New York | 1-1023 | 13-1026995 |
(State or other | (Commission | (IRS Employer |
jurisdiction of | File No.) | Identification No.) |
incorporation or | ||
organization) |
S&P Global Inc. | ||||
/s/ | Alma Rosa Montanez | |||
By: | Alma Rosa Montanez | |||
Assistant Corporate Secretary & Associate General Counsel | ||||
▪ | the impact of the recent acquisition of Kensho, including the impact on the Company’s results of operations; any failure to successfully integrate Kensho into the Company’s operations; any failure to attract and retain key employees; and the risk of litigation, unexpected costs, charges or expenses relating to the acquisition; |
▪ | worldwide economic, financial, political and regulatory conditions, including geopolitical uncertainty and conditions that may result from legislative, regulatory, trade and policy changes associated with the current U.S. administration or the United Kingdom’s withdrawal from the European Union; |
▪ | the rapidly evolving regulatory environment, in Europe, the United States and elsewhere, affecting Ratings, Platts, Indices, and Market Intelligence, including new and amended regulations and the Company’s compliance therewith; |
▪ | our ability to make acquisitions and dispositions and successfully integrate the businesses we acquire; |
▪ | the outcome of litigation, government and regulatory proceedings, investigations and inquiries; |
▪ | 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; |
▪ | the demand and market for credit ratings in and across the sectors and geographies where the Company operates; |
▪ | concerns in the marketplace affecting the Company’s credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings; |
▪ | the effect of competitive products and pricing, including the level of success of new product developments and global expansion; |
▪ | consolidation in the Company’s end-customer markets; |
▪ | the Company’s ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential of a system or network disruption that results in regulatory penalties, remedial costs or improper disclosure of confidential information or data; |
▪ | the introduction of competing products or technologies by other companies; |
▪ | the impact of customer cost-cutting pressures, including in the financial services industry and the commodities markets; |
▪ | a decline in the demand for credit risk management tools by financial institutions; |
▪ | the level of merger and acquisition activity in the United States and abroad; |
▪ | the volatility of the energy marketplace; |
▪ | the health of the commodities markets; |
▪ | our ability to attract, incentivize and retain key employees; |
▪ | the Company’s ability to successfully recover should it 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; |
▪ | our ability to adjust to changes in European and United Kingdom markets as the United Kingdom leaves the European Union, and the impact of the United Kingdom’s departure on our credit rating activities and other European and United Kingdom offerings; |
▪ | changes in applicable tax or accounting requirements; |
▪ | guidance and information regarding the implementation of the Tax Cuts and Jobs Act; |
▪ | the level of the Company’s future cash flows and capital investments; |
▪ | the impact on the Company’s revenue and net income caused by fluctuations in foreign currency exchange rates; and |
▪ | the Company’s exposure to potential criminal sanctions or civil penalties if it fails to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions. |
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Revenue | $ | 1,546 | $ | 1,513 | 2% | $ | 4,721 | $ | 4,475 | 6% | ||||||||||||
Expenses | 842 | 864 | (3)% | 2,635 | 2,519 | 5% | ||||||||||||||||
Operating profit | 704 | 649 | 8% | 2,086 | 1,956 | 7% | ||||||||||||||||
