McGraw Hill Financial, Inc. reported third quarter 2014 results with revenue of $1.26 billion, an increase of 10% compared to the same period last year. Net income and diluted earnings per share from continuing operations were $188 million and $0.68, respectively.
Adjusted net income from continuing operations increased 31% to $281 million and adjusted diluted earnings per share from continuing operations increased 32% to $1.02. The adjustments in the third quarter of 2014 are largely due to a charge relating to certain regulatory matters as well as restructuring actions. The adjustments in the third quarter of 2013 exclude the impact of the sale of India Index Services by CRISIL, a gain on the sale of Aviation Week, as well as one-time costs related primarily to the Growth and Value Plan.
“The Company’s operating performance this quarter was outstanding with 10% revenue growth, more than 400 basis points of adjusted operating margin expansion, and diluted adjusted EPS growth of 32%,” said Douglas L. Peterson, President and Chief Executive Officer of McGraw Hill Financial. “The increased demand by customers for our independent benchmarks, ratings, and analytics drove the double-digit revenue growth. Since launching McGraw Hill Financial last year, we have made great strides to create growth, drive performance, and streamline operations.”
Outlook: With the recently announced agreement to sell the McGraw Hill Construction business, its year-to-date results, including directly attributable shared costs, have now been reclassified to discontinued operations. The Company is modestly adjusting its guidance as a result of the sale. The new adjusted diluted earnings per share guidance from continuing operations, which excludes the results of McGraw Hill Construction, is a range of $3.78 to $3.83. The Company’s previous adjusted diluted earnings per share guidance, which included McGraw Hill Construction results, was a range of $3.80 to $3.90.
Actions to Resolve Regulatory Matters: Standard & Poor’s Ratings Services is currently in active discussions to resolve matters pending before the Securities and Exchange Commission, including with respect to the previously disclosed “Wells Notice” received on July 22, 2014, as well as related investigations by the Attorneys General of New York and Massachusetts. Although definitive settlement agreements have not been reached, a charge of $60 million related to these matters was recorded in the third quarter. There can be no assurance that this amount will be sufficient to resolve these matters or that definitive settlement agreements will be reached.
Restructuring Actions: The Company recently initiated additional restructuring actions, including a voluntary separation program at Standard & Poor’s Ratings Services. During the third quarter, $46 million of pre-tax restructuring charges were incurred. The Company remains committed to achieving productivity gains in its pursuit of creating growth and driving performance.
Source: McGraw Hill Earnings Release