S&p Global Inc. · NYSE:SPGI
S&p Global — The McGraw-Hill Companies — Q4 2011 Earnings Presentation
30 slides from S&p Global's earnings presentation, Jan 31, 2012
Slide 1: 4Q 2011 Earnings Call
4Q 2011 Earnings Call January 31, 2012 PRESENTERS Harold McGraw III Chairman, President and CEO Jack Callahan Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations Donald S. Rubin Senior Vice President, Investor Relations The McGraw-Hill Companies 1
Slide 2: Comparison of adjusted information to U.S. GAAP information
Comparison of adjusted information to U.S. GAAP information This presentation includes adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s business from the sa
Slide 3: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements, including without limitation statements relating to our businesses and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investm
Slide 4: 4Q 2011: Strong performance despite challenging market conditions
The McGraw-Hill Companies 2011: Solid Performance 2011: Milestone Year for the Corporation McGraw-Hill Financial: Growth in Volatile Markets McGraw-Hill Education: Repositioning for the Digital World 2012: A Momentous Year for Change 6 4Q 2011: Strong performance despite challenging market condition
Slide 5: FY 2011: Second best performance in MHP's history from continuing operations
FY 2011: Second best performance in MHP’s history from continuing operations The McGraw-Hill Companies FY 2011 FY 2010 Change Revenue $6.2 billion $6.1 billion +3% Adjusted $883 million $836 million +6% Net Income* Adjusted EPS* $2.91 $2.68 +9% * From continuing operations. Results reflect reclassif
Slide 6: 2011: Milestone year for The McGraw-Hill Companies
2011: Milestone year for The McGraw-Hill Companies 1. Announcement in September 2011 of Growth and Value Plan to create two strong public companies: McGraw-Hill Financial McGraw-Hill Education 2. Significant and rapid progress in realizing the promise of the Growth and Value Plan 4Q restructur
Slide 7: Growth and Value Plan: Significant actions to facilitate separation
Growth and Value Plan: Significant actions to facilitate separation • Massive global effort to create two efficiently sized corporate structures and separate shared services Established and staffed a Program Management Office with 17 work streams • Teams focused on growth opportunities, transaction
Slide 8: Growth and Value Plan: Making strategic investments to drive future growth
Growth and Value Plan: Making strategic investments to drive future growth • Common theme for investments: Create valuable benchmarks that become deeply embedded in workflow of customers Acquired BENTEK Energy and Steel Business Briefing Group to expands Platts’ platform 14 Growth and Value Plan: M
Slide 9: Growth and Value Plan: Continue to return wealth to our shareholders
Growth and Value Plan: Continue to return wealth to our shareholders • $1.5 billion in share repurchases in 2011 $1 billion share repurchase completed over the course of the year $500 million accelerated share repurchase transaction initiated in December $845 million of the total was spent in 4Q
Slide 10: Pro-forma McGraw-Hill Financial: Driven by high-value content and analytics
Pro-forma McGraw-Hill Financial: Driven by high-value content and analytics Newly named McGraw-Hill Financial 2011 2010 Change Revenue $4.0 billion $3.6 billion +9% Adj. Segment Op. Profit $1.3 billion $1.2 billion +7% Adj. Segment Op. Margin 33% 34% 18 S&P Capital IQ and S&P Indices: A resilient re
Slide 11: S&P Indices and S&P Capital IQ: Growth in 2011
S&P Indices S&P Indices FY 2011 FY 2010 Change Revenue $323 million $273 million +18% • How S&P Indices generate revenue: Fees based on assets under management in exchange-traded funds linked to S&P Indices • $314 billion in assets under management at year-end 2011, a 4.5% year-over- year increase
Slide 12: Standard & Poor's Ratings grew in 2011
Standard & Poor’s Ratings grew in 2011 Standard & Poor’s Ratings FY 2011 FY 2010 Change Revenue $1.8 billion $1.7 billion +4% Adj. Segment Op. Profit $728 million $755 million -4% Adj. Segment Op. Margin 41% 45% • Ratings grew despite lackluster new-issue dollar volume in the closing months of 2011
Slide 13: Outlook for regulatory costs
Outlook for regulatory costs • S&P’s regulatory framework regulatory focuses on four key areas: Quality, Criteria, Compliance and Risk Management (QCCR) • Costs for QCCR: 2011: On target 2012: Expected to increase slightly 24 Outlook for 2012: Anticipate volatility but optimistic about longer term
Slide 14: Progress on regulatory front
Progress on regulatory front • Mounting criticism of CRA-3, the European Commission’s latest proposal for regulating rating agencies Push back is coming from market participants and European Securities and Markets Authority (ESMA) • Criticism is focused on proposed mandatory rotation of coverage am
Slide 15: Latest developments on litigation front
Latest developments on litigation front • Court issued a ruling in the CalPERS case in early January 2012 We strongly disagree with Court’s ruling that CalPERS had made sufficient showing to allow case to proceed • S&P will be appealing the Court’s decision No pre-trial discovery while appeal is p
Slide 16: Commodities and Commercial
