S&P GLOBAL INC., 10-Q filed on 7/25/2013
Quarterly Report
Document and Entity Information
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jul. 19, 2013
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
MCGRAW HILL FINANCIAL INC 
 
Entity Central Index Key
0000064040 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2013 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
275.2 
Consolidated Statements of Income (Unaudited) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Income Statement [Abstract]
 
 
 
 
Revenue
$ 1,250 
$ 1,072 
$ 2,431 
$ 2,108 
Expenses:
 
 
 
 
Operating-related expenses
397 
351 
771 
713 
Selling and general expenses
382 
379 
876 
740 
Depreciation
22 
23 
45 
45 
Amortization of intangibles
13 
11 
25 
20 
Total expenses
814 
764 
1,717 
1,518 
Operating profit
436 
308 
714 
590 
Interest expense, net
16 
21 
31 
42 
Income from continuing operations before taxes on income
420 
287 
683 
548 
Provision for taxes on income
147 
107 
236 
205 
Income from continuing operations
273 
180 
447 
343 
Loss from discontinued operations, net of tax
4 
40 
(27)
4 
Gain on sale of discontinued operations, net of tax
0 
0 
612 
0 
Discontinued operations, net
4 
40 
585 
4 
Net income
277 
220 
1,032 
347 
Less: net income from continuing operations attributable to noncontrolling interests
(23)
(3)
(44)
(8)
Less: net (income) loss from discontinued operations attributable to noncontrolling interests
0 
(1)
1 
0 
Net income
254 
216 
989 
339 
Amounts attributable to The McGraw-Hill Companies, Inc. common shareholders:
 
 
 
 
Income from continuing operations
250 
177 
403 
335 
Income from discontinued operations
4 
39 
586 
4 
Net income
$ 254 
$ 216 
$ 989 
$ 339 
Basic:
 
 
 
 
Income from continuing operations (in usd per share)
$ 0.91 
$ 0.63 
$ 1.45 
$ 1.20 
Income (loss) from discontinued operations (in usd per share)
$ 0.01 
$ 0.14 
$ 2.11 
$ 0.02 
Net income (in usd per share)
$ 0.93 
$ 0.77 
$ 3.57 
$ 1.22 
Diluted:
 
 
 
 
Income from continuing operations (in usd per share)
$ 0.90 
$ 0.62 
$ 1.43 
$ 1.18 
Income (loss) from discontinued operations (in usd per share)
$ 0.01 
$ 0.14 
$ 2.08 
$ 0 
Net income (in usd per share)
$ 0.91 
$ 0.76 
$ 3.52 
$ 1.19 
Average number of common shares outstanding:
 
 
 
 
Basic (in shares)
274.3 
279.7 
277.4 
278.9 
Diluted (in shares)
278.3 
285.3 
281.3 
284.5 
Dividend declared per common share (in usd per share)
$ 0.28 
$ 0.255 
$ 0.56 
$ 0.51 
Consolidated Statements of Income (Unaudited) Parenthetical Disclosure (USD $)
In Millions, unless otherwise specified
3 Months Ended
Jun. 30, 2013
Income Statement [Abstract]
 
Accumulated other comprehensive income reclassifications for foreign currency translation adjustment
$ (75)
Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 277 
$ 220 
$ 1,032 
$ 347 
Other comprehensive income:
 
 
 
 
Foreign currency translation adjustment
(23)
(42)
44 
(25)
Income tax effect, foreign currency translation adjustment
4 
5 
(3)
6 
Foreign currency translation adjustment, net of income tax effect
(19)
(37)
41 
(19)
Pension and other post-retirment benefit plans
(37)
21 
(34)
28 
Income tax effect, pension and other post-retirment benefit plans
9 
(8)
6 
(10)
Pension and other post-retirement benefit plans, net of income tax effect
(28)
13 
(28)
18 
Unrealized loss on investments and forward exchange contracts
(1)
(3)
7 
(2)
Income tax effect, unrealized loss on investments and forward exchange contracts
0 
1 
(4)
1 
Unrealized loss on investments and forward exchange contracts, net of income tax effect
(1)
(2)
3 
(1)
Comprehensive income
229 
194 
1,048 
345 
Less: comprehensive income (loss) attributable to noncontrolling interests
(2)
2 
(5)
(5)
Less: comprehensive income attributable to redeemable noncontrolling interests
(20)
0 
(38)
0 
Comprehensive income attributable to The McGraw-Hill Companies, Inc.
$ 207 
$ 196 
$ 1,005 
$ 340 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and equivalents
$ 1,900 
$ 760 
Accounts receivable, net of allowance for doubtful accounts: 2013 - $50; 2012 - $54
957 
954 
Deferred income taxes
131 
117 
Prepaid and other current assets
119 
128 
Assets held for sale
0 
1,940 
Total current assets
3,107 
3,899 
Property and equipment, net of accumulated depreciation: 2013 - $636; 2012 - $772
340 
368 
Goodwill
1,432 
1,438 
Other intangible assets, net
1,037 
1,081 
Other non-current assets
244 
266 
Total assets
6,160 
7,052 
Current liabilities:
 
 
Accounts payable
227 
249 
Accrued compensation and contributions to retirement plans
310 
453 
Short-term debt
0 
457 
Income taxes currently payable
177 
158 
Unearned revenue
1,284 
1,229 
Other current liabilities
397 
457 
Liabilities held for sale
0 
664 
Total current liabilities
2,395 
3,667 
Long-term debt
799 
799 
Pension and other postretirement benefits
511 
529 
Other non-current liabilities
374 
407 
Total liabilities
4,079 
5,402 
Commitments and contingencies (Note 11)
   
   
Redeemable noncontrolling interest (Note 7)
810 
810 
Equity:
 
 
Common stock
412 
412 
Additional paid-in capital
342 
492 
Retained income
7,348 
6,525 
Accumulated other comprehensive loss
(501)
(517)
Less: common stock in treasury
(6,378)
(6,145)
Total equity - controlling interests
1,223 
767 
Total equity - noncontrolling interests
48 
73 
Total equity
1,271 
840 
Total liabilities and equity
$ 6,160 
$ 7,052 
Consolidated Balance Sheets Balance Sheet Parentheticals (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for Doubtful Accounts Receivable, Current
$ 50 
$ 54 
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment
$ 636 
$ 772 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Operating Activities:
 
 
Net income
$ 1,032 
$ 347 
Less: discontinued operations, net
585 
4 
Net income from continuing operations
447 
343 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
Depreciation (including amortization of technology projects)
45 
45 
Amortization of intangibles
25 
20 
Provision for losses on accounts receivable
14 
9 
Deferred income taxes
4 
3 
Stock-based compensation
47 
40 
Other
9 
18 
Changes in operating assets and liabilities, net of effect of acquisitions:
 
 
Accounts receivable
(11)
(48)
Prepaid and other current assets
(9)
(3)
Accounts payable and accrued expenses
(193)
(205)
Unearned revenue
71 
(3)
Other current liabilities
(40)
(64)
Net change in prepaid/accrued income taxes
(166)
94 
Net change in other assets and liabilities
(17)
(30)
Cash provided by operating activities from continuing operations
226 
219 
Investing Activities:
 
 
Capital expenditures
(43)
(36)
Acquisitions, net of cash acquired
0 
(148)
Changes in short-term investments
0 
26 
Cash used for investing activities from continuing operations
(43)
(158)
Financing Activities:
 
