Notes to the Consolidated Financial Statements
(Unaudited)
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1.
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Nature of Operations and Basis of Presentation
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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.
Our operations consist of
three
reportable segments: Ratings, Market and Commodities Intelligence and S&P Dow Jones Indices ("Indices").
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•
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Ratings is an independent provider of credit ratings, research and analytics, offering investors and other market participants information, ratings and benchmarks.
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•
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Market and Commodities Intelligence is a global provider of multi-asset-class data, research and analytical capabilities, which integrate cross-asset analytics and desktop services and deliver their customers in the commodity and energy markets access to high-value information, data, analytic services and pricing and quality benchmarks. As of September 7, 2016, we completed the sale of J.D. Power and the results are included in Market and Commodities Intelligence results through that date.
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•
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Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
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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, 2016
(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
months ended
March 31, 2017
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, 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.
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2.
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Acquisitions and Divestitures
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Acquisitions
During the three months ended March 31, 2017, we did
no
t complete any material acquisitions.
In March of 2016, Market and Commodities Intelligence acquired Commodity Flow, a specialist technology and business intelligence service for the global waterborne commodity and energy markets. The purchase helps extend Market and Commodities Intelligence's 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.
Divestitures
In April of 2017, we signed a letter of intent to sell our facility at East Windsor, New Jersey. The fixed assets of the facility of
$5 million
have been classified as held for sale, which is included in prepaid and other current assets in our consolidated balance sheet as of March 31, 2017.
In January of 2017, we completed the sale of Quant House SAS ("QuantHouse"), included in our Market and Commodities Intelligence segment, to QH Holdco, an independent third party. In November of 2016, we entered into a put option agreement that gave the Company the right, but not the obligation, to put the entire share capital of QuantHouse to QH Holdco. As a result, we classified the assets and liabilities of QuantHouse, net of our costs to sell, as held for sale, which is included in prepaid and other current assets and other current liabilities, respectively, in our consolidated balance sheet as of December 31, 2016. On January 4, 2017, we exercised the put option, thereby entering into a definitive agreement to sell QuantHouse to QH Holdco. On January 9, 2017, we completed the sale of QuantHouse to QH Holdco. Following the sale, the assets and liabilities of QuantHouse are no longer reported in our consolidated balance sheet as of March 31, 2017.
The components of assets and liabilities held for sale related to QuantHouse in the consolidated balance sheet consist of the following:
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(in millions)
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December 31,
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|
2016
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Accounts receivable, net
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$
|
4
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Other assets
|
3
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Assets of a business held for sale
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$
|
7
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|
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Accounts payable and accrued expenses
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$
|
3
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Unearned revenue
|
7
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Other liabilities
|
35
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Liabilities of a business held for sale
|
$
|
45
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The operating loss of our business that was disposed of for the three months ended March 31, 2017 and 2016 is as follows:
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(in millions)
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2017
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|
2016
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Operating loss
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$
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—
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|
|
$
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(7
|
)
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During the three months ended March 31, 2016, we did
no
t complete any dispositions.
The effective income tax rate was
29.5%
and
31.5%
for the three months ended March 31, 2017 and March 31, 2016, respectively. The decrease in 2017 was due to the recognition of excess tax benefits associated with share-based payments in the statement of income as well as a benefit from an acquisition-related adjustment.
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.
As of
March 31, 2017
and
December 31, 2016
, the total amount of federal, state and local, and foreign unrecognized tax benefits was
$156 million
and
$161 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
March 31, 2017
and
December 31, 2016
, we had
$46 million
and
$44 million
, respectively, of accrued interest and penalties associated with unrecognized tax benefits.
It is possible that tax examinations will be settled in the next twelve months. If any of these tax audit settlements do occur within that period, we would make any necessary adjustments to the accrual for unrecognized tax benefits. Until formal resolutions are reached between us and the tax authorities, the determination of a possible audit settlement range with respect to the impact on unrecognized tax benefits is not practicable.
In November of 2015, the FInancial Accounting Standards Board ("FASB") issued guidance to simplify the presentation of deferred income taxes. The guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption
was permitted. We early adopted this guidance in the fourth quarter of 2016, prospectively, and accordingly prior year amounts have not been reclassified.
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(in millions)
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March 31,
2017
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|
December 31,
2016
|
2.5% Senior Notes, due 2018
1
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$
|
399
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$
|
398
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3.3% Senior Notes, due 2020
2
|
696
|
|
|
696
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|
4.0% Senior Notes, due 2025
3
|
691
|
|
|
691
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|
4.4% Senior Notes, due 2026
4
|
891
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|
|
891
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|
2.95% Senior Notes, due 2027
5
|
492
|
|
|
492
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|
6.55% Senior Notes, due 2037
6
|
396
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|
|
396
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Commercial paper
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—
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|
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—
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Total debt
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3,565
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3,564
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Less: short-term debt including current maturities
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—
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—
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Long-term debt
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$
|
3,565
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|
|
$
|
3,564
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|
|
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1
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Interest payments are due semiannually on February 15 and August 15, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$1 million
.
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2
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Interest payments are due semiannually on February 14 and August 14, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$4 million
.
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3
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Interest payments are due semiannually on June 15 and December 15, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$9 million
.
