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Section 1: 10-K (10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-1023
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S&P Global Inc.
 (Exact name of registrant as specified in its charter)
New York
 
13-1026995
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
55 Water Street, New York, New York
 
10041
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: 212-438-1000
Title of each class
 
Name of exchange on which registered
Common Stock — $1 par value
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ¨   NO þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES ¨    NO þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ    NO ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
YES þ    NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ






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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
þ Large accelerated filer
  
o Accelerated filer
  
o Non-accelerated filer
  
o Smaller reporting company
 
  
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨    NO þ

The aggregate market value of voting stock held by non-affiliates of the Registrant as of the last business day of the second fiscal quarter ended June 30, 2016, was $28.3 billion, based on the closing price of the common stock as reported on the New York Stock Exchange of $107.26 per common share. For purposes of this calculation, it is assumed that directors, executive officers and beneficial owners of more than 10% of the registrant outstanding stock are affiliates. The number of shares of common stock of the Registrant outstanding as of January 27, 2017 was 258.4 million shares.

Part III incorporates information by reference from the definitive proxy statement for the 2017 annual meeting of shareholders.




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TABLE OF CONTENTS
 
 
PART I
 
Item
 
Page
1
1a.
1b.
2
3
4
 
 
 
 
 
PART II
 
 
 
 
5
6
7
7a.
8.
9.
9a.
9b.
 
 
 
 
PART III
 
 
 
 
10
11
12
13
14
 
 
 
 
PART IV
 
 
 
 
15
 
 
 


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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future events, trends, contingencies or results, appear at various places in this report and use words like “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “potential,” “predict,” “project,” “strategy,” “target” and similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will” and “would.” For example, management may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in the Company’s business strategies and methods of generating revenue; the development and performance of the Company’s services and products; the expected impact of acquisitions and dispositions; the Company’s effective tax rates; and the Company’s cost structure, dividend policy, cash flows or liquidity.
Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:
worldwide economic, political and regulatory conditions, including conditions that may result from legislative, regulatory and policy changes associated with the current U.S. administration or the United Kingdom’s likely exit from the European Union;
the rapidly evolving regulatory environment, in the United States and abroad, affecting Ratings, Market and Commodities Intelligence and Indices, including new and amended regulations and the Company’s compliance therewith;
the Company’s ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential for unauthorized access to our systems or a system or network disruption that results in improper disclosure of confidential information or data, regulatory penalties and remedial costs;
our ability to make acquisitions and dispositions and successfully integrate the businesses we acquire;
the outcome of litigation, government and regulatory proceedings, investigations and inquiries;
the health of debt and equity markets, including credit quality and spreads, the level of liquidity and future debt issuances;
the demand and market for credit ratings in and across the sectors and geographies where the Company operates;
concerns in the marketplace affecting the Company’s credibility or otherwise affecting market perceptions of the integrity or utility of independent credit ratings;
the effect of competitive products and pricing, including the level of success of new product developments and global expansion;
consolidation in the Company’s end-customer markets;
the impact of customer cost-cutting pressures, including in the financial services industry and commodities markets;
a decline in the demand for credit risk management tools by financial institutions;
the level of merger and acquisition activity in the United States and abroad;
the volatility of the energy marketplace and the health of the commodities markets;
our ability to attract, incentivize and retain key employees;
the Company’s ability to successfully recover should it experience a disaster or other business continuity problem from a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber-attack, power loss, telecommunications failure or other natural or man-made event;
changes in applicable tax or accounting requirements, including potential tax reform under the current U.S. administration;
the level of the Company’s future cash flows and capital investments;
the impact on the Company’s revenue and net income caused by fluctuations in foreign currency exchange rates; and
the Company’s exposure to potential criminal sanctions or civil penalties if it fails to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which it operates, including sanctions laws relating to countries such as Iran, Russia, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, and local laws prohibiting corrupt payments to government officials, as well as import and export restrictions.

The factors noted above are not exhaustive. The Company and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, the Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made, except as required by applicable law. Further information about the Company’s businesses, including information about factors that could materially affect its results of operations and financial condition, is contained in the Company’s filings with the SEC, including Item 1a, Risk Factors, in this Annual Report on Form 10-K.

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PART I

Item 1. Business

Overview

S&P Global Inc. (together with its consolidated subsidiaries, the “Company,” the “Registrant,” “we,” “us” or “our”) is a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, and issuers; and the commodity markets include producers, traders and intermediaries within energy, metals, petrochemicals and agriculture. We serve our global customers through a broad range of products and services available through both third-party and proprietary distribution channels. We were incorporated in December of 1925 under the laws of the state of New York.

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

We have repositioned S&P Global as a more focused company in the capital and commodity markets by exiting non-core assets and investing for growth in markets that have size and scale. In 2016, we continued to create a portfolio focused on scalable, industry leading, interrelated businesses in the capital and commodity markets. A discussion of significant changes that were made to our portfolio during the three years ended December 31, 2016 can be found within “MD&A – Overview” contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K.

Our Businesses

Our operations consist of three reportable segments: Ratings, Market and Commodities Intelligence and S&P Dow Jones Indices ("Indices"). For a discussion on the competitive conditions in our businesses, see “MD&A – Segment Review” contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K.

Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retroactively revised to reflect the current organizational structure.

Ratings
Ratings is an independent provider of credit ratings, research and analytics to investors, issuers and other market participants. Credit ratings are one of several tools investors can use when making decisions about purchasing bonds and other fixed income investments. They are opinions about credit risk and our ratings express our opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Our credit ratings can also relate to the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the debt issue may default.

With offices in over 25 countries around the world, Ratings is an important part of the world's financial infrastructure and has played a leading role for over 150 years in providing investors with information and independent benchmarks for their investment and financial decisions as well as access to the capital markets. The key constituents Ratings serves are investors, corporations, governments, municipalities, commercial and investment banks, insurance companies, asset managers, and other debt issuers.

As the capital markets continue to evolve, Ratings is well-positioned to capitalize on opportunities, driven by continuing regulatory changes, through its global network, well-established position in corporate markets and strong investor reputation.

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


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Non-transaction revenue primarily includes fees for surveillance of a credit rating, annual fees for customer relationship-based pricing programs, fees for entity credit ratings and global research and analytics.

Market and Commodities Intelligence
Market and Commodities Intelligence's portfolio of capabilities are designed to help the financial community track performance, generate better investment returns, identify new trading and investment ideas, perform risk analysis, develop mitigation strategies and provide high-value information to the commodity and energy markets that enable its customers to make better informed trading and business decisions. The key constituents Market and Commodities Intelligence serves are asset managers; investment banks; investors; brokers; financial advisors; insurance companies; investment sponsors; companies’ back-office functions, including compliance, operations, risk, clearance, and settlement; and producers, traders, and intermediaries within energy, metals and agriculture markets.

Market and Commodities Intelligence includes the following business lines:
Financial Data & Analytics a product suite that provides data, analytics and third-party research for global finance professionals, which includes the S&P Capital IQ Desktop, SNL, Leveraged Commentary & Data, Investment Advisory and integrated bulk data feeds that can be customized, which include CUSIP and Compustat;
Risk Services commercial arm that sells Ratings' credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and RatingsXpress®; and
S&P Global Platts the leading independent provider of information and benchmark prices for the commodity and energy markets. S&P Global Platts provides essential price data, analytics, and industry insight that enable the commodities and energy markets to perform with greater transparency and efficiency. Additionally, S&P Global Platts generates revenue from licensing of our proprietary market price data and price assessments to commodity exchanges.

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.

Indices
Indices is a global index provider that maintains a wide variety of indices to meet an array of investor needs. Indices’ mission is to provide transparent benchmarks to help with decision making, collaborate with the financial community to create innovative products and provide investors with tools to monitor world markets.
Indices primarily derives revenue from asset linked fees based on the S&P and Dow Jones indices and to a lesser extent generates subscription revenue and transaction revenue. Specifically, Indices generates revenue from the following sources:
Investment vehicles asset linked fees such as exchange traded funds (“ETFs”) and mutual funds, that are based on S&P Dow Jones Indices' benchmarks and generate revenue through fees based on assets and underlying funds;
Exchange traded derivatives generate royalties based on trading volumes of derivatives contracts listed on various exchanges;
Index-related licensing fees fixed or variable annual and per-issue fees for over-the-counter derivatives and retail-structured products; and
Data and customized index subscription fees fees from supporting index fund management, portfolio analytics and research.

Segment and Geographic Data

The relative contribution of our operating segments to operating revenue, operating profit, long-lived assets and geographic area for the three years ended December 31, 2016 are included in Note 12 – Segment and Geographic Information to the consolidated financial statements under Item 8, Consolidated Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.

Our Personnel

As of December 31, 2016, we had approximately 20,000 employees located worldwide, of which approximately 5,100 were employed in the U.S.


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Available Information

The Company's investor kit includes Annual Reports on Form 10-K, Proxy Statements, Quarterly Reports on Form 10-Q, current reports on Form 8-K, the current earnings release and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. For online access, go to http://investor.spglobal.com. Requests for printed copies, free of charge, can be e-mailed to investor.relations@spglobal.com or mailed to Investor Relations, S&P Global Inc., 55 Water Street, New York, NY 10041-0001. Interested parties can also call Investor Relations toll-free at 866-436-8502 (domestic callers) or 212-438-2192 (international callers). The information on our website is not, and shall not be deemed to be part hereof or incorporated into this or any of our filings with the Securities and Exchange Commission (“SEC”).

Access to more than 10 years of the Company's filings made with the SEC is available through the Company's Investor Relations website. Go to http://investor.spglobal.com and click on the SEC Filings link. In addition, these filings are available to the public on the Commission's website through their EDGAR filing system at www.sec.gov. Interested parties may also read and copy materials that the Company has filed with the SEC at the SEC's public reference room located at 100 F Street, NE, Washington, D.C. 20549 on official business days between the hours of 10AM and 3PM. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room.

Item 1a. Risk Factors


We are providing the following cautionary statements which identify all known material risks, uncertainties and other factors that could cause our actual results to differ materially from historical and expected results.

We operate in the capital, commodities and commercial markets. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, and issuers; the commodities markets include producers, traders and intermediaries within energy, metals, petrochemicals and agriculture; and the commercial markets include professionals and corporate executives within automotive, financial services, insurance and marketing / research information services. Certain risk factors are applicable to certain of our individual segments while other risk factors are applicable company-wide.

Exposure to litigation and government and regulatory proceedings, investigations and inquiries could have a material adverse effect on our business, financial condition or results of operations.

In the normal course of business, both in the United States and abroad, we and our subsidiaries are defendants in numerous legal proceedings and are often the subject of government and regulatory proceedings, investigations and inquiries, as discussed under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K and in Note 13 - Commitments and Contingencies to the consolidated financial statements under Item 8, Consolidated Financial Statements and Supplementary Data, in this Annual Report on Form 10-K, and we face the risk that additional proceedings, investigations and inquiries will arise in the future.
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 have a material adverse effect on our business, financial condition or results of operations.
In view of the uncertainty inherent in litigation and government and regulatory enforcement matters, we cannot predict the eventual outcome of the matters we are currently facing 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 we are currently facing or that we may face in the future will not have a material adverse effect on our business, financial condition or results of operations.
As litigation or the process to resolve pending matters progresses, as the case may be, we continuously 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.
Legal proceedings impose additional expenses on the Company and require the attention of senior management to an extent that may significantly reduce their ability to devote time addressing other business issues.
Risks relating to legal proceedings may be heightened in foreign jurisdictions that lack the legal protections or liability standards comparable to those that exist in the United States. In addition, new laws and regulations have been and may continue to be enacted that establish lower liability standards, shift the burden of proof or relax pleading requirements,

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thereby increasing the risk of successful litigations against the Company in the United States and in foreign jurisdictions. These litigation risks are often difficult to assess or quantify and could have a material adverse effect on our business, financial condition or results of operations.
We may not have adequate insurance or reserves to cover these risks, and the existence and magnitude of these risks often remains unknown for substantial periods of time and could have a material adverse effect on our business, financial condition or results of operations.

Our acquisitions and other strategic transactions may not produce anticipated results.

We have made and expect to continue to make acquisitions or enter into other strategic transactions to strengthen our business and grow our Company. Such transactions present significant challenges and risks.
The market for acquisition targets and other strategic transactions is highly competitive, especially in light of industry consolidation, which may affect our ability to complete such transactions.
If we are unsuccessful in completing such transactions or if such opportunities for expansion do not arise, our business, financial condition or results of operations could be materially adversely affected.
If such transactions are completed, the anticipated growth and other strategic objectives of such transactions may not be fully realized, and a variety of factors may adversely affect any anticipated benefits from such transactions. For instance, the process of integration may require more resources than anticipated, we may assume unintended liabilities, there may be unexpected regulatory and operating difficulties and expenditures, we may fail to retain key personnel of the acquired business and such transactions may divert management’s focus from other business operations.
The anticipated benefits from an acquisition or other strategic transaction may not be realized fully, or may take longer to realize than expected. As a result, the failure of acquisitions and other strategic transactions to perform as expected could have a material adverse effect on our business, financial condition or results of operations.

Changes in the volume of securities issued and traded in domestic and/or global capital markets, asset levels and flows into investment products, changes in interest rates and volatility in the financial markets, and volatility in the commodities markets could have a material adverse effect on our business, financial condition or results of operations.

