Press Releases
NEW YORK, July 26, 2012 /PRNewswire-FirstCall/ -- The McGraw-Hill Companies (NYSE: MHP) today reported revenue of $1,547 million in the second quarter, a decrease of 1% compared to the same period last year, as a result of a 5% increase at McGraw-Hill Financial and a 12% decline at McGraw-Hill Education. Net income from continuing operations increased 2% to $216 million and diluted earnings per share increased 11% to $0.76.
Excluding the impact of one-time costs related to the Growth and Value Plan, adjusted net income from continuing operations increased 15% to $243 million and adjusted diluted earnings per share increased 25% to a second quarter record of $0.85. This increase, similar to the first quarter, was primarily due to strong growth at Commodities & Commercial and S&P Capital IQ / S&P Indices.
"We are pleased by the continuing progress of our Growth and Value Plan in establishing two powerful companies, McGraw-Hill Financial and McGraw-Hill Education, by the end of the year," said Harold McGraw III, chairman, president, and chief executive officer of The McGraw-Hill Companies. "Our employees are to be applauded for delivering stellar results while simultaneously advancing the separation and implementing major cost reductions. We are delivering record adjusted earnings despite the challenging global macro-economic environment, including both the impact of the European debt crisis on global debt issuance and reduced state budgets on textbook spending."
The key achievements during the quarter that advanced the Growth and Value Plan include:
- Key management for McGraw-Hill Education is now in place, including Lloyd G. "Buzz" Waterhouse as president and chief executive officer and Patrick Milano as chief financial officer and chief administrative officer.
- The Form 10 SEC registration statement was filed on July 11, 2012.
- Cost reductions are accelerating towards the goal to achieve at least $100 million in cost savings, on a run-rate basis, by year-end.
- Key workstreams are well underway to drive the separation of numerous finance & accounting, human resource, information technology, and other support services.
- The S&P Dow Jones Indices, the world's largest provider of financial market indices, was launched on June 29, 2012.
The Outlook: "We now expect to be near the high end of our previous 2012 adjusted diluted earnings per share guidance of $3.25 to $3.35," said Mr. McGraw. "We will revisit our guidance again after we report the third quarter, traditionally the largest of the year."
McGraw-Hill Financial: Businesses that make up what will be the new McGraw-Hill Financial reported revenue of $1,073 million and adjusted operating profit of $394 million, an increase of 5% and 9%, respectively, compared to the same period a year ago. McGraw-Hill Financial will include the following lines of business:
- Standard & Poor's Ratings Services: Revenue increased 1% to $483 million and operating profit decreased 2% to $208 million in the second quarter compared to 2Q 2011—the strongest quarter of 2011 for this segment. Operating profit margins in the quarter were 43%.
Transaction revenue increased 4% to $203 million compared to the same period last year, driven by a 58% increase in U.S. public finance issuance as local governments took advantage of historically low rates. U.S. corporate issuance decreased 9%, driven by a 39% decline in speculative-grade issuance as investors became more risk averse. U.S. corporate investment-grade issuance remained resilient, up 7%. European corporate issuance experienced an overall decline of 36% as non-financial corporate issuance growth of 13% was offset by a 58% decline in financial services issuance. U.S. structured finance issuance increased 22%; however, worldwide structured finance issuance declined 36% driven by a decline in European issuance of 60%.
During the quarter, non-transaction revenue decreased 2% primarily due to adverse foreign exchange rates. Excluding the impact of foreign exchange rates, non-transaction revenue increased 2%. Non-transaction revenue represented 58% of S&P Ratings' total revenue compared to 59% for the same period last year.
Domestic revenue increased 7% but was largely offset by a decrease of 6% in international revenue. Foreign exchange rates negatively impacted international revenue by $13 million but had a negligible impact on profit. International revenue represented 46% of S&P Ratings' total second quarter revenue.
Operating profit was down in the quarter primarily due to selective additions in ratings analysts and legal expenses.
- S&P Capital IQ / S&P Indices: Revenue increased 10% to $366 million and adjusted operating profit increased 17% to $115 million.
S&P Capital IQ's revenue increased by 9% to $277 million. Solid revenue gains were reported in both Desktop Solutions and Enterprise Solutions. Contributing meaningfully to that growth was increased revenue from ratings products, including the Global Credit Portal and RatingsXpress. Despite a very competitive environment and downsizing at some customers, the number of S&P Capital IQ clients increased 13% over the past year to more than 4,200.
Credit Market Analysis Limited (CMA) was acquired from the CME Group at the end of the second quarter. The business will become part of S&P Capital IQ — broadening its existing pricing and data businesses and bolstering its asset-class coverage of OTC securities.