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4
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Interest payments are due semiannually on February 15 and August 15, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$9 million
.
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|
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5
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Interest payments are due semiannually on January 22 and July 22, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$8 million
.
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|
|
6
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Interest payments are due semiannually on May 15 and November 15, and as of
March 31, 2017
, the unamortized debt discount and issuance costs total
$4 million
.
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The fair value of our long-term debt borrowings was
$3.7 billion
as of
March 31, 2017
and
December 31, 2016
, and was estimated based on quoted market prices.
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. As of
March 31, 2017
and
December 31, 2016
, there were
no
commercial paper borrowings outstanding.
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.
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5.
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Derivative Instruments
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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
March 31, 2017
and
December 31, 2016
, 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, 2017, we entered into a series of foreign exchange forward contracts to hedge a portion of our Indian rupee, British pound, and euro exposures through the fourth quarter of 2017. These contracts are intended to offset the impact of movement of exchange rates on future revenue and operating costs and are scheduled to mature within twelve months. The changes in the fair value of these contracts are initially reported in accumulated other comprehensive loss in our consolidated balance sheet and are subsequently reclassified into revenue and selling and general expenses in the same period that the hedged transaction affects earnings.
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 were intended to offset the impact of movement of exchange rates on future operating costs and matured at the end of each quarter during 2016. The changes in the fair value of these contracts were initially reported in accumulated other comprehensive loss in our consolidated balance sheet and were subsequently reclassified into selling and general expenses in the same period that the hedge contract matured.
As of
March 31, 2017
, we estimate that
$7 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 material hedge ineffectiveness for the three months ended
March 31, 2017
and March 31, 2016. As of
March 31, 2017
and
March 31, 2016
, the aggregate notional value of our outstanding foreign currency forward contracts was
$255 million
and
$112 million
, respectively.
The following table provides information on the location and fair value amounts of our cash flow hedges as of
March 31, 2017
and
December 31, 2016
:
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(in millions)
Balance Sheet Location
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March 31, 2017
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December 31, 2016
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Prepaid and other current assets
1
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Foreign exchange forward contracts
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$
|
9
|
|
|
$
|
3
|
|
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1
|
Foreign currency forward contracts are recorded at fair value that is based on foreign currency exchange rates in active markets; therefore we classify these derivative contracts as Level 2.
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The following table provides information on the location and amounts of pre-tax gains (losses) on our cash flow hedges for the three months ended
March 31
:
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(in millions)
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Gain (Loss) Recognized in Accumulated Other Comprehensive Loss (effective portion)
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Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
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Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)
|
Cash flow hedges - designated as hedging instruments
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
Foreign exchange forward contracts
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$
|
5
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|
|
$
|
3
|
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|
Selling and general expenses
|
|
$
|
1
|
|
|
$
|
1
|
|
The activity related to the change in unrealized gains (losses) in accumulated other comprehensive loss was as follows for the three months ended
March 31
:
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|
|
|
|
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(in millions)
|
2017
|
|
2016
|
Net unrealized gains (losses) on cash flow hedges, net of taxes, beginning of period
|
$
|
2
|
|
|
$
|
(1
|
)
|
Change in fair value, net of tax
|
6
|
|
|
4
|
|
Reclassification into earnings, net of tax
|
(1
|
)
|
|
(1
|
)
|
Net unrealized gains on cash flow hedges, net of taxes, end of period
|
$
|
7
|
|
|
$
|
2
|
|
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 three months ended
March 31
are as follows:
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(in millions)
|
Retirement Plans
|
Postretirement Plans
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
18
|
|
|
20
|
|
|
—
|
|
|
1
|
|
Expected return on assets
|
(31
|
)
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
Amortization of actuarial loss
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
(8
|
)
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
1
|
|
As discussed in our Form 10-K, we changed certain discount rate assumptions on our retirement and postretirement plans, which became effective on January 1, 2017. The effect of the assumption changes on retirement and postretirement expense for the three months ended March 31, 2017 did not have a material impact to our financial position, results of operations or cash flows.
In the first quarter of
2017
, we contributed
$2 million
to our retirement plans and expect to make additional required contributions of approximately
$6 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 remaining nine months of
2017
.
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7.
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Stock-Based Compensation
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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 three months ended
March 31
is as follows:
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|
|
|
|
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(in millions)
|
2017
|
|
2016
|
Stock option expense
|
$
|
1
|
|
|
$
|
2
|
|
Restricted stock and unit awards expense
|
18
|
|
|
12
|
|
Total stock-based compensation expense
|
$
|
19
|
|
|
$
|
14
|
|
Total unrecognized compensation expense related to unvested restricted stock and unit awards as of
March 31, 2017
was
$52 million
, which is expected to be recognized over a weighted average period of
1.5 years
.
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.
Share repurchases for the three months ended
March 31
were as follows:
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|
|
|
|
|
|
|
|
(in millions, except average price)
|
2017
|
|
2016
|
Total number of shares purchased
|
1.5
|
|
|
2.2
|
|
Average price paid per share
1
|
$
|
129.97
|
|
|
$
|
91.98
|
|
Total cash utilized
1
|
$
|
201
|
|
|
$
|
200
|
|
|
|
1
|
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 three months ended March 31, 2016 resulting in
$226 million
of cash used to repurchase shares.
