What were the main drivers of Moody's revenue growth in Q2 2002?

Moody's revenue growth was driven by strong performance in both U.S. and international ratings businesses. Key contributing sectors included structured finance (residential mortgage-backed securities, credit derivatives, asset-backed securities), financial institutions, and sovereign risk. International revenue growth was particularly strong, fueled by European and Japanese structured finance and European financial institutions.

How has the acquisition of KMV impacted Moody's financial results and business segments?

The acquisition of KMV, completed in April 2002, added $12.0 million in revenue in the second quarter. It also led to the establishment of a second reportable segment, Moody's KMV, focused on credit risk management software and services. While KMV incurred an operating loss of $2.6 million in its first quarter as part of Moody's, it diversified the company's revenue streams and expanded its product offerings.

What is Moody's financial position regarding debt and liquidity?

Moody's reported $300 million in notes payable with a 7.61% interest rate, maturing in five years. The company also has access to an undrawn $160 million revolving credit facility. Operating cash flow remained strong, and the company was in compliance with all debt covenants as of June 30, 2002. The company used cash on hand and short-term borrowings (later repaid) to fund the KMV acquisition, managing its liquidity effectively.

Are there any significant legal or tax contingencies that investors should be aware of?

Moody's is involved in several legal and tax matters. These include an antitrust lawsuit by Information Resources, Inc. (IRI), a claim by L’Association Francaise des Porteurs d’ Emprunts Russes (AFPER) related to Russian debt ratings, and various tax matters stemming from prior corporate restructurings. While Moody's management believes these matters will not have a material adverse effect, the potential cash outlays for the tax matters are estimated up to $134 million, and no amount has been accrued for the IRI action. Investors should monitor developments in these areas.

MCO 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

Summary

Moody's Corporation reported strong financial performance for the second quarter and first half of 2002, driven by significant revenue growth in its core Ratings and Research segment. The acquisition of KMV in April 2002 has expanded the company's offerings into the credit risk management software space, creating a second reportable segment. Total revenue increased by 32.3% for the quarter and 30.5% for the six-month period compared to the prior year, reflecting robust activity in structured finance, financial institutions, and sovereign risk ratings, as well as international market strength. Despite increased expenses related to the KMV integration and business expansion, operating income and net income saw substantial year-over-year growth. Investors should note the successful integration of KMV and the company's strategic positioning for continued growth in credit analysis and risk management.

Key Highlights

1Revenue for the three months ended June 30, 2002, increased by 32.3% to $271.5 million, up from $205.2 million in the prior year period.
2Net income for the three months ended June 30, 2002, rose by 41.8% to $78.7 million, compared to $55.5 million in the prior year period.
3The acquisition of KMV on April 12, 2002, for $210 million, expanded the company's operations into a second reportable segment: Moody's KMV.
4Operating income margin improved to 54% for the quarter, up from 51% in the prior year, demonstrating operational leverage.
5International revenue showed strong growth, increasing by 61.6% for the quarter and representing 35% of total revenue.
6The company declared a quarterly dividend of 4.5 cents per share, payable in September 2002.
7Despite significant investments and integration costs for KMV, the company maintained compliance with its debt covenants.

MOODYS CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2002

Summary

Key Highlights

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