Our business is impacted by general economic conditions and volatility in the United States and world financial markets. Therefore, since a significant component of our credit-rating based revenue is transaction-based, and is essentially dependent on the number and dollar volume of debt securities issued in the capital markets, unfavorable financial or economic conditions that either reduce investor demand for debt securities or reduce issuers’ willingness or ability to issue such securities could reduce the number and dollar volume of debt issuances for which Ratings provides credit ratings.
Our Indices business is impacted by market volatility, asset levels of investment products tracking indices, and trading volumes of certain exchange traded derivatives. A decrease in our revenues attributable to these products could have a material adverse effect on our business, financial condition or results of operations. Volatile capital markets, as well as changing investment styles, among other factors, may influence an investor’s decision to invest in and maintain an investment in an index-linked investment product.
Increases in interest rates or credit spreads, volatility in financial markets or the interest rate environment, significant political or economic events, defaults of significant issuers and other market and economic factors may negatively impact the general level of debt issuance, the debt issuance plans of certain categories of borrowers, the level of derivatives trading and/or the types of credit-sensitive products being offered, any of which could have a material adverse effect on our business, financial condition or results of operations.
Our Platts business is impacted by volatility in the commodities markets. Weak economic conditions, especially in our key markets, including the energy industry, could reduce demand for our products, impacting our revenues and margins. As a result of volatility in commodity prices and trading activity in physical commodities and commodities derivatives, we may encounter difficulty in achieving sustained market acceptance of past or future contract terms, which could have a material adverse effect on our financial position, results of operations and cash flows.
Any weakness in the macroeconomic environment could constrain customer budgets across the markets we serve, potentially leading to a reduction in their employee headcount and a decrease in demand for our subscription-based products.

Increasing regulation of our Ratings business in the United States, Europe and elsewhere can increase our costs of doing business and therefore could have a material adverse effect on our business, financial condition or results of operations.

The financial services industry is highly regulated, rapidly evolving and subject to the potential for increasing regulation in the United States, Europe and elsewhere. The businesses conducted by Ratings are in certain cases regulated under the Credit Rating Agency Reform Act of 2006 (the “Reform Act”), the Dodd-Frank Wall Street Reform and Consumer

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Protection Act (the “Dodd-Frank Act”), the U.S. Securities Exchange Act of 1934 (the “Exchange Act”), and/or the laws of the states or other jurisdictions in which they conduct business.
In the past several years, the U.S. Congress, the International Organization of Securities Commissions ("IOSCO"), the SEC and the European Commission, including through the European Securities Market Authority ("ESMA"), as well as regulators in other countries in which Ratings operates, have been reviewing the role of rating agencies and their processes and the need for greater oversight or regulations concerning the issuance of credit ratings or the activities of credit rating agencies. Other laws, regulations and rules relating to credit rating agencies are being considered by local, national and multinational bodies and are likely to continue to be considered in the future, including provisions seeking to reduce regulatory and investor reliance on credit ratings, rotation of credit rating agencies and liability standards applicable to credit rating agencies.
These laws and regulations, and any future rulemaking, could result in reduced demand for credit ratings and increased costs, which we may be unable to pass through to customers. In addition, there may be uncertainty over the scope, interpretation and administration of such laws and regulations. We may be required to incur significant expenses in order to comply with such laws and regulations and to mitigate the risk of fines, penalties or other sanctions. Legal proceedings could become increasingly lengthy and there may be uncertainty over and exposure to liability. It is difficult to accurately assess the future impact of legislative and regulatory requirements on our business and our customers’ businesses, and they may affect Ratings’ communications with issuers as part of the rating assignment process, alter the manner in which Ratings’ ratings are developed, affect the manner in which Ratings or its customers or users of credit ratings operate, impact the demand for ratings and alter the economics of the credit ratings business. Each of these developments increases the costs and legal risk associated with the issuance of credit ratings and may have a material adverse effect on our operations, profitability and competitiveness, the demand for credit ratings and the manner in which such ratings are utilized.
Additional information regarding rating agencies is provided under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K.

Our Indices and Market and Commodities Intelligence businesses are subject to the potential for increased or changing regulation in the United States, Europe and elsewhere, which can increase our costs of doing business globally and therefore could have a material adverse effect on our business, financial condition or results of operations.

In addition to the extensive and evolving U.S. laws and regulations, foreign jurisdictions, principally in Europe, have taken measures to increase regulation of the financial services and commodities industries.
In October of 2012, IOSCO issued its Principles for Oil Price Reporting Agencies ("PRA Principles"), which IOSCO states are intended to enhance the reliability of oil price assessments that are referenced in derivative contracts subject to regulation by IOSCO members. Platts has taken steps to align its operations with the PRA Principles and, as recommended by IOSCO in its final report on the PRA Principles, has aligned to the PRA Principles for other commodities for which it publishes benchmarks.
In July of 2013, IOSCO issued its Principles for Financial Benchmarks ("Financial Benchmark Principles"), which are intended to promote the reliability of benchmark determinations, and address governance, benchmark quality and accountability mechanisms, including with regard to the indices published by Indices. Indices has taken steps to align its governance regime and operations with the Financial Benchmark Principles and engaged an independent auditor to perform a reasonable assurance review of such alignment.
The financial benchmarks industry is subject to the new pending benchmark regulation in the European Union (the “E.U. Benchmark Regulation”) as well as potential increased regulation in other jurisdictions, including Australia. The E.U. Benchmark Regulation was published on June 30, 2016 and included provisions applicable to Indices and Platts, which will become effective January 1, 2018. The E.U. Benchmark Regulation requires Indices and Platts in due course to obtain registration or authorization in connection with their respective benchmark activities in Europe. This legislation will likely cause additional operating obligations but they are not expected to be material at this time, although the exact impact remains unclear.
The European Union has recently finalized a package of legislative measures known as MiFID II ("MiFID II"), which revise and update the existing E.U. Markets in Financial Instruments Directive framework. MiFID II applies in full in all E.U. Member States as of January 3, 2017. MiFID II includes provisions that, among other things: (i) impose new conditions and requirements on the licensing of benchmarks and provide for non-discriminatory access to exchanges and clearing houses; (ii) modify the categorization and treatment of certain classes of derivatives; (iii) expand the categories of trading venue that are subject to regulation; and (iv) provide for the mandatory trading of certain derivatives on exchanges (complementing the mandatory derivative clearing requirements in the E.U. Market Infrastructure Regulation of 2011). Although the MiFID II package is “framework” legislation (meaning that much of the detail of the rules will be set out in subordinate measures to be agreed upon in the period before 2017), it is possible that the introduction of these laws and rules could affect Indices’ and Platts’ abilities both to administer and license their indices and price assessments, respectively. MiFID II and the Market Abuse Regulation (“MAR”) may impose additional regulatory

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burdens on Market and Commodities Intelligence's activities in the European Union, although the exact severity and cost are not yet known.
Market and Commodities Intelligence operates regulated investment advisory businesses in the United States, the European Union and Malaysia. These and other Market and Commodities Intelligence businesses may increasingly become subject to new or more stringent regulations that will increase the cost of doing business, which could have a material adverse effect on our business, financial condition or results of operations.

Future legislation, regulatory reform or policy changes under the current U.S. administration could have a material effect on our business and results of operations.

There exists the potential for comprehensive tax reform in the United States that may significantly change the tax rules applicable to U.S. domiciled corporations. Changes such as lower corporate tax rates, repatriation allowances, removal of the interest expense deduction, removal of the municipal bond tax exemption or the introduction of a border adjustment tax could impact the Company as a U.S. taxpayer, as well as the demand for our products and services. At this time, we cannot assess what the overall effect of such potential legislation could be on our results of operations or cash flows.
Other legislation, regulatory reform or policy changes under the current U.S. administration, such as financial services regulatory reform, U.S. oil deregulation, government-sponsored enterprise (GSE) reform and increased infrastructure spending, could impact our business. At this time, we cannot predict the scope or nature of these changes or assess what the overall effect of such potential changes could be on our results of operations or cash flows.

Regulatory changes and economic conditions leading up to and following the United Kingdom’s likely exit from the European Union could have a material adverse effect on our business and results of operations.

Following a referendum on June 23, 2016 in which voters in the United Kingdom ("U.K.") approved an exit from the European Union ("EU"), it is expected that the U.K. government will initiate a process to leave the EU (often referred to as Brexit) and begin negotiating the terms of the U.K.’s future relationship with the EU.
Any impact from Brexit on the Company will depend, in part, on the outcome of tariff, trade and other negotiations. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations between the U.K and the EU as the U.K. determines which EU laws to replace or replicate and the EU determines how to treat regulated activities (e.g., the activities of credit rating agencies) originating in the U.K. Our businesses are subject to increasing regulation of the financial services and commodities industries in Europe. Potential changes in EU regulation and/or additional regulation in the U.K. could cause additional operating obligations and increased costs for our businesses.
Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

We may become subject to liability based on the use of our products by our clients.

Some of our products support the investment processes of our clients, which, in the aggregate, manage trillions of dollars of assets. Use of our products as part of the investment process creates the risk that clients, or the parties whose assets are managed by our clients, may pursue claims against us for very significant dollar amounts, which could have a material adverse effect on our business, financial condition or results of operations.
Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of our management, personnel, financial and other resources and could have a negative impact on our reputation. In addition, such claims and lawsuits could have a material adverse effect on our business, financial condition or results of operations.

Increased competition could result in a loss of market share or revenue.

The markets for credit ratings, financial research, investment and advisory services, market data, index-based products, and commodities price assessments and related news and information about these markets are intensely competitive. Ratings, Market and Commodities Intelligence and Indices compete domestically and internationally on the basis of a number of factors, including the quality of its ratings, data, research and advisory services, client service, reputation, price, geographic scope, range of products and technological innovation.
While our businesses face competition from traditional content and analytics providers, we also face competition from non-traditional providers such as exchanges, asset managers, investment banks and technology-led companies that are adding content and analytics capabilities to their core businesses.
In addition, in some of the countries in which Ratings competes, governments may provide financial or other support to locally-based rating agencies and may from time to time establish official credit rating agencies, credit ratings criteria or procedures for evaluating local issuers.

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Sustained downward pressure on oil and other commodities prices and trading activity in those markets could have a material adverse effect on the rate of growth of Platts’ revenue, including subscription and licensing fees.

Introduction of new products, services or technologies could impact our profitability.

We operate in highly competitive markets that continue to change to adapt to customer needs. In order to maintain a competitive position, we must continue to invest in new offerings and new ways to deliver our products and services. These investments may not be profitable or may be less profitable than what we have experienced historically.
We could experience threats to our existing businesses from the rise of new competitors due to the rapidly changing environment in which we operate.
We rely on our information technology environment and certain critical databases, systems and applications to support key product and service offerings. We believe we have appropriate policies, processes and internal controls to ensure the stability of our information technology, provide security from unauthorized access to our systems and maintain business continuity, but our business could be subject to significant disruption and our business, financial condition or results of operations could be materially and adversely affected by unanticipated system failures, data corruption or unauthorized access to our systems.

A significant increase in operating costs and expenses could have a material adverse effect on our profitability.

Our major expenditures include employee compensation and capital investments.
We offer competitive salary and benefit packages in order to attract and retain the quality employees required to grow and expand our businesses. Compensation costs are influenced by general economic factors, including those affecting the cost of health insurance and postretirement benefits, and any trends specific to the employee skill sets we require.
We make significant investments in information technology data centers and other technology initiatives and we cannot provide assurances that such investments will result in increased revenues.
Although we believe we are prudent in our investment strategies and execution of our implementation plans, there is no assurance as to the ultimate recoverability of these investments.

Increased availability of free or relatively inexpensive information sources may reduce demand for our products and have a could have a material adverse effect on our business, financial condition or results of operations.

In recent years, more public sources of free or relatively inexpensive information have become available, particularly through the Internet, and advances in public cloud computing and open source software may continue.
Public sources of free or relatively inexpensive information may reduce demand for our products and services. Demand could also be reduced as a result of cost-cutting initiatives at certain companies and organizations. Although we believe our products are enhanced by our analysis, tools and applications, our financial results may be adversely affected if our customers choose to use these public sources as a substitute for our products or services.

Consolidation of customers as well as staffing levels across our customer base could impact our available markets and revenue growth.

Our businesses have a customer base which is largely comprised of members from the corporate, financial services and commodities industries. The consolidation of customers resulting from mergers and acquisitions across these industries can result in reductions in the number of firms and workforce which can impact the size of our customer base.
Our customers that strive to reduce their operating costs may seek to reduce their spending on our products and services. If a large number of smaller customers or a critical number of larger customers reduce their spending with us, our business, financial condition or results of operations could be materially and adversely affected.
Alternatively, customers may use other strategies to reduce their overall spending on financial and commodity market products and services by consolidating their spending with fewer vendors, including by selecting other vendors with lower-cost offerings, or by self-sourcing their need for financial and commodity market products and services. If customers elect to consolidate their spending on financial and commodity market products and services with other vendors and not us, if we lose business to lower priced competitors, or if customers elect to self-source their product and service needs, our business, financial condition or results of operations could be materially and adversely affected.
A material portion of our revenues in our Indices business is concentrated in some of our largest customers, who have significant assets under management in index funds and exchange-traded funds. A loss of a substantial portion of revenue from our largest customers could have a material and adverse effect on our business, financial condition or results of operations.

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If we lose key outside suppliers of data and products or if the data or products of these suppliers have errors or are delayed, we may not be able to provide our clients with the information and products they desire.

