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S&P Global Reports Third Quarter Results

S&P Global Reports Third Quarter Results

Revenue Increased 9%

Diluted EPS Increased 266% to $3.36 Due to Gain on Sale of J.D. Power

Adjusted Diluted EPS Increased 17% to $1.43

Operating Margin Increased 6,270 Basis Points to 93.7% Due to Gain on Sale of J.D. Power

Adjusted Operating Margin Increased 320 Basis Points to 44.4%

Company Release - 11/3/2016 7:10 AM ET

NEW YORK, Nov. 3, 2016 /PRNewswire/ -- S&P Global (NYSE: SPGI) today reported third quarter 2016 results with revenue of $1.44 billion, an increase of 9% compared to the same period last year. Net income and diluted earnings per share were $892 million and $3.36, respectively which included a pre-tax gain of $722 million from the sale of J.D. Power.

Adjusted net income increased 13% to $381 million and adjusted diluted earnings per share increased 17% to $1.43. The adjustments in the third quarter of 2016 were primarily related to the gain on the sale of J.D. Power and net insurance recoveries related to legal settlements, partially offset by deal-related amortization and divestiture transaction costs.

"We have made substantial refinements to our portfolio as we completed the sale of J.D. Power, two pricing businesses, and an equity research business while adding PIRA Energy Group to S&P Global Platts and Trucost to S&P Dow Jones Indices.  It is a testament to the strength of our business and the operating model that we have been able to successfully manage significant acquisitions and divestitures while continuing to deliver on our growth and performance objectives," said Douglas L. Peterson, President and Chief Executive Officer of S&P Global.  "Our strong revenue growth, successful productivity initiatives, and meaningful share repurchases combined to deliver third quarter adjusted EPS growth of 17%; a noteworthy result in this economic environment."

Outlook: The Company provides guidance on a non-GAAP basis as the Company cannot predict certain elements which are included in reported GAAP results. We are unable to reconcile our full-year adjusted diluted EPS guidance to comparable GAAP guidance without unreasonable effort because management cannot reliably predict the necessary components of our full-year 2016 net income, including the impact and timing of potential dispositions and other structural changes or their probable significance. The impact of such adjustments could be significant.

Adjusted diluted EPS guidance is increased to a range of $5.15 to $5.25 to reflect strong results year-to-date and the expectation that debt issuance remains strong for the remainder of the year.

Return of Capital: During the third quarter, the Company returned $845 million to shareholders through a $750 million accelerated share repurchase (ASR) program and by issuing dividends totaling $95 million.  Under the ASR, 5.3 million shares were received in September; however, the final share count reduction will not be determined until the program is completed.  Year-to-date, the Company has returned $1.4 billion to shareholders.  As a result of the Company's ongoing share repurchases, weighted average shares outstanding decreased by 3% versus the third quarter of 2015.  Pending a true-up of shares at the conclusion of the ASR, the Company has authorization from the Board of Directors to repurchase up to an additional 26.6 million shares. 

S&P Global Ratings: Revenue increased 9% to $642 million in the third quarter.  Transaction revenue increased 23% to $299 million largely as a result of improved contract terms and increases in corporate debt issuance, bank loan ratings, and U.S. public finance issuance.  Non-transaction revenue was unchanged at $343 million in the quarter with growth in surveillance fees offset by lower Rating Evaluation Service fees.

U.S. and international revenue increased 9% and 10%, respectively.  International revenue represented 42% of third quarter revenue.

The business continued to control costs in the quarter as reported expenses decreased 25% due primarily to legal settlement charges in the third quarter of 2015 that did not repeat in the third quarter of 2016.  Adjusted expenses were held to a 2% increase as a focus on cost containment, including lower legal expenses and reduced compliance spending mitigated annual cost increases.

