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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 1999

Commission file number 1-13286

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DUFF & PHELPS CREDIT RATING CO.(Exact name of Registrant as specified in its Charter)

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|Illinois(State of Incorporation)               |  | 36-3569514(I.R.S Employer Identification No.)
|---------------------------------------------- |  | ---------------------------------------------
|55 East Monroe Street, Chicago, Illinois 60603 |  | (312) 368-3100                               
|(Address of principal executive offices)       |  | (Registrant's telephone number)              

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 / /

On
October 31, 1999, the registrant had 4,645,524 shares of common stock outstanding.

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## 

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES

QUARTER ENDED SEPTEMBER 30, 1999

INDEX

PART I.  FINANCIAL INFORMATION

|ITEM 1. |  | Consolidated Financial Statements                                                     |  |     
|------- |  | ------------------------------------------------------------------------------------- |  | ----
|        |  | Consolidated Statements of Income
Three Months Ended September 30, 1999 and 1998      |  | 1   
|        |  | Consolidated Statements of Income
Nine Months Ended September 30, 1999 and 1998       |  | 2   
|        |  | Consolidated Balance Sheets
September 30, 1999 and December 31, 1998                  |  | 3   
|        |  | Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998   |  | 4   
|        |  | Notes to Consolidated Financial Statements                                            |  | 5-8 
|ITEM 2. |  | Management's Discussion and Analysis of Financial
Condition and Results of Operations |  | 9-11
|        |  |                                                                                       |  |     
|
|ITEM 6. |  | Exhibits and Reports on Form 8-K                                                      |  | 12  
|        |  |                                                                                       |  |     



## 

PART I.   FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)

|                                                     |  | Three Months
Ended
September 30,
1999 |        | Three Months
Ended
September 30,
1998
|---------------------------------------------------- |  | ------------------------------------- | ------ | -------------------------------------
|REVENUES (Note 1)                                    |  | $                                     | 21,560 |                                      
|EXPENSES                                             |  |                                       |        |                                      
|Employment expense                                   |  |                                       | 8,972  |                                      
|Other operating expenses                             |  |                                       | 3,738  |                                      
|Name usage fees paid to former parent (Note 2)       |  |                                       | 500    |                                      
|Depreciation and amortization (Note 1)               |  |                                       | 655    |                                      
|                                                     |  |                                       |        |                                      
|Total expenses                                       |  |                                       | 13,865 |                                      
|OPERATING INCOME                                     |  |                                       | 7,695  |                                      
|Other income                                         |  |                                       | 8      |                                      
|Interest income, net (Note 3)                        |  |                                       | 24     |                                      
|                                                     |  |                                       |        |                                      
|EARNINGS BEFORE INCOME TAXES                         |  |                                       | 7,727  |                                      
|Income taxes                                         |  |                                       | 3,370  |                                      
|                                                     |  |                                       |        |                                      
|NET EARNINGS                                         |  | $                                     | 4,357  |                                      
|                                                     |  |                                       |        |                                      
|Basic weighted average shares outstanding (Note 1)   |  |                                       | 4,622  |                                      
|BASIC EARNINGS PER SHARE (Note 1)                    |  | $                                     | 0.94   |                                      
|Diluted weighted average shares outstanding (Note 1) |  |                                       | 4,984  |                                      
|DILUTED EARNINGS PER SHARE (Note 1)                  |  | $                                     | 0.87   |                                      

