McGraw Hill Financial Reports 4th Quarter And Full-Year 2013 Results

The Company Achieved Record Revenue from Continuing Operations in 2013

4th Quarter and Full-Year Revenue Increased 2% and 10%, Respectively

Diluted EPS from Continuing Operations Decreased 6% to $0.62 in the 4th Quarter and Increased 22% to $2.90 for the Full Year

Adjusted Diluted EPS from Continuing Operations Increased 12% to $0.81 in the 4th Quarter and 21% to a Record of $3.33 for the Full Year

Introduced 2014 Adjusted Diluted EPS Guidance of $3.75 to $3.85, an Increase of 13% to 16%

04 Feb, 2014, 07:10 ET from McGraw Hill Financial

NEW YORK, Feb. 4, 2014 /PRNewswire/ -- McGraw Hill Financial, Inc. (NYSE: MHFI) today reported fourth quarter and full-year 2013 results.  The Company reported fourth quarter 2013 revenue of $1.25 billion, an increase of 2% compared to the same period last year.  Net income and diluted earnings per share from continuing operations were $173 million and $0.62, respectively.  For the full year, revenue increased 10% to $4.88 billion and net income and diluted earnings per share from continuing operations were $812 million and $2.90, respectively.

Excluding the impact of one-time costs related to restructuring, the pending sale of a data center, and lease terminations as the Company consolidates office space, adjusted net income from continuing operations for the quarter increased 9% to $223 million, and adjusted diluted earnings per share from continuing operations increased 12% to $0.81.  For the full year, adjusted net income from continuing operations increased 19% to $931 million and adjusted diluted earnings per share from continuing operations increased 21% to $3.33.

"2013 has been a momentous year for the Company as we transformed McGraw Hill Financial into a more profitable, more growth-oriented company.  These actions drove the record results delivered today with 10% revenue growth and 21% adjusted diluted EPS from continuing operations growth," said Douglas L. Peterson, president and chief executive officer of McGraw Hill Financial.  He continued, "My focus will be on enhancing our customers' experience, thoughtfully broadening our presence in international markets, and delivering strong financial performance based both upon revenue growth and cost control."

The Outlook:  "We are introducing 2014 revenue guidance of mid single-digit growth and adjusted diluted EPS guidance of $3.75 to $3.85 – essentially targeting mid-teen EPS growth.  In addition, our free cash flow guidance for 2014 is approximately $1 billion.  During the fourth quarter, we continued to evaluate our cost structure, particularly in light of recent divestitures, and identified several new cost savings opportunities.  We began addressing some of these during the fourth quarter by reducing our real estate footprint, particularly in New York City, and streamlining various management structures."

Standard & Poor's Ratings Services:  Fourth quarter revenue was the second highest of 2013.  However, facing the most difficult comparison of the year, fourth quarter 2013 revenue decreased 2% to $574 million and operating profit decreased 10% to $221 million.  Adjusted operating profit decreased 9% to $231 million.  The adjusted operating profit margin decreased to 40.2% in the quarter.

2013 revenue increased 12% to $2.27 billion.  Operating profit increased 18% to $1.0 billion.  Adjusted operating profit increased 15% to $993 million compared to 2012.  For the second straight year, adjusted operating profit margin increased, rising 120 basis points to 43.7%.

Transaction revenue decreased 12% to $257 million during the quarter primarily due to lower U.S. corporate issuance, particularly high yield. 

U.S. corporate and public issuance were down 18% and 19%, respectively, driven by the government shutdown, interest rate volatility, and economic uncertainty.  U.S. structured issuance was flat with strength in commercial mortgage-backed securities offset by weak residential mortgage-backed securities and collateralized debt obligations (predominately collateralized loan obligations).

European corporate issuance was flat with a 9% decrease in investment-grade issuance offset by a 71% increase in high-yield issuance.  Improved economic conditions drove a 25% increase in European structured issuance.