Operating profit increased 78% to $346 million and the operating profit margin improved 2,080 basis points to 54% primarily due to net legal settlement insurance recoveries in the third quarter of 2016 versus net legal settlement charges in the third quarter of 2015.  Adjusted operating profit increased 17% to $330 million with an adjusted operating profit margin that improved 330 basis points to 51%, driven by increased revenue and cost containment.  

The S&P Global Ratings segment includes S&P Global Ratings, which is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization ("NRSRO"), as well as CRISIL, a global analytical company incorporated in India, and certain other ratings-related businesses.

S&P Global Market Intelligence: Revenue increased 21% to $429 million in the third quarter of 2016 compared to the same period last year, while organic revenue grew 7%.  Due to the SNL acquisition, organic growth, and progress on integration-related synergies, quarterly operating profit increased 112% to $112 million and adjusted operating profit increased 43% to $135 million.  The operating margin improved 1,120 basis points to 26% and the adjusted operating margin improved 480 basis points to 31%.

In the third quarter, S&P Capital IQ Desktop and RatingsXpress® were the drivers of organic revenue growth. In addition, SNL revenue increased 12% to $72 million compared to third quarter 2015, including revenue prior to the Company's acquisition of SNL on September 1, 2015.

S&P Dow Jones Indices: Revenue increased 6% to $164 million in the third quarter of 2016 compared to the same period last year.  Operating profit increased 1% to $107 million.  Adjusted operating profit increased 1% to $108 million.  Operating profit attributable to the Company was $79 million.   Adjusted operating profit attributable to the Company decreased 1% to $80 million.

Revenue increased due to AUM growth in mutual funds and ETFs as well as data subscriptions.  Average AUM in exchange-traded funds based on S&P DJI's indices increased 15% in the quarter and reached a new quarter-ending record of $914 billion.

Expenses increased to support investments in technology and operations, including the recent startup of a third data center to provide additional backup capabilities.

S&P Global Platts (includes J.D. Power results through September 7, 2016):  Revenue decreased 8% to $229 million primarily because the current period only included two months of J.D. Power revenue.   Organic revenue grew 4% for the segment excluding revenue from the acquisitions of RigData and PIRA, and excluding the results of J.D. Power for the period. 

Pressure on many of our customers from continued low commodity prices continued during the quarter and muted Platts revenue growth.  Platts growth was due to mid single-digit revenue growth in core subscriptions, primarily due to the petroleum sector, partially offset by declines in Global Trading Services.

Operating profit grew to $812 million due to a $722 million pre-tax gain on the sale of J.D. Power.  Adjusted operating profit decreased 4% to $94 million in the third quarter of 2016 compared to the same period last year primarily as a result of the exclusion of J.D. Power's operating results for September.

Beginning in the fourth quarter, S&P Global Platts will be included along with S&P Global Market Intelligence in a new segment to be named Market and Commodities Intelligence.  This change will enable our segment reporting to be consistent with our organizational structure and how management will monitor the performance of these segments.

Unallocated Expense:  Unallocated expense includes corporate center functions and certain non-allocated items such as excess real estate. Unallocated expense decreased 21% to $29 million, primarily due to lower professional fees.

Provision for Income Taxes:  The Company's effective tax rates in the third quarter of 2016 and 2015 were 29.5% and 25.9%, respectively.  The Company's adjusted effective tax rate increased to 31.3% in the third quarter of 2016 compared to 29.1% in the prior period due to one-time benefits recorded in the prior period.

Balance Sheet and Cash Flow: Cash and cash equivalents at the end of the third quarter were $2.4 billion, of which approximately $1.6 billion was held outside the United States. In the first nine months of 2016, cash provided by operating activities was $1,171 million.  Free cash flow was $1,045 million, an increase of $1,542 million from the same period in 2015 due to litigation payments in the first half of 2015.  Free cash flow, excluding the after-tax payments associated with legal and regulatory settlements and insurance recoveries, was $1,081 million.