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

1

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)

|                                                     |  | Nine Months
Ended
September 30,
1999 |        | Nine Months
Ended
September 30,
1998
|---------------------------------------------------- |  | ------------------------------------ | ------ | ------------------------------------
|REVENUES (Note 1)                                    |  | $                                    | 67,244 |                                     
|EXPENSES                                             |  |                                      |        |                                     
|Employment expense                                   |  |                                      | 28,374 |                                     
|Other operating expenses                             |  |                                      | 10,990 |                                     
|Name usage fees paid to former parent (Note 2)       |  |                                      | 1,500  |                                     
|Depreciation and amortization (Note 1)               |  |                                      | 1,999  |                                     
|                                                     |  |                                      |        |                                     
|Total expenses                                       |  |                                      | 42,863 |                                     
|OPERATING INCOME                                     |  |                                      | 24,381 |                                     
|Other income                                         |  |                                      | 258    |                                     
|Interest income, net (Note 3)                        |  |                                      | 149    |                                     
|                                                     |  |                                      |        |                                     
|EARNINGS BEFORE INCOME TAXES                         |  |                                      | 24,490 |                                     
|Income taxes                                         |  |                                      | 10,553 |                                     
|                                                     |  |                                      |        |                                     
|NET EARNINGS                                         |  | $                                    | 13,937 |                                     
|                                                     |  |                                      |        |                                     
|Basic weighted average shares outstanding (Note 1)   |  |                                      | 4,569  |                                     
|BASIC EARNINGS PER SHARE (Note 1)                    |  | $                                    | 3.05   |                                     
|Diluted weighted average shares outstanding (Note 1) |  |                                      | 4,956  |                                     
|DILUTED EARNINGS PER SHARE (Note 1)                  |  | $                                    | 2.81   |                                     

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

2

## 

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS   (In Thousands)

|                                                                                                                                    |  | September 30,
1999 |        | December 31,
1998
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | -----------------
|
|ASSETS                                                                                                                              |  |                    |        |                  
|CURRENT ASSETS:                                                                                                                     |  |                    |        |                  
|Cash and cash equivalents                                                                                                           |  | $                  | 7,384  |                  
|Accounts receivable, net of allowance for doubtful accounts of $610 and $494, respectively                                          |  |                    | 12,094 |                  
|Other current assets                                                                                                                |  |                    | 951    |                  
|                                                                                                                                    |  |                    |        |                  
|Total current assets                                                                                                                |  |                    | 20,429 |                  
|OFFICE FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net of accumulated depreciation of $6,721 and $5,422, respectively (Note 1) |  |                    | 4,645  |                  
|OTHER ASSETS:                                                                                                                       |  |                    |        |                  
|Goodwill and organization costs, net (Note 1)                                                                                       |  |                    | 21,201 |                  
|Intangible assets, net (Note 1)                                                                                                     |  |                    | 1,522  |                  
|Other long-term investments                                                                                                         |  |                    | 2,528  |                  
|Other long-term assets                                                                                                              |  |                    | 70     |                  
|                                                                                                                                    |  |                    |        |                  
|TOTAL ASSETS                                                                                                                        |  | $                  | 50,395 |                  
|                                                                                                                                    |  |                    |        |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                |  |                    |        |                  
|CURRENT LIABILITIES:                                                                                                                |  |                    |        |                  
|Accrued compensation and employment taxes                                                                                           |  | $                  | 7,989  |                  
|Accounts payable                                                                                                                    |  |                    | 3,584  |                  
|Current maturities of line of credit borrowings (Note 3)                                                                            |  |                    | 0      |                  
|Advance service fee billings to clients (Note 1)                                                                                    |  |                    | 730    |                  
|Accrued income taxes                                                                                                                |  |                    | (2,868 | )                
|Other current liabilities                                                                                                           |  |                    | 0      |                  
|                                                                                                                                    |  |                    |        |                  
|Total current liabilities                                                                                                           |  |                    | 9,435  |                  
|OTHER LONG-TERM LIABILITIES                                                                                                         |  |                    | 4,058  |                  
|STOCKHOLDERS' EQUITY:                                                                                                               |  |                    |        |                  
|Preferred stock, no par value; 3,000 shares authorized, zero shares outstanding                                                     |  |                    | 0      |                  
|Common stock, no par value; 15,000 shares authorized, 4,684 and 4,544 shares issued and outstanding, respectively                   |  |                    | 4,438  |                  
|Retained earnings                                                                                                                   |  |                    | 32,464 |                  
|                                                                                                                                    |  |                    |        |                  
|TOTAL STOCKHOLDERS' EQUITY                                                                                                          |  |                    | 36,902 |                  
|                                                                                                                                    |  |                    |        |                  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                          |  | $                  | 50,395 |                  
|                                                                                                                                    |  |                    |        |                  