Non-transaction revenue increased 8% in the fourth quarter and represented 55% of Standard & Poor's Ratings' total revenue compared to 50% for the same period last year. Non-transaction growth was driven primarily by increased entity credit rating activity, particularly in Europe.

International revenue increased 8% and represented 50% of Standard & Poor's Ratings' total fourth quarter revenue.  This is the highest percentage of international revenue since 4Q 2008. 

S&P Capital IQ:  Revenue increased 4% to $301 million in the fourth quarter of 2013.  Excluding ongoing portfolio rationalization, organic growth accounted for 5%.  Quarterly operating profit decreased 5% to $46 million.  Adjusted operating profit increased 1% to $54 million.

Full-year 2013 revenue increased 4% to $1.17 billion.  Operating profit increased 1% to $211 million.  Adjusted operating profit decreased 2% to $224 million.

In the fourth quarter, Desktop Solutions, Enterprise Solutions, and Ratings IP all delivered mid single-digit revenue growth while Proprietary Research revenue declined mid single-digit.

During the fourth quarter, and throughout the year, S&P Capital IQ has been building new products and adding new data sets.  The first sale of its new Portfolio Risk Analytics product recently took place with a five-year agreement.   

S&P Dow Jones Indices:  Revenue increased 18% to $130 million in the fourth quarter of 2013.  Quarterly operating profit decreased 21% to $50 million.  Adjusted operating profit attributable to the Company decreased 26% to $37 million.  Operating profit decreased due to a $26 million non-cash impairment charge associated with an intangible asset acquired through the formation of our S&P Dow Jones Indices LLC joint venture.

2013 revenue increased 27% to $493 million.  2013 organic revenue, which excludes the Dow Jones Indexes for the first half of 2013, increased 12% to $435 million.  Operating profit increased 31% to $278 million.  Adjusted operating profit attributable to the Company increased 4% to $205 million.

The primary driver of revenue growth was the growth in assets under management (AUM) in exchange-traded funds based on S&P Dow Jones Indices.  AUM increased 43% to $668 billion at the end of the fourth quarter compared with the end of 2012, with almost half of this increase as the result of inflows.  In addition, licensing revenue from derivative trading increased primarily due to SPX and VIX trading volumes, which increased 11% and 19%, respectively.

Late in the fourth quarter of 2013, we made the final payment to acquire the intellectual property for the S&P GSCI® enabling the Company to eliminate applicable royalty obligations going forward.

Commodities & Commercial Markets:  Revenue increased 2% to $264 million and operating profit increased 41% to $76 million in the fourth quarter of 2013.  Adjusted operating profit also increased by 41% to $84 million in the fourth quarter, compared to the same period last year.

For 2013, revenue increased 4% to $1.01 billion.  Operating profit increased 25% to $311 million.  Adjusted operating profit increased by 19% to $310 million.

Platts capped another strong year with 10% revenue growth to $141 million for the fourth quarter.  During the quarter, Metals & Agriculture and Petrochemicals product subscription growth overtook Petroleum as the primary drivers of double-digit growth.  For the full-year 2013, Platts' revenue grew 13% to a record $550 million.

Commercial Markets' revenue decreased 6% for the quarter.  Excluding the sale of Aviation Week, organic revenue grew 4% for the quarter.  J.D. Power delivered its second consecutive year of record revenue; however, this was partially offset by a modest decline at Construction.

Unallocated Expense:  Unallocated expense includes corporate functions and centrally-managed costs.  Adjusted unallocated expense decreased 7% to $58 million in the fourth quarter.  Full-year 2013 adjusted unallocated expense increased $1 million to $203 million.