Comparison of Adjusted Information to U.S. GAAP Information: Adjusted diluted earnings per share, adjusted net income, adjusted operating profit and margin, adjusted expense, free cash flow, and free cash flow excluding certain items 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 4, 5 and 8.  As described on Exhibit 9, we are unable to present a quantitative reconciliation of forward-looking non-GAAP financial information presented without unreasonable effort.

Conference Call/Webcast Details:  The Company's senior management will review the third quarter earnings results on a conference call scheduled for today, November 3, at 8:30 a.m. EDT.  Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.spglobal.com.

The Webcast will be available live and in replay at http://investor.spglobal.com/CustomPage/Index?KeyGenPage=1073751596&event=18425. (Please copy and paste URL into Web browser.)

Telephone access is available. U.S. participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply). The passcode is "S&P Global" and the conference leader is Douglas Peterson. A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until December 3, 2016. U.S. participants may call (866) 460-9737; international participants may call +1 (203) 369-1345 (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 in 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, management may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in the Company's business strategies and methods of generating revenue; the development and performance of the Company's services and products; the expected impact of acquisitions and dispositions; the Company's effective tax rates; and the Company's 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 forward-looking statements include, among other things:

  • worldwide economic, financial, political and regulatory conditions, including economic conditions and regulatory changes that may result from the United Kingdom's likely exit from the European Union;
  • the rapidly evolving regulatory environment, in the United States and abroad, affecting S&P Global Ratings, S&P Global Platts, S&P Dow Jones Indices, and S&P Global Market Intelligence, including new and amended regulations and the Company's compliance therewith;
  • our ability to make acquisitions and dispositions and successfully integrate the businesses we acquire;
  • the outcome of litigation, government and regulatory proceedings, investigations and inquiries;
  • the health of debt and equity markets, including credit quality and spreads, the level of liquidity and future debt issuances;
  • the demand and market for credit ratings in and across the sectors and geographies where the Company operates;
  • concerns in the marketplace affecting the Company's credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings;
  • the effect of competitive products and pricing, including the level of success of new product developments and global expansion;
  • consolidation in the Company's end-customer markets;
  • 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 merger and acquisition activity in the United States 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;
  • our ability to incentivize and retain key employees;
  • the Company's 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 or improper disclosure of confidential information or data;
  • the Company's ability to successfully recover should it experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber-attack, power loss, telecommunications failure or other natural or man-made event;
  • changes in applicable tax or accounting requirements;
  • the level of the Company's future cash flows and capital investments;
  • the impact on the Company's revenue and net income caused by fluctuations in foreign currency exchange rates; and
  • the Company's exposure to potential criminal sanctions or civil penalties if it fails to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions.

The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, the Company cautions readers not to place undue reliance on any 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, except as required by applicable law. Further information about the Company's businesses, including information about factors that could materially affect its results of operations and financial condition, is contained in the Company's filings with the SEC, including the "Risk Factors" section in the Company's most recently filed Annual Report on Form 10-K.

About S&P Global
S&P Global is a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The Company's divisions include S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts. S&P Global has approximately 20,000 employees in 31 countries. For more information visit www.spglobal.com.

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

Get news direct via RSS:
http://investor.spglobal.com/RSS-Feeds/Index?keyGenPage=1073751617

Contact:
Investor Relations:
Chip Merritt
Vice President, Investor Relations
(212) 438-4321 (office)
chip.merritt@spglobal.com

News Media:
Jason Feuchtwanger
Director, Corporate Media Relations
(212) 438-1247 (office)
jason.feuchtwanger@spglobal.com

 

 

 

Exhibit 1


S&P Global

Condensed Consolidated Statements of Income

Three and nine months ended September 30, 2016 and 2015

(dollars in millions, except per share data)


(unaudited)

Three Months

Nine Months



2016


2015


% Change



2016


2015


% Change

















Revenue


$

1,439



$

1,324



9%



$

4,262



$

3,938



8%


Expenses


813



914



(11)%



2,472



2,456



1%


Gain on dispositions


(722)





N/M



(722)



(11)



N/M


Operating profit


1,348



410



N/M



2,512



1,493



68%


Interest expense, net


39



30



31%



122



62



97%


Income before taxes on income


1,309



380



N/M



2,390



1,431



67%


Provision for taxes on income


386



99



N/M



731



439



67%


Net income


923



281



N/M



1,659



992



67%


Less: net income attributable to noncontrolling interests


(31)



(29)



7%



(90)



(83)



7%


Net income attributable to S&P Global Inc.