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

3

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

|                                                                                      |  | Nine Months
Ended
September 30,
1999 |         | Nine Months
Ended
September 30,
1998 |  
|------------------------------------------------------------------------------------- |  | ------------------------------------ | ------- | ------------------------------------ | -
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                 |  |                                      |         |                                      |  
|Net earnings                                                                          |  | $                                    | 13,937  |                                      | $
|Decrease (increase) in accounts receivable                                            |  |                                      | (483    | )                                    |  
|Decrease in accrued compensation and employment taxes                                 |  |                                      | (2,779  | )                                    |  
|Decrease in advance service fee billings                                              |  |                                      | (436    | )                                    |  
|Depreciation and amortization                                                         |  |                                      | 1,999   |                                      |  
|Decrease in accrued income taxes                                                      |  |                                      | (3,096  | )                                    |  
|Increase in other assets and liabilities, net                                         |  |                                      | 2,108   |                                      |  
|                                                                                      |  |                                      |         |                                      |  
|Cash provided by operating activities                                                 |  |                                      | 11,250  |                                      |  
|                                                                                      |  |                                      |         |                                      |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                 |  |                                      |         |                                      |  
|Increase in other long-term investments                                               |  |                                      | (235    | )                                    |  
|Purchase of office furniture, equipment and leasehold improvementsnet of retirements |  |                                      | (931    | )                                    |  
|                                                                                      |  |                                      |         |                                      |  
|Cash used in investing activities                                                     |  |                                      | (1,166  | )                                    |  
|                                                                                      |  |                                      |         |                                      |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                 |  |                                      |         |                                      |  
|Dividends paid to shareholders                                                        |  |                                      | (414    | )                                    |  
|Decrease in deferred financing costs                                                  |  |                                      | 23      |                                      |  
|Issuances of common stock                                                             |  |                                      | 4,872   |                                      |  
|Repurchases of common stock                                                           |  |                                      | (14,650 | )                                    |  
|Tax benefit due to employee stock option exercises                                    |  |                                      | 8,351   |                                      |  
|Increase in line of credit borrowings                                                 |  |                                      | 8,000   |                                      |  
|Decrease in line of credit borrowings                                                 |  |                                      | (9,500  | )                                    |  
|                                                                                      |  |                                      |         |                                      |  
|Cash used in financing activities                                                     |  |                                      | (3,318  | )                                    |  
|                                                                                      |  |                                      |         |                                      |  
|NET INCREASE IN CASH AND CASH EQUIVALIENTS                                            |  |                                      | 6,766   |                                      |  
|                                                                                      |  |                                      |         |                                      |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        |  |                                      | 618     |                                      |  
|                                                                                      |  |                                      |         |                                      |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                              |  | $                                    | 7,384   |                                      | $
|                                                                                      |  |                                      |         |                                      |  

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

4

## 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1  SIGNIFICANT ACCOUNTING POLICIES:

General

Duff & Phelps Credit Rating Co. (the "Company") is an internationally recognized credit rating agency that provides ratings and research on corporate,
structured and sovereign financings, as well as insurance claims paying ability. The Company has offices in Chicago, New York, London, Hong Kong, Tokyo and Singapore and operates directly or through
international partners in North America, South America, Europe, Asia and Africa.

On
October 31, 1994, the spin-off of the Company from its former parent company, Phoenix Investment Partners, Ltd., formerly Duff & Phelps Corporation
("D&P"), was finalized. The Company's shares, held by D&P, were distributed October 31, 1994, to D&P shareholders of record on October 26, 1994, as a tax-free distribution
for which a favorable tax ruling was obtained from the Internal Revenue Service. D&P shareholders received one of the Company's shares for every three shares held of D&P common stock, and cash
payments were made in lieu of fractional shares. The distribution resulted in the Company operating as a free-standing entity whose common stock is publicly traded on the New York Stock
Exchange under the ticker symbol "DCR."

