas		242.9			252.6			(4	%)


Total Non-U.S.		2,113.1			1,855.7			14	%


Total		4,442.7			4,204.1			6	%


Expenses:

Operating		1,245.5			1,216.6			(2	%)

SG&A		1,080.1			985.9			(10	%)

Restructuring		48.7			—			NM

Depreciation and amortization		191.9			158.3			(21	%)

Acquisition-Related Expenses		8.3			22.5			63	%


Total		2,574.5			2,383.3			(8	%)

Operating income	$	1,868.2		$	1,820.8			3	%

Adjusted Operating Income ⁽¹⁾	$	2,117.1		$	2,001.6			6	%

Interest expense, net	$	(216.0	)	$	(208.5	)		(4	%)
Other non-operating income, net		18.8			3.7			NM
Purchase Price Hedge Gain		—			111.1			NM
CCXI Gain		—			59.7			NM


Non-operating (expense) income, net	$	(197.2	)	$	(34.0	)		NM

Net income attributable to Moody’s	$	1,309.6		$	1,000.6			31	%
Diluted weighted average shares outstanding		194.4			194.2			—
Diluted EPS attributable to Moody’s common shareholders	$	6.74		$	5.15			31	%
Adjusted Diluted EPS⁽¹⁾	$	7.39		$	6.07			22	%
Operating margin		42.1	%		43.3	%
Adjusted Operating Margin⁽¹⁾		47.7	%		47.6	%
Effective tax rate		21.0	%		43.6	%

⁽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.

The table below shows Moody’s global staffing by geographic area:


	December 31,					% Change
	2018			2017		% Change
United States		4,008			3,591		12	%
Non-U.S.		9,049			8,305		9	%

Total		13,057	⁽¹⁾		11,896		10	%

⁽¹⁾	Includes approximately 275 employees from the acquisition of Reis and Omega Performance

Global revenue of $4,442.7 million in 2018 increased $238.6 million, or 6%, compared to 2017 reflecting growth in MA partially offset by declines in MIS. Refer to the section entitled “Segment Results” of this MD&A for a more fulsome discussion of the Company’s segment revenue.


		MOODY’S 2018 10-K			39

Transaction Revenue accounted for 44% of global MCO revenue in 2018 compared to 50% in 2017.

U.S. revenue of $2,329.6 million in 2018 decreased $18.8 million over the prior year reflecting declines in MIS being partially offset by growth in MA.

Non-U.S. revenue of $2,113.1 million increased $257.4 million from 2017 reflecting growth in both reportable segments, and included approximately $167 million of inorganic revenue growth from Bureau van Dijk.

Operating expenses were $1,245.5 million in 2018, up $28.9 million from 2017, reflecting increases in non-compensation of approximately $38 million, partially offset by a decline in compensation cost of approximately $9 million. The increase in non-compensation costs is primarily due to inorganic expense growth related to the acquisitions of Bureau van Dijk, Reis and Omega. The decline in compensation costs reflects lower incentive compensation resulting from lower achievement against full-year targeted results compared to the prior year, partially offset by higher salaries and employee benefits expenses, which includes the impact of salary adjustments and hiring as well as inorganic expense growth related to the aforementioned acquisitions.

SG&A expenses of $1,080.1 million in 2018 increased $94.2 million from the prior year reflecting increases in non-compensation and compensation costs of approximately $65 million and $30 million, respectively. The increase in non-compensation costs primarily reflects inorganic expense growth related to the acquisition of Bureau van Dijk and higher legal costs. The increase in compensation costs reflects an increase in salaries and employee benefits expenses, which includes the impact of salary adjustments and hiring as well as inorganic expense growth related to the Bureau van Dijk, Reis and Omega Performance acquisitions. These increases were partially offset by lower incentive compensation reflecting lower achievement against full-year targeted results compared to the prior year.

The restructuring charge of $48.7 million relates to a restructuring program approved in the fourth quarter of 2018, which is more fully discussed in Note 10 to the consolidated financial statements.

D&A increased $33.6 million primarily due to amortization of intangible assets acquired as part of the Bureau van Dijk acquisition.

Interest expense, net in 2018 was $216.0 million, a $7.5 million increase in expense compared to 2017, primarily due to interest and fees on additional debt issued in 2017 to fund the acquisition of Bureau van Dijk and the issuance of additional notes issued in the second and fourth quarter of 2018, all of which are more fully discussed in Note 17 to the consolidated financial statements. Refer to the section entitled “Liquidity and Capital Resources” of this MD&A for further discussion regarding cash flows relating to the Company’s indebtedness. This increase was partially offset by benefits from cross-currency swaps executed in 2018, which are more fully discussed in Note 6 to the consolidated financial statements. Additionally, interest expense in 2017 included approximately $7 million due to the Make Whole Amount on the prepayment of the Series 2007-1 Notes.

Other non-operating income, net was $18.8 million in 2018, a $15.1 million increase compared to 2017 primarily reflecting lower FX losses of approximately $5 million coupled with gains on the Company’s investments in certain mutual funds.

Additionally, Moody’s recognized the $59.7 million CCXI Gain and the $111.1 million Purchase Price Hedge Gain in 2017.

The reduction in the ETR to 21.0% in 2018 primarily reflects the impact of an enacted lower corporate tax rate in the U.S. pursuant to the Tax Act. Additionally, the 2018 ETR includes additional UTPs of approximately $64 million relating to certain non-U.S. matters partially offset by a decrease relating to the transition tax liability of approximately $59 million. Furthermore, the 2018 ETR includes the benefit from lower non-U.S. effective tax rates. The ETR in 2017 was 43.6% and included a net charge of approximately $246 million related to the impacts of tax reform in the U.S. and Belgium and tax on the Purchase Price Hedge Gain, which was taxed in a higher tax jurisdiction. These items were partially offset by the non-taxable CCXI Gain in 2017.

Diluted EPS in 2018 of $6.74, which included a $0.19 restructuring charge, increased $1.59, or 31%, compared to 2017, which included both the $0.31 CCXI Gain and the $0.37 Purchase Price Hedge Gain. Adjusted Diluted EPS of $7.39 in 2018 increased $1.32, or 22%, compared to 2017 (refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for items excluded in the derivation of Adjusted Diluted EPS). The favorable impact of the Tax Act on the ETR contributed approximately 10 percentage points of the growth for both Diluted EPS and Adjusted Diluted EPS.


40		MOODY’S 2018 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:



	Year Ended December 31,						% Change Favorable (Unfavorable)
	2018			2017			% Change Favorable (Unfavorable)

Revenue:

Corporate finance (CFG)	$	1,334.1		$	1,392.7			(4	%)

Structured finance (SFG)		526.5			495.5			6	%

Financial institutions (FIG)		441.7			435.8			1	%

Public, project and infrastructure finance (PPIF)		391.1			431.3			(9	%)


Total ratings revenue		2,693.4			2,755.3			(2	%)


MIS Other		19.0			18.5			3	%


Total external revenue		2,712.4			2,773.8			(2	%)


Intersegment royalty		124.0			111.7			11	%


Total		2,836.4			2,885.5			(2	%)


Expenses:

Operating and SG&A (external)		1,166.7			1,223.3			5	%

Operating and SG&A (intersegment)		12.3			16.0			23	%

Adjusted Operating Income		1,657.4			1,646.2			1	%


Restructuring		32.2			—			NM

Depreciation and amortization		64.9			74.7			13	%

Operating income	$	1,560.3		$	1,571.5			(1	%)

Adjusted Operating Margin		58.4	%		57.1	%
Operating margin		55.0	%		54.5	%

The following is a discussion of external MIS revenue and operating expenses:

Global MIS revenue of $2,712.4 million in 2018 was down 2% compared to 2017, reflecting declines in CFG and PPIF being partially offset by growth in SFG and FIG and the favorable impact of changes in product mix and pricing increases.