Other income, net | (6 | ) | (9 | ) | (25)% | (22 | ) | (26 | ) | (16)% | ||||||||||||
Interest expense, net | 38 | 37 | 3% | 98 | 110 | (11)% | ||||||||||||||||
Income before taxes on income | 672 | 621 | 8% | 2,010 | 1,872 | 7% | ||||||||||||||||
Provision for taxes on income | 137 | 169 | (19)% | 440 | 533 | (17)% | ||||||||||||||||
Net income | 535 | 452 | 18% | 1,570 | 1,339 | 17% | ||||||||||||||||
Less: net income attributable to noncontrolling interests | (40 | ) | (38 | ) | (6)% | (123 | ) | (105 | ) | (17)% | ||||||||||||
Net income attributable to S&P Global Inc. | $ | 495 | $ | 414 | 20% | $ | 1,447 | $ | 1,234 | 17% | ||||||||||||
Earnings per share attributable to S&P Global Inc. common shareholders: | ||||||||||||||||||||||
Net income: | ||||||||||||||||||||||
Basic | $ | 1.97 | $ | 1.62 | 22% | $ | 5.75 | $ | 4.80 | 20% | ||||||||||||
Diluted | $ | 1.95 | $ | 1.61 | 22% | $ | 5.70 | $ | 4.75 | 20% | ||||||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||||
Basic | 251.3 | 255.5 | 251.6 | 257.0 | ||||||||||||||||||
Diluted | 253.5 | 257.9 | 253.7 | 259.5 | ||||||||||||||||||
Actual shares outstanding at period end | 250.9 | 255.0 | ||||||||||||||||||||
(unaudited) | September 30, | December 31, | ||||||||
2018 | 2017 | |||||||||
Assets: | ||||||||||
Cash, cash equivalents, and restricted cash | $ | 2,203 | $ | 2,779 | ||||||
Other current assets | 1,425 | 1,545 | ||||||||
Total current assets | 3,628 | 4,324 | ||||||||
Property and equipment, net | 275 | 275 | ||||||||
Goodwill and other intangible assets, net | 4,964 | 4,377 | ||||||||
Other non-current assets | 516 | 449 | ||||||||
Total assets | $ | 9,383 | $ | 9,425 | ||||||
Liabilities and Equity: | ||||||||||
Short-term debt | $ | — | $ | 399 | ||||||
Unearned revenue | 1,576 | 1,613 | ||||||||
Other current liabilities | 941 | 1,202 | ||||||||
Long-term debt | 3,661 | 3,170 | ||||||||
Pension, other postretirement benefits and other non-current liabilities | 762 | 923 | ||||||||
Total liabilities | 6,940 | 7,307 | ||||||||
Redeemable noncontrolling interest | 1,485 | 1,350 | ||||||||
Total equity | 958 | 768 | ||||||||
Total liabilities and equity | $ | 9,383 | $ | 9,425 | ||||||
(unaudited) | 2018 | 2017 | ||||||||
Operating Activities: | ||||||||||
Net income | $ | 1,570 | $ | 1,339 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||
Depreciation | 60 | 61 | ||||||||
Amortization of intangibles | 91 | 73 | ||||||||
Stock-based compensation | 73 | 65 | ||||||||
Other | 57 | 59 | ||||||||
Net changes in other operating assets and liabilities | (450 | ) | (394 | ) | ||||||
Cash provided by operating activities | 1,401 | 1,203 | ||||||||
Investing Activities: | ||||||||||
Capital expenditures | (88 | ) | (77 | ) | ||||||
Acquisitions, net of cash acquired | (263 | ) | (80 | ) | ||||||
Proceeds from dispositions | — | 2 | ||||||||
Changes in short-term investments | 5 | — | ||||||||
Cash used for investing activities | (346 | ) | (155 | ) | ||||||
Financing Activities: | ||||||||||
Proceeds from issuance of senior notes, net | 489 | — | ||||||||
Payments on senior notes | (403 | ) | — | |||||||
Dividends paid to shareholders | (379 | ) | (316 | ) | ||||||
Distributions to noncontrolling interest holders | (116 | ) | (69 | ) | ||||||
Repurchase of treasury shares | (1,108 | ) | (846 | ) | ||||||
Exercise of stock options, employee withholding tax on share-based payments, and other | (62 | ) | 20 | |||||||
Cash used for financing activities | (1,579 | ) | (1,211 | ) | ||||||
Effect of exchange rate changes on cash | (52 | ) | 83 | |||||||
Net change in cash, cash equivalents, and restricted cash | (576 | ) | (80 | ) | ||||||
Cash, cash equivalents, and restricted cash at beginning of period | 2,779 | 2,392 | ||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 2,203 | $ | 2,312 | ||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