Basis of Presentation

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions.
These estimates affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. In addition, they affect the reported
amounts of revenues and expenses during the period. Actual results could differ from these estimates.

The
accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include those assets, liabilities, revenues and
expenses directly attributable to the Company's operations in the periods presented. Certain reclassifications have been made to prior period financial statements to conform with the current
presentation.

Principles of Consolidation

During July 1994, the Company organized a U.S. subsidiary, Duff & Phelps Credit Rating Co. of Europe, with an office located in London, England.
In July 1996, the Company organized a U.S. subsidiary, Duff & Phelps Credit Rating Co. of Asia, which has offices in Hong Kong, Tokyo and Singapore. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries, Duff & Phelps Credit Rating Co. of Europe and Duff & Phelps Credit Rating Co. of Asia. All significant intercompany
balances and transactions have been eliminated.

Earnings Per Share

Earnings per share were computed using the weighted average number of shares of common stock and common stock equivalents outstanding for each of the periods
presented. Common stock equivalents are based on outstanding non-qualified stock options under the Company's long-term stock incentive plan.
5

Following
is a reconciliation of the denominator used to calculate basic earnings per share to the denominator used to calculate diluted earnings per share for the nine month periods
ended September 30 (in thousands):

|                                                |  | 1999  |   | 1998  |  
|----------------------------------------------- |  | ----- | - | ----- | -
|Basic Weighted Average Shares Outstanding       |  | 4,569 |   | 4,820 |  
|Stock Options Outstanding                       |  | 898   |   | 1,110 |  
|Reduction in Shares for Treasury Stock Proceeds |  | (511  | ) | (675  | )
|                                                |  |       |   |       |  
|Diluted Weighted Average Shares Outstanding     |  | 4,956 |   | 5,255 |  
|                                                |  |       |   |       |  

Revenue Recognition

Rating revenues are typically recognized when services rendered for credit ratings are complete, generally when billed. Revenues are dependent, in large part,
on levels of debt issuance. The Company's fee schedule depends on the type and amount of securities rated and the complexity of securities issued. Research revenues are billed in advance and amortized
over the subscription period. Certain monitoring fees are billed in advance and are amortized over the length of the life of the security.

Goodwill and Intangible Assets

Goodwill and intangible assets are shown net of accumulated amortization. Goodwill is amortized over its estimated remaining life of approximately
29 years, and intangible assets are amortized over remaining lives of one through 10 years.

The
Company periodically evaluates whether significant events have occurred that may require a revision of the estimated useful life of goodwill and intangible assets or an impairment
of the recoverability of remaining balances. The Company uses an estimate of future undiscounted cash flows over the remaining useful life of goodwill and intangible assets to measure recoverability.
Management believes that the full amount of goodwill and intangible assets is recoverable.

Depreciation and Amortization

Office
furniture and equipment are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated remaining lives of the
assets, typically three to 10 years. Leasehold improvements are amortized over the remaining lives of the related leases which are one to 10 years.

2  RELATED PARTIES:

Name Use Fees Paid to D&P

A name use fee agreement in effect between the Company and the former parent requiring payment of $2.0 million per year is included in the Company's
financial results for the periods presented. Effective September 30, 2000, the name use fee reduces to $10,000 per year.
6

Service Fees Paid to the Company

The Company provides the former parent with fixed-income research services for an annual fee of $0.9 million. For the periods presented, the
fixed-income research fees are included in revenue. The fixed-income research agreement expires on September 30, 2000.

3  LINE OF CREDIT AND LONG-TERM DEBT:

The company's debt obligation under its $20.0 million revolving credit facility at September 30, 1999 was zero and at December 31, 1998 it
was $1.5 million.