$

892



$

252



N/M



$

1,569



$

909



73%

















Earnings per share attributable to S&P Global Inc. common shareholders:















Net income:















Basic


$

3.39



$

0.93



N/M



$

5.94



$

3.33



78%


Diluted


$

3.36



$

0.92



N/M



$

5.89



$

3.30



79%

















Weighted-average number of common shares outstanding:















Basic


262.9



271.3






264.1



272.6





Diluted


265.3



274.4






266.4



275.4




















Actual shares outstanding at period end









259.1



270.3




















 

N/M - not meaningful


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

 

Exhibit 2


S&P Global

Condensed Consolidated Balance Sheets

September 30, 2016 and December 31, 2015


(dollars in millions)


(unaudited)


September 30,



December 31,




2016



2015









Assets:







Cash and cash equivalents


$

2,399




$

1,481



Other current assets


1,239




1,312



Assets of businesses held for sale


66




503



Total current assets


3,704




3,296



Property and equipment, net


255




270



Goodwill


2,958




2,882



Other intangible assets, net


1,518




1,522



Other non-current assets


241




213



Total assets


$

8,676




$

8,183










Liabilities and Equity:







Short-term debt


$

400




$

143



Unearned revenue


1,408




1,421



Other current liabilities


1,219




1,138



Liabilities of businesses held for sale


24




206



Long-term debt


3,563




3,468



Pension, other postretirement benefits and other non-current liabilities


631




644



Total liabilities


7,245




7,020



Redeemable noncontrolling interest


920




920



Total equity


511




243



Total liabilities and equity


$

8,676




$

8,183










 

 

Exhibit 3


S&P Global

Condensed Consolidated Statements of Cash Flows

Nine months ended September 30, 2016 and 2015


(dollars in millions)


(unaudited)


2016



2015









Operating Activities:







Net income


$

1,659




$

992



Adjustments to reconcile net income to cash provided by (used for) operating activities from continuing operations:







Depreciation


63




64



Amortization of intangibles


71




40



Deferred income taxes


(8)




166



Stock-based compensation


54




55



Gain on dispositions


(722)




(11)



Other


66




153



Accrued legal and regulatory settlements


(134)




(1,624)



Net changes in other operating assets and liabilities


122




(191)



Cash provided by (used for) operating activities from continuing operations


1,171




(356)










Investing Activities:







Capital expenditures


(67)




(74)



Acquisitions, net of cash acquired


(145)




(2,393)



Proceeds from dispositions


1,071




14



Changes in short-term investments


(1)




(3)



Cash provided by (used for) investing activities from continuing operations


858




(2,456)










Financing Activities:







Payments on short-term debt, net


(143)






Proceeds from issuance of senior notes, net


493




2,674



Dividends paid to shareholders


(286)




(274)



Dividends and other payments paid to noncontrolling interests


(59)




(67)



Repurchase of treasury shares


(1,123)




(501)



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


100




95



Cash (used for) provided by financing activities from continuing operations


(1,018)




1,927



Effect of exchange rate changes on cash from continuing operations


(93)




(42)



Cash provided by (used for) continuing operations


918




(927)



Cash used for discontinued operations





(129)



Net change in cash and cash equivalents


918




(1,056)



Cash and cash equivalents at beginning of period


1,481




2,497



Cash and cash equivalents at end of period


$

2,399




$

1,441










 

 


