UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 1-1023  
SPGBARRGBPOSA03.JPG
S&P Global Inc.
(Exact name of registrant as specified in its charter)
New York
13-1026995
(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

55 Water Street, New York, New York
10041
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: 212-438-1000
 
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES þ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.
þ  Large accelerated filer
o  Accelerated filer
o  Non-accelerated filer
o  Smaller reporting company
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
Class
Shares Outstanding
Date
Common stock (par value $1.00 per share)
259.1 million
October 21, 2016

1

S&P Global Inc.
INDEX
 
 
Page Number
 
 
 


2

Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders of S&P Global Inc.

We have reviewed the consolidated balance sheet of S&P Global Inc. (and subsidiaries) (the “Company”) as of September 30, 2016 , the related consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2016 and 2015 , the related statements of cash flows for the nine-month periods ended September 30, 2016 and 2015 , and the related consolidated statement of equity for the nine-month period ended September 30, 2016 . These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of S&P Global Inc. (and subsidiaries) as of December 31, 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 11, 2016.





/s/ ERNST & YOUNG LLP

New York, New York
November 3, 2016

3

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

S&P Global Inc.
Consolidated Statements of Income
(Unaudited)
(in millions, except per share amounts)
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Revenue
$
1,439

 
$
1,324

 
$
4,262

 
$
3,938

Expenses:
 
 
 
 
 
 
 
Operating-related expenses
438

 
419

 
1,363

 
1,241

Selling and general expenses
330

 
458

 
975

 
1,111

Depreciation
22

 
20

 
63

 
64

Amortization of intangibles
23

 
17

 
71

 
40

Total expenses
813

 
914

 
2,472

 
2,456

Gain on dispositions
(722
)
 
—

 
(722
)
 
(11
)
Operating profit
1,348

 
410

 
2,512

 
1,493

Interest expense, net
39

 
30

 
122

 
62

Income before taxes on income
1,309

 
380

 
2,390

 
1,431

Provision for taxes on income
386

 
99

 
731

 
439

Net income
923

 
281

 
1,659

 
992

Less: net income attributable to noncontrolling interests
(31
)
 
(29
)
 
(90
)
 
(83
)
Net income attributable to S&P Global Inc.
$
892

 
$
252

 
$
1,569

 
$
909

 
 
 
 
 
 
 
 
Earnings per share attributable to S&P Global Inc. common shareholders:
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
Basic
$
3.39

 
$
0.93

 
$
5.94

 
$
3.33

Diluted
$
3.36

 
$
0.92

 
$
5.89

 
$
3.30

Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
262.9

 
271.3

 
264.1

 
272.6

Diluted
265.3

 
274.4

 
266.4

 
275.4

 
 
 
 
 
 
 
 
Actual shares outstanding at period end


 


 
259.1

 
270.3

 
 
 
 
 
 
 
 
Dividend declared per common share
$
0.36

 
$
0.33

 
$
1.08

 
$
0.99

 
See accompanying notes to the unaudited consolidated financial statements.

4

S&P Global Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
 
(in millions)
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Net income
$
923

 
$
281

 
$
1,659

 
$
992

 
 
 
 
 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(14
)
 
(45
)
 
(55
)
 
(78
)
Income tax effect
3

 
1

 
3

 
—

 
(11
)
 
(44
)
 
(52
)
 
(78
)
 
 
 
 
 
 
 
 
Pension and other postretirement benefit plans
3

 
5

 
19

 
59

Income tax effect
(1
)
 
(1
)
 
(5
)
 
(19
)
 
2

 
4

 
14

 
40

 
 
 
 
 
 
 
 
Unrealized gain (loss) on forward exchange contracts
1

 
(1
)
 
4

 
(1
)
Income tax effect
—

 
—

 
(1
)
 
—

 
1

 
(1
)
 
3

 
(1
)
 
 
 
 
 
 
 
 
Comprehensive income
915

 
240

 
1,624

 
953

Less: comprehensive income attributable to nonredeemable noncontrolling interests
(2
)
 
(3
)
 
(8
)
 
(7
)
Less: comprehensive income attributable to redeemable noncontrolling interests
(29
)
 
(26
)
 
(82
)
 
(76
)
Comprehensive income attributable to S&P Global Inc.
$
884

 
$
211

 
$
1,534

 
$
870



See accompanying notes to the unaudited consolidated financial statements.

5

S&P Global Inc.
Consolidated Balance Sheets
 
(in millions)
September 30,
2016
 
December 31,
2015
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
2,399

 
$
1,481

Accounts receivable, net of allowance for doubtful accounts: 2016 - $32; 2015 - $37
980

 
991

Deferred income taxes
107

 
109

Prepaid and other current assets
152

 
212

Assets of businesses held for sale
66

 
503

Total current assets
3,704

 
3,296

Property and equipment, net of accumulated depreciation: 2016 - $533; 2015 - $585
255

 
270

Goodwill
2,958

 
2,882

Other intangible assets, net
1,518

 
1,522

Other non-current assets
241

 
213

Total assets
$
8,676

 
$
8,183

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
199

 
$
206

Accrued compensation and contributions to retirement plans
315

 
383

Short-term debt
400

 
143

Unearned revenue
1,408

 
1,421

Income taxes currently payable
321

 
56

Other current liabilities
384

 
493

Liabilities of businesses held for sale
24

 
206

Total current liabilities
3,051


2,908

Long-term debt
3,563

 
3,468

Pension and other postretirement benefits
259

 
276

Other non-current liabilities
372

 
368

Total liabilities
7,245

 
7,020

Redeemable noncontrolling interest (Note 8)
920

 
920

Commitments and contingencies (Note 12)

 

Equity:
 
 
 
Common stock
412

 
412

Additional paid-in capital
367

 
475

Retained income
8,924

 
7,636

Accumulated other comprehensive loss
(635
)
 
(600
)
Less: common stock in treasury
(8,606
)
 
(7,729
)
Total equity — controlling interests
462

 
194

Total equity — noncontrolling interests
49

 
49

Total equity
511

 
243

Total liabilities and equity
$
8,676

 
$
8,183


See accompanying notes to the unaudited consolidated financial statements.

6

S&P Global Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
(in millions)
Nine Months Ended
 
September 30,
 
2016
 
2015
Operating Activities:
 
 
 
Net income
$
1,659

 
$
992

Adjustments to reconcile net income to cash provided by (used for) operating activities from continuing operations:
 
 
 
Depreciation
63

 
64

Amortization of intangibles
71

 
40

Provision for losses on accounts receivable
10

 
3

Deferred income taxes
(8
)
 
166

Stock-based compensation
54

 
55

Gain on dispositions
(722
)
 
(11
)
Other
56

 
150

Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:
 
 
 
Accounts receivable
(26
)
 
(44
)
Prepaid and other current assets
(2
)
 
(6
)
Accounts payable and accrued expenses
(127
)
 
(186
)
Unearned revenue
(6
)
 
18

Accrued legal and regulatory settlements
(134
)
 
(1,624
)
Other current liabilities
(12
)
 
(53
)
Net change in prepaid/accrued income taxes
352

 
140

Net change in other assets and liabilities
(57
)
 
(60
)
Cash provided by (used for) operating activities from continuing operations
1,171

 
(356
)
Investing Activities:
 
 
 
Capital expenditures
(67
)
 
(74
)
Acquisitions, net of cash acquired
(145
)
 
(2,393
)
Proceeds from dispositions
1,071

 
14

Changes in short-term investments
(1
)
 
(3
)
Cash provided by (used for) investing activities from continuing operations
858

 
(2,456
)
Financing Activities:
 
 
 
Payments on short-term debt, net
(143
)
 
—

Proceeds from issuance of senior notes, net
493

 
2,674

Dividends paid to shareholders
(286
)
 
(274
)
Dividends and other payments paid to noncontrolling interests
(59
)
 
(67
)
Contingent consideration payments
(15
)
 
(5
)
Purchase of CRISIL shares
—

 
(16
)
Repurchase of treasury shares
(1,123
)
 
(501
)
Exercise of stock options
84

 
77

Excess tax benefits from share-based payments
31

 
39

Cash (used for) provided by financing activities from continuing operations
(1,018
)
 
1,927

Effect of exchange rate changes on cash from continuing operations
(93
)
 
(42
)
Cash provided by (used for) continuing operations
918

 
(927
)
Discontinued Operations:
 
 
 
Cash used for operating activities
—

 
(129
)
Cash used for discontinued operations
—

 
(129
)
Net change in cash and cash equivalents
918

 
(1,056
)
Cash and cash equivalents at beginning of period
1,481

 
2,497

Cash and cash equivalents at end of period
$
2,399

 
$
1,441


See accompanying notes to the unaudited consolidated financial statements.

7

S&P Global Inc.
Consolidated Statement of Equity
(Unaudited)

 (in millions)
Common Stock $1 par
 
Additional Paid-in Capital
 
Retained Income
 
Accumulated Other Comprehensive Loss
 
Less: Treasury Stock
 
Total SPGI Equity
 
Noncontrolling Interests
 
Total Equity
Balance as of December 31, 2015
$
412

 
$
475

 
$
7,636

 
$
(600
)
 
$
7,729

 
$
194

 
$
49

 
$
243

Comprehensive income 1
 
 
 
 
1,569

 
(35
)
 
 
 
1,534

 
8

 
1,542

Dividends
 
 
 
 
(287
)
 
 
 
 
 
(287
)
 
(8
)
 
(295
)
Share repurchases
 
 
(98
)
 
 
 
 
 
999

 
(1,097
)
 

 
(1,097
)
Employee stock plans, net of tax benefit
 
 
(10
)
 
 
 
 
 
(122
)
 
112

 

 
112

Change in redemption value of redeemable noncontrolling interest
 
 
 
 
6

 
 
 
 
 
6

 
 
 
6

Balance as of September 30, 2016
$
412

 
$
367

 
$
8,924

 
$
(635
)
 
$
8,606

 
$
462

 
$
49

 
$
511

1
Excludes $82 million attributable to our redeemable noncontrolling interest.

See accompanying notes to the unaudited consolidated financial statements.



8

S&P Global Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
 
1.
Nature of Operations and Basis of Presentation

S&P Global Inc. (together with its consolidated subsidiaries, "S&P Global," the “Company,” “we,” “us” or “our”) is a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

On April 27, 2016, we changed our name to S&P Global Inc. from McGraw Hill Financial, Inc.

Our operations consist of four reportable segments: S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices ("S&P DJ Indices") and S&P Global Platts.
•
S&P Global Ratings is an independent provider of credit ratings, research and analytics to investors, issuers and market participants.
•
S&P Global Market Intelligence is a global provider of multi-asset-class data, research, and analytical capabilities, which integrate cross-asset analytics and desktop services.
•
S&P DJ Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
•
S&P Global Platts is the leading independent provider of information and benchmark prices for the commodities and energy markets. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts through that date.

The S&P Global Ratings segment includes S&P Global Ratings, which is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization ("NRSRO"), as well as CRISIL, a global analytical company incorporated in India, and certain other ratings-related businesses.

In February of 2016, we entered into a definitive agreement to sell Standard & Poor's Securities Evaluations, Inc. ("SPSE") and Credit Market Analysis ("CMA"), two businesses within our S&P Global Market Intelligence segment, to Intercontinental Exchange. As a result, we classified the assets and liabilities of SPSE and CMA as held for sale in our consolidated balance sheet as of September 30, 2016. In October of 2016, we completed the sale of SPSE and CMA to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services.

In September of 2016, we completed the sale of J.D. Power, included within our S&P Global Platts segment, for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During three and nine months ended September 30, 2016, we recorded a pre-tax gain of $722 million ( $521 million after-tax) in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of September 30, 2016.

The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, the financial statements included herein should be read in conjunction with the financial statements and notes included in our Form 10-K for the year ended December 31, 2015 (our “Form 10-K”). Certain prior-year amounts have been reclassified to conform with current presentation.

In the opinion of management, all normal recurring adjustments considered necessary for a fair statement of the results of the interim periods have been included. The operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full year.

Our critical accounting estimates are disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Form 10-K. 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,

9

pension plans, incentive compensation and stock-based compensation, income taxes, contingencies and redeemable noncontrolling interests. Since the date of our Form 10-K, there have been no material changes to our critical accounting policies and estimates. 

2.
Acquisitions and Divestitures

Acquisitions

Acquisitions by segment included:

S&P Dow Jones Indices

•
In October of 2016, S&P Dow Jones Indices acquired Trucost plc, a leader in carbon and environmental data and risk analysis through its subsidiary S&P Global Indices UK Limited. The purchase will build on S&P Dow Jones Indices current portfolio of Environmental, Social and Governance solutions. The acquisition of Trucost plc is not material to our consolidated financial statements.

S&P Global Platts

•
In September of 2016, S&P Global Platts acquired PIRA Energy Group ("PIRA"), a global provider of energy research and forecasting products and services. The purchase enhances S&P Global Platts' energy analytical capabilities by expanding its oil offering and strengthening its position in the natural gas and power markets. We accounted for the acquisition of PIRA using the purchase method of accounting. The acquisition of PIRA is not material to our consolidated financial statements.

•
In June of 2016, S&P Global Platts acquired RigData, a provider of daily information on rig activity for the natural gas and oil markets across North America. The purchase enhances S&P Global Platts' energy analytical capabilities by strengthening its position in natural gas and enhancing its oil offering. We accounted for the acquisition of RigData using the purchase method of accounting. The acquisition of RigData is not material to our consolidated financial statements.

•
In March of 2016, S&P Global Platts acquired Commodity Flow, a specialist technology and business intelligence service for the global waterborne commodity and energy markets. The purchase helps extend Platts trade flow analytical capabilities and complements its existing shipping services. We accounted for the acquisition of Commodity Flow using the purchase method of accounting. The acquisition of Commodity Flow is not material to our consolidated financial statements.

•
In July of 2015, we acquired the entire issued share capital of Petromedia Ltd and its operating subsidiaries (“Petromedia”), an independent provider of data, intelligence, news and tools to the global fuels market that offers a suite of products providing clients with actionable data and intelligence that enable informed decisions, minimize risk and increase efficiency. We accounted for the acquisition of Petromedia using the purchase method of accounting. The acquisition of Petromedia is not material to our consolidated financial statements.

S&P Global Ratings

•
In June of 2016, S&P Global Ratings acquired a 49% equity investment in Thailand's TRIS Rating Company Limited from its parent company, TRIS Corporation Limited. The transaction extends an existing association between S&P Global Ratings and TRIS Rating and deepens their commitment to capital markets in Thailand. We accounted for the acquisition of TRIS Rating Company using the equity method of accounting. The equity investment in TRIS Rating is not material to our consolidated financial statements.

S&P Global Market Intelligence

•
In September of 2015, we acquired SNL Financial LC ("SNL") for $2.2 billion . SNL is a global provider of news, data, and analytical tools to five sectors in the global economy: financial services, real estate, energy, media & communications, and metals & mining. SNL delivers information through its suite of web, mobile and direct data feed platforms that helps clients, including investment and commercial banks, investors, corporations, and regulators make decisions, improve efficiency, and manage risk.

10


Divestitures

In February of 2016, we entered into a definitive agreement to sell SPSE and CMA, two businesses within our S&P Global Market Intelligence segment, to Intercontinental Exchange. As a result, we classified the assets and liabilities of SPSE and CMA as held for sale in our consolidated balance sheet as of September 30, 2016. In October of 2016, we completed the sale of SPSE and CMA to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services.
 
In September of 2016, we completed the sale of J.D. Power, included within our S&P Global Platts segment, for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the three and nine months ended September 30, 2016, we recorded a pre-tax gain of $722 million ( $521 million after-tax) in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of September 30, 2016.

During the nine months ended September 30, 2015, we recorded a pre-tax gain of $11 million in gain on dispositions in the consolidated statement of income related to the sale of our interest in a legacy McGraw Hill Construction investment.

The components of assets and liabilities of businesses held for sale in the consolidated balance sheets consist of the following:
(in millions)
September 30,
 
December 31,
 
2016
 
2015
Accounts receivable, net
$
23

 
$
58

Goodwill
38

 
75

Other intangible assets, net
3

 
335

Other assets
2

 
35

Assets of businesses held for sale
$
66

 
$
503

 
 
 
 
Accounts payable and accrued expenses
$
4

 
$
42

Unearned revenue
18

 
64

Other liabilities
2

 
100

Liabilities of businesses held for sale
$
24

 
$
206


The operating profit of our businesses that were disposed of or held for sale for the periods ended September 30, 2016 and 2015 is as follows:
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Operating profit 1
$
37

 
$
33

 
$
88

 
$
84


1  
The three and nine months ended September 30, 2016 exclude a pre-tax gain on the sale of J.D. Power of $722 million .
3.
Income Taxes

The effective income tax rate was 29.5% and 25.9% for the three months ended September 30, 2016 and September 30, 2015, respectively. The increase was due to the favorable resolution of tax audits in 2015, partially offset by a lower effective tax rate on the disposition of J.D. Power in 2016. The effective tax rate was 30.6% and 30.7% for the nine months ended September 30, 2016 and September 30, 2015, respectively.

At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect, and are individually computed, is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.


11

As of September 30, 2016 and  December 31, 2015 , the total amount of federal, state and local, and foreign unrecognized tax benefits was $121 million and $120 million , respectively, exclusive of interest and penalties. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating-related expense, respectively. In addition, as of September 30, 2016 and December 31, 2015 , we had $40 million and $31 million , respectively, of accrued interest and penalties associated with unrecognized tax benefits.

Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may significantly decrease in the next twelve months. Although the ultimate resolution of our tax audits is unpredictable, the resulting change in our unrecognized tax benefits could have a material impact on our results of operations and/or cash flows.

4.
Debt  
(in millions)
September 30,
2016
 
December 31,
2015
5.9% Senior Notes, due 2017  1
$
400

 
$
399

2.5% Senior Notes, due 2018 2
398

 
398

3.3% Senior Notes, due 2020 3
695

 
695

4.0% Senior Notes, due 2025 4
691

 
690

4.4% Senior Notes, due 2026 5
891

 
890

2.95% Senior Notes, due 2027 6
492

 
—

6.55% Senior Notes, due 2037 7
396

 
396

Commercial paper
—

 
143

Total debt
3,963

 
3,611

Less: short-term debt including current maturities 1
400

 
143

Long-term debt
$
3,563

 
$
3,468

1  
Interest payments are due semiannually on April 15 and October 15, and as of September 30, 2016 , the unamortized debt discount and issuance costs are less than $1 million . We made a $400 million early repayment of our 5.9% senior notes on October 20, 2016.
2  
Interest payments are due semiannually on February 15 and August 15, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $2 million .
3  
Interest payments are due semiannually on February 14 and August 14, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $5 million .
4  
Interest payments are due semiannually on June 15 and December 15, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $9 million .
5  
Interest payments are due semiannually on February 15 and August 15, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $9 million .
6  
Interest payments are due semiannually on January 22 and July 22, beginning on January 22, 2017, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $8 million .
7  
Interest payments are due semiannually on May 15 and November 15, and as of September 30, 2016 , the unamortized debt discount and issuance costs total $4 million .

The fair value of our long-term debt borrowings was $4.3 billion and $3.6 billion as of September 30, 2016 and December 31, 2015 , respectively, and was estimated based on quoted market prices.

