標普全球 (SPGI) 2015 Q2 法說會逐字稿

Good morning. And welcome to McGraw Hill Financial second-quarter 2015 earnings conference call. I'd like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode.

We will open the conference to questions and answers after the presentation and instructions will follow at that time. To access the webcast and slides, go to www.mhfi.com. That's M-H-F-I, for McGraw Hill Financial Incorporated.com, and click on the link for the quarterly earnings webcast.

If you are listening by telephone, please note that there is an live phone option available to synchronize the timing of the webcast slides to the audio from your telephone. To do so, log in to the webcast, after completing the guest book screen, you will see two windows in the webcast viewer. Along the bottom of the left hand window, click the Gear icon and select live phone from the list. A line will appear on the Sound icon and the slides will synchronize to the audio from your telephone.

(Operator Instructions)

I would now like to introduce Mr. Chip Merritt, Vice President of Investor Relations, from McGraw Hill Financial. Sir, you may begin.

Good morning, and thanks for joining the call. Presenting on this morning's call are Doug Peterson, President and CEO, and Jack Callahan, Chief Financial Officer. This morning, we issued a news release announcing our acquisition of SNL Financial and a separate release regarding second quarter results. If you need a copy of the releases and financial schedules, they can be downloaded at www.mhfi.com.

In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the Corporation's operating performance between periods and to view the Corporation's business from the same perspective as management's. The earnings release contains exhibits that reconcile the difference between non-GAAP measures and the comparable financial measures, calculated in accordance with US GAAP.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in the teleconference may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements.

In this regard, we direct listeners to the cautionary statements contained in our Form 10-K, 10-Qs and other periodic reports filed with the US Securities and Exchange Commission. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of McGraw Hill Financial should give me a call to better understand the impact of this legislation on the investor and potentially the Company.

In addition, we recently published the Company's new 2015 Investor Fact Book, which can be downloaded on our website. If you'd like a hard copy, let us know.

We're aware that we do have some media representatives with us on the call. However, this call is intended for investors, and we'd ask that questions for the media be directed to Jason Feuchtwanger in our New York office at 212-512-3151.

At this time, I'd like to turn the call over to Doug Peterson. Doug?

Thank you, Chip. Good morning, everyone and welcome to the call. We have two topics to cover with you on this call. The SNL Financial transaction announced this morning and our second quarter earnings. We're creating a compelling combination with the addition of SNL, so let's start with the transaction.

Before I go on to more detail, let me first give you some history. Shortly after I became CEO, we conducted a rigorous analysis of the markets we serve to define investments priorities and an acquisition wish list. For potential acquisitions, we analyzed quantitative factors, such as financial performance and market size, as well as qualitative factors such as strategic fit, strength of management team and culture alignment.

Our assessment identified SNL as a leading potential partner for MHFI and we began to explore the possibility of purchasing the company. Once we started interacting with SNL, we were quick impressed with the people at SNL, particularly its talented and dynamic senior leadership team led by Mike Chinn. We became even more convinced that a combination of the two companies offered a very attractive opportunity to create long-term shareholder value. And with cap, S&P Cap IQ and Platts, we were at a unique position to add SNL to our portfolio in a very complementary way.

As many of you know, SNL is a leading provider of sector specific market data, news, and analytics for the financial institutions, real estate, insurance, media, energy, and metals and mining sectors. And the company has increased organic revenue in the low to mid teens each year over the past decade. Its subscription business model, coupled with a strong renewal rate, is a great fit for McGraw Hill. We see exceptional opportunities, as combined company, to further penetrate core customer segments, expand into new geographies and strengthen common core capabilities in data, technology and market approach.

This is a compelling acquisition for five key reasons. There's unique fit with clear synergies with S&P Capital and Platts. There's a common industry footprint, especially in areas like banking and insurance where we can deepen our expertise. There's a proven growth engine, having delivered organic revenue growth in the low to mid teens. There are clear revenue and cost synergies and there are sound transactional fundamentals, and Jack and I will cover all five in more depth today.

SNL has a well diversified customer base, including investments banks, commercial banks, insurance companies, asset managers, corporations, and government entities. Through this acquisition, we added two more information businesses in the adjacent sectors: real estate and media. SNL products are commonly cited as best-in-class and must have by its customers, due to a combination of differentiated content, proprietary analysis and deep sector coverage.

Their products are embedded in the workflow of the user base, with tools that are being customized to user's needs over time. For example, over the past 28 years, SNL has built strong relationships with over 75,000 users, and its 5,000 customers. You'll note in the pie chart on the top right side, top right of this slide, that 91% of SNL's revenue is in the Americas. We believe that expanding SNL's global reach is one of the most attractive immediate opportunities.

SNL has sector specific expertise in five different industries: financial institutions, energy, metals and mining, real estate, and media and communications. Currently, financial insulations and energy are the two largest sectors.

SNL's well diversified customer base gives MHFI a stronger presence in banking and insurance. The company has expanded usage outside of its traditional investment banking customer base in recent years. Users leverage SNL for traditional M&A analysis. For example, the company has a widely-used bank merger model, but their capabilities run far deeper.

Additional popular use cases for the FIG product include branch mapping and competitive benchmarking. In the energy space, SNL monitors over 9,000 power plants, 100 gas utilities, 120 interstate pipelines, and 2,500 renewable energy plants. SNL tracks ownership and production data in over 80,000 mines across 60 countries in the metals and mining group.

And in real estate, SNL has data on 140,000 commercial and residential properties globally. With each new market that SNL has entered, they deploy the same model of combining differentiated analytics, with unique content and deep sector coverage. This timeline depicts SNL investments over the last decade.

From its roots in providing sector-specific information and data on financial institutions, it has expanded into new sectors. In 2004, SNL entered the energy information market through an acquisition and has built an incredible franchise in power, coal and natural gas. Between 2012 and 2014, they launched their metals and mining platform with two acquisitions and are beginning to get traction on those investments. They added a specially valuable mine level production data to its metals and mining practice with the acquisition of IntierraRMG in 2014.

SNL started developing its European financials product in 2009. The product was launched in 2011, and is showing strong growth rates. This, in addition, to similar FIG products for Asia/Latin America represent an attractive opportunity for future value creation, given the large and growing markets. SNL added depth and diversification to its financial institutions platform when it acquired the insurance specialty company, Highline Data, in 2011.