Exhibit 4


S&P Global

Operating Results

Three and nine months ended September 30, 2016 and 2015


(dollars in millions)


(unaudited)

Three Months

Nine Months



Revenue



Revenue



















2016


2015


% Change



2016


2015


% Change

















S&P Global Ratings


$

642



$

587



9%



$

1,877



$

1,851



1%


S&P Global Market Intelligence


429



356



21%



1,252



1,000



25%


S&P Dow Jones Indices


164



156



6%



468



446



5%


S&P Global Platts


229



248



(8)%



738



707



4%


Intersegment Elimination


(25)



(23)



(12)%



(73)



(66)



(12)%


Total revenue


$

1,439



$

1,324



9%



$

4,262



$

3,938



8%


































Expenses



Expenses



















2016


2015


% Change



2016


2015


% Change

















S&P Global Ratings (a)


$

296



$

393



(25)%



$

873



$

1,005



(13)%


S&P Global Market Intelligence (b)


317



303



5%



967



822



18%


S&P Dow Jones Indices (c)


57



50



16%



160



149



8%


S&P Global Platts (d)


(583)



155



N/M



(270)



442



N/M


Intersegment Elimination


(25)



(23)



(12)%



(73)



(66)



(12)%


Total expenses


$

62



$

878



(93)%



$

1,657



$

2,352



(30)%


































Operating Profit



Operating Profit



















2016


2015


% Change



2016


2015


% Change

















S&P Global Ratings (a)


$

346



$

194



78%



$

1,004



$

846



19%


S&P Global Market Intelligence (b)


112



53



N/M



285



178



60%


S&P Dow Jones Indices (c)


107



106



1%



308



297



4%


S&P Global Platts (d)


812



93



N/M



1,008



265



N/M


Total operating segments


1,377



446



N/M



2,605



1,586



64%


Unallocated expense (e)


(29)



(36)



(21)%



(93)



(93)



(1)%


Total operating profit


$

1,348



$

410



N/M



$

2,512



$

1,493



68%


















N/M - not meaningful



(a)    

The three and nine months ended September 30, 2016 primarily include a benefit related to net legal settlement insurance recoveries of $17 million and $63 million, respectively. The three and nine months ended September 30, 2015 include legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million and $40 million, respectively. The nine months ended September 30, 2016 and 2015 also include restructuring charges of $6 million and $8 million, respectively. Additionally, amortization of intangibles from acquisitions of $1 million are included for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.



(b)  

The three and nine months ended September 30, 2016 include disposition-related costs of $5 million and $12 million, respectively, and an acquisition-related cost of $1 million. The nine months ended September 30, 2016 include a technology related impairment charge of $24 million. The three and nine months ended September 30, 2015 include acquisition-related costs related to the acquisition of SNL of $32 million, and the nine months ended September 30, 2015 include restructuring charges of $12 million. Additionally, amortization of intangibles from acquisitions of $18 million and $54 million is included for the three and nine months ended September 30, 2016, respectively, and $10 million and $21 million for the three and nine months ended September 30, 2015, respectively.



(c)    

Amortization of intangibles from acquisitions of $1 million is included for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.



(d)    

As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date. The three and nine months ended September 30, 2016 include a gain on the sale of J.D. Power of $722 million. Disposition-related costs of $1 million and $5 million are also included for the three and nine months ended September 30, 2016, respectively. The nine months ended September 30, 2015 include restructuring charges of $1 million. Additionally, amortization of intangibles from acquisitions of $3 million and $9 million are included for the three and nine months ended September 30, 2016, respectively, and $5 million and $11 million for the three and nine months ended September 30, 2015, respectively.



(e)    

The nine months ended September 30, 2016 includes $3 million from a disposition-related reserve release. The nine months ended September 30, 2015 include a gain of $11 million on the sale of our interest in a legacy McGraw Hill Construction investment and restructuring charges.

