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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

Commission file number 0-20311

Interactive Data Corporation
(Exact name of registrant as specified in its charter)

22 Crosby Drive, Bedford, Massachusetts 01730-1402
(Address of principal executive offices)

Registrant’s telephone number, including area code: (781) 687-8500

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 x    No o

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of July 23, 2002 was 91,322,001.

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INDEX

PART I FINANCIAL INFORMATION
Item 1.		Financial Statements
			Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the Three Months Ended June 30, 2002 and 2001 and Six Months Ended June 30, 2002 and 2001
			Condensed Consolidated Balance Sheets at June 30, 2002 (unaudited) and December 31, 2001
			Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2002 (unaudited)
			Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2002 and 2001
			Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures about Market Risk
PART II OTHER INFORMATION
Item 4.		Submission of Matters to a Vote of Security Holders
Item 6.		Exhibits and Reports on Form 8-K
Signatures

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)

The accompanying notes are an integral part of these consolidated financial statements.

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INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)

The accompanying notes are an integral part of these consolidated financial statements.

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INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
(Unaudited)

1.  Interim Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared by Interactive Data Corporation and its wholly-owned subsidiaries (“the Company”) in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such regulations. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included. All such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2001 filed with the Securities and Exchange Commission on Form 10-K. The results for interim periods are not necessarily indicative of the results to be expected for the full year.

2.  Acquisitions

On January 31, 2002, the Company, through its FT Interactive Data Corporation subsidiary, acquired certain assets from Merrill Lynch, Pierce, Fenner & Smith Incorporated used in its Securities Pricing Service (“SPS”) business. The price paid in cash for the assets was $48,000 and was funded from the operating cash of FT Interactive Data Corporation. In addition, FT Interactive Data Corporation incurred acquisition costs of $1,833, consisting of severance costs and legal and accounting services. As of June 30, 2002, $293 of the acquisition costs have been paid.

The acquisition was accounted for using the purchase method of accounting in accordance with Financial Accounting Standard No. 141
“Business Combinations.” The purchase price has been assigned to the assets acquired based on their fair values as determined by an independent third party appraisal. The intangible asset, customer lists, is being amortized over a fourteen-year period. The Company’s financial statements include the results of operations of SPS subsequent to the acquisition date.

The acquisition was accounted for as follows:

3.  Investment In MarketWatch.com, Inc.

On December 27, 2000, the Company entered into an agreement with an affiliate of Pearson plc (“Pearson”) to sell its 34.4% ownership interest in MarketWatch.com, Inc. (“MarketWatch”) for $26,888. On January 16, 2001, the Company paid a special dividend of $26,871 to shareholders of record on January 8, 2001. This dividend related to the proceeds received from the sale of the Company’s investment in MarketWatch, less $17 paid in administrative related fees.

4.  Stock Based Compensation

The Company has 6,644 stock options outstanding under its 2000 Long Term Incentive Plan as of June 30, 2002, with a weighted average exercise price of $8.12. Of these options, 3,205 are currently exercisable and have a weighted average exercise price of $7.78.

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5.  Segment Information

The Company’s reportable segments are as follows:

Institutional		delivery of time sensitive pricing, dividend, corporate action, hard-to-value unlisted fixed income instruments, and descriptive information and fixed income portfolio analytics to institutional customers.
Retail		delivery of real-time financial market information to retail customers.

The Company evaluates its segments on the basis of net income before other income, income taxes, depreciation and amortization expense (“EBITDA”). EBITDA is presented because it is a widely accepted indicator of funds available to the business, although it is not a measure of liquidity or financial performance under generally accepted accounting principles. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under generally accepted accounting principles. EBITDA, as presented here, may differ from similarly titled measures reported by other companies due to potential differences in methods of calculation between the Company and other companies.

Segment financial information is as follows (in thousands):

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6.  Earnings Per Share

A reconciliation of the weighted average number of common shares outstanding is as follows (in thousands):

7.  Commitments and Contingencies

Derivative Action — Early in 2001, seven lawsuits were filed by various stockholders of the Company against the Company’s directors, Pearson Longman, Inc. and Pearson. These actions have been consolidated in the Delaware Chancery Court for New Castle County under the caption In re Data Broadcasting Corporation Derivative Litigation: Consolidated Civil Action No. 18665-NC (the “Derivative Action”). As is usual in derivative actions, the Company is named as a nominal defendant in the Derivative Action on the theory that the plaintiff stockholders are allegedly suing on its behalf and for its benefit.

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The Derivative Action challenges the Company’s January 2001 sale of its 34.4% interest in MarketWatch to Pearson, the parent company of the Company’s majority stockholder, as having been consummated at an allegedly inadequate price due to the supposedly undue influence of Pearson as the Company’s majority stockholder. Plaintiffs seek to have Pearson and the Company’s directors “account to the Company” for damages that the Company allegedly sustained by reason of an unduly low sale price.

The Company and its directors have answered the consolidated complaint, and discovery has commenced. The Company expects to contest the allegations against it and its directors vigorously.

8.  Income Taxes

The Company determines its periodic income tax expense based upon the current period income and the estimated annual effective tax rate for the Company. The rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the Company’s best current estimate of its annual effective tax rate. The difference between the Company’s statutory tax rate and effective tax rate in 2002 as compared to 2001 was primarily due to the cessation of non-deductible amortization for financial reporting purposes (See Note 9 and Note 10).

9.  Goodwill and Intangible Assets

Intangible assets consist of the following:

The impact on net income and earnings per share as a result of the adoption of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”), for the six months ended June 30:

Estimated amortization expense:

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10.  New Accounting Pronouncements

     Accounting for Business Combinations and Goodwill and Intangible Assets

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Financial Accounting Standard No. 141, “Business Combinations” (“FAS 141”) and FAS 142. These statements amend the accounting and reporting standards for business combinations, goodwill and certain other intangible assets. FAS 141 is effective for all business combinations initiated after June 30, 2001. FAS 142 is effective for fiscal years beginning after December 15, 2001. The Company has adopted these pronouncements in its financial statements on their respective effective dates. No material changes to the carrying values of goodwill and other intangible assets were made as a result of the adoption of FAS 142. As a result of the adoption of FAS 142, beginning with January 2002, the Company ceased the amortization of goodwill. In the three months and six months ended June 30, 2001,the Company recorded goodwill amortization of $9,309 and $18,618, respectively.

     Asset Retirement Obligations

In August 2001, FASB issued Financial Accounting Standard No. 143, “Accounting for Asset Retirement Obligations” (“FAS 143”), which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS No. 143 is required to be adopted for fiscal years beginning after June 15, 2002. Management does not expect the adoption of this standard to have any impact on the Company’s financial position or results of operations.

     Accounting for the Impairment or Disposal of Long-Lived Assets

In October 2001, FASB issued Financial Accounting Standard No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”). FAS 144 supersedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of.” FAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, “Reporting Results of Operations – Reporting the Effects of Disposal of a Segment of a Business.” FAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and has been adopted by the Company, as required, on January 1, 2002. The adoption of FAS 144 did not have any impact on its financial position or results of operations.

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INTERACTIVE DATA CORPORATION AND SUBSIDIARIES
(In thousands)
(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (in thousands)

The Company primarily supplies financial and business information to institutional and retail investors worldwide. The Company is a leading provider of time sensitive pricing, dividend, corporate action and descriptive information for more than 3.5 million securities. The Company also provides fixed income portfolio analytics, consulting and valuation services to institutional fixed income portfolio managers. At the core of the business are its extensive database expertise and technology resources.

The Company delivers real-time, end of day and historically archived data to customers through a variety of products featuring Internet, dedicated line, satellite and dialup delivery protocols. Through a broad range of strategic alliances, the Company provides links to leading financial service and software companies for trading, analysis, portfolio management and valuation.

The Company operates in two business segments:

		Institutional services — delivery of time sensitive pricing, dividend, corporate action, hard-to-value unlisted fixed income instruments, and descriptive information and fixed income portfolio analytics to institutional customers.
		Retail Investor services — delivery of real-time financial market information to retail customers.

The services provided by the Company include the following:

Institutional services:

FT Interactive Data provides a wide range of high quality financial information to trading houses, custodians and fund managers worldwide. The financial information collected and distributed includes pricing, descriptive and corporate action information on securities from all over the world.

CMS BondEdge® provides fixed income analytical tools and models designed for investment managers, broker-dealers, insurance companies and bank and pension fund managers.

Retail investor services:

The Internet based services offer real-time, Internet delivered subscription quote services for serious traders offering charts, news, research, decision support tools and alerts direct to a laptop, PC or telephone.

The Company’s broadcast services deliver real-time quotes to communication devices that rely on FM subcarriers, satellite and cable television or telephone lines.

Market trends:

In the core institutional services market through the first six months of 2002, we have experienced a higher than normal level of cancellations primarily attributable to cost cutting across financial institutions. However, revenues from the FT Interactive Data business have remained relatively resilient in the current uncertain market conditions due to higher sales from premium priced fixed income data sets. The Company believes that this is because much of the data supplied by the Company is mission critical to its customers. Also, in the six months ended June 30, 2002, the Company’s CMS BondEdge division saw a continued slowdown in sales primarily attributable to cost cutting across financial institutions.

There is a trend in North America for major financial institutions to outsource their back office accounting operations for the valuation of their security holdings and portfolios to service bureaus and custodian banks. The Company has established relationships with service bureaus and custodian banks and is a major data supplier to these institutions and expects to benefit from their growth. Another trend in North America is the consolidation of financial institutions. When these institutions merge, they look to gain synergies by combining their operations, thereby removing the need for two data sources.

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On January 31, 2002, the Company completed its acquisition of SPS for aggregate cash consideration of $48,000. This acquisition will allow the FT Interactive Data business to expand its client base and enhance its coverage of fixed income securities. The results of operations of SPS have been included in the consolidated results from the date of acquisition.

Growth in the institutional market will come from the Company’s ability to expand its data content offerings to meet the needs of its clients. In addition, the Company will continue to look to expand its market share in the burgeoning single European market.

In the Company’s retail investor services segment, the eSignal product continued, during the first six months of 2002, to strengthen its position as a leading financial data provider for retail and professional investors. After a decline in subscribers through the end of September 2001, the Company experienced net growth in subscribers in the final quarter of 2001 and the first six months of 2002. In 2002, a large proportion of the increase in subscribers has come from developing further distribution channels, which generate incremental revenues at a lower rate than from direct customers. The Company expects the introduction of European real-time streaming financial market data to enhance the prospects for eSignal in this region.

RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA (In thousands, except per share amounts)
(Unaudited)