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McGraw Hill Financial Reports 4th Quarter And Full-Year 2014 Results

McGraw Hill Financial Reports 4th Quarter And Full-Year 2014 Results

The Company Delivered Strong Revenue from Continuing Operations in Both 4th Quarter and Full-Year 2014

4th Quarter and Full-Year Revenue Each Increased 7%

As a Result of Recent Legal and Regulatory Settlements, Diluted EPS from Continuing Operations Decreased to $(3.71) in the 4th Quarter and Decreased to $(1.08) for the Full Year

Adjusted Diluted EPS from Continuing Operations Increased 23% to $0.95 in 4th Quarter and 20% to $3.88 for the Full Year

Introduces 2015 Adjusted Diluted EPS Guidance of $4.35 to $4.45

The Company Declares New Annualized Dividend of $1.32 Per Share

Company Release - 2/12/2015 7:10 AM ET

NEW YORK, Feb. 12, 2015 /PRNewswire/ -- McGraw Hill Financial, Inc. (NYSE: MHFI) today reported fourth quarter and full-year 2014 results.  The Company reported fourth quarter 2014 revenue of $1.29 billion, an increase of 7% compared to the same period last year.  Largely reflecting the impact of recent legal settlements, fourth quarter net income and diluted earnings per share from continuing operations were losses of  $(1,009) million and $(3.71), respectively.  For the full year, revenue increased 7% to $5.05 billion and net income and diluted earnings per share from continuing operations were $(293) million and $(1.08), respectively. Every business delivered increased revenue in 2014.

Excluding the impact of charges related to legal and regulatory settlements and restructuring, adjusted net income from continuing operations for the quarter increased 22% to $264 million, and adjusted diluted earnings per share from continuing operations increased 23% to $0.95.  For the full year, adjusted net income from continuing operations increased 19% to $1,073 million and adjusted diluted earnings per share from continuing operations increased 20% to $3.88.

"2014 was an important year for the Company.  We completed the portfolio rationalization of media businesses, resolved significant legal and regulatory matters, added talented new leaders to our senior management team, and delivered solid business performance," said Doug Peterson, President and Chief Executive Officer of McGraw Hill Financial.  He continued, "There is much more to be accomplished.  We will continue to focus on creating growth and driving performance, including enhancing our customers' experiences, extending our international capabilities, tightly managing our expense base, and delivering strong financial performance, all while striving to operate with the highest levels of independence, objectivity, regulatory compliance, and operational discipline."

Margin Improvement: Adjusted operating profit margin for the Company increased 280 basis points to 35.9%, marking the third consecutive year of greater than 100 basis-point improvements.

Resolved Significant Legal and Regulatory Matters:  The Company and Standard & Poor's Ratings Services recently entered into a settlement agreement with the U.S. Department of Justice and the Attorneys General of 19 states and the District of Columbia announced on February 3, 2015.  The Company reached a separate settlement with the California Public Employees' Retirement System ("CalPERS") to resolve a lawsuit relating to three structured investment vehicles.  In addition, Standard & Poor's Ratings Services reached settlements with the U.S. Securities and Exchange Commission and the Attorneys General of New York and Massachusetts which were announced on January 21, 2015.  These settlements resulted in a charge of $1.5 billion in the fourth quarter.

Restructuring Actions: Restructuring actions across the Company resulted in fourth quarter pre-tax charges of $41 million. The Company remains committed to achieving productivity gains in its pursuit of creating growth and driving performance.

Outlook:  The Company is introducing 2015 revenue guidance of mid single-digit growth and adjusted diluted EPS guidance of $4.35 to $4.45.

Standard & Poor's Ratings Services:  2014 revenue increased 8% to $2.45 billion.  Operating profit decreased to $(583) million.  Adjusted operating profit increased 13% to $1,074 million compared to 2013.  For the third straight year, adjusted operating profit margin increased more than 100 basis points, rising 190 basis points to 43.8%.

Fourth quarter 2014 revenue increased 8% to $618 million and operating profit decreased to $(1,313) million due to legal and regulatory settlements and restructuring charges.  Adjusted operating profit increased 18% to $261 million.  The adjusted operating profit margin increased to 42.2% in the quarter.

Transaction revenue increased 12% to $288 million during the quarter primarily due to increased demand for corporate ratings, particularly U.S. investment-grade and public finance ratings. 