 

 

 

Exhibit 5


S&P Global

Operating Results - Reported vs. Performance

Three and nine months ended September 30, 2016 and 2015


(dollars in millions, except per share amounts)



Three Months

(unaudited)


2016



2015



% Change




Reported


Non-GAAP Adjustments


Deal-Related Amortization


Performance e



Reported


Non-GAAP Adjustments


Deal-Related Amortization


Performance e



Reported


Performance


S&P Global Ratings


$

346



$

(17) a



$

1



$

330




$

194



$

86 a



$

1



$

281




78%


17%


S&P Global Market Intelligence


112



6 b



18



135




53



32 b



10



95




N/M


43%


S&P Dow Jones Indices


107





1



108




106





1



108




1%


1%


S&P Global Platts


812



(721) c



3



94




93





5



97




N/M


(4)%


Segment operating profit


1,377



(732)



23



667




446



118



17



581




N/M


15%


Unallocated expense


(29)







(29)




(36)







(36)




(21)%


(21)%


Operating profit


1,348



(732)



23



638




410



118



17



545




N/M


17%


Interest expense, net


39







39




30







30




31%


31%


Income before taxes on income


1,309



(732)



23



599




380



118



17



515




N/M


16%


Provision for taxes on income


386



(206)



8



187




99



45



6



150




N/M


25%


Net income


923



(526)



15



412




281



73



11



365




N/M


13%


Less: NCI net income


(31)







(31)




(29)







(29)




7%


7%


Net income attributable to SPGI


$

892



$

(526)



$

15



$

381




$

252



$

73



$

11



$

336




N/M


13%


























Diluted EPS


$

3.36



$

(1.99)



$

0.06



$

1.43




$

0.92



$

0.27



$

0.04



$

1.22




N/M


17%



























Nine Months

(unaudited)


2016



2015



% Change




Reported


Non-GAAP Adjustments


Deal-Related Amortization


Performance e



Reported


Non-GAAP Adjustments


Deal-Related Amortization


Performance e



Reported


Performance


S&P Global Ratings


$

1,004



$

(57) a



$

4



$

951




$

846



$

48 a



$

4



$

898




19%


6%


S&P Global Market Intelligence


285



37 b



54



376




178



44 b



21



243




60%


55%


S&P Dow Jones Indices


308





4



312




297





4



301




4%


3%


S&P Global Platts


1,008



(717) c



9



299




265



1 c



11



277




N/M


8%


Segment operating profit


2,605



(737)



71



1,938




1,586



93



40



1,719




64%


13%


Unallocated expense


(93)



(3) d





(96)




(93)



(10) d





(104)




(1)%


(8)%


Operating profit


2,512



(740)



71



1,842




1,493



83



40



1,615




68%


14%


Interest expense, net


122







122




62







62




97%


97%


Income before taxes on income


2,390



(740)



71



1,720




1,431



83



40



1,553




67%


11%


Provision for taxes on income


731



(211)



25



544




439



31



15



485




67%


12%


Net income


1,659



(529)



46



1,176




992



52



25



1,068




67%


10%


Less: NCI net income


(90)







(90)




(83)







(83)




7%


7%


Net income attributable to SPGI


$

1,569



$

(529)



$

46



$

1,086




$

909



$

52



$

25



$

985




73%


10%


























Diluted EPS


$

5.89



$

(1.99)



$

0.17



$

4.08




$

3.30



$

0.19



$

0.09



$

3.57




79%


14%


 


N/M - not meaningful


Note - Totals presented may not sum due to rounding


(a)    

The three and nine months ended September 30, 2016 primarily include a benefit related to net legal settlement insurance recoveries of $17 million and $63 million, respectively. The three and nine months ended September 30, 2015 include legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million and $40 million, respectively. The nine months ended September 30, 2016 and 2015 also include restructuring charges of $6 million and $8 million, respectively.