The
credit agreement contains financial covenants that require the Company to maintain certain ratios and satisfy certain financial tests, including restrictions on the ability to
incur indebtedness and limitations on the amount of capital expenditures, common stock dividends and advances to subsidiaries. The Company was in compliance with such covenants for all periods
presented.

4  LITIGATION MATTERS:

The Company and its subsidiaries are from time to time parties to various legal actions arising in the normal course of business. Management believes that
there are no proceedings pending against the Company or any of its subsidiaries which, if determined adversely, would have a material adverse effect on the financial condition or results of operations
of the Company.

5  SEGMENT INFORMATION:

The primary business of the Company is to provide credit ratings on domestic and international corporate bonds, sovereign bonds, preferred stocks, commercial
paper, certificates of deposit, structured financings and insurance company claims paying ability. To assess performance of the Company, executive management regularly reviews the financial statements
on a consolidated basis. In addition, executive management reviews revenues by major service type on a consolidated basis.

The
following table presents, on an enterprise-wide basis, revenues by service type and revenues by geographic area for the nine month periods ended September 30
(in thousands):

|                                   |  | 1999 |        | 1998
|---------------------------------- |  | ---- | ------ | ----
|REVENUES BY SERVICE TYPE           |  |      |        |     
|Corporate Rating Revenues          |  | $    | 31,411 |     
|Structured Finance Rating Revenues |  |      | 33,473 |     
|Research Revenues                  |  |      | 2,360  |     
|                                   |  |      |        |     
|Consolidated Total                 |  | $    | 67,244 |     
|                                   |  |      |        |     
|GEOGRAPHIC REVENUES                |  |      |        |     
|United States                      |  | $    | 55,127 |     
|International                      |  |      | 12,117 |     
|                                   |  |      |        |     
|Consolidated Total                 |  | $    | 67,244 |     
|                                   |  |      |        |     

7

The
following table presents on an enterprise-wide basis, long lived assets by geographic area
(in thousands):

|                   |  | September 30, 1999 |        | December 31, 1998
|------------------ |  | ------------------ | ------ | -----------------
|LONG-LIVED ASSETS  |  |                    |        |                  
|United States      |  | $                  | 29,162 |                  
|International      |  |                    | 804    |                  
|                   |  |                    |        |                  
|Consolidated Total |  | $                  | 29,966 |                  
|                   |  |                    |        |                  

6  SUPPLEMENTAL CASH FLOW INFORMATION:

For purposes of the consolidated statements of cash flows, the Company considers investments with maturities of three months or less to be cash equivalents.

For
the nine months ended September 30, interest expense paid was $0.24 million in 1999, and $0.25 million in 1998.

Income
taxes paid were $5.3 million for the nine months ended September 30, 1999 and $8.0 million for the nine months ended September 30, 1998.

8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three Months Ended September 30, 1999, Compared with Three Months Ended September 30, 1998

Revenues for the three months ended September 30, 1999, were $21.6 million, an increase of 13 percent from the $19.1 million
recorded in 1998. Corporate rating revenues totaled $10.1 million, and structured finance rating revenues increased to $10.7 million, while other revenues were $0.8 million.

Structured
finance revenues increased 13 percent in the third quarter of 1999 versus 1998, and corporate rating revenues increased 16 percent. Structured finance
revenues were driven by strong performance by the commercial mortgage-backed unit. Corporate rating revenue increases were primarily the result of additional financing activity by industrial and
financial corporations and continued strength in power project finance transactions. International revenues, which are included in the above comparisons, increased 25 percent as a result of
continued growth in Europe and improvement in Asia.

Operating
expenses for the three months ended September 30, 1999, were $13.9 million, an increase of $1.0 million or eight percent from the comparable 1998
period. This primarily reflected higher compensation costs and general and administrative expenses due to business growth.

Operating
income for the three months ended September 30, 1999, was $7.7 million, an increase of $1.4 million, or 23 percent, over the $6.3 million
recorded in 1998.