Transaction Revenue for MIS was 62% in 2018, compared to 65% in 2017.

In the U.S., revenue was $1,619.2 million in 2018, down $83.6 million from 2017 reflecting declines in CFG and PPIF.

Non-U.S. revenue was $1,093.2 million in 2018, an increase of $22.2 million or 2%, compared to 2017, primarily reflecting strength in non-U.S. SFG revenue.

Global CFG revenue of $1,334.1 million in 2018 declined 4% compared to 2017 and reflected lower corporate debt issuance (both investment-grade and speculative-grade) resulting from a confluence of unfavorable cyclical market factors which included: i) higher U.S. benchmark interest rates; ii) increased capital market volatility; iii) widening of credit spreads; and iv) an increase in U.S. corporate sector liquidity subsequent to U.S. tax reform. These declines were partially offset by changes in product mix and pricing increases coupled with growth in new ratings mandates, which resulted in higher monitoring fees in all regions. Additionally, the decline compared to 2017 was partially offset by higher bank loan revenue in the first half of 2018 in the U.S. and EMEA resulting from favorable changes in product mix, M&A financing activity and investor demand for floating rate debt instruments earlier in the year. Transaction Revenue represented 69% and 73% of total CFG revenue in 2018 and 2017, respectively. In the U.S., revenue was $852.3 million, or 6% lower compared to the prior year. Non-U.S. revenue of $481.8 million was approximately flat compared to the prior year.

Global SFG revenue of $526.5 million in 2018 increased $31.0 million, or 6%, compared to 2017. In the U.S., revenue of $342.9 million increased $2.8 million over 2017 and reflected strength in CLO formation resulting from an increase in the supply of collateral and favorable market conditions in the first half of 2018, which facilitated both new securitizations and ongoing refinancing activity. These increases were partially offset by declines in REIT issuance compared to record issuance in 2017 coupled with lower CMBS issuance. Non-U.S. revenue in 2018 of $183.6 million increased $28.2 million compared to the prior year. This growth primarily reflects increases across most asset classes in the EMEA region, most notably in structured credit which has benefited from increased availability of loan


		MOODY’S 2018 10-K			41

collateral resulting from strength in leveraged loan issuance late in 2017 into early 2018. Transaction Revenue was 65% of total SFG revenue in both 2018 and 2017.

Global FIG revenue of $441.7 million in 2018 increased $5.9 million, or 1%, compared to 2017 primarily due to growth in the insurance sector reflecting issuance to fund M&A and refinancing activity as well as benefits from changes in product mix and pricing increases. These increases were partially offset by lower banking-related revenue in Asia-Pacific reflecting a decline in issuance from Chinese financial institutions. In the U.S., revenue of $194.6 million increased 5% compared to the prior year. Non-U.S. revenue was $247.1 million in 2018, down 1% compared to 2017. Transaction revenue was 42% of total FIG revenue in 2018, compared to 45% in the same period in 2017.

Global PPIF revenue was $391.1 million in 2018 and decreased 9% compared to 2017. In the U.S., revenue in 2018 was $228.8 million, a decrease of $37.6 million compared to 2017, primarily due to lower U.S. public sector supply following the enactment of the Tax Act, which disallowed certain tax exemptions for advance refunding transactions. Additionally, the decline reflects lower infrastructure finance rated issuance volumes. These decreases were partially offset by benefits from changes in product mix and pricing increases. Outside the U.S., PPIF revenue was $162.3 million and declined modestly compared to 2017. Transaction Revenue was 61% in 2018, compared to 65% in the same period of 2017.

Operating and SG&A expenses in 2018 decreased $56.6 million compared to 2017 primarily due to approximately $98 million in lower incentive compensation accruals reflecting lower achievement against full-year targeted results compared to the prior year. This decrease was partially offset by higher salaries and employee benefits costs reflecting salary adjustments and hiring coupled with higher legal costs.

The restructuring charge relates to a restructuring program approved in the fourth quarter of 2018, which is more fully discussed in Note 10 to the consolidated financial statements.

Adjusted Operating Income and operating income in 2018, which includes intersegment royalty revenue and intersegment expenses, were $1,657.4 million and $1,560.3 million, respectively, and were generally in line with the prior year. Operating income in 2018 included a $32.2 million restructuring charge. Adjusted Operating Margin was 58.4%, or 130BPS higher than the prior year. Operating margin was 55.0% in 2018 compared to 54.5% in the prior year.

Moody’s Analytics

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Year Ended December 31,						% Change Favorable (Unfavorable)
	2018			2017			% Change Favorable (Unfavorable)

Revenue:

Research, data and analytics (RD&A)	$	1,134.1		$	832.7			36	%

Enterprise risk solutions (ERS)		437.4			448.6			(2	%)

Professional services (PS)		158.8			149.0			7	%


Total external revenue		1,730.3			1,430.3			21	%


Intersegment revenue		12.3			16.0			(23	%)


Total MA Revenue		1,742.6			1,446.3			20	%


Expenses:

Operating and SG&A (external)		1,158.9			979.2			(18	%)

Operating and SG&A (intersegment)		124.0			111.7			(11	%)

Adjusted Operating Income		459.7			355.4			29	%


Restructuring		16.5			—			NM

Acquisition-Related Expenses		8.3			22.5			63	%

Depreciation and amortization		127.0			83.6			(52	%)

Operating income	$	307.9		$	249.3			24	%

Adjusted Operating Margin		26.4	%		24.6	%
Operating margin		17.7	%		17.2	%

The following is a discussion of external MA revenue and operating expenses:

Global MA revenue increased $300.0 million, or 21%, compared to 2017, primarily due to growth in RD&A, which included approximately $202 million of inorganic revenue growth from the acquisitions of Bureau van Dijk, Reis and Omega Performance, or 14


42		MOODY’S 2018 10-K

percentage points of the growth. Additionally, the growth over the prior year reflects benefits from higher fees within MA’s recurring revenue base due to enhanced content and continued alignment of usage and licensing parameters. Recurring revenue comprised 84% and 78% of total MA revenue in 2018 and 2017, respectively.

In the U.S., revenue of $710.4 million in 2018 increased $64.8 million, mainly reflecting growth in RD&A.

Non-U.S. revenue of $1,019.9 million in 2018 was $235.2 million higher than in 2017 primarily reflecting growth in RD&A, which included approximately $167 million of inorganic growth from Bureau van Dijk.

Global RD&A revenue of $1,134.1 million, which comprised 66% and 58% of total external MA revenue in 2018 and 2017, respectively, increased $301.4 million, or 36%, over the prior year period. RD&A revenue in 2018 included approximately $198 million of inorganic revenue growth, or 24 percentage points of the growth, from the Bureau van Dijk and Reis acquisitions. RD&A revenue growth also reflects strong results in the credit research and rating data feeds product lines, where enhanced content and continued alignment of usage and licensing parameters have generated higher fees, coupled with strong organic growth from Bureau van Dijk. U.S. revenue of $480.4 million and non-U.S. revenue of $653.7 million increased 13% and 60%, respectively, compared to 2017.

Global ERS revenue of $437.4 million in 2018 decreased $11.2 million, or 2%, compared to 2017. This decrease primarily reflects a decline in perpetual software license sales and related implementation services as the business continues to transition to SaaS products sold on a subscription basis. These decreases were partially offset by continued strong demand for subscription-based products and benefits from pricing increases within ERS’s recurring revenue base. In the U.S., revenue of $170.0 million increased 2% compared to the prior year. Non-U.S. revenue of $267.4 million decreased 5% compared to the prior year.