(b)   

The three and nine months ended September 30, 2016 include disposition-related costs of $5 million and $12 million, respectively, and an acquisition-related cost of $1 million. The nine months ended September 30, 2016 include a technology related impairment charge of $24 million. The three and nine months ended September 30, 2015 include acquisition-related costs related to the acquisition of SNL of $32 million, and the nine months ended September 30, 2015 include restructuring charges of $12 million.



(c)     

As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date. The three and nine months ended September 30, 2016 include a gain on the sale of J.D. Power of $722 million. Additionally, disposition-related costs of $1 million and $5 million are included for the three and nine months ended September 30, 2016, respectively. The nine months ended September 30, 2015 include restructuring charges of $1 million.



(d)    

The nine months ended September 30, 2016 includes $3 million from a disposition-related reserve release. The nine months ended September 30, 2015 include a gain of $11 million on the sale of our interest in a legacy McGraw Hill Construction investment and restructuring charges.            



(e)  

Includes adjusted operating profit for S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts; adjusted segment operating profit; adjusted operating profit; adjusted net income attributable to SPGI; and adjusted diluted EPS.

 

 

 

Exhibit 6


S&P Global

Revenue by Type

Three and nine months ended September 30, 2016 and 2015


(dollars in millions)


(unaudited)


Subscription / Non-Transaction



Asset Linked Fees



Non-Subscription / Transaction




2016


2015


% Change



2016


2015


% Change



2016


2015


% Change


























Three Months


S&P Global Ratings (a)


$

343



$

343



—%



$



$



N/M



$

299



$

244



23%


S&P Global Market Intelligence (b)


394



322



22%







N/M



35



34



3%


S&P Dow Jones Indices (c)


33



30



11%



100



91



10%



31



35



(11)%


S&P Global Platts (d)


172



165



4%







N/M



57



83



(31)%


Intersegment elimination


(25)



(23)



(12)%







N/M







N/M


Total revenue


$

917



$

837



9%



$

100



$

91



10%



$

422



$

396



7%


























Nine Months


S&P Global Ratings (a)


$

1,010



$

990



2%



$



$



N/M



$

867



$

861



1%


S&P Global Market Intelligence (b)


1,152



900



28%







N/M



100



100



1%


S&P Dow Jones Indices (c)


95



86



11%



278



275



1%



95



85



11%


S&P Global Platts (d)


519



470



10%







N/M



219



237



(8)%


Intersegment elimination


(73)



(66)



(12)%







N/M







N/M


Total revenue


$

2,703



$

2,380



14%



$

278



$

275



1%



$

1,281



$

1,283



—%
























 

N/M - not meaningful



(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 $23 million and $68 million for the three and nine months ended September 30, 2016, respectively, and $21 million and $61 million for the three and nine months ended September 30, 2015, respectively, charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.



(b)  

Subscription revenue is related to credit ratings-related information products, S&P Capital IQ and SNL Desktops, 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  asset linked fees primarily relate to fees based on assets underlying exchange-traded funds, mutual funds and insurance products. Transaction revenue relates to trading based fees from exchange-traded derivatives.



(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. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date.

 

 


Exhibit 7


S&P Global

Revenue by Geographic Area

Three and nine months ended September 30, 2016 and 2015


(dollars in millions)


(unaudited)


U.S.



International




2016


2015


% Change



2016


2015


% Change



















Three Months


S&P Global Ratings


$

370



$

340



9%



$

272



$

247



10%


S&P Global Market Intelligence


292



236



24%



137



120



14%


S&P Dow Jones Indices


135



129



5%



29



27



8%


S&P Global Platts


101



116



(13)%



128



132



(3)%


Intersegment elimination


(13)



(11)



(17)%



(12)



(12)



(8)%


Total revenue


$

885



$

810



9%



$

554



$

514



8%



















Nine Months


S&P Global Ratings


$

1,098



$

1,078



2%



$

779



$

773



1%


S&P Global Market Intelligence


855



660



30%



397



340



17%


S&P Dow Jones Indices


388



363



7%



80



83



(4)%


S&P Global Platts


331



317



5%



407



390



4%


Intersegment elimination


(37)