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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
March 31, 2017
, approximately
24.2 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.
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.
Changes to redeemable noncontrolling interest during the
three
months ended
March 31, 2017
were as follows:
|
|
|
|
|
(in millions)
|
|
Balance as of December 31, 2016
|
$
|
1,080
|
|
Net income attributable to noncontrolling interest
|
30
|
|
Distributions payable to noncontrolling interest
|
(24
|
)
|
Redemption value adjustment
|
(6
|
)
|
Balance as of March 31, 2017
|
$
|
1,080
|
|
Accumulated Other Comprehensive Loss
The following table summarizes the changes in the components of accumulated other comprehensive loss for the
three
months ended
March 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2016
|
$
|
(332
|
)
|
|
$
|
(443
|
)
|
|
$
|
2
|
|
|
$
|
(773
|
)
|
Other comprehensive income before reclassifications
|
30
|
|
|
—
|
|
|
6
|
|
|
36
|
|
Reclassifications from accumulated other comprehensive loss to net earnings
|
—
|
|
|
3
|
|
1
|
|
(1
|
)
|
2
|
|
2
|
|
Net other comprehensive income
|
30
|
|
|
3
|
|
|
5
|
|
|
38
|
|
Balance as of March 31, 2017
|
$
|
(302
|
)
|
|
$
|
(440
|
)
|
|
$
|
7
|
|
|
$
|
(735
|
)
|
|
|
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
$1 million
for the
three
months ended
March 31, 2017
.
Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares is increased to include additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. Potential common shares consist primarily of stock options and restricted performance shares calculated using the treasury stock method.
The calculation for basic and diluted EPS for the three months ended
March 31
is as follows:
|
|
|
|
|
|
|
|
|
(in millions, except per share amounts)
|
2017
|
|
2016
|
Amounts attributable to S&P Global Inc. common shareholders:
|
|
|
|
Net income
|
$
|
399
|
|
|
$
|
294
|
|
|
|
|
|
Basic weighted-average number of common shares outstanding
|
258.2
|
|
|
265.0
|
|
Effect of stock options and other dilutive securities
|
2.6
|
|
|
2.2
|
|
Diluted weighted-average number of common shares outstanding
|
260.8
|
|
|
267.2
|
|
|
|
|
|
Earnings per share attributable to S&P Global Inc. common shareholders:
|
|
|
|
Net income:
|
|
|
|
Basic
|
$
|
1.54
|
|
|
$
|
1.11
|
|
Diluted
|
$
|
1.53
|
|
|
$
|
1.10
|
|
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
months ended
March 31, 2017
, there were
no
stock options excluded, and for the three months ended
March 31, 2016
, there were a minimal amount of stock options excluded. Restricted performance shares outstanding of
0.7 million
and
0.9 million
as of
March 31, 2017
and
2016
, respectively, were excluded.
During 2016, 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. The resulting restructuring plan consisted of a company-wide workforce reduction of approximately
230
positions and is 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
March 31, 2017
by segment is as follows:
|
|
|
|
|
|
|
|
|
|
2016 Restructuring Plans
|
(in millions)
|
Initial Charge Recorded
|
|
Ending Reserve Balance
|
Ratings
|
$
|
14
|
|
|
$
|
8
|
|
Market and Commodities Intelligence
|
10
|
|
|
5
|
|
Indices
|
1
|
|
|
1
|
|
Corporate
|
5
|
|
|
3
|
|
Total
|
$
|
30
|
|
|
$
|
17
|
|
The ending reserve balance for the 2016 restructuring plan was
$23 million
as of December 31, 2016. For the
three
months ended
March 31, 2017
, we have reduced the reserve for the 2016 restructuring plan by
$6 million
. The reductions primarily related to cash payments for employee severance costs.
|
|
11.
|
Segment and Related Information
|
We have
three
reportable segments: Ratings, Market and Commodities Intelligence and Indices. Our Chief Executive Officer is our chief operating decision-maker and evaluates performance of our segments and allocates resources based primarily on operating profit. Segment operating profit does not include unallocated expense or interest expense as these are costs that do not affect the operating results of our segments.
A summary of operating results by segment for the three months ended
March 31
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
(in millions)
|
Revenue
|
|
Operating Profit
|
|
Revenue
|
|
Operating Profit
|
Ratings
1
|
$
|
714
|
|
|
$
|
376
|
|
|
$
|
552
|
|
|
$
|
262
|
|
Market and Commodities Intelligence
2
|
593
|
|
|
186
|
|
|
661
|
|
|
183
|
|
Indices
3
|
171
|
|
|
115
|
|
|
151
|
|
|
101
|
|
Intersegment elimination
4
|
(25
|
)
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
Total operating segments
|
1,453
|
|
|
677
|
|
|
1,341
|
|
|
546
|
|
Unallocated expense
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(34
|
)
|
Total
|
$
|
1,453
|
|
|
$
|
648
|
|
|
$
|
1,341
|
|
|
$
|
512
|
|
|
|
1
|
Operating profit for 2017 includes legal settlement expenses of
$2 million
. Operating profit for 2016 includes a benefit related to net legal settlement insurance recoveries of
$12 million
. Operating profit for 2017 and 2016 also includes amortization of intangibles from acquisitions of
$1 million
.