S&P Indices' revenue grew 12% to $89 million as assets under management in exchange-traded funds and mutual funds, as well as trading volume of exchange-traded derivatives all experienced growth. Year-over-year, assets under management in ETFs based on S&P's indices increased 7% to $349 billion.
The launch of S&P Dow Jones Indices took place on June 29th. The combination of these two iconic brands will facilitate the creation of new ideas and solutions that will enable clients to create products that foster increased liquidity and investment choices for investors. With the transaction closing so late in the quarter, the earnings impact was not material.
S&P Capital IQ / S&P Indices' international revenue increased 12% to $115 million in the second quarter and represented 31% of the segment's total revenue.
- Commodities & Commercial: Revenue increased 9% to $241 million and operating profit grew by 45% to $71 million in the second quarter, compared to the same period last year.
Platts continued its record performance resulting in 19% revenue growth at Commodities to $121 million for the period. Excluding the acquisition of Steel Business Briefing Group, which was not included in second quarter 2011 results, Commodities' revenue grew 15% to $117 million.
Commercial's revenue was down 1% as gains by J.D. Power and Associates, which is on track to record its best year ever, were offset by modest declines at McGraw-Hill Construction and Aviation Week.
McGraw-Hill Education: Revenue for the segment declined 12% to $474 million while operating profit improved by 36% to $57 million in the second quarter, compared to the same period last year. The improvement in operating income was primarily the result of restructuring actions and ongoing tight expense management.
- Higher Education, Professional and International Group (HPI): Revenue decreased 2% to $241 million in the second quarter compared to the same period last year. Higher Education revenue growth was offset by declines in International revenue, predominately related to the strong U.S. dollar. Higher Education's digital and customized products are being well received in the marketplace. In particular, sales of homework management product Connect, which is sold with LearnSmart, an adaptive learning system, grew by 65%. LearnSmart, designed to help college students learn faster, study more efficiently, and retain more knowledge, is available for approximately 150 different college course titles.
McGraw-Hill Professional continues to lead the transition to digital materials with 34% of revenue in the quarter derived from digital products and services. Of particular note was the 33% growth of digital subscription platforms, which include AccessMedicine, a product suite of subscription-based Websites that feature regularly updated medical content and access to more than 65 medical titles.
- School Education Group (SEG): Revenue decreased 20% to $233 million for the quarter. The elementary-high school market continues to be impacted by the economic issues facing the states and local school districts. In addition, the state new adoption schedule for 2012 offers the lowest revenue potential for publishers in many years. As a result, the School Education Group anticipates an overall reduction of 10% in the K–12 market this year, which represents the lowest spending level in over a decade. Despite the difficult environment, SEG continues to provide innovative products including new testing materials and programs in reading and mathematics that meet the new Common Core standards. All of its major new programs include digital components, and increasingly many products are wholly digital.
Corporate Expense: Adjusted corporate expense was unchanged at $44 million in the second quarter, compared to the same period last year as a result of overall tight expense management.
Growth and Value Plan Non-GAAP Adjustments: During the quarter, there were $42 million of one-time charges related to the Growth and Value Plan. Of the total, $27 million, comprised largely of professional fees and severance, was recorded in general corporate expense. $15 million was recorded for transaction costs associated with the acquisition of the Dow Jones Index business. These charges are excluded from the adjusted results.
Share Repurchase Program: Since completing the previously announced $1.5 billion share repurchase program in April, no additional shares have been repurchased. 22.7 million shares remain under the existing share repurchase authorization. The Company anticipates resuming share repurchases in the second half of the year.
Balance Sheet and Cash Flow: Cash and short-term investments at the end of the second quarter were $839 million, a $134 million decline from December 31, 2011. Year-to-date, 2012 free cash flow (see exhibits 3 and 9) was negative $122 million, a decrease of $194 million from the same period of 2011. This was due primarily to a temporary acceleration of approximately $100 million in payments to vendors associated with a transition to a new accounting system, as well as $65 million of cash outlays associated with the Growth and Value Plan.
Comparison of Adjusted Information to U.S. GAAP Information: Adjusted earnings per share, adjusted net income, adjusted operating profit and adjusted corporate expense are non-GAAP financial measures contained in this earnings release that are derived from the Company's continuing operations. This information is provided in order to allow investors to make meaningful comparisons of the Company's operating performance between periods and to view the Company's business from the same perspective as Company management. These non-GAAP measures may be different than similar measures used by other companies. Reconciliations for the differences between non-GAAP measures used in this earnings release and comparable financial measures calculated in accordance with U.S. GAAP are attached as Exhibits 5, 9 and 10.