 
Repayments of short-term debt, net
(457)
0 
Dividends paid to shareholders
(156)
(145)
Dividends paid to noncontrolling interests
(38)
(6)
Contingent consideration payment
(12)
0 
Repurchase of treasury shares
(500)
0 
Exercise of stock options
107 
134 
Excess tax benefits from share-based payments
12 
7 
Cash (used for) provided by financing activities from continuing operations
(1,044)
(10)
Effect of exchange rate changes on cash from continuing operations
(36)
(5)
Cash used for continuing operations
(897)
46 
Cash provided by operating activities
(98)
(64)
Cash used for investing activities
2,159 
(85)
Cash used for financing activities
(25)
(5)
Effect of exchange rate changes on cash
1 
0 
Effect of change in cash and equivalents
0 
10 
Cash provided by discontinued operations
2,037 
(144)
Net change in cash and equivalents
1,140 
(98)
Cash and equivalents at beginning of period
760 
835 
Cash and equivalents at end of period
$ 1,900 
$ 737 
Consolidated Statements of Equity Statement (USD $)
In Millions, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Treasury Stock [Member]
Parent [Member]
Noncontrolling Interest [Member]
Balance as of December 31, 2012 at Dec. 31, 2012
$ 840 
$ 412 
$ 492 
$ 6,525 
$ (517)
$ 6,145 
$ 767 
$ 73 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Comprehensive Income1
1,010 
 
 
989 
16 
 
1,005 
5 
Dividends
(165)
 
 
(159)
 
 
(159)
(6)
Noncontrolling interest adjustments2
(21)
 
   
   
 
 
0 
(21)
Shares repurchases
(500)
 
(65)
 
 
435 
(500)
   
Employee stock plans, net of tax benefit
117 
 
(85)
 
 
(202)
117 
 
Change in redemption value of redeemable noncontrolling interest
6 
 
 
6 
 
 
6 
 
Other
(16)
 
 
(13)
 
 
(13)
(3)
Balance as of March 31, 2013 at Jun. 30, 2013
$ 1,271 
$ 412 
$ 342 
$ 7,348 
$ (501)
$ 6,378 
$ 1,223 
$ 48 
Nature of Operations and Basis of Presentation
Nature of Operations and Basis of Presentation
Basis of Presentation

McGraw Hill Financial, Inc. (together with its consolidated subsidiaries, "McGraw Hill Financial," the “Company,” “we,” “us” or “our”) is a leading content and analytics provider serving the capital, commodities and commercial markets. The capital markets include asset managers, banks, exchanges, issuers and financial advisors; the commodities markets include producers, traders and intermediaries within energy, metals, and agriculture; and the commercial markets include professionals and corporate executives within automotive, construction, aerospace and defense and marketing / research information services.

Our operations consist of four reportable segments: Standard & Poor’s Ratings (“S&P Ratings”), S&P Capital IQ, S&P Dow Jones Indices ("S&P DJ Indices") and Commodities & Commercial Markets (“C&C”).
•
S&P Ratings is a provider of credit ratings, offering investors and market participants with information and independent ratings benchmarks.
•
S&P Capital IQ is a global provider of digital and traditional financial research and analytical tools, which integrate cross-asset analytics and desktop services.
•
S&P DJ Indices is a global leading index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
•
C&C consists of business-to-business companies specializing in commodities and commercial markets that deliver their customers access to high-value information, data, analytic services and pricing benchmarks.

We completed the sale of our McGraw-Hill Education business ("MHE") on March 22, 2013 and, accordingly, the results of operations of MHE have been reclassified to reflect the business as a discontinued operation for the three and six months ended June 30, 2013 and 2012. The assets and liabilities of MHE have been removed from the consolidated balance sheet as of June 30, 2013 and classified as held for sale as of December 31, 2012. See Note 2 — Acquisitions and Divestitures for further discussion.

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, as amended, for the year ended December 31, 2012 (our “Form 10-K”).

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 six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the full year. Certain prior-year amounts have been reclassified to conform to the current presentation.

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 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.
Acquisitions and Divestitures
Acquisitions and Divestitures
Acquisitions and Divestitures

Acquisitions

During the six months ended June 30, 2013, we did not complete any acquisitions.

In June of 2013 we made a voluntary open offer to purchase up to an additional 22.23% of the total equity shares outstanding in CRISIL Limited, our majority owned Indian credit rating agency within our S&P Ratings segment. Full acceptance of the offer would increase our total stake in CRISIL to 75% from 52.77%.

As part of CRISIL's acquisition of Coalition Development Ltd. in July of 2012 we made a contingent purchase price payment in the first half of 2013 for $12 million that has been reflected in the consolidated statement of cash flows as a financing activity.

During the six months ended June 30, 2012, we completed the following acquisitions:
•
On June 29, 2012, we closed our transaction with CME Group, Inc. ("CME Group") and CME Group Index Services LLC ("CGIS"), a joint venture between CME Group and Dow Jones & Company, Inc., to form a new company, S&P Dow Jones Indices LLC.
•
On June 29, 2012, we acquired Credit Market Analysis Limited ("CMA") from the CME Group. CMA provides independent data concerning over-the-counter markets. CMA's data and technology will enhance our capability to provide pricing and related over-the-counter information. CMA was integrated into our S&P Capital IQ segment.
•
On April 3, 2012 we completed the acquisition of QuantHouse, an independent global provider of end-to-end systematic low latency market data solutions. QuantHouse was integrated into our S&P Capital IQ segment. The acquisition allows us to offer unique real-time monitors, derived data sets and analytics as well as the ability to package and resell this data as part of a core solution.
•
On February 8, 2012, we completed the acquisition of R² Technologies (“R²”). R² provides advanced risk and scenario-based analytics to traders, portfolio and risk managers for pricing, hedging and capital management across asset classes. R² was integrated into our S&P Capital IQ segment.

None of these acquisitions were material either individually or in the aggregate, including the pro forma impact on earnings.

Divestitures

On July 24, 2013, we announced a definitive agreement to sell Aviation Week within our C&C segment to Penton, a privately held business information company. We expect this transaction will close following the receipt of regulatory approvals and completion of customary closing conditions.

On November 26, 2012, we entered into a definitive agreement to sell MHE to investment funds affiliated with Apollo Global Management, LLC and on March 22, 2013, we completed the sale for a purchase price of $2.4 billion in cash. We recorded an after-tax gain on the sale of $612 million, which is included in discontinued operations, net in the consolidated statement of income for the six months ended June 30, 2013. We have used a portion of the after-tax proceeds from the sale to pay down short-term debt, in part driven by the special dividend paid in 2012, and to continue share repurchases. We will also continue to use a portion of the after-tax proceeds to make selective acquisitions and investments.

In connection with the sale, we have entered into transition service agreements designed to ensure and facilitate the orderly transfer of MHE's business operations to the buyer. Under the terms of these agreements, we will provide various services to MHE for an expected period of three to twelve months from the date of the sale.