|
|
|
2
|
Operating profit for 2017 includes non-cash acquisition and disposition-related adjustments of
$15 million
. Operating profit for 2016 includes a technology-related impairment charge of
$24 million
and disposition-related costs of
$3 million
. Operating profit for
2017
and
2016
also includes amortization of intangibles from acquisitions of
$22 million
.
|
|
|
3
|
Operating profit for 2017 and 2016 includes amortization of intangibles from acquisitions of
$1 million
.
|
|
|
4
|
Revenue for Ratings and expenses for Market and Commodities Intelligence include an intersegment royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings.
|
The following provides revenue by geographic region for the three months ended
March 31
:
|
|
|
|
|
|
|
|
|
(in millions)
|
2017
|
|
2016
|
U.S.
|
$
|
891
|
|
|
$
|
840
|
|
European region
|
346
|
|
|
297
|
|
Asia
|
132
|
|
|
137
|
|
Rest of the world
|
84
|
|
|
67
|
|
Total
|
$
|
1,453
|
|
|
$
|
1,341
|
|
See Note 2
—
Acquisitions and Divestitures
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 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
months ended
March 31, 2017
, S&P Dow Jones Indices LLC earned
$18 million
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.
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.
With respect to the matters identified below, we have recognized a liability when both (a) information available indicates that it is probable that a liability has been incurred as of the date of these financial statements and (b) the amount of loss can reasonably be estimated.
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. Included in these civil cases are
seven
lawsuits in Australia against the Company and Standard & Poor’s International, LLC relating to alleged investment losses in collateralized debt obligations (“CDOs”) rated by S&P Global Ratings. Discovery in certain of these cases, including the Australia matters, 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.
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
In 2014, the prosecutor in the Italian city of Trani 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 were 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 on March 30, 2017, the court in Trani issued an oral verdict acquitting each of the individual defendants and Standard & Poor’s Credit Market Services Europe of all charges. The court will issue a written opinion supporting the verdict, and the prosecutor will then have the right to appeal. If the prosecutor appeals and the verdict is reversed, a conviction could result in criminal penalties , as well as 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.
In December 2016, the court issued
two
orders granting the motions to dismiss in both the North Miami Beach and the Grika matters. In January 2017, the plaintiffs in the North Miami Beach and Grika matters filed notices of appeal of the court’s dismissal of those actions.
|
|
13.
|
Recently Issued or Adopted Accounting Standards
|
In March of 2017, FASB issued guidance to enhance the presentation of net periodic pension cost and net periodic postretirement benefit cost. The guidance requires employers to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period, and requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component outside a subtotal of income from operations, if one is presented. Additionally, only the service cost component is eligible for capitalization, when applicable. The guidance is effective for reporting periods beginning after December 15, 2017; however, early adoption is permitted. We are currently assessing the impact of this guidance on our consolidated financial statements.
In January of 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance is effective for reporting periods beginning after December 15, 2019; however, early adoption is permitted. We do not expect this guidance to have a significant impact on our consolidated financial statements.
In January of 2017, the FASB issued guidance that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance 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 August of 2016, the 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 modify 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. This guidance requires recognizing excess tax benefits and deficiencies as income tax expense or benefit in the statement of income, instead of in equity. The guidance was effective on January 1, 2017 and was adopted as follows: 1) prospectively for the recognition of excess tax benefits and deficiencies in the tax provision, 2) retrospectively for the classification of excess tax benefits and deficiencies in the statement of cash flows, and 3) retrospectively for the classification of cash paid for shares withheld to satisfy employee taxes in the statement of cash flows. For the three months ended March 31, 2017, excess tax benefits from share-based payments of
$11 million
were recognized as an income tax benefit in our consolidated statements of income and classified as an operating activity in our consolidated statements of cash flows. For the three months ended March 31, 2016, we reclassified
$6 million
of excess tax benefits from share-based payments from a financing activity to an operating activity in our consolidated statements of cash flows. In addition, cash paid for shares withheld on the employees' behalf of
$44 million
was classified as a financing activity in our consolidated statements of cash flows for the three months ended March 31, 2017. Cash paid for employee taxes of
$46 million
was reclassified from an operating activity to a financing activity in our consolidated statements of cash flows for the three months ended March 31, 2016.
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 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 arrangements. In August of 2015, the FASB issued guidance deferring the effective date of the new revenue standard by one year. 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. 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. We are currently anticipating using the modified retrospective transition method and evaluating the impact that the adoption of these updates will have on our consolidated financial statements. We are also in the process of evaluating potential changes to our accounting policies, business processes, systems and internal controls to support the recognition and disclosure requirements under the new standard. At this point, we believe the new standard will have an impact on: 1) the accounting for certain long-term deferred revenue in our Ratings segment which may contain a financing component, 2) the timing of revenue recognized in our Market and Commodities Intelligence segment for long-term contracts with price escalations, and 3) the accounting for fees for historical data in our Market and Commodities Intelligence segment currently recognized over the term of a subscription. We do not expect these changes to have a significant impact on our consolidated financial statements.
|
|
14.
|
Condensed Consolidating Financial Statements
|
On September 22, 2016, we issued
$500 million
of
2.95%
senior notes due in 2027. On May 26, 2015, we issued
$700 million
of
4.0%
senior notes due in 2025. On August 18, 2015, we issued
$2.0 billion
of senior notes, consisting of
$400 million
of
2.5%
senior notes due in 2018,
$700 million
of
3.3%
senior notes due in 2020 and
$900 million
of
4.4%
senior notes due in 2026. See Note 4
—
Debt
for additional information.