On September 22, 2016, we issued $500 million of 2.95% senior notes due in 2027. The notes are fully and unconditionally guaranteed by our wholly-owned subsidiary, Standard & Poor's Financial Services LLC. We used the net proceeds to fund the $400 million early repayment of our 5.9% senior notes due in 2017 on October 20, 2016, and intend to use 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, 2015. This credit facility will terminate on June 30, 2020. There were no commercial paper borrowings outstanding as of September 30, 2016 . Commercial paper borrowings outstanding as of December 31, 2015 totaled $143 million with an average interest rate and term of 0.95% and 17 days , respectively.


12

Depending on our indebtedness to cash flow ratio, we pay a commitment fee of 10 to 20 basis points for our credit facility, whether or not amounts have been borrowed. We currently pay a commitment fee of 15 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 indebtedness to cash flow ratio added to the applicable rate.

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.

5.
Derivative Instruments

Cash Flow Hedges

Our exposure to market risk includes changes in foreign exchange rates. We have operations in foreign countries where the functional currency is primarily the local currency. For international operations that are determined to be extensions of the parent company, the U.S. dollar is the functional currency. We typically have naturally hedged positions in most countries from a local currency perspective with offsetting assets and liabilities. As of September 30, 2016 and December 31, 2015 , we have entered into foreign exchange forward contracts to hedge the effect of adverse fluctuations in foreign currency exchange rates. We do not enter into any derivative financial instruments for speculative purposes.
During the three months ended March 31, 2016, we entered into a series of foreign exchange forward contracts to hedge a portion of our Indian Rupee exposure through the fourth quarter of 2016. These contracts are intended to offset the impact of movement of exchange rates on future operating costs and are scheduled to mature at the end of each quarter during 2016. 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 selling and general expenses in the same period that the hedge contract matures. As of September 30, 2016, we estimate that $2 million of the net gains related to derivatives designated as cash flow hedges recorded in other comprehensive income (loss) is expected to be reclassified into earnings within the next twelve months. There was no hedge ineffectiveness for the three and nine months ended September 30, 2016.
As of September 30, 2016 and September 30, 2015 , the aggregate notional value of our outstanding foreign currency forward contracts was $78 million and $59 million , respectively.
The following table provides information on the location and fair value amounts of our cash flow hedges as of September 30, 2016 and December 31, 2015 :
(in millions)
Balance Sheet Location
 
September 30, 2016
 
December 31, 2015
Prepaid and other current assets 1
Foreign exchange forward contracts
$
4

 
$
1


1  
We use the income approach to measure the fair value of our forward currency forward contracts. The income approach uses pricing models that rely on observable inputs such as forward rates, and therefore are classified as Level 2.
The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges for the periods ended September 30 :

Three Months
(in millions)
Gain (Loss) Recognized in Accumulated Other Comprehensive Loss (effective portion)
 
Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
 
Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
Cash flow hedges - designated as hedging instruments
2016
 
2015
 
 
 
2016
 
2015
Foreign exchange forward contracts
$
1

 
$
—

 
Selling and general expenses
 
$
1

 
$
—



13

Nine Months
(in millions)
Gain (Loss) Recognized in Accumulated Other Comprehensive Loss (effective portion)
 
Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
 
Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
Cash flow hedges - designated as hedging instruments
2016
 
2015
 
 
 
2016
 
2015
Foreign exchange forward contracts
$
3

 
$
—

 
Selling and general expenses
 
$
3

 
$
—


The activity related to the change in unrealized gains (losses) in accumulated other comprehensive loss was as follows for the periods ended September 30 :
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Net unrealized gains (losses) on cash flow hedges, net of taxes, beginning of period
$
1

 
$
(1
)
 
$
(1
)
 
$
(1
)
Change in fair value, net of tax
2

 
—

 
6

 
—

Reclassification into earnings, net of tax
(1
)
 
—

 
(3
)
 
—

Net unrealized gains (losses) on cash flow hedges, net of taxes, end of period
$
2

 
$
(1
)
 
$
2

 
$
(1
)

6.
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 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 voluntary 401(k) plans 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 defined benefit 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 unrecognized actuarial losses and unrecognized prior service costs. These amounts will be subsequently recognized as net periodic benefit (credit) cost pursuant to our accounting policy for amortizing such amounts.

The components of net periodic benefit (credit) cost for our retirement plans and postretirement plans for the periods ended September 30 are as follows:  

Retirement Plans
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Service cost
$
1

 
$
2

 
$
2

 
$
4

Interest cost
19

 
24

 
59

 
72

Expected return on plan assets
(30
)
 
(32
)
 
(92
)
 
(95
)
Amortization of actuarial loss
4

 
5

 
12

 
15

Net periodic benefit (credit) cost
$
(6
)
 
$
(1
)
 
$
(19
)
 
$
(4
)

14


Postretirement Plans
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Interest cost
1

 
1

 
2

 
2

Amortization of prior service credit / actuarial gain
(1
)
 
—

 
(1
)
 
—

Net periodic benefit (credit) cost
$
—

 
$
1

 
$
1

 
$
2


As discussed in our Form 10-K, we changed certain discount rate assumptions and our expected return on assets assumption for our retirement plans, which became effective on January 1, 2016. In addition, at the end of 2015, we changed our approach used to measure service and interest costs on all of our retirement plans. For 2015, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation. For 2016, we elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans' liability cash flows. We also updated the assumed mortality rates to reflect life expectancy improvements. The effect of the assumption changes for the three and nine months ended September 30, 2016 resulted in a decrease in net periodic benefit cost of approximately $5 million and $15 million , respectively.

In the first nine months of 2016 , we contributed $6 million to our retirement plans and expect to make additional required contributions of approximately $2 million to our retirement plans during the remainder of the year. We may elect to make additional non-required contributions depending on investment performance and the pension plan status in the fourth quarter of 2016 .

7.
Stock-Based Compensation

We issue stock-based incentive awards to our eligible employees and Directors under the 2002 Employee Stock Incentive Plan and a Director Deferred Stock Ownership Plan. The 2002 Employee Stock Incentive Plan permits the granting of nonqualified stock options, stock appreciation rights, performance stock, restricted stock and other stock-based awards.

Stock-based compensation for the periods ended September 30 is as follows:
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Stock option expense 1
$
2

 
$
2

 
$
6

 
$
11

Restricted stock and unit awards expense
18

 
16

 
48

 
44

Total stock-based compensation expense  
$
20

 
$
18

 
$
54

 
$
55

1  
There were a minimal amount of stock options granted in 2015. During 2015, the Company stopped granting stock options.

During the nine months ended September 30, 2016 , the Company granted 0.6 million shares of restricted stock and unit awards, which had a weighted average grant date fair value of $100.31 per share. Total unrecognized compensation expense related to unvested restricted stock and unit awards as of September 30, 2016 was $65 million , which is expected to be recognized over a weighted average period of 1.8 years .

8.
Equity

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.

In any period, share repurchase transactions could result in timing differences between the recognition of those repurchases and their settlement for cash. This could result in a difference between the cash used for financing activities related to common stock repurchased and the comparable change in equity.


15

Share repurchases for the periods ended September 30 were as follows:  
(in millions, except average price)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
Total number of shares purchased 1
5.3

 
2.3

 
8.8

 
4.9

Average price paid per share 2
$
—

 
$
99.01

 
$
98.05

 
$
102.01

Total cash utilized   3
$
750

 
$
227

 
$
1,097

 
$
501

1  
The three and nine months ended September 30, 2016 include shares received as part of our accelerated share repurchase agreement described in more detail below.
2  
Average price paid per share information does not include the accelerated share repurchase transaction as discussed in more detail below.
3  
In December of 2015, 0.3 million shares were repurchased for approximately $26 million , which settled in January of 2016. Cash used for financing activities only reflects those shares which settled during the nine months ended September 30, 2016 resulting in $1,123 million of cash used to repurchase shares.
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 September 30, 2016 , approximately 26.6 million shares remained available under the current share repurchase program which 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.

Accelerated Share Repurchase Program

Using a portion of the proceeds received from the sale of J.D. Power, we entered into an accelerated share repurchase ("ASR") agreement with a financial institution on September 7, 2016 to initiate share repurchases aggregating $750 million . The ASR agreement was structured as a capped ASR agreement in which we paid $750 million and received an initial delivery of approximately 4.4 million shares and an additional amount of 0.9 million shares during the month of September 2016, representing the minimum number of shares of our common stock to be repurchased based on a calculation using a specified capped price per share. The total number of shares to be repurchased under the ASR agreement will be based on the volume weighted-average share price, minus a discount, of our common stock over the term of the ASR agreement. This price is capped such that only under limited circumstances will we be required to deliver shares or, at our election, pay cash at settlement. Additionally, depending on the average share price through the completion date, we may receive additional shares under the ASR agreement. The final settlement of the transaction under the ASR agreement is expected to be completed no later than the first quarter of 2017. The ASR agreement was executed under the current share repurchase program, approved on December 4, 2013.

Redeemable Noncontrolling Interests

The agreement with the minority partners of our S&P Dow Jones Indices LLC contains redemption features whereby interests held by minority partners are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within our control. Specifically, under the terms of the operating agreement of S&P Dow Jones Indices LLC, after December 31, 2017, CME Group and CME Group Index Services LLC ("CGIS") will have the right at any time to sell, and we are obligated to buy, at least 20% of their share in S&P Dow Jones Indices LLC. 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.

If interests were to be redeemed under this agreement, we would generally be required to purchase the interest at fair value on the date of redemption. This interest is presented on the consolidated balance sheets outside of equity under the caption “Redeemable noncontrolling interest” with an initial value based on fair value for the portion attributable to the net assets we acquired, and based on our historical cost for the portion attributable to our S&P Index business. We adjust the redeemable noncontrolling interest each reporting period to its estimated redemption value, but never less than its initial fair value, considering a combination of an income and market valuation approach. Our income and market valuation approaches may incorporate Level 3 fair value measures for instances when observable inputs are not available, including assumptions related to expected future net cash flows, long-term growth rates, the timing and nature of tax attributes, and the redemption features. Any adjustments to the redemption value will impact retained income.

Noncontrolling interests that do not contain such redemption features are presented in equity.


16

Changes to redeemable noncontrolling interest during the nine months ended September 30, 2016 were as follows:
(in millions)
 
Balance as of December 31, 2015
$
920

Net income attributable to noncontrolling interest
82

Distributions payable to noncontrolling interest
(76
)
Redemption value adjustment
(6
)
Balance as of September 30, 2016
$
920


Accumulated Other Comprehensive Loss

The following table summarizes the changes in the components of accumulated other comprehensive loss for the nine months ended September 30, 2016 :
(in millions)
Foreign Currency Translation Adjustment
 
Pension and Postretirement Benefit Plans
 
Unrealized Gain (Loss) on Forward Exchange Contracts
 
Accumulated Other Comprehensive Loss
Balance as of December 31, 2015
$
(193
)
 
$
(406
)
 
$
(1
)
 
$
(600
)
Other comprehensive income before reclassifications
(52
)
 
7

 
6

 
(39
)
Reclassifications from accumulated other comprehensive loss to net earnings
—

 
7

1  

(3
)
2  

4

Net other comprehensive income
(52
)
 
14

 
3

 
(35
)
Balance as of September 30, 2016
$
(245
)
 
$
(392
)
 
$
2

 
$
(635
)

1  
See Note 6 — Employee Benefits for additional details of items reclassed from accumulated other comprehensive loss to net earnings.
2  
See Note 5 — Derivative Instruments for additional details of items reclassed from accumulated other comprehensive loss to net earnings.

The net actuarial loss and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income is net of a tax provision of $4 million for the nine months ended September 30, 2016 .

9.
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.


17

The calculation for basic and diluted EPS for the periods ended September 30 is as follows:  
(in millions, except per share amounts)
Three Months
 
Nine Months

2016
 
2015
 
2016
 
2015
Amounts attributable to S&P Global Inc. common shareholders:
 
 
 
 
 
 
 
Net income
$
892

 
$
252

 
$
1,569

 
$
909

 
 
 
 
 
 
 
 
Basic weighted-average number of common shares outstanding
262.9

 
271.3

 
264.1

 
272.6

Effect of stock options and other dilutive securities
2.4

 
3.1

 
2.3

 
2.8

Diluted weighted-average number of common shares outstanding
265.3

 
274.4

 
266.4

 
275.4

 
 
 
 
 
 
 
 
Earnings per share attributable to S&P Global Inc. common shareholders:
 
 
 
 
 
 
 
Net income:
 
 
 
 
 
 
 
Basic
$
3.39

 
$
0.93

 
$
5.94

 
$
3.33

Diluted
$
3.36

 
$
0.92

 
$
5.89

 
$
3.30


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. For the three and nine months ended September 30, 2016 and 2015 , there were no stock options excluded. Restricted performance shares outstanding of 0.7 million and 0.9 million as of September 30, 2016 and 2015 , respectively, were excluded.

10.
Restructuring

During 2016 and 2015, 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 2016 and 2015 restructuring plans consisted of a workforce reduction of approximately 100 and 550 positions, respectively, and are further detailed below. The charges for the 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.

The initial restructuring charge recorded and the ending reserve balance as of September 30, 2016 by segment is as follows:
 
2016 Restructuring Plans
2015 Restructuring Plans
(in millions)
Initial Charge Recorded
 
Ending Reserve Balance
Initial Charge Recorded
 
Ending Reserve Balance
S&P Global Ratings
$
8

 
$
5

$
18

 
$
7

S&P Global Market Intelligence
1

 
1

31

 
10

S&P Global Platts
6

 
5

3

 
—

Corporate
2

 
2

11

 
6

Total
$
17

 
$
13

$
63

 
$
23


We recorded a pre-tax restructuring charge of $17 million for the 2016 restructuring plan during the nine months ended September 30, 2016 and have reduced the reserve for the 2016 restructuring plan by $4 million . The ending reserve balance for the 2015 restructuring plan was $50 million as of December 31, 2015. For the nine months ended September 30, 2016 , we have reduced the reserve for the 2015 restructuring plan by $27 million .


18

11.
Segment and Related Information

We have four reportable segments: S&P Global Ratings, S&P Global Market Intelligence, S&P DJ Indices and S&P Global Platts. 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 unallocated expense or interest expense as these are costs that do not affect the operating results of our segments.

Changes to Organizational Structure

The segment amounts and discussions included in this Form 10-Q reflect the reportable segments that existed through the end of the third quarter of 2016. Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer will evaluate the performance of these segments. As a result, as of the beginning of the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts will be combined into a single reportable segment, Market and Commodities Intelligence. These changes do not impact the constituent components of our S&P Global Ratings and S&P DJ Indices reportable segments. We will begin reporting the financial results of the combined segment in our Form 10-K for the year ended December 31, 2016.

A summary of operating results by segment for the periods ended September 30 is as follows:  
Three Months
2016
 
2015
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Global Ratings 1
$
642

 
$
346

 
$
587

 
$
194

S&P Global Market Intelligence 2
429

 
112

 
356

 
53

S&P DJ Indices 3
164

 
107

 
156

 
106

S&P Global Platts 4
229

 
812

 
248

 
93

Intersegment elimination 5
(25
)
 
—

 
(23
)
 
—

Total operating segments
1,439

 
1,377

 
1,324

 
446

Unallocated expense
—

 
(29
)
 
—

 
(36
)
Total
$
1,439

 
$
1,348

 
$
1,324

 
$
410


Nine Months
2016
 
2015
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Global Ratings 1
$
1,877

 
$
1,004

 
$
1,851

 
$
846

S&P Global Market Intelligence 2
1,252

 
285

 
1,000

 
178

S&P DJ Indices 3
468

 
308

 
446

 
297

S&P Global Platts 4
738

 
1,008

 
707

 
265

Intersegment elimination 5
(73
)
 
—

 
(66
)
 
—

Total operating segments
4,262

 
2,605

 
3,938

 
1,586

Unallocated expense 6
—

 
(93
)
 
—

 
(93
)
Total
$
4,262

 
$
2,512

 
$
3,938

 
$
1,493


1  
Operating profit for the three and nine months ended September 30, 2016 primarily includes a benefit related to net legal settlement insurance recoveries of $17 million and $63 million , respectively. Operating profit for the three and nine months ended September 30, 2015 includes legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million and $40 million , respectively. Additionally, the nine months ended September 30, 2016 and 2015 include restructuring charges of $6 million and $8 million , respectively. Operating profit also includes amortization of intangibles from acquisitions of $1 million for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.
2  
Operating profit for the three and nine months ended September 30, 2016 includes disposition-related costs of $5 million and $12 million , respectively, and an acquisition-related cost of $1 million . Operating profit for the nine months ended September 30, 2016 includes a technology related impairment charge of $24 million . Operating profit for the three and nine months ended September 30, 2015 include acquisition-related costs related to the acquisition of SNL of $32 million , and the nine months ended September 30, 2015 include restructuring charges of $12 million . Operating profit also includes amortization of intangibles from acquisitions of $18 million and $54 million for the

19

three and nine months ended September 30, 2016 , respectively, and $10 million and $21 million for the three and nine months ended September 30, 2015 , respectively.
3  
Operating profit includes amortization of intangibles from acquisitions of $1 million for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.
4  
As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date. Operating profit for the three and nine months ended September 30, 2016 includes a gain on the sale of J.D. Power of $722 million . Additionally, disposition-related costs of $1 million and $5 million are included for the three and nine months ended September 30, 2016, respectively. Operating profit for the nine months ended September 31, 2015 includes restructuring charges of $1 million . Operating profit also includes amortization of intangibles from acquisitions of $3 million and $9 million for the three and nine months ended September 30, 2016, respectively, and $5 million and $11 million for the three and nine months ended September 30, 2015, respectively.
5  
Revenue for S&P Global Ratings and expenses for S&P Global Market Intelligence include an intersegment royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.
6  
The nine months ended September 30, 2016 include $3 million from a disposition-related reserve release. The nine months ended September 30, 2015 include a gain of $11 million related to the sale of our interest in a legacy McGraw Hill Construction investment. See Note 2 — Acquisitions and Divestitures for additional information. Additionally, restructuring charges are included for the nine months ended September 30, 2015.

The following provides revenue by geographic region for the periods ended September 30 :
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
2016
 
2015
U.S.
$
885

 
$
810

 
$
2,635

 
$
2,385

European region
335

 
311

 
971

 
927

Asia
145

 
137

 
438

 
416

Rest of the world
74

 
66

 
218

 
210

Total
$
1,439

 
$
1,324

 
$
4,262

 
$
3,938


See Note 2 — Acquisitions and Divestitures and Note 10 — Restructuring for additional actions that impacted the segment operating results.

12.
Commitments and Contingencies

Related Party Agreements

In June of 2012, we entered into a new 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 S&P DJ 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 three and nine months ended September 30, 2016 , S&P Dow Jones Indices LLC earned $18 million and $58 million , respectively, of revenue under the terms of the License Agreement. 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. Many of these proceedings, investigations and inquiries relate to the ratings activity of S&P Global Ratings brought by issuers and alleged purchasers of rated securities. In addition, various government and self-regulatory agencies frequently make inquiries and conduct investigations into our compliance with applicable laws and regulations, including those related to ratings activities and antitrust matters. Any of these 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.