The key components of income from discontinued operations for the periods ended June 30 consist of the following:
(in millions)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Revenue
$
—

 
$
474

 
$
268

 
$
769

Expenses
(2
)
 
417

 
312

 
774

Operating income (loss)
2

 
57

 
(44
)
 
(5
)
Interest expense (income), net
—

 
—

 
1

 
(1
)
Income (loss) before taxes on income (loss)
2

 
57

 
(45
)
 
(4
)
(Benefit) provision for taxes on income (loss) 1
(2
)
 
17

 
(18
)
 
(8
)
Income (loss) from discontinued operations, net of tax
4

 
40

 
(27
)
 
4

Pre-tax gain on sale from discontinued operations
—

 
—

 
920

 
—

Provision for taxes on income
—

 
—

 
308

 
—

Gain on sale of discontinued operations, net of tax
—

 
—

 
612

 
—

Discontinued operations, net
4

 
40

 
585

 
4

Less: net (loss) income attributable to noncontrolling interests
—

 
(1
)
 
1

 
—

Income from discontinued operations attributable to McGraw Hill Financial, Inc. common shareholders
$
4

 
$
39

 
$
586

 
$
4


1 
Benefit for taxes on income for the three months ended June 30, 2013 includes certain adjustments to the discontinued operations provision recorded for the three months ended March 31, 2013.

The components of assets and liabilities classified as held for sale in the consolidated balance sheet consist of the following:
(in millions)
December 31, 2012
Accounts receivable, net
$
333

Property and equipment, net
122

Goodwill
469

Other intangible assets, net
156

Inventories, net
235

Prepublication costs
304

Other assets
321

Assets held for sale
$
1,940

 
 
Accounts payable and accrued expenses
$
123

Unearned revenue
192

Other liabilities
349

Liabilities held for sale
$
664



We did not complete any divestitures during the six months ended June 30, 2012.
Income Taxes
Income Taxes
Income Taxes

For the three and six months ended June 30, 2013, the effective tax rate for continuing operations was 35.0% and 34.5%, respectively, and for the three and six months ended June 30, 2012, the effective tax rate for continuing operations was 37.4%. The reduction in the effective tax rate from the prior-year periods was primarily due to the partnership structure of the S&P Dow Jones Indices LLC and legal settlements as discussed in Note 11 — Commitments and Contingencies.

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, are 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 June 30, 2013 and December 31, 2012, the total amount of federal, state and local, and foreign unrecognized tax benefits was $78 million and $74 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 to the unrecognized tax benefits, as of June 30, 2013 and December 31, 2012, we had $19 million and $14 million, respectively, of accrued interest and penalties associated with uncertain tax positions.
Debt
Debt
Debt 
(in millions)
June 30, 2013
 
December 31, 2012
5.9% Senior Notes, due 2017 1
$
400

 
$
400

6.55% Senior Notes, due 2037 2
399

 
399

Commercial paper
—

 
457

Total debt
799

 
1,256

Less: short-term debt including current maturities
—

 
457

Long-term debt
$
799

 
$
799

1 
Interest payments are due semiannually on April 15 and October 15, and, as of June 30, 2013, the unamortized debt discount is $0.4 million.
2 
Interest payments are due semiannually on May 15 and November 15, and, as of June 30, 2013, the unamortized debt discount is $1.3 million.

The fair value of our long-term debt borrowings was $0.8 billion as of June 30, 2013 and $0.9 billion as of December 31, 2012 and was estimated based on Level 1 fair value measures, specifically quoted market prices.

Currently, we have the ability to borrow a total of $1.0 billion through our commercial paper program, which is supported by our credit facility described below. As of June 30, 2013, there were no commercial paper borrowings outstanding. In connection with the special dividend in the amount of $2.50 per share on our common stock we utilized our commercial paper program in December of 2012 and as a result, commercial paper borrowings outstanding as of December 31, 2012 totaled $457 million with an average interest rate and term of 0.48% and 28 days.

On June 19, 2013, we entered into a $1.0 billion four-year credit agreement (our “credit facility”) that will terminate on June 19, 2017. This credit facility replaced our $1.2 billion three-year credit facility that was scheduled to terminate on July 30, 2013. The previous credit facility was canceled after the new credit facility became effective. There were no outstanding borrowings under the previous credit facility when it was replaced.

We pay a commitment fee of 20 to 45 basis points for our credit facility, depending on our indebtedness to cash flow ratio, whether or not amounts have been borrowed and currently pay a commitment fee of 25 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 credit rating 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 3.25 to 1, and this covenant level has never been exceeded.
Employee Benefits
Employee Benefits
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 also 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 income, net of taxes. The amounts in accumulated other comprehensive income represent net unrecognized actuarial losses and unrecognized prior service costs. These amounts will be subsequently recognized as net periodic pension cost pursuant to our accounting policy for amortizing such amounts.

In the first six months of 2013, we contributed $15 million to our retirement plans and expect to make additional required contributions of approximately $8 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 second half of 2013.
Stock-Based Compensation
Stock-Based Compensation
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. No further awards may be granted under the 1993 Employee Stock Incentive Plan and any remaining outstanding options under the 1993 Employee Stock Incentive Plan expired in the first quarter of 2013. 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 June 30 is as follows:
(in millions)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Stock option expense
$
4

 
$
2

 
$
6

 
$
7

Restricted stock and unit awards expense
22

 
21

 
41

 
33

Total stock-based compensation expense
$
26

 
$
23

 
$
47

 
$
40



As of June 30, 2013 and December 31, 2012, we issued 3.0 million and 8.4 million common shares, respectively, upon exercise of certain stock options outstanding.
Equity
Equity
Equity

Stock Repurchases

In 2011, the Board of Directors approved a stock repurchase program authorizing the purchase of up to 50.0 million shares (the “2011 Repurchase Program”), which was approximately 17% of the total shares of our outstanding common stock at that time. Share repurchases for the periods ended June 30 were as follows: 
(in millions, except average price)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Total number of shares purchased 1
1.4

 
0.1

 
8.6

 
0.9

Total cash utilized
$
—

 
$
—

 
$
500

 
$
—

1 
2013 and 2012 include shares received as part of our accelerated share repurchase agreements described in more detail below.

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 June 30, 2013, 8.3 million shares remained available under the 2011 Repurchase Program. The 2011 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.

Accelerated Share Repurchase Program

We entered into an accelerated share repurchase (“ASR”) agreement with a financial institution on March 25, 2013 to initiate share repurchases aggregating $500 million. The ASR agreement was structured as a capped ASR agreement in which we paid $500 million and received an initial delivery of approximately 7.2 million shares during the three months ended March 31, 2013, with an additional 1.4 million shares received on April 1, 2013, in the aggregate, representing the minimum number of shares of our common stock to be repurchased based on a calculation using a specific capped price per share. The total number of shares ultimately purchased was determined based on the volume weighted-average share price (“VWAP”), minus a discount, of our common stock from March 25, 2013 through July 22, 2013. On July 25, 2013 we will receive a final incremental delivery of 0.7 million shares determined using a VWAP of $53.7995 bringing the total amount of shares received to 9.3 million.
In December of 2011 we entered into two separate ASR agreements with a financial institution to initiate share repurchases aggregating $500 million. The first ASR agreement was structured as an uncollared ASR agreement for the repurchase of $250 million of shares at a per share price equal to the VWAP of our common stock between December 7, 2011 and February 22, 2012. We purchased and received approximately 5 million and 0.8 million shares in December 2011 and February 2012, respectively, under the agreement. The second agreement was structured as a capped agreement for the repurchase of $250 million of shares where we purchased and received 5 million and 0.1 million shares in December 2011 and April 2012, respectively.
Redeemable Noncontrolling Interests