Income
tax expense increased proportionately with pre-tax income. Accrued income taxes payable decreased significantly in the third quarter due to a high number of
exercised stock options which will result in income tax benefits in the current year.

Net
earnings totaled $4.4 million for the period ended September 30, 1999, a $0.6 million, or 15 percent, increase over last year. Diluted earnings per
share increased 21 percent to $0.87 versus $0.72 in 1998. Basic earnings per share increased to $0.94 in 1999 versus $0.79 in 1998. Earnings per share gains are the result of the performance
described above in addition to the reduction in weighted average shares outstanding as a result of the Company's stock repurchases.

Nine Months Ended September 30, 1999, Compared with Nine Months Ended September 30, 1998

Revenues for the nine months ended September 30, 1999, were $67.2 million, an increase of eight percent or $4.8 million, over the
$62.4 million recorded in the corresponding period in 1998. Corporate rating revenues totaled $31.4 million and structured rating revenues totaled $33.5 million for the first nine
months of 1999, while other revenues totaled $2.3 million.

Revenues
for the first nine months of 1999 increased despite the tremendous growth experienced in 1998. Rating revenues were favorably impacted by a nine percent increase in
structured rating revenues and a seven percent increase in corporate rating revenues. International rating revenues, which are incorporated in the above comparisons, increased 17 percent over
last year.

Operating
expenses for the first nine months of 1999, were $42.9 million, an increase of $1.8 million over $41.1 million reported in 1998. This increase primarily
reflects higher compensation costs due to business growth offset in part by lower professional service fees and bad debt expenses. The latter cost was impacted by strong revenue increases in 1998,
which resulted in a higher receivable reserve in 1998.

Operating
income for the nine months ended September 30, 1999, was $24.4 million, an increase of $3.1 million or 14 percent over the $21.3 million
recorded in 1998.

Income
tax expense increased in line with pre-tax income.
9

Net
earnings totaled $13.9 million for the nine months ended September 30, 1999, a $1.5 million or 12 percent increase over last year. Diluted earnings per
share increased 19 percent to $2.81 versus $2.36 in 1998. Basic earnings per share increased to $3.05 in 1999 versus $2.57 in 1998. Earnings per share gains are primarily the result of the
performance described above in addition to the reduction in weighted average shares outstanding due to the Company's repurchase programs. The Company repurchased 254,500 shares in the first nine
months of 1999. Since the inception of the Company's repurchase program, a total of 1,779,084 shares have been repurchased as of September 30, 1999.

Liquidity and Capital Resources

The Company has typically financed its operations, which do not require significant amounts of working capital or capital expenditures, through funds provided
by operations.

For
the nine months ended September 30, 1999 and 1998, capital expenditures, net of retirements totaled $0.9 million and $1.5 million, respectively. These capital
expenditures were primarily for leasehold improvements, computer equipment and office furniture. Other cash investments for the third quarter included payments for ownership shares in certain joint
ventures.

Financing
activities for the nine months ended September 30, 1999, included stock repurchases of 254,500 common shares amounting to $14.7 million and dividend payments
of $0.4 million. Future share repurchases are contingent upon the Company's financial condition, capital requirements and earnings, as well as the market price and availability of the Company's
common stock. Proceeds received from options exercised under the Company's stock incentive plan plus the related tax benefit totaled $13.2 million for the nine months ended September 30,
1999 compared to $1.3 million for the same period in 1998.

The
Company has in place a $20.0 million revolving bank credit agreement that expires December 31, 1999. Long-term debt obligations were zero at
September 30, 1999 and 1998. Commitment fees are accrued on the unused facility at an annual rate of 0.25 percent and are paid quarterly. The Company is in the process of negotiating a
new line of credit due to the current credit agreement's upcoming expiration.

The
bank credit agreement contains the following financial covenants among others: (i) a minimum net worth test; (ii) a maximum leverage test; and (iii) a
limitation on indebtedness and capital expenditures. The Company is currently in compliance with such covenants. The bank credit agreement also imposes certain restrictions on the sale of assets,
mergers or consolidations, creation of liens, investments, leases and loans and certain other matters.

The
Company believes that funds provided by operations and amounts available under its credit agreement will provide adequate liquidity for the foreseeable future.

Segment Reporting

The primary business of the Company is to provide credit ratings on domestic and international corporate bonds, sovereign bonds, preferred stocks, commercial
paper, certificates of deposit, structured financings and insurance company claims paying ability. To assess performance of the Company, executive management regularly reviews the financial statements
on a consolidated basis. In addition, executive management reviews revenues by major service type on a consolidated basis. See Note 5 to the Consolidated Financial Statements, Segment
Information, for the Company's disclosures regarding segment reporting.

Market Risk

As of September 30, 1999, nine percent of the Company's total assets were located outside of the United States. International revenues totaled
approximately 18 percent of the Company's total revenues for the nine months ended September 30, 1999. The majority of the revenue was invoiced in U.S. dollars. The Company feels that
any exposure to loss due to foreign exchange rate fluctuations is minimal and
10immaterial to the financial statements at this time; therefore, the Company has not used derivatives or hedging transactions to mitigate any risks.

The
market risk inherent in the Company's bank credit agreement is the potential for increased interest expense resulting from adverse changes in interest rates. Management believes
that any potential losses due to interest rate fluctuations would be minimal and immaterial to the financial statements based on current loan levels; therefore, the Company has not entered into any
interest rate swap agreements.

Year 2000

The Year 2000 issue is the result of computer programs using a two-digit format instead of four digits to indicate years, which could cause a
system failure or other computer errors in connection with Year 2000 computing. The Company is taking steps to ensure that all mission critical systems will be fully compliant with Year 2000
requirements. The Company has adopted a Year 2000 compliance program and is currently in the testing and contingency planning phases of such program which it expects to be ongoing through year end.
Internally developed and internally used software applications, including all internally developed mission critical systems, are believed to be fully compliant. The Company has fully
replaced or updated virtually all non-compliant systems provided by third parties and used within the Company.

The
Company is soliciting written assurances from outside vendors and other third parties that their software and other products will be century-compliant, and monitoring progress of
their plan.

Ultimately,
critical vendors who cannot give adequate reassurances of their readiness will be replaced, if possible. The Company believes that substantially all its systems will be in
compliance prior to the commencement of the Year 2000. Nevertheless, the Company has developed a contingency plan covering information systems, general corporate functions, and the functions of
individual rating groups. The cost to ensure compliance is estimated to be immaterial to the results of operations at this time.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This report contains forward-looking statements that are subject to risks and uncertainties, including but not limited to the following: the Company's
performance is highly dependent on corporate debt issuances and structured finance transactions, which may decrease for any number of reasons, including changes in interest rates and adverse economic
conditions; the Company's performance is affected by the demand for and market acceptance of the Company's services; and the Company's performance may be impacted by changes in the performance of the
financial markets and general economic conditions. Accordingly, actual results may differ materially from those set forth in the forward-looking statements. Attention is also directed to other risk
factors set forth in documents filed by the Company with the Securities and Exchange Commission.
11

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PART II.   OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit No. |  | Description            
|----------- |  | -----------------------
|27          |  | Financial Data Schedule

12

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



November 12,
1999



## QuickLinks

INDEX

PART I. FINANCIAL INFORMATIONITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

DUFF & PHELPS CREDIT RATING CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands)

GeneralBasis of PresentationPrinciples of ConsolidationEarnings Per ShareRevenue RecognitionGoodwill and Intangible AssetsDepreciation and AmortizationName Use Fees Paid to D&PService Fees Paid to the CompanyITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSResults of OperationsLiquidity and Capital ResourcesSegment ReportingMarket RiskYear 2000Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

PART II. OTHER INFORMATIONITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURE