10-QPeriod: Q3 FY2014

S&P Global Inc. Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 29, 2014For Securities:SPGI

Summary

S&P Global Inc. (formerly McGraw Hill Financial, Inc.) reported a mixed financial performance for the nine months ended September 30, 2014. While consolidated revenue saw a modest increase of 8% to $3.76 billion, net income attributable to McGraw Hill Financial, Inc. common shareholders decreased significantly by 39% to $731 million, largely impacted by a substantial gain from the sale of McGraw Hill Education in the prior year period. The company continued its strategic portfolio rationalization, announcing the agreement to sell McGraw Hill Construction, which was reclassified as held for sale. The core business segments showed varying performance. S&P Ratings revenue grew but operating profit declined due to a significant $60 million charge for regulatory matters, while S&P Capital IQ and S&P Dow Jones Indices demonstrated solid revenue and operating profit growth. The Commodities & Commercial Markets segment saw revenue growth but a decline in operating profit for the quarter, impacted by restructuring charges and a prior year gain on sale. Key financial activities included a continued focus on capital allocation through share repurchases and a quarterly dividend increase. The company maintained a strong liquidity position with a notable increase in cash and equivalents and a healthy credit facility. Investors should note the ongoing legal and regulatory proceedings, particularly those affecting S&P Ratings, which pose potential financial and operational risks.

Financial Highlights

50 data points
Beta

Revenue

$1.26B

68.2% Gross Margin

Net Income

$190.00M

15.0% Net Margin

EPS (Diluted)

$0.69

Total Assets

$6.27B

Cash & Equivalents

$1.92B

Free Cash Flow

$374.00M

Financial Statements
Beta
Revenue$1.26B
Cost of Revenue$402.00M
Gross Profit$861.00M
SG&A Expenses$462.00M
Operating Expenses$897.00M
Operating Income$366.00M
Interest Expense$12.00M
Net Income$190.00M
EPS (Basic)$0.70
EPS (Diluted)$0.69
Shares Outstanding (Basic)270.90M
Shares Outstanding (Diluted)275.40M

Key Highlights

  • 1Consolidated revenue increased by 8% to $3.76 billion for the nine months ended September 30, 2014.
  • 2Net income attributable to common shareholders decreased by 39% to $731 million, impacted by the prior year's sale of McGraw Hill Education.
  • 3The company announced an agreement to sell McGraw Hill Construction, reclassifying it as discontinued operations.
  • 4S&P Ratings experienced revenue growth but a decline in operating profit due to a $60 million regulatory charge.
  • 5S&P Capital IQ and S&P Dow Jones Indices showed strong revenue and operating profit growth across both quarterly and year-to-date periods.
  • 6The company repurchased $362 million of its common stock and increased its quarterly dividend to $0.30 per share during the nine-month period.
  • 7Cash and equivalents increased to $1.92 billion, indicating a strong liquidity position.

Frequently Asked Questions

The significant decrease in net income attributable to common shareholders of 39% for the nine months ended September 30, 2014, compared to the prior year, was primarily due to a substantial after-tax gain of $592 million recorded in the prior year period from the sale of McGraw Hill Education (MHE). The current year's results do not have a comparable large gain.

S&P Ratings' operating profit was significantly impacted by a $60 million charge related to certain regulatory matters during the nine months ended September 30, 2014. Additionally, restructuring charges were recorded across various segments, and a gain on the sale of Aviation Week in the prior year affected the C&C segment's operating profit comparison.

The company demonstrated a commitment to capital allocation by repurchasing $362 million of its common stock during the first nine months of 2014 and increasing its quarterly dividend to $0.30 per share. The Board of Directors also approved a new stock repurchase program authorizing the purchase of up to 50 million shares.

The company faces ongoing legal and regulatory proceedings, particularly concerning S&P Ratings, which could result in adverse judgments, fines, or penalties. Specific matters include investigations by the U.S. Department of Justice and SEC, and proceedings in Italy related to sovereign debt downgrades and the Parmalat case. The company also disclosed potential material impacts from unrecognized tax benefits.