Revenue | Revenue | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Ratings | $ | 700 | $ | 739 | (5)% | $ | 2,223 | $ | 2,199 | 1% | ||||||||||||
Market Intelligence | 464 | 422 | 10% | 1,349 | 1,238 | 9% | ||||||||||||||||
Platts | 204 | 193 | 5% | 604 | 577 | 5% | ||||||||||||||||
Indices | 205 | 187 | 10% | 627 | 542 | 16% | ||||||||||||||||
Corporate | 5 | — | N/M | 10 | — | N/M | ||||||||||||||||
Intersegment Elimination | (32 | ) | (28 | ) | (15)% | (92 | ) | (81 | ) | (14)% | ||||||||||||
Total revenue | $ | 1,546 | $ | 1,513 | 2% | $ | 4,721 | $ | 4,475 | 6% | ||||||||||||
Expenses | Expenses | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Ratings (a) | $ | 305 | $ | 364 | (16)% | $ | 1,050 | $ | 1,055 | —% | ||||||||||||
Market Intelligence (b) | 316 | 299 | 6% | 961 | 899 | 7% | ||||||||||||||||
Platts (c) | 106 | 109 | (3)% | 319 | 332 | (4)% | ||||||||||||||||
Indices (d) | 71 | 68 | 4% | 211 | 190 | 11% | ||||||||||||||||
Corporate Unallocated expense (e) | 76 | 52 | 49% | 186 | 124 | 51% | ||||||||||||||||
Intersegment Elimination | (32 | ) | (28 | ) | (15)% | (92 | ) | (81 | ) | (14)% | ||||||||||||
Total expenses | $ | 842 | $ | 864 | (3)% | $ | 2,635 | $ | 2,519 | 5% | ||||||||||||
Operating Profit | Operating Profit | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Ratings (a) | $ | 395 | $ | 375 | 6% | $ | 1,173 | $ | 1,144 | 2% | ||||||||||||
Market Intelligence (b) | 148 | 123 | 20% | 388 | 339 | 14% | ||||||||||||||||
Platts (c) | 98 | 84 | 16% | 285 | 245 | 17% | ||||||||||||||||
Indices (d) | 134 | 119 | 13% | 416 | 352 | 18% | ||||||||||||||||
Total reportable segments | 775 | 701 | 11% | 2,262 | 2,080 | 9% | ||||||||||||||||
Corporate Unallocated (e) | (71 | ) | (52 | ) | (39)% | (176 | ) | (124 | ) | (42)% | ||||||||||||
Total operating profit | $ | 704 | $ | 649 | 8% | $ | 2,086 | $ | 1,956 | 7% | ||||||||||||
(a) | The nine months ended September 30, 2018 includes legal settlement expenses of $73 million. The three and nine months ended September 30, 2017 includes employee severance charges of $15 million and legal settlement expenses of $2 million for the nine months ended September 30, 2017. Additionally, amortization of intangibles from acquisitions of $1 million is included for the three months ended September 30, 2018 and 2017 and $2 million and $3 million for the nine months ended September 30, 2018 and 2017, respectively. |
(b) | The three and nine months ended September 30, 2018 includes restructuring charges related to a business disposition and employee severance charges of $2 million. The nine months ended September 30, 2017 includes a non-cash disposition-related adjustment of $4 million and employee severance charges of $4 million. Additionally, amortization of intangibles from acquisitions of $18 million and $17 million is included for the three months ended September 30, 2018 and 2017, respectively, and $54 million and $52 million for the nine months ended September 30, 2018 and 2017, respectively. |
(c) | Amortization of intangibles from acquisitions of $4 million and $5 million is included for the three months ended September 30, 2018 and 2017, respectively, and $13 million for the nine months ended September 30, 2018 and 2017. The nine months ended September 30, 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 $1 million. |
(d) | Amortization of intangibles from acquisitions of $2 million and $1 million is included for the three months ended September 30, 2018 and 2017, respectively, and $5 million and $4 million for the nine months ended September 30, 2018 and 2017, respectively. |