Our ability to produce our products and develop new products is dependent upon the products of other suppliers, including certain data, software and service suppliers. Some of our products are dependent upon (and of little value without) updates from our data suppliers and most of our information and data products are dependent upon (and of little value without) continuing access to historical and current data.
We utilize certain data provided by third-party data sources in a variety of ways, including large volumes of data from certain stock exchanges around the world.
If the data from our suppliers has errors, is delayed, has design defects, is unavailable on acceptable terms or is not available at all, it could have a material adverse effect on our business, financial condition or results of operations.
Some of our agreements with data suppliers allow them to cancel on short notice. Termination of one or more of our significant data agreements or exclusion from, or restricted use of, or litigation in connection with, a data provider’s information could decrease the available information for us to use (and offer our clients) and could have a material adverse effect on our business, financial condition or results of operations.

Changes in the legislative, regulatory, and commercial environments in which we operate may materially and adversely impact our ability to collect, compile, use, and publish data and may impact our financial results.

Certain types of information we collect, compile, use, and publish, including offerings in our Market and Commodities Intelligence business, are subject to regulation by governmental authorities in jurisdictions in which we operate. In addition, there is increasing concern among certain privacy advocates and government regulators regarding marketing and privacy matters, particularly as they relate to individual privacy interests.
These concerns may result in new or amended laws and regulations. Future laws and regulations with respect to the collection, compilation, use, and publication of information and consumer privacy could result in limitations on our operations, increased compliance or litigation expense, adverse publicity, or loss of revenue, which could have a material adverse effect on our business, financial condition, and results of operations. It is also possible that we could be prohibited from collecting or disseminating certain types of data, which could affect our ability to meet our customers’ needs.

Our ability to protect our intellectual property rights could impact our competitive position.

Our products contain intellectual property delivered through a variety of digital and other media. Our ability to achieve anticipated results depends in part on our ability to defend our intellectual property against infringement. Our business, financial condition or results of operations could be materially and adversely affected by inadequate or changing legal and technological protections for intellectual property and proprietary rights in some jurisdictions and markets.
Our products also contain intellectual property of third party sources. Any violation by us of the intellectual property rights of such third parties could result in litigation and reputational damage which materially and adversely affects our business, financial condition or results of operations.

We are exposed to multiple risks associated with the global nature of our operations.

The geographic breadth of our activities subjects us to significant legal, economic, operational, market, compliance and reputational risks. These include, among others, risks relating to:
economic and political conditions around the world,
inflation,
fluctuation in interest rates and currency exchange rates,
limitations that foreign governments may impose on the conversion of currency or the payment of dividends or other remittances to us from our non-U.S. subsidiaries,
differing accounting principles and standards,
unexpected increases in taxes or changes in U.S. or foreign tax laws,
the costs of repatriating cash held by entities outside the United States, including withholding or other taxes that foreign governments may impose on the payment of dividends or other remittances to us from our non-U.S. subsidiaries,
potential costs and difficulties in complying with a wide variety of foreign laws and regulations (including tax systems) administered by foreign government agencies, some of which may conflict with U.S. or other sources of law,
changes in applicable laws and regulatory requirements,
the possibility of nationalization, expropriation, price controls and other restrictive governmental actions,

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competition with local rating agencies that have greater familiarity, longer operating histories and/or support from local governments or other institutions,
civil unrest, terrorism, unstable governments and legal systems, and other factors.
Adverse developments in any of these areas could have a material adverse effect on our business, financial condition or results of operations.
Additionally, we are subject to complex U.S., European and other local laws and regulations that are applicable to our operations abroad, including trade sanctions laws, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, anti-bribery laws, anti-money laundering laws, and other financial crimes laws. Although we have implemented internal controls, policies and procedures and employee training and compliance programs to deter prohibited practices, such measures may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies and violating applicable laws and regulations. Any determination that we have violated trade sanctions, anti-bribery or anti-corruption laws could have a material adverse effect on our business, financial condition or results of operations.
Compliance with international and U.S. laws and regulations that apply to our international operations increases the cost of doing business in foreign jurisdictions. Violations of such laws and regulations may result in fines and penalties, criminal sanctions, administrative remedies, restrictions on business conduct and could have a material adverse effect on our reputation, our ability to attract and retain employees, our business, financial condition or results of operations.

Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.

Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, flood, terrorist attack, pandemic, security breach, cyber attack, power loss, telecommunications failure or other natural or man-made disaster, our ability to continue to operate will depend, in part, on the availability of our personnel, our office facilities and the proper functioning of our computer, telecommunication and other related systems and operations. In such an event, we could experience operational challenges with regard to particular areas of our operations, such as key executive officers or personnel, that could have a material adverse effect on our business.
We regularly assess and take steps to improve our existing business continuity plans and key management succession. However, a disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and result in material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships or legal liability.

Outsourcing certain aspects of our business could result in disruption and increased costs.

We have outsourced certain support functions to third-party service providers to leverage leading specialized capabilities and achieve cost efficiencies. Outsourcing these functions involves the risk that the third-party service providers may not perform to our standards or legal requirements, may not produce reliable results, may not perform in a timely manner, may not maintain the confidentiality of our proprietary information, or may fail to perform at all. Failure of these third parties to meet their contractual, regulatory, confidentiality, or other obligations to us could result in material financial loss, higher costs, regulatory actions and reputational harm.
Outsourcing these functions also involves the risk that the third-party service providers may not maintain adequate physical, technical and administrative safeguards to protect the security of our confidential information and data. Failure of these third parties to maintain these safeguards could result in unauthorized access to our systems or a system or network disruption that could lead to improper disclosure of confidential information or data, regulatory penalties and remedial costs.

We rely heavily on network systems and the Internet and any failures or disruptions may adversely affect our ability to serve our customers.

Many of our products and services are delivered electronically, and our customers rely on our ability to process transactions rapidly and deliver substantial quantities of data on computer-based networks. Our customers also depend on the continued capacity, reliability and security of our electronic delivery systems, our websites and the Internet.
Our ability to deliver our products and services electronically may be impaired due to infrastructure or network failures, malicious or defective software, human error, natural disasters, service outages at third-party Internet providers or increased government regulation.
Delays in our ability to deliver our products and services electronically may harm our reputation and result in the loss of customers. In addition, a number of our customers entrust us with storing and securing their data and information on our servers.

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Although we have disaster recovery plans that include backup facilities for our primary data centers, our systems are not always fully redundant, and our disaster planning may not always be sufficient or effective. As such, these disruptions may affect our ability to store, handle and secure such data and information.

Our operations and infrastructure may malfunction or fail, which could have a material adverse effect on our business, financial condition or results of operations.

Our ability to conduct business may be materially and adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which we are located, including New York City, the location of our headquarters, and major cities worldwide in which we have offices.
This may include a disruption involving physical or technological infrastructure used by us or third parties with or through whom we conduct business, whether due to human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, intentional acts of vandalism, acts of terrorism, political unrest, war or otherwise. Our efforts to secure and plan for potential disruptions of our major operating systems may not be successful.
We also do not have fully redundant systems for most of our smaller office locations and low-risk systems, and our disaster recovery plan does not include restoration of non-essential services. If a disruption occurs in one of our locations or systems and our personnel in those locations or those who rely on such systems are unable to utilize other systems or communicate with or travel to other locations, such persons’ ability to service and interact with our clients and customers may suffer.
We cannot predict with certainty all of the adverse effects that could result from our failure, or the failure of a third party, to efficiently address and resolve these delays and interruptions. A disruption to our operations or infrastructure could have a material adverse effect on our business, financial condition or results of operations.

We are exposed to risks related to cybersecurity and protection of confidential information.

Our operations rely on the secure processing, storage and transmission of confidential, sensitive and other types of data and information in our computer systems and networks and those of our third-party vendors.
All of our businesses have access to material non-public information concerning the Company’s customers, including sovereigns, corporate issuers and other third parties around the world, the unauthorized disclosure of which could affect the trading markets for such customers’ securities and could damage such customers’ competitive positions. The cyber risks the Company faces range from cyber-attacks common to most industries, to more sophisticated and targeted attacks intended to obtain unauthorized access to certain information or systems due in part to our prominence in the global marketplace, such as our ratings on debt issued by sovereigns and corporate issuers, or the composition of our indices. Unauthorized disclosure of this information could cause our customers to lose faith in our ability to protect their confidential information and therefore cause customers to cease doing business with us.
Breaches of our or our vendors’ systems and networks, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, computer viruses or malware, employee error, malfeasance, physical breaches or other actions, may cause material interruptions or malfunctions in our or such vendors’ websites, applications or data processing, or may compromise the confidentiality and integrity of material information regarding us, our business or our customers.
Misappropriation, improper modification, destruction, corruption or unavailability of our data and information due to cyber incidents, attacks or other security breaches could damage our brand and reputation, result in litigation and regulatory actions, and lead to loss of customer confidence in our security measures and reliability, which would harm our ability to retain customers and gain new ones.
Although S&P Global and its affiliates devote significant resources to maintain and regularly update their systems and processes that are designed to protect the security of our computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of information belonging to the enterprise and our customers, clients and employees, there is no assurance that all of our security measures will provide absolute security.
Measures that we take to avoid or mitigate material incidents can be expensive, and may be insufficient, circumvented, or become obsolete. Any material incidents could cause us to experience reputational harm, loss of customers, regulatory actions, sanctions or other statutory penalties, litigation or financial losses that are either not insured against or not fully covered through any insurance maintained by us, and increased expenses related to addressing or mitigating the risks associated with any such material incidents.
Cyber threats are rapidly evolving and are becoming increasingly sophisticated. Despite our efforts to ensure the integrity of our systems, as cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber threats might defeat the measures that we or our vendors take to anticipate, detect, avoid or mitigate such threats. Certain techniques used to obtain unauthorized access, introduce malicious software, disable or degrade service, or sabotage systems may be designed to remain dormant until a triggering event and we may be unable to anticipate these

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techniques or implement adequate preventative measures since techniques change frequently or are not recognized until launched, and because cyberattacks can originate from a wide variety of sources.
If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and could result in damage to our reputation and a loss of confidence in the security of our products and services.
The theft, loss, or misuse of personal data collected, used, stored, or transferred by us to run our business could result in significantly increased security costs or costs related to defending legal claims. Global privacy legislation, enforcement, and policy activity in this area are rapidly expanding and creating a complex regulatory compliance environment. Costs to comply with and implement these privacy-related and data protection measures could be significant. In addition, if despite our best efforts an inadvertent failure to comply with federal, state, or international privacy-related or data protection laws and regulations should occur, this could result in proceedings against us by governmental entities or others.
Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

Inability to attract and retain key qualified personnel could have a material adverse effect on our business and results of operations.

The development, maintenance and support of our products and services are dependent upon the knowledge, experience and ability of our highly skilled, educated and trained employees. Accordingly, our business is dependent on successfully attracting and retaining talented employees. If the Company is less successful in its recruiting efforts, or if it is unable to retain key employees, its ability to develop and deliver successful products and services or achieve strategic goals may be adversely affected.
Hiver2016!
Our brand and reputation are key assets and competitive advantages of our Company and our business may be affected by how we are perceived in the marketplace.

Our ability to attract and retain customers is affected by external perceptions of our brand and reputation. Negative perceptions or publicity could damage our reputation with customers, prospects and the public generally, which could negatively impact, among other things, our ability to attract and retain customers, employees and suppliers, as well as suitable candidates for acquisition or other combinations.


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Item 1b. Unresolved Staff Comments

None.


Item 2. Properties

Our corporate headquarters are located in leased premises located at 55 Water Street, New York, NY 10041. We lease office facilities at 102 locations; 32 are in the U.S. In addition, we own real property at 7 locations, of which 2 are in the U.S. Our properties consist primarily of office space used by each of our segments. We believe that all of our facilities are well maintained and are suitable and adequate for our current needs.


Item 3. Legal Proceedings

For information on our legal proceedings, see Note 13 – Commitments and Contingencies under Item 8, Consolidated Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.


Item 4. Mine Safety Disclosures

Not applicable.


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Executive Officers of the Registrant

The following individuals are the executive officers of the Company:

Name
 
Age
 
Position
Douglas L. Peterson
 
58
 
President and Chief Executive Officer
Ewout Steenbergen
 
47
 
Executive Vice President, Chief Financial Officer
Ratings
John L. Berisford
 
53
 
President, S&P Global Ratings
Market and Commodities Intelligence
Michael Chinn
 
44
 
President, Market and Commodities Intelligence
Martin Fraenkel
 
56
 
President, S&P Global Platts
Martina L. Cheung
 
41
 
Head of Global Risk Services
Indices
 
 
 
 
Alex J. Matturri, Jr.
 
