McGraw Hill Financial, Inc. (NYSE: MHFI) reported revenue of $1.25 billion, an increase of 17% compared to the same period last year. Net income and diluted earnings per share from continuing operations were $250 million and $0.90, respectively.
Excluding the impact of one‐time costs related to the Growth and Value Plan, adjusted net income from continuing operations increased 28% to $257 million, and adjusted diluted earnings per share from continuing operations increased 31% to $0.92.
Standard & Poor’s Ratings Services: Quarterly revenue increased 24% to $599 million compared to 2Q 2012, driven by strength in corporate issuance and bank loan ratings as well as continued recovery in U.S. structured finance issuance. Operating profit increased 34% to $277 million, driving a 300‐plus basis point improvement in operating profit margin to 46%.
Tender for CRISIL Shares: On July 24, the Company initiated a voluntary tender offer for up to 15.7 million shares of CRISIL Limited, a publicly traded company in India. The tender will close on August 6. If the tender is fully subscribed, the Company’s ownership in CRISIL will increase from approximately 53% to 75%.
S&P Capital IQ: Revenue increased 3% to $287 million in the second quarter of 2013. The revenue benefit from recent acquisitions was offset by the wind down of several small products. Adjusted operating profit decreased 7% to $55 million due to continued investment in the expansion of products, content, and technology.
S&P Dow Jones Indices: Revenue increased 39% to $123 million in the second quarter of 2013. Excluding the revenue associated with the Dow Jones Indexes, revenue increased 6% to $94 million. Quarterly operating profit increased 43% to $80 million. McGraw Hill Financial’s share of the operating profit increased 6% to $60 million.
Commodities & Commercial Markets: Revenue increased 8% to $259 million. Operating profit increased by 16% to $83 million in the second quarter, compared to the same period last year.
Sale of Aviation Week: Yesterday, the Company announced a definitive agreement to sell Aviation Week to Penton. The sale continues the execution of the Company’s strategy of exiting non‐core assets while investing in high‐growth, high‐margin benchmark businesses. We expect the transaction to close shortly.
DOJ Lawsuit: On July 16, the Federal District Court in California issued a decision denying our motion to dismiss the Complaint. The Court’s decision was not on the merits of the case as the Court was required at this preliminary stage to accept as true all the factual allegations from the Complaint. As the case proceeds, the Company will have the opportunity to demonstrate the independence of our ratings and the lack of merit to the Department of Justice’s Complaint.
The Outlook: 2013 adjusted earnings per share guidance is increased to a range of $3.15 to $3.25 from $3.10 to $3.20. While the Company expects global issuance to remain generally robust, markets may demonstrate volatility due in part to evolving expectations for interest rates. In addition, investors should note that comparisons to prior year results become more difficult in the second half of the year.