The agreement with the minority partners of our S&P Dow Jones Indices LLC established in June of 2012 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, Inc. (“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 six months ended June 30, 2013 were as follows:
(in millions)
 
Redeemable noncontrolling interest as of December 31, 2012
$
810

Net income attributable to noncontrolling interest
38

Distributions to noncontrolling interest
(32
)
Redemption value adjustment
(6
)
Redeemable noncontrolling interest as of June 30, 2013
$
810

Earnings Per Share
Earnings Per Share
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, restricted stock and restricted stock units calculated using the treasury stock method.
The calculation for basic and diluted EPS for the periods ended June 30 is as follows: 
(in millions, except per share amounts)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Amounts attributable to McGraw Hill Financial, Inc. common shareholders:
 
 
 
 
 
 
 
Income from continuing operations
$
250

 
$
177

 
$
403

 
$
335

Income from discontinued operations
4

 
39

 
586

 
4

Net income attributable to the Company
$
254

 
$
216

 
$
989

 
$
339

 
 
 
 
 
 
 
 
Basic weighted-average number of common shares outstanding
274.3

 
279.7

 
277.4

 
278.9

Effect of stock options and other dilutive securities
4.0

 
5.6

 
3.9

 
5.6

Diluted weighted-average number of common shares outstanding
278.3

 
285.3

 
281.3

 
284.5

 
 
 
 
 
 
 
 
Earnings per share attributable to McGraw Hill Financial, Inc. common shareholders:
 
 
 
 
 
 
 
Income from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.91

 
$
0.63

 
$
1.45

 
$
1.20

Diluted
$
0.90

 
$
0.62

 
$
1.43

 
$
1.18

Income from discontinued operations:
 
 
 
 
 
 
 
Basic
$
0.01

 
$
0.14

 
$
2.11

 
$
0.02

Diluted
$
0.01

 
$
0.14

 
$
2.08

 
$
0.01

Net income:
 
 
 
 
 
 
 
Basic
$
0.93

 
$
0.77

 
$
3.57

 
$
1.22

Diluted
$
0.91

 
$
0.76

 
$
3.52

 
$
1.19



Restricted performance shares outstanding of 2.3 million and 1.4 million as of June 30, 2013 and 2012, respectively, were not included in the computation of diluted EPS because the necessary vesting conditions had not been met.

The effect of the potential exercise of stock options is excluded from the computation of diluted EPS when the average market price of our common stock is lower than the exercise price of the related option during the period because the effect would have been antidilutive. For the three months ended June 30, 2013 and 2012, the number of stock options excluded from the computation was 2.7 million and 3.8 million, respectively, and 2.8 million and 4.0 million for the six months ended June 30, 2013 and 2012, respectively.
Restructuring
Restructuring
Restructuring

As part of our Growth and Value Plan that we began in September of 2011, we have initiated various restructuring plans as we identified opportunities for cost savings through workforce reductions and created a flatter and more agile organization. The plans that are currently active with a remaining liability are further described below. The charges for each 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 when it is determined they are no longer needed.

As part of the definitive agreement to sell MHE to investment funds affiliated with Apollo Global Management, LLC, described further in Note 2 — Acquisitions and Divestitures, we have retained MHE's restructuring liabilities. Therefore, the remaining reserves described below include MHE's restructuring liability, however, the initial charge associated with the reserve has been bifurcated between continuing and discontinued operations.

2012 Restructuring Plan

During 2012 we recorded a pre-tax restructuring charge of $68 million, consisting primarily of employee severance costs related to a company-wide workforce reduction of approximately 670 positions. This charge consisted of $15 million for S&P Ratings, $19 million for S&P Capital IQ, $1 million for S&P DJ Indices, $12 million for C&C and $21 million for our corporate headquarters. The total reserve recorded, including MHE, was $107 million.

For the three and six months ended June 30, 2013, we have reduced the reserve by $22 million and $46 million, respectively, primarily relating to cash payments for employee severance costs. The remaining reserve as of June 30, 2013 is $46 million and primarily consists of $10 million for S&P Ratings, $7 million for S&P Capital IQ, $4 million for C&C, $8 million for our corporate headquarters and $15 million for MHE.

2011 Restructuring Plan

During the fourth quarter of 2011 we recorded a pre-tax restructuring charge of $32 million, consisting primarily of facility exit costs and employee severance costs related to a company-wide workforce reduction of approximately 250 positions. This charge consisted of $9 million for S&P Ratings, $6 million for C&C and $17 million for our corporate headquarters. The total reserve recorded, including MHE, was $66 million. In the second quarter of 2012 we recorded an additional pre-tax restructuring charge of $5 million primarily for employee severance costs as part of the Growth and Value Plan.

For the three months ended June 30, 2013 and 2012, we have reduced the reserve by $3 million and $12 million, respectively, primarily relating to cash payments for employee severance costs. For the six months ended June 30, 2013 and 2012, we have reduced the reserve by $8 million and $30 million, respectively.The remaining reserve as of June 30, 2013 is $12 million, primarily relating to MHE and our corporate headquarters.
Segment and Related Information
Segment and Related Information
Segment and Related Information

We have four reportable segments: S&P Ratings, S&P Capital IQ, S&P DJ Indices and C&C. The Executive Committee, consisting of our principal corporate executives, 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, which are centrally managed costs. A summary of operating results by segment for the periods ended June 30 is as follows: 
Three Months
2013
 
2012
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Ratings
$
599

 
$
277

 
$
483

 
$
208

S&P Capital IQ
287

 
55

 
277

 
58

S&P DJ Indices
123

 
80

 
89

 
42

C&C
259

 
83

 
240

 
71

Intersegment elimination 1
(18
)
 
—

 
(17
)
 
—

Total operating segments
1,250

 
495

 
1,072

 
379

Unallocated expense 2
—

 
(59
)
 
—

 
(71
)
Total
$
1,250

 
$
436

 
$
1,072

 
$
308


Six Months
2013
 
2012
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Ratings
$
1,161

 
$
536

 
$
949

 
$
394

S&P Capital IQ
575

 
111

 
551

 
120

S&P DJ Indices
238

 
147

 
168

 
87

C&C
496

 
145

 
474

 
135

Intersegment elimination 1
(39
)
 
—

 
(34
)
 
—

Total operating segments
2,431

 
939

 
2,108

 
736

Unallocated expense 2
—

 
(225
)
 
—

 
(146
)
Total
$
2,431

 
$
714

 
$
2,108

 
$
590

1 
Revenue for S&P Ratings and expenses for S&P Capital IQ include an intersegment royalty charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.
2 
Includes Growth and Value Plan costs of $10 million and $54 million for the three and six months ended June 30, 2013, respectively and $24 million and $53 million for the three and six months ended June 30, 2012, respectively. Also includes pre-tax legal settlements of approximately $77 million for the six months ended June 30, 2013.

See Note 2 — Acquisitions and Divestitures and Note 9 — Restructuring for additional actions that impacted the segment operating results.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies

Rental Expense and Lease Obligations

As of June 30, 2013, the remaining deferred gain related to our sale-leaseback transaction with Rock-McGraw, Inc. was $116 million, as $4 million and $7 million was amortized during the three and six months ended June 30, 2013. Interest expense associated with this operating lease for the three and six months ended June 30, 2013 was $1 million and $3 million, respectively.

