10-Q 1 mhfi-2015331xq1.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015
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
McGraw Hill Financial, 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.)
1221 Avenue of the Americas, New York, New York | 10020
(Address of principal executive offices) | (Zip Code)

Registrant’s telephone number, including area code: 212-512-2000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)
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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

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
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class | Shares Outstanding | Date
Common stock (par value $1.00 per share) | 273.7 million | April 17, 2015

1

McGraw Hill Financial, Inc.
INDEX

| Page Number
PART I. FINANCIAL INFORMATION |
Item 1. Financial Statements (Unaudited) |
Report of Independent Registered Public Accounting Firm | 3
Consolidated Statements of Income for the three months ended March 31, 2015 and 2014 | 4
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 | 5
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 | 6
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 | 7
Consolidated Statement of Equity for the three months ended March 31, 2015 | 8
Notes to the Consolidated Financial Statements | 9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) | 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 34
Item 4. Controls and Procedures | 34
PART II. OTHER INFORMATION |
Item 1. Legal Proceedings | 35
Item 1a. Risk Factors | 35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 35
Item 5. Other Information | 35
Item 6. Exhibits | 37
Signatures | 38

2

Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of McGraw Hill Financial, Inc.
We have reviewed the consolidated balance sheet of McGraw Hill Financial, Inc. (and subsidiaries) (the "Company") as of March 31, 2015, the related consolidated statements of income, comprehensive income and cash flows for the three-month periods ended March 31, 2015 and 2014, and the related consolidated statements of equity for the three-month period ended March 31, 2015. These financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of McGraw Hill Financial, Inc. (and subsidiaries) as of December 31, 2014, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended, not presented herein, and in our report dated February 13, 2015, we expressed an unqualified opinion on those consolidated financial statements.
/s/ ERNST & YOUNG LLP
New York, New York
April 28, 2015
3

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
McGraw Hill Financial, Inc.
Consolidated Statements of Income
(Unaudited)

(in millions, except per share amounts) | Three Months Ended
| March 31,
| 2015 |  | 2014
Revenue | $ | 1,273 |  |  | $ | 1,196 |
Expenses: |  |  |
Operating-related expenses | 406 |  |  | 396 |
Selling and general expenses | 333 |  |  | 347 |
Depreciation | 22 |  |  | 21 |
Amortization of intangibles | 11 |  |  | 12 |
Total expenses | 772 |  |  | 776 |
Operating profit | 501 |  |  | 420 |
Interest expense, net | 16 |  |  | 14 |
Income from continuing operations before taxes on income | 485 |  |  | 406 |
Provision for taxes on income | 156 |  |  | 138 |
Income from continuing operations | 329 |  |  | 268 |
Income from discontinued operations, net of tax | — |  |  | 7 |
Net income | 329 |  |  | 275 |
Less: net income from continuing operations attributable to noncontrolling interests | (26 | ) |  | (27 | )
Net income attributable to McGraw Hill Financial, Inc. | $ | 303 |  |  | $ | 248 |
Amounts attributable to McGraw Hill Financial, Inc. common shareholders: |  |  |
Income from continuing operations | $ | 303 |  |  | $ | 241 |
Income from discontinued operations | — |  |  | 7 |
Net income | $ | 303 |  |  | $ | 248 |
Earnings per share attributable to McGraw Hill Financial, Inc. common shareholders: |  |  |
Income from continuing operations: |  |  |
Basic | $ | 1.11 |  |  | $ | 0.89 |
Diluted | $ | 1.10 |  |  | $ | 0.87 |
Income from discontinued operations: |  |  |
Basic | $ | — |  |  | $ | 0.02 |
Diluted | $ | — |  |  | $ | 0.02 |
Net income: |  |  |
Basic | $ | 1.11 |  |  | $ | 0.91 |
Diluted | $ | 1.10 |  |  | $ | 0.89 |
Weighted-average number of common shares outstanding: |  |  |
Basic | 273.5 |  |  | 271.8 |
Diluted | 276.3 |  |  | 277.2 |
Dividend declared per common share | $ | 0.33 |  |  | $ | 0.30 |

See accompanying notes to the unaudited consolidated financial statements.
4

McGraw Hill Financial, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)

(in millions) | Three Months Ended
| March 31,
| 2015 |  | 2014
Net income | $ | 329 |  |  | $ | 275 |
Other comprehensive income: |  |  |
Foreign currency translation adjustment | (82 | ) |  | 4 |
Income tax effect | — |  |  | (1 | )
| (82 | ) |  | 3 |
Pension and other postretirement benefit plans | 3 |  |  | 2 |
Income tax effect | (1 | ) |  | (1 | )
| 2 |  |  | 1 |
Unrealized gain on forward exchange contracts | 1 |  |  | 3 |
Income tax effect | — |  |  | (1 | )
| 1 |  |  | 2 |
Comprehensive income | 250 |  |  | 281 |
Less: comprehensive income attributable to nonredeemable noncontrolling interests | (1 | ) |  | (3 | )
Less: comprehensive income attributable to redeemable noncontrolling interests | (25 | ) |  | (24 | )
Comprehensive income attributable to McGraw Hill Financial, Inc. | $ | 224 |  |  | $ | 254 |

See accompanying notes to the unaudited consolidated financial statements.
5

McGraw Hill Financial, Inc.
Consolidated Balance Sheets

(in millions) | March 31, 2015 |  | December 31, 2014
| (Unaudited) |  |
ASSETS |  |  |
Current assets: |  |  |
Cash and equivalents | $ | 1,176 |  |  | $ | 2,497 |
Accounts receivable, net of allowance for doubtful accounts: $38 in 2015 and 2014 | 992 |  |  | 932 |
Deferred income taxes | 329 |  |  | 363 |
Prepaid and other current assets | 191 |  |  | 174 |
Total current assets | 2,688 |  |  | 3,966 |
Property and equipment, net of accumulated depreciation: 2015 - $569; 2014 - $563 | 200 |  |  | 206 |
Goodwill | 1,365 |  |  | 1,387 |
Other intangible assets, net | 986 |  |  | 1,004 |
Other non-current assets | 209 |  |  | 208 |
Total assets | $ | 5,448 |  |  | $ | 6,771 |
LIABILITIES AND EQUITY |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 181 |  |  | $ | 191 |
Short-term debt | 365 |  |  | — |
Accrued compensation and contributions to retirement plans | 201 |  |  | 410 |
Unearned revenue | 1,356 |  |  | 1,323 |
Accrued legal and regulatory settlements (Note 11) | 68 |  |  | 1,609 |
Other current liabilities | 408 |  |  | 434 |
Total current liabilities | 2,579 |  |  | 3,967 |
Long-term debt | 799 |  |  | 799 |
Pension and other postretirement benefits | 319 |  |  | 333 |
Other non-current liabilities | 352 |  |  | 323 |
Total liabilities | 4,049 |  |  | 5,422 |
Redeemable noncontrolling interest (Note 7) | 810 |  |  | 810 |
Commitments and contingencies (Note 11) |  |  |
Equity: |  |  |
Common stock | 412 |  |  | 412 |
Additional paid-in capital | 421 |  |  | 493 |
Retained income | 7,166 |  |  | 6,946 |
Accumulated other comprehensive loss | (593 | ) |  | (514 | )
Less: common stock in treasury | (6,867 | ) |  | (6,849 | )
Total equity — controlling interests | 539 |  |  | 488 |
Total equity — noncontrolling interests | 50 |  |  | 51 |
Total equity | 589 |  |  | 539 |
Total liabilities and equity | $ | 5,448 |  |  | $ | 6,771 |

See accompanying notes to the unaudited consolidated financial statements.
6

McGraw Hill Financial, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

(in millions) | Three Months Ended
| March 31,
| 2015 |  | 2014
Operating Activities: |  |  |
Net income | $ | 329 |  |  | $ | 275 |
Less: discontinued operations, net | — |  |  | 7 |
Income from continuing operations | 329 |  |  | 268 |
Adjustments to reconcile income from continuing operations to cash (used for) provided by operating activities from continuing operations: |  |  |
Depreciation | 22 |  |  | 21 |
Amortization of intangibles | 11 |  |  | 12 |
Provision for losses on accounts receivable | — |  |  | (4 | )
Deferred income taxes | 39 |  |  | — |
Stock-based compensation | 18 |  |  | 17 |
Other | 33 |  |  | 4 |
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions: |  |  |
Accounts receivable | (69 | ) |  | (12 | )
Prepaid and other current assets | (10 | ) |  | (5 | )
Accounts payable and accrued expenses | (305 | ) |  | (296 | )
Unearned revenue | 48 |  |  | 2 |
Accrued legal and regulatory settlements | (1,559 | ) |  | — |
Other current liabilities | (17 | ) |  | 35 |
Net change in prepaid/accrued income taxes | 110 |  |  | 95 |
Net change in other assets and liabilities | 1 |  |  | (23 | )
Cash (used for) provided by operating activities from continuing operations | (1,349 | ) |  | 114 |
Investing Activities: |  |  |
Capital expenditures | (16 | ) |  | (20 | )
Acquisitions, net of cash acquired | (2 | ) |  | (15 | )
Changes in short-term investments | (1 | ) |  | — |
Cash used for investing activities from continuing operations | (19 | ) |  | (35 | )
Financing Activities: |  |  |
Additions to short-term debt, net | 365 |  |  | — |
Dividends paid to shareholders | (94 | ) |  | (82 | )
Dividends and other payments paid to noncontrolling interests | (30 | ) |  | (15 | )
Repurchase of treasury shares | (110 | ) |  | (164 | )
Exercise of stock options | 57 |  |  | 93 |
Excess tax benefits from share-based payments | 32 |  |  | 72 |
Cash provided by (used for) financing activities from continuing operations | 220 |  |  | (96 | )
Effect of exchange rate changes on cash from continuing operations | (44 | ) |  | — |
Cash used for continuing operations | (1,192 | ) |  | (17 | )
Discontinued Operations: |  |  |
Cash (used for) provided by operating activities | (129 | ) |  | 6 |
Cash provided by (used for) investing activities | — |  |  | — |
Cash provided by (used for) financing activities | — |  |  | — |
Cash (used for) provided by discontinued operations | (129 | ) |  | 6 |
Net change in cash and equivalents | (1,321 | ) |  | (11 | )
Cash and equivalents at beginning of period | 2,497 |  |  | 1,542 |
Cash and equivalents at end of period | $ | 1,176 |  |  | $ | 1,531 |

