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RESTRUCTURING

6 Months Ended

Jun. 30, 2019

Restructuring [Abstract]

NOTE 13. RESTRUCTURING

On October 26, 2018, the chief executive officer of Moody’s approved a restructuring program (the “2018 Restructuring Program”) that the Company currently estimates will result in annualized savings of approximately $60 million per year, a portion of which will benefit 2019. The 2018 Restructuring Program, the scope of which was expanded in the second quarter of 2019, is now estimated to result in total pre-tax charges of $105 to $110 million. The 2018 Restructuring Program includes relocation of certain functions from high-cost to lower-cost jurisdictions, a reduction of staff, including from recent acquisitions and pursuant to a review of the business criticality of certain positions, and the rationalization and exit of certain real estate leases due to consolidation of various business activities. The exit from certain leased office space began in the fourth quarter of 2018 and will entail approximately $50 million of the charges to either terminate or sublease the affected real estate leases. The 2018 Restructuring Program is also anticipated to represent approximately $60 million of personnel-related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s existing severance plans. Cash outlays associated with the employee termination cost component of the 2018 Restructuring Program are anticipated to be approximately $60 million, which will be paid through 2021.

Total expenses included in the accompanying consolidated statements of operations relating to the 2018 Restructuring Program are as follows:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Restructuring		$	53.8		$	-		$	59.3		$	-

Changes to the restructuring liability during the first half of 2019 were as follows:

			Employee Termination Costs			Contract Termination Costs			Total Restructuring Liability ⁽²⁾
Balance as of December 31, 2018			$	29.9		$	12.4		$	42.3
2018 Restructuring Program:
	Adoption of New Lease Accounting Standard ⁽¹⁾			-			(10.9)			(10.9)
	Cost incurred and adjustments			26.1			4.3			30.4
	Cash payments and adjustments			(19.1)			(2.6)			(21.7)
Balance as of June 30, 2019			$	36.9		$	3.2		$	40.1
2018 Restructuring Program:
Cumulative expense incurred to date			$	59.0		$	49.0
⁽¹⁾	Upon the adoption of the New Lease Accounting Standard, the Company recorded a reclassification of $10.9 million of liabilities in the first quarter of 2019 for costs associated with certain real estate leases which were exited in previous years, as a reduction of the ROU Asset capitalized upon adoption.
⁽²⁾	The liability excludes $4.1 million of non-cash acceleration of amortization of leasehold improvements relating to the rationalization and exit of certain real estate leases as well as $24.8 million of ROU Asset impairment charges for the six months ended June 30, 2019. The fair value of the impaired ROU Assets was determined by utilizing the present value of the estimated future cash flows attributable to the assets. The fair value of those ROU assets subsequent to the impairment was $17.7 million, and is categorized as Level 3 within the ASC Topic 820 fair value hierarchy.

As of June 30, 2019, the remaining $40.1 million restructuring liability is expected to be paid out through 2021.