20

The Company believes that it has meritorious defenses to the pending claims and potential claims in the matters described below and is diligently pursuing these defenses, and in some cases working to reach an acceptable negotiated resolution. However, in view of the uncertainty inherent in litigation and government and regulatory enforcement matters, we cannot predict the eventual outcome of these matters or the timing of their resolution, or in most cases reasonably estimate what the eventual judgments, damages, fines, penalties or impact of activity restrictions may be. As a result, we cannot provide assurance that the outcome of the matters described below will not have a material adverse effect on our consolidated financial condition, cash flows, business or competitive 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 and competitive position, which may require that we record liabilities in the consolidated financial statements in future periods.

S&P Global Ratings

Financial Crisis Litigation

The Company and its subsidiaries continue to defend civil cases brought by private and public plaintiffs arising out of ratings activities prior to and during the global financial crisis of 2008-2009. Discovery in certain of these cases is ongoing. We can provide no assurance that we will not be obligated to pay significant amounts in order to resolve these matters on terms deemed acceptable. At this time, however, we are unable to reasonably estimate the range of such additional amounts, if any.

U.S. Securities and Exchange Commission

As a nationally recognized statistical rating organization registered with the SEC under Section 15E of the Securities Exchange Act of 1934, S&P Global Ratings is in ongoing communication with the staff of the SEC regarding compliance with its extensive obligations under the federal securities laws. Although S&P Global Ratings seeks to promptly address any compliance issues that it detects or that the staff of the SEC raises, there can be no assurance that the SEC will not seek remedies against S&P Global Ratings for one or more compliance deficiencies.

Trani Prosecutorial Proceeding

The prosecutor in the Italian city of Trani has obtained criminal indictments against several current and former S&P Global Ratings managers and ratings analysts for alleged market manipulation, and against Standard & Poor’s Credit Market Services Europe under Italy’s vicarious liability statute, for having allegedly failed to properly supervise the ratings analysts and prevent them from committing market manipulation. The prosecutor’s theories are based on various actions by S&P Global Ratings taken with respect to Italian sovereign debt between May of 2011 and January of 2012. Trial commenced in February of 2015 and is ongoing. Apart from criminal penalties that might be imposed following a conviction, such conviction could also lead to civil damages claims and other sanctions against Standard & Poor’s Credit Market Services Europe or the Company. Such claims and sanctions cannot be quantified at this stage.

Shareholder Derivative Actions

In August of 2015, two purported shareholders commenced a putative derivative action on behalf of the Company in New York State Supreme Court titled Retirement Plan for General Employees of the City of North Miami Beach and Robin Stein v. Harold McGraw III, et al. The complaint asserts claims for, inter alia, breach of fiduciary duty, waste of corporate assets, and mismanagement against the board of directors, certain former directors of the Company, and three former S&P Global Ratings employees. Plaintiffs seek recovery from the defendants based primarily on allegations that S&P Global Ratings’ credit ratings practices for certain residential mortgage-backed securities and collateralized debt obligations misrepresented the credit risks of those securities, allegedly resulting in losses to the Company. The Company and the individual defendants filed motions to dismiss the complaint in October of 2015. Plaintiffs filed an opposition in December of 2015, and the Company and the individual defendants filed their reply briefs in January of 2016.

In January of 2016, a different purported shareholder commenced a separate putative derivative action on behalf of the Company in New York State Supreme Court titled L.A. Grika v. Harold McGraw III, et al. The allegations in the complaint are substantially similar to those in the North Miami Beach matter described above. The complaint asserts claims for, inter alia, breach of fiduciary duty, aiding and abetting breaches of fiduciary duty, unjust enrichment, contribution and indemnification against Harold McGraw III, Douglas L. Peterson, and nine former S&P Global Ratings employees. The case was transferred to the judge presiding over the North Miami Beach action. The Company and the individual defendants filed motions to dismiss the Grika complaint in May of 2016. Plaintiffs filed an opposition in June of 2016, and the Company and the individual defendants filed their reply briefs in July of 2016.

21


The court notified the parties in August of 2016 that it will be issuing written decisions on the outstanding motions to dismiss without oral argument.   

13.
Recently Issued or Adopted Accounting Standards

In August of 2016, the Financial Accounting Standards Board ("FASB") issued guidance providing amendments to eight specific statement of cash flows classification issues. The guidance is effective for reporting periods beginning after December 15, 2017; however, early adoption is permitted. We do not expect this guidance to have a significant impact on our consolidated financial statements.

In March of 2016, the FASB issued guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In February of 2016, the FASB issued guidance that amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

In January of 2016, the FASB issued guidance to enhance the reporting model for financial instruments, which includes amendments to address certain aspects of recognition, measurement, presentation and disclosure. The guidance is effective for reporting periods beginning after December 15, 2017. We do not expect this guidance to have a significant impact on our consolidated financial statements.

In November of 2015, the FASB issued guidance to simplify the presentation of deferred income taxes. The guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.

In September of 2015, the FASB issued guidance intended to simplify the accounting for measurement-period adjustments made to provisional amounts recognized in a business combination. The guidance eliminates the requirement to retrospectively account for those adjustments. The guidance was effective on January 1, 2016, and the adoption of this guidance did not have a significant impact on our consolidated financial statements.

In February of 2015, the FASB issued guidance that requires management to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The guidance was effective on January 1, 2016, and the adoption of this guidance did not have a significant impact on our consolidated financial statements.

In January of 2015, the FASB issued guidance that eliminates the concept of reporting extraordinary items, but retains current presentation and disclosure requirements for an event or transaction that is of an unusual nature or of a type that indicates infrequency of occurrence. Transactions that meet both criteria would now also follow such presentation and disclosure requirements. The guidance was effective on January 1, 2016, and the adoption of this guidance did not have a significant impact on our consolidated financial statements.

In August of 2014, the FASB issued guidance that requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. This guidance is effective for reporting periods ending after December 15, 2016; however, early adoption is permitted. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.

In May of 2014, the FASB and the International Accounting Standards Board (“IASB”) issued jointly a converged standard on the recognition of revenue from contracts with customers, which is intended to improve the financial reporting of revenue and comparability of the top line in financial statements globally. The core principle of the new standard is for the recognition of revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element

22

arrangements. In August of 2015, the FASB issued guidance deferring the effective date of the new revenue standard by one year. The new guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Subsequently, the FASB issued implementation guidance related to the new revenue standard, including the following: In March of 2016, the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations; in April of 2016, the FASB clarified guidance on performance obligations and the licensing implementation guidance; in May of 2016, the FASB issued a practical expedient in response to identified implementation issues. While we will continue with our evaluation process, initially, we believe this guidance may have an impact on the accounting for certain proprietary consulting arrangements in our S&P Global Platts segment as well as the accounting for certain integrated desktop service revenue arrangements offered in our S&P Global Market Intelligence segment.

14.
Condensed Consolidating Financial Statements

On September 22, 2016, we issued $500 million of 2.95% senior notes due in 2027. See Note 4 — Debt for additional information.

On May 26, 2015, we issued $700 million of 4.0% senior notes due in 2025. On August 18, 2015, we issued $2.0 billion of senior notes, consisting of $400 million of 2.5% senior notes due in 2018, $700 million of 3.3% senior notes due in 2020 and $900 million of 4.4% senior notes due in 2026.

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
 
Three Months Ended September 30, 2016
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Revenue
$
175

 
$
383

 
$
914

 
$
(33
)
 
$
1,439

Expenses:
 
 
 
 
 
 
 
 
 
Operating-related expenses
27

 
111

 
333

 
(33
)
 
438

Selling and general expenses
45

 
49

 
236

 
—

 
330

Depreciation
8

 
2

 
12

 
—

 
22

Amortization of intangibles
—

 
—

 
23

 
—

 
23

Total expenses
80

 
162

 
604

 
(33
)
 
813

Gain on dispositions
(705
)
 
—

 
(17
)
 
—

 
(722
)
Operating profit
800

 
221

 
327

 
—

 
1,348

Interest expense (income), net
43

 
—

 
(4
)
 
—

 
39

Non-operating intercompany transactions
14

 
(21
)
 
(41
)
 
48

 
—

Income before taxes on income
743

 
242

 
372

 
(48
)
 
1,309

Provision for taxes on income
184

 
95

 
107

 
—

 
386

Equity in net income of subsidiaries
457

 
76

 
—

 
(533
)
 
—

Net income
$
1,016

 
$
223

 
$
265

 
$
(581
)
 
$
923

Less: net income attributable to noncontrolling interests
—

 
—

 
—

 
(31
)
 
(31
)
Net income attributable to S&P Global Inc.
$
1,016

 
$
223

 
$
265

 
$
(612
)
 
$
892

Comprehensive income
$
1,069

 
$
216

 
$
191

 
$
(561
)
 
$
915



23

 
Statement of Income
 
Nine Months Ended September 30, 2016
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Revenue
$
516

 
$
1,138

 
$
2,703

 
$
(95
)
 
$
4,262

Expenses:
 
 
 
 
 
 
 
 
 
Operating-related expenses
78

 
342

 
1,038

 
(95
)
 
1,363

Selling and general expenses
95

 
145

 
735

 
—

 
975

Depreciation
28

 
7

 
28

 
—

 
63

Amortization of intangibles
—

 
—

 
71

 
—

 
71

Total expenses
201

 
494

 
1,872

 
(95
)
 
2,472

Gain on dispositions
(705
)
 
—

 
(17
)
 
—

 
(722
)
Operating profit
1,020

 
644

 
848

 
—

 
2,512

Interest expense (income), net
129

 
—

 
(7
)
 
—

 
122

Non-operating intercompany transactions
249

 
(62
)
 
(739
)
 
552

 
—

Income before taxes on income
642

 
706

 
1,594

 
(552
)
 
2,390

Provision for taxes on income
166

 
263

 
302

 
—

 
731

Equity in net income of subsidiaries
1,865

 
220

 
—

 
(2,085
)
 
—

Net income
$
2,341

 
$
663

 
$
1,292

 
$
(2,637
)
 
$
1,659

Less: net income attributable to noncontrolling interests
—

 
—

 
—

 
(90
)
 
(90
)
Net income attributable to S&P Global Inc.
$
2,341

 
$
663

 
$
1,292

 
$
(2,727
)
 
$
1,569

Comprehensive income
$
2,351

 
$
662

 
$
1,247

 
$
(2,636
)
 
$
1,624




24

 
Statement of Income
 
Three Months Ended September 30, 2015
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Revenue
$
165

 
$
523

 
$
665

 
$
(29
)
 
$
1,324

Expenses:
 
 
 
 
 
 
 
 
 
Operating-related expenses
26

 
167

 
255

 
(29
)
 
419

Selling and general expenses
200

 
1

 
257

 
—

 
458

Depreciation
9

 
4

 
7

 
—

 
20

Amortization of intangibles
—

 
—

 
17

 
—

 
17

Total expenses
235

 
172

 
536

 
(29
)
 
914

Operating (loss) profit
(70
)
 
351

 
129

 
—

 
410

Interest expense (income), net
32

 
—

 
(2
)
 
—

 
30

Non-operating intercompany transactions
51

 
48

 
(99
)
 
—

 
—

(Loss) income before taxes on income
(153
)
 
303

 
230

 
—

 
380

(Benefit) provision for taxes on income
(74
)
 
100

 
73

 
—

 
99

Equity in net income of subsidiaries
1,180

 
206

 
—

 
(1,386
)
 
—

Net income
$
1,101

 
$
409

 
$
157

 
$
(1,386
)
 
$
281

Less: net income attributable to noncontrolling interests
—

 
—

 
—

 
(29
)
 
(29
)
Net income attributable to S&P Global Inc.
$
1,101

 
$
409

 
$
157

 
$
(1,415
)
 
$
252

Comprehensive income
$
1,095

 
$
408

 
$
123

 
$
(1,386
)
 
$
240




25

 
Statement of Income
 
Nine Months Ended September 30, 2015
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Revenue
$
481

 
$
1,640

 
$
1,902

 
$
(85
)
 
$
3,938

Expenses:
 
 
 
 
 
 
 
 
 
Operating-related expenses
87

 
546

 
693

 
(85
)
 
1,241

Selling and general expenses
259

 
93

 
759

 
—

 
1,111

Depreciation
29

 
14

 
21

 
—

 
64

Amortization of intangibles
—

 
—

 
40

 
—

 
40

Total expenses
375

 
653

 
1,513

 
(85
)
 
2,456

Gain on dispositions
—

 
—

 
(11
)
 
—

 
(11
)
Operating profit
106

 
987

 
400

 
—

 
1,493

Interest expense (income), net
69

 
—

 
(7
)
 
—

 
62

Non-operating intercompany transactions
180

 
139

 
(319
)
 
—

 
—

(Loss) income before taxes on income
(143
)
 
848

 
726

 
—

 
1,431

(Benefit) provision for taxes on income
(57
)
 
291

 
205

 
—

 
439

Equity in net income of subsidiaries
1,180

 
205

 
—

 
(1,385
)
 
—

Net income
$
1,094

 
$
762

 
$
521

 
$
(1,385
)
 
$
992

Less: net income attributable to noncontrolling interests
—

 
—

 
—

 
(83
)
 
(83
)
Net income attributable to S&P Global Inc.
$
1,094

 
$
762

 
$
521

 
$
(1,468
)
 
$
909

Comprehensive income
$
1,102

 
$
761

 
$
480

 
$
(1,390
)
 
$
953



26

 
Balance Sheet
 
September 30, 2016
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
738

 
$
—

 
$
1,661

 
$
—

 
$
2,399

Accounts receivable, net of allowance for doubtful accounts
108

 
160

 
712

 

 
980

Intercompany receivable
346

 
397

 
836

 
(1,579
)
 
—

Deferred income taxes
74

 
10

 
23

 
—

 
107

Prepaid and other current assets
75

 
—

 
77

 
—

 
152

Assets of businesses held for sale
1

 
—

 
65

 
—

 
66

Total current assets
1,342

 
567

 
3,374

 
(1,579
)
 
3,704

Property and equipment, net of accumulated depreciation
138

 
1

 
116

 
—

 
255

Goodwill
182

 
—

 
2,767

 
9

 
2,958

Other intangible assets, net
—

 
—

 
1,518

 
—

 
1,518

Investments in subsidiaries
5,232

 
672

 
7,316

 
(13,220
)
 
—

Intercompany loans receivable
18

 
—

 
1,842

 
(1,860
)
 
—

Other non-current assets
85

 
23

 
133

 
—

 
241

Total assets
$
6,997

 
$
1,263

 
$
17,066

 
$
(16,650
)
 
$
8,676

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
71

 
$
23

 
$
105

 
$
—

 
$
199

Intercompany payable
1,492

 
(22
)
 
109

 
(1,579
)
 
—

Accrued compensation and contributions to retirement plans
108

 
41

 
166

 
—

 
315

Short-term debt
400

 
—

 
—

 
—

 
400

Unearned revenue
274

 
202

 
932

 
—

 
1,408

Income taxes currently payable
236

 
—

 
85

 
—

 
321

Other current liabilities
166

 
(133
)
 
351

 
—

 
384

Liabilities of businesses held for sale
1

 
—

 
23

 
—

 
24

Total current liabilities
2,748

 
111

 
1,771

 
(1,579
)
 
3,051

Long-term debt
3,563

 
—

 
—

 
—

 
3,563

Intercompany loans payable
11

 
—

 
1,849

 
(1,860
)
 
—

Pension and postretirement benefits
208

 
—

 
51

 
—

 
259

Other non-current liabilities
(14
)
 
85

 
301

 
—

 
372

Total liabilities
6,516

 
196

 
3,972

 
(3,439
)
 
7,245

Redeemable noncontrolling interest
—

 
—

 
—

 
920

 
920

Equity:
 
 
 
 
 
 
 
 
 
Common stock
412

 
—

 
2,336

 
(2,336
)
 
412

Additional paid-in capital
(300
)
 
1,148

 
10,132

 
(10,613
)
 
367

Retained income
9,288

 
(81
)
 
1,003

 
(1,286
)
 
8,924

Accumulated other comprehensive loss
(313
)
 
—

 
(367
)
 
45

 
(635
)
Less: common stock in treasury
(8,606
)
 

 
(10
)
 
10

 
(8,606
)
Total equity - controlling interests
481

 
1,067

 
13,094

 
(14,180
)
 
462

Total equity - noncontrolling interests
—

 
—

 
—

 
49

 
49

Total equity
481

 
1,067

 
13,094

 
(14,131
)
 
511

Total liabilities and equity
$
6,997

 
$
1,263

 
$
17,066

 
$
(16,650
)
 
$
8,676


27

 
Balance Sheet
 
December 31, 2015
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
167

 
$
—

 
$
1,314

 
$
—

 
$
1,481

Accounts receivable, net of allowance for doubtful accounts
116

 
319

 
556

 
—

 
991

Intercompany receivable
208

 
1,872

 
1,273

 
(3,353
)
 
—

Deferred income taxes
75

 
10

 
24

 
—

 
109

Prepaid and other current assets
120

 
13

 
80

 
(1
)
 
212

Assets of businesses held for sale
4

 
—

 
499

 
—

 
503

Total current assets
690

 
2,214

 
3,746

 
(3,354
)
 
3,296

Property and equipment, net of accumulated depreciation
141

 
3

 
126

 
—

 
270

Goodwill
17

 
40

 
2,816

 
9

 
2,882

Other intangible assets, net
—

 
—

 
1,522

 
—

 
1,522

Investments in subsidiaries
4,651

 
659

 
7,316

 
(12,626
)
 
—

Intercompany loans receivable
16

 
368

 
1,733

 
(2,117
)
 
—

Other non-current assets
67

 
19

 
127

 
—

 
213

Total assets
$
5,582

 
$
3,303

 
$
17,386

 
$
(18,088
)
 
$
8,183

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
71

 
$
54

 
$
81

 
$
—

 
$
206

Intercompany payable
2,144

 
675

 
535

 
(3,354
)
 
—

Accrued compensation and contributions to retirement plans
127

 
89

 
167

 
—

 
383

Short-term debt
143

 
—

 
—

 
—

 
143

Unearned revenue
254

 
586

 
582

 
(1
)
 
1,421

Income taxes currently payable
1

 
—

 
55

 
—

 
56

Other current liabilities
190

 
65

 
238

 
—

 
493

Liabilities of businesses held for sale
80

 
—

 
126

 
—

 
206

Total current liabilities
3,010

 
1,469

 
1,784

 
(3,355
)
 
2,908

Long-term debt
3,468

 
—

 
—

 
—

 
3,468

Intercompany loans payable
21

 
—

 
2,096

 
(2,117
)
 
—

Pension and postretirement benefits
230

 
—

 
46

 
—

 
276

Other non-current liabilities
(25
)
 
98

 
295

 
—

 
368

Total liabilities
6,704

 
1,567

 
4,221

 
(5,472
)
 
7,020

Redeemable noncontrolling interest
—

 
—

 
—

 
920

 
920

Equity:
 
 
 
 
 
 
 
 
 
Common stock
412

 
—

 
2,337

 
(2,337
)
 
412

Additional paid-in capital
(184
)
 
1,179

 
10,174

 
(10,694
)
 
475

Retained income
6,701

 
557

 
987

 
(609
)
 
7,636

Accumulated other comprehensive loss
(322
)
 