Conference Call/Webcast Details: The Company's senior management will review the second quarter earnings results on a conference call scheduled for this morning, July 26, at 8:30 a.m. Eastern Time. This call is open to all interested parties. Discussions may include forward-looking information. Additional information presented on the conference call may be made available on the Company's Investor Relations Website at http://www.mcgraw-hill.com/investor_relations.
The Webcast will be available live and in replay at http://investor.mcgraw-hill.com/phoenix.zhtml?c=96562&p=irol-EventDetails&EventId=4805518. (Please copy and paste URL into Web browser.)
Telephone access is available. Domestic participants may call (888) 391-6568; international participants may call +1 (415) 228-4733 (long distance charges will apply). The passcode is McGraw-Hill and the conference leader is Harold McGraw III. A recorded telephone replay will be available approximately two hours after the meeting concludes and will remain available until August 26, 2012. Domestic participants may call (866) 465-2120; international participants may call +1 (203) 369-1437 (long distance charges will apply). No passcode is required.
The forward-looking statements in this news release involve risks and uncertainties and are subject to change based on various important factors, including worldwide economic, financial, liquidity, political and regulatory conditions; the health of debt (including U.S. residential mortgage-backed securities and collateralized debt obligations) and equity markets, including possible future interest rate changes; the health of the economy and in advertising; the level of expenditures and state new adoptions and open territory sales in the education market; the successful marketing of competitive products; and the effect of competitive products and pricing.
In addition, there are certain risks and uncertainties relating to our previously announced Growth and Value Plan which contemplates a separation of our education business, including, but not limited to, the impact and possible disruption to our operations, the timing and certainty of completing the transaction, unanticipated developments that may delay or negatively impact the spin-off, and the ability of each business to operate as an independent entity upon completion of the spin-off.
About The McGraw-Hill Companies: McGraw-Hill announced on September 12, 2011, its intention to separate into two public companies: McGraw-Hill Financial, a leading provider of content and analytics to global financial markets, and McGraw-Hill Education, a leading education company focused on digital learning and education services worldwide. McGraw-Hill Financial's leading brands include Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts energy information services and J.D. Power and Associates. With sales of $6.2 billion in 2011, the Company has approximately 23,000 employees across more than 280 offices in 40 countries. Additional information is available at http://www.mcgraw-hill.com/.
Investor Relations: http://www.mcgraw-hill.com/investor_relations
Get news direct from McGraw-Hill via RSS:
http://investor.mcgraw-hill.com/phoenix.zhtml?c=96562&p=newsRSS
Release issued: July 26, 2012
Contacts for The McGraw-Hill Companies:
Investor Relations:
Chip Merritt
Vice President, Investor Relations
(212) 512-4321 (office)
chip_merritt@mcgraw-hill.com
News Media:
Jason Feuchtwanger
Director, Corporate Media Relations
(212) 512-3151 (office)
jason_feuchtwanger@mcgraw-hill.com
The McGraw-Hill Companies |
||||||||||||||||
Condensed Consolidated Statements of Income |
||||||||||||||||
Three and six months ended June 30, 2012 and 2011 |
||||||||||||||||
(dollars in millions, except per share data) |
||||||||||||||||
Three Months |
Six Months |
|||||||||||||||
(unaudited) |
2012 |
2011 |
% Change |
2012 |
2011 |
% Change |
||||||||||
Revenue |
$ 1,547 |
$ 1,557 |
(1%) |
$ 2,878 |
$ 2,818 |
2% |
||||||||||
Expenses |
1,182 |
1,212 |
(2%) |
2,292 |
2,258 |
2% |
||||||||||
Other income |
- |
(13) |
N/M |
- |
(13) |
N/M |
||||||||||
Operating income |
365 |
358 |
2% |
586 |
573 |
2% |
||||||||||
Interest expense, net |
20 |
20 |
2% |
41 |
39 |
5% |
||||||||||
Income from continuing operations before taxes on income |
345 |
338 |
2% |
545 |
534 |
2% |
||||||||||
Provision for taxes on income |
125 |
122 |
2% |
198 |
194 |
2% |
||||||||||
Income from continuing operations |
220 |
216 |
2% |
347 |
340 |
2% |
||||||||||
Loss from discontinued operations, net of tax |
- |
- |
N/M |
- |
(1) |
N/M |
||||||||||
Net income |
220 |
216 |
2% |
347 |
339 |
2% |
||||||||||
Less: net income attributable to noncontrolling interests |
(4) |
(5) |
(10%) |
(8) |
(8) |
(5%) |
||||||||||
Net income attributable to The McGraw-Hill Companies, Inc. |
$ 216 |
$ 211 |
2% |
$ 339 |
$ 331 |
2% |
||||||||||
Amounts attributable to The McGraw-Hill Companies, Inc. |
||||||||||||||||
common shareholders: |
||||||||||||||||
Income from continuing operations |
$ 216 |
$ 211 |
2% |
$ 339 |
$ 332 |
2% |
||||||||||
Loss from discontinued operations, net of tax |
- |
- |
N/M |
- |
(1) |
N/M |
||||||||||
Net income |
$ 216 |
$ 211 |
2% |
$ 339 |
$ 331 |
2% |
||||||||||
Earnings per share attributable to The McGraw-Hill |
||||||||||||||||
Companies, Inc. common shareholders: |
||||||||||||||||
Basic |
$ 0.77 |
$ 0.70 |
11% |
$ 1.22 |
$ 1.09 |
12% |
||||||||||
Diluted |
$ 0.76 |
$ 0.68 |
11% |
$ 1.19 |
$ 1.07 |
11% |
||||||||||
Dividend per common share |
$ 0.255 |
$ 0.25 |
2% |
$ 0.51 |
$ 0.50 |
2% |
||||||||||
Average number of common shares outstanding: |
||||||||||||||||
Basic |
279.7 |
303.6 |
278.9 |
304.4 |
||||||||||||
Diluted |
285.3 |
309.2 |
284.5 |
309.4 |
||||||||||||
Percentages in these exhibits are calculated off the whole number, not the disclosed rounded number in the table |
||||||||||||||||
N/M - not meaningful |
||||||||||||||||
Exhibit 1 |
The McGraw-Hill Companies |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
June 30, 2012 and December 31, 2011 |
|||||||
(dollars in millions) |
|||||||
June 30, |
December 31, |
||||||
(unaudited) |
2012 |
2011 |
|||||
Assets: |
|||||||
Cash and equivalents |
$ 836 |
$ 944 |
|||||
Other current assets |
1,804 |
1,735 |
|||||
Total current assets |
2,640 |
2,679 |
|||||
Prepublication costs, net |
342 |
325 |
|||||
Property and equipment, net |
482 |
500 |
|||||
Goodwill and other intangible assets, net (a) |
3,563 |
2,656 |
|||||
Other non-current assets |
283 |
267 |
|||||
Total assets |
$ 7,310 |
$ 6,427 |
|||||
Liabilities and Equity: |
|||||||
Short-term debt |
$ 400 |
$ 400 |
|||||
Unearned revenue |
1,323 |
1,303 |
|||||
Other current liabilities |
1,156 |
1,427 |
|||||
Long-term debt |
799 |
798 |
|||||
Pension, other postretirement benefits and other non-current liabilities |
1,110 |
915 |
|||||
Total liabilities |
4,788 |
4,843 |
|||||
Redeemable noncontrolling interest (a) |
792 |
- |
|||||
Total equity |
1,730 |
1,584 |
|||||
Total liabilities and equity |
$ 7,310 |
$ 6,427 |
|||||
(a) Includes the impact of the S&P/Dow Jones Indices, LLC joint venture |
|||||||
Exhibit 2 |
The McGraw-Hill Companies |
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
Six months ended June 30, 2012 and 2011 |
|||||||
(dollars in millions) |
|||||||
(unaudited) |
2012 |
2011 |
|||||
Operating Activities: |
|||||||
Net income |
$ 347 |
$ 339 |
|||||
Adjustments to reconcile net income to cash provided by operating activities: |
|||||||
