RESTRUCTURING

12 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

On December 22, 2020, the chief executive officer of Moody’s approved a restructuring program (the “2020 MA Strategic Reorganization Restructuring Program”) that the Company estimates will result in annualized savings of $25 to $30 million per year. This program relates to a strategic reorganization in the MA reportable segment and is estimated to result in total pre-tax charges of approximately $20 to $30 million, consisting of severance and related costs primarily determined under the Company’s existing severance plans. The 2020 MA Strategic Reorganization Restructuring Program is expected to be substantially complete in the first half of 2021. Cash outlays associated with this program are expected to be $20 to $30 million, which will be paid through 2022.

On July 29, 2020, the chief executive officer of Moody’s approved a restructuring program (the “2020 Real Estate Rationalization Restructuring Program”) primarily in response to the COVID-19 pandemic which revolves around the rationalization and exit of certain real estate leases. The exit from certain leased office space began in the third quarter of 2020 and is anticipated to be substantially completed during the first half of 2021. The 2020 Real Estate Rationalization Restructuring Program primarily reflects non-cash charges related to the impairment of operating lease right-of-use assets and leasehold improvements. The 2020 Restructuring Program is expected to result in an estimated annualized savings of approximately $5 to $6 million a year and is substantially complete at December 31, 2020.

On October 26, 2018, the chief executive officer of Moody’s approved a restructuring program (the “2018 Restructuring Program”) that the Company estimates will result in annualized savings of approximately $60 million per year. The 2018 Restructuring Program, the scope of which was expanded in the second quarter of 2019, is substantially complete at December 31, 2020. The 2018 Restructuring Program included relocation of certain functions from high-cost to lower-cost jurisdictions, a reduction of staff, including from acquisitions and pursuant to a review of the business criticality of certain positions, and the rationalization and exit of certain real estate due to consolidation of various business activities. The exit from certain leased office space began in the fourth quarter of 2018 and resulted in $50 million of the charges to either terminate or sublease the affected real estate leases. The 2018 Restructuring Program also included $55 million of personnel-related restructuring charges, an amount that includes severance and related costs primarily determined under the Company’s existing severance plans. Cash outlays associated with the employee termination cost component of the 2018 Restructuring Program were $55 million.

Total expenses included in the accompanying consolidated statements of operations relating to the Company's restructuring programs are as follows:


	Year Ended December 31,
	2020		2019		2018
2018 Restructuring Program	$	(4)	$	60	$	49
2020 Real Estate Rationalization Restructuring Program	36		—		—
2020 MA Strategic Reorganization Restructuring Program	18		—		—
Total Restructuring	$	50	$	60	$	49

Changes to the restructuring liability were as follows:


	Employee Termination Costs		Contract Termination Costs		Total Restructuring Liability
Balance as of December 31, 2018	$	30	$	12	$	42
2018 Restructuring Program (1):
Adoption of New Lease Accounting Standard (2)	—		(11)		(11)
Cost incurred and adjustments	26		5		31
Cash payments and adjustments	(35)		(3)		(38)
Balance as of December 31, 2019	$	21	$	3	$	24
2018 Restructuring Program:
Cost incurred and adjustments	(4)		—		(4)
Cash payments and adjustments	(17)		(1)		(18)
2020 Real Estate Rationalization Restructuring Program (3):
Cost incurred and adjustments	—		1		1
2020 MA Strategic Reorganization Restructuring Program:
Cost incurred and adjustments	18		—		18

Balance as of December 31, 2020	$	18	$	3	$	21

Cumulative expense incurred to date
2018 Restructuring Program	$	55	$	50
2020 Real Estate Rationalization Restructuring Program:	$	—	$	36
2020 MA Strategic Reorganization Restructuring Program:	$	18	$	—

(1)The liability excludes $4 million of non-cash acceleration of amortization of leasehold improvements relating to the rationalization and exit of certain real estate leases as well as $25 million of ROU Asset impairment charges for the year ended December 31, 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 $18 million, and is categorized as Level 3 within the ASC Topic 820 fair value hierarchy.

(2)Upon the adoption of the New Lease Accounting Standard, the Company recorded a reclassification of $11 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.

(3)The liability excludes $13 million of non-cash acceleration of amortization of leasehold improvements relating to the rationalization and exit of certain real estate leases as well as $21 million of ROU Asset impairment charges for the year ended December 31, 2020. 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 $10 million, and is categorized as Level 3 within the ASC Topic 820 fair value hierarchy.

As of December 31, 2020, a majority of the remaining $21 million restructuring liability is expected to be paid out through 2022.