—

 
(322
)
 
44

 
(600
)
Less: common stock in treasury
(7,729
)
 
—

 
(12
)
 
12

 
(7,729
)
Total equity - controlling interests
(1,122
)
 
1,736

 
13,164

 
(13,584
)
 
194

Total equity - noncontrolling interests
—

 
—

 
1

 
48

 
49

Total equity
(1,122
)
 
1,736

 
13,165

 
(13,536
)
 
243

Total liabilities and equity
$
5,582

 
$
3,303

 
$
17,386

 
$
(18,088
)
 
$
8,183



28

 
Statement of Cash Flows
 
Nine Months Ended September 30, 2016
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Operating Activities:
 
 
 
 
 
 
 
 
 
Net income
$
2,341

 
$
663

 
$
1,292

 
$
(2,637
)
 
$
1,659

Adjustments to reconcile net income to cash provided by operating activities from continuing operations:
 
 
 
 
 
 
 
 
 
     Depreciation
28

 
7

 
28

 
—

 
63

     Amortization of intangibles
—

 
—

 
71

 
—

 
71

     Provision for losses on accounts receivable
2

 
—

 
8

 
—

 
10

     Deferred income taxes
(80
)
 
—

 
72

 
—

 
(8
)
     Stock-based compensation
17

 
12

 
25

 
—

 
54

     Gain on dispositions
(705
)
 
—

 
(17
)
 
—

 
(722
)
     Other
14

 
3

 
39

 
—

 
56

Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:
 
 
 
 
 
 
 
 
 
     Accounts receivable
5

 
159

 
(190
)
 
—

 
(26
)
     Prepaid and other current assets
(14
)
 
13

 
(1
)
 
—

 
(2
)
     Accounts payable and accrued expenses
(70
)
 
(147
)
 
90

 
—

 
(127
)
     Unearned revenue
20

 
(385
)
 
359

 
—

 
(6
)
     Accrued legal and regulatory settlements
—

 
(108
)
 
(26
)
 
—

 
(134
)
     Other current liabilities
(17
)
 
(25
)
 
30

 
—

 
(12
)
     Net change in prepaid/accrued income taxes
297

 
—

 
55

 
—

 
352

     Net change in other assets and liabilities
(35
)
 
29

 
(51
)
 
—

 
(57
)
Cash provided by operating activities from continuing operations
1,803

 
221

 
1,784

 
(2,637
)
 
1,171

Investing Activities:
 
 
 
 
 
 
 
 
 
     Capital expenditures
(34
)
 
(11
)
 
(22
)
 
—

 
(67
)
     Acquisitions, net of cash acquired
(140
)
 
—

 
(5
)
 
—

 
(145
)
     Proceeds from dispositions
1,047

 
—

 
24

 
—

 
1,071

     Changes in short-term investments
—

 
—

 
(1
)
 
—

 
(1
)
Cash provided by (used for) investing activities from continuing operations
873

 
(11
)
 
(4
)
 
—

 
858

Financing Activities:
 
 
 
 
 
 
 
 
 
     Payments on short-term debt, net
(143
)
 
—

 
—

 
—

 
(143
)
     Proceeds from issuance of senior notes, net
493

 
—

 
—

 
—

 
493

     Dividends paid to shareholders
(286
)
 
—

 
—

 
—

 
(286
)
 Dividends and other payments paid to noncontrolling interests
—

 
—

 
(59
)
 
—

 
(59
)
     Contingent consideration payments
(5
)
 
—

 
(10
)
 
—

 
(15
)
     Repurchase of treasury shares
(1,123
)
 
—

 
—

 
—

 
(1,123
)
     Exercise of stock options
83

 
—

 
1

 
—

 
84

     Excess tax benefits from share-based payments
31

 
—

 
—

 
—

 
31

     Intercompany financing activities
(1,155
)
 
(210
)
 
(1,272
)
 
2,637

 
—

Cash used for financing activities from continuing operations
(2,105
)
 
(210
)
 
(1,340
)
 
2,637

 
(1,018
)
Effect of exchange rate changes on cash from continuing operations
—

 
—

 
(93
)
 
—

 
(93
)
Net change in cash and cash equivalents
571

 
—

 
347

 
—

 
918

Cash and cash equivalents at beginning of period
167

 
—

 
1,314

 
—

 
1,481

Cash and cash equivalents at end of period
$
738

 
$
—

 
$
1,661

 
$
—

 
$
2,399



29

 
Statement of Cash Flows
 
Nine Months Ended September 30, 2015
 
(Unaudited)
(in millions)
S&P Global Inc.
 
Standard & Poor's Financial Services LLC
 
Non-Guarantor Subsidiaries
 
Eliminations
 
S&P Global Inc. Consolidated
Operating Activities:
 
 
 
 
 
 
 
 
 
Net income
$
1,094

 
$
762

 
$
521

 
$
(1,385
)
 
$
992

Adjustments to reconcile net income to cash provided by (used for) operating activities from continuing operations:
 
 
 
 
 
 
 
 
 
     Depreciation
29

 
14

 
21

 
—

 
64

     Amortization of intangibles
—

 
—

 
40

 
—

 
40

     Provision for losses on accounts receivable
—

 
(4
)
 
7

 
—

 
3

     Deferred income taxes
(139
)
 
161

 
144

 
—

 
166

     Stock-based compensation
16

 
16

 
23

 
—

 
55

     Gain on dispositions
—

 
—

 
(11
)
 
—

 
(11
)
     Other
107

 
22

 
21

 
—

 
150

Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:
 
 
 
 
 
 
 
 
 
     Accounts receivable
10

 
16

 
(70
)
 
—

 
(44
)
     Prepaid and other current assets
(35
)
 
22

 
7

 
—

 
(6
)
     Accounts payable and accrued expenses
(100
)
 
(76
)
 
(10
)
 
—

 
(186
)
     Unearned revenue
10

 
(20
)
 
28

 
—

 
18

     Accrued legal and regulatory settlements
—

 
(1,624
)
 
—

 
—

 
(1,624
)
     Other current liabilities
(19
)
 
(12
)
 
(22
)
 
—

 
(53
)
     Net change in prepaid/accrued income taxes
166

 
—

 
(26
)
 
—

 
140

     Net change in other assets and liabilities
91

 
4

 
(155
)
 
—

 
(60
)
Cash provided by (used for) operating activities from continuing operations
1,230

 
(719
)
 
518

 
(1,385
)
 
(356
)
Investing Activities:
 
 
 
 
 
 
 
 
 
     Capital expenditures
(38
)
 
(7
)
 
(29
)
 
—

 
(74
)
     Acquisitions, net of cash acquired
(2,241
)
 
—

 
(152
)
 
—

 
(2,393
)
     Proceeds from dispositions
—

 
—

 
14

 
—

 
14

     Changes in short-term investments
—

 
—

 
(3
)
 
—

 
(3
)
Cash used for investing activities from continuing operations
(2,279
)
 
(7
)
 
(170
)
 
—

 
(2,456
)
Financing Activities:
 
 
 
 
 
 
 
 
 
     Proceeds from issuance of senior notes, net
2,674

 
—

 
—

 
—

 
2,674

     Dividends paid to shareholders
(274
)
 
—

 
—

 
—

 
(274
)
 Dividends and other payments paid to noncontrolling interests
—

 
—

 
(67
)
 
—

 
(67
)
     Contingent consideration payments
(5
)
 
—

 
—

 
—

 
(5
)
     Purchase of CRISIL shares
—

 
—

 
(16
)
 
—

 
(16
)
     Repurchase of treasury shares
(501
)
 
—

 
—

 
—

 
(501
)
     Exercise of stock options
76

 
—

 
1

 
—

 
77

     Excess tax benefits from share-based payments
39

 
—

 
—

 
—

 
39

     Intercompany financing activities
(2,192
)
 
727

 
80

 
1,385

 
—

Cash (used for) provided by financing activities from continuing operations
(183
)
 
727

 
(2
)
 
1,385

 
1,927

Effect of exchange rate changes on cash from continuing operations
(9
)
 
—

 
(33
)
 
—

 
(42
)
Cash (used for) provided by continuing operations
(1,241
)
 
1

 
313

 
—

 
(927
)
Discontinued Operations:
 
 
 
 
 
 
 
 
 
     Cash used for operating activities
—

 
—

 
(129
)
 
—

 
(129
)
Cash used for discontinued operations
—

 
—

 
(129
)
 
—

 
(129
)
Net change in cash and cash equivalents
(1,241
)
 
1

 
184

 
—

 
(1,056
)
Cash and cash equivalents at beginning of period
1,402

 
—

 
1,095

 
—

 
2,497

Cash and cash equivalents at end of period
$
161

 
$
1

 
$
1,279

 
$
—

 
$
1,441



30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

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, "S&P Global," the “Company,” “we,” “us” or “our”) for the three and nine months ended September 30, 2016 . The MD&A should be read in conjunction with the consolidated financial statements, accompanying notes and MD&A included in our Form 10-K for the year ended December 31, 2015 (our “Form 10-K”), which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The MD&A includes the following sections:
•
Overview
•
Results of Operations — Comparing the Three and Nine Months Ended September 30, 2016 and 2015
•
Liquidity and Capital Resources
•
Reconciliation of Non-GAAP Financial Information
•
Critical Accounting Estimates
•
Recently Issued or Adopted Accounting Standards
•
Forward-Looking Statements

OVERVIEW

We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

On April 27, 2016, we changed our name to S&P Global Inc. from McGraw Hill Financial, Inc.

Our operations consist of four reportable segments: S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices ("S&P DJ Indices") and S&P Global Platts.
•
S&P Global Ratings is an independent provider of credit ratings, research and analytics, offering investors, issuers and market participants information, ratings and benchmarks.
•
S&P Global Market Intelligence is a global provider of multi-asset-class data, research, and analytical capabilities, which integrate cross-asset analytics and desktop services.
•
S&P DJ Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
•
S&P Global Platts is the leading independent provider of information and benchmark prices for the commodities and energy markets. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date.

The S&P Global Ratings segment includes S&P Global Ratings, which is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization ("NRSRO"), as well as CRISIL, a global analytical company incorporated in India, and certain other ratings-related businesses.

In February of 2016, we entered into a definitive agreement to sell Standard & Poor's Securities Evaluations, Inc. ("SPSE") and Credit Market Analysis ("CMA"), two businesses within our S&P Global Market Intelligence segment, to Intercontinental Exchange. As a result, we classified the assets and liabilities of SPSE and CMA as held for sale in our consolidated balance sheet as of September 30, 2016. In October of 2016, we completed the sale of SPSE and CMA to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services.


31


In September of 2016, we completed the sale of J.D. Power, included within our S&P Global Platts segment, for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the three and nine months ended September 30, 2016, we recorded a pre-tax gain of $722 million ($521 million after-tax) in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of September 30, 2016.

Key results for the periods ended September 30 are as follows:  
(in millions, except per share amounts)
Three Months

Nine Months

2016

2015

% Change 1

2016

2015

% Change 1
Revenue
$
1,439


$
1,324


9%

$
4,262


$
3,938


8%
Operating profit 2
$
1,348


$
410


N/M

$
2,512


$
1,493


68%
Operating margin %
94
%
 
31
%
 

 
59
%
 
38
%
 

Diluted earnings per share from continuing operations
$
3.36

 
$
0.92

 
N/M
 
$
5.89

 
$
3.30

 
79%
N/M - not meaningful

1
% changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented.
2  
Operating profit for the three and nine months ended September 30, 2016 includes net legal settlement insurance recoveries of $17 million and $63 million, respectively, disposition-related costs of $6 million and $17 million, respectively, an acquisition-related cost of $1 million, and a gain on the sale of J.D. Power of $722 million. Operating profit for the nine months ended September 30, 2016 includes a technology related impairment charge of $24 million, restructuring charges of $6 million, and a $3 million disposition-related reserve release. Operating profit for the three and nine months ended September 30, 2015 includes legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million and $40 million, respectively, and acquisition-related costs related to the acquisition of SNL of $32 million. Operating profit for the nine months ended September 30, 2015 includes an $11 million gain related to the sale of our interest in a legacy McGraw Hill Construction investment and restructuring charges of $22 million. Operating profit also includes amortization of intangibles of $23 million and $71 million for the three and nine months ended September 30, 2016 , respectively, and $17 million and $40 million for the three and nine months ended September 30, 2015 , respectively.

Three Months

Revenue increased 9% driven by increases at S&P Global Market Intelligence, S&P Global Ratings and S&P DJ Indices, partially offset by a decrease at S&P Global Platts. S&P Global Platts was unfavorably impacted by the sale of J.D. Power on September 7, 2016. Revenue growth at S&P Global Market Intelligence was favorably impacted by the acquisition of SNL Financial ("SNL") in September of 2015 and annualized contract value growth primarily driven by the S&P Capital IQ Desktop, Global Risk Services and certain data feed products. The increase at S&P Global Ratings was primarily due to growth in corporate bond ratings revenue and U.S. bank loan ratings revenue. Revenue growth at S&P DJ Indices was primarily due to higher levels of assets under management ("AUM") for ETFs and mutual funds and an increase in data revenue. Continued demand for Platts’ proprietary content at S&P Global Platts also contributed to revenue growth in the quarter.

Operating profit increased 229%. Excluding the favorable impact of the gain on the sale of J.D. Power of 181 percentage points, higher net legal settlement insurance recoveries in 2016 of 26 percentage points, higher acquisition-related costs in 2015 of 8 percentage points, partially offset by the unfavorable impact of higher amortization of intangibles from acquisitions of 2 percentage points and disposition-related costs of 1 percentage point, operating profit increased 17%. This increase was primarily due to revenue growth as discussed above and decreased costs at our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions.

Nine Months

Revenue increased 8% driven by increases at all of our reportable segments. Revenue growth at S&P Global Market Intelligence was favorably impacted by the acquisition of SNL in September of 2015 and annualized contract value growth primarily driven by the S&P Capital IQ Desktop, Global Risk Services and certain data feed products. The revenue increase at S&P Global Platts was primarily driven by continued demand for Platts’ proprietary content, partially offset by the unfavorable impact of the sale of J.D. Power on September 7, 2016. Revenue growth at S&P Global Ratings was driven by a increase in U.S. bank loan ratings

32

revenue, partially offset by a decrease in structured finance revenue. Revenue growth at S&P DJ Indices was primarily due to higher volumes for exchange-traded derivatives, higher levels of AUM for mutual funds and an increase in data revenue.

Operating profit increased 68% . Excluding the favorable impact of the gain on the sale of J.D. Power of 49 percentage points, higher net legal settlement insurance recoveries in 2016 of 7 percentage points, higher acquisition-related costs in 2015 of 2 percentage points, higher restructuring charges in 2015 of 1 percentage point, partially offset by the unfavorable impact of a technology related impairment charge of 2 percentage points, higher amortization of intangibles from acquisitions of 2 percentage points and higher disposition-related costs of 1 percentage point, operating profit increased 14%. This increase was primarily driven by revenue growth as discussed above. Decreased costs at S&P Global Ratings and our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to operating profit growth.

Our Strategy

We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. Our purpose is to provide the intelligence that is essential for companies, governments and individuals to make decisions with conviction. We seek to deliver on this purpose within the framework of our core values of integrity, excellence and relevance.

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.

RESULTS OF OPERATIONS — COMPARING THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

Consolidated Review  
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
1,439

 
$
1,324

 
9%
 
$
4,262

 
$
3,938

 
8%
Total Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating-related expenses
438

 
419

 
5%
 
1,363

 
1,241

 
10%
Selling and general expenses
330

 
458

 
(28)%
 
975

 
1,111

 
(12)%
Depreciation and amortization
45

 
37

 
22%
 
134

 
104

 
28%
Total expenses
813

 
914

 
(11)%
 
2,472

 
2,456

 
1%
Other income
(722
)
 
—

 
N/M
 
(722
)
 
(11
)
 
N/M
Operating profit
1,348

 
410

 
N/M
 
2,512

 
1,493

 
68%
Interest expense, net
39

 
30

 
31%
 
122

 
62

 
97%
Provision for taxes on income
386

 
99

 
N/M
 
731

 
439

 
67%
Net income
923

 
281

 
N/M
 
1,659

 
992

 
67%
Less: net income attributable to noncontrolling interests
(31
)
 
(29
)
 
7%
 
(90
)
 
(83
)
 
7%
Net income attributable to S&P Global Inc.
$
892

 
$
252

 
N/M
 
$
1,569

 
$
909

 
73%
N/M - not meaningful


33

Revenue

The following table provides consolidated revenue information for the periods ended September 30 :
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
1,439

 
$
1,324

 
9
%
 
$
4,262

 
$
3,938

 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Subscription / Non-transaction revenue
$
917

 
$
837

 
9
%
 
$
2,703

 
$
2,380

 
14
 %
Asset linked fees
$
100

 
$
91

 
10
%
 
$
278

 
$
275

 
1
 %
Non-subscription / Transaction revenue
$
422

 
$
396

 
7
%
 
$
1,281

 
$
1,283

 
—
 %
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     Subscription / Non-transaction revenue
64
%
 
63
%
 
 
 
63
%
 
60
%
 
 
     Asset linked fees
7
%
 
7
%
 
 
 
7
%
 
7
%
 
 
     Non-subscription / Transaction revenue
29
%
 
30
%
 
 
 
30
%
 
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
885

 
$
810

 
9
%
 
$
2,635

 
$
2,385

 
11
 %
International revenue:
 
 
 
 
 
 
 
 
 
 
 
     European region
335

 
311

 
8
%
 
971

 
927

 
5
 %
     Asia
145

 
137

 
6
%
 
438

 
416

 
5
 %
     Rest of the world
74

 
66

 
11
%
 
218

 
210

 
4
 %
Total international revenue
$
554

 
$
514

 
8
%
 
$
1,627

 
$
1,553

 
5
 %
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
62
%
 
61
%
 
 
 
62
%
 
61
%
 
 
     International revenue
38
%
 
39
%
 
 
 
38
%
 
39
%
 
 

Three Months

Subscription / non-transaction revenue increased 9% primarily from the favorable impact of the acquisition of SNL in September of 2015 and growth in S&P Global Market Intelligence's average contract values driven by an expansion in new and existing accounts as well as continued demand for Platts’ proprietary content. Asset linked fees increased 10% due to the impact of higher AUM for ETFs and mutual funds. Non-subscription / transaction revenue increased 7% primarily due to an increase in corporate bond ratings revenue and U.S. bank loan ratings revenue at S&P Global Ratings, partially offset by the unfavorable impact of the sale of J.D. Power on September 7, 2016 at S&P Global Platts. 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.

Nine Months
 
Subscription / non-transaction revenue increased 14% primarily from the favorable impact of the acquisition of SNL in September of 2015 and growth in S&P Global Market Intelligence's average contract values driven by an expansion in new and existing accounts as well as continued demand for Platts’ proprietary content. Asset linked fees increased 1% primarily due to the impact of higher average assets under management for mutual funds. Non-subscription / transaction revenue remained flat as increases at S&P DJ Indices due to higher volumes for exchange traded derivatives and increases at S&P Global Ratings primarily due to an increase in U.S. bank loan ratings revenue were offset by a decrease from the unfavorable impact of the sale of J.D. Power on September 7, 2016 at S&P Global Platts. Non-subscription / transaction revenue was also unfavorably impacted by a decrease in structured finance revenues at S&P Global Ratings. See “Segment Review” below for further information.