Adjustments to Continuing Operations:  During the fourth quarter, there were $77 million of one-time charges primarily associated with three items:

- $36 million non-cash impairment charge related to the pending sale of a data center

- $28 million restructuring charge associated with streamlining the Company's management structure and shutting down a small unprofitable business

- $13 million charge primarily related to terminating various leases as the Company reduced its real estate footprint

Return of Capital:  During 2013, share repurchases totaled approximately $1 billion with a volume weighted average price of $58.52 per share.  In addition, regular quarterly dividends totaled approximately $300 million bringing the total return of capital to $1.3 billion.  On January 29, the Board of Directors increased the regular quarterly dividend by 7.1%.  This action marks the Company's forty first year of annual dividend increases and demonstrates McGraw Hill Financial's long-term commitment to deploying capital to build total shareholder return.  Having completed its existing authorization, in December 2013 the Company announced a new 50 million share buyback authorization.  In 2014, the Company anticipates continuing its share repurchase program, subject to market conditions.

Balance Sheet and Cash Flow:  Cash and short-term investments at the end of the fourth quarter were $1.56 billion, up from $761 million at the end of 2012.  For the full year, free cash flow from continuing operations was $624 million, a decrease of $2 million from the same period in 2012.

Comparison of Adjusted Information to U.S. GAAP Information:  Adjusted diluted earnings per share, adjusted diluted earnings per share from continuing operations, adjusted net income, adjusted operating profit, adjusted unallocated expense and free cash flow are non-GAAP financial measures contained in this earnings release that are derived from the Company's continuing operations.  This information is provided in order to allow investors to make meaningful comparisons of the Company's operating performance between periods and to view the Company's business from the same perspective as Company management.  These non-GAAP measures may be different than similar measures used by other companies.  Reconciliations for the differences between non-GAAP measures used in this earnings release and comparable financial measures calculated in accordance with U.S. GAAP are attached as Exhibits 5 and 8.

Investor Day Scheduled for March 18, 2014:  McGraw Hill Financial will host an Investor Day on March 18, 2014 in New York City.  Douglas Peterson, president and chief executive officer, and other members of senior management will provide greater insight into the new McGraw Hill Financial.  Discussions may include forward-looking information.  The event is by invitation only to attend in person.  The Company will video Webcast all the presentations and will make them available, live and in replay, for all interested parties at http://investor.mhfi.com/phoenix.zhtml?c=96562&p=irol-EventDetails&EventId=5094779.

4Q 2013 Earnings Conference Call/Webcast Details:  The Company's senior management will review the fourth quarter earnings results on a conference call scheduled for this morning, February 4, 2014, at 8:30 a.m. Eastern Time.  This call is open to all interested parties.  Discussions may include forward-looking information.  Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://investor.mhfi.com.

The Webcast of the 4Q 2013 earnings call will be available live and in replay at http://investor.mhfi.com/phoenix.zhtml?c=96562&p=irol-EventDetails&EventId=5082927.  (Please copy and paste URL into Web browser.)

Telephone access is available.  Domestic participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply).  The passcode is "MHFI" and the conference leader is Douglas Peterson.  A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until March 4, 2014.  Domestic participants may call (800) 945-2458; international participants may call +1 (203) 369-3946 (long distance charges will apply).  No passcode is required.

The forward-looking statements in this news release involve risks and uncertainties and are subject to change based on various important factors, including worldwide economic, financial, liquidity, political and regulatory conditions; the health of debt (including U.S. residential mortgage-backed securities and collateralized debt obligations) and equity markets, including possible future interest rate changes; the health of the economy; the successful marketing of competitive products; and the effect of competitive products and pricing.