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 six months ended June 30, 2013, S&P Dow Jones Indices LLC earned $13 million and $24 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 Matters

The following amends the disclosure in Note 13 — Commitments and Contingencies to the consolidated financial statements of our Form 10-K.
•
In connection with the Reese v. Bahash litigation, on March 28, 2013, the plaintiff filed a motion seeking to be relieved from the judgment dismissing the case and for leave to file an amended complaint. On April 25, 2013, the Company filed its opposition to that motion. The motion is now fully briefed.
•
In connection with the DOJ lawsuit, the Company and S&P filed a motion to dismiss the complaint on April 22, 2013. The Court issued an order denying the motion to dismiss on July 16, 2013.
•
In connection with the numerous state-court actions that have been brought against the Company and S&P by the attorneys general of various states and the District of Columbia, the Company and S&P have removed most of the actions to federal court and filed a motion before the United States Judicial Panel on Multidistrict Litigation ("JPML") to consolidate and transfer those removed actions to one federal court for all pretrial proceedings. On June 6, 2013, the JPML granted S&P's motion with respect to the state actions then before it and ordered those actions be consolidated before the United States District Court for the Southern District of New York. The Company expects that any similar actions subsequently filed by other state attorneys general will be similarly consolidated in the Southern District of New York upon S&P's request. The states have moved to have the cases remanded to state court. The Court will hear argument on motions by the states to remand to state court on October 4, 2013.

We believe that the claims asserted and/or contemplated in the proceedings described in Note 13 — Commitments and Contingencies to the consolidated financial statements of our Form 10-K, as amended above, have no basis and they will be vigorously defended by the Company and/or the subsidiaries involved.

In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, involve a large number of parties or are in early stages of discovery, we cannot state with confidence what the eventual outcome of the pending matters described in Note 13 — Commitments and Contingencies to the consolidated financial statements of our Form 10-K will be, what the timing of the ultimate resolution of these matters will be or what the eventual loss, fines, penalties or impact related to each pending matter may be. We believe, based on our current knowledge, the outcome of the legal actions, proceedings and investigations currently pending should not have a material adverse effect to our financial position, results of operations or cash flows.

Additionally, in April 2013 we settled certain subprime litigation cases. Included in selling and general expenses in our consolidated statement of income for the six months ended June 30, 2013 is a pre-tax amount of approximately $77 million for these settlements. These cases were dismissed under the terms of the settlements.

Updates to our Legal and Regulatory Environment

Our commodities business is subject to the potential for increased regulation in the U.S. and abroad. On October 5, 2012, the International Organization of Securities Commissions ("IOSCO") issued its final report to the G-20, including Principles for Oil Price Reporting Agencies ("PRA"), which sets out principles IOSCO states are intended to enhance the reliability of oil price assessments that are referenced in derivative contracts subject to regulation by IOSCO members. On January 9, 2013, IOSCO held a meeting with the Price Reporting Organizations to discuss implementation of the Principles for Oil Price Reporting Agencies. At the meeting, Platts was able to obtain clarification from IOSCO on its expectations for voluntary implementation of the Principles by Platts. Platts has begun voluntary implementation of the IOSCO Oil Price Reporting Principles and does not believe the Principles will have a significant negative impact on its ongoing business operations.

In July of 2013 Platts reaffirmed its commitment to aligning its operations to the IOSCO Principles for Oil Price Reporting Agencies and to applying those principles to its price reporting in the other commodity markets in which it publishes price assessments that underlie financial derivatives contracts. The announcement followed IOSCO's publication on July 17, 2013 of its “Principles for Financial Benchmarks,” which stated that it “expects the oil PRAs to continue to implement and comply with the PRA principles.”
 
On May 14, 2013, representatives from the European Commission (DG Competition, the EC's antitrust office) commenced an unannounced inspection of Platts' offices at Canary Wharf in London which lasted until May 19, 2013 in conjunction with the potential anticompetitive conduct (in particular, in the crude oil, refined oil products and biofuels markets) relating to Platts' Market On Close price assessment process. No allegations have been made against Platts at this time. There have also been several civil actions filed in the U.S. relating to potential anticompetitive behavior by market participants relating to the Platts price assessment process, none of which have named Platts as a defendant.
Recently Adopted Accounting Standards
Recently Adopted Accounting Standards
Recent Accounting Standards

In March of 2013, the Financial Accounting Standards Board (“FASB”) issued amended guidance that resolves the diversity in practice for the accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity. The amended guidance requires that when a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income in instances when a sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Additionally, the amended guidance clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. In these instances, an entity is required to release the cumulative translation adjustment into net income. We will adopt the FASB's amended guidance during the three months ended March 31, 2014. We do not expect the adoption of the guidance to have a significant impact on our financial position, results of operations or cash flows.

In February of 2013, the FASB issued amended guidance expanding the disclosure requirements for amounts reclassified out of accumulated other comprehensive income. The amendments require an entity to present, either on the face of the statement where net income is presented or in the notes to its financial statements, details of significant items reclassified in their entirety out of accumulated other comprehensive income and identification of the respective line items effecting net income for instances when reclassification is required under U.S. GAAP. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity will be required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by type. The amendments were effective on January 1, 2013 and have been incorporated into this quarterly report on Form 10-Q. Adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows.
Acquisitions and Divestitures (Tables)
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures
The key components of income from discontinued operations for the periods ended June 30 consist of the following:
(in millions)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Revenue
$
—

 
$
474

 
$
268

 
$
769

Expenses
(2
)
 
417

 
312

 
774

Operating income (loss)
2

 
57

 
(44
)
 
(5
)
Interest expense (income), net
—

 
—

 
1

 
(1
)
Income (loss) before taxes on income (loss)
2

 
57

 
(45
)
 
(4
)
(Benefit) provision for taxes on income (loss) 1
(2
)
 
17

 
(18
)
 
(8
)
Income (loss) from discontinued operations, net of tax
4

 
40

 
(27
)
 
4

Pre-tax gain on sale from discontinued operations
—

 
—

 
920

 
—

Provision for taxes on income
—

 
—

 
308

 
—

Gain on sale of discontinued operations, net of tax
—

 
—

 
612

 
—

Discontinued operations, net
4

 
40

 
585

 
4

Less: net (loss) income attributable to noncontrolling interests
—

 
(1
)
 
1

 
—

Income from discontinued operations attributable to McGraw Hill Financial, Inc. common shareholders
$
4

 
$
39

 
$
586

 
$
4


1 
Benefit for taxes on income for the three months ended June 30, 2013 includes certain adjustments to the discontinued operations provision recorded for the three months ended March 31, 2013.