The senior notes described above are fully and unconditionally guaranteed by Standard & Poor's Financial Services LLC, a
100%
owned subsidiary of the Company. The following condensed consolidating financial statements present the results of operations, financial position and cash flows of S&P Global Inc., Standard & Poor's Financial Services LLC, and the Non-Guarantor Subsidiaries of S&P Global Inc. and Standard & Poor's Financial Services LLC, and the eliminations necessary to arrive at the information for the Company on a consolidated basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Income
|
|
Three Months Ended March 31, 2017
|
|
(Unaudited)
|
(in millions)
|
S&P Global Inc.
|
|
Standard & Poor's Financial Services LLC
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
S&P Global Inc. Consolidated
|
Revenue
|
$
|
180
|
|
|
$
|
438
|
|
|
$
|
867
|
|
|
$
|
(32
|
)
|
|
$
|
1,453
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Operating-related expenses
|
31
|
|
|
119
|
|
|
293
|
|
|
(32
|
)
|
|
411
|
|
Selling and general expenses
|
20
|
|
|
88
|
|
|
243
|
|
|
—
|
|
|
351
|
|
Depreciation
|
7
|
|
|
3
|
|
|
9
|
|
|
—
|
|
|
19
|
|
Amortization of intangibles
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Total expenses
|
58
|
|
|
210
|
|
|
569
|
|
|
(32
|
)
|
|
805
|
|
Operating profit
|
122
|
|
|
228
|
|
|
298
|
|
|
—
|
|
|
648
|
|
Interest expense (income), net
|
39
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
37
|
|
Non-operating intercompany transactions
|
82
|
|
|
(19
|
)
|
|
(901
|
)
|
|
838
|
|
|
—
|
|
Income before taxes on income
|
1
|
|
|
247
|
|
|
1,201
|
|
|
(838
|
)
|
|
611
|
|
(Benefit) provision for taxes on income
|
(11
|
)
|
|
99
|
|
|
93
|
|
|
—
|
|
|
181
|
|
Equity in net income of subsidiaries
|
1,224
|
|
|
—
|
|
|
—
|
|
|
(1,224
|
)
|
|
—
|
|
Net income
|
$
|
1,236
|
|
|
$
|
148
|
|
|
$
|
1,108
|
|
|
$
|
(2,062
|
)
|
|
$
|
430
|
|
Less: net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
(31
|
)
|
Net income attributable to S&P Global Inc.
|
$
|
1,236
|
|
|
$
|
148
|
|
|
$
|
1,108
|
|
|
$
|
(2,093
|
)
|
|
$
|
399
|
|
Comprehensive income
|
$
|
1,238
|
|
|
$
|
147
|
|
|
$
|
1,147
|
|
|
$
|
(2,064
|
)
|
|
$
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Income
|
|
Three Months Ended March 31, 2016
|
|
(Unaudited)
|
(in millions)
|
S&P Global Inc.
|
|
Standard & Poor's Financial Services LLC
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
S&P Global Inc. Consolidated
|
Revenue
|
$
|
171
|
|
|
$
|
342
|
|
|
$
|
859
|
|
|
$
|
(31
|
)
|
|
$
|
1,341
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Operating-related expenses
|
22
|
|
|
139
|
|
|
323
|
|
|
(31
|
)
|
|
453
|
|
Selling and general expenses
|
21
|
|
|
35
|
|
|
278
|
|
|
—
|
|
|
334
|
|
Depreciation
|
9
|
|
|
2
|
|
|
7
|
|
|
—
|
|
|
18
|
|
Amortization of intangibles
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Total expenses
|
52
|
|
|
176
|
|
|
632
|
|
|
(31
|
)
|
|
829
|
|
Operating profit
|
119
|
|
|
166
|
|
|
227
|
|
|
—
|
|
|
512
|
|
Interest expense (income), net
|
42
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
40
|
|
Non-operating intercompany transactions
|
74
|
|
|
(5
|
)
|
|
(497
|
)
|
|
428
|
|
|
—
|
|
Income before taxes on income
|
3
|
|
|
171
|
|
|
726
|
|
|
(428
|
)
|
|
472
|
|
Provision for taxes on income
|
—
|
|
|
57
|
|
|
92
|
|
|
—
|
|
|
149
|
|
Equity in net income of subsidiaries
|
791
|
|
|
71
|
|
|
—
|
|
|
(862
|
)
|
|
—
|
|
Net income
|
$
|
794
|
|
|
$
|
185
|
|
|
$
|
634
|
|
|
$
|
(1,290
|
)
|
|
$
|
323
|
|
Less: net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
(29
|
)
|
Net income attributable to S&P Global Inc.