Global PS revenue of $158.8 million in 2018 increased $9.8 million compared to 2017 reflecting higher revenue from analytical and research services in EMEA, which benefited from strong new sales and improved customer retention, coupled with growth in U.S. learning solutions revenue mainly due to the acquisition of Omega Performance. In the U.S., revenue in 2018 was $60.0 million, up 10% compared to 2017. Non-U.S. revenue was $98.8 million, up 5% compared to 2017.

Operating and SG&A expenses in 2018 increased $179.7 million compared to 2017 primarily due to approximately $120 million of inorganic expense growth from the Bureau van Dijk, Reis and Omega Performance acquisitions. Additionally, the increase reflects higher compensation costs primarily resulting from salary adjustments and hiring as well as higher incentive compensation reflecting higher achievement against full-year targeted results compared to the prior year.

The restructuring charge relates to a restructuring program approved in the fourth quarter of 2018, which is more fully discussed in Note 10 to the consolidated financial statements.

Depreciation and amortization increased $43.4 million primarily due to the amortization of Bureau van Dijk’s intangible assets.

Adjusted Operating Income was $459.7 million in 2018 and increased $104.3 million compared to the same period in 2017. Operating income of $307.9 million in 2018, which included a $16.5 million restructuring charge, increased $58.6 million compared to the same period in 2017. Adjusted Operating Margin in 2018 was 26.4%, up 180BPS from 2017. Operating margin was 17.7% in 2018, up 50BPS from the prior year, with the margin expansion being suppressed by the restructuring charge in 2018. Adjusted Operating Income and operating income both include intersegment revenue and expense.

RESULTS OF OPERATIONS

Year ended December 31, 2017 compared with year ended December 31, 2016

Executive Summary

Moody’s completed the acquisition of Bureau van Dijk on August 10, 2017. Moody’s results of operations include Bureau van Dijk’s operating results beginning as of August 10, 2017.

Moody’s revenue in 2017 totaled $4,204.1 million, an increase of $599.9 million, or 17%, compared to 2016 reflecting strong growth in both segments.

MIS revenue was 17% higher compared to the prior year with growth across all ratings LOBs. The most notable growth was in the CFG LOB mainly due to strong leveraged finance issuance across all regions reflecting favorable market conditions and increased investor demand for higher yielding securities.

MA revenue grew 16% compared to the prior year reflecting growth across all LOBs. The most notable growth was in the RD&A LOB, which reflected increases in credit research subscriptions and licensing of credit data as well as an approximate $92 million contribution from Bureau van Dijk (net of an approximate $36 million reduction relating to a deferred revenue adjustment required as part of acquisition accounting as further described in Note 8 to the financial statements, providing approximately seven additional percentage points to growth).


		MOODY’S 2018 10-K			43

Total operating expenses excluding D&A decreased $601.6 million, or 21% compared to 2016 reflecting the $863.8 million Settlement Charge in 2016. This decrease is partially offset by higher compensation costs in 2017, which reflects growth in performance-based compensation resulting from strong financial performance in 2017 coupled with annual merit increases. Additionally, there was approximately $64 million in Bureau van Dijk operating expenses and $22.5 million in Acquisition-Related Expenses in 2017.

D&A increased $31.6 million primarily due to amortization of intangible assets acquired as part of the Bureau van Dijk acquisition.

Operating income of $1,820.8 million in 2017 increased $1,169.9 million compared to 2016 and resulted in an operating margin of 43.3%, compared to 18.1% in the prior year. Operating income and operating margin in 2016 were suppressed by the $863.8 million Settlement Charge. Adjusted Operating Income of $2,001.6 million in 2017 increased $348.2 million compared to 2016, resulting in an Adjusted Operating Margin of 47.6% compared to 45.9% in the prior year.

The decrease in non-operating expense, net, compared to the prior year is primarily due to:

the $59.7 million CCXI Gain in 2017;

the $111.1 million Purchase Price Hedge Gain in 2017;

Partially offset by:

higher interest expense of $51.2 million primarily reflecting additional financing in 2017 utilized to fund the payment of the 2016 Settlement Charge, repay the Series 2007-1 Notes and fund the Bureau van Dijk acquisition; and

FX losses of approximately $17 million in the 2017 compared to FX gains of approximately $50 million in the prior year. The FX gains in 2016 included approximately $35 million related to the liquidation of a non-U.S. subsidiary.

The ETR of 43.6% in 2017 includes a net charge of approximately $246 million in the fourth quarter related to the impacts of tax reform in the U.S. and Belgium partially offset by the non-taxable CCXI Gain and an approximate $40 million benefit relating to Excess Tax Benefits on stock-based compensation. The 2016 ETR of 50.6% included the non-deductible nature of the federal portion of the Settlement Charge.

Full year 2017 Diluted EPS of $5.15 was up from $1.36 in 2016. Adjusted Diluted EPS of $6.07 was up 23% from $4.94 in 2016. Refer to the section entitled “Non-GAAP Financial Measures” of this MD&A for a full list of items excluded in the derivation of Adjusted Diluted EPS.


44		MOODY’S 2018 10-K

Moody’s Corporation


	Year Ended December 31,						% Change Favorable (Unfavorable)
	2017			2016			% Change Favorable (Unfavorable)

Revenue:

United States	$	2,348.4		$	2,105.5			12	%


Non-U.S.:

EMEA		1,131.7			904.4			25	%

Asia-Pacific		471.4			373.2			26	%

Americas		252.6			221.1			14	%


Total Non-U.S.		1,855.7			1,498.7			24	%


Total		4,204.1			3,604.2			17	%


Expenses:

Operating		1,216.6			1,019.6			(19	%)

SG&A		985.9			931.2			(6	%)

Restructuring		—			12.0			NM

Depreciation and amortization		158.3			126.7			(25	%)

Acquisition-Related Expenses		22.5			—			NM

Settlement Charge		—			863.8			NM


Total		2,383.3			2,953.3			19	%

Operating income	$	1,820.8		$	650.9			180	%

Adjusted Operating Income ⁽¹⁾	$	2,001.6		$	1,653.4			21	%

Interest expense, net	$	(208.5	)	$	(157.3	)		(33	%)
Other non-operating income, net		3.7			64.4			NM
Purchase Price Hedge Gain		111.1			—			NM
CCXI Gain		59.7			—			NM


Non-operating (expense) income, net	$	(34.0	)	$	(92.9	)		63	%

Net income attributable to Moody’s	$	1,000.6		$	266.6			275	%
Diluted weighted average shares outstanding		194.2			195.4			1	%
Diluted EPS attributable to Moody’s common shareholders	$	5.15		$	1.36			279	%
Adjusted Diluted EPS⁽¹⁾	$	6.07		$	4.94			23	%
Operating margin		43.3	%		18.1	%
Adjusted Operating Margin⁽¹⁾		47.6	%		45.9	%
Effective tax rate		43.6	%		50.6	%

⁽¹⁾

The table below shows Moody’s global staffing by geographic area:


	December 31,					% Change
	2017			2016		% Change
United States		3,591			3,386		6	%
Non-U.S.		8,305			7,231		15	%

Total		11,896	⁽¹⁾		10,617		12	%

⁽¹⁾	Includes 874 employees from the acquisition of Bureau van Dijk

Global revenue of $4,204.1 million in 2017 increased $599.9 million, or 17%, compared to 2016 and reflected strong growth in both MIS and MA.

The $403.0 million increase in MIS revenue primarily reflects strong global leveraged finance rated issuance volumes in CFG as issuers took advantage of favorable market conditions to refinance obligations in 2017 as well as growth in the banking sector within FIG and in CLO issuance in SFG. Additionally, the increase over prior year reflects benefits from changes in the mix of fee type, new fee initiatives and pricing increases. These increases were partially offset by lower U.S. public finance refunding volumes.