58
 
Chief Executive Officer, S&P Dow Jones Indices
S&P Global Functions
Courtney Geduldig
 
41
 
Executive Vice President, Public Affairs
France M. Gingras
 
52
 
Executive Vice President, Human Resources
Steve Kemps
 
52
 
Executive Vice President, General Counsel
Nancy Luquette
 
51
 
Senior Vice President, Chief Risk & Audit Executive
Krishna Nathan
 
54
 
Chief Information Officer
Paul Sheard
 
62
 
Executive Vice President and Chief Economist


Mr. Berisford, prior to becoming President of S&P Global Ratings on November 3, 2015, was Executive Vice President, Human Resources since 2011. Prior to that, he held senior management positions at PepsiCo, including Senior Vice President, Human Resources for Pepsi Beverages Company.
Ms. Cheung, prior to becoming Head of Global Risk Services on November 3, 2015, held management positions at S&P Global Ratings and was most recently S&P Global’s Chief Strategy Officer. Prior to joining S&P Global, she worked in the consulting industry, first in Accenture’s Financial Services Strategy group and later as a Partner at Mitchell Madison Consulting.
Mr. Chinn, prior to becoming President of Market and Commodities Intelligence in September 2016 and President of S&P Global Market Intelligence in September 2015, was Chief Executive Officer of SNL since 2010 and President of SNL since 2000.
Mr. Fraenkel, prior to becoming President of S&P Global Platts in September 2016, was Global Head of Content, responsible for leading Platts’ 450-member global editorial and analytics team, as well as being a member of the Platts Executive Committee regarding the division’s strategy and offerings in data, pricing, news and analysis. Mr. Fraenkel joined S&P Global Platts in June 2015 from CME Group, where he was Managing Director and Global Head of Energy.
Ms. Geduldig, prior to becoming Executive Vice President, Public Affairs on May 1, 2015, was Managing Director, Global Government and Public Policy since 2013, and Vice President of Global Regulatory Affairs at S&P Global Ratings. Prior to that, she was Managing Director and Head of Federal Government Relations at the Financial Services Forum.
Ms. Gingras, prior to becoming Executive Vice President, Human Resources on November 3, 2015, was Senior Vice President, Total Rewards since 2012. Prior to that, she was Head of Compensation and Benefits at Time, Inc.
Mr. Kemps, prior to becoming Executive Vice President, General Counsel at S&P Global in August 2016, served as Executive Vice President and General Counsel at Quanta Services, where he oversaw all legal affairs and advised the business on regulatory, ethical and compliance matters. Prior to joining Quanta, he served as General Counsel of Hess Retail Corporation and Dean Foods Company.

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Ms. Luquette, prior to becoming Senior Vice President, Chief Risk & Audit Executive for S&P Global in June 2016, led the S&P Global Internal Audit function and the Ratings Risk Review function for S&P Global Ratings as the Chief Audit Executive for the Company. She became S&P Global’s Chief Risk & Audit Executive and assumed leadership of the Risk Management function in June 2016. Before joining the Company, Ms. Luquette was Vice President and General Auditor for Avaya, and prior to that was a Partner in PwC’s Internal Audit and Global Risk Management Services practices.
Mr. Matturri, prior to becoming Chief Executive Officer at S&P Dow Jones Indices on July 2, 2012, served as an Executive Managing Director of S&P Indices. Prior to joining S&P Indices, Mr. Matturri served as Senior Vice President and Director of Global Equity Index Management at Northern Trust Global Investments (NTGI). He previously held management positions with Deutsche Asset Management’s Index and Quantitative Investment business and The Bank of New York.
Mr. Nathan, prior to becoming Chief Information Officer at S&P Global in May 2016, was Vice President of Systems at IBM, responsible for the development and execution of the research strategy and activity in a variety of areas such as next generation data centers, cognitive systems design, security and a range of future Systems technologies. At IBM, he held a wide variety of leadership positions, both corporate and business-aligned, spanning the U.S. and Europe.
Mr. Peterson, prior to becoming President and Chief Executive Officer on November 1, 2013, was President of Standard & Poor's Ratings Services since 2011. Prior to that, he was Chief Operating Officer of Citibank, NA.
Mr. Sheard, prior to becoming Executive Vice President and Chief Economist on November 3, 2015, was Chief Global Economics and Head of Global Economics and Research of Standard & Poor’s Ratings Services. Prior to that, he held economist positions at Nomura Securities and at Lehman Brothers.
Mr. Steenbergen, prior to becoming Executive Vice President and Chief Financial Officer at S&P Global in November 2016, was Executive Vice President and Chief Financial Officer of Voya Financial, Inc. Prior to his role as Voya's Chief Financial Officer, Mr. Steenbergen was Chief Financial Officer and Chief Risk Officer for ING Asia-Pacific and held a number of management roles for ING Group, including serving as regional general manager in Hong Kong and as a Chief Executive Officer of RVS, an ING Group company based in the Netherlands.


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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

On January 27, 2017, the closing price of our common stock was $120.69 per share as reported on the New York Stock Exchange (“NYSE”) under the ticker symbol “SPGI”. S&P Global Inc. began trading under its new ticker symbol "SPGI" on April 28, 2016. Previously, the Company's common stock traded on the NYSE under the ticker symbol "MHFI". The approximate number of record holders of our common stock as of January 27, 2017 was 3,220. The high and low sales prices of S&P Global Inc.'s common stock on the NYSE for the past two fiscal years are as follows: 
 
2016
 
2015
First Quarter
$99.85 - $78.55

 
$109.13 - $85.06

Second Quarter
112.75 - 95.83

 
108.14 - 100.44

Third Quarter
128.40 - 104.75

 
107.50 - 84.64

Fourth Quarter
127.68 - 107.21
 
101.27 - 86.10

Year
128.40 - 78.55
 
109.13 - 84.64


The performance graph below compares our cumulative total shareholder return during the previous five years with a performance indicator of the overall market (i.e., S&P 500), and our peer group. The peer group consists of the following companies: Thomson Reuters Corporation, Moody’s Corporation, CME Group Inc., MSCI Inc., FactSet Research Systems Inc. and IHS Markit Ltd. Returns assume $100 invested on December 31, 2011 and total return includes reinvestment of dividends through December 31, 2016.

37973386_spgi-201512_chartx10485a01.jpg




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Dividends

We expect to continue our policy of paying regular cash dividends, although there is no assurance as to future dividend payments because they depend on future earnings, capital requirements and our financial condition. Regular quarterly dividends per share of our common stock for 2016 and 2015 were as follows:
 
2016
 
2015
$0.36 per quarter in 2016
$
1.44

 
 
$0.33 per quarter in 2015
 
 
$
1.32


On January 25, 2017, the Board of Directors approved an increase in the quarterly common stock dividend from $0.36 per share to $0.41 per share.

Transfer Agent and Registrar for Common Stock

Computershare is the transfer agent for S&P Global. Computershare maintains the records for the Company's registered shareholders and can assist with a variety of shareholder related services.

Shareholder correspondence should be mailed to:
Computershare
P.O. Box 30170
College Station, TX 77842-3170

Overnight correspondence should be mailed to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845

Visit the Investor Center™ website to view and manage shareholder account online: www.computershare.com/investor

For shareholder assistance:
In the U.S. and Canada:
888-201-5538
Outside the U.S. and Canada:
201-680-6578
TDD for the hearing impaired:
800-231-5469
TDD outside the U.S. and Canada:
201-680-6610
E-mail address:
web.queries@computershare.com
Shareholder online inquiries
https://www-us.computershare.com/investor/Contact

Repurchase of Equity Securities

On December 4, 2013, the Board of Directors approved a share repurchase program authorizing the purchase of up to 50 million shares, which was approximately 18% of the Company's outstanding shares at that time. During the fourth quarter of 2016, we received an additional 0.9 million shares from the conclusion of our accelerated share repurchase ("ASR") agreement that we entered into on September 7, 2016. Further discussion relating to our ASR agreement can be found in Note 9 - Equity. As of December 31, 2016, 25.8 million shares remained under our current repurchase program.

Repurchased shares may be used for general corporate purposes, including the issuance of shares for stock compensation plans and to offset the dilutive effect of the exercise of employee stock options. Our current repurchase program has no expiration date and purchases under this program may be made from time to time on the open market and in private transactions, depending on market conditions.

The following table provides information on our purchases of our outstanding common stock during the fourth quarter of 2016 pursuant to our current share repurchase program (column c). In addition to these purchases, the number of shares in column (a) include shares of common stock that are tendered to us to satisfy our employees’ tax withholding obligations in connection with the vesting of awards of restricted shares (we repurchase such shares based on their fair market value on the vesting date).

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There were no other share repurchases during the quarter outside the repurchases noted below.

Period
 
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as
Part of Publicly Announced Programs
 
(d) Maximum Number of Shares that may yet be Purchased Under the Programs
Oct. 1 - Oct. 31, 2016
 
624

 
$
126.56

 

 
26.6 million
Nov. 1 - Nov. 30, 2016
 
369

 
119.46

 

 
26.6 million
Dec. 1 - Dec. 31, 2016
 
861,632

 
122.18

 
861,478

 
25.8 million
Total — Qtr
 
862,625

 
$
122.18

 
861,478

 
25.8 million

Equity Compensation Plan
For information on securities authorized under our equity compensation plans, see Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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Item 6. Selected Financial Data
(in millions, except per share data)
2016
 
2015
 
2014
 
2013
 
2012
 
Income statement data:
 
 
 
 
 
 
 
 
 
 
Revenue
$
5,661

  
$
5,313

  
$
5,051

  
$
4,702

  
$
4,270

  
Operating profit
3,369

  
1,917

  
113

  
1,358

 
1,170

  
Income from continuing operations before taxes on income
3,188

1 
1,815

2 
54

3 
1,299

4 
1,089

5 
Provision for taxes on income
960

   
547

  
245

  
425

  
388

  
Net income (loss) from continuing operations attributable to S&P Global Inc.
2,106

 
1,156

 
(293
)
  
783

  
651

  
Earnings (loss) per share from continuing operations attributable to the S&P Global Inc. common shareholders:
 
 
 
 
 
 
 
 
 
 
Basic
8.02

 
4.26

 
(1.08
)
  
2.85

 
2.33

  
Diluted
7.94

 
4.21

 
(1.08
)
  
2.80

 
2.29

  
Dividends per share
1.44

  
1.32

  
1.20

  
1.12

  
1.02

  
Special dividend declared per common share

 

 

 

 
2.50

 
Operating statistics:
 
 
 
 
 
 
 
 
 
 
Return on average equity 6
472.0
%
 
324.3
%
 
(1.4
)%
 
134.2
%
 
40.5
%
 
Income from continuing operations before taxes on income as a percent of revenue from continuing operations
56.3
%
 
34.2
%
 
1.1
 %
 
27.6
%
 
25.5
%
 
Net income (loss) from continuing operations as a percent of revenue from continuing operations
39.4
%
 
23.9
%
 
(3.8
)%
 
18.6
%
 
16.4
%
 
Balance sheet data: 7
 
 
 
 
 
 
 
 
 
 
Working capital
$
1,060

 
$
388

 
$
42

 
$
612

 
$
(1,018
)
 
Total assets
8,669

 
8,183

 
6,773

 
6,060

 
5,081

  
Total debt
3,564

 
3,611

 
795

 
794

 
1,251

  
Redeemable noncontrolling interest
1,080

 
920

 
810

 
810

 
810

 
Equity
701

 
243

 
539

 
1,344

 
840

  
Number of employees 7
20,000

 
20,400

 
17,000

 
16,400

 
15,900

  
1
Includes the impact of the following items: a $1.1 billion gain from our dispositions, a benefit related to net legal settlement insurance recoveries of $10 million, disposition-related costs of $48 million, a technology-related impairment charge of $24 million, restructuring charges of $6 million, a $3 million disposition-related reserve release, acquisition-related costs of $1 million and amortization of intangibles from acquisitions of $96 million.
2 
Includes the impact of the following items: costs related to identified operating efficiencies primarily related to restructuring of $56 million, net legal settlement expenses of $54 million, acquisition-related costs of $37 million, an $11 million gain on dispositions, and amortization of intangibles from acquisitions of $67 million.
3 
Includes the impact of the following items: $1.6 billion of legal and regulatory settlements, restructuring charges of $86 million, $4 million of professional fees largely related to corporate development activities, and amortization of intangibles from acquisitions of $48 million.
4 
Includes the impact of the following items: $77 million of legal settlements, $64 million charge for costs necessary to enable the separation of McGraw-Hill Education ("MHE") and reduce our cost structure, a $36 million non-cash impairment charge related to the sale of our data center, a $28 million restructuring charge in the fourth quarter primarily related to severance, $13 million related to terminating various leases as we reduce our real estate portfolio and a $24 million net gain from our dispositions, and amortization of intangibles from acquisitions of $51 million.
5 
Includes the impact of the following items: $135 million charge for costs necessary to enable the separation of MHE and reduce our cost structure, a $65 million restructuring charge, transaction costs of $15 million for our S&P Dow Jones Indices LLC joint venture, an $8 million charge related to a reduction in our lease commitments, partially offset by a vacation accrual reversal of $52 million, and amortization of intangibles from acquisitions of $48 million.
6 
Includes the impact of the $1.1 billion gain on dispositions in 2016, the gain on sale of McGraw Hill Construction in 2014 and the gain on sale of McGraw-Hill Education in 2013.
7 
Excludes discontinued operations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis (“MD&A”) provides a narrative of the results of operations and financial condition of S&P Global Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”) for the years ended December 31, 2016 and 2015, respectively. The MD&A should be read in conjunction with the consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K for the year ended December 31, 2016, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”).
The MD&A includes the following sections:
Overview
Results of Operations
Liquidity and Capital Resources
Reconciliation of Non-GAAP Financial Information
Critical Accounting Estimates
Recent Accounting Standards

Certain of the statements below are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, any projections of future results of operations and cash flows are subject to substantial uncertainty. See Forward-Looking Statements on page 4 of this report.

OVERVIEW

We are a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The capital markets include asset managers, investment banks, commercial banks, insurance companies, exchanges, and issuers; and the commodity markets include producers, traders and intermediaries within energy, metals, petrochemicals and agriculture.

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

We have repositioned S&P Global as a more focused company in the capital and commodity markets by exiting non-core assets and investing for growth in markets that have size and scale. In 2016, we continued to create a portfolio focused on scalable, industry leading, interrelated businesses in the capital and commodity markets.