The unfavorable impact of foreign exchange rates reduced revenue by less than 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.


34

Total Expenses

The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the periods ended September 30 :

Three Months
(in millions)
2016
 
2015
 
% Change
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
S&P Global Ratings 1
$
193

 
$
95

 
$
186

 
$
197

 
4%
 
(52)%
S&P Global Market Intelligence 2
162

 
128

 
145

 
143

 
12%
 
(10)%
S&P DJ Indices
36

 
19

 
31

 
16

 
19%
 
15%
S&P Global Platts 3
72

 
61

 
80

 
68

 
(9)%
 
(11)%
Intersegment eliminations 4
(25
)
 
—

 
(23
)
 
—

 
(12)%
 
N/M
Total segments
438

 
303

 
419

 
424

 
5%
 
(28)%
Unallocated expense
—

 
27

 
—

 
34

 
N/M
 
(21)%
Total
$
438

 
$
330

 
$
419

 
$
458

 
5%
 
(28)%
N/M - not meaningful
1  
In 2016 , selling and general expenses primarily includes a benefit related to net legal settlement insurance recoveries of $17 million. In 2015 , selling and general expenses include legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million.
2  
In 2016, selling and general expenses includes disposition-related costs of $5 million and an acquisition-related cost of $1 million. Additionally, 2015 includes acquisition-related costs related to the acquisition of SNL of $32 million.
3  
In 2016, selling and general expenses includes a gain on the sale of J.D. Power of $722 million and disposition-related costs of $1 million.
4  
Intersegment elimination relates to a royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.

Operating-Related Expenses

Operating-related expenses increased 5% . The increase at S&P Global Market Intelligence was primarily driven by the acquisition of SNL in September of 2015. Increases at S&P Global Ratings and S&P DJ Indices were due to higher compensation costs related to additional headcount. These increases were partially offset by a decrease at S&P Global Platts as a result of the sale of J.D. Power on September 7, 2016.

Intersegment eliminations primarily relate to a royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.

Selling and General Expenses

Selling and general expenses decreased 28% . Excluding the favorable impact of higher net legal settlement insurance recoveries in 2016 of 22 percentage points, higher acquisition-related costs in 2015 of 7 percentage points, partially offset by the unfavorable impact disposition-related costs of 1 percentage point, selling and general expenses remained unchanged. S&P Global Market Intelligence increase was driven by the acquisition of SNL in September of 2015. This increase was offset by a decrease at S&P Global Platts as a result of the sale of J.D. Power on September 7, 2016 and a reduction in professional service fees.

Depreciation and Amortization

Depreciation and amortization increased compared to the third quarter of 2015 due to higher intangible asset amortization in 2016 from the acquisition of SNL in September of 2015.




35

Nine Months
(in millions)
2016
 
2015
 
% Change
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
S&P Global Ratings 1
$
586

 
$
261

 
$
554

 
$
420

 
6%
 
(38)%
S&P Global Market Intelligence 2
509

 
379

 
432

 
351

 
18%
 
8%
S&P DJ Indices
105

 
49

 
94

 
49

 
12%
 
1%
S&P Global Platts 3
236

 
199

 
227

 
193

 
4%
 
3%
Intersegment eliminations 4
(73
)
 
—

 
(66
)
 
—

 
(12)%
 
N/M
Total segments
1,363

 
888

 
1,241

 
1,013

 
10%
 
(12)%
Unallocated expense 5
—

 
87

 
—

 
98

 
N/M
 
(12)%
Total
$
1,363

 
$
975

 
$
1,241

 
$
1,111

 
10%
 
(12)%
N/M - not meaningful

1  
In 2016 , selling and general expenses primarily includes a benefit related to net legal settlement insurance recoveries of $63 million. In 2015 , selling and general expenses include legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $40 million. Additionally, 2016 and 2015 includes restructuring charges of $6 million and $8 million, respectively.
2  
In 2016, selling and general expenses includes disposition-related costs of $12 million, an acquisition-related cost of $1 million, and a technology related impairment charge of $24 million. Additionally, 2015 includes acquisition-related costs related to the acquisition of SNL of $32 million and restructuring charges of $12 million.
3  
In 2016, selling and general expenses include a gain on the sale of J.D. Power of $722 million and disposition-related costs of $5 million. In 2015. selling and general expenses include restructuring charges of $1 million.
4  
Intersegment elimination relates to a royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.
5 In 2016, selling and general expenses includes a $3 million disposition-related reserve release. In 2015, selling and general expenses include a gain of $11 million related to the sale of our interest in a legacy McGraw Hill Construction investment and restructuring charges.

Operating-Related Expenses

Operating-related expenses increased 10% . The increase at S&P Global Market Intelligence was primarily driven by the acquisition of SNL in September of 2015. Increases at S&P Global Ratings and S&P DJ Indices were due to higher compensation costs related to additional headcount.

Intersegment eliminations primarily relate to a royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data developed by S&P Global Ratings.

Selling and General Expenses

Selling and general expenses decreased 12% . Excluding the favorable impact of higher net legal settlement insurance recoveries in 2016 of 9 percentage points, higher acquisition-related costs in 2015 of 3 percentage points and higher restructuring charges in 2015 of 1 percentage point, partially offset by the unfavorable impact of a technology related impairment charge of 2 percentage points and disposition related costs of 1 percentage point, selling and general expenses decreased 2%. Decreases at S&P Global Ratings were driven by lower incentive costs, reduced legal fees following the resolution of a number of significant legal matters and decreased costs related to the 2015 implementation of the Dodd-Frank Wall Street Reform of the Consumer Protection Act. This decrease was partially offset by an increase S&P Global Market Intelligence driven by the acquisition of SNL in September of 2015.

Depreciation and Amortization

Depreciation and amortization increased compared to the first nine months of 2015 due to higher intangible asset amortization in 2016 from the acquisition of SNL in September of 2015.


36

Gain on Dispositions
During the three and nine months ended September 30, 2016, we recorded a pre-tax gain of $722 million in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. During the nine months ended September 30, 2015, we recorded a pre-tax gain of $11 million in gain on dispositions in the consolidated statement of income related to the sale of our interest in a legacy McGraw Hill Construction investment.

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 “segment operating profit” with economic resources allocated primarily based on segment operating profit. Segment operating profit is defined as operating profit before unallocated expense. Segment operating profit is one of the key metrics we use to evaluate operating performance. 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.
Changes to Organizational Structure

The segment amounts and discussions included in this Form 10-Q reflect the reportable segments that existed through the end of the third quarter of 2016. Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer will evaluate the performance of these segments. As a result, as of the beginning of the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts will be combined into a single reportable segment, Market and Commodities Intelligence. These changes do not impact our the constituent components of our S&P Global Ratings and S&P DJ Indices reportable segments. We will begin reporting the financial results of the combined segment in our Form 10-K for the year ended December 31, 2016.

The tables below reconcile segment operating profit to total operating profit for the periods ended September 30 :

Three Months
(in millions)
2016
 
2015
 
% Change
S&P Global Ratings 1
$
346

 
$
194

 
78%
S&P Global Market Intelligence 2
112

 
53

 
N/M
S&P DJ Indices 3
107

 
106

 
1%
S&P Global Platts 4
812

 
93

 
N/M
Total segment operating profit
1,377

 
446

 
N/M
Unallocated expense
(29
)
 
(36
)
 
(21)%
Total operating profit
$
1,348

 
$
410

 
N/M
N/M - not meaningful

1  
Operating profit for 2016 primarily includes a benefit related to net legal settlement insurance recoveries of $17 million. Operating profit for 2015 includes legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million. Operating profit for 2016 and 2015 also includes amortization of intangibles from acquisitions of $1 million .
2  
Operating profit for 2016 includes disposition-related costs of $5 million and an acquisition-related cost of $1 million. Additionally, 2015 includes acquisition-related costs related to the acquisition of SNL of $32 million. Operating profit for 2016 and 2015 also includes amortization of intangibles from acquisitions of $18 million and $10 million , respectively.
3  
Operating profit for 2016 and 2015 includes amortization of intangibles from acquisitions of $1 million .
4  
Operating profit for 2016 includes a gain on the sale of J.D. Power of $722 million and disposition-related costs of $1 million. Operating profit for 2016 and 2015 also includes amortization of intangibles from acquisitions of $3 million and $5 million , respectively.

Segment Operating Profit — Increased 209% as compared to the third quarter of 2015 . Excluding the favorable impact of the gain on the sale of J.D. Power of 166 percentage points, higher net legal settlement insurance recoveries in 2016 of 24 percentage points, higher acquisition-related costs in 2015 of 7 percentage points, partially offset by the unfavorable impact of higher amortization of intangibles from acquisitions of 2 percentage points and disposition-related costs of 1 percentage point, segment

37

operating profit increased 15%. Revenue growth at S&P Global Market Intelligence, S&P Global Ratings and S&P DJ Indices were the primary drivers for the increase. Decreased costs at our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to segment operating profit growth. See “Segment Review” below for further information.

Unallocated Expense — These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives and unoccupied office space. Unallocated expense decreased $7 million or 21% as compared to the third quarter of 2015 . The decrease in the quarter is primarily due to a reduction in professional service fees.

Foreign exchange rates had a favorable impact on operating profit of 2 percentage points. This impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by re-calculating 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 assets and liabilities denominated in currencies other than the individual businesses functional currency.

Nine Months
(in millions)
2016
 
2015
 
% Change
S&P Global Ratings 1
$
1,004

 
$
846

 
19%
S&P Global Market Intelligence 2
285

 
178

 
60%
S&P DJ Indices 3
308

 
297

 
4%
S&P Global Platts 4
1,008

 
265

 
N/M
Total segment operating profit
2,605

 
1,586

 
64%
Unallocated expense 5
(93
)
 
(93
)
 
(1)%
Total operating profit
$
2,512

 
$
1,493

 
68%
N/M - not meaningful

1  
Operating profit for 2016 primarily includes a benefit related to net legal settlement insurance recoveries of $63 million. Operating profit for 2015 includes legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $40 million. Additionally, 2016 and 2015 includes restructuring charges of $6 million and $8 million, respectively, and amortization of intangibles from acquisitions of $4 million .
2  
Operating profit for 2016 includes disposition-related costs of $12 million, an acquisition-related cost of $1 million, and a technology related impairment charge of $24 million. Operating profit for 2015 includes acquisition-related costs related to the acquisition of SNL of $32 million and restructuring charges of $12 million. Operating profit for 2016 and 2015 also includes amortization of intangibles from acquisitions of $54 million and $21 million , respectively.
3  
Operating profit for 2016 and 2015 includes amortization of intangibles from acquisitions of $4 million .
4  
Operating profit for 2016 includes a gain on the sale of J.D. Power of $722 million and disposition-related costs of $5 million. 2015 includes restructuring charges of $1 million. Operating profit for 2016 and 2015 also includes amortization of intangibles from acquisitions of $9 million and $11 million , respectively.
5 In 2016, selling and general expenses includes a $3 million disposition-related reserve release. In 2015, selling and general expenses include a gain of $11 million related to the sale of our interest in a legacy McGraw Hill Construction investment and restructuring charges.

Segment Operating Profit — Increased 64% as compared to the first nine months of 2015 . Excluding the favorable impact of the gain on the sale of J.D. Power of 46 percentage points, higher net legal settlement insurance recoveries in 2016 of 7 percentage points, higher acquisition-related costs in 2015 of 2 percentage points, higher restructuring charges in 2015 of 1 percentage point, partially offset by the unfavorable impact of a technology related impairment charge of 2 percentage points, higher amortization of intangibles from acquisitions of 2 percentage points and higher disposition-related costs of 1 percentage point, segment operating profit increased 13%. Revenue growth at S&P Global Market Intelligence, S&P Global Ratings, S&P DJ Indices and S&P Global Platts were the primary drivers for the increase. Decreased costs at S&P Global Ratings and our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to segment operating profit growth. See “Segment Review” below for further information.

Unallocated Expense — These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives and unoccupied office space. Unallocated expense decreased 1% as compared to the first nine months of 2015 . Excluding the unfavorable impact of a gain on the sale of a non-core investment in 2015 of 11 percentage points, partially

38

offset by the favorable impact of a disposition-related reserve release of 3 percentage points and higher restructuring charges in 2015 of 1 percentage points, unallocated expense decreased 8% due to a reduction in professional service fees.

Foreign exchange rates had a favorable impact on operating profit of 2 percentage points. This impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by re-calculating 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 assets and liabilities denominated in currencies other than the individual businesses functional currency.

Interest Expense, net

Net interest expense increased compared to the third quarter and first nine months of 2015 primarily as a result of higher interest expense related to our senior notes issued in 2015.

Provision for Income Taxes

The effective income tax rate was 29.5% and 25.9% for the three months ended September 30, 2016 and September 30, 2015, respectively. The increase was due to the favorable resolution of tax audits in 2015, partially offset by a lower effective tax rate on the disposition of J.D. Power in 2016. The effective tax rate was 30.6% and 30.7% for the nine months ended September 30, 2016 and September 30, 2015, respectively.

Segment Review

S&P Global Ratings

Credit ratings are one of several tools that 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 debt issue may default.

S&P Global Ratings differentiates its revenue between transaction and non-transaction. Transaction revenue primarily includes fees associated with:
•
ratings related to new issuance of corporate and government debt instruments, and structured finance debt instruments;
•
bank loan ratings; and
•
corporate credit estimates, which are intended, based on an abbreviated analysis, to provide an indication of our opinion regarding creditworthiness of a company which does not currently have an S&P Global Ratings credit rating.

Non-transaction revenue primarily includes fees for surveillance of a credit rating, annual fees for customer relationship-based pricing programs, fees for entity credit ratings and global research and analytics. Non-transaction revenue also includes an intersegment royalty charged to S&P Global Market Intelligence for the rights to use and distribute content and data by S&P Global Ratings. Royalty revenue was $23 million and $68 million for the three and nine months ended September 30, 2016 , respectively, and $21 million and $61 million for the three and nine months ended September 30, 2015 , respectively.


39

The following table provides revenue and segment operating profit information for the periods ended September 30 :  
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
642

 
$
587

 
9%
 
$
1,877

 
$
1,851

 
1%
 
 
 
 
 
 
 
 
 
 
 
 
Non-transaction revenue
$
343

 
$
343

 
—%
 
$
1,010

 
$
990

 
2%
Transaction revenue
$
299

 
$
244

 
23%
 
$
867

 
$
861

 
1%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     Non-transaction revenue
53
%
 
58
%
 
 
 
54
%
 
54
%
 
 
     Transaction revenue
47
%
 
42
%
 
 
 
46
%
 
46
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
370

 
$
340

 
9%
 
$
1,098

 
$
1,078

 
2%
International revenue
$
272

 
$
247

 
10%
 
$
779

 
$
773

 
1%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
58
%
 
58
%
 
 
 
58
%
 
58
%
 
 
     International revenue
42
%
 
42
%
 
 
 
42
%
 
42
%
 
 
 


 


 

 


 


 

Operating profit 1
$
346

 
$
194

 
78%
 
$
1,004

 
$
846

 
19%
Operating margin %
54
%
 
33
%
 
 
 
54
%
 
46
%
 
 

1  
Operating profit for the three and nine months ended September 30, 2016 includes a benefit related to net legal settlement insurance recoveries partially offset by legal settlement charges of $17 million and $63 million, respectively. Operating profit for the three and nine months ended September 30, 2015 includes legal settlement charges partially offset by a benefit related to legal settlement insurance recoveries of $86 million and $40 million, respectively. Additionally, the nine months ended September 30, 2016 and 2015 includes restructuring charges of $6 million and $8 million, respectively. Operating profit also includes amortization of intangibles from acquisitions of $1 million for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.

Three Months

Revenue increased 9% , which includes the unfavorable impact of foreign exchange rates that reduced revenue by 1 percentage point. Transaction revenue grew primarily due to an increase in corporate bond ratings revenue across all regions and growth in U.S. bank loan ratings revenue driven largely by refinancing activity from the low interest rate environment. Revenue growth benefited from increased contract realization. Non-transaction revenue remained unchanged as an increase in surveillance fees was offset by a decline in Ratings Evaluation Service ("RES") activity.

Operating profit increased 78% . Excluding the favorable impact of higher net insurance recoveries in 2016 of 61 percentage points, operating profit increased 17%. This increase is primarily due to revenue growth. Expenses increased slightly due to higher compensation costs related to additional headcount and increased incentive costs. Increased expense was partially offset by decreased costs related to the 2015 implementation of the Dodd-Frank Wall Street Reform of the Consumer Protection Act and reduced legal fees following the resolution of a number of significant legal matters. Foreign exchange rates had a favorable impact on operating profit of less than one percentage point.

Nine Months

Revenue increased 1% , which includes the unfavorable impact of foreign exchange rates that reduced revenue by 1 percentage point. Transaction revenue increased due to growth in U.S. bank loan ratings revenue largely driven by refinancing activity from the low interest rate environment, partially offset by a decrease in structured finance revenue. Revenue growth benefited from increased contract realization. Non-transaction revenue grew primarily due to an increase in surveillance fees, partially offset by a decline in RES activity.


40

Operating profit increased 19% . Excluding the favorable impact of higher net insurance recoveries in 2016 of 13 percentage points, operating profit increased 6%. The increase is due to expense reduction as well as revenue growth. Reduced expenses were primarily driven by decreased costs related to the 2015 implementation of the Dodd-Frank Wall Street Reform of the Consumer Protection Act, reduced legal fees following the resolution of a number of significant legal matters and lower incentive costs. These increases were partially offset by higher compensation costs related to additional headcount. Foreign exchange rates had a favorable impact on operating profit of one percentage point.

Issuance Volumes

We monitor issuance volumes as an indicator of trends in transaction revenue streams within S&P Global Ratings. Issuance volumes noted within the discussion that follows are based on the domicile of the issuer. Issuance volumes can be reported in two ways: by “domicile” which is based on where an issuer is located or where the assets associated with an issue are located, or based on “marketplace” which is where the bonds are sold. The following tables depict changes in issuance levels as compared to the prior year, based on a composite of Thomson Financial, Harrison Scott Publications, Dealogic and S&P Global Ratings' internal estimates.
 
Third Quarter
Compared to Prior Year
 
Year-to-Date
Compared to Prior Year
Corporate Issuance
U.S.
 
Europe
Global
 
U.S.
 
Europe
Global
High-yield issuance
49%
 
37%
47%
 
(22)%
 
(23)%
(19)%
Investment-grade
(3)%
 
42%
52%
 
(6)%
 
12%
21%
Total new issue dollars — corporate issuance
3%
 
41%
51%
 
(9)%
 
6%
15%
•
High-yield issuance in the U.S. and Europe was up for the quarter as a result of more favorable market conditions due to tightening credit spreads. Decreases in high-yield issuance in the year-to-date period reflects weakness in the first half of the year due to market volatility and political and economic uncertainty in the European markets. High par value investment-grade issuance deals but lower volumes continued this quarter.
 
Third Quarter Compared to Prior Year
 
Year-to-Date Compared to Prior Year
Structured Finance
U.S.
 