The components of assets and liabilities classified as held for sale in the consolidated balance sheet consist of the following:
(in millions)
December 31, 2012
Accounts receivable, net
$
333

Property and equipment, net
122

Goodwill
469

Other intangible assets, net
156

Inventories, net
235

Prepublication costs
304

Other assets
321

Assets held for sale
$
1,940

 
 
Accounts payable and accrued expenses
$
123

Unearned revenue
192

Other liabilities
349

Liabilities held for sale
$
664

Debt (Tables)
Short-term and long-term debt outstanding
(in millions)
June 30, 2013
 
December 31, 2012
5.9% Senior Notes, due 2017 1
$
400

 
$
400

6.55% Senior Notes, due 2037 2
399

 
399

Commercial paper
—

 
457

Total debt
799

 
1,256

Less: short-term debt including current maturities
—

 
457

Long-term debt
$
799

 
$
799

1 
Interest payments are due semiannually on April 15 and October 15, and, as of June 30, 2013, the unamortized debt discount is $0.4 million.
2 
Interest payments are due semiannually on May 15 and November 15, and, as of June 30, 2013, the unamortized debt discount is $1.3 million.
Employee Benefits (Tables)
Components of net periodic cost for defined benefit plans and post-retirement healthcare and other benefits plan

Stock-Based Compensation (Tables)
Stock-Based Compensation
Stock-based compensation for the periods ended June 30 is as follows:
(in millions)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Stock option expense
$
4

 
$
2

 
$
6

 
$
7

Restricted stock and unit awards expense
22

 
21

 
41

 
33

Total stock-based compensation expense
$
26

 
$
23

 
$
47

 
$
40

Equity (Tables)
Share repurchases 
Share repurchases for the periods ended June 30 were as follows: 
(in millions, except average price)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Total number of shares purchased 1
1.4

 
0.1

 
8.6

 
0.9

Total cash utilized
$
—

 
$
—

 
$
500

 
$
—

1 
2013 and 2012 include shares received as part of our accelerated share repurchase agreements described in more detail below.

Redeemable Noncontrolling Interest 
Changes to redeemable noncontrolling interest during the six months ended June 30, 2013 were as follows:
(in millions)
 
Redeemable noncontrolling interest as of December 31, 2012
$
810

Net income attributable to noncontrolling interest
38

Distributions to noncontrolling interest
(32
)
Redemption value adjustment
(6
)
Redeemable noncontrolling interest as of June 30, 2013
$
810

Earnings Per Share (Tables)
Reconciliation of the number of shares used for calculating basic and diluted earnings per common share
The calculation for basic and diluted EPS for the periods ended June 30 is as follows: 
(in millions, except per share amounts)
Three Months
 
Six Months
 
2013
 
2012
 
2013
 
2012
Amounts attributable to McGraw Hill Financial, Inc. common shareholders:
 
 
 
 
 
 
 
Income from continuing operations
$
250

 
$
177

 
$
403

 
$
335

Income from discontinued operations
4

 
39

 
586

 
4

Net income attributable to the Company
$
254

 
$
216

 
$
989

 
$
339

 
 
 
 
 
 
 
 
Basic weighted-average number of common shares outstanding
274.3

 
279.7

 
277.4

 
278.9

Effect of stock options and other dilutive securities
4.0

 
5.6

 
3.9

 
5.6

Diluted weighted-average number of common shares outstanding
278.3

 
285.3

 
281.3

 
284.5

 
 
 
 
 
 
 
 
Earnings per share attributable to McGraw Hill Financial, Inc. common shareholders:
 
 
 
 
 
 
 
Income from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.91

 
$
0.63

 
$
1.45

 
$
1.20

Diluted
$
0.90

 
$
0.62

 
$
1.43

 
$
1.18

Income from discontinued operations:
 
 
 
 
 
 
 
Basic
$
0.01

 
$
0.14

 
$
2.11

 
$
0.02

Diluted
$
0.01

 
$
0.14

 
$
2.08

 
$
0.01

Net income:
 
 
 
 
 
 
 
Basic
$
0.93

 
$
0.77

 
$
3.57

 
$
1.22

Diluted
$
0.91

 
$
0.76

 
$
3.52

 
$
1.19

Segment and Related Information (Tables)
Segment information
A summary of operating results by segment for the periods ended June 30 is as follows: 
Three Months
2013
 
2012
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Ratings
$
599

 
$
277

 
$
483

 
$
208

S&P Capital IQ
287

 
55

 
277

 
58

S&P DJ Indices
123

 
80

 
89

 
42

C&C
259

 
83

 
240

 
71

Intersegment elimination 1
(18
)
 
—

 
(17
)
 
—

Total operating segments
1,250

 
495

 
1,072

 
379

Unallocated expense 2
—

 
(59
)
 
—

 
(71
)
Total
$
1,250

 
$
436

 
$
1,072

 
$
308


Six Months
2013
 
2012
(in millions)
Revenue
 
Operating Profit
 
Revenue
 
Operating Profit
S&P Ratings
$
1,161

 
$
536

 
$
949

 
$
394

S&P Capital IQ
575

 
111

 
551

 
120

S&P DJ Indices
238

 
147

 
168

 
87

C&C
496

 
145

 
474

 
135

Intersegment elimination 1
(39
)
 
—

 
(34
)
 
—

Total operating segments
2,431

 
939

 
2,108

 
736

Unallocated expense 2
—

 
(225
)
 
—

 
(146
)
Total
$
2,431

 
$
714

 
$
2,108

 
$
590

1 
Revenue for S&P Ratings and expenses for S&P Capital IQ include an intersegment royalty charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.
2 
Includes Growth and Value Plan costs of $10 million and $54 million for the three and six months ended June 30, 2013, respectively and $24 million and $53 million for the three and six months ended June 30, 2012, respectively. Also includes pre-tax legal settlements of approximately $77 million for the six months ended June 30, 2013.

Nature of Operations and Basis of Presentation Nature of Operations and Basis of Presentation (Details)
3 Months Ended 6 Months Ended
Jun. 30, 2013
Segment
Jun. 30, 2013
Segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Number of Reportable Segments
4 
4 
Acquisitions and Divestitures (Divestitures) (Details Textual) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Mar. 22, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
Equity Method Investment, Offer to Purchase Additional Equity, Percentage
22.23% 
 
 
 
 
 
Payments for Previous Acquisition, Financing Activities
 
 
 
$ 12,000,000 
$ 0 
 
Disposal Group, Including Discontinued Operation, Sale Price
 
 
 
 
 
2,400,000,000 
Gain on sale of discontinued operations, net of tax
 
0 
0 
612,000,000 
0 
 
Unallocated Amount to Segment [Member]
 
 
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
Restructuring Charges
 
$ 10,000,000 
$ 24,000,000 
$ 54,000,000 
$ 53,000,000 
 
CRISIL Limited [Member]
 
 
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
Equity Method Investment, Ownership Percentage
52.77% 
52.77% 
 
52.77% 
 
 
Pro Forma [Member]
 
 
 
 
 
 
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
 
 
 
 
 
 
Equity Method Investment, Ownership Percentage
75.00% 
75.00% 
 
75.00% 
 
 
Acquisitions and Divestitures (Divestitures) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Dec. 31, 2012
Income Statement reclassified results of discontinued operations
 
 
 
 
 
Revenue
$ 0 
$ 474 
$ 268 
$ 769 
 
Expenses
(2)
417 
312 
774 
 
Operating income (loss)
2 
57 
(44)
(5)
 
Interest expense (income), net
0 
0 
1 
(1)
 
Income (loss) before taxes on income (loss)
2 
57 
(45)
(4)
 