About McGraw Hill Financial:  McGraw Hill Financial is a leading financial intelligence company providing the global capital and commodity markets with independent benchmarks, credit ratings, portfolio and enterprise risk solutions, and analytics. The Company's iconic brands include  Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power and McGraw Hill Construction. The Company has approximately 17,000 employees in 27 countries. Additional information is available at www.mhfi.com

Investor Relations:  http://investor.mhfi.com

Get news direct from McGraw Hill Financial via RSS: http://investor.mhfi.com/phoenix.zhtml?c=96562&p=rssSubscription&t=&id=&

Release issued:  February 4, 2014

Contact:

Investor Relations: Chip Merritt Vice President, Investor Relations (212) 512-4321 (office) chip.merritt@mhfi.com

News Media: Jason Feuchtwanger Director, Corporate Media Relations (212) 512-3151 (office) jason.feuchtwanger@mhfi.com

 

 

Exhibit 1

 

McGraw Hill Financial

Condensed Consolidated Statements of Income

Periods ended December 31, 2013 and 2012

(dollars in millions, except per share data)

 

(unaudited)

Three Months

Twelve Months

2013

2012

%

Change

2013

2012

%

Change

Revenue

$

1,250

$

1,226

2%

$

4,875

$

4,450

10%

Expenses

930

931

—%

3,458

3,291

5%

Other loss (income)

36

(52)

N/M

12

(52)

N/M

Operating profit

284

347

(18)%

1,405

1,211

16%

Interest expense, net

14

18

(22)%

59

81

(26)%

Income from continuing operations

before taxes on income

270

329

(18)%

1,346

1,130

19%

Provision for taxes on income

80

118

(33)%

443

404

9%

Income from continuing operations

190

211

(10)%

903

726

24%

(Loss) from discontinued operations

(2)

(404)

(99)%

(26)

(234)

(89)%

Gain on sale of discontinued operations

—%

589

N/M

Discontinued operations, net of tax

(2)

(404)

(99)%

563

(234)

N/M

Net income (loss)

188

(193)

N/M

1,466

492

N/M

Less: net income attributable to noncontrolling interests - continuing

(17)

(21)

(21)%

(91)

(50)

81%

Less: net (income) loss attributable to noncontrolling interests - discontinued

(2)

N/M

1

(5)

N/M

Net income (loss) attributable to

McGraw Hill Financial, Inc.

$

171

$

(216)

N/M

$

1,376

$

437

N/M

Amounts attributable to McGraw Hill Financial, Inc. common shareholders:

Income from continuing operations

$

173

$

190

(9)%

$

812

$

676

20%

(Loss) income from discontinued operations

(2)

(406)

(99)%

564

(239)

N/M

Net income (loss)

$

171

$

(216)

N/M

$

1,376

$

437

N/M

Earnings per share attributable to McGraw Hill Financial, Inc. common shareholders:

Income from continuing operations:

Basic

$

0.64

$

0.68

(6)%

$

2.96

$

2.43

22%

Diluted

$

0.62

$

0.67

(6)%

$

2.90

$

2.37

22%

Income from discontinued operations:

Basic

$

(0.01)

$

(1.46)

(99)%

$

2.05

$

(0.86)

N/M

Diluted

$

(0.01)

$

(1.43)

(99)%

$

2.01

$

(0.84)

N/M

Net income:

Basic

$

0.63

$

(0.78)

N/M

$

5.01

$

1.57

N/M

Diluted

$

0.62

$

(0.76)

N/M

$

4.91

$

1.53

N/M

Weighted-average number of common shares outstanding:

Basic

270.4

277.9

274.5

278.6

Diluted

278.0

284.7

279.8

284.6

        N/M - not meaningful

        Note - % change in the tables throughout the exhibits are calculated off of the actual number, not the rounded number presented.

 

 

Exhibit 2

 

McGraw Hill Financial

Condensed Consolidated Balance Sheets

December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

2013

2012

Assets:

Cash and short-term investments

$

1,560

$

761

Other current assets

1,315

1,198

Assets held for sale (a)

61

1,940

Total current assets

2,936

3,899

Property and equipment, net

249

368

Goodwill and other intangible assets, net

2,445

2,519

Asset for pension benefits

261

98

Other non-current assets

170

168

Total assets

$

6,061

$

7,052

Liabilities and Equity:

Short-term debt

457

Unearned revenue

1,309

1,229

Other current liabilities

1,063

1,317

Liabilities held for sale (a)

664

Long-term debt

799

799

Pension, other postretirement benefits and other non-current liabilities

736

936

Total liabilities

3,907

5,402

Redeemable noncontrolling interest

810

810

Total equity

1,344

840

Total liabilities and equity

$

6,061

$

7,052

(a)   Includes one of our data centers as of December 31, 2013 and McGraw-Hill Education as of December 31, 2012.