Europe
Global
 
U.S.
 
Europe
Global
Asset-backed securities (“ABS”)
44%
 
(27)%
24%
 
(7)%
 
(10)%
(4)%
Structured Credit
(3)%
 
48%
3%
 
(41)%
 
26%
(32)%
Commercial mortgage-backed securities (“CMBS”)
(27)%
 
79%
(19)%
 
(42)%
 
(26)%
(42)%
Residential mortgage-backed securities (“RMBS”)
1%
 
(48)%
(19)%
 
(25)%
 
(4)%
(9)%
Covered bonds
*
 
(59)%
(57)%
 
*
 
(17)%
(15)%
Total new issue dollars — structured finance
11%
 
(46)%
(17)%
 
(25)%
 
(11)%
(16)%
*
Represents no activity in 2016 and 2015.

•
ABS issuance in the U.S. was up in the quarter driven by an increase in credit card and non-traditional transactions.
•
Issuance was down in the U.S. Structured Credit markets driven by lower availability of leveraged loans. Issuance was up in the European Structured Credit markets driven by new CLO engagements.
•
CMBS issuance in the U.S. was down in the quarter and year-to-date reflecting fewer conduit fusion transactions and overall market volatility. European CMBS issuance was up in the quarter, although from a low 2015 base.
•
RMBS volume in the U.S. was up slightly and European RMBS volume was down in the quarter driven primarily by one large issuance in the third quarter of 2015.
•
Covered bond issuance (which are debt securities backed by mortgages or other high-quality assets that remain on the issuer's balance sheet) in Europe was down in the quarter due to the impact of central bank lending policies.
For a further discussion of the legal and regulatory environment see Note 12 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q.


41

S&P Global Market Intelligence

S&P Global Market Intelligence's portfolio of capabilities are designed to help the financial community track performance, generate better investment returns, identify new trading and investment ideas, perform risk analysis, and develop mitigation strategies.

S&P Global Market Intelligence includes the following business lines:
•
Financial Data & Analytics — a product suite that provides data, analytics and third-party research for global finance professionals, which includes the S&P Capital IQ Desktop, SNL, Leveraged Commentary & Data, Investment Advisory and integrated bulk data feeds that can be customized, which include QuantHouse, CUSIP and Compustat; and
•
Risk Services — commercial arm that sells S&P Global Ratings' credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and RatingsXpress®.

The following table provides revenue and segment operating profit information for the periods ended September 30 :  
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
429

 
$
356

 
21%
 
$
1,252

 
$
1,000

 
25%
 
 
 
 
 
 
 
 
 
 
 
 
Subscription revenue
$
394

 
$
322

 
22%
 
$
1,152

 
$
900

 
28%
Non-subscription revenue
$
35

 
$
34

 
3%
 
$
100

 
$
100

 
1%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     Subscription revenue
92
%
 
91
%
 
 
 
92
%
 
90
%
 
 
     Non-subscription revenue
8
%
 
9
%
 
 
 
8
%
 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
292

 
$
236

 
24%
 
$
855

 
$
660

 
30%
International revenue
$
137

 
$
120

 
14%
 
$
397

 
$
340

 
17%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
68
%
 
66
%
 
 
 
68
%
 
66
%
 
 
     International revenue
32
%
 
34
%
 
 
 
32
%
 
34
%
 
 
 


 


 

 


 


 

Operating profit 1
$
112

 
$
53

 
N/M
 
$
285

 
$
178

 
60%
Operating margin %
26
%
 
15
%
 
 
 
23
%
 
18
%
 
 
N/M - not meaningful

1  
Operating profit for the three and nine months ended September 30, 2016 includes disposition-related costs of $5 million and $12 million, respectively, and an acquisition-related cost of $1 million. Operating profit for the nine months ended September 30, 2016 include a technology related impairment charge of $24 million. Additionally, the three and nine months ended September 30, 2015 include acquisition-related costs related to the acquisition of SNL of $32 million, and the nine months ended September 30, 2015 include restructuring charges of $12 million. Operating profit also includes amortization of intangibles from acquisitions of $18 million and $54 million for the three and nine months ended September 30, 2016 , respectively, and $10 million and $21 million for the three and nine months ended September 30, 2015 , respectively.

Three Months

Revenue increased 21% and was favorably impacted by 14 percentage points from the acquisition of SNL. Excluding the acquisition of SNL, revenue growth was primarily driven by increases in annualized contract values in the S&P Capital IQ Desktop, RatingsXpress® and RatingsDirect® from new and existing customers. Increases in annualized contract value for certain of our data feed products also contributed to revenue growth. These increases were partially offset by declines in the equity research business. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® continued to grow in the quarter. Both domestic and international revenue increased, with international revenue representing 32% of S&P Global Market Intelligence's total revenue. International revenue growth was primarily driven by sales growth of the S&P Capital IQ Desktop and RatingsXpress®in Europe and Asia, and the favorable impact of the acquisition of SNL.


42

Operating profit increased 112%. Excluding the favorable impact of higher acquisition-related costs in 2015 of 114 percentage points, partially offset by the unfavorable impact of disposition-related costs of 17 percentage points and the amortization of intangibles from acquisitions 28 percentage points, operating profit increased 43%. This increase is due to revenue growth and the favorable impact of foreign exchange rates of 2 percentage points, partially offset by higher compensation costs and increased technology costs as a result of the acquisition of SNL. Excluding the acquisition of SNL, expenses decreased compared to the third quarter of 2015 driven by lower compensation costs primarily due to a reduction in headcount and the favorable impact of foreign exchange rates.

Nine Months

Revenue increased 25% and was favorably impacted by 18 percentage points from the acquisition of SNL. Excluding the acquisition of SNL, revenue growth was primarily driven by increases in annualized contract values in the S&P Capital IQ Desktop, RatingsXpress® and RatingsDirect® from new and existing customers. Increases in annualized contract value for certain of our data feed products also contributed to revenue growth. These increases were partially offset by declines in the equity research business. The unfavorable impact of foreign exchange rates reduced revenue by 1 percentage point. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® continued to grow in the first nine months of the year. Both domestic and international revenue across all regions increased, with international revenue representing 32% of S&P Global Market Intelligence's total revenue. International revenue growth across all regions was primarily driven by sales growth of the S&P Capital IQ Desktop and RatingsXpress®in Europe and Asia, and the favorable impact of the acquisition of SNL.

Operating profit increased 60% . Excluding the unfavorable impact of amortization of intangibles from acquisitions of 6 percentage points, a technology related impairment charge of 5 percentage points and disposition-related costs of 2 percentage points, partially offset by favorable impact of higher acquisition-related costs in 2015 of 6 percentage points and higher restructuring charges in 2015 of 2 percentage points, operating profit increased 55%. This increase is due to revenue growth and the favorable impact of foreign exchange rates of 6 percentage points, partially offset by higher compensation costs and increased technology costs as a result of the acquisition of SNL. Excluding the acquisition of SNL, expenses decreased compared to the first nine months of 2015 driven by lower compensation costs primarily due to a reduction in headcount and the favorable impact of foreign exchange rates.

In February of 2016, we entered into a definitive agreement to sell SPSE and CMA, two businesses within our S&P Global Market Intelligence segment, to Intercontinental Exchange. As a result, we classified the assets and liabilities of SPSE and CMA as held for sale in our consolidated balance sheet as of September 30, 2016. In October of 2016, we completed the sale of SPSE and CMA to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services.

S&P Dow Jones Indices

S&P DJ Indices is a global index provider that maintains a wide variety of indices to meet an array of investor needs. S&P DJ 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.
S&P DJ Indices generates subscription revenue and transaction revenue but primarily derives revenue from asset linked fees based on the S&P and Dow Jones indices. Specifically, S&P DJ 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 — which generate royalties based on trading volumes of derivatives contracts listed on various exchanges;
•
Index-related licensing fees — which are either fixed or variable annual and per-issue fees for over-the-counter derivatives and retail-structured products; and
•
Data and customized index subscription fees — fees from supporting index fund management, portfolio analytics and research.


43

The following table provides revenue and segment operating profit information for the periods ended September 30 :  
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
164

 
$
156

 
6%
 
$
468

 
$
446

 
5%
 
 
 
 
 
 
 
 
 
 
 
 
Asset linked fees
$
100

 
$
91

 
10%
 
$
278

 
$
275

 
1%
Subscription revenue
$
33

 
$
30

 
11%
 
$
95

 
$
86

 
11%
Transaction revenue
$
31

 
$
35

 
(11)%
 
$
95

 
$
85

 
11%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     Asset linked fees
61
%
 
59
%
 
 
 
59
%
 
62
%
 
 
     Subscription revenue
20
%
 
19
%
 
 
 
20
%
 
19
%
 
 
     Transaction revenue
19
%
 
22
%
 
 
 
21
%
 
19
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
135

 
$
129

 
5%
 
$
388

 
$
363

 
7%
International revenue
$
29

 
$
27

 
8%
 
80

 
$
83

 
(4)%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
82
%
 
83
%
 
 
 
83
%
 
81
%
 
 
     International revenue
18
%
 
17
%
 
 
 
17
%
 
19
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit 1
$
107

 
$
106

 
1%
 
$
308

 
$
297

 
4%
Less: net operating profit attributable to noncontrolling interests
28

 
26

 

 
82

 
76

 

Net operating profit
$
79

 
$
80

 
(1)%
 
$
226

 
$
221

 
2%
Operating margin %
65
%
 
68
%
 
 
 
66
%
 
67
%
 
 
Net operating margin %
48
%
 
52
%
 
 
 
48
%
 
50
%
 
 

1  
Operating profit includes amortization of intangibles from acquisitions of $1 million for the three months ended September 30, 2016 and 2015 and $4 million for the nine months ended September 30, 2016 and 2015.

Three Months

Revenue at S&P DJ Indices increased 6% , primarily driven by higher levels of assets under management ("AUM") for ETFs and mutual funds and an increase in data revenue, partially offset by lower volumes for exchange-traded derivatives. Additionally, mutual fund revenue benefited from a retroactive revision to contract fees in the quarter. The favorable impact of foreign exchange rates increased revenue by less than 1 percentage point.

Ending AUM for ETFs in the third quarter of 2016 increased 22% to $914 billion and average AUM for ETFs increased 15% to $903 billion compared to the third quarter of 2015.

Operating profit grew 1% . Excluding the impact of amortization of intangibles related to acquisitions of less than 1 percentage point, operating profit increased 1%. Revenue growth and the favorable impact of foreign exchange rates was partially offset by higher compensation costs related to additional headcount and increased operating costs to support revenue growth and business initiatives at S&P DJ Indices. Foreign exchange rates had an favorable impact on operating profit of 1 percentage point.

Nine Months

Revenue at S&P DJ Indices increased 5% , primarily driven by higher volumes for exchange-traded derivatives, an increase in data revenue and higher levels of AUM for mutual funds. Additionally, mutual fund revenue benefited from a retroactive revision to contract fees. These increases were partially offset by the unfavorable impact of lower average levels of AUMs for ETFs in the first quarter of 2016. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point.


44

Operating profit grew 4% . Excluding amortization of intangibles related to acquisitions of 1 percentage point, operating profit increased 3%. Revenue growth and the favorable impact of foreign exchange rates was partially offset by higher compensation costs related to additional headcount and increased operating costs to support revenue growth and business initiatives at S&P DJ Indices. Foreign exchange rates had a favorable impact on operating profit of less than 1 percentage point.

S&P Global Platts

S&P Global Platts is the leading independent provider of information and benchmark prices for the commodities and energy markets. The S&P Global Platts business is driven by the need for high-value information and transparency in a variety of industries. S&P Global Platts seeks to deliver premier content that is deeply embedded in customer workflows and decision making processes.

In September of 2016, we completed the sale of J.D. Power, included within our S&P Global Platts segment, for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the three and nine months ended September 30, 2016, we recorded a pre-tax gain of $722 million ($521 million after-tax) in gain on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of September 30, 2016.

S&P Global Platts' revenue is generated primarily through the following sources:
•
Subscription revenue — subscriptions to our real-time news, market data and price assessments, along with other information products, primarily serving the energy and the automotive industries; and
•
Non-subscription revenue — primarily from licensing of our proprietary market price data and price assessments to commodity exchanges, syndicated and proprietary research studies, commercial-oriented data and analytics, conference sponsorship, consulting engagements, and events.  

As of September 7, 2016, we completed the sale of J.D. Power and the results are included in S&P Global Platts results through that date. Prior to the sale, S&P Global Platts included the brands Platts and J.D. Power.

The following table provides revenue and segment operating profit information for the periods ended September 30 :  
(in millions)
Three Months
 
Nine Months
 
2016
 
2015
 
% Change
 
2016
 
2015
 
% Change
Revenue
$
229

 
$
248

 
(8)%
 
$
738

 
$
707

 
4%
 
 
 
 
 
 
 
 
 
 
 
 
Subscription revenue
$
172

 
$
165

 
4%
 
$
519

 
$
470

 
10%
Non-subscription revenue
$
57

 
$
83

 
(31)%
 
$
219

 
$
237

 
(8)%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     Subscription revenue
75
%
 
67
%
 
 
 
70
%
 
66
%
 
 
     Non-subscription revenue
25
%
 
33
%
 
 
 
30
%
 
34
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
101

 
$
116

 
(13)%
 
$
331

 
$
317

 
5%
International revenue
$
128

 
$
132

 
(3)%
 
407

 
390

 
4%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
44
%
 
47
%
 
 
 
45
%
 
45
%
 
 
     International revenue
56
%
 
53
%
 
 
 
55
%
 
55
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit 1
$
812

 
$
93

 
N/M
 
$
1,008

 
$
265

 
N/M
Operating margin %
N/M

 
37
%
 
 
 
N/M

 
38
%
 
 
N/M - not meaningful

1  
Operating profit for the three and nine months ended September 30, 2016 includes a gain on the sale of J.D. Power of $722 million and disposition-related costs of $1 million and $5 million, respectively. Additionally, restructuring charges of $1 million are included for the nine months ended September 30, 2015. Operating profit also includes amortization of intangibles from acquisitions of $3 million and $9

45

million for the three and nine months ended September 30, 2016, respectively, and $5 million and $11 million for the three and nine months ended September 30, 2015, respectively.

Three Months

Revenue decreased 8% as a result of the sale of J.D. Power. This decrease was partially offset by revenue growth at Platts primarily due to continued demand for Platts' market data and price assessment products, led by petroleum product offerings. Platts' revenue was also favorably impacted by the acquisitions of PIRA Energy Group and RigData in September of 2016 and June of 2016, respectively.

Operating profit increased 778%. Excluding the favorable impact of the gain on the sale of J.D. Power of 780 percentage points and the favorable impact of amortization of intangible assets from acquisitions of 2 percentage points, partially offset by the unfavorable impact of disposition costs of 1 percentage point, operating profit decreased 4% due to the sale of J.D. Power on September 7, 2016. This decrease was partially offset by revenue growth at Platts and the favorable impact of foreign exchange rates of 6 percentage points, partially offset by higher compensation costs at Platts primarily related to additional headcount from acquisitions.

Nine Months

Revenue grew 4% primarily due to continued demand for Platts’ proprietary content. This growth was driven mainly by continued demand for Platts’ market data and price assessment products, led by petroleum product offerings. Additionally, growth has been driven by the continued licensing of our proprietary market price data and price assessments to various commodity exchanges. Platts' revenue was also favorably impacted by the acquisitions of PIRA Energy Group and RigData in September of 2016 and June of 2016, respectively, and Petromedia Ltd and its operating subsidiaries in July of 2015. These increases were partially offset by a decrease as a result of the sale of J.D. Power on September 7, 2016.

Operating profit increased 280%. Excluding the favorable impact of the gain on the sale of J.D. Power of 273 percentage points and the favorable impact of amortization of intangibles of 1 percentage point, partially offset by the unfavorable impact of disposition costs of 2 percentage points, operating profit increased 8%. This increase is primarily due to revenue growth at Platts and the favorable impact of foreign exchange rates of 3 percentage points, partially offset by higher compensation costs at Platts primarily related to additional headcount from acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

We continue to maintain a strong financial position. Our primary source of funds for operations is cash from our businesses. 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 and cash equivalents were $2,399 million as of September 30, 2016 , an increase of $918 million from December 31, 2015 , and consisted of approximately 30% of domestic cash and 70% of cash held abroad. Typically, cash held outside the U.S. is anticipated to be utilized to fund international operations or to be reinvested outside of the U.S., as a significant portion of our opportunities for growth in the coming years is expected to be abroad. In the event funds from international operations are needed to fund operations in the U.S., we would be required to accrue for and pay taxes in the U.S. to repatriate these funds.

The following table provides cash flow information for the nine months ended September 30 :  
(in millions)
2016
 
2015
 
% Change
Net cash provided by (used for):
 
 
 
 
 
Operating activities from continuing operations
$
1,171

 
$
(356
)
 
N/M
Investing activities from continuing operations
$
858

 
$
(2,456
)
 
N/M
Financing activities from continuing operations
$
(1,018
)
 
$
1,927

 
N/M
N/M - not meaningful

In the first nine months of 2016 , free cash flow increased to $1,045 million compared to $(497) million in the first nine months of 2015 . The increase is primarily due to the increase in cash provided by (used for) operating activities as discussed below. Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by (used for) operating activities less capital

46

expenditures and dividends and other payments paid to noncontrolling interests. 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 was $1,171 million for the first nine months of 2016 compared to cash used for operating activities of $356 million for the first nine months of 2015 . The increase is mainly due to the payment of legal and regulatory settlements in 2015.

Investing activities

Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions.

Cash provided by investing activities increased to $858 million for the first nine months of 2016 as compared to cash used for investing activities of $2,456 million in the first nine months of 2015 . The increase is primarily due to proceeds from the sale of J.D. Power of $1.1 billion in 2016 compared to cash used for the acquisition of SNL of $2.2 billion in 2015. See Note 2 — Acquisitions and Divestitures for further discussion.

Financing activities

Our cash outflows from financing activities consist primarily of share repurchases, dividends to shareholders and repayments of short-term and long-term debt, while cash inflows are primarily attributable to the borrowing of short-term and long-term debt and proceeds from the exercise of stock options.

Cash used for financing activities was $1,018 million in the first nine months of 2016 as compared to cash provided by financing activities of $1,927 million in the first nine months of 2015 . The decrease is primarily attributable to proceeds received from the $2.0 billion and $700 million issuances of senior notes in the third quarter of 2015 and second quarter of 2015, respectively, and an increase in cash used for share repurchases in 2016.

During the first nine months of 2016 , we used cash to repurchase 9.1 million shares for $1,123 million . In December of 2015, we purchased 0.3 million shares for approximately $26 million, which settled in January of 2016. During the first nine months of 2015 , we used cash to repurchase 4.9 million shares for $501 million . Using a portion of the proceeds received from the sale of J.D. Power, we entered into an accelerated share repurchase ("ASR") agreement with a financial institution on September 7, 2016 to initiate share repurchases aggregating $750 million . See Note 8 — Equity for further discussion.

Discontinued Operations

Cash used for operating activities from discontinued operations of $129 million in the first nine months of 2015 relates to the tax payment on the gain on sale of McGraw Hill Construction which was sold in the fourth quarter of 2014.