Depreciation (including amortization of technology projects) |
60 |
64 |
|||||
Amortization of intangibles |
32 |
30 |
|||||
Amortization of prepublication costs |
63 |
76 |
|||||
Stock-based compensation |
47 |
41 |
|||||
Other |
23 |
20 |
|||||
Net changes in operating assets and liabilities |
(417) |
(232) |
|||||
Cash provided by operating activities |
155 |
338 |
|||||
Investing Activities: |
|||||||
Investment in prepublication costs |
(79) |
(60) |
|||||
Capital expenditures |
(42) |
(45) |
|||||
Acquisitions, net of cash acquired |
(149) |
(126) |
|||||
Other |
27 |
17 |
|||||
Cash used for investing activities |
(243) |
(214) |
|||||
Financing Activities: |
|||||||
Dividends paid to shareholders |
(145) |
(152) |
|||||
Dividends paid to noncontrolling interests |
(11) |
(9) |
|||||
Repurchase of treasury shares |
- |
(300) |
|||||
Exercise of stock options and other |
141 |
82 |
|||||
Cash used for financing activities |
(15) |
(379) |
|||||
Effect of exchange rate changes on cash |
(5) |
29 |
|||||
Net change in cash and equivalents |
(108) |
(226) |
|||||
Cash and equivalents at beginning of period |
944 |
1,526 |
|||||
Cash and equivalents at end of period |
$ 836 |
$ 1,300 |
|||||
Exhibit 3 |
The McGraw-Hill Companies |
||||||||||||||||
Operating Results by Segment |
||||||||||||||||
Three and six months ended June, 2012 and 2011 |
||||||||||||||||
(dollars in millions) |
||||||||||||||||
(unaudited) |
Three Months |
Six Months |
||||||||||||||
Revenue |
Revenue |
|||||||||||||||
2012 |
2011 |
% Change |
2012 |
2011 |
% Change |
|||||||||||
S&P Ratings |
$ 483 |
$ 480 |
1% |
$ 949 |
$ 923 |
3% |
||||||||||
S&P Capital IQ / S&P Indices |
366 |
333 |
10% |
719 |
657 |
9% |
||||||||||
Commodities & Commercial |
241 |
222 |
9% |
474 |
429 |
10% |
||||||||||
McGraw-Hill Education |
474 |
537 |
(12%) |
770 |
839 |
(8%) |
||||||||||
Intersegment Elimination |
(17) |
(15) |
(13%) |
(34) |
(30) |
(13%) |
||||||||||
Total revenue |
$ 1,547 |
$ 1,557 |
(1%) |
$ 2,878 |
$ 2,818 |
2% |
||||||||||
Segment Expenses |
Segment Expenses |
|||||||||||||||
2012 |
2011 |
% Change |
2012 |
2011 |
% Change |
|||||||||||
S&P Ratings |
$ 275 |
$ 267 |
3% |
$ 555 |
$ 520 |
7% |
||||||||||
S&P Capital IQ / S&P Indices |
266 |
235 |
13% |
512 |
463 |
11% |
||||||||||
Commodities & Commercial |
170 |
173 |
(2%) |
339 |
342 |
(1%) |
||||||||||
McGraw-Hill Education |
417 |
495 |
(16%) |
778 |
872 |
(11%) |
||||||||||
Intersegment Elimination |
(17) |
(15) |
(13%) |
(34) |
(30) |
(13%) |
||||||||||
Total segment expenses |
$ 1,111 |
$ 1,155 |
(4%) |
$ 2,150 |
$ 2,167 |
(1%) |
||||||||||
Operating Income |
Operating Income (Loss) |
|||||||||||||||
2012 |
2011 |
% Change |
2012 |
2011 |
% Change |
|||||||||||
S&P Ratings |
$ 208 |
$ 213 |
(2%) |
$ 394 |
$ 403 |
(2%) |
||||||||||
S&P Capital IQ / S&P Indices |
100 |
98 |
2% |
207 |
194 |
7% |
||||||||||
Commodities & Commercial |
71 |
49 |
45% |
135 |
87 |
55% |
||||||||||
McGraw-Hill Education |
57 |
42 |
36% |
(8) |
(33) |
76% |
||||||||||
Total operating segments |
436 |
402 |
8% |
728 |
651 |
12% |
||||||||||
General corporate expense |
71 |
44 |
61% |
142 |
78 |
82% |
||||||||||
Total operating income |
$ 365 |
$ 358 |
2% |
$ 586 |
$ 573 |
2% |
||||||||||
Exhibit 4 |
The McGraw-Hill Companies |
|||||||||||||||
Operating Results by Segment - As Reported vs. As Adjusted |
|||||||||||||||
Three and six months ended June 30, 2012 and 2011 |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
(unaudited) |
Three months ended June 30, |
||||||||||||||
2012 |
2011 |
% Change |
|||||||||||||
As |
Non-GAAP Adjustments |
As |
As |
As Reported |
As Adjusted |
||||||||||
S&P Ratings |
$ 208 |
$ - |
$ 208 |
$ 213 |
(2%) |
(2%) |
|||||||||
S&P Capital IQ / S&P Indices |
100 |
15 |