 

Exhibit 3

 

McGraw Hill Financial

Condensed Consolidated Statements of Cash Flows

Years ended December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

2013

2012

Operating Activities:

Net income from continuing operations

$

903

$

726

Adjustments to reconcile income from continuing operations to cash

provided by operating activities from continuing operations:

Depreciation (including amortization of technology projects)

86

93

Amortization of intangibles

51

48

Stock-based compensation

99

93

Other

177

101

Net changes in operating assets and liabilities

(500)

(314)

Cash provided by operating activities from continuing operations

816

747

Investing Activities:

Capital expenditures

(117)

(97)

Acquisitions, net of cash acquired

(47)

(177)

Proceeds from dispositions

51

Changes in short-term investments

(17)

27

Cash used for investing activities from continuing operations

(130)

(247)

Financing Activities:

Additions to short-term debt, net

(457)

457

Payments of senior notes

(400)

Dividends paid to shareholders

(308)

(984)

Dividends and other payments paid to noncontrolling interests

(75)

(24)

Purchase of CRISIL shares

(214)

Repurchase of treasury shares

(978)

(295)

Exercise of stock options and other

289

341

Cash used for financing activities from continuing operations

(1,743)

(905)

Effect of exchange rate changes on cash from continuing operations

(1)

5

Cash used for continuing operations

(1,058)

(400)

Cash provided by discontinued operations

1,840

325

Net change in cash and equivalents

782

(75)

Cash and equivalents at beginning of year

760

835

Cash and equivalents at end of year

$

1,542

$

760

 

 

Exhibit 4

 

McGraw Hill Financial

Operating Results by Segment

Periods ended December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

Three Months

Twelve Months

Revenue

Revenue

2013

2012

% Change

2013

2012

% Change

S&P Ratings

$

574

$

584

(2)%

$

2,274

$

2,034

12%

S&P Capital IQ

301

290

4%

1,170

1,124

4%

S&P Dow Jones Indices

130

110

18%

493

388

27%

Commodities & Commercial Markets

264

260

2%

1,014

973

4%

Intersegment Elimination

(19)

(18)

(10)%

(76)

(69)

(11)%

Total revenue

$

1,250

$

1,226

2%

$

4,875

$

4,450

10%

Segment Expenses

Segment Expenses

2013

2012

% Change

2013

2012

% Change

S&P Ratings

$

353

$

338

4%

$

1,274

$

1,185

8%

S&P Capital IQ

255

242

5%

959

916

5%

S&P Dow Jones Indices

80

46

70%

215

176

22%

Commodities & Commercial Markets

188

206

(9)%

703

725

(3)%

Intersegment Elimination

(19)

(18)

(10)%

(76)

(69)

(11)%

Total segment expenses

$

857

$

814

5%

$

3,075

$

2,933

5%

Operating Profit

Operating Profit

2013

2012

% Change

2013

2012

% Change

S&P Ratings

$

221

$

246

(10)%

$

1,000

$

849

18%

S&P Capital IQ

46

48

(5)%

211

208

1%

S&P Dow Jones Indices

50

64

(21)%

278

212

31%

Commodities & Commercial Markets

76

54

41%

311

248

25%

Total operating segments

393

412

(5)%

1,800

1,517

19%

Unallocated expense

(109)

(65)

68%

(395)

(306)

29%

Total operating profit

$

284

$

347

(18)%

$

1,405

$

1,211

16%

 

 

Exhibit 5

 