The Company has a number of investments underway and it's best to think about their business as falling into two buckets: established businesses and developing businesses. On the left of this slide, are a set of businesses with low to mid teens organic growth rates and margins in the 30%s. On the right, are developing businesses, which are in investment phases and expected to turn a profit by 2017. This results in an aggregate margin in the 20%s.

We believe SNL has the ability to continue to grow revenue and expand margins on its own, but together, we think that the opportunity for growth are more substantial. The combination of SNL and McGraw Hill Financial will slightly modify our revenue mix. Adding SNL to our portfolio will increase the analytic data and research revenue of McGraw Hill Financial from 33% to 36%, and increase our recurring revenue from 60% to 62%.

It wasn't that long ago that SNL's customer base was concentrated in the investment bank sector with the systematic-built products and verticals to provide attractive and compelling data solutions. In the pie chart in the upper left-hand side of this slide, you can see SNL's customer diversification.

SNL now serves all leading bulge bracket, regional, boutique investment banks in the United States. Over 600 investment managers around the world, all of the largest 75 US commercial banks, all 25 of the largest P&C and life insurance companies in the United States, and an array of the largest and most prestigious consulting companies, media companies, power utilities and mining companies.

One of the most impressive qualities of SNL is its laser focus on data quality. SNL has a stellar reputation for sector-specific data accuracy and fast turnaround. And they have leveraged this successful operational model as they've expanded into each new industry vertical.

Now, before I hand it over to Jack, let me tell you again how impressed we've been with SNL overall and with Mike Chinn and the leadership team, specifically. The team has built an impressive company with a lot to be proud of, and we look forward to working together to build an even brighter future with McGraw Hill Financial.

And now let me turn it over to Jack, who will provide more details on the transaction.

Thanks, Doug. And good morning to everyone on the call.

As Doug mentioned, SNL is a proven growth engine that will be additive to McGraw Hill Financial's future performance. The Company has delivered mid-teens revenue growth for over a decade, driven by organic growth in the low to mid teens, complemented by selective acquisitions.

The revenue model is highly stable, as it is a subscription-based business, with high renewal rates, and clear future revenue visibility, much like our S&P Cap IQ and Platts businesses. Furthermore, the upfront receipt of cash, before the subscription period begins results in minimal working capital requirements.

In 2015, we expect revenues of around $255 million and margins over 20%, which includes 5 to 6 points of investment in the developing businesses that Doug just reviewed. Given the unique fit of SNL into McGraw Hill Financial, we have identified significant synergies, with cost- and revenue-based. We have built $70 million of EBITDA benefits in the financial plan that should be realized over the next four years by 2019. I will provide more detail on these synergies in just a moment.

There is also a tax benefit associated with the basis step-up that has an NPV of approximately $550 million, which has an economic impact on the valuation. Relative to the earnings per share, for the first full year of operation of 2016, we anticipate accretion on a cash basis excluding transaction-specific amortization. On a GAAP basis, we expect the transaction to be accretive in 2018.

As I just mentioned, SNL is a proven growth engine, delivering mid-teens growth over the last few years. Their established businesses are growing approximately 10%, with margins over 30%. Their developing businesses, global expansion of their leading financial institutions product line, the buildout of the metals and mining product line and selective software for US banks and insurance companies, are all expected to be profitable in 2017.

As these developing businesses become profitable, overall margins in the business should strongly improve. This attractive margin profile will be further strengthened by synergies. The combination of SNL and McGraw Hill Financial provides significant revenue and cost synergies for SNL and both our S&P Capital IQ and Platts businesses.

With S&P Capital IQ, we see opportunities to deepen penetration in commercial banking, insurance and corporates. This includes a terrific opportunity to accelerate international growth for SNL's leading financial institutional products, leveraging the commercial reach of McGraw Hill Financial. In addition, we see incremental opportunity by developing new products that leverage capabilities in core sectors, including rich management products for banking and insurance.

With Platts, the opportunity exists to build out the combined energy and commodity platforms. The SNL products of energy, focused largely on utilities and natural gas and metal and mining, match up well with Platts' capabilities in these areas. In energy, there is an opportunity to expand internationally, leveraging the recent Platts' acquisition of Eclipse. Furthermore, there are clear opportunities to introduce new products, especially in oil, leveraging the deep expertise of Platts.

There are also greater opportunities to build out joint capability vertically in these commodity sectors, by providing end-to-end information offerings covering price assessments, fundamental research and supply/demand analytics. Finally, SNL adds scale and leverage to our data and technology operations, which will enable us to drive efficiencies and add new opportunities to enrich existing product offerings.

Let me provide a bit more color on the data-related opportunity. SNL adds considerable capabilities in data collection, analysis, and research, with the addition of 2,000 employees in key offshore locations. The combined capabilities of both companies will have approximately 7,200 employees, primarily in locations that can attract well-trained analytical associates at a reasonable cost. This is a terrific asset to power future growth.

The total synergies built into the $70 million of EBITDA by 2019 are roughly half cost related and the balance revenue related. The revenue synergies assumed over the medium-term are fairly straightforward, as McGraw Hill Financial will work with SNL to extend their global reach. Quite simply, no other $1 billion-plus acquisition that we have reviewed since the formation of McGraw Hill Financial has offered such a clear synergy opportunity, both over the medium term and longer term in new product development and customer relevance.

The clear synergy is a significant consideration into the overall valuation of the business that's supported the purchase price. There are several other important items to consider as part of the valuation. As Doug and I have both discussed, the current profitability of the business is impacted by investments in the developing businesses, which are growing rapidly, but are not yet profitable.

We evaluated these investments in great detail and are comfortable with the ramp rate to profitability by 2017. The valuation needed to provide a return on these investments, which included multiple acquisitions over the last four to five years. There is also considerable value from the tax basis step-up, which on a net present value basis, is worth approximately $550 million.

Lastly, with the upfront cash receipts exceeding revenue, the cash basis on which a valuation is based, is roughly a year ahead of GAAP EBITDA. If you take into consideration the economic impact of a tax step-up, the value of this transaction is approximately $1.7 billion.

As we move past the investment cycle that is nearing an end and consider the cash flow is roughly a year ahead of EBITDA, we view the price of this transaction as having a mid-teens multiple on 2017 cash flow before the impact of synergies. Longer term, the synergies across SNL, S&P Cap IQ, and Platts provide a terrific opportunity for significant shareholder value creation.

Financing of the transaction should be relatively straightforward given our strong balance sheet, and the success of our recent bond offering, which re-introduced McGraw Hill Financial to the fixed income investor. This acquisition will be funded by a combination of approximately $525 million of cash on the balance sheet, and $1.7 billion of new debt.