Our operations consist of three reportable segments: Ratings, Market and Commodities Intelligence and S&P Dow Jones Indices ("Indices").
Ratings is an independent provider of credit ratings, research and analytics, offering investors and other market participants information, ratings and benchmarks.
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.
Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retroactively revised to reflect the current organizational structure.

Major Portfolio Changes

The following significant changes by segment were made to our portfolio during the three years ended December 31, 2016:


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Table of Contents

2016

Market and Commodities Intelligence

In October of 2016, we completed the sale of Standard & Poor's Securities Evaluations, Inc. ("SPSE") and Credit Market Analysis ("CMA") for $425 million in cash to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services. During year ended December 31, 2016, we recorded a pre-tax gain of $364 million ($297 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of SPSE and CMA.

In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 million ($516 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of J.D. Power. Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of December 31, 2016.

In September of 2016, we acquired PIRA Energy Group ("PIRA"), a global provider of energy research and forecasting products and services. The purchase enhances Market and Commodities Intelligence's energy analytical capabilities by expanding its oil offering and strengthening its position in the natural gas and power markets.

In June of 2016, we acquired RigData, a provider of daily information on rig activity for the natural gas and oil markets across North America. The purchase enhances Market and Commodities Intelligence's energy analytical capabilities by strengthening its position in natural gas and enhancing its oil offering.

2015

Market and Commodities Intelligence

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

In July of 2015, we acquired the entire issued share capital of Petromedia Ltd and its operating subsidiaries (“Petromedia”), an independent provider of data, intelligence, news and tools to the global fuels market that offers a suite of products providing clients with actionable data and intelligence that enable informed decisions, minimize risk and increase efficiency.

In 2015, we further reduced our real estate footprint by completing the consolidation of our corporate headquarters with our operations in New York City.

2014

Market and Commodities Intelligence

In November of 2014, we completed the sale of McGraw Hill Construction to Symphony Technology Group for $320 million in cash. We recorded an after-tax gain on the sale of $160 million, which is included in discontinued operations, net in the consolidated statement of income for the year ended December 31, 2014.

In July of 2014, we acquired Eclipse Energy Group AS, which complements our North American natural gas capabilities, which we obtained from our Bentek Energy LLC acquisition in 2011.

In 2014, in addition to the divestiture of McGraw Hill Construction discussed above, we streamlined our infrastructure by reducing our real estate footprint through selling our data facility, initiating the consolidation of our corporate headquarters with our operations in New York City, as well as disposing of our corporate aircraft.


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Table of Contents

Increased Shareholder Return

During the three years ended December 31, 2016, we have returned approximately $3.5 billion to our shareholders through a combination of share repurchases and our quarterly dividends: we completed share repurchases of approximately $2.4 billion and distributed regular quarterly dividends totaling approximately $1.1 billion. Also, on January 25, 2017, the Board of Directors approved an increase in the quarterly common stock dividend from $0.36 per share to $0.41 per share.

Key Results
(in millions)
Year ended December 31,
 
% Change 1
 
2016
 
2015
 
2014
 
’16 vs ’15
 
’15 vs ’14
Revenue
$
5,661

 
$
5,313

 
$
5,051

 
7%
 
5%
Operating profit 2
$
3,369

 
$
1,917

 
$
113

 
76%
 
N/M
% Operating margin
60
%
 
36
%
 
2
%
 
 
 
 
Diluted earnings (loss) per share from continuing operations
$
7.94

 
$
4.21

 
$
(1.08
)
 
89%
 
N/M
N/M - not meaningful
 1 
% changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented.
 2 
2016 includes a $1.1 billion gain from our dispositions, a benefit related to net legal settlement insurance recoveries of $10 million, disposition-related costs of $48 million, a technology-related impairment charge of $24 million, restructuring charges of $6 million, a $3 million disposition-related reserve release and acquisition-related costs of $1 million. 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $56 million, net legal settlement expenses of $54 million, acquisition-related costs of $37 million and a gain of $11 million on the sale of our interest in a legacy McGraw Hill Construction investment. 2014 includes $1.6 billion of legal and regulatory settlements, restructuring charges of $86 million and $4 million of professional fees largely related to corporate development activities. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $96 million, $67 million and $48 million, respectively.

2016

Revenue increased 7% driven by increases at all of our reportable segments. Revenue growth at Market and Commodities Intelligence was favorably impacted by the acquisition of SNL in September of 2015 and annualized contract value growth primarily driven by the S&P Capital IQ Desktop, Global Risk Services and certain data feed products. Continued demand for S&P Global Platts’ proprietary content also contributed to revenue growth. These increases were partially offset by the unfavorable impact from our dispositions in 2016. Revenue growth at Ratings was driven by an increase in U.S. bank loan ratings revenue, corporate bond ratings revenue and surveillance fees. Revenue growth at Indices was due to higher average levels of assets under management for exchange traded funds ("ETFs") and mutual funds, an increase in data revenue and higher volumes for exchange-traded derivatives. The unfavorable impact of foreign exchange reduced revenue by less than 1 percentage point.

Operating profit increased 76%. Excluding the favorable impact of the gain from our dispositions of 59 percentage points, higher net legal settlement insurance recoveries in 2016 of 3 percentage points, higher restructuring charges in 2015 of 3 percentage points and higher acquisition-related costs in 2015 of 2 percentage points, partially offset by the unfavorable impact of higher disposition-related costs of 3 percentage points, higher amortization of intangibles from acquisitions of 2 percentage points and a technology-related impairment charge of 1 percentage point, operating profit increased 15%. This increase was primarily driven by revenue growth as discussed above. Decreased costs at Ratings and our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to operating profit growth.

2015

Revenue increased 5% driven by increases at Market and Commodities Intelligence and Indices, partially offset by a decrease at Ratings. Revenue growth at Market and Commodities Intelligence was favorably impacted by the acquisition of SNL in September of 2015 and the acquisition of National Automobile Dealers Association's Used Car Guide (“UCG”) at J.D. Power in July of 2015. The revenue increase at Market and Commodities Intelligence was also driven by increases in average contract values in the S&P Capital IQ Desktop and Global Risk Services products, continued demand for S&P Global Platts' proprietary content and an increase in auto consulting engagements in the U.S. at J.D. Power. Revenue growth at Indices was due to higher average levels of assets under management for ETFs and mutual funds and higher volumes for exchange-traded derivatives. The revenue decrease at Ratings was driven by the unfavorable impact of foreign exchange rates. The unfavorable impact of foreign exchange rates reduced revenue by 2 percentage points which was offset by the favorable impact from acquisitions of 2 percentage points.

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Table of Contents


The increase in operating profit was primarily due to the impact of $1.6 billion in legal and regulatory settlements in 2014 compared
to net legal settlement expenses of $54 million in 2015. In addition, 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $56 million in 2015 compared to $86 million in 2014. 2015 also includes acquisition-related costs related to the acquisition of SNL of $37 million and an $11 million gain on the sale of our interest in a legacy McGraw Hill Construction investment. 2014 includes $4 million of professional fees largely related to corporate development activities. Excluding these items, operating profit increased 13%. This increase was driven by revenue growth at Market and Commodities Intelligence and Indices and cost containment efforts at Ratings during 2015.
 
Outlook

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

With the successful completion of our Growth and Performance Plan, we are aligning our efforts against two key strategic priorities, growth and excellence. We strive to deliver on our strategic priorities in the following four categories by:

Financial

Delivering strong financial performance and long-term value to our shareholders.
 
Growth

Engaging with the world around us;

Investing to meet customer needs in high growth areas; and

Expanding in international markets.

Excellence

Embracing operational excellence in all that we do; and

Accelerating digital transformation and stimulating innovation.

Talent

Enhancing leadership and accountability.

There can be no assurance that we will achieve success in implementing any one or more of these strategies as a variety of factors could unfavorably impact operating results, including prolonged difficulties in the global credit markets and a change in the regulatory environment affecting our businesses. See Item 1a, Risk Factors, in this Annual Report on Form 10-K.

Further projections and discussion on our 2017 outlook for our segments can be found within “ – Results of Operations”.


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Table of Contents

RESULTS OF OPERATIONS

Consolidated Review
 
(in millions)
Year ended December 31,
 
% Change
 
2016
 
2015
 
2014
 
'16 vs '15
 
'15 vs '14
Revenue
$
5,661

 
$
5,313

 
$
5,051

 
7%
 
5%
Expenses:
 
 
 
 
 
 
 
 
 
     Operating-related expenses
1,769

 
1,700

 
1,651

 
4%
 
3%
     Selling and general expenses
1,443

 
1,550

 
3,144

 
(7)%
 
(51)%
     Depreciation and amortization
181

 
157

 
134

 
15%
 
17%
          Total expenses
3,393

 
3,407

 
4,929

 
—%
 
(31)%
     (Gain) loss on dispositions
(1,101
)
 
(11
)
 
9

 
N/M
 
N/M
Operating profit
3,369

 
1,917

 
113

 
76%
 
N/M
     Interest expense, net
181

 
102

 
59

 
77%
 
73%
     Provision for taxes on income
960

 
547

 
245

 
76%
 
N/M
Income (loss) from continuing operations
2,228

 
1,268

 
(191
)
 
76%
 
N/M
Discontinued operations, net

 

 
178

 
N/M
 
N/M
Less: net income from continuing operations attributable to noncontrolling interests
(122
)
 
(112
)
 
(102
)
 
9%
 
9%
Net income (loss) attributable to S&P Global Inc.
$
2,106

 
$
1,156

 
$
(115
)
 
82%
 
N/M
N/M - not meaningful

Revenue

(in millions)
Year ended December 31,
 
% Change
 
2016
 
2015
 
2014
 
’16 vs ’15
 
’15 vs ’14
Subscription / Non-transaction revenue
$
3,623

 
$
3,260

 
$
3,042

 
11%
 
7%
Asset linked fees
$
381

 
$
369

 
$
345

 
3%
 
7%
Non-subscription / Transaction revenue
$
1,657

 
$
1,684

 
$
1,664

 
(2)%
 
1%
% of total revenue:
 
 
 
 
 
 
 
 
 
     Subscription / Non-transaction revenue
64
%
 
61
%
 
60
%
 
 
 
 
     Asset linked fees
7
%
 
7
%
 
7
%
 
 
 
 
     Non-subscription / Transaction revenue
29
%
 
32
%
 
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
$
3,461

 
$
3,202

 
$
2,911

 
8%
 
10%
International revenue:
 
 
 
 
 
 
 
 
 
     European region
1,330

 
1,265

 
1,316

 
5%
 
(4)%
     Asia
575

 
566

 
528

 
2%
 
7%
     Rest of the world
295

 
280

 
296

 
6%
 
(5)%
Total international revenue
$
2,200

 
$
2,111

 
$
2,140

 
4%
 
(1)%
% of total revenue:
 
 
 
 
 
 
 
 
 
     U.S. revenue
61
%
 
60
%
 
58
%
 

 

     International revenue
39
%
 
40
%
 
42
%
 

 




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37973386_spgi-201612_chartx36423.jpg 37973386_spgi-201612_chartx37434.jpg

2016
Revenue increased 7% as compared to 2015. Subscription / non-transaction revenue increased primarily from the favorable impact of the acquisition of SNL in September of 2015, growth in average contract values for our legacy Capital IQ products driven by an expansion in new and existing accounts, continued demand for S&P Global Platts’ proprietary content and an increase in surveillance fees at Ratings. Asset linked fees increased due to higher average levels of assets under management for ETFs and mutual funds. Non-subscription / transaction revenue decreased primarily due to the unfavorable impact of the sale of J.D. Power on September 7, 2016, partially offset by an increase in U.S. bank loan ratings revenue and corporate bond ratings revenue at Ratings and higher volumes for exchange traded derivatives at Indices. See " – Segment Review" below for further information.

The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. This impact refers to constant currency comparisons estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year.

2015
Revenue increased 5% as compared to 2014. Subscription / non-transaction revenue increased primarily due to growth at Market and Commodities Intelligence due to an increase in the average contract values in the S&P Capital IQ Desktop and Global Risk Services products as well as continued demand for S&P Global Platts’ proprietary content. Assets linked fees increased due to higher average levels of assets under management for ETFs and mutual funds. Non-subscription / transaction revenue increased primarily due to growth at Indices due to higher volumes for exchange-traded derivatives, partially offset by a decrease at Ratings which includes the unfavorable impact of foreign exchange rates. Subscription / non-transaction revenue growth was also favorably impacted by the acquisitions of SNL and UCG in September of 2015 and July of 2015, respectively. See " – Segment Review" below for further information.

The unfavorable impact of foreign exchange rates reduced revenue by 2 percentage points. This impact refers to constant currency comparisons estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. The unfavorable impact of foreign exchange rates on revenue primarily related to Ratings and was driven by the weakening of the Euro to the U.S. dollar.


