Powering
the Markets
of the Future
Annual Report 2018
Financial Highlights
Years ended December 31
(in millions, except per share data)
2018
2017
% Change
Revenue
$6,258
$6,063
Adjusted net income (attributable to the Company’s common
shareholders)*
$2,152 (a)
$1,784 (b)
Adjusted diluted earnings per common share*
$8.50 (a)
$6.89 (b)
Dividends per common share (c)
$2.00
$1.64
Total assets
$9,458
$9,425
Capital expenditures (d)
113
123
Total debt
3,662
3,569
Equity (including redeemable noncontrolling interest)
2,304
2,118
3
21
23
22
0
(8)
3
9
*Refer to “Reconciliation of Non-GAAP Financial Information” on page 12 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 $74 million, Kensho retention related expense of $31 million, restructuring charges related
to a business disposition and employee severance charges of $25 million, lease impairments of $11 million, a pension related charge of $5 million and amortization
of intangibles from acquisitions of $122 million.
(b) 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.
(c) Dividends paid were $0.50 per quarter in 2018 and $0.41 per quarter in 2017.
(d) Includes purchases of property and equipment and additions to technology projects.
Year-End Share Price
Dividends Per Share
Revenue (in millions)
$169.94
$169.40
$2.00
$1.64
$6,258
$6,063
$107.54
$98.58
$88.98
$1.44
$1.32
$1.20
$5,051
$5,313
$5,661
’14
’15
’16
’17
’18
’14
’15
’16
’17
’18
’14
’15
’16
’17
’18
Cumulative Total Shareholder Return(e)
260
240
220
200
180
160
140
120
100
80
’13
’14
’15
’16
’17
’18
(e) Assumes $100 invested on December 31, 2013 and total return includes reinvestment of dividends through December 31, 2018.
(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.
SPGI
Peer Group (f)
S&P 500
$231
$208
$150
To experience an
enriched version of this
Annual Report, with
expanded content, visit
spglobal.com/annualreport2018.
S&P Global 2018 Annual Report 1
Chairman’s Letter
Charles E. “Ed” Haldeman, Jr.
Chairman of the Board
Dear Fellow Shareholder:
On behalf of your Board of Directors,
I am pleased to report S&P Global
once again created value for you.
Dividends paid and share repurchases during 2018 totaled more than $2 billion.
Entering 2019, the Board increased our dividend by 14%, marking the 46th
consecutive year of annual dividend increases. With the year-end stock market
correction, the company’s total return to shareholders in 2018 was 1.4%. That beat
the 4.4% decline in the S&P 500. But it trailed the median return of our peer group.
Looking back further, our total return over five- and 10-year periods exceeded both
the S&P 500 and our peer group.
S&P Global also made significant strides preparing for the years ahead.
The management team, working closely with the Board, has created a strategic
plan that expresses S&P Global’s ability to Power the Markets of the Future.
This conveys the company’s belief that its future success depends on delivering
the essential intelligence our customers require to make decisions that are
fundamental to the healthy evolution and expansion of global capital and
commodities markets.
2 S&P Global 2018 Annual Report
Realizing this vision depends on the company’s capacity to not just adapt but
thrive in a world overflowing with data and technology. That is why we held our
2018 annual Board and Operating Committee strategic planning meeting in San
Francisco. During this time, we met with and heard from some of Silicon Valley’s
most successful and promising technology companies. These innovators offered
insights about the capabilities, characteristics and cultures S&P Global needs
to foster in order to achieve its vision, and validated our approach to technology,
innovation and high ethical standards.
As we enter 2019, we maintain a long-term view. The Board and Operating
Committee make strategic, operational and corporate governance decisions not
on a quarter-to-quarter basis, but over a multi-year time horizon. Monthly market
movements do not distract us; rather, a clear long-term strategy guides us. We
have, and continue to have, many robust discussions about how best to position
the company for success, including conversations about talent management and
environmental, social and governance risk-related matters.
I want to thank my fellow Directors for their insights and contributions throughout
the year. We are fortunate to have very engaged members of our Board, who bring
a wide range of opinions, backgrounds and perspectives to our discussions. Their
experience and counsel are invaluable to the management team and me. It’s an
honor to serve with them.
And it’s a privilege to serve a company that plays a central role helping investors,
companies and governments make informed decisions vital to their business.
S&P Global’s ability to create valuable insights is an enormous source of pride and
it is the key to understanding why we approach the markets of the future from a
position of great strength.
Sincerely,
Charles E. “Ed” Haldeman, Jr.
Chairman of the Board
S&P Global 2018 Annual Report 3
CEO’s Letter
Douglas L. Peterson
President and Chief Executive Officer
Dear Fellow Shareholder:
S&P Global achieved strong results in
2018. We extended our record of growth
by never losing sight of our values, our
purpose or our aspirations. That means
delivering essential intelligence to
our customers today, and always.
Looking back at last year, I see our people at their best: serving the needs of our
customers and our communities, making advancements across every part of our
company and creating an impact virtually everywhere across the globe.
We recorded another year of double-digit growth in adjusted diluted earnings
per share, despite volatile credit markets, and surpassed our target to return
at least 75% of our free cash flow, excluding certain items, to shareholders
by delivering more than 100%. We developed new capabilities to improve the
customer experience. We found new ways to serve the causes that drive prosperity
around the globe and support the communities where we live and work. And we
introduced programs to help employees to acquire new skills, improve the way
they work and feel even better about being part of S&P Global.
4 S&P Global 2018 Annual Report
I am pleased we delivered solid financial performance in 2018 in the face of
market volatility during the fourth quarter of the year. Despite a decline in global
bond issuance, we were able to increase revenue and profitability last year, and
we generated earnings in-line with the guidance we provided to investors. These
results are testimony to our diversified business portfolio and value we offer
to our customers.
We are proud of all that we achieved. But we’re not dwelling on the past; we’re
not complacent. We’re looking ahead and moving forward.
A little over a year ago we introduced our plan
for S&P Global to Power the Markets of the
Future with our essential intelligence. That’s
not a meaningless slogan. It’s our vision. It’s
our long-term strategy and it’s the trusted
management framework we use to set goals,
allocate capital and other resources and hold
ourselves accountable.
We developed this framework by listening
to our customers, paying close attention to
the competitive landscape and watching key
market trends.
Six foundational capabilities support
this approach and each is critical to our
future success.
We are proud
of all that
we achieved.
But we’re not
dwelling on the
past; we’re not
complacent.
I want to share some of the stories in each of these categories that illustrate how
our employees are executing our strategy and helping us achieve our purpose of
providing the intelligence that is essential to allow customers to make decisions
with conviction.
1. Global
About 40 percent of our revenue is derived from outside the U.S. We believe there
are still plenty of substantial long-term growth opportunities for us to capitalize
on as global trade flows grow and as capital markets open up in emerging, as well
as developed countries.
I share the concerns of many business leaders that geopolitical issues such as
trade disputes, trends towards isolationism and dysfunctional political systems
create headwinds for global companies. We all will have to navigate these external
forces with patience and foresight.
S&P Global 2018 Annual Report 5
In our case, China represents an excellent example of planning for the future with
a global focus, despite ongoing U.S.-China trade tensions today.
China is the third-largest bond market in the world, with an estimated $11 trillion
in outstanding corporate debt. The market is expected to grow as more corporate
financing shifts from loans and global investors look to enter China. As it does,
we’ll be there to support the move to a more liquid, sophisticated capital market.
Paving the way is the Chinese government’s recent decision to remove foreign
ownership restrictions on credit rating agencies as a way of attracting more
global investment.
In response, we’ve prepared to enter the domestic market by establishing our own
local credit ratings business to complement S&P Global Ratings’ longstanding
presence in China, which rates bonds issued offshore by Chinese entities. Earlier
this year, the Chinese government formally notified us that we are permitted
to operate a Credit Ratings Agency (CRA) in the domestic bond markets. This
approval marks the first time that a company wholly owned by an international
CRA has been able to rate domestic Chinese bonds. Investors should think of this
as a start-up operation. As the market matures, our domestic ratings agency will
too, and that is a very attractive prospect.
We have other promising plans to bring more transparency and insights to Chinese
capital markets.
S&P Global Market Intelligence has been testing new processes to develop a
sentiment analysis that provides financial risk indicators of Chinese companies.
Our teams are analyzing public disclosures to search for potential signals of
financial risk for public and private Chinese companies. This information is
valuable to commercial banks and non-financial corporates for counterparty risk
and supply chain analysis. We have filed a patent for the unique approach we took
to fuse the techniques needed to tap a previously unused, unstructured data set,
and expect to bring this solution to market later this year.
Across every corner of our company
we’re working on building a modern,
digital, integrated platform and
upgrading the user experience.
6 S&P Global 2018 Annual Report
2. Customer Orientation
Over the last few years, we’ve brought even more focus to how we serve customers
across capital and commodities markets. That work continues.
Demonstrating the importance of this endeavor, I hosted our first Commercial
Leadership Conference. We brought together leaders from sales, marketing and
other key functions across our divisions to discuss ways to enhance the value of
our content, improve product delivery and make every customer touch point a
high-quality one.
In that spirit, last year, we formed an Editorial Council to identify opportunities for
collaboration, standardization and efficiency across our news, editorial, research
and publishing operations. This cross-divisional effort will foster stronger internal
teamwork, innovation, deeper market insights and accelerate our ability to deliver
greater value to our customers.
As financial markets become more sophisticated, so do the demands of our
users. It’s, therefore, important that we continue to build relationships with both
our existing clients as well as new ones. Market outreach and demonstrating
leadership are essential. For example, I had the privilege of being in Tokyo last
year for S&P Dow Jones Indices’ 10th Annual Japan Exchange Traded Fund (ETF)
Conference. This is the largest ETF conference in Asia and the second largest
in the world. A decade ago we started this event with just a handful of market
participants. Today we have 29 partners and attendance keeps growing, increasing
to nearly 900 last year, underscoring the power of building enduring customer
relationships, the popularity of indexing and the role we play in Asian markets.
S&P Global Ratings is demonstrating a customer-oriented approach by
introducing a great deal of additional transparency to rated issuers by providing
a more robust view of corporate, insurance and financial institution risk through
Ratings360, a powerful digital solution, on the new S&P Global platform.
Across every corner of our company we’re working on building a modern, digital,
integrated platform and upgrading the user experience.
3. Technology
New and emerging technologies are allowing our employees to get creative in the
ways we serve customers.
To support this priority we have more than doubled the amount of technology
investment devoted to “Change the Business” initiatives and we’ve acquired or
organically grown capabilities to do things much differently than we have before.
In 2018, we acquired Panjiva and Kensho, welcoming an amazing group of talented
data science, artificial intelligence and machine learning experts.
The artificial intelligence and technology professionals of Kensho are supporting
projects in all of our divisions, including help with predictive distress models at
S&P Global Ratings and working with S&P Global Platts to apply AI and machine
learning techniques to the collection and examination of market data used in our
price assessments. We’ve only really explored the tip of the iceberg in terms of
realizing the full potential of Kensho-led innovation and productivity.
S&P Global 2018 Annual Report 7
Enhancing the search capabilities of our products offers enormous promise. We
take online search for granted in our everyday personal lives. It’s so effortless to
find what you want amid the vastness of the Internet. But on financial business
platforms everywhere, it’s not so easy.
S&P Global has so much deep, rich data. Yet currently our customers can only
uncover a small portion of it all, in part, because of the limitations of the search
bar. We’re changing this steadily, bit by bit. For instance, last year we released the
initial beta version of a Kensho-driven search capability on the Market Intelligence
platform to improve keyword and topic search to generate responses that
are more relevant.
Technology is serving as a value-creator across S&P Global. We added capabilities
to help customers discover and visualize complex relationships, and last year, S&P
Global Platts developed a blockchain application, the first for us. Our blockchain
network allows market participants to submit weekly inventory oil storage data to
the Fujairah Oil Industry Zone—the host of the Middle East’s largest commercial
storage capacity for refined oil products—and the local regulator. This represents
a significant upgrade to the speed and security of what had been manual, email
driven processes, and it is the foundation for more frictionless commodities
trading and financing in the future.
In addition to those projects, we are investing in innovative technology platforms
across our ecosystem both directly and through partnerships with outside venture
funds. Through San Francisco-based GreenVisor Capital and Singapore-based
Arbor Ventures, we are gaining access to a wide range of emerging businesses and
striking partnerships that address customer needs with new technologies and
business models.
4. Innovation
We clearly recognize the need for innovative approaches to sharpen our
competitive edge.
To that end, we established a rapid innovation group to help us identify
breakthrough projects in which we should invest time and resources. This program
employs an internal venture capital model, funding ideas that align with emerging
technology and disruptive, new opportunities. Because of this program, S&P
Global Platts is planning to introduce the next generation of real-time analytics,
leveraging machine learning, AI and alternative data sources, to help inform
commodity-trading decisions.
Technology is obviously enabling innovation at S&P Global. However, there are
other drivers. Consider, for example, our expanding portfolio of products and
services catering to the growing needs of companies and investors interested in
environmental, social and governance (ESG) data, benchmarks and analytics.
Investors, such as sovereign wealth and pension funds, and companies, especially
in Northern Europe and Asia but also increasingly in North America, are seeking
out new ways to measure and glean insights about ESG risk factors.
We’ve responded by developing new product offerings. For example, we unveiled
an evaluation tool last year to enable companies and investors to align their ESG
strategies with the United Nations’ Sustainable Development Goals.
8 S&P Global 2018 Annual Report
I’m also very pleased the Government Pension Investment Fund for Japan, the
world’s largest pension fund, selected two of our new carbon-efficient indices as
the benchmarks for its ESG investment strategy. Now there is approximately $10
billion in assets directly indexed to these two indices.
Climate change poses considerable risk to the private sector globally. In addition
to the solutions that help our clients mitigate the challenges presented by climate
change, S&P Global has formally expressed support for the Taskforce for Climate-
Related Financial Disclosures’ recommendations. We conducted a comprehensive
climate scenario analysis across our businesses in 2018 and we will be publishing
a report on our findings in 2019.
5. Operational Excellence
High-quality operations are essential to our ability to Power the Markets
of the Future.
Data, technology, risk and compliance all come together to form the backbone
necessary to operate effectively, reliably and consistently.
How do we do that? Bringing an Agile framework, leveraging Lean methodologies
and employing automation are a few ways, always anchored by the tone at the top.
Our Agile framework breaks down silos, decentralizes decision making and
ensures a constant customer focus. We now have 300 Agile, or scrum, teams
working across the company.
Automation is another. We are finding many places where we can hand off
logic-based, repetitive work to robots. This is freeing up our people to do more
critical thinking and higher-value tasks. Bots will not replace our people; they are
enhancing our productivity by giving our employees more time to do interesting
and rewarding projects.
The combination of technology, especially data science, and the Market
Intelligence business’ long-time strength in operational excellence is creating an
exciting new opportunity to improve productivity.
The S&P Global Market Intelligence team is using machine learning models to
analyze the massive number of documents they ingest each year. These models
assess the relevance of the documents and determine which ones should be
sent to specific teams so the data they contain can be used in our insights. This
approach has reduced the number of documents handled by our analysts by
more than a half a million annually. This is a big step forward in our quest for
operational excellence.
All of these efforts, plus improvements in our real estate footprint and other areas,
are helping us achieve the productivity savings programs we announced last year.
We expect these programs to generate approximately $100 million of run-rate cost
savings over three years.
Last but certainly not least, operational excellence means we are moving
ahead with our ongoing commitment to our robust risk, internal control and
compliance culture.
S&P Global 2018 Annual Report 9
6. People
I am so proud of the people of this company. Our people are the foundation of
everything we do and every day they exemplify our core values of relevance,
integrity and excellence.
To help us create a stronger workplace culture, we hired Dimitra Manis in 2018
as our Chief People Officer. Dimitra is a fantastic addition to our Operating
Committee, and under her leadership, we are demonstrating what it means to put
our people first.
For example, we’re fostering a culture that embraces the Agile and Lean mindsets
I mentioned earlier, which will increase collaboration and the speed of our work.
You see our progress in other areas: we are making diversity and inclusion an
even higher priority; we recently introduced progressive benefits; and to support
our communities, we have expanded the number of days our people can use to
volunteer their time.
Additionally, we’re focused on making sure we recruit and develop people with
the technology skills we need to succeed. Throughout the year we all participated
in a program called EssentialTECH and we have now launched a Data Science
Academy. This strategic initiative provides a multidisciplinary blend of data
inference, algorithm development, and technology education to those employees
who want advanced, hands-on training, with the understanding that data science
is critical to helping us solve analytically complex problems.
WOMEN, WORK AND WEALTH
It’s not just our own people we’re supporting.
Through our data, insights, philanthropic
efforts and volunteerism, we’re taking steps
to expand economic opportunities for the
underserved and support advancement for
women everywhere.
Join us in
elevating
awareness
around the
benefits
of greater
workplace
inclusivity.
Earlier this year, we began a campaign called
#ChangePays to elevate the conversation
globally about the important role women play
in the workforce and economies. According
to our research, if the U.S. increases the
number of women in the American labor
force and thereby accelerates U.S. GDP, doing
so will add $5.87 trillion to global market
capitalization in 10 years. As we move ahead,
I invite our employees, investors, clients, and global business leaders to join us in
elevating awareness around the benefits of greater workplace inclusivity.
To advance this agenda, we also are leveraging the S&P Global Foundation
to distribute grants to nonprofit partners committed to help women thrive in
today’s economy.
10 S&P Global 2018 Annual Report
We’re more strongly positioned
than ever to provide the essential
intelligence our customers need to
make decisions with conviction.
POWERING THE MARKETS OF THE FUTURE
You can see the many ways we are shaping our future by the multitude of
examples of our employees working together, across every part of our company.
I want to close by acknowledging Mike Chinn, who led our Market Intelligence
franchise and was responsible for data and technology innovation. Mike
announced he is leaving the company early in 2019. I thank Mike for the
outstanding job he did integrating SNL and setting the strategic direction
of the business.
We’re fortunate to have a deep bench of leaders who can step in and make
immediate contributions. We’re very pleased that Martina Cheung, who was
leading our Risk Services business, has succeeded Mike running Market
Intelligence and that Nick Cafferillo is now our Chief Data and Technology Officer.
I can’t imagine a better time to be at S&P Global. As I look ahead and across
the globe, we’re more strongly positioned than ever to provide the essential
intelligence our customers need to make decisions with conviction. I’m confident
that we’ll deliver for them and all of our stakeholders.
Thank you for your support that enables us to Power the Markets of the Future.
Sincerely,
Douglas L. Peterson
President and Chief Executive Officer
S&P Global 2018 Annual Report 11
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 11) 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 management views our
businesses. The Company believes these non-GAAP financial measures provide useful supplemental information 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.
12 S&P Global 2018 Annual Report
Adjusted Net Income attributable to SPGI and Adjusted Diluted EPS
Adjusted Net Income attributable to SPGI and Adjusted Diluted EPS
(unaudited)
2018
2017
% Change
Net Income
attributable
to SPGI
Diluted
EPS
Net Income
attributable
to SPGI
Diluted
EPS
Net Income
attributable
to SPGI
Diluted
EPS
Twelve Months
As Reported
Non-GAAP Adjustments (a) (b) (c) (d) (e) (f)
Deal-Related Amortization
$1,958
102
92
$7.73
0.40
0.36
$1,496
224
64
$5.78
0.87
0.25
31%
34%
Adjusted
$ 2,152
$8.50
$1,784
$6.89
21%
23%
Note - Totals presented may not sum due to rounding.
(a) 2018 includes legal settlement expenses of $74 million ($56 million after-tax) and employee severance charges of $8 million ($6 million after-tax). 2017 includes
legal settlement expenses of $55 million ($34 million after-tax) and employee severance charges of $25 million ($17 million after-tax).
(b) 2018 includes restructuring charges related to a business disposition and employee severance charges of $7 million ($5 million after-tax). 2017 includes employee
severance charges of $7 million ($5 million after-tax) and a non-cash disposition-related adjustment of $4 million ($4 million after-tax).
(c) 2017 includes a non-cash acquisition-related adjustment of $11 million ($3 million after-tax), a charge to exit a leased facility of $6 million ($3 million after-tax), an
asset write-off of $2 million ($1 million after-tax) and employee severance charges of $2 million ($2 million after-tax).
(d) 2018 includes Kensho retention related expense of $31 million ($24 million after-tax), lease impairments of $11 million ($8 million after-tax) and employee
severance charges of $10 million ($7 million after-tax). 2017 includes a charge to exit lease facilities of $19 million ($16 million after-tax) and employee severance
charges of $10 million ($6 million after-tax).
(e) 2018 includes a pension related charge of $5 million ($4 million after-tax). 2017 includes a pension related charge of $8 million ($7 million after-tax).
(f) 2018 includes an adjustment to the provisional tax charge recorded in the fourth quarter of 2017 of $8 million. 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.
Computation of Free Cash Flow and Free Cash Flow Excluding Certain Items
(unaudited)
Twelve Months
Cash provided by operating activities
Capital expenditures
Distributions to noncontrolling interest holders
Free cash flow
Tax on gain from sale of SPSE and CMA
Payment of legal settlements
Settlement of prior-year tax audits
Tax benefit from legal settlements
2018
$2,064
(113)
(154)
$1,797
–
180
73
(44)
Free cash flow excluding above items
$2,006
S&P Global 2018 Annual Report 13
16
44
45
46
47
48
49
93
94
95
97
98
99
14 S&P Global 2018 Annual Report
2018
Financial
Highlights
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”)
provides a narrative of the results of operations and financial
condition of S&P Global Inc. (together with its consolidated
subsidiaries, the “Company,” “we,” “us” or “our”) for the years
ended December 31, 2018 and 2017, respectively. The MD&A
should be read in conjunction with the consolidated financial
statements and accompanying notes included in our Annual
Report on Form 10-K for the year ended December 31, 2018,
which have been prepared in accordance with accounting
principles generally accepted in the U.S. (“U.S. GAAP”).
The MD&A includes the following sections:
• Overview
• Results of Operations
• Liquidity and Capital Resources
• Reconciliation of Non-GAAP Financial Information
• Critical Accounting Estimates
• Recent Accounting Standards
Certain of the statements below are forward-looking statements
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 42 of this report.
Overview
We are a leading provider of transparent and independent
ratings, benchmarks, analytics and data to the capital and
commodity markets worldwide. The capital markets include
asset managers, investment banks, commercial banks,
insurance companies, exchanges, trading firms and issuers;
and the commodity markets include producers, traders
and intermediaries within energy, petrochemicals, metals
and agriculture.
Our operations consist of four reportable segments: S&P Global
Ratings (“Ratings”), S&P Global Market Intelligence (“Market
Intelligence”), S&P Global Platts (“Platts”) and S&P Dow Jones
Indices (“Indices”).
• Ratings is an independent provider of credit ratings, research
and analytics, offering investors and other market participants
information, ratings and benchmarks.
• Market Intelligence is a global provider of multi-asset-class
data, research and analytical capabilities, which integrate
cross-asset analytics and desktop services.
• Platts is the leading independent provider of information and
benchmark prices for the commodity and energy markets. We
completed the sale of J.D. Power on September 7, 2016, with
the results included in Platts results through that date.
• Indices is a global index provider maintaining a wide variety
of valuation and index benchmarks for investment advisors,
wealth managers and institutional investors.
Effective beginning with the first quarter of 2018, we began
reporting the financial results of Market Intelligence and Platts
as separate reportable segments consistent with the changes to
our organizational structure and how our Chief Executive Officer
evaluates the performance of these segments. Our historical
segment reporting has been retroactively revised to reflect the
current organizational structure.
Major Portfolio Changes
The following significant changes were made to our portfolio
during the three years ended December 31, 2018:
2018
• In April of 2018, we acquired Kensho Technologies Inc.
(“Kensho”) for approximately $550 million, net of cash
acquired, in a mix of cash and stock. Kensho is a leading-edge
provider of next-generation analytics, artificial intelligence,
machine learning, and data visualization systems to Wall
Street’s premier global banks and investment institutions,
as well as the National Security community. The results of
Kensho, an operating segment of the Company, are included
in Corporate revenue and Corporate Unallocated for financial
reporting purposes.
2016
Market 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.
Platts
• 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
of income related to the sale of J.D. Power.
16 S&P Global 2018 Annual Report
• In September of 2016, we acquired PIRA Energy Group (“PIRA”),
a global provider of energy research and forecasting products
and services. The purchase enhances Platts energy analytical
capabilities by expanding its oil offering and strengthening its
position in the natural gas and power markets.
• In June of 2016, we acquired RigData, a provider of daily
information on rig activity for the natural gas and oil markets
across North America. The purchase enhances Platts energy
analytical capabilities by strengthening its position in natural
gas and enhancing its oil offering.
Increased Shareholder Return
During the three years ended December 31, 2018, we have
returned approximately $5.1 billion to our shareholders
through a combination of share repurchases and our quarterly
dividends: we completed share repurchases of approximately
$3.8 billion and distributed regular quarterly dividends totaling
approximately $1.3 billion. Also, on January 30, 2019, the Board
of Directors approved an increase in the quarterly common stock
dividend from $0.50 per share to $0.57 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
2018
2017
2016
’18 vs ’17
’17 vs ’16
$6,258
$2,790
45%
$7.73
$6,063
$2,583
43%
$5.78
$5,661
$3,341
59%
$7.94
3%
8%
34%
7%
(23)%
(27)%
1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented.
2 2018 includes legal settlement expenses of $74 million, Kensho retention related expense of $31 million, restructuring charges related to a business disposition
and employee severance charges of $25 million and lease impairments of $11 million. 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 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 million, 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. 2018, 2017 and 2016 also includes amortization of intangibles from acquisitions of $122 million, $98 million, and
$96 million, respectively.
S&P Global 2018 Annual Report 17
2018
Revenue increased 3% with a 1 percentage point favorable
impact from foreign exchange rates. Revenue growth was
driven by increases at Market Intelligence, Indices and Platts,
partially offset by a decrease at Ratings. The increase at Market
Intelligence was driven by annualized contract value growth
in the Market Intelligence Desktop and Global Risk Services
products. Revenue growth at Indices was driven by higher levels
of assets under management for exchange traded funds (“ETFs”)
and mutual funds, and higher exchange-traded derivative
volumes. The increase at Platts was due to continued demand
for market data and price assessment products. These increases
were partially offset by a decrease at Ratings driven by lower
corporate bond ratings revenue.
Operating profit increased 8% with a 2 percentage point
favorable impact from foreign exchange rates. Excluding the
unfavorable impact of higher legal settlement expenses in
2018 of less than 1 percentage point, Kensho retention related
expense in 2018 of less than 1 percentage point, and higher
deal-related amortization in 2018 of less than 1 percentage
point, partially offset by the favorable impact of higher employee
severance charges in 2017 of less than1 percentage point, the
favorable impact of non-cash acquisition and disposition-related
adjustments in 2017 of less than 1 percentage point, operating
profit increased 8%. The increase was primarily due to revenue
growth at Market Intelligence, Indices and Platts and decreased
compensation costs at Ratings and Corporate primarily driven
by reduced incentive costs as well as the decreased headcount
from attrition and prior year restructuring actions. These
increases were partially offset by a decrease in revenue at
Ratings, increased expenses at Market Intelligence due to an
increase in cost of sales as a result of royalties tied to annualized
contract value growth and increased data costs, and higher
compensation costs at Market Intelligence and Indices primarily
driven by additional headcount.
2017
Revenue increased 7% and was unfavorably impacted by 6
percentage points from the net impact of acquisitions and
dispositions. Revenue growth was driven by increases at Ratings,
Indices and Market Intelligence, partially offset by a decrease
at Platts. The increase at Ratings was primarily due to growth in
bank loan ratings revenue and corporate bond ratings revenue.
Revenue growth at Indices was primarily due to higher levels
of assets under management for ETFs and mutual funds.
The increase at Market Intelligence was driven by annualized
contract value growth in the Market Intelligence Desktop and
Global Risk Services products, partially offset by the unfavorable
impact of the disposition of non-core businesses in 2016.
The decrease at Platts was driven by the unfavorable impact
of the disposition of J.D. Power in 2016, partially offset by an
increase due to continued demand for market data and price
assessment products.
Operating profit decreased 23%. Excluding the unfavorable
impact of the gain on dispositions in 2016 of 38 percentage
18 S&P Global 2018 Annual Report
points, higher net legal settlement expenses in 2017 of 2
percentage points, higher employee severance charges in 2017
of 1 percentage point, a charge to exit leased facilities of 1
percentage point and non-cash acquisition and disposition-
related adjustments in 2017 of 1 percentage point, partially
offset by the favorable impact of a technology-related
impairment charge in 2016 of 1 percentage point and higher
disposition-related costs in 2016 of 1 percentage point,
operating profit increased 17%. This increase was primarily due
to revenue growth at Ratings, Indices and Market Intelligence as
discussed above, partially offset by higher compensation costs
due to increased incentive costs and additional headcount.
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.
We seek to deliver an exceptional, differentiated customer
experience across the globe. We strive for operational excellence,
continuous innovation, and a high performance culture driven by
our best-in-class talent. In 2019, we will strive to deliver on our
strategic priorities in the following four categories by:
Finance
• Delivering revenue growth and EBITA margin targets and
delivering on commitments to return capital to shareholders
and create capacity to invest;
• Investing for mid- to long-term revenue growth that meets or
exceeds market growth rates; and
• Pursuing a disciplined acquisition, investment and
partnership strategy.
Customer
• Strengthening and growing the core businesses;
• Delivering a modern, digital, integrated platform and user
experience that enhances customer value, accompanied by
thoughtful user migration plans;
• Expanding our presence in China to capture
market opportunities;
• Building and promoting new products to solve customer pain
points and deliver new commercial propositions in ESG, data
marketplace, and small and medium-sized enterprises; and
• Enhancing teamwork and adopting commercial tools and
processes to improve the clarity and quality of insights we
gather from customers, and improve revenue capture.
Operations
• Transforming technology infrastructure to support growth,
improve cost efficiency and mitigate cyber risk;
• Adopting core management systems, tools and processes
across the Company to improve prioritization and agility,
drive execution, and reduce complexity;
• Developing an enterprise-wide data strategy and execution
plan, leveraging machine learning and data science; and
• Further enhancing our commitment to our robust risk, internal
control and compliance culture.
People
• Creating an inclusive performance-driven culture that drives
employee engagement;
• Promoting internal mobility and attracting and retaining the
best people; and
• Improving diversity in overall representation through talent
acquisition and retention.
There can be no assurance that we will achieve success in
implementing any one or more of these strategies as a variety
of factors could unfavorably impact operating results, including
prolonged difficulties in the global credit markets and a change
in the regulatory environment affecting our businesses. See Item
1a, Risk Factors, in our Annual Report on Form 10-K.
Further projections and discussion on our 2019 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
Other income, net
Interest expense, net
Provision for taxes on income
Net income
Less: net income attributable to
noncontrolling interests
Year ended December 31,
% Change
2018
$6,258
2017
$6,063
1,701
1,561
206
3,468
–
2,790
(25)
134
560
2,121
(163)
1,695
1,605
180
3,480
–
2,583
(27)
149
823
1,638
(142)
2016
$5,661
1,773
1,467
181
3,421
(1,101)
3,341
(28)
181
960
2,228
(122)
’18 vs ’17
’17 vs ’16
3%
–%
(3)%
14%
–%
N/M
8%
8%
(10)%
(32)%
(30)%
15%
31%
7%
(4)%
9%
(1)%
2%
N/M
(23)%
5%
(18)%
(14)%
(27)%
16%
(29)%
Net income attributable to S&P Global Inc.
$1,958
$1,496
$2,106
N/M - not meaningful
S&P Global 2018 Annual Report 19
Revenue
(in millions)
Subscription revenue
Non-subscription / transaction revenue
Non-transaction revenue
Asset-linked fees
Sales usage-based royalties
% of total revenue:
Subscription revenue
Non-subscription / transaction revenue
Non-transaction revenue
Asset-linked fees
Sales usage-based royalties
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
2018
$2,682
1,428
1,381
542
225
43%
23%
22%
9%
3%
2017
$2,454
1,599
1,338
484
188
41%
26%
22%
8%
3%
2016
$2,364
1,460
1,259
400
178
42%
26%
22%
7%
3%
$3,750
$3,658
$3,461
1,543
647
318
$2,508
60%
40%
1,473
594
338
$2,405
60%
40%
1,330
575
295
$2,200
61%
39%
’18 vs ’17
’17 vs ’16
9%
(11)%
3%
12%
19%
3%
5%
9%
(6)%
4%
4%
9%
6%
21%
6%
6%
11%
3%
14%
9%
2018 Revenue by Type
2018 Revenue by Geographic Area
Asset-linked fees
9%
Sales usage-based royalties
3%
Rest of the World
5%
Asia
10%
Non-subscription /
Transaction
23%
Subscription
43%
European
Region
25%
U.S.
60%
Non-transaction
22%
20 S&P Global 2018 Annual Report
Year ended December 31,
% Change
’18 vs ’17
’17 vs ’16
(in millions)
Subscription revenue
Non-subscription / transaction revenue
Non-transaction revenue
Asset-linked fees
Sales usage-based royalties
% of total revenue:
Subscription revenue
Non-subscription / transaction revenue
Non-transaction revenue
Asset-linked fees
Sales usage-based royalties
U.S. revenue
International revenue:
European region
Asia
Rest of the world
Total international revenue
% of total revenue:
U.S. revenue
International revenue
2018
$2,682
1,428
1,381
542
225
43%
23%
22%
9%
3%
1,543
647
318
$2,508
60%
40%
2017
$2,454
1,599
1,338
484
188
41%
26%
22%
8%
3%
1,473
594
338
$2,405
60%
40%
2016
$2,364
1,460
1,259
400
178
42%
26%
22%
7%
3%
1,330
575
295
$2,200
61%
39%
$3,750
$3,658
$3,461
9%
(11)%
3%
12%
19%
3%
5%
9%
(6)%
4%
4%
9%
6%
21%
6%
6%
11%
3%
14%
9%
2018
Revenue increased 3% as compared to 2017. Subscription
revenue increased primarily from growth in Market Intelligence’s
average contract values and continued demand for Platts’
proprietary content. Non-transaction revenue grew at Ratings
primarily due to an increase in surveillance fees, higher entity
credit ratings revenue and an increase in royalty revenue.
Non-subscription / transaction revenue decreased as a decline
in corporate bond ratings revenue was partially offset by an
increase in structured finance revenue and bank loan ratings
revenue at Ratings. Asset-linked fees increased primarily due
to the impact of higher levels of assets under management for
ETFs and mutual funds at Indices. Sales usage-based royalties
increased primarily driven by higher volumes for exchange-
traded derivatives at Indices. See “Segment Review” below for
further information.
Foreign exchange rates had a one percentage point favorable
impact on revenue. This impact refers to constant currency
comparisons estimated by recalculating current year results
of foreign operations using the average exchange rate from
the prior year.
2017
Revenue increased 7% as compared to 2016. Subscription
revenue increased primarily from growth in Market Intelligence’s
average contract values and continued demand for Platts’
proprietary content, partially offset by the unfavorable
impact of the disposition of non-core businesses in 2016.
Non-transaction revenue grew at Ratings primarily due to an
increase in surveillance fees. Non-subscription / transaction
revenue increased primarily due to an increase in bank loan
ratings revenue and corporate bond ratings revenue at Ratings,
partially offset by the unfavorable impact of the disposition of
non-core businesses in 2016. Asset-linked fees increased due
to the impact of higher levels of assets under management
for ETFs and mutual funds. See “Segment Review” below for
further information.
Foreign exchange rates had a negligible impact on revenue. This
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, 2018 and 2017:
(in millions)
2018
2017
% Change
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
$813
663
226
101
(125)
1,678
23
$509
525
181
162
–
1,377
184
$864
624
222
95
(110)
1,695
–
$574
497
203
145
–
1,419
186
$1,701
$1,561
$1,695
$1,605
(6)%
6%
2%
6%
(14)%
(1)%
N/M
–%
(11)%
6%
(11)%
11%
N/M
(3)%
(1)%
(3)%
Ratings 1
Market Intelligence 2
Platts 3
Indices
Intersegment eliminations 4
Total segments
Corporate
Unallocated expense 5
N/M - not meaningful
1 In 2018, selling and general expenses include legal settlement expenses of $74 million and employee severance charges of $8 million. In 2017, selling and general
expenses include legal settlement expenses of $55 million and employee severance charges of $25 million.
2 In 2018, selling and general expenses include restructuring charges related to a business disposition and employee severance charges of $7 million. In 2017, selling
and general expenses include employee severance charges of $7 million and a non-cash disposition-related adjustment of $4 million.
3 In 2017, selling and general expenses include a non-cash acquisition-related adjustment of $11 million, a charge to exit a leased facility of $6 million, an asset write-
off of $2 million and employee severance charges of $2 million.
4 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
5 In 2018, selling and general expenses include Kensho retention related expense of $31 million, lease impairments of $11 million and employee severance charges of
$10 million. In 2017, selling and general expenses include a charge to exit leased facilities of $19 million and employee severance charges of $10 million.
S&P Global 2018 Annual Report 21
Operating-Related Expenses
Operating-related expenses remained relatively unchanged as
compared to 2017, increasing $6 million or less than 1%. Market
Intelligence increased due to an increase in cost of sales as a
result of royalties tied to annualized contract value growth and
increased data costs, and higher compensation costs related to
additional headcount. Additionally, operating-related expenses
increased due to the acquisition of Kensho in April of 2018. These
increases were partially offset by decreased compensation
costs at Ratings primarily driven by reduced incentive costs as
well as the decreased headcount from attrition and prior year
restructuring actions.
Selling and General Expenses
Selling and general expenses decreased 3%. Excluding the
favorable impact of higher employee severance charges in 2017
of 59 percentage points, non-cash acquisition and disposition-
related adjustments in 2017 of 48 percentage points, higher
lease impairment charges in 2017 of 43 percentage points and
an asset write-off in 2017 of 7 percentage points, partially offset
by the unfavorable impact of Kensho retention related expense
in 2018 of 98 percentage points and higher legal settlement
expenses in 2018 of 59 percentage points, selling and general
expenses decreased 3%. The decrease is due to decreased
compensation costs at Ratings primarily driven by reduced
incentive costs, as well as the decreased headcount from
attrition and prior year restructuring actions, and a reduction
in Corporate Unallocated expense due to a reduction in vacant
space, technology spend and professional fees. These decreases
were partially offset by higher compensation costs at Market
Intelligence and Indices, and increased expenses due to the
acquisition of Kensho in April of 2018.
Depreciation and Amortization
Depreciation and amortization increased $26 million, or 14%, compared to 2017 due to an increase in amortization expense primarily
related to the acquisition of Kensho in April of 2018.
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)
2017
2016
% Change
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
$864
624
222
95
(110)
1,695
–
$574
497
203
145
–
1,419
186
$797
667
292
115
(98)
1,773
–
$447
532
246
103
–
1,328
139
$1,695
$1,605
$1,773
$1,467
8%
(7)%
(24)%
(17)%
(12)%
(4)%
N/M
(4)%
28%
(7)%
(17)%
41%
N/M
7%
34%
9%
Ratings 1
Market Intelligence 2
Platts 3
Indices
Intersegment eliminations 4
Total segments
Corporate
Unallocated expense 5
N/M - not meaningful
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 employee severance charges of $7 million and a non-cash disposition-related adjustment of $4 million. 2016 includes
disposition-related costs of $43 million, a technology-related impairment charge of $24 million and an acquisition-related cost of $1 million.
3 In 2017, selling and general expenses include a non-cash acquisition-related adjustment of $11 million, a charge to exit a leased facility of $6 million, an asset write-
off of $2 million and employee severance charges of $2 million. In 2016, selling and general expenses include disposition-related costs of $5 million.
4 Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
5 In 2017, selling and general expenses include a charge to exit leased facilities of $19 million and employee severance charges of $10 million. In 2016, selling and
general expenses include $3 million from a disposition-related reserve release.
22 S&P Global 2018 Annual Report
(in millions)
2017
2016
% Change
Ratings 1
Market Intelligence 2
Platts 3
Indices
Intersegment eliminations 4
Total segments
Corporate
Unallocated expense 5
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
Operating-
related
expenses
Selling and
general
expenses
$864
624
222
95
(110)
1,695
–
$574
497
203
145
–
1,419
186
$797
667
292
115
(98)
1,773
–
$447
532
246
103
–
1,328
139
$1,695
$1,605
$1,773
$1,467
8%
(7)%
(24)%
(17)%
(12)%
(4)%
N/M
(4)%
28%
(7)%
(17)%
41%
N/M
7%
34%
9%
Operating-Related Expenses
Operating-related expenses decreased $78 million, or 4%, as
compared to 2016. The decrease was due to the disposition of
non-core businesses at Market Intelligence and Platts in 2016.
This decrease was partially offset by an increase at Ratings due
to higher compensation costs related to increased incentive
costs and additional headcount.
Selling and General Expenses
Selling and general expenses increased 9%. Excluding the
unfavorable impact of higher net legal settlement expenses in
2017 of 4 percentage points, higher employee severance charges
in 2017 of 2 percentage points, a charge to exit leased facilities
in 2017 of 2 percentage points and non-cash acquisition and
disposition related costs in 2017 of 1 percentage point, partially
offset by the favorable impact of higher disposition-related
costs in 2016 of 3 percentage points and a technology-related
impairment charge in 2016 of 2 percentage points, selling
and general expenses increased 5%. The increase is due to
higher compensation costs related to incentives and additional
headcount at Ratings and Indices and an increase at Corporate
primarily due to performance related incentive compensation
and Company-wide technology projects. This increase was
partially offset by a decrease at Platts as a result of the sale of
J.D. Power in 2016.
Depreciation and Amortization
Depreciation and amortization remained relatively unchanged as
compared to 2016, decreasing $1 million or 1%.
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 operator
of global exchanges, clearing houses and data services. We
recorded a pre-tax gain of $364 million in gain on dispositions
in the consolidated statement of income related to the sale of
SPSE and CMA. Additionally, in October of 2016, we completed
the sale of Equity and Fund Research (“Equity Research”) to
CFRA, a leading independent provider of forensic accounting
research, analytics and advisory services. During the year
ended December 31, 2016, we recorded a pre-tax gain of $9
million in gain on dispositions 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 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 statement of
income related to the sale of J.D. Power.
S&P Global 2018 Annual Report 23
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
segment’s contribution to operating profit. Segment operating profit is defined as operating profit before Corporate Unallocated.
Segment operating profit is not, however, a measure of financial performance under U.S. GAAP, and may not be defined and calculated
by other companies in the same manner.
The table below reconciles segment operating profit to total operating profit:
(in millions)
Ratings 1
Market Intelligence 2
Platts 3
Indices 4
Total segment operating profit
Corporate Unallocated 5
Total operating profit
Year ended December 31,
% Change
2018
$1,530
545
383
563
3,021
(231)
$2,790
2017
$1,517
457
326
478
2,778
(195)
$2,583
2016
$1,256
729
1,090
413
3,488
(147)
$3,341
’18 vs ’17
’17 vs ’16
1%
19%
18%
18%
9%
(19)%
8%
21%
(37)%
(70)%
16%
(20)%
(33)%
(23)%
1 2018 includes legal settlement expenses of $74 million and employee severance charges of $8 million. 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. 2018, 2017 and 2016 also includes amortization of intangibles from acquisitions of $2 million, $4 million and $5 million, respectively.
2 2018 includes restructuring charges related to a business disposition and employee severance charges of $7 million. 2017 includes employee severance charges of $7
million and a non-cash disposition-related adjustment of $4 million. 2016 includes a $373 million gain from our dispositions, disposition-related costs of $43 million,
a technology-related impairment charge of $24 million and an acquisition-related cost of $1 million. 2018, 2017 and 2016 includes amortization of intangibles from
acquisitions of $73 million, $71 million and $72 million, respectively.
3 2017 includes a non-cash acquisition-related adjustment of $11 million, a charge to exit a leased facility of $6 million, an asset write-off of $2 million and employee
severance charges of $2 million. 2016 includes a $728 million gain from our disposition of J.D. Power and disposition-related costs of $5 million. 2018, 2017 and 2016
includes amortization of intangibles from acquisitions of $18 million, $18 million and $14 million, respectively.
4 2018, 2017 and 2016 includes amortization of intangibles from acquisitions of $6 million.
5 2018 includes Kensho retention related expense of $31 million, lease impairments of $11 million and employee severance charges of $10 million. In 2017, selling and
general expenses include a charge to exit leased facilities of $19 million and employee severance charges of $10 million. In 2016, selling and general expenses include
$3 million from a disposition-related reserve release. 2018 also includes amortization of intangibles from acquisitions of $23 million.
2018
Segment Operating Profit
Increased $243 million, or 9% as compared to 2017. Excluding
the favorable impact of higher employee severance charges
in 2017 of 1 percentage point and non-cash acquisition and
disposition related adjustments of 1 percentage point, partially
offset by the unfavorable impact of higher legal settlement
charges in 2018 of 1 percentage point, segment operating
profit increased 7%. This increase was primarily due to revenue
growth at Market Intelligence, Indices and Platts as discussed
above and decreased compensation costs at Ratings primarily
driven by reduced incentive costs as well as the decreased
headcount from attrition and prior year restructuring actions.
These increases were partially offset by a decrease in revenue
at Ratings, increased expenses at Market Intelligence due to an
increase in cost of sales as a result of royalties tied to annualized
contract value growth and increased data costs, and higher
compensation costs at Market Intelligence and Indices primarily
driven by additional headcount. See “Segment Review” below for
further information.
Corporate Unallocated
Corporate Unallocated includes costs for corporate center
functions, select initiatives and unoccupied office space,
included in selling and general expenses, and the results
for Kensho. Corporate Unallocated operating loss increased
by $36 million or 19% as compared to 2017. Excluding the
unfavorable impact of Kensho retention related expense in
2018 of 17 percentage points, higher deal-related amortization
of 12 percentage points, partially offset by higher lease
impairment charges in 2017 of 4 percentage points, Corporate
Unallocated loss decreased 6% due to a reduction in vacant
space, performance related incentive compensation and
professional fees.
24 S&P Global 2018 Annual Report
(in millions)
Ratings 1
Platts 3
Indices 4
Market Intelligence 2
Total segment operating profit
Corporate Unallocated 5
Total operating profit
2018
$1,530
545
383
563
3,021
(231)
$2,790
2017
$1,517
457
326
478
2,778
(195)
$2,583
2016
$1,256
729
1,090
413
3,488
(147)
$3,341
’18 vs ’17
’17 vs ’16
1%
19%
18%
18%
9%
(19)%
8%
21%
(37)%
(70)%
16%
(20)%
(33)%
(23)%
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 remeasurement
of monetary assets and liabilities. Constant currency impacts
are estimated by recalculating current year results of foreign
operations using the average exchange rate from the prior year.
Remeasurement impacts are based on the variance between
current-year and prior-year foreign exchange rate fluctuations
on monetary assets and liabilities denominated in currencies
other than the individual business’ functional currency.
Interest Expense, Net
Net interest expense for 2018 decreased $16 million or 10% as
compared to 2017, driven by the release of reserves for accrued
interest related to the resolution of various tax audits in 2018.
Net interest expense for 2017 decreased $32 million or 18% as
compared to 2016, primarily as a result of the favorable impact 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.
Year ended December 31,
% Change
2017
Segment Operating Profit
Decreased $710 million, or 20% as compared to 2016. Excluding
the unfavorable impact of the gain on dispositions in 2016 of
36 percentage points, higher net legal settlement expenses in
2017 of 2 percentage points, higher employee severance charges
in 2017 of 1 percentage 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 2 percentage points and a technology-
related impairment charge in 2016 of 1 percentage point,
segment operating profit increased 17%. This increase was
primarily due to revenue growth at Ratings, Indices and Market
Intelligence as discussed above, partially offset by higher
compensation costs due to additional increased incentive costs
and additional headcount. See “Segment Review” below for
further information.
Corporate Unallocated
Corporate Unallocated includes costs for corporate center
functions, select initiatives and unoccupied office space,
included in selling and general expenses. Corporate Unallocated
operating loss increased by $48 million or 33% as compared to
2016. Excluding the unfavorable impact of a charge to exit leased
facilities in 2017 of 13 percentage points, employee severance
charges in 2017 of 7 percentage points and a disposition-related
reserve release in 2016 of 2 percentage points, Corporate
Unallocated operating loss increased 11%. This increase was
primarily due to performance related incentive compensation
and Company-wide technology projects.
Foreign exchange rates had a favorable impact on operating
profit of 1 percentage point. The foreign exchange rate impact
refers to constant currency comparisons and the remeasurement
of monetary assets and liabilities. Constant currency impacts
are estimated by recalculating current year results of foreign
operations using the average exchange rate from the prior year.
Remeasurement impacts are based on the variance between
current-year and prior-year foreign exchange rate fluctuations
on monetary assets and liabilities denominated in currencies
other than the individual business’ functional currency.
Other Income, Net
Other income, net for 2018, 2017 and 2016 was $25 million, $27
million and $28 million, respectively, and primarily includes the
net periodic benefit cost for our retirement and postretirement.
Provision for Income Taxes
Our effective tax rate was 20.9%, 33.4% and 30.1% for 2018,
2017 and 2016, respectively. The decrease in 2018 was primarily
due to the reduction of the U.S. federal corporate tax rate as a
result of the enactment of the Tax Cuts and Jobs Act (“TCJA”).
Additionally, a one-time net tax charge of $149 million due to
the TCJA was recorded in 2017, which included tax expense
of approximately $173 million on the deemed repatriation of
foreign earnings and a tax benefit of approximately $24 million in
respect of the re-valuation of the 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. This increase
related primarily to the IRS’s proposed disallowance of claimed
tax deductions for certain amounts paid in 2015 to settle
lawsuits by nineteen states and the District of Columbia. In April
2018, the Company and the IRS formally agreed to a settlement
for $14 million that had been fully reserved in prior periods.
S&P Global 2018 Annual Report 25
Segment Review
RATINGS
Ratings is an independent provider of credit ratings, research
and analytics to investors, issuers and other market participants.
Credit ratings are one of several tools investors can use when
making decisions about purchasing bonds and other fixed
income investments. They are opinions about credit risk and our
ratings express our opinion about the ability and willingness
of an issuer, such as a corporation or state or city government,
to meet its financial obligations in full and on time. Our credit
ratings can also relate to the credit quality of an individual debt
issue, such as a corporate or municipal bond, and the relative
likelihood that the issue may default.
Ratings differentiates its revenue between transaction and
non-transaction. Transaction revenue primarily includes fees
associated with:
• ratings related to new issuance of corporate and government
debt instruments, and structured finance debt instruments;
• bank loan ratings; and
• corporate credit estimates, which are intended, based on an
abbreviated analysis, to provide an indication of our opinion
regarding creditworthiness of a company which does not
currently have a Ratings credit rating.
Non-transaction revenue primarily includes fees for surveillance
of a credit rating, annual fees for customer relationship-based
pricing programs, fees for entity credit ratings and global
research and analytics. Non-transaction revenue also includes
an intersegment royalty charged to Market Intelligence for the
rights to use and distribute content and data developed by
Ratings. Royalty revenue was 2018, 2017 and 2016 was $109
million, $100 million and $92 million, respectively.
The following table provides revenue and segment operating profit information for the years ended December 31:
(in millions)
Revenue
Non-transaction revenue
Transaction revenue
% of total revenue:
Non-transaction revenue
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
2018
$2,883
$1,506
$1,377
52%
48%
$1,619
$1,264
56%
44%
$1,530
53%
2017
$2,988
$1,448
$1,540
48%
52%
$1,716
$1,272
57%
43%
$1,517
51%
2016
$2,535
$1,357
$1,178
54%
46%
$1,462
$1,073
58%
42%
$1,256
50%
’18 vs ’17
’17 vs ’16
(4)%
4%
(11)%
(6)%
(1)%
18%
7%
31%
17%
19%
1%
21%
1 2018 includes legal settlement expenses of $74 million and employee severance charges of $8 million. 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. 2018, 2017 and 2016 also includes amortization of intangibles from acquisitions of $2 million, $4 million and $5 million, respectively.
2018
Revenue decreased 4% due to a decline in transaction revenue,
partially offset by an increase in non-transaction revenue.
Transaction revenue decreased due to a decline in corporate
bond ratings revenue driven by lower corporate bond issuance in
the U.S. and Europe, partially offset by an increase in structured
finance revenue and bank loan ratings revenue. The increase in
structured finance transaction revenue was driven by increased
U.S. collateralized loan obligations (“CLO”) issuance in the
first half of the year. Non-transaction revenue grew due to an
increase in surveillance fees, higher entity credit ratings revenue,
an increase in royalty revenue, and an increase in Ratings
Evaluation Service activity. Transaction and non-transaction
revenue benefited from improved contract terms across
product categories.