A committed bridge financing of $1 billion, combined with our assisting credit facility of $1.2 billion, will provide additional flexibility through closing. Post-deal, we anticipate 1.6 times pro forma leverage, which provides ongoing flexibility in returning capital to shareholders through share repurchase and dividends, and pursuing future growth opportunities while maintaining an investment-grade rating.

Our approach to integration will be to have SNL's CEO Mike Chinn report directly to Doug. Mike and his executive team are based in Charlottesville, Virginia, and we are committed to that location over the long term. Initially, for the financial reporting purposes, we will SNL as part of S&P Cap IQ, but that may evolve over time. We expect immediate areas of focus to include pragmatic integration of corporate, data, and technology capabilities, as well as sales force training on this enhanced product line.

Let me summarize by saying that SNL has a unique fit for McGraw Hill Financial, adding sector-specific depth and overall scale. It is a proven growth engine with compelling revenue and cost synergy opportunities across both S&P Cap IQ and Platts. We agree that McGraw Hill FInancial is the right owners for SNL.

Now, let me hand the call back over to Doug to discuss our second quarter results.

Thank you, Jack.

As I said in the past, we're aligned around four very important themes that drive growth and performance and create value: strengthening our customer and stakeholder engagement, accelerating our international growth, sustaining our margin expansion and maintaining discipline in capital allocation, and fostering a robust risk and robust compliance culture to manage and mitigate risk throughout the Company. As you just heard, the acquisition of SNL today fits very well with these themes.

Now, let's turn to the second quarter, and I'm pleased to report solid results. The Company delivered increased revenue despite unfavorable foreign exchange rates and decreased issuance outside the United States, continued margin expansion with a 450-basis point improvement in adjusted operating profit margin, a 17% increase in adjusted diluted EPS to $1.21, strong year-to-date free cash flow of $621 million, excluding the payments of legal settlements, issuance of $700 million of new ten-year notes as we re-entered the capital markets for the first time in eight years, increased capital return with the re-purchase of 2.6 million shares year-to-date, new additions to the portfolio with the purchases of NADA Used Car Guide and JD Power and Petromedia and Platts and continued productivity efforts across the Company, which Jack will review later in the call.

Now, let's take a closer look at the second quarter results. Revenue increased 3%, but excluding the impact of foreign exchange, revenue increased 6%. Adjusted operating profit increased 16%. While geopolitical concerns negatively impacted issuance in our ratings business, adjusted operating profit increased across the entire portfolio. Progress on productivity initiatives resulted in a year-over-year decline in adjusted expenses.

These initiatives have been focus on delayering the organization, driving process efficiencies and improving productivity. Of note, on Friday, we will close the door on our former Midtown headquarters, as the last wave of employees relocate to our downtown Manhattan operating center at 55 Water Street. Productivity actions lead to adjusted operating margin increase of 450 basis points, and adjusted diluted EPS increased 17%.

Standard & Poor's rating services reported its second highest revenue ever, but due to unfavorable changes in FX and weak issuance outside the United States, did not exceed the second quarter of last year. Every other business segment delivered year-on-year revenue growth.

Now let me turn to individual businesses, and I'll start with Standard & Poor's rating services. In the quarter, revenue decreased 1%; excluding the negative impact of foreign exchange, revenue increased 3%. Adjusted operating profit grew 7%, and adjusted operating margin increased 370 basis points to 50%. While revenue was negatively impacted by FX, it is less of an impact on operating profit.

S&P rating services continues to make progress and improving margins, reduced headcount from recent restructurings, and lower incentive costs were the primary contributors to this quarter margin improvement. In addition, ratings continues to implement a process reengineering program called the Way We Work. Legal expenses were significantly lower; however, this was offset by cost associated with Dodd-Frank implementation as we continue to invest in people and technologies.

Transaction revenue increased to 49% to 50% of total revenue. Non-transactional revenue decreased due to the effects of a strong dollar. Excluding the impact of FX, non-transaction revenue increased 3%, due primarily to annual fee growth. Transaction revenue grew 4%, excluding the impact of foreign exchange. This is a result of the record US public finance issuance and strong US investment-grade issuance paced by a number of large M&A transactions.

When we look at second quarter issuance in US, it was driven by a 20% increase in public finance, as call options on strong 2005 issuance are being refinanced, and a 30% increase in investment-grade issuance. US structured finance issuance in total was unchanged with a 53% increase in CMBS and 18% decrease in structured credit, which is predominantly CLOs.

In Europe, issuance decreased in almost every category. RMBS was a notable exception. Concerned about Greek debt, slowing growth in China, and dramatic volatility in German sovereign debt, along with a very, very low cost bank liquidity, all combined to dampen bond market activity outside the United States in the quarter.

In Europe, investment-grade debt issuance decreased actually 33%, and high yield debt declined 54%. Structured issuance decreased 7%, with RMBS being the primary area of strength. Not depicted on this chart is issuance from other parts of the world, which collectively, excluding sovereigns, declined over 50%.

Now, let me turn to S&P Capital IQ. Revenue grew 6% with consistent growth globally. Adjusted segment operating profit grew 37%, and adjusted operating margin increased 520 basis points to 22.9%.

Capitalizing on past investments, the margin improvement is the result of product enhancements to deliver revenue growth, coupled with tight cost control. In fact, headcount increased less than 1% year-over-year, and excluding the impact of FX, revenue increased 7%, and expenses only 3%.

Let me add a bit more color on growth in the three business lines of S&P Capital IQ. S&P Capital IQ Desktop & Enterprise Solutions' revenue increased 7%, primarily as a result of low teens increase in desktop revenue driven by a similar increase in users. S&P Credit Solutions' revenue increased 6%, due primarily to growth in RatingsXpress and RatingsDirect. In the smallest category, S&P Capital IQ Markets Intelligence, revenue decreased 4% overall. Strong growth in Global Market Intelligence and Leveraged Commentary and Data, however, it was offset by declines in Equity Research Services.

Turning to S&P Dow Jones Indices, this business delivered an 11% increase in revenue due to ETF, mutual funds, data license and derivative revenue, which all increased. Operating profit increased 16%, and the operating profit margin increased 250 basis points to 64.6%.

During the quarter, we introduced 64 new indices, many in the six income space in the net of 18 new ETFs based our indices were launched. ETFs asset under management associated with our indices increased 10% to $792 billion, versus the end of the second quarter in 2014. Please note that while our year-over-year growth was meaningful, this AUM decreased from the record $832 billion at the end of 2014, and ETF flows moved to products offering European and non-US exposure.

One of our fastest growing categories has been the products based on our smart beta indices. AUM on these products increased 55% year over year to $133.6 billion.

This next slide depicts two charts which should help you to understand year-to-year ETF industry flows. In the chart on the left, you see that the AUM link to ETF, based on our indices, has declined recently. While the year-over-year comparisons are still positive, AUM has declined since the end of 2014.

The chart on the right shows the inflows into passively managed ETFs continued to be robust. In fact, while down sequentially, the industry experience record first half flowed to $146 billion. Unfortunately, compared to recent quarters, the percentage of flows directed to products based on our indices has declined. We view this as temporary, as investors move into global products.

During the quarter, we launched the flagship of our fixed income indices, the S&P 500 Bond Index. This is the first index that tracks the debt of the S&P 500 companies and the first to be priced in realtime throughout the day. We divide the market value of the bonds and with the maturity requirement of greater than one month, we anticipate that the S&P 500 Bond Index will be liquid enough to also serve as the basis for potential ETF and structured products.

The S&P 500 Bond Index currently tracks the debt of 430 S&P 500 companies, reflecting over $3 trillion in debt outstanding. At the launch, we published more than 20 years of daily historical data on the S&P 500 Bond Index. We'll round out this offering with multiple S&P 500 Index variations, based on duration, rating and sector. Examples include the S&P 500 AA Investment-Grade Corporate Bond, the S&P five-to seven year investment corporate bond index, and the S&P 500 Utilities Corporate Bond Index.

And finally as you know, we have formed a number of unique and dynamic alliances with exchanges in various markets since 1998. This quarter, we signed an agreement with the BM&F BOVESPA, designed to create and launch new co-branded Brazilian equity indices. In addition, we have signed an agreement with BMV, the Mexican Stock Exchange, incorporating all of BMV's indices, including our flagship index, IPC, the broadest indicator of the BMV's overall performance.

In the commodities and commercial market segment, revenue grew 7% with organic growth of 6%, excluding the Eclipse acquisition. This was led by high single-digit revenue growth at Platts. Adjusted segment operating profit grew 15%. Adding together the solid revenue growth and tight cost control, the adjusted operating margin increased 270 basis points to 37.8%.

JD Power delivered low single-digit revenue growth by double-digit revenue growth from the PIN Information Network, the Power Information Network and modest growth in US auto sector. Revenues in Asia were negative, as growth in the China market moderated and Japan revenue declined.

Platts continues to deliver strong results while building for the future. Platts demonstrated resiliency, delivering high single-digit revenue growth, despite continued low commodity prices. Platts' results, while quite strong, would have been even stronger except that several major banks have withdrawn from the commodity space and upselling new products has been difficult in this low oil price environment. Metals, agriculture and petrochemicals continue to deliver the highest revenue growth rates, and global trading services increased, primarily due to license revenue from the Steel Index Derivative activity and record eWindow trading volume.

Petromedia is a small but interesting tuck-in acquisition for Platts. Through a product main bunker world, Petromedia provides pricing, news and analytics for the global marine fuel markets. Bunker makes up 70% of the cost of chartering a ship, and therefore a critical price component for the industry. The other main product is Ocean Intelligence, which provides credit reports for the bunker industry and adds to Platts risk management offering.

The highlights of the quarter for JD Power was the acquisition of NADA Used Car Guide. This is the premiere source of used car value benchmarks. This acquisition fits well with JD Powers PIN business, as both generate essential pricing benchmarks and analytics. This subscription-based business, with more than 30,000 business customers expands JD

Power's offerings in the US automotive, OEM retailer, financial services and insurance markets. This final slide shows examples of how different sectors utilize this reliable used car benchmark data in their businesses.

With that, I want to thank you for joining the call this morning, and I'm going to hand it over to Jack Callahan, our Chief Financial Officer.

Thanks, Doug. I know this has been a longer call this morning than our norm, so I just want to briefly add some color on several items related to second quarter performance. The balance sheet and the impact of the SNL acquisition and our 2015 guidance and then we'll open it up to your questions.

First I will recap key financial results and review certain adjustments to earnings that were recorded in the quarter. Let's start with the second quarter income statement. Overall, these were very good results: especially the continuing progress and margin improvement.

Revenue grew 3%, despite the continued headwinds from foreign exchange, which reduced our growth rate by about 3 points. Adjusted consolidating operating profit grew 16%, with all four business units contributing to this growth. Operating margins were over 41%, up 450 basis points from a year ago. This is the highest quarterly margin achieved since the formation of McGraw Hill Financial.

Revenue growth, combined with progress on our productivity initiatives, contributed to this significant step-up. While foreign exchange had a negative impact on revenue, we have had almost no impact on adjusted operating profit for the Company as a whole, due to the offsetting impact to expenses.

Adjusted unallocated expenses decreased 22%, as the prior period had costs associated with the sale of certain assets. The tax rate on an adjusted basis was 32.3%; the balance of the year, we continue to guide below a 33% rate.

Adjusted net income increased 17%, and adjusted diluted earnings per share increased 17% to $1.21 versus the toughest comparison from 2014. The average diluted shares outstanding decreased by almost one-half million shares versus a year ago as share repurchase activity offset the diluted impact of shares granted for equity-related compensation.

Now, let me turn to adjustments to earnings, to help you better assess the underlying performance of the business. In total, pre-tax adjustments to earnings from continued operations resulted in a $30 million gain during the quarter. This consisted of $41 million in net settlement-related insurance recoveries, a gain of $11 million related to the sale of a legacy construction business asset, and $22 million of restructuring charges as the Company continues to delayer and streamline operations.

Now, I'll turn to cash flow and the return of capital. Our year-to-date free cash flow was a negative $988 million. However, once the payments associated with legal settlements are excluded, to get a better sense of our underlying cash generation from operations, year-to-date free cash flow was a positive $621 million. That puts us well on our way to full-year 2015 guidance of greater than $1.1 billion.

During the quarter, the Company stepped up its share repurchase program and bought 1.6 million shares, bringing the year-to-date total to 2.6 million shares. The share repurchase program remains an important component of our overall capital allocation, and we anticipate it continuing to selectively re-purchase shares under our remaining share repurchasing authorization of 42.9 million shares.

Now, let's turn to the balance sheet. As of the end of the second quarter, we had $1.7 billion of cash and cash equivalents, of which approximately 70% was held outside the United States. Our cash position was augmented, with the issuance of $700 million of 10-year notes in May. This was the first bond offering by the Company since 2007, and we were delighted with the strong interest from investors and the attractive 4% coupon.

We have some of the proceeds from these notes to pay down short-term debt that we incurred during the first quarter, and during the quarter we completed the refinancing of our $1.2 billion credit facility. At the end of the quarter, we had approximately $1.5 billion of long-term debt. As a result of the SNL acquisition, as we discussed earlier, we currently anticipate issuing $1.7 billion of long-term debt to fund the transaction, and we anticipate completing the financing ahead of the projected closing. Once completed, this will bring our total debt to approximately $3.2 billion, or 1.6 times EBITDA.

The unique fit of SNL, combined with the smaller acquisitions of NADA Used Car Guide by JD Power, and Petromedia by Platts, all strengthen the McGraw Hill Financial portfolio and will contribute to sustained growth. In the context of 2015 guidance and assuming that the SNL transaction closes towards the end of the third quarter, we anticipate that the deals to collectively add approximately $80 million to $90 million of revenue over the balance of this year in the second half and SNL, specifically, have a diluted impact to adjusted EPS of approximately $0.05 to $0.07.

However, based on the strength of the quarter and our outlook for the remainder of the year, we will leave adjusted EPS guidance unchanged at $4.35 to $4.45. At this point, we would expect performance toward the higher end of this range.

In closing, we continue to focus on creating growth and driving performance, building out the portfolio and improving margins and returning cash to shareholders. And today is truly a special day, as we look forward to welcoming over 3,000 associates of SNL Financial to McGraw Hill Financial.

With that, we will now open the call to your questions.

Just a couple instructions for our phone participants.

(Operator Instructions)

I would kindly ask you to limit yourself to two questions -- that's two questions -- in order to allow time for other callers during today's Q&A session. If you've been listening through speaker phone, but would like to now ask a question, we ask that you lift your handset prior to pressing star one, and remain on your handset until your question has been answered. This will ensure better sound quality. Operator, we'll now take our first question.

(Operator Instructions)

The first question is Alex Kramm from UBS.

Your line is open.

Hello. Good morning, everyone, hopefully you can hear me okay. I'm remote.

But anyways, Doug, I guess for you, I mean, you often described McGraw Hill Financial as a collection of benchmark businesses. Obviously, those are hard to purchase or hard to expand. So maybe you can just summarize to us how you think SNL can be one of those benchmark businesses or not.

And then maybe, specifically, you said part of this business will be part of Platts or could be part of Platts over time. When I look at the customer base, it's really just financial companies and not really the core user base of Platts. So can you maybe talk about this a little bit? Because a benchmark company, I would assume some corporate users as well.

Well, thank you for the question.

First of all, let me just mention that as we've been looking at our overall strategy, we focus on a combination of benchmark, of data, analytics, and research. And all of these are different sorts of products that get embedded into the workflow of the users that we work with. So first of all, SNL really is a benchmarking business at heart.

If you look at how they produce the information, the proprietary data, and the focus and attention to detail that they provide, it's very similar to what you would look at for a benchmarking business. They're not a traditional price or index or credit benchmark, but they serve as financial performance and operating performance benchmarks for companies and assets in our space.

We do look at them in addition to, as your second part of your questions, how they would enhance our business related to Platts. They've been building verticals in the mining space, in the energy market analysis. As an example, they've got industry forecast curves and proprietary daily spot market prices in the energy market. They have operational statistics on over 5,000 electrical utilities. They've got power plant unit-level data.

On the mining world, they've got profiles and statistics on all mining projects globally. They've got customized maps. They've got location data, company primary, commodity data information, ownership information, et cetera. All of that is very similar to what Bentek does and very complementary to Bentek and Eclipse in the natural gas space. So we see a lot of excellent fits in ways that we'll be able to leverage that, their database and their relationships.

So I think that we want to make sure that you get more and more data about who they are and who their customers are. But you'll see over time, as you get a chance to learn more about them, that they've diversified incredibly well beyond their traditional investment banking portfolio.

Okay, thank you. That's helpful.

Then maybe just secondly for Jack, maybe you can talk a little bit more about I guess the accretion as we think about 2016 and, to some degree, also from mechanical or technical perspective. So if you're saying it's accretive on a cash basis, are you actually going to adjust your earnings next year to exclude amortization? Or will we still find this to look dilutive on a reported basis? And if so, how much dilution do you think you could expect next year from an EPS perspective? Thanks.

Alex, at this point in time, I don't anticipate that we would exclude the amortization specifically relative to transaction. However, we will point you towards, let you know what it is such that you can judge the cash accretion that we're forecasting for next year. So we'll connect the dots there.

I think we have some work to do to close this deal. We have to finalize some purchase accounting. So I would say on a GAAP basis, next year the dilution for 2016 -- and, please, this is a first pass view of it -- is somewhere between $0.15 to $0.20. And we'll tighten up that range as we integrate this into our 2016 financial planning and future guidance.

All right. Very helpful. Thanks again.

Bill Bird, FBR Capital Markets.

Your line is open.

Yes, good morning. The synergy numbers are quite large relative to EBITDA. I was wondering if you could just give us a sense of what's included in the synergies, also what's not included. And then how do you expect synergies to phase in between now and 2018? Thank you.

Let me start, Bill. This is Doug.

Well, first of all, one of the things we've been impressed with at SNL as we've gotten to know them is their ability to run a very tight operational shop and how they've got ways that we can work together, as Jack showed on that map, in their operating centers around the globe. And second, as you saw from the chart, they've got 91% of their sales today are in the United States. And we have a sales force and penetration globally that we think that we can get a lot of the synergies from there.

But let me hand it over to Jack for some more details.

Two points, and maybe let me address cost synergies first and then come back on revenue because, again, the case is built roughly 50/50. First, on cost, we came at the analysis not just looking at the costs of SNL. We looked at the cost across SNL, S&P Capital IQ, and Platts. I think when you look across that cost base, the cost synergies that we assumed here are actually quite modest. And there's a lot of overlapping capability as it relates to technology, in some cases, data, et cetera. So I think you need to see it from a cost point of view and, please, take a more holistic view of it.

Secondly, in terms of revenue, there's both near-term, what's called medium-term and longer-term revenue synergies. Some of the more medium-term are taking their great products they've already developed, like their Global FIG Product, and we just have a much greater sales force coverage than what SNL has today. In collective, we just have more feet on the street to expand that to accelerate their global build-out.