(33)



(14)%



(36)



(33)



(10)%


Total revenue


$

2,635



$

2,385



11%



$

1,627



$

1,553



5%

















 

 

 

Exhibit 8


S&P Global

Non-GAAP Financial Information

Three and nine months ended September 30, 2016 and 2015


(dollars in millions)


Computation of Free Cash Flow and Free Cash Flow Excluding Certain Items


(unaudited)


Nine Months




2016


2015


Cash provided by (used for) operating activities from continuing operations


$

1,171



$

(356)



Capital expenditures


(67)



(74)



Dividends and other payments paid to noncontrolling interests


(59)



(67)



Free Cash Flow


$

1,045



$

(497)



Payment of legal and regulatory settlements


134



1,624



Legal settlement insurance recoveries


(77)



(101)



Tax benefit from legal settlements


(21)



(250)



Free Cash Flow Excluding Above Items


$

1,081



$

776









 

S&P Global Organic Revenue


(unaudited)


Three Months



Nine Months




2016


2015


% Change



2016


2015


% Change


Total revenue


$

1,439



$

1,324



9%



$

4,262



$

3,938



8%


S&P Global Market Intelligence acquisitions and product closures


(72)



(22)






(207)



(24)





S&P Global Platts acquisitions and divestiture


(57)



(82)






(220)



(220)





Total Adjusted Revenue


$

1,310



$

1,220



7%



$

3,835



$

3,694



4%

















Organic Revenue Constant Currency Basis


$

1,315



$

1,220



8%



$

3,849



$

3,694



4%

















 

Adjusted S&P Global Market Intelligence Revenue


(unaudited)


Three Months



Nine Months




2016


2015


% Change



2016


2015


% Change


S&P Global Market Intelligence revenue


$

429



$

356



21%



$

1,252



$

1,000



25%


Acquisitions and product closures


(72)



(22)






(207)



(24)





Adjusted S&P Global Market Intelligence Revenue


$

357



$

334



7%



$

1,045



$

976



7%

















 

Adjusted S&P Global Platts Revenue


(unaudited)


Three Months



Nine Months




2016


2015


% Change



2016


2015


% Change


S&P Global Platts revenue


$

229



$

248



(8)%



$

738



$

707



4%


Acquisitions and divestiture


(57)



(82)






(220)



(220)





Adjusted S&P Global Platts Revenue


$

172



$

166



4%



$

518



$

487



6%

















 


Adjusted S&P Dow Jones Indices Net Operating Profit


(unaudited)


Three Months



Nine Months




2016


2015


% Change



2016


2015


% Change


Adjusted operating profit


$

108



$

108



1%



$

312



$

301



3%


Income attributable to noncontrolling interests


28



26






82



76





Adjusted Net Operating Profit


$

80



$

82



(1)%



$

230



$

225



2%

























Exhibit 9

S&P Global
Non-GAAP Guidance

Our 2016 adjusted diluted EPS guidance excludes a range of adjustments to allow investors to view the Company's business from the same perspective as Company management, including full-year 2016 deal-related amortization expense, as well as the gain on the sale of J.D. Power, insurance recoveries, legal settlement charges, disposition-related costs, restructuring charges, and a technology related impairment charge that were recorded during the first nine months of 2016 as presented on Exhibit 5. We are unable to reconcile our full-year adjusted diluted EPS guidance to comparable GAAP guidance without unreasonable effort because management cannot reliably predict the necessary components of our full-year 2016 net income, including the impact and timing of potential dispositions and other structural changes or their probable significance. The impact of such adjustments could be significant. Accordingly, we are unable to provide an accurate non-GAAP to GAAP guidance reconciliation upon which our investors can rely.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/sp-global-reports-third-quarter-results-300356704.html

SOURCE S&P Global