		MOODY’S 2018 10-K			45

The $196.9 million increase in MA revenue primarily reflects higher RD&A revenue across all regions driven by growth in credit research subscriptions and licensing of ratings data as well as the contribution from the Bureau van Dijk acquisition of approximately $92 million (net of an approximate $36 million reduction relating to a deferred revenue adjustment required as part of acquisition accounting as further described in Note 8 to the financial statements).

Transaction revenue accounted for 50% of global MCO revenue in 2017 compared to 49% in 2016.

U.S. revenue of $2,348.4 million in 2017 increased $242.9 million over the prior year, reflecting growth in both reportable segments.

Non-U.S. revenue increased $357.0 million from 2016 reflecting growth in both reportable segments.

Operating expenses were $1,216.6 million in 2017, up $197.0 million from 2016, primarily due to an increase in performance-based expenses (including annual bonuses, a profit sharing contribution and performance-based equity compensation), which is correlated with the strong financial performance of the Company in 2017. This increase also reflects higher salaries and employee benefit expenses resulting from the impact of annual compensation increases and increases in headcount coupled with Bureau van Dijk expenses.

SG&A expenses of $985.9 million in 2017 increased $54.7 million from the prior year period primarily due to higher performance-based correlated costs (including annual bonuses, a profit sharing contribution and performance-based equity compensation), which is consistent with the strong financial performance of the Company in 2017 coupled with Bureau van Dijk expenses. These increases were partially offset by the impact of cost management initiatives implemented in 2016 that have benefited 2017 as well as lower legal costs.

D&A increased $31.6 million primarily due to amortization of intangible assets acquired as part of the Bureau van Dijk acquisition.

Acquisition-Related Expenses represent expenses incurred to complete and integrate the acquisition of Bureau van Dijk.

Operating income of $1,820.8 million increased $1,169.9 million from 2016. Operating margin was 43.3% compared to 18.1% in 2016. Operating income and operating margin in 2016 were suppressed by the $863.8 million Settlement Charge. Adjusted Operating Income was $2,001.6 million in 2017, an increase of $348.2 million compared to 2016. Adjusted Operating Margin of 47.6% increased 170 BPS compared to the prior year.

Interest (expense) income, net in 2017 was $(208.5) million, a $51.2 million increase in expense compared to 2016 primarily due to: i) interest on the 2017 Senior Notes and 2017 Floating Rate Senior Notes which were issued in the first quarter of 2017 to fund the payment of the 2016 Settlement Charge and repayment of the Series 2007-1 Notes; ii) interest on the 2017 Private Placement Notes Due 2023 and 2028 both issued in June 2017 coupled with interest on the 2017 Term Loan drawn down in August 2017, all of which were issued to fund the acquisition of Bureau van Dijk; and iii) fees on the undrawn 2017 Bridge Credit Facility also related to the acquisition of Bureau van Dijk.

Other non-operating (expense) income, net was $3.7 million in 2017, a $60.7 million change compared to 2016 primarily reflecting approximately $17 million in FX losses in 2017 compared to approximately $50 million in FX gains in the prior year. The FX gains in 2016 included an approximate $35 million gain related to the liquidation of a non-U.S. subsidiary.

Additionally, Moody’s recognized the $59.7 million CCXI Gain and the $111.1 million Purchase Price Hedge Gain in 2017.

The ETR of 43.6% in 2017 includes a net charge of approximately $246 million in the fourth quarter related to the impacts of corporate tax reform in the U.S. and Belgium partially offset by the non-taxable CCXI Gain and an approximate $40 million benefit reflecting the adoption on a prospective basis of a new accounting standard relating to Excess Tax Benefits on stock-based compensation. In accordance with a new accounting standard, these Excess Tax Benefits are now recorded to the provision for income taxes, whereas in the prior year were recorded to capital surplus (refer to Note 1 to the consolidated financial statements for further discussion on this new accounting standard). The 2016 ETR of 50.6% included the non-deductible nature of the federal portion of the Settlement Charge. The impact of the aforementioned tax reform in the U.S. is expected to reduce the Company’s ETR in years subsequent to 2017. For the full-year ended December 31, 2018, the Company expects the ETR to be between 22% and 23%.


46		MOODY’S 2018 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:


	Year Ended December 31,						% Change Favorable (Unfavorable)
	2017			2016			% Change Favorable (Unfavorable)

Revenue:

Corporate finance (CFG)	$	1,392.7		$	1,122.3			24	%

Structured finance (SFG)		495.5			436.8			13	%

Financial institutions (FIG)		435.8			368.9			18	%

Public, project and infrastructure finance (PPIF)		431.3			412.2			5	%


Total ratings revenue		2,755.3			2,340.2			18	%


MIS Other		18.5			30.6			(40	%)


Total external revenue		2,773.8			2,370.8			17	%


Intersegment royalty		111.7			100.2			11	%


Total		2,885.5			2,471.0			17	%


Expenses:

Operating and SG&A (external)		1,223.3			1,094.3			(12	%)

Operating and SG&A (intersegment)		16.0			13.5			(19	%)

Adjusted Operating Income		1,646.2			1,363.2			21	%


Restructuring		—			10.2			NM

Depreciation and amortization		74.7			73.8			(1	%)

Settlement Charge		—			863.8			NM

Operating income	$	1,571.5		$	415.4			278	%

Adjusted Operating Margin		57.1	%		55.2	%
Operating margin		54.5	%		16.8	%

The following is a discussion of external MIS revenue and operating expenses:

Global MIS revenue of $2,773.8 million in 2017 was up 17% compared to 2016, most notably from strong leveraged finance rated issuance volumes within CFG coupled with strong growth in banking-related revenue in FIG and increases across most asset classes in SFG. Also contributing to the growth was the favorable impact of changes in product mix, new fee initiatives and pricing increases.

Transaction revenue for MIS was 65% in 2017 compared to 61% in 2016.

In the U.S., revenue was $1,702.8 million in 2017, an increase of $200.9 million or 13%, compared to 2016 primarily reflecting strong growth in CFG, SFG and FIG revenue being partially offset by declines in PPIF and MIS Other revenue.

Non-U.S. revenue was $1,071.0 million in 2017, an increase of $202.1 million or 23%, compared to 2016 reflecting growth across all LOBs excluding MIS Other.

Global CFG revenue of $1,392.7 million in 2017 was up 24% compared to 2016 primarily due to strength in leveraged finance issuance in the U.S., EMEA and Asia-Pacific as issuers took advantage of favorable market conditions to refinance obligations and fund M&A activity. The growth in leveraged finance revenue also reflects benefits from a favorable product mix in 2017 compared to the prior year where issuance volumes included a greater number of lower-yielding jumbo deals. The increase over the prior year also reflects higher investment-grade corporate debt revenue in the U.S. reflecting continued favorable market conditions and benefits from changes in product mix, new fee initiatives and pricing increases as well as growth in monitoring fees across all regions. Transaction revenue represented 73% of total CFG revenue in 2017, compared to 68% in the prior year period. In the U.S., revenue was $909.7 million, or 19% higher compared to the prior year. Non-U.S. revenue of $483.0 million increased 34% compared to the prior year.

Global SFG revenue of $495.5 million in 2017 increased $58.7 million, or 13%, compared to 2016. In the U.S., revenue of $340.1 million increased $46.8 million over 2016 primarily due to strong growth in CLO issuance reflecting an increase in bank loan supply and favorable market conditions which enabled both new securitizations and a surge in refinancing activity. Non-U.S. revenue in 2017 of $155.4 million increased $11.9 million compared to the prior year primarily reflecting growth across most asset classes in the EMEA region. Transaction revenue was 65% of total SFG revenue in 2017 compared to 62% in the prior year.