And then longer term, there's a lot of new product development opportunity. That's quite exciting. Both maybe in more traditional S&P Cap IQ space; but also, as Doug was just mentioning with Platts, in terms of the mutual areas of capability that we've built out there.

And then, question on the phasing in --how it may phase in between now and 2018?

Traditionally, as you'd expect, the cost synergies are a little bit more forward-weighting. And between now and -- we had pointed to $70 million by 2019. We may get a little bit more benefit on the revenue side a little earlier because of the opportunity to take their existing product line through our sales force.

And in terms of specifics for 2016, we'll give you more guidance on that when we do it, in the context of our full outlook for next year, towards the end of this year or early next.

Thank you.

Thank you, Bill.

Andre Benjamin, Goldman Sachs.

Your line is open.

Thank you, good morning.

First question, I know you're just getting your hands around this large deal, But I was thinking, what does this mean for incremental M&A, which you mentioned you may continue to do. How we should think about areas of focus? Should we expect you to do some other things, like continue to build the Index business more organically like you've been doing? And then if you were to do a deal, how high a leverage you would be temporarily willing to go for that deal.

Andre, good morning. Thank you for the question.

We continue to believe we have flexibility to pursue what we've already described before as our SNL allocation between investing in organic growth, smaller tuck-in acquisitions, continue to pay our dividend, and also repurchase shares. As I mentioned earlier, we're focused on benchmark businesses, in particular, how we can also enhance those with high quality data, and research businesses.

So we'd hope that we can continue to do small transactions, like the other ones that we announced this quarter with Petromedia and NADA Used Car Guide. It's our goal to continue to add to the portfolio high quality properties over time. But in a sense, we also want to keep a level of leverage so we're also able to always continue to pay our dividend and repurchase shares.

And then on the core business, I know you mentioned that you are having some challenge in the Platts business from some banks pulling back. Any color on exactly how much of a headwind that was? Just color. I apologize if I missed it. And more importantly, do you have any visibility into how many more may follow that trend going forward?

I wouldn't refer to it as a challenge. I mean, Platts had a great quarter; so I would not put it in that context at all. We probably lost 1 point or 2 points of growth off of what we otherwise would have had because of some of the banks pulling out of commodity space, and a couple small factories going out of business. But great quarter -- and with oil prices the way they've gone so dramatically south, it's kind of amazing how little Platts has been impacted.

Thanks.

Joseph Foresi, Janney Montgomery Scott.

Your line is open.

Hello, I was wondering if you could talk about the pricing structure of the SNL acquisition and how you feel pricing power there relates to what you're seeing in Capital IQ?

I think we've been very impressed with the must-have capability of what SNL offers its customer set and the very sector-specific data and analytics that they provide. I think over time, they have realized reasonable pricing improvements over time; and I suspect that will continue. But I wouldn't point to anything unusual about pricing. I think it's more of what we work on across both our S&P Cap IQ business and Platts, so I think it's very similar.

Okay. And then if I can just get some comments on Europe and the issuance market there, and your thoughts as we head towards the back half of the year? Thanks.

Yes, so Europe has continued to be incredibly weak. There are a combination of factors that I mentioned earlier, the volatility that we saw earlier in the year with the German yields. We also saw some of the negative interest rate issuance, et cetera. We haven't seen too much of a rebound in Europe in this July, although there have been a few reverse Yankee bonds, which have gone in the market in a few financial institutions.

But overall, Europe investment grade moved down 33%. And the investment grade corporates were down 33%. In the second quarter, financial institutions were down 40%. Total Europe was down over 40%, and the rest of the world was down 54%. So we saw very strong issuance in the US. And investment grade was up almost 30%, although non-investment grade US was down 8.9%.

So as I've always said every quarter when we have these calls and when I meet with investors is we don't know what each quarter is going to bring. And we have a longer-term forecast that, with the combination of refinancing with global growth, with a belief that Europe will continue to move from a banking market to a capital market overall, that in the long run, we will see a growth in issuance. But we do see, quarter by quarter, a lot of volatility.

Thank you.

Doug Arthur, Huber Research.

Your line is open.

Yes. Thanks.

Jack, I think you mentioned, or Doug, that the organic growth trend at SNL has been low to mid-teens. Can you break that down between sort of how much of that growth is a function of the new verticals they've had gotten into? Or another way of asking the question is what's the organic growth of the very established products? Are they slowing, or are they also growing at a mid-teens level? Thanks.

Sure. Doug, there's a chart in the deck that I think kind of lays it out over the last few years -- I think back to 2012. So on a compounded basis, including the forecast for 2015, the established businesses have been growing around 10%. And then the developing businesses have been growing -- I think it's 70%, -- yes, I think over the last few years, for an all-in take of around 16%.

Now on the established side, it's really a combination of both organic investment combined with selective acquisitions. So you should view the developing business as a combination of both internal investment that they've made combined with some of these acquisitions. And if you look at the timeline, you can see they've been pretty active the last few years, adding to the mix.

So the --

Slide 16.

Okay. Just to clarify, the organic growth has included the impact of the small tuck-ins.

No, let's break it apart. I think if we kind of go within the developing businesses, some of that's been internal investment; some of it has been acquisition. So depending on the year, that can -- that's what we kind of classify over a longer-term time frame there. It's either lower teens to mid-teens, depending on the year.

Okay. Thank you. I'll go back and take a look at that. Thanks.

Denny Galindo, Morgan Stanley.

Your line is open.

Hello there. Good morning.

I had a quick one just on the quarter on Capital IQ margins were very strong. It looks like the best since 2012 or so. And I wanted to get a feeling for whether there was any kind of one-time-ish benefit from here, whether it was kind of mix-driven. I know that some of your lower profit pieces of that segment have been declining, whereas some of the other ones are growing. Or any other kind of one-time issues that might have driven that margin expansion, and can we expect them to continue?

Yes. First of all, we have been doing some selective restructuring in that business. And also, the team there has done a nice job of sort of re-sequencing on, I think, some of the investments that were underway in the business. And I think that's starting to have some real benefits.

I would say, though, the margin -- there is a little bit of an impact in their margins, and that's Cap IQ from ForEx. Just about all of their revenue is dollar-denominated based. And from an expense point of view, we are benefitted from ForEx, particularly in the pound and the euro. So a little less than half is ForEx, but the rest is just good performance in terms of expense management.