See accompanying notes to the unaudited consolidated financial statements.
7

McGraw Hill Financial, Inc.
Consolidated Statement of Equity
(Unaudited)

(in millions) | Common Stock $1 par |  | Additional Paid-in Capital |  | Retained Income |  | Accumulated Other Comprehensive Loss |  | Less: Treasury Stock |  | Total MHFI Equity |  | Noncontrolling Interests |  | Total Equity
Balance as of December 31, 2014 | $ | 412 |  |  | $ | 493 |  |  | $ | 6,946 |  |  | $ | (514 | ) |  | $ | 6,849 |  |  | $ | 488 |  |  | $ | 51 |  |  | $ | 539 |
Comprehensive income 1 |  |  |  |  | 303 |  |  | (79 | ) |  |  |  | 224 |  |  | 1 |  |  | 225 |
Dividends |  |  |  |  | (91 | ) |  |  |  |  |  | (91 | ) |  | (4 | ) |  | (95 | )
Share repurchases |  |  |  |  |  |  |  |  |  | 110 |  |  | (110 | ) |  |  |  | (110 | )
Employee stock plans, net of tax benefit |  |  | (72 | ) |  |  |  |  |  | (92 | ) |  | 20 |  |  | 2 |  |  | 22 |
Change in redemption value of redeemable noncontrolling interest |  |  |  |  | 8 |  |  |  |  |  |  | 8 |  |  |  |  | 8 |
Balance as of March 31, 2015 | $ | 412 |  |  | $ | 421 |  |  | $ | 7,166 |  |  | $ | (593 | ) |  | $ | 6,867 |  |  | $ | 539 |  |  | $ | 50 |  |  | $ | 589 |

1 | Excludes $25 million attributable to our redeemable noncontrolling interest.

See accompanying notes to the unaudited consolidated financial statements.
8

McGraw Hill Financial, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)

1. | Nature of Operations and Basis of Presentation

McGraw Hill Financial, Inc. (together with its consolidated subsidiaries, "McGraw Hill Financial," the “Company,” “we,” “us” or “our”) is a leading benchmarks & ratings, analytics, data and research provider serving the global capital, commodities and commercial markets. The capital markets include asset managers, investment banks, commercial banks, exchanges, and issuers; the commodities markets include producers, traders and intermediaries within energy, metals, and agriculture; and the commercial markets include professionals and corporate executives within automotive and marketing / research information services.
Our operations consist of four reportable segments: Standard & Poor’s Ratings Services (“S&P Ratings”), S&P Capital IQ, S&P Dow Jones Indices ("S&P DJ Indices") and Commodities & Commercial Markets (“C&C”).

• | S&P Ratings is an independent provider of credit ratings, research and analytics, offering investors and market participants information, ratings and benchmarks.

• | S&P Capital IQ is a global provider of multi-asset-class data, research and analytical capabilities, which integrate cross-asset analytics and desktop services.

• | S&P DJ Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.

• | C&C consists of business-to-business companies specializing in commercial and commodities markets that deliver their customers access to high-value information, data, analytic services and pricing and quality benchmarks.

The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, the financial statements included herein should be read in conjunction with the financial statements and notes included in our Form 10-K for the year ended December 31, 2014 (our “Form 10-K”).
In the opinion of management all normal recurring adjustments considered necessary for a fair statement of the results of the interim periods have been included. The operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the full year. Certain prior-year amounts have been reclassified to conform to the current presentation.
Our critical accounting estimates are disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, valuation of long-lived assets, goodwill and other intangible assets, pension plans, incentive compensation and stock-based compensation, income taxes, contingencies and redeemable noncontrolling interests. Since the date of our Form 10-K, there have been no material changes to our critical accounting policies and estimates.

2. | Acquisitions and Divestitures

Acquisitions
During the three months ended March 31, 2015, we did not complete any material acquisitions.
In March of 2014, we acquired the intellectual property of a family of Broad Market Indices (“BMI”) from Citigroup Global Markets Inc., that was integrated into our S&P DJ Indices segment. The BMI provides a broad measure of the global equities markets which includes approximately 11,000 companies in more than 52 countries covering both developed and emerging markets. We accounted for the acquisition of the intellectual property on a cost basis and it was not material to our consolidated financial statements.
Divestitures
During the three months ended March 31, 2015 and March 31, 2014, we did not complete any dispositions.
9

Discontinued Operations
On November 3, 2014, we completed the sale of McGraw Hill Construction, which has historically been part of our C&C segment, to Symphony Technology Group for $320 million in cash. Accordingly, the results of operations for the three months ended March 31, 2014, have been reclassified to reflect the business as a discontinued operation.
The key components of income from discontinued operations for the three months ended March 31, 2014 consist of the following:

(in millions) |
Revenue | $ | 40 |
Expenses | 29 |
Operating income | 11 |
Provision for taxes on income | 4 |
Income from discontinued operations, net of tax | $ | 7 |

3. | Income Taxes

The effective income tax rate for continuing operations was 32.1% and 33.9% for the three months ended March 31, 2015 and March 31, 2014, respectively. The decrease in the effective income tax rate was primarily the result of a non-recurring benefit recorded during the three months ended March 31, 2015.
At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect, and are individually computed, are recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.
As of March 31, 2015 and December 31, 2014, the total amount of federal, state and local, and foreign unrecognized tax benefits was $137 million and $118 million, respectively, exclusive of interest and penalties. The increase in unrecognized tax benefits relates primarily to tax positions of prior years. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating-related expense, respectively. In addition to the unrecognized tax benefits, as of March 31, 2015 and December 31, 2014, we had $25 million and $23 million respectively of accrued interest and penalties associated with uncertain tax positions.
Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may significantly decrease in the next twelve months. Although the ultimate resolution of our tax audits is unpredictable, the resulting change in our unrecognized tax benefits could have a material impact on our results of operations and/or cash flows.

4. | Debt

(in millions) | March 31, 2015 |  | December 31, 2014
5.9% Senior Notes, due 2017 1 | $ | 400 |  |  | $ | 400 |
6.55% Senior Notes, due 2037 2 | 399 |  |  | 399 |
Commercial paper | 190 |  |  | — |
Revolving line of credit | 175 |  |  | — |
Total debt | 1,164 |  |  | 799 |
Less: short-term debt including current maturities | 365 |  |  | — |
Long-term debt | $ | 799 |  |  | $ | 799 |

1 | Interest payments are due semiannually on April 15 and October 15, and, as of March 31, 2015, the unamortized debt discount is less than $1 million.

2 | Interest payments are due semiannually on May 15 and November 15, and, as of March 31, 2015, the unamortized debt discount is approximately $1 million.

10

The fair value of our long-term debt borrowings was $0.9 billion as of March 31, 2015 and December 31, 2014, respectively, and was estimated based on quoted market prices.
We have the ability to borrow a total of $1.0 billion through our commercial paper program, which is supported by our $1.0 billion four-year credit agreement (our “credit facility”) that we entered into in June of 2013. This credit facility will terminate on June 19, 2017.
In connection with the payment of legal and regulatory settlements recorded in 2014 and paid largely in 2015, we utilized our commercial paper program and borrowed from our credit facility during the three months ended March 31, 2015. As a result, commercial paper outstanding as of March 31, 2015 totaled $190 million with an average interest rate and term to maturity of 0.86% and 16 days. Our revolving line of credit outstanding as of March 31, 2015 totaled $175 million with an interest rate and term to maturity of 1.51% and 71 days. As of December 31, 2014, we had no commercial paper outstanding or borrowings outstanding under our credit facility.
We pay a commitment fee of 20 to 45 basis points for our credit facility, depending on our indebtedness to cash flow ratio, whether or not amounts have been borrowed, and for the first quarter of 2015 we paid a commitment fee of 20 basis points. The interest rate on borrowings under our credit facility is, at our option, calculated using rates that are primarily based on either the prevailing London Inter-Bank Offer Rate, the prime rate determined by the administrative agent or the Federal Funds Rate. For certain borrowings under this credit facility, there is also a spread based on our indebtedness to cash flow ratio added to the applicable rate.
Our credit facility contains certain covenants. The only financial covenant requires that our indebtedness to cash flow ratio, as defined in our credit facility, is not greater than 3.25 to 1, and this covenant level has never been exceeded.

5. | Employee Benefits

We maintain a number of active defined contribution retirement plans for our employees. The majority of our defined benefit plans are frozen. As a result, no new employees will be permitted to enter these plans and no additional benefits for current participants in the frozen plans will be accrued.
We have supplemental benefit plans that provide senior management with supplemental retirement, disability and death benefits. Certain supplemental retirement benefits are based on final monthly earnings. In addition, we sponsor voluntary 401(k) plans under which we may match employee contributions up to certain levels of compensation as well as profit-sharing plans under which we contribute a percentage of eligible employees' compensation to the employees' accounts.
We also provide certain medical, dental and life insurance benefits for active and retired employees and eligible dependents. The medical and dental plans and supplemental life insurance plan are contributory, while the basic life insurance plan is noncontributory. We currently do not prefund any of these plans.
We recognize the funded status of our defined benefit retirement and postretirement plans in the consolidated balance sheets, with a corresponding adjustment to accumulated other comprehensive loss, net of taxes. The amounts in accumulated other comprehensive loss represent unrecognized actuarial losses and unrecognized prior service costs. These amounts will be subsequently recognized as net periodic pension cost pursuant to our accounting policy for amortizing such amounts.
As discussed in our Form 10-K, we changed certain discount rate assumptions and our expected return on assets assumption for our retirement plans, which became effective on January 1, 2015. In addition, we updated the assumed mortality rates to reflect life expectancy improvements. The effect of the assumption changes resulted in an increase in pre-tax retirement expense of approximately $8 million for the three months ended March 31, 2015.
In the first quarter of 2015, we contributed $5 million to our retirement plans and expect to make additional required contributions of approximately $10 million to our retirement plans during the remainder of the year. We may elect to make additional non-required contributions depending on investment performance and the pension plan status in the remaining nine months of 2015.