		MOODY’S 2018 10-K			47

Global FIG revenue of $435.8 million in 2017 increased $66.9 million, or 18%, compared to 2016. In the U.S., revenue of $186.1 million increased $26.0 million compared to the prior year primarily reflecting higher issuance in the banking sector and benefits from changes in product mix, new fee initiatives and price increases. Non-U.S. revenue was $249.7 million in 2017, up $40.9 million compared to 2016 primarily due to higher banking revenue in EMEA from opportunistic issuance amidst current favorable market conditions as well as benefits from changes in product mix, new fee initiatives and pricing increases. The non-U.S. growth also reflects strength in banking revenue in the Asia-Pacific region reflecting higher cross-border issuance from Chinese banks and the non-bank financial sector. Transaction revenue was 45% of total FIG revenue in 2017 compared to 37% in 2016.

Global PPIF revenue was $431.3 million in 2017 and increased $19.1 million, or 5%, compared to 2016. In the U.S., revenue in 2017 was $266.4 million and decreased $9.8 million compared to 2016 primarily due to strong PFG refunding volumes in 2016. These decreases were partially offset by growth in infrastructure finance revenue coupled with benefits from changes in product mix, new fee initiatives and pricing increases. Outside the U.S., PPIF revenue was $164.9 million and increased $28.9 million compared to 2016 reflecting strong growth in infrastructure finance revenue in the Asia-Pacific region and growth in public finance revenue in EMEA. Transaction revenue was 65% of total PPIF revenue in 2017 compared to 63% in the prior year.

Operating and SG&A expenses in 2017 increased $129.0 million compared to 2016 primarily due to growth in performance-based compensation resulting from strong financial performance in 2017 coupled with increased headcount and higher salaries and employee benefits costs reflecting annual compensation increases. These increases were partially offset by lower legal fees and continued cost control initiatives.

Adjusted Operating Income and operating income in 2017, which includes intersegment royalty revenue and intersegment expenses, were $1,646.2 million and $1,571.5 million, respectively, and increased $283.0 million and $1,156.1 million, respectively, compared to 2016. Adjusted Operating Margin was 57.1% or 190 BPS higher than the prior year. Operating margin was 54.5% in 2017 compared to 16.8% in the prior year. Operating income and operating margin in 2016 were suppressed due to the Settlement Charge.

Moody’s Analytics

The table below provides a summary of revenue and operating results, followed by further insight and commentary:


	Year Ended December 31,						% Change Favorable (Unfavorable)
	2017			2016			% Change Favorable (Unfavorable)

Revenue:

Research, data and analytics (RD&A)	$	832.7		$	667.6			25	%

Enterprise risk solutions (ERS)		448.6			418.8			7	%

Professional services (PS)		149.0			147.0			1	%


Total external revenue		1,430.3			1,233.4			16	%


Intersegment revenue		16.0			13.5			19	%


Total MA Revenue		1,446.3			1,246.9			16	%


Expenses:

Operating and SG&A (external)		979.2			856.5			(14	%)

Operating and SG&A (intersegment)		111.7			100.2			(11	%)


Adjusted Operating Income		355.4			290.2			22	%


Restructuring		—			1.8			NM

Acquisition-Related Expenses		22.5			—			NM

Depreciation and amortization		83.6			52.9			(58	%)


Operating income	$	249.3		$	235.5			6	%


Adjusted Operating Margin		24.6	%		23.3	%

Operating margin		17.2	%		18.9	%

The following is a discussion of external MA revenue and operating expenses:

Global MA revenue increased $196.9 million, or 16%, compared to 2016 primarily due to growth in RD&A (which included approximately $92 million in revenue, or 7 percentage points of the growth, from the Bureau van Dijk acquisition) coupled with growth in ERS, which included revenue from the first quarter 2016 acquisition of GGY. Additionally, the growth over the prior year reflects benefits from higher fees within MA’s recurring revenue base due to enhanced content and continued alignment of usage and licensing parameters. Recurring revenue comprised 78% and 75% of total MA revenue in 2017 and 2016, respectively.


48		MOODY’S 2018 10-K

In the U.S., revenue of $645.6 million in 2017 increased $42.0 million, and reflected growth across all LOBs.

Non-U.S. revenue of $784.7 million in 2017 was $154.9 million higher than in 2016 reflecting growth in RD&A, which included approximately $82 million in non-U.S. Bureau van Dijk revenue, and higher ERS revenue.

Global RD&A revenue of $832.7 million, which comprised 58% and 54% of total external MA revenue in 2017 and 2016, respectively, increased $165.1 million, or 25%, over the prior year period. In the U.S., revenue of $424.4 million increased $35.1 million compared to 2016. Non-U.S. revenue of $408.3 million increased $130.0 million compared to the prior year. RD&A revenue in 2017 included approximately $92 million in revenue, or 14 percentage points of the growth, from the Bureau van Dijk acquisition (net of an approximate $36 million reduction relating to a deferred revenue adjustment required as part of acquisition accounting as further described in Note 7 to the financial statements). RD&A revenue growth also reflects strong results in the credit research and rating data feeds product lines, where enhanced content and continued alignment of usage and licensing parameters have generated higher fees.

Global ERS revenue of $448.6 million in 2017 increased $29.8 million, or 7%, over 2016. The growth is primarily due to higher revenue from risk and finance analytics products coupled with incremental revenue from GGY, which was acquired in March 2016. Additionally, the revenue growth reflects benefits from pricing increases within ERS’s recurring revenue base. Revenue in ERS is subject to quarterly volatility resulting from the variable nature of project timing and the concentration of software implementation and license revenue in a relatively small number of engagements. In the U.S., revenue of $166.6 million increased $3.7 million compared to the prior year. Non-U.S. revenue of $282.0 million increased $26.1 million compared to the prior year.

Global PS revenue of $149.0 million in 2017 increased 1% compared to 2016 reflecting higher revenue from analytical and research services in the U.S. mostly offset by lower revenue from these services internationally. In the U.S., revenue in 2017 was $54.6 million, up 6% compared to 2016. Non-U.S. revenue was $94.4 million, down 1% compared to 2016.

Operating and SG&A expenses in 2017 increased $122.7 million compared to 2016. The expense growth includes an approximate $74 million increase in compensation costs reflecting $32 million in Bureau van Dijk compensation costs coupled with annual salary increases, higher performance-based compensation and higher severance costs partially offset by the impact of cost control initiatives. Non-compensation costs increased approximately $49 million primarily due to Bureau van Dijk expenses.

There were $22.5 million in Acquisition-Related Expenses incurred to complete and integrate the acquisition of Bureau van Dijk.

Depreciation and amortization increased $30.7 million primarily due to the amortization of Bureau van Dijk’s intangible assets.

Adjusted Operating Income was $355.4 million in 2017 and increased $65.2 million compared to the same period in 2016. Operating income of $249.3 million in 2017 increased $13.8 million compared to the same period in 2016. Adjusted Operating Margin in 2017 was 24.6%, up 130BPS from 2016. Operating margin was 17.2% in 2017, down 170BPS from the prior year reflecting the aforementioned $22.5 million in Bureau van Dijk Acquisition-Related Expenses coupled with approximately $31 million of higher D&A primarily relating to Bureau van Dijk’s intangible assets. Adjusted Operating Income and operating income both include intersegment revenue and expense.

MARKET RISK

Foreign exchange risk:

Moody’s maintains a presence in 42 countries. In 2018, approximately 43% of both the Company’s revenue and 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, 2018, approximately 71% of Moody’s assets were located outside the U.S., making the Company susceptible to fluctuations in FX rates. The effects of translating assets and liabilities of non-U.S. operations with non-U.S. functional currencies to the U.S. dollar are charged or credited to OCI.