(e) | The three and nine months ended September 30, 2018 includes Kensho retention related expense of $11 million and $23 million, respectively, lease impairments of $11 million, and employee severance charges of $7 million. The three and nine months ended September 30, 2017 includes employee severance charges of $4 million. Additionally, amortization of intangibles from acquisitions of $8 million and $17 million is included for the three and nine months ended September 30, 2018. |
(unaudited) | Three Months | Nine Months | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||||||||
Ratings | Operating Profit | $ | 395 | $ | 375 | 6% | $ | 1,173 | $ | 1,144 | 2% | ||||||||||||
Non-GAAP Adjustments (a) | — | 15 | 73 | 16 | |||||||||||||||||||
Deal-Related Amortization | 1 | 1 | 2 | 3 | |||||||||||||||||||
Adjusted Operating Profit | $ | 396 | $ | 391 | 1% | $ | 1,248 | $ | 1,164 | 7% | |||||||||||||
Market Intelligence | Operating Profit | $ | 148 | $ | 123 | 20% | $ | 388 | $ | 339 | 14% | ||||||||||||
Non-GAAP Adjustments (b) | 2 | — | 2 | 8 | |||||||||||||||||||
Deal-Related Amortization | 18 | 17 | 54 | 52 | |||||||||||||||||||
Adjusted Operating Profit | $ | 168 | $ | 140 | 20% | $ | 444 | $ | 399 | 11% | |||||||||||||
Platts | Operating Profit | $ | 98 | $ | 84 | 16% | $ | 285 | $ | 245 | 17% | ||||||||||||
Non-GAAP Adjustments (c) | — | — | — | 20 | |||||||||||||||||||
Deal-Related Amortization | 4 | 5 | 13 | 13 | |||||||||||||||||||
Adjusted Operating Profit | $ | 102 | $ | 89 | 15% | $ | 298 | $ | 279 | 7% | |||||||||||||
Indices | Operating Profit | $ | 134 | $ | 119 | 13% | $ | 416 | $ | 352 | 18% | ||||||||||||
Deal-Related Amortization | 2 | 1 | 5 | 4 | |||||||||||||||||||
Adjusted Operating Profit | $ | 136 | $ | 120 | 13% | $ | 421 | $ | 356 | 18% | |||||||||||||
Total Segments | Operating Profit | $ | 775 | $ | 701 | 11% | $ | 2,262 | $ | 2,080 | 9% | ||||||||||||
Non-GAAP Adjustments (a) (b) (c) | 2 | 15 | 75 | 45 | |||||||||||||||||||
Deal-Related Amortization | 25 | 24 | 74 | 73 | |||||||||||||||||||
Adjusted Segment Operating Profit | $ | 802 | $ | 740 | 8% | $ | 2,411 | $ | 2,198 | 10% | |||||||||||||
Corporate Unallocated | Corporate Unallocated | $ | (71 | ) | $ | (52 | ) | (39)% | $ | (176 | ) | $ | (124 | ) | (42)% | ||||||||
Non-GAAP Adjustments (d) | 28 | 4 | 40 | 4 | |||||||||||||||||||
Deal-Related Amortization | 8 | — | 17 | — | |||||||||||||||||||
Adjusted Corporate Unallocated | $ | (35 | ) | $ | (48 | ) | 25% | $ | (119 | ) | $ | (120 | ) | (1)% | |||||||||
Total SPGI | Operating Profit | $ | 704 | $ | 649 | 8% | $ | 2,086 | $ | 1,956 | 7% | ||||||||||||
Non-GAAP Adjustments (a) (b) (c) (d) | 30 | 19 | 115 | 49 | |||||||||||||||||||
Deal-Related Amortization | 33 | 24 | 91 | 73 | |||||||||||||||||||
Adjusted Operating Profit | $ | 767 | $ | 692 | 11% | $ | 2,292 | $ | 2,078 | 10% | |||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Provision for Income Taxes | $ | 137 | $ | 169 | (19)% | $ | 440 | $ | 533 | (17)% | ||||||||||||
Non-GAAP Adjustments (a) (b) (c) (d) (e) | 16 | 7 | 36 | 21 | ||||||||||||||||||
Deal-Related Amortization | 8 | 9 | 22 | 25 | ||||||||||||||||||
Adjusted Provision for Income Taxes | $ | 161 | $ | 185 | (13)% | $ | 499 | $ | 579 | (14)% | ||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Adjusted Operating Profit | $ | 767 | $ | 692 | 11% | $ | 2,292 | $ | 2,078 | 10% | ||||||||||||
Other Income, Net | (6 | ) | (9 | ) | (22 | ) | (26 | ) | ||||||||||||||
Interest Expense, Net | 38 | 37 | 98 | 110 | ||||||||||||||||||
Adjusted Income Before Taxes on Income (1) | 736 | 664 | 11% | 2,216 | 1,994 | 11% | ||||||||||||||||
Adjusted Provision for Income Taxes (2) | 161 | 185 | 499 | 579 | ||||||||||||||||||
Adjusted Effective Tax Rate (2)/(1) | 21.9 | % | 27.9 | % | 22.5 | % | 29.0 | % | ||||||||||||||
(unaudited) | 2018 | 2017 | % Change | ||||||||||||||||||||
Net Income attributable to SPGI | Diluted EPS | Net Income attributable to SPGI | Diluted EPS | Net Income attributable to SPGI | Diluted EPS | ||||||||||||||||||