(a) |
115 |
98 |
2% |
17% |
||||||||
Commodities & Commercial |
71 |
- |
71 |
49 |
45% |
45% |
|||||||||
McGraw-Hill Education |
57 |
- |
57 |
42 |
36% |
36% |
|||||||||
Segment operating income |
436 |
15 |
451 |
402 |
8% |
12% |
|||||||||
General corporate expense |
71 |
27 |
(b) |
44 |
44 |
61% |
(2%) |
||||||||
Operating income |
365 |
42 |
407 |
358 |
2% |
14% |
|||||||||
Interest expense, net |
20 |
- |
20 |
20 |
2% |
2% |
|||||||||
Income before taxes on income |
345 |
42 |
387 |
338 |
2% |
14% |
|||||||||
Provision for taxes on income |
125 |
15 |
140 |
122 |
2% |
15% |
|||||||||
Income from continuing operations |
220 |
27 |
247 |
216 |
2% |
14% |
|||||||||
Loss from discontinued operations, net of tax |
- |
- |
- |
- |
N/M |
N/M |
|||||||||
Net income |
220 |
27 |
247 |
216 |
2% |
14% |
|||||||||
Less: Noncontrolling interests net income |
(4) |
- |
(4) |
(5) |
(10%) |
(10%) |
|||||||||
Net income attributable to MHP |
$ 216 |
27 |
$ 243 |
$ 211 |
2% |
15% |
|||||||||
Amounts attributable to MHP common shareholders: |
|||||||||||||||
Income from continuing operations |
$ 216 |
27 |
$ 243 |
$ 211 |
2% |
15% |
|||||||||
Loss from discontinued operations, net of tax |
- |
- |
- |
- |
N/M |
N/M |
|||||||||
Net income |
$ 216 |
27 |
$ 243 |
$ 211 |
2% |
15% |
|||||||||
Diluted EPS from continuing operations |
$ 0.76 |
$ 0.09 |
$ 0.85 |
$ 0.68 |
11% |
25% |
|||||||||
(unaudited) |
Six months ended June 30, |
||||||||||||||
2012 |
2011 |
% Change |
|||||||||||||
As |
Non-GAAP Adjustments |
As |
As |
As Reported |
As Adjusted |
||||||||||
S&P Ratings |
$ 394 |
$ - |
$ 394 |
$ 403 |
(2%) |
(2%) |
|||||||||
S&P Capital IQ / S&P Indices |
207 |
15 |
(a) |
222 |
194 |
7% |
14% |
||||||||
Commodities & Commercial |
135 |
- |
135 |
87 |
55% |
55% |
|||||||||
McGraw-Hill Education |
(8) |
- |
(8) |
(33) |
76% |
76% |
|||||||||
Segment operating income |
728 |
15 |
743 |
651 |
12% |
14% |
|||||||||
General corporate expense |
142 |
60 |
(b) |
82 |
78 |
82% |
5% |
||||||||
Operating income |
586 |
75 |
661 |
573 |
2% |
15% |
|||||||||
Interest expense, net |
41 |
- |
41 |
39 |
5% |
5% |
|||||||||
Income before taxes on income |
545 |
75 |
620 |
534 |
2% |
16% |
|||||||||
Provision for taxes on income |
198 |
27 |
225 |
194 |
2% |
16% |
|||||||||
Income from continuing operations |
347 |
48 |
395 |
340 |
2% |
16% |
|||||||||
Loss from discontinued operations, net of tax |
- |
- |
- |
(1) |
N/M |
N/M |
|||||||||
Net income |
347 |
48 |
395 |
339 |
2% |
16% |
|||||||||
Less: Noncontrolling interests net income |
(8) |
- |
(8) |
(8) |
(5%) |
(5%) |
|||||||||
Net income attributable to MHP |
$ 339 |
48 |
$ 387 |
$ 331 |
2% |
17% |
|||||||||
Amounts attributable to MHP common shareholders: |
|||||||||||||||
Income from continuing operations |
$ 339 |
48 |
$ 387 |
$ 332 |
2% |
16% |
|||||||||
Loss from discontinued operations, net of tax |
- |
- |
- |
(1) |
N/M |
N/M |
|||||||||
Net income |
$ 339 |
48 |
$ 387 |
$ 331 |
2% |
17% |
|||||||||
Diluted EPS from continuing operations |
$ 1.19 |
$ 0.17 |
$ 1.36 |
$ 1.07 |
11% |
27% |
|||||||||
N/M - not meaningful |
|||||||||||||||
(a) Transaction costs associated with our S&P/Dow Jones Indices, LLC joint venture |
|||||||||||||||
(b) Includes Growth and Value Plan related costs necessary to enable separation and reduce our cost structure, which includes professional fees and severance charges, and for the six months also includes a charge related to a reduction in our lease commitments |
|||||||||||||||
Exhibit 5 |
The McGraw-Hill Companies |
||||||||
Standard & Poor's Ratings |
||||||||
Three and six months ended June 30, 2012 and 2011 |
||||||||
(dollars in millions) |
||||||||
Transaction vs. Non-Transaction Revenue |
||||||||
(unaudited) |
2012 |
2011 |