Non-transaction revenue increased 4% in the fourth quarter and represented 53% of Standard & Poor's Ratings' total revenue compared to 55% for the same period last year. Non-transaction growth was driven primarily by annual fees (predominantly frequent-issuer relationship fees and surveillance).  Rating Evaluation Service revenue also increased as a result of increased merger and acquisition activity. 

In the fourth quarter domestic revenue increased 15% and international revenue increased 1%.  International revenue represented 47% of Standard & Poor's Ratings' total fourth quarter revenue.

S&P Capital IQ: Full-year 2014 revenue increased 6% to $1.24 billion.  Excluding ongoing portfolio rationalization, organic revenue growth was 7%.  Operating profit increased 21% to $228 million.  Adjusted operating profit grew 18% to $237 million.

Revenue increased 5% to $318 million in the fourth quarter of 2014.  Excluding ongoing portfolio rationalization, organic revenue growth was 6%.  Quarterly operating profit increased 42% to $56 million.  Adjusted operating profit increased 31% to $62 million.

In the fourth quarter, three key products, S&P Capital IQ Desktop, RatingsXpress®and Ratings Direct® were the drivers of growth.  S&P Capital IQ's international revenue increased 5% to $112 million in the fourth quarter and represented 35% of the business unit's total revenue.

S&P Dow Jones Indices:  2014 revenue increased 12% to $552 million. Operating profit increased 30% to $347 million.  Adjusted operating profit attributable to the Company increased 35% to $259 million.

Revenue increased 8% to $140 million in the fourth quarter of 2014.  Quarterly operating profit increased 83% to $87 million.  Adjusted operating profit attributable to the Company increased 87% to $64 million.   As a reminder, adjusted operating profit in the fourth quarter of 2013 included a $26 million non-cash impairment charge associated with an intangible asset acquired through the formation of the S&P Dow Jones Indices LLC joint venture.

There were three primary drivers of revenue growth during the quarter.  First, exchange-traded derivative licensing fees increased as a result of a volatility-led resurgence in trading activity.  Second, assets under management (AUM) in exchange-traded funds based on S&P Dow Jones Indices increased 25% to $832 billion at the end of the fourth quarter compared with the end of 2013.  More than half of this increase was the result of unit creation, or inflows. Third, mutual fund AUM based upon S&P Dow Jones Indices increased 17%, surpassing $1 trillion for the first time.

Commodities & Commercial Markets:  For 2014, revenue increased 6% to $893 million.  Organic revenue, excluding the acquisition of Eclipse and the divestiture of Aviation Week in 2013, increased 9%. Operating profit improved 3% to $290 million.  Adjusted operating profit improved 10% to $306 million.

Revenue increased 8% to $236 million in the fourth quarter of 2014.  Organic revenue, excluding the acquisition of Eclipse, increased 7%.  Operating profit improved 9% to $72 million in the fourth quarter of 2014.  Adjusted operating profit improved 4% to $76 million in the fourth quarter, compared to the same period last year.

Platts delivered high single-digit organic revenue growth in both the fourth quarter and for the full year.  Petroleum grew high single digits in the quarter and the full year, while Metals & Agriculture delivered the greatest rate of revenue growth in the quarter at 42%, reflecting recent investments in this sector.

J.D. Power recorded low single-digit revenue growth in the quarter and high single-digit revenue growth for the full year.  Growth in the fourth quarter was largely due to the auto business.

Adjusted Unallocated Expense:  Adjusted unallocated expense includes corporate center functions and certain non-performance related items such as excess real estate.  Adjusted unallocated expense decreased 1% to $41 million in the fourth quarter.  Full-year 2014 adjusted unallocated expense increased 7% to $152 million primarily as a result of charges in the second quarter related to the sale of a data center and the corporate aircraft.

Adjustments to Continuing Operations:  During the fourth quarter, there were $1.593 billion of charges primarily related to legal and regulatory settlements:

  • $687.5 million to resolve legal matters with the U.S. Department of Justice;
  • $687.5 million to resolve legal matters with the Attorneys General of 19 states and the District of Columbia;
  • $125 million to resolve the CalPERS lawsuit;
  • $17 million in additional charges associated with the settlements with the U.S. Securities and Exchange Commission and the Attorneys General of New York and Massachusetts;
  • $35 million associated with settlements of other private litigation stemming from the financial crisis; and
  • $41 million of restructuring charges associated with productivity improvements, approximately half of which was in Standard & Poor's Ratings Services.