Three Months | |||||||||||||||||||||||
As Reported | $ | 495 | $ | 1.95 | $ | 414 | $ | 1.61 | 20% | 22% | |||||||||||||
Non-GAAP Adjustments (a) (b) (c) (d) (e) | 15 | 0.06 | 12 | 0.05 | |||||||||||||||||||
Deal-Related Amortization | 26 | 0.10 | 16 | 0.06 | |||||||||||||||||||
Adjusted | $ | 536 | $ | 2.11 | $ | 442 | $ | 1.71 | 21% | 23% | |||||||||||||
Nine Months | |||||||||||||||||||||||
As Reported | $ | 1,447 | $ | 5.70 | $ | 1,234 | $ | 4.75 | 17% | 20% | |||||||||||||
Non-GAAP Adjustments (a) (b) (c) (d) (e) | 78 | 0.31 | 29 | 0.11 | |||||||||||||||||||
Deal-Related Amortization | 69 | 0.27 | 47 | 0.18 | |||||||||||||||||||
Adjusted | $ | 1,594 | $ | 6.28 | $ | 1,310 | $ | 5.05 | 22% | 24% | |||||||||||||
(a) | The nine months ended September 30, 2018 includes legal settlement expenses of $73 million ($55 million after-tax). The three and nine months ended September 30, 2017 includes employee severance charges of $15 million ($9 million after-tax) and legal settlement expenses of $2 million ($1 million after-tax) for the nine months ended September 30, 2017. |
(b) | The three and nine month ended September 30, 2018 includes restructuring charges related to a business disposition and employee severance charges of $2 million ($2 million after -tax). The nine months ended September 30, 2017 includes a non-cash disposition-related adjustment of $4 million ($4 million after-tax) and employee severance charges of $4 million ($3 million after-tax). |
(c) | The nine months ended September 30, 2017 includes a non-cash acquisition-related adjustment of $11 million ($3 million after-tax), a charge to exit a leased facility of $6 million ($3 million after-tax), an asset write-off of $2 million ($1 million after-tax) and employee severance charges of $1 million ($1 million after-tax). |
(d) | The three and nine months ended September 30, 2018 includes Kensho retention related expense of $11 million ($8 million after-tax) and $23 million ($17 million after-tax), respectively, lease impairments of $11 million ($8 million after-tax), and employee severance charges of $7 million ($5 million after-tax). The three and nine months ended September 30, 2017 includes employee severance charges of $4 million ($3 million after-tax). |
(e) | The three and nine months ended September 30, 2018 includes an adjustment to the provisional tax charge recorded in the fourth quarter of 2017 of $8 million. |
(unaudited) | Three Months | ||||||||||||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||||||||
Ratings | Market Intelligence | Platts | |||||||||||||||||||||||||||||||
Non-Subscription / Transaction (a) | $ | 328 | $ | 372 | (12)% | $ | 8 | $ | 10 | (20)% | $ | 2 | $ | 2 | 14% | ||||||||||||||||||
Non-Transaction (b) | 372 | 367 | 1% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Subscription (c) | — | — | N/M | 451 | 406 | 11% | 188 | 177 | 6% | ||||||||||||||||||||||||
Asset-Linked Fees (d) | — | — | N/M | 5 | 6 | (21)% | — | — | N/M | ||||||||||||||||||||||||
Sales Usage-Based Royalties (e) | — | — | N/M | — | — | N/M | 14 | 14 | (6)% | ||||||||||||||||||||||||
Total revenue | $ | 700 | $ | 739 | (5)% | $ | 464 | $ | 422 | 10% | $ | 204 | $ | 193 | 5% | ||||||||||||||||||
Indices | Corporate | Intersegment Elimination | |||||||||||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||||||||
Non-Subscription / Transaction (a) | $ | — | $ | — | N/M | $ | — | $ | — | N/M | $ | — | $ | — | N/M | ||||||||||||||||||
Non-Transaction (b) | — | — | N/M | — | — | N/M | (32 | ) | (28 | ) | (15)% | ||||||||||||||||||||||
Subscription (c) | 41 | 36 | 12% | 5 | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Asset-Linked Fees (d) | 131 | 118 | 11% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Sales Usage-Based Royalties (e) | 33 | 33 | 2% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Total revenue | $ | 205 | $ | 187 | 10% | $ | 5 | $ | — | N/M | $ | (32 | ) | $ | (28 | ) | (15)% | ||||||||||||||||