(Benefit) provision for taxes on income (loss) 1
2 
(17)
18 
8 
 
Income (loss) from discontinued operations, net of tax
4 
40 
(27)
4 
 
Pre-tax gain on sale from discontinued operations
0 
0 
920 
0 
 
Provision for taxes on income
0 
0 
308 
0 
 
Gain on sale of discontinued operations, net of tax
0 
0 
612 
0 
 
Discontinued operations, net
4 
40 
585 
4 
 
Less: net (loss) income attributable to noncontrolling interests
0 
(1)
1 
0 
 
Income from discontinued operations attributable to McGraw Hill Financial, Inc. common shareholders
4 
39 
586 
4 
 
Assets and liabilities reclassified as held for sale
 
 
 
 
 
Accounts receivable, net
 
 
 
 
333 
Property and equipment, net
 
 
 
 
122 
Goodwill
 
 
 
 
469 
Other intangible assets, net
 
 
 
 
156 
Inventories, net
 
 
 
 
235 
Prepublication costs
 
 
 
 
304 
Other assets
 
 
 
 
321 
Assets held for sale
 
 
 
 
1,940 
Accounts payable and accrued expenses
 
 
 
 
123 
Unearned revenue
 
 
 
 
192 
Other liabilities
 
 
 
 
349 
Liabilities held for sale
 
 
 
 
$ 664 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Jun. 30, 2012
Dec. 31, 2012
Income Taxes (Textual) [Abstract]
 
 
 
 
Effective tax rate
35.00% 
34.50% 
37.40% 
 
Unrecognized tax benefits interest on income taxes expense
$ 78 
$ 78 
 
$ 74 
Accrued interest and penalty related to unrecognized tax benefits included in income tax provision
$ 19 
$ 19 
 
$ 14 
Debt (Details) (USD $)
Jun. 30, 2013
Dec. 31, 2012
Debt Instrument [Line Items]
 
 
Total debt
$ 799,000,000 
$ 1,256,000,000 
Less: short-term debt including current maturities
0 
457,000,000 
Long-term debt
799,000,000 
799,000,000 
Debt (Textual) [Abstract]
 
 
Long-term Debt, Fair Value
800,000,000 
900,000,000 
5.9% Senior Notes, due 2017 [Member]
 
 
Debt Instrument [Line Items]
 
 
Total debt
400,000,000 1
400,000,000 1
Debt (Textual) [Abstract]
 
 
Interest rate
5.90% 
5.90% 
Unamortized debt discount on senior notes
400,000 
 
6.55% Senior Notes, due 2037 [Member]
 
 
Debt Instrument [Line Items]
 
 
Total debt
399,000,000 2
399,000,000 2
Debt (Textual) [Abstract]
 
 
Interest rate
6.55% 
6.55% 
Unamortized debt discount on senior notes
1,300,000 
 
Notes Payable [Member]
 
 
Debt Instrument [Line Items]
 
 
Total debt
$ 0 
$ 457,000,000 
(Commercial Paper Program) (Details) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended
Dec. 31, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
4 Year Facility [Member]
Jun. 19, 2013
4 Year Facility [Member]
Jun. 18, 2013
3 Year Facility [Member]
Jun. 30, 2013
Maximum [Member]
Line of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
Size of total commercial paper program
 
$ 1,000,000,000 
 
$ 1,000,000,000 
 
 
$ 1,000,000,000 
$ 1,200,000,000 
 
Commitment fee, minimum percentage to pay depending on credit rating
 
 
 
 
 
0.20% 
 
 
 
Commitment fee, maximum percentage to pay depending on credit rating
 
 
 
 
 
0.45% 
 
 
 
Commitment fee
 
 
 
 
 
0.25% 
 
 
 
Commitment fee discription
 
 
 
 
 
20 to 45 basis points for our credit facility, depending on our indebtedness to cash flow ratio, whether or not amounts have been borrowed and currently pay a commitment fee of 25 basis points. 
 
 
 
Dividend declared per common share (in usd per share)
$ 2.50 
$ 0.28 
$ 0.255 
$ 0.56 
$ 0.51 
 
 
 
 
Line of credit amount outstanding
457,000,000 
 
 
 
 
 
 
 
 
Line of credit, interest rate
0.48% 
 
 
 
 
 
 
 
 
Line of credit, term at period end
28 days 
 
 
 
 
 
 
 
 
Indebtedness to cash flow
 
 
 
 
 
 
 
 
3.25 
Long-term Debt, Fair Value
$ 900,000,000 
$ 800,000,000 
 
$ 800,000,000 
 
 
 
 
 
Employee Benefits (Details Textual) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Employee Benefits (Textual) [Abstract]
 
Contribution towards retirement plans
$ 15 
Expected contributions towards of retirement plans
$ 8 
Stock-Based Compensation (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Stock-Based Compensation
 
 
 
 
Stock option expense
$ 4 
$ 2 
$ 6 
$ 7 
Restricted stock and unit awards expense
22 
21 
41 
33 
Total stock-based compensation expense
$ 26 
$ 23 
$ 47 
$ 40 
Stock-Based Compensation (Details Textual)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2013
Dec. 31, 2011
Stock Based Compensation (Textual) [Abstract]
 
 
Common shares issued from exercise of stock option outstanding
3.0 
8.4 
Equity (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Sep. 30, 2011
Jun. 30, 2013
Jun. 30, 2012
Share repurchases
 
 
 
 
Total number of shares purchased
 
 
8.6 1
0.9 1
Total cash utilized
$ 0 
$ 0 
$ 500 
$ 0 
2011 Repurchase Program [Member]
 
 
 
 
Share repurchases
 
 
 
 
Total number of shares purchased
1.4 1
0.1 1
 
 
Equity (Details Textual) (USD $)
In Millions, except Per Share data, unless otherwise specified
0 Months Ended 6 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 4 Months Ended
Apr. 2, 2013
Mar. 25, 2013
Jun. 30, 2013
Dec. 31, 2011
agreements
Jun. 30, 2013
2011 Repurchase Program [Member]
Jun. 30, 2013
First ASR Agreement [Member]
Jun. 30, 2013
Second ASR Agreement [Member]
Feb. 28, 2012
Uncollared ASR Agreement [Member]
Dec. 31, 2011
Uncollared ASR Agreement [Member]
Jun. 30, 2013
Uncollared ASR Agreement [Member]
Apr. 30, 2012
Capped ASR Agreement [Member]
Dec. 31, 2011
Capped ASR Agreement [Member]
Jul. 25, 2013
Subsequent Event [Member]
Equity (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock repurchase program number of shares authorized to be repurchased
 
 
 
 
50.0 
 
 
 
 
 
 
 
 
Maximum number of shares authorized for repurchase under stock repurchase plan as percentage of outstanding common stock
 
 
 
 
17.00% 
 
 
 
 
 
 
 
 
Remaining shares available under repurchase program
 
 
 
 
8.3 
 
 
 
 
 
 
 
 
Repurchase of additional shares
 
$ 500 
 
$ 500 
 
 
 
 
 
 
 
 
 
Repurchase of shares at a per share price
 
 
 
 
 
$ 250 
$ 250 
 
 
 
 
 
 
Shares received on initial delivery
 
 
 
 
 
 
 
 
5.0 
7.2 
 
5.0 
 
Additional shares received
1.4 
 
 
 
 
 
 
0.8 
 
 
0.1 
 
0.7 
Accelerated Share Repurchases, Final Price Paid Per Share
 
 
 
 
 
 
 
 
 
 
 
 
$ 53.7995 
Accelerated Share Repurchases, Cumulative Shares Repurchased
 
 
 