Provision for Income Taxes: The Company's effective tax rate from continuing operations in 2014 was 453.7% due to the portion of legal settlements that are not tax deductible.  The adjusted effective tax rate from continuing operations in 2014 was 33.1% representing a reduction of 80 basis points versus 2013.

Dividend: The Board of Directors of McGraw Hill Financial approved the regular quarterly cash dividend on the Company's common stock.  The quarterly dividend will increase from $0.30 to $0.33 per share. The dividend will be payable on March 11, 2015, to shareholders of record on February 25, 2015.  The new annualized dividend rate is $1.32 per share.

The Company has paid a dividend each year since 1937 and is one of fewer than 25 companies in the S&P 500 that has increased its dividend annually for at least the last 42 years.

Return of Capital:  Return of capital to shareholders in 2014, in the form of share repurchases and dividends, was $688 million. During the fourth quarter, the Company did not repurchase any shares of common stock. The Company has approximately 45.6 million shares remaining under the existing share repurchase authorization from the Board of Directors.  In 2015, the Company anticipates continuing its share repurchase program, subject to domestic cash availability and market conditions.

Balance Sheet and Cash Flow:  Cash and short-term investments at the end of the fourth quarter were $2.5 billion, up from $1.6 billion at the end of 2013.  The majority of the legal and regulatory settlements listed above will be paid in the first quarter of 2015.  For full year 2014, free cash flow from continuing operations was $1.0 billion, an increase of $443 million from 2013.

Comparison of Adjusted Information to U.S. GAAP Information: Adjusted diluted earnings per share, adjusted diluted earnings per share from continuing operations, adjusted net income, adjusted operating profit and margin, adjusted expense, adjusted unallocated expense, and free cash flow are non-GAAP financial measures contained in this earnings release that are derived from the Company's continuing operations. This information is provided in order to allow investors to make meaningful comparisons of the Company's operating performance between periods and to view the Company's business from the same perspective as Company management. These non-GAAP measures may be different than similar measures used by other companies. Reconciliations for the differences between non-GAAP measures used in this earnings release and comparable financial measures calculated in accordance with U.S. GAAP are attached as Exhibits 5 and 8.

Conference Call/Webcast Details: The Company's senior management will review fourth quarter and full-year 2014 results on a conference call scheduled for this morning, February 12, 2015, at 8:30 a.m. ET. This call is open to all interested parties.  Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.mhfi.com.

The Webcast will be available live and in replay at http://investor.mhfi.com/phoenix.zhtml?c=96562&p=irol-EventDetails&EventId=5184265. (Please copy and paste URL into Web browser.)

Telephone access is available. Domestic participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply). The passcode is "MHFI" and the conference leader is Douglas Peterson. A recorded telephone replay will be available approximately two hours after the conference call concludes and will remain available until March 12, 2015. To access the replay domestic participants may call (800) 839-1156; international participants may call +1 (402) 998-0972 (long distance charges will apply). No passcode is required.

Forward-Looking Statements:  This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future events, trends, contingencies or results, appear at various places throughout this report and use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "forecast," "future," "intend," "plan," "potential," "predict," "project," "strategy," "target" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." For example, we may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; the expected impact of acquisitions and dispositions; our effective tax rates; and our cost structure, dividend policy, cash flows or liquidity.

Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include, among other things:

  • the rapidly evolving regulatory environment, in the United States and abroad, affecting Standard & Poor's Ratings Services, Platts, S&P Dow Jones Indices, S&P Capital IQ and our other businesses, including new and amended regulations and our compliance therewith;
  • the outcome of litigation, government and regulatory proceedings, investigations and inquiries;
  • worldwide economic, financial, political and regulatory conditions;
  • the health of debt and equity markets, including credit quality and spreads, the level of liquidity and future debt issuances;
  • the level of interest rates and the strength of the credit and capital markets in the U.S. and abroad;
  • the demand and market for credit ratings in and across the sectors and geographies where we operate;
  • concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings;
  • our ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential of a system or network disruption that results in regulatory penalties, remedial costs and/or improper disclosure of confidential information or data;
  • the effect of competitive products and pricing;
  • consolidation in our end-customer market;
  • the impact of cost-cutting pressures across the financial services industry;
  • a decline in the demand for credit risk management tools by financial institutions;
  • the level of success of new product development and global expansion;
  • the level of merger and acquisition activity in the U.S. and abroad;
  • the volatility of the energy marketplace;
  • the health of the commodities markets;
  • the impact of cost-cutting pressures and reduced trading in oil and other commodities markets;
  • the level of our future cash flows;
  • our ability to make acquisitions and dispositions and to integrate, and realize expected synergies, savings or benefits from, the businesses we acquire;
  • the level of our capital investments;
  • the level of restructuring charges we incur;
  • the strength and performance of the domestic and international automotive markets;
  • our ability to successfully recover should we experience a disaster or other business continuity problem, such as a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, power loss, telecommunications failure or other natural or man-made disaster;
  • changes in applicable tax or accounting requirements;
  • the impact on our net income caused by fluctuations in foreign currency exchange issues; and
  • our exposure to potential criminal sanctions or civil remedies if we fail to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which we operate, including sanctions laws relating to countries such as Iran, Russia, Cuba, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, local laws prohibiting corrupt payments to government officials, as well as import and export restrictions.