Okay. And then lastly, this SNL is really more of a sector-specific data platform. And actually, some of the kind of more general platforms have also been going to kind of providing more sector-specific information. Is this kind of a trend in the industry -- that everyone's going to have their own sector-specific platform instead of the more general, one-size-fits-all platforms? Or do you think it's just additive? Or maybe you could just talk about that trend.

Well, from a point of view of the trend, I think that we find what our users and customers are looking for is depth -- depth of knowledge, depth of data, time series, being able to go back for a long time to be able to understand the kind of data need. As an example, not related to SNL, but when we launched the S&P 500 Bond Index, we put in 20 years of back data on this kind of transaction.

So what I would look at is the type of data and analytics that are required more and more in the market is sophistication. And to have that kind of sophistication, you need to have kind of depth and data and industry-specific information that somebody like SNL has. So I think SNL has been a leader in this area, as well as some of the other McGraw Hill Financial businesses. And you should expect to see this kind of activity from a lot of different companies.

Operator?

Our next question comes from Peter Appert, Piper Jaffray.

Your line is now open.

Thanks.

Doug, it looks like S&P's revenue growth is maybe lagging a little bit relative to some of the peers or relative to the whole industry. Do you have any bridge in terms of why that differential may exist?

So I've looked at this in a couple different ways. The main drivers of differential in growth is in United States; and it's in the structured finance market, specifically. If you look at the issuance during the second quarter as I went through them, the largest growth in the United States was in the investment grade corporates and in public finance, which we continue to perform very well in.

And then the only sector where there was growth in the United States in structured finance is in CMBS. And as you know, we're temporarily not involved in conduit/fusion in CMBS. And that's the main differentiating factor that we've seen when we look at our competitors.

Got it. Thank you.

And then on the margin side, the progress at S&P has obviously been very impressive. Can you talk about how far along we are in the margin improvement story? Are most of the gains baked in at this point, or is there more to come?

We're going to continue to work as much as possible on that. Although we continue to invest in people and technology, we think that it's important that we automate and update our systems, such as our processing systems. I mentioned the way we work, Dodd-Frank.

We're also ensuring that we have high-quality publication and publishing systems. So that we think that we're very, very pleased with the performance and with the improvement in the margins. We will continue to attack those margins through every different lever we have.

But on the other hand, we want to continue to invest to have the highest quality and very high-quality risk management when we look at the way we manage the Company. So we're pleased. We think that there should continue to be more progress, but we don't want to overpromise either.

And, Peter, one thing just as a reminder is this was a good revenue quarter. So there is the importance of revenue leverage in the margin. So I think while 50% margins are quite attractive, I'm not sure I would straightline that, particularly the third quarter, which is traditionally a little bit lower in revenues. But we're overall extraordinarily pleased with the strong profit and the solid progress we've made there.

Thank you.

Tim McHugh, William Blair.

Your line is now open.

Yes, I guess just another question on SNL. The differentiation, I guess. Can you help us just -- for those less familiar with the product, I guess -- how is the data different than what people can get through other data providers? Or is it more the research and analysis layered on top of the data that's really the differentiating point as SNL goes to market here?

This is Jack. I'll take a start and then maybe Doug can add on.

I think what's different is, if you kind of compare it with S&P Cap IQ, which has sort of broad coverage, SNL has really grown up very sector-specific with deep, deep expertise in financial institutions. And that's where they really have perfected their model. And then what they have by building off of that depth, they then have kind of taken that model, then expanded it to other significant industry types that then have provided them the growth.

And they're still in the middle of this expansion and investment phase. That's why we're very excited to work with them now, to kind of leverage the great progress they've made in taking their financial institutions product globally. And we want to work with them with the Platts, and investments they've made in energy and metals and mining, to kind of collectively continue to build out that very sector-specific deep insight. And they provide some tools, the fact that was really a point about getting all the way down to workflow, that actually simplified some of the -- as far as even simplifying some of the regulatory requirements for some of the commercial banks. So they're very, very deep and very much linked into the workflow of their clients.

Let me just add, as an example, in the bank area where they started in the kind of discipline that they're now moving into their other verticals. So if you were to look at the United States banking market, they have detailed information about every branch of every bank in the United States.

They can look at the proximity of the different branches and overlap analyses. They can have an analysis of bird eye views and satellite. They can map it. They can look at the markets and the market demographics of every branch. They can look at deposit concentration and deposit growth. They can then add into that deposit rates, auto rates, mortgage rates, asset quality, demographics, et cetera.

And so that's the kind of information which is unparalleled as they've built up in that kind a market. And they've taken that expertise and that approach to managing and gathering data and then distributing that. Which is a combination of proprietary data mapped with some third-party data, so that they really provide something that's quite unique. And they moved that into the markets. And it's very complementary to both S&P Cap IQ and Platts, as we've said.

Thank you.

And as we think about the core part of SNL, the 10% growth I guess over the last few years. Do you have any sense that you can give us for how much of that is price versus customer growth, versus kind of selling additional products to the established customer base?

I think that would be premature to get into that level of detail on this call. But it's been a combination of both extending their reach and some fair realization on pricing.

Okay. Thank you.

Thanks, Tim.

Bill Wilmington,Wells Fargo.

Your line is open.

Thank you. And congratulations on the SNL acquisition. Their accuracy guarantee is famous.

So one question I want to ask you is just to make sure that I have the bridge correctly in terms of how you're looking at the acquisition costs before and after the adjustments. So if we just start out unadjusted, the $2.225 billion, versus the EBITDA, it looks like about $51 million unadjusted? And then we can adjust -- you can back out the $550 million on the tax and add the $70 million back to the EBITDA. That would get you to something closer to a 14 multiple. Is that the way you're thinking about it?

I think you've got to look forward. I mean, because they're current margins are so impacted by the investments that they're making in the developing businesses, combined with the fact that they've made a number of acquisitions in these areas to kind of build them out. I would look forward to 2017, whereas these investments which we have spent a lot of time looking at that we're quite excited about. Once they start to basically contribute to the profit pool before any real application of synergies, you start to be getting to a GAAP EBITDA in 2017 of around $100 million.

And also too, remember, the valuation here is based on cash, not GAAP EBITDA. And they tend to have, like, 98% of their customers pay ahead. So if you think about it from a rough cash EBITDA, you could add, at least on a current run rate, around $20 million to that number. So I think that's more the right range to think about comparing it to what the valuation of business is. And then we start to layer in the synergies as we start to move forward into 2017, 2018 and beyond.

