S&P Global
Annual Report 2016

Plain-text annual report

55 Water Street New York, NY 10041 spglobal.com Annual Report 2016 S & P G l o b a l 2 0 1 6 A n n u a l R e p o r t Essential There’s intelligence. Then there’s essential intelligence. Board of Directors Charles E. “Ed” Haldeman, Jr. (A,E,N) Non-Executive Chairman of the Board S&P Global & KCG Holdings, Inc. Marco Alverà Chief Executive Officer Snam S.p.A. Sir Winfried Bischoff (C,F) Chairman Financial Reporting Council & JP Morgan Securities plc William D. Green (C,E,N) Former CEO & Chairman Accenture Stephanie C. Hill (F) Vice President & General Manager Cyber, Ships & Advanced Technologies (CSAT) for Rotary and Mission Systems Lockheed Martin Operating Committee Rebecca Jacoby (F) Senior Vice President, Operations Cisco Systems, Inc. Monique F. Leroux (A) President International Cooperative Alliance Chair of the Board Investissement Québec Maria R. Morris (A) Executive Vice President, Global Employee Benefits Interim Head of the U.S. Business MetLife, Inc. Hilda Ochoa-Brillembourg (A,F) Founder and Chairman Strategic Investment Group Douglas L. Peterson (E) President and Chief Executive Officer S&P Global Sir Michael Rake (A,E,F) Chairman BT Group plc & Worldpay Group plc Edward B. Rust, Jr. (C,E,N) Chairman Emeritus State Farm Mutual Automobile Insurance Company Kurt L. Schmoke (C,N) President University of Baltimore Richard E. Thornburgh (A,E,F) Non-Executive Director and Chairman Credit Suisse Holdings (USA), Inc. Vice Chairman Credit Suisse Group A.G. Douglas L. Peterson President and Chief Executive Officer John Berisford President, S&P Global Ratings Mike Chinn President, S&P Global Market and Commodities Intelligence Martina L. Cheung Head of Global Risk Services Martin Fraenkel President, S&P Global Platts Courtney Geduldig Executive Vice President, Public Affairs France M. Gingras Executive Vice President, Human Resources Steve Kemps Executive Vice President, General Counsel Nancy Luquette Senior Vice President, Chief Risk & Audit Executive Alex J. Matturri Chief Executive Officer, S&P Dow Jones Indices Krishna Nathan Chief Information Officer Paul Sheard Executive Vice President and Chief Economist Ewout L. Steenbergen Executive Vice President, Chief Financial Officer Ashu Suyash Managing Director and Chief Executive Officer, CRISIL (A) Audit Committee (C) Compensation & Leadership Development Committee (E) Executive Committee (F) Financial Policy Committee (N) Nominating & Corporate Governance Committee Our Purpose We provide intelligence that is essential for companies, governments and individuals to make decisions with conviction. Values Relevance We provide relevant solutions to our clients and bring passion and a thirst for knowledge in serving them. Excellence We pursue excellence in everything we do. We value results, encourage teamwork and embrace change. Integrity We act with integrity and are honest, transparent and accountable for our actions. Photo: S&P Global employees representing the Company’s Chief Data Office, technology and other parts of the business 02 What We Do We know that our clients need to make decisions quickly and with confidence. Timely and relevant intelligence is essential. We mine through billions of data points to uncover what matters. We gather this data from all over the world, searching for what others might have missed. All the while, our people and cutting edge systems work around the clock to process this information in real time. We empower clients with critical information and the analytics to draw conclusions. Our capabilities reach every aspect of the financial services industry, and we’re always thinking about new ways to create growth and achieve excellence. With our rich data, research, benchmark and analytic capabilities, we’re constantly uncovering insights to give our clients the best possible picture of the world’s markets. Our essential offerings all work to give companies, governments and individuals the complete picture of the markets, so they can make decisions with conviction. The result? Sound strategic analysis for clients, and for the world’s markets. Our data, analytics, benchmarks and intelligence enable the essential decisions that set the world in motion. 20,000 31 employees countries with S&P Global presence $5.66B ~60% in revenue in 2016 of employees are Millennials 03 Our essential offerings all work to give companies, governments and individuals the complete picture of the markets, so they can make decisions with conviction. Our Divisions S&P Global Ratings S&P Global Market Intelligence Credit ratings, credit risk research & insights support growth & transparency in capital markets. Data, analytics & sector intelligence to gain insights into markets. S&P Dow Jones Indices S&P Global Platts Innovative indices investors need to identify, measure & capitalize on global investment opportunities. The commodities & energy market insights needed to inform decisions. 04 Letter from the Chairman Dear Fellow Shareholder: Welcome to our first Annual Report as S&P Global. A year ago you approved changing the Company’s name to better reflect its core businesses in international capital and commodities markets and the rich heritage of Standard & Poor’s. Since then, S&P Global has been the name that treasurers and traders, lenders and borrowers, and risk managers and portfolio managers have turned to for the insights they need to make important decisions. This is what S&P Global calls “essential intelligence.” In 2016, the independent data, benchmarks and analytics S&P Global offers were as essential as ever as investors, corporate professionals and market participants tried to manage through periods of global market turbulence. As a result, S&P Global performed well last year. Management produced profitable growth. Employees across the Company displayed strong execution. And the Board and senior leadership team demonstrated a disciplined approach to allocating capital—the conviction to step away from an investment when it doesn’t make economic sense and to step forward when it does. Together, these factors have sustained the Company’s commitment to building shareholder value. To underscore this commitment, in January 2017, the Board of Directors increased the regular quarterly cash dividend on the Company’s common stock by almost 14% to $0.41. The annualized rate of $1.64 per share represents a compounded annual growth rate of 9.6% since 1974. In total last year, the Company returned $1.5 billion to shareholders in the form of dividends and share repurchases. Although share price is not the sole measure of our performance, it is worth acknowledging that over the past five years the total annualized return for our stock has been 19.05% as compared to 12.23% for the S&P 500. The Board has been working closely with management to maintain the steady growth of S&P Global. We have been actively engaged with them to set and provide oversight of long-term strategy goals, including putting a priority on environmental, social and governance (ESG) issues, and we align executive compensation with performance in order to hold teams accountable and reward excellence. Driving profitable growth and building long-term shareholder value are top priorities for the Board, but they are not the only ones. Maintaining the highest standards of corporate governance is also a focal point. As such, the Company is continually searching for talented leaders with diverse backgrounds and perspectives to join our Board. We appointed four new leaders to our Board since I wrote to you last year. Maria R. Morris, Monique F. Leroux, Stephanie C. Hill and Marco Alverà are accomplished executives with critical experience in finance, investing, technology and global business operations. Their appointments demonstrate the Company’s pledge to invite people with diverse points of view, skills and experience into the boardroom to guide S&P Global. S&P Global accomplished a lot in 2016 and I look forward to what lies ahead. In times like these, when markets are demanding and evolving, our oversight responsibilities, including making sure that management is executing on long- term priorities such as investments in technology and people never wavers. On behalf of your Board of Directors, I thank you for your interest in S&P Global. Sincerely, Charles E. “Ed” Haldeman, Jr. Chairman of the Board 05 S&P Global has been the name that treasurers and traders, lenders and borrowers, and risk managers and portfolio managers have turned to for the insights they need to make important decisions. This is what S&P Global calls “essential intelligence.” Maximizing Shareholder Value $1.5B 13.9% 19.05% returned to shareholders in 2016 increase in dividend in 2017 5-year total annualized share price return* * As of 12/31/16 06 Letter from the President and Chief Executive Officer volatility. Unpredictability seemed to be the one constant as rising populism drove the Brexit vote and U.S. election results, questions persisted about rising interest rates in the U.S., and oil prices rebounded sharply after hitting their cyclical lows at the start the year. Amidst all of this change, I am grateful for our 20,000 employees around the globe, who give our customers the confidence they need to use our data, analytics and benchmarks to make critical decisions. Essential to evolving markets Uncertainty continues in 2017. The markets are now faced with a geopolitical dynamic that will test the way in which we all work together. The backlash against globalization is real and support for populism is significant. The need for leaders to think beyond the short term is acute and it is important for companies and governments to find middle ground on pro-growth public policies that bring long-term structural change and global competitiveness—such as tax reform, infrastructure investment, trade liberalization and regulatory reform. In the U.S., we need to address taxes. This is a change that is long overdue to reflect the makeup of the 21st century U.S. economy and that will enable economic, job and export growth; capital inflows; and investments. Beyond these shifting geopolitical sands, we are all faced with rapid technological innovation and an evolving regulatory environment. The world around us doesn’t stop changing. Uncertainty can spark volatility and risk aversion—a recipe that can hurt business confidence, investment, lending and funding conditions, and ultimately growth. Dear Fellow Shareholder: I am delighted to report that 2016 was a standout year for our Company. – We launched S&P Global in April. This milestone symbolizes everything we have done to reposition the business portfolio. The brand acknowledges our history of delivering essential business insights while offering a modern look. The name resonates with our clients and our employees are enthusiastic about our renewed common sense of purpose and values. – We delivered strong financial performance in 2016 and achieved the three-year annual financial goals we defined in 2014. – We made significant progress integrating SNL Financial and S&P Capital IQ. – We completed the sale of J.D. Power for $1.1 billion in September, and in connection with the closing, entered into a $750 million Accelerated Share Repurchase agreement. – We divested two pricing businesses where we did not have critical mass—Standard & Poor’s Securities Evaluations, Inc. and Credit Market Analysis—and we also exited our Equity Research business. – We invested for future growth by adding complementary capabilities, including three tuck-in acquisitions to build out Platts’ analytical offerings. – And we made several key appointments to our Operating Committee. These accomplishments are significant in any year, but they were especially gratifying in 2016, a time marked by global political, economic and market Yet S&P Global is well positioned to benefit from many of the changes taking place around the world, making us excited about the future. 07 For S&P Global Ratings, there are a number of dynamics in the market influencing the business. Debt Issuance: The health of the economy, first and foremost, is the driver most closely correlated to bond issuers coming to market. Economic growth propels business investment, and when companies need to raise capital the debt markets serve as a critical funding mechanism. S&P Global economists expect worldwide GDP growth of 3.5% this year, and overall, we expect global issuance to grow about 3% to $6.7 trillion in 2017. In the medium term, a large amount of corporate debt will be maturing. We estimate that nearly $9.6 trillion in rated global corporate debt needs to be refinanced between 2017 through 2021. Much of this debt will need to be rated and S&P Global will be there to help issuers and investors evaluate credit risk. It’s still early to tell exactly what public policy changes will be coming from Washington, DC, and what sort of impact they will have on our ratings business. We are watching these issues closely. What we do know is that changes to tax policy, Dodd-Frank, the Affordable Care Act and infrastructure investment policy will have implications for economic growth and market dynamics. Growth of Passive Investing: One of the biggest stories in investing is the shift from actively managed funds to index-based or passive investments. This  trend benefits S&P Dow Jones Indices and is being driven by investors’ search for transparent, low-cost, diversified and efficient investable products. From 2004 to 2015 assets under management in passively managed U.S. equity and bond index funds and ETFs increased from $812 billion to $4.4 trillion.1 Index-based assets under management in the U.S., even with their rapid rise in popularity, only make up 28% of the total funds under management, suggesting there is plenty of room for growth. Evolving Regulations: The changing and disparate regulatory environment confronting our customers around the globe related to capital and liquidity, market infrastructure, reporting and stress testing is yet another trend creating opportunities for us to serve a market need. While the regulatory agenda will increase the cost of compliance for some customers, it will also create demand for external data and analytics solutions. That is why Risk Services, an offering of S&P Global Market Intelligence, is a growing area of attention. The market for credit risk services is estimated to be $9 billion, excluding the market for ratings. To help our clients assess risk, the team launched two new products last year, Credit Analytics and Bank Scorecard, which are both performing well, albeit off of a small base. In addition, there is exciting work going on with our RatingsDirect® product. In 2016, we added structured and public finance content to round out the RatingsDirect® offering on the Capital IQ platform, and later this year, we will begin offering clients a more visual, interactive and dynamic way to explore RatingsDirect® data. Achieved Growth & Performance Goals 2014–2016 Annual Goals Mid-to-high single-digit revenue growth Sustained margin expansion aided by productivity initiatives Mid-teens adjusted diluted EPS growth $1.0 billion+ in annual free cash flow* to provide significant financial flexibility Multi-Year Goals Maintain disciplined capital allocation approach: – Continue to pursue attractive acquisitions – Sustain dividend growth and share repurchases (trade basis) Complete portfolio rationalization with evaluation of strategic alternatives for McGraw Hill Construction Target at least $100 million in productivity savings for 2014–2016 1 Strategic Insight Simfund * Excluding legal and regulatory settlements, insurance recoveries and tax on gain from sale of J.D. Power. 08 Photo: S&P Global employees at the Company’s worldwide headquarters in New York City What is essential to us in the future? Creating S&P Global last year was much more than changing the Company’s name. We have worked hand in hand with our Board of Directors to establish a long-term growth strategy and a culture built on a strong foundation of enduring values—integrity, excellence and relevance. Our Priorities – People & Corporate Responsibility: We have been investing in our people. Last year, we established an executive development program that brings together leaders from different divisions and functions to address specific business issues. We have also created a fresh approach to maximize our business capabilities, volunteerism and financial support to nonprofits to strengthen the economies and communities where we live and work. – Technology, Data & Analytics: We have been investing in technology, data operations and enhanced analytics. We see opportunities to better leverage these assets, including putting more attention on utilizing alternative data sources, to enhance the client experience. – Continuous Improvement: We are committed to continuous improvement. To illustrate this point, our adjusted operating margin from continuing operations has increased by 1,040 basis points to 42.9% since 2012. A key contributor of this expansion was achieving slightly more than $140 million in productivity savings since 2014. At the same time, we have not lost sight of our history of being able to adapt to changing market needs, which is why we will continue to make investments that maximize the essential intelligence we provide. – Responding to Market & Customer Needs: We continue to align our businesses with powerful secular trends by investing in the areas where there are the greatest opportunities for long- term growth. Fortunately, growth opportunities to meet our customers’ needs are spread across S&P Global, including credit ratings, equity and fixed income indices, commodities price assessments and analytics, and risk analytics. As we look ahead, an ongoing commitment to growth and excellence in everything we do will be essential to our success as a world-class digital data and analytics Company. Let me give you a few examples of initiatives underway that illustrate our dedication to growth and excellence. Growth We invested in organic growth in 2016 with the development of a platform for debt issuers called Ratings 360™, and after an early 2017 pilot, we anticipate rolling it out later this year. This powerful platform offers integrated, full-spectrum analytical insights from S&P Global Ratings. It is a holistic, singular view of credit risk that has never before been presented in this way and provides a new level of transparency. 09 Last year, we acquired three businesses— Commodity Flow, PIRA Energy and RigData— to build a world-class energy and commodities supply and demand forecasting platform for customers of S&P Global Platts. Aided by alternative data sources such as satellite imagery of shipping routes, this business is leveraging a team of analysts and sophisticated models to provide customers with the information, trade flow analysis, insight and forecasts they need to make better-informed trading and business decisions. We have demonstrated our commitment to serving the increasing needs of long-term investors interested in sustainable finance by expanding the breadth and depth of our ESG solutions. I am very proud that last year S&P Dow Jones Indices acquired Trucost—a business established to deliver the insights and transparency fundamental to transition to a low carbon, resource efficient economy—and S&P Global Ratings proposed two evaluation tools to assess risks to sustainability, which we expect to introduce more broadly this year. Excellence There is perhaps no better example of our commitment to operational excellence and flawless execution than the integration of SNL and S&P Capital IQ. It remains a top strategic priority. Later this year, we will begin rolling out to the investment banking community a beta version of the combined SNL and Capital IQ solutions which brings together the best of both products into a single-user interface and experience. This new platform, available on desktop, mobile, and MS Office, will include in-depth industry news and streaming real-time market data. As a result of this combination, our clients will glean greater insight, make better and faster decisions, and operate with greater  efficiency. Quality is a key element of operational excellence. The S&P Global Market Intelligence team is passionate about delivering the highest possible degree of quality, timeliness and completeness in its data and earlier this year they extended the SNL reward program to S&P Capital IQ clients. Under this program, if a client reports a mistake in the data or news on public companies distributed through our desktop and enterprise products, we will send them a $50 reward. This is a clear example of how a commitment to excellence can translate to client confidence and even higher quality data in the future. At S&P Global Ratings, the work we are doing and investments we’re making in technology to streamline and strengthen our processes is another area where we are demonstrating a sharp focus on operational, analytical and functional excellence. We are committed to these types of initiatives across the enterprise in order to produce the essential intelligence that institutions, investors and individuals need to make informed decisions across global capital and commodities markets. Essential intelligence: the way forward In summary, the strengths of our Company— the integrity and ingenuity of our people; the rich data sets, powerful analytics and independent benchmarks that bring clarity to clients and transparency to complex markets; and an enduring commitment to growth and excellence—have been the cornerstone of our success, and they will continue as our foundation in the years ahead. Our vision is to build the business in a way that delivers long-term growth and value. We accomplish this through: – The effective deployment of capital, – Deeper penetration of existing markets and thoughtfully entering new ones, – And leveraging innovative technology and data operations. Our businesses—S&P Global Ratings, S&P Dow Jones Indices, S&P Global Market Intelligence, CRISIL and S&P Global Platts—are clear leaders in their markets, are powerful brands and are well positioned for long-term success. As a result, I look to the future with a great deal of optimism and pride. I thank our Board of Directors, shareholders, employees, customers and partners for their commitment to S&P Global. Sincerely, Supporting women entrepreneurs all around the globe is one of the pillars of S&P Global’s corporate responsibility (CR) strategy. The Company’s approach to CR is explained on page 15. Photo courtesy of the Aspen Institute Douglas L. Peterson President and Chief Executive Officer 10 Transparency We bring essential clarity and transparency to otherwise opaque capital markets with credit ratings, research, deep analytics and fundamental data. 11 Essential to understanding risk In complex, volatile and rapidly moving credit markets, corporations, banks and institutional investors turn to S&P Global Ratings, S&P Global Market Intelligence and CRISIL to evaluate and manage risk. We bring essential clarity and transparency to otherwise opaque capital markets with credit ratings, research, deep analytics and fundamental data. We have exciting developments underway in 2017 to strengthen the services our businesses offer to clients. – Debt issuers are positioned to benefit from Ratings 360™, a powerful new S&P Global Ratings platform to be launched soon. Chief financial officers and corporate treasurers will be able to access an enhanced and integrated view of credit risk that until Ratings 360™ was only available through multiple platforms. Utilizing broad and deep data and analytics, Ratings 360™ will provide the rationale behind ratings, facilitate modeling, and offer users the ability to interact with S&P Global Ratings staff. – Collaboration between S&P Global Market Intelligence and CRISIL, a global analytics company and India’s leading rating agency, will enable S&P Global to offer credit assessment reports to the world’s biggest commercial banks to support, enhance, and complement their processes for analyzing credit risk. Global growth is also a priority. Testimony to the growing needs of investors and borrowers in Asia, Latin America and the Middle East, S&P Global Ratings has recently established a presence in Chile and Saudi Arabia, and acquired a minority equity stake in Thailand’s TRIS Rating. 12 Independence Essential to measuring markets Independence has been a hallmark of our indices and the basis for our commodities information for more than 100 years. Today, S&P Dow Jones Indices and S&P Global Platts play essential and growing roles in the functioning of efficient markets throughout the world. The trend away from actively managed funds to index-based investing is powering the growth of S&P Dow Jones Indices. Demonstrating this point, assets in exchange-traded funds or ETFs based on our indices surpassed $1 trillion at the end of 2016, marking a new milestone for this business. S&P Dow Jones Indices is home to two of the most iconic measures of the U.S. stock market: – The Dow Jones Industrial Average is the world’s most-cited market measure and celebrated its 120th anniversary in 2016. – The S&P 500 is the world’s most-followed stock market index with $7.5 trillion in benchmarked assets and turns 60 years old in 2017. We are not limited to measuring equity markets. S&P Dow Jones Indices calculates 1 million indices and our coverage spans asset classes, geographies and investment strategies. As investors search for yield, an increasing area of focus is on offering index-based solutions to fit a range of fixed-income strategies. The essential role S&P Global Platts price assessments play for a range of commodities means they are often used to settle contracts. The markets that use them give them “benchmark” status. Entering 2017, our Japan Korea Marker (Platts JKM™) is serving as the first benchmark for LNG pricing in Asia. In Japan, Platts JKM™ is supporting the process of energy market liberalization through price transparency. In the UAE, we are now providing weekly inventory data for the Fujairah Oil Industry Zone, advancing the emirate’s progression towards becoming one of the world’s leading energy hubs serving Asian markets. 13 Independence has been a hallmark of our indices and the basis for our commodities information for more than 100 years. Today, S&P Dow Jones Indices and S&P Global Platts play essential and growing roles in the functioning of efficient markets throughout the world. 14 We match our skills with the growing needs of society to deliver essential information and analytics that enable companies, investors and communities to pursue sustainable growth strategies. Sustainability 15 Essential to sustainable growth We match our skills with the growing needs of society to deliver essential information and analytics that enable companies, investors and communities to pursue sustainable growth strategies. To this end, we are expanding and building on our portfolio of environmental, social and governance (ESG) products that provide solutions. For example, S&P Dow Jones Indices acquired Trucost plc in 2016. The complementary nature of these two businesses allows S&P Global to combine Trucost’s industry-leading environmental impact data and risk metrics with S&P Dow Jones Indices’ world-class benchmarking capabilities to develop ESG solutions. Additionally, S&P Global Ratings proposed two new assessments in 2016: a new Green Evaluation tool that analyzes and estimates the environmental impact of projects or initiatives financed by bonds, and an ESG Assessment methodology for corporate bond issuers. The Company is taking on leadership roles in other ways to support green finance: – Dr. Richard Mattison, CEO of Trucost, was appointed in 2016 to the European Commission’s High-Level Expert Group on sustainable finance, which is tasked with recommendations on how to integrate sustainability considerations into the EU’s rules for the financial sector. – S&P Global has committed to the principles of the Task Force on Climate-related Financial Disclosures. The Task Force was created by the Financial Stability Board with the aim of developing voluntary, consistent climate-related financial risk disclosures to be used by companies. – S&P Global Ratings rated $500 million in notes issued by Starbucks for sustainability projects relating to coffee sourcing. We also rated MidAmerican Energy’s first “eligible green” bonds, to support the utility’s wind projects including Wind XI, the largest single economic development project ever in Iowa. Essential to society Corporate Responsibility is more than philanthropy. It’s about finding the essential connections between our capabilities and the needs of society. It’s how we create economic opportunities and thriving communities. We direct our attention and support activities in three areas: 1. Promoting Sustainability We’re always working to reduce our own environmental impact, but, as our ESG products and services show, supporting sustainability is also an essential business imperative. 2. Elevating People Millions of jobs in science, technology, engineering, and mathematics (STEM) are going unfilled. This creates global challenges for both the workforce and employers. One of the ways we are addressing the STEM jobs gap is by partnering with nonprofits such as For the Inspiration and Recognition of Science and Technology (FIRST) to inspire students from diverse backgrounds to be science and technology leaders. In 2016, our employees donated nearly 1,800 hours of their time to the FIRST Robotics program. 3. Supporting Women Entrepreneurs When women are in business, economies grow. Around the world, however, women entrepreneurs face barriers to starting and expanding businesses. We leverage our capabilities and people to connect entrepreneurs to financial services, support nonprofit partners and provide mentoring. For example, in 2016, in partnership with MicroMentor we introduced a virtual mentoring platform to match our employees with women entrepreneurs globally. Additionally last year, in collaboration with the Aspen Institute’s Network for Development Entrepreneurs, we issued three $50,000 awards to nonprofits to create data and technology-based solutions to facilitate access to capital for women entrepreneurs in emerging markets. More information on our commitment to sustainable corporate responsibility can be viewed at spglobal.com. 16 Financial Highlights Years ended December 31 (in millions, except per share data) 2016 2015 % Change Revenue $ 5,661 $ 5,313 Adjusted net income (attributable to the Company’s common shareholders)* 1,420(a) 1,288(b) Adjusted diluted earnings per common share from continuing operations* $ 5.35(a) $ 4.69(b) Dividends per common share(c) Total assets Capital expenditures(d) Total debt Equity (including redeemable noncontrolling interest) $ 1.44 $ 1.32 $ 8,669 $ 8,183 115 3,564 1,781 139 3,611 1,163 7 10 14 9 6 (17) (1) 53 * Refer to “Reconciliation of Non-GAAP Financial Information” on page 17 of this report for a discussion of the Company’s non-GAAP financial measures. (a) Excludes the impact of the following items: a gain from our dispositions of $1.1 billion, a benefit related to net legal settlement insurance recoveries of $10 million, disposition-related costs of $48 million, a technology-related impairment charge of $24 million, restructuring charges of $6 million, a disposition-related reserve release of $3 million, acquisition-related costs of $1 million, and amortization of intangibles from acquisitions of $96 million. (b) Excludes the impact of the following items: costs related to identified operating efficiencies primarily related to restructuring of $56 million, net legal settlement expenses of $54 million, acquisition-related costs of $37 million, an $11 million gain on dispositions, and amortization of intangibles from acquisitions of $67 million. (c) Dividends paid were $0.36 per quarter in 2016 and $0.33 per quarter in 2015. (d) Includes purchases of property and equipment and additions to technology projects. (e) Assumes $100 invested on December 31, 2011 and total return includes reinvestment of dividends through December 31, 2016. (f) The peer group consists of the following companies: Thomson Reuters Corporation, Moody’s Corporation, CME Group Inc., MSCI Inc., FactSet Research Systems Inc. and IHS Markit Ltd. Year-End Share Price Dividends Per Share Revenue (in millions) Shareholder Return Five-Year Cumulative Total Return(e) (12/31/11–12/31/16) $107.54 $98.58 $88.98 $78.20 $54.67 $1.44 $1.32 $1.20 $1.12 $1.02 $5,661 $5,313 $5,051 $4,702 $4,270 $271 $239 $198 $300 250 200 150 100 50 ’12 ’13 ’14 ’15 ’16 ’12 ’13 ’14 ’15 ’16 ’12 ’13 ’14 ’15 ’16 ’11 ’12 ’13 ’14 ’15 ’16 SPGI S&P 500 Peer Group(f) Reconciliation of Non-GAAP Financial Information The following is provided to supplement certain non-GAAP financial measures discussed in the letter to shareholders and the financial highlights section of this report (pages 4–16) both as reported (on a GAAP basis) and as adjusted by excluding certain items (non-GAAP) as explained below. 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. OPERATING RESULTS BY SEGMENT — REPORTED VS. PERFORMANCE (dollars in millions, except per share amounts) (unaudited) Reported Non-GAAP Adjustments Deal- Related Amortization Performancee Reported Non-GAAP Adjustments Deal- Related Amortization Performance Reported Performance Years ended December 31, 2016 and 2015 2016 2015 % Change $ 1,262 $ (4)a $ 5 $ 1,263 $ 1,078 $ 68a $ 5 $ 1,151 17% 10% Ratings Market and Commodities Intelligence S&P Dow Jones Indices Segment operating profit Unallocated expense Operating profit Interest expense, net 1,822 412 3,496 (127) 3,369 181 (1,027)b — (1,031) (3)c (1,034) (21)d Income before taxes on income Provision for taxes on income 3,188 960 (1,013) (265) Net income Less: NCI net income 2,228 (122) (748) — 85 6 96 — 96 — 96 34 62 — 881 585 417 392 2,561 2,055 (130) (138) 2,431 1,917 160 102 2,271 1,815 729 547 1,542 1,268 (122) (112) 70b — 138 (2)c 136 — 136 48 88 — 57 5 67 — 67 — 67 23 44 — 712 397 2,260 (139) 2,121 102 2,019 619 1,400 (112) N/M 5% 70% (8)% 76% 77% 76% 76% 76% 9% Net income attributable to SPGI $ 2,106 $ (748) $ 62 $ 1,420 $ 1,156 $ 88 $ 44 $ 1,288 82% Diluted EPS $ 7.94 $ (2.82) $ 0.23 $ 5.35 $ 4.21 $ 0.32 $ 0.16 $ 4.69 89% N/M — not meaningful Note — Totals presented may not sum due to rounding. (a) 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and restructuring charges of $6 million. 2015 includes net legal settle- ment expenses of $54 million and restructuring charges of $13 million. (b) 2016 includes a gain on dispositions of $1.1  billion, disposition- related costs of $48  million, a technology- related impairment charge of $24  million and acquisition- related costs of $1  million. 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $33  million and  acquisition- related costs of $37 million. (c) 2016 includes a disposition- related reserve release of $3 million. 2015 includes a gain on dispositions of $11 million and restructuring charges of $10 million. (d) 2016 includes a redemption fee of $21 million related to the early payment of our senior notes. (e) Adjusted operating margin for the Company was 42.9% in 2016. COMPUTATION OF FREE CASH FLOW AND FREE CASH FLOW EXCLUDING CERTAIN ITEMS Years ended December 31, 2016, 2015 and 2014 (dollars in millions) (unaudited) 2016 2015 Cash provided by operating activities from continuing operations Capital expenditures Dividends and other payments paid to noncontrolling interests Free cash flow Tax on gain from sale of J.D. Power Payment of legal and regulatory settlements Legal settlement insurance recoveries Tax benefit from legal settlements Free cash flow excluding above items $ 1,464 (115) (116) $ 1,233 200 150 (77) (24) $ 1,482 $ 195 (139) (104) $ (48) — 1,624 (101) (250) $ 1,225 2014 $ 1,209 (92) (84) $ 1,033 — 35 — — $ 1,068 S&P Global 2016 Annual Report 17 24% 5% 13% (7)% 15% 56% 13% 18% 10% 9% 10% 14% 20 Management’s Discussion and Analysis 48 Consolidated Statements of Income 49 Consolidated Statements of Comprehensive Income 50 Consolidated Balance Sheets 51 Consolidated Statements of Cash Flows 52 Consolidated Statements of Equity 53 Notes to the Consolidated Financial Statements 92 Five Year Financial Review 93 Report of Management 94 Report of Independent Registered Public Accounting Firm 96 Shareholder Information IBC Directors and Principal Executives 18 S&P Global 2016 Annual Report 2016 Financial Performance Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis (“MD&A”) We have repositioned S&P Global as a more focused company provides a narrative of the results of operations and financial in the capital and commodity markets by exiting non-core condition of S&P  Global Inc. (together with its consolidated assets and investing for growth in markets that have size and subsidiaries, the “Company,” “we,” “us” or “our”) for the years scale. In 2016, we continued to create a portfolio focused on ended December 31, 2016 and 2015, respectively. The MD&A scalable, industry leading, interrelated businesses in the capi- should be read in conjunction with the consolidated financial tal and commodity markets. statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016, which have been prepared in accordance with accounting prin- ciples generally accepted in the U.S. (“U.S. GAAP”). Our operations consist of three reportable segments: Ratings, Market and Commodities Intelligence and S&P Dow Jones Indices (“Indices”). Ratings is an independent provider of credit ratings, research The MD&A includes the following sections: and analytics, offering investors and other market partici- Overview Results of Operations pants information, ratings and benchmarks. Market and Commodities Intelligence is a global provider Liquidity and Capital Resources of multi-asset-class data, research and analytical capa- Reconciliation of Non-GAAP Financial Information bilities, which integrate cross-asset analytics and desktop Critical Accounting Estimates Recent Accounting Standards Certain of the statements below are forward- looking state- ments within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, any projections of future results of operations and cash flows are subject to substan- tial uncertainty. See Forward- Looking Statements on page 46 of this report. Overview We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insur- ance companies, exchanges, and issuers; and the commodity markets include producers, traders and intermediaries within energy, metals, petrochemicals and agriculture. On April 27, 2016, we changed our name to S&P Global Inc. from McGraw Hill Financial, Inc. services and deliver their customers in the commodity and energy markets access to high-value information, data, analytic services and pricing and quality benchmarks. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in Market and Commodities Intelligence results through that date. Indices is a global index provider that maintains a wide vari- ety of valuation and index benchmarks for investment advi- sors, wealth managers and institutional investors. Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consis- tent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P  Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retro- actively revised to reflect the current organizational structure. 