10-QPeriod: Q3 FY2004

S&P Global Inc. Quarterly Report for Q3 Ended Sep 30, 2004

Filed October 29, 2004For Securities:SPGI

Summary

S&P Global Inc. (SPGI), formerly The McGraw-Hill Companies, Inc., reported solid financial results for the nine months ended September 30, 2004. The company demonstrated consistent revenue growth, driven primarily by its Financial Services segment, which benefited from strong structured finance and corporate finance rating activities. The McGraw-Hill Education segment also showed resilience, with strategic acquisitions like Grow Network aimed at expanding its customized education solutions. While revenue and income from continuing operations showed year-over-year increases for both the three and nine-month periods, investors should note certain factors. The company divested non-strategic assets, including the juvenile retail publishing business and S&P ComStock, which are now reported as discontinued operations. The company also made significant strategic acquisitions, such as Capital IQ, which is expected to have a small dilutive effect on earnings per share in the near term but is anticipated to complement existing offerings. Overall, SPGI appears to be executing on its strategy, focusing on its core strengths in financial information and education services while managing its portfolio effectively.

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2004, increased by 6.4% to $3.8 billion compared to the same period in 2003.
  • 2Income from continuing operations for the nine months ended September 30, 2004, rose by 20.0% to $566.4 million.
  • 3The Financial Services segment was a key growth driver, with revenue increasing 14.8% year-over-year for the nine-month period, boosted by structured finance and corporate finance ratings.
  • 4The company made strategic acquisitions, including Capital IQ (financial information) and Grow Network (education), to enhance its service offerings and market position.
  • 5The divestiture of non-core assets, such as the juvenile retail publishing business and S&P ComStock, continued, with these now reported as discontinued operations.
  • 6Diluted earnings per share from continuing operations for the nine months increased to $2.94 from $2.46 in the prior year, indicating improved profitability.
  • 7The company's strong liquidity is supported by cash generated from operations, and it secured a new $1.2 billion revolving credit facility, demonstrating financial flexibility.

Frequently Asked Questions

Revenue growth was primarily driven by the Financial Services segment, which saw significant increases in structured finance and corporate finance ratings. The Information and Media Services segment also contributed with growth in business-to-business and broadcasting revenues.

The company acquired Capital IQ and Grow Network in 2004. While their immediate impact on third-quarter revenue and operating profit was not material, Capital IQ is expected to dilute diluted earnings per share by $0.02 in 2004 and $0.05 in 2005. Grow Network is not expected to have a material impact on EPS in 2004.

The company divested the juvenile retail publishing business in January 2004 and S&P ComStock in February 2003. The results of these businesses are reported as discontinued operations, which reduces comparability with periods before their divestiture. For the nine months ended September 30, 2004, discontinued operations resulted in a loss of $0.6 million, compared to earnings of $55.8 million in the prior year, largely due to the gain from the ComStock sale in 2003.

The company anticipates its effective tax rate to be 37.0% for the remainder of the year. Prepublication spending is expected to increase in the fourth quarter to reflect significant adoption opportunities in 2005. The company also expects continued strength in RMBS issuance in the fourth quarter.