Operating profit increased 1%, with a 3 percentage point
favorable impact from foreign exchange rates. Excluding the
unfavorable impact of higher legal settlement expenses in 2018
of 6 percentage points, partially offset by the favorable impact
of higher employee severance charges in 2017 of 5 percentage
points and higher amortization of intangibles from acquisitions
in 2017 of 1 percentage point, operating profit increased 1%. This
increase was primarily due to the favorable impact of foreign
26 S&P Global 2018 Annual Report
exchange rates and a decrease in compensation costs related to
lower incentive costs as well as the decreased headcount from
attrition and prior year restructuring actions, partially offset
by the decrease in revenue discussed above and an increase
in costs related to the development of a global center for
technology talent in India.
2017
Revenue increased 18%. Transaction revenue grew primarily due
to growth in bank loan ratings revenue in the U.S. and Europe
and an increase in corporate bond ratings revenue driven by an
increase in corporate bond issuance. The increase in bank loan
ratings revenue was driven by refinancing activity from the low
interest rate environment. The increase in structured finance
revenue driven by increased U.S. collateralized loan obligations
and U.S. commercial mortgage-backed securities issuance also
contributed to revenue growth. These increases were partially
offset by a decline in public finance 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 21%. Excluding the unfavorable
impact of higher net legal settlement expenses in 2017 of 5
percentage points and higher employee severance charges in
2017 of 1 percentage point, operating profit increased 27%.
This increase is primarily due to revenue growth, partially offset
by higher compensation costs related to increased incentive
costs and additional headcount. A reduction in legal fees
and professional service fees also had a favorable impact on
operating profit growth.
Market Issuance Volumes
We monitor market issuance volumes regularly within Ratings.
Market issuance volumes noted within the discussion that
follows are based on the domicile of the issuer. Issuance volumes
can be reported in two ways: by “domicile” which is based on
where an issuer is located or where the assets associated with
an issue are located, or based on “marketplace” which is where
the bonds are sold. The following tables depict changes in
market issuance levels as compared to the prior year, based on
a composite of Thomson Financial, Harrison Scott Publications
and Dealogic market issuance views.
2018 Compared to 2017
Corporate Bond Issuance *
High-yield issuance
Investment grade
Total new issue dollars —
Corporate issuance
U.S.
(43)%
(23)%
(26)%
Europe
Global
(34)%
4%
(2)%
(40)%
(5)%
(10)%
* Includes Industrials and Financial Services.
• The 2018 decrease in global corporate issuance, primarily
driven by a decline in high-yield issuance, was mainly due to
increased market volatility, slowing global economic growth
and higher interest rates in the U.S. compared to more
favorable market conditions in 2017. Market conditions in
2017 were favorable due to tightening credit spreads and
some issuers going to market in advance of expected interest
rate increases. Additionally, increased liquidity provided to
U.S. companies driven by tax reform is unfavorably impacting
issuance growth.
2018 Compared to 2017
Structured Finance
Asset-backed securities
(“ABS”)
Structured credit
Commercial mortgage-backed
securities (“CMBS”)
Residential mortgage-backed
securities (“RMBS”)
Covered bonds
Total new issue dollars —
Structured finance
U.S.
6%
(2)%
(18)%
32%
**
1%
Europe
Global
16%
21%
54%
22%
54%
38%
11%
2%
(12)%
28%
61%
18%
** Represents no activity in 2018 and 2017.
• ABS issuance was up in the U.S. due to an increase in auto and
non-traditional asset transactions and Europe reflecting an
increase in auto transactions.
• Issuance was up in the European structured credit markets
mainly driven by new CLO transactions.
• CMBS issuance was down in the U.S. reflecting decreased
market volume. European CMBS issuance was up, although
from a low 2017 base.
• RMBS issuance was up in the U.S. and in Europe reflecting
increased market volume.
• Covered bond (debt securities backed by mortgages or
other high-quality assets that remain on the issuer’s
balance sheet) issuance in Europe was up partially due to
the impact of new regulations bringing consistency across
countries within Europe.
Industry Highlights and Outlook
Revenue decreased in 2018 due to a decrease in corporate bond
ratings revenue driven by lower corporate bond issuance. In
2018, Ratings focused on international expansion particularly in
China. In 2019, Ratings will continue to focus on strengthening
analytical excellence to drive market relevance, executing on
foundational technology and data initiatives, and entering new
high-potential geographies with innovative products.
S&P Global 2018 Annual Report 27
Legal and Regulatory Environment
General
Ratings and many of the securities that it rates are subject to
extensive regulation in both the U.S. and in other countries, and
therefore existing and proposed laws and regulations can impact
the Company’s operations and the markets in which it operates.
Additional laws and regulations have been adopted but not yet
implemented or have been proposed or are being 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 as required. We do not
believe that such new laws, regulations or rules will have a
material adverse effect on our financial condition or results
of operations. Other laws, regulations and rules relating to
credit rating agencies are being considered by local, national,
foreign and multinational bodies and are likely to continue to be
considered in the future, including provisions seeking to reduce
regulatory and investor reliance on credit ratings, rotation of
credit rating agencies and liability standards applicable to credit
rating agencies. The impact on us of the adoption of any such
laws, regulations or rules remains uncertain, but could increase
the costs and legal risks relating to Ratings’ rating activities, or
adversely affect our ability to compete, or result in changes in
the demand for credit ratings.
In the normal course of business both in the U.S. and abroad,
Ratings (or the legal entities comprising Ratings) are defendants
in numerous legal proceedings and are often the subject of
government and regulatory proceedings, investigations and
inquiries. Many of these proceedings, investigations and
inquiries 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, which could adversely impact our consolidated
financial condition, cash flows, business or competitive position.
U.S.
The businesses conducted by our Ratings segment are, in certain
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
designating NRSROs in 1975 for use of their credit ratings in
the determination of capital charges for registered brokers and
dealers under the SEC’s Net Capital Rule. The Reform Act created
a new SEC registration system for rating agencies that choose
to register as NRSROs. Under the Reform Act, the SEC is given
authority and oversight of NRSROs and can censure NRSROs,
revoke their registration or limit or suspend their registration
in certain cases. The rules implemented by the SEC pursuant
to the Reform Act, the Dodd Frank Act and the Exchange Act
address, among other things, prevention or misuse of material
non-public information, conflicts of interest, documentation and
assessment of internal controls, and improving transparency
of ratings performance and methodologies. The public portions
of the current version of S&P Global Ratings’ Form NRSRO are
available on S&P Global Ratings’ website.
European Union
In the European Union (“EU”), the credit rating industry is
registered 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 industry in the EU, which became effective in 2010.
CRA1 requires the registration, formal regulation and periodic
inspection of credit rating agencies operating in the EU.
Ratings was granted registration in October of 2011. In January
of 2011, the EU established the European Securities and
Markets Authority (“ESMA”), which, among other things, has
direct supervisory responsibility for the registered credit rating
industry throughout the EU.
Additional rules augmenting the supervisory framework for
credit rating agencies went into effect in 2013. Commonly
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
resecuritizations, which may limit the number of years a
credit rating agency can issue ratings for such securities of a
particular issuer;
• impose restrictions on credit rating agencies or their
shareholders if certain ownership thresholds are crossed; and
28 S&P Global 2018 Annual Report
SPSE and CMA. Additionally, in October of 2016, we completed
the sale of Equity Research, a business within our Market
Intelligence segment to CFRA, a leading independent provider of
forensic accounting research, analytics and advisory services.
During the year ended December 31, 2016, we recorded a pre-tax
gain of $9 million ($5 million after-tax) in gain on dispositions
in the consolidated statement of income related to the sale of
Equity Research.
Market 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
the S&P Capital IQ and SNL Desktop products);
• Data Management Solutions — integrated bulk data
feeds and application programming interfaces that can be
customized, which includes Compustat, GICS, Point In Time
Financials and CUSIP; and
• Risk Services — commercial arm that sells Ratings’ credit
ratings and related data, analytics and research, which
includes subscription-based offerings, RatingsDirect® and
RatingsXpress®, and Credit Analytics.
Subscription revenue at Market Intelligence is primarily derived
from distribution of data, analytics, third-party research, and
credit ratings-related information primarily through web-based
channels, including Market Intelligence Desktop, RatingsDirect®,
RatingsXpress®, and Credit Analytics. Non-subscription revenue
at Market Intelligence is primarily related to certain advisory,
pricing and analytical services.
• 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 EU.
Other Jurisdictions
Outside of the U.S. and the EU, regulators and government
officials have also been implementing formal oversight of credit
rating agencies. Ratings is subject to regulations in most of the
foreign jurisdictions in which it operates and continues to work
closely with regulators globally to promote the global consistency
of regulatory requirements. Regulators in additional countries
may introduce new regulations in the future. This includes the
UK, which is in the process of establishing its own credit rating
agencies oversight regime for its exit from the EU.
For a further discussion of competitive and other risks inherent
in our Ratings business, see Item 1a, Risk Factors, in our Annual
Report on Form 10-K. For a further discussion of the legal and
regulatory environment in our Ratings business, see Note 13 -
Commitments and Contingencies to the consolidated financial
statements under Item 8, Consolidated Financial Statements
and Supplementary Data, in our Annual Report on Form 10-K.
MARKET INTELLIGENCE
Market Intelligence’s portfolio of capabilities is designed to help
investment professionals, government agencies, corporations
and universities track performance, generate alpha, identify
investment ideas, understand competitive and industry
dynamics, perform valuations and assess credit risk.
In January of 2017, we completed the sale of Quant House SAS
(“QuantHouse”), included in our Market 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 obligation, 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 is 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.
In October of 2016, we completed the sale of SPSE and CMA for
$425 million in cash to Intercontinental Exchange, an operator
of global exchanges, clearing houses and data services. During
the 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
S&P Global 2018 Annual Report 29
The following table provides revenue and segment operating profit information for the years ended December 31:
(in millions)
Revenue
Subscription revenue
Non-subscription revenue
Asset-linked fees
% of total revenue:
Subscription revenue
Non-subscription revenue
Asset-linked fees
U.S. revenue
International revenue
% of total revenue:
U.S. revenue
International revenue
Operating profit 1
% Operating margin
Year ended December 31,
% Change
2018
$1,833
$1,773
$40
$20
97%
2%
1%
$1,180
$653
64%
36%
$545
30%
2017
$1,683
$1,614
$46
$23
96%
3%
1%
$1,114
$569
66%
34%
$457
27%
2016
$1,661
$1,543
$99
$19
93%
6%
1%
$1,122
$539
68%
32%
$729
44%
’18 vs ’17
’17 vs ’16
9%
10%
(13)%
(14)%
1%
5%
(54)%
19%
6%
14%
(1)%
6%
19%
(37)%
1 2018 includes restructuring charges related to a business disposition and employee severance charges of $7 million. 2017 includes employee severance charges of $7
million and a non-cash disposition-related adjustment of $4 million. 2016 includes a $373 million gain from our dispositions, disposition-related costs of $43 million,
a technology-related impairment charge of $24 million and an acquisition-related cost of $1 million. 2018, 2017 and 2016 includes amortization of intangibles from
acquisitions of $73 million, $71 million and $72 million, respectively.
Note - In 2018, Trucost plc (“Trucost”) was integrated from Indices into Market Intelligence and historical reporting was retroactively revised to reflect the change.
2018
Revenue increased 9% and was favorably impacted by 1
percentage point from the impact of recent acquisitions.
Excluding acquisitions, the revenue increase was driven by
growth in annualized contract values in the Market Intelligence
Desktop, RatingsXpress® and RatingsDirect® products from
new and existing customers. The number of users and customers
continued to grow for each of these products in 2018. Increases
in annualized contract value for certain of our data feed products
within Data Management Solutions also contributed to revenue
growth. Both domestic and international revenue increased
compared to 2017. In 2018, international revenue represented
36% of Market Intelligence’s total revenue compared
to 34% in 2017.
Operating profit increased 19%, with a 3 percentage point
favorable impact from foreign exchange rates. Excluding the
favorable impact of a non-cash disposition-related adjustment
in 2017 of 8 percentage points and higher employee severance
charges in 2017 of 2 percentage points, partially offset by
the unfavorable impact of higher amortization in 2018 of 5
percentage points and disposition-related costs in 2018 of
2 percentage points, operating profit increased 16%. The
increase was primarily due to revenue growth, partially offset
by an increase in cost of sales as a result of royalties tied to
annualized contract value growth and increased data costs,
and higher compensation costs driven by additional headcount
partially related to the acquisitions of Panjiva Inc. (“Panjiva”) in
February of 2018 and the RateWatch business (“RateWatch”) in
June of 2018. See Note 2 - Acquisitions and Divestitures to the
Consolidated Financial Statements and Supplementary Data, in
our Annual Report on Form 10-K for further discussion.
2017
Revenue increased 1% and was unfavorably impacted by 8
percentage points from the net impact of acquisitions and
dispositions. Excluding these acquisitions and dispositions, the
revenue increase was driven by growth in annualized contract
values in the Market Intelligence Desktop, RatingsXpress® and
RatingsDirect® products from new and existing customers. The
number of users and customers continued to grow for each of
these products in 2017. Increases in annualized contract value
for certain of our data feed products within Data Management
Solutions also contributed to revenue growth. International
revenue increased and domestic revenue decreased slightly
compared to 2016. In 2017, international revenue represented
34% of Market Intelligence’s total revenue compared to 32%
in 2016. Revenue growth was unfavorably impacted by the
dispositions of SPSE and CMA in October of 2016, Equity Fund
Research in October of 2016 and QuantHouse in January of
2017, and favorably impacted by the acquisition of Trucost in
October of 2016. See Note 2 - Acquisitions and Divestitures to
the Consolidated Financial Statements and Supplementary
Data, in our Annual Report on Form 10-K for further discussion.
30 S&P Global 2018 Annual Report
Operating profit decreased 37%. Excluding the unfavorable
impact of the gain on dispositions in 2016 of 55 percentage
points, higher employee severance charges in 2017 of 1
percentage point and a non-cash acquisition adjustment in 2017
of 1 percentage point, partially offset by the favorable impact of
disposition-related costs in 2016 of 6 percentage points and a
technology-related impairment charge in 2016 of 4 percentage
points, operating profit increased 9%. The increase is due to
margin improvement from existing businesses, partially offset by
the unfavorable impact of the dispositions discussed above.
Industry Highlights and Outlook
In 2018, Market Intelligence continued to develop its desktop
platform by enhancing its product offerings and developing
its analytical capabilities. Market Intelligence released the
latest version of the desktop platform with significant content,
feature, and performance enhancements and introduced the
initial release of Kensho-driven topic search. Additionally, the
segment integrated and leveraged recent acquisitions to develop
and expand its analytical capabilities and offerings. In 2019,
Market Intelligence will continue to focus on leveraging its strong
content heritage to expand the core business, streamlining and
enriching the customer experience across all delivery platforms,
and harnessing new data sources and technology to extend into
new growth areas and geographies.
Legal and Regulatory Environment
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
exercise a passport right to provide specified cross border
services into other European Economic Area (“EEA”) States,
and is to the conditions under the E.U. Markets in Financial
Instruments Directive (“MiFID”).
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,
including the quality of its research and advisory services, client
service, reputation, price, geographic scope, range of products
and services, and technological innovation. For a further
discussion of competitive and other risks inherent in our Market
Intelligence business, see Item 1a, Risk Factors, in our Annual
Report on Form 10-K.
European Union
The EU enacted a package of legislative measures known as
MiFID II (“MiFID II”), which revises and updates the existing EU
Markets in Financial Instruments Directive framework, and the
substantive provisions became applicable in all EU Member
States as of January 3, 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
requirements in the EU Market Infrastructure Regulation of
2011). Although the MiFID II package is “framework” legislation
(meaning that much of the detail of the rules will be set out in
subordinate measures, including some technical standards yet
to be adopted by the European Commission.
PLATTS
Platts is the leading independent provider of information and
benchmark prices for the commodity and energy markets. Platts
provides essential price data, analytics, and industry insight
enabling the commodity and energy markets to perform with
greater transparency and efficiency.
Platts’ revenue is generated primarily through the
following sources:
• Subscription revenue — primarily from subscriptions to our
real-time news, market data and price assessments, along with
other information products;
• Sales usage-based royalties — primarily from licensing of
our proprietary market price data and price assessments to
commodity exchanges; and
• Non-subscription revenue — conference sponsorship,
consulting engagements, and events.
We completed the sale of J.D. Power on September 7, 2016, with
the results included in Platts results through that date. 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 of J.D. Power.
S&P Global 2018 Annual Report 31
(in millions)
Revenue
Subscription revenue
Sales usage-based royalties
Non-subscription revenue
% of total revenue:
Subscription revenue
Sales usage-based royalties
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
2018
$815
$750
$54
$11
92%
7%
1%
$283
$532
35%
65%
$383
47%
2017
$774
$704
$57
$13
91%
7%
2%
$284
$490
37%
63%
$326
42%
2016
$925
$689
$53
$183
74%
6%
20%
$400
$525
43%
57%
$1,090
118%
’18 vs ’17
’17 vs ’16
5%
6%
(5)%
(12)%
(16)%
2%
7%
(93)%
–%
9%
(29)%
(7)%
18%
(70)%
1 2017 includes a non-cash acquisition-related adjustment of $11 million, a charge to exit a leased facility of $6 million, an asset write-off of $2 million and employee
severance charges of $2 million. 2016 includes a $728 million gain from our disposition of J.D. Power and disposition-related costs of $5 million. 2018, 2017 and 2016
includes amortization of intangibles from acquisitions of $18 million, $18 million and $14 million, respectively.
2018
Revenue increased 5% due to continued demand for market data
and price assessment products across all commodity sectors,
led by petroleum, partially offset by a decrease in sales usage-
based royalties from the licensing of our proprietary market
price data and price assessments to commodity exchanges
mainly due to a decline in oil trading volumes in the first nine
months of 2018. Demand for market data and price assessment
products was driven by international customers. While petroleum
is still the biggest revenue driver, the proportional revenue
mix continues to become more diversified as other sectors
contributed to revenue growth including petrochemicals, metals
and agriculture. International revenue increased and domestic
revenue remained relatively unchanged compared to 2017. In
2018, international revenue represented 65% of Platts total
revenue compared to 63% in 2017.
Operating profit increased 18%. Excluding the favorable impact
of a non-cash acquisition-related adjustment in 2017 of 4
percentage points, a charge to exit a leased facility in 2017 of 2
percentage points, an asset write-off in 2017 of 1 percentage
point and employee severance charges in 2017 of 1 percentage
point, operating profit increased 10%, with the increase largely
driven by revenue growth.
2017
Revenue decreased 16% and was unfavorably impacted by
21 percentage points from the net impact of acquisitions and
dispositions discussed below. Excluding these acquisitions
and dispositions, revenue increased due to continued demand
for market data and price assessment products across all
commodity sectors, led by petroleum. Demand for market data
and price assessment products was driven by international
customers. While petroleum is still the biggest revenue driver, the
proportional revenue mix continues to become more diversified
as other sectors contributed to revenue growth including
petrochemicals, metals and agriculture. Both domestic and
international revenue decreased compared to 2016 due to the
unfavorable impact from the disposition of J.D. Power. In 2017,
international revenue represented 63% of Platts total revenue
compared to 57% in 2016. Revenue was unfavorably impacted by
the disposition of J.D. Power in September of 2016 and favorably
impacted by the acquisitions of RigData and PIRA in June of 2016
and September of 2016, respectively. See Note 2 - Acquisitions
and Divestitures to the Consolidated Financial Statements and
Supplementary Data, in our Annual Report on Form 10-K for
further discussion.
Operating profit decreased 70%. Excluding the unfavorable
impact of the gain on dispositions in 2016 of 64 percentage
points, a non-cash acquisition-related adjustment in 2017 of
1 percentage point and a charge to exit a leased facility of 1
percentage point, operating profit decreased 4% due to the
unfavorable impact from the disposition of J.D. Power.
32 S&P Global 2018 Annual Report
(in millions)
Revenue
Subscription revenue
Sales usage-based royalties
Non-subscription revenue
% of total revenue:
Subscription revenue
Sales usage-based royalties
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
2018
$815
$750
$54
$11
92%
7%
1%
$283
$532
35%
65%
$383
47%
2017
$774
$704
$57
$13
91%
7%
2%
$284
$490
37%
63%
$326
42%
2016
$925
$689
$53
$183
74%
6%
20%
$400
$525
43%
57%
$1,090
118%
’18 vs ’17
’17 vs ’16
5%
6%
(5)%
(12)%
(16)%
2%
7%
(93)%
–%
9%
(29)%
(7)%
18%
(70)%
Platts has aligned 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 commodities for
which it publishes benchmarks.
Platts competes domestically and internationally on the basis
of a number of factors, including the quality of its assessments
and other information it provides to the commodities and related
markets, client service, reputation, price, range of products and
services (including geographic coverage) and technological
innovation. Furthermore, sustained downward pressure on
oil and other commodities prices and trading activity in those
markets could have a material adverse impact on the rate of
growth of Platts’ revenue. For a further discussion of competitive
and other risks inherent in our Platts business, see Item 1a, Risk
Factors, in our Annual Report on Form 10-K.
INDICES
Indices is a global index provider 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’
benchmarks and generate revenue through fees based on
assets and underlying funds;
• Exchange traded derivatives — generate sales usage-based
royalties based on trading volumes of derivatives contracts
listed on various exchanges;
• Index-related licensing fees — fixed or variable annual and per-
issue asset-linked 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.
Industry Highlights and Outlook
In 2018, sustained demand for market data and price
assessment products across all commodity sectors, led by
petroleum, continued to drive revenue growth despite small
declines in sales usage-based royalty revenue. In 2018, Platts
set the groundwork for enhancing its commercial model and
simplifying its customer facing and operating platforms for
improved user experience. In 2019, Platts will continue to focus
on extending the core business through innovation, simplifying
its product and platform strategy, and driving commercial
transformation.
Legal and Regulatory Environment
Platts’ commodities price assessment and information
business is subject to increasing regulatory scrutiny in the U.S.
and abroad. As discussed below under the heading “Indices-
Legal and Regulatory Environment”, the financial benchmarks
industry is subject to the new benchmark regulation in the
EU (the “EU 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, Platts will be required in due
course to obtain registration or authorization in connection with
its benchmark and price assessment activities in Europe and
potentially elsewhere.
European Union
The EU has enacted MiFID II, which revise and update the
existing EU Markets in Financial Instruments Directive and the
substantive provisions became applicable in all EU Member
States as of January 3, 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
requirements in the E.U. Market Infrastructure Regulation of
2011). Although the MiFID II package is “framework” legislation
(meaning that much of the detail of the rules will be set out in
subordinate measures, including some technical standards yet
to be adopted by the European Commission. The introduction
of the MiFID II package may result in changes to the manner
in which Platts licenses its price assessments. MiFID II and
the MAR may impose additional regulatory burdens on Platts
activities in the EU, although the exact impact and costs
are not yet known.
In October of 2012, IOSCO issued its Principles for Oil Price
Reporting Agencies (“PRA 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 2018 Annual Report 33
The following table provides revenue and segment operating profit information for the years ended December 31:
Year ended December 31,
% Change
(in millions)
Revenue
Asset-linked fees
Sales usage-based royalties
Subscription revenue
% of total revenue:
Asset-linked fees
Sales usage-based royalties
Subscription 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
2018
$837
$522
$171
$144
62%
21%
17%
$719
$118
86%
14%
$563
$151
$412
67%
49%
2017
$728
$461
$131
$136
63%
18%
19%
$601
$127
83%
17%
$478
$129
$349
66%
48%
’18 vs ’17
’17 vs ’16
15%
13%
30%
6%
20%
(7)%
18%
17%
18%
14%
21%
5%
4%
15%
12%
16%
18%
15%
2016
$638
$381
$125
$132
60%
20%
20%
$525
$113
82%
18%
$413
$109
$304
65%
48%
1 2018, 2017 and 2016 includes amortization of intangibles from acquisitions of $6 million.
Note - In 2018, Trucost was integrated from Indices into Market Intelligence and historical reporting was retroactively revised to reflect the change.
2018
Revenue increased 15%, primarily driven by higher average
levels of assets under management (“AUM”) for ETFs and mutual
funds, and higher exchange-traded derivative volumes due to
market volatility. Average AUM for ETFs increased 20% to $1.399
trillion compared to 2017. Ending AUM for ETFs decreased 3% to
$1.309 trillion compared to 2017 driven by the impact of market
depreciation in the fourth quarter of 2018.
Operating profit grew 18%. The impact of revenue growth
was partially offset by increased operating costs to support
revenue growth and business initiatives at Indices and higher
compensation costs from additional headcount.
2017
Revenue increased 14%, primarily driven by higher AUM for ETFs
and mutual funds. Ending AUM for ETFs increased 31% to $1.343
trillion and average AUM for ETFs increased 34% to $1.167
trillion compared to 2016.
initiatives at Indices. Higher compensation costs related to
increased incentive costs and additional headcount.
Industry Highlights and Outlook
Indices continues to be the leading index provider for the ETF
market space. In 2018, higher average levels of AUM for ETFs and
higher volumes for exchange-traded derivatives contributed to
revenue growth. In 2018, Indices continued to launch innovative
indices, expand index product offerings and grow international
partnerships. In 2019, Indices will continue to focus on growing
the core business, expanding innovative offerings, and growing
globally through collaborative client relationships.
Legal and Regulatory Environment
The financial benchmarks industry is subject to the new
benchmark regulation in the European Union (the “EU
Benchmark Regulation”), the new benchmark regulation in
Australia (the “Australia Benchmark Regulation”) and potential
increased regulation in other jurisdictions.