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Table of Contents

Total Expenses

The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the years ended December 31, 2016 and 2015:
(in millions)
2016
 
2015
 
% Change
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
Ratings 1
$
776

 
$
463

 
$
737

 
$
571

 
5%
 
(19)%
Market and Commodities Intelligence 2
946

 
786

 
925

 
769

 
2%
 
2%
Indices
145

 
75

 
126

 
70

 
14%
 
6%
Intersegment eliminations 3
(98
)
 

 
(88
)
 

 
(10)%
 
N/M
Total segments
1,769

 
1,324

 
1,700

 
1,410

 
4%
 
(6)%
Corporate 4

 
119

 

 
140

 
N/M
 
(15)%
 
$
1,769

 
$
1,443

 
$
1,700

 
$
1,550

 
4%
 
(7)%
N/M - not meaningful
1 
In 2016, selling and general expenses include a benefit related to net legal settlement insurance recoveries of $10 million. In 2015, selling and general expenses include net legal settlement expenses of $54 million. Additionally, 2016 and 2015 include restructuring charges of $6 million and $13 million, respectively.
2 
In 2016, selling and general expenses include disposition-related costs of $48 million, a technology-related impairment charge of $24 million and acquisition-related costs of $1 million. In 2015, selling and general expenses include acquisition-related costs related to the acquisition of SNL of $37 million and costs related to identified operating efficiencies primarily related to restructuring of $33 million.
3 
Intersegment eliminations relate to a royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings.
4 
In 2016, selling and general expenses include $3 million from a disposition-related reserve release and 2015 includes costs related to identified operating efficiencies primarily related to restructuring of $10 million
Operating-Related Expenses
Operating-related expenses increased $69 million or 4% as compared to 2015. The increase at Market and Commodities Intelligence was primarily driven by the acquisition of SNL in September of 2015, partially offset by decreases from our dispositions in 2016. Increases at Ratings and Indices were due to higher compensation costs related to additional headcount and increased incentive costs.

Selling and General Expenses
Selling and general expenses decreased 7%. Excluding the favorable impact of higher net legal settlement insurance recoveries in 2016 of 4 percentage points, higher restructuring charges in 2015 of 3 percentage points, higher acquisition-related costs in 2015 of 2 percentage points, partially offset by the unfavorable impact of disposition-related costs of 3 percentage points and a technology-related impairment charge of 1 percentage point, selling and general expenses decreased 2%. Decreases at Ratings were driven by reduced professional fees following the completion of the Company's program for the 2015 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and reduced legal fees following the resolution of a number of significant legal matters. This decrease was partially offset by an increase at Market and Commodities Intelligence driven by the acquisition of SNL in September of 2015, partially offset by decreases from our dispositions in 2016.

Depreciation and Amortization
Depreciation and amortization increased $24 million or 15% as compared to 2015 primarily due to higher intangible asset amortization in 2016 from the acquisition of SNL in September of 2015.


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The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the years ended December 31, 2015 and 2014:
(in millions)
2015
 
2014
 
% Change
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
 
Operating-
related expenses
 
Selling and
general expenses
Ratings 1
$
737

 
$
571

 
$
777

 
$
2,219

 
(5)%
 
(74)%
Market and Commodities Intelligence 2
925

 
769

 
839

 
700

 
10%
 
10%
Indices 3
126

 
70

 
120

 
77

 
6%
 
(9)%
Intersegment eliminations 4
(88
)
 

 
(86
)
 

 
(3)%
 
N/M
Total segments
1,700

 
1,410

 
1,650

 
2,996

 
3%
 
(53)%
Corporate 5

 
140

 
1

 
148

 
N/M
 
(6)%
 
$
1,700

 
$
1,550

 
$
1,651

 
$
3,144

 
3%
 
(51)%
N/M - not meaningful
1 
In 2015, selling and general expenses include net legal settlement expenses of $54 million and restructuring charges of $13 million, respectively. In 2014, selling and general expenses include $1.6 billion for legal and regulatory settlements and restructuring charges of $45 million.
2 
In 2015, selling and general expenses include acquisition-related costs related to the acquisition of SNL of $37 million and costs related to identified operating efficiencies primarily related to restructuring of $33 million. In 2014, selling and general expenses include $25 million of restructuring charges.
3 
In 2014, selling and general expenses include the impact of professional fees largely related to corporate development activities of $4 million.
4 
Intersegment eliminations relate to a royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings.
5 
In 2015, selling and general expenses include costs related to identified operating efficiencies primarily related to restructuring of $10 million and 2014 includes restructuring charges of $16 million.
Operating-Related Expenses
Operating-related expenses increased $49 million or 3% as compared to 2014. Increases at Market and Commodities Intelligence were primarily driven by higher data processing costs, the acquisition of SNL in September of 2015 and higher incentive costs. These increases were partially offset by declines at Ratings driven by our compensation cost containment efforts resulting from 2014 restructuring actions.

Selling and General Expenses
Selling and general expenses decreased 51%. Excluding the favorable net impact of legal settlement and regulatory settlement charges and insurance recoveries of 48 percentage points, higher costs recorded in 2014 related to identified operating efficiencies primarily related to restructuring of 1 percentage point, partially offset by the unfavorable impact of acquisition-related costs related to the acquisition of SNL of 1 percentage point, selling and general expenses decreased 3%. The decline was due to a decrease at Ratings driven by lower incentive and legal costs, partially offset by increased costs related to the 2015 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and an increase at Market and Commodities Intelligence driven by the acquisition of SNL in September of 2015.

Depreciation and Amortization
Depreciation and amortization increased $23 million or 17% as compared to 2014, primarily due to higher intangible asset amortization in 2015 due to the acquisition of SNL in September of 2015 and the acquisition of UCG in July of 2015.


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Table of Contents

(Gain) Loss on Dispositions

During 2016, we completed the following transactions that resulted in a pre-tax gain of $1.1 billion in (gain) loss on dispositions in the consolidated statement of income:
In October of 2016, we completed the sale of Equity and Fund Research ("Equity Research"), a business within our Market and Commodities Intelligence segment to CFRA, a leading independent provider of forensic accounting research, analytics and advisory services. During the year ended December 31, 2016, we recorded a pre-tax gain of $9 million in (gain) loss on dispositions in the consolidated statement of income related to the sale of Equity Research.

In October of 2016, we completed the sale of SPSE and CMA for $425 million in cash to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services. We recorded a pre-tax gain of $364 million in (gain) loss on dispositions in the consolidated statement of income related to the sale of SPSE and CMA.
In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. We recorded a pre-tax gain of $728 million in (gain) loss on dispositions in the consolidated statement of income related to the sale of J.D. Power.
During 2015, we completed the sale of our interest in a legacy McGraw Hill Construction investment that resulted in a pre-tax gain of $11 million in (gain) loss on dispositions in the consolidated statement of income.
During 2014, we completed the following transactions that resulted in a pre-tax loss of $9 million in (gain) loss on dispositions in the consolidated statement of income:
On July 31, 2014, we completed the sale of the Company's aircraft to Harold W. McGraw III, then Chairman of the Company's Board of Directors and former President and CEO of the Company ("Mr. McGraw") for a purchase price of $20 million, which was modestly higher than the independent appraisal obtained. During the second quarter of 2014, we recorded a non-cash impairment charge of $6 million in (gain) loss on dispositions in our consolidated statement of income as a result of the pending sale. See Note 14 – Related Party Transactions to our consolidated financial statements for further discussion.
On June 30, 2014, we completed the sale of our data center to Quality Technology Services, LLC (“QTS”) which owns, operates, and manages data centers. Net proceeds from the sale of $58 million were received in July of 2014. The sale includes all of the facilities and equipment on the south campus of our East Windsor, New Jersey location, inclusive of the rights and obligations associated with an adjoining solar power field. The sale resulted in an expense of $3 million recorded in (gain) loss on dispositions in our consolidated statement of income, which is in addition to the non-cash impairment charge we recorded in the fourth quarter of 2013.
Operating Profit

We consider operating profit to be an important measure for evaluating our operating performance and we evaluate operating profit for each of the reportable business segments in which we operate.
We internally manage our operations by reference to “segment operating profit” with economic resources allocated primarily based on segment operating profit. Segment operating profit is defined as operating profit before unallocated expense. Segment operating profit is one of the key metrics we use to evaluate operating performance. Segment operating profit is not, however, a measure of financial performance under U.S. GAAP, and may not be defined and calculated by other companies in the same manner.
Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retroactively revised to reflect the current organizational structure.

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The table below reconciles segment operating profit to total operating profit:
(in millions)
Year ended December 31,
% Change
 
2016
 
2015
 
2014
 
'16 vs '15
 
'15 vs '14
Ratings 1
$
1,262

 
$
1,078

 
$
(583
)
 
17%
 
N/M
Market and Commodities Intelligence 2
1,822

 
585

 
518

 
N/M
 
13%
Indices 3
412

 
392

 
347

 
5%
 
13%
Total segment operating profit
3,496

 
2,055

 
282

 
70%
 
N/M
Unallocated expense 4
(127
)
 
(138
)
 
(169
)
 
(8)%
 
(18)%
Total operating profit
$
3,369

 
$
1,917

 
$
113

 
76%
 
N/M
N/M - not meaningful
1 
2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and restructuring charges of $6 million. 2015 includes net legal settlement expenses of $54 million and restructuring charges of $13 million. 2014 includes $1.6 billion of legal and regulatory settlements and restructuring charges of $45 million. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $5 million, $5 million and $6 million, respectively.
2 
2016 includes a $1.1 billion gain from our dispositions, disposition-related costs of $48 million, a technology-related impairment charge of $24 million and an acquisition-related cost of $1 million. 2015 includes acquisition-related costs related to the acquisition of SNL of $37 million and costs identified operating efficiencies primarily related to restructuring of $33 million. 2014 includes $25 million of restructuring charges. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $85 million, $57 million and $37 million, respectively.
3 
2014 includes the impact of professional fees largely related to corporate development activities of $4 million. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $6 million, $5 million and $5 million, respectively.
4 
2016 includes $3 million from a disposition-related reserve release. 2015 includes a gain of $11 million related to the sale of our interest in a legacy McGraw Hill Construction investment and costs related to identified operating efficiencies primarily related to restructuring of $10 million. 2014 includes restructuring charges of $16 million.

2016

Segment Operating Profit — Increased $1.4 billion, or 70% as compared to 2015. Excluding the favorable impact of the gain from our dispositions of 55 percentage points, higher net legal settlement insurance recoveries in 2016 of 3 percentage points, higher acquisition-related costs in 2015 of 2 percentage points, higher restructuring charges in 2015 of 2 percentage points, partially offset by the unfavorable impact of a technology-related impairment charge of 1 percentage point, higher amortization of intangibles from acquisitions of 2 percentage points and higher disposition-related costs of 2 percentage points, segment operating profit increased 13%. Revenue growth at Market and Commodities Intelligence, Ratings and Indices were the primary drivers for the increase. Decreased costs at Ratings and our legacy Capital IQ business due to reduced headcount following our 2015 restructuring actions also contributed to segment operating profit growth. See “ – Segment Review” below for further information.

Unallocated Expense Decreased by $11 million or 8% as compared to 2015. These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives and unoccupied office space. Excluding the unfavorable impact of a gain on the sale of our interest in a legacy McGraw Hill Construction investment in 2015 of 8 percentage points, partially offset by the favorable impact of a disposition-related reserve release of 2 percentage points and higher restructuring charges in 2015 of 7 percentage points, unallocated expense decreased 7% due to higher 2016 pension income as well as a reduction in professional service fees.

Foreign exchange rates had a favorable impact on operating profit of 2 percentage points. The foreign exchange rate impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations on monetary assets and liabilities denominated in currencies other than the individual business' functional currency.

2015

Segment Operating Profit — Increased $1.8 billion, or 629% as compared to 2014. 2015 includes net legal settlement charges of $54 million compared to legal and regulatory settlement charges of $1.6 billion in 2014. Excluding the favorable impact of lower net legal and regulatory settlement charges of 621 percentage points, higher costs recorded in 2014 related to identified operating

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efficiencies primarily related to restructuring of 9 percentage points and the impact of professional fees largely related to corporate development activities recorded in 2014 of 2 percentage points, partially offset by the unfavorable impact of acquisition-related costs related to the acquisition of SNL of 15 percentage points, segment operating profit increased 11%. Revenue growth at Market and Commodities Intelligence and Indices, and cost containment efforts at Ratings during 2015 were the primary drivers for the increase. See “ – Segment Review” below for further information.
 
Unallocated Expense Decreased by $31 million or 18% as compared to 2014. These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives and unoccupied office space. Excluding the favorable impact of the sale of our interest in a legacy McGraw Hill Construction investment of 6 percentage points and higher costs recorded in 2014 related to identified operating efficiencies primarily related to restructuring of 4 percentage points, unallocated expense decreased by 9 percentage points as compared to 2014. This decrease was primarily driven by the impact of a $9 million loss recorded in the second quarter of 2014 related to the sale of the Company's aircraft and the sale of our data center.

Foreign currency exchange rates had a negligible impact on operating profit. The foreign exchange rate impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by recalculating current year results of foreign operations using the average exchange rate from the prior year. Remeasurement impacts are based on the variance between current-year and prior-year foreign exchange rate fluctuations on monetary assets and liabilities denominated in currencies other than the individual business' functional currency.

Interest Expense, net

Net interest expense for 2016 increased $79 million or 77% as compared to 2015, primarily as a result of the $700 million of senior notes issued in the second quarter of 2015, the $2.0 billion of senior notes issued in the third quarter of 2015 and the $500 million of senior notes issued in the third quarter of 2016. Additionally, net interest expense in 2016 includes a redemption fee on the early payment of our 5.9% senior notes due in 2017. These increases were partially offset by the favorable impact of lower interest rates on the $500 million of senior notes issued in the third quarter of 2016.

Net interest expense for 2015 increased 73% compared to 2014 as a result of the $700 million of senior notes issued in the second quarter of 2015 and the $2.0 billion of senior notes issued in the third quarter of 2015.

Provision for Income Taxes

Our effective tax rate from continuing operations was 30.1% for 2016 and 2015, and 453.7% for 2014. The decrease in the 2015 effective tax rate was primarily due to the reduction in charges for legal settlements, improved profitability in several lower tax jurisdictions outside of the United States, and continuing resolution of prior year tax audits.