The factors above are not exhaustive.  The Company and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, we caution readers not to place undue reliance on the above forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made. Further information about our businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company's filings with the SEC, including Item 1a, Risk Factors, in our most recently filed Annual Report on Form 10-K.

About McGraw Hill Financial: McGraw Hill Financial is a leading financial intelligence company providing the global capital and commodity markets with independent benchmarks, credit ratings, portfolio and enterprise risk solutions, and analytics. The Company's iconic brands include Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, and J.D. Power. The Company has approximately 17,000 employees in 30 countries. Additional information is available at www.mhfi.com.

Investor Relations: http://investor.mhfi.com

Get news direct from McGraw Hill Financial via RSS:

http://investor.mhfi.com/phoenix.zhtml?c=96562&p=rssSubscription&t=&id=& 

Contact:
Investor Relations:
Chip Merritt
Vice President, Investor Relations
(212) 512-4321 (office)
chip.merritt@mhfi.com 

News Media:
Jason Feuchtwanger
Director, Corporate Media Relations
(212) 512-3151 (office)
jason.feuchtwanger@mhfi.com

 


Exhibit 1

McGraw Hill Financial
Condensed Consolidated Statements of Income
Periods ended December 31, 2014 and 2013


(dollars in millions, except per share data)


(unaudited)

Three Months

Twelve Months




2014


2013


% Change



2014


2013


% Change



















Revenue


$

1,290


$

1,206


7%



$

5,051


$

4,702


7%



Expenses


2,438


899


N/M



4,929


3,332


48%



Other loss



36


N/M



9


12


(25)%



Operating (loss) profit (a)


(1,148)


271


N/M



113


1,358


(92)%



Interest expense, net


19


14


36%



59


59


(1)%



(Loss) income from continuing operations
   before taxes on income


(1,167)


257


N/M



54


1,298


(96)%



(Benefit) provision for taxes on income


(183)


75


N/M



245


425


(42)%



(Loss) income from continuing operations


(984)


182


N/M



(191)


874


N/M



Income from discontinued operations (b)


3


6


(41)%



18


3


N/M



Gain on sale of discontinued operations


160



N/M



160


589


(73)%



Discontinued operations, net of tax


163


6


N/M



178


592


(70)%



Net (loss) income


(821)


188


N/M



(13)


1,466


N/M



Less: net income attributable to noncontrolling
   interests - continuing


(25)


(17)


52%



(102)


(91)


12%



Less: net loss attributable to noncontrolling
  interests - discontinued




N/M




1


N/M



Net (loss) income attributable to McGraw
   Hill Financial, Inc.


$

(846)


$

171


N/M



$

(115)


$

1,376


N/M



















Amounts attributable to McGraw Hill
   Financial, Inc. common shareholders:
















(Loss) income from continuing operations


$

(1,009)


$

165


N/M



$

(293)


$

783


N/M



Income from discontinued operations


163


6


N/M



178


593


(70)%



Net (loss) income


$

(846)


$

171


N/M



$

(115)


$

1,376


N/M



















Earnings (loss) per share attributable to
   McGraw Hill Financial, Inc. common
   shareholders:
















(Loss) income from continuing operations:
















Basic


$

(3.71)


$

0.61


N/M



$

(1.08)


$

2.85


N/M



Diluted


$

(3.71)


$

0.60


N/M



$

(1.08)


$

2.80


N/M



Income from discontinued operations:
















Basic


$

0.60


$

0.02


N/M



$

0.66


$

2.16


(70)%



Diluted


$

0.60


$

0.02


N/M



$

0.66


$

2.12


(69)%



Net (loss) income:
















Basic


$

(3.11)


$

0.63


N/M



$

(0.42)


$

5.01


N/M



Diluted


$

(3.11)


$

0.62


N/M



$

(0.42)


$

4.91


N/M



















Weighted-average number of common shares outstanding:
















Basic


271.7


270.4





271.5


274.5





Diluted


271.7


278.0





271.5


279.8






















N/M - not meaningful

Note - % change in the tables throughout the exhibits are calculated off of the actual number, not the rounded number presented.