Operating profit grew 16%. The impact of revenue growth was
partially offset by higher compensation costs and increased
operating costs to support revenue growth and business
The EU Benchmark Regulation was published June 30, 2016
and included provisions applicable to Indices and Platts, which
became effective January 1, 2018. The EU Benchmark Regulation
34 S&P Global 2018 Annual Report
(in millions)
Revenue
Asset-linked fees
Sales usage-based royalties
Subscription revenue
% of total revenue:
Asset-linked fees
Sales usage-based royalties
Subscription revenue
U.S. revenue
International revenue
% of total revenue:
U.S. revenue
International revenue
Operating profit 1
Less: net income attributable
to noncontrolling interests
Net operating profit
% Operating margin
% Net operating margin
Year ended December 31,
% Change
’18 vs ’17
’17 vs ’16
2018
$837
$522
$171
$144
62%
21%
17%
$719
$118
86%
14%
$563
$151
$412
67%
49%
2017
$728
$461
$131
$136
63%
18%
19%
$601
$127
83%
17%
$478
$129
$349
66%
48%
2016
$638
$381
$125
$132
60%
20%
20%
$525
$113
82%
18%
$413
$109
$304
65%
48%
15%
13%
30%
6%
20%
(7)%
18%
17%
18%
14%
21%
5%
4%
15%
12%
16%
18%
15%
provides a two (2) year transitional period during which Indices
and Platts are required to obtain registration or authorization in
connection with their respective benchmark activities in Europe.
This legislation will likely cause additional operating obligations
but they are not expected to be material at this time, although
the exact impact remains unclear.
As discussed above under the heading “Platts Legal and
Regulatory Environment,” the EU 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 MAR
may impose additional regulatory burdens on Indices activities in
the EU, although the exact impact and costs are not yet known.
The Australian Benchmark Regulation was enacted in
June of 2018 and included provisions applicable to Indices,
designating the S&P ASX 200 a significant financial benchmark
and therefore requiring Indices to obtain a license from the
Australian Investment and Securities Commission (“ASIC”) as
its administrator. Although narrower in scope, the requirements
of the Australian Benchmark Regulation are similar to those of
the E.U. Benchmark Regulation. This legislation will likely cause
additional operating obligations but they are not expected to be
material at this time, although the exact impact remains unclear.
In July of 2013, the IOSCO issued Financial Benchmark
Principles, intended to promote the reliability of benchmark
determinations, and address governance, benchmark quality 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 technological innovation.
For a further discussion of competitive and other risks inherent
in our Indices business, see Item 1a, Risk Factors, in our Annual
Report on Form 10-K.
Liquidity And Capital Resources
We continue to maintain a strong financial position. Our primary
source of funds for operations is cash from our businesses and
our core businesses have been strong cash generators. In 2019,
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 businesses, strategic
acquisitions, share repurchases, dividends, repayment of debt,
capital expenditures and investment in our infrastructure.
Cash Flow Overview
Cash, cash equivalents, and restricted cash were $2.0 billion as
of December 31, 2018, a decrease of $0.8 billion as compared
to December 31, 2017, and consisted of approximately 40% of
domestic cash and 60% of cash held abroad.
(in millions)
Year ended December 31,
2018
2017
2016
Net cash provided by (used for):
Operating activities
Investing activities
Financing activities
$2,064
(513)
(2,288)
$2,016
(209)
(1,507)
$1,560
1,171
(1,662)
In 2018, free cash flow remained relatively unchanged at
$1.8 billion compared to 2017. Free cash flow is a non-GAAP
financial measure and reflects our cash flow provided by
operating activities less capital expenditures and distributions
to noncontrolling interest 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.
Operating Activities
Cash provided by operating activities increased to $2.1 billion
in 2018 as compared to $2.0 billion in 2017. The increase is
mainly due to higher results from operations in 2018 and lower
estimated income tax payments in 2018 due to the reduction of
the U.S. federal corporate tax rate as a result of the enactment
of the TCJA, partially offset by legal settlement payments and
settlement payments following the resolution of tax audits.
Cash provided by operating activities increased to $2.0 billion in
2017 as compared to $1.6 billion in 2016. The increase is mainly
due to higher results from operations, partially offset by the
timing of estimated tax payments.
Investing Activities
Our cash outflows from investing activities are primarily for
acquisitions and capital expenditures, while cash inflows are
primarily proceeds from dispositions.
S&P Global 2018 Annual Report 35
Cash used for investing activities increased to $0.5 billion
for 2018 as compared to $0.2 billion in 2017, primarily due to
cash used for the acquisition of Kensho and the purchase of
intellectual property in 2018.
Cash used for investing activities decreased to $0.2 billion for
2017 as compared to cash provided by investing activities of $1.2
billion in 2016. The decrease is primarily due to proceeds from
the sale of J.D. Power of $1.1 billion in 2016.
On December 4, 2013, the Board of Directors approved a share
repurchase program authorizing the purchase of up to 50 million
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 conditions.
As of December 31, 2018, 10.6 million shares remained available
under our current repurchase program.
Refer to Note 2 – Acquisitions and Divestitures to the
Consolidated Financial Statements and Supplementary Data,
in our Annual Report on Form 10-K for further information.
We entered into an ASR agreement with a financial
institution on February 11, 2019 to initiate share repurchases
aggregating $500 million.
Financing Activities
Our cash outflows from financing activities consist primarily of
share repurchases, dividends and repayment of short-term and
long-term debt, while cash inflows are primarily inflows from
long-term and short-term debt borrowings and proceeds from
the exercise of stock options.
Cash used for financing activities increased to $2.3 billion
in 2018 from $1.5 billion in 2017. The increase is primarily
attributable to higher cash paid for share repurchases in 2018.
Cash used for financing activities decreased to $1.5 billion
in 2017 from $1.7 billion in 2016. The decrease is primarily
attributable to higher repayments of debt and higher cash paid
for share repurchases in 2016, partially offset by the issuance of
senior notes in 2016.
During 2018, we used cash to repurchase 8.4 million shares for
$1.7 billion. We entered into an accelerated share repurchase
(“ASR”) agreement with a financial institution on October 29,
2018 to initiate share repurchases aggregating $500 million.
We repurchased a total of 2.9 million shares under the ASR
agreement for an average purchase price of $173.80 per share.
We entered into an ASR agreement with a financial institution
on March 6, 2018 to initiate share repurchases aggregating
$1 billion. We repurchased a total of 5.1 million shares
under that ASR agreement for an average purchase price of
$197.49 per share.
During 2017, we used cash to repurchase 6.8 million shares for
$1.0 billion. We entered into an ASR agreement with a financial
institution on August 1, 2017 to initiate share repurchases
aggregating $500 million. We repurchased a total of 3.2 million
shares under the ASR agreement for an average purchase price
of $154.46 per share.
During 2016, we used cash to repurchase 10 million shares for
$1.1 billion, which included 0.3 million shares for approximately
$26 million that settled in January of 2016. 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.
We repurchased a total of 6.1 million shares under the ASR
agreement for an average purchase price of $122.18 per share.
36 S&P Global 2018 Annual Report
See Note 9 – Equity to the Consolidated Financial Statements
and Supplementary Data, in our Annual Report on Form 10-K for
further discussion related to our ASR agreements.
Additional Financing
We have the ability to borrow a total of $1.2 billion through our
commercial paper program, which is supported by our revolving
$1.2 billion five-year credit agreement (our “credit facility”)
that we entered into on June 30, 2017. This credit facility will
terminate on June 30, 2022. There were no commercial paper
borrowings outstanding as of December 31, 2018 and 2017.
Depending on our corporate credit rating, we pay a commitment
fee of 8 to 17.5 basis points for our credit facility, whether or not
amounts have been borrowed. We currently pay a commitment
fee of 10 basis points. The interest rate on borrowings under
our credit facility is, at our option, calculated using rates that
are primarily based on either the prevailing London Inter-Bank
Offer Rate, the prime rate determined by the administrative
agent or the Federal Funds Rate. For certain borrowings
under this credit facility, there is also a spread based on our
corporate credit rating.
Our credit facility contains certain covenants. The only financial
covenant requires that our indebtedness to cash flow ratio, as
defined in our credit facility, is not greater than 4 to 1, and this
covenant level has never been exceeded.
On August 8, 2018, Moody’s Investors Service, Inc. upgraded
our long-term debt ratings to A3 from Baa1, affirmed our P-2
short-term/commercial paper rating and the ratings outlook
was maintained at stable. On October 12, 2018, Fitch Ratings
upgraded our long-term debt rating to A- from BBB+, affirmed
our F2 short-term/commercial paper rating and the ratings
outlook was maintained at stable.
Dividends
On January 30, 2019, the Board of Directors approved an increase
in the quarterly common stock dividend from $0.50 per share to
$0.57 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 disclosed herein. For
example, we are contractually committed to contracts for information-technology outsourcing, certain enterprise-wide information-
technology software licensing and maintenance and make certain minimum lease payments for the use of property under operating
lease agreements.
We believe that the amount of cash and cash equivalents on hand, cash flow expected from operations and availability under our
credit facility will be adequate for us to execute our business strategy and meet anticipated requirements for lease obligations,
capital expenditures, working capital and debt service for 2019.
The following table summarizes our significant contractual obligations and commercial commitments as of December 31, 2018,
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
$–
154
130
83
$367
1-3
Years
$698
277
187
57
$1,219
3-5
Years
More than
5 Years
$–
262
142
34
$2,964
1,096
400
49
Total
$3,662
1,789
859
223
$438
$4,509
$6,533
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, 2018, we had $147 million of liabilities for
unrecognized tax benefits. We have excluded the liabilities for
unrecognized tax benefits from our contractual obligations
table because, until formal resolutions are reached, reasonable
estimates of the timing of cash settlements with the respective
taxing authorities are not practicable.
As of December 31, 2018, we have recorded $1,620 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 operating
agreement of S&P Dow Jones Indices LLC, whereby, after
December 31, 2017, CME Group and CME Group Index Services
LLC (“CGIS”) has 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 contractual obligations
table because we are uncertain as to the timing and the ultimate
amount of the potential payment we may be required to make.
We make contributions to our pension and postretirement plans
in order to satisfy minimum funding requirements as well as
additional contributions that we consider appropriate to improve
the funded status of our plans. During 2018, we contributed
$9 million and $1 million to our retirement and postretirement
plans, respectively. Expected employer contributions in 2019 are
$46 million and $6 million for our retirement and postretirement
plans, respectively. In 2019, 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, 2018 and 2017, we did not have any material
relationships 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
purposes. As such we are not exposed to any financial liquidity,
market or credit risk that could arise if we had engaged in
such relationships.
S&P Global 2018 Annual Report 37
Reconciliation Of Non-GAAP Financial Information
Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by operating activities less capital expenditures
and 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
conduct 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 available 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)
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 settlements
Legal settlement insurance recoveries
Settlement of prior-year tax audits
Tax benefit from legal settlements
Free cash flow excluding above items
Cash (used for) provided by investing activities
Cash used for financing activities
N/M - not meaningful
Year ended December 31,
% Change
2018
$2,064
(113)
(154)
$1,797
—
—
180
—
73
(44)
$2,006
(513)
(2,288)
2017
$2,016
(123)
(111)
$1,782
—
67
4
—
—
(2)
$1,851
(209)
(1507)
2016
$1,560
(115)
(116)
$1,329
200
—
150
(77)
—
(24)
$1,578
1,171
(1,662)
’18 vs ’17
’17 vs ’16
2%
1%
8%
N/M
52%
29%
34%
17%
N/M
(9)%
38 S&P Global 2018 Annual Report
Year ended December 31,
% Change
’18 vs ’17
’17 vs ’16
(in millions)
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 settlements
Legal settlement insurance recoveries
Settlement of prior-year tax audits
Tax benefit from legal settlements
Free cash flow excluding above items
2018
$2,064
(113)
(154)
$1,797
—
—
180
—
73
(44)
2017
$2,016
(123)
(111)
$1,782
—
67
4
—
—
(2)
2016
$1,560
(115)
(116)
$1,329
200
—
150
(77)
—
(24)
$2,006
$1,851
$1,578
Cash (used for) provided by investing activities
Cash used for financing activities
(513)
(2,288)
(209)
(1507)
1,171
(1,662)
2%
1%
8%
N/M
52%
29%
34%
17%
N/M
(9)%
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.
On an ongoing basis, we evaluate our estimates and
assumptions, including those related to revenue recognition,
allowance for doubtful accounts, valuation of long-lived assets,
goodwill and other intangible assets, pension plans, incentive
compensation and stock-based compensation, income taxes,
contingencies 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 liabilities 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
different 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 preparation of
our consolidated financial statements:
Revenue Recognition
We adopted Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) 606 “Revenue from Contracts with
Customers” using the modified retrospective transition method
applied to our revenue contracts with customers as of January
1, 2018. Results for reporting periods beginning after January
1, 2018 are presented under ASC 606, while prior year amounts
are not adjusted and continue to be reported in accordance with
our historic accounting under ASC 605 “Revenue Recognition”.
We recorded a net increase to opening retained earnings of
$35 million as of January 1, 2018 due to the cumulative effect
of adopting ASC 606, with the impact primarily related to our
treatment of costs to obtain a contract and to a lesser extent,
changes to the timing of the recognition of our subscription and
non-transaction revenues. We recognized incremental revenue
of $6 million for the year ended December 31, 2018 as a result of
the adoption of this standard.
Under ASC 606, revenue is recognized when a customer obtains
control of promised goods or services in an amount that reflects
the consideration the entity expects to receive in exchange for
those goods or services. Under ASC 605, revenue was recognized
as it was earned and when services were rendered. See Note 1 -
Accounting Policies to our consolidated financial statements for
further information.
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 indicators. The
impact on operating profit for a one percentage point change in
the allowance for doubtful accounts is approximately $15 million.
For the years ended December 31, 2018, 2017 and 2016, there
were no material changes in our assumptions regarding the
determination of the allowance for doubtful accounts. Based
on our current outlook these assumptions are not expected to
significantly change in 2019.
Accounting for the Impairment of Long-lived Assets
(Including Other Intangible Assets)
We evaluate long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Upon such an occurrence,
recoverability of assets to be held and used is measured by
comparing the carrying amount of an asset to current forecasts
of undiscounted future net cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its
estimated future cash flows, an impairment charge is recognized
equal to the amount by which the carrying amount of the asset
exceeds the fair value of the asset. For long-lived assets held for
sale, assets are written down to fair value, less cost to sell. Fair
value is determined based on market evidence, discounted cash
flows, appraised values or management’s estimates, depending
upon the nature of the assets.
For the year ended December 31, 2016, we recorded a non-
cash impairment charge of $24 million related to a technology
project at our Market Intelligence segment in selling and 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 identifiable
intangible assets of businesses acquired. As of December
31, 2018 and 2017, the carrying value of goodwill and other
indefinite-lived intangible assets was $4.4 billion and $3.7
billion, respectively. Goodwill and other intangible assets with
indefinite lives are not amortized, but instead are tested for
impairment annually during the fourth quarter each year or more
frequently if events or changes in circumstances indicate that
the asset might be impaired.
S&P Global 2018 Annual Report 39
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.
We performed our impairment assessment of goodwill and
indefinite-lived intangible assets and concluded that no
impairment existed for the years ended December 31, 2018,
2017, and 2016.
Retirement Plans and Postretirement Healthcare
and Other Benefits
Our employee pension and other postretirement benefit costs
and obligations are dependent on assumptions concerning
the outcome of future events and circumstances, including
compensation increases, long-term return on pension plan
assets, healthcare cost trends, discount rates and other factors.
In determining such assumptions, we consult with outside
actuaries and other advisors where deemed appropriate. In
accordance with relevant accounting standards, if actual
results differ from our assumptions, such differences are
deferred and amortized over the estimated remaining lifetime
of the plan participants. While we believe that the assumptions
used in these calculations are reasonable, differences in
actual experience or changes in assumptions could affect
the expense and liabilities related to our pension and other
postretirement benefits.
The following is a discussion of some significant assumptions
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 based
on the plan’s asset allocation strategy and projected market
returns over the long-term.
Goodwill
As part of our annual impairment test of our four reporting units,
we initially perform a qualitative analysis evaluating whether
any events and circumstances occurred 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. Reporting
units are generally an operating segment or one level below an
operating segment. Our qualitative assessment included, but
was not limited to, consideration of macroeconomic conditions,
industry and market conditions, cost factors, cash flows,
changes in key Company personnel and our share price. If, based
on our evaluation of the events and circumstances that occurred
during the year we do not believe that it is more likely than not
that the fair value of any of our reporting units is less than its
carrying amount, no quantitative impairment test is performed.
Conversely, if the results of our qualitative assessment
determine that it is more likely than not that the fair value of any
of our reporting units is less than its respective carrying amount
we perform a two-step quantitative impairment test. For 2018,
based on our qualitative assessments, we determined that it
is more likely than not that our reporting units’ fair values were
greater than their respective carrying amounts.
If the fair value of the reporting unit is less than the carrying
value, a second step is performed which compares the implied
fair value of the reporting unit’s goodwill to the carrying value of
the goodwill. The implied fair value of the goodwill is determined
based on the difference between the fair value of the reporting
unit and the net fair value of the identifiable assets and liabilities
of the reporting unit. If the implied fair value of the goodwill is
less than the carrying value, the difference is recognized as an
impairment charge.
Indefinite-Lived Intangible Assets
We evaluate the recoverability of indefinite-lived intangible
assets by first performing a qualitative analysis evaluating
whether any events and circumstances occurred that provide
evidence that it is more likely than not that the indefinite-lived
asset is impaired. If, based on our evaluation of the events and
circumstances that occurred during the year we do not believe
that it is more likely than not that the indefinite-lived asset
is impaired, no quantitative impairment test is performed.
Conversely, if the results of our qualitative assessment
determine that it is more likely than not that the indefinite-lived
asset is impaired, a quantitative impairment test is performed.
If necessary, the impairment test is performed by comparing the
estimated fair value of the intangible asset to its carrying value.
If the indefinite-lived intangible asset carrying value exceeds its
fair value, an impairment analysis is performed using the income
approach. The fair value of loss is recognized in an amount equal
to that excess. Significant judgments inherent in these analyses
include 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
40 S&P Global 2018 Annual Report
Our discount rate and return on asset assumptions used to determine the net periodic pension and postretirement
benefit cost on our U.S. retirement plans are as follows:
Retirement Plans
Postretirement Plans
January 1
Discount rate
Return on assets
2019
2018
2017
2019
2018
2017
4.40%
6.00%
3.68%
6.00%
4.14%
6.25%
4.15%
3.40%
3.69%
Weighted-average healthcare cost rate
6.50%
6.50%
7.00%
Stock-Based Compensation
Stock-based compensation expense is measured at the grant
date based on the fair value of the award and is recognized over
the requisite service period, which typically is the vesting period.
Stock-based compensation is classified as both operating-
related expense and selling and general expense in our
consolidated statements of income.
We use a lattice-based option-pricing model to estimate the fair
value of options granted. The following assumptions were used in
valuing the options granted:
Risk-free average interest rate
Dividend yield
Volatility
Expected life (years)
Weighted-average grant-date
fair value per option
Year Ended
December 31, 2018
2.6 - 2.7%
1.1%
21.8 - 22.0%
5.67 - 6.07
$112.98
Because lattice-based option-pricing models incorporate ranges
of assumptions, those ranges are disclosed. These assumptions
are based on multiple factors, including historical 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.
In 2018, we made a one-time issuance of incentive stock options
in connection with our acquisition of Kensho in April of 2018.
There were no stock options granted in 2017 and 2016.
Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to be applied to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. We recognize liabilities
for uncertain tax positions taken or expected to be taken in
income tax returns. Accrued interest and penalties related to
unrecognized tax benefits are recognized in interest expense and
operating expense, respectively.
Judgment is required in determining our provision for income
taxes, deferred tax assets and liabilities and unrecognized tax
benefits. In determining the need for a valuation allowance, the
historical and projected financial performance of the operation
that is recording a net deferred tax asset is considered along
with any other pertinent information.
We file income tax returns in the U.S. federal jurisdiction,
various 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 assessment
relies on estimates and assumptions and may involve a series
of complex judgments about future events. It is possible that
examinations will be settled prior to December 31, 2019. If
any of these tax audit settlements do occur within that period
we would make any necessary adjustments to the accrual for
unrecognized tax benefits.
As of December 31, 2018, we have approximately $2.3 billion of
undistributed earnings of our foreign subsidiaries, of which $784
million is reinvested indefinitely in our foreign operations.
S&P Global 2018 Annual Report 41
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 probable
that a liability had been incurred at the date of the financial
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 potential
amounts or ranges of probable losses, and recognize a liability, if
any, for these contingencies based on an analysis of each matter
with the assistance of outside legal counsel and, if applicable,
other experts. Because many of these matters are resolved
over long periods of time, our estimate of liabilities may change
due to new developments, changes in assumptions or changes
in our strategy related to the matter. When we accrue for loss
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 loss when it is at least
reasonably possible that a loss may have been incurred.
Forward-Looking Statements
Our 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
management’s current views concerning future events, trends,
contingencies or results, appear at various places in this report
and use words like “anticipate,” “assume,” “believe,” “continue,”
“estimate,” “expect,” “forecast,” “future,” “intend,” “plan,”
“potential,” “predict,” “project,” “strategy,” “target” and similar
terms, and future or conditional tense verbs like “could,” “may,”
“might,” “should,” “will” and “would.” For example, management
may use forward-looking statements when addressing topics
such as: the outcome of contingencies; future actions by
regulators; changes in the Company’s business strategies
and methods of generating revenue; the development and
performance of the Company’s services and products; the
expected impact of acquisitions and dispositions; the Company’s
effective tax rates; and the Company’s cost structure, dividend
policy, cash flows or liquidity.
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 market
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.
Recent Accounting Standards
See Note 1 – Accounting Policies to our consolidated financial
statements for a detailed description of recent accounting
standards. We expect the adoption of these recent accounting
standards to have a material impact on our consolidated
balance sheet; however, we do not expect that these standards
will have a material impact on our consolidated statements of
income or cash flows.
Forward-looking statements are subject to inherent risks and
uncertainties. Factors that could cause actual results to differ
materially from those expressed or implied in forward-looking
statements include, among other things:
• worldwide economic, financial, political and regulatory
conditions, including geopolitical uncertainty and conditions
that may result from legislative, regulatory, trade and policy
changes associated with the current U.S. administration or the
United Kingdom’s withdrawal from the European Union;
• the rapidly evolving regulatory environment, in Europe, the
United States and elsewhere, affecting S&P Global Ratings,
S&P Global Platts, S&P Global Indices, and S&P Global Market
Intelligence, including new and amended regulations and the
Company’s compliance therewith;
• the impact of the recent acquisition of Kensho, including the
impact on the Company’s results of operations; any failure to
successfully integrate Kensho into the Company’s operations;
any failure to attract and retain key employees; and the risk of
litigation, unexpected costs, charges or expenses relating to
the acquisition;
• the Company’s ability to maintain adequate physical, technical
and administrative safeguards to protect the security of
confidential information and data, and the potential for
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
successfully integrate the businesses we acquire;
• the outcome of litigation, government and regulatory
proceedings, investigations and inquiries;
42 S&P Global 2018 Annual Report
• the health of debt and equity markets, including credit quality
and spreads, the level of liquidity and future debt issuances
and the potentially adverse impact of increased access to cash
resulting from the Tax Cuts and Jobs Act;
experience a disaster or other business continuity problem
from a hurricane, flood, earthquake, terrorist attack, pandemic,
security breach, cyber-attack, power loss, telecommunications
failure or other natural or man-made event;
• the demand and market for credit ratings in and across the
sectors and geographies where the Company operates;
• changes in applicable tax or accounting requirements,
including the impact of the Tax Cuts and Jobs Act in the U.S.;
• concerns in the marketplace affecting the Company’s credibility
or otherwise affecting market perceptions of the integrity or
utility of independent credit ratings, benchmarks and indices;
• the level of the Company’s future cash flows and
capital investments;
• the effect of competitive products and pricing, including
the level of success of new product developments and
global expansion;
• consolidation in the Company’s end-customer markets;
• the introduction of competing products or technologies by
other companies;
• the impact of customer cost-cutting pressures, including in the
financial services industry and commodities markets;
• a decline in the demand for credit risk management tools by
financial institutions;
• the level of merger and acquisition activity in the United
States and abroad;
• the volatility of the energy marketplace;
• 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 offerings in the European Union and United Kingdom,
particularly in the event of the United Kingdom’s departure
without an agreement on terms with the European Union;
• the Company’s ability to successfully recover should it
• the impact on the Company’s revenue and net income caused
by fluctuations in foreign currency exchange rates; and
• the Company’s exposure to potential criminal sanctions or
civil penalties if it fails to comply with foreign and U.S. laws
and regulations that are applicable in the domestic and
international jurisdictions in which it operates, including
sanctions laws relating to countries such as Iran, Russia, Sudan
and Syria, anti-corruption laws such as the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act of 2010, and local laws
prohibiting corrupt payments to government officials, as well as
import and export restrictions.
The factors noted above are not exhaustive. The Company and
its subsidiaries operate in a dynamic business environment in
which new risks emerge frequently. Accordingly, the Company
cautions readers not to place undue reliance on any forward-
looking statements, which speak only as of the dates on
which they are made. The Company undertakes no obligation
to update or revise any forward-looking statement to reflect
events or circumstances arising after the date on which it is
made, except as required by applicable law. Further information
about the Company’s businesses, including information about
factors that could materially affect its results of operations
and financial condition, is contained in the Company’s filings
with the SEC, including Item 1a, Risk Factors, in our Annual
Report on Form 10-K.
S&P Global 2018 Annual Report 43
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
Other income, net
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,
2018
$6,258
2017
$6,063
2016
$5,661
1,701
1,561
84
122
3,468
—
2,790
(25)
134
2,681
560
2,121
(163)
1,695
1,605
82
98
3,480
—
2,583
(27)
149
2,461
823
1,638
(142)
1,773
1,467
85
96
3,421
(1,101)
3,341
(28)
181
3,188
960
2,228
(122)
Net income attributable to S&P Global Inc.
$1,958
$1,496
$2,106
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.
$7.80
$7.73
250.9
253.2
248.4
$2.00
$5.84
$5.78
256.3
258.9
253.7
$1.64
$8.02
$7.94
262.8
265.2
258.3
$1.44
44 S&P Global 2018 Annual Report
(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
Other income, net
Interest expense, net
Income before taxes on income
Provision for taxes on income
Net income
Year Ended December 31,
2018
$6,258
2017
$6,063
2016
$5,661
1,701
1,561
84
122
3,468
—
2,790
(25)
134
2,681
560
2,121
(163)
$7.80
$7.73
250.9
253.2
248.4
$2.00
1,695
1,605
82
98
—
3,480
2,583
(27)
149
2,461
823
1,638
(142)
$5.84
$5.78
256.3
258.9
253.7
$1.64
1,773
1,467
85
96
3,421
(1,101)
3,341
(28)
181
3,188
960
2,228
(122)
$8.02
$7.94
262.8
265.2
258.3
$1.44
Less: net income attributable to noncontrolling interests
Net income attributable to S&P Global Inc.