20 S&P Global 2016 Annual Report MAJOR PORTFOLIO CHANGES The following significant changes by segment were made to helps clients, including investment and commercial banks, investors, corporations, and regulators make decisions, our portfolio during the three years ended December 31, 2016: improve efficiency, and manage risk. 2016 Market and Commodities Intelligence In July of 2015, we acquired the entire issued share capital of Petromedia Ltd and its operating subsidiaries (“Petromedia”), an independent provider of data, intelligence, news and In October of 2016, we completed the sale of Standard & tools to the global fuels market that offers a suite of prod- Poor’s Securities Evaluations, Inc. (“SPSE”) and Credit Market ucts providing clients with actionable data and intelligence Analysis (“CMA”) for $425 million in cash to Intercontinental that enable informed decisions, minimize risk and increase Exchange, an operator of global exchanges, clearing houses efficiency. and data services. During the year ended December 31, 2016, we recorded a pre-tax gain of $364  million ($297  million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of SPSE and CMA. In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and ini- tiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 million ($516 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consoli- In 2015, we further reduced our real estate footprint by com- pleting the consolidation of our corporate headquarters with our operations in New York City. 2014 Market and Commodities Intelligence In November of 2014, we completed the sale of McGraw Hill Construction to Symphony Technology Group for $320 mil- lion in cash. We recorded an after-tax gain on the sale of $160 million, which is included in discontinued operations, net in the consolidated statement of income for the year ended December 31, 2014. In July of 2014, we acquired Eclipse Energy Group AS, which complements our North American natural gas capabilities, which we obtained from our Bentek Energy LLC acquisition dated balance sheet as of December 31, 2016. in 2011. In September of 2016, we acquired PIRA Energy Group (“PIRA”), a global provider of energy research and forecasting products and services. The purchase enhances Market and Commodities Intelligence’s energy analytical capabilities by expanding its oil offering and strengthening its position in the natural gas and power markets. In June of 2016, we acquired RigData, a provider of daily information on rig activity for the natural gas and oil markets across North America. The purchase enhances Market and Commodities Intelligence’s energy analytical capabilities by strengthening its position in natural gas and enhancing its oil offering. 2015 In 2014, in addition to the divestiture of McGraw Hill Construction discussed above, we streamlined our infrastruc- ture by reducing our real estate footprint through selling our data facility, initiating the consolidation of our corporate head- quarters with our operations in New York City, as well as dis- posing of our corporate aircraft. Increased Shareholder Return During the three years ended December  31, 2016, we have returned approximately $3.5  billion to our shareholders through a combination of share repurchases and our quarterly dividends: we completed share repurchases of approximately $2.4 billion and distributed regular quarterly dividends totaling approximately $1.1 billion. Also, on January 25, 2017, the Board Market and Commodities Intelligence of Directors approved an increase in the quarterly common In September of 2015, we acquired SNL Financial LC (“SNL”) stock dividend from $0.36 per share to $0.41 per share. for $2.2 billion. SNL is a global provider of news, data, and analytical tools to five sectors in the global economy: finan- cial services, real estate, energy, media & communications, and metals & mining. SNL delivers information through its suite of web, mobile and direct data feed platforms that S&P Global 2016 Annual Report 21 KEY RESULTS (in millions) Revenue Operating profit 2 % Operating margin Diluted earnings (loss) per share from continuing operations N/M — not meaningful Year ended December 31, % Change 1 2016 2015 2014 ’16 vs ’15 ’15 vs ’14 $ 5,661 $ 3,369 $ 5,313 $ 1,917 60% 36% $ 7.94 $ 4.21 $ 5,051 $ 113 2% $ (1.08) 7% 76% 89% 5% N/M N/M 1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented. 2 2016 includes a $1.1 billion gain from our dispositions, a benefit related to net legal settlement insurance recoveries of $10 million, disposition- related costs of $48 million, a technology- related impairment charge of $24 million, restructuring charges of $6 million, a $3 million disposition- related reserve release and acquisition- related costs of $1 million. 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $56 million, net legal settlement expenses of $54 million, acquisition- related costs of $37 million and a gain of $11 million on the sale of our interest in a legacy McGraw Hill Construction investment. 2014 includes $1.6 billion of legal and regulatory settlements, restructuring charges of $86 million and $4 million of professional fees largely related to corporate development activities. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $96 million, $67 million and $48 million, respectively. 2016 Revenue increased 7% driven by increases at all of our report- 2015 Revenue increased 5% driven by increases at Market and able segments. Revenue growth at Market and Commodities Commodities Intelligence and Indices, partially offset by Intelligence was favorably impacted by the acquisition of SNL a decrease at Ratings. Revenue growth at Market and in September of 2015 and annualized contract value growth Commodities Intelligence was favorably impacted by the primarily driven by the S&P Capital IQ Desktop, Global Risk acquisition of SNL in September of 2015 and the acquisition Services and certain data feed products. Continued demand of National Automobile Dealers Association’s Used Car Guide for S&P Global Platts’ proprietary content also contributed to (“UCG”) at J.D. Power in July of 2015. The revenue increase revenue growth. These increases were partially offset by the at Market and Commodities Intelligence was also driven by unfavorable impact from our dispositions in 2016. Revenue increases in average contract values in the S&P Capital IQ growth at Ratings was driven by an increase in U.S. bank loan Desktop and Global Risk Services products, continued demand ratings revenue, corporate bond ratings revenue and surveil- for S&P Global Platts’ proprietary content and an increase in lance fees. Revenue growth at Indices was due to higher aver- auto consulting engagements in the U.S. at J.D. Power. Revenue age levels of assets under management for exchange traded growth at Indices was due to higher average levels of assets funds (“ETFs”) and mutual funds, an increase in data revenue under management for ETFs and mutual funds and higher vol- and higher volumes for exchange- traded derivatives. The unfa- umes for exchange- traded derivatives. The revenue decrease vorable impact of foreign exchange reduced revenue by less at Ratings was driven by the unfavorable impact of foreign than 1 percentage point. Operating profit increased 76%. Excluding the favorable impact of the gain from our dispositions of 59 percentage points, higher net legal settlement insurance recoveries in 2016 of 3  per- exchange rates. The unfavorable impact of foreign exchange rates reduced revenue by 2 percentage points which was off- set by the favorable impact from acquisitions of 2  percent- age points. centage points, higher restructuring charges in 2015 of 3 per- The increase in operating profit was primarily due to the impact centage points and higher acquisition- related costs in 2015 of of $1.6 billion in legal and regulatory settlements in 2014 com- 2 percentage points, partially offset by the unfavorable impact pared to net legal settlement expenses of $54 million in 2015. of higher disposition- related costs of 3  percentage points, In addition, 2015 includes costs related to identified operating higher amortization of intangibles from acquisitions of 2 per- efficiencies primarily related to restructuring of $56  million centage points and a technology- related impairment charge in 2015 compared to $86 million in 2014. 2015 also includes of 1  percentage point, operating profit increased 15%. This acquisition- related costs related to the acquisition of SNL of increase was primarily driven by revenue growth as discussed $37 million and an $11 million gain on the sale of our interest in above. Decreased costs at Ratings and our legacy Capital IQ a legacy McGraw Hill Construction investment. 2014 includes business due to reduced headcount following our 2015 restruc- $4  million of professional fees largely related to corporate turing actions also contributed to operating profit growth. development activities. Excluding these items, operating profit 22 S&P Global 2016 Annual Report increased 13%. This increase was driven by revenue growth Growth at Market and Commodities Intelligence and Indices and cost Engaging with the world around us; containment efforts at Ratings during 2015. Investing to meet customer needs in high growth areas; and Expanding in international markets. OUTLOOK We are a leading provider of transparent and independent Excellence ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. Our purpose is to provide the Embracing operational excellence in all that we do; and Accelerating digital transformation and stimulating intelligence that is essential for companies, governments innovation. and individuals to make decisions with conviction. We seek to deliver on this purpose within the framework of our core values Talent of integrity, excellence and relevance. Enhancing leadership and accountability. With the successful completion of our Growth and Performance Plan, we are aligning our efforts against two key strategic prior- ities, growth and excellence. We strive to deliver on our strate- gic priorities in the following four categories by: Financial There can be no assurance that we will achieve success in implementing any one or more of these strategies as a variety of factors could unfavorably impact operating results, including prolonged difficulties in the global credit markets and a change in the regulatory environment affecting our businesses. See Item 1a, Risk Factors, in our Annual Report on Form 10-K. Delivering strong financial performance and long-term value to our shareholders. Further projections and discussion on our 2017 outlook for our segments can be found within “ — Results of Operations”. Results of Operations CONSOLIDATED REVIEW (in millions) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation and amortization Total expenses (Gain) loss on dispositions Operating profit Interest expense, net Provision for taxes on income Income (loss) from continuing operations Discontinued operations, net — — 178 Less: net income from continuing operations attributable to noncontrolling interests (122) (112) (102) 9% Net income (loss) attributable to S&P Global Inc. $ 2,106 $ 1,156 $ (115) 82% N/M — not meaningful Year ended December 31, % Change 2016 2015 2014 ’16 vs ’15 ’15 vs ’14 $ 5,661 $ 5,313 $ 5,051 7% 5% 1,769 1,443 181 3,393 1,700 1,550 157 3,407 (1,101) (11) 3,369 181 960 2,228 1,917 102 547 1,268 1,651 3,144 134 4,929 9 113 59 245 (191) 4% (7)% 15% 3% (51)% 17% —% (31)% N/M 76% 77% 76% 76% N/M N/M N/M 73% N/M N/M N/M 9% N/M S&P Global 2016 Annual Report 23 REVENUE (in millions) Subscription / Non- transaction revenue Asset linked fees Non- subscription / Transaction revenue % of total revenue: Subscription / Non- transaction revenue Asset linked fees Non- subscription / Transaction revenue U.S. revenue International revenue: European region Asia Rest of the world Total international revenue % of total revenue: U.S. revenue International revenue Year ended December 31, % Change 2016 2015 2014 ’16 vs ’15 ’15 vs ’14 $ 3,623 $ 381 $ 1,657 $ 3,260 $ 369 $ 1,684 $ 3,042 $ 345 $ 1,664 11% 3% (2)% 7% 7% 1% 64% 7% 29% 61% 7% 32% 60% 7% 33% $ 3,461 $ 3,202 $ 2,911 8% 10% 1,330 575 295 1,265 566 280 1,316 528 296 $ 2,200 $ 2,111 $ 2,140 5% 2% 6% 4% (4)% 7% (5)% (1)% 61% 39% 60% 40% 58% 42% 2016 Revenue by Type 2016 Revenue by Geographic Area Non-subscription/ Transaction 29% Subscription/ Non-transaction 64% Rest of the World 5% Asia 10% U.S. 61% Asset linked fees 7% European Region 24% 24 S&P Global 2016 Annual Report 2016 Revenue increased 7% as compared to 2015. Subscription / 2015 Revenue increased 5% as compared to 2014. Subscription / non- transaction revenue increased primarily from the favor- non- transaction revenue increased primarily due to growth able impact of the acquisition of SNL in September of 2015, at Market and Commodities Intelligence due to an increase in growth in average contract values for our legacy Capital IQ the average contract values in the S&P Capital IQ Desktop and products driven by an expansion in new and existing accounts, Global Risk Services products as well as continued demand continued demand for S&P Global Platts’ proprietary content for S&P Global Platts’ proprietary content. Assets linked fees and an increase in surveillance fees at Ratings. Asset linked increased due to higher average levels of assets under man- fees increased due to higher average levels of assets under agement for ETFs and mutual funds. Non- subscription / trans- management for ETFs and mutual funds. Non- subscription / action revenue increased primarily due to growth at Indices due transaction revenue decreased primarily due to the unfavor- to higher volumes for exchange- traded derivatives, partially able impact of the sale of J.D. Power on September 7, 2016, par- offset by a decrease at Ratings which includes the unfavor- tially offset by an increase in U.S. bank loan ratings revenue and able impact of foreign exchange rates. Subscription / non- corporate bond ratings revenue at Ratings and higher volumes transaction revenue growth was also favorably impacted by the for exchange traded derivatives at Indices. See “ — Segment acquisitions of SNL and UCG in September of 2015 and July of Review” below for further information. 2015, respectively. See “ — Segment Review” below for further The unfavorable impact of foreign exchange rates reduced rev- information. enue by less than 1 percentage point. This impact refers to con- The unfavorable impact of foreign exchange rates reduced rev- stant currency comparisons estimated by recalculating current enue by 2 percentage points. This impact refers to constant year results of foreign operations using the average exchange currency comparisons estimated by recalculating current year rate from the prior year. results of foreign operations using the average exchange rate from the prior year. The unfavorable impact of foreign exchange rates on revenue primarily related to Ratings and was driven by the weakening of the Euro to the U.S. dollar. TOTAL EXPENSES The following tables provide an analysis by segment of our operating- related expenses and selling and general expenses for the years ended December 31, 2016 and 2015: (in millions) Ratings 1 Market and Commodities Intelligence 2 Indices Intersegment eliminations 3 Total segments Corporate 4 N/M — not meaningful 2016 2015 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses $ 776 946 145 (98) 1,769 — $ 463 786 75 — 1,324 119 $ 737 925 126 (88) 1,700 — $ 571 769 70 — 1,410 140 $ 1,769 $ 1,443 $ 1,700 $ 1,550 5% 2% 14% (10)% 4% N/M 4% (19)% 2% 6% N/M (6)% (15)% (7)% 1 In 2016, selling and general expenses include a benefit related to net legal settlement insurance recoveries of $10 million. In 2015, selling and general expenses include net legal settlement expenses of $54 million. Additionally, 2016 and 2015 include restructuring charges of $6 million and $13 million, respectively. 2 In 2016, selling and general expenses include disposition- related costs of $48  million, a technology- related impairment charge of $24  million and acquisition- related costs of $1 million. In 2015, selling and general expenses include acquisition- related costs related to the acquisition of SNL of $37 million and costs related to identified operating efficiencies primarily related to restructuring of $33 million. 3 Intersegment eliminations relate to a royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings. 4 In 2016, selling and general expenses include $3 million from a disposition- related reserve release and 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $10 million. S&P Global 2016 Annual Report 25  Operating- Related Expenses Operating- related expenses increased $69  million or 4% as related costs in 2015 of 2 percentage points, partially offset by the unfavorable impact of disposition- related costs of 3 per- compared to 2015. The increase at Market and Commodities centage points and a technology- related impairment charge Intelligence was primarily driven by the acquisition of SNL in of 1 percentage point, selling and general expenses decreased September of 2015, partially offset by decreases from our dis- 2%. Decreases at Ratings were driven by reduced professional positions in 2016. Increases at Ratings and Indices were due fees following the completion of the Company’s program for the to higher compensation costs related to additional headcount 2015 implementation of the Dodd-Frank Wall Street Reform and increased incentive costs. Selling and General Expenses Selling and general expenses decreased 7%. Excluding the and Consumer Protection Act and reduced legal fees follow- ing the resolution of a number of significant legal matters. This decrease was partially offset by an increase at Market and Commodities Intelligence driven by the acquisition of SNL in favorable impact of higher net legal settlement insurance September of 2015, partially offset by decreases from our dis- recoveries in 2016 of 4 percentage points, higher restructur- positions in 2016. ing charges in 2015 of 3 percentage points, higher acquisition- Depreciation and Amortization Depreciation and amortization increased $24 million or 15% as compared to 2015 primarily due to higher intangible asset amor- tization in 2016 from the acquisition of SNL in September of 2015. The following tables provide an analysis by segment of our operating- related expenses and selling and general expenses for the years ended December 31, 2015 and 2014: (in millions) Ratings 1 Market and Commodities Intelligence 2 Indices 3 Intersegment eliminations 4 Total segments Corporate 5 N/M — not meaningful 2015 2014 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses $ 737 925 126 (88) 1,700 — $ 571 769 70 — 1,410 140 $ 777 839 120 (86) 1,650 1 $ 2,219 700 77 — 2,996 148 $ 1,700 $ 1,550 $ 1,651 $ 3,144 (5)% 10% 6% (3)% 3% N/M 3% (74)% 10% (9)% N/M (53)% (6)% (51)% 1 In 2015, selling and general expenses include net legal settlement expenses of $54 million and restructuring charges of $13 million, respectively. In 2014, selling and general expenses include $1.6 billion for legal and regulatory settlements and restructuring charges of $45 million. 2 In 2015, selling and general expenses include acquisition- related costs related to the acquisition of SNL of $37 million and costs related to identified operating efficiencies primarily related to restructuring of $33 million. In 2014, selling and general expenses include $25 million of restructuring charges. 3 In 2014, selling and general expenses include the impact of professional fees largely related to corporate development activities of $4 million. 4 Intersegment eliminations relate to a royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings. 5 In 2015, selling and general expenses include costs related to identified operating efficiencies primarily related to restructuring of $10 million and 2014 includes restructuring charges of $16 million. Operating- Related Expenses Operating- related expenses increased $49  million or 3% as Selling and General Expenses Selling and general expenses decreased 51%. Excluding the compared to 2014. Increases at Market and Commodities favorable net impact of legal settlement and regulatory set- Intelligence were primarily driven by higher data processing tlement charges and insurance recoveries of 48  percentage costs, the acquisition of SNL in September of 2015 and higher points, higher costs recorded in 2014 related to identified incentive costs. These increases were partially offset by operating efficiencies primarily related to restructuring of declines at Ratings driven by our compensation cost contain- 1 percentage point, partially offset by the unfavorable impact ment efforts resulting from 2014 restructuring actions. of acquisition- related costs related to the acquisition of SNL 26 S&P Global 2016 Annual Report of 1 percentage point, selling and general expenses decreased Company (“Mr. McGraw”) for a purchase price of $20 million, 3%. The decline was due to a decrease at Ratings driven by which was modestly higher than the independent appraisal lower incentive and legal costs, partially offset by increased obtained. During the second quarter of 2014, we recorded costs related to the 2015 implementation of the Dodd-Frank a non-cash impairment charge of $6  million in (gain) loss Wall Street Reform and Consumer Protection Act and an on dispositions in our consolidated statement of income as increase at Market and Commodities Intelligence driven by the a result of the pending sale. See Note  14 — Related Party acquisition of SNL in September of 2015. Transactions to our consolidated financial statements for Depreciation and Amortization Depreciation and amortization increased $23 million or 17% On June 30, 2014, we completed the sale of our data center to Quality Technology Services, LLC (“QTS”) which owns, oper- as compared to 2014, primarily due to higher intangible asset ates, and manages data centers. Net proceeds from the sale amortization in 2015 due to the acquisition of SNL in September of $58 million were received in July of 2014. The sale includes further discussion. of 2015 and the acquisition of UCG in July of 2015. (GAIN) LOSS ON DISPOSITIONS During 2016, we completed the following transactions that all of the facilities and equipment on the south campus of our East Windsor, New Jersey location, inclusive of the rights and obligations associated with an adjoining solar power field. The sale resulted in an expense of $3 million recorded resulted in a pre-tax gain of $1.1 billion in (gain) loss on disposi- in (gain) loss on dispositions in our consolidated statement tions in the consolidated statement of income: of income, which is in addition to the non-cash impairment In October of 2016, we completed the sale of Equity and Fund charge we recorded in the fourth quarter of 2013. Research (“Equity Research”), a business within our Market and Commodities Intelligence segment to CFRA, a lead- ing independent provider of forensic accounting research, OPERATING PROFIT We consider operating profit to be an important measure for analytics and advisory services. During the year ended evaluating our operating performance and we evaluate oper- December 31, 2016, we recorded a pre-tax gain of $9 million ating profit for each of the reportable business segments in in (gain) loss on dispositions in the consolidated statement of which we operate. income related to the sale of Equity Research. In October of 2016, we completed the sale of SPSE and CMA for $425  million in cash to Intercontinental Exchange, an operator of global exchanges, clearing houses and data ser- vices. We recorded a pre-tax gain of $364 million in (gain) loss on dispositions in the consolidated statement of income related to the sale of SPSE and CMA. In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. We recorded a pre-tax gain of We internally manage our operations by reference to “segment operating profit” with economic resources allocated primarily based on segment operating profit. Segment operating profit is defined as operating profit before unallocated expense. Segment operating profit is one of the key metrics we use to evaluate operating performance. Segment operating profit is not, however, a measure of financial performance under U.S. GAAP, and may not be defined and calculated by other compa- nies in the same manner. $728 million in (gain) loss on dispositions in the consolidated Effective beginning with the fourth quarter of 2016, we statement of income related to the sale of J.D. Power. realigned certain of our reportable segments to be consis- During 2015, we completed the sale of our interest in a legacy McGraw Hill Construction investment that resulted in a pre-tax gain of $11 million in (gain) loss on dispositions in the consoli- dated statement of income. tent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P  Global Platts are included in a new reportable segment named Market and Commodities During 2014, we completed the following transactions that Intelligence. Our historical segment reporting has been retro- resulted in a pre-tax loss of $9 million in (gain) loss on disposi- actively revised to reflect the current organizational structure. tions in the consolidated statement of income: On July 31, 2014, we completed the sale of the Company’s air- craft to Harold W. McGraw III, then Chairman of the Compa- ny’s Board of Directors and former President and CEO of the S&P Global 2016 Annual Report 27 The table below reconciles segment operating profit to total operating profit: (in millions) Ratings 1 Market and Commodities Intelligence 2 Indices 3 Total segment operating profit Unallocated expense 4 Total operating profit N/M — not meaningful Year ended December 31, % Change 2016 $ 1,262 1,822 412 3,496 (127) 2015 $ 1,078 585 392 2,055 (138) 2014 $ (583) 518 347 282 (169) $ 3,369 $ 1,917 $ 113 ’16 vs ’15 ’15 vs ’14 17% N/M 5% 70% (8)% 76% N/M 13% 13% N/M (18)% N/M 1 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and restructuring charges of $6 million. 2015 includes net legal settle- ment expenses of $54 million and restructuring charges of $13 million. 2014 includes $1.6 billion of legal and regulatory settlements and restructuring charges of $45 million. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $5 million, $5 million and $6 million, respectively. 2 2016 includes a $1.1 billion gain from our dispositions, disposition- related costs of $48 million, a technology- related impairment charge of $24 million and an acquisition- related cost of $1 million. 2015 includes acquisition- related costs related to the acquisition of SNL of $37 million and costs identified operating efficiencies primarily related to restructuring of $33 million. 2014 includes $25 million of restructuring charges. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $85 million, $57 million and $37 million, respectively. 3 2014 includes the impact of professional fees largely related to corporate development activities of $4 million. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $6 million, $5 million and $5 million, respectively. 4 2016 includes $3 million from a disposition- related reserve release. 2015 includes a gain of $11 million related to the sale of our interest in a legacy McGraw Hill Construction investment and costs related to identified operating efficiencies primarily related to restructuring of $10 million. 2014 includes restructuring charges of $16 million. 2016 SEGMENT OPERATING PROFIT — Increased $1.4  billion, or 70% as compared to 2015. Excluding the favorable impact of the gain from our dispositions of 55 percentage points, higher net legal settlement insurance recoveries in 2016 of 3  per- centage points, higher acquisition- related costs in 2015 of 2 percentage points, higher restructuring charges in 2015 of 2 percentage points, partially offset by the unfavorable impact of a technology- related impairment charge of 1  percentage point, higher amortization of intangibles from acquisitions of 2  percentage points and higher disposition- related costs of 2 percentage points, segment operating profit increased 13%. Revenue growth at Market and Commodities Intelligence, Ratings and Indices were the primary drivers for the increase. Decreased costs at Ratings and our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to segment operating profit growth. See “ — Segment Review” below for further information. Unallocated Expense — Decreased by $11 million or 8% as com- pared to 2015. These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives and unoccupied office space. Excluding the unfavorable impact of a gain on the sale of our interest in a legacy McGraw Hill Construction investment in 2015 of 8 per- centage points, partially offset by the favorable impact of a disposition- related reserve release of 2 percentage points and higher restructuring charges in 2015 of 7 percentage points, unallocated expense decreased 7% due to higher 2016 pension income as well as a reduction in professional service fees. Foreign exchange rates had a favorable impact on operating profit of 2 percentage points. The foreign exchange rate impact refers to constant currency comparisons and the remeasure- ment of monetary assets and liabilities. Constant currency impacts are estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations on monetary assets and liabilities denominated in currencies other than the individual business’ functional currency. 2015 SEGMENT OPERATING PROFIT — Increased $1.8  billion, or 629% as compared to 2014. 2015 includes net legal settlement charges of $54 million compared to legal and regulatory set- tlement charges of $1.6 billion in 2014. Excluding the favorable impact of lower net legal and regulatory settlement charges of 621 percentage points, higher costs recorded in 2014 related to identified operating efficiencies primarily related to restructur- ing of 9 percentage points and the impact of professional fees largely related to corporate development activities recorded in 2014 of 2 percentage points, partially offset by the unfavor- able impact of acquisition- related costs related to the acquisi- tion of SNL of 15 percentage points, segment operating profit increased 11%. Revenue growth at Market and Commodities 28 S&P Global 2016 Annual Report Intelligence and Indices, and cost containment efforts at Ratings during 2015 were the primary drivers for the increase. INTEREST EXPENSE, NET Net interest expense for 2016 increased $79 million or 77% as See “ — Segment Review” below for further information. compared to 2015, primarily as a result of the $700 million of UNALLOCATED EXPENSE — Decreased by $31 million or 18% as compared to 2014. These expenses, included in selling and general expenses, mainly include costs for corporate cen- ter functions, select initiatives and unoccupied office space. Excluding the favorable impact of the sale of our interest in a legacy McGraw Hill Construction investment of 6 percentage points and higher costs recorded in 2014 related to identified operating efficiencies primarily related to restructuring of senior notes issued in the second quarter of 2015, the $2.0 bil- lion of senior notes issued in the third quarter of 2015 and the $500 million of senior notes issued in the third quarter of 2016. Additionally, net interest expense in 2016 includes a redemp- tion fee on the early payment of our 5.9% senior notes due in 2017. These increases were partially offset by the favorable impact of lower interest rates on the $500  million of senior notes issued in the third quarter of 2016. 4 percentage points, unallocated expense decreased by 9 per- Net interest expense for 2015 increased 73% compared to 2014 centage points as compared to 2014. This decrease was pri- as a result of the $700 million of senior notes issued in the sec- marily driven by the impact of a $9 million loss recorded in the ond quarter of 2015 and the $2.0 billion of senior notes issued second quarter of 2014 related to the sale of the Company’s in the third quarter of 2015. aircraft and the sale of our data center. Foreign currency exchange rates had a negligible impact on operating profit. The foreign exchange rate impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations PROVISION FOR INCOME TAXES Our effective tax rate from continuing operations was 30.1% for 2016 and 2015, and 453.7% for 2014. The decrease in the 2015 effective tax rate was primarily due to the reduction in charges for legal settlements, improved profitability in several lower tax jurisdictions outside of the United States, and continuing reso- lution of prior year tax audits. on monetary assets and liabilities denominated in currencies DISCONTINUED OPERATIONS, NET other than the individual business’ functional currency. Income from discontinued operations was $178  million in 2014, primarily as a result of the after-tax gain of $160 million recorded on the sale of McGraw Hill Construction in 2014. Segment Review RATINGS Ratings is an independent provider of credit ratings, research Ratings differentiates its revenue between transaction and non- transaction. Transaction revenue primarily includes fees and analytics to investors, issuers and other market partici- associated with: pants. Credit ratings are one of several tools investors can use ratings related to new issuance of corporate and government when making decisions about purchasing bonds and other debt instruments, and structured finance debt instruments; fixed income investments. They are opinions about credit risk bank loan ratings; and and our ratings express our opinion about the ability and will- corporate credit estimates, which are intended, based on an ingness of an issuer, such as a corporation or state or city gov- abbreviated analysis, to provide an indication of our opin- ernment, to meet its financial obligations in full and on time. ion regarding creditworthiness of a company which does not Our credit ratings can also relate to the credit quality of an indi- currently have a Ratings credit rating. vidual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default. Non- transaction revenue primarily includes fees for sur- veillance of a credit rating, annual fees for customer relationship-based pricing programs, fees for entity credit S&P Global 2016 Annual Report 29 ratings and global research and analytics. Non- transaction distribute content and data developed by Ratings. Royalty rev- revenue also includes an intersegment royalty charged to enue for 2016, 2015 and 2014 was $92 million, $83 million and Market and Commodities Intelligence for the rights to use and $77 million, respectively. (in millions) Revenue Non- transaction Transaction % of total revenue: Non- transaction Transaction U.S. revenue International revenue % of total revenue: U.S. revenue International revenue Operating profit (loss) 1 % Operating margin N/M — not meaningful Year ended December 31, % Change 2016 $ 2,535 $ 1,357 $ 1,178 2015 $ 2,428 $ 1,321 $ 1,107 54% 46% 54% 46% $ 1,462 $ 1,073 $ 1,390 $ 1,038 58% 42% 57% 43% $ 1,262 $ 1,078 50% 44% 2014 ’16 vs ’15 ’15 vs ’14 $ 2,455 $ 1,326 $ 1,129 54% 46% $ 1,305 $ 1,150 53% 47% $ (583) (24)% 4% 3% 6% (1)% — % (2)% 5% 3% 7% (10)% 17% N/M 1 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and restructuring charges of $6 million. 2015 includes net legal settle- ment expenses of $54 million and restructuring charges of $13 million. 2014 includes $1.6 billion of legal and regulatory settlements and restructuring charges of $45 million. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $5 million, $5 million and $6 million, respectively. 2016 Revenue increased 4%, which includes the unfavorable impact 2015 Revenue decreased 1%, which includes the unfavorable impact of foreign exchange rates that reduced revenue by 1 percent- of foreign exchange rates that reduced revenue by 4  per- age point. Transaction revenue increased due to growth in U.S. centage points. Excluding the unfavorable impact of foreign bank loan ratings revenue and an increase in corporate bond exchange rates, transaction revenue increased primarily due to ratings revenue largely driven by refinancing activity from the an increase in U.S. Public Finance issuance, partially offset by a low interest rate environment, partially offset by a decrease in decline in structured finance revenue driven by reduced global structured finance revenue. Revenue growth benefited from market issuance. Excluding the unfavorable impact of foreign increased contract realization. Non- transaction revenue grew exchange rates, non- transaction revenue also increased due primarily due to an increase in surveillance fees, partially offset to growth in surveillance revenues and additional RES activ- by a decline in Ratings Evaluation Service (“RES”) activity. ity, partially offset by lower revenue associated with new client Operating profit increased 17%. Excluding the favorable impact relationships. of higher net legal settlement insurance recoveries in 2016 of Operating profit increased 285%. Excluding the favorable 6 percentage points and lower restructuring charges in 2016 net impact of legal and regulatory settlement charges and of 1  percentage point, operating profit increased 10%. The insurance recoveries of 273 percentage points and net higher increase is due to both revenue growth and expense reduction. restructuring costs recorded in 2014 of 6 percentage points, Reduced expenses were primarily driven by reduced profes- operating profit increased 7%. Foreign currency exchange sional fees following the completion of the Company’s program rates had an unfavorable impact of 1  percentage point on for the 2015 implementation of the Dodd-Frank Wall Street the operating profit growth of 7%. This increase was driven Reform and Consumer Protection Act and reduced legal fees by decreased compensation costs primarily driven by lower following the resolution of a number of significant legal mat- incentive costs and cost containment resulting from 2014 ters. These decreases were partially offset by higher compen- restructuring actions and reduced legal fees following the res- sation costs related to increased incentive costs and additional olution of a number of significant legal matters, partially offset headcount. Foreign exchange rates had a favorable impact on by increased costs related to the 2015 implementation of the operating profit of 1 percentage point. Dodd-Frank Wall Street Reform and Consumer Protection Act and the decrease in revenue discussed above. 30 S&P Global 2016 Annual Report Market Issuance Volumes We monitor market issuance volumes as an indicator of trends RMBS volume in the U.S. was down driven by minimal activ- ity in the private label securities market. The increase in in transaction revenue streams within Ratings. Market issu- European RMBS volume was driven by several large issu- ance volumes noted within the discussion that follows are ances in 2016. based on the domicile of the issuer. Issuance volumes can be Covered bond (debt securities backed by mortgages or other reported in two ways: by “domicile”, which is based on where high- quality assets that remain on the issuer’s balance an issuer is located or where the assets associated with an sheet) issuance in Europe was down due to the impact of issue are located, or based on “marketplace”, which is where central bank lending policies. the bonds are sold. The following tables depict changes in mar- ket issuance levels as compared to the prior year, based on a composite of Thomson Financial, Harrison Scott Publications, Dealogic and Rating’s internal estimates. Industry Highlights and Outlook Revenue increased in 2016 primarily due to an increase in U.S. bank loan ratings and corporate bond ratings revenue driven by refinancing activity from the low interest rate environment. 2016 Compared to 2015 These increases were partially offset by a decrease in struc- Corporate Bond Issuance U.S. Europe High-Yield Issuance Investment Grade Total New Issue Dollars — (14)% (5)% (21)% 8% Global (12)% 11% Corporate Issuance (6)% 4% 8% tured finance revenue. High-yield corporate issuance volumes increased in the second half of the year as a result of more favorable market conditions primarily due to tightening credit spreads. Weakness in high-yield corporate issuance volumes in the first half of the year was due to market volatility and politi- Decreases in high-yield issuance in the year-to-date period cal and economic uncertainty largely in the European markets. reflect weakness in the first half of the year due to mar- ket volatility and political and economic uncertainty in the Legal and Regulatory Environment European markets. High-yield issuance in the U.S. and General Europe was up for the second half of the year as a result of more favorable market conditions primarily due to tightening credit spreads. Although the number of investment-grade issuances in the U.S. was up, issuance dollars declined due to fewer high par value issuance deals. Ratings and many of the securities that it rates are subject to extensive regulation in both the U.S. and in other countries, and therefore existing and proposed laws and regulations can impact the Company’s operations and the markets in which it operates. Additional laws and regulations have been adopted 2016 Compared to 2015 but not yet implemented or have been proposed or are being Structured Finance Asset- Backed Securities (“ABS”) Structured Credit Commercial Mortgage- Backed U.S. 1% (4)% Europe Global considered. In addition, in certain countries, governments 14% 36% 7% 2% may provide financial or other support to locally-based rating agencies. For example, governments may from time to time Securities (“CMBS”) (29)% (26)% (30)% Residential Mortgage- Backed Securities (“RMBS”) Covered Bonds Total New Issue Dollars — (29)% * 37% (25)% 9% (20)% Structured Finance (10)% (7)% (5)% *Represents no activity in 2016 and 2015. establish official rating agencies or credit ratings criteria or procedures for evaluating local issuers. We have reviewed the new laws, regulations and rules which have been adopted and we have implemented, or are planning to implement, changes as required. We do not believe that such new laws, regulations or rules will have a material adverse effect on our financial condition or results of operations. Other laws, regulations and ABS issuance was up in the U.S. and Europe driven by an rules relating to credit rating agencies are being considered by increase in credit card transactions, consumer loans and local, national, foreign and multinational bodies and are likely small business loans. to continue to be considered in the future, including provisions Issuance was down in the U.S. Structured Credit markets seeking to reduce regulatory and investor reliance on credit driven by lower availability of leveraged loans. Issuance was ratings, rotation of credit rating agencies and liability stan- up in the European Structured Credit markets driven by new dards applicable to credit rating agencies. The impact on us collateralized loan obligations (“CLO”) engagements. of the adoption of any such laws, regulations or rules remains CMBS issuance in the U.S. and Europe was down reflecting uncertain, but could increase the costs and legal risks relating lower market volume due to overall market conditions. S&P Global 2016 Annual Report 31 to Ratings’ rating activities, or adversely affect our ability to European Union compete, or result in changes in the demand for credit ratings. In the European Union, the credit rating industry is registered In the normal course of business both in the U.S. and abroad, Ratings (or the legal entities comprising Ratings) are defen- dants in numerous legal proceedings and are often the subject of government and regulatory proceedings, investigations and inquiries. Many of these proceedings, investigations and inqui- ries relate to the ratings activity of Ratings and are or have been brought by purchasers of rated securities. In addition, various government and self- regulatory agencies frequently make inquiries and conduct investigations into Ratings’ compliance with applicable laws and regulations. Any of these proceedings, investigations or inquiries could ultimately result in adverse judgments, damages, fines, penalties or activity restrictions, and supervised through a pan- European regulatory framework which is a compilation of three sets of legislative actions. In 2009, the European Parliament passed a regulation (“CRA1”) that established an oversight regime for the credit rating indus- try in the European Union, which became effective in 2010. CRA1 requires the registration, formal regulation and periodic inspection of credit rating agencies operating in the European Union. Ratings was granted registration in October of 2011. In January of 2011, the European Union established the European Securities and Markets Authority (“ESMA”), which, among other things, has direct supervisory responsibility for the registered credit rating industry throughout the European Union. which could adversely impact our consolidated financial con- Additional rules augmenting the supervisory framework for dition, cash flows, business or competitive position. credit rating agencies went into effect in 2013. Commonly U.S. The businesses conducted by our Ratings segment are, in cer- tain cases, regulated under the Credit Rating Agency Reform Act of 2006 (the “Reform Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”), the Securities Exchange Act of 1934 (the “Exchange Act”) and/ or the laws of the states or other jurisdictions in which they conduct business. The financial services industry is subject to the potential for increased regulation in the U.S. S&P Global Ratings is a credit rating agency that is registered with the SEC as a Nationally Recognized Statistical Rating Organization (“NRSRO”). The SEC first began informally des- ignating NRSROs in 1975 for use of their credit ratings in the determination of capital charges for registered brokers and dealers under the SEC’s Net Capital Rule. The Reform Act created a new SEC registration system for rating agencies that choose to register as NRSROs. Under the Reform Act, referred to as CRA3, these rules, among other things: impose various additional procedural requirements with respect to ratings of sovereign issuers; require member states to adopt laws imposing liability on credit rating agencies for an intentional or grossly negligent failure to abide by the applicable regulations; impose mandatory rotation requirements on credit rating agencies hired by issuers of securities for ratings of rese- curitizations, which may limit the number of years a credit rating agency can issue ratings for such securities of a par- ticular issuer; impose restrictions on credit rating agencies or their share- holders if certain ownership thresholds are crossed; and impose additional procedural and substantive requirements on the pricing of services. The financial services industry is subject to the potential for increased regulation in the European Union. the SEC is given authority and oversight of NRSROs and can Other Jurisdictions censure NRSROs, revoke their registration or limit or suspend Outside of the U.S. and the European Union, regulators and their registration in certain cases. The rules implemented government officials have also been implementing formal by the SEC pursuant to the Reform Act, the Dodd Frank Act oversight of credit rating agencies. Ratings is subject to reg- and the Exchange Act address, among other things, preven- ulations in most of the foreign jurisdictions in which it oper- tion or misuse of material non- public information, conflicts ates and continues to work closely with regulators globally to of interest, documentation and assessment of internal con- promote the global consistency of regulatory requirements. trols, and improving transparency of ratings performance and Regulators in additional countries may introduce new regula- methodologies. The public portions of the current version of tions in the future. S&P Global Ratings’ Form NRSRO are available on S&P Global Ratings’ website. 32 S&P Global 2016 Annual Report For a further discussion of competitive and other risks inherent In October of 2016, we completed the sale of SPSE and CMA for in our Ratings business, see Item 1a, Risk Factors, in our Annual $425 million in cash to Intercontinental Exchange, an operator Report on Form 10-K. For a further discussion of the legal and of global exchanges, clearing houses and data services. During regulatory environment in our Ratings business, see Note 13 — the year ended December 31, 2016, we recorded a pre-tax gain Commitments and Contingencies to the consolidated financial of $364 million ($297 million after-tax) in (gain) loss on dispo- statements under Item 8, Consolidated Financial Statements sitions in the consolidated statement of income related to the and Supplementary Data, in our Annual Report on Form 10-K. sale of SPSE and CMA. MARKET AND COMMODITIES INTELLIGENCE Market and Commodities Intelligence’s portfolio of capabili- ties are designed to help the financial community track per- formance, generate better investment returns, identify new trading and investment ideas, perform risk analysis, develop mitigation strategies and provide high-value information to the commodity and energy markets that enable its customers to make better informed trading and business decisions. In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and ini- tiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 million ($516 million after-tax) in (gain) loss on dispo- Effective beginning with the fourth quarter of 2016, we sitions in the consolidated statement of income related to the realigned certain of our reportable segments to be consis- sale of J.D. Power. Following the sale, the assets and liabilities tent with changes to our organizational structure and how our of J.D. Power are no longer reported in our consolidated bal- Chief Executive Officer evaluates the performance of these ance sheet as of December 31, 2016. segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P  Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retro- actively revised to reflect the current organizational structure. On November 3, 2014, we completed the sale of McGraw Hill Construction to Symphony Technology Group for $320 million in cash. Accordingly, the results of operations for the year ended December 31, 2014 and all prior periods presented were reclas- sified to reflect the business as a discontinued operation. See In November of 2016, we entered into a put option agreement Note 2 — Acquisitions and Divestitures for further discussion. that gave the Company the right, but not the obligation, to put the entire share capital of Quant House SAS (“QuantHouse”), included in our Market and Commodities Intelligence seg- ment, to QH Holdco, an independent third party. As a result, we classified the assets and liabilities of QuantHouse, net of our costs to sell, as held for sale in our consolidated balance sheet as of December 31, 2016 resulting in an aggregate loss of $31 million. On January 4, 2017, we exercised the put option, thereby entering into a definitive agreement to sell QuantHouse to QH Holdco. On January 9, 2017, we completed the sale of QuantHouse to QH Holdco. Market and Commodities Intelligence includes the following business lines: Financial Data & Analytics — a product suite that provides data, analytics and third-party research for global finance professionals, which includes the S&P Capital IQ Desktop, SNL, Leveraged Commentary & Data, Investment Advisory and integrated bulk data feeds that can be customized, which include CUSIP and Compustat; Risk Services — commercial arm that sells Ratings’ credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and In October of 2016, we completed the sale of Equity Research, RatingsXpress®; and a business within our Market and Commodities Intelligence segment to CFRA, a leading independent provider of forensic accounting research, analytics and advisory services. During the year ended December 31, 2016, we recorded a pre-tax gain of $9 million ($5 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of Equity Research. S&P  Global Platts — the leading independent provider of information and benchmark prices for the commodity and energy markets. S&P Global Platts provides essential price data, analytics, and industry insight that enable the com- modity and energy markets to perform with greater trans- parency and efficiency. Additionally, S&P  Global Platts generates revenue from licensing of our proprietary market price data and price assessments to commodity exchanges. S&P Global 2016 Annual Report 33 As of September 7, 2016, we completed the sale of J.D. Power and the results are included in Market and Commodities Intelligence results through that date. (in millions) Revenue Subscription revenue Non- subscription revenue % of total revenue: Subscription revenue Non- subscription revenue U.S. revenue International revenue % of total revenue: U.S. revenue International revenue Operating profit 1 % Operating margin N/M — not meaningful Year ended December 31, % Change 2016 $ 2,585 $ 2,231 $ 354 2015 $ 2,376 $ 1,911 $ 465 86% 14% 80% 20% $ 1,523 $ 1,062 $ 1,368 $ 1,008 59% 41% 58% 42% $ 1,822 $ 585 70% 25% 2014 ’16 vs ’15 ’15 vs ’14 $ 2,130 $ 1,694 $ 436 80% 20% $ 1,210 $ 920 57% 43% $ 518 24% 9% 17% (24)% 12% 13% 7% 11% 6% 13% 10% 212% 13% 1 2016 includes a $1.1 billion gain from our dispositions, disposition- related costs of $48 million, a technology- related impairment charge of $24 million and an acquisition- related cost of $1 million. 2015 includes acquisition- related costs related to the acquisition of SNL of $37 million and costs identified operating efficiencies primarily related to restructuring of $33 million. 2014 includes $25 million of restructuring charges. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $85 million, $57 million and $37 million, respectively. 2016 Revenue increased 9% and was favorably impacted by 1 per- Operating profit increased 212%. Excluding the favorable impact from the gain on dispositions of 194 percentage points, centage point of growth from the net impact of acquisitions and the favorable impact of higher acquisition- related costs in dispositions discussed below. Revenue growth was also driven 2015 of 6 percentage points and higher restructuring charges by increases in annualized contract values in the S&P Capital in 2015 of 6 percentage points, partially offset by the unfavor- IQ Desktop, RatingsXpress® and RatingsDirect® from new and able impact of higher disposition- related costs of 9 percent- existing customers. The number of users on the S&P Capital age points, higher amortization of intangibles from acquisitions IQ Desktop and the number of customers at RatingsXpress® of 5 percentage points and a technology- related impairment continued to grow in 2016. Increases in annualized contract charge of 4  percentage points, operating profit increased value for certain of our data feed products also contributed 24%. This increase is due to revenue growth and the favorable to revenue growth. Additionally, strength in S&P Global Platts’ impact of foreign exchange rates of 5 percentage points, par- proprietary content due to continued demand for S&P Global tially offset by higher compensation costs and increased tech- Platts’ market data and price assessment products across all nology costs primarily as a result of the acquisition of SNL in commodity sectors, led by petroleum, and continued licensing September of 2015. of our proprietary market price data and price assessments to various commodity exchanges contributed to revenue growth. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. Both domestic and international revenue increased, with international revenue representing 41% of Market and Commodities Intelligence’s total revenue. Revenue was favorably impacted by the acqui- sitions of SNL, PIRA Energy Group (“PIRA”), RigData and Petromedia Ltd, partially offset by the unfavorable impact of the dispositions of J.D. Power, SPSE and CMA and Equity Research. See Note 2 — Acquisitions and Divestitures for fur- ther discussion. 2015 Revenue increased 12% and was favorably impacted by 5 per- centage points of growth from the impact of acquisitions dis- cussed below. Revenue growth was also driven by increases in annualized contract values in the S&P Capital IQ Desktop, RatingsXpress® and RatingsDirect® from new and existing cus- tomers. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® continued to grow in 2015. Additionally, strength in S&P Global Platts’ proprietary content due to continued demand for S&P Global Platts’ mar- ket data and price assessment products across all commodity sectors, led by petroleum product offerings, and continued licensing of our proprietary market price data and price assess- ments to various commodity exchanges contributed to revenue 34 S&P Global 2016 Annual Report growth. The unfavorable impact of foreign exchange rates Market Intelligence operates a business that is authorized reduced revenue by less than 1  percentage point. Revenue and regulated in the United Kingdom by the Financial Conduct was favorably impacted by the acquisitions of SNL, National Authority (the “FCA”). As such, this business is authorized to Automobile Dealers Association’s Used Car Guide (“UCG”), arrange and advise on investments, and is also entitled to exer- Petromedia in July of 2015 and Eclipse Energy Group AS and cise a passport right to provide specified cross border services its operating subsidiaries (“Eclipse”). See Note 2 — Acquisitions into other European Economic Area (“EEA”) States, and is to and Divestitures for further discussion. the conditions under the E.U. Markets in Financial Instruments Operating profit increased 13%. Excluding the unfavorable Directive (“MiFID”). impact of acquisition- related costs related to the acquisition On October 4, 2016, S&P Global completed the sale of Standard of SNL of 6 percentage points, higher amortization of intangi- & Poor’s Securities Evaluations, Inc. (one of Market Intelligence’s bles from acquisitions of 3 percentage points and higher costs investment advisory businesses) to Intercontinental Exchange. recorded in 2015 related to identified operating efficiencies pri- On October 3, 2016 Market Intelligence completed the sale of marily related to restructuring of 1 percentage point, operating substantially all of its Equity Research business by transferring profit increased 23%. This increase is due to revenue growth the assets of the business to Accounting Research & Analytics, and the favorable impact of foreign exchange rates of 5 per- LLC (“CFRA”). On September 7, 2016 Market Intelligence entered centage points, partially offset by higher technology costs and into a stock purchase agreement with CFRA to sell and transfer increased compensation costs driven by additional headcount its entire ownership in Standard & Poor’s Malaysia Sdn. Bhd related to the acquisitions of SNL and UCG. (S&P Malaysia) and its research business. Until the completion Industry Highlights and Outlook In 2016, Market and Commodities Intelligence benefited from organic revenue growth and continued revenue and costs syn- ergies resulting from progress on the integration of SNL. In 2016, the segment completed the sale of J.D. Power, and SPSE and CMA, resulting in a portfolio focused on scalable, indus- try leading, interrelated businesses in the capital and com- modity markets. Additionally, in 2016, the segment completed the acquisitions of PIRA and RigData to enhance Market and Commodities Intelligence’s energy analytical capabilities. of this transaction, Market Intelligence will continue to operate the Equity Research business conducted by S&P Malaysia. The markets for research and investment advisory services are very competitive. Market Intelligence competes domestically and internationally on the basis of a number of factors, includ- ing the quality of its research and advisory services, client ser- vice, reputation, price, geographic scope, range of products and services, and technological innovation. For a further dis- cussion of competitive and other risks inherent in our Market Intelligence business, see Item 1a, Risk Factors, in our Annual Report on Form 10-K. In 2017, Market and Commodities Intelligence will seek to develop new products and deliver enhancements to existing S&P Global Platts content and analytical capabilities. The segment also expects S&P Global Platts’ commodities price assessment and infor- to further expand its presence in selected markets and mation business is subject to increasing regulatory scrutiny geographies to accelerate international growth. Market and in the U.S. and abroad. As discussed below under the head- Commodities Intelligence will continue to focus on integrat- ing “ Indices-Legal and Regulatory Environment”, the financial ing and leveraging recent acquisitions to expand its analytical benchmarks industry is subject to the new pending bench- offerings. Legal and Regulatory Environment Market Intelligence The financial services industry is subject to the potential for increased regulation in the U.S. and abroad. Market Intelligence operates investment advisory businesses that are regulated in the U.S. under the U.S. Investment Advisers Act of 1940 (the “Investment Advisers Act”) and/or the laws of the states or other jurisdictions in which they conduct business. mark regulation in the European Union (the “E.U. Benchmark Regulation”) as well as potential increased regulation in other jurisdictions. As a result of these measures, as well as measures that could be taken in other jurisdictions outside of Europe, S&P  Global Platts will be required in due course to obtain registration or authorization in connection with its benchmark and price assessment activities in Europe and potentially elsewhere. Also as discussed above under the heading “ Indices-Legal and Regulatory Environment”, the European Union has recently finalized a package of legislative measures known as MiFID II, S&P Global 2016 Annual Report 35 which may also impact S&P Global Platts’ business. Although The markets for commodities price assessments and informa- the MiFID II package is “framework” legislation, it is possi- tion are very competitive. S&P Global Platts competes domes- ble that the introduction of these laws and rules could affect tically and internationally on the basis of a number of factors, S&P  Global Platts’ ability both to administer and license its including the quality of its assessments and other informa- price assessments. In October of 2012, IOSCO issued its PRA Principles which set out principles, which are intended to enhance the reliability of oil price assessments referenced in derivative contracts subject to regulation by IOSCO members. S&P  Global Platts has taken steps to align its operations with the PRA Principles and as recommended by IOSCO in its final report on the PRA Principles, has aligned to the PRA Principles for other commod- ities for which it publishes benchmarks. tion it provides to the commodities and related markets, cli- ent service, reputation, price, range of products and services (including geographic coverage) and technological innovation. Furthermore, sustained downward pressure on oil and other commodities prices and trading activity in those markets could have a material adverse impact on the rate of growth of S&P Global Platts’ revenue. For a further discussion of compet- itive and other risks inherent in our Platts business, see Item 1a, Risk Factors, in our Annual Report on Form 10-K. INDICES Indices is a global index provider that maintains a wide variety of indices to meet an array of investor needs. Indices’ mission is to provide transparent benchmarks to help with decision making, collaborate with the financial community to create innovative products and provide investors with tools to monitor world markets. Indices primarily derives revenue from asset linked fees based on the S&P and Dow Jones indices and to a lesser extent generates subscription revenue and transaction revenue. Specifically, Indices generates revenue from the following sources: Investment vehicles — asset linked fees such as ETFs and mutual funds, that are based on the S&P Dow Jones Indices’ bench- marks and generate revenue through fees based on assets and underlying funds; Exchange traded derivatives — generate royalties based on trading volumes of derivatives contracts listed on various exchanges; Index- related licensing fees — fixed or variable annual and per-issue fees for over-the- counter derivatives and retail- structured products; and Data and customized index subscription fees — fees from supporting index fund management, portfolio analytics and research. (in millions) Revenue Asset linked fees Subscription revenue Transaction revenue % of total revenue: Asset linked fees Subscription revenue Transaction revenue U.S. revenue International revenue % of total revenue: U.S. revenue International revenue Operating profit 1 Less: net income attributable to noncontrolling interests Net operating profit % Operating margin % Net operating margin Year ended December 31, % Change 2016 $ 639 $ 381 $ 133 $ 125 60% 21% 19% $ 525 $ 114 82% 18% $ 412 $ 109 $ 303 64% 47% 2015 $ 597 $ 369 $ 116 $ 112 62% 19% 19% $ 488 $ 109 82% 18% $ 392 $ 101 $ 291 66% 49% 2014 $ 552 $ 345 $ 108 $ 99 62% 20% 18% $ 440 $ 112 80% 20% $ 347 $ 92 $ 255 63% 46% ’16 vs ’15 ’15 vs ’14 7% 3% 14% 11% 8% 7% 8% 13% 8% 5% 11% (2)% 5% 8% 4% 13% 10% 14% 1 2014 includes $4 million of professional fees largely related to corporate development activities. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $6 million, $5 million and $5 million, respectively. 36 S&P Global 2016 Annual Report 2016 Revenue at Indices increased 7%, primarily driven by higher Industry Highlights and Outlook Indices continues to be the leading index provider for the ETF average levels of assets under management (“AUM”) for ETFs market space. In 2016, higher average levels of AUM for ETFs and mutual funds, an increase in data revenue and higher vol- contributed to revenue growth. Additionally, data revenue and umes for exchange- traded derivatives. Revenue growth was higher volumes for exchange- traded derivatives contributed to favorably impacted by less than one percentage point from the the increase in revenue. acquisition of Trucost plc (“Trucost”) in October of 2016. See Note 2 — Acquisitions and Divestitures for further discussion. Ending AUM for ETFs increased 25% to $1.023 trillion and aver- age AUM for ETFs increased 8% to $869 billion compared to In October of 2016, the segment completed the acquisition of Trucost to build on it’s current portfolio of Environmental, Social and Governance solutions. 2015. Higher average levels of AUM for ETFs contributed to rev- Indices will continue to seek to expand index offerings through enue growth primarily driven by the flow of investment funds to asset class expansion, new geographies, and investment strat- the U.S. equity markets in the second half of the year. Foreign egies by remaining focused on: exchange rates had a favorable impact on revenue of less than organic growth initiatives focused on building out its index 1 percentage point. and service offering; Operating profit grew 5%. Revenue growth was partially offset by higher compensation costs primarily driven by additional headcount related to the acquisition of Trucost plc, increased incentive costs and increased operating costs to support revenue growth and business initiatives at Indices. Foreign exchange rates had a favorable impact on operating profit of less than 1 percentage point. 2015 Revenue at Indices increased 8%, primarily driven by higher average levels of AUM for ETFs and mutual funds. Volumes acquisitions to expand into adjacent markets; strategic acquisitions/partnerships to accelerate strategic areas of growth; and expanding relationships with global exchanges to expand geographic reach and gain access to regional data sets. Legal and Regulatory Environment The financial benchmarks industry is subject to the new pend- ing benchmark regulation in the European Union (the “E.U. Benchmark Regulation”) as well as potential increased regula- tion in other jurisdictions. for exchange- traded derivatives continued to increase for The E.U. Benchmark Regulation was published June 30, 2016 certain products which also contributed to revenue growth. and included provisions applicable to Indices and Platts, which Additionally, the year-over-year revenue increase was slightly will become effective January  1, 2018. The E.U. Benchmark unfavorably impacted by the refinement of our process for esti- Regulation requires Indices and Platts in due course to obtain mating revenue for certain products that favorably impacted registration or authorization in connection with their respec- 2014 which caused a one-time revenue increase in the pri- tive benchmark activities in Europe. This legislation will or-year period. Ending AUM for ETFs decreased 2% to $815 bil- likely cause additional operating obligations but they are not lion in 2015 from $832 billion in 2014, primarily due to the flow expected to be material at this time, although the exact impact of investment funds to the developed international equity mar- remains unclear. kets and the impact of lower equity prices. The unfavorable impact of foreign exchange rates reduced revenue by 1 per- centage point. Operating profit grew 13%. Excluding the favorable impact of professional fees largely related to corporate development activities recorded in 2014 of 1  percentage point, operating profit increased 12%. This increase was primarily due to reve- nue growth as expenses remained relatively flat as a result of cost containment measures. S&P Global 2016 Annual Report 37 In addition, the European Union has recently finalized a pack- age of legislative measures known as MiFID II, which revise Liquidity and Capital Resources and update the existing E.U. Markets in Financial Instruments We continue to maintain a strong financial position. Our primary Directive framework. MiFID II applies in full in all E.U. Member source of funds for operations is cash from our businesses States as of January 3, 2017. MiFID II includes provisions that, and our core businesses have been strong cash generators. In among other things: (i)  impose new conditions and require- 2017, cash on hand, cash flows from operations and availability ments on the licensing of benchmarks and provide for non- under our existing credit facility are expected to be sufficient discriminatory access to exchanges and clearing houses; to meet any additional operating and recurring cash needs into (ii) modify the categorization and treatment of certain classes the foreseeable future. We use our cash for a variety of needs, of derivatives; (iii) expand the categories of trading venue that including but not limited to: ongoing investments in our busi- are subject to regulation; and (iv) provide for the mandatory nesses, strategic acquisitions, share repurchases, dividends, trading of certain derivatives on exchanges (complementing repayment of debt, capital expenditures and investment in our the mandatory derivative clearing requirements in the E.U. infrastructure. Market Infrastructure Regulation of 2011). Although the MiFID II package is “framework” legislation (meaning that much of the detail of the rules will be set out in subordinate measures to be CASH FLOW OVERVIEW Cash and cash equivalents were $2.4 billion as of December 31, agreed upon in the period before 2017), it is possible that the 2016, an increase of $0.9 billion as compared to December 31, introduction of these laws and rules could affect Indices’ ability 2015, and consisted of approximately 30% of domestic cash both to administer and license its indices. and 70% of cash held abroad. Typically, cash held outside the In July of 2013, the International Organization of Securities Commissions (“IOSCO”) issued Financial Benchmark Principles, intended to promote the reliability of benchmark determinations, and address governance, benchmark qual- ity and accountability mechanisms, including with regard to the indices published by Indices. Even though the Financial Benchmark Principles are not binding law, Indices has taken steps to align its governance regime and operations with the Financial Benchmark Principles and engaged an independent auditor to perform a reasonable assurance review of such alignment. The markets for index providers are very competitive. Indices competes domestically and internationally on the basis of a number of factors, including the quality of its benchmark indices, client service, reputation, price, range of products and services (including geographic coverage) and technolog- U.S. is anticipated to be utilized to fund international opera- tions or to be reinvested outside of the U.S., as a significant portion of our opportunities for growth in the coming years is expected to be abroad. In the event funds from international operations are needed to fund operations in the U.S., we would be required to accrue for and pay taxes in the U.S. to repatriate these funds. (in millions) 2016 2015 2014 Year ended December 31, Net cash provided by (used for): Operating activities from continuing operations Investing activities from continuing operations Financing activities from continuing operations $ 1,464 $ 195 $ 1,209 1,205 (2,525) (65) (1,600) 1,510 (462) ical innovation. For a further discussion of competitive and In 2016, free cash flow increased to $1.2 billion compared to other risks inherent in our Indices business, see Item 1a, Risk $(48.0) million in 2015. The increase is primarily due to the Factors, in our Annual Report on Form 10-K. 38 S&P Global 2016 Annual Report increase in cash provided from operating activities as dis- cussed below. Free cash flow is a non-GAAP financial mea- sure and reflects our cash flow provided by operating activities less capital expenditures and dividends and other payments paid to noncontrolling interests. Capital expenditures include purchases of property and equipment and additions to tech- nology projects. See “Reconciliation of Non-GAAP Financial Information” below for a reconciliation of cash flow provided by operating activities, the most directly comparable U.S. GAAP financial measure, to free cash flow and free cash flow exclud- ing certain items. Operating activities Cash provided by operating activities increased $1.3  billion of J.D. Power, we entered into an accelerated share repurchase (“ASR”) agreement with a financial institution on September 7, to $1.5 billion in 2016 compared to $195 million in 2015. The 2016 to initiate share repurchases aggregating $750 million. We increase is mainly due to the payment of legal and regulatory repurchased a total of 6.1 million shares under the ASR agree- settlements in 2015 of $1.6  billion, partially offset by higher ment for an average purchase price of $122.18 per share. See income tax payments in 2016. Note 9 — Equity for further discussion. Cash provided by operating activities decreased $1.0  billion During 2015, we used cash to repurchase 9.8 million shares for to $195 million in 2015 compared to $1.2 billion in 2014. The $974 million. An additional 0.3 million shares were repurchased decrease is mainly due to the payment of legal and regulatory in the fourth quarter of 2015 for approximately $26  million, settlements in 2015 of $1.6 billion. which settled in January of 2016. Investing activities Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions. During 2014, we used cash to repurchase 4.6 million shares for $362 million. Included in the repurchase were 0.5 million shares of the Company’s common stock from the personal holdings of Harold W. McGraw III, then Chairman of the Company’s Board of Directors and former President and CEO of the Company Cash provided by investing activities increased to $1.2 billion (“Mr. McGraw”). The shares were purchased at a discount of for 2016 as compared to cash used for investing activities of 0.35% from the June 24, 2014 New York Stock Exchange clos- $2.5 billion in 2015. The increase is primarily due to proceeds ing price pursuant to a private transaction with Mr. McGraw. from the sale of J.D. Power of $1.1 billion in 2016 compared to We repurchased these shares with cash for $41 million. This cash used for the acquisition of SNL of $2.2 billion in 2015. transaction was approved by the Nominating and Corporate Cash used for investing activities increased to $2.5 billion for 2015 from $65 million in 2014, primarily due to the acquisition of SNL in 2015. Refer to Note 2 — Acquisitions and Divestitures to our consoli- dated financial statements for further information. Financing activities Our cash outflows from financing activities consist primar- ily of share repurchases, dividends and repayment of debt, while cash inflows are primarily inflows from long-term and short-term debt borrowings and proceeds from the exercise of stock options. Governance Committee of the Company’s Board of Directors after consultation with members of the Financial Policy Committee. On December 4, 2013, the Board of Directors approved a share repurchase program authorizing the purchase of up to 50 mil- lion shares, which was approximately 18% of the total shares of our outstanding common stock at that time. Our current repurchase program has no expiration date and purchases under this program may be made from time to time on the open market and in private transactions, depending on market con- ditions. As of December 31, 2016, 25.8 million shares remained available under our current repurchase program. Cash used for financing activities was $1.6 billion in 2016 com- pared to cash provided by financing activities of $1.5 billion in Discontinued Operations Cash flows from discontinued operations reflects the classi- 2015. The decrease is primarily attributable to higher proceeds fication of McGraw Hill Construction as a discontinued oper- received from the issuance of senior notes in 2015. ation. Cash used for operating activities from discontinued Cash provided by financing activities was $1.5 billion in 2015 compared to cash used for financing activities of $462 million in 2014, driven by proceeds from the issuance of senior notes in 2015, partially offset by an increase in cash used for the repur- chase of treasury shares. operations decreased to $129 million in 2015 compared to cash provided by operating activities from discontinued operations of $18 million in 2014 due to the tax payment on the gain on sale of McGraw Hill Construction in 2015. Cash provided by invest- ing activities from discontinued operations of $320 million in 2014 relates to proceeds received from the sale of McGraw Hill During 2016, we used cash to repurchase 10 million shares for Construction. $1,123 million. In December of 2015, we repurchased 0.3 million shares for approximately $26 million, which settled in January of 2016. Using a portion of the proceeds received from the sale S&P Global 2016 Annual Report 39 ADDITIONAL FINANCING We have the ability to borrow a total of $1.2 billion through our commercial paper program, which is supported by our revolv- as defined in our credit facility, is not greater than 4 to 1, and this covenant level has never been exceeded. ing $1.2 billion five-year credit agreement (our “credit facility”) that we entered into on June 30, 2015. This credit facility will DIVIDENDS On January  25, 2017, the Board of Directors approved an terminate on June 30, 2020. There were no commercial paper increase in the quarterly common stock dividend from $0.36 borrowings outstanding as of December 31, 2016. Commercial per share to $0.41 per share. paper borrowings outstanding as of December 31, 2015 totaled $143 million with an average interest rate and term of 0.95% and 17 days, respectively. Depending on our indebtedness to cash flow ratio, we pay a commitment fee of 10 to 20 basis points for our credit facility, whether or not amounts have been borrowed. We currently pay a commitment fee of 15 basis points. The interest rate on bor- rowings under our credit facility is, at our option, calculated using rates that are primarily based on either the prevailing London Inter-Bank Offered Rate, the prime rate determined by the administrative agent or the Federal Funds Rate. For cer- tain borrowings under this credit facility, there is also a spread based on our indebtedness to cash flow ratio added to the applicable rate. Our credit facility contains certain covenants. The only finan- cial covenant requires that our indebtedness to cash flow ratio, CONTRACTUAL OBLIGATIONS We typically have various contractual obligations, which are recorded as liabilities in our consolidated balance sheets, while other items, such as certain purchase commitments and other executory contracts, are not recognized, but are dis- closed herein. For example, we are contractually committed to contracts for information- technology outsourcing, certain enterprise-wide information- technology software licensing and maintenance and make certain minimum lease payments for the use of property under operating lease agreements. We believe that the amount of cash and cash equivalents on hand, cash flow expected from operations and availability under our credit facility will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations, capital expenditures, working capital and debt ser- vice for 2017. The following table summarizes our significant contractual obligations and commercial commitments as of December 31, 2016, over the next several years that relate to our continuing operations. Additional details regarding these obligations are provided in the notes to our consolidated financial statements, as referenced in the footnotes to the table: (in millions) Debt: 1 Principal payments Interest payments Operating leases 2 Purchase obligations and other 3 Total contractual cash obligations Less than 1 Year 1–3 Years 3–5 Years More than 5 Years $ — 165 116 107 $ 388 $ 398 269 210 84 $ 961 $ 696 232 136 31 $ 1,095 $ 2,470 766 540 79 $ 3,855 Total $ 3,564 1,432 1,002 301 $ 6,299 1 Our debt obligations are described in Note 5 — Debt to our consolidated financial statements. 2 Amounts shown include taxes and escalation payments, see Note 13 — Commitments and Contingencies to our consolidated financial statements for further discussion on our operating lease obligations. 3 Other consists primarily of commitments for unconditional purchase obligations in contracts for information- technology outsourcing and certain enterprise-wide information- technology software licensing and maintenance. 40 S&P Global 2016 Annual Report As of December 31, 2016, we had $161 million of liabilities for unrecognized tax benefits. We have excluded the liabilities for unrecognized tax benefits from our contractual obligations Reconciliation of Non-GAAP Financial Information Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by operating activities less capital expenditures and dividends and other payments paid to non- controlling interests. Capital expenditures include purchases of property and equipment and additions to technology proj- ects. Our cash flow provided by operating activities is the most directly comparable U.S. GAAP financial measure to free cash flow. Additionally, we have considered certain items in evaluat- ing free cash flow, which are included in the table below. We believe the presentation of free cash flow and free cash flow excluding certain items allows our investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management. We use free cash flow to conduct and evaluate our business because we believe it typically presents a more conservative measure of cash flows since capital expenditures and dividends and other payments paid to noncontrolling interests are considered a necessary component of ongoing operations. Free cash flow is useful for management and investors because it allows management and investors to evaluate the cash available to us to service debt, make strategic acquisitions and investments, repurchase stock and fund ongoing operation and working capital needs. table because reasonable estimates of the timing of cash settlements with the respective taxing authorities are not practicable. As of December  31, 2016, we have recorded $1,080  million for our redeemable noncontrolling interest in our S&P Dow Jones Indices LLC partnership discussed in Note 9 — Equity to our consolidated financial statements. Specifically, this amount relates to the put option under the terms of the oper- ating agreement of S&P Dow Jones Indices LLC, whereby, after December 31, 2017, CME Group and CME Group Index Services LLC (“CGIS”) will have the right at any time to sell, and we are obligated to buy, at least 20% of their share in S&P Dow Jones Indices LLC. We have excluded this amount from our contrac- tual obligations table because we are uncertain as to the timing and the ultimate amount of the potential payment we may be required to make. We make contributions to our pension and postretirement plans in order to satisfy minimum funding requirements as well as additional contributions that we consider appropriate to improve the funded status of our plans. During 2016, we con- tributed $8 million and $6 million to our domestic and inter- national retirement and postretirement plans, respectively. Expected employer contributions in 2017 are $8  million for each of our domestic and international retirement and postre- tirement plans. In 2017, we may elect to make additional non- required contributions depending on investment performance and the pension plan status. See Note 7 — Employee Benefits to our consolidated financial statements for further discussion. OFF- BALANCE SHEET ARRANGEMENTS As of December 31, 2016 and 2015, we did not have any rela- tionships with unconsolidated entities, such as entities often referred to as specific purpose or variable interest entities where we are the primary beneficiary, which would have been established for the purpose of facilitating off- balance sheet arrangements or other contractually narrow or limited pur- poses. As such we are not exposed to any financial liquidity, market or credit risk that could arise if we had engaged in such relationships. S&P Global 2016 Annual Report 41 The presentation of free cash flow and free cash flow excluding certain items are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow, as we calculate it, may not be comparable to similarly titled measures employed by other companies. The following table presents a reconciliation of our cash flow provided by operating activities to free cash flow excluding the impact of the items below: Year ended December 31, % Change (in millions) 2016 2015 2014 ’16 vs ’15 ’15 vs ’14 Cash provided by operating activities Capital expenditures Dividends and other payments paid to noncontrolling interests Free cash flow Tax on gain from sale of J.D. Power Payment of legal and regulatory settlements Legal settlement insurance recoveries Tax benefit from legal settlements Free cash flow excluding above items $ 1,464 (115) (116) $ 1,233 200 150 (77) (24) $ 1,482 $ 195 (139) $ 1,209 (92) (104) (84) $ (48) — 1,624 (101) (250) $ 1,225 $ 1,033 — 35 — — $ 1,068 N/M (84)% N/M N/M 21% 15% Critical Accounting Estimates Our discussion and analysis of our financial condition and selection of our critical accounting estimates with the Audit results of operations is based upon our consolidated financial Committee of our Board of Directors. The Audit Committee has statements, which have been prepared in accordance with U.S. reviewed our disclosure relating to them in this MD&A. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Unless otherwise indicated, all discussion and analysis of our finan- cial condition and results of operations relate to our continuing operations. We believe the following critical accounting policies require us to make significant judgments and estimates in the prepara- tion of our consolidated financial statements: REVENUE RECOGNITION Revenue is recognized as it is earned when services are ren- dered. We consider amounts to be earned once evidence of On an ongoing basis, we evaluate our estimates and assump- an arrangement has been obtained, services are performed, tions, including those related to revenue recognition, allowance fees are fixed or determinable and collectability is reasonably for doubtful accounts, valuation of long-lived assets, goodwill assured. Revenue relating to products that provide for more and other intangible assets, pension plans, incentive compen- than one deliverable is recognized based upon the relative fair sation and stock-based compensation, income taxes, contin- value to the customer of each deliverable as each deliverable is gencies and redeemable noncontrolling interests. We base our provided. Revenue relating to agreements that provide for more estimates on historical experience, current developments and than one service is recognized based upon the relative fair on various other assumptions that we believe to be reasonable value to the customer of each service component as each com- under these circumstances, the results of which form the basis ponent is earned. If the fair value to the customer for each ser- for making judgments about carrying values of assets and lia- vice is not objectively determinable, we make our best estimate bilities that cannot readily be determined from other sources. of the services’ standalone selling price and recognize revenue There can be no assurance that actual results will not differ as earned as the services are delivered. The allocation of con- from those estimates. Management considers an accounting estimate to be critical if it required assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or dif- ferent estimates could have a material effect on our results of operations. Management has discussed the development and sideration received from multiple element arrangements that involve initial assignment of ratings and the future surveillance of ratings is determined through an analysis that considers cash consideration that would be received for instances when the service components are sold separately. In such cases, we defer portions of rating fees that we estimate will be attributed 42 S&P Global 2016 Annual Report to future surveillance and recognize the deferred revenue rat- by the asset. If the carrying amount of the asset exceeds its ably over the estimated surveillance periods. Advertising reve- estimated future cash flows, an impairment charge is recog- nue is recognized when the page is run. Subscription income is nized equal to the amount by which the carrying amount of the recognized over the related subscription period. asset exceeds the fair value of the asset. For long-lived assets For the years ended December 31, 2016, 2015 and 2014, no sig- nificant changes have been made to the underlying assump- tions related to estimates of revenue or the methodologies applied. We are currently evaluating the impact that the adop- held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on market evidence, dis- counted cash flows, appraised values or management’s esti- mates, depending upon the nature of the assets. tion of the new accounting standard of recognition of reve- For the year ended December  31, 2016, we recorded a non- nue will have on our consolidated financial statements. See cash impairment charge of $24 million related to a technology Note  1 — Accounting Policies to our consolidated financial project at our Market and Commodities segment in selling and statements for further information. At this point, we believe general expenses in our consolidated statement of income. the new standard will have an impact on: 1) the accounting for certain long-term deferred revenue in our Ratings segment which may contain a financing component, 2) the timing of rev- enue recognized in our Market and Commodities Intelligence segment for long term contracts with price escalations, and 3) the accounting for fees for historical data in our Market and Commodities Intelligence segment currently recognized over the term of a subscription. We do not expect these changes to have a significant impact on our consolidated financial statements. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts reserve methodology is On July 31, 2014, we completed the sale of the Company’s air- craft to Harold W. McGraw III, then Chairman of the Company’s Board of Directors and former President and CEO of the Company for a purchase price of $20 million. During the sec- ond quarter of 2014, we recorded a non-cash impairment charge of $6 million in (gain) loss on dispositions in our con- solidated statement of income as a result of the pending sale. See Note 14 — Related Party Transactions to our consolidated financial statements for further information. On June 30, 2014, we completed the sale of our data center to Quality Technology Services, LLC (“QTS”) which owns, oper- ates, and manages data centers. Net proceeds from the sale based on historical analysis, a review of outstanding balances of $58 million were received in July of 2014. The sale includes and current conditions. In determining these reserves, we all of the facilities and equipment on the south campus of our consider, amongst other factors, the financial condition and East Windsor, New Jersey location, inclusive of the rights and risk profile of our customers, areas of specific or concentrated obligations associated with an adjoining solar power field. The risk as well as applicable industry trends or market indica- sale resulted in an expense of $3 million recorded in (gain) loss tors. The impact on operating profit for a one percentage point on dispositions in our consolidated statement of income, which change in the allowance for doubtful accounts is approximately is in addition to the non-cash impairment charge of $36 million $12 million. For the years ended December 31, 2016, 2015 and 2014, there were no material changes in our assumptions regarding the determination of the allowance for doubtful accounts. Based on our current outlook these assumptions are not expected to significantly change in 2017. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS (INCLUDING OTHER INTANGIBLE ASSETS) We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to current forecasts of undiscounted future net cash flows expected to be generated we recorded in the fourth quarter of 2013 to adjust the value of the facilities and associated infrastructure classified as held for sale to their fair value. GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and iden- tifiable intangible assets of businesses acquired. As of December  31, 2016 and 2015, the carrying value of goodwill and other indefinite-lived intangible assets was $3.7 billion and $3.6 billion, respectively. Goodwill and other intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually during the fourth quarter each year or S&P Global 2016 Annual Report 43 more frequently if events or changes in circumstances indicate If necessary, the impairment test is performed by comparing that the asset might be impaired. the estimated fair value of the intangible asset to its carrying Goodwill As part of our annual impairment test of our four reporting value. If the indefinite-lived intangible asset carrying value exceeds its fair value, an impairment analysis is performed using the income approach. The fair value of loss is recognized units, we initially perform a qualitative analysis evaluating in an amount equal to that excess. Significant judgments inher- whether any events and circumstances occurred that pro- ent in these analyses include estimating the amount and timing vide evidence that it is more likely than not that the fair value of future cash flows and the selection of appropriate discount of any of our reporting units is less than its carrying amount. rates, royalty rates and long-term growth rate assumptions. Reporting units are generally an operating segment or one Changes in these estimates and assumptions could materially level below an operating segment. Our qualitative assessment affect the determination of fair value for this indefinite-lived included, but was not limited to, consideration of macroeco- intangible asset and could result in an impairment charge, nomic conditions, industry and market conditions, cost fac- which could be material to our financial position and results tors, cash flows, changes in key Company personnel and our of operations. share price. If, based on our evaluation of the events and cir- cumstances that occurred during the year we do not believe that it is more likely than not that the fair value of any of our reporting units is less than its carrying amount, no quantitative impairment test is performed. Conversely, if the results of our qualitative assessment determine that it is more likely than not that the fair value of any of our reporting units is less than its respective carrying amount we perform a two-step quan- titative impairment test. For 2016, based on our qualitative assessments, we determined that it is more likely than not that our reporting units’ fair value was greater than their respective carrying amounts. If the fair value of the reporting unit is less than the carrying value, a second step is performed which compares the implied fair value of the reporting unit’s goodwill to the carrying value of the goodwill. The implied fair value of the goodwill is deter- mined based on the difference between the fair value of the reporting unit and the net fair value of the identifiable assets and liabilities of the reporting unit. If the implied fair value of the goodwill is less than the carrying value, the difference is recognized as an impairment charge. Indefinite-Lived Intangible Assets We evaluate the recoverability of indefinite-lived intangible We performed our impairment assessment of goodwill and indefinite-lived intangible assets and concluded that no impairment existed for the years ended December 31, 2016, 2015, and 2014. RETIREMENT PLANS AND POSTRETIREMENT HEALTHCARE AND OTHER BENEFITS Our employee pension and other postretirement benefit costs and obligations are dependent on assumptions concerning the outcome of future events and circumstances, including com- pensation increases, long-term return on pension plan assets, healthcare cost trends, discount rates and other factors. In determining such assumptions, we consult with outside actu- aries and other advisors where deemed appropriate. In accor- dance with relevant accounting standards, if actual results differ from our assumptions, such differences are deferred and amortized over the estimated remaining lifetime of the plan participants. While we believe that the assumptions used in these calculations are reasonable, differences in actual expe- rience or changes in assumptions could affect the expense and liabilities related to our pension and other postretirement benefits. The following is a discussion of some significant assumptions assets by first performing a qualitative analysis evaluating that we make in determining costs and obligations for pension whether any events and circumstances occurred that provide and other postretirement benefits: evidence that it is more likely than not that the indefinite-lived Discount rate assumptions are based on current yields on asset is impaired. If, based on our evaluation of the events and high-grade corporate long-term bonds. circumstances that occurred during the year we do not believe Healthcare cost trend assumptions are based on historical that it is more likely than not that the indefinite-lived asset market data, the near-term outlook and an assessment of is impaired, no quantitative impairment test is performed. likely long-term trends. Conversely, if the results of our qualitative assessment deter- The expected return on assets assumption is calculated mine that it is more likely than not that the indefinite-lived based on the plan’s asset allocation strategy and projected asset is impaired, a quantitative impairment test is performed. market returns over the long-term. 44 S&P Global 2016 Annual Report Our discount rate and return on asset assumptions used to determine the net periodic pension and postretirement benefit cost on our U.S. retirement plans are as follows: Retirement Plans Postretirement Plans January 1 2017 2016 2015 2017 2016 2015 Discount rate 1 Return on assets Weighted- average healthcare cost rate 4.14% 6.25% 4.47% 6.25% 4.15% 6.25% 3.69% 3.90% 3.60% 7.00% 7.00% 7.00% 1 At the end of 2015, we changed our approach used to measure service and interest costs on all of our retirement plans. See Note 7 — Employee Benefits to our consolidated financial statements for further information. STOCK-BASED COMPENSATION Stock-based compensation expense is measured at the grant INCOME TAXES Deferred tax assets and liabilities are recognized for the future date based on the fair value of the award and is recognized tax consequences attributable to differences between finan- over the requisite service period, which typically is the vest- cial statement carrying amounts of existing assets and liabil- ing period. Stock-based compensation is classified as both ities and their respective tax bases. Deferred tax assets and operating- related expense and selling and general expense in liabilities are measured using enacted tax rates expected to be our consolidated statements of income. applied to taxable income in the years in which those temporary We use a lattice-based option- pricing model to estimate the fair value of options granted. The following assumptions were used in valuing the options granted: Risk-free average interest rate Dividend yield Volatility Expected life (years) Weighted- average grant-date fair Year Ended December 31, 2015 2014 0.2–1.9% 1.4% 21–39% 6.3 0.1–2.9% 1.4–1.8% 18–41% 6.21–6.25 value per option $27.57 $23.41 Because lattice-based option- pricing models incorporate ranges of assumptions, those ranges are disclosed. These assumptions are based on multiple factors, including histori- cal exercise patterns, post- vesting termination rates, expected future exercise patterns and the expected volatility of our stock price. The risk-free interest rate is the imputed forward rate based on the U.S. Treasury yield at the date of grant. We use the historical volatility of our stock price over the expected term of the options to estimate the expected volatility. The expected term of options granted is derived from the output of the lattice model and represents the period of time that options granted are expected to be outstanding. differences are expected to be recovered or settled. We recog- nize liabilities for uncertain tax positions taken or expected to be taken in income tax returns. Accrued interest and penalties related to unrecognized tax benefits are recognized in interest expense and operating expense, respectively. Judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and unrecognized tax benefits. In determining the need for a valuation allowance, the historical and projected financial performance of the operation that is recording a net deferred tax asset is considered along with any other pertinent information. We file income tax returns in the U.S. federal jurisdiction, vari- ous states, and foreign jurisdictions, and we are routinely under audit by many different tax authorities. We believe that our accrual for tax liabilities is adequate for all open audit years based on our assessment of many factors including past expe- rience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. It is possible that examinations will be settled prior to December 31, 2017. If any of these tax audit settlements do occur within that period we would make any necessary adjustments to the accrual for unrecognized tax benefits. Until formal resolutions are reached between us and During 2015, we stopped granting stock options as part of our the tax authorities, the determination of a possible audit set- employees’ total stock-based incentive awards. There were no tlement range with respect to the impact on unrecognized tax stock options granted in 2016 and a minimal amount of stock benefits is not practicable. On the basis of present information, options granted in 2015. it is our opinion that any assessments resulting from the cur- rent audits will not have a material effect on our consolidated financial statements. S&P Global 2016 Annual Report 45 We have determined that the undistributed earnings of our foreign subsidiaries are permanently reinvested within those REDEEMABLE NONCONTROLLING INTEREST The fair value component of the redeemable noncontrolling foreign operations. Accordingly, we have not provided deferred interest in Indices business is based on a combination of an income taxes on these indefinitely reinvested earnings. A future income and market valuation approach. Our income and mar- distribution by the foreign subsidiaries of these earnings could ket valuation approaches may incorporate Level 3 measures for result in additional tax liability, which may be material to our instances when observable inputs are not available, including future reported results, financial position and cash flows. assumptions related to expected future net cash flows, long- For the years ended December  31, 2016, 2015 and 2014, we made no material changes in our assumptions regarding the term growth rates, the timing and nature of tax attributes, and the redemption features. determination of the provision for income taxes. However, cer- RECENT ACCOUNTING STANDARDS tain events could occur that would materially affect our esti- See Note 1 — Accounting Policies to our consolidated financial mates and assumptions regarding deferred taxes. Changes in statements for a detailed description of recent accounting current tax laws and applicable enacted tax rates could affect standards. We do not expect these recent accounting stan- the valuation of deferred tax assets and liabilities, thereby dards to have a material impact on our results of operations, impacting our income tax provision. financial condition, or liquidity in future periods. CONTINGENCIES We are subject to a number of lawsuits and claims that arise Forward- Looking Statements in the ordinary course of business. We recognize a liability for Our Annual Report on Form  10-K contains “ forward- looking such contingencies when both (a) information available prior to statements,” as defined in the Private Securities Litigation issuance of the financial statements indicates that it is prob- Reform Act of 1995. These statements, which express man- able that a liability had been incurred at the date of the finan- agement’s current views concerning future events, trends, con- cial statements and (b) the amount of loss can reasonably be tingencies or results, appear at various places in this report estimated. We continually assess the likelihood of any adverse and use words like “anticipate,” “assume,” “believe,” “continue,” judgments or outcomes to our contingencies, as well as poten- “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” tial amounts or ranges of probable losses, and recognize a lia- “potential,” “predict,” “project,” “strategy,” “target” and similar bility, if any, for these contingencies based on an analysis of terms, and future or conditional tense verbs like “could,” “may,” each matter with the assistance of outside legal counsel and, “might,” “should,” “will” and “would.” For example, management if applicable, other experts. Because many of these matters may use forward- looking statements when addressing topics are resolved over long periods of time, our estimate of liabilities such as: the outcome of contingencies; future actions by reg- may change due to new developments, changes in assump- ulators; changes in the Company’s business strategies and tions or changes in our strategy related to the matter. When methods of generating revenue; the development and perfor- we accrue for loss contingencies and the reasonable estimate mance of the Company’s services and products; the expected of the loss is within a range, we record its best estimate within impact of acquisitions and dispositions; the Company’s effec- the range. We disclose an estimated possible loss or a range of tive tax rates; and the Company’s cost structure, dividend pol- loss when it is at least reasonably possible that a loss may have icy, cash flows or liquidity. been incurred. 46 S&P Global 2016 Annual Report 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, political and regulatory conditions, including conditions that may result from legislative, regu- latory and policy changes associated with the current U.S. administration or the United Kingdom’s likely exit from the European Union; the rapidly evolving regulatory environment, in the United the impact on the Company’s revenue and net income caused States and abroad, affecting Ratings, Market and Commod- by fluctuations in foreign currency exchange rates; and ities Intelligence and Indices, including new and amended the Company’s exposure to potential criminal sanctions or regulations and the Company’s compliance therewith; civil penalties if it fails to comply with foreign and U.S. laws the Company’s ability to maintain adequate physical, tech- and regulations that are applicable in the domestic and inter- nical and administrative safeguards to protect the security national jurisdictions in which it operates, including sanc- of confidential information and data, and the potential for tions laws relating to countries such as Iran, Russia, Sudan unauthorized access to our systems or a system or network and Syria, anti- corruption laws such as the U.S. Foreign disruption that results in improper disclosure of confidential Corrupt Practices Act and the U.K. Bribery Act of 2010, and information or data, regulatory penalties and remedial costs; local laws prohibiting corrupt payments to government offi- our ability to make acquisitions and dispositions and suc- cials, as well as import and export restrictions. The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environ- ment 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 obli- gation 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 infor- mation about the Company’s businesses, including information about factors that could materially affect its results of opera- tions and financial condition, is contained in the Company’s fil- ings with the SEC, including Item 1a, Risk Factors, in our Annual Report on Form 10-K. cessfully integrate the businesses we acquire; the outcome of litigation, government and regulatory pro- ceedings, 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 credi- bility or otherwise affecting market perceptions of the integ- rity 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 customer cost- cutting pressures, including in the financial services industry and commodities markets; 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 and the health of the commodities markets; our ability to attract, incentivize and retain key employees; the Company’s ability to successfully recover should it expe- rience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber- attack, power loss, telecommunica- tions failure or other natural or man-made event; changes in applicable tax or accounting requirements, including potential tax reform under the current U.S. administration; the level of the Company’s future cash flows and capital investments; S&P Global 2016 Annual Report 47 Consolidated Statements of Income (in millions, except per share data) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation Amortization of intangibles Total expenses (Gain) loss on dispositions Operating profit Interest expense, net Income from continuing operations before taxes on income Provision for taxes on income Income (loss) from continuing operations Discontinued operations, net of tax: Income from discontinued operations Gain on sale of discontinued operations Discontinued operations, net Net income (loss) Less: net income from continuing operations attributable to noncontrolling interests Year Ended December 31, 2016 2015 2014 $ 5,661 $ 5,313 $ 5,051 1,769 1,443 85 96 3,393 (1,101) 3,369 181 3,188 960 2,228 1,700 1,550 90 67 3,407 (11) 1,917 102 1,815 547 1,268 — — — — — — 2,228 (122) 1,268 (112) 1,651 3,144 86 48 4,929 9 113 59 54 245 (191) 18 160 178 (13) (102) Net income (loss) attributable to S&P Global Inc. $ 2,106 $ 1,156 $ (115) Amounts attributable to S&P Global Inc. common shareholders: Income (loss) from continuing operations Income from discontinued operations Net income (loss) Earnings (loss) per share attributable to S&P Global Inc. common shareholders: Income (loss) from continuing operations: Basic Diluted Income from discontinued operations: Basic Diluted Net income (loss): Basic Diluted Weighted- average number of common shares outstanding: Basic Diluted Actual shares outstanding at year end Dividend declared per common share See accompanying notes to the consolidated financial statements. $ 2,106 $ 1,156 — — $ 2,106 $ 1,156 $ (293) 178 $ (115) $ 8.02 $ 7.94 $ 4.26 $ 4.21 $ (1.08) $ (1.08) $ — $ — $ — $ — $ 0.66 $ 0.66 $ 8.02 $ 7.94 262.8 265.2 258.3 $ 1.44 $ 4.26 $ 4.21 271.6 274.6 265.2 $ 1.32 $ (0.42) $ (0.42) 271.5 271.5 272.0 $ 1.20 48 S&P Global 2016 Annual Report Consolidated Statements of Comprehensive Income (in millions) Net income (loss) Other comprehensive income (loss): Foreign currency translation adjustment Income tax effect Pension and other postretirement benefit plans Income tax effect Unrealized gain (loss) on forward exchange contracts Income tax effect Comprehensive income (loss) Less: comprehensive income attributable to nonredeemable noncontrolling interests Less: comprehensive income attributable to redeemable noncontrolling interests Year Ended December 31, 2016 2015 $ 2,228 $ 1,268 2014 $ (13) (132) (7) (139) (27) (10) (37) 4 (1) 3 2,055 (13) (109) (111) 1 (110) 34 (9) 25 (1) — (1) 1,182 (11) (101) (108) 2 (106) (357) 142 (215) 4 (1) 3 (331) (10) (92) Comprehensive income (loss) attributable to S&P Global Inc. $ 1,933 $ 1,070 $ (433) See accompanying notes to the consolidated financial statements. S&P Global 2016 Annual Report 49 Consolidated Balance Sheets (in millions) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowance for doubtful accounts: 2016 — $28; 2015 — $37 Deferred income taxes Prepaid and other current assets Assets of a business held for sale Total current assets Property and equipment: Buildings and leasehold improvements Equipment and furniture Total property and equipment Less: accumulated depreciation Property and equipment, net Goodwill Other intangible assets, net Other non- current assets Total assets LIABILITIES AND EQUITY Current liabilities: Accounts payable Accrued compensation and contributions to retirement plans Short-term debt Income taxes currently payable Unearned revenue Accrued legal and regulatory settlements Other current liabilities Liabilities of a business held for sale Total current liabilities Long-term debt Pension and other postretirement benefits Other non- current liabilities Total liabilities Redeemable noncontrolling interest Commitments and contingencies (Note 13) Equity: Common stock, $1 par value: authorized — 600 million shares; issued — 412 million shares in 2016 and 2015 Additional paid-in capital Retained income Accumulated other comprehensive loss Less: common stock in treasury — at cost: 2016 — 153 million shares; 2015 — 146 million shares Total equity — controlling interests Total equity — noncontrolling interests Total equity Total liabilities and equity See accompanying notes to the consolidated financial statements. 