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, 2015. This credit facility will terminate on June 30, 2020. There were no commercial paper borrowings outstanding as of September 30, 2016 . Commercial paper borrowings outstanding as of December 31, 2015 totaled $143 million with an average interest rate and term 0.95% and 17 days, respectively.

Depending on our indebtedness to cash flow ratio, we pay a commitment fee of 10 to 20 basis points for our credit facility, whether or not amounts have been borrowed. We currently pay a commitment fee of 15 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 indebtedness to cash flow ratio added to the applicable rate.

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. 

47


Dividends

On January 27, 2016, the Board of Directors approved an increase in the quarterly common stock dividend from $0.33 per share to $0.36 per share.

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by (used for) operating activities less capital expenditures and dividends and other payments paid to noncontrolling interests. 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 dividends and other payments paid to noncontrolling interests 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 service debt, make strategic acquisitions and investments, repurchase stock and fund ongoing operational and working capital needs.

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 for the nine months ended September 30 :  
(in millions)
2016
 
2015
Cash provided by (used for) operating activities from continuing operations
$
1,171

 
$
(356
)
Capital expenditures
(67
)
 
(74
)
Dividends and other payments paid to noncontrolling interests
(59
)
 
(67
)
Free cash flow
1,045

 
(497
)
Payment of legal and regulatory settlements
134

 
1,624

Legal settlement insurance recoveries
(77
)
 
(101
)
Tax benefit from legal settlements
(21
)

(250
)
Free cash flow excluding above items
$
1,081

 
$
776


CRITICAL ACCOUNTING ESTIMATES

Our accounting policies are described in Note 1 — Accounting Policies to the consolidated financial statements in our Form 10-K. As discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Form 10-K, we consider 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. These critical estimates include 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 non-controlling 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. Since the date of our Form 10-K, there have been no changes to our critical accounting estimates.

RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS

See Note 13 – Recently Issued or Adopted Accounting Standards to the consolidated financial statements of this Form 10-Q for further information.


48

FORWARD-LOOKING STATEMENTS

This report 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.” Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:
•
worldwide economic, financial, political and regulatory conditions, including economic conditions and regulatory changes that may result from the United Kingdom’s likely exit from the European Union;
•
the rapidly evolving regulatory environment, in the United States and abroad, affecting S&P Global Ratings, S&P Global Platts, S&P Dow Jones Indices, and S&P Global 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;
•
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 impact of cost-cutting pressures across the financial services industry;
•
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 cost-cutting pressures and reduced trading in oil and other commodities markets;
•
our ability to incentivize and retain key employees;
•
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 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;
•
changes in applicable tax or accounting requirements;
•
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.

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 the “Risk Factors” section in the Company’s most recently filed Annual Report on Form 10-K.

49

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk includes changes in foreign exchange rates. We have operations in foreign countries where the functional currency is primarily the local currency. For international operations that are determined to be extensions of the parent company, the U.S. dollar is the functional currency. We typically have naturally hedged positions in most countries from a local currency perspective with offsetting assets and liabilities. As of September 30, 2016 and December 31, 2015, we entered into foreign exchange forward contracts to hedge the effect of adverse fluctuations in foreign currency exchange rates. We have not entered into any derivative financial instruments for speculative purposes. See Note 5 - Derivative Instruments to the consolidated financial statements of this Form 10-Q for further discussion.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed so that information required to be disclosed in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Interim Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

As of September 30, 2016 , an evaluation was performed under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2016 .

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




50

PART II – OTHER INFORMATION
Item 1. Legal Proceedings

See Note 12 – Commitments and Contingencies - Legal & Regulatory Matters to the consolidated financial statements of this Form 10-Q for information on our legal proceedings.

Item 1a. Risk Factors

Our Form 10-K contains detailed cautionary statements which identify all known material risks, uncertainties and other factors that could cause our actual results to differ materially from historical or expected results. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 10-K. Except as presented below, there have been no material changes to the risk factors we have previously disclosed in Item 1a, Risk Factors, in our Form 10-K.
Regulatory changes and economic conditions leading up to and following the United Kingdom’s likely exit from the European Union could have a material adverse effect on our business and results of operations.
•
Following a referendum on June 23, 2016 in which voters in the United Kingdom ("U.K.") approved an exit from the European Union ("EU"), it is expected that the U.K. government will initiate a process to leave the EU (often referred to as Brexit) and begin negotiating the terms of the U.K.’s future relationship with the EU.

•
Any impact from Brexit on the Company will depend, in part, on the outcome of tariff, trade and other negotiations. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations between the U.K and the EU as the U.K. determines which EU laws to replace or replicate and the EU determines how to treat regulated activities (e.g., the activities of credit rating agencies) originating in the U.K. Our businesses are subject to increasing regulation of the financial services and commodities industries in Europe. Potential changes in EU regulation and/or additional regulation in the U.K. could cause additional operating obligations and increased costs for our businesses.

•
Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 Company's outstanding shares at that time. During the third quarter of 2016 , we repurchased 5.3 million shares and, as of September 30, 2016 , 26.6 million shares remained under our current repurchase program.

Using a portion of the proceeds received from the sale of J.D. Power, we entered into an accelerated share repurchase ("ASR") agreement with a financial institution on September 7, 2016 to initiate share repurchases aggregating $750 million . The ASR agreement was structured as a capped ASR agreement in which we paid $750 million and received an initial delivery of approximately 4.4 million shares and an additional amount of 0.9 million shares during the month of September 2016, representing the minimum number of shares of our common stock to be repurchased based on a calculation using a specified capped price per share. The total number of shares to be repurchased under the ASR agreement will be based on the volume weighted-average share price, minus a discount, of our common stock over the term of the ASR agreement. This price is capped such that only under limited circumstances will we be required to deliver shares or, at our election, pay cash at settlement. Additionally, depending on the average share price through the completion date, we may receive additional shares under the ASR agreement. The final settlement of the transaction under the ASR agreement is expected to be completed no later than the first quarter of 2017. The ASR agreement was executed under the current share repurchase program, approved on December 4, 2013.

Repurchased 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. The 2013 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.

The following table provides information on our purchases of our outstanding common stock during the third quarter of 2016 pursuant to our current share repurchase program (column c). In addition to these purchases, the number of shares in column (a) include shares of common stock that are tendered to us to satisfy our employees’ tax withholding obligations in connection with the vesting of awards of restricted shares (we repurchase such shares based on their fair market value on the vesting date). There were no other share repurchases during the quarter outside the repurchases noted below.

51


(amounts in millions, except per share price)  
Period
 
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as
Part of Publicly Announced Programs
 
(d) Maximum Number of Shares that may yet be Purchased Under the Programs
Jul. 1 — Jul. 31, 2016
 
—

 
$
121.95

 
—

 
31.9

Aug 1 — Aug 31, 2016
 
—

 
120.74

 
—

 
31.9

Sep. 1 — Sep. 30, 2016 1
 
5.3

 
123.94

 
5.3

 
5.3

Total — Qtr 1
 
5.3

 
$
121.99

 
5.3

 
26.6

    
1  
Average price paid per share information does not include the accelerated share repurchase transaction as discussed in more detail above.
Item 5. Other Information

IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT DISCLOSURE

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which amended the Securities Exchange Act of 1934, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether, during the reporting period, it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable laws and regulations.

Revenue during the third quarter of 2016 attributable to the transactions or dealings by the Company described below was approximately $211,000, with net profit from such sales being a fraction of the revenues.

During the third quarter of 2016, one of the Company’s divisions, a provider of energy-related information in over 150 countries, sold information and informational materials, which are generally exempt from U.S. economic sanctions, to fourteen subscribers that are owned or controlled, or appear to be owned or controlled, by the Government of Iran (the “GOI”). The Company, among other things, offers customers that subscribe to its publications access to proprietary data, analytics, and industry information that enable commodities markets to perform with greater transparency and efficiency. This division provided such data related to the energy and petrochemicals markets to the subscribers referenced above, generating revenue that was a de minimis portion of both the division's and the Company’s revenue. Eight of the subscribers are designated by the U.S. Treasury Department’s Office of Foreign Assets Control as GOI entities and six appear, based on publicly available information, to be owned or controlled by GOI entities. We believe that these transactions were permissible under U.S. sanctions pursuant to certain statutory and regulatory exemptions for the exportation of information and informational materials. The Company will continue to monitor its provision of products and services to these Iranian customers so that such activity continues to be permissible under U.S. sanctions.







52

Item 6. Exhibits

 
 
(10.1)
Registrant’s Key Executive Short Term Incentive Compensation Plan, as amended effective January 1, 2016
 
 
(12)
Computation of Ratio of Earnings to Fixed Charges
 
 
(15)
Letter on Unaudited Interim Financials
 
 
(31.1)
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
 
 
(31.2)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
 
 
(32)
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
(101.INS)
XBRL Instance Document
 
 
(101.SCH)
XBRL Taxonomy Extension Schema
 
 
(101.CAL)
XBRL Taxonomy Extension Calculation Linkbase
 
 
(101.LAB)
XBRL Taxonomy Extension Label Linkbase
 
 
(101.PRE)
XBRL Taxonomy Extension Presentation Linkbase
 
 
(101.DEF)
XBRL Taxonomy Extension Definition Linkbase




53

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
S&P Global Inc.
 
 
 
Registrant

 
 
 
 
Date:
November 3, 2016
By:
/s/  Robert J. MacKay
 
 
 
Robert J. MacKay
 
 
 
Interim Chief Financial Officer
 
 
 
 
Date:
November 3, 2016
By:
/s/  Christopher F. Craig
 
 
 
Christopher F. Craig
 
 
 
Interim Corporate Controller

54
Exhibit (10.1)

SPGBARRGBPOSA03.JPG



KEY EXECUTIVE SHORT-TERM
INCENTIVE COMPENSATION PLAN
(Amended and restated effective as of January 1, 2016)


- 2 -

S&P GLOBAL INC.
KEY EXECUTIVE SHORT-TERM INCENTIVE COMPENSATION PLAN

S&P Global Inc. (“ SPGI” ), a corporation existing under the laws of the State of New York, has established and adopted the Key Executive Short-Term Incentive Compensation Plan (the “ Plan ”) to provide annual incentive awards to key employees of the Company, including, in the case of executive officers and certain other key executives of the Company, awards which are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. The Plan is amended and restated effective as of January 1, 2016.
1.      PURPOSES OF THE PLAN
The purposes of the Plan are to provide the opportunity for incentives and financial rewards to key employees of the Company designated by the Committee, who, because of the extent of their responsibilities, can make significant contributions to the Company’s performance by their ability, industry, loyalty, leadership and individual achievement. Providing recognition and financial rewards to such individuals based on the performance of the Company and their contributions will advance the interests of SPGI and its shareholders and will assist the Company in attracting and retaining management of the highest caliber and ability.
2.      DEFINITIONS
2.1. “ Award ” means, subject to Section 5, the right granted to a Participant for a Year to be eligible to receive an Award Payment from the Pool in which the Participant is participating for such Year based on the attainment of the Performance Objectives for the Pool, the attainment of the Participant’s Individual Performance Criteria and such other subjective or objective factors as the Committee may determine.

2.2. “ Award Payment ” means the amount paid to a Participant for a given year in respect of an Award. A Participant’s Award Payment shall equal the sum of the Participant’s Individual Formula Amount and Individual Performance Amount.

2.3. “ Beneficiary ” shall mean a Participant’s beneficiary designated on a beneficiary designation form approved by and provided to the Company or, if no such designation is made, the Participant’s estate.

2.4. “ Board ” means the Board of Directors of SPGI.

2.5. “ Cause ” means the Participant’s misconduct in respect of his or her obligations to the Company or other acts of misconduct by the Participant occurring during the course of his or her employment, which in either case results in or could reasonably be expected to result in material damage to the property, business or reputation of the Company; provided that in no event shall unsatisfactory job performance alone be deemed to be Cause; and provided further that no termination of employment that is carried out at the request of a person seeking to accomplish a Change in Control or otherwise in anticipation of a Change in Control shall be deemed to be for Cause.

2.6. “ Change in Control ” has the meaning set forth in Section 4.7(c) below.


- 3 -


2.7. “ Change-in-Control Award Payment ” means the pro rata portion, based on the portion of the Year elapsed at the Change-in-Control Effective Date, of the average of, for each of the preceding three Years, the Participant’s Award Payment or, for any such Year in which the Participant did not participate in the Plan, the actual amount paid to the Participant under any other short-term incentive plan of the Company. For purposes of determining a Participant’s Change-in-Control Award Payment, if the Participant did not participate in a short-term incentive plan of the Company during one or more of the preceding three Years, such average shall be deemed to be equal to the Participant’s Award Payment (or other short-term incentive award payment) or the average of the Participant’s Award Payments (or other payments), as applicable, for such Year or Years in which the Participant participated in the Plan (or other short-term incentive award plan). If any such Award Payment (or other short-term incentive award payment) was reduced because the Participant commenced employment with the Company after the start of the applicable Year, then the amount of such Award Payment (or other payment) shall be annualized for purposes of determining such average. If the Participant did not participate in a short-term incentive plan of the Company during the preceding three Years, then the Participant’s Change-in-Control Award Payment shall be equal to (x) the Participant’s annual base salary, multiplied by (y) the average of the Change-in-Control Award Payments to be paid to the other Participants at the same grade level and in a similar business unit as the Participant (or, in the case of a Covered Participant, the other Covered Participants) as a result of the Change in Control, divided by (z) the average of such other Participants’ (or Covered Participants’) annual base salaries.

2.8. “ Change-in-Control Effective Date ” has the meaning set forth in Section 4.7(a) below.

2.9. “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, and the applicable rules and regulations thereunder.

2.10. “ Covered Award ” means an Award to a Covered Participant which is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.

2.11. “ Covered Participant ” has the meaning set forth in Section 5.1 below.

2.12. “ Committee ” means the Compensation and Leadership Development Committee of the Board. If at any time no Committee shall be in office, then, subject to satisfying the requirements of Section 162(m)(4)(C) of the Code and the listing requirements of the New York Stock Exchange, the functions of the Committee specified in the Plan shall be exercised by the Board or by a committee of Board members. As used in the Plan, where applicable, the term “Committee” also shall mean one or more officers or employees, or committees thereof, to which the Committee has delegated the authority to take actions on its behalf pursuant to Section 3.2(c) below.

2.13. “ Company” means SPGI and all domestic and foreign corporations, partnerships and other legal entities of which at least 20% of the voting securities or ownership interests of such entities are owned directly or indirectly by SPGI.

2.14. “ Corporate Transaction ” has the meaning set forth in Section 4.7(c)(iii) below.

2.15. “ Disability ” means eligibility for disability benefits under the terms of the Company’s Long-Term Disability Plan in effect for the Participant at the time the Participant becomes disabled.



- 4 -

2.16. “ Early Retirement ” means, with the approval of the Committee, termination of a Participant’s employment with the Company on or after attaining age 55, but before attaining age 65, after having completed at least 10 years of service with the Company determined using principles applied by the Company on a consistent basis.

2.17. “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto, and the applicable rules and regulations thereunder.

2.18. “ Individual Bonus Target ” means the target bonus established for each Participant at or near the start of the applicable Year.

2.19. “ Individual Formula Amount ” means the portion of a Participant’s Award Payment for a Year that is determined in accordance with Section 4.3 based on the attainment of the Performance Objectives for the Pool applicable to the Participant’s Award.

2.20. “ Individual Performance Amount ” means the portion, if any, of a Participant’s Award Payment for a Year that is determined in accordance with Section 4.3 based on the attainment of the applicable Individual Performance Criteria.

2.21. “ Individual Performance Criteria ” means financial or non-financial performance criteria (which may include the Performance Objectives for the Pool applicable to the Participant’s Award) to be achieved during a Year and upon which the amount of the Participant’s Individual Performance Amount shall be based. Individual Performance Criteria may include objective and subjective determinations of individual performance for a Year (which may include the results of a Participant’s individual performance evaluation by the Company for the Year).

2.22. “ Net Income ” means the Company’s after-tax income as reported on a consolidated basis in the Company’s audited financial statements for the applicable Year. Net Income shall be adjusted to eliminate the effects of charges for restructurings, charges for discontinued operations, charges for extraordinary items and other unusual or non-recurring items of loss or expense, the unbudgeted current Year impact and cumulative effect of accounting changes, the unbudgeted loss or expense impact of any acquisition or divestiture made during the Year, and any direct or indirect change in the Federal corporate tax law or rate affecting the Year, each as defined by generally accepted accounting principles and identified in the audited financial statements, notes to the audited financial statements, management’s discussion and analysis or other Company filings with the Securities and Exchange Commission.

2.23. “ Normal Retirement ” means termination of a Participant’s employment with the Company on or after age 65.

2.24. “ Outstanding Common Stock ” has the meaning set forth in Section 4.7(c)(i) below.

2.25. “ Outstanding Voting Securities ” has the meaning set forth in Section 4.7(c)(i) below.

2.26. “ Participant ” has the meaning set forth in Section 3.1 below.

2.27. “ Performance Objectives ” means financial or non-financial performance objectives to be achieved during a Year and which are used to determine the funding level for a Pool.

2.28. “ Person ” has the meaning set forth in Section 4.7(c)(i) below.


- 5 -


2.29. “ Pool ” means the amount allocated for payment of Awards in any Year, based on achievement of the applicable Performance Objectives during such Year. The Committee may establish, for any year: (i) one Pool for the Company; (ii) separate Pools for each segment or for some or all of the business units within a segment of the Company; or (iii) one or more Pools based on such organizational and other factors as the Committee shall deem relevant.

2.30. “Recovery Policy” means the Senior Executive Pay Recovery Policy of S&P Global Inc. (and any successor policy), as amended from time to time.

2.31. “ Retirement ” means Early Retirement or Normal Retirement.

2.32. “ Termination Award Payment ” means a pro rata Award Payment for the portion of the Year during which the Participant was employed by the Company and participating in the Plan, of which (i) the Individual Formula Amount will be based on actual achievement for the Year of the Performance Objectives for the Pool applicable to the Participant’s Award and (ii) the Individual Performance Amount will be based on assumed target performance under the Individual Performance Criteria applicable to the Award.

The foregoing notwithstanding, in the event the achievement for the Year of the Performance Objectives for the Pool applicable to the Participant’s Award exceeds 100%, such achievement shall for purposes of said payment to such Participant be deemed to be 100%.

Furthermore, the foregoing notwithstanding in the case of any Covered Award, the pro rata Award Payment described above shall not exceed the percentage of Net Income set forth in Section 5.2 for the Covered Award.

2.33. “Year” means the calendar year, or the fiscal year of SPGI, if other than a calendar year.

3.    ELIGIBILITY AND ADMINISTRATION

3.1. Eligibility . The individuals entitled to participate in the Plan shall be those key employees of the Company (excluding employees participating for the Year in any other short-term incentive plan of the Company) who are selected by the Committee to receive an Award for the Year (each, a “ Participant ”).