% Change |
|||||
Three Months |
||||||||
Transaction revenue (a) |
$ 203 |
$ 196 |
4% |
|||||
Non-transaction revenue (b) (c) |
280 |
284 |
(2%) |
|||||
Total Standard & Poor's Ratings |
$ 483 |
$ 480 |
1% |
|||||
Six Months |
||||||||
Transaction revenue |
$ 397 |
$ 372 |
7% |
|||||
Non-transaction revenue |
552 |
551 |
- |
|||||
Total Standard & Poor's Ratings |
$ 949 |
$ 923 |
3% |
|||||
(a) |
Revenue related to ratings of publicly-issued debt, bank loan ratings and corporate credit estimates |
|||||||
(b) |
Revenue primarily related to annual fees for frequent issuer programs and surveillance |
|||||||
(c) |
Includes intersegment royalty revenue from S&P Capital IQ / S&P Indices of $17 million and $34 million for the three and six months ended June 30, 2012, respectively and $15 million and $30 million for the three and six months ended June 30, 2011, respectively |
|||||||
Domestic vs. International Revenue |
||||||||
(unaudited) |
2012 |
2011 |
% Change |
|||||
Three Months |
||||||||
Domestic revenue |
$ 263 |
$ 246 |
7% |
|||||
International revenue |
220 |
234 |
(6%) |
|||||
Total Standard & Poor's Ratings |
$ 483 |
$ 480 |
1% |
|||||
Six Months |
||||||||
Domestic revenue |
$ 510 |
$ 485 |
5% |
|||||
International revenue |
439 |
438 |
- |
|||||
Total Standard & Poor's Ratings |
$ 949 |
$ 923 |
3% |
|||||
Exhibit 6 |
The McGraw-Hill Companies |
||||||||
S&P Capital IQ / S&P Indices |
||||||||
Three and six months ended June 30, 2012 and 2011 |
||||||||
(dollars in millions) |
||||||||
S&P Capital IQ / S&P Indices Revenue |
||||||||
(unaudited) |
2012 |
2011 |
% Change |
|||||
Three Months |
||||||||
S&P Capital IQ |
$ 277 |
$ 253 |
9% |
|||||
S&P Indices |
89 |
80 |
12% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 366 |
$ 333 |
10% |
|||||
Six Months |
||||||||
S&P Capital IQ |
$ 551 |
$ 502 |
10% |
|||||
S&P Indices |
168 |
155 |
8% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 719 |
$ 657 |
9% |
|||||
Subscription vs. Non-Subscription Revenue |
||||||||
(unaudited) |
2012 |
2011 |
% Change |
|||||
Three Months |
||||||||
Subscription revenue (a) |
$ 269 |
$ 245 |
10% |
|||||
Non-subscription revenue (b) |
97 |
88 |
10% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 366 |
$ 333 |
10% |
|||||
Six Months |
||||||||
Subscription revenue |
$ 535 |
$ 486 |
10% |
|||||
Non-subscription revenue |
184 |
171 |
7% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 719 |
$ 657 |
9% |
|||||
(a) |
Revenue related to credit ratings-related information products, Capital IQ platform, investment research products and other data subscriptions |
|||||||
(b) |
Revenue related to fees based on assets underlying exchange-traded funds, as well as certain advisory, pricing and analytical services |
|||||||
Domestic vs. International Revenue |
||||||||
(unaudited) |
2012 |
2011 |
% Change |
|||||
Three Months |
||||||||
Domestic revenue |
$ 251 |
$ 230 |
9% |
|||||
International revenue |
115 |
103 |
12% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 366 |
$ 333 |
10% |
|||||
Six Months |
||||||||
Domestic revenue |
$ 497 |
$ 461 |
8% |
|||||
International revenue |
222 |
196 |
14% |
|||||
Total S&P Capital IQ / S&P Indices |
$ 719 |
$ 657 |
9% |
|||||
Exhibit 7 |
The McGraw-Hill Companies |
|||||||||||
Commodities & Commercial |
|||||||||||
Three and six months ended June 30, 2012 and 2011 |
|||||||||||
(dollars in millions) |
|||||||||||
Commodities & Commercial Revenue |
|||||||||||
(unaudited) |
2012 |
2011 |
% Change |
||||||||
Three Months |
|||||||||||
Commodities |
$ 121 |
$ 101 |
19% |
||||||||
Commercial |
120 |
121 |
(1%) |
||||||||
Total Commodities & Commercial |
$ 241 |
$ 222 |
9% |
||||||||
Six Months |
|||||||||||
Commodities |
$ 239 |
$ 199 |
20% |
||||||||