(a) 

Includes legal and regulatory settlements of $1.6 billion in the three and twelve months ended December 31, 2014. The twelve months ended December 31, 2013 includes $77 million of legal settlements.



(b) 

In the fourth quarter of 2014, the Company sold McGraw Hill Construction, which historically was included in our Commodities & Commercial segment. As a result, this business has been reflected as a discontinued operation for all periods presented.

 

 


Exhibit 2

McGraw Hill Financial
Condensed Consolidated Balance Sheets
December 31, 2014 and 2013

(dollars in millions)


(unaudited)


2014



2013













Assets:









Cash and equivalents


$

2,497



$

1,542




Other current assets


1,469



1,399




Total current assets


3,966



2,941




Property and equipment, net


206



249




Goodwill and other intangible assets, net


2,391



2,442




Asset for pension benefits


28



261




Other non-current assets


180



168




Total assets


$

6,771



$

6,061













Liabilities and Equity:









Unearned revenue


1,323



1,268




Other current liabilities (a)


2,644



1,104




Long-term debt


799



799




Pension, other postretirement benefits and other non-current liabilities


656



736




Total liabilities


5,422



3,907




Redeemable noncontrolling interest


810



810




Total equity


539



1,344




Total liabilities and equity


$

6,771



$

6,061















(a)  

  Includes a liability of $1.6 billion related to legal and regulatory settlements as of December 31, 2014.

 

 

Exhibit 3

McGraw Hill Financial
Condensed Consolidated Statements of Cash Flows
Years ended December 31, 2014 and 2013

(dollars in millions)


(unaudited)


2014



2013











Operating Activities:








Net (loss) income from continuing operations


$

(191)



$

874



Adjustments to reconcile income from continuing operations to cash provided by
   operating activities from continuing operations:








Depreciation (including amortization of technology projects)


86



86



Amortization of intangibles


48



51



Stock-based compensation


100



96



Other (a)


1,433



161



Net changes in operating assets and liabilities


(267)



(486)



Cash provided by operating activities from continuing operations


1,209



782











Investing Activities:








Capital expenditures


(92)



(117)



Acquisitions, net of cash acquired


(71)



(47)



Proceeds from dispositions


83



51



Changes in short-term investments


15



(17)



Cash used for investing activities from continuing operations


(65)



(130)











Financing Activities:








Additions to short-term debt, net




(457)



Dividends paid to shareholders


(326)



(308)



Dividends and other payments paid to noncontrolling interests


(84)



(75)



Purchase of CRISIL shares




(214)



Repurchase of treasury shares


(362)



(978)



Exercise of stock options, excess tax benefits from share-based payments and other


310



289



Cash used for financing activities from continuing operations


(462)



(1,743)



Effect of exchange rate changes on cash from continuing operations


(65)



(1)



Cash provided by (used for) continuing operations


617



(1,092)



Cash provided by discontinued operations


338



1,874



   Net change in cash and equivalents


955



782



   Cash and equivalents at beginning of year


1,542



760



   Cash and equivalents at end of year


$

2,497



$

1,542













(a)  

  Includes $1.6 billion related to legal and regulatory settlements for the year ended December 31, 2014.