Discontinued Operations, net

Income from discontinued operations was $178 million in 2014, primarily as a result of the after-tax gain of $160 million recorded on the sale of McGraw Hill Construction in 2014.

Segment Review

Ratings

Ratings is an independent provider of credit ratings, research and analytics to investors, issuers and other market participants. Credit ratings are one of several tools investors can use when making decisions about purchasing bonds and other fixed income investments. They are opinions about credit risk and our ratings express our opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time. Our credit ratings can also relate to the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default.

Ratings differentiates its revenue between transaction and non-transaction. Transaction revenue primarily includes fees associated with:
ratings related to new issuance of corporate and government debt instruments, and structured finance debt instruments;
bank loan ratings; and

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corporate credit estimates, which are intended, based on an abbreviated analysis, to provide an indication of our opinion regarding creditworthiness of a company which does not currently have a Ratings credit rating.

Non-transaction revenue primarily includes fees for surveillance of a credit rating, annual fees for customer relationship-based pricing programs, fees for entity credit ratings and global research and analytics. Non-transaction revenue also includes an intersegment royalty charged to Market and Commodities Intelligence for the rights to use and distribute content and data developed by Ratings. Royalty revenue for 2016, 2015 and 2014 was $92 million, $83 million and $77 million, respectively.

(in millions)
 
Year ended December 31,
 
% Change
 
 
2016
 
2015
 
2014
 
’16 vs ’15
 
’15 vs ’14
Revenue
 
$
2,535

 
$
2,428

 
$
2,455

 
4
%
 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
Non-transaction
 
$
1,357

 
$
1,321

 
$
1,326

 
3
%
 
 %
Transaction
 
$
1,178

 
$
1,107

 
$
1,129

 
6
%
 
(2
)%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
Non-transaction
 
54
%
 
54
%
 
54
 %
 
 
 
 
Transaction
 
46
%
 
46
%
 
46
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
 
$
1,462

 
$
1,390

 
$
1,305

 
5
%
 
7
 %
International revenue
 
$
1,073

 
$
1,038

 
$
1,150

 
3
%
 
(10
)%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
 
58
%
 
57
%
 
53
 %
 

 

     International revenue
 
42
%
 
43
%
 
47
 %
 

 

 
 
 
 
 
 
 
 
 
 
 
Operating profit (loss) 1
 
$
1,262

 
$
1,078

 
$
(583
)
 
17
%
 
N/M

% Operating margin
 
50
%
 
44
%
 
(24
)%
 
 
 
 
 
N/M - not meaningful
1 
2016 includes a benefit related to net legal settlement insurance recoveries of $10 million and restructuring charges of $6 million. 2015 includes net legal settlement expenses of $54 million and restructuring charges of $13 million. 2014 includes $1.6 billion of legal and regulatory settlements and restructuring charges of $45 million. 2016, 2015 and 2014 also includes amortization of intangibles from acquisitions of $5 million, $5 million and $6 million, respectively.

2016

Revenue increased 4%, which includes the unfavorable impact of foreign exchange rates that reduced revenue by 1 percentage point. Transaction revenue increased due to growth in U.S. bank loan ratings revenue and an increase in corporate bond ratings revenue largely driven by refinancing activity from the low interest rate environment, partially offset by a decrease in structured finance revenue. Revenue growth benefited from increased contract realization. Non-transaction revenue grew primarily due to an increase in surveillance fees, partially offset by a decline in Ratings Evaluation Service ("RES") activity.

Operating profit increased 17%. Excluding the favorable impact of higher net legal settlement insurance recoveries in 2016 of 6 percentage points and lower restructuring charges in 2016 of 1 percentage point, operating profit increased 10%. The increase is due to both revenue growth and expense reduction. Reduced expenses were primarily driven by reduced professional fees following the completion of the Company's program for the 2015 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and reduced legal fees following the resolution of a number of significant legal matters. These decreases were partially offset by higher compensation costs related to increased incentive costs and additional headcount. Foreign exchange rates had a favorable impact on operating profit of 1 percentage point.

2015

Revenue decreased 1%, which includes the unfavorable impact of foreign exchange rates that reduced revenue by 4 percentage points. Excluding the unfavorable impact of foreign exchange rates, transaction revenue increased primarily due to an increase in U.S. Public Finance issuance, partially offset by a decline in structured finance revenue driven by reduced global market issuance.

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Excluding the unfavorable impact of foreign exchange rates, non-transaction revenue also increased due to growth in surveillance revenues and additional RES activity, partially offset by lower revenue associated with new client relationships.

Operating profit increased 285%. Excluding the favorable net impact of legal and regulatory settlement charges and insurance recoveries of 273 percentage points and net higher restructuring costs recorded in 2014 of 6 percentage points, operating profit increased 7%. Foreign currency exchange rates had an unfavorable impact of 1 percentage point on the operating profit growth of 7%. This increase was driven by decreased compensation costs primarily driven by lower incentive costs and cost containment resulting from 2014 restructuring actions and reduced legal fees following the resolution of a number of significant legal matters, partially offset by increased costs related to the 2015 implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the decrease in revenue discussed above.

Market Issuance Volumes

We monitor market issuance volumes as an indicator of trends in transaction revenue streams within Ratings. Market issuance volumes noted within the discussion that follows are based on the domicile of the issuer. Issuance volumes can be reported in two ways: by "domicile", which is based on where an issuer is located or where the assets associated with an issue are located, or based on "marketplace", which is where the bonds are sold. The following tables depict changes in market issuance levels as compared to the prior year, based on a composite of Thomson Financial, Harrison Scott Publications, Dealogic and Rating’s internal estimates.
 
 
2016 Compared to 2015
Corporate Bond Issuance
 
U.S.
 
Europe
 
Global
High-Yield Issuance
 
(14)%
 
(21)%
 
(12)%
Investment Grade
 
(5)%
 
8%
 
11%
Total New Issue Dollars—Corporate Issuance
 
(6)%
 
4%
 
8%
Decreases in high-yield issuance in the year-to-date period reflect weakness in the first half of the year due to market volatility and political and economic uncertainty in the European markets. High-yield issuance in the U.S. and Europe was up for the second half of the year as a result of more favorable market conditions primarily due to tightening credit spreads. Although the number of investment-grade issuances in the U.S. was up, issuance dollars declined due to fewer high par value issuance deals.
 
 
2016 Compared to 2015
Structured Finance
 
U.S.
 
Europe
 
Global
Asset-Backed Securities (“ABS”)
 
1%
 
14%
 
7%
Structured Credit
 
(4)%
 
36%
 
2%
Commercial Mortgage-Backed Securities (“CMBS”)
 
(29)%
 
(26)%
 
(30)%
Residential Mortgage-Backed Securities (“RMBS”)
 
(29)%
 
37%
 
9%
Covered Bonds
 
*
 
(25)%
 
(20)%
Total New Issue Dollars—Structured Finance
 
(10)%
 
(7)%
 
(5)%
* Represents no activity in 2016 and 2015.

ABS issuance was up in the U.S. and Europe driven by an increase in credit card transactions, consumer loans and small business loans.
Issuance was down in the U.S. Structured Credit markets driven by lower availability of leveraged loans. Issuance was up in the European Structured Credit markets driven by new collateralized loan obligations ("CLO") engagements.
CMBS issuance in the U.S. and Europe was down reflecting lower market volume due to overall market conditions.
RMBS volume in the U.S. was down driven by minimal activity in the private label securities market. The increase in European RMBS volume was driven by several large issuances in 2016.
Covered bond (debt securities backed by mortgages or other high-quality assets that remain on the issuer's balance sheet) issuance in Europe was down due to the impact of central bank lending policies.


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Industry Highlights and Outlook

Revenue increased in 2016 primarily due to an increase in U.S. bank loan ratings and corporate bond ratings revenue driven by refinancing activity from the low interest rate environment. These increases were partially offset by a decrease in structured finance revenue. High-yield corporate issuance volumes increased in the second half of the year as a result of more favorable market conditions primarily due to tightening credit spreads. Weakness in high-yield corporate issuance volumes in the first half of the year was due to market volatility and political and economic uncertainty largely in the European markets.

Legal and Regulatory Environment

General
Ratings and many of the securities that it rates are subject to extensive regulation in both the U.S. and in other countries, and therefore existing and proposed laws and regulations can impact the Company’s operations and the markets in which it operates. Additional laws and regulations have been adopted but not yet implemented or have been proposed or are being considered. In addition, in certain countries, governments may provide financial or other support to locally-based rating agencies. For example, governments may from time to time establish official rating agencies or credit ratings criteria or procedures for evaluating local issuers. We have reviewed the new laws, regulations and rules which have been adopted and we have implemented, or are planning to implement, changes as required. We do not believe that such new laws, regulations or rules will have a material adverse effect on our financial condition or results of operations. Other laws, regulations and rules relating to credit rating agencies are being considered by local, national, foreign and multinational bodies and are likely to continue to be considered in the future, including provisions seeking to reduce regulatory and investor reliance on credit ratings, rotation of credit rating agencies and liability standards applicable to credit rating agencies. The impact on us of the adoption of any such laws, regulations or rules remains uncertain, but could increase the costs and legal risks relating to Ratings’ rating activities, or adversely affect our ability to compete, or result in changes in the demand for credit ratings.

In the normal course of business both in the U.S. and abroad, Ratings (or the legal entities comprising Ratings) are defendants in numerous 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 Ratings and are or have been brought by purchasers of rated securities. In addition, various government and self-regulatory agencies frequently make inquiries and conduct investigations into Ratings’ compliance with applicable laws and regulations. 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.

U.S.
The businesses conducted by our Ratings segment are, in certain cases, regulated under the Credit Rating Agency Reform Act of 2006 (the “Reform Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Frank Act”), the Securities Exchange Act of 1934 (the “Exchange Act”) and/or the laws of the states or other jurisdictions in which they conduct business. The financial services industry is subject to the potential for increased regulation in the U.S.

S&P Global Ratings is a credit rating agency that is registered with the SEC as a Nationally Recognized Statistical Rating Organization (“NRSRO”). The SEC first began informally designating NRSROs in 1975 for use of their credit ratings in the determination of capital charges for registered brokers and dealers under the SEC’s Net Capital Rule. The Reform Act created a new SEC registration system for rating agencies that choose to register as NRSROs. Under the Reform Act, the SEC is given authority and oversight of NRSROs and can censure NRSROs, revoke their registration or limit or suspend their registration in certain cases. The rules implemented by the SEC pursuant to the Reform Act, the Dodd Frank Act and the Exchange Act address, among other things, prevention or misuse of material non-public information, conflicts of interest, documentation and assessment of internal controls, and improving transparency of ratings performance and methodologies. The public portions of the current version of S&P Global Ratings’ Form NRSRO are available on S&P Global Ratings’ website.

European Union
In the European Union, the credit rating industry is registered and supervised through a pan-European regulatory framework which is a compilation of three sets of legislative actions. In 2009, the European Parliament passed a regulation (“CRA1”) that established an oversight regime for the credit rating industry in the European Union, which became effective in 2010. CRA1 requires the registration, formal regulation and periodic inspection of credit rating agencies operating in the European Union. Ratings was granted registration in October of 2011. In January of 2011, the European Union established the European Securities and Markets Authority (“ESMA”), which, among other things, has direct supervisory responsibility for the registered credit rating industry throughout the European Union.


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Additional rules augmenting the supervisory framework for credit rating agencies went into effect in 2013. Commonly referred to as CRA3, these rules, among other things:
impose various additional procedural requirements with respect to ratings of sovereign issuers;
require member states to adopt laws imposing liability on credit rating agencies for an intentional or grossly negligent failure to abide by the applicable regulations;
impose mandatory rotation requirements on credit rating agencies hired by issuers of securities for ratings of resecuritizations, which may limit the number of years a credit rating agency can issue ratings for such securities of a particular issuer;
impose restrictions on credit rating agencies or their shareholders if certain ownership thresholds are crossed; and
impose additional procedural and substantive requirements on the pricing of services.

The financial services industry is subject to the potential for increased regulation in the European Union.

Other Jurisdictions
Outside of the U.S. and the European Union, regulators and government officials have also been implementing formal oversight of credit rating agencies. Ratings is subject to regulations in most of the foreign jurisdictions in which it operates and continues to work closely with regulators globally to promote the global consistency of regulatory requirements. Regulators in additional countries may introduce new regulations in the future.

For a further discussion of competitive and other risks inherent in our Ratings business, see Item 1a, Risk Factors, in this Annual Report on Form 10-K. For a further discussion of the legal and regulatory environment in our Ratings business, see Note 13 - Commitments and Contingencies to the consolidated financial statements under Item 8, Consolidated Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.

Market and Commodities Intelligence

Market and Commodities Intelligence's portfolio of capabilities are designed to help the financial community track performance, generate better investment returns, identify new trading and investment ideas, perform risk analysis, develop mitigation strategies and provide high-value information to the commodity and energy markets that enable its customers to make better informed trading and business decisions.

Effective beginning with the fourth quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how our Chief Executive Officer evaluates the performance of these segments. Beginning in the fourth quarter of 2016, S&P Global Market Intelligence and S&P Global Platts are included in a new reportable segment named Market and Commodities Intelligence. Our historical segment reporting has been retroactively revised to reflect the current organizational structure.

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 Quant House SAS ("QuantHouse"), included in our Market and Commodities Intelligence segment, to QH Holdco, an independent third party. As a result, we classified the assets and liabilities of QuantHouse, net of our costs to sell, as held for sale in our consolidated balance sheet as of December 31, 2016 resulting in an aggregate loss of $31 million. 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.