Commercial |
235 |
230 |
2% |
||||||||
Total Commodities & Commercial |
$ 474 |
$ 429 |
10% |
||||||||
Subscription vs. Non-Subscription Revenue |
|||||||||||
(unaudited) |
2012 |
2011 |
% Change |
||||||||
Three Months |
|||||||||||
Subscription revenue (a) |
$ 154 |
$ 136 |
12% |
||||||||
Non-subscription revenue (b) |
87 |
86 |
2% |
||||||||
Total Commodities & Commercial |
$ 241 |
$ 222 |
9% |
||||||||
Six Months |
|||||||||||
Subscription revenue |
$ 304 |
$ 270 |
13% |
||||||||
Non-subscription revenue |
170 |
159 |
6% |
||||||||
Total Commodities & Commercial |
$ 474 |
$ 429 |
10% |
||||||||
(a) |
Revenue related to Platts real-time news, market data and price assessments, along with other print and digital information products primarily serving the energy, automotive, construction, aerospace and defense markets. |
||||||||||
(b) |
Revenue related to syndicated and proprietary research studies, advertising, consulting engagements and events. |
||||||||||
Domestic vs. International Revenue |
|||||||||||
(unaudited) |
2012 |
2011 |
% Change |
||||||||
Three Months |
|||||||||||
Domestic revenue |
$ 145 |
$ 139 |
4% |
||||||||
International revenue |
96 |
83 |
16% |
||||||||
Total Commodities & Commercial |
$ 241 |
$ 222 |
9% |
||||||||
Six Months |
|||||||||||
Domestic revenue |
$ 280 |
$ 267 |
5% |
||||||||
International revenue |
194 |
162 |
19% |
||||||||
Total Commodities & Commercial |
$ 474 |
$ 429 |
10% |
||||||||
Exhibit 8 |
The McGraw-Hill Companies |
||||||||||
Non-GAAP Financial Information |
||||||||||
Six months ended June 30, 2012 and 2011 |
||||||||||
(dollars in millions) |
||||||||||
Computation of Free Cash Flow |
||||||||||
(unaudited) |
Six Months |
|||||||||
2012 |
2011 |
|||||||||
Cash provided by operating activities |
$ 155 |
$ 338 |
||||||||
Investment in prepublication costs |
(79) |
(60) |
||||||||
Capital expenditures |
(42) |
(45) |
||||||||
Cash flow before dividends |
34 |
233 |
||||||||
Dividends paid to shareholders |
(145) |
(152) |
||||||||
Dividends paid to noncontrolling interests |
(11) |
(9) |
||||||||
Free cash flow |
$ (122) |
$ 72 |
||||||||
Exhibit 9 |
The McGraw-Hill Companies |
|||||||||||||||
Proforma McGraw-Hill Financial & McGraw-Hill Education - As Reported vs. As Adjusted |
|||||||||||||||
Three and six months ended June 30, 2012 and 2011 |
|||||||||||||||
(dollars in millions) |
|||||||||||||||
Note- The Corporation's previously announced Growth and Value Plan includes the creation of two independent companies in 2012: the newly named McGraw-Hill Financial and McGraw-Hill Education. This exhibit is derived from Exhibits 4 and 5 and is for informational purposes only and is not intended to represent what the results for the new McGraw-Hill Financial would have been had the spin-off occurred on the date presented. |
|||||||||||||||
(unaudited) |
Three months ended June 30, |
||||||||||||||
2012 |
2011 |
% Change |
|||||||||||||
As |
Non-GAAP Adjustments |
As |
As |
As Reported |
As Adjusted |
||||||||||
Revenue |
|||||||||||||||
Standard & Poor's Ratings |
$ 483 |
$ 483 |
$ 480 |
1% |
1% |
||||||||||
S&P Capital IQ / S&P Indices |
366 |
366 |
333 |
10% |
10% |
||||||||||
Commodities & Commercial |
241 |
241 |
222 |
9% |
9% |
||||||||||
Intersegment Elimination |
(17) |
(17) |
(15) |
(13%) |
(13%) |
||||||||||
New McGraw-Hill Financial |
1,073 |
1,073 |
1,020 |
5% |
5% |
||||||||||
McGraw-Hill Education |
474 |
474 |
537 |
(12%) |
(12%) |
||||||||||
Total revenue |
$ 1,547 |
$ 1,547 |
$ 1,557 |
(1%) |
(1%) |
||||||||||
Operating Income |
|||||||||||||||
Standard & Poor's Ratings |
$ 208 |
$ - |
$ 208 |
$ 213 |
(2%) |
(2%) |
|||||||||
S&P Capital IQ / S&P Indices |
100 |
15 |
(a) |
115 |
98 |
2% |
17% |
||||||||
Commodities & Commercial |