Got it. And then a question on the overall business. It's such a high percentage of renewals. Is there a seasonality to the renewals? Are most of them taking place at the end of December, beginning of January? Or is it kind of spread out throughout the year?

Actually, a good number of their deals are multi-year in nature. So it's a little bit of a mix. There's a little bit of maybe at the end of the year, but there's nothing overly pronounced in it.

Got it.

We've been quite impressed with their overall success in their renewals -- and really on a consistent year-on-year fashion. It's really quite remarkable, particularly when you consider how they've expanded out from their core strength in financial institutions into new sectors over the last few years

Well, thank you very much.

Thank you.

James Friedman, Susquehanna.

Your line is now open.

Hello. Thank you. It's Jamie at Susquehanna.

I was wondering, with regard to the $140 million cost takeout plan for the McGraw Hill side, if you can update us as to where you are there.

And then I guess I'll ask my SNL upfront. In terms of 5 to 6 points of investment, could you articulate a little bit more detail where that investment is going?

Sure. We're well on track to, as was our cost statement, I think that's pretty obvious by looking at our margins the progress that we've made there. As Doug mentioned, one part of that program was the exit of our old headquarters building, which is being completed over the last few weeks. So we're well on our way to delivering on that target. And we may actually, kind of give in the very strong margin we've had so far, we may be a little ahead of that previous target that we had set to have full realization of the $140 million by the end of 2016. So I think we're a bit ahead, but we'll give a more complete update on that as we approach the back half of the year.

And as it relates back to your investments on 6 points of investment, that has all to do with the investments they're making in the buildout of the developing businesses. So that's taking the FIG product global; it's building out metals and mining, which is really interesting to us; and it's synergy with Platts. And they also have some selected software businesses capabilities that they offer US commercial banks and insurance companies.

So those businesses are growing very nicely, You add a compounded basis of around 70% over the last few years. And they'll start contributing to profitability in 2017.

Thank you.

Thank you.

Our next question comes from Manav Patnaik, Barclays.

Your line is open.

Yes. Thank you.

Just one question for Jack and then one for Doug as well. Firstly, on the margins, the SNL financial, I just want to make sure I got that clear. You said steady state, the margins should be 30%. I think you said there was 5 to 6 points of investments going on; so I guess margins should be 25%. But I think you said this year there's only 20%. So I just wanted to know what that gap was, and if that 30% includes your synergies by 2018?

Well, I think the way to think about it is there are established businesses right now that are in the 30% range. They're investing in developing businesses. So once the developing businesses start to contribute to profitability -- frankly, they're a drag right now -- overall company margins will start to approach that 30% sort of number over time.

And then there's also just some general margin improvement in these established businesses. And that's just the sequence of the buildout of these developing businesses is to improve the overall margins of the business over the next two years. Then we would layer in specific synergies.

Okay.

And then just big picture, Doug, it seems like, obviously you are looking at 2017 cash EBITDA. There seems like some work left and synergies and tax benefits and so forth, and you get your mid-teens multiple. Wood Mac seemed like it was sort of a teen-er, like you get to the similar multiples in 2017. So what was the difference between walking out of that deal and valuation versus pursuing this one?

I don't have any comments on Wood Mac. What I would say is that we're very, very pleased with SNL. It's a fantastic business, as I said earlier. Mike Chinn and the management team have built a very high-quality set of businesses and operating procedures.

We think that they bring a high-quality operating platform. They've got product innovation, and that they can benefit tremendously from our global reach, as well as our operating centers we already have. This is really about SNL today, and we're very pleased that we're able to announce this transaction.

Okay. All right. Fair enough, thanks.

Vincent Hung, Autonomous.

Your line is now open.

Hello, good morning.

Good morning.

Good morning.

Just first question. Could you just talk about the existing management team and how they're going to be incentivized and how long that's going to be locked in for?

Locked in? We have contracts with Mike Chinn and the folks.

Are we talking about the SNL people or McGraw Financial?

Yes, SNL.

Yes, well, I think in our approach we are -- look, Mike is now a direct report to Doug. And one of the reasons why we are excited about this deal was the quality of that leadership team. And we're looking forward to working with them. And we're quite comfortable that we're going to have that opportunity over the coming years.

Okay. Last question -- on slide 12, you break out the revenues by customer type. Can you just give us a sense of revenue growth by those customer types?

All we would say is that I think -- you're asking in the context of SNL?

Yes.

Yes. The only thing we would say today is that they've done a very nice job of kind of broadening out from investments banks and to kind of appeal more to the buy side -- commercial banks, insurance, and corporate. So I think they've done a nice job building a very, very broad reach in their customers that they serve. And they have no significant dependence on any one customer or customer type, which I think kind of gives more to the stability and future predictability of the business.

Okay. Thanks.

Thank you.

And our last question comes from Patrick O'Shaughnessy, Raymond James.

Your line is now open.

Hello, so a question on the tax benefit that you are going to be getting. Can you talk a little bit about the nature of that benefit? And then how are you going to realize it? Is your GAAP tax rate going to be lower going forward, or how do you actually benefit from that?

It's basically just a step-up in the basis. So it will provide us some tax benefits within the United States, which in large part, our highest tax jurisdiction. And it will collectively give us a couple tenths of improvement in our overall effective tax rate, which is helpful. So that's how it will come in over the next few years.

It plays out over a number of years.

A number of years. That's why you really need to think about it on an NPV basis. This benefit with be with us for about 15 years.

All right. Got it. Thank you. That makes sense.

And then as far as the cash component of the deal, are you able to use any non-US cash for that? Or is that basically going to, more or less, tap out the US cash that you have on hand right now?

It will be mostly US-based deal in terms of cash. That's one reason why we do need to raise some new debt to fund the transaction.

All right. Great. Thank you.

Great. Well, thank you, everyone. I know this has been a very long call. And you might have some more questions that you can get to Chip later.

We've covered a lot this morning on our acquisition announcement on SNL Financial. We also were able to go through the quarter, which we think was a very strong quarter from the point of view of margin improvement and continued for us to deliver what we've been talking about in the past. So thank you again, everybody. And good morning.

That concludes this morning's call. A PDF version of the presenters' slides is available now for downloading from www.mhfi.com. A replay of this call, including the Q&A session, will be available in about two hours. The replay will be maintained on McGraw Hill's financial website for 12 months from today and for one month from today by telephone.

On behalf of McGraw Hill Financial, we thank you for participating and wish you a good day.