 
 
 
 
 
 
 
 
 
9.3 
Accelerated Share Repurchase Program, Number of Agreements Entered
 
 
 
2 
 
 
 
 
 
 
 
 
 
Interest In Joint Venture Minimum Percentage
 
 
20.00% 
 
 
 
 
 
 
 
 
 
 
Business Acquisition, Agreement Terms, Change of Control, Put Option for Minority Interest Ownership, Effective Period
 
 
15 days 
 
 
 
 
 
 
 
 
 
 
Equity (Details 2) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Jun. 30, 2013
Dec. 31, 2012
Jun. 30, 2012
Stockholders' Equity Attributable to Redeemable Noncontrolling Interest [Roll Forward]
 
 
 
Redeemable Noncontrolling Interest, Equity, Carrying Amount
 
$ 810 
$ 810 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest
38 
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
32 
 
 
Noncontrolling Interest, Change in Redemption Value
(6)
 
 
Redeemable Noncontrolling Interest, Equity, Carrying Amount
$ 810 
$ 810 
$ 810 
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Amount attributable to The McGraw-Hill Companies, Inc. common shareholders:
 
 
 
 
Income from continuing operations
$ 250 
$ 177 
$ 403 
$ 335 
Income from discontinued operations
4 
39 
586 
4 
Net income
$ 254 
$ 216 
$ 989 
$ 339 
Basic weighted-average number of common shares outstanding
274.3 
279.7 
277.4 
278.9 
Effect of stock options and other dilutive securities
4.0 
5.6 
3.9 
5.6 
Diluted weighted-average number of common shares outstanding
278.3 
285.3 
281.3 
284.5 
Basic EPS:
 
 
 
 
Income from continuing operations (in usd per share)
$ 0.91 
$ 0.63 
$ 1.45 
$ 1.20 
Loss from discontinued operations, net of tax (in usd per share)
$ 0.01 
$ 0.14 
$ 2.11 
$ 0.02 
Net income (in usd per share)
$ 0.93 
$ 0.77 
$ 3.57 
$ 1.22 
Diluted EPS:
 
 
 
 
Income from continuing operations (in usd per share)
$ 0.90 
$ 0.62 
$ 1.43 
$ 1.18 
Loss from discontinued operations, net of tax (in usd per share)
$ 0.01 
$ 0.14 
$ 2.08 
$ 0 
Net income (in usd per share)
$ 0.91 
$ 0.76 
$ 3.52 
$ 1.19 
Restricted Stock [Member]
 
 
 
 
Common Shares Outstanding (Textual) [Abstract]
 
 
 
 
Outstanding shares not included in the computation of diluted earnings per share for both restricted stock and stock options
 
 
2.3 
1.4 
Stock Options [Member]
 
 
 
 
Common Shares Outstanding (Textual) [Abstract]
 
 
 
 
Outstanding shares not included in the computation of diluted earnings per share for both restricted stock and stock options
2.7 
3.8 
2.8 
4.0 
Restructuring (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2013
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
Restructuring Plan, 2012 [Member]
Positions
Dec. 31, 2012
Restructuring Plan, 2012 [Member]
Dec. 31, 2011
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
Restructuring Plan, 2011 [Member]
Jun. 30, 2012
Restructuring Plan, 2011 [Member]
Dec. 31, 2011
Restructuring Plan, 2011 [Member]
Positions
Jun. 30, 2013
Restructuring Plan, 2011 [Member]
Jun. 30, 2012
Restructuring Plan, 2011 [Member]
Jun. 30, 2013
Growth And Value Plan [Member]
Jun. 30, 2013
MHE [Member]
Restructuring Plan, 2012 [Member]
Dec. 31, 2011
MHE [Member]
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
S&P Ratings [Member]
Restructuring Plan, 2012 [Member]
Dec. 31, 2011
S&P Ratings [Member]
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
S&P Capital IQ / Indices [Member]
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
C&C [Member]
Restructuring Plan, 2012 [Member]
Jun. 30, 2013
Corporate Segment [Member]
Restructuring Plan, 2012 [Member]
Dec. 31, 2011
Corporate Segment [Member]
Restructuring Plan, 2012 [Member]
Restructuring (Textual) [Abstract]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax restructuring charge
 
$ 68 
 
 
 
 
$ 32 
 
 
$ 5 
$ 12 
$ 6 
$ 15 
$ 9 
$ 19 
$ 1 
$ 21 
$ 17 
Restructuring reserve
 
 
107 
66 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Workforce reduction, positions
 
670 
 
 
 
 
250 
 
 
 
 
 
 
 
 
 
 
 
Restructuring charges paid
22 
46 
 
 
3 
12 
 
8 
30 
 
 
 
 
 
 
 
 
 
Restructuring reserve, current
$ 46 
$ 46 
 
 
$ 12 
 
 
$ 12 
 
 
$ 15 
 
$ 10 
 
$ 7 
$ 4 
$ 8 
 
Segment and Related Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Segment
Jun. 30, 2012
Jun. 30, 2013
Segment
Jun. 30, 2012
Segment Reporting Information [Line Items]
 
 
 
 
Number of Reportable Segments
4 
 
4 
 
Segment information
 
 
 
 
Revenue
$ 1,250 
$ 1,072 
$ 2,431 
$ 2,108 
Operating Income (Loss)
436 
308 
714 
590 
S&P Ratings [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
599 
483 
1,161 
949 
Operating Income (Loss)
277 
208 
536 
394 
S&P Capital IQ/S&P Indices [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
287 
277 
575 
551 
Operating Income (Loss)
55 
58 
111 
120 
Commodities & Commercial [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
123 
89 
238 
168 
Operating Income (Loss)
80 
42 
147 
87 
McGraw-Hill Education [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
259 
240 
496 
474 
Operating Income (Loss)
83 
71 
145 
135 
Intersegment elimination [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
(18)1
(17)1
(39)1
(34)1
Operating Income (Loss)
0 1
0 1
0 1
0 1
Operating Segments [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
1,250 
1,072 
2,431 
2,108 
Operating Income (Loss)
495 
379 
939 
736 
General corporate expense [Member]
 
 
 
 
Segment information
 
 
 
 
Revenue
0 2
0 2
0 2
0 2
Operating Income (Loss)
(59)2
(71)2
(225)2
(146)2
Restructuring Charges
10 
24 
54 
53 
Pretax Legal Settlement [Member] |
General corporate expense [Member]
 
 
 
 
Segment information
 
 
 
 
Restructuring Charges
$ 77 
 
 
 
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Jun. 30, 2013
S&P/DJ Indices [Member]
CME Group [Member]
Jun. 30, 2013
S&P/DJ Indices [Member]
CME Group [Member]
Apr. 30, 2013
Subsequent Event [Member]
Commitments and Contingencies (Textual) [Abstract]
 
 
 
 
 
Deferred gain
$ 116 
$ 116 
 
 
 
Amortized Deferred Gain
4 
7 
 
 
 
Interest expense
1 
3 
 
 
 
Related Party Transaction [Line Items]
 
 
 
 
 
Revenues earned under License Agreement with CME Group
 
 
13 
24 
 
Noncontrolling interest ownership by noncontrolling owners
27.00% 
27.00% 
 
 
 
Litigation settlement amount
 
 
 
 
$ 77