55 Water Street
New York, NY 10041
spglobal.com
Annual Report 2016
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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.
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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
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