$1,958
$1,496
$2,106
Earnings per share attributable to S&P Global Inc. common shareholders:
Weighted-average number of common shares outstanding:
Net income:
Basic
Diluted
Basic
Diluted
Actual shares outstanding at year end
Dividend declared per common share
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 gain (loss) on investment and 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,
2018
$2,121
2017
$1,638
2016
$2,228
(96)
(4)
(100)
(14)
9
(5)
2
—
2
2,018
(12)
93
—
93
52
(11)
41
(10)
—
(10)
1,762
(13)
(132)
(7)
(139)
(27)
(10)
(37)
4
(1)
3
2,055
(13)
(151)
(129)
(109)
Comprehensive income attributable to S&P Global Inc.
$1,855
$1,620
$1,933
See accompanying notes to the consolidated financial statements.
S&P Global 2018 Annual Report 45
Consolidated Balance Sheets
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowance for doubtful accounts: 2018- $34 ; 2017 - $33
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: 2018 - 294 million shares; 2017 - 412 million shares
Additional paid-in capital
Retained income
Accumulated other comprehensive loss
Less: common stock in treasury - at cost: 2018 - 45 million shares; 2017 - 158 million shares
Total equity – controlling interests
Total equity – noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to the consolidated financial statements.
46 S&P Global 2018 Annual Report
December 31,
2018
2017
$1,917
$2,777
41
18
1,449
179
3,604
372
494
866
(596)
270
3,535
1,524
525
2
12
1,319
214
4,324
354
475
829
(554)
275
2,989
1,388
449
$9,458
$9,425
$211
354
—
72
1,641
1
350
2,629
3,662
229
634
7,154
1,620
294
833
11,284
(742)
(11,041)
628
56
684
$195
472
399
77
1,613
107
351
3,214
3,170
244
679
7,307
1,352
412
525
10,023
(649)
(9,602)
709
57
766
$9,458
$9,425
Consolidated Statements of Cash Flows
(in millions)
Operating Activities:
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Year Ended December 31,
2018
2017
2016
$2,121
$1,638
$2,228
Depreciation
Amortization of intangibles
Provision for losses on accounts receivable
Deferred income taxes
Stock-based compensation
Gain on dispositions
Accrued legal 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 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
Contingent consideration payment
Proceeds from dispositions
Changes in short-term investments
Cash (used for) provided by 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 payment
Purchase of additional CRISIL shares
Employee withholding tax on share-based payments
Cash used for financing activities
Effect of exchange rate changes on cash
Net change in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
Cash paid during the year for:
Interest
Income taxes
84
122
21
81
94
—
1
52
(164)
(1)
(106)
70
(108)
(67)
(7)
(129)
2,064
(113)
(401)
—
6
(5)
82
98
16
—
99
—
55
96
(196)
10
75
85
(4)
(85)
32
15
2,016
(123)
(83)
—
2
(5)
(513)
(209)
—
489
(403)
(503)
(154)
—
—
—
(421)
(111)
85
96
9
79
76
(1,101)
54
30
(177)
5
19
107
(150)
(19)
174
45
1,560
(115)
(177)
(34)
1,498
(1)
1,171
(143)
493
(421)
(380)
(116)
(1,660)
(1,001)
(1,123)
34
—
(25)
(66)
(2,288)
(84)
(821)
2,779
$1,958
$151
$558
75
—
—
(49)
(1,507)
87
387
2,392
$2,779
$139
$709
88
(5)
—
(55)
(1,662)
(158)
911
1,481
$2,392
$150
$683
See accompanying notes to the consolidated financial statements.
S&P Global 2018 Annual Report 47
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
Non-
controlling
Interests
Total
Equity
Balance as of December 31, 2015
$412
$475
$7,636
$(600)
$7,729
Comprehensive income ¹
Dividends
Share repurchases
Employee stock plans,
net of tax benefit
Change in redemption value of
redeemable noncontrolling interest
Other
Balance as of December 31, 2016
Comprehensive income ¹
Dividends
Share repurchases
Employee stock plans
Change in redemption value of
redeemable noncontrolling interest
Other
2,106
(380)
(173)
$194
1,933
(380)
27
$412
$502
23
(153)
1
$9,210
1,496
(421)
(260)
(2)
1,097 (1,097)
(125)
152
$(773)
$ 8,701
124
(153)
1
$ 650
1,620
(421)
1,001 (1,001)
(100)
123
(260)
(2)
Balance as of December 31, 2017
$412
$ 525 $10,023
$ (649)
$ 9,602
$ 709
Comprehensive income ¹
Dividends
Share repurchases
Retirement of common stock
(118)
Employee stock plans
Change in redemption value of
redeemable noncontrolling interest
Increase in CRISIL ownership
Stock consideration for Kensho
Other
1,958
(503)
(228)
(75)
56
(25)
352
(103)
1,855
(503)
1,585 (1,660)
(118)
(28)
—
84
(228)
(25)
352
44
Balance as of December 31, 2018
$294
$833
$11,284
$(742)
$11,041
$628
34²
10²
$49
13
(10)
(1)
$51
15
(10)
(5)
8
(2)
$ 57
12
(11)
2
(4)
$56
$243
1,946
(390)
(1,097)
152
(153)
—
$701
1,635
(431)
(1,006)
131
(260)
(4)
$ 766
1,867
(514)
(1,660)
—
84
(228)
(23)
352
40
$684
1 Excludes $151 million, $129 million and $109 million in 2018, 2017 and 2016, respectively, attributable to redeemable noncontrolling interest.
2 Includes opening balance sheet adjustments related to the adoption of the new revenue recognition standard and the reclassification of the unrealized loss on
investments from Accumulated other comprehensive loss to Retained income. See Note 1 — Accounting Policies for additional details.
See accompanying notes to the consolidated financial statements.
48 S&P Global 2018 Annual Report
Notes to the Consolidated Financial Statements
Adoption of ASC 606, “Revenue From
Contracts with Customers”
We adopted ASC 606 “Revenue from Contracts with Customers”
using the modified retrospective transition method applied to
our revenue contracts with customers as of January 1, 2018.
Results for reporting periods beginning after January 1, 2018
are presented under ASC 606, while prior year amounts are
not adjusted and continue to be reported in accordance with
our historic accounting under ASC 605 “Revenue Recognition”.
We recorded a net increase to opening retained earnings of
$35 million as of January 1, 2018 due to the cumulative effect
of adopting ASC 606, with the impact primarily related to our
treatment of costs to obtain a contract and to a lesser extent,
changes to the timing of the recognition of our subscription and
non-transaction revenues. We recognized incremental revenue
of $6 million for the year ended December 31, 2018 as a result of
the adoption of this standard.
Under ASC 606, revenue is recognized when a customer obtains
control of promised goods or services in an amount that reflects
the consideration the entity expects to receive in exchange for
those goods or services. Under ASC 605, revenue was recognized
as it was earned and when services were rendered.
1. Accounting Policies
Nature of Operations
S&P Global Inc. (together with its consolidated subsidiaries,
the “Company,” the “Registrant,” “we,” “us” or “our”) is a leading
provider of transparent and independent ratings, benchmarks,
analytics and data to the capital and commodity markets
worldwide. The capital markets include asset managers,
investment banks, commercial banks, insurance companies,
exchanges, trading firms and issuers; and the commodity
markets include producers, traders and intermediaries within
energy, metals, petrochemicals and agriculture.
Our operations consist of four reportable segments: S&P Global
Ratings (“Ratings”), S&P Global Market Intelligence (“Market
Intelligence”), S&P Global Platts (“Platts”) and S&P Dow Jones
Indices (“Indices”).
• Ratings is an independent provider of credit ratings, research
and analytics, offering investors and other market participants
information, ratings and benchmarks.
• Market Intelligence is a global provider of multi-asset-class
data, research and analytical capabilities, which integrate
cross-asset analytics and desktop services.
• Platts is the leading independent provider of information and
benchmark prices for the commodity and energy markets. We
completed the sale of J.D. Power on September 7, 2016, with
the results included in Platts results through that date.
• Indices is a global index provider that maintains a wide variety
of valuation and index benchmarks for investment advisors,
wealth managers and institutional investors.
In April of 2018, we acquired Kensho Technologies Inc. (“Kensho”)
for approximately $550 million, net of cash acquired, in a mix of
cash and stock. The results of Kensho, an operating segment of
the Company, are included in Corporate revenue and Corporate
Unallocated for financial reporting purposes. Restricted cash
of $32 million included in our consolidated balance sheet as of
December 31, 2018 includes amounts held in escrow accounts
in connection with our acquisition of Kensho. See Note 2 –
Acquisitions and Divestitures for additional information and
Note 12 – Segment and Geographic Information for further
discussion on our reportable segments.
In January of 2018, we adopted Financial Accounting Standards
Board Accounting Standards Codification (“ASC”) 606 as
discussed below.
S&P Global 2018 Annual Report 49
The following table presents our revenue disaggregated by revenue type for the years ended December 31:
(in millions)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Intersegment
Elimination ¹
Total
Subscription
Non-transaction
Non-subscription / Transaction
Asset-linked fees
Sales usage-based royalties
$ —
1,506
1,377
—
—
$1,773
—
40
20
—
$750
—
11
—
54
2018
$144
—
—
522
171
Total revenue
$2,883
$1,833
$815
$837
Timing of revenue recognition
Services transferred at a point in time
Services transferred over time
Total revenue
$1,377
1,506
$2,883
$ 40
1,793
$1,833
$ 11
804
$815
$ —
837
$837
$15
—
—
—
—
$15
$ —
15
$15
$ —
(125)
—
—
—
$2,682
1,381
1,428
542
225
$(125)
$6,258
$ —
(125)
$(125)
$1,428
4,830
$6,258
(in millions)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Intersegment
Elimination ¹
Total
Subscription
Non-transaction
Non-subscription / Transaction
Asset-linked fees
Sales usage-based royalties
$ —
1,448
1,540
—
—
$1,614
—
46
23
—
$704
—
13
—
57
2017²
$136
—
—
461
131
$ —
—
—
—
—
$ —
(110)
—
—
—
$2,454
1,338
1,599
484
188
Total revenue
$2,988
$1,683
$774
$728
$ —
$(110)
$6,063
Timing of revenue recognition
Services transferred at a point in time
Services transferred over time
Total revenue
$1,540
1,448
$2,988
$46
1,637
$1,683
$13
761
$774
$ —
728
$728
$ —
—
$ —
$ —
(110)
$(110)
$1,599
4,464
$6,063
(in millions)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Intersegment
Elimination ¹
Total
Subscription
Non-transaction
Non-subscription / Transaction
Asset-linked fees
Sales usage-based royalties
$ —
1,357
1,178
—
—
$1,543
—
99
19
—
$689
—
183
—
53
2016²
$132
—
—
381
125
$ —
—
—
—
—
$ —
(98)
—
—
—
$2,364
1,259
1,460
400
178
Total revenue
$2,535
$1,661
$925
$638
$ —
$(98)
$5,661
Timing of revenue recognition
Services transferred at a point in time
Services transferred over time
Total revenue
$ 1,178
1,357
$2,535
$ 99
1,562
$1,661
$183
742
$925
$ —
638
$638
$ —
—
$ —
$ —
(98)
$(98)
$1,460
4,201
$5,661
1 Intersegment eliminations mainly consists of a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
2 As noted above, amounts for the years ended December 31, 2017 and 2016 were not adjusted under the modified retrospective transition method applied to our
revenue contracts with customers as of January 1, 2018.
50 S&P Global 2018 Annual Report
Subscription revenue
Subscription revenue at Market Intelligence is primarily derived
from distribution of data, analytics, third party research, and
credit ratings-related information primarily through web-based
channels including Market Intelligence Desktop, RatingsDirect®,
RatingsXpress®, and Credit Analytics. Subscription revenue at
Platts is generated by providing customers access to commodity
and energy-related price assessments, market data, and real-
time news, along with other information services. Subscription
revenue at Indices is derived from the contracts for underlying
data of our indexes to support our customers’ management of
index funds, portfolio analytics, and research.
For subscription products and services, we generally provide
continuous access to dynamic data sets and analytics for
a defined period, with revenue recognized ratably as our
performance obligation to provide access to our data and
analytics is progressively fulfilled over the stated term
of the contract.
Non-transaction revenue
Non-transaction revenue at Ratings is primarily related
to surveillance of a credit rating, annual fees for customer
relationship-based pricing programs, fees for entity credit
ratings and global research and analytics. Non-transaction
revenue also includes an intersegment revenue elimination
of $125 million, $110 million and $98 million for the years
ended December 31, 2018, 2017, and 2016 respectively,
mainly consisting of the royalty charged to Market Intelligence
for the rights to use and distribute content and data
developed by Ratings.
For non-transaction revenue related to Ratings’ surveillance
services, we continuously monitor factors that impact the
creditworthiness of an issuer over the contractual term with
revenue recognized to the extent that our performance obligation
is progressively fulfilled over the term contract. Because
surveillance services are continuously provided throughout
the term of the contract, our measure of progress towards
fulfillment of our obligation to monitor a rating is a time-based
output measure with revenue recognized ratably over the term
of the contract.
Non-subscription / Transaction revenue
Transaction revenue at our Ratings segment primarily includes
fees associated with:
• ratings related to new issuance of corporate and government
debt instruments; and structured finance instruments;
• bank loan ratings; and
• corporate credit estimates, which are intended, based on an
abbreviated analysis, to provide an indication of our opinion
regarding creditworthiness of a company which does not
currently have a Ratings credit rating.
Transaction revenue is recognized at the point in time when our
performance obligation is satisfied by issuing a rating on our
customer’s instruments, our customer’s creditworthiness, or a
counter-party’s creditworthiness and when we have a right to
payment and the customer can benefit from the significant risks
and rewards of ownership.
Non-subscription revenue at Market Intelligence is primarily
related to certain advisory, pricing and analytical services. Non-
subscription revenue at Platts is primarily related to conference
sponsorship, consulting engagements and events.
Asset-linked fees
Asset-linked fees at Indices and Market Intelligence are primarily
related to royalties payments based on the value of assets
under management in our customers exchange-traded funds
and mutual funds.
For asset-linked products and services, we provide licenses
conveying continuous access to our index and benchmark-
related intellectual property during a specified contract term.
Revenue is recognized when the extent that our customers
have used our licensed intellectual property can be quantified.
Recognition of revenue for our asset-linked fee arrangements is
subject to the “recognition constraint” for usage-based royalty
payments because we cannot reasonably predict the value of
the assets that will be invested in index funds structured using
our intellectual property until it is either publicly available or
when we are notified by our customers. Revenue derived from an
asset-linked fee arrangement is measured and recognized when
the certainty of the extent of its utilization of our index products
by our customers is known.
Sales usage-based royalties
Sales usage-based royalty revenue at our Indices segment is
primarily related to trading based fees from exchange-traded
derivatives. Sales and usage-based royalty revenue at our Platts
segment is primarily related to licensing of its proprietary market
price data and price assessments to commodity exchanges.
For sales usage-based royalty products and services, we
provide licenses conveying the right to continuous access to
our intellectual property over the contract term, with revenue
recognized when the extent of our license’s utilization can be
quantified, or more specifically, when trading volumes are known
and publicly available to us or when we are notified by our
customers. Recognition of revenue of fees tied to trading volumes
is subject to the recognition constraint for a usage-based royalty
promised by our customers in exchange for the license of our
intellectual property, with revenue recognized when trading
volumes are known.
Arrangements with Multiple Performance Obligations
Our contracts with customers may include multiple performance
obligations. Revenue relating to agreements that provide for
more than one performance obligation is recognized based upon
the relative fair value to the customer of each service component
as each component is earned. The fair value of the service
components are determined using an analysis that considers
S&P Global 2018 Annual Report 51
cash consideration that would be received for instances when
the service components are sold separately. If the fair value to
the customer for each service is not objectively determinable, we
make our best estimate of the services’ stand-alone selling price
and record revenue as it is earned over the service period.
Receivables
We record a receivable when a customer is billed or when
revenue is recognized prior to billing a customer. For multi-
year agreements, we generally invoice customers annually at
the beginning of each annual period. The opening balance of
accounts receivable, net of allowance for doubtful accounts,
was $1,319 million as of January 1, 2018.
Contract Assets
Contract assets include unbilled amounts from when the
Company transfers service to a customer before a customer
pays consideration or before payment is due. As of December 31,
2018 and 2017, contract assets were $26 million and $17 million,
respectively, and are included in accounts receivable in our
consolidated balance sheets.
Unearned Revenue
We record unearned revenue when cash payments are received
or due in advance of our performance. The increase in the
unearned revenue balance for the year ended December 31, 2018
is primarily driven by cash payments received or due in advance
of satisfying our performance obligations, offset by $1.5 billion of
revenues recognized that were included in the unearned revenue
balance at the beginning of the period.
Remaining Performance Obligations
Remaining performance obligations represent the transaction
price of contracts for work that has not yet been performed. As
of December 31, 2018, the aggregate amount of the transaction
price allocated to remaining performance obligations was $1.4
billion. We expect to recognize revenue on approximately half
and three-quarters of the remaining performance obligations
over the next 12 and 24 months, respectively, with the remainder
recognized thereafter.
We do not disclose the value of unfulfilled performance
obligations for (i) contracts with an original expected length
of one year or less and (ii) contracts where revenue is a
usage-based royalty promised in exchange for a license of
intellectual property.
Costs to Obtain a Contract
We recognize an asset for the incremental costs of obtaining a
contract with a customer if we expect the benefit of those costs
to be longer than one year. We have determined that certain sales
commission programs meet the requirements to be capitalized.
Total capitalized costs to obtain a contract were $101 million
as of December 31, 2018, and are included in prepaid and other
current assets and other non-current assets on our consolidated
balance sheets. The asset will be amortized over a period
consistent with the transfer to the customer of the goods or
services to which the asset relates, calculated based on the
52 S&P Global 2018 Annual Report
customer term and the average life of the products and services
underlying the contracts. The expense is recorded within selling
and general expenses.
We expense sales commissions when incurred if the
amortization period would have been one year or less. These
costs are recorded within selling and general expenses.
Presentation of net periodic pension cost and net
periodic postretirement benefit cost
During the first quarter of 2018, we adopted new accounting
guidance requiring that net periodic benefit cost for our
retirement and postretirement plans other than the service
cost component be included outside of operating profit; these
costs are included in other income, net in our consolidated
statements of income.
The components of other income, net for the year ended
December 31 are as follows:
(in millions)
Other components of net
periodic benefit cost
Net loss from investments
Other income, net
2018
$(30)
5
$(25)
2017
$(27)
—
$(27)
2016
$(28)
—
$(28)
Assets and Liabilities Held for Sale and
Discontinued Operations
Assets and Liabilities Held for Sale
We classify a disposal group to be sold as held for sale in the
period in which all of the following criteria are met: management,
having the authority to approve the action, commits to a plan
to sell the disposal group; the disposal group is available for
immediate sale in its present condition subject only to terms
that are usual and customary for sales of such disposal group;
an active program to locate a buyer and other actions required
to complete the plan to sell the disposal group have been
initiated; the sale of the disposal group is probable, and transfer
of the disposal group is expected to qualify for recognition as a
completed sale within one year, except if events or circumstances
beyond our control extend the period of time required to sell
the disposal group beyond one year; the disposal group is being
actively marketed for sale at a price that is reasonable in relation
to its current fair value; and actions required to complete the
plan indicate that it is unlikely that significant changes to the
plan will be made or that the plan will be withdrawn.
A disposal group that is classified as held for sale is initially
measured at the lower of its carrying value or fair value less
any costs to sell. Any loss resulting from this measurement is
recognized in the period in which the held for sale criteria are
met. Conversely, gains are not recognized on the sale of
a disposal group until the date of sale.
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 adjustment
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 criteria 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
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 determination 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 operationally and for
financial reporting purposes. If we conclude that the disposal
represents a strategic shift, then the results of operations of
the group of assets being disposed of (as well as any gain or
loss on the disposal transaction) are aggregated for separate
presentation apart from our continuing operating results in the
consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts
of all subsidiaries and our share of earnings or losses of joint
ventures and affiliated companies under the equity method
of accounting. All significant intercompany accounts and
transactions have been 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.
Cash and Cash Equivalents
Cash and cash equivalents include ordinary bank deposits
and highly liquid investments with original maturities of three
months or less that consist primarily of money market funds
with unrestricted daily liquidity and fixed term time deposits.
Such investments and bank deposits are stated at cost, which
approximates market value, and were $1.9 billion and $2.8
billion as of December 31, 2018 and 2017, respectively. These
investments are not subject to significant market risk.
Restricted Cash
Cash that is subject to legal restrictions or is unavailable for
general operating purposes is classified as restricted cash.
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 dividends are recorded in income when earned.
Accounts Receivable
Credit is extended to customers based upon an evaluation
of the customer’s financial condition. Accounts receivable,
which include billings consistent with terms of contractual
arrangements, are recorded at net realizable value.
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 indicators.
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 committed and it is probable that
the project will be completed and used to perform the function
intended. Incremental costs are expenditures that are out-of-
pocket to us and are not part of an allocation or existing expense
base. Software development and website implementation costs
are expensed 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 capitalized technology costs were $205
million and $186 million as of December 31, 2018 and 2017,
respectively. Accumulated amortization of capitalized technology
costs was $105 million and $104 million as of December 31, 2018
and 2017, respectively.
Fair Value
Certain assets and liabilities are required to be recorded at fair
value and classified within a fair value hierarchy based on inputs
used when measuring fair value. We have forward exchange
contracts that are adjusted to fair value on a recurring basis.
Other financial instruments, including cash and cash equivalents
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 as of December
31, 2018 and 2017, respectively, and was estimated based on
quoted market prices.
S&P Global 2018 Annual Report 53
Accounting for the Impairment of Long-lived Assets
(Including Other Intangible Assets)
We evaluate long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Upon such an occurrence,
recoverability of assets to be held and used is measured by
comparing the carrying amount of an asset to current forecasts
of undiscounted future net cash flows expected to be generated
by the asset. If the carrying amount of the asset exceeds its
estimated future cash flows, an impairment charge is recognized
equal to the amount by which the carrying amount of the asset
exceeds the fair value of the asset. For long-lived assets held for
sale, assets are written down to fair value, less cost to sell. Fair
value is determined based on market evidence, discounted cash
flows, appraised values or management’s estimates, depending
upon the nature of the assets.
For the year ended December 31, 2016, we recorded a non-
cash impairment charge of $24 million related to a technology
project at our Market Intelligence segment in selling and general
expenses in our consolidated statement of income.
Goodwill and Other Indefinite-lived Intangible Assets
Goodwill represents the excess of purchase price and related
costs over the value assigned to the net tangible and identifiable
intangible assets of businesses acquired. Goodwill and other
intangible assets with indefinite lives are not amortized, but
instead are tested for impairment annually during the fourth
quarter each year, or more frequently if events or changes
in circumstances indicate that the asset might be impaired.
We have four reporting units with goodwill that are 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 performed.
Conversely, if the results of our qualitative assessment
determine that it is more likely than not that the fair value of
any of our reporting units is less than their respective carrying
amounts we perform a two-step quantitative impairment test.
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 reporting units
are estimated using the income approach, which incorporates
the use of the discounted free cash flow (“DCF”) analyses and are
corroborated using the market approach, which incorporates the
use of revenue and earnings multiples based on market data. The
DCF analyses are based on the current operating budgets and
estimated long-term growth projections for each reporting unit.
Future cash flows are discounted based on a market comparable
weighted average cost of capital rate for each reporting unit,
54 S&P Global 2018 Annual Report
adjusted for market and other risks where appropriate. In
addition, we analyze any difference between the sum of the fair
values of the reporting units and our total market capitalization
for reasonableness, taking into account certain factors including
control premiums.
If the fair value of the reporting unit is less than the carrying
value, a second step is performed which compares the implied
fair value of the reporting unit’s goodwill to the carrying value of
the goodwill. The fair value of the goodwill is determined 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.
We evaluate the recoverability of indefinite-lived intangible
assets by first performing a qualitative analysis evaluating
whether any events and circumstances occurred that provide
evidence that it is more likely than not that the indefinite-lived
asset is impaired. If, based on our evaluation of the events and
circumstances that occurred during the year we do not believe
that it is more likely than not that the indefinite-lived asset
is impaired, no quantitative impairment test is performed.
Conversely, if the results of our qualitative assessment
determine 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 recognized in an amount
equal to that excess.
Significant judgments inherent 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 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.
We performed our impairment assessment of goodwill
and indefinite-lived intangible assets and concluded that
no impairment existed for the years ended December 31,
2018, 2017 and 2016.
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 company, the United States (“U.S.”)
dollar is the functional currency. For local currency operations,
assets and liabilities are translated into U.S. dollars using end of
period exchange rates, and revenue and expenses are translated
into U.S. dollars using weighted-average exchange rates. Foreign
currency translation adjustments are accumulated in a separate
component of equity.
Depreciation
The costs of property and equipment are depreciated using
the straight-line method based upon the following estimated
useful lives: buildings and improvements from 15 to 40 years
and equipment and furniture from 2 to 10 years. The costs of
leasehold improvements are amortized over the lesser of the
useful lives or the terms of the respective leases.
Advertising Expense
The cost of advertising is expensed as incurred. We incurred $33
million, $33 million and $35 million in advertising costs for the
years ended December 31, 2018, 2017 and 2016, respectively.
Stock-based Compensation
Stock-based compensation expense is measured at the grant
date based on the fair value of the award and is recognized over
the requisite service period, which typically is the vesting period.
Stock-based compensation is classified as both operating-
related expense and selling and general expense in the
consolidated statements of income.
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:
Year Ended December 31, 2018
Risk-free average interest rate
Dividend yield
Volatility
Expected life (years)
Weighted-average grant-date
fair value per option
2.6 - 2.7%
1.1%
21.8 - 22.0%
5.67 - 6.07
$112.98
Because lattice-based option-pricing models incorporate ranges
of assumptions, those ranges are disclosed. These assumptions
are based on multiple factors, including historical 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.
In 2018, we made a one-time issuance of incentive stock options
in connection with our acquisition of Kensho in April of 2018.
There were no stock options granted in 2017 and 2016.
Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to be applied to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. We recognize liabilities
for uncertain tax positions taken or expected to be taken in
income tax returns. Accrued interest and penalties related to
unrecognized tax benefits are recognized in interest expense and
operating expense, respectively.
Judgment is required in determining our provision for income
taxes, deferred tax assets and liabilities and unrecognized tax
benefits. In determining the need for a valuation allowance, the
historical and projected financial performance of the operation
that is recording a net deferred tax asset is considered along
with any other pertinent information.
We file income tax returns in the U.S. federal jurisdiction,
various 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 assessment
relies on estimates and assumptions and may involve a series
of complex judgments about future events. It is possible that
examinations will be settled prior to December 31, 2019. If
any of these tax audit settlements do occur within that period
we would make any necessary adjustments to the accrual for
unrecognized tax benefits.
As of December 31, 2018, we have approximately $2.3 billion of
undistributed earnings of our foreign subsidiaries, of which $784
million is reinvested indefinitely in our foreign operations.
Redeemable Noncontrolling Interest
The agreement with the minority partners of our S&P Dow Jones
Indices LLC joint venture established in June of 2012 contains
redemption features whereby interests held by our minority
partners are redeemable either (i) at the option of the holder
or (ii) upon the occurrence of an event that is not solely within
our control. Since redemption of the noncontrolling interest
is outside of our control, this interest is presented on our
consolidated balance sheets under the caption “Redeemable
noncontrolling interest.” If the interest were to be redeemed, we
would be required to purchase all of such interest at fair value on
the date of redemption. We adjust the redeemable noncontrolling
interest each reporting period to its estimated redemption value,
but never less than its initial fair value, using a combination of an
income and market valuation approach. Our income and market
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
further detail.
S&P Global 2018 Annual Report 55
Contingencies
We accrue for loss contingencies when both (a) information
available prior to issuance of the consolidated financial
statements indicates that it is probable that a liability had been
incurred at the date of the financial 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 potential amounts or ranges
of probable losses, and recognize a liability, if any, for these
contingencies based on an analysis of each matter with the
assistance of outside legal counsel and, if applicable, other
experts. Because many of these matters are resolved over long
periods of time, our estimate of liabilities may change due to
new developments, changes in assumptions or changes in
our strategy related to the matter. When we accrue for loss
contingencies and the reasonable estimate of the loss is within a
range, we record our best estimate within the range. We disclose
an estimated possible loss or a range of loss when it is at least
reasonably possible that a loss may be incurred.
Recent Accounting Standards
In November of 2018, the Financial Accounting Standards Board
(“FASB”) issued guidance that provides clarification on whether
certain transactions between collaborative arrangement
participants should be accounted for revenue with ASC 606.
The guidance is effective for reporting periods after December
15, 2019; however early adoption is permitted. We are currently
evaluating the impact of the adoption of this guidance on our
consolidated financial statements.
In August of 2018, the FASB issued guidance to align the
requirements for capitalizing implementation costs incurred
in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred
to develop or obtain internal-use software. The guidance is
effective for reporting periods beginning after December 15,
2019; however, early adoption is permitted. We are currently
evaluating the impact of this guidance on our consolidated
financial statements.
In February of 2018, the FASB issued guidance which allows
companies to reclassify certain stranded income tax effects
resulting from the enactment of the Tax Cuts and Jobs Act from
accumulated other comprehensive income to retained earnings.
The guidance is effective for reporting periods after December
15, 2018; however early adoption is permitted. We are currently
evaluating the impact of the adoption of this guidance on our
consolidated financial statements.
In August of 2017, the FASB issued guidance to enhance the
hedge accounting model for both nonfinancial and financial risk
components, which includes amendments to address certain
aspects of recognition and presentation disclosure. In October
of 2018, the FASB issued a subsequent update that permits the
inclusion of the Secured Overnight Financing Rate Overnight
Index Swap rate as a benchmark interest rate for hedge
56 S&P Global 2018 Annual Report
accounting purposes. The guidance is effective for reporting
periods beginning after December 15, 2018. We do not expect
this guidance to have a significant impact on our consolidated
financial statements.
In May of 2017, the FASB issued guidance that provides
clarification on when modification accounting should be
used for changes to the terms or conditions of a share-based
payment award. This guidance does not change the accounting
for modifications but clarifies when modification accounting
guidance should be applied. Under the new guidance, an entity
should apply modification accounting in response to a change
in the terms and conditions of an entity’s share-based payment
awards unless three newly specified criteria are met. The
guidance was effective on January 1, 2018, and the adoption
of this guidance did not have a significant impact on our
consolidated financial statements.
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 employers 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 net periodic
postretirement benefit cost to be presented in the income
statement separately from the service cost component outside
a subtotal of income from operations. Additionally, only the
service cost component is eligible for capitalization. We adopted
the guidance on January 1, 2018. The change in capitalization
requirement did not have a material impact on our consolidated
financial statements. As a result of the adoption of the guidance,
net periodic benefit cost for our retirement and post retirement
plans other than the service cost component are included in
other income, net in our consolidated statements of income. See
Note 7 – Employee Benefits for additional information related to
our retirement and postretirement plans.
In January of 2017, the FASB issued guidance that simplifies
the subsequent measurement of goodwill and eliminates Step 2
from the goodwill impairment test. Under the new guidance, an
entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its
carrying amount. An entity should recognize an impairment
charge for the amount by which the carrying amount exceeds
the reporting unit’s fair value; however, the 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 the goodwill impairment
loss, if applicable. The guidance is effective for reporting periods
beginning after December 15, 2019; however, early adoption is
permitted. We do not expect this guidance to have a significant
impact on our consolidated financial statements.
In January of 2017, the FASB issued guidance that clarifies the
definition of a business with the objective of adding guidance
to assist entities with evaluating whether transactions should
be accounted for as acquisitions (or disposals) of assets or
businesses. The guidance was effective on January 1, 2018, and
the adoption of this guidance did not have a significant impact on
our consolidated financial statements.
In November of 2016, the FASB issued guidance requiring that
a statement of cash flows explain the change during the period
in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. We
adopted this guidance on January 1, 2018. The adoption of this
guidance did not have a significant impact on our consolidated
financial statements.
In August of 2016, the FASB issued guidance providing
amendments to eight specific statement of cash flows
classification issues. The guidance was effective on January 1,
2018, and the adoption of this guidance did not 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 a “right of use” asset with an offsetting lease liability,
with expenses recognized similar to current lease accounting.
The guidance is effective for reporting periods beginning
after December 15, 2018, with early adoption permitted. In
July of 2018, the FASB issued a subsequent update providing
entities an additional transition method to adopt the new lease
standard, allowing entities to adopt the standard prospectively
without restating prior period’s financial statements. We have
elected this transition method upon adoption on January 1,
2019. We have also elected to apply the “package” of practical
expedients permitting entities to forgo reassessment of (1) the
lease classification of expired or existing leases, (2) whether
any expired or existing contracts contain leases, and (3) the
accounting for initial direct costs of existing leases.
Based on our preliminary analysis, we anticipate that following
the adoption of the new standard, the Company will recognize
a lease liability of approximately $700 million with an offsetting
right of use asset with no impact on our consolidated statements
of income or cash flows. As part of our implementation process,
we have refined our processes, procedures, and controls to
capture the complete population of our leases that incorporates
a third party software solution that will report both the initial and
ongoing financial statement impact of the new standard.
In January of 2016, the FASB issued guidance to enhance the
reporting model for financial instruments, which includes
amendments to address certain aspects of recognition,
measurement, presentation and disclosure. We adopted this
guidance on January 1, 2018. We recorded a reduction to
opening retained earnings and an increase to accumulated
other comprehensive income of $10 million as of January 1,
2018 due to the adoption of this guidance. The adoption of this
guidance did not have a significant impact on our consolidated
financial statements.
In May of 2014, the FASB and the International Accounting
Standards Board (“IASB”) issued jointly a converged standard
on the recognition of revenue from contracts with customers,
which is intended to improve the financial reporting of revenue
and comparability of the top line in financial statements globally.
The core principle of the new standard is for the recognition of
revenue to depict the transfer of goods or services to customers
in amounts that reflect the payment to which the company
expects to be entitled in exchange for those goods or services.
The new standard also results in enhanced revenue disclosures,
provides guidance for transactions that were not previously
addressed comprehensively and improve guidance for multiple-
element arrangements. We adopted the new revenue standard
effective January 1, 2018 using the modified retrospective
transition method. See Adoption of ASC 606, “Revenue from
Contracts with Customers” above for further details.
Reclassification
Certain prior year amounts have been reclassified for
comparability purposes.
2. Acquisitions and Divestitures
Acquisitions
2018
For the year ended December 31, 2018, we paid for acquisitions
in a mix of cash and stock. We paid cash for acquisitions of
$401 million, net of cash acquired, funded with cash flows from
operations. Additionally, stock consideration was given for our
acquisition of Kensho. None of our acquisitions were material
either individually or in the aggregate, including the pro forma
impact on earnings. Acquisitions completed during the year
ended December 31, 2018 included:
• In December of 2018, Indices purchased the balance of
the intellectual property (“IP”) rights in a family of indices
derived from the S&P 500, solidifying its IP in and to the S&P
500 index family. We accounted for the acquisition on a cost
basis. The transaction is not material to our consolidated
financial statements.
• In August of 2018, we acquired a 5.03% investment in
FiscalNote, a technology innovator at the intersection of
global business and government that provides advanced,
data-driven Issues Management solutions. We measured
the investment in FiscalNote at cost, less any impairment,
and changes resulting from observable price changes will
be recorded in the consolidated statements of income. The
investment in FiscalNote is not material to our consolidated
financial statements.
S&P Global 2018 Annual Report 57
• In June of 2018, Market Intelligence acquired the RateWatch
business (“RateWatch”) from TheStreet, Inc., a B2B data
business that offers subscription and custom reports on bank
deposits, loans, fees and other product data to the financial
services industry. The acquisition will complement and
strengthen Market Intelligence’s core capabilities of providing
differentiated data and analytics solutions for the banking
sector. We accounted for the acquisition of RateWatch using the
purchase method of accounting. The acquisition of RateWatch
is not material to our consolidated financial statements.
• In April of 2018, we acquired Kensho for approximately $550
million, net of cash acquired, in a mix of cash and stock.
Kensho is a leading-edge provider of next-generation analytics,
artificial intelligence, machine learning, and data visualization
systems to Wall Street’s premier global banks and investment
institutions, as well as the National Security community. The
acquisition will strengthen S&P Global’s emerging technology
capabilities, enhance our ability to deliver essential, actionable
insights that will transform the user experience for our
clients, and accelerate efforts to improve efficiency and
effectiveness of our core internal operations. We accounted
for the acquisition of Kensho using the purchase method of
accounting. The acquisition of Kensho is not material to our
consolidated financial statements.
• In February of 2018, Market Intelligence acquired Panjiva,
Inc. (“Panjiva”), a privately-held company that provides deep,
differentiated, sector-relevant insights on global supply chains,
leveraging data science and technology to make sense of large,
unstructured datasets. The acquisition will help strengthen
the insights, products and data that we provide to our clients
throughout the world. We accounted for the acquisition of Panjiva
using the purchase method of accounting. The acquisition of
Panjiva is not material to our consolidated financial statements.
• In January of 2018, CRISIL, included within our Ratings
segment, acquired a 100% stake in Pragmatix Services Private
Limited (“Pragmatix”), a data analytics company focused on
delivering cutting edge solutions in the “data to intelligence”
life cycle to the Banking, Financial Services and Insurance
vertical. The acquisition will strengthen CRISIL’s position as an
agile, innovative and global analytics company. We accounted
for the acquisition of Pragmatix using the purchase method of
accounting. The acquisition of Pragmatix is not material to our
consolidated financial statements.
For acquisitions during 2018 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
growth opportunities as a result of the acquisition. The intangible
assets, excluding goodwill and indefinite-lived intangibles, will
be amortized over their anticipated useful lives between 1 and
10 years which will be determined when we finalize our purchase
price allocations. The goodwill for RateWatch is expected to be
deductible for tax purposes.
58 S&P Global 2018 Annual Report
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
investment 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.
The investment with Algomi is not material to our consolidated
financial statements.
• In June of 2017, CRISIL, included within our Ratings segment,
acquired 8.9% of the outstanding shares of CARE Ratings
Limited (“CARE”) from Canara Bank. CARE is a Securities
and Exchange Board of India registered credit rating agency
providing various rating and grading services in India whose
shares are publicly traded on both the Bombay Stock Exchange
and the National Stock Exchange of India. We accounted for the
investment in CARE as available-for-sale using the fair value
method of accounting. The investment in CARE is not material
to our consolidated financial statements.
2016
For the year ended December 31, 2016, we paid cash for
acquisitions, net of cash acquired, totaling $177 million. None
of our acquisitions were material either individually or in the
aggregate, including the pro forma impact on earnings. All
acquisitions were funded with cash flows from operations.
Acquisitions completed during the year ended December
31, 2016 included:
• In December of 2016, Market Intelligence acquired a 2.54%
equity investment in 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 October of 2016, Indices acquired Trucost plc, a leader in
carbon and environmental data and risk analysis through
its subsidiary S&P Global Indices UK Limited. The purchase
will build on Indices’ current portfolio of Environmental,
Social and Governance solutions. The acquisition of Trucost
plc is not material to our consolidated financial statements.
In 2018, Trucost was integrated from Indices into Market
Intelligence and historical reporting was retroactively revised to
reflect the change.
• In September of 2016, Platts acquired PIRA Energy Group
(“PIRA”), a global provider of energy research and forecasting
products and services. The purchase enhances Platts’
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.
Non-cash investing activities
Liabilities assumed in conjunction with our acquisitions
are as follows:
• In June of 2016, Platts acquired RigData, a provider of daily
information on rig activity for the natural gas and oil markets
across North America. The purchase enhances Platts’
energy analytical capabilities by strengthening its position
in natural gas and enhancing its oil offering. We accounted
for the acquisition of RigData using the purchase method of
accounting. The acquisition of RigData is not material to our
consolidated financial statements.
(in millions)
Fair value of assets acquired
Cash and stock consideration
(net of cash acquired)
Liabilities assumed
DIVESTITURES
Year ended December 31,
2018
$857
803
$54
2017
$83
83
$ —
2016
$253
211
$42
• In June of 2016, Ratings acquired a 49% equity investment
in Thailand’s TRIS Rating Company Limited from its parent
company, TRIS Corporation Limited. The transaction extends
an existing association between Ratings and TRIS Rating and
deepens their commitment to capital markets in Thailand. We
accounted for the acquisition of TRIS Rating Company using
the equity method of accounting. The equity investment in TRIS
Rating is not material to our consolidated financial statements.
• In March of 2016, Platts acquired Commodity Flow, a specialist
technology and business intelligence service for the global
waterborne commodity and energy markets. The purchase
helps extend Platts’ trade flow analytical capabilities and
complements its existing shipping services. We accounted
for the acquisition of Commodity Flow using the purchase
method of accounting. The acquisition of Commodity Flow
is not material to our consolidated financial statements.
Following our acquisition of PIRA, we made a contingent
purchase price payment in 2016 for $34 million that has been
reflected in the consolidated statement of cash flows as an
investing 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 statement
of cash flows as a financing activity.
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
growth opportunities as a result of the acquisition. The intangible
assets, excluding goodwill and indefinite-lived intangibles, will
be amortized over their anticipated useful lives between 3 and
10 years which will be determined when we finalize our purchase
price allocations. The goodwill for PIRA and RigData is expected
to be deductible for tax purposes.
2018
During the year ended December 31, 2018, we did not complete
any material dispositions.
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 consolidated balance
sheet as of December 31, 2018 and 2017.
In January of 2017, we completed the sale of Quant House SAS
(“QuantHouse”), included in our Market 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 obligation, 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.
2016
During the year ended December 31, 2016, we completed the
following dispositions that resulted in a net pre-tax gain of
$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 Intelligence
segment, for $425 million in 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 dispositions in the consolidated statement of income
related to the sale of SPSE and CMA. Additionally, in October
of 2016, we completed the sale of Equity and Fund Research
(“Equity Research”) to CFRA, a leading independent provider of
S&P Global 2018 Annual Report 59
forensic accounting research, analytics and advisory services.
During the year ended December 31, 2016, we recorded a
pre-tax gain of $9 million ($5 million after-tax) in gain on
dispositions 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 Platts 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 of J.D. Power.
The operating profit of our businesses that were disposed of or
held for sale for the years ending December 31, 2018, 2017, and
2016 is as follows:
(in millions)
Operating profit ¹
Year ended December 31,
2018
$ —
2017
$ —
2016
$62
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, 2016
Other ¹
Balance as of December 31, 2017
Acquisitions
Other ¹
Balance as of December 31, 2018
Ratings
Market
Intelligence
$109
5
114
5
(6)
$1,960
1
1,961
62
6
Platts
Indices
Corporate
Total
$497
26
523
—
(7)
$383
8
383
—
(12)
$ —
—
—
498
—
$2,949
40
2,989
565
(19)
$113
$2,029
$516
$379
$498
$3,535
1 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. 2018 includes adjustments related to Trucost.
Goodwill additions in the table above relate to transactions discussed in Note 2 – Acquisitions and Divestitures.
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 $846 million and $714 million as of December 31, 2018 and
2017, respectively.
• 2018 and 2017 both include $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.
• 2018 and 2017 both include $185 million within our Market Intelligence segment for the SNL tradename.
• 2018 includes $132 million within our Indices segment for the balance of the IP rights in a family of indices derived from the S&P
500, solidifying Indices IP in and to the S&P 500 index family.
• 2018 and 2017 both include $59 million within our Indices segment for the Goldman Sachs Commodity Index intellectual property
and the Broad Market Indices intellectual property.
60 S&P Global 2018 Annual Report
The following table summarizes our definite-lived intangible assets:
(in millions)
COST
Balance as of December 31, 2016
Dispositions
Other ¹
Balance as of December 31, 2017
Acquisitions
Other (primarily Fx)
Databases
and software
Content
Customer
relationships
Tradenames
Other
intangibles
Total
$506
(4)
52
554
3
4
$139
$330
$45
$163
$1,183
—
—
139
—
—
(2)
19
347
—
(1)
—
5
50
—
—
—
(86)
77
123
(6)
(6)
(10)
1,167
126
(3)
Balance as of December 31, 2018
$561
$139
$346
$50
$194
$1,290
$36
$52
$391
4
—
1
1
42
3
—
—
6
(1)
(4)
4
57
32
(1)
(2)
98
(6)
—
10
493
122
—
(3)
$612
$674
$678
ACCUMULATED AMORTIZATION
Balance as of December 31, 2016
Current year amortization
Dispositions
Reclassifications
Other (primarily Fx)
Balance as of December 31, 2017
Current year amortization
Reclassifications
Other (primarily Fx)
$132
52
(3)
2
4
187
52
1
—
$87
14
—
—
—
101
14
—
—
$84
22
(2)
1
1
106
21
—
(1)
Balance as of December 31, 2018
$240
$115
$126
$45
$86
NET DEFINITE-LIVED INTANGIBLES:
December 31, 2017
December 31, 2018
$367
$321
$38
$24
$241
$220
$8
$5
$20
$108
1 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, 2018 is approximately 11 years.
Amortization expense for the years ended December 31, 2018, 2017 and 2016 was $122 million, $98 million, and $96 million,
respectively. 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
2019
$122
2020
$114
2021
$83
2022
$74
2023
$70
S&P Global 2018 Annual Report 61
4. Taxes on Income
Income before taxes on income resulting from domestic and
foreign operations is as follows:
Year ended December 31,
(in millions)
2018
2017
2016
Domestic operations
Foreign operations
$1,857
824
$1,723
$2,585
738
603
Total income before taxes
$2,681
$2,461
$3,188
The provision for taxes on income consists of the following:
(in millions)
Federal:
Current
Deferred
Total federal
Foreign:
Current
Deferred
Total federal
State and local:
Current
Deferred
Total state and local
Year ended December 31,
2018
2017
2016
$183
$489
$641
68
251
214
(2)
212
81
16
97
63
552
194
(3)
191
73
7
80
79
720
133
(4)
129
99
12
111
Total provision for taxes
$560
$823
$960
A reconciliation of the U.S. federal statutory income tax
rate to our effective income tax rate for financial reporting
purposes is as follows:
Year ended December 31,
2018
2017
2016
U.S. federal statutory income tax rate
21.0% 35.0% 35.0%
State and local income taxes
Divestitures
Foreign operations
TCJA Transition Tax
Stock-based compensation
S&P Dow Jones Indices LLC joint venture
Tax credits and incentives
Other, net
2.8
—
0.2
(0.3)
(1.2)
(1.2)
(1.7)
1.3
2.5
—
(3.9)
6.0
(2.7)
(1.8)
(2.1)
0.4
2.7
(4.3)
(2.0)
—
—
(1.2)
(1.6)
1.5
Effective income tax rate
20.9% 33.4%
30.1%
62 S&P Global 2018 Annual Report
The decrease in the effective income tax rate in 2018 was
primarily due to the reduction of the U.S. federal corporate
tax rate as a result of the enactment of the Tax Cuts and Jobs
Act (“TCJA”). Additionally, a one-time transition tax charge
of $149 million due to the TCJA was recorded in 2017, which
included tax expense of approximately $173 million on the
deemed repatriation of foreign earnings and a tax benefit of
approximately $24 million in respect of the re-valuation of
the net U.S. deferred tax liabilities at the reduced corporate
income tax rate.
We have elected to recognize the tax on Global Intangible Low
Taxed Income (“GILTI”) as a period expense in the year the tax is
incurred. GILTI expense is included in Other, net above.
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
Total deferred tax liabilities
Net deferred income tax asset
before valuation allowance
Valuation allowance
Net deferred income tax (liability) asset
Reported as:
Non-current deferred tax assets
Non-current deferred tax liabilities
Net deferred income tax (liability) asset
December 31,
2018
2017
$2
57
36
48
11
8
155
24
341
(295)
—
(295)
46
(156)
$(110)
$52
(162)
$(110)
$27
50
47
34
26
8
135
45
372
(249)
(4)
(253)
119
(127)
$(8)
$59
(67)
$(8)
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 primarily
related to operating losses.
As of December 31, 2018, we have approximately $2.3 billion
of undistributed earnings of our foreign subsidiaries, of which
$784 million is reinvested indefinitely in our foreign operations.
We have not recorded deferred income taxes applicable
to undistributed earnings of foreign subsidiaries that are
indefinitely reinvested in foreign operations. Quantification
of the deferred tax liability, if any, associated with indefinitely
reinvested earnings is not practicable.
We made net income tax payments totaling $558 million in 2018,
$709 million in 2017, and $683 million in 2016. As of December
31, 2018, we had net operating loss carryforwards of $691
million, of which a significant portion has an unlimited carryover
period under current law.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
with few exceptions, we are no longer subject to federal, state, or
foreign income tax examinations by tax authorities for the years
before 2011. The impact to tax expense in 2018, 2017 and 2016
was not material.
We file income tax returns in the U.S. federal jurisdiction and
various state and foreign jurisdictions, and we are routinely
under audit by many different tax authorities. We believe that
our accrual for tax liabilities is adequate for all open audit
years based on an assessment of many factors including past
experience and interpretations of tax law. This assessment
relies on estimates and assumptions and may involve a series
of complex judgments about future events. It is possible that
tax examinations will be settled prior to December 31, 2019. If
any of these tax audit settlements do occur within that period,
we would make any necessary adjustments to the accrual for
unrecognized tax benefits.
Year ended December 31,
5. Debt
2018
$212
2017
$ 221
2016
$162
A summary of short-term and long-term debt
outstanding is as follows:
(in millions)
Balance at beginning of year
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 limitations
19
2
(21)
(65)
—
23
17
(32)
(5)
(12)
48
20
(3)
(6)
—
Balance at end of year
$147
$212
$221
The total amount of federal, state and local, and foreign
unrecognized tax benefits as of December 31, 2018, 2017
and 2016 was $147 million, $212 million and $221 million,
respectively, exclusive of interest and penalties. During the
period ending December 31, 2018, there was no net tax impact to
tax expense from the change in unrecognized tax benefits.
We recognize accrued interest and penalties related to
unrecognized tax benefits in interest expense and operating-
related expense, respectively. 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 $40 million in the next twelve months as
a result of the resolution of local tax examinations. In addition
to the unrecognized tax benefits, as of December 31, 2018 and
2017, we had $35 million and $59 million, respectively, of accrued
interest and penalties associated with unrecognized tax benefits.
The U.S. federal income tax audit for 2017 is in process. During
2018, we completed federal, state and foreign tax audits and,
(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
4.5% Senior Notes, due 2048 7
Total debt
Less: short-term debt including
current maturities
December 31,
2018
$ —
698
693
892
493
396
490
2017
$399
697
692
892
493
396
—
3,662
3,569
—
399
Long-term debt
$3,662
$3,170
1 We made a $400 million early repayment of our 2.5% senior note in June of 2018.
2 Interest payments are due semiannually on February 14 and August 14, and
as of December 31, 2018, the unamortized debt discount and issuance costs
total $2 million.
3 Interest payments are due semiannually on June 15 and December 15, and
as of December 31, 2018, the unamortized debt discount and issuance costs
total $7 million.
4 Interest payments are due semiannually on February 15 and August 15, and
as of December 31, 2018, 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, 2018, 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, 2018, the unamortized debt discount and issuance costs
total $4 million.
7 Interest payments are due semiannually on May 15 and November 15, and
as of December 31, 2018, the unamortized debt discount and issuance costs
total $10 million.
S&P Global 2018 Annual Report 63
Annual debt maturities are scheduled as follows based on book
values as of December 31, 2018: no amounts due in 2019, $698
million due in 2020, no amounts due in 2021, 2022, and 2023
and $3.0 billion due thereafter.
On May 17, 2018, we issued $500 million of 4.5% notes due
in 2048. The notes are fully and unconditionally guaranteed
by our wholly-owned subsidiary, Standard & Poor’s Financial
Services LLC. In June of 2018, we used the net proceeds to fund
the redemption price of the $400 million outstanding principal
amount of our 2.5% senior notes due in August of 2018, and the
balance for general corporate purposes.
On September 22, 2016, we issued $500 million of 2.95% senior
notes due in 2027. The notes are fully and unconditionally
guaranteed by our wholly-owned subsidiary, Standard & Poor’s
Financial Services LLC. We used the net proceeds to fund
the $400 million early repayment of our 5.9% senior notes
due in 2017 on October 20, 2016, and the balance for general
corporate purposes.
We have the ability to borrow a total of $1.2 billion through our
commercial paper program, which is supported by our revolving
$1.2 billion five-year credit agreement (our “credit facility”)
that we entered into on June 30, 2017. This credit facility will
terminate on June 30, 2022. There were no commercial paper
borrowings outstanding as of December 31, 2018 and 2017.
Depending on our corporate credit rating, we pay a commitment
fee of 8 to 17.5 basis points for our credit facility, whether or not
amounts have been borrowed. We currently pay a commitment
fee of 10 basis points. The interest rate on borrowings under
our credit facility is, at our option, calculated using rates that
are primarily based on either the prevailing London Inter-Bank
Offer Rate, the prime rate determined by the administrative
agent or the Federal Funds Rate. For certain borrowings
under this credit facility, there is also a spread based on our
corporate credit rating.
Our credit facility contains certain covenants. The only financial
covenant requires that our indebtedness to cash flow ratio, as
defined in our credit facility, is not greater than 4 to 1, and this
covenant level has never been exceeded.
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
international 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, 2018 and December 31, 2017, we
have entered into foreign exchange forward contracts to mitigate
or hedge the effect of adverse fluctuations in foreign currency
exchange rates. Foreign exchange 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 twelve months ended December 31, 2018 and 2017,
we entered into foreign exchange forward contracts in order to
mitigate 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, 2018 and
2017, the aggregate notional value of these outstanding forward
contracts was $98 million and $130 million, respectively. The
changes in fair value of these forward contracts are recorded in
prepaid and other assets in the consolidated balance sheet with
their corresponding change in fair value recognized into selling
and general expenses in the consolidated statement of income.
The amount recorded in selling and general expense for the
twelve months ended December 31, 2018 and 2017 related to
these contracts was a net loss of $12 million and a net gain of $3
million, respectively.
Cash Flow Hedges
During the twelve months ended December 31, 2018 and 2017,
we entered into a series of foreign exchange forward contracts
to hedge a portion of the Indian rupee, British pound, and
Euro exposures through the fourth quarter of 2019 and 2018,
respectively. During the twelve months ended December 31,
2016, we entered into a series of foreign exchange forward
contracts to hedge a portion of the Indian Rupee exposure
through the fourth quarter of 2016. These contracts are intended
to offset the impact of movement of exchange rates on future
revenue and operating costs and are scheduled to mature within
twelve months. The changes in the fair value of these contracts
are initially reported in accumulated other comprehensive
loss in our consolidated balance sheet and are subsequently
reclassified into revenue and selling and general expenses in the
same period that the hedged transaction affects earnings.
64 S&P Global 2018 Annual Report
As of December 31, 2018, we estimate that $4 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, 2018.
As of December 31, 2018 and December 31, 2017, the aggregate notional value of our outstanding foreign exchange forward contracts
designated as cash flow hedges was $289 million and $307 million, respectively.
The following table provides information on the location and fair value amounts of our cash flow hedges as of December 31, 2018 and
December 31, 2017:
(in millions)
Balance Sheet Location
Derivatives designated as cash flow hedges:
Prepaid and other
current assets
Foreign exchange
forward contracts
December 31,
2018
2017
$3
$3
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 (Loss)
Reclassified from
Accumulated Other
Comprehensive Loss into
Income (effective portion)
Gain (Loss) Reclassified
from Accumulated Other
Comprehensive Loss into
Income (effective portion)
(in millions)
2018
2017
2016
2018
2017
2016
Cash flow hedges - Designated as hedging instruments
Foreign exchange forward contracts
$2
$—
$3
Revenue, Selling and
general expenses
$(4)
$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 on cash flow hedges, net of taxes, end of year
Year ended December 31,
2018
2017
$2
(2)
4
$4
$2
9
(9)
$2
2016
$(1)
7
(4)
$2
S&P Global 2018 Annual Report 65
7. Employee Benefits
We maintain a number of active defined contribution retirement plans for our employees. The majority of our defined benefit plans
are frozen. As a result, no new employees will be permitted to enter these plans and no additional benefits for current participants in
the frozen plans will be accrued.
We also have supplemental benefit plans that provide senior management with supplemental retirement, disability and death
benefits. Certain supplemental retirement benefits are based on final monthly earnings. In addition, we sponsor a voluntary 401(k)
plan under which we may match employee contributions up to certain levels of compensation as well as profit-sharing plans under
which we contribute a percentage of eligible employees’ compensation to the employees’ accounts.
We also provide certain medical, dental and life insurance benefits for active and retired employees and eligible dependents.
The medical and dental plans and supplemental life insurance plan are contributory, while the basic life insurance plan is
noncontributory. We currently do not prefund any of these plans.
We recognize the funded status of our retirement and postretirement plans in the consolidated balance sheets, with a corresponding
adjustment to accumulated other comprehensive loss, net of taxes. The amounts in accumulated other comprehensive loss represent
net unrecognized actuarial losses and unrecognized prior service costs. These amounts will be subsequently recognized as net
periodic pension cost pursuant to our accounting policy for amortizing such amounts.
66 S&P Global 2018 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
postretirement plans as of December 31, 2018 and 2017, is as follows (benefits paid in the table below include only those amounts
contributed directly to or paid directly from plan assets):
(in millions)
Net benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss (gain)
Gross benefits paid
Foreign currency effect
Other adjustments 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 ¹
Fair value of plan assets at end of year
Funded status
Amounts Recognized in Consolidated Balance Sheets
Non-current asset
Current liabilities
Non-current liabilities
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:
Net actuarial loss (gain)
Prior service credit
Total recognized
1 Relates to the impact of retiree annuity purchases in 2017.
RETIREMENT PLANS
POSTRETIREMENT PLANS
2018
$2,329
2017
$2,260
3
71
—
(199)
(103)
(26)
1
2,076
2,219
(113)
9
—
(103)
(25)
—
1,987
$(89)
$125
(9)
(205)
$(89)
$2,066
$214
$204
$ —
$460
2
$462
3
74
—
107
(110)
38
(43)
2,329
2,073
263
8
—
(110)
31
(46)
2,219
$(110)
$114
(9)
(215)
$(110)
$2,319
$224
$214
$ —
$451
1
$452
2018
$49
—
2017
$57
—
1
3
(4)
(8)
—
(1)
40
20
—
1
3
(8)
—
—
16
2
3
(5)
(8)
—
—
49
—
—
25
3
(8)
—
—
20
$(24)
$(29)
$ —
—
(24)
$(24)
$ —
—
(29)
$(29)
$(41)
(14)
$(55)
$(37)
(12)
$(49)
S&P Global 2018 Annual Report 67
The actuarial loss included in accumulated other comprehensive loss for our retirement plans and expected to be recognized in net
periodic benefit cost during the year ending December 31, 2019 is $13 million. There is an immaterial amount of 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, 2019.
The actuarial gain included in accumulated other comprehensive loss for our postretirement plans and expected to be recognized in
net periodic benefit cost during the year ending December 31, 2019 is $2 million. The prior year service credit included in accumulated
other comprehensive loss for our postretirement plans and expected to be recognized in net periodic benefit cost during the year
ending December 31, 2019 is $1 million.
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:
RETIREMENT PLANS
POSTRETIREMENT PLANS
(in millions)
Service cost
Interest cost
Expected return on assets
Amortization of:
Actuarial loss (gain)
Prior service credit
Other 1
Net periodic benefit cost
1 Represents a charge related to our U.K retirement plan.
2018
2017
2016
$3
71
$3
74
$3
78
(124)
(126)
(122)
20
—
4
18
—
8
16
—
—
2018
$ —
2017
$ —
2016
$ —
1
—
(2)
(1)
—
2
—
(2)
(2)
—
2
—
(1)
—
—
$1
$(26)
$(23)
$(25)
$(2)
$(2)
Our U.K. retirement plan accounted for a benefit of $10 million in 2018, $6 million in 2017, and $10 million in 2016 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
2018
$28
(15)
1
(4)
$10
2017
$(20)
(12)
—
(7)
$(39)
2016
$60
(10)
—
—
$50
2018
$(7)
1
1
—
$(5)
2017
$(3)
1
1
—
$(1)
2016
$(12)
1
(8)
—
$(19)
The total cost for our retirement plans was $80 million for 2018, $70 million for 2017 and $69 million for 2016. Included in the total
retirement plans cost are defined contribution plans cost of $79 million for 2018, $70 million for 2017 and $65 million for 2016.
68 S&P Global 2018 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
2018
2017
2016
2018
2017
2016
4.40%
3.68%
4.14%
4.15%
3.40%
3.69%
3.68%
2.41%
6.00%
4.13%
2.58%
6.25%
4.47%
3.84%
6.25%
6.50%
3.40%
7.00%
3.69%
7.00%
3.94%
1 The assumed weighted-average healthcare cost trend rate will decrease ratably from 6.5% in 2018 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, 2018, we changed our discount rate assumption on our U.S. retirement plans to 3.68% from 4.13% in 2017 and changed our discount rate
assumption on our U.K. plan to 2.41% from 2.58% in 2017.
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, 2019, our return on assets assumption for the U.S. plan and U.K. plan remained unchanged at 6.00%.
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 provided to
certain participants are at least actuarially equivalent to Medicare Part D, and, accordingly, we are entitled to a subsidy.
Expected employer contributions in 2019 are $46 million and $6 million for our retirement and postretirement plans respectively.
In 2019, 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)
2019
2020
2021
2022
2023
2024-2028
Postretirement Plans 2
Retirement 1
Plans
Gross
payments
Retiree
contributions
$91
94
96
99
101
534
$8
7
6
6
5
19
$(2)
(2)
(2)
(2)
1
(7)
Medicare
subsidy 3
$ —
—
—
—
—
—
Net
payments
$6
5
4
4
6
12
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.
S&P Global 2018 Annual Report 69
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 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
substantially 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, 2018 and 2017, by asset class is as follows:
70 S&P Global 2018 Annual Report
(in millions)
Cash and short-term investments
Equities:
U.S. indexes 1
U.S. growth and value
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 5
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, excluding U.K.
Real Estate:
U.K. 4
Total
Collective investment funds 5
Total
December 31, 2018
Total
Level 1
$4
21
69
—
—
—
—
—
—
—
$94
December 31, 2017
Level 1
$10
50
109
5
45
—
—
—
—
—
—
—
Level 2
$—
—
—
1,070
35
4
18
13
18
—
$1,158
Level 3
$—
—
—
—
—
—
—
—
—
39
$39
Level 2
$—
Level 3
$—
—
—
—
—
1,076
35
5
19
15
18
—
—
—
—
—
—
—
—
—
—
—
39
$39
$219
$1,168
$4
21
69
1,070
35
4
18
13
18
39
$1,291
$696
$1,987
Total
$10
50
109
5
45
1,076
35
5
19
15
18
39
$1,426
$793
$2,219
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.
5 Includes the Standard & Poor’s 500 Composite Stock Index, the Standard & Poor’s MidCap 400 Composite Stock Index,
a short-term investment fund which is a common collective trust vehicle, and other various asset classes.
S&P Global 2018 Annual Report 71
For securities that are quoted in active markets, the trustee/
custodian determines fair value by applying securities’ prices
obtained from its pricing vendors. For commingled funds that
are not actively traded, the trustee applies pricing information
provided by investment management firms to the unit quantities
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
traded derive their prices from investment managers, which in
turn, employ vendors that use pricing models (e.g., discounted
cash flow, comparables). The domestic defined benefit plans
have no investment in our stock, except through the S&P 500
commingled trust index fund.
The trustee obtains estimated prices from vendors for securities
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, 2017
Purchases
Distributions
Gain (loss)
Balance as of December 31, 2018
Level 3
$39
—
(2)
2
$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 $1,572 million
and $1,739 million as of December 31, 2018 and 2017
respectively, and the target allocations in 2018 include
75% fixed income, 16% domestic equities and 9%
international equities.
• The U.K. pension trust had assets of $415 million
and $480 million as of December 31, 2018 and 2017,
respectively, and the target allocations in 2018 include
40% fixed income, 30% diversified growth funds, 20%
equities and 10% real estate.
The pension assets are invested with the goal of producing a
combination of capital growth, income and a liability hedge.
The mix of assets is established after consideration of the long-
term performance and risk characteristics of asset classes.
Investments are selected based on their potential to enhance
returns, preserve capital and reduce overall volatility. Holdings
are diversified within each asset class. The portfolios employ a
mix of index and actively managed equity strategies by market
capitalization, style, geographic regions and economic sectors.
The fixed income strategies include U.S. long duration
securities, opportunistic fixed income securities and U.K. debt
instruments. The short-term portfolio, whose primary goal
is capital preservation for liquidity purposes, is composed of
government and government-agency securities, uninvested
cash, receivables and payables. The portfolios do not employ
any financial leverage.
U.S. Defined Contribution Plan
Assets of the defined contribution plan in the U.S. consist
primarily of investment options, which include actively managed
equity, indexed equity, actively managed equity/bond funds,
target date funds, S&P Global Inc. common stock, stable value
and money market strategies. There is also a self-directed
mutual fund investment option. The plan purchased 193,051
shares and sold 205,798 shares of S&P Global Inc. common
stock in 2018 and purchased 228,248 shares and sold 297,750
shares of S&P Global Inc. common stock in 2017. The plan
held approximately 1.5 million shares of S&P Global Inc.
common stock as of December 31, 2018 and 2017, with market
values of $251 million and $255 million, respectively. The plan
received dividends on S&P Global Inc. common stock of $3
million during both the years ended December 31, 2018 and
December 31, 2017.
8. Stock-Based Compensation
We issue stock-based incentive awards to our eligible employees
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 nonqualified stock
options, stock appreciation rights, performance stock,
restricted stock and other stock-based awards. In 2018,
we made a one-time issuance of incentive stock options
under the 2002 Plan to replace Kensho employees’
stock options that were assumed in connection with our
acquisition of Kensho in April of 2018.
• 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
compensation 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 equivalent number of shares credited to the
deferred stock account. Recipients under this plan are
not required to provide consideration 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 available under the plan.
72 S&P Global 2018 Annual Report
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
December 31,
2018
2017
33.3
1.7
35.0
33.8
2.1
35.9
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-based compensation expense and the corresponding tax
benefit are as follows:
(in millions)
2018
2017
2016
Expected life (years)
Year ended December 31,
Volatility
Stock option expense
Restricted stock and unit
awards expense
Total stock-based
compensation expense
Tax benefit
$5
89
$94
$19
$3
96
$99
$38
$7
69
$76
$29
Stock Options
Stock options may not be granted at a price less than the fair
market value of our common stock on the date of grant. Stock
options granted vest over a four year service period and have a
maximum term of 10 years. Stock option compensation costs are
recognized from the date of grant, utilizing a four-year graded
vesting method. Under this method, more than half of the costs
are recognized over the first twelve months, approximately
one-quarter of the costs are recognized over a twenty-four
month period starting from the date of grant, approximately
one-tenth of the costs are recognized over a thirty-six month
period starting from the date of grant, and the remaining
costs recognized over a forty-eight 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 used in
valuing the options granted:
Risk-free average interest rate
Dividend yield
Weighted-average grant-date fair
value per option
Year ended December 31, 2018
2.6 - 2.7%
1.1%
21.8 - 22.0%
5.67 - 6.07
$112.98
Because lattice-based option-pricing models incorporate ranges
of assumptions, those ranges are disclosed. These assumptions
are based on multiple factors, including historical 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.
In 2018, we made a one-time issuance of incentive stock
options under the 2002 Plan to replace Kensho employees’ stock
options that were assumed in connection with our acquisition
of Kensho in April of 2018. There were no stock options granted
in 2017 and 2016.
S&P Global 2018 Annual Report 73
Stock option activity is as follows:
(in millions, except per award amounts)
Options outstanding as of December 31, 2017
Granted
Exercised
Forfeited and expired 1
Options outstanding as of December 31, 2018
Options exercisable as of December 31, 2018
1 There are less 0.1 million shares forfeited and expired.
(in millions, except per award amounts)
Nonvested options outstanding as of December 31, 2017
Granted
Vested
Forfeited 1
Nonvested options outstanding as of December 31, 2018
Total unrecognized compensation expense related to nonvested options
Weighted-average years to be recognized over
1 There are less than 0.1 million shares forfeited.
Shares
Weighted average
exercise price
Weighted-average
remaining years of
contractual term
Aggregate
intrinsic value
2.1
0.2
(0.6)
—
1.7
1.6
$44.09
$74.11
$161.14
$71.68
$47.92
$46.69
3.3
3.1
$202
$195
Shares
Weighted-average
grant-date fair value
$27.52
$112.98
$112.36
$112.14
$113.02
—
0.2
(0.1)
—
0.1
$2
2.0
The total fair value of our stock options that vested during the years ended December 31, 2018, 2017 and 2016 was $5 million,
$4 million and $7 million, respectively.
Information regarding our stock option exercises is as follows:
(in millions)
Net cash proceeds from the exercise of stock options
Total intrinsic value of stock option exercises
Income tax benefit realized from stock option exercises
2018
$34
$77
$27
Year ended December 31,
2017
$75
$118
$64
2016
$88
$95
$41
74 S&P Global 2018 Annual Report
RESTRICTED STOCK AND UNIT AWARDS
Restricted stock and unit awards (performance and non-
performance) have been granted under the 2002 Plan.
Performance unit awards will vest only if we achieve certain
financial goals over the performance period. Restricted stock
non-performance awards have various vesting periods (generally
three years), with vesting beginning on the first anniversary
of the awards. Recipients of restricted stock and unit awards
are not required to provide consideration to us other than
rendering service.
The stock-based compensation expense for restricted stock
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
of awards that are anticipated to fully vest. For performance
unit awards, adjustments are made to expense dependent upon
financial goals achieved.
Restricted stock and unit activity for performance and non-
performance awards is as follows:
(in millions, except per award
amounts)
Nonvested shares as of
December 31, 2017
Granted
Vested
Forfeited
Nonvested shares as of
December 31, 2018
Total unrecognized
compensation expense related
to nonvested awards
Weighted-average years
to be recognized over
Shares
Weighted-
average grant-
date fair value
$124.91
$182.75
$167.13
$149.03
$172.24
0.8
1.0
(0.9)
(0.1)
0.8
$76
1.9
Weighted-average grant-date
fair value per award
Total fair value of restricted
stock and unit awards vested
Tax benefit relating to
restricted stock activity
Year ended December 31,
2018
2017
2016
$182.75
$147.12
$93.01
$154
$147
$32
$36
$99
$26
9. Equity
Capital Stock
Two million shares of preferred stock, par value $1 per share, are
authorized; none have been issued.
On January 30, 2019, the Board of Directors approved an
increase in the dividends for 2019 to a quarterly rate of $0.57
per common share.
Quarterly dividend rate
Annualized dividend rate
Dividends paid (in millions)
Year ended December 31,
2018
$0.50
$2.00
$503
2017
$0.41
$1.64
$421
2016
$0.36
$1.44
$380
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)
Total number of shares purchased 1
Year ended December 31,
2018
$8.4
2017
$6.8
2016
$9.7
Average price paid per share 2
$197.21
$147.74
$113.36
Total cash utilized 2
$1,660
$1,001
$1,097
1 2018, 2017 and 2016 includes shares received as part of our accelerated
share 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. Cash used for financing activities only
reflects those shares which settled during the year ended December 31, 2018,
2017 and 2016 resulting in $1,660 million, $1,001 million and $1,123 million of
cash used to repurchase shares, respectively.
Our purchased shares may be used for general corporate
purposes, including the issuance of shares for stock
compensation plans and to offset the dilutive effect of the
exercise of employee stock options. As of December 31, 2018,
10.6 million shares remained available under our current share
repurchase program. Our current share 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 conditions.
S&P Global 2018 Annual Report 75
Accelerated Share Repurchase Agreements
2018
We entered into an accelerated share repurchase (“ASR”)
agreement with a financial institution on October 29, 2018 to
initiate share repurchases aggregating $500 million. The ASR
agreement was structured as an uncapped ASR agreement in
which we paid $500 million and received an initial delivery of
approximately 2.5 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 January 2, 2019 and
received an additional 0.4 million shares. We repurchased a total
of 2.9 million shares under the ASR agreement for an average
purchase price of $173.80 per share. The total 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.
We entered into an ASR agreement with a financial institution
on March 6, 2018 to initiate share repurchases aggregating
$1 billion. The ASR agreement was structured as an uncapped
ASR agreement in which we paid $1 billion and received an
initial delivery of approximately 4.5 million shares, representing
85% of the $1 billion at a price equal to the then market
price of the Company. We completed the ASR agreement on
September 25, 2018, and received an additional 0.6 million
shares. We repurchased a total of 5.1 million shares under
the ASR agreement for an average purchase price of $197.49
per share. The total number of shares repurchased under the
ASR agreement is equal to $1 billion 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.
2017
We entered into an ASR agreement with a financial institution on
August 1, 2017 to initiate share repurchases aggregating $500
million. The ASR 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 repurchased
a total of 3.2 million shares under the ASR agreement for an
average purchase price of $154.46 per share. The total 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.
2016
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 completed
the ASR agreement on December 7, 2016 and received an
additional 0.9 million shares, which settled on December 12,
2016. We repurchased a total of 6.1 million shares under the
ASR agreement for an average purchase price of $122.18 per
share. The total number of shares repurchased under the ASR
agreement was based on the volume weighted-average share
price, minus a discount, of our common stock over the term of
the ASR agreement. The repurchased shares are held in Treasury.
The ASR agreement was executed under the current share
repurchase program, approved on December 4, 2013.
The ASR agreements discussed above were each accounted
for as two transactions: a stock purchase transaction and a
forward stock purchase contract. 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 purposes of calculating basic and diluted
earnings per share. The forward stock purchase contract was
classified as an equity instrument.
We entered into an ASR agreement with a financial
institution on February 11, 2019 to initiate share repurchases
aggregating $500 million.
Redeemable Noncontrolling Interests
The agreement with the minority partners that own 27% of our
S&P Dow Jones Indices LLC joint venture contains redemption
features whereby interests held by minority partners are
redeemable either (i) at the option of the holder or (ii) upon the
occurrence of an event that is not solely within our control.
Specifically, under the terms of the operating agreement of S&P
Dow Jones Indices LLC, after December 31, 2017, CME Group and
CME Group Index Services LLC (“CGIS”) has 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. In addition, in the event there is
a change of control of the Company, for the 15 days following a
change in control, CME Group and CGIS will have the right to put
their interest to us at the then fair value of CME Group’s and CGIS’
minority interest.
76 S&P Global 2018 Annual Report
If interests were to be redeemed under this agreement, we
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 redeemable noncontrolling interest each reporting period
to its estimated redemption value, but never less than its
initial fair value, considering a combination of an income and
market valuation approach. Our income and market valuation
approaches may incorporate Level 3 fair value 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.
Noncontrolling interests that do not contain such redemption
features are presented in equity.
Changes to redeemable noncontrolling interest during the year
ended December 31, 2018 were as follows:
(in millions)
Balance as of December 31, 2017
Net income attributable to
noncontrolling interest
Distributions to noncontrolling interest
Redemption value adjustment
Balance as of December 31, 2018
$1,352
151
(111)
228
$1,620
Accumulated Other Comprehensive Loss
The following table summarizes the changes in the components of accumulated other comprehensive loss for the year ended
December 31, 2018:
(in millions)
Balance as of December 31, 2017
Other comprehensive loss before
reclassifications
Reclassifications from accumulated other
comprehensive loss to net earnings
Net other comprehensive (loss) income
Amounts reclassified to retained income
Balance as of December 31, 2018
Foreign
Currency
Translation
Adjustment
Pension and
Postretirement
Benefit Plans 1
Unrealized
Gain (Loss)
on Forward
Exchange
Contracts 2
Unrealized
Loss on
Investment 3
Accumulated
Other
Comprehensive
Loss
$(239)
(100)
—
(100)
—
$(339)
$(402)
(19)
14
(5)
—
$(407)
$2
(2)
4
2
—
$4
(10)
—
—
—
10
$ —
$(649)
(121)
18
(103)
10
$(742)
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.
3 On January 1, 2018, the unrealized loss on investments was reclassified to retained income. See Note 1 - Accounting Policies for additional details.
The net actuarial loss and prior service cost related to pension and other postretirement benefit plans included in other
comprehensive income is net of a tax provision of $9 million for the year ended December 31, 2018.
S&P Global 2018 Annual Report 77
10. Earnings per Share
Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the
Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic
EPS, except the number of shares is increased to include additional common shares that would have been outstanding if potential
common shares with a dilutive effect had been issued. Potential common shares consist primarily of stock options and restricted
performance shares calculated using the treasury stock method.
The calculation for basic and diluted EPS is as follows:
(in millions, except per share data)
2018
2017
2016
Year ended December 31,
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
Diluted weighted-average number of common shares outstanding
Earnings per share attributable to S&P Global Inc. common shareholders:
Net income:
Basic
Diluted
$1,958
250.9
2.3
253.2
$7.80
$7.73
$1,496
256.3
2.6
258.9
$5.84
$5.78
$2,106
262.8
2.4
265.2
$8.02
$7.94
Each period we have certain stock options and restricted performance shares that are potentially excluded from the computation
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, 2018, 2017 and 2016, there were no stock options excluded. Restricted performance
shares outstanding of 0.5 million, 0.6 million and 0.7 million as of December 31, 2018, 2017 and 2016, respectively, were excluded.
78 S&P Global 2018 Annual Report
11. Restructuring
During 2018 and 2017, we continued to evaluate our cost structure and further identified cost savings associated with streamlining
our management structure and our decision to exit non-strategic businesses. Our 2018 and 2017 restructuring plans consisted of a
company-wide workforce reduction of approximately 160 and 520 positions, respectively, and are further detailed below. The charges
for each restructuring plan are classified as selling and general expenses within the consolidated statements of income and the
reserves are included in other current liabilities in the consolidated balance sheets.
In certain circumstances, reserves are no longer needed because of efficiencies in carrying out the plans or because employees
previously identified for separation resigned from the Company and did not receive severance or were reassigned due to
circumstances not foreseen when the original plans were initiated. In these cases, we reverse reserves through the consolidated
statements of income during the period when it is determined they are no longer needed. There were approximately $6 million of
reserves from the 2017 restructuring plan that we have reversed in 2018, which offset the initial charge of $44 million recorded for
the 2017 restructuring plan. There were approximately $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.