Commodities and Commercial Commodities and Commercial (formerly Information & Media segment) FY 2011 FY 2010 Change Revenue $896 million $811 million +10% Adj. Segment Op. Profit* $186 million $164 million +13% Adj. Segment Op. Margin* 21% 20% Note: - Results are based on continuing operations and r
Slide 17: Commodities & Commercial: Expect another year of growth in 2012
Commodities & Commercial: Expect another year of growth in 2012 Commercial FY 2011 FY 2010 Change Revenue $477 million $467 million +2% Note: Results are based on continuing operations • Positive factors: Demand for automotive studies will be fueled by continued strength in emerging markets, includ
Slide 18: McGraw-Hill Education: A strong finish
The McGraw-Hill Companies 2011: Solid Performance 2011: Milestone Year for the Corporation McGraw-Hill Financial: Growth in Volatile Markets McGraw-Hill Education: Repositioning for the Digital World 2012: A Momentous Year for Change 34 McGraw-Hill Education: A strong finish McGraw-Hill Education Se
Slide 19: Growth of digital is fundamentally changing the higher education, professional markets
McGraw-Hill Education: A strong finish • Factors in 2011 performance: • A strong finish in U.S. higher education helped produce 4% revenue growth to $516 million for McGraw-Hill Education in 4Q • Lower purchasing levels in the el-hi market were offset by tight expense controls, lower prepublication
Slide 20: Digital evolution is picking up speed in the elementary-high school market
Digital evolution is picking up speed in the elementary-high school market • 2011: McGraw-Hill became the first educational publisher to launch a digital, cloud-based curriculum CINCH Learning programs for science and math Available on any computer, tablet, or mobile device 38 Digital evolution is
Slide 21: Digital evolution is picking up speed in the elementary-high school market
Digital evolution is picking up speed in the elementary-high school market • 2011: Decline in school education reflects historically low funding Sales in the el-hi market decreased by 9.4% in 2011 to about $3.3 billion according to the Association of American publishers Our performance was heavily
Slide 22: The McGraw-Hill Companies
The McGraw-Hill Companies • 2011: Enormous change Year produced enormous change for MHP in a short period of time Recorded second best results in our history • Outlook for 2012: Introduction of two separate companies See another challenging year in our markets Confident in the strength of our b
Slide 23: Jack Callahan
Jack Callahan Executive Vice President and Chief Financial Officer The McGraw-Hill Companies 44 4Q 2011: Operating performance Revenue Adjusted Segment (Dollars in millions, % growth year-over-year) Operating Profit (Dollars in millions; % growth year-over-year) Flat - 8% $1,004 $300 + 4% $516 +++ $
Slide 24: McGraw-Hill Financial: 4Q 2011 results by segment
McGraw-Hill Financial: 4Q 2011 results by segment Revenue* Adjusted Segment (Dollars in millions, % growth year-over-year) Operating Profit (Dollars in millions; % growth year-over-year) Total: $1,004 million Total: $300 million Growth: Flat Growth: - 8% - 8% +8% -24% $434 +8% $348 $156 +29% $239 +2
Slide 25: Adjusted earnings per share from continuing operations
Adjusted earnings per share from continuing operations 4Q % FY % ( in millions, except EPS) 2011 Change 2011 Change Adjusted income $191 +9% $906 +6% Less: Adjusted net income attributable to $7 Flat $23 +5% noncontrolling interests Adjusted net income $184 +10% $883 +6% Shares outstanding 292 -6% 3
Slide 26: 2011: Another year of strong cash flow
2011: Another year of strong cash flow (dollars in millions) 2011 2010 Cash provided by operating activities $1,344 $1,458 Investment in prepublication costs (158) (151) Capital expenditures (119) (115) Dividends paid to shareholders (296) (292) Dividends paid to noncontrolling interests (12) (19) T
Slide 27: 2012: Complex undertaking to separate global operations
2012: Complex undertaking to separate global operations • Focus on separation before the end of 2012 requires coordination of multiple complex work streams • Cost reduction program involves disaggregating shared services and establishing two appropriately- sized corporate centers • Wave 1 of the cos
Slide 28: 2012: Baseline guidance
2012: Baseline guidance 2012 Growth ~ Upper ~ Upper single digits single digits McGraw-Hill Financial Revenue Adj. Segment Op. Profit McGraw-Hill EPS projections assume Education relatively flat revenue and profits EPS $3.25 – $3.35 +12% – 15% NOTE: 2011 and 2012 results exclude restructuring charge
Slide 29: Strong outlook and balance sheet provide flexibility in anticipation of separation
Strong outlook and balance sheet provide flexibility in anticipation of separation • Net cash and short-term investments As of December 31, 2011: $973 million $575 million decline from December 31, 2010, largely in support of acquisitions and share repurchases • Gross debt: Approximately $1.2 bi
Slide 30: 4Q 2011 Earnings Call
4Q 2011 Earnings Call January 31, 2012 REPLAY OPTIONS Internet replay available for one year Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts Telephone replay available through March 1, 2012 Domestic: 800-933-9003 International
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