The effects of revaluing assets and liabilities that are denominated in currencies other than a subsidiary’s functional currency are charged to other non-operating income (expense), net in the Company’s consolidated statements of operations. Accordingly, the Company enters into foreign exchange forwards to partially mitigate the change in fair value on certain assets and liabilities 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 foreign currencies strengthened against the U.S. dollar:


Foreign Currency Forwards⁽¹⁾		Impact on fair value of contract if foreign currency strengthened by 10%
Sell	Buy
U.S. dollar	British pound	$31 million unfavorable impact
U.S. dollar	Canadian dollar	$11 million unfavorable impact
U.S. dollar	Euro	$21 million unfavorable impact
U.S. dollar	Japanese yen	$2 million unfavorable impact

⁽¹⁾	Refer to Note 6 to the consolidated financial statements in Item 8 of this Form 10-K for further detail on the forward contracts.


		MOODY’S 2018 10-K			49

The change in fair value of the foreign exchange forward contracts would be offset by FX revaluation gains or losses on underlying assets and liabilities denominated in currencies other than a subsidiary’s functional currency.

Euro-denominated debt and cross-currency swaps designated as net investment hedges:

The Company has designated €500 million of the 2015 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 $57 million unfavorable adjustment to OCI related to this net investment hedge. This adjustment would be offset by favorable translation adjustments on the Company’s euro net investment in subsidiaries.

During 2018, the Company entered into cross-currency swaps to exchange an aggregate amount of €710.2 million with corresponding interest based on the floating 3-month EURIBOR for an aggregate amount of $830.0 million with corresponding interest based on the floating 3-month U.S. LIBOR, which were designated as net investment hedges under ASC Topic 815, Derivatives and Hedging. The purpose of these cross-currency swaps is to mitigate FX exposure related to a portion of the Company’s euro net investments in certain foreign subsidiaries against changes in euro/USD exchange rates. If the euro were to strengthen 10% relative to the U.S. dollar, there would be an approximate $81 million unfavorable impact to the fair value of the cross-currency swaps recognized in OCI, which would be offset by favorable currency translation gains on the Company’s euro net investment in foreign subsidiaries.

Credit and Interest rate risk:

Interest rate swaps designated as a fair value hedge:

The Company’s interest rate risk management objectives are to reduce the funding cost and volatility to the Company and to alter the interest rate exposure to the desired risk profile. Moody’s uses interest rate swaps as deemed necessary to assist in accomplishing these objectives. The Company is exposed to interest rate risk on its various outstanding fixed-rate debt for which the fair value of the outstanding fixed rate debt fluctuates based on changes in interest rates. The Company has entered into interest rate swaps to convert the fixed interest rate on certain of its long-term debt to a floating interest rate based on the 3-month LIBOR. These swaps are adjusted to fair market value based on prevailing interest rates at the end of each reporting period and fluctuations are recorded as a reduction or addition to the carrying value of the borrowing, while net interest payments are recorded as interest expense/income in the Company’s consolidated statement of operations. A hypothetical change of 100 BPS in the LIBOR-based swap rate would result in an approximate $36 million change to the fair value of the swap, which would be offset by the change in fair value of the hedged item.

Additional information on these interest rate swaps is disclosed in Note 6 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 mutual funds, money market deposit accounts, certificates of deposit and issuers of high-grade commercial paper and by limiting the amount it can invest with any single issuer. Short-term investments primarily consist of certificates of deposit.

LIQUIDITY AND CAPITAL RESOURCES

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:


	Year Ended December 31,									Year Ended December 31,

	2018			2017			$ Change Favorable (unfavorable)			2017			2016			$ Change Favorable (unfavorable)

Net cash provided by operating activities	$	1,461.1		$	754.6		$	706.5		$	754.6		$	1,259.2		$	(504.6	)

Net cash (used in) provided by investing activities	$	(406.4	)	$	(3,420.0	)	$	3,013.6		$	(3,420.0	)	$	102.0		$	(3,522.0	)

Net cash (used in) provided by financing activities	$	(411.5	)	$	1,600.1		$	(2,011.6	)	$	1,600.1		$	(1,042.9	)	$	2,643.0

Free Cash Flow ⁽¹⁾	$	1,370.7		$	664.0		$	706.7		$	664.0		$	1,144.0		$	(480.0	)

⁽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 “Non-GAAP Financial Measures” of this MD&A for further information on this financial measure.


50		MOODY’S 2018 10-K

Net cash provided by operating activities

Year ended December 31, 2018 compared to the year ended December 31, 2017:

Net cash flows from operating activities increased $706.5 million compared to the prior year primarily due to the approximate $864 million payment for the Settlement Charge in 2017. This increase was partially offset by higher incentive compensation payments of approximately $90 million in 2018 compared to the prior year and a decrease of approximately $30 million due to timing of tax payments.

Year ended December 31, 2017 compared to the year ended December 31, 2016:

Net cash flows from operating activities decreased $504.6 million compared to the prior year primarily due to the approximate $864 million payment for the Settlement Charge in 2017. This was partially offset by an increase in cash flows primarily relating to the Company’s strong earnings growth in 2017.

Net cash (used in) provided by investing activities

Year ended December 31, 2018 compared to the year ended December 31, 2017:

The $3,013.6 million decrease in cash flows used in investing activities compared to 2017 primarily reflects:

a net $3.2 billion decrease in cash paid for acquisitions compared to the prior year primarily reflecting the acquisition of Bureau van Dijk for approximately $3.5 billion in 2017, partially offset by approximately $289 million paid in 2018 for the acquisitions of Reis and Omega Performance;

Partially offset by:

$111.1 million of cash received in 2017 relating to the Purchase Price Hedge; and

higher net purchases of investments of $100.8 million in 2018.

Year ended December 31, 2017 compared to the year ended December 31, 2016:

The $3,522.0 million increase in cash flows used in investing activities compared to 2016 primarily reflects:

a $3.4 billion increase in cash paid for acquisitions compared to the prior year primarily reflecting the acquisition of Bureau van Dijk in the third quarter of 2017;

lower net maturities of investments of $251.2 million in 2017;

Partially offset by:

cash received of $111.1 million relating to the Purchase Price Hedge in 2017.

Net cash (used in) provided by financing activities

Year ended December 31, 2018 compared to the year ended December 31, 2017:

The $2,011.6 million increase in cash used in financing activities was primarily attributed to:

net proceeds of $158.6 million in 2018 relating to the issuance of the 2018 Senior Notes in June and December 2018, partially offset by repayment of the 2017 Term Loan, the 2017 Floating Rate Senior Notes and net repayments of CP; and

net proceeds of $2.1 billion in 2017, which included debt and commercial paper issued to fund the acquisition of Bureau van Dijk and the payment of the Settlement Charge, partially offset by the early repayment of the 2007-1 Notes and repayments of CP in 2017.

Year ended December 31, 2017 compared to the year ended December 31, 2016:

The $2,643.0 million increase in cash provided by financing activities was primarily attributed to:

proceeds of $1.5 billion from notes and a term loan issued as well as $0.1 billion in net proceeds from commercial paper to fund the acquisition of Bureau van Dijk. Additionally, reflects $0.8 billion of notes issued in the first quarter of 2017 to fund the payment of the 2016 Settlement Charge and the early repayment of the Series 2007-1 Notes;

treasury shares repurchased of $199.7 million in 2017 compared to $738.8 million in 2016;

partially offset by:

repayment of the $300 million Series 2007-1 Notes in 2017.

Cash and short-term investments held in non-U.S. jurisdictions

The Company’s aggregate cash and cash equivalents and short-term investments of $1.8 billion at December 31, 2018 included approximately $0.9 billion located outside of the U.S. Approximately 21% 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. cash flow to maintain sufficient liquidity in all regions to effectively meet its operating needs.