50 S&P Global 2016 Annual Report December 31, 2016 2015 $ 2,392 8 1,122 — 142 7 3,671 $ 1,481 6 991 109 206 503 3,296 356 452 808 (537) 271 2,949 1,506 272 352 503 855 (585) 270 2,882 1,522 213 $ 8,669 $ 8,183 $ 183 409 — 95 1,509 56 314 45 2,611 3,564 274 439 6,888 1,080 412 502 9,210 (773) (8,701) 650 51 $ 206 383 143 56 1,421 121 372 206 2,908 3,468 276 368 7,020 920 412 475 7,636 (600) (7,729) 194 49 701 243 $ 8,669 $ 8,183 Consolidated Statements of Cash Flows (in millions) Operating Activities: Net income (loss) Less: income from discontinued operations Net income (loss) from continuing operations Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities from continuing operations: Depreciation Amortization of intangibles Provision for losses on accounts receivable Deferred income taxes Stock-based compensation (Gain) loss on dispositions Accrued legal and regulatory settlements Other Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: Accounts receivable Prepaid and other current assets Accounts payable and accrued expenses Unearned revenue Accrued legal and regulatory settlements Other current liabilities Net change in prepaid / accrued income taxes Net change in other assets and liabilities Cash provided by operating activities from continuing operations Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash provided by (used for) investing activities from continuing operations Financing Activities: (Payments on) / additions to short-term debt, net Proceeds from issuance of senior notes, net Payments on senior notes Dividends paid to shareholders Dividends and other payments paid to noncontrolling interests Repurchase of treasury shares Exercise of stock options Contingent consideration payments Purchase of additional CRISIL shares Excess tax benefits from share-based payments Cash (used for) provided by financing activities from continuing operations Effect of exchange rate changes on cash from continuing operations Cash provided by (used for) continuing operations Discontinued Operations: Cash (used for) provided by operating activities Cash provided by investing activities Cash (used for) provided by discontinued operations Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash paid during the year for: Interest (including discontinued operations) Income taxes (including discontinued operations) See accompanying notes to the consolidated financial statements. Year Ended December 31, 2016 2015 2014 $ 2,228 $ 1,268 — 2,228 — 1,268 $ (13) 178 (191) 85 96 9 79 76 (1,101) 54 30 (177) (2) (26) 107 (150) (21) 132 45 1,464 (115) (177) 1,498 (1) 1,205 90 67 8 280 78 (11) 119 57 (118) (4) (92) 129 (1,624) (78) 61 (35) 195 (139) (2,396) 14 (4) (2,525) (143) 493 (421) (380) (116) (1,123) 88 (39) — 41 (1,600) (158) 911 143 2,674 — (363) (104) (974) 86 (5) (16) 69 1,510 (67) (887) 86 48 11 (245) 100 9 1,587 71 (9) (7) (130) 78 (35) (16) (93) (55) 1,209 (92) (71) 83 15 (65) — — — (326) (84) (362) 193 (11) — 128 (462) (65) 617 — — — 911 1,481 $ 2,392 (129) — (129) (1,016) 2,497 $ 1,481 $ 150 $ 683 $ 65 $ 260 18 320 338 955 1,542 $ 2,497 $ 50 $ 419 S&P Global 2016 Annual Report 51 Consolidated Statements of Equity (in millions) Balance as of December 31, 2013 Comprehensive (loss) income 1 Dividends Share repurchases Employee stock plans, net of tax benefit Change in redemption value of redeemable noncontrolling interest Other Common Stock $1 par Additional Paid-in Capital Retained Income Accumulated Other Comprehensive Loss Less: Treasury Stock Total SPGI Equity Noncontrolling Interests Total Equity $ 412 $ 447 $ 7,384 (115) (324) 46 (1) 2 (318) $ (196) $ 6,746 $ 1,301 (433) (324) (352) 352 (249) 295 (1) 2 $ 43 $ 1,344 (423) (332) (346) 295 10 (8) 6 (1) 2 Balance as of December 31, 2014 $ 412 $ 493 $ 6,946 $ (514) $ 6,849 $ 488 $ 51 $ 539 Comprehensive income 1 Dividends Share repurchases Employee stock plans, net of tax benefit Change in redemption value of redeemable noncontrolling interest Other 1,156 (359) (86) (18) (107) 1,000 (120) 1,070 (359) (1,000) 102 (107) — 11 (9) (2) 1,081 (368) (1,002) 102 (107) (2) (2) Balance as of December 31, 2015 $ 412 $ 475 $ 7,636 $ (600) $ 7,729 $ 194 $ 49 $ 243 Comprehensive income 1 Dividends Share repurchases Employee stock plans, net of tax benefit Change in redemption value of redeemable noncontrolling interest Other 2,106 (380) (173) 27 (153) 1 1,097 (125) 1,933 (380) (1,097) 152 (153) 1 13 (10) — 1,946 (390) (1,097) 152 (153) — (1) Balance as of December 31, 2016 $ 412 $ 502 $ 9,210 $ (773) $ 8,701 $ 650 $ 51 $ 701 1 Excludes $109 million, $101 million and $92 million in 2016, 2015 and 2014, respectively, attributable to redeemable noncontrolling interest. See accompanying notes to the consolidated financial statements. 52 S&P Global 2016 Annual Report Notes to the Consolidated Financial Statements 1. Accounting Policies and customary for sales of such disposal group; an active pro- gram to locate a buyer and other actions required to complete NATURE OF OPERATIONS S&P Global Inc. (together with its the plan to sell the disposal group have been initiated; the sale consolidated subsidiaries, the “Company,” the “Registrant,” of the disposal group is probable, and transfer of the disposal “we,” “us” or “our”) is a leading provider of transparent and group is expected to qualify for recognition as a completed sale independent ratings, benchmarks, analytics and data to the within one year, except if events or circumstances beyond our capital and commodity markets worldwide. The capital mar- control extend the period of time required to sell the disposal kets include asset managers, investment banks, commercial group beyond one year; the disposal group is being actively banks, insurance companies, exchanges, and issuers; and the marketed for sale at a price that is reasonable in relation to its commodity markets include producers, traders and interme- current fair value; and actions required to complete the plan diaries within energy, metals, petrochemicals and agriculture. indicate that it is unlikely that significant changes to the plan Our operations consist of three reportable segments: Ratings, will be made or that the plan will be withdrawn. Market and Commodities Intelligence and S&P Dow Jones An entity that is classified as held for sale is initially measured Indices (“Indices”). at the lower of its carrying value or fair value less any costs Ratings is an independent provider of credit ratings, research to sell. Any loss resulting from this measurement is recog- and analytics, offering investors and other market partici- nized in the period in which the held for sale criteria are met. pants information, ratings and benchmarks. Conversely, gains are not recognized on the sale of a disposal Market and Commodities Intelligence is a global provider group until the date of sale. of multi-asset-class data, research and analytical capa- bilities, which integrate cross-asset analytics and desktop services and deliver their customers in the commodity and energy markets access to high-value information, data, analytic services and pricing and quality benchmarks. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in Market and Commodities Intelligence results through that date. Indices is a global index provider that maintains a wide vari- ety of valuation and index benchmarks for investment advi- sors, wealth managers and institutional investors. See Note  12 — Segment and Geographic Information for fur- ther discussion on our operating segments, which are also our reportable segments. Assets and Liabilities Held for Sale and Discontinued Operations ASSETS AND LIABILITIES HELD FOR SALE We classify a dis- posal group to be sold as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the disposal group; the disposal group is available for immediate sale in its present condition subject only to terms that are usual The fair value of a disposal group less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjust- ment to the carrying value of the disposal group, as long as the new carrying value does not exceed the carrying value of the disposal group at the time it was initially classified as held for sale. Upon determining that a disposal group meets the crite- ria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group as held for sale in the current period in our consolidated balance sheets. DISCONTINUED OPERATIONS Beginning on January 1, 2015, we adopted revised guidance for discontinued operations that raises the threshold for a disposal to qualify as a discontinued operation. In determining whether a disposal of a component of an entity or a group of components of an entity is required to be presented as a discontinued operation, we make a determi- nation whether the disposal represents a strategic shift that had, or will have, a major effect on our operations and financial results. A component of an entity comprises operations and cash flows that can be clearly distinguished both operation- ally and for financial reporting purposes. If we conclude that the disposal represents a strategic shift, then the results of operations of the group of assets being disposed of (as well as S&P Global 2016 Annual Report 53 any gain or loss on the disposal transaction) are aggregated SHORT-TERM INVESTMENTS Short-term investments  are for separate presentation apart from our continuing operating securities with original maturities greater than 90 days that results in the consolidated financial statements. are  available for use in our operations in the next twelve For the year ended December 31, 2014, we applied the previous guidance for discontinued operations in determining whether a group of assets disposed or to be disposed of should be pre- sented as a discontinued operation. We determined whether months. The short-term investments, primarily consisting of certificates of deposit and mutual funds, are classified as held- to- maturity and therefore are carried at cost. Interest and div- idends are recorded into income when earned. the group of assets being disposed of comprised a component ACCOUNTS RECEIVABLE Credit is extended to customers of the entity. We also determined whether the cash flows asso- based upon an evaluation of the customer’s financial condi- ciated with the group of assets had been or would have been tion. Accounts receivable, which include billings consistent eliminated from our ongoing operations as a result of the dis- with terms of contractual arrangements, are recorded at net posal transaction and whether we would have had significant realizable value. continuing involvement in the operations of the group of assets after the disposal transaction. If we concluded that the cash flows had been eliminated and we had no significant continu- ing involvement, then the results of operations of the group of assets being disposed of (as well as any gain or loss on the dis- posal transaction) were aggregated for separate presentation apart from our continuing operating results in the consolidated financial statements. See Note 2 — Acquisitions and Divestitures for a summary of discontinued operations. Unless otherwise indicated, all dis- closures and amounts in the notes to our consolidated financial statements relate to our continuing operations. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts reserve methodology is based on historical analysis, a review of outstanding balances and current con- ditions. In determining these reserves, we consider, amongst other factors, the financial condition and risk profile of our customers, areas of specific or concentrated risk as well as applicable industry trends or market indicators. DEFERRED TECHNOLOGY COSTS We capitalize certain soft- ware development and website implementation costs. Capitalized costs only include incremental, direct costs of materials and services incurred to develop the software after the preliminary project stage is completed, funding has been PRINCIPLES OF CONSOLIDATION The consolidated finan- committed and it is probable that the project will be com- cial statements include the accounts of all subsidiaries and pleted and used to perform the function intended. Incremental our share of earnings or losses of joint ventures and affiliated costs are expenditures that are out-of- pocket to us and are companies under the equity method of accounting. All sig- not part of an allocation or existing expense base. Software nificant intercompany accounts and transactions have been development and website implementation costs are expensed eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. as incurred during the preliminary project stage. Capitalized costs are amortized from the year the software is ready for its intended use over its estimated useful life, three to seven years, using the straight-line method. Periodically, we evaluate the amortization methods, remaining lives and recoverability of such costs. Capitalized software development and website implementation costs are included in other non- current assets and are presented net of accumulated amortization. Gross CASH AND CASH EQUIVALENTS Cash and cash equivalents deferred technology costs were $145 million and $128 million include ordinary bank deposits and highly liquid investments as of December 31, 2016 and 2015, respectively. Accumulated with original maturities of three months or less that consist amortization of deferred technology costs was $91 million and primarily of money market funds with unrestricted daily liquid- $72 million as of December 31, 2016 and 2015, respectively. ity and fixed term time deposits. Such investments and bank deposits are stated at cost, which approximates market value, and were $2.4 billion and $1.5 billion as of December 31, 2016 and 2015, respectively. These investments are not subject to significant market risk. FAIR VALUE Certain assets and liabilities are required to be recorded at fair value and classified within a fair value hierar- chy based on inputs used when measuring fair value. We have an immaterial amount of forward exchange contracts that are adjusted to fair value on a recurring basis. 54 S&P Global 2016 Annual Report Other financial instruments, including cash and cash equiva- we recorded in the fourth quarter of 2013 to adjust the value of lents and short-term investments, are recorded at cost, which the facilities and associated infrastructure classified as held approximates fair value because of the short-term maturity for sale to their fair value. and highly liquid nature of these instruments. The fair value of our long-term debt borrowings were $3.7 billion and $3.6 billion as of December 31, 2016 and 2015, respectively, and was esti- mated based on quoted market prices. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS Goodwill and other intangible assets with indefinite lives are (INCLUDING OTHER INTANGIBLE ASSETS) We evaluate long- not amortized, but instead are tested for impairment annually lived assets for impairment whenever events or changes in cir- during the fourth quarter each year, or more frequently if events cumstances indicate that the carrying amount of an asset may or changes in circumstances indicate that the asset might be not be recoverable. Upon such an occurrence, recoverability of impaired. We have four reporting units with goodwill that are assets to be held and used is measured by comparing the car- evaluated for impairment. rying amount of an asset to current forecasts of undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on market evidence, discounted cash flows, appraised values or management’s estimates, depend- ing upon the nature of the assets. We initially perform a qualitative analysis evaluating whether any events and circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of any of our reporting units is less than its carrying amount. If, based on our evaluation we do not believe that it is more likely than not that the fair value of any of our reporting units is less than its carrying amount, no quantitative impairment test is per- formed. Conversely, if the results of our qualitative assessment determine that it is more likely than not that the fair value of any of our reporting units is less than their respective carrying For the year ended December  31, 2016, we recorded a non- amounts we perform a two-step quantitative impairment test. cash impairment charge of $24 million related to a technology project at our Market and Commodities Intelligence segment in selling and general expenses in our consolidated statement of income. When conducting the first step of our two step impairment test to evaluate the recoverability of goodwill at the reporting unit level, the estimated fair value of the reporting unit is compared to its carrying value including goodwill. Fair value of the report- On July 31, 2014, we completed the sale of the Company’s air- ing units are estimated using the income approach, which craft to Harold W. McGraw III, then Chairman of the Company’s incorporates the use of a discounted free cash flow (“DCF”) Board of Directors and former President and CEO of the analyses and are corroborated using the market approach, Company for a purchase price of $20 million. During the sec- which incorporates the use of revenue and earnings multiples ond quarter of 2014, we recorded a non-cash impairment based on market data. The DCF analyses are based on the charge of $6 million in (gain) loss on dispositions in our consoli- current operating budgets and estimated long-term growth dated statement of income as a result of the pending sale. See projections for each reporting unit. Future cash flows are dis- Note 14 — Related Party Transactions for further discussion. counted based on a market comparable weighted average On June 30, 2014, we completed the sale of our data center to Quality Technology Services, LLC (“QTS”) which owns, oper- ates, and manages data centers. Net proceeds from the sale of $58 million were received in July of 2014. The sale includes all of the facilities and equipment on the south campus of our cost of capital rate for each reporting unit, adjusted for market and other risks where appropriate. In addition, we analyze any difference between the sum of the fair values of the reporting units and our total market capitalization for reasonableness, taking into account certain factors including control premiums. East Windsor, New Jersey location, inclusive of the rights and If the fair value of the reporting unit is less than the carrying obligations associated with an adjoining solar power field. The value, a second step is performed which compares the implied sale resulted in an expense of $3 million recorded in (gain) loss fair value of the reporting unit’s goodwill to the carrying value of on dispositions in our consolidated statement of income, which the goodwill. The fair value of the goodwill is determined based is in addition to the non-cash impairment charge of $36 million on the difference between the fair value of the reporting unit S&P Global 2016 Annual Report 55 and the net fair value of the identifiable assets and liabilities REVENUE RECOGNITION Revenue is recognized as it is of the reporting unit. If the implied fair value of the goodwill is earned when services are rendered. We consider amounts to be less than the carrying value, the difference is recognized as an earned once evidence of an arrangement has been obtained, impairment charge. We evaluate the recoverability of indefinite-lived intangible assets by first performing a qualitative analysis evaluating whether any events and circumstances occurred that provide evidence that it is more likely than not that the indefinite-lived asset is impaired. If, based on our evaluation of the events and circumstances that occurred during the year we do not believe that it is more likely than not that the indefinite-lived asset is impaired, no quantitative impairment test is performed. Conversely, if the results of our qualitative assessment deter- mine that it is more likely than not that the indefinite-lived asset is impaired, a quantitative impairment test is performed. If necessary, the impairment test is performed by comparing the estimated fair value of the intangible asset to its carrying value. If the indefinite-lived intangible asset carrying value exceeds its fair value, an impairment analysis is performed using the income approach. The fair value of loss is recognized in an amount equal to that excess. Significant judgments inherent in these analyses include esti- mating the amount and timing of future cash flows and the selection of appropriate discount rates, royalty rates and long- term growth rate assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit and indefinite-lived intangible asset and could result in an impairment charge, which could services are performed, fees are fixed or determinable and collectability is reasonably assured. Revenue relating to prod- ucts that provide for more than one deliverable is recognized based upon the relative fair value to the customer of each deliverable as each deliverable is provided. Revenue relating to agreements that provide for more than one service is recog- nized based upon the relative fair value to the customer of each service component as each component is earned. If the fair value to the customer for each service is not objectively deter- minable, management makes its best estimate of the services’ stand-alone selling price and records revenue as it is earned over the service period. For arrangements that include multiple services, fair value of the service components are determined using an analysis that considers cash consideration that would be received for instances when the service components are sold separately. Advertising revenue is recognized when the page is run. Subscription income is recognized over the related subscription period. DEPRECIATION The costs of property and equipment are depreciated using the straight-line method based upon the following estimated useful lives: buildings and improvements from 15 to 40 years and equipment and furniture from 2 to 10 years. The costs of leasehold improvements are amortized over the lesser of the useful lives or the terms of the respec- tive leases. be material to our financial position and results of operations. ADVERTISING EXPENSE The cost of advertising is expensed We performed our impairment assessment of goodwill and indefinite-lived intangible assets and concluded that no impairment existed for the years ended December 31, 2016, 2015 and 2014. FOREIGN CURRENCY TRANSLATION We have operations in many foreign countries. For most international operations, the local currency is the functional currency. For international operations that are determined to be extensions of the par- ent company, the United States (“U.S.”) dollar is the functional as incurred. We incurred $35 million, $33 million and $35 mil- lion in advertising costs for the years ended December 31, 2016, 2015 and 2014, respectively. STOCK-BASED COMPENSATION Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which typically is the vesting period. Stock-based compensa- tion is classified as both operating- related expense and selling and general expense in the consolidated statements of income. currency. For local currency operations, assets and liabilities INCOME TAXES Deferred tax assets and liabilities are rec- are translated into U.S. dollars using end of period exchange ognized for the future tax consequences attributable to dif- rates, and revenue and expenses are translated into U.S. dol- ferences between financial statement carrying amounts of lars using weighted- average exchange rates. Foreign currency existing assets and liabilities and their respective tax bases. translation adjustments are accumulated in a separate com- Deferred tax assets and liabilities are measured using enacted ponent of equity. 56 S&P Global 2016 Annual Report tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize liabilities for uncertain tax positions taken or expected to be taken in income tax returns. the redemption features. Any adjustments to the redemption Accrued interest and penalties related to unrecognized tax value will impact retained income. See Note 9 — Equity for fur- benefits are recognized in interest expense and operating ther detail. expense, respectively. CONTINGENCIES We accrue for loss contingencies when Judgment is required in determining our provision for income both (a) information available prior to issuance of the financial taxes, deferred tax assets and liabilities and unrecognized tax statements indicates that it is probable that a liability had been benefits. In determining the need for a valuation allowance, the incurred at the date of the financial statements and (b)  the historical and projected financial performance of the operation amount of loss can reasonably be estimated. We continually that is recording a net deferred tax asset is considered along assess the likelihood of any adverse judgments or outcomes with any other pertinent information. to our contingencies, as well as potential amounts or ranges We file income tax returns in the U.S. federal jurisdiction, vari- ous states, and foreign jurisdictions, and we are routinely under audit by many different tax authorities. We believe that our accrual for tax liabilities is adequate for all open audit years based on our assessment of many factors including past expe- rience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. It is possible that examinations will be settled prior to December 31, 2017. If any of these tax audit settlements do occur within that period we would make any necessary adjustments to the accrual for unrecognized tax of probable losses, and recognize a liability, if any, for these contingencies based on an analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Because many of these matters are resolved over long periods of time, our estimate of liabilities may change due to new developments, changes in assumptions or changes in our strategy related to the matter. When we accrue for loss con- tingencies and the reasonable estimate of the loss is within a range, we record its best estimate within the range. We disclose an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may be incurred. benefits. Until formal resolutions are reached between us and RECENT ACCOUNTING STANDARDS In August of 2016, the the tax authorities, the determination of a possible audit set- Financial Accounting Standards Board (“FASB”) issued guid- tlement range with respect to the impact on unrecognized tax ance providing amendments to eight specific statement of cash benefits is not practicable. On the basis of present information, flows classification issues. The guidance is effective for report- our opinion is that any assessments resulting from the current ing periods beginning after December 15, 2017; however, early audits will not have a material effect on our consolidated finan- adoption is permitted. We do not expect this guidance to have cial statements. a significant impact on our consolidated financial statements. REDEEMABLE NONCONTROLLING INTEREST The agree- In March of 2016, the FASB issued guidance to modify several ment with the minority partners of our S&P Dow Jones Indices aspects of accounting for share-based payment transactions, LLC joint venture established in June of 2012 contains redemp- including the accounting for income taxes, forfeitures, stat- tion features whereby interests held by our minority partners utory tax withholding requirements, as well as classification are redeemable either (i) at the option of the holder or (ii) upon in the statement of cash flows. This guidance will require rec- the occurrence of an event that is not solely within our control. ognizing excess tax benefits and deficiencies as income tax Since redemption of the noncontrolling interest is outside of our expense or benefit in the statement of income, instead of in control, this interest is presented on our consolidated balance equity as under the current guidance. We reported excess tax sheets under the caption “Redeemable noncontrolling inter- benefits from share-based payments of $41 million, $69 mil- est.” If the interest were to be redeemed, we would be required lion and $128 million for the years ended December 31, 2016, to purchase all of such interest at fair value on the date of 2015 and 2014, respectively. In addition, these amounts will redemption. We adjust the redeemable noncontrolling interest be classified as an operating activity in the statement of cash each reporting period to its estimated redemption value, but flows, instead of as a financing activity. Cash paid for shares never less than its initial fair value, using a combination of an withheld on the employees’ behalf will be classified as a financ- income and market valuation approach. Our income and mar- ing activity, instead of as an operating activity. Cash paid for ket valuation approaches may incorporate Level 3 measures for employee taxes was $55 million, $92 million and $95 million instances when observable inputs are not available, including for the years ended December 31, 2016, 2015 and 2014, respec- assumptions related to expected future net cash flows, long- tively. The 2016, 2015 and 2014 amounts of excess tax bene- term growth rates, the timing and nature of tax attributes, and fits from share-based payments and cash paid for employee S&P Global 2016 Annual Report 57 taxes are not necessarily indicative of future amounts that may certain legal entities. All legal entities are subject to reevalu- arise from the implementation of the new accounting guidance. ation under the revised consolidation model. This guidance is The guidance is effective for reporting periods beginning after effective for reporting periods beginning after December 15, December 15, 2016 is required to be adopted as follows: 1) pro- 2015; however, early adoption is permitted. The adoption of this spectively for the recognition of excess tax benefits and defi- guidance did not have a significant impact on our consolidated ciencies in the tax provision, 2) retrospectively or prospectively financial statements. for the classification of excess tax benefits and deficiencies in the statement of cash flows, and 3) retrospectively for the clas- sification of cash paid for shares withheld to satisfy employee taxes in the statement of cash flows. In January of 2015, the FASB issued guidance that eliminates the concept of reporting extraordinary items, but retains cur- rent presentation and disclosure requirements for an event or transaction that is of an unusual nature or of a type that indi- In February of 2016, the FASB issued guidance that amends cates infrequency of occurrence. Transactions that meet both accounting for leases. Under the new guidance, a lessee will criteria would now also follow such presentation and disclosure recognize assets and liabilities but will recognize expenses requirements. This guidance is effective for reporting periods similar to current lease accounting. The guidance is effec- beginning after December 15, 2015; however, early adoption is tive for reporting periods beginning after December 15, 2018; permitted. The adoption of this guidance did not have a signifi- however, early adoption is permitted. The new guidance must cant impact on our consolidated financial statements. be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. We are currently evaluating the impact of the adop- tion of this guidance on our consolidated financial statements. In August of 2014, the FASB issued guidance that requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise sub- stantial doubt about the entity’s ability to continue as a going In January of 2016, the FASB issued guidance to enhance the concern within one year after the date the financial statements reporting model for financial instruments, which includes are issued and provide related disclosures. This guidance is amendments to address certain aspects of recognition, mea- effective for reporting periods ending after December 15, 2016; surement, presentation and disclosure. The guidance is effec- however, early adoption is permitted. The adoption of this guid- tive for reporting periods beginning after December 15, 2017. ance did not have a significant impact on our consolidated We do not expect this guidance to have a significant impact on financial statements. our consolidated financial statements. In May of 2014, the FASB and the International Accounting In November of 2015, the FASB issued guidance to simplify Standards Board (“IASB”) issued jointly a converged standard the presentation of deferred income taxes. The guidance on the recognition of revenue from contracts with customers requires that deferred tax liabilities and assets be classified which is intended to improve the financial reporting of reve- as noncurrent in a classified statement of financial position. nue and comparability of the top line in financial statements This guidance is effective for reporting periods beginning after globally. The core principle of the new standard is for the rec- December 15, 2016; however, early adoption is permitted. We ognition of revenue to depict the transfer of goods or services early adopted this guidance in the fourth quarter of 2016, pro- to customers in amounts that reflect the payment to which the spectively, and accordingly prior year amounts have not been company expects to be entitled in exchange for those goods or reclassified. In September of 2015, the FASB issued guidance intended to simplify the accounting for measurement- period adjustments made to provisional amounts recognized in a business com- bination. The guidance eliminates the requirement to retro- spectively account for those adjustments. The guidance was effective on January 1, 2016, and the adoption of this guidance did not have a significant impact on our consolidated financial statements. services. The new standard will also result in enhanced reve- nue disclosures, provide guidance for transactions that were not previously addressed comprehensively and improve guid- ance for multiple- element arrangements. In August of 2015, the FASB issued guidance deferring the effective date of the new revenue standard by one year. Subsequently, the FASB issued implementation guidance related to the new revenue stan- dard, including the following: In March of 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations; in April of 2016, the FASB clar- In February of 2015, the FASB issued guidance that requires ified guidance on performance obligations and the licensing management to evaluate whether they should consolidate implementation guidance; in May of 2016, the FASB issued a 58 S&P Global 2016 Annual Report practical expedient in response to identified implementation energy analytical capabilities by expanding its oil offering issues. The new guidance will be effective for annual reporting and strengthening its position in the natural gas and power periods beginning after December 15, 2017, including interim markets. We accounted for the acquisition of PIRA using the reporting periods within that reporting period. Early adoption purchase method of accounting. The acquisition of PIRA is is permitted only as of annual reporting periods beginning not material to our consolidated financial statements. after December 15, 2016, including interim reporting periods In June of 2016, Market and Commodities Intelligence within that reporting period. We are currently evaluating the acquired RigData, a provider of daily information on rig application of a transition method and the impact that adop- activity for the natural gas and oil markets across North tion of these updates will have on our consolidated financial America. The purchase enhances Market and Commodities statements. At this point, we believe the new standard will have Intelligence’s energy analytical capabilities by strengthen- an impact on: 1) the accounting for certain long-term deferred ing its position in natural gas and enhancing its oil offering. revenue in our Ratings segment which may contain a financing We accounted for the acquisition of RigData using the pur- component, 2) the timing of revenue recognized in our Market chase method of accounting. The acquisition of RigData is and Commodities Intelligence segment for long term contracts not material to our consolidated financial statements. with price escalations, and 3) the accounting for fees for histor- In March of 2016, Market and Commodities Intelligence ical data in our Market and Commodities Intelligence segment acquired Commodity Flow, a specialist technology and busi- currently recognized over the term of a subscription. We do not ness intelligence service for the global waterborne com- expect these changes to have a significant impact on our con- modity and energy markets. The purchase helps extend solidated financial statements. RECLASSIFICATION Certain prior year amounts have been reclassified for compa- rability purposes. 2. Acquisitions and Divestitures ACQUISITIONS 2016 For the year ended December  31, 2016, we paid cash for acquisitions, net of cash acquired, totaling $177 million. None of our acquisitions were material either individually or in the aggregate, including the pro forma impact on earnings. All acquisitions were funded with cash flows from operations. Acquisitions completed during the year ended December 31, 2016 by segment included: Market and Commodities Intelligence In December of 2016, Market and Commodities Intelligence acquired a 2.54% equity investment in Kensho Technologies, Inc. (“Kensho”), a financial technology startup in market data analytics. We accounted for the acquisition of Kensho on a cost basis. Our investment in Kensho is not material to our consolidated financial statements. In September of 2016, Market and Commodities Intelligence acquired PIRA Energy Group (“PIRA”), a global provider of energy research and forecasting products and services. The purchase enhances Market and Commodities Intelligence’s Market and Commodities Intelligence’s trade flow analyti- cal capabilities and complements its existing shipping ser- vices. We accounted for the acquisition of Commodity Flow using the purchase method of accounting. The acquisition of Commodity Flow is not material to our consolidated financial statements. Following our acquisition of PIRA, we made a contingent pur- chase price payment in 2016 for $34  million that has been reflected in the consolidated statement of cash flows as a financing activity. Following our acquisition of National Automobile Dealers Association’s Used Car Guide (“UCG”) at J.D. Power in July of 2015, we made a contingent purchase price payment in 2016 for $5 million that has been reflected in the consolidated state- ment of cash flows as a financing activity. Indices In October of 2016, Indices acquired Trucost plc, a leader in carbon and environmental data and risk analysis through its subsidiary S&P Global Indices UK Limited. The purchase will build on Indices’ current portfolio of Environmental, Social and Governance solutions. The acquisition of Trucost plc is not material to our consolidated financial statements. Ratings In June of 2016, Ratings acquired a 49% equity investment in Thailand’s TRIS Rating Company Limited from its parent company, TRIS Corporation Limited. The transaction extends an existing association between Ratings and TRIS Rating and deepens their commitment to capital markets in Thailand. S&P Global 2016 Annual Report 59 We accounted for the acquisition of TRIS Rating Company Following our acquisition of UCG at J.D. Power in July of 2015, using the equity method of accounting. The equity invest- we made a contingent purchase price payment in 2015 for ment in TRIS Rating is not material to our consolidated finan- $5 million that has been reflected in the consolidated state- cial statements. ment of cash flows as a financing activity. For acquisitions during 2016 that were accounted for using the For acquisitions during 2015 that were accounted for using the purchase method, the excess of the purchase price over the purchase method, the excess of the purchase price over the fair value of the net assets acquired is allocated to goodwill and fair value of the net assets acquired is allocated to goodwill and other intangibles. The goodwill recognized on our acquisitions other intangibles. Intangible assets recorded for all transac- is largely attributable to anticipated operational synergies and tions are amortized using the straight-line method for periods growth opportunities as a result of the acquisition. The intangi- not exceeding 18 years. ble assets, excluding goodwill and indefinite-lived intangibles, will be amortized over their anticipated useful lives between 3 and 10 years which will be determined when we finalize our Acquisition of SNL ACQUISITION- RELATED EXPENSES During the year ended purchase price allocations. The goodwill for PIRA and RigData December  31, 2015, the Company incurred approximately is expected to be deductible for tax purposes. 2015 For the year ended December 31, 2015, we paid cash for acqui- sitions, net of cash acquired, totaling $2.4  billion. We used the net proceeds of our $2.0 billion of senior notes issued in August of 2015 and cash on hand to finance the acquisition of SNL. All other acquisitions were funded with cash flows from operations. Acquisitions completed during the year ended December 31, 2015 by segment included: Market and Commodities Intelligence In September of 2015, we acquired SNL Financial LC (“SNL”) for $2.2 billion. SNL is a global provider of news, data, and $37 million of acquisition- related costs related to the acquisi- tion of SNL. These expenses are included in selling and general expenses in our consolidated statements of income. ALLOCATION OF PURCHASE PRICE Our acquisition of SNL was accounted for using the purchase method. Under the pur- chase method, the excess of the purchase price over the fair value of the net assets acquired is allocated to goodwill and other intangibles. The goodwill recognized is largely attributable to anticipated operational synergies and growth opportunities as a result of the acquisition. The intangible assets, excluding goodwill and indefinite-lived intangibles, will be amortized over their anticipated useful lives between 10 and 18 years. The goodwill is expected to be deductible for tax purposes. analytical tools to five sectors in the global economy: finan- The following table presents the final allocation of purchase cial services, real estate, energy, media & communications, price to the assets and liabilities of SNL as a result of the and metals & mining. SNL delivers information through its suite of web, mobile and direct data feed platforms that helps clients, including investment and commercial banks, investors, corporations, and regulators make decisions, improve efficiency, and manage risk. See below for further detail related to this transaction. In July of 2015, we acquired the entire issued share capital of Petromedia Ltd and its operating subsidiaries (“Petromedia”), an independent provider of data, intelligence, news and tools acquisition. (in millions) Current assets Property, plant and equipment Goodwill Other intangible assets, net: Databases and software Customer relationships Tradenames Other intangibles to the global fuels market that offers a suite of products Other intangible assets, net that provides clients with actionable data and intelligence that enable informed decisions, minimize risk and increase efficiency. We accounted for the acquisition of Petromedia using the purchase method of accounting. The acquisition of Petromedia is not material to our consolidated financial statements. Other non- current assets Total assets acquired Current liabilities Unearned revenue Other non- current liabilities Total liabilities acquired Net assets acquired 60 S&P Global 2016 Annual Report $ 29 19 1,574 421 162 185 4 772 1 2,395 (43) (117) (1) (161) $ 2,234 SUPPLEMENTAL PRO FORMA INFORMATION Supplemental comprehensive suite of data and analytics products on the information on an unaudited pro forma basis is presented European natural gas and liquefied natural gas markets below for the years ended December 31, 2015 and 2014 as if as well as a range of advisory services leveraging Eclipse’s the acquisition of SNL occurred on January 1, 2014. The pro knowledge base, data capabilities, and modeling suite of forma financial information is presented for comparative products. This transaction complements our North American purposes only, based on estimates and assumptions, which natural gas capabilities, which we obtained from our Bentek the Company believes to be reasonable but not necessarily Energy LLC acquisition in 2011. We accounted for the acqui- indicative of the consolidated financial position or results of sition of Eclipse using the purchase method of accounting. operations in future periods or the results that actually would The acquisition of Eclipse is not material to our consolidated have been realized had this acquisition been completed at financial statements. the beginning of 2015. The unaudited pro forma information includes intangible asset charges and incremental borrowing Indices costs as a result of the acquisition, net of related tax, estimated In March of 2014, we acquired the intellectual property of a using the Company’s effective tax rate for continuing opera- family of Broad Market Indices (“BMI”) from Citigroup Global tions for the periods presented. (in millions) Pro forma revenue Pro forma net income (loss) from continuing operations Year Ended December 31, 2015 2014 $ 5,477 $ 5,275 Markets Inc. The BMI provides a broad measure of the global equities markets which includes approximately 11,000 com- panies in more than 52 countries covering both developed and emerging markets. We accounted for the acquisition of the intellectual property on a cost basis and it was not mate- $ 1,258 $ (251) rial to our consolidated financial statements. 2014 For the year ended December  31, 2014, we paid cash for acquisitions, net of cash acquired, totaling $82 million. None of our acquisitions were material either individually or in the aggregate, including the pro forma impact on earnings. All acquisitions were funded with cash flows from operations. Acquisitions completed during the year ended December 31, 2014 by segment included: Ratings In October of 2014, we acquired BRC Investor Services S.A. (“BRC”), a Colombia-based ratings firm providing risk clas- sifications of banks, financial services providers, insurance companies, corporate bonds and structured issues that will expand our presence in the Latin American credit markets. We accounted for the acquisition of BRC using the purchase method of accounting. The acquisition is not material to our consolidated financial statements. Following CRISIL’s acquisition of Coalition Development Ltd. (“Coalition”) that occurred in July of 2012, we made a contin- gent purchase price payment in 2014 for $11 million that has been reflected in the consolidated statement of cash flows as a financing activity. For acquisitions during 2014 that were accounted for using the purchase method, the excess of the purchase price over the fair value of the net assets acquired is allocated to goodwill and other intangibles. Intangible assets recorded for all transac- tions are amortized using the straight-line method for periods not exceeding 7 years. None of the goodwill acquired from our acquisitions during 2014 will be deductible for tax purposes. Non-cash investing activities Liabilities assumed in conjunction with the acquisition of busi- nesses are as follows: Year ended December 31, (in millions) 2016 2015 Fair value of assets acquired Cash paid (net of cash acquired) $ 253 $ 2,576 2,401 211 Liabilities assumed $ 42 $ 175 2014 $ 67 52 $ 15 DIVESTITURES — CONTINUING OPERATIONS In November of 2016, we entered into a put option agreement that gave the Company the right, but not the obligation, to put the entire share capital of Quant House SAS (“QuantHouse”), included in our Market and Commodities Intelligence seg- ment, to QH Holdco, an independent third party. As a result, we classified the assets and liabilities of QuantHouse, net of Market and Commodities Intelligence our costs to sell, as held for sale in our consolidated balance In July of 2014, we acquired Eclipse Energy Group AS and sheet as of December 31, 2016 resulting in an aggregate loss its operating subsidiaries (“Eclipse”), which provides a of $31 million. On January 4, 2017, we exercised the put option, S&P Global 2016 Annual Report 61 thereby entering into a definitive agreement to sell QuantHouse Commodities Intelligence segment, and initiated an active to QH Holdco. On January 9, 2017, we completed the sale of program to sell the business. The assets and liabilities of J.D. QuantHouse to QH Holdco. Power were classified as held for sale in our consolidated bal- ance sheet as of December 31, 2015. 2016 During the year ended December 31, 2016, we completed the following dispositions that resulted in a net pre-tax gain of 2014 During the year ended December 31, 2014, we completed the $1.1 billion, which was included in (gain) loss on dispositions in following dispositions that resulted in a net pre-tax loss of the consolidated statement of income: $9 million, which was included in (gain) loss on dispositions in In October of 2016, we completed the sale of Equity and Fund the consolidated statement of income: Research (“Equity Research”), a business within our Market On July 31, 2014, we completed the sale of the Company’s and Commodities Intelligence segment to CFRA, a lead- aircraft to Harold W. McGraw III, then Chairman of the ing independent provider of forensic accounting research, Company’s Board of Directors and former President and CEO analytics and advisory services. During the year ended of the Company for a purchase price of $20 million. During December 31, 2016, we recorded a pre-tax gain of $9 million the second quarter of 2014, we recorded a non-cash impair- ($5 million after-tax) in (gain) loss on dispositions in the con- ment charge of $6 million in (gain) loss on dispositions in our solidated statement of income related to the sale of Equity consolidated statement of income as a result of the pending Research. sale. See Note 14 — Related Party Transactions for further In October of 2016, we completed the sale of Standard information. & Poor’s Securities Evaluations, Inc. (“SPSE”) and Credit On June 30, 2014, we completed the sale of our data center Market Analysis (“CMA”), two businesses within our Market to Quality Technology Services, LLC which owns, operates and Commodities Intelligence segment, for $425 million in and manages data centers. Net proceeds from the sale of cash to Intercontinental Exchange, an operator of global $58 million were received in July of 2014. The sale included exchanges, clearing houses and data services. During the all of the facilities and equipment on the south campus of year ended December 31, 2016, we recorded a pre-tax gain our East Windsor, New Jersey location, inclusive of the rights of $364 million ($297 million after-tax) in (gain) loss on dis- and obligations associated with an adjoining solar power positions in the consolidated statement of income related to field. The sale resulted in an expense of $3 million recorded the sale of SPSE and CMA. in (gain) loss on dispositions in our consolidated statement In September of 2016, we completed the sale of J.D. Power, of income, which is in addition to the non-cash impairment included within our Market and Commodities Intelligence charge we recorded in the fourth quarter of 2013. segment, for $1.1  billion to XIO Group, a global alternative investments firm headquartered in London. During the year ended December  31, 2016, we recorded a pre-tax gain of The components of assets and liabilities held for sale in the consolidated balance sheet consist of the following: $728 million ($516 million after-tax) in (gain) loss on disposi- (in millions) tions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabili- ties of J.D. Power are no longer reported in our consolidated balance sheet as of December 31, 2016. Accounts receivable, net Goodwill Other intangible assets, net Other assets 2015 During the year ended December  31, 2015, we recorded a pre-tax gain of $11 million in (gain) loss on dispositions in the consolidated statement of income related to the sale of our interest in a legacy McGraw Hill Construction investment. Assets of a business held for sale Accounts payable and accrued expenses Unearned revenue Other liabilities Liabilities of a business held for sale December 31, 20161 December 31, 20152 $ 4 — — 3 $ 7 $ 3 7 35 $ 45 $ 58 75 335 35 $ 503 $ 42 64 100 $ 206 In the fourth quarter of 2015, we began exploring strategic 1 Assets and liabilities held for sale as of December  31, 2016 relate to alternatives for J.D. Power, included within our Market and QuantHouse. 2 Assets and liabilities held for sale as of December 31, 2015 relate to J.D. Power. 62 S&P Global 2016 Annual Report The operating profit of our businesses that were disposed of or The key components of income from discontinued operations held for sale for the years ending December 31, 2016, 2015, and for the year ended December 31, 2014 consist of the following: 2014 is as follows: (in millions) Operating profit 1 Year ended December 31, 2016 $62 2015 $85 2014 $71 1 The year ended December 31, 2016 excludes a pre-tax gain of $1.1 billion on our dispositions. DISCONTINUED OPERATIONS On November  3, 2014, we completed the sale of McGraw (in millions) Revenue Expenses Operating income Provision for taxes on income Income from discontinued operations, net of tax Pre-tax gain on sale from discontinued operations Hill Construction, which has historically been part of the Provision for taxes on gain on sale Market and Commodities Intelligence segment, to Symphony Gain on sale of discontinued operations, Technology Group for $320  million in cash. We recorded an net of tax after-tax gain on the sale of $160 million, which is included in discontinued operations, net in the consolidated statement of income for the year ended December 31, 2014. We used the after-tax proceeds from the sale to make selective acquisi- tions, investments, share repurchases and for general corpo- rate purposes. Income from discontinued operations attributable to S&P Global Inc. common shareholders Results from discontinued operations for the year ended December  31, 2014 included the after-tax gain on sale of McGraw Hill Construction of $160 million. Year ended December 31, 2014 $ 139 110 29 11 18 289 129 160 $ 178 3. Goodwill and Other Intangible Assets GOODWILL Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. The change in the carrying amount of goodwill by segment is shown below: (in millions) Balance as of December 31, 2014 Acquisitions Reclassifications 1 Other (primarily Fx) Balance as of December 31, 2015 Acquisitions Dispositions Other (primarily Fx) Market and Commodities Intelligence $ 889 1,602 (75) (24) 2,392 106 (35) (6) Ratings $ 122 — — (8) 114 — — (5) Indices $ 376 — — — 376 7 — — Total $ 1,387 1,602 (75) (32) 2,882 113 (35) (11) Balance as of December 31, 2016 $ 109 $ 2,457 $ 383 $ 2,949 1 Relates to J.D. Power, which is classified as assets held for sale in our consolidated balance sheet as of December 31, 2015. Goodwill additions and dispositions in the table above relate to transactions discussed in Note 2 — Acquisitions and Divestitures. S&P Global 2016 Annual Report 63 OTHER INTANGIBLE ASSETS Other intangible assets include both indefinite-lived assets not subject to amortization and definite-lived assets subject to amortization. We have indefinite-lived assets with a carrying value of $714 million as of December 31, 2016 and 2015 that consist of the following: $380 million and $90 million for Dow Jones Indices intellectual property and the Dow Jones tradename, respectively, that we recorded as part of the transaction to form S&P Dow Jones Indices LLC in 2012. $185 million within our Market and Commodities Intelligence segment for the SNL tradename. $59 million within our Indices segment for the Goldman Sachs Commodity Index intellectual property and the Broad Market Indices intellectual property. The following table summarizes our definite-lived intangible assets: Content $ 139 Customer relationships Tradenames Other intangibles $ 228 $ 46 $ 111 (in millions) Cost Databases and software Balance as of December 31, 2014 Acquisitions Reclassifications 1 Other (primarily Fx) Balance as of December 31, 2015 Acquisitions Dispositions Impairment 2 Reclassifications Other (primarily Fx) $ 113 421 (19) (5) 510 — — (2) — (2) — — — 139 — — — — — — (62) 2 168 — — — 165 (3) Balance as of December 31, 2016 $ 506 $ 139 $ 330 Accumulated amortization Balance as of December 31, 2014 Current year amortization Reclassifications 1 Other (primarily Fx) Balance as of December 31, 2015 Current year amortization Dispositions Impairment 2 Reclassifications Other (primarily Fx) $ 88 $ 59 $ 80 20 (18) (2) 88 47 — (2) 2 (3) 14 — — 73 14 — — — — 9 (30) 1 60 21 — — 5 (2) Balance as of December 31, 2016 $ 132 $ 87 $ 84 Net definite-lived intangibles: December 31, 2015 December 31, 2016 $ 422 $ 374 $ 66 $ 52 $ 108 $ 246 Total $ 637 598 (91) (11) 1,133 98 (10) (24) — (14) 177 (8) (11) 269 98 (8) (22) (166) (8) $ 163 $ 1,183 $ 64 $ 326 22 (14) (5) 67 12 (6) (10) (7) (4) 67 (64) (5) 324 96 (7) (12) — (10) $ 52 $ 391 $ 202 $ 111 $ 809 $ 792 — (2) 3 47 — (2) — 1 (1) $ 45 $ 35 2 (2) 1 36 2 (1) — — (1) $ 36 $ 11 $ 9 1 Relates to J.D. Power, which is classified as assets held for sale in our consolidated balance sheet as of December 31, 2015. 2 Relates to a technology- related impairment charge at Market and Commodities Intelligence and recorded in selling and general expenses in our consolidated statement of income. Definite-lived intangible assets are being amortized on a straight-line basis over periods of up to 20 years. The weighted- average life of the intangible assets as of December 31, 2016 is approximately 12 years. Amortization expense for the years ended December 31, 2016, 2015 and 2014 was $96 million, $67 million, and $48 million, respec- tively. Expected amortization expense for intangible assets over the next five years for the years ended December 31, assuming no further acquisitions or dispositions, is as follows: (in millions) Amortization expense 2017 $88 2018 $84 2019 $79 2020 $73 2021 $62 64 S&P Global 2016 Annual Report 4. Taxes on Income The principal temporary differences between the accounting for income and expenses for financial reporting and income tax Income before taxes on income resulted from domestic and purposes are as follows: foreign operations is as follows: (in millions) Domestic operations Foreign operations Year Ended December 31, (in millions) 2016 2015 2014 Deferred tax assets: $ 2,585 $ 1,266 $ (423) 477 603 549 Total continuing income before taxes $ 3,188 $ 1,815 $ 54 The provision for taxes on income consists of the following: (in millions) Federal: Current Deferred Year Ended December 31, 2016 2015 2014 $ 641 $ 90 $ 285 (213) 79 276 Total federal 720 366 72 Foreign: Current Deferred Total foreign State and local: Current Deferred 133 (4) 111 (1) 135 1 129 110 136 99 12 34 37 62 (25) Total state and local 111 71 37 Total provision for taxes for continuing operations 960 547 245 Provision for discontinued operations — — 140 Legal and regulatory settlements Employee compensation Accrued expenses Postretirement benefits Unearned revenue Allowance for doubtful accounts Loss carryforwards Other Total deferred tax assets Deferred tax liabilities: Goodwill and intangible assets Fixed assets Other Total deferred tax liabilities Net deferred income tax asset (liability) before valuation allowance Valuation allowance December 31, 2016 2015 $ 23 $ 45 91 72 126 39 12 114 18 78 87 105 33 11 112 3 452 517 (320) (3) — (299) (9) — (323) (308) 129 (116) 209 (98) Net deferred income tax asset (liability) $ 13 $ 111 Reported as: Current deferred tax assets Current deferred tax liabilities Non- current deferred tax assets Non- current deferred tax liabilities $ — $ 109 (8) 33 (23) — 61 (48) Net deferred income tax asset (liability) $ 13 $ 111 Total provision for taxes $ 960 $ 547 $ 385 In November of 2015, the FASB issued guidance to simplify A reconciliation of the U.S. federal statutory income tax rate to requires that deferred tax liabilities and assets be classified our effective income tax rate for financial reporting purposes as noncurrent in a classified statement of financial position. is as follows: This guidance is effective for reporting periods beginning after Year Ended December 31, December 15, 2016; however, early adoption is permitted. We the presentation of deferred income taxes. The guidance U.S. federal statutory income tax rate Legal and regulatory settlements State and local income taxes Divestitures Foreign operations S&P Dow Jones Indices LLC joint venture Tax credits and incentives Other, net Effective income tax rate for continuing operations 2016 2015 2014 35.0% 35.0% 35.0% — 2.7 (4.3) (2.0) (1.2) (1.6) 1.5 — 524.1 64.2 2.6 — — (79.6) (3.2) (2.0) (2.9) 0.6 (60.2) (91.5) 61.7 30.1% 30.1% 453.7% early adopted this guidance in the fourth quarter of 2016, pro- spectively, and accordingly prior year amounts have not been reclassified. We record valuation allowances against deferred income tax assets when we determine that it is more likely than not based upon all the available evidence that such deferred income tax assets will not be realized. The valuation allowance is primarily related to operating losses. We have not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefi- nitely reinvested in foreign operations. Undistributed earnings that are indefinitely reinvested in foreign operations amounted to $1.7  billion at December  31, 2016. Quantification of the S&P Global 2016 Annual Report 65 deferred tax liability, if any, associated with indefinitely rein- experience and interpretations of tax law. This assessment vested earnings is not practicable. relies on estimates and assumptions and may involve a series We made net income tax payments for continuing and discon- tinued operations totaling $683 million in 2016, $260 million in 2015, and $419 million in 2014. As of December 31, 2016, we had net operating loss carryforwards of $446 million, of which a major portion has an unlimited carryover period under cur- rent law. of complex judgments about future events. It is possible that tax examinations will be settled prior to December 31, 2017. If any of these tax audit settlements do occur within that period, we would make any necessary adjustments to the accrual for unrecognized tax benefits. Until formal resolutions are reached between us and the tax authorities, the determination of a possible audit settlement range with respect to the impact on A reconciliation of the beginning and ending amount of unrec- unrecognized tax benefits is not practicable. ognized tax benefits is as follows: Year ended December 31, 5. Debt A summary of short-term and long-term debt outstanding is (in millions) 2016 2015 2014 Balance at beginning of year $ 120 $ 118 $ 82 Additions based on tax positions related to the current year Additions for tax positions of prior years Reduction for tax positions of prior years Reduction for settlements 35 14 (3) (5) 22 12 (14) (18) 30 33 (11) (16) Balance at end of year $ 161 $ 120 $ 118 The total amount of federal, state and local, and foreign unrec- ognized tax benefits as of December 31, 2016, 2015 and 2014 was $161 million, $120 million and $118 million, respectively, as follows: (in millions) 5.9% Senior Notes, due 2017 1 2.5% Senior Notes, due 2018 2 3.3% Senior Notes, due 2020 3 4.0% Senior Notes, due 2025 4 4.4% Senior Notes, due 2026 5 2.95% Senior Notes, due 2027 6 6.55% Senior Notes, due 2037 7 Commercial paper exclusive of interest and penalties. The increase of $46 million Total debt in 2016 (excluding settlements) is the amount of unrecognized Less: short-term debt including current tax benefits that unfavorably impacted tax expense. The unfa- maturities vorable impact to the tax provision was partially offset by the Long-term debt resolution of tax audits in multiple jurisdictions. We recognize accrued interest and penalties related to unrec- ognized tax benefits in interest expense and operating- related expense, respectively. In addition to the unrecognized tax ben- efits, as of December 31, 2016 and 2015, we had $44 million and $31 million, respectively, of accrued interest and penalties associated with uncertain tax positions. During 2016, we completed the federal income tax audit for 2014. The U.S. federal income tax audits for 2016 and 2015 are in process. During 2016, we completed various state and foreign tax audits and, with few exceptions, we are no longer subject to federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2008. The impact to tax expense in 2016, 2015 and 2014 was not material. We file income tax returns in the U.S. federal jurisdiction, var- ious states, and foreign jurisdictions, and we are routinely under audit by many different tax authorities. We believe that our accrual for tax liabilities is adequate for all open audit years based on an assessment of many factors including past 66 S&P Global 2016 Annual Report 1 We made a $400  million early repayment of our 5.9% senior notes on October 20, 2016. 2 Interest payments are due semiannually on February 15 and August 15, and as of December 31, 2016, the unamortized debt discount and issuance costs total $2 million. 3 Interest payments are due semiannually on February 14 and August 14, and as of December 31, 2016, the unamortized debt discount and issuance costs total $4 million. 4 Interest payments are due semiannually on June 15 and December 15, and as of December 31, 2016, the unamortized debt discount and issuance costs total $9 million. 5 Interest payments are due semiannually on February 15 and August 15, and as of December 31, 2016, the unamortized debt discount and issuance costs total $9 million. 6 Interest payments are due semiannually on January 22 and July 22, beginning on January 22, 2017, and as of December 31, 2016, the unamortized debt dis- count and issuance costs total $8 million. 7 Interest payments are due semiannually on May 15 and November 15, and as of December 31, 2016, the unamortized debt discount and issuance costs total $4 million. Annual long-term debt maturities are scheduled as follows based on book values as of December 31, 2016: no amounts due in 2017, $398 million due in 2018, no amounts due in 2019, $696 million due in 2020, no amounts due in 2021, and $2.5 bil- lion due thereafter. December 31, 2016 2015 $ — $ 399 398 398 696 695 691 690 891 890 492 — 396 396 — 143 3,564 3,611 — 143 $ 3,564 $ 3,468 On September 22, 2016, we issued $500 million of 2.95% senior notes due in 2027. The notes are fully and unconditionally guar- anteed by our wholly-owned subsidiary, Standard & Poor’s Financial Services LLC. We used the net proceeds to fund the $400 million early repayment of our 5.9% senior notes due in 2017 on October 20, 2016, and intend to use the balance for general corporate purposes. 6. Derivative Instruments CASH FLOW HEDGES Our exposure to market risk includes changes in foreign exchange rates. We have operations in foreign countries where the functional currency is primarily the local currency. For inter- national operations that are determined to be extensions of On August  18, 2015, we issued $2.0  billion of senior notes the parent company, the U.S. dollar is the functional currency. consisting of $400 million of 2.5% senior notes due in 2018, We typically have naturally hedged positions in most countries $700 million of 3.3% senior notes due in 2020 and $900 mil- from a local currency perspective with offsetting assets and lion of 4.4% senior notes due in 2026. The notes are fully and liabilities. As of December 31, 2016 and December 31, 2015, we unconditionally guaranteed by our wholly-owned subsidiary, have entered into foreign exchange forward contracts to hedge Standard & Poor’s Financial Services LLC. We used the net pro- the effect of adverse fluctuations in foreign currency exchange ceeds to finance the acquisition of SNL. rates. We do not enter into any derivative financial instruments On May 26, 2015, we issued $700 million of 4.0% senior notes for speculative purposes. due in 2025 and used a portion of the net proceeds for the During the three months ended March 31, 2016, we entered into repayment of short-term debt, including commercial paper. a series of foreign exchange forward contracts to hedge a por- The 4.0% senior notes will mature on June 15, 2025 and are tion of our Indian Rupee exposure through the fourth quarter fully and unconditionally guaranteed by our wholly-owned sub- of 2016. These contracts were intended to offset the impact sidiary, Standard & Poor’s Financial Services LLC. of movement of exchange rates on future operating costs and We have the ability to borrow a total of $1.2 billion through our commercial paper program, which is supported by our revolv- ing $1.2 billion five-year credit agreement (our “credit facility”) that we entered into on June 30, 2015. This credit facility will terminate on June 30, 2020. There were no commercial paper borrowings outstanding as of December 31, 2016. Commercial paper borrowings as of December 31, 2015 totaled $143 million with an average interest rate and term of 0.95% and 17 days, respectively. matured at the end of each quarter during 2016. The changes in the fair value of these contracts are initially reported in accu- mulated other comprehensive loss in our consolidated bal- ance sheet and are subsequently reclassified into selling and general expenses in the same period that the hedge contract matures. As of December 31, 2016, we estimate that $2 mil- lion of the net gains related to derivatives designated as cash flow hedges recorded in other comprehensive income (loss) is expected to be reclassified into earnings within the next twelve months. There was no hedge ineffectiveness for the year ended Depending on our indebtedness to cash flow ratio, we pay a December 31, 2016. commitment fee of 10 to 20 basis points for our credit facility, whether or not amounts have been borrowed. We currently pay a commitment fee of 15 basis points. The interest rate on bor- rowings under our credit facility is, at our option, calculated As of December 31, 2016 and December 31, 2015, the aggregate notional value of our outstanding foreign currency forward con- tracts was $65 million and $58 million, respectively. using rates that are primarily based on either the prevailing The following table provides information on the location and London Inter-Bank Offered Rate, the prime rate determined fair value amounts of our cash flow hedges as of December 31, by the administrative agent or the Federal Funds Rate. For cer- 2016 and December 31, 2015: tain borrowings under this credit facility, there is also a spread (in millions) based on our indebtedness to cash flow ratio added to the Balance Sheet Location December 31, 2016 2015 applicable rate. Our credit facility contains certain covenants. The only finan- cial covenant requires that our indebtedness to cash flow ratio, as defined in our credit facility, is not greater than 4 to 1, and this covenant level has never been exceeded. Prepaid and other current assets 1 Foreign exchange forward contracts $3 $1 1 We use the income approach to measure the fair value of our forward cur- rency forward contracts. The income approach uses pricing models that rely on observable inputs such as forward rates, and therefore are classified as Level 2. S&P Global 2016 Annual Report 67 The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges for the years ended December 31: Gain (Loss) Recognized in Accumulated Other Comprehensive Loss (effective portion) Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion) Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion) (in millions) Cash flow hedges — designated as hedging instruments Foreign exchange forward contracts 2016 2015 2014 $3 $ — $2 Selling and general expenses 2016 2015 2014 $4 $ — $ — The activity related to the change in unrealized gains (losses) in accumulated other comprehensive loss was as follows for the years ended December 31: (in millions) Net unrealized gains (losses) on cash flow hedges, net of taxes, beginning of year Change in fair value, net of tax Reclassification into earnings, net of tax Net unrealized gains (losses) on cash flow hedges, net of taxes, end of year Year ended December 31, 2016 $ (1) 7 (4) $ 2 2015 $ (1) — — $ (1) 2014 $ (3) 2 — $ (1) 7. Employee Benefits We maintain a number of active defined contribution retire- We also provide certain medical, dental and life insurance ben- ment plans for our employees. The majority of our defined efits for active and retired employees and eligible dependents. benefit plans are frozen. As a result, no new employees will be The medical and dental plans and supplemental life insurance permitted to enter these plans and no additional benefits for plan are contributory, while the basic life insurance plan is non- current participants in the frozen plans will be accrued. contributory. We currently do not prefund any of these plans. We also have supplemental benefit plans that provide senior We recognize the funded status of our retirement and post- management with supplemental retirement, disability and retirement plans in the consolidated balance sheets, with a death benefits. Certain supplemental retirement benefits corresponding adjustment to accumulated other comprehen- are based on final monthly earnings. In addition, we sponsor sive income, net of taxes. The amounts in accumulated other voluntary 401(k) plans under which we may match employee comprehensive income represent net unrecognized actuarial contributions up to certain levels of compensation as well as losses and unrecognized prior service costs. These amounts profit- sharing plans under which we contribute a percentage of will be subsequently recognized as net periodic pension cost eligible employees’ compensation to the employees’ accounts. pursuant to our accounting policy for amortizing such amounts. 68 S&P Global 2016 Annual Report BENEFIT OBLIGATION A summary of the benefit obligation and the fair value of plan assets, as well as the funded status for the retirement and postre- tirement plans as of December 31, is as follows (benefits paid in the table below include only those amounts contributed directly to or paid directly from plan assets): (in millions) Net benefit obligation at beginning of year Service cost Interest cost Plan participants’ contributions Actuarial loss (gain) Gross benefits paid Foreign currency effect Other adjustments Net benefit obligation at end of year Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Plan participants’ contributions Gross benefits paid Foreign currency effect Other adjustments Fair value of plan assets at end of year Funded status Amounts recognized in consolidated balance sheets: Non- current assets Current liabilities Non- current liabilities Retirement Plans Postretirement Plans 2016 2015 2016 $ 2,199 $ 2,462 6 96 — (189) (150) (26) — 3 78 — 196 (121) (75) (20) $ 80 — 2 4 (6) (10) — (13) 2,260 2,199 57 2,023 259 8 — (121) (74) (22) 2,236 (57) 15 — (150) (21) — — — 6 4 (10) — — 2,073 2,023 — 2015 $ 96 — 3 4 (12) (12) — 1 80 — — 8 4 (12) — — — $ (187) $ (176) $ (57) $ (80) $ 46 $ (8) (225) 36 (8) (204) $ — (8) (49) $ — (8) (72) $ (80) Accumulated benefit obligation Plans with accumulated benefit obligation in excess of the fair value of plan assets: Projected benefit obligation Accumulated benefit obligation Fair value of plan assets Amounts recognized in accumulated other comprehensive loss, net of tax: $ (187) $ (176) $ (57) $ 2,251 $ 2,190 $ 674 $ 1,810 $ 665 $ 1,801 $ 441 $ 1,598 Net actuarial loss (gain) Prior service credit Total recognized $ 483 $ 433 1 1 $ (35) (13) $ 484 $ 434 $ (48) $ (24) (5) $ (29) The actuarial loss included in accumulated other comprehensive loss for our retirement plans and expected to be recognized in net periodic pension cost during the year ending December 31, 2017 is $18 million. There is no prior service credit included in accumulated other comprehensive loss for our retirement plans expected to be recognized in net periodic benefit cost during the year ending December 31, 2017. There is an immaterial amount of actuarial loss and prior service credit included in accumulated other comprehensive loss for our postretirement plans expected to be recognized in net periodic benefit cost during the year ending December 31, 2017. S&P Global 2016 Annual Report 69 NET PERIODIC BENEFIT COST For purposes of determining annual pension cost, prior service costs are being amortized straight-line over the average expected remaining lifetime of plan participants expected to receive benefits. A summary of net periodic benefit cost for our retirement and postretirement plans for the years ended December 31, is as follows: (in millions) Service cost Interest cost Expected return on assets Amortization of: Actuarial loss (gain) Prior service (credit) cost Curtailment 1 Net periodic benefit cost Retirement Plans Postretirement Plans 2016 2015 2014 2016 2015 $ 3 $ 6 $ 78 (122) 96 (127) 5 99 (138) 16 — — 20 — — 11 — — $ — 2 — (1) — — 2014 $ 1 4 $ — 3 — (1) — (1) — (1) $ (25) $ (5) $ (23) $ 1 $ 2 $ 3 1 The curtailment gain for our postretirement plans in 2014 is a result of plan changes effective October 31, 2014 eliminating retiree medical and life insurance benefits for active employees not retiring by July 1, 2016. Our U.K. retirement plan accounted for a benefit of $10 million in 2016, $10 million in 2015, and $8 million in 2014 of the net periodic benefit cost attributable to the funded plans. Other changes in plan assets and benefit obligations recognized in other comprehensive income, net of tax for the years ended December 31, are as follows: (in millions) Net actuarial loss (gain) Recognized actuarial (gain) loss Prior service cost (credit) Total recognized Retirement Plans Postretirement Plans 2016 2015 2014 $ 60 (10) — $ (6) (13) — $ 232 (7) — 2016 $ (12) 1 (8) 2015 $ (17) — 1 $ 50 $ (19) $ 225 $ (19) $ (16) 2014 $ 3 1 (5) $ (1) The total cost for our retirement plans was $69 million for 2016, $91 million for 2015 and $81 million for 2014. Included in the total retirement plans cost are defined contribution plans cost of $65 million for 2016, $67 million for 2015 and $74 million for 2014. 70 S&P Global 2016 Annual Report ASSUMPTIONS Benefit obligation: Discount rate 2 Net periodic cost: Weighted- average healthcare cost rate 1 Discount rate — U.S. plan 2 Discount rate — U.K. plan 2 Return on assets 3 Retirement Plans Postretirement Plans 2016 2015 2014 2016 2015 2014 4.14% 4.47% 4.15% 3.69% 3.90% 3.60% 4.47% 3.84% 6.25% 4.15% 3.8% 5.0% 4.5% 6.25% 7.125% 7.0% 3.94% 7.0% 7.0% 3.60% 4.125% 1 The assumed weighted- average healthcare cost trend rate will decrease ratably from 7% in 2016 to 5% in 2024 and remain at that level thereafter. Assumed healthcare cost trends have an effect on the amounts reported for the healthcare plans. A one percentage point change in assumed healthcare cost trend creates the following effects: (in millions) Effect on postretirement obligation 1% point increase 1% point decrease $1 $(1) 2 Effective January 1, 2016, we changed our discount rate assumption on our U.S. retirement plans to 4.47% from 4.15% in 2015 and changed our discount rate assumption on our U.K. plan to 3.84% from 3.8% in 2015. At the end of 2015, we changed our approach used to measure service and interest costs on all of our retirement plans. For 2015 and prior periods presented, we measured service and interest costs utilizing a single weighted- average discount rate derived from the yield curve used to measure the benefit obligation. For 2016, we elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe this new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our benefit obligation. We have accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and, accordingly, have accounted for it on a prospective basis. Pension and postretirement medical costs decreased by approximately $14 million in 2016 as a result of this change. 3 The expected return on assets assumption is calculated based on the plan’s asset allocation strategy and projected market returns over the long-term. Effective January 1, 2017, our return on assets assumption for the U.S. plan and U.K. plan remained unchanged at 6.25%. CASH FLOWS In December of 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was enacted. The Act established a prescription drug benefit under Medicare, known as “Medicare Part D”, and a federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Our benefits pro- vided to certain participants are at least actuarially equivalent to Medicare Part D, and, accordingly, we are entitled to a subsidy. Expected employer contributions in 2017 are $8 million for each of our retirement and postretirement plans. In 2017, we may elect to make additional non- required contributions depending on investment performance and the pension plan status. Information about the expected cash flows for our retirement and postretirement plans and the impact of the Medicare subsidy is as follows: (in millions) 2017 2018 2019 2020 2021 2022–2026 Postretirement Plans 2 Retirement Plans1 Gross payments Retiree contributions Medicare subsidy3 Net payments $ 88 90 93 96 98 527 $ 12 11 10 9 8 30 $ (4) (4) (3) (3) (3) (12) $ — — — — — — $ 8 7 7 6 5 18 1 Reflects the total benefits expected to be paid from the plans or from our assets including both our share of the benefit cost and the participants’ share of the cost. 2 Reflects the total benefits expected to be paid from our assets. 3 Expected medicare subsidy amounts, for the years presented, are less than $1 million. FAIR VALUE OF PLAN ASSETS In accordance with authoritative guidance for fair value measurements certain assets and liabilities are required to be recorded at fair value. Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value hierarchy has been established which requires us to maximize the S&P Global 2016 Annual Report 71 use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs used to measure fair value are as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substan- tially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of our defined benefit plans assets as of December 31, 2016 and 2015, by asset class is as follows: (in millions) Cash and short-term investments Equities: U.S. indexes 1 U.S. growth and value U.K. International, excluding U.K. Fixed income: Long duration strategy 2 Intermediate duration securities Agency mortgage backed securities Asset backed securities Non- agency mortgage backed securities 3 International Real Estate U.K. 4 Other Total Collective investment funds Total (in millions) Cash, short-term investments, and other Equities: U.S. indexes 1 U.S. growth and value U.K. International, excluding U.K. Fixed income: Long duration strategy 2 Intermediate duration securities Agency mortgage backed securities Asset backed securities Non- agency mortgage backed securities 3 International Other Total Collective investment funds Total December 31, 2016 Level 1 $ 38 69 103 3 38 — — — — — — — — Level 2 $ — — — — — 970 32 5 19 20 16 — — Level 3 $ — — — — — — — — — — — 11 — $ 251 $ 1,062 $ 11 December 31, 2015 Level 1 $ 1 63 92 6 35 — — — — — — — Level 2 $ — Level 3 $ — — — — — 969 31 6 17 23 17 — — — — — — — — — — — — $ 197 $ 1,063 $ — Total $ 38 69 103 3 38 970 32 5 19 20 16 11 — $ 1,324 749 $ 2,073 Total $ 1 63 92 6 35 969 31 6 17 23 17 — $ 1,260 763 $ 2,023 1 Includes securities that are tracked in the S&P Smallcap 600 index. 2 Includes securities that are mainly investment grade obligations of issuers in the U.S. 3 Includes U.S. mortgage- backed securities that are not backed by the U.S. government. 4 Includes a fund which holds real estate properties in the U.K. 72 S&P Global 2016 Annual Report For securities that are quoted in active markets, the trustee/ preservation for liquidity purposes, is composed of government custodian determines fair value by applying securities’ prices and government- agency securities, uninvested cash, receiv- obtained from its pricing vendors. For commingled funds that ables and payables. The portfolios do not employ any financial are not actively traded, the trustee applies pricing information leverage. provided by investment management firms to the unit quanti- ties of such funds. Investment management firms employ their own pricing vendors to value the securities underlying each U.S. DEFINED CONTRIBUTION PLANS Assets of the defined contribution plans in the U.S. consist pri- commingled fund. Underlying securities that are not actively marily of investment options which include actively managed traded derive their prices from investment managers, which in equity, indexed equity, actively managed equity/bond funds, turn, employ vendors that use pricing models (e.g., discounted target date funds, S&P Global Inc. common stock, stable value cash flow, comparables). The domestic defined benefit plans and money market strategies. There is also a self- directed have no investment in our stock, except through the S&P 500 mutual fund investment option. The plans purchased 216,035 commingled trust index fund. The trustee obtains estimated prices from vendors for secu- rities that are not easily quotable and they are categorized accordingly as Level 3. The following table details further information on our plan assets where we have used significant unobservable inputs (Level 3): (in millions) Balance as of December 31, 2015 Purchases Balance as of December 31, 2016 Level 3 $ — 11 $ 11 PENSION TRUSTS’ ASSET ALLOCATIONS There are two pension trusts, one in the U.S. and one in the U.K. The U.S. pension trust had assets of $1.6  billion as of December 31, 2016 and 2015, and the target allocations in 2016 include 68% debt securities and short-term invest- ments, 27% domestic equities and 5% international equities. The U.K. pension trust had assets of $441  million and $425  million as of December  31, 2016 and 2015, respec- tively, and the target allocations in 2016 include 40% fixed income, 30% diversified growth funds, 20% equities and 10% real estate. The pension assets are invested with the goal of producing a combination of capital growth, income and a liability hedge. The mix of assets is established after consideration of the long- term performance and risk characteristics of asset classes. Investments are selected based on their potential to enhance returns, preserve capital and reduce overall volatility. Holdings are diversified within each asset class. The portfolios employ a mix of index and actively managed equity strategies by market capitalization, style, geographic regions and economic sectors. The fixed income strategies include U.S. long duration securi- shares and sold 437,283 shares of S&P  Global Inc. common stock in 2016 and purchased 223,656 shares and sold 247,984 shares of S&P  Global Inc. common stock in 2015. The plans held approximately 1.6 million shares of S&P Global Inc. com- mon stock as of December 31, 2016 and 1.8 million shares as of December 31, 2015, with market values of $171 million and $179  million, respectively. The plans received dividends on S&P Global Inc. common stock of $2 million during both the years ended December 31, 2016 and December 31, 2015. 8. Stock-Based Compensation We issue stock-based incentive awards to our eligible employ- ees and Directors under the 2002 Employee Stock Incentive Plan and a Director Deferred Stock Ownership Plan. 2002 EMPLOYEE STOCK INCENTIVE PLAN (THE “2002 PLAN”) — The 2002 Plan permits the granting of nonquali- fied stock options, stock appreciation rights, performance stock, restricted stock and other stock-based awards. DIRECTOR DEFERRED STOCK OWNERSHIP PLAN — Under this plan, common stock reserved may be credited to deferred stock accounts for eligible Directors. In general, the plan requires that 50% of eligible Directors’ annual com- pensation plus dividend equivalents be credited to deferred stock accounts. Each Director may also elect to defer all or a portion of the remaining compensation and have an equiva- lent number of shares credited to the deferred stock account. Recipients under this plan are not required to provide con- sideration to us other than rendering service. Shares will be delivered as of the date a recipient ceases to be a member of the Board of Directors or within five years thereafter, if so elected. The plan will remain in effect until terminated by the Board of Directors or until no shares of stock remain avail- ties, opportunistic fixed income securities and U.K. debt instru- able under the plan. ments. The short-term portfolio, whose primary goal is capital S&P Global 2016 Annual Report 73 The number of common shares reserved for issuance are as follows: (in millions) Shares available for granting under the 2002 Plan Options outstanding Total shares reserved for issuance 1 2016 33.5 3.8 37.3 2015 32.8 5.8 38.6 1 Shares reserved for issuance under the Director Deferred Stock Ownership Plan are not included in the total, but are approximately 0.1 million. We issue treasury shares upon exercise of stock options and the issuance of restricted stock and unit awards. To offset the dilutive effect of the exercise of employee stock options, we periodically repurchase shares. See Note 9 — Equity for further discussion. STOCK OPTIONS Stock options may not be granted at a price less than the fair December 31, market value of our common stock on the date of grant. Stock options granted vest over a three year service period in equal annual installments and have a maximum term of 10 years. Stock option compensation costs are recognized from the date of grant, utilizing a three-year graded vesting method. Under this method, one-third of the costs are ratably recognized over the first twelve months, one-third of the costs are ratably recognized over a twenty-four month period starting from the date of grant with the remaining costs ratably recognized over a thirty-six month period starting from the date of grant. We use a lattice-based option- pricing model to estimate the fair value of options granted. The following assumptions were Stock-based compensation expense and the corresponding used in valuing the options granted: tax benefit are as follows: (in millions) Stock option expense Restricted stock and unit awards Year Ended December 31, 2016 2015 2014 $ 7 $ 14 $ 21 expense 69 64 79 Risk-free average interest rate Dividend yield Volatility Expected life (years) Weighted- average grant-date fair Year Ended December 31, 2015 2014 0.2–1.9% 1.4% 21–39% 6.3 0.1–2.9% 1.4–1.8% 18–41% 6.21–6.25 Total stock-based compensation value per option $27.57 $23.41 expense Tax benefit $ 76 $ 78 $ 100 $ 29 $ 29 $ 38 Because lattice-based option- pricing models incorporate Stock-based compensation of $2 million is recorded in discon- tinued operations for the year ended December 31, 2014, as a result of the sale of McGraw Hill Construction described further in Note 2 — Acquisitions and Divestitures. ranges of assumptions, those ranges are disclosed. These assumptions are based on multiple factors, including histori- cal exercise patterns, post- vesting termination rates, expected future exercise patterns and the expected volatility of our stock price. The risk-free interest rate is the imputed forward rate based on the U.S. Treasury yield at the date of grant. We use the historical volatility of our stock price over the expected term of the options to estimate the expected volatility. The expected term of options granted is derived from the output of the lattice model and represents the period of time that options granted are expected to be outstanding. During 2015, we stopped granting stock options as part of our employees’ total stock-based incentive awards. There were no stock options granted in 2016 and a minimal amount of stock options granted in 2015. 74 S&P Global 2016 Annual Report Stock option activity is as follows: (in millions, except per award amounts) Options outstanding as of December 31, 2015 Exercised Canceled, forfeited and expired Options outstanding as of December 31, 2016 Options exercisable as of December 31, 2016 (in millions, except per award amounts) Nonvested options outstanding as of December 31, 2015 Vested Forfeited Nonvested options outstanding as of December 31, 2016 Total unrecognized compensation expense related to nonvested options 1 Weighted- average years to be recognized over Shares Weighted average exercise price Weighted- average remaining years of contractual term Aggregate intrinsic value 3.6 3.5 $ 246 $ 242 $ 45.61 $ 95.87 $ 69.93 $ 43.36 $ 41.87 Weighted- average grant-date fair value $19.82 $19.35 $21.84 $23.42 5.8 (1.9) (0.1) 3.8 3.7 Shares 0.8 (0.5) (0.1) 0.2 $ — 0.3 1 There is less than $1 million of unrecognized compensation expense related to nonvested options. The total fair value of our stock options that vested during the Restricted stock and unit activity for performance and non- years ended December 31, 2016, 2015 and 2014 was $7 million, performance awards is as follows: $11 million and $6 million, respectively. Information regarding our stock option exercises is as follows: (in millions, except per award amounts) Shares Weighted- average grant-date fair value (in millions) Year Ended December 31, 2016 2015 2014 Net cash proceeds from the exercise of stock options $ 88 $ 86 $ 193 Nonvested shares as of December 31, 2015 Granted Vested Forfeited 1.2 $ 92.39 0.9 $ 93.01 (0.9) $ 106.81 (0.2) $ 95.41 Total intrinsic value of stock option Nonvested shares as of December 31, 2016 1.0 $ 106.31 exercises $ 95 $ 94 $ 168 Income tax benefit realized from stock option exercises $ 41 $ 49 $ 73 Total unrecognized compensation expense related to nonvested awards Weighted- average years to be recognized over $ 55 1.7 RESTRICTED STOCK AND UNIT AWARDS Restricted stock and unit awards (performance and non- performance) have been granted under the 2002 Plan. Performance unit awards will vest only if we achieve certain Year Ended December 31, 2016 2015 2014 Weighted- average grant-date fair value per award $ 93.01 $ 77.06 $ 77.74 Total fair value of restricted stock financial goals over the performance period. Restricted stock and unit awards vested $ 99 $ 155 $ 88 non- performance awards have various vesting periods (gener- ally three years), with vesting beginning on the first anniversary of the awards. Recipients of restricted stock and unit awards are not required to provide consideration to us other than ren- dering service. Tax benefit relating to restricted stock activity $ 26 $ 24 $ 30 For the years ended December  31, 2016, 2015 and 2014, $41 million, $69 million and $128 million, respectively, of excess tax benefits from stock options exercises and restricted stock The stock-based compensation expense for restricted stock and unit award vestings are reported in our cash flows used for and unit awards is determined based on the market price of our financing activities. stock at the grant date of the award applied to the total number of awards that are anticipated to fully vest. For performance unit awards, adjustments are made to expense dependent upon financial goals achieved. S&P Global 2016 Annual Report 75 9. Equity CAPITAL STOCK Two million shares of preferred stock, par value $1 per share, are authorized; none have been issued. ACCELERATED SHARE REPURCHASE PROGRAM Using a portion of the proceeds received from the sale of J.D. Power, we entered into an accelerated share repurchase (“ASR”) agreement with a financial institution on September 7, 2016 to initiate share repurchases aggregating $750 million. The ASR agreement was structured as a capped ASR agreement in On January  25, 2017, the Board of Directors approved an which we paid $750 million and received an initial delivery of increase in the dividends for 2017 to a quarterly rate of $0.41 approximately 4.4 million shares and an additional amount of per common share. 0.9 million shares during the month of September 2016, repre- Quarterly dividend rate Annualized dividend rate Dividends paid (in millions) Year Ended December 31, senting the minimum number of shares of our common stock 2016 2015 2014 to be repurchased based on a calculation using a specified $ 0.36 $ 0.33 $ 0.30 $ 1.44 $ 1.32 $ 1.20 $ 380 $ 363 $ 326 capped price per share. We completed the ASR agreement on December 7, 2016 and received an additional 0.9 million shares, which settled on December 12, 2016. We repurchased a total STOCK REPURCHASES On December 4, 2013, the Board of Directors approved a share repurchase program authorizing the purchase of 50  million shares, which was approximately 18% of the total shares of our outstanding common stock at that time. Share repurchases were as follows: (in millions, except average price) 2016 2015 2014 Year Ended December 31, Total number of shares purchased 1 Average price paid per share 2, 3 Total cash utilized 2 9.7 10.1 4.4 $ 113.36 $ 99.00 $ 79.06 $ 1,097 $ 1,000 $ 352 1 2016 includes shares received as part of our accelerated share repurchase agreement as described in more detail below. 2 In December of 2015, 0.3 million shares were repurchased for approximately $26  million, which settled in January of 2016. Excluding these 0.3  million shares, the average price paid per share was $98.98. In December of 2013, 0.1 million shares were repurchased for approximately $10 million, which set- tled in January of 2014. Cash used for financing activities only reflects those shares which settled during the year ended December 31, 2016, 2015 and 2014 resulting in $1,123 million, $974 million and $362 million of cash used to repurchase shares, respectively. 3 On June 25, 2014, we repurchased 0.5 million shares of the Company’s com- mon stock from the personal holdings of Harold W. McGraw III, then Chairman of the Company’s Board of Directors and former President and CEO of the Company, at a discount of 0.35% from the June  24, 2014 New York Stock Exchange closing price. We repurchased these shares with cash for $41 mil- lion at an average price of $82.66 per share. See Note  14 — Related Party Transactions for further information. of 6.1  million shares under the ASR agreement for an aver- age purchase price of $122.18 per share. The total number of shares repurchased under the ASR agreement was based on the volume weighted- average share price, minus a discount, of our common stock over the term of the ASR agreement. The repurchased shares are held in Treasury. The ASR agreement was executed under the current share repurchase program, approved on December 4, 2013. The ASR agreement was accounted for as two transactions: a stock purchase transaction and a forward stock purchase con- tract. The shares delivered under the ASR agreement resulted in a reduction of our outstanding shares used to determine our weighted average common shares outstanding for pur- poses of calculating basic and diluted earnings per share. The forward stock purchase contract was classified as an equity instrument. REDEEMABLE NONCONTROLLING INTERESTS The agreement with the minority partners of our S&P Dow Jones Indices LLC partnership contains redemption features whereby interests held by minority partners are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within our control. Specifically, under the terms of the operating agreement of Indices LLC, after December  31, 2017, CME Group and CME Group Index Our purchased shares may be used for general corporate pur- Services LLC (“CGIS”) will have the right at any time to sell, and poses, including the issuance of shares for stock compensa- we are obligated to buy, at least 20% of their share in S&P Dow tion plans and to offset the dilutive effect of the exercise of Jones Indices LLC. In addition, in the event there is a change employee stock options. As of December 31, 2016, 25.8 million of control of the Company, for the 15 days following a change shares remained available under our current share repurchase in control, CME Group and CGIS will have the right to put their program. Our current share repurchase program has no expira- interest to us at the then fair value of CME Group’s and CGIS’ tion date and purchases under this program may be made from minority interest. time to time on the open market and in private transactions, depending on market conditions. 76 S&P Global 2016 Annual Report If interests were to be redeemed under this agreement, we assumptions related to expected future net cash flows, long- would generally be required to purchase the interest at fair term growth rates, the timing and nature of tax attributes, and value on the date of redemption. This interest is presented on the redemption features. Any adjustments to the redemption the consolidated balance sheets outside of equity under the value will impact retained income. caption “Redeemable noncontrolling interest” with an initial value based on fair value for the portion attributable to the net assets we acquired, and based on our historical cost for the Noncontrolling interests that do not contain such redemption features are presented in equity. portion attributable to our S&P Index business. We adjust the Changes to redeemable noncontrolling interest during the year redeemable noncontrolling interest each reporting period to ended December 31, 2016 were as follows: its estimated redemption value, but never less than its initial (in millions) fair value, considering a combination of an income and mar- Balance as of December 31, 2015 ket valuation approach. Our income and market valuation approaches may incorporate Level 3 fair value measures for instances when observable inputs are not available, including Net income attributable to noncontrolling interest Distributions to noncontrolling interest Redemption value adjustment Balance as of December 31, 2016 $ 920 109 (102) 153 $ 1,080 ACCUMULATED OTHER COMPREHENSIVE LOSS The following table summarizes the changes in the components of accumulated other comprehensive loss for the year ended December 31, 2016: (in millions) Balance as of December 31, 2015 Other comprehensive income before reclassifications Reclassifications from accumulated other Foreign Currency Translation Adjustment Pension and Postretirement Benefit Plans Unrealized Gain (Loss) on Forward Exchange Contracts Accumulated Other Comprehensive Loss $ (193) (139) $ (406) (47) comprehensive loss to net earnings — 101 Net other comprehensive income Balance as of December 31, 2016 (139) $ (332) (37) $ (443) $ (1) 7 (4)2 3 $ 2 $ (600) (179) 6 (173) $ (773) 1 See Note 7 — Employee Benefits for additional details of items reclassed from accumulated other comprehensive loss to net earnings. 2 See Note 6 — Derivative Instruments for additional details of items reclassed from accumulated other comprehensive loss to net earnings. The net actuarial loss and prior service cost related to pension and other postretirement benefit plans included in other compre- hensive income is net of a tax provision of $5 million for the year ended December 31, 2016. 10. Earnings (Loss) per Share Basic earnings (loss) per common share is computed by divid- ing net income (loss) attributable to the common shareholders of the Company by the weighted- average number of common shares outstanding. Diluted earnings (loss) per share is com- puted in the same manner as basic earnings (loss) per share, except the number of shares is increased to include additional common shares that would have been outstanding if poten- tial common shares with a dilutive effect had been issued. Potential common shares consist primarily of stock options, restricted stock and restricted stock units calculated using the treasury stock method. S&P Global 2016 Annual Report 77 Basic weighted- average number of common shares outstanding Effect of stock options and other Diluted weighted- average number of common shares outstanding Income (loss) from continuing operations: Basic Diluted Income from discontinued operations: Basic Diluted Net income (loss): Basic Diluted The calculation for basic and diluted earnings (loss) per share is as follows: 11. Restructuring (in millions, except per share data) 2016 2015 2014 Year Ended December 31, Amount attributable to S&P Global Inc. common shareholders: Income (loss) from continuing operations $ 2,106 $ 1,156 $ (293) Income from discontinued operations Net income (loss) attributable to — — 178 the Company $ 2,106 $ 1,156 $ (115) During 2016 and 2015, we continued to evaluate our cost structure and further identified cost savings associated with streamlining our management structure and our decision to exit non- strategic businesses. Our 2016 and 2015 restructur- ing plans consisted of a company-wide workforce reduction of approximately 230 positions and 550 positions, respectively, and are further detailed below. The charges for each restruc- turing plan are classified as selling and general expenses within the consolidated statements of income and the reserves are included in other current liabilities in the consolidated bal- 262.8 271.6 271.5 ance sheets. dilutive securities 2.4 3.0 — In certain circumstances, reserves are no longer needed because of efficiencies in carrying out the plans or because 265.2 274.6 271.5 employees previously identified for separation resigned from $ 8.02 $ 4.26 $ (1.08) $ 7.94 $ 4.21 $ (1.08) the Company and did not receive severance or were reassigned due to circumstances not foreseen when the original plans were initiated. In these cases, we reverse reserves through the consolidated statements of income during the period when it is determined they are no longer needed. There was approxi- $ — $ — $ 0.66 $ — $ — $ 0.66 mately $7 million of reserves from the 2015 restructuring plan that we have reversed in 2016, which offset the initial charge $ 8.02 $ 4.26 $ (0.42) $ 7.94 $ 4.21 $ (0.42) of $63 million recorded for the 2015 restructuring plan. Also, there was approximately $7 million of reserves from the 2014 restructuring plan that we have reversed in 2015, which offset Each period we have certain stock options and restricted per- the initial charge of $86 million recorded for the 2014 restruc- formance shares that are excluded from the computation of turing plan. diluted earnings (loss) per share. The effect of the potential exercise of stock options is excluded when the average market price of our common stock is lower than the exercise price of the related option during the period or when a loss from con- tinuing operations exists because the effect would have been antidilutive. Additionally, restricted performance shares are excluded because the necessary vesting conditions had not been met or when a loss from continuing operations exists. As of December 31, 2016 and 2015, there were no stock options excluded as compared to 2.9 million stock options excluded for the year ended December 31, 2014. Additionally, restricted performance shares outstanding of 0.7 million, 0.9 million and 3.2 million as of December 31, 2016, 2015 and 2014, respec- tively, were excluded. The initial restructuring charge recorded and the ending reserve balance as of December 31, 2016 by segment is as follows: 2016 Restructuring Plan 2015 Restructuring Plan Initial Charge Recorded Ending Reserve Balance Initial Charge Recorded Ending Reserve Balance $14 $10 $18 $ 2 10 1 5 8 1 4 34 — 11 4 — 4 $30 $23 $63 $10 (in millions) Ratings Market and Commodities Intelligence Indices Corporate Total For the year ended December 31, 2016, we have reduced the reserve for the 2016 restructuring plan by $7 million and for the years ended December 31, 2016 and 2015, we have reduced the reserve for the 2015 restructuring plan by $40 million and $13 million, respectively. The reductions primarily related to cash payments for employee severance costs. 78 S&P Global 2016 Annual Report 12. Segment and Geographic Information As discussed in Note 1 — Accounting Policies, we have three reportable segments: Ratings, Market and Commodities Intelligence and Indices. Our Chief Executive Officer is our chief operating decision-maker and evaluates performance of our segments and allocates resources based primarily on operating profit. Segment operating profit does not include unallocated expense or interest expense, as these are costs that do not affect the operating results of our segments. We use the same accounting policies for our segments as those described in Note 1 — Accounting Policies. Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retroactively revised to reflect the current orga- nizational structure. Segment information for the years ended December 31 is as follows: (in millions) Ratings 1 Market and Commodities Intelligence 2 Indices 3 Intersegment elimination 4 Total operating segments 2016 $ 2,535 2,585 639 (98) 5,661 Revenue 2015 $ 2,428 2,376 597 (88) 5,313 2014 $ 2,455 2,130 552 (86) 5,051 Unallocated expense 5 — — — Operating Profit (Loss) 2016 2015 $ 1,262 1,822 412 — 3,496 (127) $ 1,078 585 392 — 2,055 (138) Total $ 5,661 $ 5,313 $ 5,051 $ 3,369 $ 1,917 2014 $ (583) 518 347 — 282 (169) $ 113 1 Operating profit for the year ended December 31, 2016 primarily includes a benefit related to net legal settlement insurance recoveries of $10 million and restruc- turing charges of $6 million. Operating profit for the year ended December 31, 2015 includes net legal settlement expenses of $54 million and restructuring charges of $13 million. Operating profit for the year ended December 31, 2014 includes legal and regulatory settlements of $1.6 billion and restructuring charges of $45 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $5 million for the years ended December 31, 2016 and 2015 and $6 million for the year ended December 31, 2014. 2 Operating profit for the year ended December  31, 2016 includes a $1.1  billion gain from our dispositions, disposition- related costs of $48  million, a technology- related impairment charge of $24 million and an acquisition- related cost of $1 million. Operating profit for the year ended December 31, 2015 includes acquisition- related costs related to the acquisition of SNL of $37 million and costs identified operating efficiencies primarily related to restructuring of $33 mil- lion. Operating profit for the year ended December 31, 2014 includes restructuring charges of $25 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $85 million, $57 million and $37 million for the years ended December 31, 2016, 2015, and 2014, respectively. 3 Operating profit for the year ended December 31, 2014 includes the impact of professional fees largely related to corporate development activities of $4 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $6 million for the year ended December 31, 2016 and $5 million for the years ended December 31, 2015 and 2014. 4 Revenue for Ratings and expenses for Market and Commodities Intelligence include an intersegment royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings. 5 The year ended December 31, 2016 includes $3 million from a disposition- related reserve release. The year ended December 31, 2015 includes a gain of $11 mil- lion related to the sale of our interest in a legacy McGraw Hill Construction investment and costs related to identified operating efficiencies primarily related to restructuring of $10 million. The year ended December 31, 2014 includes restructuring charges of $16 million. (in millions) Ratings Market and Commodities Intelligence Indices Total operating segments Corporate Total Depreciation & Amortization Capital Expenditures 2016 $ 34 131 8 173 8 $ 181 2015 $ 43 99 8 150 7 $ 157 2014 $ 43 74 7 124 10 $ 134 2016 $ 42 57 3 102 13 $ 115 2015 $ 48 78 4 130 9 $ 139 2014 $ 33 49 2 84 8 $ 92 S&P Global 2016 Annual Report 79 Segment information as of December 31 is as follows: (in millions) Ratings Market and Commodities Intelligence Indices Total operating segments Corporate 1 Assets of a business held for sale 2 Total Total Assets 2016 $ 612 4,104 1,247 5,963 2,699 7 2015 $ 620 4,011 1,181 5,812 1,868 503 $ 8,669 $ 8,183 1 Corporate assets consist principally of cash and cash equivalents, assets for pension benefits, deferred income taxes and leasehold improvements related to subleased areas. 2 Includes QuantHouse and J.D. Power as of December 31, 2016 and 2015, respectively. We have operations with foreign revenue and long-lived assets in approximately 95 countries. We do not have operations in any foreign country that represent more than 8% of our consolidated revenue. Transfers between geographic areas are recorded at agreed upon prices and intercompany revenue and profit are eliminated. No single customer accounted for more than 10% of our consolidated revenue. The following provides revenue and long-lived assets by geographic region: (in millions) U.S. European region Asia Rest of the world Total U.S. European region Asia Rest of the world Total Revenue Year ended December 31, Long-lived Assets December 31, 2016 $ 3,461 1,330 575 295 $ 5,661 2015 $ 3,202 1,265 566 280 $ 5,313 2014 $ 2,911 1,316 528 296 $ 5,051 2016 $ 4,335 341 58 46 $ 4,780 2015 $ 4,198 419 63 50 $ 4,730 Revenue Year ended December 31, Long-lived Assets December 31, 2016 2015 2014 2016 2015 61% 24 10 5 60% 24 11 5 58% 26 10 6 91% 7 1 1 89% 9 1 1 100% 100% 100% 100% 100% See Note 2 — Acquisitions and Divestitures and Note 11 — Restructuring, for actions that impacted the segment operating results. 80 S&P Global 2016 Annual Report 13. Commitments and Contingencies Cash amounts for future minimum rental commitments under existing non- cancelable leases with a remaining term of more than one year, along with minimum sublease rental income to be received under non- cancelable subleases are shown in the RENTAL EXPENSE AND LEASE OBLIGATIONS We are committed under lease arrangements covering prop- following table. erty, computer systems and office equipment. Leasehold (in millions) improvements are amortized on a straight-line basis over the shorter of their economic lives or their lease term. Certain lease arrangements contain escalation clauses covering increased costs for various defined real estate taxes and operating ser- vices and the associated fees are recognized on a straight-line basis over the minimum lease period. 2017 2018 2019 2020 2021 2022 and beyond Total Rent commitment Sublease income Net rent $ 116 110 100 73 63 540 $ 1,002 $ (17) (17) (17) (3) — — $ (54) $ 99 93 83 70 63 540 $ 948 Rental expense for property and equipment under all operating lease agreements is as follows: (in millions) 2016 2015 2014 Year ended December 31, Gross rental expense Less: sublease revenue Less: Rock- McGraw rent credit $ 179 $ 182 $ 199 (16) (23) (16) — (14) (4) LEGAL & REGULATORY MATTERS In the normal course of business both in the United States and abroad, the Company and its subsidiaries are defendants in a number of legal proceedings and are often the subject of gov- ernment and regulatory proceedings, investigations and inqui- ries. Many of these proceedings, investigations and inquiries Net rental expense $ 163 $ 164 $ 160 relate to the ratings activity of S&P Global Ratings brought by In December of 2003, we sold our 45% equity investment in Rock- McGraw, Inc., which owned our then headquarters build- ing in New York City, and remained an anchor tenant by con- currently leasing back space from the buyer through 2020. Proceeds from the disposition were $382 million and the sale resulted in a pre-tax gain, net of transaction costs, of $131 mil- lion ($58 million after-tax) upon disposition. As a result of the amount of building space we retained through our leaseback, issuers and alleged purchasers of rated securities. In addition, various government and self- regulatory agencies frequently make inquiries and conduct investigations into our compliance with applicable laws and regulations, including those related to ratings activities and antitrust matters. Any of these pro- ceedings, investigations or inquiries could ultimately result in adverse judgments, damages, fines, penalties or activity restrictions, which could adversely impact our consolidated financial condition, cash flows, business or competitive a pre-tax gain of $212  million ($126  million after-tax) was position. deferred upon the disposition in 2003. In December of 2013, we entered into an arrangement with the buyer to shorten the lease to December of 2015 in exchange for approximately $60 million which was recorded as a reduction to the unrec- ognized deferred gain from the sale. The remaining gain was amortized over the remaining lease term as a reduction in rent expense. The amount of gain recognized for the years ended December 31, 2015 and 2014 was $4 million and $21 million, respectively. The lease terminated in December of 2015. The Company believes that it has meritorious defenses to the pending claims and potential claims in the matters described below and is diligently pursuing these defenses, and in some cases working to reach an acceptable negotiated resolution. However, in view of the uncertainty inherent in litigation and government and regulatory enforcement matters, we cannot predict the eventual outcome of these matters or the timing of their resolution, or in most cases reasonably estimate what the eventual judgments, damages, fines, penalties or impact of activity restrictions may be. As a result, we cannot provide assurance that the outcome of the matters described below will not have a material adverse effect on our consolidated financial condition, cash flows, business or competitive posi- tion. As litigation or the process to resolve pending matters progresses, as the case may be, we will continue to review the latest information available and assess our ability to predict S&P Global 2016 Annual Report 81 the outcome of such matters and the effects, if any, on our con- January and February of 2017. Apart from criminal penalties solidated financial condition, cash flows, business and com- that might be imposed following a conviction, such conviction petitive position, which may require that we record liabilities in could also lead to civil damages claims and other sanctions the consolidated financial statements in future periods. against Standard & Poor’s Credit Market Services Europe or With respect to the matters identified below, we have recog- nized a liability when both (a) information available indicates that it is probable that a liability has been incurred as of the date of these financial statements and (b) the amount of loss can reasonably be estimated. S&P GLOBAL RATINGS Financial Crisis Litigation The Company and its subsidiaries continue to defend civil cases brought by private and public plaintiffs arising out of ratings activities prior to and during the global financial cri- sis of 2008-2009. Included in these civil cases are seven law- suits in Australia against the Company and Standard & Poor’s International, LLC relating to alleged investment losses in collateralized debt obligations (“CDOs”) rated by S&P Global Ratings. Discovery in certain of these cases, including the Australia matters, is ongoing. We can provide no assurance that we will not be obligated to pay significant amounts in order to resolve these matters on terms deemed acceptable. the Company. Such claims and sanctions cannot be quantified at this stage. Shareholder Derivative Actions In August of 2015, two purported shareholders commenced a putative derivative action on behalf of the Company in New York State Supreme Court titled Retirement Plan for General Employees of the City of North Miami Beach and Robin Stein v. Harold McGraw III, et al. The complaint asserts claims for, inter alia, breach of fiduciary duty, waste of corporate assets, and mismanagement against the board of directors, certain former directors of the Company, and three former S&P Global Ratings employees. Plaintiffs seek recovery from the defendants based primarily on allegations that S&P Global Ratings’ credit ratings practices for certain residential mortgage- backed securities and collateralized debt obligations misrepresented the credit risks of those securities, allegedly resulting in losses to the Company. The Company and the individual defendants filed motions to dismiss the complaint in October of 2015. Plaintiffs filed an opposition in December of 2015, and the Company and the individual defendants filed their reply briefs in January U.S. Securities and Exchange Commission of 2016. As a nationally recognized statistical rating organization registered with the SEC under Section 15E of the Securities Exchange Act of 1934, S&P Global Ratings is in ongoing com- munication with the staff of the SEC regarding compliance with its extensive obligations under the federal securities laws. Although S&P Global Ratings seeks to promptly address any compliance issues that it detects or that the staff of the SEC raises, there can be no assurance that the SEC will not seek remedies against S&P Global Ratings for one or more compli- ance deficiencies. Trani Prosecutorial Proceeding The prosecutor in the Italian city of Trani has obtained crimi- nal indictments against several current and former S&P Global Ratings managers and ratings analysts for alleged market manipulation, and against Standard & Poor’s Credit Market Services Europe under Italy’s vicarious liability statute, for having allegedly failed to properly supervise the ratings ana- lysts and prevent them from committing market manipula- tion. The prosecutor’s theories are based on various actions by S&P Global Ratings taken with respect to Italian sovereign debt between May of 2011 and January of 2012. Trial commenced in February of 2015 and closing arguments are scheduled for 82 S&P Global 2016 Annual Report In January of 2016, a different purported shareholder com- menced a separate putative derivative action on behalf of the Company in New York State Supreme Court titled L.A. Grika v. Harold McGraw III, et al. The allegations in the complaint are substantially similar to those in the North Miami Beach matter described above. The complaint asserts claims for, inter alia, breach of fiduciary duty, aiding and abetting breaches of fidu- ciary duty, unjust enrichment, contribution and indemnification against Harold McGraw III, Douglas L. Peterson, and nine for- mer S&P Global Ratings employees. The case was transferred to the judge presiding over the North Miami Beach action. The Company and the individual defendants filed motions to dismiss the Grika complaint in May of 2016. Plaintiffs filed an opposition in June of 2016, and the Company and the individual defendants filed their reply briefs in July of 2016. The court notified the parties in August of 2016 that it will be issuing written decisions on the outstanding motions to dismiss without oral argument. In December 2016, the court issued two orders granting the motions to dismiss in both the North Miami Beach and the Grika matters. In January 2017, the plaintiffs in the North Miami Beach and Grika matters filed notices of appeal of the court’s dismissal of those actions. 