(unaudited) | Nine Months | ||||||||||||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||||||||
Ratings | Market Intelligence | Platts | |||||||||||||||||||||||||||||||
Non-Subscription / Transaction (a) | $ | 1,094 | $ | 1,138 | (4)% | $ | 28 | $ | 32 | (15)% | $ | 8 | $ | 9 | (9)% | ||||||||||||||||||
Non-Transaction (b) | 1,129 | 1,061 | 6% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Subscription (c) | — | — | N/M | 1,306 | 1,189 | 10% | 556 | 523 | 6% | ||||||||||||||||||||||||
Asset-Linked Fees (d) | — | — | N/M | 15 | 17 | (13)% | — | — | N/M | ||||||||||||||||||||||||
Sales Usage-Based Royalties (e) | — | — | N/M | — | — | N/M | 40 | 45 | (10)% | ||||||||||||||||||||||||
Total revenue | $ | 2,223 | $ | 2,199 | 1% | $ | 1,349 | $ | 1,238 | 9% | $ | 604 | $ | 577 | 5% | ||||||||||||||||||
Indices | Corporate | Intersegment Elimination | |||||||||||||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||||||||
Non-Subscription / Transaction (a) | $ | — | $ | — | N/M | $ | — | $ | — | N/M | $ | — | $ | — | N/M | ||||||||||||||||||
Non-Transaction (b) | — | — | N/M | — | — | N/M | (92 | ) | (81 | ) | (14)% | ||||||||||||||||||||||
Subscription (c) | 109 | 104 | 4% | 10 | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Asset-Linked Fees (d) | 396 | 340 | 17% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Sales Usage-Based Royalties (e) | 122 | 98 | 25% | — | — | N/M | — | — | N/M | ||||||||||||||||||||||||
Total revenue | $ | 627 | $ | 542 | 16% | $ | 10 | $ | — | N/M | $ | (92 | ) | $ | (81 | ) | (14)% | ||||||||||||||||
(a) | Non-subscription / transaction revenue is primarily related to ratings of publicly-issued debt, bank loan ratings and corporate credit estimates. |
(b) | Non-transaction revenue 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, which mainly consists of the royalty of $28 million and $81 million for the three and nine months ended September 30, 2018, respectively, and $25 million and $73 million for the three and six months ended September 30, 2017, respectively, charged to Market Intelligence for the rights to use and distribute content and data developed by Ratings. |
(c) | Subscription revenue is related to credit ratings-related information products, Market Intelligence Desktop products, investment research products and other data subscriptions, real-time news, market data and price assessments, along with other information products. |
(d) | Asset-linked fees primarily related to fees based on assets underlying exchange-traded funds, mutual funds and insurance products. |
(e) | Sales usage-based royalty revenue is primarily related to trading based fees from exchange-traded derivatives and licensing of its proprietary market price data and price assessments to commodity exchanges. |
(unaudited) | U.S. | International | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Three Months | ||||||||||||||||||||||
Ratings | $ | 400 | $ | 425 | (6)% | $ | 300 | $ | 314 | (4)% | ||||||||||||
Market Intelligence | 300 | 279 | 8% | 164 | 143 | 15% | ||||||||||||||||
Platts | 70 | 70 | —% | 134 | 123 | 8% | ||||||||||||||||
Indices | 175 | 155 | 13% | 30 | 32 | (6)% | ||||||||||||||||
Corporate | 5 | — | N/M | — | — | N/M | ||||||||||||||||
Intersegment elimination | (18 | ) | (15 | ) | (17)% | (14 | ) | (13 | ) | (14)% | ||||||||||||
Total revenue | $ | 932 | $ | 914 | 2% | $ | 614 | $ | 599 | 2% | ||||||||||||
Nine Months | ||||||||||||||||||||||
Ratings | $ | 1,266 | $ | 1,276 | (1)% | $ | 957 | $ | 923 | 4% | ||||||||||||
Market Intelligence | 874 | 831 | 5% | 475 | 407 | 17% | ||||||||||||||||
Platts | 210 | 213 | (1)% | 394 | 364 | 9% | ||||||||||||||||