		MOODY’S 2018 10-K			51

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 cash in a manner that addresses compliance with local statutory requirements, sufficient offshore working capital and any other factors that 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.

Other Material Future Cash Requirements

The Company believes that it has the financial resources needed to meet its cash requirements and expects to have positive operating cash flow in 2019. Cash requirements for periods beyond the next twelve months will depend, among other things, on the Company’s profitability and its ability to manage working capital requirements. The Company may also borrow from various sources.

The Company remains committed to using its strong cash flow to create value for shareholders by investing in growing areas of the business, reinvesting in ratings quality initiatives, making selective acquisitions, repurchasing stock and paying a dividend, all in a manner consistent with maintaining sufficient liquidity after giving effect to any additional indebtedness that may be incurred.

Dividends and Share Repurchases

On February 12, 2019, the Board approved the declaration of a quarterly dividend of $0.50 per share for Moody’s common stock, payable March 18, 2019 to shareholders of record at the close of business on February 25, 2019. The continued payment of dividends at this rate, or at all, is subject to the discretion of the Board.

On December 15, 2015, the Board authorized a $1.0 billion share repurchase program, which at December 31, 2018 had a remaining authority of approximately $324 million. Additionally, in October 2018, the Board authorized an additional $1.0 billion share repurchase program, which may commence following the completion of the existing program.

On February 20, 2019, the Company entered into an accelerated share repurchase agreement (ASR) with a financial institution counterparty to repurchase $500 million of its outstanding common stock. The final settlement of the transaction under the ASR agreement is expected to be completed no later than April 2019. The ASR was entered into pursuant to the Company’s existing share repurchase program, as further discussed in Note 18 of the Company’s financial statements.

Full-year 2019 total share repurchases (including shares repurchased via the aforementioned ASR) are expected to be approximately $1 billion, subject to available cash, market conditions and other ongoing capital allocation decisions.

Restructuring

On October 26, 2018, the Company approved a restructuring program that is estimated to result in an annualized savings of approximately $40 to $50 million a year, a portion of which will benefit 2019. This restructuring program is estimated to result in total pre-tax charges of approximately $70 to $80 million, of which approximately $35 to $40 million is estimated to result from personnel-related activities. A majority of the cash outlays for these personnel-related activities will be paid in the year ended December 31, 2019. This restructuring program is more fully discussed in Note 10 to the consolidated financial statements.

Other cash requirements

The Company has future cash requirements, including operating leases and debt service and payments, as noted in the tables that follow as well as future payments related to the transition tax under the Tax Act.

Indebtedness

At December 31, 2018, Moody’s had $5.7 billion of outstanding debt and approximately $1 billion of additional capacity available under the Company’s CP program, which is backstopped by the 2018 Facility as more fully discussed in Note 17 to the consolidated financial statements. At December 31, 2018, the Company was in compliance with all covenants contained within all of the debt agreements. All of the Company’s long-term 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. At December 31, 2018, there were no such cross defaults.

During 2018, the Company issued $1.1 billion in unsecured senior notes via public offerings, the terms of which are more fully discussed in Note 17. Additionally, the Company repaid the 2017 Term Loan of $500 million and the 2017 Floating Rate Senior Notes of $300 million. Furthermore, in January 2019, the Company also repaid the 2014 Senior Note (5-year) of $450 million.

The Company has fulfilled its commitment to delever its balance sheet following additional financing obtained in 2017 to partially fund the acquisition of Bureau van Dijk.


52		MOODY’S 2018 10-K

The repayment schedule for the Company’s borrowings outstanding at December 31, 2018 is as follows:


Year Ending December 31,	2010 Senior Notes due 2020		2012 Senior Notes due 2022		2013 Senior Notes due 2024		2014 Senior Notes (5-year) due 2019 ⁽¹⁾		2014 Senior Notes (30-year) due 2044		2015 Senior Notes due 2027		2017 Senior Notes due 2021		2017 Senior Notes due 2023		2017 Senior Notes due 2028		2018 Senior Notes due 2021		2018 Senior Notes due 2029		2018 Senior Notes due 2048		Total

2019	$	—	$	—	$	—	$	450.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	450.0

2020		500.0		—		—		—		—		—		—		—		—		—		—		—		500.0

2021		—		—		—		—		—		—		500.0		—		—		300.0		—		—		800.0

2022		—		500.0		—		—		—		—		—		—		—		—		—		—		500.0

2023		—		—		—		—		—		—		—		500.0		—		—		—		—		500.0

Thereafter		—		—		500.0		—		600.0		571.6		—		—		500.0		—		400.0		400.0		2,971.6


Total	$	500.0	$	500.0	$	500.0	$	450.0	$	600.0	$	571.6	$	500.0	$	500.0	$	500.0	$	300.0	$	400.0	$	400.0	$	5,721.6

⁽¹⁾	In January 2019, the Company repaid the 2014 Senior Notes (5-year) of $450 million.

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.

Off-Balance Sheet Arrangements

At December 31, 2018, Moody’s did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as special purpose or variable interest entities where Moody’s is the primary beneficiary, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, Moody’s is not exposed to any financing, liquidity, market or credit risk that could arise if it had engaged in such relationships.

Contractual Obligations

The following table presents payments due under the Company’s contractual obligations as of December 31, 2018:


			Payments Due by Period

(in millions)	Total		Less Than 1 Year		1-3 Years		3-5 Years		Over 5 Years

Indebtedness⁽¹⁾	$	7,943.2	$	662.8	$	1,670.8	$	1,270.1	$	4,339.5

Operating lease obligations		715.7		105.9		197.9		165.4		246.5

Purchase obligations		193.8		104.8		89.0		—		—

Pension obligations⁽²⁾		139.0		6.9		42.7		25.5		63.9


Total⁽³⁾	$	8,991.7	$	880.4	$	2,000.4	$	1,461.0	$	4,649.9

⁽¹⁾	Reflects principal payments, related interest and applicable fees due on all indebtedness outstanding as described in Note 17 to the consolidated financial statements.

⁽²⁾	Reflects projected benefit payments relating to the Company’s U.S. unfunded DBPPs and Retirement and Other Plans described in Note 14 to the consolidated financial statements.

⁽³⁾

The table above does not include the Company’s net long-term tax liabilities of $494.6 million relating to UTPs, since the expected cash outflow of such amounts by period cannot be reasonably estimated. Additionally, the table above does not include approximately $198 million relating to the remaining unpaid deemed repatriation liability resulting from the Tax Act enacted into law in the U.S. in December 2017.

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 non-GAAP financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company’s performance, facilitate comparisons to competitors’ operating results and can provide greater transparency to investors of supplemental information used by management in its financial and operational decision-making. These non-GAAP measures, as defined by the Company, are not necessarily comparable to similarly defined measures of other companies. Furthermore, these non-GAAP measures should not be viewed in isolation or used as a substitute for other GAAP measures in assessing the operating performance or cash flows of the Company. Below are descriptions of the Company’s non-GAAP financial measures accompanied by a reconciliation of the non-GAAP measure to its most directly comparable GAAP measure:

Adjusted Operating Income and Adjusted Operating Margin:

The Company presents Adjusted Operating Income because management deems this metric to be a useful measure of assessing the operating performance of Moody’s. Adjusted Operating Income excludes depreciation and amortization, restructuring, and Acquisition-


		MOODY’S 2018 10-K			53

Related Expenses. Depreciation and amortization are excluded because companies utilize productive assets of different ages and use 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. Acquisition-Related Expenses consist of expenses incurred to complete and integrate the acquisition of Bureau van Dijk and are excluded due to the material nature of these expenses on an annual basis, which are not expected to recur at this dollar magnitude subsequent to the completion of the multi-year integration effort. Acquisition-Related Expenses from other acquisitions were not material. Management believes that the exclusion of depreciation and amortization, restructuring charges, and Acquisition-Related Expenses, 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.