McGraw Hill Financial

Operating Results by Segment - Reported vs. Performance

Periods ended December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

2013

2012

% Change

Reported

Non-GAAP

Adjustments

Performance

Reported

Non-GAAP

Adjustments

Performance

Reported

Performance

Three Months

S&P Ratings

$

221

$

10

a

$

231

$

246

$

8

b

$

254

(10)%

(9)%

S&P Capital IQ

46

8

a

54

48

5

b

53

(5)%

1%

S&P Dow Jones Indices

50

a

50

64

3

b

67

(21)%

(24)%

Commodities & Commercial Markets

76

8

a

84

54

6

b

59

41%

41%

Segment operating profit

393

26

419

412

22

433

(5)%

(3)%

Unallocated expense  

(109)

51

c

(58)

(65)

3

c

(62)

68%

(7)%

Operating profit

284

77

361

347

25

371

(18)%

(3)%

Interest expense, net  

14

14

18

18

(22)%

(22)%

Income before taxes on income

270

77

347

329

25

353

(18)%

(2)%

Provision for taxes on income

80

27

107

118

9

126

(32)%

(16)%

Income from continuing operations

190

50

240

211

16

227

(10)%

6%

Income from discontinued operations

(2)

2

(404)

404

(99)%

—%

Net income

188

52

240

(193)

420

227

N/M

6%

Less: NCI net income - continuing

(17)

(17)

(21)

(1)

(22)

(21)%

(24)%

Less: NCI net income - discontinued

(2)

2

N/M

—%

Net income - continuing

$

173

$

50

$

223

$

190

$

15

$

205

(9)%

9%

Net income - discontinued

$

(2)

$

2

$

$

(406)

$

406

$

(99)%

—%

Net income attributable to MHFI

$

171

$

52

$

223

$

(216)

$

421

$

205

N/M

9%

Diluted EPS - continuing

$

0.62

$

0.18

$

0.81

$

0.67

$

0.05

$

0.72

(6)%

12%

Diluted EPS - total

$

0.62

$

0.19

$

0.81

$

(0.76)

$

1.48

$

0.72

N/M

12%

Twelve Months

S&P Ratings

$

1,000

$

(6)

a

$

993

$

849

$

16

b

$

865

18%

15%

S&P Capital IQ

211

12

a

224

208

20

b

228

1%

(2)%

S&P Dow Jones Indices

278

a

278

212

22

b

234

31%

19%

Commodities & Commercial Markets

311

(1)

a

310

248

12

b

260

25%

19%

Segment operating profit

1,800

5

1,805

1,517

70

1,587

19%

14%

Unallocated expense  

(395)

192

c

(203)

(306)

104

c

(202)

29%

—%

Operating profit

1,405

197

1,602

1,211

174

1,385

16%

16%

Interest expense, net  

59

59

81

81

(26)%

(26)%

Income before taxes on income

1,346

197

1,543

1,130

174

1,304

19%

18%

Provision for taxes on income

443

82

525

404

65

469

9%

12%

Income from continuing operations

903

115

1,018

726

109

835

24%

22%

Income from discontinued operations

563

(563)

(234)

234

N/M

—%

Net income

1,466

(448)

1,018

492

343

835

N/M

22%

Less: NCI net income - continuing

(91)

4

(87)

(50)

(2)

(52)

81%

67%

Less: NCI net income - discontinued

1

(1)

(5)

5

N/M

—%

Net income - continuing

$

812

$

119

$

931

$

676

$

107

$

783

20%

19%

Net income - discontinued

$

564

$

(564)

$

$

(239)

$

239

$

N/M

—%

Net income attributable to MHFI

$

1,376

$

(445)

$

931

$

437

$

346

$

783

N/M

19%

Diluted EPS - continuing

$

2.90

$

0.43

$

3.33

$

2.37

$

0.38

$

2.75

22%

21%

Diluted EPS - total

$

4.91

$

(1.59)

$

3.33

$

1.53

$

1.22

$

2.75

N/M

21%

N/M - not meaningful

Note - Totals presented may not sum across due to rounding.

