10-QPeriod: Q3 FY2012

S&P Global Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 2, 2012For Securities:SPGI

Summary

S&P Global Inc. (SPGI), formerly The McGraw-Hill Companies, Inc., reported revenue of $1.953 billion for the third quarter of 2012, a slight increase of 2% year-over-year, while nine-month revenue reached $4.830 billion, up 2% as well. Despite revenue growth, operating profit saw a decline of 13% to $528 million for the quarter and 6% to $1.114 billion for the nine months, impacted by significant "Growth and Value Plan" costs, including restructuring charges and professional fees, totaling $99 million in the quarter and $174 million year-to-date. The company is actively pursuing a separation of its education business (McGraw-Hill Education - MHE) either through a spin-off or sale, which is a key strategic initiative. The S&P Ratings segment demonstrated strong performance with a 22% revenue increase in the quarter, driven by high-yield corporate bond issuance. Conversely, the McGraw-Hill Education segment experienced an 11% revenue decline, largely due to lower sales in school education. The company's financial position remains strong, with cash and equivalents of $1.243 billion, and it continues to return capital to shareholders through dividends and share repurchases.

Financial Highlights

53 data points
Beta

Revenue

$1.12B

67.1% Gross Margin

Net Income

$314.00M

28.1% Net Margin

EPS (Diluted)

$1.10

Total Assets

$7.94B

Cash & Equivalents

$1.14B

Free Cash Flow

$379.00M

Financial Statements
Beta
Revenue$1.12B
Cost of Revenue$367.00M
Gross Profit$749.00M
SG&A Expenses$435.00M
Operating Expenses$841.00M
Operating Income$275.00M
Interest Expense$21.00M
Net Income$314.00M
EPS (Basic)$1.13
EPS (Diluted)$1.10
Shares Outstanding (Basic)278.70M
Shares Outstanding (Diluted)284.60M

Key Highlights

  • 1Total revenue for Q3 2012 increased by 2% to $1.953 billion, and for the first nine months of 2012, it increased by 2% to $4.830 billion.
  • 2Operating profit decreased by 13% to $528 million in Q3 2012 and by 6% to $1.114 billion for the first nine months, primarily due to significant "Growth and Value Plan" costs.
  • 3The company is executing a "Growth and Value Plan" to separate into two companies: McGraw-Hill Financial and McGraw-Hill Education, with separation expected by the end of 2012.
  • 4S&P Ratings segment showed robust revenue growth of 22% in Q3 2012, driven by strong bond issuance.
  • 5McGraw-Hill Education segment revenue declined by 11% in Q3 2012, impacted by lower sales in school education and digital revenue deferrals.
  • 6Cash and equivalents increased to $1.243 billion as of September 30, 2012.
  • 7The company repurchased approximately 5.9 million shares in Q3 2012 and maintained its quarterly dividend.

Frequently Asked Questions

The company is executing a "Growth and Value Plan" which aims to separate into two distinct entities: McGraw-Hill Financial (focused on content and analytics for financial markets) and McGraw-Hill Education (focused on education services and digital learning). This separation is expected to occur by the end of 2012, either through a spin-off or a sale of the education business.

S&P Ratings performed strongly with a 22% revenue increase in Q3 2012 due to increased bond issuance. S&P Capital IQ / S&P Indices saw revenue growth, but operating profit was impacted by costs. Commodities & Commercial (C&C) also experienced revenue and operating profit growth, driven by Platts and J.D. Power. McGraw-Hill Education (MHE) saw a revenue decline of 11% in Q3 2012, primarily due to lower sales in its School Education Group.

The company maintains a strong financial position with $1.243 billion in cash and equivalents as of September 30, 2012. They continue to return value to shareholders through a quarterly dividend of $0.255 per share and active share repurchase programs, having repurchased approximately 5.9 million shares in the third quarter of 2012.

The decrease in operating profit is largely attributable to significant costs associated with the "Growth and Value Plan," which includes professional fees, transaction costs, and restructuring charges. These costs amounted to $99 million in the third quarter and $174 million for the first nine months of 2012.