 

 


Exhibit 4

McGraw Hill Financial
Operating Results by Segment
Periods ended December 31, 2014 and 2013

(dollars in millions)


(unaudited)

Three Months

Twelve Months




















Revenue



Revenue





2014


2013


% Change



2014


2013


% Change



















S&P Ratings Services


$

618


$

574


8%



$

2,455


$

2,274


8%



S&P Capital IQ


318


301


5%



1,237


1,170


6%



S&P Dow Jones Indices


140


130


8%



552


493


12%



Commodities & Commercial Markets


236


220


8%



893


841


6%



Intersegment Elimination


(22)


(19)


(15)%



(86)


(76)


(13)%



Total revenue


$

1,290


$

1,206


7%



$

5,051


$

4,702


7%





































Expenses



Expenses





2014


2013


% Change



2014


2013


% Change



















S&P Ratings Services (a)


$

1,931


$

363


N/M



$

3,038


$

1,392


N/M



S&P Capital IQ


262


261


—%



1,009


981


3%



S&P Dow Jones Indices


53


83


(35)%



205


227


(10)%



Commodities & Commercial Markets


164


154


7%



603


561


8%



Intersegment Elimination


(22)


(19)


(15)%



(86)


(76)


(13)%



Total expenses


$

2,388


$

842


N/M



$

4,769


$

3,085


55%





































Operating (Loss) Profit



Operating (Loss) Profit





2014


2013


% Change



2014


2013


% Change



















S&P Ratings Services (a)


$

(1,313)


$

211


N/M



$

(583)


$

882


N/M



S&P Capital IQ


56


40


42%



228


189


21%



S&P Dow Jones Indices


87


47


83%



347


266


30%



Commodities & Commercial Markets


72


66


9%



290


280


3%



Total operating segments


(1,098)


364


N/M



282


1,617


(83)%



Unallocated expense


(50)


(93)


(46)%



(169)


(259)


(35)%



Total operating (loss) profit


$

(1,148)


$

271


N/M



$

113


$

1,358


(92)%




















N/M - not meaningful


(a)  

Includes legal and regulatory settlements of $1.6 billion in the three and twelve months ended December 31, 2014. The twelve months ended December 31, 2013 includes $77 million of legal settlements.

 

 


Exhibit 5

McGraw Hill Financial
Operating Results by Segment - Reported vs. Performance
Periods ended December 31, 2014 and 2013

(dollars in millions)


(unaudited)


2014


2013



% Change





Reported


Non-GAAP Adjustments


Performance


Reported


Non-GAAP Adjustments


Performance



Reported


Performance

























Three Months


S&P Ratings Services


$

(1,313)


$

1,574

a

$

261



$

211


$

10

d

$

220



N/M


18%



S&P Capital IQ


56


5

b

62



40


8

d

47



42%


31%



S&P Dow Jones Indices


87



87



47



48



83%


82%



Commodities & Commercial Markets


72


4

b

76



66


7

d

73



9%


4%



Segment operating (loss) profit


(1,098)


1,583


485



364


25


388



N/M


25%



Unallocated expense


(50)


10

b

(41)



(93)


52

e

(41)



(46)%


(1)%



Operating (loss) profit


(1,148)


1,593


444



271


77


347



N/M


28%



Interest expense, net


19



19



14



14



36%


36%



(Loss) income before taxes on income


(1,167)


1,593


425



257


77


333



N/M


28%



(Benefit) provision for taxes on income


(183)


320


136



75


26


101



N/M


35%



(Loss) income from continuing operations


(984)


1,273


289



182


51


233



N/M


24%



Income from discontinued operations


163


(163)




6


(6)




N/M


—%



Net (loss) income


(821)


1,110


289



188


45


233



N/M


24%



Less: NCI net income - continuing


(25)



(25)



(17)



(17)



52%


52%



Net (loss) income - continuing


(1,009)


1,273


264



165


51


216



N/M


22%



Net income - discontinued


163


(163)




6


(6)




N/M


—%



Net (loss) income attributable to MHFI


$

(846)


$

1,110


$

264



$

171


$

45


$

216



N/M


22%
























Diluted (loss) earnings per share -
   continuing


$

(3.71)


$

4.66


$

0.95

f


$

0.60


$

0.18


$

0.78



N/M


23%



Diluted (loss) earnings per share - total


$

(3.11)


$

4.06


$

0.95

f


$

0.62


$

0.16


$

0.78



N/M


23%

























Twelve Months


S&P Ratings Services


$

(583)


$

1,657

a

$

1,074



$

882


$

70

d

$

952



N/M


13%



S&P Capital IQ


228


9

b

237



189


12

d

201



21%


18%



S&P Dow Jones Indices


347


4

c

351



266



266



30%


32%



Commodities & Commercial Markets


290


16

b

306



280


(2)

d

278



3%


10%



Segment operating profit


282


1,686


1,968



1,617


80


1,697



(83)%


16%



Unallocated expense


(169)


16

b

(152)



(259)


117

e

(142)