3.2. Administration . (a) The Plan shall be administered by the Committee. Subject to the provisions of the Plan and to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board: (i) the Committee may from time to time establish rules for the administration of the Plan; (ii) the Committee shall have discretionary authority to determine the degree of attainment of Performance Objectives and satisfaction of Individual Performance Criteria, the actual amount of each Pool and the amount of the Award Payment for each Participant in respect of a Year, including, without limitation, the authority to make factual determinations, to construe and interpret the Plan and any instrument or agreement entered into in connection with the Plan, to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect, and to decide all matters arising thereunder or in connection with the administration of the Plan; and (iii) the decisions of the Committee, to the extent permitted by law, shall be final, conclusive and binding on all persons, including the Company and any Participant, having or claiming to have any right or interest in or under the Plan or any Award.


- 6 -

(b)    In addition, subject to the provisions of the Plan and to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, the Committee shall have full power and authority to do the following: (i) select the Participants for each Year; (ii) determine the terms and conditions, not inconsistent with the provisions of the Plan, of each Award; (iii) determine the time when Awards will be made; (iv) determine the Individual Bonus Targets to be granted to Participants in respect of a Year; (v) establish and determine the target amount of each Pool and the applicable Performance Objectives for such Pool; (vi) establish Individual Performance Criteria, as applicable, for each Award; (vii) certify the Award Payment in respect of Covered Awards; (viii) determine the form of Award Payments and whether any portion of an Award Payment shall be mandatorily or may be voluntarily deferred by Participants; (ix) appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. The Committee in its sole discretion has the authority to effect adjustments from time to time in connection with determining the degree of achievement of financial objectives (except in the case of the determination of Net Income under Covered Awards), and to make any other determinations, as it deems equitable, fair or advisable for the purpose of ascertaining the amount of Award Payments.
(c)    To the extent not inconsistent with applicable law, Section 162(m)(4)(c) of the Code and the listing requirements of the New York Stock Exchange, the Committee may delegate to one or more officers or employees of the Company, or one or more committees thereof, the authority to take actions on its behalf pursuant to the Plan; provided , however , that the Committee may not delegate its authority with respect to Section 4.7, Section 5, Section 6.1 or Section 6.2 below, or in respect of a Covered Award, and that a person to whom such authority is delegated may not further delegate such authority unless specifically authorized by the Committee.
(d)    To the extent permitted by law, the Committee and each member of the Committee and any officer or employee or committee thereof to whom responsibilities have been delegated under the Plan shall be indemnified by the Company against any claims, and the expenses of defending against such claims, resulting from any action or conduct relating to the administration of the Plan, except claims arising from gross negligence, willful neglect or willful misconduct.
4.      AWARDS
4.1. Pool . At or near the start of the applicable Year, the Committee shall: (i) determine the number of Pools for the Year; (ii) specify the relevant Performance Objectives for each Pool; (iii) identify the Participants eligible to receive a share of each Pool, the Individual Bonus Target for each such Participant and specify the Individual Performance Criteria under their Awards; and (iv) determine the target amount of each Pool. During the applicable Year, the Committee shall have discretion to adjust the target or actual amount of each Pool to reflect changes in the employment status of Participants during the Year and to adjust the actual amount of one or more Pools to take account of Award Payments in respect of Covered Awards allocated to such Pool.

4.2. Notice . Each Participant shall be notified at or near the beginning of the applicable Year of the amount of his or her Individual Bonus Target. The Committee shall determine for each Year the time and manner of notice to Participants of Awards.

4.3. Determination of Pools and Payment . As soon as reasonably practicable following the conclusion of each Year, the Committee shall determine the actual amount of each Pool, based on the attainment of the applicable Performance Objectives for such Pool for such Year. Seventy percent of each Pool, in the case of Participants with a grade level of 20 or above, or fifty percent of each Pool, in the case


- 7 -

of Participants with a grade level of less than 20, shall be allocated to the Participants therein in proportion to each Participant’s Individual Bonus Target, and the amount so allocated to a Participant shall constitute the Participant’s Individual Formula Amount for the Year; provided , however , that no portion of such 70% or 50%, respectively, of the Pool shall be allocated to any Participant whose performance rating for the year is “Underperforming, requires improvement” (or equivalent designation), with the result that any such Participant’s Individual Formula Amount shall be zero. The remaining 30% or 50%, as applicable, of each Pool shall be allocated to Participants therein based on the their attainment of the applicable Individual Performance Criteria for the Year; provided , however , that no portion of such 30% or 50%, respectively, of the Pool shall be allocated to any Participant whose performance rating for the year is “Underperforming, requires improvement” (or equivalent designation), with the result that any such Participant’s Individual Performance Amount shall be zero. Each Award Payment shall, subject to any deferral required or permitted by the Committee, be paid to the Participant in cash, stock awards under a shareholder-approved stock plan of the Company, or any combination thereof at such time as is determined by the Committee in its sole discretion following the end of the applicable Year, but no more than 90 days following the date of the report of SPGI’s independent auditors certifying SPGI’s financial statements for the Year.

4.4. Performance Measures . Performance Objectives may consist of financial objectives, non-financial objectives or a combination of financial and non-financial objectives. If more than one Pool is established for a Year, such Pools may have the same or different Performance Objectives. Individual Performance Criteria may consist of financial objectives, non-financial objectives or a combination of financial and non-financial objectives and may include objective and subjective measures of individual performance, including the results of a Participant’s individual performance evaluation by the Company. Except in the case of the determination of Net Income under Covered Awards, the Committee in its sole discretion shall have the authority to alter or adjust financial objectives during the course of any Year, or to alter or adjust the financial results otherwise reported or achieved by SPGI during such Year, if it is deemed appropriate to do so.

4.5. Termination of Employment.

(a)     If a Participant’s employment with the Company terminates during any Year because of a termination by the Company other than for Cause and the Participant is not Retirement Eligible (as defined in Section 4.5(b) below) on the effective date of the termination of employment, then the Participant, subject to the Participant executing a general release of claims against the Company in a form reasonably satisfactory to the Company, shall receive a Termination Award Payment for the portion of the Year during which the Participant was employed by the Company and participating in the Plan. Unless the Committee specifies an earlier payment date, such Termination Award Payment shall be made at the time that Award Payments for the applicable Year are made to other Participants.
(b)    If a Participant’s employment with the Company terminates during any Year because of (i) death, Disability or Retirement or (ii) a termination by the Company other than for Cause and the Participant is Retirement Eligible on the date of the termination of employment, then the Participant (or in the event of death, the Participant’s Beneficiary), subject to the Participant executing (or in the event of death, the Participant’s Beneficiary) a general release of claims against the Company in a form reasonably satisfactory to the Company, shall be eligible to receive a Pro Rata Actual Award Payment (as defined below) for the portion of the Year during which the Participant was employed by the Company and participating in the Plan. Unless the Committee specifies an earlier payment date, such Pro Rata Actual Award Payment shall be made at the time that Award Payments for the applicable Year are made to other Participants. For purposes of this Section 4.5(b), “ Retirement Eligible ” means


- 8 -

eligible as of the date of the Participant’s termination of employment (as shown on the books and records of the Company) for Normal Retirement or, with the approval of the Committee, Early Retirement. Solely for purposes of this Section 4.5(b), “ Pro Rata Actual Award Payment ” means an amount determined by multiplying X by Y: where “X” equals the actual Award Payment for an Award that a Participant would have received if the Participant had remained continuously employed by the Company through the Award payment date, determined on the basis of the achievement of performance measures for the Year and as adjusted in the Committee’s discretion for any applicable subjective or objective performance measures applicable to the Award or the Participant; and “Y” equals a fraction, the numerator is the number of whole calendar days in the portion of the Year during which the Participant was employed by the Company and participating in the Plan and the denominator is 365. Notwithstanding the above, if the Award is a Covered Award, in no event shall the amount of the Award Payment payable under this Section 4.5(b) exceed the percentage of Net Income set forth in Section 5.2 for the Covered Award.
    (c)    A Participant whose employment with the Company terminates during a Year or prior to the payment date for Cause, or who voluntarily resigns during a Year or prior to the payment date, shall not be eligible for any payment under the Plan for such Year. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company. A leave of absence, approved by the Committee, shall not be deemed to be a termination of employment for purposes of the Plan, and may warrant a full Award Payment or Termination Award Payment as determined by the Committee.
4.6. Transfer . If a Participant is transferred within the Company during any Year to a position that is not considered as eligible for participation in the Plan, the Committee may, in its sole and absolute discretion, authorize a Termination Award Payment to the Participant, based on the portion of the Year during which the Participant was participating in the Plan, and the degree to which during the Year the applicable Performance Objectives and Individual Performance Criteria were achieved during the Year.
4.7. Change in Control. In the event of a Change in Control, then:
(a)    Immediately after such event becomes effective (the “ Change-in-Control Effective Date ”), the Company shall pay to each Participant for the Year in which the Change in Control occurs a Change-in-Control Award Payment for the portion of the Year elapsed to the Change-in-Control Effective Date, and shall have no further obligation under the Participant’s Award with respect to the Year. If the Committee so determines, the Company may also pay to each Participant an additional amount, if any, to reflect the achievement during the portion of the Year elapsed to the Change-in-Control Effective Date of the Performance Objectives for the Pool applicable to the Participant’s Award and of the Individual Performance Criteria under the Award.
(b)    The reasonable legal fees incurred by any Participant to enforce his/her valid rights under this Section 4.7 shall be reimbursed by SPGI, in addition to sums otherwise due under the Plan, whether or not the Participant is successful in enforcing his/her rights or whether or not the matter is settled. Such reimbursement shall be made on a “pay-as-you-go” basis, as soon as practicable after presentation to SPGI of any periodic statements for such fees.
(c)    “ Change in Control ” means any of the following events:
(i)    An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “ Person ”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of


- 9 -

common stock of SPGI (the “ Outstanding Common Stock ”) or (2) the combined voting power of the then outstanding voting securities of SPGI entitled to vote generally in the election of directors (the “ Outstanding Voting Securities ”); excluding, however, the following: (A) any acquisition directly from SPGI, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from SPGI; (B) any acquisition by SPGI; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by SPGI or any entity controlled by SPGI; or (D) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or
(ii)    A change in the composition of the Board such that the individuals who, as of the effective date of the Plan, constitute the Board (such Board shall be hereinafter referred to as the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided , however , for purposes of this definition, that any individual who becomes a member of the Board subsequent to the effective date of the Plan, whose election, or nomination for election by SPGI’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided further that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or
(iii)    Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of SPGI (a “ Corporate Transaction ”); excluding, however, a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns SPGI or all or substantially all of SPGI’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (2) no Person (other than the SPGI, any employee benefit plan (or related trust) of SPGI or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 20% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or
(iv)    The approval by the shareholders of SPGI of a complete liquidation or dissolution of SPGI.
5.      COVERED AWARDS
5.1. Covered Participants. No later than 90 days after the commencement of each Year, the Committee shall, in writing: (i) designate the Participants to receive a Covered Award for the Year (“ Covered Participants ”); and (ii) notify each Covered Participant of his or her Covered Award for the Year. The Committee shall designate as Covered Participants the Participants who are executive officers


- 10 -

of the Company and the other Participants who are expected to be a “covered employee” within the meaning of Section 162(m)(3) of the Code in the Year in which SPGI would become entitled to take a compensation deduction as a result of the Award Payment (determined without regard to the limitation on deductibility imposed by Section 162(m) of the Code).

5.2. Covered Award. For each Year, a Covered Award shall consist of 0.7% of Net Income for the Year in the case of the Chief Executive Officer of SPGI and 0.5% of Net Income for the Year in the case of each other Covered Participant.

5.3. Award Payment. The Award Payment in respect of each Covered Award shall be an amount equal to or less than such percentage of Net Income, as determined by the Committee in its sole discretion. In the exercise of such discretion, the Committee may take into account the Award Payment that the Covered Participant would have received had the Covered Participant participated in a specified Pool for the Year, and may reduce the actual amount of such Pool by reference to the Award Payment made to the Covered Participant for the Year. Notwithstanding anything to the contrary in the Plan, however, the Committee shall not have any discretion or authority to increase the Award Payment payable under a Covered Award.

5.4. Certification. As soon as reasonably practicable following the conclusion of each Year, the Committee shall certify, in writing, the achievement of Net Income and the amount of the Award Payment in respect of each Covered Award for the Year.

6.      MISCELLANEOUS
6.1. Amendment and Termination of the Plan . The Committee or the Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable subject to any requirement for shareholder approval imposed by applicable law, including Section 162(m) of the Code, and to the listing requirements of the New York Stock Exchange; provided , however , that Section 4.7 above, as it applies to any Change in Control, may not be amended following that Change in Control, nor may it be amended in anticipation of a Change in Control, in either case, in a manner adverse to any Participant without the Participant’s express written consent.

6.2. Section 162(m) of the Code . Unless otherwise determined by the Committee, or expressly provided herein, the provisions of this Plan shall be administered and interpreted in accordance with Section 162(m) of the Code to ensure the maximum deductibility by the Company of the payment of Covered Awards.

6.3. Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant, net of any applicable Federal, State and local taxes required to be paid or withheld. The Company shall have the right to withhold from wages, Award Payments or other amounts otherwise payable to such Participant such withholding taxes as may be required by law, or to otherwise require the Participant to pay such withholding taxes. If the Participant shall fail to make such tax payments as are required or to satisfy any other payment obligation to the Company, the Company shall, to the extent permitted by law, have the right to deduct any such amounts from any payment of any kind otherwise due to such Participant or to take such other action as may be necessary to satisfy such withholding or other obligations.

6.4. Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Participant the right to continue in the employment of the


- 11 -

Company or affect any right that the Company may have to terminate the employment of (or to demote or to exclude from future Awards under the Plan) any such Participant at any time for any reason. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants under the Plan.

6.5. Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan constitute a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company except as specifically provided under the applicable plan or as may otherwise be determined by the Committee or by the Board.

6.6. Recovery Policy. Awards under the Plan shall be subject to the requirements of the Recovery Policy, and all amounts paid or payable to a Participant under or in respect of the Plan shall be subject to recovery or other action pursuant to the Recovery Policy, as and to the extent provided thereby.

6.7. Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

6.8. Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive compensation, and deferred compensation if permitted by the Committee. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.

6.9. Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of New York.

6.10. Effective Date of Plan . The Plan was originally effective as of January 1, 2005 subject to the approval of the Plan by SPGI’s shareholders at the 2005 annual meeting, which approval was obtained. The amendments to the Plan incorporated in the restated Plan document set forth above are effective as of January 1, 2016.





Exhibit (12)
S&P Global Inc.
Computation of Ratio of Earnings to Fixed Charges
(in millions)

 
Nine months ended September 30,
 
Years ended December 31,
 
 
2016
 
2015
 
2014
 
2013
 
2012
 
2011
 
Earnings:
 
 
 
 
 
 
 
 
 
 
 
 
 Income from continuing operations before taxes on income 1
$
2,390

 
$
1,815

 
$
54

 
$
1,299

 
$
1,089

 
$
975

 
Fixed charges
168

 
162

  
118

  
124

  
128

  
131

  
Total earnings
$
2,558

 
$
1,977

  
$
172

  
$
1,423

  
$
1,217

  
$
1,106

  
Fixed charges:  
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
$
120

 
$
101

  
$
58

  
$
62

  
$
81

  
$
86

  
Portion of rental payments deemed to
   be interest
45

 
59

  
59

  
61

  
46

  
44

  
Amortization of debt issuance costs and
   discount
3

 
2

  
1

  
1

  
1

  
1

  
Total fixed charges
$
168

 
$
162

  
$
118

  
$
124

  
$
128

  
$
131

  
Ratio of earnings to fixed charges:
15.2

x 
12.2

x 
1.5

x 
11.5

x 
9.5

x 
8.4

x 

1  
Includes the impact of the gain on disposition of J.D. Power in the nine months ended September 30, 2016.






Exhibit (15)


The Board of Directors and Shareholders of
S&P Global Inc.


We are aware of the incorporation by reference in the following Registration Statements:

1.
Registration Statement (Form S-3 No. 333-146981) pertaining to the Debt Securities of The McGraw-Hill Companies, Inc.,
2.
Registration Statements (Form S-8 No. 33-49743, No. 333-30043 and No. 333-40502) pertaining to the 1993 Employee Stock Incentive Plan,
3.
Registration Statements (Form S-8 No. 333-92224 and No. 333-116993) pertaining to the 2002 Stock Incentive Plan,
4.
Registration Statement (Form S-8 No. 333-06871) pertaining to the Director Deferred Stock Ownership Plan,
5.
Registration Statement (Form S-8 No. 33-50856) pertaining to The Savings Incentive Plan of McGraw-Hill, Inc. and its Subsidiaries, The Employee Retirement Account Plan of McGraw-Hill, Inc. and its Subsidiaries, The Standard & Poor's Savings Incentive Plan for Represented Employees, The Standard & Poor's Employee Retirement Account Plan for Represented Employees, The Employees' Investment Plan of McGraw-Hill Broadcasting Company, Inc. and its Subsidiaries,
6.
Registration Statement (Form S-8 No. 333-126465) pertaining to The Savings Incentive Plan of The McGraw-Hill Companies, Inc. and its Subsidiaries, The Employee Retirement Account Plan of The McGraw-Hill Companies, Inc. and its Subsidiaries, The Standard & Poor's Savings Incentive Plan for Represented Employees, and The Standard & Poor's Employee Retirement Account Plan for Represented Employees,
7.
Registration Statement (Form S-8 No. 333-157570) pertaining to The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and its Subsidiaries, and The Standard & Poor's 401(k) Savings and Profit Sharing Plan for Represented Employees,
8.
Registration Statement (Form S-8 No. 333-167885) pertaining to The Amended and Restated 2002 Stock Incentive Plan,
9.
Registration Statement (Form S-8 No. 333-170902) pertaining to The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and its Subsidiaries, and The Standard & Poor's 401(k) Savings and Profit Sharing Plan for Represented Employees,
10.
Registration Statement (Form S-4 No. 333-207675) and related Prospectus of McGraw Hill Financial, Inc. for the registration of $400,000,000 2.500% Senior Notes due 2018, $700,000,000 3.300% Senior Notes due 2020, $700,000,000 4.000% Senior Notes due 2025 and $900,000,000 4.400% Senior Notes due 2026, and
11.
Registration Statement (Form S-3 No. 333-212304) pertaining to Common Stock, Preferred Stock, Debt Securities, Warrants, Purchase Contracts, Units and Guarantees of Debt Securities of S&P Global Inc.

of our report dated November 3, 2016 relating to the unaudited consolidated interim financial statements of S&P Global Inc., which are included in its Form 10-Q for the quarter ended September 30, 2016 .


/s/ ERNST & YOUNG LLP

New York, New York
November 3, 2016




Exhibit (31.1)
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
I, Douglas L. Peterson, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of S&P Global Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: November 3, 2016
/s/  Douglas L. Peterson
 
Douglas L. Peterson
 
President and Chief Executive Officer


Exhibit (31.2)
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended
I, Robert J. MacKay, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of S&P Global Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date: November 3, 2016
/s/ Robert J. MacKay
 
Robert J. MacKay
 
Interim Chief Financial Officer


Exhibit (32)
Certifications pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, each of the undersigned officers of S&P Global Inc. (the “Company”), does hereby certify, to such officer's knowledge, that:
This quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2016 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
The information contained in this quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: November 3, 2016
/s/  Douglas L. Peterson
 
Douglas L. Peterson
 
President and Chief Executive Officer
 
 
Date: November 3, 2016
/s/  Robert J. MacKay
 
Robert J. MacKay
 
Interim Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.