Indices | 533 | 448 | 19% | 94 | 94 | 1% | ||||||||||||||||
Corporate | 10 | — | N/M | — | — | N/M | ||||||||||||||||
Intersegment elimination | (50 | ) | (42 | ) | (17)% | (42 | ) | (39 | ) | (11)% | ||||||||||||
Total revenue | $ | 2,843 | $ | 2,726 | 4% | $ | 1,878 | $ | 1,749 | 7% | ||||||||||||
(unaudited) | Nine Months | ||||||||
2018 | 2017 | ||||||||
Cash provided by operating activities | $ | 1,401 | $ | 1,203 | |||||
Capital expenditures | (88 | ) | (77 | ) | |||||
Distributions to noncontrolling interest holders | (116 | ) | (69 | ) | |||||
Free cash flow | $ | 1,197 | $ | 1,057 | |||||
Tax on gain from sale of SPSE and CMA | — | 67 | |||||||
Payment of legal settlements | 180 | 4 | |||||||
Settlement of prior-year tax audits | 71 | — | |||||||
Tax benefit from legal settlements | (44 | ) | — | ||||||
Free cash flow excluding certain items | $ | 1,404 | $ | 1,128 | |||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Total revenue | $ | 1,546 | $ | 1,513 | 2% | $ | 4,721 | $ | 4,475 | 6% | ||||||||||||
Ratings acquisition | (2 | ) | — | (4 | ) | — | ||||||||||||||||
Market Intelligence acquisitions | (5 | ) | — | (9 | ) | — | ||||||||||||||||
Corporate acquisition | (5 | ) | — | (10 | ) | — | ||||||||||||||||
Total adjusted revenue | $ | 1,534 | $ | 1,513 | 1% | $ | 4,698 | $ | 4,475 | 5% | ||||||||||||
Organic revenue constant currency basis | $ | 1,537 | $ | 1,513 | 2% | $ | 4,664 | $ | 4,475 | 4% | ||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Ratings revenue | $ | 700 | $ | 739 | (5)% | $ | 2,223 | $ | 2,199 | 1% | ||||||||||||
Acquisition | (2 | ) | — | (4 | ) | — | ||||||||||||||||
Adjusted Ratings revenue | $ | 698 | $ | 739 | (5)% | $ | 2,219 | $ | 2,199 | 1% | ||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Market Intelligence revenue | $ | 464 | $ | 422 | 10% | $ | 1,349 | $ | 1,238 | 9% | ||||||||||||
Acquisitions | (5 | ) | — | (9 | ) | — | ||||||||||||||||
Adjusted Market Intelligence revenue | $ | 459 | $ | 422 | 9% | $ | 1,340 | $ | 1,238 | 8% | ||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Adjusted operating profit | $ | 136 | $ | 120 | 13% | $ | 421 | $ | 356 | 18% | ||||||||||||
Income attributable to noncontrolling interests | 36 | 33 | 112 | 95 | ||||||||||||||||||
Adjusted Net Operating Profit | $ | 100 | $ | 87 | 15% | $ | 309 | $ | 261 | 17% | ||||||||||||
(unaudited) | Three Months | Nine Months | ||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
Corporate Unallocated | $ | (71 | ) | $ | (52 | ) | (39)% | $ | (176 | ) | $ | (124 | ) | (42)% | ||||||||
Corporate Revenue | (5 | ) | — | (10 | ) | — | ||||||||||||||||
Corporate Unallocated Expense | (76 | ) | (52 | ) | 46% | (186 | ) | (124 | ) | 51% | ||||||||||||
Non-GAAP Adjustments | 28 | 4 | 40 | 4 | ||||||||||||||||||
Deal-Related Amortization | 8 | — | 16 | — | ||||||||||||||||||
Adjusted Kensho Expense (a) | 11 | — | 23 | — | ||||||||||||||||||
Adjusted Corporate Unallocated Expense | $ | (29 | ) | $ | (48 | ) | (38)% | $ | (107 | ) | $ | (120 | ) | (9)% | ||||||||
(a) | The three and nine months ended September 30, 2018 excludes amortization of intangibles from acquisitions of $8 million and $16 million, respectively, and an adjustment for Kensho retention related expense of $11 million and $23 million, respectively. |
(unaudited) | |||||||||
Low | High | ||||||||
GAAP Diluted EPS | $ | 7.77 | $ | 7.87 | |||||
Deal-related amortization | 0.40 | 0.40 | |||||||
Compensation for replacement equity awards and retention plans | 0.09 | 0.09 | |||||||
Integration costs | 0.01 | 0.01 | |||||||
Legal settlement | 0.20 | 0.20 | |||||||
Lease impairments | 0.03 | 0.03 | |||||||
Restructuring | 0.03 | 0.03 | |||||||
Reduction to Provisional Tax Charge | (0.03 | ) | (0.03 | ) | |||||
Non-GAAP Diluted EPS | $ | 8.50 | $ | 8.60 | |||||
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