(35)%


7%



Operating profit


113


1,702


1,815



1,358


197


1,555



(92)%


17%



Interest expense, net


59



59



59



59



(1)%


(1)%



Income before taxes on income


54


1,702


1,756



1,298


197


1,495



(96)%


17%



Provision for taxes on income


245


336


581



425


82


506



(42)%


15%



(Loss) income from continuing operations


(191)


1,366


1,175



874


115


989



N/M


19%



Income from discontinued operations


178


(178)




592


(592)




(70)%


—%



Net (loss) income


(13)


1,188


1,175



1,466


(477)


989



N/M


19%



Less: NCI net income - continuing


(102)



(102)



(91)


4


(87)



12%


18%



Less: NCI net income - discontinued






1


(1)




N/M


—%



Net (loss) income - continuing


(293)


1,366


1,073



783


119


902



N/M


19%



Net income - discontinued


178


(178)




593


(593)




(70)%


—%



Net (loss) income attributable to MHFI


$

(115)


$

1,188


$

1,073



$

1,376


$

(474)


$

902



N/M


19%
























Diluted (loss) earnings per share -
   continuing


$

(1.08)


$

4.96


$

3.88

f


$

2.80


$

0.43


$

3.22



N/M


20%



Diluted (loss) earnings per share - total


$

(0.42)


$

4.30


$

3.88

f


$

4.91


$

(1.69)


$

3.22



N/M


20%





N/M - not meaningful

Note - Totals presented may not sum across due to rounding.



(a)  

Includes restructuring charges and legal and regulatory settlements of $1.6 billion for the three and twelve months ended December 31, 2014.



(b)  

Includes restructuring charges for the three and twelve months ended December 31, 2014.



(c) 

Includes professional fees largely related to corporate development activities for the year ended December 31, 2014.



(d)  

The three and twelve months ended December 31, 2013 include restructuring charges across all segments and, additionally, the twelve months primarily includes  a gain on the sale of an equity investment held by CRISIL and legal settlements of approximately $77 million at S&P Ratings Services; a loss on the sale of Financial Communications at S&P Capital IQ; and a gain on the sale of Aviation Week at Commodities & Commercial Markets.



(e)  

The three and twelve months ended December 31, 2013 include a $36 million non-cash impairment charge related to the sale of a data center and $13 million related to terminating various leases. The twelve months ended December 31, 2013 also includes costs necessary to enable the separation of MHE and reduce our cost structure of $64 million.



(f)   

Diluted weighted-average shares outstanding of 276.2 million were used to calculate adjusted diluted EPS for the three and twelve months ended December 31, 2014. This amount includes securities that had an antidilutive effect to reported diluted EPS due to a loss from continuing operations.

 

 

Exhibit 6

McGraw Hill Financial
Subscription / Non-Transaction vs. Non-Subscription / Transaction Revenue
Periods ended December 31, 2014 and 2013

(dollars in millions)


(unaudited)


Subscription / Non-Transaction



Non-Subscription / Transaction








2014


2013


% Change



2014


2013


% Change



























Three Months






S&P Ratings Services (a)


$

330


$

317


4%



$

288


$

257


12%






S&P Capital IQ (b)


286


270


6%



32


31


2%






S&P Dow Jones Indices (c)


29


27


10%



111


103


7%






Commodities & Commercial Markets (d)


148


136


10%



88


84


4%






Intersegment elimination


(22)


(19)


(15)%











Total revenue


$

771


$

731


6%



$

519


$

475


9%



























Twelve Months






S&P Ratings Services (a)


$

1,326


$

1,239


7%



$

1,129


$

1,035


9%






S&P Capital IQ (b)


1,118


1,056


6%



119


114


4%






S&P Dow Jones Indices (c)


111


103


8%



441


390


13%






Commodities & Commercial Markets (d)


576


527


9%



317


314


1%






Intersegment elimination


(86)


(76)


(13)%











Total revenue


$

3,045


$

2,849


7%



$

2,006


$

1,853


8%

























(a)  

Non-transaction revenue is primarily related to annual fees for frequent issuer programs and surveillance, while transaction revenue is related to ratings of publicly-issued debt, bank loan ratings and corporate credit estimates. Non-transaction revenue also includes an intersegment revenue elimination, which mainly consists of the royalty of $20 million and $77 million for the three and twelve months ended December 31, 2014, respectively and $18 million and $72 million for the three and twelve months ended December 31, 2013, respectively, charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.