6. | Stock-Based Compensation

We issue stock-based incentive awards to our eligible employees and Directors under the 2002 Employee Stock Incentive Plan and a Director Deferred Stock Ownership Plan. The 2002 Employee Stock Incentive Plan permits the granting of nonqualified stock options, stock appreciation rights, performance stock, restricted stock and other stock-based awards.
11

Stock-based compensation for the three months ended March 31 is as follows:

(in millions) | 2015 |  | 2014
Stock option expense | $ | 6 |  |  | $ | 3 |
Restricted stock and unit awards expense | 12 |  |  | 14 |
Total stock-based compensation expense | $ | 18 |  |  | $ | 17 |

Total unrecognized compensation expense related to unvested stock option awards and unvested restricted stock unit awards as of March 31, 2015 was $8 million and $57 million, respectively, which is expected to be recognized over a weighted average period of 1.8 years and 1.5 years, respectively.

7. | Equity

Stock Repurchases
On December 4, 2013, the Board of Directors approved a share repurchase program authorizing the purchase of 50 million shares, which was approximately 18% of the total shares of our outstanding common stock at that time.
In any period, share repurchase transactions could result in timing differences between the recognition of those repurchases and their settlement for cash. This could result in a difference between the cash used for financing activities related to common stock repurchased and the comparable change in equity.
Share repurchases for the three months ended March 31 were as follows:

(in millions, except average price) | 2015 |  | 2014
Total number of shares purchased | 1.1 |  |  | 2.2 |
Average price paid per share 1 | $ | 104.31 |  |  | $ | 78.47 |
Total cash utilized 2 | $ | 110 |  |  | $ | 174 |

1 | In March of 2014, 0.3 million shares were repurchased for $21 million, which settled in April 2014. Excluding these shares, the average price paid per share was $78.99.

2 | In December of 2013, 0.1 million shares were repurchased for approximately $10 million, which settled in January of 2014. Cash used for financing activities only reflects those shares which settled during the three months ended March 31, 2014 resulting in $164 million of cash used to repurchase shares.

Our purchased shares may be used for general corporate purposes, including the issuance of shares for stock compensation plans and to offset the dilutive effect of the exercise of employee stock options. As of March 31, 2015, 44.5 million shares remained available under the current share repurchase program which 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.
Redeemable Noncontrolling Interests
The agreement with the minority partners of our S&P Dow Jones Indices LLC established in June of 2012 contains redemption features whereby interests held by minority partners are redeemable either (i) at the option of the holder or (ii) upon the occurrence of an event that is not solely within our control. Specifically, under the terms of the operating agreement of S&P Dow Jones Indices LLC, after December 31, 2017, CME Group, Inc. ("CME Group") and CME Group Index Services LLC ("CGIS") will have the right at any time to sell, and we are obligated to buy, at least 20% of their share in S&P Dow Jones Indices LLC. In addition, in the event there is a change of control of the Company, for the 15 days following a change in control, CME Group and CGIS will have the right to put their interest to us at the then fair value of CME Group's and CGIS' minority interest.
If interests were to be redeemed under this agreement, we would generally be required to purchase the interest at fair value on the date of redemption. This interest is presented on the consolidated balance sheets outside of equity under the caption “Redeemable noncontrolling interest” with an initial value based on fair value for the portion attributable to the net assets we acquired, and based on our historical cost for the portion attributable to our S&P Index business. We adjust the redeemable noncontrolling interest each reporting period to its estimated redemption value, but never less than its initial fair value, considering a combination of an income and market valuation approach. Our income and market valuation approaches may incorporate Level 3 fair value measures for instances when observable inputs are not available, including assumptions related to expected future net cash flows, long-term
12

growth rates, the timing and nature of tax attributes, and the redemption features. Any adjustments to the redemption value will impact retained income.
Noncontrolling interests that do not contain such redemption features are presented in equity.
Changes to redeemable noncontrolling interest during the three months ended March 31, 2015 were as follows:

(in millions) |
Balance as of December 31, 2014 | $ | 810 |
Net income attributable to noncontrolling interest | 25 |
Distributions payable to noncontrolling interest | (17 | )
Redemption value adjustment | (8 | )
Balance as of March 31, 2015 | $ | 810 |

Accumulated Other Comprehensive Loss
The following table summarizes the changes in the components of accumulated other comprehensive loss for the three months ended March 31, 2015:

(in millions) | Foreign Currency Translation Adjustment |  | Pension and Postretirement Benefit Plans |  | Unrealized Gain (Loss) on Forward Exchange Contracts |  | Accumulated Other Comprehensive Loss
Balance as of December 31, 2014 | $ | (83 | ) |  | $ | (431 | ) |  | $ | — |  |  | $ | (514 | )
Other comprehensive income before reclassifications | (82 | ) |  | — |  |  | — |  |  | (82 | )
Reclassifications from accumulated other comprehensive loss to net earnings | — |  |  | 3 |  | 1 |  | — |  |  | 3 |
Net other comprehensive income | (82 | ) |  | 3 |  |  | — |  |  | (79 | )
Balance as of March 31, 2015 | $ | (165 | ) |  | $ | (428 | ) |  | $ | — |  |  | $ | (593 | )

1 | See Note 5 — Employee Benefits for additional details of items reclassed from accumulated other comprehensive loss to net earnings.

The net actuarial loss and prior service cost related to pension and other postretirement benefit plans included in other comprehensive income is net of a tax provision of $2 million for the three months ended March 31, 2015.

8. | Earnings Per Share

Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares is increased to include additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. Potential common shares consist primarily of stock options and restricted performance shares calculated using the treasury stock method.
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The calculation for basic and diluted EPS for the three months ended March 31 is as follows:

(in millions, except per share amounts) | 2015 |  | 2014
Amounts attributable to McGraw Hill Financial, Inc. common shareholders: |  |  |
Income from continuing operations | $ | 303 |  |  | $ | 241 |
Income from discontinued operations | — |  |  | 7 |
Net income | $ | 303 |  |  | $ | 248 |
Basic weighted-average number of common shares outstanding | 273.5 |  |  | 271.8 |
Effect of stock options and other dilutive securities | 2.8 |  |  | 5.4 |
Diluted weighted-average number of common shares outstanding | 276.3 |  |  | 277.2 |
Earnings per share attributable to McGraw Hill Financial, Inc. common shareholders: |  |  |
Income from continuing operations: |  |  |
Basic | $ | 1.11 |  |  | $ | 0.89 |
Diluted | $ | 1.10 |  |  | $ | 0.87 |
Income from discontinued operations: |  |  |
Basic | $ | — |  |  | $ | 0.02 |
Diluted | $ | — |  |  | $ | 0.02 |
Net income: |  |  |
Basic | $ | 1.11 |  |  | $ | 0.91 |
Diluted | $ | 1.10 |  |  | $ | 0.89 |

Each period we have certain stock options and restricted performance shares that are excluded from the computation of diluted EPS. The effect of the potential exercise of stock options is excluded when the average market price of our common stock is lower than the exercise price of the related option during the period because the effect would have been antidilutive. Additionally, restricted performance shares are excluded because the necessary vesting conditions had not been met. For the three months ended March 31, 2015 and 2014, there were no stock options excluded. Restricted performance shares outstanding of 1.4 million and 0.9 million as of March 31, 2015 and 2014, respectively, were excluded.

9. | Restructuring

During 2014, we continued to evaluate our cost structure and further identified cost savings associated with streamlining our management structure and our decision to exit non-strategic businesses. The resulting restructuring plan consisted of a company-wide workforce reduction of approximately 590 positions and is further detailed below. The charges for the restructuring plan are classified as selling and general expenses within the consolidated statements of income and the reserves are included in other current liabilities in the consolidated balance sheets.
In certain circumstances, reserves are no longer needed because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were reassigned due to circumstances not foreseen when the original plans were initiated. In these cases, we reverse reserves through the consolidated statements of income during the period when it is determined they are no longer needed.
As part of the sale of McGraw Hill Construction, which has historically been part of our C&C segment, to Symphony Technology Group, described further in Note 2 — Acquisitions and Divestitures, we have retained McGraw Hill Construction's restructuring liabilities. Therefore, the remaining reserves described below include McGraw Hill Construction's restructuring liability; however, the initial charge associated with the reserve has been bifurcated between continuing and discontinued operations.
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The initial restructuring charge recorded and the ending reserve balance as of March 31, 2015 by segment is as follows:

| 2014 Restructuring Plan
(in millions) | Initial Charge Recorded |  | Ending Reserve Balance
S&P Ratings | $ | 45 |  |  | $ | 31 |
S&P Capital IQ | 9 |  |  | 6 |
C&C 1 | 16 |  |  | 10 |
Corporate | 16 |  |  | 13 |
Total | $ | 86 |  |  | $ | 60 |

1 | The 2014 restructuring plan includes an initial charge of $3 million and an ending reserve balance of $1 million for McGraw Hill Construction.

The ending reserve balance for the 2014 restructuring plan was $78 million as of December 31, 2014. For the three months ended March 31, 2015, we have reduced the reserve for the 2014 restructuring plan by $18 million.

10. | Segment and Related Information

We have four reportable segments: S&P Ratings, S&P Capital IQ, S&P DJ Indices and C&C. Our Chief Executive Officer is our chief operating decision-maker and evaluates performance of our segments and allocates resources based primarily on operating profit. Segment operating profit does not include unallocated expense or interest expense as these are costs that do not affect the operating results of our segments.
A summary of operating results by segment for the three months ended March 31 is as follows:

| 2015 |  | 2014
(in millions) | Revenue |  | Operating Profit |  | Revenue |  | Operating Profit
S&P Ratings 1 | $ | 606 |  |  | $ | 291 |  |  | $ | 569 |  |  | $ | 240 |
S&P Capital IQ | 320 |  |  | 63 |  |  | 301 |  |  | 53 |
S&P DJ Indices | 143 |  |  | 95 |  |  | 137 |  |  | 91 |
C&C | 225 |  |  | 85 |  |  | 211 |  |  | 70 |
Intersegment elimination 2 | (21 | ) |  | — |  |  | (22 | ) |  | — |
Total operating segments | 1,273 |  |  | 534 |  |  | 1,196 |  |  | 454 |
Unallocated expense | — |  |  | (33 | ) |  | — |  |  | (34 | )
Total | $ | 1,273 |  |  | $ | 501 |  |  | $ | 1,196 |  |  | $ | 420 |

1 | 2015 includes a benefit of $35 million related to legal settlement insurance recoveries, partially offset by $29 million of legal settlement charges.