	Year Ended December 31,

	2018			2017			2016

Operating income	$	1,868.2		$	1,820.8		$	650.9

Adjustments:

Restructuring		48.7			—			12.0

Depreciation and amortization		191.9			158.3			126.7

Acquisition-Related Expenses		8.3			22.5			—

Settlement Charge		—			—			863.8


Adjusted Operating Income	$	2,117.1		$	2,001.6		$	1,653.4


Operating margin		42.1	%		43.3	%		18.1	%

Adjusted Operating Margin		47.7	%		47.6	%		45.9	%

Adjusted Net Income and Adjusted Diluted EPS attributable to Moody’s 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 the operating performance of Moody’s. Adjusted Net Income and Adjusted Diluted EPS exclude the impact of amortization of acquired intangible assets, Acquisition-Related Expenses, restructuring charges, the Purchase Price Hedge Gain, the CCXI Gain, the effects of U.S. tax reform and certain adjustments relating to the Company’s non-U.S. UTPs.

The Company excludes the impact of amortization of acquired intangible assets as companies utilize intangible assets with different ages and have different methods of acquiring and amortizing intangible assets. 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. Also, management believes that excluding acquisition-related amortization expense provides additional perspective when comparing operating results from period to period, and with both acquisitive and non-acquisitive peer companies. Additionally Acquisition-Related Expenses are excluded due to the material nature of these expenses on an annual basis, which are not expected to recur at this dollar magnitude subsequent to the completion of the multi-year integration effort relating to Bureau van Dijk. Acquisition-Related Expenses from other acquisitions were not material.

The Company excludes the Purchase Price Hedge Gain, the CCXI Gain and restructuring charges to provide additional perspective on the Company’s operating results from period to period and across companies as the frequency and magnitude of similar transactions may vary widely across periods.

Furthermore, U.S. tax reform as well as changes in tax laws in Europe were both enacted in the fourth quarter of 2017, resulting in significant adjustments to the provision for income taxes. The Company excludes these adjustments as well as the impact of 2018 adjustments pursuant to U.S. tax reform and certain adjustments relating to the Company’s non-U.S. UTPs, which resulted in significant adjustments to the provision for income taxes in 2018. The Company excludes these 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.


54		MOODY’S 2018 10-K

Below is a reconciliation of this measure to its most directly comparable U.S. GAAP amount:


	Year ended December 31,

Amounts in millions	2018						2017						2016

Net income attributable to Moody’s common shareholders				$	1,309.6					$	1,000.6					$	266.6

CCXI Gain					—						(59.7	)					—

Pre-Tax Purchase Price Hedge Gain	$	—					$	(111.1	)				$	—

Tax on Purchase Price Hedge Gain		—						38.8						—


Net Purchase Price Hedge Gain					—						(72.3	)					—

Pre-Tax Acquisition-Related Expenses	$	8.3					$	22.5					$	—

Tax on Acquisition-Related Expenses		(2.1	)					(3.6	)					—


Net Acquisition-Related Expenses ⁽¹⁾					6.2						18.9						—

Pre-Tax Acquisition-Related Intangible Amortization Expenses	$	101.7					$	61.4					$	34.2

Tax on Acquisition-Related Intangible Amortization Expenses		(23.0	)					(16.2	)					(9.8	)


Net Acquisition-Related Intangible Amortization Expenses					78.7						45.2						24.4

Net Impact of U.S. tax reform					(59.0	)					247.3						—

Net impact of U.S. tax reform/ Belgium statutory tax rate change on deferred taxes					—						(1.7	)					—

Increase to non-U.S. UTPs					63.9						—						—

Pre-Tax Restructuring	$	48.7					$	—					$	12.0

Tax on Restructuring		(11.9	)					—						(3.9	)


Net Restructuring					36.8						—						8.1

Pre-tax Settlement Charge	$	—					$	—					$	863.8

Tax on Settlement Charge		—						—						(163.1	)


Net Settlement Charge					—						—						700.7

FX gain on liquidation of a subsidiary					—						—						(34.8	)


Adjusted Net Income				$	1,436.2					$	1,178.3					$	965.0

⁽¹⁾	Certain of these Acquisition-Related Expenses are not deductible for tax.

The tax impacts in the table above were calculated using tax rates in effect in the jurisdiction for which the item relates.


		MOODY’S 2018 10-K			55


	Year ended December 31,

	2018						2017						2016

Earnings per share attributable to Moody’s common shareholders				$	6.74					$	5.15					$	1.36

CCXI Gain					—						(0.31	)					—

Pre-Tax Purchase Price Hedge Gain	$	—					$	(0.57	)				$	—

Tax on Purchase Price Hedge Gain		—						0.20						—


Net Purchase Price Hedge Gain					—						(0.37	)					—

Pre-Tax Acquisition-Related Expenses	$	0.04					$	0.12					$	—

Tax on Acquisition-Related Expenses		(0.01	)					(0.02	)					—


Net Acquisition-Related Expenses ⁽¹⁾					0.03						0.10						—

Pre-Tax Acquisition-Related Intangible Amortization Expenses	$	0.52					$	0.32					$	0.18

Tax on Acquisition-Related Intangible Amortization Expenses		(0.12	)					(0.09	)					(0.05	)


Net Acquisition-Related Intangible Amortization Expenses					0.40						0.23						0.13

Net Impact of U.S. tax reform					(0.30	)					1.28						—

Net impact of U.S. tax reform/ Belgium statutory tax rate change on deferred taxes					—						(0.01	)					—

Increase to non-U.S. UTPs					0.33						—						—

Pre-Tax Restructuring	$	0.25					$	—					$	0.06

Tax on Restructuring		(0.06	)					—						(0.02	)


Net Restructuring					0.19						—						0.04

Pre-tax Settlement Charge	$	—					$	—					$	4.42

Tax on Settlement Charge		—						—						(0.83	)


Net Settlement Charge					—						—						3.59

FX gain on liquidation of a subsidiary					—						—						(0.18	)


Adjusted Diluted EPS				$	7.39					$	6.07					$	4.94

⁽¹⁾	Certain of these Acquisition-Related Expenses are not deductible for t

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$190.54	189	$35,980

10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-04-16	Shareholder Vote
8-K	2019-02-15	Earnings, Regulation FD, Exhibits
8-K	2019-02-11	Officers, Officers, Regulation FD, Exhibits
8-K	2018-12-17	Other Events, Exhibits
8-K	2018-12-03	Other Events, Other Events, Exhibits
8-K	2018-11-14	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2018-11-08	Officers, Exhibits
8-K	2018-10-26	Earnings, Regulation FD, Exhibits
8-K	2018-07-31	Officers, Exhibits
8-K	2018-07-27	Earnings, Regulation FD, Exhibits
8-K	2018-06-01	Other Events, Other Events, Exhibits
8-K	2018-06-01	Other Events, Exhibits
8-K	2018-05-03	Officers, Officers
8-K	2018-04-27	Earnings, Regulation FD, Exhibits
8-K	2018-04-24	Shareholder Vote, Shareholder Vote
8-K	2018-04-19	Regulation FD, Regulation FD
8-K	2018-03-30	Officers
8-K	2018-02-12	Officers, Regulation FD
8-K	2018-02-09	Earnings, Regulation FD, Exhibits
8-K	2018-01-26	Officers, Exhibits

BCS	Barclays	37,700
GWW	Grainger W W	17,010
EWBC	East West Bancorp	7,540
MAC	Macerich	5,790
UMC	United Microelectronics	4,620
XBIT	Xbiotech	318
CUE	Cue Biopharma	184
CCM	Concord Medical Services Holdings	114
SGMA	SigmaTron	12
GLNS	Golden Star Resource	0

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