(b) 

Subscription revenue is related to credit ratings-related information products, S&P Capital IQ Desktop, investment research products and other data subscriptions, while non-subscription revenue is related to certain advisory, pricing and analytical services.



(c)  

Subscription revenue is related to data subscriptions, which support index fund management, portfolio analytics and research, while non-subscription revenue relates to fees based on assets underlying exchange-traded funds, as well as certain advisory, pricing and analytical services.



(d)  

Subscription revenue at Platts is related to real-time news, market data, and price assessments, along with other information products, while non-subscription revenue is related to licensing of its proprietary market price data and price assessments to commodity exchanges, conference sponsorship, consulting engagements and events. Subscription revenue at J.D. Power is related to information products primarily serving the automotive market, while non-subscription revenue is related to syndicated and proprietary research studies, advertising, consulting engagements and events.

 

.

Exhibit 7

McGraw Hill Financial
Domestic vs. International Revenue
Periods ended December 31, 2014 and 2013

(dollars in millions)


(unaudited)


Domestic



International








2014


2013


% Change



2014


2013


% Change



























Three Months






S&P Ratings Services


$

328


$

287


15%



$

290


$

287


1%






S&P Capital IQ


206


194


6%



112


107


5%






S&P Dow Jones Indices


113


99


14%



27


31


(13)%






Commodities & Commercial Markets


105


103


2%



131


117


12%






Intersegment elimination


(11)


(9)


(19)%



(11)


(10)


(12)%






Total revenue


$

741


$

674


10%



$

549


$

532


3%



























Twelve Months






S&P Ratings Services


$

1,305


$

1,214


8%



$

1,150


$

1,060


8%






S&P Capital IQ


809


767


5%



428


403


6%






S&P Dow Jones Indices


440


385


14%



112


108


4%






Commodities & Commercial Markets


401


394


2%



492


447


10%






Intersegment elimination


(44)


(37)


(18)%



(42)


(39)


(8)%






Total revenue


$

2,911


$

2,723


7%



$

2,140


$

1,979


8%

























 

 

Exhibit 8

McGraw Hill Financial
Non-GAAP Financial Information
Periods ended December 31, 2014 and 2013

 

(dollars in millions)

 

Computation of Free Cash Flow



(unaudited)

Twelve Months







2014


2013






Cash provided by operating activities from continuing operations

$

1,209


$        782






Capital expenditures


(92)


(117)






Dividends and other payments paid to noncontrolling interests


(84)


(75)






Free cash flow

$

1,033


$        590
















McGraw Hill Financial Organic Revenue


(unaudited)


Three Months



Twelve Months




2014


2013


% Change



2014


2013


% Change


Total revenue


$

1,290


$

1,206


7%



$

5,051


$

4,702


7%


C&C acquisitions and divestitures
    (Eclipse and Aviation Week)


(1)






(3)


(26)




S&P Capital IQ product closures and
    divestitures



(2)





(2)


(15)




Total Adjusted Revenue


$

1,289


$

1,204


7%



$

5,046


$

4,661


8%


















Adjusted S&P Capital IQ Revenue


(unaudited)


Three Months



Twelve Months




2014


2013


% Change



2014


2013


% Change


S&P Capital IQ revenue


$

318


$

301


5%



$

1,237


$

1,170


6%


Product closures and divestitures



(2)





(2)


(15)




Adjusted S&P Capital IQ Revenue


$

318


$

299


6%



$

1,235


$

1,155


7%


















Adjusted Commodities & Commercial Markets Revenue


(unaudited)


Three Months



Twelve Months




2014


2013


% Change



2014


2013


% Change


C&C revenue


$

236


$

220


8%



$

893


$

841


6%


Acquisitions and divestitures (Eclipse
    and Aviation Week)

 


(1)






(3)


(26)




Adjusted C&C Revenue


$

235


$

220


7%



$

890


$

815


9%


















Adjusted S&P Dow Jones Indices Net Operating Profit


(unaudited)


Three Months



Twelve Months




2014


2013


% Change



2014


2013


% Change


Adjusted operating profit


$

87


$

48


82%



$

351


$

266


32%


Income attributable to NCI


23


13





92


73




Adjusted Net Operating Profit


$

64


$

35


87%



$

259


$

193


35%

















 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mcgraw-hill-financial-reports-4th-quarter-and-full-year-2014-results-300035166.html

SOURCE McGraw Hill Financial, Inc.