2 | Revenue for S&P Ratings and expenses for S&P Capital IQ include an intersegment royalty charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.

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

11. | Commitments and Contingencies

Rental Expense and Lease Obligations
In December of 2003, we sold our 45% equity investment in Rock-McGraw, Inc., which owns our headquarters building in New York City, and remained an anchor tenant in our corporate headquarters building in New York City by concurrently leasing back space from the buyer through 2020. In December of 2013, we entered into an arrangement with the buyer to shorten the lease to December 2015 in exchange for approximately $60 million which was recorded as a reduction to the unrecognized deferred gain from the sale. The remaining gain is being amortized over the remaining lease term as a reduction in rent expense.
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As of March 31, 2015, the remaining deferred gain was $5 million, as $2 million was amortized during the three months ended March 31, 2015. Interest expense associated with this operating lease was less than $1 million for the three months ended March 31, 2015.
Legal & Regulatory Matters
In the normal course of business both in the United States and abroad, the Company, its subsidiary Standard & Poor’s Financial Services LLC (“S&P LLC”) and some of its other subsidiaries 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 S&P 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 adversely impact our consolidated financial condition, cash flows, business or competitive position.
The Company believes that it has meritorious defenses to the pending claims and potential claims in the matters described below and is diligently pursuing these defenses, and in some cases working to reach an acceptable negotiated resolution. However, in view of the uncertainty inherent in litigation and government and regulatory enforcement matters, we cannot predict the eventual outcome of these matters 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 described below will not have a material adverse effect on our consolidated financial condition, cash flows, business or competitive position. As litigation or the process to resolve pending matters progresses, as the case may be, we will continue to 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.
S&P Ratings
Financial Crisis Litigation
The Company and its subsidiaries continue to defend civil cases brought by private and public plaintiffs arising out of ratings activities prior to and during the global financial crisis of 2008-2009. Discovery in these cases is ongoing. We can provide no assurance that we will not be obligated to pay significant amounts in order to resolve these matters on terms deemed acceptable. At this time, however, we are unable to reasonably estimate the range of such amounts, if any.
U.S. Securities and Exchange Commission
As a nationally recognized statistical rating organization registered with the SEC under Section 15E of the Securities Exchange Act of 1934, S&P Ratings is in ongoing communication with the staff of the SEC regarding compliance with its extensive obligations under the federal securities laws. Although S&P Ratings seeks to promptly address any compliance issues that it detects or that the staff of the SEC raises, there can be no assurance that the SEC will not seek remedies against S&P Ratings for one or more material compliance deficiencies.
Prosecutor General of the Corte dei Conti
In January 2014, S&P Ratings received notification of a potential claim by the Prosecutor General of the Corte dei Conti, an Italian administrative court, with respect to whether S&P Ratings’ downgrade of Italian sovereign debt in May 2011 wrongfully damaged Italy’s public finances and international reputation and whether S&P Ratings should pay compensation to Italy for the costs of Italian budget adjustments and for ancillary damages in an amount “not lower than” €234 billion. On February 18, 2015, the Prosecutor General announced that he had ordered the matter dismissed in December 2014.
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Parmalat Litigation
In September and October 2005, writs of summons were served on The McGraw-Hill Companies, SRL and The McGraw-Hill Companies, SA in an action brought in the Tribunal of Milan, Italy by the Extraordinary Commissioner of Parmalat Finanziaria S.p.A. and Parmalat S.p.A. (collectively, “Parmalat”), claiming damages of €4.1 billion, representing the value of bonds issued by Parmalat which were rated investment grade by S&P Ratings, plus damages for S&P Ratings’ alleged complicity in aggravating Parmalat’s financial difficulties, among other claims. In June 2011, the Court dismissed Parmalat’s main damages claim based on the value of the bonds, and ordered the defendants to pay Parmalat approximately €0.8 million, representing ratings fees paid by Parmalat, plus interest and expenses. In September 2012, Parmalat appealed the judgment and, in November 2012, requested payment of the judgment in the amount of €1.1 million, which was paid in December 2012. In July 2014, the Court of Appeals of Milan issued an order reopening the proceedings to allow the parties to submit additional pleadings. A hearing was held on February 25, 2015.
Trani Prosecutorial Proceeding
The prosecutor in the Italian city of Trani is seeking criminal indictments against several current and former S&P Ratings managers and ratings analysts for alleged market manipulation, and against Standard & Poor’s Credit Market Services Europe under Italy’s vicarious liability statute, for having allegedly failed to properly supervise the ratings analysts and prevent them from committing market manipulation. The prosecutor’s theories are based on various actions by S&P Ratings taken with respect to Italian sovereign debt between May 2011 and January 2012. In October 2014, the court granted the prosecutor’s request and issued indictments against the current and former S&P Ratings managers and ratings analysts, as well as Standard & Poor’s Credit Market Services Europe. The trial commenced with a hearing on February 4, 2015, and the proceedings will continue on subsequent dates. Apart from criminal penalties that might be imposed following a conviction, under Italian law such conviction could also lead to civil damages claims against Standard & Poors Credit Market Services Europe. These claims cannot be quantified at this stage.
Commodities & Commercial Markets
Platts
In May 2013, representatives from the European Commission (DG Competition, the EC’s antitrust office) commenced an unannounced inspection of Platts’ London offices in conjunction with potential anticompetitive conduct (in particular, in the crude oil, refined oil products and biofuels markets) relating to Platts’ Market On Close price assessment process. No allegations have been made against Platts at this time. There have also been several civil actions filed in the United States relating to potential anticompetitive behavior by market participants relating to Platts’ price assessment process, none of which have named Platts as a defendant.
McGraw Hill Construction
In October 2009, an action was filed in the U.S. District Court for the Southern District of New York in which Reed Construction Data asserted a number of claims under various state and federal laws against the Company relating to alleged misappropriation and unfair competition by McGraw Hill Construction and seeking an unspecified amount of damages. In September 2010, the Court granted the Company’s motion to dismiss some of the claims. In September 2014, the Court granted summary judgment to the Company on all of Reed’s remaining claims with the exception of the unfair competition claim. In October 2014, the parties submitted a joint stipulation to the Court agreeing to dismiss both Reed’s unfair competition claim and the Company’s counterclaims without prejudice to reinstatement in the event of a successful appeal of Reed’s dismissed claims.

12. | Recent Accounting Standards

In February of 2015, the Financial Accounting Standards Board (“FASB”) issued guidance that requires management to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. This guidance is effective for reporting periods beginning after December 15, 2015, however, early adoption is permitted. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.
In January of 2015, the FASB issued guidance that eliminates the concept of reporting extraordinary items, but retains current presentation and disclosure requirements for an event or transaction that is of an unusual nature or of a type that indicates infrequency of occurrence. Transactions that meet both criteria would now also follow such presentation and disclosure requirements. This guidance is effective for reporting periods beginning after December 15, 2015, however, early adoption is permitted. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.
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In August of 2014, the FASB issued guidance that requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. This guidance is effective for reporting periods beginning after December 15, 2016, however, early adoption is permitted. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.
In May of 2014, the FASB and the International Accounting Standards Board (“IASB”) issued jointly a converged standard on the recognition of revenue from contracts with customers which is intended to improve the financial reporting of revenue and comparability of the top line in financial statements globally. The core principle of the new standard is for the recognition of revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. We are currently in the process of assessing the impact the adoption of this guidance will have on our consolidated financial statements.
In April of 2014, the FASB issued final guidance that raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance is intended to reduce the frequency of disposals reported as discontinued operations by focusing on strategic shifts that have or will have a major effect on an entity’s operations and financial results. In addition, the guidance permits companies to have continuing cash flows and significant continuing involvement with the disposed component. The amendments were effective on January 1, 2015, and the adoption of the guidance did not have a significant impact on our consolidated financial statements.

13. | Related Party Transactions

In June of 2012, we entered into a new license agreement (the "License Agreement") with the holder of S&P Dow Jones Indices LLC noncontrolling interest, CME Group, which replaced the 2005 license agreement between S&P DJ Indices and CME Group. Under the terms of the License Agreement, S&P Dow Jones Indices LLC receives a share of the profits from the trading and clearing of CME Group's equity index products. During the three months ended March 31, 2015, S&P Dow Jones Indices LLC earned $14 million, of revenue under the terms of the License Agreement. The entire amount of this revenue is included in our consolidated statement of income and the portion related to the 27% noncontrolling interest is removed in net income attributable to noncontrolling interests.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)
The following Management's Discussion and Analysis (“MD&A”) provides a narrative of the results of operations and financial condition of McGraw Hill Financial, Inc. (together with its consolidated subsidiaries, "McGraw Hill Financial," the “Company,” “we,” “us” or “our”) for the three months ended March 31, 2015. The MD&A should be read in conjunction with the consolidated financial statements, accompanying notes and MD&A included in our Form 10-K for the year ended December 31, 2014 (our “Form 10-K”), which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The MD&A includes the following sections:

• | Overview

• | Results of Operations — Comparing the Three Months Ended March 31, 2015 and 2014

• | Liquidity and Capital Resources

• | Reconciliation of Non-GAAP Financial Information

• | Critical Accounting Estimates

• | Recently Adopted Accounting Standards

• | Forward-Looking Statements

OVERVIEW
We are a leading ratings, benchmarks & ratings, analytics, data and research provider serving the global capital, commodities and commercial markets. The capital markets include asset managers, investment banks, commercial banks, exchanges and issuers; the commodities markets include producers, traders and intermediaries within energy, metals, and agriculture; and the commercial markets include professionals and corporate executives within automotive and marketing / research information services.
Our operations consist of four reportable segments: Standard & Poor’s Ratings Services (“S&P Ratings”), S&P Capital IQ, S&P Dow Jones Indices ("S&P DJ Indices") and Commodities & Commercial Markets (“C&C”).

• | S&P Ratings is an independent provider of credit ratings, research and analytics, offering investors and market participants information, ratings and benchmarks.

• | S&P Capital IQ is a global provider of multi-asset-class data, research and analytical capabilities, which integrate cross-asset analytics and desktop services.

• | S&P DJ Indices is a global index provider that maintains a wide variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.

