S&P Global
Annual Report 2017

Plain-text annual report

55 Water Street New York, NY 10041 spglobal.com S & P G l o b a l 2 0 1 7 A n n u a l R e p o r t Essential intelligence shapes a world of opportunity Annual Report 2017 Financial Highlights Years ended December 31 (in millions, except per share data) 2017 2016 % Change Revenue $ 6,063 $ 5,661 Adjusted net income (attributable to the Company’s common shareholders)* 1,784(a) 1,420(b) Adjusted diluted earnings per common share* $ 6.89(a) $ 5.35(b) Dividends per common share(c) $ 1.64 $ 1.44 Total assets $ 9,425 $ 8,669 Capital expenditures(d) 123 115 Total debt 3,569 3,564 7 26 29 14 9 7 0 Equity (including redeemable noncontrolling interest) 2,118 1,781 19 * Refer to “Reconciliation of Non-GAAP Financial Information” on page 13 of this report for a discussion of the Company’s non-GAAP financial measures. (a) Excludes the impact of the following items: legal settlement expenses of $55 million, employee severance charges of $44 million, a charge to exit leased facilities of $25 million, non-cash acquisition and disposition-related adjustments of $15 million, a pension related charge of $8 million, an asset write-off of $2 million and amortization of intangibles from acquisitions of $98 million. (b) 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, employee severance 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. (c) Dividends paid were $0.41 per quarter in 2017 and $0.36 per quarter in 2016. (d) Includes purchases of property and equipment and additions to technology projects. Directors and Principal Executives Board of Directors Charles E. “Ed” Haldeman, Jr. (E, F, N) Non-Executive Chairman of the Board S&P Global Inc. Rebecca Jacoby (F) Former Senior Vice President, Operations Cisco Systems, Inc. Marco Alverà (F, N) Chief Executive Officer Snam S.p.A. William D. Green (C, E, N) Former CEO and Chairman Accenture Stephanie C. Hill (A, C) Senior Vice President Corporate Strategy and Business Development Lockheed Martin Operating Committee Monique F. Leroux (A, C) Chair Investissement Québec Quebec Economic and Innovation Council Maria R. Morris (A, F) Former Executive Vice President Global Employee Benefits MetLife, Inc. Douglas L. Peterson (E) President and Chief Executive Officer S&P Global Inc. Sir Michael Rake (A, E, F) Chairman Worldpay Group plc Phoenix Global Resources 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 Ewout Steenbergen Executive Vice President, Chief Financial Officer John L. Berisford President, S&P Global Ratings Mike Chinn President, S&P Global Market Intelligence & Executive Vice President, Data and Technology Innovation, S&P Global Martin Fraenkel President, S&P Global Platts Alexander J. Matturri Chief Executive Officer, S&P Dow Jones Indices Nick Cafferillo Chief Technology Officer Martina L. Cheung Head of Global Risk Services Courtney Geduldig Executive Vice President, Public Affairs Steven J. Kemps Executive Vice President, General Counsel Swamy Kocherlakota Chief Information Officer Nancy Luquette Senior Vice President, Chief Risk & Audit Executive 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 IFC IBC Year-End Share Price Dividends per Share Revenue (in millions) $169.40 $107.54 $98.58 $88.98 $78.20 $1.64 $1.44 $1.32 $1.20 $1.12 $6,063 $5,661 $5,313 $5,051 $4,702 ’13 ’14 ’15 ’16 ’17 ’13 ’14 ’15 ’16 ’17 ’13 ’14 ’15 ’16 ’17 Cumulative Total Shareholder Return(e) 400 300 200 100 0 SPGI Peer Group(f) S&P 500 $333 $266 $208 ’12 ’13 ’14 ’15 ’16 ’17 (e) Assumes $100 invested on December 31, 2012 and total return includes reinvestment of dividends through December 31, 2017. (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. To experience an enriched version of this Annual Report, with expanded content, visit spglobal.com/ annual-report-2017. 02 Chairman’s Letter Charles E. “Ed” Haldeman, Jr. Chairman of the Board Dear Fellow Shareholder: We are pleased that S&P Global generated strong growth in 2017. Our employees excelled at increasing revenue and operating profit. This very solid financial performance demonstrates the demand for the essential research, data, analytics and benchmarks S&P Global provides, and underscores the positive influence of productivity initiatives. The earnings power — and the potential — of S&P Global have created significant value for you, our shareholders. In 2017, total return to shareholders was 59%, surpassing the S&P 500’s return of 22% and our peer group’s 29% return. Last year, the Company returned $1.4 billion to shareholders in the form of dividend payments and share repurchases. In February of this year, your Board of Directors once again approved an increase in the regular cash dividend on the Company’s common stock. The increase of 22% to an annual rate of $2.00 affirms S&P Global’s commitment to shareholders. For 45 consecutive years, through a wide variety of business cycles and market conditions, the Board has increased the regular cash dividend. Fewer than 25 companies in the S&P 500 can claim such a record. To maintain our commitment to shareholders, the Board and management team continually assess the Company’s strategy and operating performance. Late last year we discussed the biggest trends in technology and themes influencing global capital and commodity markets. This conversation was informed by the leadership team’s outreach to customers and users to understand their needs today and well into the future. 03 59% Total return to shareholders in 2017 $1.4B Cash returned to shareholders in 2017 The result of this strategic project both affirmed S&P Global’s purpose of providing essential intelligence to customers so they can make confident business decisions, as well as crystallized a vision to power the markets of the future. In Doug’s letter, he lays out the steps the Company is taking to realize this vision. Thriving in an evolving environment based on a foundation of integrity and a capacity to anticipate and absorb change are key characteristics of successful organizations. The Board of Directors has oversight responsibility of the Company’s risk management framework, including working with the senior leadership team to foster a culture instilled with honesty, transparency, accountability and risk awareness. We have a terrific set of directors who bring a diverse and valuable set of experiences, skills and perspectives into the boardroom. They also offer a fresh point of view. With the addition of four new Board members over the last two years, we’ve significantly reduced the average tenure of directors to about six years. That is well below the average 8.2-year tenure of directors of S&P 500 companies. I am grateful to all our directors for their counsel, contributions and commitment to the highest standards of good corporate governance. The earnings power — and the potential — of S&P Global have created significant value for you, our shareholders. By returning cash to shareowners while investing in the most promising growth initiatives, S&P Global has proven to be a responsible steward of shareholder capital. The actions the management team took in 2017 and continues to take today are designed to enable S&P Global to continue delivering superior results for all of its stakeholders. Thank you for your support. Sincerely, Charles E. “Ed” Haldeman, Jr. Chairman of the Board 04 CEO’s Letter Douglas L. Peterson President and Chief Executive Officer Dear Fellow Shareholder: The shifting conditions that were the backdrop to so many world events in 2017 are still front and center in many places. Geopolitical risks and social movements are ongoing. New technologies are emerging. Public policies and the regulatory landscape are changing. Customer expectations are evolving. All of these factors have the potential to be disruptive. Amidst this period of uncertainty, S&P Global must be agile and adaptable and possess the ingenuity and farsightedness to successfully navigate a dynamic, complex and rapidly moving business environment. In business, disruption can create opportunities for companies to be formed while it causes others to disappear. Research indicates, for the first time, that new American companies are failing at a faster rate than they are being started. To capitalize on today’s greatest changes and to identify emerging trends, innovation is more essential than ever. Improving operations and products are important but so is the way we develop and execute our long-term strategy. Last year we began a future-defining project to ask our customers and market participants about the geopolitical, regulatory, technological and economic developments they face doing business. The powerful insights we gleaned from these conversations have allowed us to develop a strategy and vision for what lies ahead — a belief that S&P Global will power the markets of the future with its essential intelligence by delivering an exceptional, differentiated customer experience across the globe. 05 This ambition is built on a rich heritage. For generations this Company has endured because of its ability to adapt to shifting markets while remaining relevant to our customers. From our founding during the first Industrial Revolution to the Big Data Analytics Revolution of today, businesses have turned to us to help them make informed decisions. Today the tradition of innovation, the spirit of continuous improvement and the commitment to operational excellence go on as we find new ways to enhance our proprietary data, to make better use of technology and to work more closely together. Today the tradition of innovation, the spirit of continuous improvement and the commitment to operational excellence go on as we find new ways to enhance our proprietary data, to make better use of technology and to work more closely together. In short, we envision a world of opportunities. This approach coupled with favorable market conditions served us well in 2017. I am very pleased that every business division generated organic revenue growth and improved productivity. 13% Organic revenue increased in 2017 – Organic revenue increased 13%. – Adjusted operating profit margins expanded 420 basis points to 47%. – Adjusted diluted earnings per share grew 29%. The underlying strength of each of our businesses was evident. – Attractive credit conditions supported strong bond issuance and an increasing number of bank loan ratings, which drove S&P Global Ratings’ positive results. – The shift from actively managed funds to passive investments continued as S&P Dow Jones Indices benefited from record funds flowing into exchange-traded funds associated with our indices. – The need for actionable insights based on unique and proprietary content from a wide range of customers, beyond banks and investors, propelled S&P Global Market Intelligence. – And the critical nature of our benchmark pricing data and analytics, together with a successful push to diversify offerings into areas such as liquefied natural gas (LNG) and agriculture, helped S&P Global Platts deliver another year of growth. An exceptional performance in 2017 provides a strong foundation for growth in 2018. There is still much work to be done, and we are excited about the initiatives underway across our Company to deliver value to our customers and to further improve our own productivity during this time of change. 06 Detailed Capital Management Philosophy Introduced in 2017 We are continuously analyzing a wide range of internal investments and acquisitions, allocating capital to the highest-returning projects and holding our management team accountable. We are focused on: Responsible stewardship of shareholder capital Rigorous framework for capital allocation Business line accountability Capital light, cash flow generative business model Businesses competing for capital to optimize portfolio Being disciplined acquirers Capital Returns to Shareholders 75% of annual Free Cash Flow* *excluding certain items Annual Capital Expenditures ~$125M Prudent Financial Profile Remain investment-grade rated $200M Target average minimum U.S. cash balance of $200 million 1.75 – 2.25 Target an adjusted gross leverage to adjusted EBITDA ratio of 1.75 to 2.25 Acquisitions Opportunities that – Augment our benchmark, proprietary data, and tools & analytics capabilities – Provide geographic diversification – Bolster recurring revenues – Create synergies We are seizing opportunities to work together and with new partners to leverage advanced technology that enables future growth. Technology is always a topic that comes up when I talk with other CEOs because of its potential to change businesses and industries. Artificial Intelligence (AI) and machine learning present both risks and opportunities. We are responding with new solutions. As an example, S&P Global Market Intelligence has applied natural language processing (NLP) to corporate earnings call transcripts to dissect the tone, complexity and overall level of engagement with analysts as indicators of earnings sentiment to help investors uncover new insights. 07 To succeed in the future, we will need to develop entire ecosystems of companies with these new capabilities. In 2017, we made a number of investments in early-stage financial technology, or fintech, firms that give us access to AI and predictive analytics. This presents opportunities to work with innovative small businesses to test new solutions for customers. To kick off 2018, we have reorganized our technology functions by establishing three operational services teams specifically focused on Technology Innovations and Software Engineering, Data Operations and Digital Infrastructure. These three teams are working closely together to ensure we achieve the full potential of our data and the latest technologies. In 2018, other ongoing technology priorities include protecting our Company, as we remain vigilant about cybersecurity, and updating the technology and workflow tools that are essential to our employees. We see opportunities to build a stronger workforce. We continue to thrive thanks to our diverse, global team and by promoting a work environment focused on leadership development, career advancement and open feedback linked with performance management. Positioning the Company for growth in an age of technology disruption also means new investments in our people. Over the last two years we’ve increased our hiring of software engineers and developers, data and content managers, information security specialists and other technology roles. Technology and people are our two largest investments. But it’s not just about hiring. We also need to give our technology teams, and all our employees, more advanced training. In 2017, we launched a project called EssentialTech to enhance the technology acumen of our entire employee base and provide the networks and tools necessary to help them compete and succeed. How We Manage Our Company We are driven by our vision to power the markets of the future. To achieve success in 2018, we are focused on four critical areas. Financial We remain committed to strong financial performance and to creating long-term value for our shareholders. Customer We will be a customer-oriented firm. New innovative solutions and an enriched, modern user experience are keys. Operations We strive for operational excellence in all we do. Technology, data, risk and compliance are focal points. People We are creating a performance culture, and we are committed to leadership development programs, diversity and inclusion, and enhancing technology skills. 08 Expanding Diversity and Inclusion Opportunities for Employees The diverse characteristics, perspectives, ideas and backgrounds that our employees bring to S&P Global give us a vital competitive edge. We embrace and support our employees’ diversity in a variety of ways. For example, our nine Employee Resource Groups support, engage and inspire our employees by connecting people with shared interests, experiences and perspectives. The mission of the ERGs is to attract and retain diverse talent, promote professional development, support communities where we operate, spark innovation and expand business opportunities. Our Employee Resource Groups Adelante Hispanic and Latino Professionals APEX Asian Professionals for Excellence BOLD Black Organization for Leadership and Development LEAD Learning, Empowering and Accelerating Digital ParentsNet Working Parents and Caregivers Network REACH Recognize Employees of all Abilities, Celebrate and Harness Spectrum LGBTQ & Friends VALOR Veterans and Allies Leading for Organizational Results WINS Women’s Initiative for Networking and Success Employee Resource Group Membership Is Growing Fast Number of Employee Resource Group Chapters Is Increasing 47.1% 53.9% 28 39 3,191 ’15 4,910 ’16 7,222 ’17 ’15 ’16 56 ’17 09 I visit customers around the world to listen and learn about their aspirations, strategies and needs. It’s one of the most interesting aspects of my role. Becoming a more customer-oriented organization is essential to our long-term success. We are capitalizing on opportunities to optimize data, create new platforms and deliver new insights. The launch of the S&P Global Market Intelligence platform has been a massive data and technology project that clearly demonstrates the value of our businesses increasingly working side by side. One of the most visible ways we have been integrating the SNL Financial and S&P Capital IQ businesses was the creation of a single platform for delivering essential intelligence to the markets. Powerful visual displays of data and deep analytics reveal insights delivered in an intuitive design that provide customers with the essential information they need, whenever they need it. One of the important benefits of this project is that it was built as an S&P Global platform so that our other businesses can build their own solutions on it for their own clients. In fact, S&P Global Platts and the S&P Global Ratings teams are already taking advantage of this architecture and utilizing this technology platform. We recognize the opportunity to anticipate and fulfill evolving customer needs. I visit customers around the world to listen and learn about their aspirations, strategies and needs. It’s one of the most interesting aspects of my role. Becoming a more customer-oriented organization is essential to our long-term success. To accomplish that we need to continually improve the client experience. One example is last year’s introduction of Ratings360™ to corporate issuers. Ratings360™ is a new digital delivery system that provides a comprehensive, 360-degree view of a company’s critical credit risk factors, along with new tools, services and support, all in one easy-to-use and interactive platform. Ratings360™ is helping deepen customer relationships and it is one more way we are working together to demonstrate our essential intelligence. Another evolving customer need is the growing interest among companies and investors in environmental, social and governance (ESG) issues. In this case we are increasingly collaborating across our businesses to support market demand. Last year S&P Global Ratings launched Green Evaluations, an asset-level environmental credential for investors interested in a more 10 comprehensive picture of the green impact and climate risk attributes of their portfolio. This is an ongoing collaborative effort that has benefited from the environmental data and risk analysis of Trucost, which S&P Dow Jones Indices acquired in 2016. Trucost has helped the Ratings team develop the analytical framework, source the data and refine their overall approach to Green Evaluations. We are encouraged by the enthusiasm for this new offering in the market. The long-term growth potential of global capital markets offers exciting prospects to serve new customers. We are interested in opportunities that augment our benchmark, proprietary data and tools and analytics capabilities; provide geographic diversification, including in developing markets; bolster recurring revenues; and/or provide synergies. S&P Global Platts further demonstrates the work we’re doing to meet the evolving needs of customers. We’ve heard from many customers who believe that our products and services can bring added value, especially if they come together in a new way that allows them to connect the dots of a commodity’s trade flow. The combination of rig information at the wellhead, pipeline flow data that goes all the way to a shipping terminal and satellite tracking of cargo around the globe can be quite powerful. By putting all those assets together to see the flow of commodity data gives a completely new dynamic to an oil company, an airline or other customer developing business plans or trying to improve a forecast. Bringing together this comprehensive set of data and forecasting tools is one of the biggest growth engines for S&P Global Platts. We are securing opportunities to address changes in the regulatory and public policy environment. New legislation and regulatory requirements that affect our business are emerging. We’re operating under the assumption that in markets across the globe there will be increasing levels of regulation and oversight for all of our businesses; however, compliance, risk management and control functions are already part of our operations, and integrity is a core value embedded in our culture. In the U.S., tax reform legislation became law last year. As a result, we estimate our effective corporate tax rate in 2018 will decline to a range of 21% to 22.5% from an adjusted rate of 28.9% in 2017. The reduction in our effective tax rate will generate approximately $200 million of additional cash flow in 2018. Tax reform also resulted in a 22% increase in our regular quarterly cash dividend, a $20 million contribution to the S&P Global Foundation and improves our 2018 earnings per share outlook by more than $1.00 per share. $200M The reduction in our effective tax rate will generate approximately $200 million of additional cash flow in 2018 We are always evaluating new rules in different countries to determine their impact on our business. For example in Europe, recent regulatory changes to the Markets in Financial Instruments Directive, or MiFID II, took effect and are likely to disrupt the research industry but may also provide an opportunity for us to meet the evolving data and research needs of customers. 11 $20M 2018 contribution to S&P Global Foundation New Opportunities to Support Communities and Economies In 2018, to underscore our commitment to powering more inclusive and sustainable economies and thriving global communities, S&P Global has increased its investments in a range of philanthropic and public engagement programs. In February, we announced that as a result of U.S. tax reform we are contributing $20 million to the S&P Global Foundation that will support non-profit organizations that are aligned with our Corporate Responsibility (CR) strategy. Our CR strategy leverages the essential connections between our capabilities and the needs of society. We focus our efforts where our skills can make a real difference by: – providing tools for sustainable investment while minimizing our own environmental footprint; – accelerating and promoting science, technology, engineering, and math (STEM) skill development; and – breaking down barriers to capital for women entrepreneurs. This focused strategy has resulted in: – thousands of our employees volunteering as part of our Community Impact Month initiative to support hundreds of community projects worldwide; – an expanded Disaster Relief Matching Gift program after natural disasters struck around the world and employees volunteered to support the hardest hit neighborhoods; – a wide variety of programs to support women entrepreneurs and business leaders, including promoting the flow of resources and capital to enterprises owned and managed by women; and – CarbonNeutral® Business Travel Certification through investments in renewable energy projects globally. 12 On behalf of my 20,000 colleagues, I want to thank our customers, our shareholders and our partners for putting their trust in S&P Global and our ability to deliver essential intelligence to power the markets of the future. We see a world of opportunity to power the markets of the future. I am really proud of the way our employees are responding to change. I am grateful for their enthusiasm, dedication and teamwork. Our collective ability to collaborate in new ways, to thrive in evolving markets and to leverage new technologies creates exciting new global opportunities. One thing that does not change is our commitment to our core values of relevance, excellence and integrity. Providing relevant solutions, embracing teamwork and acting with transparency are the principles that guide everything we do. On behalf of my 20,000 colleagues, I want to thank our customers, our shareholders and our partners for putting their trust in S&P Global and our ability to deliver essential intelligence to power the markets of the future. Sincerely, Douglas L. Peterson President and Chief Executive Officer Reconciliation of Non-GAAP Financial Information The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). 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 (IFC–page 12) both as reported (on a GAAP basis) and as adjusted by excluding certain items (Non-GAAP) as explained below. The Company’s non-GAAP measures include adjustments that reflect how man- agement views our businesses. The Company believes these non-GAAP financial measures provide useful supplemental infor- mation that, in the case of non-GAAP financial measures other than free cash flow and free cash flow excluding certain items, enables investors to better compare the Company’s performance across periods, and management also uses these measures internally to assess the operating performance of its business, to assess performance for employee compensation purposes and to decide how to allocate resources. The Company believes that the presentation of free cash flow and free cash flow excluding certain items allows investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management and that such measures are useful in evaluating the cash available to us to prepay debt, make strategic acquisitions and investments, and repurchase stock. However, investors should not consider any of these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports. S&P Global 2017 Annual Report 13 OPERATING RESULTS BY SEGMENT — REPORTED VS. PERFORMANCE Non-GAAP Financial Information Periods ended December 31, 2017 and 2016 (dollars in millions, except per share amounts) Adjusted Operating Profit (unaudited) Ratings Operating Profit Non-GAAP Adjustments (a) Deal- Related Amortization Adjusted Operating Profit Market and Commodities Intelligence Operating Profit Non-GAAP Adjustments (b) Deal- Related Amortization Adjusted Operating Profit S&P Dow Jones Indices Operating Profit Deal- Related Amortization Adjusted Operating Profit Total Segments Operating Profit Non-GAAP Adjustments (a) (b) Deal- Related Amortization Adjusted Segment Operating Profit Unallocated Expense Unallocated Expense Non-GAAP Adjustments (c) Adjusted Unallocated Expense Total SPGI Operating Profit Non-GAAP Adjustments (a) (b) (c) Deal- Related Amortization Adjusted Operating Profit Adjusted Interest Expense (unaudited) Interest Expense Non-GAAP Adjustments (d) Adjusted Interest Expense Adjusted Provision for Income Taxes (unaudited) Provision for Income Taxes Non-GAAP Adjustments (a) (b) (c) (d) (e) Deal- Related Amortization Adjusted Provision for Income Taxes 14 S&P Global 2017 Annual Report Twelve Months 2017 2016 % Change $ 1,524 80 4 $ 1,608 $ 793 33 87 $ 913 $ 471 7 $ 478 $ 2,788 112 98 $ 2,998 $ (178) 37 $ (141) $ 2,610 149 98 $ 2,857 $ 1,262 (4) 5 $ 1,263 $ 1,822 (1,027) 85 $ 881 $ 412 6 $ 417 $ 3,496 (1,031) 96 $ 2,561 $ (127) (3) $ (130) $ 3,369 (1,034) 96 $ 2,431 21% 27% (56)% 4% 14% 14% (20)% 17% 40% 9% (23)% 18% 2017 $ 149 — $ 149 Twelve Months 2016 $ 181 (21) $ 160 2017 $ 823 (75) 34 $ 782 Twelve Months 2016 $ 960 (265) 34 $ 729 % Change (18)% (7)% % Change (14)% 7% Adjusted Effective Tax Rate (unaudited) Adjusted Operating Profit Adjusted Interest Expense Adjusted Income Before Taxes on Income (1) Adjusted Provision for Income Taxes (2) Adjusted Effective Tax Rate (2)/(1) 2017 $ 2,857 (149) 2,708 782 Twelve Months 2016 % Change $ 2,431 (160) 2,271 729 18% 19% 28.9% 32.1% Adjusted Net Income Attributable to SPGI and Adjusted Diluted EPS (unaudited) 2017 Net Income Attributable to SPGI Diluted EPS 2016 Net Income Attributable to SPGI Twelve Months As Reported Non-GAAP Adjustments (a) (b) (c) Deal- Related Amortization Adjusted $ 1,496 224 64 $ 1,784 $ 5.78 0.87 0.25 $ 6.89 Note — Totals presented may not sum due to rounding. $ 2,106 (748) 62 % Change Net Income Attributable to SPGI Diluted EPS (29)% (27)% Diluted EPS $ 7.94 (2.82) 0.23 $ 1,420 $ 5.35 26% 29% Note — Total SPGI adjusted operating profit for the twelve months ended December 31, 2017 include revenue of $6,063 million and adjusted total expense of $3,206 million. Total SPGI adjusted operating profit for the twelve months ended December 31, 2016 include revenue of $5,661 million and adjusted total expense of $3,230 million. Note — Adjusted operating margin for Ratings, Market and Commodities Intelligence and S&P Dow Jones Indices was 54%, 37% and 65% for the twelve months ended December 31, 2017. Adjusted operating margin for the Company was 47% for the twelve months ended December 31, 2017. (a) 2017 includes legal settlement expenses $55 million ($34 million after-tax) and employee severance charges of $25 million ($17 million after-tax). 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million ($4 million after-tax) and employee severance charges of $6 million ($3 million after-tax). (b) 2017 includes non-cash acquisition and disposition- related adjustments of $15 million ($7 million after-tax), employee severance charges of $9 million ($7 mil- lion after-tax), a charge to exit a leased facility of $6 million ($3 million after-tax), and an asset-write off of $2 million ($1 million after-tax). 2016 includes a gain on dispositions of $1.1 billion ($818 million after-tax), disposition- related costs of $48 million ($42 million after-tax), a technology- related impairment charge of $24 million ($16 million after-tax) and an acquisition- related cost of $1 million ($1 million after-tax). (c) 2017 includes a charge to exit leased facilities of $19 million ($16 million after-tax), a pension related charge of $8 million ($7 million after-tax), and employee severance charges of $10 million ($6 million after-tax). 2016 includes $3 million ($2 million after-tax) from a disposition- related reserve release. (d) 2016 includes a redemption fee of $21 million ($13 million after-tax) related to the early payment of our senior notes. (e) 2017 includes $149 million of tax expense due to U.S. tax reform, primarily associated with the deemed repatriation of foreign earnings, which was partially offset by a $21 million tax benefit related to prior year divestitures. S&P GLOBAL ORGANIC REVENUE (unaudited) Total revenue Market and Commodities Intelligence acquisitions, divestitures and product closures S&P Dow Jones Indices acquisition Total adjusted revenue 2017 $ 6,063 (30) (3) $ 6,030 Twelve Months 2016 $ 5,661 (333) — $ 5,328 % Change 7% 13% S&P Global 2017 Annual Report 15  18 Management’s Discussion and Analysis 46 Consolidated Statements of Income 47 Consolidated Statements of Comprehensive Income 48 Consolidated Balance Sheets 49 Consolidated Statements of Cash Flows 50 Consolidated Statements of Equity 51 Notes to the Consolidated Financial Statements 88 Five Year Financial Review 89 Report of Management 90 Report of Independent Registered Public Accounting Firm 92 Shareholder Information IBC Directors and Principal Executives 16 S&P Global 2017 Annual Report 2017 Financial Performance Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis (“MD&A”) Market and Commodities Intelligence is a global provider of provides a narrative of the results of operations and financial multi-asset-class data, research and analytical capabilities, condition of S&P Global Inc. (together with its consolidated which integrate cross-asset analytics and desktop services subsidiaries, the “Company,” “we,” “us” or “our”) for the years and deliver their customers in the commodity and energy ended December 31, 2017 and 2016, respectively. The MD&A markets access to high-value information, data, analytic should be read in conjunction with the consolidated financial services and pricing and quality benchmarks. We completed statements and accompanying notes included in this Annual the sale of J.D. Power on September 7, 2016, with the results Report on Form 10-K for the year ended December 31, 2017, included in Market and Commodities Intelligence results which have been prepared in accordance with accounting prin- through that date. ciples generally accepted in the U.S. (“U.S. GAAP”). Indices is a global index provider maintaining a wide variety The MD&A includes the following sections: Overview Results of Operations of valuation and index benchmarks for investment advisors, wealth managers and institutional investors. In December of 2017, we announced that S&P Global Platts, Liquidity and Capital Resources a business line within Market and Commodities Intelligence, Reconciliation of Non-GAAP Financial Information will be managed as a separate business and comprise a sep- 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 substantial uncertainty. See Forward- Looking Statements on page  44 of this report. Overview We are a leading provider of transparent and independent rat- ings, benchmarks, analytics and data to the capital and com- modity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, trading firms and issuers; and the com- modity markets include producers, traders and intermediaries within energy, metals, petrochemicals and agriculture. 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 and analytics, offering investors and other market partici- pants information, ratings and benchmarks. arate reportable segment effective January  1, 2018. We will begin reporting the financial results of S&P Global Market Intelligence and S&P Global Platts as separate reportable seg- ments beginning with the first quarter of 2018. MAJOR PORTFOLIO CHANGES The following significant changes by segment were made to our portfolio during the three years ended December 31, 2017: 2016 Market and Commodities Intelligence In October of 2016, we completed the sale of Standard & Poor’s Securities Evaluations, Inc. (“SPSE”) and Credit Market Analysis (“CMA”) for $425 million in cash to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services. During year ended December 31, 2016, we recorded a pre-tax gain of $364 million ($297 million after- tax) in gain 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 invest- ments firm headquartered in London. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 mil- lion ($516  million after-tax) in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. 18 S&P Global 2017 Annual Report In September of 2016, we acquired PIRA Energy Group investors, corporations, and regulators make decisions, (“PIRA”), a global provider of energy research and forecasting improve efficiency, and manage risk. products and services. The purchase enhances Market and In July of 2015, we acquired the entire issued share capital of Commodities Intelligence’s energy analytical capabilities by Petromedia Ltd and its operating subsidiaries (“Petromedia”), expanding its oil offering and strengthening its position in the an independent provider of data, intelligence, news and natural gas and power markets. tools to the global fuels market that offers a suite of prod- In June of 2016, we acquired RigData, a provider of daily ucts providing clients with actionable data and intelligence information on rig activity for the natural gas and oil markets that enable informed decisions, minimize risk and increase across North America. The purchase enhances Market and efficiency. Commodities Intelligence’s energy analytical capabilities by strengthening its position in natural gas and enhancing its oil offering. 2015 Market and Commodities Intelligence 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. Increased Shareholder Return During the three years ended December  31, 2017, we have In September of 2015, we acquired SNL Financial LC (“SNL”) returned approximately $4.3  billion to our shareholders for $2.2 billion. SNL is a global provider of news, data, and through a combination of share repurchases and our quarterly analytical tools to five sectors in the global economy: finan- dividends: we completed share repurchases of approximately cial services, real estate, energy, media & communications, $3.1 billion and distributed regular quarterly dividends totaling and metals & mining. SNL delivers information through its approximately $1.2 billion. Also, on February 2, 2018, the Board suite of web, mobile and direct data feed platforms that of Directors approved an increase in the quarterly common helps clients, including investment and commercial banks, stock dividend from $0.41 per share to $0.50 per share. KEY RESULTS (in millions) Revenue Operating profit 2 % Operating margin Diluted earnings per share from net income Year ended December 31, % Change 1 2017 $ 6,063 $ 2,610 2016 $ 5,661 $ 3,369 2015 $ 5,313 $ 1,917 43% 60% 36% ’17 vs ’16 ’16 vs ’15 7% (23)% 7% 76% 89% $ 5.78 $ 7.94 $ 4.21 (27)% 1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented. 2 2017 includes legal settlement expenses of $55  million, employee severance charges of $44  million, a charge to exit leased facilities of $25  million, non- cash acquisition and disposition- related adjustments of $15 million, a pension related charge of $8 million and an asset write-off of $2 million. 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 mil- lion, a technology- related impairment charge of $24 million, employee severance 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 employee severance charges 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. 2017, 2016 and 2015 also includes amortization of intangibles from acquisitions of $98 million, $96 million, and $67 million, respectively. S&P Global 2017 Annual Report 19 2017 Revenue increased 7% driven by increases at Ratings Operating profit increased 76%. Excluding the favorable impact of the gain from our dispositions of 59  percentage points, and Indices, partially offset by a decrease at Market and higher net legal settlement insurance recoveries in 2016 of Commodities Intelligence. The increase at Ratings was primar- 3  percentage points, higher employee severance charges in ily due to growth in bank loan ratings revenue and corporate 2015 of 3  percentage points and higher acquisition- related bond ratings revenue. Revenue growth at Indices was primarily costs in 2015 of 2  percentage points, partially offset by the due to higher levels of assets under management for exchange unfavorable impact of higher disposition- related costs of traded funds (“ETFs”) and mutual funds. The decrease at 3 percentage points, higher amortization of intangibles from Market and Commodities Intelligence was primarily due to the acquisitions of 2 percentage points and a technology- related disposition of non-core businesses in 2016, partially offset by impairment charge of 1  percentage point, operating profit annualized contract value growth in the S&P Global Market increased 15%. This increase was primarily driven by revenue Intelligence Desktop and Global Risk Services products and growth as discussed above. Decreased costs at Ratings and continued demand for Platts’ proprietary content at S&P our legacy Capital IQ business due to reduced headcount fol- Global Platts. lowing our 2015 restructuring actions also contributed to oper- Operating profit decreased 23%. Excluding the unfavorable impact of the gain on dispositions in 2016 of 37  percentage points, higher net legal settlement expenses in 2017 of 2 per- centage points, higher employee severance charges in 2017 of 1 percentage point, a charge to exit leased facilities of 1 per- centage point and non-cash acquisition and disposition- related adjustments in 2017 of 1 percentage point, partially offset by the favorable impact of higher disposition- related costs in 2016 of 1  percentage point, operating profit increased 18%. This increase was primarily due to revenue growth at Ratings and ating profit growth. OUR STRATEGY We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. Our purpose is to provide the intelligence that is essential for companies, governments and individuals to make decisions with conviction. We seek to deliver on this purpose within the framework of our core values of integrity, excellence and relevance. Indices as discussed above, partially offset by higher compen- We seek to deliver an exceptional, differentiated customer expe- sation costs due to increased incentive costs and additional rience across the globe. We strive for operational excellence, headcount. 2016 Revenue increased 7% driven by increases at all of our report- continuous innovation, and a high performance culture driven by our best-in-class talent. In 2018, we will strive to deliver on our strategic priorities in the following four categories by: able segments. Revenue growth at Market and Commodities Finance Intelligence was favorably impacted by the acquisition of Achieving financial targets and creating shareholder value SNL in September of 2015 and annualized contract value by focusing on organic revenue growth and continuing to growth primarily driven by the S&P Capital IQ Desktop, Global deliver margin expansion with a focus on operating leverage Risk Services and certain data feed products within Data and efficiency opportunities; and Management Solutions. Continued demand for S&P Global Outperforming traditional and nontraditional competitors. Platts’ proprietary content also contributed to revenue growth. These increases were partially offset by the unfavorable impact Customer from our dispositions in 2016. Revenue growth at Ratings was Delivering greater customer value through deeper client driven by an increase in U.S. bank loan ratings revenue, cor- and market insights, innovative solutions, stronger internal porate bond ratings revenue and surveillance fees. Revenue teamwork and reliable, nimble Go-to- Market processes; growth at Indices was due to higher average levels of assets Enriching and modernizing the user experience to improve under management for ETFs and mutual funds, an increase customer loyalty; in data revenue and higher volumes for exchange- traded Identifying and executing transformative growth opportu- derivatives. nities; and Accelerating investments and coordination in building new products and in developing new markets. 20 S&P Global 2017 Annual Report Operations Committing to leadership development programs and skills Enhancing planning and software engineering processes to training; speed up the delivery of content and products; Embracing and expanding diversity and inclusion in our Applying lean management, robotics, automation and workforce; and machine learning to streamline internal workflow and deliver Enhancing and augmenting technology talent and skills productivity; across the company. Strengthening our Digital Infrastructure capabilities, with emphasis on workplace services and cybersecurity; and Upholding our commitment to a disciplined and practical risk, control and compliance environment. People Creating a performance culture to drive innovation, flexibility 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 this Annual Report on Form 10-K. and agility to address customer needs; Further projections and discussion on our 2018 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 on dispositions Operating profit Interest expense, net Provision for taxes on income Net income Year ended December 31, % Change 2017 2016 2015 ’17 vs ’16 ’16 vs ’15 $ 6,063 $ 5,661 $ 5,313 7% 7% 1,713 1,560 180 3,453 1,773 1,439 181 3,393 1,718 1,532 157 3,407 (3)% 8% (1)% 2% — (1,101) (11) N/M 2,610 149 823 1,638 3,369 181 960 2,228 1,917 102 547 1,268 (23)% (18)% (14)% (27)% 16% (29)% 3% (6)% 15% —% N/M 76% 77% 76% 76% 9% 82% Less: net income attributable to noncontrolling interests (142) (122) (112) Net income attributable to S&P Global Inc. $ 1,496 $ 2,106 $ 1,156 N/M — not meaningful S&P Global 2017 Annual Report 21 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 2017 2016 2015 ’17 vs ’16 ’16 vs ’15 $ 3,796 $ 461 $ 1,806 $ 3,623 $ 381 $ 1,657 $ 3,260 $ 369 $ 1,684 5% 21% 9% 11% 3% (2)% 63% 7% 30% 64% 7% 29% 61% 7% 32% $ 3,658 $ 3,461 $ 3,202 6% 1,473 594 338 1,330 575 295 1,265 566 280 $ 2,405 $ 2,200 $ 2,111 11% 3% 14% 9% 8% 5% 2% 6% 4% 60% 40% 61% 39% 60% 40% 2017 Revenue by Type 2017 Revenue by Geographic Area Non-subscription/ Transaction 30% Subscription/ Non-transaction 63% Rest of the World 6% Asia 10% U.S. 60% Asset-linked fees 7% European Region 24% 22 S&P Global 2017 Annual Report 2017 Revenue increased 7% as compared to 2016. Subscription / 2016 Revenue increased 7% as compared to 2015. Subscription / non- transaction revenue increased primarily from growth in non- transaction revenue increased primarily from the favor- S&P Global Market Intelligence’s average contract values, con- able impact of the acquisition of SNL in September 2015, tinued demand for Platts’ proprietary content and an increase growth in average contract values for our legacy Capital IQ in surveillance fees at Ratings, partially offset by the unfavor- products driven by an expansion in new and existing accounts, able impact of the disposition of non-core businesses in 2016. continued demand for S&P Global Platts’ proprietary content Asset- linked fees increased due to the impact of higher levels and an increase in surveillance fees at Ratings. Asset- linked of assets under management for ETFs and mutual funds. Non- fees increased due to higher levels of assets under manage- subscription / transaction revenue increased primarily due to ment for ETFs and mutual funds. Non- subscription / transac- bank loan ratings revenue and corporate bond ratings reve- tion revenue decreased primarily due to the unfavorable impact nue at Ratings, partially offset by the unfavorable impact of of the sale of J.D. Power on September 7, 2016, partially offset the disposition of non-core businesses in 2016. See “Segment by an increase in U.S. bank loan ratings revenue and corpo- Review” below for further information. rate bond ratings revenue at Ratings and higher volumes for Foreign exchange rates had a negligible impact on revenue. This impact refers to constant currency comparisons estimated by exchange traded derivatives at Indices. See “Segment Review” below for further information. recalculating current year results of foreign operations using Foreign exchange rates had a negligible impact on revenue. This the average exchange rate from the prior year. impact refers to constant currency comparisons estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. 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, 2017 and 2016: (in millions) Ratings 1 Market and Commodities Intelligence 2 Indices Intersegment eliminations 3 Total segments Corporate 4 N/M — not meaningful 2017 2016 % Change Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses Operating- related expenses Selling and general expenses $ 850 833 139 (109) 1,713 — $ 581 699 111 — 1,391 169 $ 797 958 116 (98) 1,773 — $ 442 774 104 — 1,320 119 $ 1,713 $ 1,560 $ 1,773 $ 1,439 7% (13)% 21% (12)% (3)% N/M (3)% 32% (10)% 7% N/M 5% 42% 8% 1 In 2017, selling and general expenses include legal settlement expenses of $55 million and employee severance charges of $25 million. In 2016, selling and general expenses include a benefit related to net legal settlement insurance recoveries of $10 million and employee severance charges of $6 million. 2 In 2017, selling and general expenses include non-cash acquisition and disposition- related adjustments of $15 million, employee severance charges of $9 mil- lion, a charge to exit a leased facility of $6 million, and an asset write-off of $2 million. 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. 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 2017, selling and general expenses include a charge to exit leased facilities of $19 million, employee severance charges of $10 million and a pension related charge of $8 million. In 2016, selling and general expenses include $3 million from a disposition- related reserve release. S&P Global 2017 Annual Report 23  Operating- Related Expenses Operating- related expenses decreased $60 million or 3% as in 2017 of 2 percentage points and non-cash acquisition and disposition related costs in 2017 of 1 percentage point, partially compared to 2016. The decrease at Market and Commodities offset by the favorable impact of higher disposition- related Intelligence was due to the disposition of non-core businesses costs in 2016 of 3 percentage points and a technology- related in 2016. This decrease was partially offset by increases at impairment charge in 2016 of 2 percentage points, selling and Ratings and Indices due to higher compensation costs related general expenses increased 3 percentage points. The increase to increased incentive costs and additional headcount. is due to higher compensation costs related to incentives and Selling and General Expenses Selling and general expenses increased 8%. Excluding the unfa- at Corporate primarily due to performance related incentive compensation and Company-wide technology projects. This vorable impact of higher net legal settlement expenses in 2017 increase was partially offset by a decrease at Market and of 4 percentage points, higher employee severance charges in Commodities Intelligence as a result of business divestitures additional headcount at Ratings and Indices and an increase 2017 of 3 percentage points, a charge to exit leased facilities in 2016. Depreciation and Amortization Depreciation and amortization remained relatively unchanged as compared to 2016, decreasing $1 million or 1%. 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 $ 797 958 116 (98) 1,773 — $ 442 774 104 — 1,320 119 $ 767 925 114 (88) 1,718 — $ 541 769 82 — 1,392 140 $ 1,773 $ 1,439 $ 1,718 $ 1,532 4% 4% 1% (10)% 3% N/M 3% (18)% 1% 26% N/M (5)% (15)% (6)% 1 In 2016, selling and general expenses include a benefit related to net legal settlement insurance recoveries of $10 million and employee severance charges of $6 million. In 2015, selling and general expenses include net legal settlement expenses of $54 million and employee severance charges $13 million. 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 employee severance charges 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 employee severance charges of $10 million. Operating- Related Expenses Operating- related expenses increased $55  million or 3% as Selling and General Expenses Selling and general expenses decreased 6%. Excluding the compared to 2015. The increase at Market and Commodities favorable impact of higher net legal settlement insurance Intelligence was primarily driven by the acquisition of SNL in recoveries in 2016 of 4  percentage points, higher employee September of 2015, partially offset by decreases from our dis- severance charges in 2015 of 3  percentage points, higher positions in 2016. The increase at Ratings and Indices were due acquisition- related costs in 2015 of 2 percentage points, par- to higher compensation costs related to additional headcount tially offset by the unfavorable impact of disposition- related and increased incentive costs. costs of 3  percentage points and a technology- related impairment charge of 1 percentage point, selling and general expenses decreased 1%. Decreases at Ratings were driven by reduced professional fees following the completion of the 24 S&P Global 2017 Annual Report Company’s program for the 2015 implementation of the Dodd- operator of global exchanges, clearing houses and data ser- Frank Wall Street Reform and Consumer Protection Act and vices. We recorded a pre-tax gain of $364 million in gain on reduced legal fees following the resolution of a number of sig- dispositions in the consolidated statement of income related nificant legal matters. This decrease was partially offset by to the sale of SPSE and CMA. Additionally, in October of 2016, an increase at Market and Commodities Intelligence driven by we completed the sale of Equity and Fund Research (“Equity the acquisition of SNL in September of 2015, partially offset by Research”) to CFRA, a leading independent provider of foren- decreases from our dispositions in 2016. sic accounting research, analytics and advisory services. Depreciation and Amortization Depreciation and amortization increased $24 million or 15% During the year ended December  31, 2016, we recorded a pre-tax gain of $9 million in gain on dispositions in the con- solidated statement of income related to the sale of Equity as compared to 2015, primarily due to higher intangible asset Research. amortization in 2016 from the acquisition of SNL in September In September of 2016, we completed the sale of J.D. Power of 2015. GAIN ON DISPOSITIONS During 2016, we completed the following transactions that resulted in a pre-tax gain of $1.1 billion in gain on dispositions in the consolidated statement of income: In October of 2016, we completed the sale of SPSE and CMA for $425  million in cash to Intercontinental Exchange, an for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. We recorded a pre-tax gain of $728 million in gain on dispositions in the consolidated state- ment of income related to the sale of J.D. Power. 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 on dispositions in the consolidated statement of income. OPERATING PROFIT We consider operating profit to be an important measure for evaluating our operating performance and we evaluate operating profit for each of the reportable business segments in which we operate. We internally manage our operations by reference to operating profit with economic resources allocated primarily based on each segments contribution to operating profit. Segment operating profit is defined as operating profit before unallocated expense. Segment operating profit is not, however, a measure of financial performance under U.S. GAAP, and may not be defined and cal- culated by other companies in the same manner. The table below reconciles segment operating profit to total operating profit: Year ended December 31, % Change (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 2015 ’17 vs ’16 ’16 vs ’15 2017 $ 1,524 793 471 2,788 (178) 2016 $ 1,262 1,822 412 3,496 (127) $ 1,078 585 392 2,055 (138) $ 2,610 $ 3,369 $ 1,917 21% (56)% 14% (20)% 40% (23)% 17% N/M 5% 70% (8)% 76% 1 2017 includes legal settlement expenses of $55 million and employee severance charges of $25 million. 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and employee severance charges of $6 million. 2015 includes net legal settlement expenses of $54 million and employee sev- erance charges of $13 million. 2017, 2016 and 2015 also includes amortization of intangibles from acquisitions of $4 million, $5 million and $5 million, respectively. 2 2017 includes non-cash acquisition and disposition- related adjustments of $15 million, employee severance charges of $9 million, a charge to exit a leased facility of $6 million, and an asset write-off of $2 million. 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 acquisi- tion of SNL of $37 million and costs identified operating efficiencies primarily related to employee severance charges of $33 million. 2017, 2016 and 2015 includes amortization of intangibles from acquisitions of $87 million, $85 million and $57 million, respectively. 3 2017, 2016 and 2015 includes amortization of intangibles from acquisitions of $7 million, $6 million and $5 million, respectively. 4 2017 includes a charge to exit leased facilities of $19 million, employee severance charges of $10 million and a pension related charge of $8 million. 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 employee severance charges of $10 million. S&P Global 2017 Annual Report 25 2017 SEGMENT OPERATING PROFIT — Decreased $0.7 billion, or 2 percentage points, partially offset by the unfavorable impact of a technology- related impairment charge of 1  percentage 20% as compared to 2016. Excluding the unfavorable impact of point, higher amortization of intangibles from acquisitions of the gain on dispositions in 2016 of 36 percentage points, higher 2  percentage points and higher disposition- related costs of net legal settlement expenses in 2017 of 2 percentage points, 2 percentage points, segment operating profit increased 13%. higher employee severance charges in 2017 of 1 percentage Revenue growth at Market and Commodities Intelligence, point and non-cash acquisition and disposition- related adjust- Ratings and Indices were the primary drivers for the increase. ments in 2017 of 1  percentage point, partially offset by the Decreased costs at Ratings and our legacy Capital IQ business favorable impact of higher disposition- related costs in 2016 due to reduced headcount following our 2015 restructuring of 2 percentage points and a technology- related impairment actions also contributed to segment operating profit growth. charge in 2016 of 1 percentage point, segment operating profit See “Segment Review” below for further information. increased 17%. This increase was primarily due to revenue growth at Ratings and Indices as discussed above, partially off- set by higher compensation costs due to additional increased incentive costs and additional headcount. See “Segment Review” below for further information. UNALLOCATED EXPENSE — Decreased by $11 million or 8% as compared to 2015. These expenses, included in selling and general expenses, mainly include costs for corporate cen- ter functions, select initiatives and unoccupied office space. Excluding the unfavorable impact of a gain on the sale of our UNALLOCATED EXPENSE — Increased by $51 million or 40% interest in a legacy McGraw Hill Construction investment in as compared to 2016. These expenses, included in selling and 2015 of 8 percentage points, partially offset by the favorable general expenses, mainly include costs for corporate cen- impact of a disposition- related reserve release of 2 percent- ter functions, select initiatives and unoccupied office space. age points and higher employee severance charges in 2015 of Excluding the unfavorable impact of a charge to exit leased facil- 7 percentage points, unallocated expense decreased 7% due ities in 2017 of 14 percentage points, a pension related charge to higher 2016 pension income as well as a reduction in profes- in 2017 of 7 percentage points, employee severance charges in sional service fees. 2017 of 8 percentage points and a disposition- related reserve release in 2016 of 2 percentage points, unallocated expense increased 9%. This increase was primarily due to performance related incentive compensation and Company-wide technol- ogy projects. 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 exchange rates had a favorable impact on operating foreign operations using the average exchange rate from the profit of 1 percentage point. The foreign exchange rate impact prior year. Remeasurement impacts are based on the variance refers to constant currency comparisons and the remeasure- between current-year and prior-year foreign exchange rate ment of monetary assets and liabilities. Constant currency fluctuations on monetary assets and liabilities denominated impacts are estimated by recalculating current year results of in currencies other than the individual business’ functional foreign operations using the average exchange rate from the currency. 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 INTEREST EXPENSE, NET Net interest expense for 2017 decreased $32 million or 18% as in currencies other than the individual business’ functional compared to 2016, primarily as a result of the favorable impact currency. 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 percent- age points, higher acquisition- related costs in 2015 of 2 per- centage points, higher employee severance charges in 2015 of of lower interest rates on the $500  million of senior notes issued in 2016 compared to the $400 million senior notes that were repaid in the third quarter of 2016. Net interest expense for 2016 increased $79  million or 77% as compared to 2015, primarily as a result of the $700  mil- lion of senior notes issued in the second quarter of 2015, the $2.0 billion 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 26 S&P Global 2017 Annual Report redemption fee on the early payment of our 5.9% senior notes Our effective tax rate was 33.4% for 2017, and 30.1% for 2016 due in 2017. These increases were partially offset by the favor- and 2015. The increase in 2017 was primarily due to the one- able impact of lower interest rates on the $500 million of senior time tax charge for the deemed repatriation of foreign earnings, notes issued in the third quarter of 2016. net of the recognition of excess tax benefits associated with share-based payments in the statement of income and the re- valuation of net U.S. deferred tax liabilities at the reduced corporate income tax rate. The Company is continuously subject to tax examinations in various jurisdictions. In May 2017, the IRS issued a 30-Day Letter proposing to increase the Company’s federal income tax for the 2015 tax year by approximately $242 million. The proposed increase relates primarily to the IRS’s proposed dis- allowance of claimed tax deductions for certain amounts paid in 2015 to settle lawsuits by nineteen states and the District of Columbia. We vigorously disagree with the proposed adjust- ment and have filed a formal protest with the IRS to contest the matter before the IRS Appeals Office. This development does not materially change our initial assessment of the deductibil- ity of our settlement payments. PROVISION FOR INCOME TAXES Comprehensive tax legislation, enacted through the Tax Cuts and Jobs Act (“TCJA”) on December  22, 2017, significantly modified U.S. corporate income tax law. Provisional amounts have been recorded in our financial statements based on the Company’s initial analysis of the TCJA. The Company may adjust these amounts in future periods if our interpretation of the TCJA changes or as additional guidance from the U.S. Treasury becomes available. As a result of the TCJA, a pro- visional amount of $149  million has been recorded which reflects a one-time tax charge of approximately $173 million on the deemed repatriation of foreign earnings and a one- time tax benefit of approximately $24 million in respect of the re- valuation of net U.S. deferred tax liabilities at the reduced corporate income tax rate. While the TCJA reduced net income in 2017, the Company is anticipating an ongoing future benefit from the lower corporate income tax rate. Segment Review RATINGS Ratings is an independent provider of credit ratings, research bank loan ratings; and corporate credit estimates, which are intended, based on an and analytics to investors, issuers and other market partici- abbreviated analysis, to provide an indication of our opin- pants. Credit ratings are one of several tools investors can use ion regarding creditworthiness of a company which does not when making decisions about purchasing bonds and other currently have a Ratings credit rating. fixed income investments. They are opinions about credit risk and our ratings express our opinion about the ability and will- ingness of an issuer, such as a corporation or state or city gov- ernment, to meet its financial obligations in full and on time. Our credit ratings can also relate to the credit quality of an indi- 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 rat- ings and global research and analytics. Non- transaction reve- nue also includes an intersegment royalty charged to Market and Commodities Intelligence for the rights to use and distrib- ute content and data developed by Ratings. Royalty revenue Ratings differentiates its revenue between transaction and from Market and Commodities Intelligence for 2017, 2016 and non- transaction. Transaction revenue primarily includes fees 2015 was $100 million, $92 million and $83 million, respectively. associated with: ratings related to new issuance of corporate and government debt instruments, and structured finance debt instruments; S&P Global 2017 Annual Report 27 (in millions) Revenue Transaction revenue Non- transaction revenue % of total revenue: Transaction revenue Non- transaction revenue U.S. revenue International revenue % of total revenue: U.S. revenue International revenue Operating profit 1 % Operating margin Year ended December 31, % Change 2015 ’17 vs ’16 ’16 vs ’15 2017 $ 2,988 $ 1,540 $ 1,448 2016 $ 2,535 $ 1,178 $ 1,357 $ 2,428 $ 1,107 $ 1,321 52% 48% 46% 54% 46% 54% $ 1,716 $ 1,272 $ 1,462 $ 1,073 $ 1,390 $ 1,038 57% 43% 58% 42% 57% 43% 18% 31% 7% 17% 19% 4% 6% 3% 5% 3% $ 1,524 $ 1,262 $ 1,078 21% 17% 51% 50% 44% 1 2017 includes legal settlement expenses of $55 million and employee severance charges of $25 million. 2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and employee severance charges of $6 million. 2015 includes net legal settlement expenses of $54 million and employee sev- erance charges of $13 million. 2017, 2016 and 2015 also includes amortization of intangibles from acquisitions of $4 million, $5 million and $5 million, respectively. 2017 Revenue increased 18%. Transaction revenue grew primar- 2016 Revenue increased 4%, which includes the unfavorable impact ily due to growth in bank loan ratings revenue in the U.S. and of foreign exchange rates that reduced revenue by 1 percent- Europe and an increase in corporate bond ratings revenue age point. Transaction revenue increased due to growth in U.S. driven by an increase in corporate bond issuance. The increase bank loan ratings revenue and an increase in corporate bond in bank loan ratings revenue was driven by refinancing activ- ratings revenue largely driven by refinancing activity from the ity from the low interest rate environment. The increase in low interest rate environment, partially offset by a decrease in structured finance revenue driven by increased U.S. collater- structured finance revenue. Revenue growth benefited from alized loan obligations and U.S. commercial mortgage- backed increased contract realization. Non- transaction revenue grew securities issuance also contributed to revenue growth. These primarily due to an increase in surveillance fees, partially offset increases were partially offset by a decline in public finance by a decline in Ratings Evaluation Service activity. revenue driven by lower state and municipal bond issuance. Non- transaction revenue grew primarily due to an increase in surveillance fees and higher entity credit ratings revenue. Operating profit increased 17%. Excluding the favorable impact of higher net legal settlement insurance recoveries in 2016 of 6 percentage points and lower employee severance charges in Operating profit increased 21%. Excluding the unfavorable 2016 of 1 percentage point, operating profit increased 10%. The impact of higher net legal settlement expenses in 2017 of increase is due to both revenue growth and expense reduction. 5 percentage points and higher employee severance charges Reduced expenses were primarily driven by reduced profes- in 2017 of 1 percentage point, operating profit increased 27%. sional fees following the completion of the Company’s program This increase is primarily due to revenue growth, partially offset for the 2015 implementation of the Dodd-Frank Wall Street by higher compensation costs related to increased incentive Reform and Consumer Protection Act and reduced legal fees costs and additional headcount. A reduction in legal fees and following the resolution of a number of significant legal mat- professional service fees also had a favorable impact on oper- ters. These decreases were partially offset by higher compen- ating profit growth. sation costs related to increased incentive costs and additional headcount. Foreign exchange rates had a favorable impact on operating profit of 1 percentage point. 28 S&P Global 2017 Annual Report Market Issuance Volumes We monitor market issuance volumes regularly within Ratings. RMBS volume in the U.S. was up driven primarily by favorable reaction to the new risk retention rules and favorable market Market issuance volumes noted within the discussion that fol- conditions leading to increased activity in single family rent- lows are based on the domicile of the issuer. Issuance volumes als, credit risk transfers, and non- qualified mortgage deals. can be reported in two ways: by “domicile” which is based on EMEA issuance declined as central bank liquidity schemes where an issuer is located or where the assets associated with provided other opportunities for funding sources. an issue are located, or based on “marketplace” which is where Covered bond (debt securities backed by mortgages or other the bonds are sold. The following tables depict changes in mar- high- quality assets that remain on the issuer’s balance ket issuance levels as compared to the prior year, based on a sheet) issuance in Europe was up partially due to the impact composite of Thomson Financial, Harrison Scott Publications, from the European Central Bank’s covered bond asset pur- Dealogic and Ratings’ internal estimates. chase program. 2017 Compared to 2016 Corporate Bond Issuance U.S. Europe Global High-yield issuance Investment grade Total new issue dollars — Corporate issuance 24% 8% 10% 63% (2)% 53% 1% 5% 6% Corporate issuance in the U.S. and Europe was up as a result of more favorable market conditions primarily due to tighten- ing credit spreads and some issuers that went to market in advance of expected interest rate increases. Both high-yield Industry Highlights and Outlook Revenue increased in 2017 primarily due to an increase in bank loan ratings and corporate bond ratings revenue driven by refinancing activity from the low interest rate environment. High-yield and investment grade corporate issuance volumes increased as a result of more favorable market conditions pri- marily due to tightening credit spreads and some issuers that went to market in advance of expected interest rate increases. Legal and Regulatory Environment and investment grade issuance comparisons also benefited from weakness in 2016 due to market volatility and political General and economic uncertainty in the European markets. Ratings and many of the securities that it rates are subject to extensive regulation in both the U.S. and in other countries, Structured Finance U.S. Europe Global impact the Company’s operations and the markets in which it 2017 Compared to 2016 and therefore existing and proposed laws and regulations can Asset- backed securities (“ABS”) Structured credit Commercial mortgage- backed 12% 87% (12)% 74% 7% 85% operates. Additional laws and regulations have been adopted but not yet implemented or have been proposed or are being securities (“CMBS”) 20% (5)% 19% Residential mortgage- backed securities (“RMBS”) Covered bonds Total new issue dollars — Structured finance *Represents no activity in 2017 and 2016. 46% * (34)% 9% 3% —% 36% 2% 18% considered. In addition, in certain countries, governments may provide financial or other support to locally-based rating agencies. For example, governments may from time to time 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 ABS issuance was up in the U.S. driven by an increase in as required. We do not believe that such new laws, regulations auto transactions, commercial real estate loans and student or rules will have a material adverse effect on our financial loans. European ABS declined due to key auto issuers com- condition or results of operations. Other laws, regulations and pleting financing in the unsecured debt market. rules relating to credit rating agencies are being considered by Issuance was up in the U.S. and European structured credit local, national, foreign and multinational bodies and are likely markets driven by increased collateralized loan obligations to continue to be considered in the future, including provisions (“CLO”) refinancing engagements primarily due to overall seeking to reduce regulatory and investor reliance on credit market conditions. ratings, rotation of credit rating agencies and liability stan- CMBS issuance was up in the U.S. reflecting increased mar- dards applicable to credit rating agencies. The impact on us ket volume due to a low interest rate environment and favor- of the adoption of any such laws, regulations or rules remains able reaction to the new risk retention rules. European CMBS uncertain, but could increase the costs and legal risks relating issuance was down, although from a low 2016 base. S&P Global 2017 Annual Report 29 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 desig- nating NRSROs in 1975 for use of their credit ratings in the deter- mination 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, the SEC is given 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. authority and oversight of NRSROs and can censure NRSROs, Other Jurisdictions revoke their registration or limit or suspend their registration Outside of the U.S. and the European Union, regulators and in certain cases. The rules implemented by the SEC pursuant government officials have also been implementing formal to the Reform Act, the Dodd Frank Act and the Exchange Act oversight of credit rating agencies. Ratings is subject to reg- address, among other things, prevention or misuse of material ulations in most of the foreign jurisdictions in which it oper- non- public information, conflicts of interest, documentation ates and continues to work closely with regulators globally to and assessment of internal controls, and improving transpar- promote the global consistency of regulatory requirements. ency of ratings performance and methodologies. The public Regulators in additional countries may introduce new regula- portions of the current version of S&P Global Ratings’ Form tions in the future. NRSRO are available on S&P Global Ratings’ website. 30 S&P Global 2017 Annual Report For a further discussion of competitive and other risks inherent of global exchanges, clearing houses and data services. During in our Ratings business, see Item 1a, Risk Factors, in this Annual the year ended December 31, 2016, we recorded a pre-tax gain Report on Form 10-K. For a further discussion of the legal and of $364 million ($297 million after-tax) in gain on dispositions regulatory environment in our Ratings business, see Note 13 — in the consolidated statement of income related to the sale of Commitments and Contingencies to the consolidated financial SPSE and CMA. Additionally, in October of 2016, we completed statements under Item 8, Consolidated Financial Statements the sale of Equity Research, a business within our Market and and Supplementary Data, in this Annual Report on Form 10-K. Commodities Intelligence segment to CFRA, a leading indepen- MARKET AND COMMODITIES INTELLIGENCE Market and Commodities Intelligence’s portfolio of capabilities dent 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 are designed to help the financial community, corporations and gain on dispositions in the consolidated statement of income professional service firms track performance, generate bet- related to the sale of Equity Research. ter 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. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 million ($516 million after-tax) in gain on dispositions in the consolidated statement In December of 2017, we announced that S&P Global Platts, of income related to the sale of J.D. Power. a business line within Market and Commodities Intelligence, will be managed as a separate business and comprise a sep- arate reportable segment effective January  1, 2018. We will begin reporting the financial results of S&P Global Market Intelligence and S&P Global Platts as separate reportable seg- ments beginning with the first quarter of 2018. Market and Commodities Intelligence includes the following business lines: Desktop — a product suite that provides data, analytics and third-party research for global finance professionals, which includes the Market Intelligence Desktop (which are inclusive of S&P Capital IQ and SNL Desktop products); In January of 2017, we completed the sale of Quant House Data Management Solutions — integrated data feeds and SAS (“QuantHouse”), included in our Market and Commodities application programming interfaces that can be customized, Intelligence segment, to QH Holdco, an independent third party. which includes Computstat, GICS, Point In Time Financials In November of 2016, we entered into a put option agreement and CUSIP; that gave the Company the right, but not the obligation, to put Risk Services — commercial arm that sells Ratings’ credit the entire share capital of QuantHouse to QH Holdco. As a result, ratings and related data, analytics and research, which we classified the assets and liabilities of QuantHouse, net of includes subscription-based offerings, RatingsDirect® and our costs to sell, as held for sale, which is included in prepaid RatingsXpress®; and and other current assets and other current liabilities, respec- tively, 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 defin- itive agreement to sell QuantHouse to QH Holdco. On January 9, 2017, we completed the sale of QuantHouse to QH Holdco. In October of 2016, we completed the sale of SPSE and CMA for $425 million in cash to Intercontinental Exchange, an operator 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 commodities and energy markets to perform with greater transparency 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 2017 Annual Report 31 We completed the sale of J.D. Power on September 7, 2016, with the results 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 Year ended December 31, % Change 2017 $ 2,452 $ 2,317 $ 135 2016 $ 2,585 $ 2,231 $ 354 2015 ’17 vs ’16 ’16 vs ’15 $ 2,376 $ 1,911 $ 465 (5)% 4% (62)% 9% 17% (24)% 95% 5% 86% 14% 80% 20% $ 1,396 $ 1,056 $ 1,523 $ 1,062 $ 1,368 $ 1,008 57% 43% 59% 41% 58% 42% (8)% (1)% 11% 6% $ 793 $ 1,822 $ 585 (56)% 212% 32% 70% 25% 1 2017 includes non-cash acquisition and disposition- related adjustments of $15 million, employee severance charges of $9 million, a charge to exit a leased facility of $6 million, and an asset write-off of $2 million. 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 acquisi- tion of SNL of $37 million and costs identified operating efficiencies primarily related to employee severance charges of $33 million. 2017, 2016 and 2015 includes amortization of intangibles from acquisitions of $87 million, $85 million and $57 million, respectively. 2017 Revenue decreased 5% and was unfavorably impacted by Operating profit decreased 56%. Excluding the unfavorable impact of the gain on dispositions in 2016 of 62  percentage 13 percentage points from the net impact of acquisitions and points, non-cash acquisition and disposition- related adjust- dispositions. Excluding these acquisitions and dispositions, ments in 2017 of 1  percentage point, partially offset by the revenue increased primarily driven by growth in annualized favorable impact of disposition- related costs in 2016 of 2 per- contract values in the Market Intelligence Desktop products, centage points and a technology- related impairment charge RatingsXpress® and RatingsDirect® from new and existing in 2016 of 1 percentage point, operating profit increased 4%. customers. The number of users and customers continued to The increase is due to margin improvement from existing busi- grow for each of these products in 2017. Increases in annual- nesses, partially offset by the unfavorable impact of the dispo- ized contract value for certain of our data feed products within sitions discussed above. Data Management Solutions also contributed to revenue growth. Additionally, strength in S&P Global Platts’ propri- etary content due to continued demand for market data and price assessment products across all commodity sectors, led by petroleum, contributed to revenue growth. Both domestic and international revenue decreased due to the unfavorable impact of the dispositions discussed below. In 2017, interna- tional revenue represented 43% of Market and Commodities Intelligence’s total revenue compared to 41% in 2016. Revenue was favorably impacted by the acquisitions of RigData and PIRA in June of 2016 and September of 2016, respectively. Revenue was unfavorably impacted by the dispositions of J.D. Power in September of 2016, SPSE and CMA in October of 2016, Equity Fund Research in October of 2016 and QuantHouse in January of 2017. See Note 2 — Acquisitions and Divestitures for further discussion. 2016 Revenue increased 9% and was favorably impacted by 1 per- centage point of growth from the net impact of acquisitions and dispositions discussed 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 customers. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® con- tinued to grow in 2016. Increases in annualized contract value for certain of our data feed products within Data Management Solutions also contributed to revenue growth. Additionally, strength in S&P Global Platts’ proprietary content due to con- tinued demand for S&P Global Platts’ market data and price assessment products across all commodity sectors, led by petroleum, and continued licensing of our proprietary mar- ket price data and price assessments to various commodity exchanges contributed to revenue growth. Both domestic and 32 S&P Global 2017 Annual Report international revenue increased, with international revenue into other European Economic Area (“EEA”) States, and is to representing 41% of Market and Commodities Intelligence’s the conditions under the E.U. Markets in Financial Instruments total revenue. Revenue was favorably impacted by the acqui- Directive (“MiFID”). sitions of SNL, PIRA, RigData and Petromedia Ltd, partially off- set by the unfavorable impact of the dispositions of J.D. Power, SPSE and CMA and Equity Research. See Note 2 — Acquisitions and Divestitures for further discussion. 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- Operating profit increased 212%. Excluding the favorable vice, reputation, price, geographic scope, range of products impact from the gain on dispositions of 194 percentage points, and services, and technological innovation. For a further dis- the favorable impact of higher acquisition- related costs in 2015 cussion of competitive and other risks inherent in our Market of 6 percentage points and higher employee severance charges Intelligence business, see Item 1a, Risk Factors, in this Annual in 2015 of 6 percentage points, partially offset by the unfavor- Report on Form 10-K. able impact of higher disposition- related costs of 9 percent- age points, higher amortization of intangibles from acquisitions S&P Global Platts of 5 percentage points and a technology- related impairment charge of 4  percentage points, operating profit increased 24%. This increase is due to revenue growth and the favorable impact of foreign exchange rates of 5 percentage points, par- tially offset by higher compensation costs and increased tech- nology costs primarily as a result of the acquisition of SNL in September of 2015. Industry Highlights and Outlook In 2017, Market and Commodities Intelligence continued to S&P Global Platts’ commodities price assessment and infor- mation business is subject to increasing regulatory scrutiny in the U.S. and abroad. As discussed below under the head- ing “ Indices-Legal and Regulatory Environment”, the financial benchmarks industry is subject to the new pending bench- 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 benefit from organic revenue growth and SNL integration syn- to obtain registration or authorization in connection with its ergies. The segment also launched a beta version of the new benchmark and price assessment activities in Europe and Market Intelligence platform in 2017. Additionally, the segment potentially elsewhere. integrated and leveraged recent acquisitions to develop and expand its analytical capabilities and offerings. The European Union has finalized a package of legislative mea- sures known as MiFID II (“MiFID II”), which revise and update In 2018, both Market Intelligence and S&P Global Platts will the existing E.U. Markets in Financial Instruments Directive continue to enhance its product offerings, pursue growth in framework entered into force on July 2, 2014, and the substan- new markets and geographies, and develop its analytical tive provisions apply in all E.U. Member States as of January 3, capabilities. 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. Market Intelligence operates a business that is authorized and regulated in the United Kingdom by the Financial Conduct Authority (the “FCA”). As such, this business is authorized to arrange and advise on investments, and is also entitled to exer- cise a passport right to provide specified cross border services 2018. MiFID II includes provisions that, among other things: (i) impose new conditions and requirements on the licensing of benchmarks and provide for non- discriminatory access to exchanges and clearing houses; (ii) modify the categorization and treatment of certain classes of derivatives; (iii)  expand the categories of trading venue that are subject to regulation; (iv) require the unbundling of investment research and direct how asset managers pay for research either out of a research payment account or from a firm’s profits; and (v) provide for the mandatory trading of certain derivatives on exchanges (complementing the mandatory derivative clearing require- ments in the E.U. Market Infrastructure Regulation of 2011). The MiFID II package is “framework” legislation (meaning that much of the detail of the rules will be set out in subordinate mea- sures, including some technical standards yet to be adopted S&P Global 2017 Annual Report 33 by the European Commission). The introduction of the MiFID II The markets for commodities price assessments and informa- package may result in changes to the manner in which Platts tion are very competitive. S&P Global Platts competes domes- licenses its price assessments. MiFID II and the Market Abuse tically and internationally on the basis of a number of factors, Regulation (“MAR”) may impose additional regulatory burdens including the quality of its assessments and other informa- on Platts’s activities in the European Union, although the exact tion it provides to the commodities and related markets, cli- impact and costs are not yet known. ent service, reputation, price, range of products and services 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. (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 competitive and other risks inherent in our Platts business, see Item 1a, Risk Factors, in this Annual Report on Form 10-K. INDICES Indices is a global index provider maintaining 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. Year ended December 31, % Change (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 2017 $ 733 $ 461 $ 141 $ 131 2016 $ 639 $ 381 $ 133 $ 125 63% 19% 18% $ 603 $ 130 60% 21% 19% $ 525 $ 114 82% 18% 82% 18% $ 471 $ 127 $ 344 $ 412 $ 109 $ 303 64% 47% 64% 47% 2015 $ 597 $ 369 $ 116 $ 112 62% 19% 19% $ 488 $ 109 82% 18% $ 392 $ 101 $ 291 66% 49% ’17 vs ’16 ’16 vs ’15 15% 21% 6% 5% 7% 3% 14% 11% 15% 14% 14% 16% 14% 8% 5% 5% 8% 4% 1 2017, 2016 and 2015 includes amortization of intangibles from acquisitions of $7 million, $6 million and $5 million, respectively. 34 S&P Global 2017 Annual Report 2017 Revenue at Indices increased 15%, primarily driven by higher Legal and Regulatory Environment The financial benchmarks industry is subject to the new pend- average levels of assets under management (“AUM”) for ETFs ing benchmark regulation in the European Union (the “E.U. and mutual funds. Revenue growth was favorably impacted Benchmark Regulation”) as well as potential increased regula- by 1  percentage point from the acquisition of Trucost plc tion in other jurisdictions. (“Trucost”) in October of 2016. See Note 2 — Acquisitions and Divestitures for further discussion. Ending AUM for ETFs increased 31% to $1.343  trillion and average AUM for ETFs increased 34% to $1.167 trillion compared to 2016. The E.U. Benchmark Regulation was published June 30, 2016 and included provisions applicable to Indices and Platts, which will become effective January  1, 2018. The E.U. Benchmark Regulation requires Indices and Platts in due course to obtain Operating profit grew 14%. The impact of revenue growth was registration or authorization in connection with their respec- partially offset by higher compensation costs and increased tive benchmark activities in Europe. This legislation will operating costs to support revenue growth and business ini- likely cause additional operating obligations but they are not tiatives at Indices. Higher compensation costs related to expected to be material at this time, although the exact impact increased incentive costs and additional headcount partially remains unclear. related to the acquisition of Trucost. 2016 Revenue at Indices increased 7%, primarily driven by higher average levels of AUM for ETFs and mutual funds, an increase in data revenue and higher volumes for exchange- traded deriv- atives. Revenue growth was favorably impacted by less than one percentage point from the acquisition of Trucost. Ending AUM for ETFs increased 25% to $1.023  trillion and average AUM for ETFs increased 8% to $869 billion compared to 2015. As discussed above under the heading “S&P Global Platts Legal and Regulatory Environment”, the European Union has finalized a package of legislative measures known as MiFID II. The introduction of the MiFID II package may result in changes to the manner in which S&P Dow Jones Indices licenses its indices. MiFID II and the Market Abuse Regulation (“MAR”) may impose additional regulatory burdens on S&P Dow Jones Indices activities in the European Union, although the exact impact and costs are not yet known. Higher average levels of AUM for ETFs contributed to revenue In July of 2013, the International Organization of Securities growth primarily driven by the flow of investment funds to the Commissions (“IOSCO”) issued Financial Benchmark U.S. equity markets in the second half of the year. Operating profit grew 5%. Revenue growth was partially offset by higher compensation costs primarily driven by additional headcount related to the acquisition of Trucost, increased incentive costs and increased operating costs to support reve- nue growth and business initiatives at Indices. Industry Highlights and Outlook Indices continues to be the leading index provider for the ETF market space. In 2017, higher average levels of AUM for ETFs contributed to revenue growth. In 2017, Indices focused on continued Index innovation and growing international partner- ships. In 2018, Indices will continue to pursue opportunities for innovation and seek to grow international partnerships. 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- ical innovation. For a further discussion of competitive and other risks inherent in our Indices business, see Item 1a, Risk Factors, in this Annual Report on Form 10-K. S&P Global 2017 Annual Report 35 Liquidity and Capital Resources We continue to maintain a strong financial position. Our primary source of funds for operations is cash from our businesses Operating activities Cash provided by operating activities increased to $2.0 billion in 2017 compared to $1.6 billion in 2016. The increase is mainly due to higher results from operations, partially offset by the and our core businesses have been strong cash generators. In timing of estimated tax payments. 2018, cash on hand, cash flows from operations and availability under our existing credit facility are expected to be sufficient to meet any additional operating and recurring cash needs into the foreseeable future. We use our cash for a variety of needs, including but not limited to: ongoing investments in our busi- nesses, strategic acquisitions, share repurchases, dividends, repayment of debt, capital expenditures and investment in our infrastructure. CASH FLOW OVERVIEW Cash and cash equivalents were $2.8 billion as of December 31, Cash provided by operating activities increased $1.2  billion to $1.6 billion in 2016 compared to $356 million in 2015. The increase is mainly due to the payment of legal and regulatory settlements in 2015 of $1.6 billion. Investing activities Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions. Cash used for investing activities decreased to $209 million for 2017, an increase of $0.4 billion as compared to December 31, 2017 as compared to cash provided by investing activities of 2016, and consisted of approximately 20% of domestic cash $1.2 billion in 2016. The decrease is primarily due to proceeds and 80% of cash held abroad. from the sale of J.D. Power of $1.1 billion in 2016. (in millions) Net cash provided by (used for): Operating activities from continuing operations Investing activities from continuing operations Financing activities from continuing operations Year ended December 31, 2017 2016 2015 $ 2,016 $ 1,560 $ 356 (209) 1,205 (2,525) Cash provided by investing activities increased to $1.2 billion for 2016 as compared to cash used for investing activities of $2.5 billion in 2015. The increase is primarily due to proceeds from the sale of J.D. Power of $1.1 billion in 2016 compared to cash used for the acquisition of SNL of $2.2 billion in 2015. Refer to Note 2 — Acquisitions and Divestitures to our consoli- (1,507) (1,696) 1,349 dated financial statements for further information. In 2017, free cash flow increased to $1.8 billion compared to $1.3 billion in 2016. The increase is primarily due to the increase Financing activities Our cash outflows from financing activities consist primar- in cash provided from operating activities as discussed below. ily of share repurchases, dividends and repayment of debt, Free cash flow is a non-GAAP financial measure and reflects while cash inflows are primarily inflows from long-term and our cash flow provided by operating activities less capital short-term debt borrowings and proceeds from the exercise expenditures and distributions to noncontrolling interest of stock options. holders. Capital expenditures include purchases of property and equipment and additions to technology 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 excluding certain items. Cash used for financing activities decreased to $1.5 billion in 2017 from $1.7 billion in 2016. The decrease is primarily attrib- utable to higher repayments of debt and higher cash paid for share repurchases in 2016, partially offset by the issuance of senior notes in 2016. Cash used for financing activities was $1.7 billion in 2016 com- pared to cash provided by financing activities of $1.3 billion in 2015. The decrease is primarily attributable to higher proceeds received from the issuance of senior notes in 2015. 36 S&P Global 2017 Annual Report During 2017, we used cash to repurchase 6.8 million shares for We have the ability to borrow a total of $1.2 billion through our $1.0 billion. We entered into an accelerated share repurchase commercial paper program, which is supported by our credit (“ASR”) agreement with a financial institution on August 1, 2017 facility. There were no commercial paper borrowings outstand- to initiate share repurchases aggregating $500  million. We ing as of December 31, 2017 and 2016. repurchased a total of 3.2 million shares under the ASR agree- ment for an average purchase price of $154.46 per share. See Note 9 — Equity for further discussion. Depending on our corporate credit rating, we pay a commit- ment fee of 8 to 17.5 basis points for our credit facility, whether or not amounts have been borrowed. We currently pay a com- During 2016, we used cash to repurchase 10  million shares mitment fee of 12.5 basis points. The interest rate on borrow- for $1.1 billion, which included 0.3 million shares for approxi- ings under our credit facility is, at our option, calculated using mately $26 million that settled in January of 2016. Using a por- rates that are primarily based on either the prevailing London tion of the proceeds received from the sale of J.D. Power, we Inter-Bank Offer Rate, the prime rate determined by the admin- entered into an ASR agreement with a financial institution on istrative agent or the Federal Funds Rate. For certain borrow- September 7, 2016 to initiate share repurchases aggregating ings under this credit facility, there is also a spread based on $750 million. We repurchased a total of 6.1 million shares under our corporate credit rating. the ASR agreement for an average purchase price of $122.18 per share. See Note 9 — Equity for further discussion. Our credit facility contains certain covenants. The only finan- cial covenant requires that our indebtedness to cash flow ratio, During 2015, we used cash to repurchase 9.8 million shares for as defined in our credit facility, is not greater than 4 to 1, and $974 million. An additional 0.3 million shares were repurchased this covenant level has never been exceeded. in the fourth quarter of 2015 for approximately $26  million, which settled in January of 2016. 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, 2017, 19 million shares remained available under our current repurchase program. Discontinued Operations Cash flows from discontinued operations reflects the classi- DIVIDENDS On February  2, 2018, the Board of Directors approved an increase in the quarterly common stock dividend from $0.41 per share to $0.50 per share. 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 fication of McGraw Hill Construction as a discontinued oper- and maintenance and make certain minimum lease payments ation. Cash used for operating activities from discontinued for the use of property under operating lease agreements. operations of $129 million in 2015 relates to the tax payment on the gain on sale of McGraw Hill Construction. ADDITIONAL FINANCING On June 30, 2017, we entered into a $1.2 billion five year- credit agreement (our “credit facility”) that will terminate on June 30, 2022. This credit facility replaced our $1.2 billion five year credit facility that was scheduled to terminate on June 30, 2020. The previous credit facility was canceled immediately after the new credit facility became effective. There were no outstand- ing borrowings under the previous credit facility when it was replaced. 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 2018. S&P Global 2017 Annual Report 37 The following table summarizes our significant contractual obligations and commercial commitments as of December 31, 2017, over the next several years. 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 $ 399 138 122 110 $ 769 $ 697 254 192 100 $ 1,243 $ — 217 140 31 $ 388 $ 2,473 657 516 78 $ 3,724 Total $ 3,569 1,266 970 319 $ 6,124 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. As of December 31, 2017, we had $212 million of liabilities for well as additional contributions that we consider appropriate unrecognized tax benefits. We have excluded the liabilities for to improve the funded status of our plans. During 2017, we unrecognized tax benefits from our contractual obligations contributed $8  million and $25  million to our domestic and table because, until formal resolutions are reached, reasonable international retirement and postretirement plans, respec- estimates of the timing of cash settlements with the respective tively. Expected employer contributions in 2018 are $9 million taxing authorities are not practicable. and $7 million for our domestic and international retirement As of December  31, 2017, we have recorded $1,350  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. and postretirement plans, respectively. In 2018, 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, 2017 and 2016, 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, We make contributions to our pension and postretirement market or credit risk that could arise if we had engaged in such plans in order to satisfy minimum funding requirements as relationships. 38 S&P Global 2017 Annual Report 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 expen- ditures and distributions to noncontrolling interest holders. Capital expenditures include purchases of property and equipment and additions to technology projects. 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 evaluating 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 con- duct and evaluate our business because we believe it typically presents a more conservative measure of cash flows since capital expenditures and distributions to noncontrolling interest holders 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 avail- able to us to prepay debt, make strategic acquisitions and investments and repurchase stock. 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: (in millions) 2017 2016 2015 ’17 vs ’16 ’16 vs ’15 Year ended December 31, % Change Cash provided by operating activities Capital expenditures Distributions to noncontrolling interest holders Free cash flow Tax on gain from sale of J.D. Power Tax on gain from sale of SPSE and CMA Payment of legal and regulatory settlements Legal settlement insurance recoveries Tax benefit from legal settlements $ 2,016 (123) (111) $ 1,782 — 67 4 — (2) $ 1,560 (115) (116) $ 1,329 200 — 150 (77) (24) Free cash flow excluding above items $ 1,851 $ 1,578 N/M — not meaningful $ 356 (139) (104) $ 113 — — 1,624 (101) (250) $ 1,386 29% N/M 34% N/M 17% 14% S&P Global 2017 Annual Report 39 Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. 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. On an ongoing basis, we evaluate our estimates and assump- tions, including those related to revenue recognition, allowance for doubtful accounts, valuation of long-lived assets, goodwill and other intangible assets, pension plans, incentive compen- sation and stock-based compensation, income taxes, contin- gencies and redeemable noncontrolling interests. We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and lia- bilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ 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 selection of our critical accounting estimates with the Audit Committee of our Board of Directors. The Audit Committee has reviewed our disclosure relating to them in this MD&A. 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 an arrangement has been obtained, services are performed, fees are fixed or determinable and collectability is reasonably assured. Revenue relating to products 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 recognized based upon the relative fair value to the customer of each service component as each com- ponent is earned. If the fair value to the customer for each ser- vice is not objectively determinable, we make our best estimate of the services’ standalone selling price and recognize revenue as earned as the services are delivered. The allocation of con- 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 to future surveillance and recognize the deferred revenue rat- ably over the estimated surveillance periods. Advertising reve- nue is recognized when the page is run. Subscription income is recognized over the related subscription period. For the years ended December 31, 2017, 2016 and 2015, no sig- nificant changes have been made to the underlying assump- tions related to estimates of revenue or the methodologies applied. In 2018, we will be adopting a new accounting standard for the recognition of revenue. See Note 1 — Accounting Policies to our consolidated financial statements for further informa- tion related to the impact of the new revenue standard in 2018. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts reserve methodology is based on historical analysis, a review of outstanding balances and current conditions. 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 indica- tors. The impact on operating profit for a one percentage point change in the allowance for doubtful accounts is approximately $14 million. 40 S&P Global 2017 Annual Report For the years ended December 31, 2017, 2016 and 2015, there were no material changes in our assumptions regarding the Goodwill As part of our annual impairment test of our four reporting determination of the allowance for doubtful accounts. Based units, we initially perform a qualitative analysis evaluating on our current outlook these assumptions are not expected to whether any events and circumstances occurred that pro- significantly change in 2018. vide evidence that it is more likely than not that the fair value of any of our reporting units is less than its carrying amount. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED Reporting units are generally an operating segment or one ASSETS (INCLUDING OTHER INTANGIBLE ASSETS) We evaluate long-lived assets for impairment whenever events level below an operating segment. Our qualitative assessment included, but was not limited to, consideration of macroeco- or changes in circumstances indicate that the carrying amount nomic conditions, industry and market conditions, cost fac- of an asset may not be recoverable. Upon such an occurrence, tors, cash flows, changes in key Company personnel and our recoverability of assets to be held and used is measured by share price. If, based on our evaluation of the events and cir- comparing the carrying amount of an asset to current forecasts cumstances that occurred during the year we do not believe of undiscounted future net cash flows expected to be gener- that it is more likely than not that the fair value of any of our ated by the asset. If the carrying amount of the asset exceeds reporting units is less than its carrying amount, no quantitative its estimated future cash flows, an impairment charge is recog- impairment test is performed. Conversely, if the results of our nized equal to the amount by which the carrying amount of the qualitative assessment determine that it is more likely than asset exceeds the fair value of the asset. For long-lived assets not that the fair value of any of our reporting units is less than held for sale, assets are written down to fair value, less cost to its respective carrying amount we perform a two-step quan- sell. Fair value is determined based on market evidence, dis- titative impairment test. For 2017, based on our qualitative counted cash flows, appraised values or management’s esti- assessments, we determined that it is more likely than not that mates, depending upon the nature of the assets. our reporting units’ fair value was greater than their respective For the year ended December  31, 2016, we recorded a non- carrying amounts. cash impairment charge of $24 million related to a technology If the fair value of the reporting unit is less than the carrying project at our Market and Commodities segment in selling and 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. general expenses in our consolidated statement of income. 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, 2017 and 2016, the carrying value of goodwill and other indefinite-lived intangible assets was $3.7  billion, respectively. Goodwill and other intangible assets with indef- inite lives are not amortized, but instead are tested for impair- ment annually during the fourth quarter each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. S&P Global 2017 Annual Report 41 Indefinite-Lived Intangible Assets We evaluate the recoverability of indefinite-lived intangible assets by first performing a qualitative analysis evaluating RETIREMENT PLANS AND POSTRETIREMENT HEALTHCARE AND OTHER BENEFITS Our employee pension and other postretirement benefit costs whether any events and circumstances occurred that provide and obligations are dependent on assumptions concerning the evidence that it is more likely than not that the indefinite-lived outcome of future events and circumstances, including com- asset is impaired. If, based on our evaluation of the events and pensation increases, long-term return on pension plan assets, circumstances that occurred during the year we do not believe healthcare cost trends, discount rates and other factors. In that it is more likely than not that the indefinite-lived asset determining such assumptions, we consult with outside actu- is impaired, no quantitative impairment test is performed. aries and other advisors where deemed appropriate. In accor- Conversely, if the results of our qualitative assessment deter- dance with relevant accounting standards, if actual results mine that it is more likely than not that the indefinite-lived differ from our assumptions, such differences are deferred and asset is impaired, a quantitative impairment test is performed. amortized over the estimated remaining lifetime of the plan If necessary, the impairment test is performed by comparing participants. While we believe that the assumptions used in the estimated fair value of the intangible asset to its carrying these calculations are reasonable, differences in actual expe- value. If the indefinite-lived intangible asset carrying value rience or changes in assumptions could affect the expense exceeds its fair value, an impairment analysis is performed and liabilities related to our pension and other postretirement using the income approach. The fair value of loss is recognized benefits. in an amount equal to that excess. Significant judgments inher- ent in these analyses include estimating 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 this indefinite-lived intangible asset and could result in an impairment charge, which could be material to our financial position and results of operations. The following is a discussion of some significant assumptions that we make in determining costs and obligations for pension and other postretirement benefits: Discount rate assumptions are based on current yields on high-grade corporate long-term bonds. Healthcare cost trend assumptions are based on historical market data, the near-term outlook and an assessment of likely long-term trends. The expected return on assets assumption is calculated We performed our impairment assessment of goodwill and based on the plan’s asset allocation strategy and projected indefinite-lived intangible assets and concluded that no market returns over the long-term. impairment existed for the years ended December  31, 2017, 2016, and 2015. 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: January 1 Discount rate Return on assets Weighted- average healthcare cost rate Retirement Plans Postretirement Plans 2018 3.68% 6.00% 2017 4.14% 6.25% 2016 4.47% 6.25% 2018 3.40% 2017 3.69% 2016 3.90% 6.50% 7.00% 7.00% 42 S&P Global 2017 Annual Report 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: 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 Year Ended December 31, 2015 expense and operating expense, respectively. Risk-free average interest rate Dividend yield Volatility Expected life (years) Weighted- average grant-date fair value per option 0.2–1.9% 1.4% 21–39% 6.3 $27.57 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 Because lattice-based option- pricing models incorporate with any other pertinent information. ranges of assumptions, those ranges are disclosed. These We file income tax returns in the U.S. federal jurisdiction, var- assumptions are based on multiple factors, including histori- ious states, and foreign jurisdictions, and we are routinely cal exercise patterns, post- vesting termination rates, expected under audit by many different tax authorities. We believe that future exercise patterns and the expected volatility of our stock our accrual for tax liabilities is adequate for all open audit price. The risk-free interest rate is the imputed forward rate years based on our assessment of many factors including based on the U.S. Treasury yield at the date of grant. We use the past experience and interpretations of tax law. This assess- historical volatility of our stock price over the expected term of ment relies on estimates and assumptions and may involve a the options to estimate the expected volatility. The expected series of complex judgments about future events. It is possible term of options granted is derived from the output of the lattice that examinations will be settled prior to December 31, 2018. If model and represents the period of time that options granted any of these tax audit settlements do occur within that period are expected to be outstanding. we would make any necessary adjustments to the accrual for During 2015, we stopped granting stock options as part of our unrecognized tax benefits. employees’ total stock-based incentive awards. There were no For the years ended December  31, 2016 and 2015, we had stock options granted in 2017 and 2016 and a minimal amount determined that the undistributed earnings of our foreign of stock options granted in 2015. subsidiaries were permanently reinvested within those for- eign operations. Accordingly, we had not recorded deferred income taxes on these indefinitely reinvested earnings. As of December  31, 2017, we have approximately $2.6  billion of undistributed earnings of our foreign subsidiaries. As a result of the TCJA, more than 70% of these $2.6 billion earnings will no longer be permanently reinvested. We will continue to per- manently reinvest approximately $780 million of these undis- tributed earnings. S&P Global 2017 Annual Report 43 CONTINGENCIES We are subject to a number of lawsuits and claims that arise in the ordinary course of business. We recognize a liability for such contingencies when both (a) information available prior to issuance of the financial statements indicates that it is prob- able that a liability had been incurred at the date of the finan- cial statements and (b) the amount of loss can reasonably be estimated. We continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well as poten- tial amounts or ranges of probable losses, and recognize a lia- bility, 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 assump- tions or changes in our strategy related to the matter. When we accrue for loss contingencies 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 Forward- Looking Statements This Annual Report on Form 10-K contains “ forward- looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express man- agement’s current views concerning future events, trends, con- tingencies or results, appear at various places in this report and use words like “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would.” For example, management may use forward- looking statements when addressing topics such as: the outcome of contingencies; future actions by reg- ulators; changes in the Company’s business strategies and methods of generating revenue; the development and perfor- mance of the Company’s services and products; the expected impact of acquisitions and dispositions; the Company’s effec- 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. REDEEMABLE NONCONTROLLING INTEREST The fair value component of the redeemable noncontrolling interest in Indices business is based on a combination of an income and market valuation approach. Our income and mar- ket valuation approaches may incorporate Level 3 measures for instances when observable inputs are not available, including 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 withdrawal from the assumptions related to expected future net cash flows, long- European Union; term growth rates, the timing and nature of tax attributes, and the redemption features. RECENT ACCOUNTING STANDARDS See Note 1 — Accounting Policies to our consolidated financial the rapidly evolving regulatory environment, in Europe, the United States and elsewhere, affecting Ratings, Market and Commodities Intelligence and Indices, including new and amended regulations and the Company’s compliance therewith; statements for a detailed description of recent accounting the Company’s ability to maintain adequate physical, tech- standards. We do not expect these recent accounting stan- nical and administrative safeguards to protect the security dards to have a material impact on our results of operations, of confidential information and data, and the potential for financial condition, or liquidity in future periods. unauthorized access to our systems or a system or network disruption that results in improper disclosure of confidential information or data, regulatory penalties and remedial costs; our ability to make acquisitions and dispositions and suc- cessfully integrate the businesses we acquire; the outcome of litigation, government and regulatory pro- ceedings, investigations and inquiries; 44 S&P Global 2017 Annual Report the health of debt and equity markets, including credit The factors noted above are not exhaustive. The Company quality and spreads, the level of liquidity and future debt and its subsidiaries operate in a dynamic business environ- issuances; ment in which new risks emerge frequently. Accordingly, the the demand and market for credit ratings in and across the Company cautions readers not to place undue reliance on any sectors and geographies where the Company operates; forward- looking statements, which speak only as of the dates concerns in the marketplace affecting the Company’s credi- on which they are made. The Company undertakes no obli- bility or otherwise affecting market perceptions of the integ- gation to update or revise any forward- looking statement to rity or utility of independent credit ratings; reflect events or circumstances arising after the date on which the effect of competitive products and pricing, including the it is made, except as required by applicable law. Further infor- level of success of new product developments and global mation about the Company’s businesses, including information expansion; about factors that could materially affect its results of opera- consolidation in the Company’s end- customer markets; tions and financial condition, is contained in the Company’s fil- the impact of customer cost- cutting pressures, including in ings with the SEC, including Item 1a, Risk Factors, in this Annual the financial services industry and commodities markets; Report on Form 10-K. 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; our ability to adjust to changes in European and United Kingdom markets as the United Kingdom leaves the European Union, and the impact of the United Kingdom’s departure on our credit rating activities and other European and United Kingdom offerings; 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 the impact of recent tax reform in the U.S.; the level of the Company’s future cash flows and capital investments; the impact on the Company’s revenue and net income caused by fluctuations in foreign currency exchange rates; and the Company’s exposure to potential criminal sanctions or civil penalties if it fails to comply with foreign and U.S. laws and regulations that are applicable in the domestic and inter- national jurisdictions in which it operates, including sanc- tions laws relating to countries such as Iran, Russia, Sudan and Syria, anti- corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government offi- cials, as well as import and export restrictions. S&P Global 2017 Annual Report 45 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 on dispositions Operating profit Interest expense, net Income before taxes on income Provision for taxes on income Net income Less: net income attributable to noncontrolling interests Year Ended December 31, 2017 2016 2015 $ 6,063 $ 5,661 $ 5,313 1,713 1,560 82 98 3,453 — 2,610 149 2,461 823 1,638 (142) 1,773 1,439 85 96 3,393 (1,101) 3,369 181 3,188 960 2,228 (122) 1,718 1,532 90 67 3,407 (11) 1,917 102 1,815 547 1,268 (112) Net income attributable to S&P Global Inc. $ 1,496 $ 2,106 $ 1,156 Earnings per share attributable to S&P Global Inc. common shareholders: Net income: 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. $ 5.84 $ 5.78 256.3 258.9 253.7 $ 1.64 $ 8.02 $ 7.94 262.8 265.2 258.3 $ 1.44 $ 4.26 $ 4.21 271.6 274.6 265.2 $ 1.32 46 S&P Global 2017 Annual Report Consolidated Statements of Comprehensive Income (in millions) Net income Other comprehensive income: Foreign currency translation adjustment Income tax effect Pension and other postretirement benefit plans Income tax effect Unrealized loss on investment Income tax effect Unrealized gain (loss) on forward exchange contracts Income tax effect Comprehensive income Less: comprehensive income attributable to nonredeemable noncontrolling interests Less: comprehensive income attributable to redeemable noncontrolling interests Year Ended December 31, 2017 2016 2015 $ 1,638 $ 2,228 $ 1,268 93 — 93 52 (11) 41 (10) — (10) — — — 1,762 (15) (127) (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) Comprehensive income attributable to S&P Global Inc. $ 1,620 $ 1,933 $ 1,070 See accompanying notes to the consolidated financial statements. S&P Global 2017 Annual Report 47 Consolidated Balance Sheets (in millions) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowance for doubtful accounts: 2017 — $33; 2016 — $28 Prepaid and other current assets 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 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 2017 and 2016 Additional paid-in capital Retained income Accumulated other comprehensive loss Less: common stock in treasury — at cost: 2017 — 158 million shares; 2016 — 153 million shares 412 525 10,025 (649) (9,602) Total equity — controlling interests Total equity — noncontrolling interests Total equity Total liabilities and equity See accompanying notes to the consolidated financial statements. 48 S&P Global 2017 Annual Report December 31, 2017 2016 $ 2,779 12 1,319 214 4,324 354 475 829 (554) 275 2,989 1,388 449 $ 2,392 8 1,122 149 3,671 356 452 808 (537) 271 2,949 1,506 272 $ 9,425 $ 8,669 $ 195 472 399 77 1,613 107 351 3,214 3,170 244 679 7,307 1,350 $ 183 409 — 95 1,509 56 359 2,611 3,564 274 439 6,888 1,080 412 502 9,210 (773) (8,701) 650 51 701 711 57 768 $ 9,425 $ 8,669 Consolidated Statements of Cash Flows (in millions) 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 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 (used for) provided by 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 Distributions to noncontrolling interest holders Repurchase of treasury shares Exercise of stock options Contingent consideration payments Purchase of additional CRISIL shares Employee withholding tax on share-based payments Cash (used for) provided by financing activities from continuing operations Effect of exchange rate changes on cash Cash 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 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, 2017 2016 2015 $ 1,638 $ 2,228 $ 1,268 82 98 16 — 99 — 55 96 (196) 10 75 85 (4) (85) 32 15 2,016 (123) (83) 2 (5) (209) — — — (421) (111) (1,001) 75 — — (49) (1,507) 87 387 85 96 9 79 76 (1,101) 54 30 (177) 5 19 107 (150) (19) 174 45 1,560 (115) (177) 1,498 (1) 1,205 (143) 493 (421) (380) (116) (1,123) 88 (39) — (55) (1,696) (158) 911 — — — — 90 67 8 280 78 (11) 119 57 (118) 5 (9) 129 (1,624) (77) 129 (35) 356 (139) (2,396) 14 (4) (2,525) 143 2,674 — (363) (104) (974) 86 (5) (16) (92) 1,349 (67) (887) (129) (129) 387 2,392 911 1,481 (1,016) 2,497 $ 2,779 $ 2,392 $ 1,481 $ 139 $ 709 $ 150 $ 683 $ 65 $ 260 S&P Global 2017 Annual Report 49 Consolidated Statements of Equity (in millions) Common Stock $1 par Additional Paid-in Capital Retained Income Accumulated Other Comprehensive Loss Less: Treasury Stock Total SPGI Equity Noncontrolling Interests Total Equity Balance as of December 31, 2014 $ 412 Comprehensive income 1 Dividends Share repurchases Employee stock plans, net of tax benefit Change in redemption value of redeemable noncontrolling interest Other $ 493 $ 6,946 1,156 (359) (86) $ (514) $ 6,849 $ 488 1,070 (359) (1,000) 1,000 $ 51 $ 539 1,081 (368) (1,002) 11 (9) (2) (18) (120) 102 102 (107) (107) — (2) (107) (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) 1,933 (380) 13 (10) 1,097 (1,097) (125) 152 1,946 (390) (1,097) 152 (153) 1 (153) — (1) 27 (153) 1 Balance as of December 31, 2016 $ 412 $ 502 $ 9,210 $ (773) $ 8,701 $ 650 $ 51 $ 701 Comprehensive income 1 Dividends Share repurchases Employee stock plans Change in redemption value of 1,496 (421) 124 23 redeemable noncontrolling interest (260) Other 1,001 (100) 1,620 (421) (1,001) 123 (260) — 15 (10) (5) 8 1,635 (431) (1,006) 131 (2) (260) (2) Balance as of December 31, 2017 $ 412 $ 525 $ 10,025 $ (649) $ 9,602 $ 711 $ 57 $ 768 1 Excludes $127 million, $109 million and $101 million in 2017, 2016 and 2015, respectively, attributable to redeemable noncontrolling interest. See accompanying notes to the consolidated financial statements. 50 S&P Global 2017 Annual Report Notes to the Consolidated Financial Statements 1. Accounting Policies sale in its present condition subject only to terms that are usual and customary for sales of such disposal group; an active pro- NATURE OF OPERATIONS S&P Global Inc. (together with its gram to locate a buyer and other actions required to complete consolidated subsidiaries, the “Company,” the “Registrant,” the plan to sell the disposal group have been initiated; the sale “we,” “us” or “our”) is a leading provider of transparent and of the disposal group is probable, and transfer of the disposal independent ratings, benchmarks, analytics and data to the group is expected to qualify for recognition as a completed sale capital and commodity markets worldwide. The capital mar- within one year, except if events or circumstances beyond our kets include asset managers, investment banks, commercial control extend the period of time required to sell the disposal banks, insurance companies, exchanges, trading firms and group beyond one year; the disposal group is being actively issuers; and the commodity markets include producers, trad- marketed for sale at a price that is reasonable in relation to its ers and intermediaries within energy, metals, petrochemicals current fair value; and actions required to complete the plan and agriculture. Our operations consist of three reportable segments: Ratings, indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Market and Commodities Intelligence and S&P Dow Jones A disposal group that is classified as held for sale is initially Indices (“Indices”). measured at the lower of its carrying value or fair value less any Ratings is an independent provider of credit ratings, research costs to sell. Any loss resulting from this measurement is rec- and analytics, offering investors and other market partici- ognized 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 of group until the date of sale. multi-asset-class data, research and analytical capabilities, 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. We completed the sale of J.D. Power on September 7, 2016, with the results 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 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 S&P Global 2017 Annual Report 51 operations of the group of assets being disposed of (as well as customers, areas of specific or concentrated risk as well as any gain or loss on the disposal transaction) are aggregated applicable industry trends or market indicators. for separate presentation apart from our continuing operating results in the consolidated financial statements. Unless oth- erwise indicated, all disclosures and amounts in the notes to our consolidated financial statements relate to our continuing operations. CAPITALIZED TECHNOLOGY COSTS We capitalize certain software 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 $186 million and $145 million include ordinary bank deposits and highly liquid investments as of December 31, 2017 and 2016, respectively. Accumulated with original maturities of three months or less that consist amortization of deferred technology costs was $104 million and primarily of money market funds with unrestricted daily liquid- $91 million as of December 31, 2017 and 2016, respectively. ity and fixed term time deposits. Such investments and bank deposits are stated at cost, which approximates market value, and were $2.8 billion and $2.4 billion as of December 31, 2017 and 2016, respectively. These investments are not subject to significant market risk. SHORT-TERM INVESTMENTS Short-term investments  are securities with original maturities greater than 90 days that are available for use in our operations in the next twelve 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 in income when earned. ACCOUNTS RECEIVABLE Credit is extended to customers based upon an evaluation of the customer’s financial condi- tion. Accounts receivable, which include billings consistent with terms of contractual arrangements, are recorded at net realizable value. 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. Other financial instruments, including cash and cash equiva- lents and short-term investments, are recorded at cost, which approximates fair value because of the short-term maturity and highly liquid nature of these instruments. The fair value of our total debt borrowings were $3.8 billion and $3.7 billion as of December 31, 2017 and 2016, respectively, and was estimated based on quoted market prices. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS (INCLUDING OTHER INTANGIBLE ASSETS) We evaluate long- lived assets for impairment whenever events or changes in cir- cumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for assets to be held and used is measured by comparing the car- doubtful accounts reserve methodology is based on historical rying amount of an asset to current forecasts of undiscounted analysis, a review of outstanding balances and current con- future net cash flows expected to be generated by the asset. If ditions. In determining these reserves, we consider, amongst the carrying amount of the asset exceeds its estimated future other factors, the financial condition and risk profile of our cash flows, an impairment charge is recognized equal to the 52 S&P Global 2017 Annual Report amount by which the carrying amount of the asset exceeds difference between the sum of the fair values of the reporting the fair value of the asset. For long-lived assets held for sale, units and our total market capitalization for reasonableness, assets are written down to fair value, less cost to sell. Fair value taking into account certain factors including control premiums. is determined based on market evidence, discounted cash flows, appraised values or management’s estimates, depend- ing upon the nature of the assets. 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 For the year ended December  31, 2016, we recorded a non- the goodwill. The fair value of the goodwill is determined based cash impairment charge of $24 million related to a technology on the difference between the fair value of the reporting unit project at our Market and Commodities Intelligence segment and the net fair value of the identifiable assets and liabilities in selling and general expenses in our consolidated statement of the reporting unit. If the implied fair value of the goodwill is of income. less than the carrying value, the difference is recognized as an GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE impairment charge. ASSETS Goodwill represents the excess of purchase price and We evaluate the recoverability of indefinite-lived intangible related costs over the value assigned to the net tangible and assets by first performing a qualitative analysis evaluating identifiable intangible assets of businesses acquired. Goodwill whether any events and circumstances occurred that provide and other intangible assets with indefinite lives are not amor- evidence that it is more likely than not that the indefinite-lived tized, but instead are tested for impairment annually during asset is impaired. If, based on our evaluation of the events and the fourth quarter each year, or more frequently if events or circumstances that occurred during the year we do not believe changes in circumstances indicate that the asset might be that it is more likely than not that the indefinite-lived asset impaired. We have four reporting units with goodwill that are is impaired, no quantitative impairment test is performed. evaluated for impairment. 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 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. An impairment charge is recog- nized in an amount equal to that excess. determine that it is more likely than not that the fair value of Significant judgments inherent in these analyses include esti- any of our reporting units is less than their respective carrying mating the amount and timing of future cash flows and the amounts we perform a two-step quantitative impairment test. selection of appropriate discount rates, royalty rates and long- 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- ing units are estimated using the income approach, which 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 be material to our financial position and results of operations. incorporates the use of the discounted free cash flow (“DCF”) We performed our impairment assessment of goodwill and analyses and are corroborated using the market approach, indefinite-lived intangible assets and concluded that no which incorporates the use of revenue and earnings multiples impairment existed for the years ended December  31, 2017, based on market data. The DCF analyses are based on the 2016 and 2015. current operating budgets and estimated long-term growth projections for each reporting unit. Future cash flows are dis- counted based on a market comparable weighted average cost of capital rate for each reporting unit, adjusted for market and other risks where appropriate. In addition, we analyze any 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 parent S&P Global 2017 Annual Report 53 company, the United States (“U.S.”) dollar is the functional INCOME TAXES Deferred tax assets and liabilities are rec- currency. For local currency operations, assets and liabilities ognized for the future tax consequences attributable to dif- are translated into U.S. dollars using end of period exchange ferences between financial statement carrying amounts of rates, and revenue and expenses are translated into U.S. dol- existing assets and liabilities and their respective tax bases. lars using weighted- average exchange rates. Foreign currency Deferred tax assets and liabilities are measured using enacted translation adjustments are accumulated in a separate com- tax rates expected to be applied to taxable income in the years ponent of equity. REVENUE RECOGNITION Revenue is recognized as it is earned when services are rendered. We consider amounts to be earned once evidence of an arrangement has been obtained, services are performed, fees are fixed or determinable and collectability is reasonably assured. Revenue relating to prod- 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. Accrued interest and penalties related to unrecognized tax benefits are recognized in interest expense and operating expense, respectively. ucts that provide for more than one deliverable is recognized Judgment is required in determining our provision for income based upon the relative fair value to the customer of each taxes, deferred tax assets and liabilities and unrecognized tax deliverable as each deliverable is provided. Revenue relating benefits. In determining the need for a valuation allowance, the to agreements that provide for more than one service is recog- historical and projected financial performance of the operation nized based upon the relative fair value to the customer of each that is recording a net deferred tax asset is considered along service component as each component is earned. If the fair with any other pertinent information. 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. 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 our assessment of many factors including past experience and interpretations of tax law. This assess- ment 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, 2018. If any of these tax audit settlements do occur within that period DEPRECIATION The costs of property and equipment are we would make any necessary adjustments to the accrual for depreciated using the straight-line method based upon the unrecognized tax benefits. 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. For the years ended December  31, 2016 and 2015, we had determined that the undistributed earnings of our foreign subsidiaries were permanently reinvested within those for- eign operations. Accordingly, we had not recorded deferred income taxes on these indefinitely reinvested earnings. As ADVERTISING EXPENSE The cost of advertising is expensed of December  31, 2017, we have approximately $2.6  billion of as incurred. We incurred $33 million, $35 million and $33 mil- undistributed earnings of our foreign subsidiaries. As a result lion in advertising costs for the years ended December 31, 2017, of the TCJA, more than 70% of these $2.6  billion earnings 2016 and 2015, respectively. STOCK-BASED COMPENSATION Stock-based compensation expense is measured at the grant date based on the fair value will no longer be permanently reinvested. We will continue to permanently reinvest approximately $780 million of these undistributed earnings. of the award and is recognized over the requisite service period, REDEEMABLE NONCONTROLLING INTEREST The agree- which typically is the vesting period. Stock-based compensa- ment with the minority partners of our S&P Dow Jones Indices tion is classified as both operating- related expense and selling LLC joint venture established in June of 2012 contains redemp- and general expense in the consolidated statements of income. tion features whereby interests held by our minority partners are redeemable either (i) at the option of the holder or (ii) upon 54 S&P Global 2017 Annual Report the occurrence of an event that is not solely within our control. award. This guidance does not change the accounting for mod- Since redemption of the noncontrolling interest is outside of our ifications but clarifies when modification accounting guidance control, this interest is presented on our consolidated balance should be applied. Under the new guidance, an entity should sheets under the caption “Redeemable noncontrolling inter- apply modification accounting in response to a change in the est.” If the interest were to be redeemed, we would be required terms and conditions of an entity’s share-based payment to purchase all of such interest at fair value on the date of awards unless three newly specified criteria are met. The redemption. We adjust the redeemable noncontrolling interest guidance is effective for reporting periods beginning after each reporting period to its estimated redemption value, but December 15, 2017; however, early adoption is permitted. We never less than its initial fair value, using a combination of an do not expect this guidance to have a significant impact on our income and market valuation approach. Our income and mar- consolidated financial statements. ket valuation approaches may incorporate Level 3 measures for instances when observable inputs are not available, including assumptions related to expected future net cash flows, long- term growth rates, the timing and nature of tax attributes, and the redemption features. Any adjustments to the redemption value will impact retained income. See Note 9 — Equity for fur- ther detail. In March of 2017, the FASB issued guidance to enhance the presentation of net periodic pension cost and net periodic postretirement benefit cost. The guidance requires employ- ers to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period, and requires the other components of net periodic pension cost and CONTINGENCIES We accrue for loss contingencies when net periodic postretirement benefit cost to be presented in the both (a) information available prior to issuance of the consol- income statement separately from the service cost component idated financial statements indicates that it is probable that outside a subtotal of income from operations. Additionally, a liability had been incurred at the date of the financial state- only the service cost component is eligible for capitalization. ments and (b) the amount of loss can reasonably be estimated. The guidance is effective for reporting periods beginning after We continually assess the likelihood of any adverse judgments December 15, 2017; however, early adoption is permitted. The or outcomes to our contingencies, as well as potential amounts guidance is required to be adopted retrospectively with respect or ranges of probable losses, and recognize a liability, if any, for to the income statement presentation requirement and pro- these contingencies based on an analysis of each matter with spectively for the capitalization requirement. The change in the assistance of outside legal counsel and, if applicable, other capitalization requirement will not have a material impact on experts. Because many of these matters are resolved over long our consolidated financial statements. We recorded a bene- periods of time, our estimate of liabilities may change due to fit of $25 million, $24 million and $3 million in 2017, 2016 and new developments, changes in assumptions or changes in our 2015, respectively, related to our net periodic benefit costs for strategy related to the matter. When we accrue for loss con- our retirement and postretirement plans. These amounts are tingencies and the reasonable estimate of the loss is within a not necessarily indicative of future amounts that may arise in range, we record our best estimate within the range. We dis- years following the implementation of this new guidance. See close an estimated possible loss or a range of loss when it is at Note 7 — Employee Benefits for additional information related least reasonably possible that a loss may be incurred. to our retirement and postretirement plans. RECENT ACCOUNTING STANDARDS In August of 2017, the In January of 2017, the FASB issued guidance that simplifies Financial Accounting Standards Board (“FASB”) issued guid- the subsequent measurement of goodwill and eliminates ance to enhance the hedge accounting model for both non- Step 2 from the goodwill impairment test. Under the new guid- financial and financial risk components, which includes ance, an entity should perform its annual, or interim, goodwill amendments to address certain aspects of recognition and impairment test by comparing the fair value of a reporting presentation disclosure. The guidance is effective for reporting unit with its carrying amount. An entity should recognize periods beginning after December 15, 2018. We do not expect an impairment charge for the amount by which the carrying this guidance to have a significant impact on our consolidated amount exceeds the reporting unit’s fair value; however, the financial statements. In May of 2017, the FASB issued guidance that provides clari- fication on when modification accounting should be used for changes to the terms or conditions of a share-based payment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring S&P Global 2017 Annual Report 55 the goodwill impairment loss, if applicable. The guidance is financing activity in our consolidated statements of cash flows effective for reporting periods beginning after December 15, for the years ended December 31, 2016 and 2015, respectively. 2019; however, early adoption is permitted. We do not expect this guidance to have a significant impact on our consolidated financial statements. In February of 2016, the FASB issued guidance that amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses In January of 2017, the FASB issued guidance that clarifies the similar to current lease accounting. The guidance is effec- definition of a business with the objective of adding guidance tive for reporting periods beginning after December 15, 2018; to assist entities with evaluating whether transactions should however, early adoption is permitted. The new guidance must be accounted for as acquisitions (or disposals) of assets or be adopted using a modified retrospective approach to each businesses. The guidance is effective for reporting periods prior reporting period presented with various optional practical beginning after December 15, 2017. We do not expect this guid- expedients. We are currently evaluating the impact of the adop- ance to have a significant impact on our consolidated financial tion of this guidance on our consolidated financial statements. statements. In January of 2016, the FASB issued guidance to enhance the In August of 2016, the FASB issued guidance providing amend- reporting model for financial instruments, which includes ments to eight specific statement of cash flows classification amendments to address certain aspects of recognition, mea- issues. The guidance is effective for reporting periods begin- surement, presentation and disclosure. The guidance is effec- ning after December 15, 2017; however, early adoption is per- tive for reporting periods beginning after December 15, 2017. mitted. We do not expect this guidance to have a significant We do not expect this guidance to have a significant impact on impact on our consolidated financial statements. our consolidated financial statements. In March of 2016, the FASB issued guidance to modify several In May of 2014, the FASB and the International Accounting aspects of accounting for share-based payment transactions, Standards Board (“IASB”) issued jointly a converged standard including the accounting for income taxes, forfeitures, statu- on the recognition of revenue from contracts with customers, tory tax withholding requirements, as well as classification in which is intended to improve the financial reporting of reve- the statement of cash flows. This guidance requires recogniz- nue and comparability of the top line in financial statements ing excess tax benefits and deficiencies as income tax expense globally. The core principle of the new standard is for the rec- or benefit in the statement of income, instead of in equity. The ognition of revenue to depict the transfer of goods or services guidance was effective on January 1, 2017 and was adopted as to customers in amounts that reflect the payment to which the follows: 1) prospectively for the recognition of excess tax ben- company expects to be entitled in exchange for those goods or efits and deficiencies in the tax provision, 2) retrospectively for services. The new standard will also result in enhanced reve- the classification of excess tax benefits and deficiencies in the nue disclosures, provide guidance for transactions that were statement of cash flows, and 3) retrospectively for the classi- not previously addressed comprehensively and improve guid- fication of cash paid for shares withheld to satisfy employee ance for multiple- element arrangements. In August of 2015, the taxes in the statement of cash flows. For the year ended FASB issued guidance deferring the effective date of the new December 31, 2017, excess tax benefits from share-based pay- revenue standard by one year. Subsequently, the FASB issued ments of $72 million were recognized as an income tax benefit implementation guidance related to the new revenue standard, in our consolidated statements of income and classified as an including the following: In March of 2016, the FASB issued guid- operating activity in our consolidated statements of cash flows. ance to clarify the implementation guidance on principal ver- For the years ended December 31, 2016 and 2015, we reclas- sus agent considerations; in April of 2016, the FASB clarified sified $41 million and $69 million, respectively, of excess tax guidance on performance obligations and the licensing imple- benefits from share-based payments from a financing activity mentation guidance; in May of 2016, the FASB issued a practi- to an operating activity in our consolidated statements of cash cal expedient in response to identified implementation issues. flows. In addition, cash paid for shares withheld on the employ- The new guidance will be effective for annual reporting periods ees’ behalf of $49 million was classified as a financing activity beginning after December 15, 2017, including interim reporting in our consolidated statements of cash flows for the year ended periods within that reporting period. We have completed our December 31, 2017. Cash paid for employee taxes of $55 million evaluation of changes to our accounting policies, business pro- and $92 million were reclassified from an operating activity to a cesses, systems and internal controls to support the recogni- tion and disclosure requirements under the new standard. We 56 S&P Global 2017 Annual Report will adopt the new revenue standard effective January 1, 2018 The investment with Algomi is not material to our consoli- using the modified retrospective transition method. Based on dated financial statements. our analysis, adoption of the new standard will impact: 1) the In June of 2017, CRISIL, included within our Ratings segment, capitalization of costs to obtain contracts with our custom- acquired 8.9% of the outstanding shares of CARE Ratings ers and the related amortization period of those costs; 2) the Limited (“CARE”) from Canara Bank. CARE is a Securities timing of when fees for certain Ratings products that are rec- and Exchange Board of India registered credit rating agency ognized to match when the customer obtains control of the providing various rating and grading services in India whose product; 3) the accounting for long-term deferred revenue in shares are publicly traded on both the Bombay Stock our Ratings segment which contain a financing component; Exchange and the National Stock Exchange of India. We and 4) the presentation of sales of certain of our jointly-owned accounted for the investment in CARE as available-for-sale products in our Market and Commodities Intelligence segment, using the fair value method of accounting. The investment where revenue will be recognized on a gross rather than net balance as of December 31, 2017 of $54 million is included in basis. The aggregate impact of these adjustments on our open- other non- current assets in our consolidated balance sheet. ing balance sheet will be an increase to retained earnings of The change in the fair value of this investment is reported in approximately $40 million, with the increase driven primarily by accumulated other comprehensive loss in our consolidated the capitalization of costs to obtain contracts with our custom- balance sheet. The investment in CARE is not material to our ers of approximately $79 million previously expensed, offset by consolidated financial statements. the deferral of income associated with our Ratings products of approximately $14 million previously recognized in revenue, the net impact of recording expense associated with the significant 2016 For the year ended December  31, 2016, we paid cash for financing component of Ratings’ long term deferred revenue of acquisitions, net of cash acquired, totaling $177 million. None approximately $12 million, and a net increase to the associated of our acquisitions were material either individually or in the deferred tax assets and deferred tax liabilities associated with aggregate, including the pro forma impact on earnings. All these adjustments of approximately $13 million. RECLASSIFICATION Certain prior year amounts have been reclassified for compa- rability purposes. 2. Acquisitions and Divestitures ACQUISITIONS 2017 For the year ended December  31, 2017, we paid cash for acquisitions, net of cash acquired, totaling $83 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, 2017 included: In August of 2017, we acquired a 6.02% investment in Algomi Limited (“Algomi”), an innovative fintech company focused on providing software- enabled liquidity solutions to both buy- side and sell-side firms within the credit markets. Our invest- ment in Algomi will help facilitate product collaboration and enable future business expansion. We accounted for the investment in Algomi using the cost method of accounting. 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 energy analytical capabilities by expanding its oil offering and strengthening its position in the natural gas and power markets. We accounted for the acquisition of PIRA using the purchase method of accounting. The acquisition of PIRA is not material to our consolidated financial statements. In June of 2016, Market and Commodities Intelligence 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 S&P Global 2017 Annual Report 57 its position in natural gas and enhancing its oil offering. We growth opportunities as a result of the acquisition. The intangi- accounted for the acquisition of RigData using the purchase ble assets, excluding goodwill and indefinite-lived intangibles, method of accounting. The acquisition of RigData is not will be amortized over their anticipated useful lives between material to our consolidated financial statements. 3 and 10 years which will be determined when we finalize our In March of 2016, Market and Commodities Intelligence purchase price allocations. The goodwill for PIRA and RigData acquired Commodity Flow, a specialist technology and busi- is expected to be deductible for tax purposes. ness intelligence service for the global waterborne com- modity and energy markets. The purchase helps extend Market and Commodities Intelligence’s trade flow analyti- 2015 For the year ended December 31, 2015, we paid cash for acqui- cal capabilities and complements its existing shipping ser- sitions, net of cash acquired, totaling $2.4  billion. We used vices. We accounted for the acquisition of Commodity Flow the net proceeds of our $2.0 billion of senior notes issued in using the purchase method of accounting. The acquisition of August of 2015 and cash on hand to finance the acquisition of Commodity Flow is not material to our consolidated financial SNL. All other acquisitions were funded with cash flows from 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 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 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 helps clients, including investment and commercial banks, investors, corporations, and regulators make decisions, improve efficiency, and manage risk. See below for further In October of 2016, Indices acquired Trucost plc, a leader in detail related to this transaction. carbon and environmental data and risk analysis through its In July of 2015, we acquired the entire issued share capital of subsidiary S&P Global Indices UK Limited. The purchase will Petromedia Ltd and its operating subsidiaries (“Petromedia”), build on Indices’ current portfolio of Environmental, Social an independent provider of data, intelligence, news and tools and Governance solutions. The acquisition of Trucost plc is to the global fuels market that offers a suite of products not material to our consolidated financial statements. Ratings that provides clients with actionable data and intelligence that enable informed decisions, minimize risk and increase efficiency. We accounted for the acquisition of Petromedia In June of 2016, Ratings acquired a 49% equity investment using the purchase method of accounting. The acquisition in Thailand’s TRIS Rating Company Limited from its parent of Petromedia is not material to our consolidated financial company, TRIS Corporation Limited. The transaction extends statements. an existing association between Ratings and TRIS Rating and deepens their commitment to capital markets in Thailand. We accounted for the acquisition of TRIS Rating Company using the equity method of accounting. The equity invest- ment in TRIS Rating is not material to our consolidated finan- cial statements. For acquisitions during 2016 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. The goodwill recognized on our acquisitions is largely attributable to anticipated operational synergies and Following our acquisition of UCG at J.D. Power in July of 2015, we made a contingent purchase price payment in 2015 for $5 million that has been reflected in the consolidated state- ment of cash flows as a financing activity. For acquisitions during 2015 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 18 years. 58 S&P Global 2017 Annual Report Acquisition of SNL ACQUISITION- RELATED EXPENSES During the year ended the results that actually would have been realized had this acquisition been completed at the beginning of 2015. The unau- December  31, 2015, the Company incurred approximately dited pro forma information includes intangible asset charges $37 million of acquisition- related costs related to the acquisi- and incremental borrowing costs as a result of the acquisition, tion of SNL. These expenses are included in selling and general net of related tax, estimated using the Company’s effective tax expenses in our consolidated statements of income. rate for continuing operations for the periods presented. 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 attribut- able to anticipated operational synergies and growth oppor- tunities 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. (in millions) Pro forma revenue Pro forma net income Year Ended December 31, 2015 $5,477 $1,258 Non-cash investing activities Liabilities assumed in conjunction with our acquisitions are as follows: (in millions) Fair value of assets acquired Cash paid (net of cash acquired) Year ended December 31, 2017 2016 2015 $ 83 $ 253 $ 2,576 2,401 211 83 The following table presents the final allocation of purchase Liabilities assumed $ — $ 42 $ 175 price to the assets and liabilities of SNL as a result of the acquisition. (in millions) Current assets Property, plant and equipment Goodwill Other intangible assets, net: Databases and software Customer relationships Tradenames Other intangibles Other intangible assets, net Other non- current assets Total assets acquired Current liabilities Unearned revenue Other non- current liabilities Total liabilities acquired Net assets acquired $ 29 19 1,574 421 162 185 4 772 1 2,395 (43) (117) (1) (161) $ 2,234 SUPPLEMENTAL PRO FORMA INFORMATION Supplemental information on an unaudited pro forma basis is presented below for the year ended December 31, 2015 as if the acquisition of SNL occurred on January 1, 2015. The pro forma financial infor- mation is presented for comparative purposes only, based on estimates and assumptions, which the Company believes to be DIVESTITURES — CONTINUING OPERATIONS 2017 In April of 2017, we signed a letter of intent to sell our facility at East Windsor, New Jersey. The fixed assets of the facility of $5  million have been classified as held for sale, which is included in prepaid and other current assets in our consoli- dated balance sheet as of December 31, 2017. In January of 2017, we completed the sale of Quant House SAS (“QuantHouse”), included in our Market and Commodities Intelligence segment, to QH Holdco, an independent third party. In November of 2016, we entered into a put option agreement that gave the Company the right, but not the obli- gation, to put the entire share capital of QuantHouse to QH Holdco. As a result, we classified the assets and liabilities of QuantHouse, net of our costs to sell, as held for sale, which were included in prepaid and other current assets and other current liabilities, respectively, 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. reasonable but not necessarily indicative of the consolidated The components of assets and liabilities held for sale related to financial position or results of operations in future periods or QuantHouse, which were included in prepaid and other current S&P Global 2017 Annual Report 59 assets and other current liabilities in the consolidated balance Research”) to CFRA, a leading independent provider of foren- sheet, consist of the following: sic accounting research, analytics and advisory services. December 31, 2016 During the year ended December  31, 2016, we recorded a (in millions) Accounts receivable, net Other assets Assets of a business held for sale Accounts payable and accrued expenses Unearned revenue Other liabilities Liabilities of a business held for sale $ 4 3 $ 7 $ 3 7 35 $ 45 pre-tax gain of $9 million ($5 million after-tax) in gain on dis- positions in the consolidated statement of income related to the sale of Equity Research. In September of 2016, we completed the sale of J.D. Power, included within our Market and Commodities Intelligence 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 $728 million ($516 million after-tax) in gain on dispositions in the consolidated statement of income related to the sale 2016 During the year ended December 31, 2016, we completed the following dispositions that resulted in a net pre-tax gain of of J.D. Power. $1.1 billion, which was included in gain on dispositions in the consolidated statement of income: In October of 2016, we completed the sale of Standard & Poor’s Securities Evaluations, Inc. (“SPSE”) and Credit Market Analysis (“CMA”), two businesses within our Market 2015 During the year ended December 31, 2015, we recorded a pre- tax gain of $11 million in gain on dispositions in the consoli- dated statement of income related to the sale of our interest in and Commodities Intelligence segment, for $425 million in a legacy McGraw Hill Construction investment. cash to Intercontinental Exchange, an operator of global exchanges, clearing houses 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 on disposi- The operating profit of our businesses that were disposed of or held for sale for the years ending December 31, 2017, 2016, and 2015 is as follows: tions in the consolidated statement of income related to the sale of SPSE and CMA. Additionally, in October of 2016, we (in millions) Operating profit 1 Year ended December 31, 2017 $— 2016 $62 2015 $85 completed the sale of Equity and Fund Research (“Equity 1 The year ended December 31, 2016 excludes a pre-tax gain of $1.1 billion on our dispositions. 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, 2015 Acquisitions Dispositions Other 1 Balance as of December 31, 2016 Other 1 Balance as of December 31, 2017 Market and Commodities Intelligence $ 2,392 106 (35 ) (6 ) 2,457 27 $ 2,484 Ratings $ 114 — — (5) 109 5 $ 114 Indices $ 376 7 — — 383 8 $ 391 Total $ 2,882 113 (35) (11) 2,949 40 $ 2,989 1 Primarily relates to the impact of foreign exchange and valuation adjustments for prior period acquisitions. 2016 includes adjustments related to SNL and Petromedia. 2017 includes adjustments related to PIRA, Trucost, RigData and Commodity Flow. Goodwill additions and dispositions in the table above relate to transactions discussed in Note 2 — Acquisitions and Divestitures. 60 S&P Global 2017 Annual Report 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, 2017 and 2016 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: Databases and software Content Customer relationships Tradenames Other intangibles Total $ 510 $ 139 $ 168 $ 47 $ 269 $ 1,133 (in millions) Cost Balance as of December 31, 2015 Acquisitions Dispositions Impairment 1 Reclassifications Other (primarily Fx) Balance as of December 31, 2016 Dispositions Other 2 Balance as of December 31, 2017 Accumulated amortization Balance as of December 31, 2015 Current year amortization Dispositions Impairment 1 Reclassifications Other (primarily Fx) Balance as of December 31, 2016 Current year amortization Dispositions Reclassifications Other (primarily Fx) — — (2) — (2) 506 (4) 52 — — — — — 139 — — — — — 165 (3) 330 (2) 19 $ 554 $ 139 $ 347 $ 88 $ 73 $ 60 47 — (2) 2 (3) 132 52 (3) 2 4 14 — — — — 87 14 — — — 21 — — 5 (2) 84 22 (2) 1 1 — (2) — 1 (1) 45 — 5 $ 50 $ 36 2 (1) — — (1) 36 4 — 1 1 $ 42 $ 9 $ 8 98 (8) (22) (166) (8) 163 — (86) 98 (10) (24) — (14) 1,183 (6) (10) $ 77 $ 1,167 $ 67 $ 324 12 (6) (10) (7) (4) 52 6 (1) (4) 4 96 (7) (12) — (10) 391 98 (6) — 10 $ 57 $ 493 $ 111 $ 20 $ 792 $ 674 Balance as of December 31, 2017 $ 187 $ 101 $ 106 Net definite-lived intangibles: December 31, 2016 December 31, 2017 $ 374 $ 367 $ 52 $ 38 $ 246 $ 241 1 Relates to a technology- related impairment charge at Market and Commodities Intelligence and recorded in selling and general expenses in the consolidated statement of income. 2 Primarily relates to the impact of foreign exchange and valuation adjustments for prior period acquisitions. 2017 includes adjustments related to PIRA, Trucost, RigData and Commodity Flow. 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, 2017 is approximately 12 years. Amortization expense for the years ended December 31, 2017, 2016 and 2015 was $98 million, $96 million, and $67 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 2018 $95 2019 $88 2020 $82 2021 $70 2022 $68 S&P Global 2017 Annual Report 61 4. Taxes on Income A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate for financial reporting purposes Comprehensive tax legislation enacted through the Tax Cuts is as follows: and Jobs Act (“TCJA”) on December  22, 2017, significantly modified U.S. corporate income tax law. Provisional amounts have been recorded in our financial statements based on the U.S. federal statutory income Company’s initial analysis of the TCJA. The Company may tax rate Year Ended December 31, 2017 2016 2015 35.0% 35.0% 35.0% 2.5 2.7 2.6 — (4.3) — (3.9) (3.2) (2.0) 6.0 — — (2.7) — — (1.8) (2.1) 0.4 (1.2) (1.6) 1.5 (2.0) (2.9) 0.6 State and local income taxes Divestitures Foreign operations Impact of TCJA Stock-based compensation S&P Dow Jones Indices LLC joint venture Tax credits and incentives Other, net Effective income tax rate 33.4% 30.1% 30.1% The principal temporary differences between the accounting for income and expenses for financial reporting and income tax purposes are as follows: (in millions) Deferred tax assets: 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 before valuation allowance Valuation allowance December 31, 2017 2016 $ 27 $ 23 78 87 105 33 11 112 3 50 47 34 26 8 135 45 372 452 (249) (4) — (253) (320) (3) — (323) 119 (127) 129 (116) Net deferred income tax (liability) asset $ (8) $ 13 Reported as: Non- current deferred tax assets Non- current deferred tax liabilities $ 59 $ 61 (48) (67) Net deferred income tax (liability) asset $ (8) $ 13 We record valuation allowances against deferred income tax assets when we determine that it is more likely than not that such deferred income tax assets will not be realized based upon all the available evidence. The valuation allowance is pri- marily related to operating losses. adjust these amounts in future periods if our interpretation of the TCJA changes or as additional guidance from the U.S. Treasury becomes available. As a result of the TCJA, a pro- visional amount of $149  million has been recorded which reflects a one-time tax charge of approximately $173 million on the deemed repatriation of foreign earnings and a one-time tax benefit of approximately $24 million in respect of the re- valuation of net U.S. deferred tax liabilities at the reduced cor- porate income tax rate. Income before taxes on income resulting from domestic and foreign operations is as follows: (in millions) Domestic operations Foreign operations Year Ended December 31, 2017 2016 2015 $ 1,723 $ 2,585 $ 1,266 549 738 603 Total income before taxes $ 2,461 $ 3,188 $ 1,815 The provision for taxes on income consists of the following: (in millions) Federal: Current Deferred Year Ended December 31, 2017 2016 2015 $ 489 $ 641 $ 90 276 63 79 Total federal 552 720 366 Foreign: Current Deferred Total foreign State and local: Current Deferred Total state and local 194 (3) 133 (4) 111 (1) 191 129 110 73 7 99 12 80 111 34 37 71 Total provision for taxes $ 823 $ 960 $ 547 62 S&P Global 2017 Annual Report We have not recorded deferred income taxes applicable to The U.S. federal income tax audits for 2016 and 2015 are in pro- undistributed earnings of foreign subsidiaries that are indefi- cess. During 2017, we completed various state and foreign tax nitely reinvested in foreign operations. Undistributed earnings audits and, with few exceptions, we are no longer subject to that are indefinitely reinvested in foreign operations amounted federal, state and local, or non-U.S. income tax examinations to $780  million at December  31, 2017. Quantification of the by tax authorities for the years before 2010. The impact to tax deferred tax liability, if any, associated with indefinitely rein- expense in 2017, 2016 and 2015 was not material. vested earnings is not practicable. We file income tax returns in the U.S. federal jurisdiction, var- We made net income tax payments for continuing and discon- ious states, and foreign jurisdictions, and we are routinely tinued operations totaling $709 million in 2017, $683 million in under audit by many different tax authorities. We believe that 2016, and $260 million in 2015. As of December 31, 2017, we our accrual for tax liabilities is adequate for all open audit had net operating loss carryforwards of $564 million, of which years based on an assessment of many factors including past a major portion has an unlimited carryover period under cur- experience and interpretations of tax law. This assessment rent law. A reconciliation of the beginning and ending amount of unrec- ognized tax benefits is as follows: Year ended December 31, relies on estimates and assumptions and may involve a series of complex judgments about future events. It is possible that tax examinations will be settled prior to December 31, 2018. If any of these tax audit settlements do occur within that period, we would make any necessary adjustments to the accrual for (in millions) 2017 2016 2015 unrecognized tax benefits. Balance at beginning of year $ 221 $ 162 $ 155 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 Expiration of applicable statutes of 23 17 (32) (5) 48 20 (3) (6) 24 16 (15) (18) limitations Balance at end of year (12) — — $ 212 $ 221 $ 162 The total amount of federal, state and local, and foreign unrec- ognized tax benefits as of December 31, 2017, 2016 and 2015 was $212 million, $221 million and $162 million, respectively, exclusive of interest and penalties. During the period ending December 31, 2017, the change in unrecognized tax benefits resulted in a net reduction of tax expense of $4 million. 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, 2017 and 2016, we had $59 million and $44 million, respectively, of accrued interest and penal- ties associated with unrecognized tax benefits. Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits on the balance sheet may be reduced by up to approximately $60 million in the next twelve months as a result of the resolution of local tax examinations. 5. Debt A summary of short-term and long-term debt outstanding is as follows: (in millions) 2.5% Senior Notes, due 2018 1 3.3% Senior Notes, due 2020 2 4.0% Senior Notes, due 2025 3 4.4% Senior Notes, due 2026 4 2.95% Senior Notes, due 2027 5 6.55% Senior Notes, due 2037 6 Total debt Less: short-term debt including current maturities Long-term debt December 31, 2017 2016 $ 399 697 692 892 493 396 $ 398 696 691 891 492 396 3,569 3,564 399 — $ 3,170 $ 3,564 1 Interest payments are due semiannually on February 15 and August 15, and as of December 31, 2017, the unamortized debt discount and issuance costs total $1 million. 2 Interest payments are due semiannually on February 14 and August 14, and as of December 31, 2017, the unamortized debt discount and issuance costs total $3 million. 3 Interest payments are due semiannually on June 15 and December 15, and as of December 31, 2017, the unamortized debt discount and issuance costs total $8 million. 4 Interest payments are due semiannually on February 15 and August 15, and as of December 31, 2017, the unamortized debt discount and issuance costs total $8 million. 5 Interest payments are due semiannually on January 22 and July 22, and as of December 31, 2017, the unamortized debt discount and issuance costs total $7 million. 6 Interest payments are due semiannually on May 15 and November 15, and as of December 31, 2017, the unamortized debt discount and issuance costs total $4 million. S&P Global 2017 Annual Report 63 Annual debt maturities are scheduled as follows based on book rates that are primarily based on either the prevailing London values as of December 31, 2017: $399 million due in 2018, no Inter-Bank Offer Rate, the prime rate determined by the admin- amounts due in 2019, $697 million due in 2020, no amounts due istrative agent or the Federal Funds Rate. For certain borrow- in 2021, and $2.5 billion due thereafter. ings under this credit facility, there is also a spread based on On September 22, 2016, we issued $500 million of 2.95% senior our corporate credit rating. notes due in 2027. The notes are fully and unconditionally guar- Our credit facility contains certain covenants. The only finan- anteed by our wholly-owned subsidiary, Standard & Poor’s cial covenant requires that our indebtedness to cash flow ratio, Financial Services LLC. We used the net proceeds to fund the as defined in our credit facility, is not greater than 4 to 1, and $400 million early repayment of our 5.9% senior notes due in this covenant level has never been exceeded. 2017 on October 20, 2016, and intend to use the balance for general corporate purposes. 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 mil- lion of 4.4% senior notes due in 2026. The notes are fully and unconditionally guaranteed by our wholly-owned subsidiary, Standard & Poor’s Financial Services LLC. We used the net pro- ceeds to finance the acquisition of SNL. On May 26, 2015, we issued $700 million of 4.0% senior notes due in 2025 and used a portion of the net proceeds for the repayment of short-term debt, including commercial paper. The 4.0% senior notes will mature on June 15, 2025 and are fully and unconditionally guaranteed by our wholly-owned sub- sidiary, Standard & Poor’s Financial Services LLC. On June 30, 2017, we entered into a revolving $1.2 billion five- year credit agreement (our “credit facility”) that will terminate on June 30, 2022. This credit facility replaced our $1.2 billion five-year credit facility that was scheduled to terminate on June 30, 2020. The previous credit facility was canceled imme- diately after the new credit facility became effective. There 6. Derivative Instruments 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 the parent company, the U.S. dollar is the functional currency. We typically have naturally hedged positions in most countries from a local currency perspective with offsetting assets and liabilities. As of December  31, 2017 and December  31, 2016, we have entered into foreign exchange forward contracts to mitigate or hedge the effect of adverse fluctuations in foreign currency exchange rates. Foreign currency forward contracts are recorded at fair value that is based on foreign currency exchange rates in active markets; therefore, we classify these derivative contracts within Level 2 of the fair value hierarchy. We do not enter into any derivative financial instruments for speculative purposes. UNDESIGNATED DERIVATIVE INSTRUMENTS During the three months ended December 31, 2017, we entered were no outstanding borrowings under the previous credit into foreign exchange forward contracts in order to mitigate facility when it was replaced. We have the ability to borrow a total of $1.2 billion through our commercial paper program, which is supported by our credit facility. There were no commercial paper borrowings outstand- ing as of December 31, 2017 and 2016. the change in fair value of specific assets and liabilities in the consolidated balance sheet. These forward contracts do not qualify for hedge accounting. As of December  31, 2017, the aggregate notional value of these outstanding forward con- tracts was $130 million. The changes in fair value of these for- ward contracts are recorded in prepaid and other assets in the Depending on our corporate credit rating, we pay a commit- consolidated balance sheet with their corresponding change ment fee of 8 to 17.5 basis points for our credit facility, whether in fair value recognized into selling and general expenses in the or not amounts have been borrowed. We currently pay a com- consolidated statement of income. The net gain recorded in mitment fee of 12.5 basis points. The interest rate on borrow- selling and general expense for the year ended December 31, ings under our credit facility is, at our option, calculated using 2017 related to these contracts was $3 million. 64 S&P Global 2017 Annual Report CASH FLOW HEDGES During the three months ended March  31, 2017 and December 31, 2017, we entered into a series of foreign exchange forward contracts to hedge a portion of our Indian rupee, British pound, and Euro exposures through the fourth quarter of 2017 and 2018, respectively. These contracts are intended to offset the impact of the movement of exchange rates on future rev- enue and operating costs and are scheduled to mature within twelve months. The changes in the fair value of these contracts selling and general expenses in the same period that the hedge contract matures. As of December 31, 2017, we estimate that $2 million of the net gains related to derivatives designated as cash flow hedges recorded in other comprehensive income is expected to be reclassified into earnings within the next twelve months. There was no material hedge ineffectiveness for the year ended December 31, 2017. are initially reported in accumulated other comprehensive As of December 31, 2017 and December 31, 2016, the aggregate loss in our consolidated balance sheet and are subsequently notional value of our outstanding foreign currency forward con- reclassified into revenue and selling and general expenses in tracts designated as cash flow hedges was $307 million and the same period that the hedged transaction affects earnings. $65 million, respectively. During the three months ended March  31, 2016, we entered The following table provides information on the location and into a series of foreign exchange forward contracts to hedge fair value amounts of our cash flow hedges as of December 31, a portion of our Indian Rupee exposure through the fourth 2017 and December 31, 2016: quarter of 2016. These contracts were intended to offset the impact of the movement of exchange rates on future operat- (in millions) December 31, 2017 2016 ing costs and matured at the end of each quarter during 2016. The changes in the fair value of these contracts were initially reported in accumulated other comprehensive loss in our con- solidated balance sheet and subsequently reclassified into Balance Sheet Location Derivatives designated as cash flow hedges: Foreign exchange Prepaid and other current assets forward contracts $3 $3 S&P Global 2017 Annual Report 65 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 2017 $ — 2016 2015 $3 $ — Selling and general expenses 2017 2016 2015 $9 $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, 2017 $ 2 9 (9) $ 2 2016 $ (1) 7 (4) $ 2 2015 $ (1) — — $ (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 postre- management with supplemental retirement, disability and tirement plans in the consolidated balance sheets, with a cor- death benefits. Certain supplemental retirement benefits responding adjustment to accumulated other comprehensive are based on final monthly earnings. In addition, we sponsor loss, net of taxes. The amounts in accumulated other compre- voluntary 401(k) plans under which we may match employee hensive loss represent net unrecognized actuarial losses and contributions up to certain levels of compensation as well as unrecognized prior service costs. These amounts will be sub- profit- sharing plans under which we contribute a percentage of sequently recognized as net periodic pension cost pursuant to eligible employees’ compensation to the employees’ accounts. our accounting policy for amortizing such amounts. 66 S&P Global 2017 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 post- retirement plans as of December 31, 2017 and 2016, is as follows (benefits paid in the table below include only those amounts contributed directly to or paid directly from plan assets): Retirement Plans Postretirement Plans (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 1 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 2017 2016 2017 3 74 — 107 (110) $ 2,260 $ 2,199 3 78 — 196 (121) (75) (20) 38 (43) $ 57 — 2 3 (5) (8) — — 2,329 2,260 49 2,073 263 8 — (110) 31 (46) 2,023 259 8 — (121) (74) (22) — — 25 3 (8) — — 2,219 2,073 20 2016 $ 80 — 2 4 (6) (10) — (13) 57 — — 6 4 (10) — — — $ (110) $ (187) $ (29) $ (57) $ 114 $ (9) (215) 46 (8) (225) $ — — (29) $ (110) $ (187) $ (29) $ — (8) (49) $ (57) 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: $ 2,319 $ 2,251 $ 224 $ 674 $ 214 $ 665 $ — $ 441 Net actuarial loss (gain) Prior service credit Total recognized 1 Relates to the impact of retiree annuity purchases. $ 451 $ 483 1 1 $ (37) (12) $ 452 $ 484 $ (49) $ (35) (13) $ (48) 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, 2018 is $19 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, 2018. 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, 2018. S&P Global 2017 Annual Report 67 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 Other 1 Net periodic benefit cost Retirement Plans Postretirement Plans 2017 2016 2015 2017 2016 $ 3 $ 3 $ 74 (126) 78 (122) 6 96 (127) $ — 2 — $ — 2 — 18 — 8 16 — — 20 — — (2) (2) — (1) — — 2015 $ — 3 — — (1) — $ (23) $ (25) $ (5) $ (2) $ 1 $ 2 1 Represents a charge related to our U.K. retirement plan. Our U.K. retirement plan accounted for a benefit of $6 million in 2017, $10 million in 2016, and $10 million in 2015 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 (gain) loss Recognized actuarial (gain) loss Prior service (credit) cost Other 1 Total recognized 1 Represents a charge related to our U.K. retirement plan. Retirement Plans Postretirement Plans 2017 2016 2015 $ (20) (12) — (7) $ 60 (10) — $ (6) (13) — 2017 $ (3) 2016 $ (12) 1 1 1 (8) 2015 $ (17) — 1 $ (39) $ 50 $ (19) $ (1) $ (19) $ (16) The total cost for our retirement plans was $70 million for 2017, $69 million for 2016 and $91 million for 2015. Included in the total retirement plans cost are defined contribution plans cost of $70 million for 2017, $65 million for 2016 and $67 million for 2015. 68 S&P Global 2017 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 2017 2016 2015 2017 2016 2015 3.68% 4.14% 4.47% 3.40% 3.69% 3.90% 4.13% 2.58% 6.25% 4.47% 3.84% 6.25% 7.00% 4.15% 3.69% 3.80% 6.25% 7.00% 3.94% 7.00% 3.60% 1 The assumed weighted- average healthcare cost trend rate will decrease ratably from 7% in 2017 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 $ — $ — 2 Effective January 1, 2017, we changed our discount rate assumption on our U.S. retirement plans to 4.13% from 4.47% in 2016 and changed our discount rate assumption on our U.K. plan to 2.58% from 3.84% in 2016. 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 and 2017, 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 $10 million in 2017 and $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, 2018, our return on assets assumption for the U.S. plan and U.K. plan decreased to 6.00% from 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 2018 are $9 million and $7 million for our retirement and postretirement plans respectively. In 2018, 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) 2018 2019 2020 2021 2022 2023–2027 Postretirement Plans 2 Retirement Plans 1 Gross payments Retiree contributions $ 88 90 93 96 99 527 $ 9 8 8 7 6 24 $ (3) (3) (2) (2) (2) (9) Medicare subsidy 3 $ — — — — — — Net payments $ 6 5 6 5 4 15 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 2017 Annual Report 69 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, 2017 and 2016, 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, excluding U.K. Real Estate U.K. 4 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 Real Estate U.K. 4 Total Collective investment funds Total December 31, 2017 Level 1 $ 10 50 109 5 45 — — — — — — Level 2 $ — — — — — 1,076 35 5 19 15 18 — — Level 3 $ — — — — — — — — — — — 39 $ 219 $ 1,168 $ 39 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 Total $ 10 50 109 5 45 1,076 35 5 19 15 18 39 $ 1,426 $ 793 $ 2,219 Total $ 38 69 103 3 38 970 32 5 19 20 16 11 $ 1,324 $ 749 $ 2,073 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. 70 S&P Global 2017 Annual Report For securities that are quoted in active markets, the trustee/ instruments. The short-term portfolio, whose primary goal is custodian determines fair value by applying securities’ prices capital preservation for liquidity purposes, is composed of gov- obtained from its pricing vendors. For commingled funds that ernment and government- agency securities, uninvested cash, are not actively traded, the trustee applies pricing information receivables and payables. The portfolios do not employ any provided by investment management firms to the unit quanti- financial leverage. ties of such funds. Investment management firms employ their own pricing vendors to value the securities underlying each commingled fund. Underlying securities that are not actively U.S. DEFINED CONTRIBUTION PLANS Assets of the defined contribution plans in the U.S. consist pri- traded derive their prices from investment managers, which in marily of investment options which include actively managed turn, employ vendors that use pricing models (e.g., discounted equity, indexed equity, actively managed equity/bond funds, cash flow, comparables). The domestic defined benefit plans target date funds, S&P Global Inc. common stock, stable value have no investment in our stock, except through the S&P 500 and money market strategies. There is also a self- directed 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, 2016 Purchases Distributions Gain (loss) Balance as of December 31, 2017 Level 3 $11 28 (1) 1 $39 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 $1,739  million and $1,632 million as of December 31, 2017 and 2016 respectively, and the target allocations in 2017 include 68% fixed income, 27% domestic equities and 5% international equities. The U.K. pension trust had assets of $480  million and $441  million as of December  31, 2017 and 2016, respec- tively, and the target allocations in 2017 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 sec- tors. The fixed income strategies include U.S. long duration mutual fund investment option. The plans purchased 228,248 shares and sold 297,750 shares of S&P Global Inc. common stock in 2017 and purchased 216,035 shares and sold 437,283 shares of S&P Global Inc. common stock in 2016. The plans held approximately 1.5 million shares of S&P Global Inc. com- mon stock as of December 31, 2017 and 1.6 million shares as of December 31, 2016, with market values of $255 million and $171 million, respectively. The plans received dividends on S&P Global Inc. common stock of $3 million and $2 million during the years ended December 31, 2017 and December 31, 2016 respectively. 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- securities, opportunistic fixed income securities and U.K. debt able under the plan. S&P Global 2017 Annual Report 71 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 2017 33.8 2.1 35.9 2016 33.5 3.8 37.3 1 Shares reserved for issuance under the Director Deferred Stock Ownership Plan are not included in the total, but are less than 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, 2017 2016 2015 $ 3 $ 7 $ 14 expense 96 69 64 Year Ended December 31, 2015 Risk-free average interest rate Dividend yield Volatility Expected life (years) Weighted- average grant-date fair value per option 0.2–1.9% 1.4% 21–39% 6.3 $27.57 Total stock-based compensation expense Tax benefit $ 99 $ 76 $ 78 Because lattice-based option- pricing models incorporate $ 38 $ 29 $ 29 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 2017 and 2016 and a minimal amount of stock options granted in 2015. 72 S&P Global 2017 Annual Report Stock option activity is as follows: (in millions, except per award amounts) Options outstanding as of December 31, 2016 Exercised Forfeited and expired 1 Options outstanding as of December 31, 2017 Options exercisable as of December 31, 2017 1 There are less 0.1 million shares forfeited and expired. Shares Weighted average exercise price Weighted- average remaining years of contractual term Aggregate intrinsic value 3.8 (1.7) — 2.1 2.1 $ 43.36 $ 113.04 $ 72.35 $ 44.09 $ 44.08 3.5 3.5 $270 $270 (in millions, except per award amounts) Nonvested options outstanding as of December 31, 2016 Vested Forfeited 1 Nonvested options outstanding as of December 31, 2017 Total unrecognized compensation expense related to nonvested options 2 Weighted- average years to be recognized over 1 There are less than 0.1 million shares forfeited. Shares 0.2 (0.2) — — $ — 0.1 Weighted- average grant-date fair value $23.42 $23.40 $24.22 $27.52 2 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 of awards that are anticipated to fully vest. For performance years ended December 31, 2017, 2016 and 2015 was $4 million, unit awards, adjustments are made to expense dependent $7 million and $11 million, respectively. upon financial goals achieved. Information regarding our stock option exercises is as follows: Restricted stock and unit activity for performance and non- (in millions) Net cash proceeds from the exercise Year Ended December 31, 2017 2016 2015 performance awards is as follows: of stock options $ 75 $ 88 $ 86 (in millions, except per award amounts) Shares Weighted- average grant-date fair value Total intrinsic value of stock option exercises $ 118 $ 95 $ 94 Income tax benefit realized from stock option exercises $ 64 $ 41 $ 49 Nonvested shares as of December 31, 2016 Granted Vested Forfeited 1 1.0 $ 106.31 0.8 $ 147.12 (1.0) $ 156.16 — $ 107.96 Nonvested shares as of December 31, 2017 0.8 $ 124.91 RESTRICTED STOCK AND UNIT AWARDS Restricted stock and unit awards (performance and non- Total unrecognized compensation expense related to nonvested awards performance) have been granted under the 2002 Plan. Weighted- average years to be recognized over $ 66 1.6 Performance unit awards will vest only if we achieve certain 1 There are less than 0.1 million shares forfeited. financial goals over the performance period. Restricted stock 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 Year Ended December 31, 2017 2016 2015 Weighted- average grant-date fair value per award $ 147.12 $ 93.01 $ 77.06 are not required to provide consideration to us other than ren- Total fair value of restricted dering service. stock and unit awards vested $ 147 $ 99 $ 155 Tax benefit relating to The stock-based compensation expense for restricted stock restricted stock activity $ 36 $ 26 $ 24 and unit awards is determined based on the market price of our stock at the grant date of the award applied to the total number S&P Global 2017 Annual Report 73 9. Equity CAPITAL STOCK Two million shares of preferred stock, par value $1 per share, are authorized; none have been issued. agreement was structured as an uncapped ASR agreement in which we paid $500 million and received an initial delivery of approximately 2.8 million shares, representing 85% of the $500 million at a price equal to the then market price of the Company. We completed the ASR agreement on October 31, 2017 and received an additional 0.5 million shares. We repur- On February  2, 2018, the Board of Directors approved an chased a total of 3.2 million shares under the ASR agreement increase in the dividends for 2018 to a quarterly rate of $0.50 for an average purchase price of $154.46 per share. The total per common share. Quarterly dividend rate Annualized dividend rate Dividends paid (in millions) Year Ended December 31, 2017 2016 2015 $ 0.41 $ 0.36 $ 0.33 $ 1.64 $ 1.44 $ 1.32 $ 421 $ 380 $ 363 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) 2017 2016 2015 Year Ended December 31, Total number of shares purchased 1 Average price paid per share 2 Total cash utilized 2 9.7 6.8 10.1 $ 147.74 $ 113.36 $ 99.00 $ 1,001 $ 1,097 $ 1,000 number of shares repurchased under the ASR agreement is equal to $500 million divided by the volume weighted- average share price, less a discount. The repurchased shares are held in Treasury. The ASR agreement was executed under the current share repurchase program, approved on December 4, 2013. Using a portion of the proceeds received from the sale of J.D. Power, we entered into an 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 which we paid $750 million and received an initial delivery of approximately 4.4 million shares and an additional amount of 0.9  million shares during the month of September 2016, representing the minimum number of shares of our common stock to be repurchased based on a calculation using a specified capped price per share. We com- pleted 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 of 6.1 million shares under the ASR agreement for an average purchase price of $122.18 per 1 2017 and 2016 includes shares received as part of our accelerated share share. The total number of shares repurchased under the ASR repurchase agreements 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. Cash used for financ- ing activities only reflects those shares which settled during the year ended December 31, 2017, 2016 and 2015 resulting in $1,001 million, $1,123 million and $974 million of cash used to repurchase shares, respectively. Our purchased shares may be used for general corporate pur- poses, including the issuance of shares for stock compensa- tion plans and to offset the dilutive effect of the exercise of employee stock options. As of December 31, 2017, 19 million shares remained available under our current share repurchase program. Our current share repurchase program has no expira- tion date and purchases under this program may be made from time to time on the open market and in private transactions, depending on market conditions. 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 agreements were 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. ACCELERATED SHARE REPURCHASE AGREEMENTS We entered into an accelerated share repurchase (“ASR”) agreement with a financial institution on August  1, 2017 to initiate share repurchases aggregating $500 million. The ASR REDEEMABLE NONCONTROLLING INTERESTS The agreement with the minority partners that own 27% of our S&P Dow Jones Indices LLC joint venture contains redemp- tion features whereby interests held by minority partners are redeemable either (i)  at the option of the holder or (ii)  upon 74 S&P Global 2017 Annual Report the occurrence of an event that is not solely within our con- its estimated redemption value, but never less than its initial trol. Specifically, under the terms of the operating agreement fair value, considering a combination of an income and mar- of S&P Dow Jones Indices LLC, after December 31, 2017, CME ket valuation approach. Our income and market valuation Group and CME Group Index Services LLC (“CGIS”) will have the approaches may incorporate Level 3 fair value measures for right at any time to sell, and we are obligated to buy, at least instances when observable inputs are not available, including 20% of their share in S&P Dow Jones Indices LLC. In addition, assumptions related to expected future net cash flows, long- in the event there is a change of control of the Company, for the term growth rates, the timing and nature of tax attributes, and 15 days following a change in control, CME Group and CGIS will the redemption features. Any adjustments to the redemption have the right to put their interest to us at the then fair value of value will impact retained income. CME Group’s and CGIS’ minority interest. Noncontrolling interests that do not contain such redemption If interests were to be redeemed under this agreement, we features are presented in equity. would generally be required to purchase the interest at fair value on the date of redemption. This interest is presented on the consolidated balance sheets outside of equity under the 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 portion attributable to our S&P Index business. We adjust the Changes to redeemable noncontrolling interest during the year ended December 31, 2017 were as follows: (in millions) Balance as of December 31, 2016 Net income attributable to noncontrolling interest Distributions to noncontrolling interest Redemption value adjustment $ 1,080 127 (117) 260 $ 1,350 redeemable noncontrolling interest each reporting period to Balance as of December 31, 2017 ACCUMULATED OTHER COMPREHENSIVE LOSS The following table summarizes the changes in the components of accumulated other comprehensive loss for the year ended December 31, 2017: Foreign Currency Translation Adjustment Pension and Postretirement Benefit Plans 1 Unrealized Gain (Loss) on Forward Exchange Contracts 2 Unrealized Loss on Investment Accumulated Other Comprehensive Loss (in millions) Balance as of December 31, 2016 Other comprehensive income before reclassifications Reclassifications from accumulated other comprehensive loss to net earnings Net other comprehensive income $ (332) 93 — 93 $ (443) 30 11 41 Balance as of December 31, 2017 $ (239) $ (402) $ 2 9 (9) — $ 2 — (10) — (10) $ (10) $ (773) 122 2 124 $ (649) 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, 2017. 10. Earnings per Share Basic earnings per common share (“EPS”) is computed by divid- additional common shares that would have been outstanding ing net income attributable to the common shareholders of the if potential common shares with a dilutive effect had been Company by the weighted- average number of common shares issued. Potential common shares consist primarily of stock outstanding. Diluted EPS is computed in the same manner as options and restricted performance shares calculated using basic EPS, except the number of shares is increased to include the treasury stock method. S&P Global 2017 Annual Report 75 The calculation for basic and diluted EPS is as follows: due to circumstances not foreseen when the original plans (in millions, except per share data) 2017 2016 2015 consolidated statements of income during the period when it Year Ended December 31, were initiated. In these cases, we reverse reserves through the Amount attributable to S&P Global Inc. common shareholders: Net income Basic weighted- average number of common shares outstanding Effect of stock options and other dilutive securities $ 1,496 $ 2,106 $ 1,156 256.3 262.8 271.6 is determined they are no longer needed. There was approxi- mately $7 million of reserves from the 2016 restructuring plan that we have reversed in 2017, which offset the initial charge of $30 million recorded for the 2016 restructuring plan. Also, there was approximately $7 million of reserves from the 2015 2.6 2.4 3.0 restructuring plan that we have reversed in 2016, which offset Diluted weighted- average number of the initial charge of $63 million recorded for the 2015 restruc- common shares outstanding 258.9 265.2 274.6 turing plan. Earnings per share attributable to S&P Global Inc. common shareholders: Net income: Basic Diluted $ 5.84 $ 8.02 $ 4.26 $ 5.78 $ 7.94 $ 4.21 Each period we have certain stock options and restricted per- formance shares that are potentially excluded from the com- putation of diluted EPS. 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 net loss 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 net loss exists. As of December 31, 2017, 2016 and 2015, there were no stock options excluded. Restricted performance shares outstand- ing of 0.6 million, 0.7 million and 0.9 million as of December 31, 2017, 2016 and 2015, respectively, were excluded. 11. Restructuring The initial restructuring charge recorded and the ending reserve balance as of December 31, 2017 by segment is as follows: 2017 Restructuring Plan 2016 Restructuring Plan Initial Charge Recorded Ending Reserve Balance Initial Charge Recorded Ending Reserve Balance $ 25 $ 24 $ 14 4 9 — 10 5 — 10 10 1 5 3 — 1 $ 44 $ 39 $ 30 $ 8 (in millions) Ratings Market and Commodities Intelligence Indices Corporate Total For the year ended December 31, 2017, we have reduced the reserve for the 2017 restructuring plan by $5 million and for the years ended December 31, 2017 and 2016, we have reduced the reserve for the 2016 restructuring plan by $15 million and $7  million, respectively. The reductions primarily related to cash payments for employee severance costs. During 2017 and 2016, we continued to evaluate our cost structure and further identified cost savings associated with streamlining our management structure and our decision to 12. Segment and Geographic Information exit non- strategic businesses. Our 2017 and 2016 restructur- As discussed in Note 1 — Accounting Policies, we have three ing plans consisted of a company-wide workforce reduction reportable segments: Ratings, Market and Commodities of approximately 520 and 230 positions, respectively, and are Intelligence and Indices. further detailed below. The charges for each restructuring plan are classified as selling and general expenses within the con- solidated statements of income and the reserves are included in other current liabilities in the consolidated balance sheets. Our Chief Executive Officer is our chief operating decision- maker and evaluates performance of our segments and allo- cates resources based primarily on operating profit. Segment operating profit does not include unallocated expense or inter- In certain circumstances, reserves are no longer needed est expense, as these are costs that do not affect the operating because of efficiencies in carrying out the plans or because results of our segments. We use the same accounting policies employees previously identified for separation resigned from for our segments as those described in Note 1 — Accounting the Company and did not receive severance or were reassigned Policies. 76 S&P Global 2017 Annual Report 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 2017 $ 2,988 2,452 733 (110) 6,063 Revenue 2016 $ 2,535 2,585 639 (98) 5,661 2015 $ 2,428 2,376 597 (88) 5,313 Unallocated expense 5 — — — Operating Profit 2017 2016 $ 1,524 793 471 — 2,788 (178) $ 1,262 1,822 412 — 3,496 (127) 2015 $ 1,078 585 392 — 2,055 (138) Total $ 6,063 $ 5,661 $ 5,313 $ 2,610 $ 3,369 $ 1,917 1 Operating profit for the year ended December 31, 2017 includes legal settlement expenses of $55 million and employee severance charges of $25 million. Operating profit for the year ended December 31, 2016 primarily includes a benefit related to net legal settlement insurance recoveries of $10 million and employee severance charges of $6 million. Operating profit for the year ended December 31, 2015 includes net legal settlement expenses of $54 million and employee severance charges of $13 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $4 million for the year ended December 31, 2017 and $5 million for the years ended December 31, 2016 and 2015. 2 Operating profit for the year ended December 31, 2017 includes non-cash acquisition and disposition- related adjustments of $15 million, employee sever- ance charges of $9 million, a charge to exit a leased facility of $6 million, and an asset-write off of $2 million. 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 related to identified operating efficiencies primarily related to employee severance charges of $33 million. Additionally, operating profit includes amortization of intangibles from acquisitions of $87 million, $85 million and $57 million for the years ended December 31, 2017, 2016 and 2015, respectively. 3 Operating profit includes amortization of intangibles from acquisitions of $7 million, $6 million and $5 million for the years ended December 31, 2017, 2016 and 2015, respectively. 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, 2017 includes a charge to exit leased facilities of $19 million, employee severance charges of $10 million and a pension related charge of $8 million. 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 million related to the sale of our interest in a legacy McGraw Hill Construction investment and costs related to identified operating efficiencies pri- marily related to employee severance charges of $10 million. (in millions) Ratings Market and Commodities Intelligence Indices Total operating segments Corporate Total Depreciation & Amortization Capital Expenditures 2017 $ 34 128 9 171 9 $ 180 2016 $ 34 131 8 173 8 $ 181 2015 $ 43 99 8 150 7 $ 157 2017 $ 45 52 3 100 23 $ 123 2016 $ 42 57 3 102 13 $ 115 Segment information as of December 31 is as follows: 2015 $ 48 78 4 130 9 $ 139 2016 $ 612 4,104 1,247 5,963 2,699 7 Total Assets 2017 $ 788 4,172 1,270 6,230 3,190 5 $ 9,425 $ 8,669 (in millions) Ratings Market and Commodities Intelligence Indices Total operating segments Corporate 1 Assets held for sale 2 Total 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 East Windsor, New Jersey facility and QuantHouse as of December 31, 2017 and 2016, respectively. S&P Global 2017 Annual Report 77 We do not have operations in any foreign country that represent more than 7% 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, 2017 $ 3,658 1,473 594 338 $ 6,063 2016 $ 3,461 1,330 575 295 $ 5,661 Revenue Year ended December 31, 2015 $ 3,202 1,265 566 280 $ 5,313 2017 $ 4,285 346 54 49 $ 4,734 2016 $ 4,335 341 58 46 $ 4,780 Long-lived Assets December 31, 2017 2016 2015 2017 2016 60% 24 10 6 61% 24 10 5 60% 24 11 5 91% 7 1 1 91% 7 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. 13. Commitments and Contingencies RELATED PARTY AGREEMENT In June of 2012, we entered into a license agreement (the RENTAL EXPENSE AND LEASE OBLIGATIONS We are committed under lease arrangements covering prop- “License Agreement”) with the holder of S&P Dow Jones Indices erty, computer systems and office equipment. Leasehold LLC noncontrolling interest, CME Group, which replaced the improvements are amortized on a straight-line basis over the 2005 license agreement between Indices and CME Group. shorter of their economic lives or their lease term. Certain lease Under the terms of the License Agreement, S&P Dow Jones arrangements contain escalation clauses covering increased Indices LLC receives a share of the profits from the trading and costs for various defined real estate taxes and operating ser- clearing of CME Group’s equity index products. During the years vices and the associated fees are recognized on a straight-line ended December  31, 2017, 2016 and 2015, S&P Dow Jones basis over the minimum lease period. Rental expense for property and equipment under all operating lease agreements is as follows: (in millions) Gross rental expense Less: sublease revenue Less: rent credit Year ended December 31, 2017 2016 2015 $ 177 $ 179 $ 182 (14) (4) (17) — (16) — Net rental expense $ 160 $ 163 $ 164 Indices LLC earned $74 million, $76 million and $63 million of revenue under the terms of the License Agreement, respec- tively. The entire amount of this revenue is included in our con- solidated statement of income and the portion related to the 27% noncontrolling interest is removed in net income attribut- able to noncontrolling interests. 78 S&P Global 2017 Annual Report Cash amounts for future minimum rental commitments under the outcome of such matters and the effects, if any, on our con- existing non- cancelable leases with a remaining term of more solidated financial condition, cash flows, business and com- than one year, along with minimum sublease rental income to petitive position, which may require that we record liabilities in be received under non- cancelable subleases are shown in the the consolidated financial statements in future periods. following table. (in millions) 2018 2019 2020 2021 2022 2023 and beyond Total Rent commitment Sublease income Net rent $ 122 109 83 71 69 516 $ 970 $ (17) (17) (3) — — — $ (37) $ 105 92 80 71 69 516 $ 933 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 relate to the ratings activity of S&P Global Ratings brought by 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 position. 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 crisis of 2008–2009. Included in these civil cases are several 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. We can provide no assurance that we will not be obli- gated to pay significant amounts in order to resolve these mat- ters on terms deemed acceptable. U.S. Securities and Exchange Commission 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 The Company believes that it has meritorious defenses to the raises, there can be no assurance that the SEC will not seek pending claims and potential claims in the matters described remedies against S&P Global Ratings for one or more compli- below and is diligently pursuing these defenses, and in some ance deficiencies. 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 Trani Prosecutorial Proceeding In 2014, the prosecutor in the Italian city of Trani obtained criminal 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 stat- ute, for having allegedly failed to properly supervise the ratings analysts and prevent them from committing market manipula- tion. The prosecutor’s theories were based on various actions by S&P Global Ratings taken with respect to Italian sovereign debt between May of 2011 and January of 2012. On March 30, 2017, following trial, the court in Trani issued an oral verdict S&P Global 2017 Annual Report 79 acquitting each of the individual defendants and Standard & Company. In January of 2016, a different purported share- Poor’s Credit Market Services Europe of all charges, and on holder commenced a separate putative derivative action on September 27, 2017, the court filed a written opinion support- behalf of the Company in New York State Supreme Court titled ing the verdict. The prosecutor did not appeal, and the verdict L.A. Grika v. Harold McGraw III, et al. The allegations in the is now final. 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, among other things, breach of fiduciary duty, waste of cor- porate assets, and mismanagement against the board of directors and certain former directors and employees of the Company. 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 complaint are substantially similar to those in the North Miami Beach matter. The complaint asserts claims for, among other things, breach of fiduciary duty, aiding and abetting breaches of fiduciary duty, unjust enrichment, contribution and indem- nification against Harold McGraw III, Douglas L. Peterson, and nine former employees of the Company. The Grika matter was transferred to the judge presiding over the North Miami Beach matter. In December of 2016, the court issued orders granting the Company’s motions to dismiss both the North Miami Beach and Grika matters. In January of 2017, the plaintiffs in both matters filed notices of appeal. Briefing on the North Miami Beach appeal is now complete, and oral argument was held on January 23, 2018. The plaintiff in the Grika matter filed a brief in support of his appeal on January 2, 2018, and the Company and the individual defendants filed briefs in opposition to the risks of those securities, allegedly resulting in losses to the appeal on January 31, 2018. 14. Quarterly Financial Information (Unaudited) (in millions, except per share data) 2017 Revenue Operating profit Net income First quarter Second quarter Third quarter Fourth quarter Total year $ 1,453 $ 1,509 $ 1,513 $ 1,589 $ 6,063 $ 648 $ 677 $ 658 $ 628 $ 2,610 $ 430 $ 457 $ 452 $ 299 $ 1,638 Net income attributable to S&P Global common shareholders $ 399 $ 421 $ 414 $ 263 $ 1,496 Earnings per share attributable to S&P Global Inc. common shareholders: Net income: Basic Diluted 2016 1 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. $ 1.54 $ 1.63 $ 1.62 $ 1.03 $ 5.84 $ 1.53 $ 1.62 $ 1.61 $ 1.02 $ 5.78 $ 1,341 $ 1,482 $ 1,439 $ 1,399 $ 5,661 $ 512 $ 651 $ 1,348 $ 857 $ 3,369 $ 323 $ 412 $ 923 $ 569 $ 2,228 $ 294 $ 383 $ 892 $ 537 $ 2,106 $ 1.11 $ 1.45 $ 3.39 $ 1.10 $ 1.44 $ 3.36 2.07 2.05 8.02 7.94 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. 80 S&P Global 2017 Annual Report 15. 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 Operating profit Interest expense (income), net Non- operating intercompany transactions (Loss) income before taxes on income Provision for taxes on income Equity in net income of subsidiaries Net income Less: net income attributable to noncontrolling interests Net income attributable to S&P Global Inc. Comprehensive income Statement of Income Year Ended December 31, 2017 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated $ 717 $ 1,780 $ 3,704 $ (138) $ 6,063 108 162 31 — 301 416 163 365 (112) 26 3,808 3,670 — $ 3,670 $ 3,694 482 345 11 — 838 942 — (77) 1,019 370 — 649 — $ 649 $ 649 1,261 1,053 40 98 2,452 1,252 (14) (2,463) 3,729 427 — 3,302 (138) — — — (138) — — 2,175 (2,175) — (3,808) (5,983) 1,713 1,560 82 98 3,453 2,610 149 — 2,461 823 — 1,638 — (142) $ 3,302 $ (6,125) $ 3,401 $ (5,982) (142) $ 1,496 $ 1,762 S&P Global 2017 Annual Report 81 (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 interests Net income attributable to S&P Global Inc. Comprehensive income (in millions) Revenue Expenses: Operating- related expenses Selling and general expenses Depreciation Amortization of intangibles Total expenses Gain on disposition 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 attributable to noncontrolling interests Net income attributable to S&P Global Inc. Comprehensive income Statement of Income Year Ended December 31, 2016 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated $ 667 $ 1,513 $ 3,607 $ (126) $ 5,661 113 109 38 — 260 (1,072) 1,479 191 356 932 275 2,412 3,069 — $ 3,069 $ 3,099 451 243 9 — 703 — 810 — (83) 893 420 294 767 — $ 767 $ 767 1,335 1,087 38 96 2,556 (29) 1,080 (10) (941) 2,031 265 — 1,766 (126) — — — (126) — — — 668 (668) — (2,706) (3,374) — $ 1,766 $ 1,563 (122) $ (3,496) $ (3,374) 1,773 1,439 85 96 3,393 (1,101) 3,369 181 — 3,188 960 — 2,228 (122) $ 2,106 $ 2,055 Statement of Income Year Ended December 31, 2015 S&P Global Inc. Standard & Poor’s Financial Services LLC Non- Guarantor Subsidiaries Eliminations S&P Global Inc. Consolidated $ 624 $ 2,141 $ 2,663 $ (115) $ 5,313 137 184 40 — 361 — 263 112 282 (131) (107) 1,473 1,449 — $ 1,449 $ 1,446 737 254 18 — 1,009 — 1,132 — 222 910 358 272 824 — $ 824 $ 822 959 1,094 32 67 2,152 (11) 522 (10) (504) 1,036 296 — 740 (115) — — — (115) — — — — — — (1,745) (1,745) — $ 740 $ 655 (112) $ (1,857) $ (1,741) 1,718 1,532 90 67 3,407 (11) 1,917 102 — 1,815 547 — 1,268 (112) $ 1,156 $ 1,182 82 S&P Global 2017 Annual Report Balance Sheet December 31, 2017 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 $ 632 $ — $ 2,147 $ — $ 2,779 doubtful accounts Intercompany receivable Prepaid and other current assets 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 settlements Other current liabilities 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 138 768 143 1,681 158 261 — 8,364 116 215 152 1,784 (3) 1,933 10 — — 5 — 61 1,029 2,527 86 5,789 107 2,719 1,388 8,028 1,699 174 — (5,079) — (5,079) — 9 — (16,397) (1,815) (1) 1,319 — 226 4,324 275 2,989 1,388 — — 449 $ 10,795 $ 2,009 $ 19,904 $ (23,283) $ 9,425 $ 79 3,433 $ 23 492 $ 93 1,154 $ — (5,079) $ 195 — 145 399 2 293 — 136 4,487 3,170 101 180 376 8,314 — 412 (216) 12,156 (269) (9,602) 2,481 — 2,481 86 — — 193 2 21 817 — — — 74 891 — — 602 516 — — 1,118 — 1,118 241 — 75 1,127 105 194 2,989 — 1,715 64 229 4,997 — 2,318 9,256 3,782 (426) (23) 14,907 — 14,907 — — — — — — (5,079) — (1,816) — — (6,895) 1,350 (2,318) (9,117) (6,429) 46 23 (17,795) 57 (17,738) 472 399 77 1,613 107 351 3,214 3,170 — 244 679 7,307 1,350 412 525 10,025 (649) (9,602) 711 57 768 Total liabilities and equity $ 10,795 $ 2,009 $ 19,904 $ (23,283) $ 9,425 S&P Global 2017 Annual Report 83 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 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 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 138 (165) 77 761 159 261 — 5,464 17 134 131 837 2 970 1 — — 680 — 24 853 870 79 — (1,542) (1) 3,483 (1,543) 111 2,679 1,506 7,826 1,354 114 — 9 — (13,970) (1,371) — 1,122 — 157 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 — 966 69 — 191 3 (54) 271 — — — 74 345 — — 1,154 176 — — 1,330 — 1,330 211 52 1,045 51 250 1,874 — 1,360 78 314 3,626 — 2,460 10,485 1,034 (525) (7) 13,447 — 13,447 — — — — (1,541) — (1,371) — (1) (2,913) 1,080 (2,460) (10,963) (1,721) 44 7 (15,093) 51 (15,042) 409 95 1,509 56 359 2,611 3,564 — 274 439 6,888 1,080 412 502 9,210 (773) (8,701) 650 51 701 $ 8,669 Total liabilities and equity $ 6,796 $ 1,675 $ 17,073 $ (16,875) 84 S&P Global 2017 Annual Report (in millions) S&P Global Inc. Statement of Cash Flows Year Ended December 31, 2017 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: Depreciation Amortization of intangibles Provision for losses on accounts receivable Deferred income taxes Stock-based compensation Accrued legal 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 settlements Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash provided by operating activities Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash used for investing activities Financing Activities: Dividends paid to shareholders Distributions to noncontrolling interest holders Repurchase of treasury shares Exercise of stock options Employee withholding tax on share-based payments Intercompany financing activities Cash used for financing activities 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 $ 3,670 $ 649 $ 3,302 $ (5,983) $ 1,638 31 — 2 108 35 — 34 (2) (5) 22 19 — (42) 41 7 3,920 (55) — — — (55) 11 — 3 (10) 22 — 19 (23) 3 97 2 (1) (12) (18) (6) 736 (32) — — — (32) 40 98 11 (98) 42 55 43 (171) 12 (44) 64 (3) (31) 9 14 3,343 (36) (83) 2 (5) (122) — — — — — — — — — — — — — — — (5,983) — — — — — (421) — — — — (1,001) 68 (49) (2,546) (3,949) 5 (79) 711 — — — — (704) (704) — — — (111) — 7 — (2,733) (2,837) 82 466 1,681 — — — — 5,983 5,983 — — — 82 98 16 — 99 55 96 (196) 10 75 85 (4) (85) 32 15 2,016 (123) (83) 2 (5) (209) (421) (111) (1,001) 75 (49) — (1,507) 87 387 2,392 Cash and cash equivalents at end of year $ 632 $ — $ 2,147 $ — $ 2,779 S&P Global 2017 Annual Report 85 (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: 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 settlements Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash provided by operating activities Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from dispositions Changes in short-term investments Cash provided by (used for) investing activities Financing Activities: Payments on short-term debt, net Proceeds from issuance of senior notes, net Payments on senior notes Dividends paid to shareholders Distributions to noncontrolling interest holders Repurchase of treasury shares Exercise of stock options Contingent consideration payments Employee withholding tax on share-based payments Intercompany financing activities Cash used for financing activities 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 $ 3,069 $ 767 $ 1,766 $ (3,374) $ 2,228 38 — 1 16 22 (1,072) 3 48 (24) (2) (8) 19 — (27) 141 (9) 2,215 (68) (144) 1,422 — 1,210 (143) 493 (421) (380) — (1,123) 86 (5) (55) (1,333) (2,881) — 544 167 9 — — (9) 17 — 1 5 187 10 (39) (395) (108) (27) — 38 456 (15) — — — (15) — — — — — — — — — (441) (441) — — — 38 96 8 72 37 (29) 50 (23) (340) (3) 66 483 (42) 35 33 16 2,263 (32) (33) 76 (1) 10 — — — — (116) — 2 (34) — (1,600) (1,748) (158) 367 1,314 — — — — — — — — — — — — — — — — (3,374) — — — — — — — — — — — — — — 3,374 3,374 — — — 85 96 9 79 76 (1,101) 54 30 (177) 5 19 107 (150) (19) 174 45 1,560 (115) (177) 1,498 (1) 1,205 (143) 493 (421) (380) (116) (1,123) 88 (39) (55) — (1,696) (158) 911 1,481 Cash and cash equivalents at end of year $ 711 $ — $ 1,681 $ — $ 2,392 86 S&P Global 2017 Annual Report (in millions) S&P Global Inc. Statement of Cash Flows Year Ended December 31, 2015 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 (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 disposition 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 settlements Other current liabilities Net change in prepaid/accrued income taxes Net change in other assets and liabilities Cash provided by (used for) operating activities $ 1,449 $ 824 $ 740 $ (1,745) $ 1,268 40 — 1 33 23 — — 23 3 (4) 8 (5) — (31) 14 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) 5 (9) 129 (1,624) (77) 129 (35) from continuing operations 1,632 (349) 818 (1,745) 356 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 Proceeds from issuance of senior notes, net Dividends paid to shareholders Distributions to noncontrolling interest holders Repurchase of treasury shares Exercise of stock options Contingent consideration payments Purchase of additional CRISIL shares Employee withholding tax on share-based payments Intercompany financing activities Cash (used for) provided by financing activities from continuing operations Effect of exchange rate changes on cash from continuing operations Cash 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 (67) (2,243) — — (10) — — — (62) (153) 14 (4) — — — — (139) (2,396) 14 (4) (2,310) (10) (205) — (2,525) 143 2,674 (363) — (974) 80 (5) — (92) (2,020) — — — — — — — — — 359 — — — (104) — 6 — (16) — (84) — — — — — — — — — 1,745 143 2,674 (363) (104) (974) 86 (5) (16) (92) — (557) 359 (198) 1,745 1,349 — (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 S&P Global 2017 Annual Report 87 Five Year Financial Review (in millions, except per share data) Income statement data: Revenue Operating profit Income before taxes on income Provision for taxes on income Net income (loss) from continuing operations attributable to 2017 2016 2015 2014 2013 $ 6,063 2,610 2,4611 8236 $ 5,661 3,369 3,1882 960 $ 5,313 1,917 1,815 3 547 $ 5,051 113 544 245 $ 4,702 1,358 1,2995 425 S&P Global Inc. 1,496 2,106 1,156 (293) 783 Earnings (loss) per share from continuing operations attributable to the S&P Global Inc. common shareholders: Basic Diluted Dividends per share Operating statistics: 5.84 5.78 1.64 8.02 7.94 1.44 4.26 4.21 1.32 (1.08) (1.08) 1.20 2.85 2.80 1.12 Return on average equity 7 Income from continuing operations before taxes on income as a 223.0% 472.0% 324.3% (1.4)% 134.2% percent of revenue from continuing operations 40.6% 56.3% 34.2% 1.1% 27.6% Net income (loss) from continuing operations as a percent of revenue from continuing operations 27.0% 39.4% 23.9% (3.8)% 18.6% Balance sheet data: 7 Working capital Total assets Total debt Redeemable noncontrolling interest Equity Number of employees 8 $ 1,110 9,425 3,569 1,350 768 20,400 $ 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 Includes the impact of the following items: legal settlement expenses of $55 million, employee severance charges of $44 million, a charge to exit leased facilities of $25 million, non-cash acquisition and disposition- related adjustments of $15 million, a pension related charge of $8 million, an asset write-off of $2 million and amortization of intangibles from acquisitions of $98 million. 2 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 mil- lion, disposition- related costs of $48 million, a technology- related impairment charge of $24 million, employee severance charges of $6 million, a $3 million disposition- related reserve release, an acquisition- related cost of $1 million and amortization of intangibles from acquisitions of $96 million. 3 Includes the impact of the following items: costs related to identified operating efficiencies primarily related to employee severance charges 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 acqui- sitions of $67 million. 4 Includes the impact of the following items: $1.6 billion of legal and regulatory settlements, employee severance charges of $86 million, $4 million of professional fees largely related to corporate development activities and amortization of intangibles from acquisitions of $48 million. 5 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 and reduce our cost structure, a $36 million non-cash impairment charge related to the sale of our data center, employee severance charges of $28 mil- lion, a charge to exit leased facilities of $13 million, a $24 million net gain from our dispositions and amortization of intangibles from acquisitions of $51 million. 6 Includes $149 million of tax expense due to U.S. tax reform, primarily associated with the deemed repatriation of foreign earnings, which was partially offset by a $21 million tax benefit related to prior year divestitures. 7 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. 8 Excludes discontinued operations. 88 S&P Global 2017 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, 2017. 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, 2017, 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 2017 Annual Report 89 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of S&P Global Inc. OPINION ON THE FINANCIAL STATEMENTS We have audited the accompanying consolidated balance BASIS FOR OPINION These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the sheets of S&P Global Inc. (the Company) as of December 31, PCAOB and are required to be independent with respect to the 2017 and 2016, and the related consolidated statements of Company in accordance with the U.S. federal securities laws income, comprehensive income, equity and cash flows for and the applicable rules and regulations of the Securities and each of the three years in the period ended December 31, 2017, Exchange Commission and the PCAOB. and the related notes (collectively referred to as the “con- solidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consoli- dated financial position of the Company at December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and per- form the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included perform- ing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such pro- We also have audited, in accordance with the standards of cedures included examining, on a test basis, evidence regard- the Public Company Accounting Oversight Board (United ing the amounts and disclosures in the financial statements. States) (PCAOB), the Company’s internal control over finan- Our audits also included evaluating the accounting principles cial reporting as of December  31, 2017, based on crite- used and significant estimates made by management, as well ria established in Internal Control- Integrated Framework as evaluating the overall presentation of the financial state- issued by the Committee of Sponsoring Organizations of the ments. We believe that our audits provide a reasonable basis Treadway Commission (2013 framework), and our report dated for our opinion. February 9, 2018 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP We have served as the Company’s auditor since 1969. New York, New York February 9, 2018 90 S&P Global 2017 Annual Report Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Our audit included obtaining an understanding of internal con- S&P Global Inc. OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING We have audited S&P Global Inc.’s internal control over finan- cial reporting as of December 31, 2017, based on criteria estab- lished in Internal Control- Integrated Framework issued by trol over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and oper- ating 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 pro- vides a reasonable basis for our opinion. the Committee of Sponsoring Organizations of the Treadway DEFINITION AND LIMITATIONS OF INTERNAL Commission (2013 framework) (the COSO criteria). In our opin- ion, S&P Global Inc. (the Company) maintained, in all material CONTROL OVER FINANCIAL REPORTING A company’s internal control over financial reporting is a pro- respects, effective internal control over financial reporting as cess designed to provide reasonable assurance regarding the of December 31, 2017, based on the COSO criteria. reliability of financial reporting and the preparation of financial We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of S&P Global Inc. as of December 31, 2017 and 2016, and the related consoli- dated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial state- ment schedule listed in Item 15(a)(2) and our report dated February 9, 2018 expressed an unqualified opinion thereon. BASIS FOR OPINION The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over finan- cial reporting included in the accompanying Management’s statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reason- 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. Annual Report on Internal Control Over Financial Reporting. Because of its inherent limitations, internal control over finan- Our responsibility is to express an opinion on the Company’s cial reporting may not prevent or detect misstatements. Also, internal control over financial reporting based on our audit. We projections of any evaluation of effectiveness to future periods are a public accounting firm registered with the PCAOB and are subject to the risk that controls may become inadequate are required to be independent with respect to the Company in because of changes in conditions, or that the degree of compli- accordance with the U.S. federal securities laws and the appli- ance with the policies or procedures may deteriorate. cable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effec- tive internal control over financial reporting was maintained in all material respects. /s/ ERNST & YOUNG LLP New York, New York February 9, 2018 S&P Global 2017 Annual Report 91 Shareholder Information Annual Meeting The 2018 annual meeting will be held at 11 a.m. EDT on Tuesday, May 1st 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 our common stock are traded primarily on the New York Stock Exchange. SPGI is the ticker symbol for our common stock. Investor Relations Web Site Go to http://investor.spglobal.com to find: – Management presentations – Financial news releases – Financial reports, including the annual report, proxy statement and SEC filings – Investor Fact Book – Operating Committee – Corporate governance documents – Dividend and stock split history – Stock quotes and charts – 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. 92 S&P Global 2017 Annual Report Shareholder correspondence should be mailed to: Computershare P.O. Box 505000 Louisville, KY 40233 Overnight correspondence should be mailed to: Computershare 462 South 4th Street, Suite 1600 Louisville, KY 40202 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, 2017. The financial information included in this report was excerpted from the Company’s Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on February 9, 2018. Shareholders may access a complete copy of the 10-K from the SEC Filings & Reports section of the Company’s Investor Relations Website at http://investor.spglobal.com. m o c . i n o s d d a . w w w i n o s d d A y b n g s e D i Financial Highlights Years ended December 31 (in millions, except per share data) 2017 2016 % Change Revenue $ 6,063 $ 5,661 Adjusted net income (attributable to the Company’s common shareholders)* 1,784(a) 1,420(b) Adjusted diluted earnings per common share* $ 6.89(a) $ 5.35(b) Dividends per common share(c) $ 1.64 $ 1.44 Total assets $ 9,425 $ 8,669 Capital expenditures(d) 123 115 Total debt 3,569 3,564 7 26 29 14 9 7 0 Equity (including redeemable noncontrolling interest) 2,118 1,781 19 * Refer to “Reconciliation of Non-GAAP Financial Information” on page 13 of this report for a discussion of the Company’s non-GAAP financial measures. (a) Excludes the impact of the following items: legal settlement expenses of $55 million, employee severance charges of $44 million, a charge to exit leased facilities of $25 million, non-cash acquisition and disposition-related adjustments of $15 million, a pension related charge of $8 million, an asset write-off of $2 million and amortization of intangibles from acquisitions of $98 million. (b) 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, employee severance 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. (c) Dividends paid were $0.41 per quarter in 2017 and $0.36 per quarter in 2016. (d) Includes purchases of property and equipment and additions to technology projects. Directors and Principal Executives Board of Directors Charles E. “Ed” Haldeman, Jr. (E, F, N) Non-Executive Chairman of the Board S&P Global Inc. Rebecca Jacoby (F) Former Senior Vice President, Operations Cisco Systems, Inc. Marco Alverà (F, N) Chief Executive Officer Snam S.p.A. William D. Green (C, E, N) Former CEO and Chairman Accenture Stephanie C. Hill (A, C) Senior Vice President Corporate Strategy and Business Development Lockheed Martin Operating Committee Monique F. Leroux (A, C) Chair Investissement Québec Quebec Economic and Innovation Council Maria R. Morris (A, F) Former Executive Vice President Global Employee Benefits MetLife, Inc. Douglas L. Peterson (E) President and Chief Executive Officer S&P Global Inc. Sir Michael Rake (A, E, F) Chairman Worldpay Group plc Phoenix Global Resources 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 Ewout Steenbergen Executive Vice President, Chief Financial Officer John L. Berisford President, S&P Global Ratings Mike Chinn President, S&P Global Market Intelligence & Executive Vice President, Data and Technology Innovation, S&P Global Martin Fraenkel President, S&P Global Platts Alexander J. Matturri Chief Executive Officer, S&P Dow Jones Indices Nick Cafferillo Chief Technology Officer Martina L. Cheung Head of Global Risk Services Courtney Geduldig Executive Vice President, Public Affairs Steven J. Kemps Executive Vice President, General Counsel Swamy Kocherlakota Chief Information Officer Nancy Luquette Senior Vice President, Chief Risk & Audit Executive 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 IFC IBC 55 Water Street New York, NY 10041 spglobal.com S & P G l o b a l 2 0 1 7 A n n u a l R e p o r t Essential intelligence shapes a world of opportunity Annual Report 2017 

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