The initial restructuring charge recorded and the ending reserve balance as of December 31, 2018 by segment is as follows:
(in millions)
Ratings
Market Intelligence
Platts
Indices
Corporate
Total
2018 Restructuring Plan
2017 Restructuring Plan
Initial Charge
Recorded
Ending Reserve
Balance
Initial Charge
Recorded
Ending Reserve
Balance
$8
7
—
—
10
$25
$8
7
—
—
9
$24
$25
8
1
—
10
$44
$7
1
—
—
2
$10
For the year ended December 31, 2018, we have reduced the reserve for the 2018 restructuring plan by $1 million and for the years
ended December 31, 2018 and 2017, we have reduced the reserve for the 2017 restructuring plan by $29 million and $5 million,
respectively. The reductions primarily related to cash payments for employee severance charges.
S&P Global 2018 Annual Report 79
Operating Profit
(in millions)
Ratings 2
Market Intelligence 3
Platts 4
Indices 5
2018
2017
2016
$1,530
$1,517
$1,256
545
383
563
457
326
478
729
1,090
413
Total reportable segments
3,021
2,778
3,488
Corporate Unallocated 6
(231)
(195)
(147)
Total operating profit
$2,790
$2,583
$3,341
1 Revenue for Ratings and expenses for Market Intelligence include an
intersegment royalty charged to Market Intelligence for the rights to use and
distribute content and data developed by Ratings.
2 Operating profit for the year ended December 31, 2018 includes legal settlement
expenses of $74 million and employee severance charges of $8 million. 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. Additionally, operating profit includes amortization of
intangibles from acquisitions of $2 million, $4 million $5 million for the years
ended December 31, 2018, 2017 and 2016, respectively.
3 Operating profit for the year ended December 31, 2018 includes restructuring
charges related to a business disposition and employee severance charges
of $7 million. Operating profit for the year ended December 31, 2017 includes
employee severance charges of $7 million, and non-cash disposition-related
adjustments of $4 million. Operating profit for the year ended December 31,
2016 includes a $373 million gain from our dispositions, disposition-related
costs of $43 million, a technology-related impairment charge of $24 million and
an acquisition-related cost of $1 million. Additionally, operating profit includes
amortization of intangibles from acquisitions of $73 million, $71 million and $72
million for the years ended December 31, 2018, 2017 and 2016, respectively.
4 Operating profit for the year ended December 31, 2017 includes non-cash
acquisition-related adjustment of $11 million, a charge to exit a leased facility
of $6 million, an asset write-off of $2 million, and employee severance charges
of $2 million. Operating profit for the year ended December 31, 2016 includes
a $728 million gain from our dispositions and disposition-related costs of $5
million. Additionally, Operating profit includes amortization of intangibles from
acquisitions of $18 million for the years ended December 31, 2018 and 2017 and
$14 million for the year ended December 31, 2016.
5 Operating profit includes amortization of intangibles from acquisitions of $6
million for the years ended December 31, 2018, 2017 and 2016, respectively.
6 Corporate Unallocated operating loss for the year ended December 31, 2018
includes Kensho retention related expense of $31 million, lease impairments
of $11 million and employee severance charges of $10 million. Corporate
Unallocated operating loss for the year ended December 31, 2017 includes a
charge to exit leased facilities of $19 million and employee severance charges
of $10 million. The year ended December 31, 2016 includes $3 million from
a disposition-related reserve release. Additionally, Corporate Unallocated
operating loss includes amortization of intangibles from acquisitions of $23
million for the year December 31, 2018.
12. Segment and
Geographic Information
As discussed in Note 1 – Accounting Policies, we have
four reportable segments: Ratings, Market Intelligence,
Platts and Indices.
Our Chief Executive Officer is our chief operating decision-maker
and evaluates performance of our segments and allocates
resources based primarily on operating profit. Segment operating
profit does not include Corporate Unallocated, other income, net,
or interest expense, net, as these are costs that do not affect the
operating results of our reportable segments. We use the same
accounting policies for our segments as those described in Note
1 – Accounting Policies.
In April of 2018, we acquired Kensho for approximately $550
million, net of cash acquired, in a mix of cash and stock. The
results of Kensho, an operating segment of the Company, are
included in Corporate revenue and Corporate Unallocated for
financial reporting purposes. See Note 2 – Acquisitions and
Divestitures for additional information.
Effective beginning with the first quarter of 2018, we began
reporting the financial results of Market Intelligence and Platts
as separate reportable segments consistent with the changes to
our organizational structure and how our Chief Executive Officer
evaluates the performance of these segments. Our historical
segment reporting has been retroactively revised to reflect the
current organizational structure.
A summary of operating results for the years ended December
31 is as follows:
Revenue
(in millions)
Ratings
Market Intelligence
Platts
Indices
Corporate
2018
2017
2016
$2,883
$2,988
$2,535
1,833
1,683
1,661
815
837
15
774
728
—
925
638
—
(98)
Intersegment elimination 1
(125)
(110)
Total revenue
$6,258
$6,063
$5,661
80 S&P Global 2018 Annual Report
(in millions)
Ratings
Market Intelligence
Platts
Indices
Total reportable segments
Corporate
Total
Segment information as of December 31 is as follows:
(in millions)
Ratings
Market Intelligence
Platts
Indices
Total reportable segments
Corporate 1
Assets held for sale 2
Total
Depreciation & Amortization
Capital Expenditures
2018
$32
99
27
9
167
39
$206
2017
2016
$34
104
25
8
171
9
$34
105
26
8
173
8
2018
$42
30
9
3
84
29
2017
$45
37
15
3
100
23
$180
$181
$113
$123
2016
$42
40
17
3
102
13
$115
Total Assets
2018
$680
3,606
787
1,443
6,516
2,928
14
2017
$788
3,381
791
1,270
6,230
3,190
5
$9,458
$9,425
1 Corporate assets consist principally of cash and cash equivalents, goodwill and other intangible assets, assets for pension benefits, deferred income taxes and
leasehold improvements related to subleased areas.
2 Includes East Windsor, New Jersey facility as of December 31, 2018 and 2017, respectively.
S&P Global 2018 Annual Report 81
We do not have operations in any foreign country that represent more than 8% of our consolidated revenue. Transfers between
geographic areas are recorded at agreed upon prices and intercompany revenue and profit are eliminated. No single customer
accounted for more than 10% of our consolidated revenue.
The following provides revenue and long-lived assets by geographic region:
(in millions)
U.S.
European region
Asia
Rest of the world
Total
U.S.
European region
Asia
Rest of the world
Total
REVENUE
LONG-LIVED ASSETS
Year ended December 31,
2018
2017
2016
$3,750
$3,658
$3,461
1,543
1,473
1,330
647
318
594
338
575
295
December 31,
2018
2017
$5,019
$4,285
317
51
42
346
54
49
$6,258
$6,063
$5,661
$5,429
$4,734
REVENUE
LONG-LIVED ASSETS
Year ended December 31,
December 31,
2018
60%
25
10
5
2017
60%
24
10
6
2016
61%
24
10
5
2018
92%
6
1
1
2017
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 March of 2018, the Company made a $20 million contribution
to the S&P Global Foundation.
In June of 2012, we entered into a license agreement (the
“License Agreement”) with the holder of S&P Dow Jones Indices
LLC noncontrolling interest, CME Group, which replaced the
2005 license agreement between Indices and CME Group. Under
the terms of the License Agreement, S&P Dow Jones Indices
LLC receives a share of the profits from the trading and clearing
of CME Group’s equity index products. During the years ended
December 31, 2018, 2017 and 2016, S&P Dow Jones Indices
LLC earned $121 million, $74 million and $76 million of revenue
under the terms of the License Agreement, respectively. The
entire amount of this revenue is included in our consolidated
statement of income and the portion related to the 27%
noncontrolling interest is removed in net income attributable to
noncontrolling interests.
Rental Expense and Lease Obligations
We are committed under lease arrangements covering
property, computer systems and office equipment. Leasehold
improvements are amortized on a straight-line basis over the
shorter of their economic lives or their lease term. Certain lease
arrangements contain escalation clauses covering increased
costs for various defined real estate taxes and operating services
and the associated fees are recognized on a straight-line 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
Net rental expense
Year ended December 31,
2018
$172
(17)
$155
2017
$177
(17)
$160
2016
$179
(16)
$163
82 S&P Global 2018 Annual Report
Cash amounts for future minimum rental commitments under
existing non-cancelable leases with a remaining term of more
than one year, along with minimum sublease rental income to
be received under non-cancelable subleases are shown in the
following table.
(in millions)
Rent
commitment
Sublease
income
2019
2020
2021
2022
2023
2024 and beyond
Total
$130
102
85
75
67
400
$859
$(17)
(3)
—
—
—
—
$(20)
Net
rent
$113
99
85
75
67
400
$839
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 the outcome of such matters and
the effects, if any, on our consolidated financial condition, cash
flows, business or competitive position, which may require that
we record liabilities in the consolidated financial statements in
future periods.
S&P Global Ratings
In the second quarter the Company entered into an agreement
to settle certain civil cases in Australia against the Company and
certain of its subsidiaries relating to alleged investment losses in
collateralized debt obligations rated by S&P Global Ratings. The
settlement was approved by the court in August 2018.
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
government and regulatory proceedings, investigations and
inquiries. 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. For example, 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 communication with
the staff of the SEC regarding compliance with its extensive
obligations under the federal securities laws. Although S&P
Global Ratings seeks to promptly address any compliance issues
that it detects or that the staff of the SEC raises, there can be
no assurance that the SEC will not seek remedies against S&P
Global Ratings for one or more compliance deficiencies. Any of
these proceedings, 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.
In view of the uncertainty inherent in litigation and government
and regulatory enforcement matters, we cannot predict
the eventual outcome of such matters or the timing of their
resolution, or in most cases reasonably estimate what the
eventual judgments, damages, fines, penalties or impact of
activity (if any) restrictions may be. As a result, we cannot provide
assurance that such outcomes will not have a material adverse
effect on our consolidated financial condition, cash flows,
business or competitive position. As litigation or the process
S&P Global 2018 Annual Report 83
14. Quarterly Financial Information (Unaudited)
(in millions, except per share data)
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
2018
Revenue
Operating profit
Net income
Net income attributable to S&P
Global common shareholders
$1,567
$1,609
$1,546
$1,536
$711
$534
$491
$672
$501
$461
$704
$535
$495
$704
$551
$512
Earnings per share attributable to S&P Global Inc. common shareholders:
Net income:
Basic
Diluted
2017
Revenue
Operating profit
Net income
Net income attributable to S&P
Global common shareholders
$1.94
$1.93
$1.83
$1.82
$1.97
$1.95
$2.06
$2.03
$1,453
$1,509
$1,513
$1,589
$639
$430
$399
$668
$457
$421
$649
$452
$414
$627
$299
$263
Total
year
$6,258
$2,790
$2,121
$1,958
$7.80
$7.73
$6,063
$2,583
$1,638
$1,496
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
$1.53
$1.63
$1.62
$1.62
$1.61
$1.03
$1.02
$5.84
$5.78
84 S&P Global 2018 Annual Report
15. Condensed Consolidating Financial Statements
On May 17, 2018, we issued $500 million of 4.5% notes due in 2048. 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 operations,
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.
STATEMENT OF INCOME
Year Ended December 31, 2018
(in millions)
Revenue
Expenses
Operating-related expenses
Selling and general expenses
Depreciation
Amortization of intangibles
Total expenses
Operating profit
Other income, net
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
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$776
$1,695
$3,940
$(153)
$6,258
127
183
37
—
347
429
(27)
143
363
(50)
(14)
3,576
3,540
—
$3,540
$3,510
434
292
7
—
733
962
—
2
(75)
1,035
250
(1)
784
—
$784
$783
1,293
1,086
40
122
2,541
1,399
2
(11)
(1,872)
3,280
324
—
2,956
—
$2,956
$2,884
(153)
—
—
—
(153)
—
—
—
1,584
(1,584)
—
(3,575)
(5,159)
(163)
$(5,322)
$(5,159)
1,701
1,561
84
122
3,468
2,790
(25)
134
—
2,681
560
—
2,121
(163)
$1,958
$2,018
S&P Global 2018 Annual Report 85
STATEMENT OF INCOME
Year Ended December 31, 2017
(in millions)
Revenue
Expenses
Operating-related expenses
Selling and general expenses
Depreciation
Amortization of intangibles
Total expenses
Operating profit
Other income, net
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
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$717
$1,780
$3,704
$(138)
$6,063
90
196
31
—
317
400
(16)
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
1,064
40
98
2,463
1,241
(11)
(14)
(2,463)
3,729
427
—
3,302
—
$3,302
$3,401
(138)
—
—
—
(138)
—
—
—
2,175
(2,175)
—
(3,808)
(5,983)
(142)
$(6,125)
$(5,982)
1,695
1,605
82
98
3,480
2,583
(27)
149
—
2,461
823
—
1,638
(142)
$1,496
$1,762
86 S&P Global 2018 Annual Report
STATEMENT OF INCOME
Year Ended December 31, 2016
(in millions)
Revenue
Expenses
Operating-related expenses
Selling and general expenses
Depreciation
Amortization of intangibles
Total expenses
Gain on disposition
Operating profit
Other income, net
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
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$667
$1,513
$3,607
$(126)
$5,661
114
128
38
—
280
(1,072)
1,459
(20)
191
356
932
275
2,412
3,069
—
$3,069
$3,099
451
243
9
—
703
—
810
—
—
(83)
893
420
294
767
—
$767
$767
1,334
1,096
38
96
2,564
(29)
1,072
(8)
(10)
(941)
2,031
265
—
1,766
—
$1,766
$1,563
(126)
—
—
—
(126)
—
—
—
—
668
(668)
—
(2,706)
(3,374)
(122)
$(3,496)
$(3,374)
1,773
1,467
85
96
3,421
(1,101)
3,341
(28)
181
—
3,188
960
—
2,228
(122)
$2,106
$2,055
S&P Global 2018 Annual Report 87
BALANCE SHEET
December 31, 2018
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance
for 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 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
Total liabilities and equity
88 S&P Global 2018 Annual Report
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$694
—
163
550
58
1,465
192
261
—
8,599
130
194
$—
—
109
2,138
3
2,250
—
—
—
6
—
45
$1,223
41
1,177
2,873
136
5,450
78
3,265
1,524
8,030
1,643
286
$—
—
—
(5,561)
—
(5,561)
—
9
—
(16,635)
(1,773)
—
$1,917
41
1,449
—
197
3,604
270
3,535
1,524
—
—
525
$10,841
$2,301
$20,276
$(23,960)
$9,458
$89
4,453
125
1
240
—
180
5,088
3,662
114
162
166
9,192
—
294
72
12,622
(299)
(11,040)
1,649
—
1,649
$10,841
$15
32
33
—
235
—
16
331
—
—
—
75
406
—
—
618
1,277
—
—
1,895
—
1,895
$2,301
$107
1,076
196
71
1,166
1
154
2,771
—
1,659
67
393
4,890
—
2,279
9,784
3,824
(489)
(13)
$—
(5,561)
—
—
—
—
—
(5,561)
—
(1,773)
—
—
(7,334)
1,620
(2,279)
(9,641)
(6,439)
46
12
15,385
(18,301)
1
55
15,386
(18,246)
$211
—
354
72
1,641
1
350
2,629
3,662
—
229
634
7,154
1,620
294
833
11,284
(742)
(11,041)
628
56
684
$20,276
$(23,960)
$9,458
BALANCE SHEET
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance
for 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
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
December 31, 2017
$632
—
138
768
143
1,681
158
261
—
8,364
116
215
$—
—
152
1,784
(3)
1,933
10
—
—
5
—
61
$2,145
2
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)
$2,777
2
1,319
—
226
4,324
275
2,989
1,388
—
—
449
$10,795
$2,009
$19,904
$(23,283)
$9,425
$79
3,433
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
$23
492
86
—
—
193
2
21
817
—
—
—
74
891
—
—
602
516
—
—
1,118
—
1,118
$93
1,154
241
—
75
1,127
105
194
2,989
—
1,715
64
229
4,997
—
2,318
9,256
3,782
(426)
(23)
$—
(5,079)
—
—
—
—
—
—
(5,079)
—
(1,816)
—
—
(6,895)
1,352
(2,318)
(9,117)
(6,431)
46
23
14,907
(17,797)
—
57
14,907
(17,740)
$195
—
472
399
77
1,613
107
351
3,214
3,170
—
244
679
7,307
1,352
412
525
10,023
(649)
(9,602)
709
57
766
Total liabilities and equity
$10,795
$2,009
$19,904
$(23,283)
$9,425
S&P Global 2018 Annual Report 89
STATEMENT OF CASH FLOWS
Year Ended December 31, 2018
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$3,540
$784
$2,956
$(5,159)
$2,121
37
—
3
33
28
—
46
(27)
(2)
(11)
(53)
—
(22)
2
(128)
3,446
(81)
—
—
—
(81)
489
(403)
(503)
—
(1,660)
26
—
(66)
(1,181)
(3,298)
(5)
62
632
$694
7
—
4
10
16
1
5
39
(4)
(64)
13
—
(11)
—
32
832
(16)
—
—
—
(16)
—
—
—
—
—
—
—
—
(816)
(816)
—
—
—
40
122
14
38
50
—
1
(176)
5
(31)
110
(108)
(34)
(9)
(33)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,945
(5,159)
(16)
(401)
6
(5)
(416)
—
—
—
(154)
—
8
(25)
—
(3,162)
(3,333)
(79)
(883)
2,147
—
—
—
—
—
—
—
—
—
—
—
—
—
5,159
5,159
—
—
—
84
122
21
81
94
1
52
(164)
(1)
(106)
70
(108)
(67)
(7)
(129)
2,064
(113)
(401)
6
(5)
(513)
489
(403)
(503)
(154)
(1,660)
34
(25)
(66)
—
(2,288)
(84)
(821)
2,779
$—
$1,264
$—
$1,958
(in millions)
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 other 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:
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
Purchase of additional CRISIL shares
Employee withholding tax on share-based payments
Intercompany financing activities
Cash used for financing activities
Effect of exchange rate changes on cash
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash
at beginning of year
Cash, cash equivalents, and restricted cash
at end of year
90 S&P Global 2018 Annual Report
STATEMENT OF CASH FLOWS
Year Ended December 31, 2017
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$3,670
$649
$3,302
$(5,983)
$1,638
(in millions)
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 other 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
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
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash
at beginning of year
Cash, cash equivalents, and restricted cash
at end of year
Cash provided by operating activities
3,920
31
—
2
108
35
—
34
(2)
(5)
22
19
—
(42)
41
7
(55)
—
—
—
(55)
(421)
—
(1,001)
68
(49)
(2,546)
(3,949)
5
(79)
711
11
—
3
(10)
22
—
19
(23)
3
97
2
(1)
(12)
(18)
(6)
736
(32)
—
—
—
(32)
—
—
—
—
—
(704)
(704)
—
—
—
40
98
11
(98)
42
55
43
(171)
12
(44)
64
(3)
(31)
9
14
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,343
(5,983)
(36)
(83)
2
(5)
(122)
—
(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
$632
$—
$2,147
$—
$2,779
S&P Global 2018 Annual Report 91
STATEMENT OF CASH FLOWS
Year Ended December 31, 2016
(in millions)
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 disposition
Accrued legal 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 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
Contingent consideration payment
Proceeds from dispositions
Changes in short-term investments
Cash provided by (used for) investing activities
Financing Activities:
Additions to short-term debt
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 payment
Employee withholding tax on share-based payments
Intercompany financing activities
Cash used for financing activities
Effect of exchange rate changes on cash
Net change in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash
at beginning of year
Cash, cash equivalents, and restricted cash
at end of year
92 S&P Global 2018 Annual Report
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$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)
(34)
76
(1)
(24)
—
—
—
—
(116)
—
2
—
—
(1,600)
(1,714)
(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)
(34)
1,498
(1)
1,171
(143)
493
(421)
(380)
(116)
(1,123)
88
(5)
(55)
—
(1,662)
(158)
911
1,481
$711
$—
$1,681
$—
$2,392
Five Year Financial Review
(in millions, except per share data)
2018
2017
2016
2015
2014
INCOME STATEMENT DATA:
Revenue
Operating profit
Income before taxes on income
Provision for taxes on income
Net income (loss) from continuing operations
attributable to S&P Global Inc.
Earnings (loss) per share from continuing
operations attributable to the S&P Global Inc.
common shareholders:
Basic
Diluted
Dividends per share
OPERATING STATISTICS:
Return on average equity 7
Income from continuing operations before taxes
on income as a percent of revenue from continuing
operations
Net income (loss) from continuing operations as a
percent of revenue from continuing operations
BALANCE SHEET DATA: 7
Working capital
Total assets
Total debt
Redeemable noncontrolling interest
Equity
$6,258
2,790
2,6811
560
1,958
7.80
7.73
2.00
$6,063
2,583
2,4612
8236
1,496
5.84
5.78
1.64
$5,661
3,341
3,1883
960
2,106
8.02
7.94
1.44
$5,313
1,908
1,8154
547
1,156
4.26
4.21
1.32
292.6%
222.3%
472.0%
324.3%
42.8%
40.6%
56.3%
34.2%
$5,051
88
545
245
(293)
(1.08)
(1.08)
1.20
(1.4)%
1.1%
33.9%
27.0%
39.4%
23.9%
(3.8)%
$975
9,458
3,662
1,620
684
$1,110
9,425
3,569
1,352
766
$1,060
8,669
3,564
1,080
701
$388
8,183
3,611
920
243
$42
6,773
795
810
539
NUMBER OF EMPLOYEES 8
21,200
20,400
20,000
20,400
17,000
1 Includes the impact of the following items: legal settlement expenses of $74 million, Kensho retention related expense of $31 million, restructuring charges related to a
business disposition and employee severance charges of $25 million, lease impairments of $11 million, a pension related charge of $5 million and amortization of
intangibles from acquisitions of $122 million.
2 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.
3 Includes the impact of the following items: a $1.1 billion gain from our dispositions, a benefit related to net legal settlement insurance recoveries of $10 million, disposition-
related costs of $48 million, a technology-related impairment charge of $24 million, 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.
4 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 acquisitions
of $67 million.
5 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.
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.
8 Excludes discontinued operations.
S&P Global 2018 Annual Report 93
Report of Management
To the Shareholders of S&P Global Inc.
Management’s Annual Report on its Responsibility for the Company’s Financial 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 including amounts
based on management’s best estimates and judgments, present fairly S&P Global Inc.’s financial condition and the results of the
Company’s operations. Other financial information given in this report is consistent with these statements.
The Company’s management is responsible for establishing 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 financial records in several
ways: a program of internal audits, the careful selection and training of management personnel, maintaining an organizational
structure that provides an appropriate 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 responsible 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 management present.
Management’s Report on Internal Control Over Financial Reporting
As stated above, the Company’s management is responsible for establishing and maintaining adequate internal control 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 controls 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 financial
reporting were effective as of December 31, 2018. 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 statements
of the Company for the year ended December 31, 2018, 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
Ewout L. Steenbergen
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
94 S&P Global 2018 Annual Report
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
sheets of S&P Global Inc. (the Company) as of December 31,
2018 and 2017, the related consolidated statements of income,
comprehensive income, equity and cash flows for each of the
three years in the period ended December 31, 2018, and the
related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company at December 31, 2018 and 2017, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 2018, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting
as of December 31, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated February 12, 2019 expressed
an unqualified opinion thereon.
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
PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform
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 performing 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 procedures
included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used
and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis
for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1969.
New York, New York
February 12, 2019
S&P Global 2018 Annual Report 95
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
S&P Global Inc.
Opinion on Internal Control over Financial Reporting
We have audited S&P Global Inc.’s internal control over
financial reporting as of December 31, 2018, based on criteria
established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion,
S&P Global Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2018, based on the COSO criteria.
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, 2018 and 2017, the related consolidated
statements of income, comprehensive income, equity and cash
flows for each of the three years in the period ended December
31, 2018, and the related notes and financial statement schedule
listed in Item 15(a)(2) and our report dated February 12, 2019
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
financial reporting included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We
are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the
applicable 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 effective
internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
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 reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable
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
accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
New York, New York
February 12, 2019
96 S&P Global 2018 Annual Report
Shareholder Information
Annual Meeting
Overnight correspondence should be mailed to:
The 2019 annual meeting will be held at 11 a.m. EDT on
Thursday, May 9th at 55 Water Street, New York, NY, 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.
Shareholder correspondence should be mailed to:
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
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: 781-575-4592
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
Public Affairs at 212-438-2297.
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, 2018.
The financial information included in this report was excerpted
from the Company’s Form 10-K for the year ended December
31, 2018, filed with the Securities and Exchange Commission
on February 13, 2019. 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.
S&P Global 2018 Annual Report 97
Board of Directors
Charles E. “Ed”
Haldeman, Jr. (E, F, N)
Non-Executive Chairman
of the Board
S&P Global Inc.
Marco Alverà (F, N)
Chief Executive Officer
Snam S.p.A.
William “Bill” J. Amelio (A, F)
Chief Executive Officer
Avnet, Inc.
William D. Green (C, E, N)
Former CEO and Chairman
Accenture Plc
Stephanie C. Hill (A, C)
Senior Vice President
Corporate Strategy and
Business Development
Lockheed Martin Corp.
Rebecca Jacoby (F, N)
Former Senior Vice
President, Operations
Cisco Systems, Inc.
Monique F. Leroux (A, C)
Chair
Investissement Québec
Stretegic Advisor
Fiera Capital Corporation
Maria R. Morris (A, E, 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, F)
Chairman
Phoenix Global
Resources Plc
NewDay Cards LTD
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)
Former Non-Executive
Director and Chairman
Credit Suisse Holdings (USA), Inc.
Former Vice Chairman
Credit Suisse Group A.G.
98 S&P Global 2018 Annual Report
A – Audit Committee
C – Compensation & Leadership
Development Committee
E – Executive Committee
F – Financial Policy Committee
N – Nominating & Corporate Governance Committee
Committee assignments as of March 25, 2019.
Operating Committee
Douglas L. Peterson
President and Chief
Executive Officer
Ewout Steenbergen
Executive Vice President,
Chief Financial Officer
John L. Berisford
President,
S&P Global Ratings
Martina L. Cheung
President, S&P Global
Market Intelligence
Martin Fraenkel
President,
S&P Global Platts
Alexander J. Matturri, Jr.
Chief Executive Officer,
S&P Dow Jones Indices
Nick Cafferillo
Chief Data &
Technology Officer
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
Dimitra Manis
Executive Vice President,
Chief People Officer
Ashu Suyash
Managing Director and
Chief Executive Officer, CRISIL
S&P Global 2018 Annual Report 99
55 Water Street
New York, NY 10041
spglobal.com