• | C&C consists of business-to-business companies specializing in commercial and commodities markets that deliver their customers access to high-value information, data, analytic services and pricing and quality benchmarks.

Key results for the three months ended March 31 are as follows:

(in millions, except per share amounts) | 2015 |  | 2014 |  | % Change 1
Revenue | $ | 1,273 |  |  | $ | 1,196 |  |  | 6%
Operating profit | $ | 501 |  |  | $ | 420 |  |  | 19%
Operating margin % | 39 | % |  | 35 | % |  |
Diluted earnings per share from continuing operations | $ | 1.10 |  |  | $ | 0.87 |  |  | 26%

1 | % changes in the tables throughout the MD&A are calculated off of the actual number, not the rounded number presented.

S&P Ratings — Revenue and operating profit increased 6% and 21%, respectively. Revenue growth was driven by increases in transaction revenue primarily due to growth in corporate bond ratings revenue in both the U.S. and Asia Pacific and an increase in U.S. public finance revenues, partially offset by a decline in the bank loan rating market. Operating profit increased due to the increases in revenue, compensation cost containment resulting from 2014 restructuring actions and a benefit related to legal settlement insurance recoveries. These increases were partially offset by legal settlement charges and increased costs related to the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Foreign exchange rates unfavorably impacted revenue for the quarter, which was offset by a favorable impact on expenses.
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S&P Capital IQ — Revenue and operating profit increased 6% and 18%, respectively. The revenue increase was attributable to growth at the S&P Capital IQ Desktop, RatingsXpress® and CUSIP driven by increases in average contract values for each product. Revenue increases were driven by improved customer retention rates and increased revenue from new and existing accounts. Operating profit increased due to the increases in revenue, partially offset by higher incentive, advertising and technology costs, and increased outside consulting fees.
S&P DJ Indices — Revenue and operating profit increased 5% and 4%, respectively. Revenue increased primarily due to higher levels of assets under management for ETFs and mutual funds, larger over-the-counter issuances, and higher data revenue. These increases were partially offset by lower volumes for exchange-traded derivatives. Additionally, the year-over-year revenue increase was unfavorably impacted by the refinement of our process for estimating revenue for certain products that favorably impacted the first quarter of 2014 which caused a one-time revenue increase in the prior-year period. Operating profit increased compared to 2014 primarily due to the increases in revenue, partially offset by an increase in compensation costs.
C&C — Revenue and operating profit increased 7% and 23%, respectively. The revenue increase was primarily driven by continued demand for Platts’ proprietary content as annualized contract values increased and increases at J.D. Power driven by strong demand in the U.S. and Singapore. Operating profit increased primarily due to the increases in revenue, lower compensation costs at Platts, partially offset by increased compensation and operating costs to support business growth at J.D. Power.
Our Strategy
We strive to be the leading provider of transparent and independent benchmarks & ratings, analytics, data and research in the global capital, commodities and commercial markets. We seek to promote sustainable growth in the global capital, commodities and commercial markets by providing customers with essential intelligence and superior service. We intend to provide essential intelligence through benchmarks and ratings, analytics, data, and research that enables mission-critical decisions in investment management, investment banking, CBIS (commercial banking, insurance and specialty), and corporates.
We are aligning our efforts against two key strategic priorities: creating growth and driving performance.
Creating Growth

• | We will strive to drive global growth by focusing on customers and innovation.

Driving Performance

• | We will strive to boost operational excellence, productivity, risk management, and compliance; and to attract and develop the finest talent.

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.
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RESULTS OF OPERATIONS — COMPARING THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
Consolidated Review

(in millions) | 2015 |  | 2014 |  | % Change
Revenue | $ | 1,273 |  |  | $ | 1,196 |  |  | 6%
Total Expenses: |  |  |  |  |
Operating-related expenses | 406 |  |  | 396 |  |  | 2%
Selling and general expenses | 333 |  |  | 347 |  |  | (4)%
Depreciation and amortization | 33 |  |  | 33 |  |  | 1%
Total expenses | 772 |  |  | 776 |  |  | (1)%
Operating profit | 501 |  |  | 420 |  |  | 19%
Interest expense, net | 16 |  |  | 14 |  |  | 13%
Provision for taxes on income | 156 |  |  | 138 |  |  | 13%
Income from continuing operations | 329 |  |  | 268 |  |  | 23%
Discontinued operations, net | — |  |  | 7 |  |  | N/M
Less: net income from continuing operations attributable to noncontrolling interests | (26 | ) |  | (27 | ) |  | (2)%
Net income attributable to McGraw Hill Financial, Inc. | $ | 303 |  |  | $ | 248 |  |  | 22%

N/M - not meaningful
Revenue
The following table provides consolidated revenue information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Subscription / Non-transaction revenue | $ | 761 |  |  | $ | 741 |  |  | 3 | %
Non-subscription / Transaction revenue | $ | 512 |  |  | $ | 455 |  |  | 13 | %
Domestic revenue | $ | 765 |  |  | $ | 695 |  |  | 10 | %
International revenue | $ | 508 |  |  | $ | 501 |  |  | 1 | %

Revenue increased $77 million or 6% as compared to the first quarter of 2014. Subscription / non-transaction revenue increased primarily due to growth at S&P Capital IQ due to an increase in the average contract values driven by new customer relationships and increases in existing accounts and continued demand for Platts’ proprietary content. Non-subscription / transaction revenue increased primarily due to strong growth at S&P Ratings due to increases in corporate bond ratings revenue and U.S. public finance revenues, partially offset by a decline in the bank loan rating market. See “Segment Review” below for further information.
Foreign exchange rates had an unfavorable impact of $24 million on revenue for the first quarter of 2015. 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 S&P Ratings driven by the weakening of the Euro to the U.S. dollar.
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Total Expenses
The following tables provide an analysis by segment of our operating-related expenses and selling and general expenses for the three months ended March 31:

(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
S&P Ratings | $ | 184 |  |  | $ | 121 |  |  | $ | 194 |  |  | $ | 124 |  |  | (6)% |  | (3)%
S&P Capital IQ | 143 |  |  | 103 |  |  | 136 |  |  | 100 |  |  | 5% |  | 3%
S&P DJ Indices | 26 |  |  | 20 |  |  | 22 |  |  | 21 |  |  | 18% |  | (6)%
C&C | 74 |  |  | 59 |  |  | 66 |  |  | 70 |  |  | 12% |  | (15)%
Intersegment eliminations | (21 | ) |  | — |  |  | (22 | ) |  | — |  |  | 4% |  | N/M
Total segments | 406 |  |  | 303 |  |  | 396 |  |  | 315 |  |  | 2% |  | (4)%
Unallocated expense | — |  |  | 30 |  |  | — |  |  | 32 |  |  | N/M |  | (4)%
Total | $ | 406 |  |  | $ | 333 |  |  | $ | 396 |  |  | $ | 347 |  |  | 2% |  | (4)%

N/M - not meaningful
Operating-Related Expenses
Operating-related expenses increased $9 million or 2% as compared to the first quarter of 2014, primarily driven by increases at C&C of $8 million or 12%, S&P Capital IQ of $7 million or 5%, and S&P DJ Indices of $4 million or 18%, partially offset by decreases at S&P Ratings of $11 million or 6%. Increases at C&C primarily related to higher costs of sales resulting from an increase in business. The increases at S&P Capital IQ and S&P DJ Indices were primarily attributable to increased compensation costs and higher technology costs. Partially offsetting these increases were declines at S&P Ratings primarily driven our compensation cost containment efforts resulting from 2014 restructuring actions as well as a favorable impact of foreign exchange rates.
Intersegment eliminations primarily relate to a royalty charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings.
Selling and General Expenses
Selling and general expenses decreased $13 million or 4% as compared to the first quarter of 2014, driven by decreases at C&C of $11 million or 15% primarily due to the impact of restructuring charges recorded at Platts in 2014. Additionally, S&P Ratings decreased $4 million or 3% primarily due to legal settlement recoveries of $35 million in the first quarter of 2015, partially offset by legal settlement charges of $29 million.
Depreciation and Amortization
Depreciation and amortization remained relatively flat as compared to the first quarter of 2014.
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.
The tables below reconcile segment operating profit to total operating profit for the three months ended March 31:
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(in millions) | 2015 |  | 2014 |  | % Change
S&P Ratings 1 | $ | 291 |  |  | $ | 240 |  |  | 21%
S&P Capital IQ | 63 |  |  | 53 |  |  | 18%
S&P DJ Indices | 95 |  |  | 91 |  |  | 4%
C&C | 85 |  |  | 70 |  |  | 23%
Total segment operating profit | 534 |  |  | 454 |  |  | 18%
Unallocated expense | (33 | ) |  | (34 | ) |  | (3)%
Total operating profit | $ | 501 |  |  | $ | 420 |  |  | 19%

1 | 2015 includes a benefit of $35 million related to legal settlement insurance recoveries, partially offset by $29 million of legal settlement charges.

Segment Operating Profit — Increased $80 million or 18% in the quarter as compared to the first quarter of 2014. Segment operating profit margins were 42% and 38% for the first quarter of 2015 and 2014, respectively. Strong revenue growth at S&P Ratings, S&P Capital IQ, C&C and S&P DJ Indices during the quarter were the primary drivers for the increase. Additionally, operating profit margins were favorably impacted by legal settlement insurance recoveries of $35 million, partially offset by $29 million of legal settlement charges at S&P Ratings. See “Segment Review” below for further information.
Unallocated Expense — These expenses, included in selling and general expenses, mainly include costs for corporate center functions, select initiatives, unoccupied office space and corporate overhead costs allocable to discontinued operations. Unallocated expense remained relatively flat as compared to the first quarter of 2014, decreasing by $1 million or 3%.
Foreign exchange rates had a favorable impact of $5 million on operating profit as compared to the first quarter of 2014. This was the result of foreign exchange gains having a favorable impact of $3 million on current year operating profit, compared to foreign exchange losses of $3 million in 2014. This impact refers to constant currency comparisons and the remeasurement of monetary assets and liabilities. Constant currency impacts are estimated by re-calculating 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 assets and liabilities denominated in currencies other than the individual businesses functional currency.
Interest Expense, net
Net interest expense increased 13% as compared to the first quarter of 2014, primarily as a result of higher interest expense for taxes for the three months ended March 31, 2015.
Provision for Income Taxes
The effective income tax rate for continuing operations was 32.1% and 33.9% for the three months ended March 31, 2015, and March 31, 2014, respectively. The decrease in the effective income tax rate was primarily the result of a non-recurring benefit recorded during the three months ended March 31, 2015.
Segment Review
Standard & Poor's Ratings Services
Credit ratings are one of several tools that 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 issuer may default.
S&P 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 an S&P Ratings credit rating.

Non-transaction revenue primarily includes fees for surveillance of a credit rating, annual fees for customer relationship-based pricing programs and fees for entity credit ratings.
The following table provides revenue and segment operating profit information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Revenue: |  |  |  |  |
Transaction | $ | 289 |  |  | $ | 245 |  |  | 18%
Non-transaction | 317 |  |  | 324 |  |  | (2)%
Total revenue | $ | 606 |  |  | $ | 569 |  |  | 6%
% of total revenue: |  |  |  |  |
Transaction | 48 | % |  | 43 | % |  |
Non-transaction | 52 | % |  | 57 | % |  |
Domestic revenue | $ | 352 |  |  | $ | 305 |  |  | 15%
International revenue | $ | 254 |  |  | $ | 264 |  |  | (4)%
Operating profit 1 | $ | 291 |  |  | $ | 240 |  |  | 21%
Operating margin % | 48 | % |  | 42 | % |  |

1 | 2015 includes a benefit of $35 million related to legal settlement insurance recoveries, partially offset by $29 million of legal settlement charges.

Foreign exchange rates had an unfavorable impact on revenue of $20 million and an immaterial impact on operating profit for the first quarter of 2015.
Revenue
Transaction revenue increased compared to the first quarter of 2014 primarily driven by growth in corporate bond ratings revenue in both the U.S. and Asia Pacific. Growth in the U.S. was driven by the continued low interest rate environment and mergers & acquisitions (M&A) activity. Asia benefited from interest rate reductions in China. Growth was also driven by increases in U.S. Public Finance issuance as issuers continued to take advantage of the low interest rate environment. These increases were partially offset by declines in the bank loan rating market.
The increase in transaction revenue was partially offset by a decrease in non-transaction revenue. Non-transaction revenue decreased primarily due to the unfavorable impact of foreign exchange rates, as well as lower entity credit ratings activity. Additionally, year-over-year revenue growth was unfavorably impacted by reductions to our estimated required sales allowances resulting from improved billing and collection trends that favorably impacted the first quarter of 2014 which caused a one-time revenue increase in the prior-year period. Non-transaction revenue includes an intersegment royalty charged to S&P Capital IQ for the rights to use and distribute content and data developed by S&P Ratings. Royalty revenue for the first quarter of 2015 and 2014 was $20 million and $19 million, respectively.
Operating Profit
Operating profit increased compared to the first quarter of 2014 primarily due to the increases in revenue discussed above, a benefit of $35 million related to legal settlement insurance recoveries and compensation cost containment resulting from 2014 restructuring actions. These increases were partially offset by $29 million of legal settlement charges and increased costs related to the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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Issuance Volumes
We monitor issuance volumes as an indicator of trends in transaction revenue streams within S&P Ratings. 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 issuance levels as compared to the prior year, based on Thomson Financial, Harrison Scott Publications, Dealogic and S&P Ratings' internal estimates.

| First Quarter Compared to Prior Year
Corporate Issuance | U.S. |  | Europe
High-yield issuance | 39% |  | (5)%
Investment-grade | 24% |  | (9)%
Total new issue dollars — corporate issuance | 27% |  | (9)%

• | Corporate issuance in the U.S. was up driven by strong double-digit increases in both high-yield and investment-grade debt issuance. Growth was due to M&A activity as well as retail dollars moving steadily into high yield mutual funds. The trend of high par value deals, but lower volumes continued this quarter. Additionally, low interest rates in Europe resulted in American issuers transacting in European markets to diversify funding sources and reduce costs.

• | Corporate issuance in Europe decreased as a result of economic and political uncertainty in the European markets in the first quarter of 2015 compared to improving economic conditions in the comparable prior year period.

| First Quarter Compared to Prior Year
Structured Finance | U.S. |  | Europe
Asset-backed securities (“ABS”) | 16% |  | 57%
Structured Credit | 13% |  | 83%
Commercial mortgage-backed securities (“CMBS”) | 29% |  | 78%
Residential mortgage-backed securities (“RMBS”) | 53% |  | 204%
Covered bonds | ** |  | (3)%
Total new issue dollars — structured finance | 21% |  | 23%

** | Represents no activity in 2015 and 2014.

• | ABS issuance in the U.S. was up driven by strong vehicle sales and growth in loan originations. The increase was also driven by higher non-traditional volume due to a diversity of transactions including equipment, shipping receivables, container, timeshare and aircraft deals. Partially offsetting this growth was a decline in credit card activity as banks shifted to deposit funding rather than securitization for alternate funding. Student loan activity was also down driven by minimal private market deals and lower Federal Family Education Loan Program ("FFELP") refinancing. ABS issuance in Europe was up primarily driven by increased vehicle and non-traditional volume.

• | Issuance was up in the U.S. Structured Credit market driven by favorable spreads and refinancing activity. European Structured Credit issuance was also up, although from a low 2014 base.

• | CMBS issuance was up in the U.S. driven by favorable market conditions and investor demand accompanied by growing attraction by private equity investors to single borrower transactions, which grew proportionally year over year. European CMBS issuance was also up, although from a low 2014 base.

• | RMBS volume was up in the U.S. driven by a higher volume of prime and re-remic deals. Even with the increase, the market continues to be challenged by the unfavorable economics of transactions and minimal private loan activity with most loans originated by the Government Sponsored Enterprises ("GSEs"). European RMBS volume was predominately driven by the UK as investors took advantage of the country's non-participation in the European Central Bank's buy-back program.

• | Covered bond issuance (which are debt securities backed by mortgages or other high-quality assets that remain on the issuer's balance sheet) in Europe was down slightly compared to last year with most activity in Germany, Norway and Sweden.

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For a further discussion of the legal and regulatory environment see Note 11 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q.
S&P Capital IQ
S&P Capital IQ's portfolio of capabilities are designed to help the financial community track performance, generate better investment returns (alpha), identify new trading and investment ideas, perform risk analysis, and develop mitigation strategies.
S&P Capital IQ includes the following business lines:

• | S&P Capital IQ Desktop & Enterprise Solutions — a product suite that provides data, analytics and third-party research for global finance professionals, which includes the S&P Capital IQ Desktop and integrated bulk data feeds that can be customized, which include QuantHouse, S&P Securities Evaluations, CUSIP and Compustat;

• | S&P Credit Solutions — commercial arm that sells Standard & Poor's Ratings Services' credit ratings and related data, analytics and research, which includes subscription-based offerings, RatingsDirect® and RatingsXpress®; and

• | S&P Capital IQ Markets Intelligence — a comprehensive source of market research for financial professionals, which includes Global Markets Intelligence, Leveraged Commentary & Data and Equity Research Services.

The following table provides revenue and segment operating profit information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Revenue: |  |  |  |  |
Subscription revenue | $ | 287 |  |  | $ | 272 |  |  | 6%
Non-subscription revenue | 33 |  |  | 29 |  |  | 13%
Total revenue | $ | 320 |  |  | $ | 301 |  |  | 6%
Domestic revenue | $ | 212 |  |  | $ | 199 |  |  | 6%
International revenue | $ | 108 |  |  | $ | 102 |  |  | 6%
Operating profit | $ | 63 |  |  | $ | 53 |  |  | 18%
Operating margin % | 20 | % |  | 18 | % |  |

Foreign exchange rates had an unfavorable impact of $2 million on revenue and an immaterial impact on operating profit for the quarter.
Revenue
Revenue grew compared to the first quarter of 2014 primarily due to growth from the S&P Capital IQ Desktop, RatingsXpress® and CUSIP, driven by increases in average contract values for each product from the comparable prior year period. Revenue increases were driven by both improved customer retention rates and increased revenue from new and existing customers. These increases were partially offset by declines in the equity research business and the unfavorable impact related to the closure of a non-core business.
Growth in the average contract value of the S&P Capital IQ Desktop continued to be driven by new customer relationships and increases for existing accounts. Increases for existing accounts continued to be driven by bundled solution offerings integrated within the S&P Capital IQ Desktop, new datasets and expanded coverage of existing datasets combined with improved functionality of the S&P Capital IQ Desktop. The number of users on the S&P Capital IQ Desktop grew over the first quarter of 2014. S&P Capital IQ Desktop benefited in the first quarter of 2015 from a higher customer retention rate compared to the first quarter of 2014.
Both domestic and international revenue increased over the first quarter of 2014, and international revenue represented 34% of S&P Capital IQ's total revenue. International revenue growth in the quarter was primarily driven by sales growth of the S&P Capital IQ Desktop in Europe, Asia and Canada.
The subscription base for RatingsXpress® is growing due to new client relationships and expanded relationships within existing accounts as the number of customers has increased 2% in the first quarter of 2015 as compared to the first quarter of 2014.
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RatingsXpress® continues to benefit from changes in the regulatory environment resulting in increased compliance requirements which have created a greater need for alternative risk tools. RatingsDirect® also had revenue growth in the quarter driven by increased average contract values. Both RatingsXpress® and RatingsDirect® benefited in the first quarter of 2015 from an improvement in customer retention rates compared to the first quarter of 2014.
Operating Profit
Operating profit increased compared to the first quarter of 2014 due to the increase in revenue as discussed above. Partially offsetting the increases to operating profit were increased compensation costs primarily due to higher incentive costs, higher advertising costs related to a branding campaign that began in mid-2014, higher technology costs and increased outside consulting fees related to certain initiatives and projects which did not take place in 2014.
S&P Dow Jones Indices
S&P DJ Indices is a global index provider that maintains a wide variety of indices to meet an array of investor needs. S&P DJ 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.
S&P DJ Indices generates subscription revenue but primarily derives revenue from non-subscription products based on the S&P and Dow Jones Indices. Specifically, S&P DJ Indices generates revenue from the following sources:

• | Investment vehicles — such as ETFs, which are based on the S&P Dow Jones Indices' benchmarks and generate revenue through fees based on assets and underlying funds;

• | Exchange listed derivatives — which generate royalties based on trading volumes of derivatives contracts listed on various exchanges;

• | Index-related licensing fees — which are either fixed or variable annual and per-issue fees for over-the-counter derivatives and retail-structured products; and

• | Data and customized index subscription fees — which support index fund management, portfolio analytics and research.

The following table provides revenue and segment operating profit information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Revenue: |  |  |  |  |
Non-subscription revenue | $ | 114 |  |  | $ | 111 |  |  | 3%
Subscription revenue | 29 |  |  | 26 |  |  | 14%
Total revenue | $ | 143 |  |  | $ | 137 |  |  | 5%
Domestic revenue | $ | 114 |  |  | $ | 108 |  |  | 6%
International revenue | $ | 29 |  |  | $ | 29 |  |  | (1)%
Operating profit | $ | 95 |  |  | $ | 91 |  |  | 4%
Less: net operating profit attributable to noncontrolling interests | 25 |  |  | 24 |  |  |
Net operating profit | $ | 70 |  |  | $ | 67 |  |  | 5%
Operating margin % | 67 | % |  | 67 | % |  |
Net operating margin % | 49 | % |  | 49 | % |  |

Foreign exchange rates had an immaterial impact on revenue and operating profit for the quarter.
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Revenue
Revenue at S&P DJ Indices increased 5% compared to the first quarter of 2014, primarily driven by higher average levels of assets under management ("AUM") for ETFs and mutual funds, larger over-the-counter issuances, and higher data revenue as annualized contract values increased. These increases were partially offset by lower volumes for exchange-traded derivatives. Additionally, the year-over-year revenue increase was unfavorably impacted by the refinement of our process for estimating revenue for certain products that favorably impacted the first quarter of 2014 which caused a one-time revenue increase in the prior-year period.
Fifty new indices and twelve new ETFs were launched during the first quarter of 2015, however, the total number of ETFs have decreased compared to the fourth quarter of 2014 due to the closing of underperforming ETFs in 2015. AUM for ETFs rose 22% to $810 billion in the first quarter of 2015 from $667 billion in the first quarter of 2014. AUM for the first quarter of 2015 was slightly lower than th e record amount of $832 billion set in the fourth quarter of 2014. S&P DJ Indices continues to be the leading index provider for the ETF market with assets representing 28% of global ETF assets.
Operating Profit
Operating profit grew compared to the first quarter of 2014 primarily due to the increase in revenue as discussed above and a reduction in bad debt expense, partially offset by an increase in compensation costs related to additional headcount and higher incentive costs. The growth in operating margin was muted as compared to prior-year period because the one-time revenue increase referred to above had a dollar-for-dollar positive impact to S&P DJ Indices operating profit in the first quarter of 2014.
Commodities & Commercial Markets
C&C consists of business-to-business companies specializing in the commodities and commercial markets that deliver their customers access to high-value information, data, analytic services and pricing and quality benchmarks. C&C includes the following brands:

• | Platts — provides essential price data, analytics, and industry insight that enable commodities markets to perform with greater transparency and efficiency; and

• | J.D. Power — provides essential consumer intelligence to help businesses measure, understand, and improve the key performance metrics that drive growth and profitability.

The C&C business is driven by the need for high-value information and transparency in a variety of industries. C&C seeks to deliver premier content that is deeply embedded in customer workflows and decision making processes.
C&C's revenue is generated primarily through the following sources:

• | Subscription revenue — subscriptions to our real-time news, market data and price assessments, along with other information products, primarily serving the energy and the automotive industry; and

• | Non-subscription revenue — primarily from licensing of our proprietary market price data and price assessments to commodity exchanges, syndicated and proprietary research studies, conference sponsorship, consulting engagements, and events.

The following table provides revenue and segment operating profit information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Total revenue | $ | 225 |  |  | $ | 211 |  |  | 7%
Subscription revenue | $ | 149 |  |  | $ | 141 |  |  | 6%
Non-subscription revenue | $ | 76 |  |  | $ | 70 |  |  | 9%
Domestic revenue | $ | 98 |  |  | $ | 95 |  |  | 3%
International revenue | $ | 127 |  |  | $ | 116 |  |  | 10%
Operating profit | $ | 85 |  |  | $ | 70 |  |  | 23%
Operating margin % | 38 | % |  | 33 | % |  |

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Foreign exchange rates had an immaterial impact on revenue and a favorable impact of $3 million on operating profit for the quarter.
Revenue
Revenue grew compared to the first quarter of 2014 primarily due to continued demand for Platts’ proprietary content. This growth was mainly driven by strength in Platts’ market data and price assessment products across all commodity sectors, led by petroleum. Additionally, the continued licensing of our proprietary market price data and assessments to various commodity exchanges contributed to revenue growth. While petroleum is still the biggest driver, the revenue mix continues to become more diversified as other sectors showed positive annualized contract value growth including, coal, natural gas, petrochemicals, metals and agriculture. Platts revenue in the first quarter of 2015 was also favorably impacted by the acquisition of Eclipse Energy Group AS and its operating subsidiaries (“Eclipse”) in July of 2014.
Additionally, growth at J.D. Power also contributed to the revenue increase. Increases at J.D. Power were driven by strong demand for auto consulting engagements in the U.S. and Singapore and growth in the U.S. Power Information Network® ("PIN") business. PIN provides real-time automotive information and decision-support tools based on the collection and analysis of daily new- and used-vehicle retail transaction data from thousands of automotive franchises.
Operating Profit
Operating profit increased due to the increases in revenue discussed above, a decrease in compensation costs at Platts driven by a reduction in headcount related to 2014 restructuring actions, and a benefit from foreign exchange rates. These increases were partially offset by higher compensation costs related to additional headcount and increased operating costs to support business growth at J.D. Power.
For a further discussion of the legal and regulatory environment see Note 11 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES
We continue to maintain a strong financial position. Our primary source of funds for operations is cash from our businesses and our core businesses have been strong cash generators. Cash on hand, cash flows from operations and availability under our existing credit facility are expected to be sufficient to meet any additional operating and recurring cash needs into the foreseeable future. We use our cash for a variety of needs, including among others: ongoing investments in our businesses, strategic acquisitions, share repurchases, dividends, repayment of debt, capital expenditures and investment in our infrastructure.
Cash Flow Overview
Cash and equivalents were $1,176 million as of March 31, 2015, a decrease of $1,321 million from December 31, 2014, and consisted of approximately 10% of domestic cash and 90% of cash held abroad. Typically, cash held outside the U.S. is anticipated to be utilized to fund international operations or to be reinvested outside of the U.S., as a significant portion of our opportunities for growth in the coming years is expected to be abroad. In the event funds from international operations are needed to fund operations in the U.S., we would be required to accrue for and pay taxes in the U.S. to repatriate these funds.
The following table provides cash flow information for the three months ended March 31:

(in millions) | 2015 |  | 2014 |  | % Change
Net cash (used for) provided by: |  |  |  |  |
Operating activities from continuing operations | $ | (1,349 | ) |  | $ | 114 |  |  | N/M
Investing activities from continuing operations | $ | (19 | ) |  | $ | (35 | ) |  | (46)%
Financing activities from continuing operations | $ | 220 |  |  | $ | (96 | ) |  | N/M

N/M - not meaningful
In the first three months of 2015, free cash flow decreased to $(1,395) million compared to $79 million in the first three months of 2014. The decrease is primarily due to the decrease in cash (used for) provided by operating activities as discussed below. Free cash flow is a non-GAAP financial measure and reflects our cash flow (used for) provided by operating activities less capital expenditures and dividends and other payments paid to noncontrolling interests. Capital expenditures include purchases of property
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and equipment and additions to technology projects. See “Reconciliation of Non-GAAP Financial Information” below for a reconciliation of cash flow provided by operating activities, the most directly comparable U.S. GAAP financial measure, to free cash flow.
Operating activities
Cash used by operating activities was $1,349 million for the first three months of 2015 compared to cash provided by operating activities of $114 million for the first three months of 2014. The decrease is mainly due to the payment of legal and regulatory settlements in the first quarter of 2015.
Investing activities
Our cash outflows from investing activities are primarily for acquisitions and capital expenditures, while cash inflows are primarily proceeds from dispositions.
Cash used for investing activities decreased $16 million to $19 million for the first three months of 2015, primarily due to a lower amount of cash paid for acquisitions in 2015. Refer to Note 2 — Acquisitions and Divestitures to our unaudited consolidated financial statements for further information.
Financing activities
Our cash outflows from financing activities consist primarily of share repurchases, dividends to shareholders and repayments of short-term debt, while cash inflows are primarily additions to short-term debt and proceeds from the exercise of stock options.
Cash provided by financing activities was $220 million in the first three months of 2015 as compared to cash used for financing activities of $96 million in the first three months of 2014. This increase is primarily attributable to the borrowing of short-term debt and a decrease in cash used for repurchase of treasury shares during the first quarter of 2015. See Additional Financing information below for further information on short-term debt.
During the first three months of 2015, we used cash to repurchase 1.1 million shares for $110 million at an average price paid per share of $104.31, excluding commissions. During the first three months of 2014, we used cash to repurchase 2.1 million shares for $164 million at an average price paid per share of $78.89, excluding commissions.
Discontinued Operations
Cash used for operating activities from discontinued operations of $129 million in the first three months of 2015 relates to the tax payment on the gain on sale of McGraw Hill Construction which was sold in the fourth quarter of 2014.
Additional Financing
We have the ability to borrow a total of $1.0 billion through our commercial paper program, which is supported by our $1.0 billion four-year credit agreement (our “credit facility”) that we entered into in June of 2013. This credit facility will terminate on June 19, 2017.
In connection with the payment of legal and regulatory settlements recorded in 2014 and paid largely in 2015, we utilized our commercial paper program and borrowed from our credit facility during the three months ended March 31, 2015. As a result, commercial paper outstanding as of March 31, 2015 totaled $190 million with an average interest rate and term to maturity of 0.86% and 16 days. Our revolving line of credit outstanding as of March 31, 2015 totaled $175 million with an interest rate and term to maturity of 1.51% and 71 days. As of December 31, 2014, we had no commercial paper outstanding or borrowings outstanding under our credit facility.
We pay a commitment fee of 20 to 45 basis points for our credit facility, depending on our indebtedness to cash flow ratio, whether or not amounts have been borrowed, and for the first quarter of 2015 we paid a commitment fee of 20 basis points. The interest rate on borrowings under our credit facility is, at our option, calculated using rates that are primarily based on either the prevailing London Inter-Bank Offer Rate, the prime rate determined by the administrative agent or the Federal Funds Rate. For certain borrowings under this credit facility, there is also a spread based on our indebtedness to cash flow ratio added to the applicable rate.
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Our credit facility contains certain covenants. The only financial covenant requires that our indebtedness to cash flow ratio, as defined in our credit facility, is not greater than 3.25 to 1, and this covenant level has never been exceeded.
On January 22, 2015, Fitch Ratings revised its ratings outlook from negative to stable and affirmed our BBB+ long-term debt rating and F2 short-term/commercial paper rating.
Dividends
On February 12, 2015, the Board of Directors approved an increase in the quarterly common stock dividend from $0.30 per share to $0.33 per share.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
Free cash flow is a non-GAAP financial measure and reflects our cash flow provided by operating activities less capital expenditures and dividends and other payments paid to noncontrolling interests. Capital expenditures include purchases of property and equipment and additions to technology projects. Our cash flow provided by operating activities is the most directly comparable U.S. GAAP financial measure to free cash flow.
We believe the presentation of free cash flow allows our investors to evaluate the cash generated from our underlying operations in a manner similar to the method used by management. We use free cash flow to conduct and evaluate our business because we believe it typically presents a more conservative measure of cash flows since capital expenditures and dividends and other payments paid to noncontrolling interests are considered a necessary component of ongoing operations. Free cash flow is useful for management and investors because it allows management and investors to evaluate the cash available to us to service debt, make strategic acquisitions and investments, repurchase stock and fund ongoing operational and working capital needs.
The presentation of free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Free cash flow, as we calculate it, may not be comparable to similarly titled measures employed by other companies. The following table presents a reconciliation of our cash flow provided by operating activities to free cash flow for the three months ended March 31:

(in millions) | 2015 |  | 2014
Cash (used for) provided by operating activities from continuing operations | $ | (1,349 | ) |  | $ | 114 |
Capital expenditures | (16 | ) |  | (20 | )
Dividends and other payments paid to noncontrolling interests | (30 | ) |  | (15 | )
Free cash flow | $ | (1,395 | ) |  | $ | 79 |

CRITICAL ACCOUNTING ESTIMATES
Our accounting policies are described in Note 1 — Accounting Policies to the consolidated financial statements in our Form 10-K. As discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K, we consider an accounting estimate to be critical if it required assumptions to be made that were uncertain at the time the estimate was made and changes in the estimate or different estimates could have a material effect on our results of operations. These critical estimates include those related to revenue recognition, allowance for doubtful accounts, valuation of long-lived assets, goodwill and other intangible assets, pension plans, incentive compensation and stock-based compensation, income taxes, contingencies and redeemable non-controlling interests. We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that cannot readily be determined from other sources. There can be no assurance that actual results will not differ from those estimates. Since the date of our Form 10-K, there have been no changes to our critical accounting estimates.
RECENT ACCOUNTING STANDARDS
See Note 12 – Recent Accounting Standards to the consolidated financial statements of this Form 10-Q for further information.
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FORWARD-LOOKING STATEMENTS
This report 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 throughout 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, we may use forward-looking statements when addressing topics such as: the outcome of contingencies; future actions by regulators; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; the expected impact of acquisitions and dispositions; our effective tax rates; and our 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 our forward-looking statements include, among other things:

• | the rapidly evolving regulatory environment, in the United States and abroad, affecting Standard & Poor’s Ratings Services, Platts, S&P Dow Jones Indices, S&P Capital IQ and our other businesses, including new and amended regulations and our compliance therewith;

• | the outcome of litigation, government and regulatory proceedings, investigations and inquiries;

• | worldwide economic, financial, political and regulatory conditions;

• | the health of debt and equity markets, including credit quality and spreads, the level of liquidity and future debt issuances;

• | the level of interest rates and the strength of the credit and capital markets in the U.S. and abroad;

• | the demand and market for credit ratings in and across the sectors and geographies where we operate;

• | concerns in the marketplace affecting our credibility or otherwise affecting market perceptions of the integrity or utility of independent credit agency ratings;

• | our ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential information and data, and the potential of a system or network disruption that results in regulatory penalties, remedial costs and/or improper disclosure of confidential information or data;

• | the effect of competitive products and pricing;

• | consolidation in our end customer market;

• | the impact of cost-cutting pressures across the financial services industry;

• | a decline in the demand for credit risk management tools by financial institutions;

• | the level of success of new product development and global expansion;

• | the level of merger and acquisition activity in the U.S. and abroad;

• | the volatility of the energy marketplace;

• | the health of the commodities markets;

• | the impact of cost-cutting pressures and reduced trading in oil and other commodities markets;

• | the level of our future cash flows;

• | our ability to make acquisitions and dispositions and to integrate, and realize expected synergies, savings or benefits from, the businesses we acquire;

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• | the level of our capital investments;

• | the level of restructuring charges we incur;

• | the strength and performance of the domestic and international automotive markets;

• | our ability to successfully recover should we experience a disaster or other business continuity problem, such as a hurricane, flood, earthquake, terrorist attack, pandemic, security breach, cyber attack, power loss, telecommunications failure or other natural or man-made disaster;

• | changes in applicable tax or accounting requirements;

• | the impact on our net income caused by fluctuations in foreign currency exchange issues; and

• | our exposure to potential criminal sanctions or civil remedies if we fail to comply with foreign and U.S. laws and regulations that are applicable in the domestic and international jurisdictions in which we operate, including sanctions laws relating to countries such as Iran, Russia, Cuba, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act of 2010, local laws prohibiting corrupt payments to government officials, as well as import and export restrictions.

The factors above are not exhaustive. McGraw Hill Financial, Inc. and it subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, we caution readers not to place undue reliance on the above 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. Further information about our businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company’s filings with the SEC, including the "Risk Factors" section in our most recently filed Annual Report on Form 10-K.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in our exposure to market risk during the three months ended March 31, 2015 from those disclosed in our Form 10-K for the year ended December 31, 2014.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2015, an evaluation was performed under the supervision and with the participation of management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of March 31, 2015.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
See Note 11 – Commitments and Contingencies - Legal & Regulatory Matters to the consolidated financial statements of this Form 10-Q for information on our legal proceedings.
Item 1a. Risk Factors
Our Form 10-K contains detailed cautionary statements which identify all known material risks, uncertainties and other factors that could cause our actual results to differ materially from historical or expected results. There have been no material changes to the risk factors we have previously disclosed in Item 1a, Risk Factors, in our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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 first quarter of 2015, we repurchased 1.1 million shares and, as of March 31, 2015, 44.5 million shares remained under our current share 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 first quarter of 2015 pursuant to our current share repurchase program (column c). In addition to these purchases, the number of shares in column (a) include: 1) 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), and 2) our shares deemed surrendered to us to pay the exercise price and to satisfy our employees’ tax withholding obligations in connection with the exercise of employee stock options. There were no other share repurchases during the quarter outside the repurchases noted below.
(amounts in millions, except per share price)

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
Jan. 1 — Jan. 31, 2015 |  | 0.8 |  |  | $ | 88.98 |  |  | — |  |  | 45.6 |
Feb. 1 — Feb. 28, 2015 |  | 0.5 |  |  | 103.95 |  |  | 0.5 |  |  | 45.1 |
Mar. 1 — Mar. 31, 2015 |  | 0.6 |  |  | 104.59 |  |  | 0.6 |  |  | 44.5 |
Total — Qtr |  | 1.9 |  |  | $ | 97.79 |  |  | 1.1 |  |  | 44.5 |

Item 5. Other Information
IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT DISCLOSURE
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which amended the Securities Exchange Act of 1934, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether, during the reporting period, it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable laws and regulations.
Revenue during the first quarter of 2015 attributable to the transactions or dealings by the Company described below was approximately $168,344, with net profit from such sales being a fraction of the revenues.
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During the first quarter of 2015, one of the Company’s divisions, a provider of energy-related information in over 150 countries, sold information and informational materials, which are generally exempt from U.S. economic sanctions, to twelve Iran-linked subscribers that are designated by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) pursuant to Executive Order 13382 and/or are owned or controlled, or appear to be owned or controlled, by the Government of Iran (the “GOI”). The Company, among other things, offers customers that subscribe to its publications access to proprietary data, analytics, and industry information that enable commodities markets to perform with greater transparency and efficiency. This division provided such data related to the energy and petrochemicals markets to the Iran-linked subscribers referenced above, generating revenue that was a de minimis portion of both the division's and the Company’s revenue. One of the twelve Iran-linked customers is designated by OFAC pursuant to Executive Order 13382; one is designated by OFAC both pursuant to Executive Order 13382 and as a GOI entity; five are designated by OFAC as GOI entities; and five appear, based on publicly available information, to be owned or controlled by GOI entities. We believe that these transactions were permissible under U.S. sanctions pursuant to certain statutory and regulatory exemptions for the exportation of information and informational materials. The Company is reviewing whether to continue to provide these products to these Iranian customers in the future.
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Item 6. Exhibits

(10.1) | Form of Performance Share Unit Terms and Conditions
(10.2) | Form of Restricted Stock Unit Award Terms and Conditions
(15) | Letter on Unaudited Interim Financials
(31.1) | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
(31.2) | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
(32) | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(101.INS) | XBRL Instance Document
(101.SCH) | XBRL Taxonomy Extension Schema
(101.CAL) | XBRL Taxonomy Extension Calculation Linkbase
(101.LAB) | XBRL Taxonomy Extension Label Linkbase
(101.PRE) | XBRL Taxonomy Extension Presentation Linkbase
(101.DEF) | XBRL Taxonomy Extension Definition Linkbase

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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  | McGraw Hill Financial, Inc.
|  |  | Registrant
Date: | April 28, 2015 | By: | /s/ Jack F. Callahan, Jr.
|  |  | Jack F. Callahan, Jr.
|  |  | Executive Vice President and Chief Financial Officer
Date: | April 28, 2015 | By: | /s/ Emmanuel N. Korakis
|  |  | Emmanuel N. Korakis
|  |  | Senior Vice President and Corporate Controller

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