(a)   The three months includes restructuring charges across the segments and, additionally, the twelve months primarily includes a gain on the sale of an equity investment held by CRISIL at S&P Ratings; a loss on the sale of Financial Communications at S&P Capital IQ; and a gain on the sale of Aviation Week at Commodities & Commercial Markets.

(b)  Includes restructuring charges and S&P Dow Jones Indices also includes transaction costs associated with our S&P Dow Jones LLC joint venture.

(c)   Includes Growth and Value Plan related costs necessary to enable the separation of MHE and reduce our cost structure, which primarily includes professional fees, restructuring charges and other non-recurring costs. 2013 also includes pre-tax legal settlements of approximately $77 million, a $36 million non-cash impairment charge related to the pending sale of a data center and $13 million related to terminating various leases as we reduce our real estate portfolio. 2012 also includes a charge related to our lease commitments and $52 million related to a vacation accrual reversal. 

 

Exhibit 6

 

McGraw Hill Financial

Subscription / Non-Transaction vs. Non-Subscription / Transaction Revenue

Periods ended December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

Subscription / Non-Transaction

Non-Subscription / Transaction

2013

2012

% Change

2013

2012

% Change

Three Months

S&P Ratings (a)

$

317

$

292

8%

$

257

$

292

(12)%

S&P Capital IQ (b)

270

260

4%

31

30

3%

S&P Dow Jones Indices (c)

27

26

4%

103

84

22%

Commodities Markets (d)

130

119

10%

11

10

8%

Commercial Markets (e)

38

41

(9)%

85

90

(5)%

Intersegment elimination

(19)

(18)

10%

Total revenue

$

763

$

720

6%

$

487

$

506

(4)%

Twelve Months

S&P Ratings (a)

$

1,239

$

1,131

10%

$

1,035

$

903

15%

S&P Capital IQ (b)

1,056

1,014

4%

114

110

4%

S&P Dow Jones Indices (c)

103

87

19%

390

301

30%

Commodities Markets (d)

500

449

11%

50

40

25%

Commercial Markets (e)

156

165

(5)%

308

319

(3)%

Intersegment elimination

(76)

(69)

11%

Total revenue

$

2,978

$

2,777

7%

$

1,897

$

1,673

13%

(a)    Non-transaction revenue is primarily related to annual fees for frequent issuer programs and surveillance, while transaction revenue is related to ratings of publicly-issued debt, bank loan ratings and corporate credit estimates. Non-transaction revenue also includes an intersegment revenue elimination, which mainly consists of the royalty of $18 million and $72 million for the three and twelve months ended December 31, 2013, respectively and $18 million and $69 million for the three and twelve months ended December 31, 2012, respectively, charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.

(b)   Subscription revenue is related to credit ratings-related information products, S&P Capital IQ platform, investment research products and other data subscriptions, while non-subscription revenue is related to certain advisory, pricing and analytical services.

(c)    Subscription revenue is related to data subscriptions, which support index fund management, portfolio analytics and research, while non-subscription revenue relates to fees based on assets underlying exchange-traded funds, as well as certain advisory, pricing and analytical services.

(d)   Subscription revenue is related to Platts real-time news, market data, and price assessments, along with other print and digital information products, while non-subscription revenue is related to licensing of our proprietary market price data and price assessments to commodity exchanges, conference sponsorship, consulting engagements, and events.

(e)    Subscription revenue is related to print and digital information products primarily serving automotive and construction markets, while non-subscription revenue is related to syndicated and proprietary research studies, advertising, consulting engagements and events.

 

Exhibit 7

 

McGraw Hill Financial

Domestic vs. International Revenue

Periods ended December 31, 2013 and 2012

(dollars in millions)

 

(unaudited)

Domestic

International

2013

2012

% Change

2013

2012

% Change

Three Months

S&P Ratings

$

287

$

318

(10)%

$

287

$

266

8%

S&P Capital IQ

194

190

2%

107

99

8%

S&P Dow Jones Indices

99

87

14%

31

23

33%

Commodities Markets

56

51

10%

85

78

9%

Commercial Markets

90

97

(8)%

33

34

(2)%

Intersegment elimination

(9)

(7)

22%

(10)

(10)

7%

Total revenue

$

717

$

736

(3)%

$

533

$

490

9%

Twelve Months

S&P Ratings

$

1,214

$

1,102

10%

$

1,060

$

932

14%

S&P Capital IQ

767

749

2%

403

375

7%

S&P Dow Jones Indices

385

301

28%

108

87

24%

Commodities Markets

218

193

13%

332

296

12%

Commercial Markets

345

370

(7)%

119

114

4%

Intersegment elimination

(37)

(31)

20%

(39)

(38)

3%

Total revenue

$

2,892

$

2,684

8%

$

1,983

$

1,766

12%

 

Exhibit 8

 

McGraw Hill Financial

Non-GAAP Financial Information

Periods ended December 31, 2013 and 2012

(dollars in millions)

Computation of Free Cash Flow

(unaudited)

Twelve Months

2013

2012

Cash provided by operating activities

$

816

$

747

Capital expenditures

(117)

(97)

Dividends and other payments paid to noncontrolling interests

(75)

(24)

Free cash flow

$

624

$

626

 

 McGraw Hill Financial Organic Revenue1

(unaudited)

Three Months

Twelve Months

2013

2012

% Change

2013

2012

% Change

Total Revenue

$

1,250

$

1,226

2%

$

4,875

$

4,450

10%

S&P Capital IQ Acquisitions

(12)

Dow Jones Indices

(58)

Aviation Week

(14)

(26)

(47)

S&P Capital IQ product closures and divestitures

(4)

(6)

(20)

Total Adjusted Revenue

$

1,250

$

1,208

3%

$

4,773

$

4,383

9%

 

Adjusted S&P Capital IQ Revenue

(unaudited)

Three Months

Twelve Months

2013

2012

% Change

2013

2012

% Change

S&P Capital IQ

$

301

$

290

4%

$

1,170

$

1,124

4%

Acquisitions (Quanthouse and CMA)

(12)

Product closures and divestitures

(4)

(6)

(20)

Adjusted S&P Capital IQ

$

301

$

286

5%

$

1,152

$

1,104

4%

 

Adjusted Commodities & Commercial Markets Revenue

(unaudited)

Three Months

Twelve Months

2013

2012

% Change

2013

2012

% Change

Commodities & Commercial Markets

$

264

$

260

2%

$

1,014

$

973

4%

Aviation Week

(14)

(26)

(47)

Adjusted Commodities &

Commercial Markets

$

264

$

246

7%

$

988

$

926

7%

Commercial Markets

$

123

$

131

(6)%

$

464

$

484

(4)%

Aviation Week

(14)

(26)

(47)

Adjusted Commercial Markets

$

123

$

117

4%

$

438

$

437

—%

 

Adjusted S&P Dow Jones Indices Revenue and Adjusted Net Operating Profit

(unaudited)

Three Months

Twelve Months

2013

2012

% Change

2013

2012

% Change

S&P Dow Jones Revenue

$

493

$

388

27%

Dow Jones Indices

(58)

Adjusted S&P Dow Jones Indices

$

435

$

388

12%

Adjusted Operating Profit

$

50

$

67

(24)%

$

278

$

234

19%

Income attributable to NCI

13

17

73

36

Adjusted Net Operating Profit

$

37

$

50

(26)%

$

205

$

198

4%

1    2013 revenue related to acquisitions is removed for those comparable periods in 2012 where we did not own the acquired business.

SOURCE McGraw Hill Financial



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