|
$
|
794
|
|
|
$
|
185
|
|
|
$
|
634
|
|
|
$
|
(1,319
|
)
|
|
$
|
294
|
|
Comprehensive income
|
$
|
802
|
|
|
$
|
185
|
|
|
$
|
646
|
|
|
$
|
(1,290
|
)
|
|
$
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
March 31, 2017
|
|
(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
|
$
|
627
|
|
|
$
|
—
|
|
|
$
|
1,784
|
|
|
$
|
—
|
|
|
$
|
2,411
|
|
Accounts receivable, net of allowance for doubtful accounts
|
129
|
|
|
188
|
|
|
791
|
|
|
—
|
|
|
1,108
|
|
Intercompany receivable
|
2,737
|
|
|
3,287
|
|
|
1,913
|
|
|
(7,937
|
)
|
|
—
|
|
Prepaid and other current assets
|
63
|
|
|
(1
|
)
|
|
83
|
|
|
(1
|
)
|
|
144
|
|
Total current assets
|
3,556
|
|
|
3,474
|
|
|
4,571
|
|
|
(7,938
|
)
|
|
3,663
|
|
Property and equipment, net of accumulated depreciation
|
150
|
|
|
1
|
|
|
114
|
|
|
—
|
|
|
265
|
|
Goodwill
|
261
|
|
|
—
|
|
|
2,690
|
|
|
9
|
|
|
2,960
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
1,474
|
|
|
—
|
|
|
1,474
|
|
Investments in subsidiaries
|
5,970
|
|
|
5
|
|
|
8,663
|
|
|
(14,638
|
)
|
|
—
|
|
Intercompany loans receivable
|
17
|
|
|
—
|
|
|
1,503
|
|
|
(1,520
|
)
|
|
—
|
|
Other non-current assets
|
148
|
|
|
26
|
|
|
118
|
|
|
—
|
|
|
292
|
|
Total assets
|
$
|
10,102
|
|
|
$
|
3,506
|
|
|
$
|
19,133
|
|
|
$
|
(24,087
|
)
|
|
$
|
8,654
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
56
|
|
|
$
|
14
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
162
|
|
Intercompany payable
|
4,379
|
|
|
2,392
|
|
|
1,166
|
|
|
(7,937
|
)
|
|
—
|
|
Accrued compensation and contributions to retirement plans
|
86
|
|
|
22
|
|
|
97
|
|
|
—
|
|
|
205
|
|
Income taxes currently payable
|
163
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
243
|
|
Unearned revenue
|
279
|
|
|
215
|
|
|
1,016
|
|
|
—
|
|
|
1,510
|
|
Other current liabilities
|
129
|
|
|
12
|
|
|
208
|
|
|
|
|
349
|
|
Total current liabilities
|
5,092
|
|
|
2,655
|
|
|
2,659
|
|
|
(7,937
|
)
|
|
2,469
|
|
Long-term debt
|
3,565
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,565
|
|
Intercompany loans payable
|
11
|
|
|
—
|
|
|
1,509
|
|
|
(1,520
|
)
|
|
—
|
|
Pension and other postretirement benefits
|
194
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
271
|
|
Other non-current liabilities
|
56
|
|
|
71
|
|
|
299
|
|
|
(1
|
)
|
|
425
|
|
Total liabilities
|
8,918
|
|
|
2,726
|
|
|
4,544
|
|
|
(9,458
|
)
|
|
6,730
|
|
Redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
1,080
|
|
|
1,080
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Common stock
|
412
|
|
|
—
|
|
|
2,386
|
|
|
(2,386
|
)
|
|
412
|
|
Additional paid-in capital
|
(218
|
)
|
|
583
|
|
|
11,308
|
|
|
(11,203
|
)
|
|
470
|
|
Retained income
|
10,148
|
|
|
197
|
|
|
1,388
|
|
|
(2,224
|
)
|
|
9,509
|
|
Accumulated other comprehensive loss
|
(291
|
)
|
|
—
|
|
|
(486
|
)
|
|
42
|
|
|
(735
|
)
|
Less: common stock in treasury
|
(8,867
|
)
|
|
—
|
|
|
(8
|
)
|
|
8
|
|
|
(8,867
|
)
|
Total equity - controlling interests
|
1,184
|
|
|
780
|
|
|
14,588
|
|
|
(15,763
|
)
|
|
789
|
|
Total equity - noncontrolling interests
|
—
|
|
|
—
|
|
|
1
|
|
|
54
|
|
|
55
|
|
Total equity
|
1,184
|
|
|
780
|
|
|
14,589
|
|
|
(15,709
|
)
|
|
844
|
|
Total liabilities and equity
|
$
|
10,102
|
|
|
$
|
3,506
|
|
|
$
|
19,133
|
|
|
$
|
(24,087
|
)
|
|
$
|
8,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
|
December 31, 2016
|
(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
|
$
|
711
|
|
|
$
|
—
|
|
|
$
|
1,681
|
|
|
$
|
—
|
|
|
$
|
2,392
|
|
Accounts receivable, net of allowance for doubtful accounts
|
138
|
|
|
131
|
|
|
853
|
|
|
—
|
|
|
1,122
|
|
Intercompany receivable
|
(165
|
)
|
|
837
|
|
|
870
|
|
|
(1,542
|
)
|
|
—
|
|
Prepaid and other current assets
|
77
|
|
|
2
|
|
|
79
|
|
|
(1
|
)
|
|
157
|
|
Total current assets
|
761
|
|
|
970
|
|
|
3,483
|
|
|
(1,543
|
)
|
|
3,671
|
|
Property and equipment, net of accumulated depreciation
|
159
|
|
|
1
|
|
|
111
|
|
|
—
|
|
|
271
|
|
Goodwill
|
261
|
|
|
—
|
|
|
2,679
|
|
|
9
|
|
|
2,949
|
|
Other intangible assets, net
|
—
|
|
|
—
|
|
|
1,506
|
|
|
—
|
|
|
1,506
|
|
Investments in subsidiaries
|
5,464
|
|
|
680
|
|
|
7,826
|
|
|
(13,970
|
)
|
|
—
|
|
Intercompany loans receivable
|
17
|
|
|
—
|
|
|
1,354
|
|
|
(1,371
|
)
|
|
—
|
|
Other non-current assets
|
134
|
|
|
24
|
|
|
114
|
|
|
—
|
|
|
272
|
|
Total assets
|
$
|
6,796
|
|
|
$
|
1,675
|
|
|
$
|
17,073
|
|
|
$
|
(16,875
|
)
|
|
$
|
8,669
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
73
|
|
|
$
|
22
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
183
|
|
Intercompany payable
|
1,324
|
|
|
40
|
|
|
177
|
|
|
(1,541
|
)
|
|
—
|
|
Accrued compensation and contributions to retirement plans
|
129
|
|
|
69
|
|
|
211
|
|
|
—
|
|
|
409
|
|
Income taxes currently payable
|
43
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
95
|
|
Unearned revenue
|
273
|
|
|
191
|
|
|
1,045
|
|
|
—
|
|
|
1,509
|
|
Other current liabilities
|
165
|
|
|
(51
|
)
|
|
301
|
|
|
—
|
|
|
415
|
|
Total current liabilities
|
2,007
|
|
|
271
|
|
|
1,874
|
|
|
(1,541
|
)
|
|
2,611
|
|
Long-term debt
|
3,564
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,564
|
|
Intercompany loans payable
|
11
|
|
|
—
|
|
|
1,360
|
|
|
(1,371
|
)
|
|
—
|
|
Pension and other postretirement benefits
|
196
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
274
|
|
Other non-current liabilities
|
52
|
|
|
74
|
|
|
314
|
|
|
(1
|
)
|
|
439
|
|
Total liabilities
|
5,830
|
|
|
345
|
|
|
3,626
|
|
|
(2,913
|
)
|
|
6,888
|
|
Redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
1,080
|
|
|
1,080
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Common stock
|
412
|
|
|
—
|
|
|
2,460
|
|
|
(2,460
|
)
|
|
412
|
|
Additional paid-in capital
|
(174
|
)
|
|
1,154
|
|
|
10,485
|
|
|
(10,963
|
)
|
|
502
|
|
Retained income
|
9,721
|
|
|
176
|
|
|
1,034
|
|
|
(1,721
|
)
|
|
9,210
|
|
Accumulated other comprehensive loss
|
(292
|
)
|
|
—
|
|
|
(525
|
)
|
|
44
|
|
|
(773
|
)
|
Less: common stock in treasury
|
(8,701
|
)
|
|
—
|
|
|
(7
|
)
|
|
7
|
|
|
(8,701
|
)
|
Total equity - controlling interests
|
966
|
|
|
1,330
|
|
|
13,447
|
|
|
(15,093
|
)
|
|
650
|
|
Total equity - noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
51
|
|
Total equity
|
966
|
|
|
1,330
|
|
|
13,447
|
|
|
(15,042
|
)
|
|
701
|
|
Total liabilities and equity
|
$
|
6,796
|
|
|
$
|
1,675
|
|
|
$
|
17,073
|
|
|
$
|
(16,875
|
)
|
|
$
|
8,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows
|
|
Three Months Ended March 31, 2017
|
|
(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
|
$
|
1,236
|
|
|
$
|
148
|
|
|
$
|
1,108
|
|
|
$
|
(2,062
|
)
|
|
$
|
430
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
7
|
|
|
3
|
|
|
9
|
|
|
—
|
|
|
19
|
|
Amortization of intangibles
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Provision for losses on accounts receivable
|
1
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
5
|
|
Deferred income taxes
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Stock-based compensation
|
7
|
|
|
4
|
|
|
8
|
|
|
—
|
|
|
19
|
|
Other
|
6
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
14
|
|
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
8
|
|
|
(59
|
)
|
|
63
|
|
|
—
|
|
|
12
|
|
Prepaid and other current assets
|
8
|
|
|
3
|
|
|
(2
|
)
|
|
—
|
|
|
9
|
|
Accounts payable and accrued expenses
|
(61
|
)
|
|
12
|
|
|
(186
|
)
|
|
—
|
|
|
(235
|
)
|
Unearned revenue
|
5
|
|
|
25
|
|
|
(36
|
)
|
|
—
|
|
|
(6
|
)
|
Accrued legal settlements
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Other current liabilities
|
(35
|
)
|
|
(3
|
)
|
|
(20
|
)
|
|
—
|
|
|
(58
|
)
|
Net change in prepaid/accrued income taxes
|
123
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
146
|
|
Net change in other assets and liabilities
|
(6
|
)
|
|
(4
|
)
|
|
(14
|
)
|
|
—
|
|
|
(24
|
)
|
Cash provided by operating activities
|
1,298
|
|
|
129
|
|
|
988
|
|
|
(2,062
|
)
|
|
353
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(4
|
)
|
|
(4
|
)
|
|
(15
|
)
|
|
—
|
|
|
(23
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Proceeds from dispositions
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Cash used for investing activities
|
(4
|
)
|
|
(4
|
)
|
|
(14
|
)
|
|
—
|
|
|
(22
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Dividends paid to shareholders
|
(106
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
Dividends and other payments paid to noncontrolling interests
|
—
|
|
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
Repurchase of treasury shares
|
(201
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(201
|
)
|
Exercise of stock options
|
29
|
|
|
—
|
|
|
|
|
—
|
|
|
29
|
|
Employee withholding tax on share-based payments
|
(44
|
)
|
|
—
|
|
|
|
|
—
|
|
|
(44
|
)
|
Intercompany financing activities
|
(1,056
|
)
|
|
(125
|
)
|
|
(881
|
)
|
|
2,062
|
|
|
—
|
|
Cash used for financing activities
|
(1,378
|
)
|
|
(125
|
)
|
|
(905
|
)
|
|
2,062
|
|
|
(346
|
)
|
Effect of exchange rate changes on cash from continuing operations
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
Net change in cash and cash equivalents
|
(84
|
)
|
|
—
|
|
|
103
|
|
|
—
|
|
|
19
|
|
Cash and cash equivalents at beginning of period
|
711
|
|
|
—
|
|
|
1,681
|
|
|
—
|
|
|
2,392
|
|
Cash and cash equivalents at end of period
|
$
|
627
|
|
|
$
|
—
|
|
|
$
|
1,784
|
|
|
$
|
—
|
|
|
$
|
2,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows
|
|
Three Months Ended March 31, 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
|
$
|
794
|
|
|
$
|
185
|
|
|
$
|
634
|
|
|
$
|
(1,290
|
)
|
|
$
|
323
|
|
Adjustments to reconcile net income to cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
9
|
|
|
2
|
|
|
7
|
|
|
—
|
|
|
18
|
|
Amortization of intangibles
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Provision for losses on accounts receivable
|
—
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Deferred income taxes
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Stock-based compensation
|
4
|
|
|
3
|
|
|
7
|
|
|
—
|
|
|
14
|
|
Other
|
3
|
|
|
3
|
|
|
25
|
|
|
—
|
|
|
31
|
|
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
(7
|
)
|
|
153
|
|
|
(153
|
)
|
|
—
|
|
|
(7
|
)
|
Prepaid and other current assets
|
5
|
|
|
(3
|
)
|
|
(14
|
)
|
|
—
|
|
|
(12
|
)
|
Accounts payable and accrued expenses
|
(52
|
)
|
|
(89
|
)
|
|
(96
|
)
|
|
—
|
|
|
(237
|
)
|
Unearned revenue
|
15
|
|
|
(374
|
)
|
|
398
|
|
|
—
|
|
|
39
|
|
Accrued legal settlements
|
—
|
|
|
(108
|
)
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
Other current liabilities
|
(10
|
)
|
|
(19
|
)
|
|
53
|
|
|
—
|
|
|
24
|
|
Net change in prepaid/accrued income taxes
|
104
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
105
|
|
Net change in other assets and liabilities
|
(17
|
)
|
|
30
|
|
|
(44
|
)
|
|
—
|
|
|
(31
|
)
|
Cash provided by (used for) operating activities
|
847
|
|
|
(216
|
)
|
|
844
|
|
|
(1,290
|
)
|
|
185
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(4
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
—
|
|
|
(16
|
)
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
Changes in short-term investments
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Cash used for investing activities
|
(4
|
)
|
|
(4
|
)
|
|
(16
|
)
|
|
—
|
|
|
(24
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Additions to short-term debt, net
|
329
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
329
|
|
Dividends paid to shareholders
|
(96
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(96
|
)
|
Dividends and other payments paid to noncontrolling interests
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
Repurchase of treasury shares
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
Exercise of stock options
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
Employee withholding tax on share-based payments
|
(46
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46
|
)
|
Intercompany financing activities
|
(838
|
)
|
|
220
|
|
|
(672
|
)
|
|
1,290
|
|
|
—
|
|
Cash (used for) provided by financing activities
|
(846
|
)
|
|
220
|
|
|
(705
|
)
|
|
1,290
|
|
|
(41
|
)
|
Effect of exchange rate changes on cash from continuing operations
|
7
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(1
|
)
|
Net change in cash and cash equivalents
|
4
|
|
|
—
|
|
|
115
|
|
|
—
|
|
|
119
|
|
Cash and cash equivalents at beginning of period
|
167
|
|
|
—
|
|
|
1,314
|
|
|
—
|
|
|
1,481
|
|
Cash and cash equivalents at end of period
|
$
|
171
|
|
|
$
|
—
|
|
|
$
|
1,429
|
|
|
$
|
—
|
|
|
$
|
1,600
|
|