In October of 2016, we completed the sale of Equity Research, a business within our Market and Commodities Intelligence segment to CFRA, a leading independent provider of forensic accounting research, analytics and advisory services. During the year ended December 31, 2016, we recorded a pre-tax gain of $9 million ($5 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of Equity Research.

In October of 2016, we completed the sale of SPSE and CMA for $425 million in cash to Intercontinental Exchange, an operator of global exchanges, clearing houses and data services. During the year ended December 31, 2016, we recorded a pre-tax gain of $364 million ($297 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of SPSE and CMA.

In September of 2016, we completed the sale of J.D. Power for $1.1 billion to XIO Group, a global alternative investments firm headquartered in London. In the fourth quarter of 2015, we began exploring strategic alternatives for J.D. Power and initiated an active program to sell the business. The assets and liabilities of J.D. Power were classified as held for sale in our consolidated balance sheet as of December 31, 2015. During the year ended December 31, 2016, we recorded a pre-tax gain of $728 million ($516 million after-tax) in (gain) loss on dispositions in the consolidated statement of income related to the sale of J.D. Power.

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Following the sale, the assets and liabilities of J.D. Power are no longer reported in our consolidated balance sheet as of December 31, 2016.

On November 3, 2014, we completed the sale of McGraw Hill Construction to Symphony Technology Group for $320 million in cash. Accordingly, the results of operations for the year ended December 31, 2014 and all prior periods presented were reclassified to reflect the business as a discontinued operation. See Note 2 — Acquisitions and Divestitures for further discussion.

Market and Commodities Intelligence includes the following business lines:
Financial Data & Analytics a product suite that provides data, analytics and third-party research for global finance professionals, which includes the S&P Capital IQ Desktop, SNL, Leveraged Commentary & Data, Investment Advisory and integrated bulk data feeds that can be customized, which include CUSIP and Compustat;
Risk Services commercial arm that sells Ratings' credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and RatingsXpress®; and
S&P Global Platts the leading independent provider of information and benchmark prices for the commodity and energy markets. S&P Global Platts provides essential price data, analytics, and industry insight that enable the commodity and energy markets to perform with greater transparency and efficiency. Additionally, S&P Global Platts generates revenue from licensing of our proprietary market price data and price assessments to commodity exchanges.

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.

(in millions)
 
Year ended December 31,
 
% Change
 
 
2016
 
2015
 
2014
 
’16 vs ’15
 
’15 vs ’14
Revenue
 
$
2,585

 
$
2,376

 
$
2,130

 
9
 %
 
12
%
 
 
 
 
 
 
 
 
 
 
 
Subscription revenue
 
$
2,231

 
$
1,911

 
$
1,694

 
17
 %
 
13
%
Non-subscription revenue
 
$
354

 
$
465

 
$
436

 
(24
)%
 
7
%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
     Subscription revenue
 
86
%
 
80
%
 
80
%
 
 
 
 
     Non-subscription revenue
 
14
%
 
20
%
 
20
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
 
$
1,523

 
$
1,368

 
$
1,210

 
11
 %
 
13
%
International revenue
 
$
1,062

 
$
1,008

 
$
920

 
6
 %
 
10
%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
     U.S. revenue
 
59
%
 
58
%
 
57
%
 
 
 
 
     International revenue
 
41
%
 
42
%
 
43
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit 1
 
$
1,822

 
$
585

 
$
518

 
212
 %
 
13
%
% Operating margin
 
70
%
 
25
%
 
24
%
 
 
 
 
N/M - not meaningful
1 
2016 includes a $1.1 billion gain from our dispositions, disposition-related costs of $48 million, a technology-related impairment charge of $24 million and an acquisition-related cost of $1 million. 2015 includes acquisition-related costs related to the acquisition of SNL of $37 million and costs identified operating efficiencies primarily related to restructuring of $33 million. 2014 includes $25 million of restructuring charges. 2016, 2015 and 2014 includes amortization of intangibles from acquisitions of $85 million, $57 million and $37 million, respectively.

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2016

Revenue increased 9% and was favorably impacted by 1 percentage point of growth from the net impact of acquisitions and dispositions discussed below. Revenue growth was also driven by increases in annualized contract values in the S&P Capital IQ Desktop, RatingsXpress® and RatingsDirect® from new and existing customers. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® continued to grow in 2016. Increases in annualized contract value for certain of our data feed products also contributed to revenue growth. Additionally, strength in S&P Global Platts' proprietary content due to continued demand for S&P Global Platts’ market data and price assessment products across all commodity sectors, led by petroleum, and continued licensing of our proprietary market price data and price assessments to various commodity exchanges contributed to revenue growth. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. Both domestic and international revenue increased, with international revenue representing 41% of Market and Commodities Intelligence's total revenue. Revenue was favorably impacted by the acquisitions of SNL, PIRA Energy Group ("PIRA"), RigData and Petromedia Ltd, partially offset by the unfavorable impact of the dispositions of J.D. Power, SPSE and CMA and Equity Research. See Note 2 — Acquisitions and Divestitures for further discussion.

Operating profit increased 212%. Excluding the favorable impact from the gain on dispositions of 194 percentage points, the favorable impact of higher acquisition-related costs in 2015 of 6 percentage points and higher restructuring charges in 2015 of 6 percentage points, partially offset by the unfavorable impact of higher disposition-related costs of 9 percentage points, higher amortization of intangibles from acquisitions of 5 percentage points and a technology-related impairment charge of 4 percentage points, operating profit increased 24%. This increase is due to revenue growth and the favorable impact of foreign exchange rates of 5 percentage points, partially offset by higher compensation costs and increased technology costs primarily as a result of the acquisition of SNL in September of 2015.

2015

Revenue increased 12% and was favorably impacted by 5 percentage points of growth from the impact of acquisitions discussed below. Revenue growth was also driven by increases in annualized contract values in the S&P Capital IQ Desktop, RatingsXpress® and RatingsDirect® from new and existing customers. The number of users on the S&P Capital IQ Desktop and the number of customers at RatingsXpress® continued to grow in 2015. Additionally, strength in S&P Global Platts' proprietary content due to continued demand for S&P Global Platts’ market data and price assessment products across all commodity sectors, led by petroleum product offerings, and continued licensing of our proprietary market price data and price assessments to various commodity exchanges contributed to revenue growth. The unfavorable impact of foreign exchange rates reduced revenue by less than 1 percentage point. Revenue was favorably impacted by the acquisitions of SNL, National Automobile Dealers Association's Used Car Guide ("UCG"), Petromedia in July of 2015 and Eclipse Energy Group AS and its operating subsidiaries (“Eclipse”). See Note 2 — Acquisitions and Divestitures for further discussion.

Operating profit increased 13%. Excluding the unfavorable impact of acquisition-related costs related to the acquisition of SNL of 6 percentage points, higher amortization of intangibles from acquisitions of 3 percentage points and higher costs recorded in 2015 related to identified operating efficiencies primarily related to restructuring of 1 percentage point, operating profit increased 23%. This increase is due to revenue growth and the favorable impact of foreign exchange rates of 5 percentage points, partially offset by higher technology costs and increased compensation costs driven by additional headcount related to the acquisitions of SNL and UCG.

Industry Highlights and Outlook

In 2016, Market and Commodities Intelligence benefited from organic revenue growth and continued revenue and costs synergies resulting from progress on the integration of SNL. In 2016, the segment completed the sale of J.D. Power, and SPSE and CMA, resulting in a portfolio focused on scalable, industry leading, interrelated businesses in the capital and commodity markets. Additionally, in 2016, the segment completed the acquisitions of PIRA and RigData to enhance Market and Commodities Intelligence's energy analytical capabilities.

In 2017, Market and Commodities Intelligence will seek to develop new products and deliver enhancements to existing content and analytical capabilities. The segment also expects to further expand its presence in selected markets and geographies to accelerate international growth. Market and Commodities Intelligence will continue to focus on integrating and leveraging recent acquisitions to expand its analytical offerings.


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Legal and Regulatory Environment

Market Intelligence
The financial services industry is subject to the potential for increased regulation in the U.S. and abroad. Market Intelligence operates investment advisory businesses that are regulated in the U.S. under the U.S. Investment Advisers Act of 1940 (the “Investment Advisers Act”) and/or the laws of the states or other jurisdictions in which they conduct business.

Market Intelligence operates a business that is authorized and regulated in the United Kingdom by the Financial Conduct Authority (the “FCA”). As such, this business is authorized to arrange and advise on investments, and is also entitled to exercise a passport right to provide specified cross border services into other European Economic Area (“EEA”) States, and is to the conditions under the E.U. Markets in Financial Instruments Directive (“MiFID”).

On October 4, 2016, S&P Global completed the sale of Standard & Poor’s Securities Evaluations, Inc. (one of Market Intelligence’s investment advisory businesses) to Intercontinental Exchange. On October 3, 2016 Market Intelligence completed the sale of substantially all of its Equity Research business by transferring the assets of the business to Accounting Research & Analytics, LLC (“CFRA”). On September 7, 2016 Market Intelligence entered into a stock purchase agreement with CFRA to sell and transfer its entire ownership in Standard & Poor’s Malaysia Sdn. Bhd (S&P Malaysia) and its research business. Until the completion of this transaction, Market Intelligence will continue to operate the Equity Research business conducted by S&P Malaysia.

The markets for research and investment advisory services are very competitive. Market Intelligence competes domestically and internationally on the basis of a number of factors, including the quality of its research and advisory services, client service, reputation, price, geographic scope, range of products and services, and technological innovation. For a further discussion of competitive and other risks inherent in our Market Intelligence business, see Item 1a, Risk Factors, in this Annual Report on Form 10-K.

S&P Global Platts
S&P Global Platts’ commodities price assessment and information business is subject to increasing regulatory scrutiny in the U.S. and abroad. As discussed below under the heading “Indices-Legal and Regulatory Environment”, the financial benchmarks industry is subject to the new pending benchmark regulation in the European Union (the “E.U. Benchmark Regulation”) as well as potential increased regulation in other jurisdictions. As a result of these measures, as well as measures that could be taken in other jurisdictions outside of Europe, S&P Global Platts will be required in due course to obtain registration or authorization in connection with its benchmark and price assessment activities in Europe and potentially elsewhere.

Also as discussed above under the heading “Indices-Legal and Regulatory Environment”, the European Union has recently finalized a package of legislative measures known as MiFID II, which may also impact S&P Global Platts’ business. Although the MiFID II package is “framework” legislation, it is possible that the introduction of these laws and rules could affect S&P Global Platts’ ability both to administer and license its price assessments.

In October of 2012, IOSCO issued its PRA Principles which set out principles, which are intended to enhance the reliability of oil price assessments referenced in derivative contracts subject to regulation by IOSCO members. S&P Global Platts has taken steps to align its operations with the PRA Principles and as recommended by IOSCO in its final report on the PRA Principles, has aligned to the PRA Principles for other commodities for which it publishes benchmarks.

The markets for commodities price assessments and information are very competitive. S&P Global Platts competes domestically and internationally on the basis of a number of factors, including the quality of its assessments and other information it provides to the commodities and related markets, client service, reputation, price, range of products and services (including geographic coverage) and technological innovation. Furthermore, sustained downward pressure on oil and other commodities prices and trading activity in those markets could have a material adverse impact on the rate of growth of S&P Global Platts’ revenue. For a further discussion of competitive and other risks inherent in our Platts business, see Item 1a, Risk Factors, in this Annual Report on Form 10-K.


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Table of Contents

Indices

Indices is a global index provider that maintains a wide variety of indices to meet an array of investor needs. Indices’ mission is to provide transparent benchmarks to help with decision making, collaborate with the financial community to create innovative products and provide investors with tools to monitor world markets.
Indices primarily derives revenue from asset linked fees based on the S&P and Dow Jones indices and to a lesser extent generates subscription revenue and transaction revenue. Specifically, Indices generates revenue from the following sources:
Investment vehicles asset linked fees such as ETFs and mutual funds, that are based on the S&P Dow Jones Indices' benchmarks and generate revenue through fees based on assets and underlying funds;
Exchange traded derivatives generate royalties based on trading volumes of derivatives contracts listed on various exchanges;
Index-related licensing fees fixed or variable annual and per-issue fees for over-the-counter derivatives and retail-structured products; and
Data and customized index subscription fees fees from supporting index fund management, portfolio analytics and research.

(in millions)
 
Year ended December 31,
 
% Change
 
 
2016
 
2015
 
2014
 
’16 vs ’15
 
’15 vs ’14
Revenue
 
$
639

 
$
597

 
$
552

 
7%
 
8%
 
 
 
 
 
 
 
 
 
 
 
Asset linked fees
 
$
381

 
$
369

 
$
345

 
3%
 
7%
Subscription revenue
 
$
133

 
$
116

 
$
108

 
14%
 
8%
Transaction revenue
 
$
125

 
$
112

 
$
99

 
11%
 
13%
% of total revenue:
 
 
 
 
 
 
 
 
 
 
     Asset linked fees
 
60
%
 
62
%
 
62
%
 
 
 
 
     Subscription revenue
 
21
%
 
19
%
 
20
%
 
 
 
 
     Transaction revenue
 
19
%
 
19
%
 
18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. revenue
 
$
525

 
$
488

 
$
440

 
8%
 
11%
International revenue
 
$
114

 
$
109

 
$
112

 
5%
 
(2)%
% of total revenue: