Accelerating
progress
in the world.
Powering
the Markets
of the Future
Annual Report 2019
Financial Highlights
Years ended December 31
(in millions, except per share data)
Revenue
2019
2018
% Change
$6,699
$6,258
Adjusted net income (attributable to the Company’s common shareholders)*
2,352 (a)
2,152 (b)
Adjusted diluted earnings per common share*
$9.53 (a)
$8.50 (b)
Dividends per common share (c)
Total assets
Capital expenditures (d)
Total debt
Equity (including redeemable noncontrolling interest)
$2.28
$2.00
$11,348
$9,441
115
3,948
2,804
113
3,662
2,304
7
9
12
14
20
2
8
22
*Refer to “Reconciliation of Non-GAAP Financial Information” on page 14 of this report for a discussion of the Company’s non-GAAP financial measures.
(a) Excludes the impact of the following items: a pension related charge of $113 million, costs associated with early repayment of our Senior Notes of $57 million, a
$49 million gain on dispositions, employee severance charges of $25 million, Kensho retention related expense of $21 million, lease impairments of $11 million,
acquisition-related costs of $4 million and amortization of intangibles from acquisitions of $122 million.
(b) 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.
(c) Dividends paid were $0.57 per quarter in 2019 and $0.50 per quarter in 2018.
(d) Includes purchases of property and equipment and additions to technology projects.
Year-End Share Price
Dividends Per Share
Revenue (in millions)
$273.05
$169.94
$169.40
$2.28
$2.00
$1.64
$1.44
$1.32
$107.54
$98.58
$6,699
$6,258
$6,063
$5,661
$5,313
’15
’16
’17
’18
’19
’15
’16
’17
’18
’19
’15
’16
’17
’18
’19
Cumulative Total Shareholder Return(e)
325
300
275
250
225
200
175
150
125
100
SPGI
Peer Group (f)
S&P 500
$325
$288
$157
‘14
‘15
‘16
‘17
‘18
‘19
(e) Assumes $100 invested on December 31, 2014 and total return includes reinvestment of dividends through December 31, 2019.
(f) The peer group consists of the following companies: Moody’s Corporation, CME Group Inc., MSCI Inc., FactSet Research Systems
Inc., IHS Markit Ltd., Verisk Analytics, Inc., Intercontinental Exchange, Inc.
To experience an
enriched version of this
Annual Report, with
expanded content, visit
spglobal.com/annualreport.
S&P Global 2019 Annual Report 1
Chairman’s Letter
Charles E. “Ed” Haldeman, Jr.
Chairman of the Board
Dear Fellow Shareholder:
Last year I used this letter to tell you about the Board of Directors’ annual offsite meeting near
Silicon Valley. We decided to meet there because technology plays such a critical, value-
generating role at S&P Global that we wanted to meet with and learn from some of the most
respected and innovative high-tech company leaders.
This year I want to explain why we chose to hold our most recent strategy session in India.
There are few strategic business hubs anywhere in the world as important for S&P Global
as India. In fact, S&P Global today has more employees in India than in any other country.
The teams in India represent some of the brightest, most entrepreneurial and enterprising
people in the company. They are technologists, finance professionals, product developers and
analysts. They’re passionate about what they do, and they love working for our company.
During our time in India, we visited four cities and got to meet with many employees. We
walked the floors of the offices and heard directly from employees about how they’re using
advanced technologies to develop new customer applications. We heard about what motivates
them and their interest in skills-based training programs.
I share this story for two reasons.
First, to express that the Board takes an active and very serious approach to its
responsibilities of overseeing the company’s business affairs. We have a first-class
management team. But it’s important for the Board to see operations for ourselves, to ask
questions and to learn firsthand how people in the field are executing the company’s strategy.
The second reason is that S&P Global’s India operations, in many ways, represent the very
best of what our company has to offer. This includes a customer-first mentality, ingenuity,
collaboration across divisions, intellectual curiosity and a commitment to community service.
2 S&P Global 2019 Annual Report
Throughout my experience in the financial services industry, including my time running asset
management firms, my focus has always been on delivering for investors. But it’s true that long-
term investors also keep their eye on how well their portfolio companies are serving other important
constituents. Are they delivering value to customers and to their communities? Are they taking care of
their employees?
S&P Global is a strong company because it knows the importance of all of these factors in
producing results.
In 2019, S&P Global generated some very good results. The company’s total shareholder return was
62.3%, compared to a return of 28.9% for the S&P 500 and 44.7% for its peer group.
I am very pleased to note that others have taken notice of the S&P Global management
team’s performance.
Last year Harvard Business Review named our company’s President and CEO Doug Peterson
one of its 100 best-performing CEOs in the world. HBR’s methodology considers a company’s
financial performance as well as an evaluation of a company’s environmental, social and
governance (ESG) factors.
Doug and the leadership team earned other accolades last year. The Drucker Institute ranked S&P
Global 50th out of the top 250 “Best Managed Companies of 2019.” The Drucker Institute employed
five performance dimensions to measure companies: customer satisfaction, employee engagement
and development, innovation, social responsibility, and financial strength. Also, Institutional Investor
magazine named S&P Global to its 2020 All-America Executive Team rankings.
Those are well deserved honors and they are a reflection of management’s ability to serve many
different stakeholders.
As you’ll read in Doug’s letter, he has clear plans to power further growth. No matter how you may know
of or work with S&P Global — either as a shareholder, client, employee, supplier or just someone who’s
interested in our company — I hope you’ll take away why we’re excited about our performance and
prospects. Certainly, there are a lot of recent accomplishments of which to be proud. There’s also a lot
to look forward to in 2020 and beyond.
In closing, I want to say thank you to my fellow Directors for all of their contributions. Bill Amelio joined
our Board last year just after I completed writing my 2018 shareholder letter. He’s been a terrific
addition to the Board, demonstrating once again our commitment to an ongoing process of adding a
diverse set of skills, perspectives and backgrounds.
And I thank you for your interest in and support of S&P Global.
Sincerely,
Charles E. “Ed” Haldeman, Jr.
Chairman of the Board
S&P Global 2019 Annual Report 3
CEO’s Letter
Douglas L. Peterson
President and CEO
Dear Fellow Shareholder:
Our global headquarters is located
on the southern tip of Manhattan.
The lifeblood of vibrant economies —
a free, fair and transparent market
system, entrepreneurship and
hard work — is all around us.
There are cargo ships entering and leaving Lower New York Bay, feeding supply
chains and facilitating international trade. Uptown and across the East and
Hudson Rivers to Brooklyn and New Jersey, there are the people, neighborhoods,
businesses, data, roads and railways fueling economic growth.
This scene — and similar ones around our offices I visited last year from Boston
to Beijing — is a reminder of S&P Global’s impact and reach.
Our price assessments enable the trading of commodities, providing
transparency to airlines, steel companies and electric utilities buying and selling
energy. Our credit ratings unlock capital to support governments building new
infrastructure and help companies finance their expansion plans. Our indices are
used by funds to create savings for teachers, nurses, firefighters, police officers
and retirees. And increasingly, our work is helping businesses and investors
shape sustainable investment strategies that address the major environmental,
social and corporate governance (ESG) issues important to stakeholders
around the globe.
4 S&P Global 2019 Annual Report
For 160 years our focus has been on serving customers with business information.
Just as it was in 1860, today we provide our customers with the intelligence they
need to make critical decisions.
We recently set out to explain the effect this essential intelligence has on not just
our customers but other stakeholders too. More and more frequently, employees,
job recruits, community partners and suppliers are asking how the work we do
influences society. They want to know that what we do matters. To answer this
question, in 2019 we updated our purpose
statement to convey not just what we
do but why we do it. This purpose, which
we express as Accelerating Progress in
the World, is helping to unify our culture,
serving as inspiration for our employees, and
connecting us with all of the people we do
business with.
Just as it was
in 1860, today
we provide our
customers
with the
intelligence
they need to
make critical
decisions.
We know that progress isn’t linear and it
doesn’t come easily. We all face uncertainty,
disruption and ambiguity that can inhibit
development and growth. But we also know
that S&P Global can provide the insights
that businesses, financial institutions
and government agencies need to unlock
value, create economic opportunities and
spur progress.
Our Strategy and Investments
for Future Growth
While the way we communicate this purpose is new, our long-term strategy, the
management framework and mission statement we call Powering the Markets
of the Future, continues to be the roadmap we use to guide investment decisions
and create accountability across the entire organization.
Our strategy provides a consistent, straightforward way to talk with our Board
of Directors, investors and employees about our priorities. Within that strategy,
there are six necessary capabilities that form the foundation of everything we
do. They are: Global, Customer Orientation, Technology, Innovation, Operational
Excellence and People.
Consistent with our strong record of achievement in 2019, including solid financial
results, we deployed $102 million in 2019 to fuel future growth by expanding
globally, driving innovation, improving the customer experience and leveraging
technology. I want to share details about some of these investments and in doing
so, I hope to give you a sense not only of the possibilities we have but also the
tremendous enthusiasm and optimism we feel about the future.
S&P Global 2019 Annual Report 5
Globality
The first component of this investment program is our global focus. Asia —
which makes up 11% of our revenues — and especially China, represent major
opportunities.
In 2019 we opened our domestic credit rating agency in China. China is developing
a deep, liquid, sophisticated bond market so that it can better connect to the
global financial system. To accomplish this goal in what is approaching the second
largest bond market in the world, transparent and internationally recognized
benchmarks are necessary.
We now have over 30 ratings analysts on the ground in China and a local,
centralized support staff to handle legal, compliance, finance and people
functions supporting all of our businesses in China. We’ve held hundreds of
meetings, educating the market about our ratings, methodologies and criteria.
We’re off to a great start with an initial set of ratings, demonstrating a good
spread from AAA to BBB, and we have had a very enthusiastic reception from
market players. However, this progress isn’t a signal that we’ll see the impact in
our business results immediately. This is a market that will take time to develop,
perhaps three, five or 10 years. But we recognize this and we’re committed to
China for the long term.
In addition to our local rating agency, we’re expanding our data, analytics and
benchmark businesses in the region. S&P Global Market Intelligence has added
full coverage of Chinese public and private bond issuers with profiles and
financials, and S&P Global Platts is adding new sales staff in markets across
Asia. Additionally, the Government Pension Investment Fund for Japan, the
world’s largest pension fund, has significantly expanded its assets allocated to
products based on our ESG indices, including the S&P/JPX Carbon Efficient Index,
developed in partnership with the Japan Exchange Group.
A commitment to creating
a superior customer experience is
another key to our growth plans.
6 S&P Global 2019 Annual Report
Putting the Customer at the
Center of Our Business
A commitment to creating a superior customer experience is another key to
our growth plans.
We know that our customers’ expectations are changing. They want exceptional
business experiences that are just like the ones they have in their personal
lives. The products we provide need to be designed and delivered in a way that is
seamless, personalized and fast. By listening closely to customer feedback, having
boots on the ground visiting with our customers to hear about their needs, we will
build loyalty and reinforce the value we offer.
What does an enhanced customer experience look like? In one case at S&P Global
Platts, the team heard from clients about a particular need and in response,
produced an app that provides an all-in-one, on-the-go platform for reading
commodity news, prices, market commentary and analytics.
We’ve made a great deal of progress throughout the organization so far and
with ongoing work, including establishing a customer experience community of
excellence in the company, we’re confident that we’ll produce even better results
for our customers in the future.
Leading with Innovation and Technology
We launched a lot of great products in 2019, demonstrating how our employees
are moving quickly to adapt to and stay ahead of the needs of our markets.
Creating differentiated ESG offerings for our customers is one of our most
promising growth initiatives — and an excellent example of innovation — because
of increasing demand from investors and companies for data and benchmarks
that bring greater transparency, comparability and reliability to capital
market participants.
S&P Global’s ESG capabilities span the entire company and provide our customers
with data and insights so that they can accelerate progress by identifying growth
opportunities and mitigating ESG risk.
In 2019 S&P Global Ratings introduced ESG Evaluations to serve issuers and
investors. This evaluation is a cross-sector, relative analysis of an entity’s ability to
operate successfully in the future and optimize long-term stakeholder value. We
have published six ESG Evaluations and we have a very healthy pipeline.
S&P Global 2019 Annual Report 7
In our index business, in 2019 we unveiled a global suite of ESG indices, including
the S&P 500 ESG Index. This builds on a rich heritage tracing back to the
introduction of the Dow Jones Sustainability Index in 1999.
Trucost, which has environmental data on 15,000 companies, launched Climate
Change Physical Risk analytics to help investors, companies and governments
understand the exposure of businesses’ assets to climate change.
And S&P Global Platts is focusing on renewable energies and continues to provide
analytics to examine the forces that affect the global, national and regional
markets for greenhouse gas emissions.
All of these new products are possible because of the strength of our ESG data
capabilities, which were greatly enhanced by our recent acquisition of the ESG
ratings business of RobecoSAM. This business includes the widely followed SAM
Corporate Sustainability Assessment (CSA), an annual evaluation of companies’
sustainability practices. The CSA is recognized as one of the most advanced
ESG scoring methodologies, as it draws upon 20 years of experience analyzing
sustainability’s impact on a company’s long-term value creation.
We expect solid growth over the next several years from our ESG solutions, data,
scores, benchmarks and analytics.
It’s not all about the solutions we offer to the market when it comes to ESG,
however. S&P Global is committed to improving its own corporate ESG disclosures
to provide more transparency to market participants. For example, in 2019, under
the leadership of our CFO Ewout Steenbergen, we published our first Task Force on
Climate-related Financial Disclosures (TCFD) report.
There are other examples that demonstrate innovation and customer orientation.
These examples are happening across the company. At S&P Global Platts, we
continue to build out new price assessments to diversify beyond the petroleum
category both by small acquisitions such as the Live Rice Index and organically,
including new assessments of marine fuel and hydrogen. And S&P Dow Jones
Indices last year launched Global SmallCap Select Indices and eight new sector
indices in Chile.
I also want to highlight our investments in technology, which are focused on the
continued deployment of data science, AI, cloud, machine learning and robotics.
8 S&P Global 2019 Annual Report
2019 Business
Results
In 2019 we benefited from favorable
market conditions and made excellent
progress executing our strategy. It was
a banner year. Revenue grew 7% to $6.7
billion and we improved profitability as
the adjusted operating profit margin
increased 140 basis points to 50.2%.
Our adjusted net income rose 9% to
$2.35 billion or $9.53 on an adjusted
diluted earnings per share basis.
That exceeded our adjusted earnings
guidance for the year. And our free
cash flow, excluding certain items, was
$2.58 billion, of which we returned $1.8
billion to shareholders.
In 2018 we announced a $100 million,
three-year cost reduction plan. The
plan focuses on productivity initiatives
across real estate, technology and
support functions. We now estimate
that we have achieved run-rate savings
of approximately $85 million.
2019 Revenue
(dollars in millions)
2019
% Change
S&P Global Ratings
8%
$3,106
S&P Global Market Intelligence
$1,959
7%
S&P Dow Jones Indices
$918
10%
S&P Global Platts
$844
4%
2020 Outlook
We expect 2020 to be another year of
growth for the company. We estimate
mid- to high-single-digit revenue
growth and our adjusted diluted
earnings per share guidance is $10.40
to $10.60, implying a 9% increase
compared with 2019 if we achieve the
low end of the range.
S&P Global 2019 Annual Report 9
We are very excited about how Kensho, the AI business we acquired in 2018,
has become a catalyst for innovation and change at S&P Global. Let me offer
a few examples of how Kensho and its elite computer engineering, data
science and product management teams are creating new opportunities for us
and our customers.
Kensho is helping Platts totally revamp its Market on Close, or MOC, process. Our
price reporters run the MOC process three times a day, every business day around
the globe, publishing firm commodity bids, offers and trades. This stream of data
helps market participants understand how commodity values evolve and the
data underpin our benchmarks from crude oil to LNG. In 2019 Kensho applied AI,
machine learning and data visualization techniques to support our price reporters
with better technology, which means important benchmark pricing data will be
available to market participants much faster.
Kensho Scribe is another great example of technology and innovation coming
together to create a better experience for our customers and efficiencies for our
people. Scribe is a new speech recognition solution that transcribes earnings
conference calls. Using machine learning techniques, Scribe parsed thousands of
hours of audio files from Market Intelligence’s archives to develop its capabilities.
Market Intelligence will produce nearly 40,000 conference call transcripts for its
clients in 2020. Now Scribe is capable of delivering more accurate transcripts to
clients about 20% faster than we had before.
Those are just a couple of instances, among a growing list, that demonstrate how
the people of Kensho are delivering value.
We’ve also been investing in technology to consolidate data centers, move certain
customer-facing applications to the cloud and strengthen cybersecurity.
We are very excited about how Kensho,
the AI business we acquired in 2018,
has become a catalyst for innovation
and change at S&P Global.
10 S&P Global 2019 Annual Report
Putting Our People First
All of this progress — from global expansion to innovation and customer
orientation to technology — is a tribute to our people. They are a constant source
of inspiration and pride. I can’t thank them enough for all they do to support our
mission and advance our purpose.
Over the last year we continued to foster a people-first culture. For example, we
introduced a series of policies and practices to modernize our workplace and
help employees improve their careers — including coaching, training and internal
mobility programs — and we created cultural influencers to help strengthen
relationships at the office.
While we work to build an even stronger workplace, one thing that is not changing
is our enduring set of values of excellence, relevance and integrity. That means
change inspires us to excel. It means we’re focused on what matters. And it means
we always do what’s right.
Serving All Stakeholders and Making a
Positive Impact in the World
A little more than a year ago we reflected on the ways we can use our essential
intelligence to make a greater impact in the world. In 2019 we launched a
campaign, #ChangePays, focused on unlocking the potential of women in the
workforce by spotlighting their positive impact on companies, organizations,
economies and global communities. We conducted original research that
illustrates women’s influence on politics, stock markets and the global economy.
It’s vital that we learn where we’ve made progress and where there’s still a long
way to go. We shared our findings during meetings with the World Economic
Forum, the Institute of International Finance, the International Monetary Fund and
many other organizations.
The campaign has been a galvanizing force for our employees and it has enriched
an important dialogue.
We expect to continue engaging stakeholders on issues like this and acting on all
of the environmental, social and governance matters material to our business.
S&P Global 2019 Annual Report 11
Many other business leaders have recognized that being responsive to a wide
range of their stakeholders is essential to the sustainability of their companies
and to the long-term viability of our economy. In 2019 the Business Roundtable,
an association of America’s leading companies, updated its Statement on the
Purpose of a Corporation to reflect this reality. As a member of its Board of
Directors, I am proud to endorse this position.
At S&P Global, we are deeply committed to the highest standards of ESG
practices and to delivering value to all of our stakeholders. This approach is
consistent with our values, fundamental to our strategy and essential to our
sustainable performance.
It’s why we have programs to give our people in-demand skills training for a 21st
century workforce.
It’s why we have a strong risk- and control-minded culture.
It’s why we are becoming a more customer-focused organization.
It’s why we follow policies and programs to promote diversity and inclusion,
support human rights and encourage sustainable practices with our suppliers.
It’s why our charitable foundation awarded 50 grants in 2019 that have the
potential to help 7 million people in 18 countries.
It’s why we have expanded our employee volunteer program, generating nearly $2
million in economic value, to support local communities.
And it’s why we committed to, and significantly surpassed, our five-year
environmental performance goals by reducing paper use by 70% and greenhouse
gas emissions by 30%.
All of these commitments align to deliver performance and value to you, the
owners of S&P Global.
Before concluding, I want to recognize and thank one of our leaders who will be
retiring in 2020. S&P Dow Jones Indices CEO Alex Matturri has been a wonderful
colleague and one of the financial market’s strongest ambassadors of low-cost,
passive investing and transparency. He earned the trust of clients and is a big
reason for so much of the success of our index business. Over the last 13 years,
Alex championed partnerships with global stock exchanges, led the development
of new indices and benchmarks, and spearheaded the joint venture with CME
Group that created the leading index franchise we have today. As Alex works to
12 S&P Global 2019 Annual Report
ensure a smooth management transition later this year, we thank him for his
leadership and for being a friend and advocate for military veterans during his
time with our company.
We achieved so much in 2019 by working together as one company and by not
deviating from a simple, proven strategy. We accomplished our financial goals
by being disciplined acquirers and responsible investors of your capital. And we
delivered on our commitments to all of our stakeholders by working to meet their
needs, staying true to our values and never forgetting our 160-year history as an
independent source of transparent business information.
As we make our way through what we expect to be another year of growth
for S&P Global, we’ll stay committed to those same principles, guided by our
customers and all of the people we work with. Moving ahead with more work to
do, while navigating market uncertainties, we are united in our responsibility
to a sustainable future, driven by the pursuit of our common mission to
power the markets of the future and our common purpose to accelerate
progress in the world.
Sincerely,
Douglas L. Peterson
President and CEO
S&P Global 2019 Annual Report 13
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-page13) 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.
14 S&P Global 2019 Annual Report
Operating Results - Reported vs. Performance
Non-GAAP Financial Information
Twelve Months ended December 31, 2019 and 2018
(dollars in millions, except per share amounts)
Adjusted Operating Profit
(unaudited)
Total SPGI
Operating profit
Non-GAAP adjustments (a) (b) (c) (d)
Deal-related amortization
Adjusted operating profit
Adjusted Other Expense (Income), net
(unaudited)
Other expense (income), net
Non-GAAP adjustments (e)
Adjusted other expense (income), net
Adjusted Interest Expense, net
(unaudited)
Interest expense, net
Non-GAAP adjustments (f)
Adjusted interest expense, net
Adjusted Provision for Income Taxes
(unaudited)
Provision for income taxes
Non-GAAP adjustments (a) (b) (c) (d) (e) (f) (g)
Deal-related amortization
Adjusted provision for income taxes
Adjusted Effective Tax Rate
(unaudited)
Adjusted operating profit
Adjusted other expense (income), net
Adjusted interest expense
Adjusted income before taxes on income
Adjusted provision for income taxes
Adjusted effective tax rate 1
2019
2018 % Change
$3,226
12
122
$2,790
141
122
16%
$3,360
$3,052
10%
2019
$98
(113)
$(14)
2019
$198
57
$141
2019
$627
45
29
$702
2018 % Change
$(25)
(5)
$(29)
N/M
52%
2018 % Change
$134
—
$134
48%
5%
2018 % Change
$560
44
29
$633
12%
11%
2019
$3,360
(14)
141
3,233
2018 % Change
$3,052
(29)
134
2,948
10%
10%
702
633
21.7%
21.5%
1 The adjusted effective tax rate is calculated by dividing the adjusted provision for income taxes by the adjusted income before taxes on income.
N/M - not meaningful
S&P Global 2019 Annual Report 15
Twelve Months ended December 31, 2019 and 2018
(dollars in millions, except per share amounts)
Adjusted Net Income attributable to SPGI and Adjusted Diluted EPS
(unaudited)
2019
2018
% Change
As reported
Non-GAAP adjustments (a) (b) (c) (d) (e) (f) (g)
Deal-related amortization
Adjusted
Note - Totals presented may not sum due to rounding.
Net Income
attributable
to SPGI
Diluted
EPS
Net Income
attributable
to SPGI
$2,123
$8.60
$1,958
136
92
0.55
0.37
102
92
Diluted
EPS
$7.73
0.40
0.36
Net Income
attributable to
SPGI
Diluted
EPS
8%
11%
$2,352
$9.53
$2,152
$8.50
9%
12%
Note - Total SPGI adjusted operating profit for 2019 includes revenue of $6,699 million. Adjusted operating profit margin for the Company was 50.2% for 2019. Adjusted
operating profit margin is calculated as adjusted operating profit divided by revenue.
(a) 2019 includes employee severance charges of $11 million ($9 million after-tax). 2018 includes legal settlement expenses of $74 million ($56 million after-tax) and
employee severance charges of $8 million ($6 million after-tax).
(b) 2019 includes employee severance charges of $6 million ($4 million after-tax) and acquisition-related costs of $4 million ($3 million after-tax). As of July 1, 2019,
we completed the sale of SPIAS and the results are included in Market Intelligence results through that date. 2019 also includes a gain on the sale of SPIAS of $22
million ($12 million after-tax). 2018 includes restructuring charges related to a business disposition and employee severance charges of $7 million ($5 million
after-tax).
(c) As of July 31, 2019, we completed the sale of RigData and the results are included in Platts results through that date. 2019 includes a gain on the sale of RigData of
$27 million ($26 million after-tax) and employee severance charges of $1 million ($1 million after-tax).
(d) 2019 includes Kensho retention related expense of $21 million ($16 million after-tax). 2019 includes lease impairments of $11 million ($8 million after-tax), and
employee severance charges of $7 million ($6 million after-tax). 2018 includes Kensho retention related expense of $31 million ($24 million after-tax). 2018 also
includes lease impairments of $11 million ($8 million after-tax) and employee severance charges of $10 million ($7 million after-tax).
(e) 2019 includes a pension related charge of $113 million ($85 million after-tax). 2018 includes a pension related charge of $5 million ($4 million after-tax).
(f) 2019 includes costs associated with early repayment of our Senior Notes of $57 million ($43 million after-tax).
(g) 2018 includes an adjustment to the provisional tax charge recorded in the fourth quarter of 2017 of $8 million.
16 S&P Global 2019 Annual Report
Twelve Months ended December 31, 2019 and 2018
(dollars in millions, except per share amounts)
Computation of Free Cash Flow and Free Cash Flow Excluding Certain Items
(unaudited)
Cash provided by operating activities
Capital expenditures
Distributions to noncontrolling interest holders, net
Free cash flow
Settlement of prior-year tax audits
Tax on gain from sale of SPIAS and RigData
Payment of legal settlements
Tax benefit from legal settlements
2019
$2,776
(115)
(143)
$2,518
51
13
1
—
2018
$2,064
(113)
(154)
$1,797
73
—
180
(44)
Free cash flow excluding above items
$2,583
$2,006
Reconciliation of 2020 Non-GAAP Guidance
(unaudited)
GAAP Diluted EPS
Deal-related amortization
Compensation for replacement equity awards and retention plans
Non-GAAP Diluted EPS
Low
$10.00
0.37
0.03
$10.40
High
$10.20
0.37
0.03
$10.60
S&P Global 2019 Annual Report 17
20
48
49
50
51
52
53
99
100
101
104
105
106
18 S&P Global 2019 Annual Report
2019
Financial
Performance
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, 2019 and 2018, 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, 2019,
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 pages 46-47 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.
20 S&P Global 2019 Annual Report
• Platts is the leading independent provider of information and
benchmark prices for the commodity and energy markets.
• Indices is a global index provider maintaining a wide variety
of valuation and index benchmarks for investment advisors,
wealth managers and institutional investors.
Major Portfolio Changes
The following significant change was recently made to our
portfolio in January of 2020:
• In January of 2020, we completed the acquisition of the ESG
Ratings Business from RobecoSAM, which includes the widely
followed SAM* Corporate Sustainability Assessment, an
annual evaluation of companies’ sustainability practices. The
acquisition will bolster our position as the premier resource
for essential environmental, social, and governance (“ESG”)
insights and product solutions for our customers. Through this
acquisition, we will be able to offer our customers even more
transparent, robust and comprehensive ESG solutions.
The following significant change was made to our portfolio during
the three years ended December 31, 2019:
• 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. Beginning in the first quarter
of 2019, the contract obligations for revenue from Kensho’s
major customers were transferred to Market Intelligence
for fulfillment. As a result of this transfer, from January 1,
2019 revenue from contracts with Kensho’s customers is
reflected in Market Intelligence’s results. In 2018, the revenue
from contracts with Kensho’s customers was reported in
Corporate revenue.
Increased Shareholder Return
During the three years ended December 31, 2019, we have
returned approximately $5.4 billion to our shareholders
through a combination of share repurchases and our quarterly
dividends: we completed share repurchases of approximately
$3.9 billion and distributed regular quarterly dividends totaling
approximately $1.5 billion. Also, on January 29, 2020 the Board
of Directors approved an increase in the quarterly common stock
dividend from $0.57 per share to $0.67 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
2019
$6,699
$3,226
48%
$8.60
2018
$6,258
$2,790
45%
$7.73
2017
’19 vs ’18
’18 vs ’17
$6,063
$2,583
43%
$5.78
7%
16%
11%
3%
8%
34%
1 % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented.
2 2019 includes a gain on the sale of RigData and SPIAS of $27 million and $22 million, respectively, employee severance charges of $25 million, Kensho retention
related expense of $21 million, lease impairments of $11 million and acquisition-related costs of $4 million. 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. 2019 and 2018 also includes amortization
of intangibles from acquisitions of $122 million and 2017 includes amortization of intangibles from acquisitions of $98 million.
2019
Revenue increased 7%, with an unfavorable impact of 1
percentage point from foreign exchange rates. The increase
was driven by revenue growth at all of our reportable segments.
Revenue growth at Ratings was driven by an increase in
corporate bond ratings revenue and public finance revenue,
partially offset by lower bank loan ratings revenue. The increase
at Market Intelligence was driven by annualized contract value
growth in the Market Intelligence Desktop, Credit Risk Solutions
and Data Management Solutions products. The increase at
Indices was due to higher levels of assets under management
for exchange traded funds (“ETFs”) and mutual funds. Revenue
growth at Indices was also favorably impacted by the buyout of
the balance of intellectual property rights in a family of indices
from one of our co-marketing and index development partners
in the fourth quarter of 2018, retrospective fees for previously
unlicensed and unreported index usage and benefits related
to recent contract renegotiation. The increase at Platts was
primarily due to continued demand for market data and price
assessment products.
Operating profit increased 16%, with a favorable impact from
foreign exchange rates of less than 1 percentage point. Excluding
the impact of higher legal settlement expenses in 2018 of 3
percentage points, a gain on our dispositions of 2 percentage
points and higher Kensho retention related expense in 2018 of 1
percentage point, operating profit increased 10%. The increase
was primarily due to revenue growth at all of our reportable
segments, lower professional fees and decreased expenses
at Corporate Unallocated driven by a $20 million reduction
in contributions made to the S&P Global Foundation in 2018.
These increases to operating profit were partially offset by
higher technology costs, an increase in incentive costs and
higher compensation costs driven by annual merit increases and
additional headcount.
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 Credit Risk Solutions
products. Revenue growth at Indices was driven by higher
levels of assets under management for 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 than 1 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.
S&P Global 2019 Annual Report 21
Operations
• Modernizing our workplace to improve end-user productivity
and experience, enabling our employees to innovate and better
serve our customers;
• Standardizing and simplifying our technology to best support
and enable our divisions;
• Reducing our Cyber Security risk while augmenting process
maturity and producing outcomes commensurate with
our risk appetite;
• Maintaining our strong commitment to quality, utilizing shared
data processes and capabilities; and
• Continuing to advance a strong Risk, Internal Control, and
Compliance environment.
People
• Creating an inclusive performance-driven culture that
drives employee engagement and aligns with our purpose of
accelerating progress in the world;
• Promoting career mobility and attracting and retaining the
best people; and
• Improving diversity in overall representation through talent
acquisition, advancement 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 2020 outlook for our
segments can be found within “ – Results of Operations”.
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 in line with our core values of integrity,
excellence and relevance.
In 2018, we announced the launch of Powering the Markets
of the Future to provide a framework for our forward-looking
business strategy. Through this framework, we seek to
deliver an exceptional, differentiated customer experience by
enhancing our foundational capabilities, evolving and growing
our core businesses, and pursuing growth via adjacencies. In
2020, we will strive to deliver on our strategic priorities in the
following key areas:
Finance
• Meeting or exceeding revenue growth and EBITA margin
targets and delivering on commitments to return capital
to shareholders;
• Funding organic opportunities with continued
productivity gains;
• Pursuing a disciplined acquisition, investment and partnership
strategy to support our strategic initiatives; and
• Better serving our customers, employees, and the communities
in which we operate through our commitment to corporate
responsibility and sustainability.
Customer
• Continuing to drive excellence through our core
business offerings;
• Delivering ESG, Small and Medium-sized Enterprise data and
Marketplace solutions to market on schedule and with strong
commercial traction;
• Modernizing and enhancing the delivery of our products across
multiple channels (e.g., S&P Global Platform, MI Smart move,
feeds, application programming interfaces);
• Providing a superior customer experience through the
collective efforts of our divisions and functions; and
• Accelerating growth in non-U.S. markets with a particular
focus on progressing our businesses in China.
22 S&P Global 2019 Annual Report
Results of Operations
CONSOLIDATED REVIEW
Year ended December 31,
% Change
(in millions)
Revenue
Expenses:
Operating-related expenses
Selling and general expenses
Depreciation and amortization
Total expenses
Gain on dispositions
Operating profit
Other expense (income), net
Interest expense, net
Provision for taxes on income
Net income
Less: net income attributable to
noncontrolling interests
2019
$6,699
2018
$6,258
2017
$6,063
1,801
1,517
204
3,522
(49)
3,226
98
198
627
2,303
(180)
1,698
1,564
206
3,468
–
2,790
(25)
134
560
2,121
(163)
1,694
1,606
180
3,480
–
2,583
(27)
149
823
1,638
(142)
Net income attributable to S&P Global Inc.
$2,123
$1,958
$1,496
’19 vs ’18
’18 vs ’17
7%
6%
(3)%
(1)%
2%
N/M
16%
N/M
48%
12%
9%
(10)%
8%
3%
–%
(3)%
14%
–%
N/M
8%
8%
(10)%
(32)%
30%
(15)%
31%
N/M - not meaningful
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
2019
$2,843
1,632
1,401
623
200
43%
24%
21%
9%
3%
2018
$2,682
1,401
1,408
542
225
43%
22%
23%
9%
3%
2017
$2,454
1,574
1,363
484
188
41%
26%
22%
8%
3%
$3,949
$3,750
$3,658
1,681
715
354
$2,750
59%
41%
1,543
647
318
$2,508
60%
40%
1,473
594
338
$2,405
60%
40%
’19 vs ’18
’18 vs ’17
6%
17%
(1)%
15%
(11)%
5%
9%
11%
11%
10%
9%
(11)%
3%
12%
19%
3%
5%
9%
(6)%
4%
S&P Global 2019 Annual Report 23
2019 Revenue by Type
2019 Revenue by Geographic Area
Asset-linked fees
9%
Sales usage-based royalties
3%
Rest of the World
5%
Asia
11%
Non-subscription /
Transaction
24%
Subscription
43%
European
Region
25%
U.S.
59%
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 1 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.
Non-transaction
21%
2019
Revenue increased 7% as compared to 2018. Subscription
revenue increased primarily from growth in Market Intelligence’s
average contract values and continued demand for Platts’
proprietary content. Higher data subscription revenue at
Indices also contributed to subscription revenue growth.
Non-transaction revenue decreased 1% primarily due to
the unfavorable impact from foreign exchange rates. Non-
transaction revenue was unfavorably impacted by a decline
in Ratings Evaluation Service activity, a decrease at CRISIL,
primarily within the risk and analytics sector, and lower
entity credit ratings revenue, and benefited from an increase
in surveillance revenue and higher royalty revenue. Non-
subscription / transaction revenue increased driven by an
increase in corporate bond ratings revenue and public finance
revenue, partially offset by a decline in bank loan ratings
revenue at Ratings. Asset-linked fees increased due to the
impact of higher levels of assets under management for
ETFs and mutual funds at Indices. Additionally, asset-linked
fees was favorably impacted by the buyout of the balance of
intellectual property rights in a family of indices from one of
our co-marketing and index development partners in the fourth
quarter of 2018, retrospective fees for previously unlicensed and
unreported index usage and benefits related to recent contract
renegotiations. The decline in sales-usage based royalties
was primarily driven by lower exchange-traded derivative
volumes at Indices in 2019. See “Segment Review” below for
further information.
The unfavorable impact of foreign exchange rates reduced
revenue by 1 percentage point. 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.
24 S&P Global 2019 Annual Report
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, 2019 and 2018:
(in millions)
2019
2018
% 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
$847
691
219
136
(128)
1,765
36
$1,801
$461
583
194
144
—
1,382
135
$1,517
$804
654
212
129
(125)
1,674
24
$517
535
195
133
—
1,380
184
$1,698
$1,564
5%
6%
3%
5%
(2)%
5%
53%
6%
(11)%
9%
(1)%
8%
N/M
—%
(27)%
(3)%
N/M - not meaningful
1
2
In 2019, selling and general expenses include employee severance charges of $11 million. In 2018, selling and general expenses include legal settlement expenses of
$74 million and employee severance charges of $8 million.
In 2019, selling and general expenses include employee severance charges of $6 million and acquisition-related costs of $4 million. In 2018, selling and general
expenses include restructuring charges related to a business disposition and employee severance charges of $7 million.
3 In 2019, selling and general expenses include employee severance charges of $1 million.
4
5
Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
In 2019, selling and general expenses include Kensho retention related expense of $21 million, lease impairments of $11 million and employee severance charges of
$7 million. 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.
Operating-Related Expenses
Operating-related expenses increased as compared to 2018
driven by the acquisition of Kensho in April of 2018 and increases
at all of our reportable segments. Ratings increased primarily
due to an increase in incentive costs, partially offset by lower
professional fees. The increase at Market Intelligence was due
to higher technology costs, higher compensation costs and an
increase in intersegment royalties tied to annualized contract
value growth. Platts increased due to higher compensation costs
primarily related to annual merit increases and higher costs
to support business initiatives. The increase at Indices was
primarily related to increased royalties due to increased traction
of royalty-based products and higher compensation costs.
Intersegment eliminations primarily relate to a royalty charged
to Market Intelligence for the rights to use and distribute content
and data developed by Ratings.
2%. This increase was primarily driven by an increase at Market
Intelligence due to higher compensation and technology costs.
The increase at Ratings was primarily driven by an increase
in incentive costs. Indices increased primarily due to higher
legal expenses and compensation costs. These increases
were partially offset by a decrease in expenses at Corporate
Unallocated primarily driven by a $20 million contribution made
by the Company to the S&P Global Foundation in 2018 and a
decrease in expenses at Kensho.
Depreciation and Amortization
Depreciation and amortization decreased $2 million, or 1%,
compared to 2018 due to decreases at Market Intelligence
and Platts related to assets becoming fully depreciated and
assets becoming fully amortized at Platts, partially offset by an
increase in amortization expense from the acquisition of Kensho
in April of 2018.
Selling and General Expenses
Selling and general expenses decreased 3%. Excluding the
impact of legal settlement expenses in 2018 of 4 percentage
points and higher Kensho retention related expense in 2018
of 1 percentage point, selling and general expenses increased
S&P Global 2019 Annual Report 25
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
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
$804
654
212
129
(125)
1,674
24
$517
535
195
133
—
1,380
184
$856
619
207
121
(109)
1,694
—
$582
502
218
118
—
1,420
186
$1,698
$1,564
$1,694
$1,606
(6)%
6%
3%
6%
(14)%
(1)%
N/M
—%
(11)%
7%
(10)%
12%
N/M
(3)%
(1)%
(3)%
N/M - not meaningful
1
2
3
4
5
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.
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.
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.
Intersegment eliminations primarily relate to a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
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.
Operating-Related Expenses
Operating-related expenses remained relatively unchanged as
compared to 2017, increasing $4 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.
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.
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
Depreciation and Amortization
Depreciation and amortization increased $26 million, or 14%,
compared to 2018 due to an increase in amortization expense
primarily related to the acquisition of Kensho in April of 2018.
26 S&P Global 2019 Annual Report
(in millions)
Market Intelligence 2
Ratings 1
Platts 3
Indices
Intersegment eliminations 4
Total segments
Corporate Unallocated expense 5
Operating-
Selling and
Operating-
Selling and
Operating-
Selling and
related
expenses
general
expenses
related
expenses
general
expenses
related
expenses
general
expenses
$804
654
212
129
(125)
1,674
24
$517
535
195
133
—
1,380
184
$856
619
207
121
(109)
1,694
—
$582
502
218
118
—
1,420
186
$1,698
$1,564
$1,694
$1,606
(6)%
6%
3%
6%
(1)%
N/M
—%
(14)%
(11)%
7%
(10)%
12%
N/M
(3)%
(1)%
(3)%
Gain on Dispositions
During the year ended December 31, 2019, we completed the
following dispositions that resulted in a pre-tax gain of $49
million, which was included in Gain on dispositions in the
consolidated statement of income:
• In July of 2019, we completed the sale of RigData, a business
within our Platts segment, to Drilling Info, Inc. RigData is a
provider of daily information on rig activity for the natural
gas and oil markets across North America. During the year
ended December 31, 2019, we recorded a pre-tax gain of
$27 million ($26 million after-tax) in Gain on dispositions
in the consolidated statement of income related to the
sale of RigData.
• In March of 2019, we entered into an agreement to sell
Standard & Poor’s Investment Advisory Services LLC (“SPIAS”),
a business within our Market Intelligence segment, to Goldman
Sachs Asset Management (“GSAM”). SPIAS provides non-
discretionary investment advice across institutional sub-
advisory and intermediary distribution channels globally.
On July 1, 2019, we completed the sale of SPIAS to GSAM.
During the year ended December 31, 2019, we recorded a
pre-tax gain of $22 million ($12 million after-tax) in Gain on
dispositions in the consolidated statement of income related
to the sale of SPIAS.
S&P Global 2019 Annual Report 27
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
2019
$1,763
607
438
630
3,438
(212)
$3,226
2018
$1,530
545
383
563
3,021
(231)
$2,790
2017
$1,517
457
326
478
2,778
(195)
$2,583
’19 vs ’18
’18 vs ’17
15%
11%
15%
12%
14%
8%
16%
1%
19%
18%
18%
9%
(19)%
8%
1 2019 includes employee severance charges of $11 million. 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. 2019 and 2018 includes amortization of intangibles from
acquisitions of $2 million and 2017 includes amortization of intangibles from acquisitions of $4 million.
2 2019 includes a gain on the sale of SPIAS of $22 million, employee severance charges of $6 million and acquisition-related costs of $4 million. 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. 2019, 2018 and 2017 includes amortization of intangibles from acquisitions of $75 million, $73 million and $71
million, respectively.
3 2019 includes a gain on the sale of RigData of $27 million and employee severance charges of $1 million. 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. 2019 includes amortization
of intangibles from acquisitions of $12 million and both 2018 and 2017 includes amortization of intangibles from acquisitions of $18 million.
4 2019, 2018 and 2017 includes amortization of intangibles from acquisitions of $6 million.
5 2019 includes Kensho retention related expense of $21 million, lease impairments of $11 million and employee severance charges of $7 million. 2018 includes Kensho
retention related expense of $31 million, lease impairments of $11 million and employee severance charges of $10 million. 2017 includes a charge to exit leased
facilities of $19 million and employee severance charges of $10 million. 2019 and 2018 also includes amortization of intangibles from acquisitions of $28 million and
$23 million, respectively.
2019
Segment Operating Profit
Increased $417 million, or 14% as compared to 2018. Excluding
the impact of higher legal settlement expenses in 2018 of 3
percentage points and a gain on our dispositions in 2019 of 2
percentage points, segment operating profit increased 9%. This
increase was primarily driven by an increase in revenue at all of
our reportable segments and lower professional fees, partially
offset by higher technology costs, an increase in incentive costs
and higher compensation costs driven by annual merit increases
and additional headcount.
Corporate Unallocated
Corporate Unallocated includes costs for corporate center
functions, select initiatives and unoccupied office space and
Kensho, included in selling and general expenses, and Kensho
revenue in 2018. Corporate Unallocated improved by $19 million
or 8% as compared to 2018. Excluding the favorable impact of
lower Kensho retention related expense in 2019 of 2 percentage
points, partially offset by the unfavorable impact of higher deal-
related amortization in 2019 of 1 percentage point, Corporate
Unallocated improved 7% primarily driven by a $20 million
contribution made by the Company to the S&P Global Foundation
in 2018 and a reduction in professional fees.
Foreign exchange rates had a favorable impact on operating
profit of less than 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.
28 S&P Global 2019 Annual Report
with these retirees. The purchase of this group annuity contract
was funded with pension plan assets. As a result, the Company’s
outstanding pension benefit obligation was reduced by
approximately $370 million, representing approximately 24% of
the total obligations of the Company’s qualified pension plans. In
connection with this transaction, the Company recorded a pre-
tax settlement charge of $113 million, reflecting the accelerated
recognition of a portion of unamortized actuarial losses in the
plan. The Company also recorded pension settlement charges
of $5 million and $8 million in 2018 and 2017, respectively.
Excluding these charges, other income, net was $14 million, $29
million and $35 million for 2019, 2018 and 2017, respectively.
The decreases in other income, net in 2019 compared to 2018
and 2018 compared to 2017 were primarily due to a higher loss
on investments.
Interest Expense, net
Net interest expense for 2019 increased $64 million or 48% as
compared to 2018, primarily driven by costs associated with the
early repayment of our 3.3% Senior Notes and a portion of our
6.55% Senior Notes. Excluding these costs, net interest expense
increased $7 million or 5%, driven by the release of reserves
for accrued interest related to the resolution of various tax
audits in 2018.
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.
Provision for Income Taxes
Our effective tax rate was 21.4%, 20.9% and 33.4% for 2019,
2018 and 2017, respectively. The increase in 2019 was primarily
due to an increase in accruals for potential tax liabilities for prior
years in various jurisdictions. 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.
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 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 in 2018. 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
improved 6% due to a reduction in vacant space, performance
related incentive compensation and professional fees.
Foreign exchange rates had a favorable impact on operating
profit of 2 percentage points. The foreign exchange rate impact
refers to constant currency comparisons and the 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 Expense (Income), net
Other expense, net for 2019 was $98 million and other income,
net for 2018 and 2017 was $25 million and $27 million,
respectively. Other income (expense), net primarily includes the
net periodic benefit cost for our retirement and postretirement
plans. During the first quarter of 2019, the Company purchased
a group annuity contract under which an insurance company
assumed the Company’s obligation to pay pension benefits to
approximately 4,600 retirees and beneficiaries. This purchase
eliminates all future investment or mortality risk associated
S&P Global 2019 Annual Report 29
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 disaggregates 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, as well as 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 at CRISIL. 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 for 2019, 2018 and 2017 was $118
million, $109 million and $100 million, respectively.
The following table provides revenue and segment operating
profit information for the years ended December 31:
(in millions)
Revenue
Transaction revenue 1
Non-transaction revenue 1
% of total revenue:
Transaction revenue
Non-transaction revenue
U.S. revenue
International revenue
% of total revenue:
U.S. revenue
International revenue
Operating profit 2
% Operating margin
Year ended December 31,
% Change
2019
$3,106
$1,577
$1,529
51%
49%
$1,745
$1,361
56%
44%
$1,763
57%
2018
$2,883
$1,350
$1,533
47%
53%
$1,619
$1,264
56%
44%
$1,530
53%
2017
$2,988
$1,515
$1,473
51%
49%
$1,716
$1,272
57%
43%
$1,517
51%
’19 vs ’18
’18 vs ’17
8%
17%
—%
8%
8%
(4)%
(11)%
4%
(6)%
1%
15%
1%
1
In 2019, we reevaluated our transaction and non-transaction revenue presentation which resulted in a reclassification from transaction revenue to non-transaction
revenue of $27 million and $25 million for 2018 and 2017, respectively.
2 2019 includes employee severance charges of $11 million. 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. 2019 and 2018 includes amortization of intangibles from
acquisitions of $2 million and 2017 includes amortization of intangibles from acquisitions of $4 million.
2019
Revenue increased 8%, with a 1 percentage point unfavorable
impact from foreign exchange rates, due to an increase in
transaction revenue. Transaction revenue increased due to an
increase in corporate bond ratings revenue primarily driven by
higher corporate bond issuance in the U.S. and Europe mainly
resulting from historically low borrowing costs, partially offset
by lower bank loan ratings revenue driven by reduced U.S.
issuance volumes. An increase in public finance revenue due
to increased issuance also contributed to transaction revenue
growth. Non-transaction revenue decreased less than 1%
primarily due to the unfavorable impact from foreign exchange
rates. Non-transaction revenue was unfavorably impacted by
a decline in Ratings Evaluation Service activity, a decrease at
CRISIL, primarily within the risk and analytics sector, and lower
entity credit ratings revenue, and benefited from an increase in
surveillance revenue and higher royalty revenue. Transaction and
non-transaction revenue also benefited from improved contract
terms across product categories.
Operating profit increased 15%, with a 2 percentage point
unfavorable impact from foreign exchange rates. Excluding
the impact of higher legal settlement expenses in 2018 of 5
percentage points, operating profit increased 10%. This increase
was primarily due to the increase in revenue discussed above
30 S&P Global 2019 Annual Report
combined with a reduction in legal expenses, lower professional
fees from increased leverage on the Global Technology Center
and internal resources, partially offset by an increase in incentive
costs and AWS cloud infrastructure spend.
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 revenue, 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 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
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.
Market Issuance Volumes
We monitor market issuance volumes regularly within Ratings.
Market issuance volumes noted within the discussion that
follows are based on where an issuer is located or where the
assets associated with an issue are located. Structured Finance
issuance includes amounts when a transaction closes, not
when initially priced and excludes domestically-rated Chinese
issuance. The following tables depict changes in issuance
levels as compared to the prior year based on data from SDC
Platinum for Corporate bond issuance and based on a composite
of external data feeds and Ratings’ internal estimates for
Structured Finance issuance.
Corporate Bond Issuance *
High-yield issuance
Investment-grade issuance
Total issuance
* Includes Industrials and Financial Services.
2019 Compared to 2018
U.S.
58%
14%
20%
Europe
Global
35%
(2)%
2%
51%
12%
15%
• Corporate issuance was up in 2019 driven by double-digit
increases in both high-yield and investment grade issuance.
U.S. high-yield issuance increased as accommodating
views from the U.S. Federal Reserve regarding interest rates
throughout 2019 moved investors toward more fixed-rate debt.
Strength was also seen in U.S. investment grade issuance as
issuers were taking advantage of historically low borrowing
costs. Increased issuance in Europe was driven by strength
in high-yield issuance. Both high-yield and investment grade
issuance comparisons also benefited from weakness in 2018
due to market volatility and slowing global economic growth.
2019 Compared to 2018
Structured Finance
U.S.
Europe
Global
Asset-backed securities (“ABS”)
(1)%
(14)%
—%
Structured credit (primarily
CLOs)
Commercial mortgage-backed
securities (“CMBS”)
Residential mortgage-backed
securities (“RMBS”)
Covered bonds
Total issuance
** Represents no activity in 2019 and 2018.
(46)%
(30)%
(43)%
26%
17%
23%
67%
6%
28%
**
(11)%
(8)%
(10)%
(10)%
(9)%
• ABS issuance was down slightly in the U.S. reflecting a decline
in student loan and credit card transactions and down in
Europe primarily in auto transactions reflecting uncertainty
caused by regulation introducing a new framework for simple,
transparent and standardized (“STS”) securitizations effective
January 1, 2019.
• Issuance was down in the U.S. and European structured credit
markets driven by a decline in CLO transactions.
• CMBS issuance was up in the U.S. reflecting increased market
volume caused by a decline in interest rates. CMBS issuance
was also up in Europe driven by increased market volume.
• RMBS issuance was up in the U.S. reflecting increased market
volume primarily driven by nonqualified mortgages. RMBS
issuance was also up in Europe reflecting increased market
volume in the fourth quarter of 2019.
• Covered bond (debt securities backed by mortgages or other
high-quality assets that remain on the issuer’s balance
sheet) issuance in Europe was down driven by difficult market
conditions in the third and fourth quarters of 2019.
S&P Global 2019 Annual Report 31
Industry Highlights and Outlook
Revenue increased in 2019 due to an increase in corporate
bond ratings revenue primarily driven by higher corporate bond
issuance in the U.S. and Europe. In 2019, Ratings continued
to focus on international expansion particularly in China and
published its first ratings in the domestic Chinese bond market.
Additionally, Ratings launched ESG Evaluation in 2019. The ESG
Evaluation is a cross-sector, relative analysis of an entity’s ability
to operate successfully in the future and optimize long-term
stakeholder value in light of its natural and social environment
and the quality of its governance.
In 2020, Ratings will continue to focus on strengthening
analytical excellence to drive market relevance, leveraging
new technology and data capabilities to transform its value
chain, entering new high-potential geographies with innovative
products and extending its strong analytical capabilities to new
opportunities such as ESG and cybersecurity.
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, remuneration and 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 and/or our remuneration, 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:
32 S&P Global 2019 Annual Report
• 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
• Credit Risk Solutions — 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 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
• 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, in which the Financial Conduct Authority is
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 March of 2019, we entered into an agreement to sell SPIAS,
a business within our Market Intelligence segment, to GSAM.
SPIAS provides non-discretionary investment advice across
institutional sub-advisory and intermediary distribution
channels globally. On July 1, 2019, we completed the sale of
SPIAS to GSAM. During 2019, we recorded a pre-tax gain of
$22 million ($12 million after-tax) in Gain on dispositions in the
consolidated statement of income related to the sale of SPIAS.
Market Intelligence includes the following business lines:
S&P Global 2019 Annual Report 33
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
2019
$1,959
$1,904
$45
$10
97%
2%
1%
$1,213
$746
62%
38%
$607
31%
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%
’19 vs ’18
’18 vs ’17
7%
7%
12%
(50)%
9%
10%
(13)%
(14)%
3%
14%
6%
14%
11%
19%
1 2019 includes a gain on the disposition of SPIAS of $22 million, employee severance charges of $6 million and acquisition-related costs of $4 million. 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. 2019, 2018 and 2017 includes amortization of intangibles from acquisitions of $75 million, $73 million and $71
million, respectively.
2019
Revenue increased 7% and was favorably impacted by less than
1 percentage point from the net impact of recent acquisitions
and a disposition. Excluding the impact of the acquisitions
and disposition, increased revenue was driven by growth in
annualized contract values in the Market Intelligence Desktop
products, RatingsXpress®, RatingsDirect®, CUSIP and our data
feed products within Data Management Solutions. Excluding the
impact of the acquisitions and disposition favorably impacting
Desktop revenue growth by 1 percentage point, revenue growth
at Data Management Solutions, Credit Risk Solutions and
Desktop was 11%, 9% and 4%, respectively. Both domestic and
international revenue increased compared to 2018. In 2019,
international revenue represented 38% of Market Intelligence’s
total revenue compared to 36% in 2018. Foreign exchange
rates had an unfavorable impact of less than 1 percentage
point. Revenue was favorably impacted by the acquisitions of
451 Research, LLC, Panjiva Inc. (“Panjiva”) and the RateWatch
business (“RateWatch”) in December of 2019, February of 2018
and June of 2018, respectively, and the transfer of Kensho
revenue from Corporate in January of 2019, and unfavorably
impacted by the disposition of SPIAS in July of 2019. See Note
1 - Nature of Operations and Basis of Presentation and Note
2 - Acquisitions and Divestitures to the Consolidated Financial
Statements and Supplementary Data, in the Annual Report on
Form 10-K for further discussion.
Operating profit increased 11%, with a 2 percentage point
favorable impact from foreign exchange rates. Excluding the
favorable impact of the gain on the disposition of SPIAS of 5
percentage points, partially offset by the unfavorable impact
of acquisition-related costs in 2019 of 1 percentage point,
operating profit increased 7%. The increase was primarily due
to revenue growth, partially offset by higher technology costs,
higher compensation costs primarily driven by additional
headcount and an increase in intersegment royalties tied to
annualized contract value growth.
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.
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
34 S&P Global 2019 Annual Report
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 intersegment 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 in February of 2018 and RateWatch
in June of 2018.
Industry Highlights and Outlook
In 2019, Market Intelligence launched unique technology
innovations including Textual Data Analytics, Kensho’s Scribe and
several ESG-related offerings. Textual Data Analytics, launched
on XpressfeedTM, provides sentiment scores and behavioral
metrics derived from earnings call transcripts. Kensho’s Scribe is
a speech recognition solution specifically optimized for financial
audio. In 2019, Market Intelligence continued to develop
its desktop platform by enhancing its product offerings and
developing its analytical capabilities. In 2020, 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
geographies and growth areas such as ESG.
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 EU 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), the introduction
of the MiFID II package may result in changes to the manner in
which Market Intelligence licenses its price certain products.
MiFID II may impose regulatory burdens on Market Intelligence
activities in the EU, although the exact impact and costs
are not yet known.
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.
On July 31, 2019, we completed the sale of RigData, a business
within our Platts segment, to Drilling Info, Inc. RigData is a
provider of daily information on rig activity for the natural gas
and oil markets across North America. During 2019, we recorded
a pre-tax gain of $27 million ($26 million after-tax) in Gain on
dispositions in the consolidated statement of income related to
the sale of RigData.
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.
S&P Global 2019 Annual Report 35
(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
2019
$844
$774
$60
$10
92%
7%
1%
$281
$563
33%
67%
$438
52%
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%
’19 vs ’18
’18 vs ’17
4%
3%
11%
(5)%
–%
6%
5%
6%
(5)%
(12)%
–%
9%
15%
18%
1 2019 includes a gain on the disposition of RigData of $27 million and employee severance charges of $1 million. 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. 2019 includes
amortization of intangibles from acquisitions of $12 million and both 2018 and 2017 includes amortization of intangibles from acquisitions of $18 million.
2019
Revenue increased 4% and was unfavorably impacted by
less than 1 percentage point from the net impact of recent
acquisitions and a disposition. Excluding the acquisitions and
disposition, revenue increased due to continued demand for
market data and price assessment products driven by both
expanded product offerings to our existing customers combined
with enhanced contract terms. Additionally, revenue growth
was driven by an increase in sales usage-based royalties from
the licensing of our proprietary market price data and price
assessments to commodity exchanges mainly due to increased
trading volumes in Iron Ore, LNG and Gasoil. Demand for market
data and price assessment products was driven by international
customers. International revenue increased and domestic
revenue, which was unfavorably impacted by the disposition
of RigData in July of 2019, remained relatively unchanged
compared to 2018. In 2019, international revenue represented
67% of Platts total revenue compared to 65% in 2018. Petroleum
continues to be the most significant revenue driver, followed
by power & gas, metals and petrochemicals also contributing
to revenue growth. Foreign exchange rates had an unfavorable
impact of less than 1 percentage point. Revenue was unfavorably
impacted by the disposition of RigData in July of 2019 and
favorably impacted by the acquisitions of Live Rice Index and
Enerdata in August of 2019 and September of 2019, respectively.
See Note 2 - Acquisitions and Divestitures to the Consolidated
Financial Statements and Supplementary Data, in the Annual
Report on Form 10-K for further discussion.
Operating profit increased 15% with a 2 percentage point
favorable impact from foreign exchange rates. Excluding the
favorable impact of the gain on the disposition of RigData of
7 percentage points and lower amortization of intangibles in
2019 of 2 percentage points, operating profit increased 6%. The
increase was primarily due to revenue growth, partially offset by
an increase in operating costs to support revenue growth and
business initiatives at Platts, including Asia expansion initiatives,
an increase in compensation costs due to annual merit increases
and increased headcount, higher technology costs, an increase
in the bad debt provision in the current year and one-time costs
related to the discontinuation of a product line at Platts.
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.
36 S&P Global 2019 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
’19 vs ’18
’18 vs ’17
2019
$844
$774
$60
$10
92%
7%
1%
$281
$563
33%
67%
$438
52%
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%
4%
3%
11%
(5)%
–%
6%
5%
6%
(5)%
(12)%
–%
9%
15%
18%
(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 Market Abuse Regulation (“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.
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.
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 sales-usage based
royalties. 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.
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.
Industry Highlights and Outlook
In 2019, sustained demand for market data and price
assessment products, led by petroleum, continued to drive
revenue growth. Revenue also increased from the licensing
of our proprietary market price data and price assessments
to commodity exchanges driven by higher trading volumes. In
2019, Platts continued to drive commercial transformation by
enhancing and simplifying the customer experience. Additionally,
Platts focused on expanding its capabilities in Asia. In 2020,
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. Platts has obtained authorization and is
now supervised by the Dutch Authority for the Financial Markets
in the Netherlands under the EU Benchmark Regulation, and
may need to take similar steps in other jurisdictions including
the United Kingdom post-Brexit and jurisdictions outside of
Europe if they pass similar legislation. 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.
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 EU Market Infrastructure Regulation of
2011). Although the MiFID II package is “framework” legislation
S&P Global 2019 Annual Report 37
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
Subscription revenue
Sales usage-based royalties
% of total revenue:
Asset-linked fees
Subscription revenue
Sales usage-based royalties
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
2019
$918
$613
$165
$140
67%
18%
15%
$772
$146
84%
16%
$630
$170
$460
69%
50%
2018
$837
$522
$144
$171
62%
17%
21%
$719
$118
86%
14%
$563
$151
$412
67%
49%
’19 vs ’18
’18 vs ’17
10%
18%
14%
(18)%
7%
24%
12%
12%
12%
15%
13%
6%
30%
20%
(7)%
18%
17%
18%
2017
$728
$461
$136
$131
63%
19%
18%
$601
$127
83%
17%
$478
$129
$349
66%
48%
1 2019, 2018 and 2017 includes amortization of intangibles from acquisitions of $6 million.
2019
Revenue increased 10% due to higher levels of assets under
management (“AUM”) for ETFs and mutual funds. Additionally,
revenue was favorably impacted by the buyout of the balance
of intellectual property rights in a family of indices from
one of our co-marketing and index development partners in
the fourth quarter of 2018, retrospective fees for previously
unlicensed and unreported index usage and benefits related
to contract renegotiations. These increases were partially
offset by a decrease in exchange-traded derivatives revenue
primarily driven by lower volumes in 2019. Ending AUM for ETFs
increased 30% to $1.701 trillion in 2019 and average AUM for
ETFs increased 8% to $1.508 trillion compared to 2018. Foreign
exchange rates had an unfavorable impact of less than 1
percentage point.
Operating profit grew 12%. The impact of revenue growth was
partially offset by higher operating costs from increased royalties
due to increased traction of royalty-based products, higher legal
expenses and increased compensation costs primarily driven by
additional headcount, partially offset by lower incentive costs.
Foreign exchange rates had a favorable impact of less than 1
percentage point.
2018
Revenue increased 15%, primarily driven by higher AUM for
ETFs and mutual funds, and higher exchange-traded derivative
38 S&P Global 2019 Annual Report
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.
Foreign exchange rates had an unfavorable impact of less than 1
percentage point.
Operating profit grew 18%. The impact of revenue growth
was partially offset by higher operating costs to support
revenue growth and business initiatives at Indices and higher
compensation costs from additional headcount. Foreign
exchange rates had an unfavorable impact of less than 1
percentage point.
Industry Highlights and Outlook
Indices continues to be the leading index provider for the ETF
market space. In 2019, higher average levels of AUM for ETFs
contributed to revenue growth. In 2019, Indices continued to
launch innovative indices, expand index product offerings and
grow international partnerships. In 2020, Indices will continue
to focus on growing the core business, expanding innovative
offerings with focus on differentiated solutions such as factor,
multi-asset-class, and ESG indices, and growing globally through
collaborative client relationships.
(in millions)
Revenue
Asset-linked fees
Subscription revenue
Sales usage-based royalties
% of total revenue:
Asset-linked fees
Subscription revenue
Sales usage-based royalties
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
’19 vs ’18
’18 vs ’17
2019
$918
$613
$165
$140
67%
18%
15%
$772
$146
84%
16%
$630
$170
$460
69%
50%
2018
$837
$522
$144
$171
62%
17%
21%
$719
$118
86%
14%
$563
$151
$412
67%
49%
2017
$728
$461
$136
$131
63%
19%
18%
$601
$127
83%
17%
$478
$129
$349
66%
48%
10%
18%
14%
(18)%
7%
24%
12%
12%
12%
15%
13%
6%
30%
20%
(7)%
18%
17%
18%
Legal and Regulatory Environment
Liquidity and Capital Resources
Over the past four years the financial benchmarks industry has
been subject to specific benchmark regulation in the European
Union (the “EU Benchmark Regulation”) and Australia (the
“Australia Benchmark Regulation”). Other jurisdictions are also
considering new regulation for financial benchmarks.
The EU Benchmark Regulation was published June 30, 2016
and included provisions applicable to Indices and Platts, which
became effective January 1, 2018. Both Indices and Platts have
established separate benchmark administrators in connection
with their benchmark activities in Europe. The Indices and Platts
entities are both based in Amsterdam and are authorized by
the Netherlands Authority for Financial Markets (AFM). 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.
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. Indices is in the process of obtaining such license.
Although narrower in scope, the requirements of the Australian
Benchmark Regulation are similar to those of the EU 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
(IOSCO Principles), intended to promote the reliability of financial
benchmark determinations. The IOSCO Principles address
governance, benchmark quality and accountability mechanisms,
including with regard to the indices published by Indices. Even
though the IOSCO Principles are not binding law, Indices has
taken steps to align its governance regime and operations
with the IOSCO Principles and engaged an independent
auditor to perform an annual 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.
Our Indices business is impacted by market volatility, asset levels
of investment products tracking indices, and trading volumes
of certain exchange traded derivatives. Volatile capital markets,
as well as changing investment styles, among other factors,
may influence an investor’s decision to invest in and maintain
an investment in an index-linked investment product. 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.
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
2020, 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 $2.9 billion as
of December 31, 2019, an increase of $0.9 billion as compared to
December 31, 2018.
Year ended December 31,
(in millions)
2019
2018
2017
Net cash provided by (used for):
Operating activities
Investing activities
Financing activities
$2,776
$2,064
(131)
(1,751)
(513)
(2,288)
$2,016
(209)
(1,507)
In 2019, free cash flow increased to $2.5 billion compared to $1.8
billion in 2018. 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 $2.8 billion
in 2019 as compared to $2.1 billion in 2018. The increase
is mainly due to higher results from operations, lower
incentive compensation payments and lower legal settlement
payments in 2019.
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.
S&P Global 2019 Annual Report 39
Investing Activities
Our cash outflows from investing activities are primarily for
acquisitions and capital expenditures, while cash inflows are
primarily proceeds from dispositions.
Cash used for investing activities decreased to $0.1 billion
for 2019 as compared to $0.5 billion in 2018, primarily due to
cash used for the acquisition of Kensho and the purchase of
intellectual property in 2018.
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.
Refer to Note 2 – Acquisitions and Divestitures to the
Consolidated Financial Statements and Supplementary Data, in
the Annual Report on Form 10-K for further information.
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 decreased to $1.8 billion
in 2019 from $2.3 billion in 2018. The decrease is primarily
attributable to higher cash paid for share repurchases in 2018
and proceeds from the issuance of senior notes in 2019.
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.
During 2019, we received 5.9 million shares, including 0.4 million
shares received in January of 2019 related to our October 29,
2018 accelerated share repurchase (“ASR”) agreement, resulting
in $1,240 million of cash used to repurchase shares. We entered
into an ASR agreement with a financial institution on August
5, 2019 to initiate share repurchases aggregating $500 million.
We repurchased a total of 2.0 million shares under the ASR
agreement for an average purchase price of $253.36 per share.
We entered into an ASR agreement with a financial institution
on February 11, 2019 to initiate share repurchases aggregating
$500 million. We repurchased a total of 2.3 million shares
under the ASR agreement for an average purchase price of
$214.65 per share.
During 2018, we used cash to repurchase 8.4 million shares for
$1.7 billion. We entered into an 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
40 S&P Global 2019 Annual Report
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.
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, 2019, 4.7 million shares remained available under
our current repurchase program.
See Note 9 — Equity to the Consolidated Financial Statements
and Supplementary Data, in the 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, 2019 and 2018.
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 November 1, 2019, Fitch Ratings upgraded our short-term/
commercial paper rating to F1 from F2, affirmed our long-term
debt rating and the ratings outlook was maintained at stable.
Dividends
On January 29, 2020, the Board of Directors approved an increase
in the quarterly common stock dividend from $0.57 per share to
$0.67 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.
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 2020.
The following table summarizes our significant contractual obligations and commercial commitments as of December 31, 2019,
over the next several years. Additional details regarding these obligations are provided in the notes to our consolidated financial
statements, as referenced in the footnotes to the table:
(in millions)
Debt: 1
Principal payments
Interest payments
Operating leases 2
Purchase obligations and other 3
Total contractual cash obligations
Less than
1 Year
1-3
Years
3-5
Years
More than
5 Years
Total
$—
$156
$133
$91
$380
$—
$313
$211
$98
$622
$—
$313
$147
$69
$3,948
$1,414
$358
$70
$3,948
$2,196
$849
$328
$529
$5,790
$7,321
1 Our debt obligations are described in Note 5 – Debt to our consolidated financial statement.
2 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, 2019, we had $124 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, 2019, we have recorded $2,268 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 2019, we contributed $46
million to our retirement plans. Expected employer contributions
in 2020 are $11 million and $5 million for our retirement and
postretirement plans, respectively. In 2020, 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, 2019 and 2018, 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 2019 Annual Report 41
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:
Year ended December 31,
% Change
(in millions)
Cash provided by operating activities
Capital expenditures
Distributions to noncontrolling
interest holders, net 1
Free cash flow
Settlement of prior-year tax audits
Tax on gain from sale of SPIAS and RigData
Tax on gain from sale of SPSE and CMA
Payment of legal settlements
Tax benefit from legal settlements
2019
$2,776
(115)
(143)
$2,518
51
13
—
1
—
2018
$2,064
(113)
(154)
$1,797
73
—
—
180
(44)
2017
$2,016
(123)
(111)
$1,782
—
—
67
4
(2)
’19 vs ’18
’18 vs ’17
34%
2%
40%
1%
Free cash flow excluding above items
$2,583
$2,006
$1,851
29%
8%
1 Distributions to noncontrolling interest holders is net of amounts owed to the S&P Dow Jones Indices LLC joint venture by the noncontrolling interest holders.
(in millions)
Cash used for investing activities
Cash used for financing activities
N/M - not meaningful
2019
(131)
(1,751)
2018
(513)
(2,288)
2017
(209)
(1,507)
’19 vs ’18
’18 vs ’17
(75)%
(23)%
N/M
52%
42 S&P Global 2019 Annual Report
Year ended December 31,
% Change
(in millions)
Cash provided by operating activities
Capital expenditures
Distributions to noncontrolling
interest holders, net 1
Free cash flow
Settlement of prior-year tax audits
Tax on gain from sale of SPIAS and RigData
Tax on gain from sale of SPSE and CMA
Payment of legal settlements
Tax benefit from legal settlements
2019
$2,776
(115)
(143)
$2,518
51
13
—
1
—
2018
$2,064
(113)
(154)
$1,797
73
—
—
180
(44)
2017
$2,016
(123)
(111)
$1,782
—
—
67
4
(2)
’19 vs ’18
’18 vs ’17
34%
2%
40%
1%
Free cash flow excluding above items
$2,583
$2,006
$1,851
29%
8%
(in millions)
Cash used for investing activities
Cash used for financing activities
2019
(131)
(1,751)
2018
(513)
(2,288)
2017
(209)
(1,507)
’19 vs ’18
’18 vs ’17
(75)%
(23)%
N/M
52%
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 $16 million.
For the years ended December 31, 2019, 2018 and 2017, 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 2020.
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.
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, 2019 and 2018, the carrying value of goodwill and other
indefinite-lived intangible assets was $4.4 billion. 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 2019 Annual Report 43
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, 2019,
2018, and 2017.
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 2019,
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
44 S&P Global 2019 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:
January 1
Discount rate
Return on assets
Retirement Plans
Postretirement Plans
2020
2019
2018
2020
2019
2018
3.45%
5.50%
4.40%
6.00%
3.68%
6.00%
3.08%
4.15%
3.40%
Weighted-average healthcare cost rate
6.50%
6.50%
6.50%
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:
Year ended December 31, 2018
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.
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
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.
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 2019 and 2017.
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, 2020. 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, 2019, we have approximately $3.2 billion of
undistributed earnings of our foreign subsidiaries, of which $776
million is reinvested indefinitely in our foreign operations.
S&P Global 2019 Annual Report 45
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.
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 fair
value measures for instances when observable inputs are
not available. The more significant judgmental assumptions
used to estimate the value of the S&P Dow Jones Indices LLC
joint venture include an estimated discount rate, a range of
assumptions that form the basis of the expected future net cash
flows (e.g., the revenue growth rates and operating margins),
and a company specific beta. The significant judgmental
assumptions used that incorporate market data, including the
relative weighting of market observable information and the
comparability of that information in our valuation models, are
forward-looking and could be affected by future economic and
market conditions.
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
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.
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, and factors that contribute to uncertainty
and volatility including natural and man-made disasters,
pandemics (i.e. coronavirus), geopolitical uncertainty, and
conditions that may result from legislative, regulatory,
trade and policy changes associated with the current U.S.
administration;
• the rapidly evolving regulatory environment, in Europe,
the United States and elsewhere, affecting Ratings, S&P
Global Platts, Indices, and S&P Global Market Intelligence,
including new and amended regulations and the Company’s
compliance therewith;
• 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
a system or network disruption that results in regulatory
penalties and remedial costs or improper disclosure of
confidential information or data;
• our ability to make acquisitions and dispositions and
successfully integrate the businesses we acquire;
46 S&P Global 2019 Annual Report
• the outcome of litigation, government and regulatory
• our ability to attract, incentivize and retain key employees;
proceedings, investigations and inquiries;
• the Company’s ability to successfully recover should it
• 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
• the level of the Company’s future cash flows and
sectors and geographies where the Company operates;
capital investments;
• 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 effect of competitive products and pricing, including
the level of success of new product developments and
global expansion;
• the impact on the Company’s revenue and net income caused
by fluctuations in foreign currency exchange rates;
• the Company’s ability to adjust to changes in European and
United Kingdom markets as the United Kingdom leaves the
European Union, and the impact of the United Kingdom’s
departure on our credit rating activities and other offerings in
the European Union and United Kingdom; and
• the Company’s exposure to potential criminal sanctions or
civil penalties for noncompliance 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, Syria and Venezuela, 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;
• 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;
• the impact of changes in applicable tax or accounting
requirements, including the Tax Cuts and Jobs Act
on the Company.
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 2019 Annual Report 47
Consolidated Statements of Income
(in millions, except per share data)
Revenue
Expenses:
Operating-related expenses
Selling and general expenses
Depreciation
Amortization of intangibles
Total expenses
Gain on dispositions
Operating profit
Other expense (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,
2019
$6,699
2018
$6,258
2017
$6,063
1,801
1,517
82
122
3,522
(49)
3,226
98
198
2,930
627
2,303
(180)
1,698
1,564
84
122
3,468
—
2,790
(25)
134
2,681
560
2,121
(163)
1,694
1,606
82
98
3,480
—
2,583
(27)
149
2,461
823
1,638
(142)
Net income attributable to S&P Global Inc.
$2,123
$1,958
$1,496
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
See accompanying notes to the consolidated financial statements.
$8.65
$8.60
245.4
246.9
244.0
$7.80
$7.73
250.9
253.2
248.4
$5.84
$5.78
256.3
258.9
253.7
48 S&P Global 2019 Annual Report
Consolidated Statements of Comprehensive Income
(in millions)
Net income
Other comprehensive income:
Foreign currency translation adjustments
Income tax effect
Pension and other postretirement benefit plans
Income tax effect
Unrealized (loss) gain 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,
2019
$2,303
2018
$2,121
2017
$1,638
10
8
18
141
(39)
102
(2)
—
(2)
2,421
(10)
(96)
(4)
(100)
(14)
9
(5)
2
—
2
2,018
(12)
93
—
93
52
(11)
41
(10)
—
(10)
1,762
(13)
(170)
(151)
(129)
Comprehensive income attributable to S&P Global Inc.
$2,241
$1,855
$1,620
Weighted-average number of common shares outstanding:
See accompanying notes to the consolidated financial statements.
(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 expense (income), net
Interest expense, net
Income before taxes on income
Provision for taxes on income
Net income
Net income:
Basic
Diluted
Basic
Diluted
Actual shares outstanding at year end
Year Ended December 31,
2019
$6,699
2018
$6,258
2017
$6,063
1,801
1,517
82
122
3,522
(49)
3,226
98
198
2,930
627
2,303
(180)
$8.65
$8.60
245.4
246.9
244.0
1,698
1,564
84
122
3,468
—
2,790
(25)
134
2,681
560
2,121
(163)
$7.80
$7.73
250.9
253.2
248.4
1,694
1,606
82
98
—
3,480
2,583
(27)
149
2,461
823
1,638
(142)
$5.84
$5.78
256.3
258.9
253.7
Less: net income attributable to noncontrolling interests
Net income attributable to S&P Global Inc.
$2,123
$1,958
$1,496
Earnings per share attributable to S&P Global Inc. common shareholders:
S&P Global 2019 Annual Report 49
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: 2019- $34; 2018 - $34
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
Right of use assets
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
Income taxes currently payable
Unearned revenue
Other current liabilities
Total current liabilities
Long-term debt
Lease liabilities – non-current
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:
2019 - 294 million shares; 2018 - 294 million shares
Additional paid-in capital
Retained income
Accumulated other comprehensive loss
Less: common stock in treasury - at cost: 2019 - 50 million shares; 2018 - 45 million shares
Total equity – controlling interests
Total equity – noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to the consolidated financial statements.
50 S&P Global 2019 Annual Report
December 31,
2019
2018
$2,866
$1,917
20
28
1,577
221
4,712
420
522
942
(622)
320
676
3,575
1,424
641
41
18
1,449
162
3,587
372
494
866
(596)
270
—
3,535
1,524
525
$11,348
$9,441
$190
446
68
1,928
461
3,093
3,948
620
259
624
8,544
2,268
294
903
12,205
(624)
(12,299)
479
57
536
$211
354
73
1,641
351
2,630
3,662
—
229
616
7,137
1,620
294
833
11,284
(742)
(11,041)
628
56
684
$11,348
$9,441
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,
2019
2018
2017
$2,303
$2,121
$1,638
Depreciation
Amortization of intangibles
Provision for losses on accounts receivable
Deferred income taxes
Stock-based compensation
Gain on dispositions
Accrued legal settlements
Pension settlement charge, net of taxes
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, net
Repurchase of treasury shares
Exercise of stock options
Purchase of additional CRISIL shares
Employee withholding tax on share-based payments and other
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
See accompanying notes to the consolidated financial statements.
82
122
18
46
78
(49)
—
85
93
(135)
(81)
73
256
(1)
(56)
(41)
(17)
2,776
(115)
(91)
85
(10)
(131)
1,086
(868)
(560)
(143)
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)
82
98
16
—
99
—
55
—
96
(196)
10
75
85
(4)
(85)
32
15
2,016
(123)
(83)
2
(5)
(209)
—
—
(421)
(111)
(1,240)
(1,660)
(1,001)
40
—
(66)
(1,751)
34
928
1,958
$2,886
$162
$659
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
S&P Global 2019 Annual Report 51
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
Balance as of December 31, 2016
$412
$502
$9,210
$(773)
$8,701
Comprehensive income ¹
Dividends (Dividend declared per
common share — $1.64 per share)
Share repurchases
Employee stock plans
Change in redemption value of
redeemable noncontrolling interest
Other
Balance as of December 31, 2017
Comprehensive income ¹
Dividends (Dividend declared per
common share — $2.00 per share)
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
23
$412
$525
1,496
(421)
(260)
(2)
$10,023
1,958
(503)
(228)
(75)
56
(25)
352
124
$650
1,620
(421)
1,001 (1,001)
(100)
123
$(649)
$9,602
(103)
(260)
(2)
$709
1,855
(503)
1,585 (1,660)
(118)
(28)
—
84
(228)
(25)
352
44
342
102
Balance as of December 31, 2018
$294
$833
$11,284
$(742)
$11,041
$628
Comprehensive income ¹
Dividends (Dividend declared per
common share — $2.28 per share)
Share repurchases
Employee stock plans
Capital contribution from
noncontrolling interest
Change in redemption value of
redeemable noncontrolling interest
Other
75
(5)
2,123
(560)
(36)
(608)
2
118
2,241
(560)
1,315 (1,240)
(57)
52
(36)
(608)
2
Balance as of December 31, 2019
$294
$903 $12,205
$(624)
$12,299
$479
Total
Equity
$701
1,635
(431)
(1,006)
131
(260)
(4)
$766
1,867
(514)
(1,660)
—
84
(228)
(23)
352
40
$684
2,251
(570)
(1,240)
52
(36)
(608)
3
$536
$51
15
(10)
(5)
8
(2)
$57
12
(11)
2
(4)
$56
10
(10)
1
$57
1 Excludes $170 million, $151 million and $129 million in 2019, 2018 and 2017, 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 accompanying notes to the consolidated financial statements.
52 S&P Global 2019 Annual Report
Notes to the Consolidated Financial Statements
Adoption of ASC 842, “Leases”
On January 1, 2019, we adopted Financial Accounting Standards
Board Accounting Standards Codification (“FASB ASC”) 842
that requires a lessee to recognize “right of use” assets with
offsetting lease liabilities on the balance sheet, with expenses
recognized similar to previously issued guidance. We adopted the
new lease standard effective January 1, 2019 using the modified
retrospective transition method. Under this transition method,
the standard was adopted prospectively without restating prior
period’s financial statements. See Note 13 — Commitments and
Contingencies for further details on our leases.
Adoption of ASC 606, “Revenue from
Contracts with Customers”
We adopted FASB 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.
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.
• 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. Beginning in the first quarter of 2019, the
contract obligations for revenue from Kensho’s major customers
were transferred to Market Intelligence for fulfillment. As
a result of this transfer, from January 1, 2019, revenue from
contracts with Kensho’s customers is reflected in Market
Intelligence’s results. In 2018, the revenue from contracts
with Kensho’s customers was reported in Corporate revenue.
Restricted cash of $15 million and $32 million included in our
consolidated balance sheets as of December 31, 2019 and
2018, respectively, 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.
S&P Global 2019 Annual Report 53
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 $128 million, $125 million and $110 million for the years
ended December 31, 2019, 2018, and 2017 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 Rating’s 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; as well as 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.
54 S&P Global 2019 Annual Report
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.
Unearned Revenue
We record unearned revenue when cash payments are received
in advance of our performance. The increase in the unearned
revenue balance for the year ended December 31, 2019 is
primarily driven by cash payments received in advance of
satisfying our performance obligations, offset by $1.7 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, 2019, the aggregate amount of the transaction
price allocated to remaining performance obligations was $1.9
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.
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
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.
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,
2019 and 2018, contract assets were $28 million and $26 million,
respectively, and are included in accounts receivable in our
consolidated balance sheets.
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
$115 million and $101 million as of December 31, 2019 and
December 31, 2018, respectively, 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
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.
S&P Global 2019 Annual Report 55
Other Expense (Income), net
The components of other expense (income), net for the year
ended December 31 are as follows:
(in millions)
2019
2018
2017
Other components of net
periodic benefit cost1
Net loss from investments
Other expense (income), net
$79
19
$98
$(30)
$(27)
5
$(25)
—
$(27)
1 During 2019, the Company purchased a group annuity contract under which
an insurance company assumed a portion of the Company’s obligation to
pay pension benefits to the plan’s beneficiaries. The purchase of this group
annuity contract was funded by pension plan assets. The net periodic benefit
cost for our retirement and post retirement plans for 2019 includes a non-
cash pre-tax settlement charge of $113 million reflecting the accelerated
recognition of a portion of unamortized actuarial losses in the plan.
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 $2.9 billion and $1.9
billion as of December 31, 2019 and 2018, respectively. These
investments are not subject to significant market risk.
56 S&P Global 2019 Annual Report
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 and a cross currency swap 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
long-term debt borrowings were $3.9 billion and $3.8 billion as
of December 31, 2019 and 2018, respectively, and was estimated
based on quoted market prices.
Accounting for the Impairment of Long-Lived Assets
(Including Other Intangible Assets)
We evaluate long-lived assets for impairment whenever events
or changes in 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.
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 $212
million and $205 million as of December 31, 2019 and 2018,
respectively. Accumulated amortization of capitalized technology
costs was $129 million and $105 million as of December 31, 2019
and 2018, respectively.
S&P Global 2019 Annual Report 57
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,
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,
2019, 2018 and 2017.
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
$34 million in advertising costs for the year ended December
31, 2019 and $33 million for the years ended December
31, 2018 and 2017.
58 S&P Global 2019 Annual Report
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 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 2019 and 2017.
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, 2020. 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, 2019, we have approximately $3.2 billion of
undistributed earnings of our foreign subsidiaries, of which $776
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 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 generally be required to purchase the
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 both income and market valuation approaches.
Our income and market valuation approaches incorporate
Level 3 measures for instances when observable inputs are
not available. The more significant judgmental assumptions
used to estimate the value of the S&P Dow Jones Indices LLC
joint venture include an estimated discount rate, a range of
assumptions that form the basis of the expected future net cash
flows (e.g., the revenue growth rates and operating margins),
and a company specific beta. The significant judgmental
assumptions used that incorporate market data, including the
relative weighting of market observable information and the
comparability of that information in our valuation models, are
forward-looking and could be affected by future economic and
market conditions. Any adjustments to the redemption value will
impact retained income. See Note 9 – Equity for further detail.
S&P Global 2019 Annual Report 59
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 January 2020, the Financial Accounting Standards Board
(“FASB”) issued a guidance intended to clarify the interaction of
the accounting for equity securities under ASC 321, investments
accounted for under the equity method of accounting under
ASC 323, and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. This guidance
could change how the Company accounts for an equity security
under the measurement alternative. The guidance is effective
for reporting periods beginning after December 15, 2020;
however early adoption permitted. We are currently evaluating
the impact of the adoption of this guidance on our consolidated
financial statements.
In December of 2019, the FASB issued guidance to simplify the
accounting for income taxes. The guidance eliminates certain
exceptions to the general principles of Topic 740. The guidance
is effective for reporting periods after December 15, 2020;
however, early adoption is permitted. We are currently evaluating
the impact of the adoption of this guidance on our consolidated
financial statements.
In November of 2018, the FASB issued guidance that provides
clarification on whether certain transactions between
collaborative arrangement participants should be accounted for
as revenue under Accounting Standards Codification (“ASC”) 606.
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 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 do not expect
this guidance to have a significant impact 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. The guidance
was effective on January 1, 2019, and the adoption of this
guidance did not have a significant impact on our consolidated
financial statements.
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 June of 2016, the FASB issued guidance that amends the
measurement of credit losses on certain financial instruments
by requiring the use of an expected loss methodology, which will
result in more timely recognition of credit losses. The guidance
is effective for reporting periods beginning after December
15, 2019. We have completed our evaluation of changes to our
accounting policies, business processes, systems and internal
controls to support the recognition and disclosure requirements
under the new standard. The adoption of the new standard will
impact our process around the assessment of the adequacy of
our allowance for doubtful accounts on accounts receivable and
contract assets to incorporate the impact of forecasts of future
economic conditions, in addition to past events and current
economic conditions. Based on our preliminary analysis, we
anticipate that following the adoption of the new standard, the
Company will recognize an immaterial adjustment to retained
earnings as of the date of adoption.
60 S&P Global 2019 Annual Report
In February of 2016, the FASB issued guidance amending the
accounting for leases that requires a lessee to recognize “right
of use” assets with offsetting lease liabilities on the balance
sheet, with expenses recognized similar to previously issued
guidance. This guidance is effective for reporting periods
beginning after December 15, 2018 with early adoption
permitted. We adopted the new lease standard effective January
1, 2019 using the modified retrospective transition method. 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. This standard
had a material impact on our consolidated balance sheet, but did
not have an 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 leases that incorporates a third party
software solution to report the financial statement impact of the
new standard. See Note 12 — Commitments and Contingencies
for further details on our leases.
Reclassification
Certain prior year amounts have been reclassified for
comparability purposes.
2. Acquisitions and Divestitures
Acquisitions
2020
In December of 2019, CRISIL, included within our Ratings
segment, agreed to acquire Greenwich Associates LLC
(“Greenwich”), a leading provider of proprietary benchmarking
data, analytics and qualitative, actionable insights that helps
financial services firms worldwide measure and improve
business performance. The acquisition will complement
CRISIL’s existing portfolio of products and expand offerings to
new segments across financial services including commercial
banks and asset and wealth managers. We will account for
the acquisition using the purchase method of accounting. The
acquisition of Greenwich will not be material to our consolidated
financial statements. The completion of this acquisition is
subject to certain closing conditions.
In January of 2020, we completed the acquisition of the ESG
Ratings Business from RobecoSAM, which includes the widely
followed SAM* Corporate Sustainability Assessment, an annual
evaluation of companies’ sustainability practices. The acquisition
will bolster our position as the premier resource for essential
environmental, social, and governance (“ESG”) insights and
product solutions for our customers. Through this acquisition,
we will be able to offer our customers even more transparent,
robust and comprehensive ESG solutions. We accounted for
the acquisition using the purchase method of accounting. The
acquisition of the ESG Ratings Business is not material to our
consolidated financial statements.
2019
For the year ended December 31, 2019, we paid cash for
acquisitions of $91 million, net of cash acquired, funded with
cash from operations. 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, 2019 included:
• In December of 2019, Market Intelligence acquired 451
Research, LLC (“451 Research”), a privately-held research and
advisory firm that provides intelligence, expertise and data
covering high-growth emerging technology segments. This
acquisition will expand and strengthen Market Intelligence’s
research coverage, adding differentiated expertise and
intelligence with comprehensive offerings in technologies. We
accounted for the acquisition using the purchase method of
accounting. The acquisition of 451 Research is not material to
our consolidated financial statements.
• In September of 2019, Platts acquired Canadian Enerdata
Ltd. (“Enerdata”), an independent provider of energy data
and information in Canada, to further enhance Platts’
North American natural gas offering. We accounted for the
acquisition using the purchase method of accounting. The
acquisition of Enerdata is not material to our consolidated
financial statements.
• In August of 2019, Platts acquired Live Rice Index (“LRI”),
a global provider of information and benchmark price
assessments for the rice industry. The purchase expands Platts
portfolio of agricultural price assessments while extending its
data and news coverage in key export regions for international
grains. We accounted for the acquisition using the purchase
method of accounting. The acquisition of LRI is not material to
our consolidated financial statements.
• In July of 2019, we completed the acquisition of the Orion
technology center from Ness Technologies. Orion was
developed to become our center of excellence for technology
talent to focus on innovation by providing employees with
access to the latest technologies and global communications
infrastructure, as well as physical spaces that enable highly-
collaborative teams. We accounted for the acquisition using
the purchase method of accounting. The acquisition of Orion is
not material to our consolidated financial statements.
S&P Global 2019 Annual Report 61
For acquisitions during 2019 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 451 Research and Orion is
expected to be deductible for tax purposes.
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. All acquisitions were funded with cash flows
from operations. 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.
• 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 useful lives not exceeding 10 years.
The goodwill for RateWatch will continue to be deductible
for tax purposes.
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:
62 S&P Global 2019 Annual Report
• 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.
• On July 31, 2019, we completed the sale of RigData, a business
within our Platts segment, to Drilling Info, Inc. RigData is a
provider of daily information on rig activity for the natural
gas and oil markets across North America. During the year
ended December 31, 2019, we recorded a pre-tax gain of
$27 million ($26 million after-tax) in Gain on dispositions
in the consolidated statement of income related to the
sale of RigData.
• In March of 2019, we entered into an agreement to sell
Standard & Poor’s Investment Advisory Services LLC (“SPIAS”),
a business within our Market Intelligence segment, to Goldman
Sachs Asset Management (“GSAM”). SPIAS provides non-
discretionary investment advice across institutional sub-
advisory and intermediary distribution channels globally.
On July 1, 2019, we completed the sale of SPIAS to GSAM.
During the year ended December 31, 2019, we recorded a
pre-tax gain of $22 million ($12 million after-tax) in Gain on
dispositions in the consolidated statement of income related
to the sale of SPIAS.
Non-cash Investing Activities
Liabilities assumed in conjunction with our acquisitions
are as follows:
2018
During the year ended December 31, 2018, we did not complete
any material dispositions.
Year ended December 31,
2019
$110
91
$19
2018
$857
803
$54
2017
$83
83
$ —
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, 2019 and 2018.
(in millions)
Fair value of assets acquired
Cash and stock consideration
(net of cash acquired)
Liabilities assumed
DIVESTITURES
2020
In January of 2020, Market Intelligence entered into a strategic
alliance to transition S&P Global Market Intelligence’s Investor
Relations (“IR”) webhosting business to Q4 Inc. (“Q4”). This
alliance will integrate Market Intelligence’s proprietary data into
Q4’s portfolio of solutions, enabling further opportunities for
commercial collaboration. In connection with transitioning its
IR webhosting business to Q4, Market Intelligence has made a
minority investment in Q4.
2019
During the year ended December 31, 2019, we completed the
following dispositions that resulted in a pre-tax gain of $49
million, which was included in Gain on dispositions in the
consolidated statement of income:
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. 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.
The operating profit of our businesses that were disposed
of for the years ending December 31, 2019, 2018, and
2017 is as follows:
(in millions)
Operating profit 1
Year ended December 31,
2019
$5
2018
$8
2017
$6
1 The year ended December 31, 2019 excludes a pre-tax gain of $49 million on
our dispositions.
S&P Global 2019 Annual Report 63
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)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Total
Balance as of December 31, 2017
$114
$1,961
$523
$391
Acquisitions
Other ¹
Balance as of December 31, 2018
Acquisitions
Dispositions
Reclassifications
Other ¹
5
(6)
113
—
—
—
2
62
6
2,029
44
(12)
3
(2)
—
(7)
516
6
(3)
—
2
—
(12)
379
—
—
(3)
—
$—
498
—
498
—
—
—
3
$2,989
565
(19)
3,535
50
(15)
—
5
Balance as of December 31, 2019
$115
$2,062
$521
$376
$501
$3,575
1 Primarily relates to the impact of foreign exchange and valuation adjustments for prior period acquisitions. 2018 includes adjustments related to Trucost. 2019
includes adjustments related to Panjiva, RateWatch and Eclipse.
Goodwill additions and dispositions 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 as of December 31, 2019 and 2018.
• 2019 and 2018 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.
• 2019 and 2018 both include $185 million within our Market Intelligence segment for the SNL tradename.
• 2019 and 2018 both include $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.
• 2019 and 2018 both include $59 million within our Indices segment for the Goldman Sachs Commodity Index intellectual property
and the Broad Market Indices intellectual property.
64 S&P Global 2019 Annual Report
The following table summarizes our definite-lived intangible assets:
(in millions)
COST
Databases
and software
Content
Customer
relationships
Tradenames
Other
intangibles
Balance as of December 31, 2017
$554
$139
—
—
139
—
—
—
$347
—
(1)
346
—
10
(1)
$50
—
—
50
—
5
(1)
$77
123
(6)
194
29
(93)
—
$139
$355
$54
$130
$1,307
Total
$1,167
126
(3)
1,290
29
—
(12)
Acquisitions
Other (primarily Fx) 1
Balance as of December 31, 2018
Acquisitions
Reclassifications
Other 1
Balance as of December 31, 2019
ACCUMULATED AMORTIZATION
3
4
561
—
78
(10)
$629
Balance as of December 31, 2017
$187
$101
$106
$42
$57
Current year amortization
Reclassifications
Other (primarily Fx) 1
Balance as of December 31, 2018
Current year amortization
Reclassifications
Other 1
52
1
—
240
73
22
(4)
14
—
—
115
14
—
—
21
—
(1)
126
23
4
—
Balance as of December 31, 2019
$331
$129
$153
NET DEFINITE-LIVED INTANGIBLES:
December 31, 2018
December 31, 2019
$321
$298
$24
$10
$220
$202
3
—
—
45
3
1
(1)
$48
$5
$6
32
(1)
(2)
86
9
(27)
—
$68
$108
$62
$493
122
—
(3)
612
122
—
(5)
$729
$678
$578
1 Primarily relates to the impact of foreign exchange and valuation adjustments for prior period acquisitions. 2019 includes adjustments related to RigData.
Definite-lived intangible assets are being amortized on a straight-line basis over periods of up to 21 years. The weighted-average life
of the intangible assets as of December 31, 2019 is approximately 12 years.
Amortization expense was $122 million for the years ended December 31, 2019 and 2018 and $98 million for the year ended
December 31, 2017. 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
2020
$117
2021
$86
2022
$78
2023
$73
2024
$70
S&P Global 2019 Annual Report 65
4. Taxes on Income
Income before taxes on income resulting from domestic and
foreign operations is as follows:
Year ended December 31,
(in millions)
2019
2018
2017
Domestic operations
Foreign operations
$2,068
862
$1,857
$1,723
824
738
Total income before taxes
$2,930
$2,681
$2,461
The provision for taxes on income consists of the following:
(in millions)
Federal:
Current
Deferred
Total federal
Foreign:
Current
Deferred
Total foreign
State and local:
Current
Deferred
Total state and local
Year ended December 31,
2019
2018
2017
$303
$198
$489
13
316
201
14
215
93
3
96
53
251
214
(2)
212
84
13
97
63
552
194
(3)
191
73
7
80
Total provision for taxes
$627
$560
$823
A reconciliation of the U.S. federal statutory income tax
rate to our effective income tax rate for financial reporting
purposes is as follows:
State and local income taxes
Foreign operations
TCJA Transition Tax
Stock-based compensation
S&P Dow Jones Indices LLC joint venture
Tax credits and incentives
Other, net
2.6
(0.3)
—
(1.4)
(1.2)
(1.7)
2.4
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
Effective income tax rate
21.4% 20.9% 33.4%
66 S&P Global 2019 Annual Report
The increase in the effective income tax rate in 2019 was
primarily due to an increase in accruals for potential tax
liabilities for prior years in various jurisdictions. 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
Total deferred tax liabilities
Net deferred income tax asset
before valuation allowance
December 31,
2019
2018
$2
58
30
27
28
9
155
24
333
(318)
(318)
15
(163)
$(148)
$52
(200)
$(148)
$2
57
36
48
29
8
155
24
359
(295)
(295)
64
(156)
$(92)
$52
(144)
$(92)
Non-current deferred tax assets
Non-current deferred tax liabilities
Net deferred income tax (liability) asset
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.
U.S. federal statutory income tax rate
21.0% 21.0% 35.0%
Reported as:
Year ended December 31,
Valuation allowance
2019
2018
2017
Net deferred income tax (liability) asset
As of December 31, 2019, we have approximately $3.2 billion
of undistributed earnings of our foreign subsidiaries, of which
$776 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 $659 million in 2019,
$558 million in 2018, and $709 million in 2017. As of December
31, 2019, we had net operating loss carryforwards of $689
million, of which a significant portion has an unlimited carryover
period under current law.
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, 2020. 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.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
5. Debt
Year ended December 31,
A summary of 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
2019
$147
21
11
(15)
(33)
(7)
2018
$212
2017
$ 221
19
2
(21)
(65)
—
23
17
(32)
(5)
(12)
(in millions)
3.3% Senior Notes, due 2020 1
4.0% Senior Notes, due 2025 2
4.4% Senior Notes, due 2026 3
2.95% Senior Notes, due 2027 4
2.5% Senior Notes, due 2029 5
6.55% Senior Notes, due 2037 6
4.5% Senior Notes, due 2048 7
3.25% Senior Notes, due 2049 8
December 31,
2019
$—
694
893
493
495
294
490
589
2018
$698
693
892
493
—
396
490
—
Balance at end of year
$124
$147
$212
Long-term debt
$3,948
$3,662
The total amount of federal, state and local, and foreign
unrecognized tax benefits as of December 31, 2019, 2018
and 2017 was $124 million, $147 million and $212 million,
respectively, exclusive of interest and penalties. During the
period ended December 31, 2019, the change in unrecognized tax
benefits resulted in a net increase of tax expense of $10 million.
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 $10 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, 2019 and
2018, we had $20 million and $35 million, respectively, of accrued
interest and penalties associated with unrecognized tax benefits.
The U.S. federal income tax audit for 2017 and 2018 is in process.
During 2019, we completed state and foreign tax audits and,
with few exceptions, we are no longer subject to federal, state, or
foreign income tax examinations by tax authorities for the years
before 2013. The impact to tax expense in 2019, 2018 and 2017
was not material.
1 We made a $700 million early repayment of our 3.3% senior note in the fourth
quarter of 2019.
2
3
4
5
Interest payments are due semiannually on June 15 and December 15, and as of
December 31, 2019, the unamortized debt discount and issuance costs total $6
million.
Interest payments are due semiannually on February 15 and August 15, and as
of December 31, 2019, the unamortized debt discount and issuance costs total
$7 million.
Interest payments are due semiannually on January 22 and July 22, and as of
December 31, 2019, the unamortized debt discount and issuance costs total $7
million.
Interest payments are due semiannually on June 1 and December 1, beginning
on June 1, 2020, and as of December 31, 2019, the unamortized debt discount
and issuance costs total $5 million.
6 We made a $103 million early repayment of a portion of our 6.55% senior note
in November of 2019. Interest payments are due semiannually on May 15 and
November 15, and as of December 31, 2019, the unamortized debt discount and
issuance costs total $3 million.
7
8
Interest payments are due semiannually on May 15 and November 15, and as
of December 31, 2019, the unamortized debt discount and issuance costs total
$10 million.
Interest payments are due semiannually on June 1 and December 1, beginning
on June 1, 2020, and as of December 31, 2019, the unamortized debt discount
and issuance costs total $11 million.
S&P Global 2019 Annual Report 67
Annual debt maturities are scheduled as follows based on book
values as of December 31, 2019: no amounts due in 2020, 2021,
2022, 2023, and 2024 and $3.9 billion due thereafter.
On November 26, 2019, we issued $500 million of 2.5% senior
notes due in 2029 and $600 million of 3.25% senior notes due in
2049. The notes are fully and unconditionally guaranteed by our
wholly-owned subsidiary, Standard & Poor’s Financial Services
LLC. In the fourth quarter of 2019, we used the net proceeds to
fund the redemption of the $700 million outstanding principal
amount of our 3.3% senior notes due in August of 2020 and a
portion of the $400 million outstanding principal amount of our
6.55% senior notes due in October of 2037.
We typically have naturally hedged positions in most countries
from a local currency perspective with offsetting assets and
liabilities. As of December 31, 2019 and December 31, 2018, we
have entered into foreign exchange forward contracts to mitigate
or hedge the effect of adverse fluctuations in foreign exchange
rates. As of December 31, 2019, we have entered into a cross
currency swap contract to hedge a portion of our net investment
in a foreign subsidiary against volatility in foreign exchange
rates. These 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.
On May 17, 2018, we issued $500 million of 4.5% senior 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.
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, 2019 and 2018.
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.
Undesignated Derivative Instruments
During the twelve months ended December 31, 2019, 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, 2019 and 2018, the aggregate notional value of these
outstanding forward contracts was $116 million and $98 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, 2019 and
2018 related to these contracts was a net gain of $4 million and a
net loss of $12 million, respectively.
Net Investment Hedge
During the twelve months ended December 31, 2019, we
entered into a cross currency swap to hedge a portion of our net
investment in a certain European subsidiary against volatility
in the Euro/U.S. dollar exchange rate. This swap is designated
and qualifies as a hedge of a net investment in a foreign
subsidiary and is scheduled to mature in 2024. As of December
31, 2019, the notional value of our outstanding cross currency
swap designated as a net investment hedge was $400 million.
The changes in the fair value of this swap are recognized in
foreign currency translation adjustments, a component of other
comprehensive income (loss), and reported in accumulated
other comprehensive loss in our consolidated balance sheet. The
gain or loss will be subsequently reclassified into net earnings
when the hedged net investment is either sold or substantially
liquidated. We have elected to assess the effectiveness of our
net investment hedge based on changes in spot exchange
rates. Accordingly, amounts related to the cross currency swap
recognized directly in net income during 2019 represent net
periodic interest settlements and accruals, which are recognized
in interest expense, net. We recognized net interest income of $1
million in 2019.
68 S&P Global 2019 Annual Report
Cash Flow Hedges
During the twelve months ended December 31, 2019, 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 2020, 2019
and 2018, respectively. 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.
As of December 31, 2019, we estimate that $2 million of the net
gains related to derivatives designated as cash flow hedges
recorded in other comprehensive income is expected to be
reclassified into earnings within the next twelve months.
As of December 31, 2019 and December 31, 2018, the aggregate
notional value of our outstanding foreign exchange forward
contracts designated as cash flow hedges was $249 million and
$289 million, respectively.
The following table provides information on the location and fair value amounts of our cash flow hedges and net investment hedge as
of December 31, 2019 and December 31, 2018:
December 31,
(in millions)
Balance Sheet Location
Derivatives designated as cash flow hedges:
Prepaid and other current assets
Foreign exchange forward contracts
Derivatives designated as cash flow hedges:
Other non-current liabilities
Cross currency swap
2019
2018
$1
$10
$3
—
The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges and net
investment hedge for the years ended December 31:
(in millions)
Cash flow hedges - designated as
hedging instruments
Foreign exchange forward contracts
Net investment hedge - designated as
hedging instrument
Gain (Loss) Recognized
in Accumulated Other
Comprehensive Loss
(effective portion)
2019
2018
2017
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)
2019
2018
2017
$(2)
$2
$—
Revenue, Selling and
general expenses
$5
$(4)
$9
Cross currency swap
$(10)
$—
$—
$—
$—
$—
S&P Global 2019 Annual Report 69
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)
Cash Flow Hedges
Net unrealized gains (losses) on cash flow hedges, net of taxes, beginning of year
Change in fair value, net of tax
Reclassification into earnings, net of tax
Net unrealized gains (losses) on cash flow hedges, net of taxes, end of year
Net Investment Hedge
Net unrealized gains (losses) on net investment hedge, net of taxes, beginning of year
Change in fair value, net of tax
Reclassification into earnings, net of tax
Net unrealized gains (losses) on net investment hedge, net of taxes, end of year
Year ended December 31,
2019
2018
2017
$4
3
(5)
$2
$—
(10)
—
$(10)
$2
(2)
4
$4
$—
—
—
$—
$2
9
(9)
$2
$—
—
—
$—
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.
Net periodic benefit cost for our retirement and postretirement plans other than the service cost component are included in other
expense (income), net in our consolidated statements of income.
70 S&P Global 2019 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, 2019 and 2018, is as follows (benefits paid in the table below include only those amounts
contributed directly to or paid directly from plan assets):
RETIREMENT PLANS
POSTRETIREMENT PLANS
(in millions)
Net benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss (gain)
Gross benefits paid
Foreign currency effect
Other adjustments 1
Net benefit obligation at end of year
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Gross benefits paid
Foreign currency effect
Other adjustments 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
2019
$2,076
2018
$2,329
3
64
—
232
(75)
13
(368)
1,945
1,987
354
46
—
(75)
16
(368)
1,960
$15
$259
(10)
(234)
$15
3
71
—
(199)
(103)
(26)
1
2,076
2,219
(113)
9
—
(103)
(25)
—
1,987
$(89)
$125
(9)
(205)
$(89)
Accumulated benefit obligation
$1,932
$2,066
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
$244
$231
$—
$355
2
$357
$214
$204
$—
$460
2
$462
2019
$40
—
2018
$49
—
1
2
1
(6)
—
—
38
16
1
—
3
(7)
—
—
13
1
3
(4)
(8)
—
(1)
40
20
—
1
3
(8)
—
—
16
$(25)
$(24)
$—
—
(25)
$(25)
$ —
—
(24)
$(24)
$(40)
(13)
$(53)
$(41)
(14)
$(55)
1 Relates to the impact of a retiree annuity purchase in 2019. The Company purchased a group annuity contract under which an insurance company assumed a portion of the
Company’s obligation to pay pension benefits to the plan’s beneficiaries. The purchase of this group annuity contract was funded by pension plan assets.
S&P Global 2019 Annual Report 71
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, 2020 is $15 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, 2020.
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, 2020 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, 2020 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:
(in millions)
Service cost
Interest cost
Expected return on assets
Amortization of:
Actuarial loss (gain)
Prior service credit
Net periodic benefit cost
Settlement charge
Total net periodic benefit cost
RETIREMENT PLANS
POSTRETIREMENT PLANS
2019
2018
2017
2019
2018
2017
$3
64
$3
71
$3
74
(108)
(124)
(126)
20
—
(30)
42
18
—
(31)
82
12
—
(29)
1131
$84
$—
1
—
(2)
(1)
(2)
—
$—
1
—
(2)
(1)
(2)
—
$—
2
—
(2)
(2)
(2)
—
$(26)
$(23)
$(2)
$(2)
$(2)
1 Relates to the impact of a retiree annuity purchase in 2019. The Company purchased a group annuity contract under which an insurance company assumed a portion
of the Company’s obligation to pay pension benefits to the plan’s beneficiaries. The purchase of this group annuity contract was funded by pension plan assets. The
non-cash pretax settlement charge reflects the accelerated recognition of a portion of unamortized actuarial losses in the plan.
2 Represents a charge related to our U.K. retirement plan.
Our U.K. retirement plan accounted for a benefit of $14 million in 2019, $10 million in 2018 and $6 million in 2017 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
Settlement charge
Total recognized
RETIREMENT PLANS
POSTRETIREMENT PLANS
2019
$(10)
(10)
—
(85)1
$(105)
2018
$28
(15)
1
(4)2
$10
2017
$(20)
(12)
—
(7)2
$(39)
2019
2018
2017
$—
1
1
—
$2
$(7)
1
1
—
$(5)
$(3)
1
1
—
$(1)
1 Relates to the impact of a retiree annuity purchase in 2019. The Company purchased a group annuity contract under which an insurance company assumed a portion of
the Company’s obligation to pay pension benefits to the plan’s beneficiaries. The purchase of this group annuity contract was funded by pension plan assets. The non-
cash after tax settlement charge reflects the accelerated recognition of a portion of unamortized actuarial losses in the plan.
2 Represents a charge related to our U.K. retirement plan.
72 S&P Global 2019 Annual Report
The total cost for our retirement plans was $187 million for 2019, $80 million for 2018 and $70 million for 2017. The total cost for our
retirement plans in 2019 includes the $113 million settlement charge related to the retiree annuity purchase in 2019. Included in the
total retirement plans cost are defined contribution plans cost of $73 million for 2019, $79 million for 2018 and $70 million for 2017.
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
2019
2018
2017
2019
2018
2017
3.45%
4.40%
3.68%
3.08% 4.15% 3.40%
4.40%
2.72%
6.00%
3.68%
2.41%
6.00%
4.13%
2.58%
6.25%
6.50% 6.50% 7.00%
4.15% 3.40% 3.69%
1 The assumed weighted-average healthcare cost trend rate will decrease ratably from 6% in 2019 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, 2019, we changed our discount rate assumption on our U.S. retirement plans to 4.40% from 3.68% in 2018 and changed our discount rate
assumption on our U.K. plan to 2.72% from 2.41% in 2018.
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, 2020, our return on assets assumption for the U.S. plan was reduced to 5.50% from 6.00% and the 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 2020 are $11 million and $5 million for our retirement and postretirement plans, respectively.
In 2020, 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)
2020
2021
2022
2023
2024
2025-2029
Retirement 1
Plans
Gross
payments
Retiree
contributions
Medicare
subsidy 3
Net
payments
Postretirement Plans 2
$63
66
69
72
75
413
$7
6
6
5
5
17
$(2)
(2)
(2)
(1)
(1)
(6)
$ —
—
—
—
—
—
$5
4
4
4
4
11
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 2019 Annual Report 73
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, 2019 and 2018, by asset class is as follows:
74 S&P Global 2019 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 and short-term investments
Equities:
U.S. indexes 1
U.S. growth and value
U.K.
International, excluding U.K.
Fixed income:
Long duration strategy 2
Intermediate duration securities
Agency mortgage backed securities
Asset backed securities
Non-agency mortgage backed securities 3
International, excluding U.K.
Real Estate:
U.K. 4
Total
Collective investment funds 5
Total
December 31, 2019
Total
Level 1
$3
23
56
—
—
—
—
—
—
—
$82
$3
23
56
1,078
20
3
14
11
15
39
$1,262
$698
$1,960
December 31, 2018
Total
Level 1
$4
21
69
—
—
—
—
—
—
—
—
—
$94
$4
21
69
—
—
1,070
35
4
18
13
18
39
$1,291
$696
$1,987
Level 2
$—
—
—
1,078
20
3
14
11
15
—
$1,141
Level 3
$—
—
—
—
—
—
—
—
—
39
$39
Level 2
$—
Level 3
$—
—
—
—
—
1,070
35
4
18
13
18
—
$1,158
—
—
—
—
—
—
—
—
—
—
39
$39
1
2
3
4
5
Includes securities that are tracked in the S&P Smallcap 600 index.
Includes securities that are mainly investment grade obligations of issuers in the U.S.
Includes U.S. mortgage-backed securities that are not backed by the U.S. government.
Includes a fund which holds real estate properties in the U.K.
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 2019 Annual Report 75
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:
(in millions)
Balance as of December 31, 2018
Purchases
Distributions
Gain (loss)
Balance as of December 31, 2019
Level 3
$39
—
—
—
$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 $1,432 million and $1,572
million as of December 31, 2019 and 2018 respectively, and
the target allocations in 2019 include 75% fixed income, 16%
domestic equities and 9% international equities.
• The U.K. pension trust had assets of $528 million and $415
million as of December 31, 2019 and 2018, respectively, and
the target allocations in 2019 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 165,286
shares and sold 333,030 shares of S&P Global Inc. common
stock in 2019 and purchased 193,051 shares and sold 205,798
shares of S&P Global Inc. common stock in 2018. The plan
held approximately 1.3 million and 1.5 million shares of S&P
Global Inc. common stock as of December 31, 2019 and 2018,
respectively, with market values of $355 million and $251
million, respectively. The plan received dividends on S&P Global
Inc. common stock of $3 million during both the years ended
December 31, 2019 and December 31, 2018.
8. Stock-Based Compensation
We issue stock-based incentive awards to our eligible employees
under the 2019 Employee Stock Incentive Plan and to our
eligible non-employee Directors under a Director Deferred Stock
Ownership Plan. No further awards may be granted under the
2002 Employee Stock Incentive Plan (the “2002 Plan”), although
awards granted under the 2002 Plan prior to the adoption of the
new 2019 Plan in June of 2019 remain outstanding in accordance
with their terms. The remaining outstanding options under the
2002 Plan will have fully met their maximum term and expire in
the second quarter of 2028.
• 2019 Employee Stock Incentive Plan (the “2019 Plan”)
The 2019 Plan permits the granting of incentive stock
options, nonqualified stock options, stock appreciation
rights, performance stock, restricted stock and other
stock-based awards.
76 S&P Global 2019 Annual Report
• 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.
The number of common shares reserved for issuance
are as follows:
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:
(in millions)
Shares available for granting 1
Options outstanding
Total shares reserved for issuance 2
December 31,
2019
20.0
0.7
20.7
2018
33.3
1.7
35.0
Risk-free average interest rate
Dividend yield
Volatility
Expected life (years)
1 Shares available for granting at December 31, 2019 and 2018 are under the 2019
Plan and 2002 Plan, respectively.
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
2 Shares reserved for issuance under the Director Deferred Stock Ownership
Plan are not included in the total, but are less than 1.0 million at December 31
2019 and 2018, respectively.
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:
Year ended December 31,
(in millions)
2019
2018
2017
Stock option expense
Restricted stock and unit
awards expense
Total stock-based
compensation expense
Tax benefit
$1
77
$78
$13
$5
89
$94
$19
$3
96
$99
$38
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 2019 and 2017.
S&P Global 2019 Annual Report 77
Stock option activity is as follows:
(in millions, except per award amounts)
Options outstanding as of December 31, 2018
Exercised
Forfeited and expired 1
Options outstanding as of December 31, 2019
Options exercisable as of December 31, 2019
1 There are less than 0.1 million shares forfeited and expired.
Shares
Weighted average
exercise price
Weighted-average
remaining years of
contractual term
Aggregate
intrinsic value
1.7
(1.0)
—
0.7
0.7
$47.92
$163.99
$70.70
$55.73
$55.12
3.1
3.0
$155
$151
(in millions, except per award amounts)
Nonvested options outstanding as of December 31, 2018
Vested 1
Forfeited
Nonvested options outstanding as of December 31, 2019 ²
Total unrecognized compensation expense related to nonvested options
Weighted-average years to be recognized over
1 There are less than 0.1 million shares vested.
2 There are less than 0.1 million nonvested options outstanding as of December 31, 2019.
Shares
Weighted-average
grant-date fair value
$113.02
$113.42
$113.17
$112.68
0.1
—
(0.1)
—
$0.3
0.7
The total fair value of our stock options that vested during the years ended December 31, 2019, 2018 and 2017 was $3 million, $5
million and $4 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
2019
$40
$110
$33
Year ended December 31,
2018
$34
$77
$27
2017
$75
$118
$64
78 S&P Global 2019 Annual Report
RESTRICTED STOCK AND UNIT AWARDS
Restricted stock and unit awards (performance and non-
performance) have been granted under the 2002 Plan and 2019
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, 2018
Granted
Vested
Forfeited
Nonvested shares as of
December 31, 2019
Total unrecognized
compensation expense related
to nonvested awards
Weighted-average years
to be recognized over
Shares
Weighted-
average grant-
date fair value
$172.24
$187.40
$144.18
$179.76
$199.93
0.8
0.5
(0.6)
(0.1)
0.6
$72
1.8
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,
2019
2018
2017
$187.40
$182.75
$147.12
$153
$154
$147
$29
$32
$36
9. Equity
Capital Stock
Two million shares of preferred stock, par value $1 per share, are
authorized; none have been issued.
On January 29, 2020, the Board of Directors approved an
increase in the dividends for 2020 to a quarterly rate of $0.67
per common share.
Quarterly dividend rate
Annualized dividend rate
Dividends paid (in millions)
Year ended December 31,
2019
$0.57
$2.28
$560
2018
$0.50
$2.00
$503
2017
$0.41
$1.64
$421
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.
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, 2019,
4.7 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.
We have entered into accelerated share repurchase (“ASR”)
agreements with financial institutions to initiate share
repurchases of our common stock. Under an ASR agreement, we
pay a specified amount to the financial institution and receive an
initial delivery of shares. This initial delivery of shares represents
the minimum number of shares that we may receive under the
agreement. Upon settlement of the ASR agreement, the financial
institution delivers additional shares. The total number of shares
ultimately delivered, and therefore the average price paid per
share, is determined at the end of the applicable purchase period
of each ASR agreement based on the volume weighted-average
share price, less a discount. We account for our ASR agreements
as two transactions: a stock purchase transaction and a forward
stock purchase contract. The shares delivered under the ASR
agreements resulted in a reduction of outstanding shares used
to determine our weighted average common shares outstanding
for purposes of calculating basic and diluted earnings per share.
The repurchased shares are held in Treasury. The forward stock
purchase contracts were classified as equity instruments.
The ASR agreements were executed under the current share
repurchase program, approved on December 4, 2013.
S&P Global 2019 Annual Report 79
The terms of each ASR agreement entered for the years ended December 31, 2019, 2018 and 2017, structured as outlined above,
are as follows:
(in millions, except average price)
ASR Agreement
Initiation
Date
ASR Agreement
Completion
Date
Initial
Shares
Delivered
Additional
Shares
Delivered
Total
Number of
Shares
Average
Price Paid
Per Share
August 5, 2019 1
October 1, 2019
February 11, 2019 2
July 31, 2019
October 29, 2018 3
January 2, 2019
March 6, 2018 4
September 25, 2018
August 1, 2017 5
October 31, 2017
1.8
2.2
2.5
4.5
2.8
0.1
0.1
0.4
0.6
0.5
2.0
2.3
2.9
5.1
3.2
$253.36
$214.65
$173.80
$197.49
$154.46
Total
Cash
Utilized
$500
$500
$500
$1,000
$500
1 The ASR agreement was structured as a capped ASR agreement in which we paid $500 million and received an initial delivery of 1.8 million shares, representing the
minimum number of shares of our common stock to be repurchased based on a calculation using a specified capped price per share.
2 The ASR agreement was structured as an uncapped ASR agreement in which we paid $500 million and received an initial delivery of 2.2 million shares, representing
85% of the $500 million at a price equal to the then market price of the Company.
3 The ASR agreement was structured as an uncapped ASR agreement in which we paid $500 million and received an initial delivery of 2.5 million shares, representing
85% of the $500 million at a price equal to the then market price of the Company.
4 The ASR agreement was structured as an uncapped ASR agreement in which we paid $1 billion and received an initial delivery of 4.5 million shares, representing 85%
of the $1 billion at a price equal to the then market price of the Company.
5 The ASR agreement was structured as an uncapped ASR agreement in which we paid $500 million and received an initial delivery of 2.8 million shares, representing
85% of the $500 million at a price equal to the then market price of the Company.
Additionally, we purchased shares of our common stock in the open market as follows:
(in millions, except average price)
Year Ended
December 31, 2019
December 31, 2018
December 31, 2017
Total number of shares purchased
Average price paid per share
Total cash utilized
1.2
0.9
3.5
$208.83
$182.93
$141.60
$240
$160
$501
During the year ended December 31, 2019, we received 5.9 million shares, including 0.4 million shares received in January of 2019
related to our October 29, 2018 ASR agreement, resulting in $1,240 million of cash used to repurchase shares. During the years
ended December 31, 2018 and 2017, we purchased a total of 8.4 million and 6.8 million shares for cash of $1,660 million and $1,001
million, respectively.
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, 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.
80 S&P Global 2019 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, using both income and market
valuation approaches. Our income and market valuation approaches may incorporate Level 3 fair value measures for instances when
observable inputs are not available. The more significant judgmental assumptions used to estimate the value of the S&P Dow Jones
Indices LLC joint venture include an estimated discount rate, a range of assumptions that form the basis of the expected future
net cash flows (e.g., the revenue growth rates and operating margins), and a company specific beta. The significant judgmental
assumptions used that incorporate market data, including the relative weighting of market observable information and the
comparability of that information in our valuation models, are forward-looking and could be affected by future economic and market
conditions. 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, 2019 were as follows:
(in millions)
Balance as of December 31, 2018
Net income attributable to noncontrolling interest
Capital contribution from noncontrolling interest
Distributions to noncontrolling interest
Redemption value adjustment
Balance as of December 31, 2019
$1,620
170
36
(166)
608
$2,268
Accumulated Other Comprehensive Loss
The following table summarizes the changes in the components of accumulated other comprehensive loss for the year ended
December 31, 2019:
(in millions)
Foreign
Currency
Translation
Adjustment 1
Pension and
Postretirement
Benefit
Plans 2
Unrealized
Gain (Loss) on
Forward Exchange
Contracts 1
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2018
$(339)
$(407)
Other comprehensive gain (loss) before reclassifications
Reclassifications from accumulated other comprehensive
loss to net earnings
Net other comprehensive gain (loss) income
Balance as of December 31, 2019
18
—
18
$(321)
9
93
102
$(305)
$4
3
(5)
(2)
$2
$(742)
30
88
118
$(624)
1 See Note 6 — Derivative Instruments for additional details of gains (losses) included in accumulated other comprehensive loss and items reclassed from
accumulated other comprehensive loss to net earnings.
2 Reflects amortization of net actuarial losses and is net of a tax benefit of $39 million for the year ended December 31, 2019. See Note 7 — Employee Benefits for
additional details of items reclassed from accumulated other comprehensive loss to net earnings.
S&P Global 2019 Annual Report 81
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:
Year ended December 31,
(in millions, except per share data)
2019
2018
2017
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
$2,123
245.4
1.5
246.9
$8.65
$8.60
$1,958
250.9
2.3
253.2
$7.80
$7.73
$1,496
256.3
2.6
258.9
$5.84
$5.78
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, 2019, 2018 and 2017, there were no stock options excluded. Restricted performance
shares outstanding of 0.4 million, 0.5 million and 0.6 million as of December 31, 2019, 2018 and 2017, respectively, were excluded.
82 S&P Global 2019 Annual Report
11. Restructuring
During 2019 and 2018, 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 2019 and 2018 restructuring plans consisted of a
company-wide workforce reduction of approximately 300 and 160 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 $3 million of
reserves from the 2018 restructuring plan that we have reversed in 2019, which offset the initial charge of $25 million recorded for
the 2018 restructuring plan. 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.
The initial restructuring charge recorded and the ending reserve balance as of December 31, 2019 by segment is as follows:
(in millions)
Ratings
Market Intelligence
Platts
Corporate
Total
2019 Restructuring Plan
2018 Restructuring Plan
Initial Charge
Recorded
Ending Reserve
Balance
Initial Charge
Recorded
Ending Reserve
Balance
$11
6
1
7
$25
$7
5
—
6
$18
$8
7
—
10
$25
$—
1
—
1
$2
For the year ended December 31, 2019, we have reduced the reserve for the 2019 restructuring plan by $7 million and for the years
ended December 31, 2019 and 2018, we have reduced the reserve for the 2018 restructuring plan by $22 million and $1 million,
respectively. The reductions primarily related to cash payments for employee severance charges.
S&P Global 2019 Annual Report 83
Operating Profit
(in millions)
Ratings 2
Market Intelligence 3
Platts 4
Indices 5
2019
2018
2017
$1,763
$1,530
$1,517
607
438
630
545
383
563
457
326
478
2,778
(195)
Total reportable segments
3,438
3,021
Corporate Unallocated 6
(212)
(231)
Total operating profit
$3,226
$2,790
$2,583
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 or the year ended December 31, 2019 includes employee
severance charges of $11 million. 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. Additionally, operating profit includes
amortization of intangibles from acquisitions of $2 million for the years ended
December 31, 2019 and 2018 and $4 million for the year ended December 31,
2017.
3 As of July 1, 2019, we completed the sale of SPIAS and the results are included
in Market Intelligence results through that date. Operating profit for the
year ended December 31, 2019 includes a gain on the sale of SPIAS of $22
million, employee severance charges of $6 million and acquisition related
costs of $4 million. 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. Additionally, operating profit
includes amortization of intangibles from acquisitions of $75 million, $73
million and $71 million for the years ended December 31, 2019, 2018 and 2017,
respectively.
4 As of July 31, 2019, we completed the sale of RigData and the results are
included in Platts results through that date. Operating profit for the year ended
December 31, 2019 includes a gain on the sale of RigData of $27 million and
employee severance charges of $1 million. 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. Additionally, Operating
profit includes amortization of intangibles from acquisitions of $12 million
for the year ended December 31, 2019 and $18 million for the years ended
December 31, 2018 and 2017.
5 Operating profit includes amortization of intangibles from acquisitions of $6
million for the years ended December 31, 2019, 2018 and 2017, respectively.
6 Corporate Unallocated operating loss for the year ended December 31, 2019
includes Kensho retention related expenses of $21 million, lease impairments
of $11 million and employee severance charges of $7 million. 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.
Additionally, Corporate Unallocated operating loss includes amortization of
intangibles from acquisitions of $28 million and $23 million for the years ended
December 31, 2019 and 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.
Beginning in the first quarter of 2019, the contract obligations
for revenue from Kensho’s major customers were transferred to
Market Intelligence for fulfillment. As a result of this transfer,
from January 1, 2019 revenue from contracts with Kensho’s
customers is reflected in Market Intelligence’s results. In 2018,
the revenue from contracts with Kensho’s customers was
reported in Corporate revenue. See Note 2 — Acquisitions and
Divestitures for additional information.
A summary of operating results for the years ended December
31 is as follows:
Revenue
(in millions)
Ratings
Market Intelligence
Platts
Indices
Corporate
2019
2018
2017
$3,106
$2,883
$2,988
1,959
1,833
1,683
844
918
—
815
837
15
774
728
—
Intersegment elimination 1
(128)
(125)
(110)
Total revenue
$6,699
$6,258
$6,063
84 S&P Global 2019 Annual Report
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-subscription / Transaction
Non-transaction
Asset-linked fees
Sales usage-based royalties
Total revenue
Timing of revenue recognition
$—
1,577
1,529
—
—
2019
$1,904
$774
$165
45
—
10
—
10
—
—
60
—
—
613
140
$3,106
$1,959
$844
$918
Services transferred at a point in time
Services transferred over time
Total revenue
$1,577
1,529
$3,106
$45
1,914
$1,959
$10
834
$844
$—
918
$918
$—
—
—
—
—
$—
$—
—
$—
$—
—
(128)
—
—
$2,843
1,632
1,401
623
200
$(128)
$6,699
$—
(128)
$1,632
5,067
$(128)
$6,699
(in millions)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Intersegment
Elimination 1
Total
Subscription
Non-subscription / Transaction
Non-transaction
Asset-linked fees
Sales usage-based royalties
Total revenue
Timing of revenue recognition
$—
1,350
1,533
—
—
2018 2
$1,773
$750
$144
40
—
20
—
11
—
—
54
—
—
522
171
$2,883
$1,833
$815
$837
Services transferred at a point in time
Services transferred over time
Total revenue
$1,350
1,533
$2,883
$40
1,793
$1,833
$11
804
$815
$—
837
$837
$15
—
—
—
—
$15
$—
15
$15
$—
—
(125)
—
—
$2,682
1,401
1,408
542
225
$(125)
$6,258
$—
(125)
$1,401
4,857
$(125)
$6,258
(in millions)
Ratings
Market
Intelligence
Platts
Indices
Corporate
Intersegment
Elimination 1
Total
Subscription
Non-subscription / Transaction
Non-transaction
Asset-linked fees
Sales usage-based royalties
Total revenue
Timing of revenue recognition
$—
1,515
1,473
—
—
2017 2, 3
$1,614
$704
$136
46
—
23
—
13
—
—
57
—
—
461
131
$2,988
$1,683
$774
$728
Services transferred at a point in time
Services transferred over time
Total revenue
$1,515
1,473
$2,988
$46
1,637
$1,683
$13
761
$774
$—
728
$728
$—
—
—
—
—
$—
$—
—
$—
$—
—
(110)
—
—
$2,454
1,574
1,363
484
188
$(110)
$6,063
$—
(110)
$1,574
4,489
$(110)
$6,063
1
2
Intersegment eliminations mainly consists of a royalty charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings.
In 2019, we reevaluated our transaction and non-transaction revenue presentation which resulted in a reclassification from transaction revenue to non-transaction
revenue of $27 million and $25 million for 2018 and 2017, respectively.
3 Amounts for the year ended December 31, 2017 were not adjusted under the modified retrospective transition method applied to our revenue contracts with
customers as of January 1, 2018.
S&P Global 2019 Annual Report 85
Segment information for the years ended December 31 is as follows:
(in millions)
Ratings
Market Intelligence
Platts
Indices
Total reportable segments
Corporate
Total
Depreciation & Amortization
Capital Expenditures
2019
$34
99
21
8
162
42
2018
$32
99
27
9
167
39
2017
$34
104
25
8
171
9
$204
$206
$180
2019
$41
44
13
5
103
12
$115
2018
$42
30
9
3
84
29
$113
2017
$45
37
15
3
100
23
$123
Segment information for the years ended December 31 is as follows:
(in millions)
Ratings
Market Intelligence
Platts
Indices
Total reportable segments
Corporate 1
Assets held for sale 2
Total
Total Assets
2019
$963
3,806
938
1,492
7,199
4,140
9
2018
$680
3,606
787
1,443
6,516
2,911
14
$11,348
$9,441
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 and New Jersey facility as of December 31, 2019 and 2018, respectively.
86 S&P Global 2019 Annual Report
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,
December 31,
2019
2018
2017
$3,949
$3,750
$3,658
1,681
1,543
1,473
715
354
647
318
594
338
2019
2018
$4,946
$5,019
323
93
44
317
51
42
$6,699
$6,258
$6,063
$5,406
$5,429
REVENUE
LONG-LIVED ASSETS
Year ended December 31,
December 31,
2019
59%
25
11
5
2018
60%
25
10
5
2017
60%
24
10
6
2019
91%
6
2
1
2018
92%
6
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.
S&P Global 2019 Annual Report 87
13. Commitments and Contingencies
Leases
We determine whether an arrangement meets the criteria for
an operating lease or a finance lease at the inception of the
arrangement. We have operating leases for office space and
equipment. Our leases have remaining lease terms of 1 year to 14
years, some of which include options to extend the leases for up
to 12 years, and some of which include options to terminate the
leases within 1 year. We consider these options in determining
the lease term used to establish our right-of use (“ROU”) assets
and associated lease liabilities. We sublease certain real estate
leases to third parties which mainly consist of operating leases
for space within our offices.
Leases with an initial term of 12 months or less are not recorded
on the balance sheet; we recognize lease expenses for these
leases on a straight line-basis over the lease term in operating-
related expenses and selling and general expenses.
Operating lease ROU assets and operating lease liabilities are
recognized based on the present value of future minimum lease
payments over the lease term at commencement date. Our future
minimum based payments used to determine our lease liabilities
include minimum based rent payments and escalations. As
most of our leases do not provide an implicit rate, we use our
estimated incremental borrowing rate based on the information
available at commencement date in determining the present
value of lease payments.
The following table provides information on the location and
amounts of our leases on our consolidated balance sheet as of
December 31, 2019:
(in millions)
Balance Sheet Location
Assets
2019
Right of use assets
Lease right-of-use assets
$676
Liabilities
Other current liabilities
Current lease liabilities
Lease liabilities — non-current Non-current lease liabilities
112
620
The components of lease expense for the year ended December
31 are as follows:
(in millions)
Operating lease cost
Sublease income
Total lease cost
2019
$157
(18)
$139
Supplemental information related to leases for the year ended
December 31 are as follows:
(in millions)
Cash paid for amounts included in the measurement
for operating lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for
lease obligations
Operating leases
2019
$146
777
Weighted-average remaining lease term and discount rate for our
operating leases as of December 31 are as follows:
Weighted-average remaining lease term (years)
Weighted-average discount rate
Maturities of lease liabilities for our operating leases
are as follows:
(in millions)
2020
2021
2022
2023
2024
2025 and beyond
Total undiscounted lease payments
Less: Imputed interest
Present value of lease liabilities
2019
8.95
3.93%
$133
113
98
82
65
358
$849
117
$732
88 S&P Global 2019 Annual Report
Related Party Agreement
In March of 2018, the Company made a $20 million contribution
to the S&P Global Foundation included in selling and
general expenses.
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, 2019, 2018 and 2017, S&P Dow Jones Indices LLC
earned $114 million, $121 million and $74 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.
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.
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 seeks to promptly address any compliance
issues that it detects or that the staff of the SEC or another
regulator raises, there can be no assurance that the SEC or
another regulator will not seek remedies against S&P Global 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
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 2019 Annual Report 89
14. Quarterly Financial Information (Unaudited)
(in millions, except per share data)
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
2019
Revenue
Operating profit
Net income
Net income attributable to S&P
Global common shareholders
$1,571
$705
$453
$410
$1,704
$813
$602
$555
$1,689
$891
$662
$617
$1,735
$818
$585
$541
Earnings per share attributable to S&P Global Inc. common shareholders:
Net income:
Basic
Diluted
2018
Revenue
Operating profit
Net income
Net income attributable to S&P
Global common shareholders
$1.66
$1.65
$2.25
$2.24
$2.52
$2.50
$2.22
$2.20
$1,567
$1,609
$1,546
$1,536
$711
$534
$491
$672
$501
$461
$704
$535
$495
$704
$551
$512
Total
year
$6,699
$3,226
$2,303
$2,123
$8.65
$8.60
$6,258
$2,790
$2,121
$1,958
Earnings per share attributable to S&P Global Inc. common shareholders:
Net income:
Basic
Diluted
Note - Totals presented may not sum due to rounding.
$1.94
$1.93
$1.83
$1.82
$1.97
$1.95
$2.06
$2.03
$7.80
$7.73
90 S&P Global 2019 Annual Report
15. Condensed Consolidating Financial Statements
On November 26, 2019, we issued $500 million of 2.5% senior notes due in 2029 and $600 million of 3.25% senior notes due in 2049.
In the fourth quarter of 2019, we used the net proceeds to fund the redemption of the $700 million outstanding principal amount of
our 3.3% senior notes due in August of 2020 and a portion of the $400 million outstanding principal amount of our 6.55% senior notes
due in October of 2037. 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 that were repaid 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, 2019
(in millions)
Revenue
Expenses:
Operating-related expenses
Selling and general expenses
Depreciation
Amortization of intangibles
Total expenses
Gain on dispositions
Operating profit
Other expense, 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
$812
$1,898
$4,146
$(157)
$6,699
158
133
44
—
335
(49)
526
91
213
378
(156)
(74)
3,405
3,323
—
$3,323
$3,446
440
329
12
—
781
—
1,117
—
—
(48)
1,165
285
—
880
—
$880
$880
1,360
1,055
26
122
2,563
—
1,583
7
(15)
(1,530)
3,121
416
—
2,705
—
$2,705
$2,697
(157)
—
—
—
(157)
—
—
—
—
1,200
(1,200)
—
(3,405)
(4,605)
(180)
$(4,785)
$(4,602)
1,801
1,517
82
122
3,522
(49)
3,226
98
198
—
2,930
627
—
2,303
(180)
$2,123
$2,421
S&P Global 2019 Annual Report 91
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) expense, 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
124
177
46
—
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
1,095
31
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)
1,698
1,564
84
122
3,468
2,790
(25)
134
—
2,681
560
—
2,121
(163)
$1,958
$2,018
92 S&P Global 2019 Annual Report
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
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
89
197
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)
1,694
1,606
82
98
3,480
2,583
(27)
149
—
2,461
823
—
1,638
(142)
$1,496
$1,762
S&P Global 2019 Annual Report 93
BALANCE SHEET
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
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
Right of use assets
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
Other current liabilities
Total current liabilities
Long-term debt
Lease liabilities – non-current
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
94 S&P Global 2019 Annual Report
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
December 31, 2019
$1,130
—
—
229
675
102
2,136
204
402
283
—
12,134
17
281
$—
—
—
148
2,855
2
3,005
—
1
—
—
6
—
37
$1,736
20
28
1,200
3,983
117
7,084
116
273
3,283
1,424
8,088
1,229
324
$—
—
—
—
(7,513)
—
(7,513)
—
—
9
—
(20,228)
(1,246)
(1)
$2,866
20
28
1,577
—
221
4,712
320
676
3,575
1,424
—
—
641
$15,457
$3,049
$21,821
$(28,979)
$11,348
$80
6,288
148
7
297
187
7,007
3,948
383
—
178
171
11,687
—
294
112
15,836
(175)
(12,297)
3,770
—
3,770
$15,457
$11
27
61
—
243
18
360
—
1
—
—
81
442
—
—
632
1,975
—
—
2,607
—
2,607
$3,049
$99
1,198
237
61
1,388
256
3,239
—
236
1,246
81
373
5,175
—
2,377
9,362
5,404
(497)
(2)
16,644
2
16,646
$21,821
$—
(7,513)
—
—
—
—
(7,513)
—
—
(1,246)
—
(1)
(8,760)
2,268
(2,377)
(9,203)
(11,010)
48
—
(22,542)
55
(22,487)
$(28,979)
$190
—
446
68
1,928
461
3,093
3,948
620
—
259
624
8,544
2,268
294
903
12,205
(624)
(12,299)
479
57
536
$11,348
BALANCE SHEET
(in millions)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
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
Right of use assets
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
Other current liabilities
Total current liabilities
Long-term debt
Lease liabilities – non-current
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
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
December 31, 2018
$694
—
—
163
550
41
1,448
192
—
261
—
8,599
130
194
$—
—
—
109
2,138
3
2,250
—
—
—
—
6
—
45
$1,223
41
18
1,177
2,873
118
5,450
78
—
3,265
1,524
8,030
1,643
286
$—
—
—
—
(5,561)
—
(5,561)
—
—
9
—
(16,635)
(1,773)
—
$1,917
41
18
1,449
—
162
3,587
270
—
3,535
1,524
—
—
525
$10,824
$2,301
$20,276
$(23,960)
$9,441
$89
4,453
125
2
240
180
5,089
3,662
—
114
162
148
9,175
—
294
72
12,622
(299)
(11,040)
1,649
—
1,649
$10,824
$15
32
33
—
235
16
331
—
—
—
—
75
406
—
—
618
1,277
—
—
1,895
—
1,895
$2,301
$107
1,076
196
71
1,166
155
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
1
15,386
$20,276
(18,301)
55
(18,246)
$(23,960)
$211
—
354
73
1,641
351
2,630
3,662
—
—
229
616
7,137
1,620
294
833
11,284
(742)
(11,041)
628
56
684
$9,441
S&P Global 2019 Annual Report 95
STATEMENT OF CASH FLOWS
Year Ended December 31, 2019
Standard
& Poor’s
Financial
Services LLC
S&P Global Inc.
Non-Guarantor
Subsidiaries
Eliminations
S&P Global Inc.
Consolidated
$3,323
$880
$2,705
$(4,605)
$2,303
Cash provided by operating activities
3,370
(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 dispositions
Pension settlement charge, net of taxes
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 provided by (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, net
Repurchase of treasury shares
Exercise of stock options
Employee withholding tax on share-based
payments and other
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
96 S&P Global 2019 Annual Report
44
—
5
24
27
(49)
85
64
(72)
17
14
56
—
(61)
(33)
(74)
(46)
—
85
—
39
1,086
(868)
(560)
—
(1,240)
36
(64)
(1,368)
(2,978)
5
436
694
12
—
4
(10)
14
—
—
2
(49)
(35)
32
28
(1)
1
(5)
34
907
(3)
—
—
—
(3)
—
—
—
—
—
—
—
(904)
(904)
—
—
—
26
122
9
32
37
—
—
27
(14)
(63)
27
172
—
4
(3)
23
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
82
122
18
46
78
(49)
85
93
(135)
(81)
73
256
(1)
(56)
(41)
(17)
3,104
(4,605)
2,776
(66)
(91)
—
(10)
(167)
—
—
—
(143)
—
4
(2)
(2,333)
(2,474)
29
492
1,264
—
—
—
—
—
—
—
—
—
—
—
—
4,605
4,605
—
—
—
(115)
(91)
85
(10)
(131)
1,086
(868)
(560)
(143)
(1,240)
40
(66)
—
(1,751)
34
928
1,958
$1,130
$—
$1,756
$—
$2,886
STATEMENT OF CASH FLOWS
Year Ended December 31, 2018
(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, net
Repurchase of treasury shares
Exercise of stock options
Purchase of additional CRISIL shares
Employee withholding tax on share-based
payments and other
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
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
46
—
3
33
28
—
46
(27)
(2)
(11)
(53)
—
(22)
2
(128)
3,455
(81)
—
—
—
(81)
489
(403)
(503)
—
(1,660)
26
—
(66)
(1,190)
(3,307)
(5)
62
632
$694
7
—
4
10
16
1
5
39
(4)
(64)
13
—
(11)
—
32
832
(16)
—
—
—
(16)
—
—
—
—
—
—
—
—
(816)
(816)
—
—
—
31
122
14
38
50
—
1
(176)
5
(31)
110
(108)
(34)
(9)
(33)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
84
122
21
81
94
1
52
(164)
(1)
(106)
70
(108)
(67)
(7)
(129)
2,936
(5,159)
2,064
(16)
(401)
6
(5)
(416)
—
—
—
(154)
—
8
(25)
—
(3,153)
(3,324)
(79)
(883)
2,147
—
—
—
—
—
—
—
—
—
—
—
—
—
5,159
5,159
—
—
—
(113)
(401)
6
(5)
(513)
489
(403)
(503)
(154)
(1,660)
34
(25)
(66)
—
(2,288)
(84)
(821)
2,779
$—
$1,264
$—
$1,958
S&P Global 2019 Annual Report 97
STATEMENT OF CASH FLOWS
Year Ended December 31, 2017
Standard
& Poor’s
Financial
Services LLC
Non-Guarantor
Subsidiaries
Eliminations
S&P
Global Inc.
Consolidated
S&P Global Inc.
$3,670
$649
$3,302
$(5,983)
$1,638
Cash provided by operating activities
3,920
(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, net
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
98 S&P Global 2019 Annual Report
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
82
98
16
—
99
55
96
(196)
10
75
85
(4)
(85)
32
15
3,343
(5,983)
2,016
(36)
(83)
2
(5)
(122)
—
(111)
—
7
—
(2,733)
(2,837)
82
466
1,681
—
—
—
—
—
—
—
—
—
—
5,983
5,983
—
—
—
(123)
(83)
2
(5)
(209)
(421)
(111)
(1,001)
75
(49)
—
(1,507)
87
387
2,392
$632
$—
$2,147
$—
$2,779
Five Year Financial Review
(in millions, except per share data)
2019
2018
2017
2016
2015
INCOME STATEMENT DATA:
Revenue
Operating profit
Income before taxes on income
Provision for taxes on income
Net income attributable to S&P Global Inc.
Earnings per share attributable to the S&P Global
Inc. common shareholders:
Basic
Diluted
Dividends per share
OPERATING STATISTICS:
Return on average equity 7
Income before taxes on income as a percent of
revenue from operations
Net income from operations as a percent of
revenue from operations
BALANCE SHEET DATA:
Working capital 8
Total assets
Total debt 9
Redeemable noncontrolling interest
Equity
$6,699
3,226
2,9301
627
2,123
8.65
8.60
2.28
$6,258
2,790
2,6812
560
1,958
7.80
7.73
2.00
$6,063
2,583
2,4613
8236
1,496
5.84
5.78
1.64
$5,661
3,341
3,1884
960
2,106
8.02
7.94
1.44
377.5%
43.7%
292.6%
42.8%
222.3%
40.6%
472.0%
56.3%
34.4%
33.9%
27.0%
39.4%
$1,619
11,348
3,948
2,268
536
$957
9,441
3,662
1,620
684
$1,110
9,425
3,569
1,352
766
$1,060
8,669
3,564
1,080
701
$5,313
1,908
1,8155
547
1,156
4.26
4.21
1.32
324.3%
34.2%
23.9%
$388
8,183
3,611
920
243
NUMBER OF EMPLOYEES
22,500
21,200
20,400
20,000
20,400
1
2
3
4
5
6
7
Includes the impact of the following items: a pension related charge of $113 million, costs associated with early repayment of our Senior Notes of $56 million, a
$49 million gain on dispositions, employee severance charges of $25 million, Kensho retention related expense of $21 million, lease impairments of $11 million,
acquisition-related costs of $4 million and amortization of intangibles from acquisitions of $122 million.
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.
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.
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.
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.
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.
Includes the impact of the $49 million gain on dispositions in 2019 and the $1.1 billion gain on dispositions in 2016.
8 Working capital is calculated as current assets less current liabilities.
9
Includes short-term debt of $399 million and $143 million as of December 31, 2017 and December 31, 2015, respectively.
S&P Global 2019 Annual Report 99
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, 2019. 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, 2019, 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
100 S&P Global 2019 Annual Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
S&P Global Inc.
and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance
sheets of S&P Global Inc. (the Company) as of December 31,
2019 and 2018, the related consolidated statements of income,
comprehensive income, equity and cash flows for each of the
three years in the period ended December 31, 2019, 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, 2019 and 2018, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019, 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, 2019, 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 10, 2020 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
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the financial statements that
was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any
way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit
matter or on the account or disclosures to which it relates.
S&P Global 2019 Annual Report 101
Valuation of redeemable noncontrolling interest in S&P Dow Jones Indices LLC
DESCRIPTION
OF THE
MATTER
As described in Notes 1 and 9 to the financial statements, the Company has an agreement with the minority
partners of its S&P Dow Jones Indices LLC joint venture that contains redemption features outside of the control
of the Company. This arrangement is reported as a redeemable noncontrolling interest at fair value of $2,268
million at December 31, 2019. The Company adjusts the redeemable noncontrolling interest each reporting
period to its estimated redemption value, but never less than its initial fair value, using both income and market
valuation approaches.
Auditing the Company’s valuation of its redeemable noncontrolling interest was complex due to the estimation
uncertainty in determining the fair value. The estimation uncertainty was primarily due to the sensitivity of
the fair value to underlying assumptions about the future performance of the business. The more significant
judgmental assumptions used to estimate the value of the S&P Dow Jones Indices LLC joint venture include
an estimated discount rate, a range of assumptions that form the basis of the expected future net cash flows
(e.g., revenue growth rates and operating margins), a company specific beta and earnings and transaction
multiples for comparable companies and similar acquisitions, respectively. These significant judgmental
assumptions that incorporate market data are forward-looking and could be affected by future economic and
market conditions.
HOW WE
ADDRESSED
THE MATTER
IN OUR AUDIT
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s
controls over the accounting for its redeemable noncontrolling interest, including controls over management’s
judgments and evaluation of the underlying assumptions with regard to the valuation models applied and the
estimation process supporting the determination of the fair value of S&P Dow Jones Indices LLC joint venture.
To test the valuation of redeemable noncontrolling interest, we evaluated the Company’s selection of the
valuation methodology and the methods and significant assumptions used by inspecting available market data
and performing sensitivity analyses. For example, when evaluating the assumptions related to the revenue
growth rate and operating profit margins, we compared the assumptions to the past performance of S&P Dow
Jones Indices LLC joint venture in addition to current observable industry, market and economic trends. We
involved valuation specialists to assist in our evaluation of the methodology and significant assumptions used
by the Company, including the discount rate, company specific beta and earnings for comparable companies
and transaction multiples for similar acquisitions. We also tested the completeness and accuracy of the
underlying data supporting the significant assumptions and estimates.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1969.
New York, New York
February 10, 2020
102 S&P Global 2019 Annual Report
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, 2019, 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, 2019, 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, 2019 and 2018, the related consolidated
statements of income, comprehensive income, equity and cash
flows for each of the three years in the period ended December
31, 2019, and the related notes and our report dated February 10,
2020 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 10, 2020
S&P Global 2019 Annual Report 103
Shareholder Information
Annual Meeting
Transfer Agent and Registrar for Common Stock
The 2020 annual meeting will be held at 11 a.m. EDT on
Wednesday, May 13th at 55 Water Street, New York, NY, 10041.
The annual meeting will also be Webcast at:
http://investor.spglobal.com.
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.
* Important Notice Regarding Potential
Changes in Annual Meeting Logistics:
We are carefully monitoring coronavirus (COVID-19)
developments and the related recommendations and protocols
issued by public health authorities and federal, state, and local
governments. If we determine to change the date, time, place
or any logistics for the Annual Meeting due to developments
relating to the coronavirus (COVID-19) or otherwise, we will
provide notice to our shareholders as promptly as practicable
through a press release, the filing of a Current Report on Form
8-K and additional soliciting materials.
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 212-438-1471.
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).
104 S&P Global 2019 Annual Report
Shareholder correspondence should be mailed to:
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Overnight correspondence should be mailed to:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Investor Center™ website to view and manage shareholder
account online: www.computershare.com/investor
For shareholder assistance:
In the U.S. and Canada: 888-201-5538
Outside the U.S. and Canada: 201-680-6578
TDD for the hearing impaired: 800-952-9245
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.
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, 2019.
The financial information included in this report was
excerpted from the Company’s Form 10-K for the year
ended December 31, 2019, filed with the Securities and
Exchange Commission on February 10, 2020. 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.
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,
Enterprise Business
Transformation
Lockheed Martin Corp.
Rebecca Jacoby (F, N)
Former Senior Vice
President, Operations
Cisco Systems, Inc.
Monique F. Leroux (A, C)
Strategic Advisor,
Fiera Capital
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.
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.
A – Audit Committee
C – Compensation & Leadership Development Committee
E – Executive Committee
F – Finance Committee
N – Nominating & Corporate Governance Committee
Committee assignments as of March 30, 2020.
S&P Global 2019 Annual Report 105
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
Courtney Geduldig
Chief Public and Government
Affairs Officer
Steven J. Kemps
Executive Vice President,
General Counsel
Swamy Kocherlakota
Executive Vice President,
Chief Information Officer
Nancy Luquette
Executive Vice President,
Chief Risk Officer
Dimitra Manis
Executive Vice President,
Chief People Officer
Ashu Suyash
Managing Director and
Chief Executive Officer, CRISIL
106 S&P Global 2019 Annual Report
55 Water Street
New York, NY 10041
spglobal.com