14. Related Party Transactions We  repurchased these shares with cash for $41  million at an average price of $82.66 per share. This transaction was On July 31, 2014, we completed the sale of the Company’s air- approved by the Nominating and Corporate Governance craft to Harold W. McGraw III, then Chairman of the Company’s Committee of the Company’s Board of Directors after consul- Board of Directors and former President and CEO of the tation with members of the Financial Policy Committee. Company (“Mr. McGraw”) for a purchase price of $20 million, which was modestly higher than the independent appraisal obtained. This transaction was approved by the Nominating and Corporate Governance Committee of the Company’s Board of Directors after consultation with members of the Financial Policy Committee. During the second quarter of 2014, we recorded a non-cash impairment charge of $6 million in (gain) loss on dispositions in our consolidated statement of income as a result of the pending sale. In June of 2012, we entered into a license agreement (the “License Agreement”) with the holder of S&P Dow Jones Indices LLC noncontrolling interest, CME Group, which replaced the 2005 license agreement between Indices and CME Group. Under the terms of the License Agreement, S&P Dow Jones Indices LLC receives a share of the profits from the trading and clearing of CME Group’s equity index products. During the years ended December  31, 2016, 2015 and 2014, S&P Dow Jones Indices LLC earned $76 million, $63 million and $52 million of On June  25, 2014, we repurchased 0.5  million shares of the revenue under the terms of the License Agreement, respec- Company’s common stock from the personal holdings of tively. The entire amount of this revenue is included in our con- Mr.  McGraw. The shares were purchased at a discount of solidated statement of income and the portion related to the 0.35% from the June 24, 2014 New York Stock Exchange clos- 27% noncontrolling interest is removed in net income attribut- ing price pursuant to a private transaction with Mr. McGraw. able to noncontrolling interests. 15. Quarterly Financial Information (Unaudited) (in millions, except per share data) 2016 1 Revenue Operating profit Net income First quarter Second quarter Third quarter Fourth quarter Total year $ 1,341 $ 1,482 $ 1,439 $ 1,399 $ 5,661 $ 512 $ 651 $ 1,348 $ 857 $ 3,369 $ 323 $ 412 $ 923 $ 569 $ 2,228 Net income attributable to S&P Global common shareholders $ 294 $ 383 $ 892 $ 537 $ 2,106 Earnings per share attributable to S&P Global Inc. common shareholders: Net income: Basic Diluted 2015 Revenue Operating profit Net income Net income attributable to S&P Global common shareholders Earnings per share attributable to S&P Global Inc. common shareholders: Net income: Basic Diluted Note — Totals presented may not sum due to rounding. $ 1.11 $ 1.45 $ 3.39 $ 2.07 $ 8.02 $ 1.10 $ 1.44 $ 3.36 $ 2.05 $ 7.94 $ 1,273 $ 1,342 $ 1,324 $ 1,374 $ 5,313 $ 501 $ 582 $ 410 $ 424 $ 1,917 $ 329 $ 381 $ 281 $ 276 $ 1,268 $ 303 $ 353 $ 252 $ 248 $ 1,156 $ 1.11 $ 1.29 $ 0.93 $ 0.92 $ 4.26 $ 1.10 $ 1.28 $ 0.92 $ 0.91 $ 4.21 1 The third quarter of 2016 and the fourth of 2016 include a pre-tax gain on our dispositions of $722 million ($521 million after-tax) and $379 million ($297 million after-tax), respectively. See Note 2 — Acquisitions and Divestitures for further information. S&P Global 2016 Annual Report 83 16. Condensed Consolidating Financial Statements On September 22, 2016, we issued $500 million of 2.95% senior notes due in 2027. On May 26, 2015, we issued $700 million of 4.0% senior notes due in 2025. On August 18, 2015, we issued $2.0 billion of senior notes, consisting of $400 million of 2.5% senior notes due in 2018, $700 million of 3.3% senior notes due in 2020 and $900 million of 4.4% senior notes due in 2026. See Note 5 — Debt for additional information. The senior notes described above are fully and unconditionally guaranteed by Standard & Poor’s Financial Services LLC, a 100% owned subsidiary of the Company. The following condensed consolidating financial statements present the results of opera- tions, financial position and cash flows of S&P Global Inc., Standard & Poor’s Financial Services LLC, and the Non- Guarantor Subsidiaries of S&P Global Inc. and Standard & Poor’s Financial Services LLC, and the eliminations necessary to arrive at the information for the Company on a consolidated basis. (in millions) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation Amortization of intangibles Total expenses Gain on dispositions Operating profit Interest expense (income), net Non- operating intercompany transactions Income before taxes on income Provision for taxes on income Equity in net income of subsidiaries Net income Less: net income attributable to noncontrolling Statement of Income Year Ended December 31, 2016 Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries S&P Global Inc. Eliminations S&P Global Inc. Consolidated $ 667 $ 1,513 $ 3,607 $ (126) $ 5,661 109 113 38 — 260 (1,072) 1,479 191 356 932 275 2,412 3,069 451 243 9 — 703 — 810 — (83) 893 420 294 767 1,335 1,087 38 96 2,556 (29) 1,080 (10) (941) 2,031 265 — (126) — — — (126) — — — 668 (668) — (2,706) 1,766 (3,374) 1,769 1,443 85 96 3,393 (1,101) 3,369 181 — 3,188 960 — 2,228 interests — — — (122) (122) Net income attributable to S&P Global Inc. Comprehensive income $ 3,069 $ 3,099 $ 767 $ 767 $ 1,766 $ 1,563 $ (3,496) $ (3,374) $ 2,106 $ 2,055 84 S&P Global 2016 Annual Report (in millions) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation Amortization of intangibles Total expenses Gain on dispositions Operating profit Interest expense (income), net Non- operating intercompany transactions (Loss) income before taxes on income (Benefit) provision for taxes on income Equity in net income of subsidiaries Net income Less: net income from continuing operations attributable to noncontrolling interests Net income attributable to S&P Global Inc. Comprehensive income Statement of Income Year Ended December 31, 2015 Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries S&P Global Inc. Eliminations S&P Global Inc. Consolidated $ 624 $ 2,141 $ 2,663 $ (115) $ 5,313 119 202 40 — 361 — 263 112 282 (131) (107) 1,473 1,449 737 254 18 — 1,009 — 1,132 — 222 910 358 272 824 959 1,094 32 67 2,152 (11) 522 (10) (504) 1,036 296 — (115) — — — (115) — — — — — — (1,745) 740 (1,745) — — — (112) $ 1,449 $ 1,446 $ 824 $ 822 $ 740 $ 655 $ (1,857) $ (1,741) 1,700 1,550 90 67 3,407 (11) 1,917 102 — 1,815 547 — 1,268 (112) $ 1,156 $ 1,182 S&P Global 2016 Annual Report 85 (in millions) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation Amortization of intangibles Total expenses Loss on dispositions Operating profit (loss) Interest expense (income), net Non- operating intercompany transactions (Loss) income from continuing operations before taxes on income (Benefit) provision for taxes on income Equity in net (loss) income of subsidiaries (Loss) income from continuing operations Discontinued operations, net of tax: Income from discontinued operations Gain on sale of discontinued operations Discontinued operations, net Statement of Income Year Ended December 31, 2014 Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries S&P Global Inc. Eliminations S&P Global Inc. Consolidated $ 598 $ 2,043 $ 2,525 $ (115) $ 5,051 117 257 41 4 419 3 176 66 193 (83) (22) (443) (504) 18 160 178 764 1,975 17 — 2,756 — (713) — 38 (751) 16 248 (519) 885 912 28 44 1,869 6 650 (7) (231) 888 251 — 637 — — — — — — (115) — — — (115) — — — — — — 195 195 — — — 1,651 3,144 86 48 4,929 9 113 59 — 54 245 — (191) 18 160 178 Net (loss) income $ (326) $ (519) $ 637 $ 195 $ (13) Less: net income from continuing operations attributable to noncontrolling interests Net (loss) income attributable to S&P Global Inc. Comprehensive income — — — (102) $ (326) $ (495) $ (519) $ (544) $ 637 $ 513 $ 93 $ 195 (102) $ (115) $ (331) 86 S&P Global 2016 Annual Report Balance Sheet December 31, 2016 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated (in millions) ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance for $ 711 $ — $ 1,681 $ — $ 2,392 doubtful accounts Intercompany receivable Prepaid and other current assets Assets of a business held for sale Total current assets Property and equipment, net of accumulated depreciation Goodwill Other intangible assets, net Investments in subsidiaries Intercompany loans receivable Other non- current assets Total assets LIABILITIES AND EQUITY Current liabilities: Accounts payable Intercompany payable Accrued compensation and contributions to retirement plans Income taxes currently payable Unearned revenue Accrued legal and regulatory settlements Other current liabilities Liabilities of a business held for sale Total current liabilities Long-term debt Intercompany loans payable Pension and other postretirement benefits Other non- current liabilities Total liabilities Redeemable noncontrolling interest Equity: Common stock Additional paid-in capital Retained income Accumulated other comprehensive loss Less: common stock in treasury Total equity — controlling interests Total equity — noncontrolling interests 138 (165) 77 — 761 159 261 — 5,464 17 134 131 837 2 — 970 1 — — 680 — 24 853 870 72 7 — (1,542) (1) — 3,483 (1,543) 111 2,679 1,506 7,826 1,354 114 — 9 — (13,970) (1,371) — 1,122 — 150 7 3,671 271 2,949 1,506 — — 272 $ 6,796 $ 1,675 $ 17,073 $ (16,875) $ 8,669 $ 73 1,324 $ 22 40 $ 88 177 $ — (1,541) $ 183 — 129 43 273 2 163 — 2,007 3,564 11 196 52 5,830 — 412 (174) 9,721 (292) (8,701) 966 — 69 — 191 3 (54) — 271 — — — 74 345 — — 1,154 176 — — 1,330 — 211 52 1,045 51 205 45 — — — — — — 1,874 (1,541) — 1,360 78 314 — (1,371) — (1) 3,626 (2,913) — 1,080 2,460 10,485 1,034 (525) (7) (2,460) (10,963) (1,721) 44 7 13,447 (15,093) — 51 409 95 1,509 56 314 45 2,611 3,564 — 274 439 6,888 1,080 412 502 9,210 (773) (8,701) 650 51 701 $ 8,669 Total equity 966 1,330 13,447 (15,042) Total liabilities and equity $ 6,796 $ 1,675 $ 17,073 $ (16,875) S&P Global 2016 Annual Report 87 Balance Sheet December 31, 2015 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated (in millions) ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance for $ 167 $ — $ 1,314 $ — $ 1,481 doubtful accounts Intercompany receivable Deferred income taxes Prepaid and other current assets Assets of a business held for sale Total current assets Property and equipment, net of accumulated depreciation Goodwill Other intangible assets, net Investments in subsidiaries Intercompany loans receivable Other non- current assets Total assets LIABILITIES AND EQUITY Current liabilities: Accounts payable Intercompany payable Accrued compensation and contributions to retirement plans Short-term debt Income taxes currently payable Unearned revenue Accrued legal and regulatory settlements Other current liabilities Liabilities of a business held for sale Total current liabilities Long-term debt Intercompany loans payable Pension and other postretirement benefits Other non- current liabilities Total liabilities Redeemable noncontrolling interest Equity: Common stock Additional paid-in capital Retained income Accumulated other comprehensive loss Less: common stock in treasury Total equity — controlling interests Total equity — noncontrolling interests Total equity 116 208 75 120 4 690 141 17 — 4,651 16 67 319 1,872 10 13 — 2,214 3 40 — 659 368 19 556 1,273 24 80 499 — (3,353) — (1) — 3,746 (3,354) 126 2,816 1,522 7,316 1,733 127 — 9 — (12,626) (2,117) — 991 — 109 212 503 3,296 270 2,882 1,522 — — 213 $ 5,582 $ 3,303 $ 17,386 $ (18,088) $ 8,183 $ 71 2,144 $ 54 675 $ 81 535 $ — (3,354) $ 206 — 127 143 1 254 — 190 80 3,010 3,468 21 230 (25) 6,704 — 412 (184) 6,701 (322) (7,729) (1,122) — (1,122) 89 — — 586 115 (50) — 1,469 — — — 98 1,567 — — 1,179 557 — — 1,736 — 1,736 167 — 55 582 6 232 126 — — — (1) — — — 1,784 (3,355) — 2,096 46 295 — (2,117) — — 4,221 (5,472) — 920 2,337 10,174 987 (322) (12) (2,337) (10,694) (609) 44 12 13,164 (13,584) 1 48 13,165 (13,536) 383 143 56 1,421 121 372 206 2,908 3,468 — 276 368 7,020 920 412 475 7,636 (600) (7,729) 194 49 243 $ 8,183 Total liabilities and equity $ 5,582 $ 3,303 $ 17,386 $ (18,088) 88 S&P Global 2016 Annual Report (in millions) S&P Global Inc. Statement of Cash Flows Year Ended December 31, 2016 Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated Operating Activities: Net income Adjustments to reconcile net income to cash provided by operating activities from continuing operations: Depreciation Amortization of intangibles Provision for losses on accounts receivable Deferred income taxes Stock-based compensation Gain on dispositions Accrued legal and regulatory settlements Other Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: Accounts receivable Prepaid and current assets Accounts payable and accrued expenses Unearned revenue Accrued legal and regulatory settlement Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash provided by operating activities from continuing operations Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash provided by (used for) investing activities $ 3,069 $ 767 $ 1,766 $ (3,374) $ 2,228 38 — 1 16 22 (1,072) 3 48 (24) (9) (53) 19 — (29) 99 (9) 9 — — (9) 17 — 1 5 187 10 (39) (395) (108) (27) — 38 38 96 8 72 37 (29) 50 (23) (340) (3) 66 483 (42) 35 33 16 — — — — — — — — — — — — — — — — 85 96 9 79 76 (1,101) 54 30 (177) (2) (26) 107 (150) (21) 132 45 2,119 456 2,263 (3,374) 1,464 (68) (144) 1,422 — (15) — — — (32) (33) 76 (1) — — — — (115) (177) 1,498 (1) from continuing operations 1,210 (15) 10 — 1,205 Financing Activities: Payments on short-term debt, net Proceeds from issuance of senior notes, net Payments on senior notes Dividends paid to shareholders Dividends and other payments paid to noncontrolling interests Contingent consideration payments Repurchase of treasury shares Exercise of stock options Excess tax benefits from share-based payments Intercompany financing activities Cash used for financing activities from continuing operations Effect of exchange rate changes on cash from continuing operations Net change in cash and cash equivalents Cash and cash equivalents at beginning of year (143) 493 (421) (380) — (5) (1,123) 86 41 (1,333) — — — — — — — — — (441) — — — — (116) (34) — 2 — (1,600) — — — — — — — — — 3,374 (143) 493 (421) (380) (116) (39) (1,123) 88 41 — (2,785) (441) (1,748) 3,374 (1,600) — 544 167 — — — (158) 367 1,314 — — — (158) 911 1,481 Cash and cash equivalents at end of year $ 711 $ — $ 1,681 $ — $ 2,392 S&P Global 2016 Annual Report 89 (in millions) Operating Activities: Net income Adjustments to reconcile income from continuing operations to cash provided by (used for) operating activities from continuing operations: Depreciation Amortization of intangibles Provision for losses on accounts receivable Deferred income taxes Stock-based compensation Gain on dispositions Accrued legal and regulatory settlements Other Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: Accounts receivable Prepaid and current assets Accounts payable and accrued expenses Unearned revenue Accrued legal and regulatory settlement Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash provided by (used for) operating activities Statement of Cash Flows Year Ended December 31, 2015 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated $ 1,449 $ 824 $ 740 $ (1,745) $ 1,268 40 — 1 33 23 — — 23 3 (13) (75) (5) — (32) (54) 78 18 — 1 290 24 — 110 16 (27) 14 (34) 66 (1,624) (35) — 8 32 67 6 (43) 31 (11) 9 18 (94) (5) 17 68 — (11) 115 (121) — — — — — — — — — — — — — — — — 90 67 8 280 78 (11) 119 57 (118) (4) (92) 129 (1,624) (78) 61 (35) from continuing operations 1,471 (349) 818 (1,745) 195 Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash used for investing activities from continuing operations Financing Activities: Additions to short-term debt, net Proceeds from issuance of senior notes, net Dividends paid to shareholders Dividends and other payments paid to noncontrolling interests Contingent consideration payments Repurchase of treasury shares Exercise of stock options Purchase of additional CRISIL shares Excess tax benefits from share-based payments Intercompany financing activities Cash (used for) provided by financing activities from (67) (2,243) — — (10) — — — (62) (153) 14 (4) — — — — (139) (2,396) 14 (4) (2,310) (10) (205) — (2,525) 143 2,674 (363) — (5) (974) 80 — 69 (2,020) — — — — — — — — — 359 — — — (104) — — 6 (16) — (84) — — — — — — — — — 1,745 143 2,674 (363) (104) (5) (974) 86 (16) 69 — continuing operations (396) 359 (198) 1,745 1,510 Effect of exchange rate changes on cash from continuing operations Cash (used for) provided by continuing operations Discontinued Operations: Cash used for operating activities Cash used for discontinued operations Net change in cash and cash equivalents Cash and cash equivalents at beginning of year — (1,235) — — — — (1,235) 1,402 — — — — (67) 348 (129) (129) 219 1,095 — — — — — — (67) (887) (129) (129) (1,016) 2,497 Cash and cash equivalents at end of year $ 167 $ — $ 1,314 $ — $ 1,481 90 S&P Global 2016 Annual Report (in millions) Operating Activities: Net (loss) income Less: discontinued operations, net (Loss) income from continuing operations Adjustments to reconcile (loss) income from continuing operations to cash (used for) provided by operating activities from continuing operations: Depreciation Amortization of intangibles Provision for losses on accounts receivable Deferred income taxes Stock-based compensation Loss on dispositions Accrued legal and regulatory settlements Other Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: Accounts receivable Prepaid and current assets Accounts payable and accrued expenses Unearned revenue Accrued legal and regulatory settlement Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash (used for) provided by operating activities from continuing operations Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash provided by (used for) investing activities from continuing operations Financing Activities: Dividends paid to shareholders Dividends and other payments paid to noncontrolling interests Contingent consideration payments Repurchase of treasury shares Exercise of stock options Excess tax benefits from share-based payments Intercompany financing activities Cash provided by (used for) financing activities from Statement of Cash Flows Year Ended December 31, 2014 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated $ (326) 178 (504) $ (519) — (519) $ 637 — 637 $ 195 — 195 $ (13) 178 (191) 41 4 — 42 31 3 — 18 (11) (42) (83) 8 — (51) 13 (131) 17 — 5 (272) 34 — 1,587 39 47 (17) (47) 26 (35) 45 3 5 28 44 6 (15) 35 6 — 14 (45) 52 — 44 — (10) (109) 71 — — — — — — — — — — — — — — — — 86 48 11 (245) 100 9 1,587 71 (9) (7) (130) 78 (35) (16) (93) (55) (662) 918 758 195 1,209 (26) — 63 — (14) — — — (52) (71) 20 15 — — — — 37 (14) (88) — (92) (71) 83 15 (65) (326) — — — (326) — — (362) 184 128 1,377 — — — — — (904) (84) (11) — 9 — (278) — — — — — (195) (84) (11) (362) 193 128 — continuing operations 1,001 (904) (364) (195) (462) Effect of exchange rate changes on cash from continuing operations Cash provided by continuing operations Discontinued Operations: Cash provided by operating activities Cash provided by investing activities Cash provided by discontinued operations Net change in cash and cash equivalents Cash and cash equivalents at beginning of year 3 379 18 320 338 717 685 — — — — — — — (68) 238 — — — 238 857 — — — — — — — (65) 617 18 320 338 955 1,542 Cash and cash equivalents at end of year $ 1,402 $ — $ 1,095 $ — $ 2,497 S&P Global 2016 Annual Report 91 Five Year Financial Review (in millions, except per share data) Income statement data: Revenue Operating profit Income from continuing operations before taxes on income Provision for taxes on income Net income (loss) from continuing operations attributable to 2016 2015 2014 2013 2012 $ 5,661 3,369 3,1881 960 $ 5,313 1,917 1,8152 547 $ 5,051 113 543 245 $ 4,702 1,358 1,2994 425 $ 4,270 1,170 1,0895 388 S&P Global Inc. 2,106 1,156 (293) 783 651 Earnings (loss) per share from continuing operations attributable to the S&P Global Inc. common shareholders: Basic Diluted Dividends per share Special dividend declared per common share Operating statistics: 8.02 7.94 1.44 — 4.26 4.21 1.32 — (1.08) (1.08) 1.20 — 2.85 2.80 1.12 — 2.33 2.29 1.02 2.50 Return on average equity 6 Income from continuing operations before taxes on income as a 472.0% 324.3% (1.4)% 134.2% 40.5% percent of revenue from continuing operations 56.3% 34.2% 1.1% 27.6% 25.5% Net income (loss) from continuing operations as a percent of revenue from continuing operations Balance sheet data: 7 Working capital Total assets Total debt Redeemable noncontrolling interest Equity Number of employees 7 39.4% 23.9% (3.8)% 18.6% 16.4% $ 1,060 8,669 3,564 1,080 701 20,000 $ 388 8,183 3,611 920 243 20,400 $ 42 6,773 795 810 539 17,000 $ 612 6,060 794 810 1,344 16,400 $ (1,018) 5,081 1,251 810 840 15,900 1 Includes the impact of the following items: a $1.1 billion gain from our dispositions, a benefit related to net legal settlement insurance recoveries of $10 million, disposition- related costs of $48 million, a technology- related impairment charge of $24 million, restructuring charges of $6 million, a $3 million disposition- related reserve release, acquisition- related costs of $1 million and amortization of intangibles from acquisitions of $96 million. 2 Includes the impact of the following items: costs related to identified operating efficiencies primarily related to restructuring of $56 million, net legal settle- ment expenses of $54 million, acquisition- related costs of $37 million, an $11 million gain on dispositions, and amortization of intangibles from acquisitions of $67 million. 3 Includes the impact of the following items: $1.6 billion of legal and regulatory settlements, restructuring charges of $86 million, $4 million of professional fees largely related to corporate development activities, and amortization of intangibles from acquisitions of $48 million. 4 Includes the impact of the following items: $77 million of legal settlements, $64 million charge for costs necessary to enable the separation of McGraw-Hill Education (“MHE”) and reduce our cost structure, a $36 million non-cash impairment charge related to the sale of our data center, a $28 million restructuring charge in the fourth quarter primarily related to severance, $13 million related to terminating various leases as we reduce our real estate portfolio and a $24 million net gain from our dispositions, and amortization of intangibles from acquisitions of $51 million. 5 Includes the impact of the following items: $135 million charge for costs necessary to enable the separation of MHE and reduce our cost structure, a $65 million restructuring charge, transaction costs of $15 million for our S&P Dow Jones Indices LLC joint venture, an $8 million charge related to a reduction in our lease commitments, partially offset by a vacation accrual reversal of $52 million, and amortization of intangibles from acquisitions of $48 million. 6 Includes the impact of the $1.1 billion gain on dispositions in 2016, the gain on sale of McGraw Hill Construction in 2014 and the gain on sale of McGraw-Hill Education in 2013. 7 Excludes discontinued operations. 92 S&P Global 2016 Annual Report Report of Management To the Shareholders of S&P Global Inc. MANAGEMENT’S REPORT ON INTERNAL CONTROL MANAGEMENT’S ANNUAL REPORT ON ITS OVER FINANCIAL REPORTING As stated above, the Company’s management is responsible RESPONSIBILITY FOR THE COMPANY’S FINANCIAL for establishing and maintaining adequate internal control STATEMENTS AND INTERNAL CONTROL OVER FINANCIAL REPORTING The financial statements in this report were prepared by the management of S&P Global Inc., which is responsible for their integrity and objectivity. These statements, prepared in conformity with accounting principles generally accepted in the United States and includ- ing amounts based on management’s best estimates and judg- ments, present fairly S&P Global Inc.’s financial condition and the results of the Company’s operations. Other financial infor- mation given in this report is consistent with these statements. The Company’s management is responsible for establish- ing and maintaining adequate internal control over financial reporting for the Company as defined under the U.S. Securities Exchange Act of 1934. It further assures the quality of the finan- cial records in several ways: a program of internal audits, the careful selection and training of management personnel, main- taining an organizational structure that provides an appropri- ate division of financial responsibilities, and communicating financial and other relevant policies throughout the Company. S&P  Global Inc.’s Board of Directors, through its Audit Committee, composed entirely of outside directors, is respon- sible for reviewing and monitoring the Company’s financial reporting and accounting practices. The Audit Committee meets periodically with management, the Company’s internal auditors and the independent registered public accounting firm to ensure that each group is carrying out its respective responsibilities. In addition, the independent registered public accounting firm has full and free access to the Audit Committee and meet with it with no representatives from man- agement present. over financial reporting. The Company’s management has evaluated the system of internal control using the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework (“COSO 2013 framework”). Management has selected the COSO 2013 framework for its evaluation as it is a control framework recognized by the Securities and Exchange Commission and the Public Company Accounting Oversight Board that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant con- trols are not omitted and is relevant to an evaluation of internal controls over financial reporting. Based on management’s evaluation under this framework, we have concluded that the Company’s internal controls over finan- cial reporting were effective as of December 31, 2016. There are no material weaknesses in the Company’s internal control over financial reporting that have been identified by management. The Company’s independent registered public accounting firm, Ernst & Young LLP, has audited the consolidated financial state- ments of the Company for the year ended December 31, 2016, and has issued their reports on the financial statements and the effectiveness of internal controls over financial reporting. OTHER MATTERS There have been no changes in the Company’s internal controls over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Douglas L. Peterson President and Chief Executive Officer Ewout L. Steenbergen Executive Vice President and Chief Financial Officer S&P Global 2016 Annual Report 93 Report of Independent Registered Public Accounting Firm THE BOARD OF DIRECTORS AND SHAREHOLDERS In our opinion, the financial statements referred to above pres- OF S&P GLOBAL INC. We have audited the accompanying consolidated balance sheets of S&P Global Inc. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, cash flows and equity for each of the three years in the period ended December  31, ent fairly, in all material respects, the consolidated financial position of S&P Global Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. 2016. These financial statements are the responsibility of the We also have audited, in accordance with the standards of the Company’s management. Our responsibility is to express an Public Company Accounting Oversight Board (United States), opinion on these financial statements based on our audits. S&P Global Inc.’s internal control over financial reporting as of We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan- cial statements are free of material misstatement. An audit December 31, 2016, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 9, 2017 expressed an unqualified opinion thereon. includes examining, on a test basis, evidence supporting the /s/ ERNST & YOUNG LLP amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evalu- ating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. New York, New York February 9, 2017 94 S&P Global 2016 Annual Report Report of Independent Registered Public Accounting Firm THE BOARD OF DIRECTORS AND SHAREHOLDERS that (1) pertain to the maintenance of records that, in reason- OF S&P GLOBAL INC. We have audited S&P  Global Inc.’s (the “Company”) inter- nal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). S&P Global Inc.’s management is respon- sible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of inter- nal control over financial reporting included in the accompa- nying Management’s Annual Report on Internal Control Over able detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reason- able assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accor- dance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding pre- vention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Financial Reporting. Our responsibility is to express an opin- Because of its inherent limitations, internal control over finan- ion on the Company’s internal control over financial reporting cial reporting may not prevent or detect misstatements. Also, based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compli- ance with the policies or procedures may deteriorate. audit to obtain reasonable assurance about whether effective In our opinion, S&P  Global Inc. maintained, in all material internal control over financial reporting was maintained in all respects, effective internal control over financial reporting as material respects. Our audit included obtaining an understand- of December 31, 2016, based on the COSO criteria. ing of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of S&P  Global Inc. as of December 31, 2016 and 2015, and the related consoli- dated statements of income, comprehensive income, cash flows and equity for each of the three years in the period ended A company’s internal control over financial reporting is a pro- December  31, 2016 of S&P  Global Inc. and our report dated cess designed to provide reasonable assurance regarding the February 9, 2017 expressed an unqualified opinion thereon. reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally /s/ ERNST & YOUNG LLP accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures New York, New York February 9, 2017 S&P Global 2016 Annual Report 95 Shareholder Information Annual Meeting The 2017 annual meeting will be held at 11 a.m. EDT on Wednesday, April 26th at 55 Water Street, New York, New York, 10041. The annual meeting will also be Webcast at: http://investor.spglobal.com Stock Exchange Listing Shares of the Company’s common stock are traded primarily on the New York Stock Exchange. On April 28, 2016, S&P Global’s common stock began trading under its new symbol “SPGI.” The previous symbol was “MHFI.” Investor Relations Web Site Go to http://investor.spglobal.com to find: – Dividend and stock split history – Stock quotes and charts – Investor Fact Book – Corporate governance documents – Financial reports, including the annual report, proxy statement and SEC filings – Financial news releases – Management presentations – Investor e-mail alerts – RSS news feeds Investor Kit The Company’s investor kit includes the most recent Annual Report, Proxy Statement, Form 10-Qs, Form 10-K, and earnings release. These documents can be downloaded from the SEC Filings & Reports section of the Company’s Investor Relations Website at http://investor.spglobal.com. Requests for printed copies, free of charge, can be e-mailed to investor.relations@spglobal.com or mailed to Investor Relations, S&P Global Inc., 55 Water Street, New York, NY 10041. Interested parties can also call Investor Relations toll-free at 866-436-8502 (domestic callers) or 212-438-2192 (international callers). Transfer Agent and Registrar for Common Stock Computershare is the transfer agent for S&P Global Inc. Computershare maintains the records for the Company’s registered shareholders and can assist with a variety of shareholder related services. 96 S&P Global 2016 Annual Report Shareholder correspondence should be mailed to: Computershare P.O. Box 30170 College Station, TX 77842-3170 Overnight correspondence should be mailed to: Computershare 211 Quality Circle, Suite 210 College Station, TX 77845 Investor Center™ website to view and manage shareholder account online: www.computershare.com/investor For shareholder assistance: In the U.S. and Canada: 888-201-5538 Outside the U.S. and Canada: 201-680-6578 TDD for the hearing impaired: 800-231-5469 TDD outside the U.S. and Canada: 201-680-6610 E-mail address: web.queries@computershare.com Shareholder online inquiries: https://www-us.computershare.com/investor/Contact Direct Stock Purchase and Dividend Reinvestment Plan This program offers a convenient, low-cost way to invest in S&P Global’s common stock. Participants can purchase and sell shares directly through the program, make optional cash investments weekly, reinvest dividends, and send certificates to the transfer agent for safekeeping. Interested investors can view the prospectus and enroll online at www.computershare.com/investor. To receive the materials by mail, contact Computershare as noted above. News Media Inquiries Go to www.spglobal.com/press to view the latest Company news and information or to submit an e-mail inquiry. You may also call Corporate Affairs at 212-438-1247. Certifications and S&P Global Inc. Form 10-K We have filed the required certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1, 31.2 and 32 to our Form 10-K for the year ended December 31, 2016. The financial information included in this report was excerpted from the Company’s Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on February 9, 2017. Shareholders may access a complete copy of the 10-K from the SEC Filings & Reports section of the Company’s Investor Relations Website at http://investor.spglobal.com. m o c . i n o s d d a . w w w i n o s d d A y b n g s e D i There’s intelligence. Then there’s essential intelligence. Board of Directors Charles E. “Ed” Haldeman, Jr. (A,E,N) Non-Executive Chairman of the Board S&P Global & KCG Holdings, Inc. Marco Alverà Chief Executive Officer Snam S.p.A. Sir Winfried Bischoff (C,F) Chairman Financial Reporting Council & JP Morgan Securities plc William D. Green (C,E,N) Former CEO & Chairman Accenture Stephanie C. Hill (F) Vice President & General Manager Cyber, Ships & Advanced Technologies (CSAT) for Rotary and Mission Systems Lockheed Martin Operating Committee Rebecca Jacoby (F) Senior Vice President, Operations Cisco Systems, Inc. Monique F. Leroux (A) President International Cooperative Alliance Chair of the Board Investissement Québec Maria R. Morris (A) Executive Vice President, Global Employee Benefits Interim Head of the U.S. Business MetLife, Inc. Hilda Ochoa-Brillembourg (A,F) Founder and Chairman Strategic Investment Group Douglas L. Peterson (E) President and Chief Executive Officer S&P Global Sir Michael Rake (A,E,F) Chairman BT Group plc & Worldpay Group plc Edward B. Rust, Jr. (C,E,N) Chairman Emeritus State Farm Mutual Automobile Insurance Company Kurt L. Schmoke (C,N) President University of Baltimore Richard E. Thornburgh (A,E,F) Non-Executive Director and Chairman Credit Suisse Holdings (USA), Inc. Vice Chairman Credit Suisse Group A.G. Douglas L. Peterson President and Chief Executive Officer John Berisford President, S&P Global Ratings Mike Chinn President, S&P Global Market and Commodities Intelligence Martina L. Cheung Head of Global Risk Services Martin Fraenkel President, S&P Global Platts Courtney Geduldig Executive Vice President, Public Affairs France M. Gingras Executive Vice President, Human Resources Steve Kemps Executive Vice President, General Counsel Nancy Luquette Senior Vice President, Chief Risk & Audit Executive Alex J. Matturri Chief Executive Officer, S&P Dow Jones Indices Krishna Nathan Chief Information Officer Paul Sheard Executive Vice President and Chief Economist Ewout L. Steenbergen Executive Vice President, Chief Financial Officer Ashu Suyash Managing Director and Chief Executive Officer, CRISIL (A) Audit Committee (C) Compensation & Leadership Development Committee (E) Executive Committee (F) Financial Policy Committee (N) Nominating & Corporate Governance Committee 55 Water Street New York, NY 10041 spglobal.com Annual Report 2016 S & P G l o b a l 2 0 1 6 A n n u a l R e p o r t Essential 

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