10-QPeriod: Q2 FY2009

S&P Global Inc. Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:SPGI

Summary

S&P Global Inc. (SPGI), formerly The McGraw-Hill Companies, Inc., reported its financial results for the second quarter and the first six months of 2009. The company experienced a decline in total revenue for both periods compared to 2008, with a decrease of 12.4% in the second quarter to $1.465 billion and a 9.6% decrease for the six months to $2.613 billion. This revenue drop was attributed to a challenging economic environment impacting all three of its operating segments: McGraw-Hill Education, Financial Services, and Information & Media. Net income also saw a significant decrease, with second-quarter net income attributable to the company falling 22.7% to $164.1 million, or $0.52 per diluted share, down from $0.66 in the prior year. For the first six months, net income decreased by 22.6% to $227.1 million, or $0.73 per diluted share, compared to $0.91 in the same period of 2008. The company is navigating these challenges through cost-saving initiatives and restructuring plans across its segments, while maintaining a strong liquidity position with cash and equivalents increasing to $556.1 million.

Financial Highlights

54 data points
Beta

Revenue

$1.47B

60.2% Gross Margin

Net Income

$164.10M

11.2% Net Margin

EPS (Diluted)

$0.52

Total Assets

$6.06B

Cash & Equivalents

$556.13M

Free Cash Flow

$218.12M

Financial Statements
Beta
Revenue$1.47B
Cost of Revenue$582.50M
Gross Profit$882.70M
SG&A Expenses$546.13M
Operating Expenses$1.17B
Operating Income$296.33M
Interest Expense$18.50M
Net Income$164.10M
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)312.23M
Shares Outstanding (Diluted)313.03M

Key Highlights

  • 1Total revenue declined by 12.4% in Q2 2009 to $1.465 billion and by 9.6% for the first six months to $2.613 billion, reflecting a challenging economic environment.
  • 2Net income attributable to the company decreased by 22.7% in Q2 2009 to $164.1 million ($0.52/share) and by 22.6% for the first six months to $227.1 million ($0.73/share).
  • 3The Financial Services segment, which includes Standard & Poor's, saw revenue decline 8.4% in Q2, largely due to weakness in Credit Market Services, although Investment Services revenue decline was partially offset by growth at Capital IQ.
  • 4McGraw-Hill Education revenue decreased by 17.2% in Q2, primarily due to softness in the School Education Group, while Higher Education saw revenue increases.
  • 5Information & Media segment revenue decreased by 11.5% in Q2, driven by declines in advertising in the Business-to-Business and Broadcasting divisions.
  • 6The company generated $289.1 million in cash from operating activities for the first six months of 2009, an increase from $37.4 million in the prior year, indicating improved cash flow management.
  • 7SPGI has initiated restructuring plans across its segments to manage costs and mitigate the impact of economic conditions, recording net pre-tax restructuring charges in Q2 2009.

Frequently Asked Questions

The revenue decline was primarily driven by the challenging global economic environment, which impacted all three of S&P Global's operating segments. Specifically, weakness in Credit Market Services within Financial Services, softness in the School Education Group within McGraw-Hill Education, and declines in advertising in the Business-to-Business and Broadcasting divisions within Information & Media contributed significantly to the overall revenue decrease.

The Financial Services segment experienced an 8.4% revenue decrease in the second quarter of 2009. This was mainly due to continued weakness in Credit Market Services, including declines in structured finance. However, revenue from Investment Services saw a modest decrease, partially offset by growth at Capital IQ. The segment's operating margin remained strong at 41.0%.

S&P Global is implementing several strategies to navigate the economic downturn. These include cost-saving initiatives across all segments, restructuring plans to realign business operations and reduce workforce, and focusing on core business areas. The company also reported improved cash flow from operations and maintained a strong liquidity position.

The McGraw-Hill Education segment saw a significant revenue decline of 17.2% in the second quarter, primarily due to reduced state adoption sales and budget constraints in schools. While the outlook for state new adoptions in 2009 was projected to be lower than in 2008, the company expected to perform well in key adoption opportunities and potentially benefit from federal stimulus funding. Higher Education revenue showed resilience and growth.