10-KPeriod: FY2004

MOODYS CORP /DE/ Annual Report, Year Ended Dec 31, 2004

Filed March 8, 2005For Securities:MCO

Summary

Moody's Corporation's 2004 annual report (10-K) highlights a strong financial performance with revenue increasing by 15.4% to $1.44 billion and net income growing by 16.8% to $425.1 million. This growth was primarily driven by robust performance in Moody's Investors Service, particularly in structured finance and research, as well as continued expansion in the Moody's KMV segment. The company also saw significant growth in its international operations, which contributed a substantial portion of the overall revenue increase. Looking ahead, Moody's anticipates continued growth, albeit at a moderated pace compared to 2004, with projected high single-digit revenue growth for 2005. The company is investing in geographic expansion, analytic process improvements, and technology to support future growth. However, it also faces potential challenges from increased competition, evolving regulatory environments in the US and Europe, and the ongoing management of legacy tax matters. The company also announced a two-for-one stock split and an increase in its quarterly dividend, reflecting its confidence in its financial position and future prospects.

Key Highlights

  • 1Moody's Corporation reported a 15.4% increase in revenue for 2004, reaching $1.44 billion, driven by strong performance in both its Moody's Investors Service and Moody's KMV segments.
  • 2Net income saw a significant rise of 16.8% to $425.1 million, indicating improved profitability.
  • 3The company experienced robust growth in its international operations, with international revenue increasing by 16.8%.
  • 4Structured finance, particularly residential mortgage-backed and home equity loan securities, was a key driver of growth for Moody's Investors Service.
  • 5Moody's KMV segment continued its growth trajectory, with revenue increasing by 14.0%.
  • 6The company is actively managing legacy tax matters, increasing its reserves in 2004 to $136 million to cover potential exposures.
  • 7Moody's announced a two-for-one stock split and an increase in its quarterly dividend, signaling confidence in future performance and commitment to shareholder returns.

Frequently Asked Questions

Moody's revenue growth in 2004 was primarily driven by strong performance in its Moody's Investors Service segment, specifically in structured finance (especially residential mortgage-backed and home equity loan securities) and the research business. The Moody's KMV segment also contributed positively, showing a 14.0% revenue increase. International operations, benefiting from favorable currency translation and growth across various sectors, were also a significant contributor to the overall revenue increase.

For 2005, Moody's expects high single-digit percent revenue growth, including the positive impact of currency translation. The company anticipates a moderation in growth compared to 2004, partly due to a projected decline in U.S. structured finance revenue. Operating margins are expected to be down approximately 200 basis points, reflecting slower revenue growth and continued investments. Diluted earnings per share are projected to grow in the mid-teens percent range.

Moody's identifies several key risks, including potential changes in the volume of debt securities issued in capital markets, increased pricing pressure from competitors, the introduction of competing products or technologies, and potential loss of key employees. Additionally, the company is subject to evolving regulatory environments in the U.S. and Europe, as well as litigation risks related to its rating opinions. The management of legacy tax matters and potential government-sponsored credit rating agencies are also noted as significant factors.

Subsequent to the end of fiscal year 2004, Moody's announced a two-for-one stock split, subject to shareholder approval, to be effective in May 2005. The company's Board of Directors also voted to increase the quarterly dividend per share from $0.075 to $0.11 (pre-split basis), signaling confidence in its financial health and commitment to shareholder returns.